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60 Minutes Provides Platform for US Military to Hype Imaginary China and Russia Threat

By Matt Peppe | Just the Facts | August 2, 2015

The CBS news program 60 Minutes on Sunday aired an extended segment titled “The Battle Above” that relayed the concerns of various US military personnel that China and Russia could pose a threat to the vast system of American satellites that are used for military purposes and for commercial use by banks, telecommunications companies, farmers and others.

“Top military and intelligence leaders are now worried those satellites are vulnerable to attack. They say China, in particular, has been actively testing anti-satellite weapons that could, in effect, knock out America’s eyes and ears,” said correspondent David Martin.

Gen. John Hyten, head of the 38,000-person Space Command unit of the US Air Force, tells all his troops that there is a “contested environment” in space with multiple countries not allied with the U.S. possessing capabilities that could potentially threaten American satellites. “It’s a competition that I wish wasn’t occurring, but it is. And if we’re threatened in space, we have the right to self-defense, and we’ll make sure we can execute that right,” Hyten says.

While the Pentagon admits spending $10 billion per year on space, 60 Minutes reports that when you add in other indirect costs the actual total reaches $25 billion. And Air Force Secretary Deborah Lee James says the Pentagon plans to spend an additional $5 billion over the next 5 years on protecting its satellites.

Hyten describes the ambitions and activities of foreign actors in space as essentially an existential threat not just to the U.S. military but to the American economy. This is a useful narrative for an agency that is seeking billions of dollars to extend its current dominance.

Without a discernible threat, it would be difficult to justify such outlandish expenditures as the X-37B space plane. The plane is able to return to earth after voyaging for 20 months into space, allowing anything included in the payload to be later retrieved. The purpose of the plane is as yet undisclosed. But Hyten’s response when asked if it will one day be used as a weapons system – that he can’t answer – is revealing.

The military officials interviewed by 60 Minutes frame the issue as one in which the U.S. is acting purely in self-defense and within international law. Martin mentions that there is a 1967 U.N. treaty that calls for the peaceful use of space, but says in practice it does not resolve much. When he asks if this means it’s every country for himself, Lee James says, “Pretty much.”

60 Minutes makes much of anti-satellite weapons tests that China conducted in 2007, nearly a decade ago. China’s foreign ministry told the news program that it has not conducted any tests since and is “committed to the peaceful use of outer space.”

Are China’s declarations just empty rhetoric to conceal their true ambitions? And what threat do Russia and other countries like North Korea actually pose?

60 Minutes fails to mention that the United Nations has actively been dealing with the threat of weapons in space, and it is the United States itself – not China or Russia – that has been most forceful in rejecting limits on weapons programs and an arms race in space.

In its most recent session, the UN General Assembly passed two resolutions directly related to the use of weapons in space – one of which the U.S. government outright opposed and the other which it abstained from voting on.

UNGA resolution 69/31, “Prevention of an arms race in outer space” passed by a margin of 178-0 with 2 abstentions (the United States and Israel). The resolution affirmed that “the exploration and use of outer space, including the Moon and other celestial bodies, shall be for peaceful purposes and shall be carried out for the benefit and in the interest of all countries” and recalled that all States must “observe the provisions of the Charter of the United Nations regarding the use or threat of use of force in their international relations, including in their space activities.”

The General Assembly also passed resolution 69/32, “No first placement of weapons in outer space,” passed by a margin of 126-4 with 26 abstentions. China, Russia, North Korea and Iran all voted in favor of this measure, while the United States, Israel and US allies Georgia and Ukraine were the only nations voting against it.

The resolution “urges an early start of substantive work based on the updated draft treaty on the prevention of the placement of weapons in outer space and of the threat or use of force against outer space” that was submitted at the Conference on Disarmament. The draft treaty was submitted by two states: China and Russia.

In their story, 60 Minutes serves the role of Pentagon PR mouthpiece, allowing US military officials to hype the threat of China and Russia by presenting a narrative based on little more than their own paranoia.

If they wanted to realistically assess the threat of an arms race in space and determine who is responsible, 60 Minutes would have examined the extensive actions and voting record of the United States, China, Russia, and other states in the diplomatic arena to deal with such a threat. This would demonstrate emphatically that the United States has stood virtually alone in the world in opposing peaceful cooperation and de-escalation of military action in space. But apparently 60 Minutes finds it easier to simply take the Pentagon’s arguments and analysis at face value.

The DoD’s scare tactics of creating an imaginary threat – in the form Washington’s familiar punching bags China and Russia – allow them to frame their space program as an imperative reaction to legitimate national security threats, rather than as a superfluous, aggressive expansion of their unchallenged hegemony that extends not just around the globe, but thousands of miles into the reaches of outer space.

August 3, 2015 Posted by | Mainstream Media, Warmongering, Militarism | , , , , , , , , , | Leave a comment

China’s NGO Law: Countering Western Soft Power and Subversion

By Eric Draitser – New Eastern Outlook – 25.07.2015

China has recently taken an important step in more tightly regulating foreign non-governmental organizations (NGOs) inside the country. Despite condemnation from so called human rights groups in the West, China’s move should be understood as a critical decision to assert sovereignty over its own political space. Naturally, the shrill cries of “repression” and “hostility toward civil society” from western NGOs have done little to shake the resolve of Beijing as the government has recognized the critical importance of cutting off all avenues for political and social destabilization.

The predictable argument, once again being made against China’s Overseas NGO Management Law, is that it is a restriction on freedom of association and expression, and a means of stifling the burgeoning civil society sector in China. The NGO advocates portray this proposed legislation as another example of the violation of human rights in China, and further evidence of Beijing’s lack of commitment to them. They posit that China is moving to further entrench an authoritarian government by closing off the democratic space which has emerged in recent years.

