- Inside The World's "Doomsday Vault"
Imagine that the unthinkable has happened. A massive asteroid impact triggers a “nuclear winter” effect, or one of the world’s most dangerous supervolcanos erupts. Maybe Donald Trump gets in an epic Twitter feud with Kim Jong-Un that initiates World War 3. Either way, things are going sideways, and the fate of human civilization itself is at stake. Will everything be lost? Visual Capitalist's Jeff Desjardins explains…
ENTER THE ‘DOOMSDAY VAULT’
Well, besides the fact that the world’s cities have been replaced by smoking craters, there is some good news for the humans that survive a potentially apocalyptic scenario.
On a remote island that is just 800 miles (1,300 km) from the North Pole, the Norwegian government has built a failsafe in the freezing cold that protects thousands of the most vital crops from extinction. Officially called the Svalbard Global Seed Vault, it already holds close to a million samples of crops around the world, with each sample holding about 500 seeds.
Today’s infographic, from Futurism, has more on this Doomsday Vault that could one day help to save civilization:Courtesy of: Visual Capitalist
- Paul Craig Roberts Asks "Is That Armageddon Over The Horizon?"
The insouciance of the Western world is extraordinary.
It is not only Americans who permit themselves to be brainwashed by CNN, MSNBC, NPR, the New York Times and Washington Post, but also their counterparts in Europe, Canada, Australia, and Japan, who rely on the war propaganda machine that poses as a media.
The Western “leaders,” that is, the puppets on the end of the strings pulled by the powerful private interest groups and the Deep State, are just as insouciant.
Trump and his counterparts in the American Empire must be unaware that they are provoking war with Russia and China, or else they are psychopaths.
A new White House Fool has replaced the old fool. The New Fool has sent his Secretary of State to Russia. For what? To deliver an ultimatum? To make more false accusations? To apologize for the lies?
Consider the audacity of Secretary of State Tillerson. He has spent the week prior to his visit to Moscow supporting incredible lies and false allegations that Assad of Syria used chemical weapons with Russia’s permission, which justified Washington’s unambigious war crime of a military attack on a country with which the US has not declared war. Less than 100 days in office, and Trump is already a war criminal along with the rest of his warmonger government.
The entire world knows this, but no one says it. Instead, Tillerson, who has been heavy with lies and threats has the confidence to go to Moscow to tell the Russians that they have to hand over Assad to the American Uni-Power.
Tillerson’s mission demonstrates the complete, total unreality of the world in which Washington lives. Try to imagine Tillerson’s arrogance. If you had been bad-mouthing and threatening strong, important people, would you feel comfortable going over to their house to have dinner with them? Does Tillerson think that now that Russia has largely freed Syrtia of US-supported ISIS, Russia is going to turn Syria over to Washington?
Is he going to tell Lavrov that he didn’t really mean all those nasty lies he told about Russia, but the zionist neoconservatives made him do it? That he is not really in charge, just a tool of the Anglo-Zionist Empire?
Maybe Tillerson is going to ask for asylum and get on the winning side.
Stephen Cohen, one of the few remaining Americans knowledgeable about Russia, told the two CNN presstitutes and the warmonger Col. Leighton, one of the “experts” that the presstitutes roll out to pronounce the propaganda against Russia, that Russia was preparing for hot war. It seems to have gone over the heads of the CNN presstitutes and colonel. Whose payroll are they on?
The Russian leaders, who, unlike the Western liars, speak the truth, have said clearly that Russia will never again fight a war on her own territory. The Russians couldn’t put it more clearly. Provoke a war, and we will destroy you on your own territory.
When you watch the president and government in Washington, the European governments, especially the idiots in London, the Canadian and Australian governments, you can only marvel at the total stupidity of “Western leadership.” They are begging for the end of the world.
And the presstitutes are at work driving toward the end of life. Huge numbers of Western peoples are being prepared for their demise, and they are protected from the realization by their insouciance.
Washington is so arrogant and lost in its own hubris, that Washington does not understand that the years of clear as crystal lies about Russia and Russian intentions and deeds have convinced Russia that Washington is preparing the populations of the United States and Washington’s captive peoples in West and East Europe, Canada, Australia, and Japan for a US pre-emptive nuclear strike against Russia. Published US war plans against China have convinced China of the same.
If not for war, what else is the change in US war doctrine for? George W. Bush abandoned the stabilizing role of nuclear weapons by moving them from a retaliatory function to a nuclear first strike. Then he pulled out of the anti-ballistic missile treaty concluded by President Richard Nixon. Now we have US missile sites positioned on Russia’s borders. We tell the Russians the lie that the missiles are to prevent an Iranian nuclear ICBM strike against Europe. This lie is told, and accepted by the puppets in Europe, despite the known, incontestable fact that Iran has neither nukes nor ICBMs. But the Russians do not accept it. They know it is another Washington lie.
When Russia hears these flagrant, blatant, obvious lies, Russia understands that Washington intends a preemptive nuclear attack on Russia.
China has reached the same conclusion.
So, here is the situation. Two countries with nuclear forces expect that the insane fools who rule the West are going to attack them with nuclear weapons. What are Russia and China doing? Are they begging for mercy?
No. They are preparing to destroy the evil West, a collection of liars and war criminals, the like of which the world has never previously experienced.
It is the US, the washed-up joke of a “uni-power” that after 16 years is still unable to defeat a few thousand lightly armed Taliban in Afghanistan, that needs to ask for mercy.
The reckless and irresponsible war talk in the US government and presstitute media and among NATO and Washington’s vassals must stop immediately. Life is in the balance.
Putin has shown amazing patience with Washington’s lies and provocations, but he cannot risk Russia by trusting Washington, whom no one can trust. Not the American people, not the Russian people, not any people.
By jumping on the Deep State’s propaganda wagon the liberal/progressive/left is complicit in the march toward Armageddon.
- Turkish Referendum Full Preview
This Sunday, Turkey will vote in a hotly contested referendum on the presidential
system, whose outcome could place sweeping new powers in the
hands of President Tayyip Erdogan and herald the most radical change to
the country