However, amid all the hand-wringing about human rights and democracy, what is conveniently left out of the narrative is the simple fact that foreign NGOs, and domestic ones funded by foreign money, are, to a large extent, agents of foreign interests, and are quite used as soft power weapons for destabilization. And this is no mere conspiracy theory as the documented record of the role of NGOs in recent political unrest in China is voluminous. It would not be a stretch to say that Beijing has finally recognized, just as Russia has before it, that in order to maintain political stability and true sovereignty, it must be able to control the civil society space otherwise manipulated by the US and its allies.

‘Soft Power’ and the Destabilization of China

Joseph Nye famously defined ‘soft power’ as the ability of a country to persuade others and/or manipulate events without force or coercion in order to achieve politically desirable outcomes. And one of the main tools of modern soft power is civil society and the NGOs that dominate it. With financial backing from some of the most powerful individuals and institutions in the world, these NGOs use the cover of “democracy promotion” and human rights to further the agenda of their patrons. And China has been particularly victimized by precisely this sort of strategy.

Human Rights Watch, and the NGO complex at large, has condemned China’s Overseas NGO Management Law because they quite rightly believe that it will severely hamper their efforts to act independently of Beijing. However, contrary to the irreproachable expression of innocence that such organizations masquerade behind, the reality is that they act as a de facto arm of western intelligence agencies and governments, and they have played a central role in the destabilization of China in recent years.

Undoubtedly the most highly publicized example of just such political meddling took place in 2014 with the much hyped “Occupy Central” movement in Hong Kong, also known as the Umbrella Movement. The Western media fed uninformed news consumers story after story about a “pro-democracy” movement seeking to give voice to, as White House spokesman Josh Earnest cynically articulated, “…the aspirations of the Hong Kong people.” But such vacuous rhetoric was only part of the story.

What the corporate media in the West failed to mention were the deeply rooted connections between the Occupy Central movement and key organs of US soft power. The oft touted leader of Occupy Central was a pro-Western academic named Benny Tai, a law professor at the University of Hong Kong. Though he presented himself as the leader of a grassroots mass movement, Mr. Tai has for years been partnered with the National Democratic Institute (NDI), a nominal NGO which is actually directly funded by the US State Department via the National Endowment for Democracy (NED). In fact, the NDI has been one of the leading advocates (and financial backers presumably) of the Center for Comparative and Public Law at the University of Hong Kong, a program with which Benny Tai has been intimately connected, including as a board member since 2006. So, far from being merely an emerging leader, Tai was a carefully selected point person for a US-sponsored color revolution-style movement.

Two other high profile figures involved with Occupy Central were Audrey Eu, founder of the Civic Party in Hong Kong, and Martin Lee, founding chairman of the Democrat Party of Hong Kong. Both Eu and Lee have long-standing ties to the US government through the NED and NDI, with Eu having been a frequent contributor to NDI sponsored panels and programs, and Lee having the glorious distinction of having both been a recipient of awards from NED and NDI, as well as meeting with US Vice President Joe Biden in 2014 along with anti-Beijing advocate Anson Chan.

It does not take exceptional powers of deduction to see that, to varying degrees, Tai, Eu, Lee, and Chan each act as the public face of a US Government-sponsored initiative to destabilize the political situation in Hong Kong, one of China’s most economically and politically important regions. Through the intermediary of the NGO, Washington is able to promote an anti-Beijing line under the auspices of “democracy promotion,” just as it has done everywhere from Ukraine to Venezuela. Luckily for China, the movement was not supported by either the bulk of the working class in Hong Kong and China, or even by many of the middle class who saw it as little more than an inconvenience at best. However, it required swift government action to contain the public relations and media fiasco that could have resulted from the movement, a fact of which Beijing, no doubt, took note.

As a spokesperson for the National People’s Congress explained in April, the NGO law is necessary for “safeguarding national security and maintaining social stability.” Indeed, in late 2014, in the wake of the Occupy Central protests, Chinese President Xi Jinping traveled to Macau and spoke of the need to ensure that Macau walked on the “right path.” In a thinly veiled reference to Hong Kong, Xi praised Macau for continuing to follow the “one country, two systems” policy under which the special administrative regions of Macau and Hong Kong have greater autonomy but are still subject to Chinese law. Essentially, Xi made it quite clear that, despite the foreign NGO-manufactured movement in Hong Kong, Beijing remained firmly in control. And this is precisely the issue: control.

NGOs, Soft Power, and Terror in Xinjiang

The NGO ‘soft power’ weapon is not relegated solely to Hong Kong however. In fact, the western Chinese province of Xinjiang, one of the most volatile regions in the country, has seen active destabilization and subversion by soft power elements consistently over recent years. Home to the majority Muslim Uighur ethnic group, Xinjiang has been repeatedly attacked both with terrorism and vile propaganda that has sought to paint to China as the oppressor and enemy of Uighurs, and Muslims generally.

Xinjiang has been victim to a number of deadly terrorist attacks in recent years, including the heinous drive-by bombings that killed dozens and injured over 100 people in May 2014, the mass stabbings and bombings of November 2014, and the deadly attack by Uighur terrorists on a traffic checkpoint just last month which left 18 people dead. Were such attacks, which claimed the lives of scores of innocent Chinese citizens, to have been carried out against, say, Americans, the western media would be all but declaring holy jihad against the entire world. However, since they’ve happened in China, these are merely isolated incidents that are due to the “marginalization” and “oppression” of the Uighur people by the big bad Chinese authorities.

Such a sickeningly biased narrative is in no small part due to the NGO penetration of the Uighur community and a vast public relations network funded directly by the US Government. The same National Endowment for Democracy (NED) which has disbursed funds to the NDI and other organizations involved in the Hong Kong destabilization of “Occupy Central,” has been a primary funder of the Uighur NGO complex.

The following organizations have each received significant financial support from the NED through the years: World Uighur Congress, Uighur American Association, International Uighur Human rights and Democracy Foundation, and the International Uighur PEN Club, among others. These NGOs are quite often the sources cited by western media for comments on anything related to Xinjiang and are almost always quick to demonize Beijing for all problems in the region, including terrorism.

Perhaps the best example of just such propaganda and dishonesty came in the last few weeks as western media was flooded with stories making the spurious allegation that China had banned the observance of Ramadan in Xinjiang. Indeed, there were literally hundreds of articles condemning China for this “restriction of religious freedom,” portraying the Chinese government as repressive and a violator of human rights. Interestingly, the primary source for the claim was none other than the NED-funded World Uighur Congress.

Moreover, in mid July, on the day of Eid al-Fitr (the final day of Ramadan), the Wall Street Journal ran a story covering the media push-back from China which has sought in recent weeks to publicize the fact that Xinjiang, and all of China, has celebrated openly for Ramadan. And, as one should come to expect, the anti-China source cited is, as usual, a representative of the World Uighur Congress. It seems that this organization, far from being merely a human rights advocate, is in fact a mouthpiece for US propaganda against China. And when the propaganda is challenged and discredited by China, well that just invites new and more blistering propaganda.

The Geopolitical Footprints

All of this demonization has taken on a clear geopolitical and strategic significance as Turkey has stepped into the fray condemning China for its alleged “persecution” of Uighur Muslims, whom Ankara sees as Turks from its neo-Ottoman revanchist perspective. The Turkish Foreign ministry said in a statement that “Our people have been saddened over the news that Uighur Turks have been banned from fasting or carrying out other religious duties in the Xinjiang region… Our deep concern over these reports have been conveyed to China’s ambassador in Ankara.”

China responded to what it deemed to be inappropriate comments from Turkey’s Foreign Ministry, especially in light of Turkey’s absurd characterization of the Uighurs (who are Chinese citizens) as “Turks.” China’s Foreign Ministry Spokeswoman Hua Chunying stated, “China has already demanded that Turkey clarify these reports and we have expressed concern about the statement from the Turkish foreign ministry… You should know that all the people of Xinjiang enjoy the freedom of religious belief accorded to them by the Chinese constitution.”

While the Chinese government, as it almost always does, used decidedly muted language to express its displeasure, the implications of the statement were not lost on keen political observers with some understanding of the China-Turkey relationship. Although the two countries have many aligned interests, as evidenced by Turkey’s repeatedly expressed desire to join the Shanghai Cooperation Organization (SCO), the little known fact is that Turkey is one of the major facilitators of terrorism in China.

Though it received almost no fanfare from international media, in January 2015 Chinese authorities arrested at least ten Turkish suspects alleged to have organized and facilitated the illegal border crossings of a number of Uighur extremists. It has further been revealed that these extremists were planning to travel to Syria, Afghanistan, and Pakistan to train and fight with fellow jihadis.

The story is still further evidence of a well-funded, well-organized international terror network operated and/or facilitated by Turkish intelligence. According to the Turkish Foreign Ministry, the ten Turkish citizens were arrested in Shanghai on November 17, 2014 for facilitating illegal immigration. While the formal charges against them range from forging documents to actually aiding illegal migration, it is the larger question of international terrorism that lurks beneath the surface. Because of course, as the evidence seems to indicate, these Uighur immigrants were not merely traveling to see loved ones in another country. On the contrary, they were likely part of a previously documented trend of Uighur extremists traveling to the Middle East to train and fight with the Islamic State or other terror groups.

It is these same extremist networks that carried out the aforementioned deadly bombing in Urumqi, capital of Xinjiang. In fact, precisely this trend was exposed two months earlier in September 2014 when Reuters reported that Beijing formally accused militant Uighurs from Xinjiang of having traveled to Islamic State-controlled territory to receive training. Further corroborating these accusations, the Jakarta Post of Indonesia reported that four Chinese Uighur jihadists had been arrested in Indonesia after having travelled from Xinjiang through Malaysia. Other, similar reports have also surfaced in recent months, painting a picture of a concerted campaign to help Uighur extremists travel throughout Asia, communicating and collaborating with transnational terror groups such as the Islamic State.

So, Uighur terrorists with forged documents provided by sources inside Turkey are implicated as being part of the same terror networks that carried out a series of deadly attacks on Chinese citizens and police. No wonder China is not exactly bending over backwards to dry Erdogan’s and the Turkish government’s crocodile tears. And yet, despite the terror war, the US-funded Uighur NGOs continue to portray China as responsible for the terrorism.

The destabilization of China takes many forms. From a manufactured protest movement in Hong Kong sponsored by NGOs connected to the US government, to a fabricated propaganda war peddled by other NGOs sponsored by the US government, to a terror war fomented by a NATO member, China is a nation under assault by soft and hard power. That Beijing is finally taking steps to curb the pernicious influence of such NGOs, and the forces they represent, is not only a positive step, it’s an absolutely necessary one. The national security and national sovereignty of the People’s Republic of China requires nothing less.

July 26, 2015 Posted by | Deception, Mainstream Media, Warmongering | , , , , , , , | 1 Comment

The Increasing Burden of Diabetes in China

By Cesar Chelala | CounterPunch | July 24, 2015

China’s economic growth in the last three decades has dramatically transformed the nation’s economic landscape, removing 500 million people from poverty. This progress, however, has been accompanied by an increase in some diseases –such as diabetes– notably associated with increased urbanization and changed lifestyles. Twenty-five years ago, the number of people with diabetes in China was less than one percent. Today, China has more than 114 million people suffering from the disease, the highest number of any country in the world.

It is estimated that 11.6 percent of Chinese adults have diabetes, a proportion higher than the U.S. with 11.3 percent. Experts blame the increase in sedentary lifestyles, high consumption of sugary and high-calorie Western diets, excessive smoking and lack of exercise. According to some experts, India and China will have an increase of an additional 48.5m people with diabetes between 2007 and 2025.

Because the number of people suffering from this disease in China is increasing rapidly, the cost of treating diabetes and its complications can reach extremely high levels, and have a significant impact in the country’s economy. According to the International Diabetes Federation, 13% of medical expenditures in China are directly caused by diabetes. The yearly costs are US$25 billion. It is estimated that these costs will increase substantially, and reach more than $47 billion in 2030. In China, lost productivity costs alone are equivalent to 0.6% of GDP as reported by The Economist Intelligence Unit in 2007.

Both types of diabetes exact three kinds of economic costs: direct, indirect and those resulting from lost productivity. The direct costs include medical visits and treatment, medications and hospitalization for the disease and its complications. Indirect costs, which include informal care by relatives and paramedical personnel, constitute almost half the total cost of diabetes. Loss of productivity costs include those due to the consequences of the disability caused by the disease and its complications.

Diabetes also places a heavy toll on household income. People with diabetes spend 9 times more money in health care than healthy people of the same age and sex without diabetes. Those who have had diabetes for more than 10 years spent an estimated 22% of their household income for health care.

The total estimated cost of diabetes in the U.S. was estimated in $245 billion in 2012, of which 43 percent was for hospital inpatient care, 18 percent for prescription medications to treat the complications of the disease and 12 percent was for anti-diabetic agents.

People with diabetes report 3-4 times more in-patient care, out-patient visits and emergency room visits than people without diabetes of the same age and sex. In addition, health expenditures for people who have had diabetes for 10 or more years are 460% higher than for people who have had diabetes for 1-2 years.

Of the two kinds of diabetes, Type 1 is diagnosed primarily in children and young adults, and has probably genetic and environmental components. Type 2 diabetes, which probably has also a small genetic component, is mostly caused by unhealthy lifestyles and obesity. Type 1 diabetes accounts for approximately 5 percent of all cases.

Before a person develops diabetes Type 2, they frequently have a condition called pre-diabetes, which has no symptoms. In pre-diabetes, blood glucose levels are higher than normal but not high enough to qualify people as diabetics. It is estimated that 493 million people -or one in two adults- in China has pre-diabetes. Without treatment, those with pre-diabetes will develop full-fledged diabetes in 10 years or less.

What makes this condition particularly serious is that it is frequently ignored, and those affected by it are at a 50% higher risk of heart disease and stroke than those who don’t have pre-diabetes. According to some estimates, each year six to seven percent of those with pre-diabetes will be added to the diabetes population.

In diabetes Type 1 the body doesn’t produce enough, or in many cases any insulin, while in diabetes Type 2 the body still produces insulin but has lost the capacity to make use of the insulin it makes. Because of increasing rates obesity, children are now more affected by this last type of disease. In Japan, for example, Type 2 diabetes is now more common among Japanese children than diabetes Type 1 and in China type 2 diabetes is now being seen at younger ages.

Increased awareness and education about the disease’s damaging effects is critical. In October 2012, the Chinese government launched a three-year project called China National Plan for Non-Communicable Disease Prevention and Treatment (2012-2015) to train 100,000 community-level doctors in diabetes prevention and treatment.

To improve the results of this plan, however, teachers in primary schools must also be trained and special classes should be devoted to this problem. Awareness should be raised in the general population about the importance of addressing risk factors, such as having poor eating habits, smoking in excess and having unhealthy lifestyles. If this serious crisis is not properly faced, it can provoke a most damaging effect on the country’s economy and on the health status of the population.

Dr. Cesar Chelala is an international public health consultant.

July 24, 2015 Posted by | Economics | , | Leave a comment

Russia: Iran to join SCO after sanction lifted

Press TV – July 8, 2015

Iran will join the Eurasian economic, political and military bloc, the Shanghai Cooperation Organization (SCO), after sanctions are lifted on the country, a Russian presidential aide has said.

The announcement came after foreign ministers of the organization met ahead of a summit by SCO and BRICS leaders in the Russian city of Ufa.

“The Iranian application is on the agenda for consideration. Sooner or later, the application will be granted after the UN Security Council sanctions are lifted,” Interfax quoted Russian presidential adviser Anton Kobyakov as saying.

Iran and the P5+1 group of world countries are currently involved in make-or-break talks in order to reach a nuclear agreement which would have sanctions lifted on Tehran.

Russian Foreign Minister Sergei Lavrov told Interfax that the removal of a conventional arms embargo on Iran is a “major problem” in the negotiations.

“I can assure you that there remains one major problem that is related to sanctions: this is the problem of an arms embargo,” he said in Vienna.

Iranian President Hassan Rouhani will head to Russia on Thursday to participate in the summit of SCO and BRICS nations.

Iran has an observer status on SCO, awaiting the removal of sanctions to become a full-fledged member.

SCO currently consists of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. Kobyakov said the organization has received 11 new applications for membership, including from Egypt.

Russian officials have said India and Pakistan will join SCO as full members after years of holding observer status as Prime Ministers Narendra Modi and Nawaz Sharif will join regional leaders in Ufa.

The Iranian president will attend the BRICS summit of Brazil, Russia, India, China and South Africa as a special guest and will also deliver a speech to the event.

The BRICS accounts for almost half the world’s population and about one-fifth of global economic output. Its New Development Bank is seen on course to challenge the dominance of US-led World Bank and International Monetary Fund.

July 8, 2015 Posted by | Economics, Solidarity and Activism | , , , , , , , , , | Leave a comment

China, India, Russia largest shareholders in China-led bank

The BRICS Post | June 29, 2015

Fifty countries on Monday signed the articles of agreement for the new China-led Asian Infrastructure Investment Bank, the first major global financial instrument independent from the Bretton Woods system.

Seven remaining countries out of the 57 that have applied to be founding members, Denmark, Kuwait, Malaysia, Philippines, Holland, South Africa and Thailand, are awaiting domestic approval.

“This will be a significant event. The constitution will lay a solid foundation for the establishment and operation of the AIIB,” said Chinese Finance Minister Lou Jiwei.

The AIIB will have an authorized capital of $100 billion, divided into shares that have a value of $100,000.

BRICS members China, India and Russia are the three largest shareholders, with a voting share of 26.06 per cent, 7.5 per cent and 5.92 per cent, respectively.

Following the signing of the bank’s charter, the agreement on the $100 billion AIIB will now have to be ratified by the parliaments of the founding members.

Asian countries will contribute up to 75 per cent of the total capital and be allocated a share of the quota based on their economic size.

Chinese Vice Finance Minister Shi Yaobin said China’s initial stake and voting share are “natural results” of current rules, and may be diluted as more members join.

Australia was first to sign the agreement in the Great Hall of the People in Beijing on Monday, state media reports said.

The Bank will base its headquarters in Beijing.

The Chinese Finance Ministry said the new lender will start operations by the end of 2015 under two preconditions: At least 10 prospective members ratify the agreement, and the initial subscribed capital is no less than 50 per cent of the authorized capital.

The 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.

China and other emerging economies, including BRICS, have long protested against their limited voice at other multilateral development banks, including the World Bank, International Monetary Fund and Asian Development Bank (ADB).

China is grouped in the ‘Category II’ voting bloc at the World Bank while at the Asian Development Bank, China with a 5.5 per cent share is far outdone by America’s 15.7 per cent and Japan’s 15.6 per cent share.

The ADB has estimated that in the next decade Asian countries will need $8 trillion in infrastructure investments to maintain the current economic growth rate.

China scholar Asit Biswas at the Lee Kuan Yew School of Public Policy, Singapore, says Washington’s criticism of the China-led Bank is “childish”.

“Some critics argue that the AIIB will reduce the environmental, social and procurement standards in a race to the bottom. This is a childish criticism, especially because China has invited other governments to help with funding and governance,” he writes.

The US and Japan have not applied for the membership in the AIIB.

However, despite US pressures on its allies not to join the bank, Britain, France, Germany, Italy among others have signed on as founding members of the China-led Bank.

Meanwhile, New Zealand and Australia have already announced that they will invest $87.27 million and $718 million respectively as paid-in capital to the AIIB.

The new lender will finance infrastructure projects like the construction of roads, railways, and airports in the Asia-Pacific Region.


Iran, 49 states sign Asia bank charter

Press TV June 29, 2015

Iran on Monday joined 49 countries in signing up to the Asian Infrastructure Investment Bank (AIIB), bringing Asia’s largest financial lender a step closer to existence.

Finance and Economy Minister Ali Tayebnia put Iran’s signature to the bank’s articles of association at a ceremony in Beijing’s Great Hall of the People, which capped six months of intense negotiations.

In April, China accepted Iran as a founding member of the Asian Infrastructure Investment Bank being seen as a rival to the US-led World Bank, the International Monetary Fund (IMF) and the Asian Development Bank.

With the signing which amounted to the creation of AIIB’s legal framework, China’s Finance Minister Lou Jiwei said he was confident the bank could start functioning before the end of the year.

Seven more founding members would ink the articles after approval by their respective governments.

The bank will have a capital of $100 billion in the form of shares, each worth $100,000, distributed among the members. Beijing will be by far the largest shareholder at about 30%, followed by India at 8.4% and Russia at 6.5%.

China will also have 26% of the votes which are not enough to give it a veto on decision-making, while smaller members will have larger voice.

Singapore’s Senior Minister for Finance and Transport Josephine Teo said the bank will provide new opportunities for its members’ businesses and promote sustainable growth in Asia.

Seventy-five percent of AIIB’s shares are distributed within the Asian region while the rest is assigned among countries beyond it.

Germany, France and Brazil are among the non-Asian members of the bank despite US efforts to dissuade allies from joining it. Another US ally joining AIIB is Australia but Japan has stayed away from it.

Countries beyond the region can expand their share but the portion cannot be bigger than 30%. Public procurement of the AIIB will be open to all countries around the world.

But the president of the bank will have to be chosen from the Asian region for a maximum of two consecutive five-year terms.

The bank will be headquartered in Beijing and its lean structure will be overseen by an unpaid, non-resident board of directors which, architects say, would save it money and friction in decision-making.

Earlier this month, former Federal Reserve chairman Ben Bernanke rebuked US lawmakers for allowing China to found the new bank, which threatens to upend Washington’s domination over the world economic order.

He said lawmakers were to blame because they refused to agree 2010 reforms that would have given greater clout to China and other emerging powers in the International Monetary Fund.

June 29, 2015 Posted by | Economics, Solidarity and Activism | , , , , , , , , , , , | Leave a comment

Russia, China Deepen Win-Win

By F. William Engdahl – New Eastern Outlook – 29.06.2015

It’s scarcely a day passes that there isn’t some fascinating new development bringing Russia and China closer in peaceful economic cooperation. The most recent such development involves what must be described as a win-win development in which Russia has agreed to lease prime Siberian agriculture lands to a Chinese company for the coming fifty years. It fits beautifully to plans for the development of the world’s largest infrastructure project, the planned New Silk Road Economic Belt, a network of new high-speed railway lines criss-crossing Eurasia from China to Mongolia to Russia and beyond ultimately to the EU.

The Chinese government officials in recent years are very fond of talking about “win-win” developments in business and politics. Now a genuine win-win development is emerging for both China and Russia in Siberia near the borders of Mongolia and China in the region known since 2008 as Zabaikalsky krai or region.

The region has a very sparse population of just over 1 million Russians on a land area of some 432,000 square kilometers. It also holds some of the richest, most fertile farmland in the world. China for its part is hurt by increasing desertification, water problems and other pressures on its food production security. China also has population and money to invest in worthwhile projects, something the more remote regions of the Russian Federation have had serious deficits of during the Cold War and especially since the destructive Yeltsin years.

Now the government of Zabaikalsky krai has signed a 49-year lease agreement with China’s Zoje Resources Investment together with its daughter company Huae Sinban to lease 115,000 hectares or just under 300,000 acres of Russian farmland to China. The Chinese company will invest more than 24 billion rubles for development of agricultural sector in the region, to produce agricultural products for Russian and Chinese markets. Plans are to grow fodder, grain and oilseeds as well as to develop poultry, meat and dairy products production in Russia’s Baikal region.

The project will be divided into two stages. If the first stage is successfully completed by 2018, the Chinese company will be given a lease on a second parcel of land bringing the total to 200,000 hectares. For Russia and the region it will be a win. The lands where the project will start have not been farmed for almost 30 years and to make the land suitable again for farming will require the labor of as many as 3,000 hands. Also significant is that the Chinese company had to compete for the land deal with several other Chinese companies as well as companies from South Korea, New Zealand and even from the United States.

Wang Haiyun, senior advisor at the Chinese Institute for International Strategic Studies, called the deal an example of the developing trust between the two countries, according to an article from the Chinese newspaper Huanqiu Shibao. He noted that the fact that Russian authorities agreed to lease such an immense territory for 49 years to a Chinese company proves Moscow has no ideological prejudice towards Beijing.

China-Russia Agriculture Fund

The latest land lease deal in Zabaikalsky krai follows other positive developments in agriculture cooperation between Russia and China. This past May Russia’s state Direct Investment Fund head, Kirill Dmitriev, announced that RDIF, the Russia-China Investment Fund and the government of China’s Heilongjiang province have agreed on the creation of a special investment fund for agriculture projects. The fund will total some $2 billion and be funded by primarily money of institutional Chinese investors, including those with significant experience in investment in the agricultural sector, Dmitriev added. He said that the agreement on the creation of a joint investment bank will help attract Chinese capital to Russia and make it easier for Russian companies to enter China’s markets. China’s Heilongjiang Province is to the east of Zabaikalsky krai.

Silk roads to golden goals

The China-Zabaikalsky krai agriculture agreement is merely the initial step of what will become a major infrastructure and industrial development of the now-remote underdeveloped Siberian region. Zabaikalsky krai is one of the richest regions in all Russia. Russia’s largest known deposit of copper at Udokanskoye in the region has resources of 20 million tons. On June 3 at the Sochi SP1520 annual international railways forum, Russian Railways president Vladimir Yakunin announced that the Russian Copper Company, a joint venture by Russian Railways Public Company, UMMC, and Vnesheconombank, had applied for development of the Udokanskoye copper deposit, confirming that Russia is thinking very strategically about its development in the region.

In addition the region is rich in gold, molybdenum, tin, lead, zinc and coal. Its crops are today wheat, barley and oats. The region is amply blessed with fresh water and flowing rivers.

At the same time Beijing has announced it is creating a huge $16 billion fund to develop gold mines along the rail route linking Russia and China and Central Asia. One major obstacle to date to exploitation of Russia’s vast agriculture and mineral riches has been availability of modern infrastructure to bring the products to market. Contrary to Harvard University or George Soros “shock therapy” free market theories, markets are not “free.”

At the September, 2014 meeting of the Shanghai Cooperation Organization in Dushanbe, at the request of the Mongolian president, China’s Xi, Russia’s Putin and Mongolia’s Tsakhiagiin Elbegdorj agreed to integrate Beijing’s Silk Road Economic Belt initiative with Russia’s transcontinental rail plan and Mongolia’s Prairie Road program, to jointly build a China-Mongolia-Russia economic corridor.

That could turn Mongolia into a “transit corridor” linking the Chinese and Russian economies. Mongolia is larger than Japan, France and Spain together. The three are discussing issues of traffic interconnectivity, how to facilitate cargo clearance and transportation, and the feasibility of building a transnational power grid.

Eurasian Economic Birth

The potential of the recent economic cooperation agreements between the two great Eurasian nations, Russia and China, is without question the most promising economic development in the world today. As US sanctions forced Russia to turn increasingly to its eastern neighbor, China, US military provocations against China in the East China Sea and elsewhere forced China to completely rethink its own strategic orientation. Developing their land connections in a vast economic space is emerging as the result. As the ancient Chinese saying goes, every crisis contains new opportunities if viewed so.

Beijing has discussed building various Eurasian rail ties for several years but in the past eighteen months since the beginning of the Presidency of Xi Jinping it has assumed highest priority, especially the construction of the New Silk Road Economic Belt. President XI has made that Silk Road project the cornerstone of his presidential term. In the meeting of Xi on May 8 in Moscow with Russian President Putin, the two presidents signed a joint declaration “on cooperation in coordinating development of EEU and the Silk Road Economic Belt,” with both declaring their goal to coordinate the two projects in order to build a “common economic space” in Eurasia, including a Free Trade Agreement between the EEU and China. Chinese Foreign Minister Wang Yi recently stated that the trade turnover between China and Russia is likely to reach $100 billion in 2015. The future prospects, with construction of the network of high-speed railways, is staggering.

Markets, all markets, are man-made, products of deliberate or not so deliberate decisions of individuals and usually of governments. The creation of what could become a multi-trillion dollar economic space spanning the vast Eurasian land is moving forward in a beautiful way. The China-Russia agriculture land leasing is a sign that Russia is opening a new qualitative phase in these developments.

In the world of mathematics win-win is referred to as a “non-zero sum game” in which there is typically a matrix of multiple payouts for all participants. That seems to be emerging across the vast Eurasian expanse far faster than anyone could have imagined even two years ago.

June 29, 2015 Posted by | Economics | , , , | Leave a comment

How much did renewable electricity grow in China last year?

By Robert Wilson | Carbon Counter | June 25, 2015

Last year global renewable electricity – i.e. hydro, wind and solar – consumption grew by 193.7 TWh. This represented 55% of the total growth in global electricity consumption.

And China, where renewable electricity consumption grew by 174.9 TWh, made up a large part of the increase. A renewables revolution is clearly unfolding. Or maybe not.

Careful readers will have noted the word order in my first sentence – hydro, wind and solar. If you follow debates on energy closely you will regularly be astonished by how often commentators act as if wind and solar dominate renewable energy. The fact that bioenergy has grown by more in this century than wind and solar combined is not something you will ever be told.

The same is true for hydro-electricity.

A representative image of renewables in China is not this:

china_windor this:

china-solar-powerInstead it is this:

threegorgesBig hydroelectric dams, such as The Three Gorges shown above, dominate Chinese renewables. In fact, they dominate China’s total low carbon energy supply.

China gets five times more electricity from its hydroelectric plants than from wind and solar combined. Total hydroelectricity supply in 2014 was 1064.3 TWh, while wind was 158.4 TWh and solar was 29.1 TWh.

Most of these hydroelectric plants have been built this century. Total hydroelectric generation in 2000 was 222.4 TWh, one fifth of what it is today.

Last year China’s hydroelectric output increased by 144 TWh, but wind and solar increased by 30.8 TWh. Put together this made up roughly three quarters of the rise in China’s electricity generation.

So are renewables or, more accurately big hydro, taking over electricity generation?

Probably not.

First, growth in China’s electricity generation is slowing because its economy is having problems. In the decade before last year China’s electricity generation increased by an average of 350 TWh each year. If China’s economy returns to the growth levels the Communist Party believes is necessary to stop the risks of another Tiananmen, we aren’t likely to see such low growth continuing.

Second, hydroelectric output was artificially high due to the weather.

Hydroelectric dams operate on a simple principle. Flowing water is converted into electricity. More flowing water equals more power. So, roughly speaking, if it is wetter dams will produce more electricity.

And this is what happened in China last year. Official data shows that the capacity factors of China’s hydroelectric dams increased by 8.7% last year. In other words, had the climatic conditions been the same as in 2013, China’s hydroelectric output would only have grown by 48 TWh, and not 144 TWh.

The increase in China’s total renewable electricity generation was therefore double what it would have been had it not been for the wetter conditions.

So, not only does hydroelectricity dominate Chinese renewables, but we have to be incredibly careful interpreting year to year changes in production caused by rain conditions.

The same holds at the global level. If China’s hydroelectric output had stayed still last year, global hydroelectric output would have actually fallen by 67 TWh last year. Again, this was due to climatic conditions, not a decrease in hydroelectric capacity.

This fall in non-China hydroelectricity was greater than the increase in global generation from either wind or solar. Clearly lumping hydro, wind, and solar generation into one figure can lead to erroneous conclusions.

Note on data

Generation data taken from the latest BP Statistical Review of World Energy.

June 25, 2015 Posted by | Deception, Economics | | Leave a comment

East Must Provide Alternative to, Not Replace Western Hegemony

By Ulson Gunnar – New Eastern Outlook – 14.06.2015

Recent news has shown China quickly gaining ground against a West which has for centuries maintained hegemony over Asia Pacific. Beyond Asia, China has been steadily expanding its influence throughout Africa and the Middle East. Together with Russia, Iran and other nations of the “East,” they are constructing what is commonly referred to as a “multi-polar” world order.

This multi-polar world order stands in contrast to the unipolar order the West has sought to impose for decades after the end of the World Wars and is a continuation of Western imperialism carried out by the British and other European empires during the decline of the Ottoman Empire.

But is what the East doing truly building an alternative to the West’s brand of hegemonic imperialism? Or is it simply more of the same under a different label? Moreover, is the West’s behavior coaxing other nations to unify under a singular, consolidated banner, only to be rolled under the West’s vision of an international order ruled from Washington, Wall Street, London and Brussels?

These are questions that must be asked and explored particularly by the people who gravitate toward the East the most. They understand the threat of Western hegemony and the very real damage it has and still is inflicting upon humanity. From the devastation of Iraq and Afghanistan, to the wars raging in Yemen, Syria and Libya, Western designs have taken unstable tinderboxes around the globe and turned them into raging infernos.

Naturally, people look for a force to counter such inhumane violence, bloodshed and shameless exploitation and manipulation. They see that counter in Russia, China and those in their spheres of influence. And while in the past these nations have indeed served as counterweights to the forces of fascism or imperialism, one must always be careful not to simply back one hegemon over another.

For Moscow, Beijing and across the other BRICS nations, they must understand that the support and success they enjoy is specifically because they offer what many believe is an alternative to, not a replacement for Western hegemony. The world sees BRICS as a viable alternative specifically because they are not setting up military bases in foreign lands, intervening militarily thousands of miles from their borders and working with nations instead of coercing them. As soon as they cease to uphold these principles, they will cease to serve as a relevant alternative to the West.

China in particular has been long criticized by the West for doing business with any nation regardless of their so-called human rights record. The West however, makes these criticisms because it disrupts their ability to exploit human rights as a pretense to meddle diplomatically, militarily and economically in any targeted country. Meanwhile, the West gladly has conducted long-term business with the most egregious human rights offenders on Earth, the Saudi regime chief among them.

China has repeatedly, sometimes even painfully reasserted the primacy of national sovereignty in ruling over all international relations. It must not only continue to reassert this message diplomatically, but also pragmatically throughout its foreign policy. Not only is it a matter of self-interest, preventing foreign interests from dictating to Beijing what it should do within its own borders, but it helps set a solid precedent in establishing a new multi-polar global order.

Supranational Institutions Old and New

Russia, China and the rest of BRICS are themselves creating a variety of supranational institutions and military alliances to compete against those of the West, particularly the IMF, World Bank, NATO, and even the UN itself. However, while doing this, they must ensure the preservation, even the encouragement of national sovereignty as the primary organizing principle among these new institutions. And not just on paper, but especially in practice, whether it suits BRICS at the moment or not.

This is because whether those special interests behind BRICS and standing in apparent opposition to the West realize it or not, the very reason they have been given an opportunity by the global public is specifically because they are perceived as being different from the West and the Western way of using their global wealth and influence. And whether it serves their interests immediately or fully, they must fulfill these expectations or suffer the same backlash the West is now facing, both at home and abroad.

The world is changing economically, technologically and culturally. These shifts have not boded well for the concept of “globalization” or even supranational institutions. To seek to create doppelgangers of existing and failing Western supranational and international institutions seems folly at best.

Understanding this, and balancing competition with the West’s existing and still potent institutions, against the changing dynamics of the coming future is essential for the survival and eventual success of BRICS and the multi-polar world they claim to want to create.

A world where technology now empowers one individual to do what once required many people and tremendous resources, constitutes a shift in the balance of power between local communities, nations and global alliances and power brokers. Even if the people have yet to realize this, they will soon. The future of BRICS depends on a collective understanding that fighting this coming shift will lead BRICS to the same cliff the West is currently dangling over.

For the people themselves, they must understand that they have always been in the driver’s seat, even if insidious hands have reached past them to take the wheel for the majority of this trip. Realizing that the people, not special interests have the ability to steer the world toward a path we would all like to see it on is our greatest bet. We need not obsessively support one bloc over another, subscribing almost religiously to political parties, personalities and brands, but should instead agree on a set of principles and only back those as long as they uphold those principles.

By attaching ourselves to political parties, personalities and brands, we stand only to be inevitably disappointed. On the other hand, principles are inextinguishable, indomitable and everlasting. In the ongoing game of geopolitics, if ever we want to finally break the continuous turning of the wheel of history, we must stop following those whose hands are turning that wheel, and follow the principles that always and forever lead forward.

When Russia, China and the rest of BRICS stand up for national sovereignty, non-interventionism and non-military expansionism, we should applaud them not because they are simply BRICS, but because of the principles they are upholding. When they fail to do so, we must also, and as equally as vocal, condemn them.

June 14, 2015 Posted by | Militarism | , , , | Leave a comment

On a Fast Track to National Ruin

By Pat Buchanan • Unz Review • May 8, 2015

In the first quarter of 2015, in the sixth year of the historic Obama recovery, the U.S. economy grew by two-tenths of 1 percent.

And that probably sugarcoats it.

For trade deficits subtract from the growth of GDP, and the U.S. trade deficit that just came in was a monster.

As the AP’s Martin Crutsinger writes, “The U.S. trade deficit in March swelled to the highest level in more than six years, propelled by a flood of imports that may have sapped the U.S. economy of any growth in the first quarter.”

The March deficit was $51.2 billion, largest of any month since 2008. In goods alone, the trade deficit hit $64 billion.

As Crutsinger writes, a surge in imports to $239 billion in March, “reflected greater shipments of foreign-made industrial machinery, autos, mobile phones, clothing and furniture.”

What does this flood of imports of things we once made here mean for a city like, say, Baltimore? Writes columnist Allan Brownfeld:

“Baltimore was once a city where tens of thousands of blue collar employees earned a good living in industries building cars, airplanes and making steel. … In 1970, about a third of the labor force in Baltimore was employed in manufacturing. By 2000, only 7 percent of city residents had manufacturing jobs.”

Put down blue-collar Baltimore alongside Motor City, Detroit, as another fatality of free-trade fanaticism.

For as imports substitute for U.S. production and kill U.S. jobs, trade deficits reduce a nation’s GDP. And since Bill Clinton took office, the U.S. trade deficits have totaled $11.2 trillion.

An astronomical figure.

It translates not only into millions of manufacturing jobs lost and tens of thousands of factories closed, but also millions of manufacturing jobs that were never created, and tens of thousands of factories that did not open here, but did open in Mexico, China and other Asian countries.

In importing all those trillions in foreign-made goods, we exported the future of America’s young. Our political and corporate elites sold out working- and middle-class America — to enrich the monied class.

And they sure succeeded.

Yet, remarkably, Republicans who wail over Obama’s budget deficits ignore the more ruinous trade deficits that leech away the industrial base upon which America’s self-reliance and military might have always depended.

Last month, the U.S. trade deficit with the People’s Republic of China reached $31.2 billion, the largest in history between two nations.

Over 25 years, China has amassed $4 trillion in trade surpluses at our expense. And where are the Republicans?

Talking tough about building new fleets of planes and ships and carriers to defend Asia from the rising threat of China, which those same Republicans did more than anyone else to create.

Now this GOP Congress is preparing to vote for “fast track” and surrender its right to amend any Trans-Pacific Partnership trade deal that Obama brings home.

But consider that TPP. While the propaganda is all about a deal to cover 40 percent of world trade, what are we really talking about?

First, TPP will cover 37 percent of world trade. But 80 percent of that is trade between the U.S. and nations with which we already have trade deals. As for the last 20 percent, our new partners will be New Zealand, Malaysia, Vietnam, Brunei and Japan.

Query: Who benefits more if we get access to Vietnam’s market, which is 1 percent of ours, while Hanoi gets access to a U.S. market that is 100 times the size of theirs?

The core of the TPP is the deal with Japan.

But do decades of Japanese trade surpluses at our expense, achieved through the manipulation of Japan’s currency and hidden restrictions on U.S. imports, justify a Congressional surrender to Barack Obama of all rights to amend any Japan deal he produces?

Columnist Robert Samuelson writes that a TPP failure “could produce a historic watershed. … rejection could mean the end of an era. … So, when opponents criticize the Trans-Pacific Partnership, they need to answer a simple question: Compared to what?”

Valid points, and a fair question.

And yes, an era is ending, a post-Cold War era where the United States threw open her markets to nations all over the world, as they sheltered their own. The end of an era where America volunteered to defend nations and fight wars having nothing to do with her own vital interests or national security.

The bankruptcy of a U.S. trade and foreign policy, which has led to the transparent decline of the United States and the astonishing rise of China, is apparent now virtually everywhere.

And America is not immune to the rising tide of nationalism.

Though, like the alcoholic who does not realize his condition until he is lying face down in the gutter, it may be a while before we get out of the empire business and start looking out again, as our fathers did, for the American republic first.

But that day is coming.

Copyright 2015 Creators.com.

May 8, 2015 Posted by | Economics | , , | Leave a comment

China to build $2bn Iran-Pakistan pipeline – media

RT | April 9, 2015

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.

April 9, 2015 Posted by | Economics | , , , , | Leave a comment

Europe and the BRICS countries forge an independent rating system

By Ian BLOHM | Oriental Review | April 2, 2015

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.

Ian Blohm is the economist and international financial adviser of the Polish origin. He is currently based in Moscow and can be reached at ian_blohm@myway.com

April 3, 2015 Posted by | Deception, Economics | , , , , , | Leave a comment

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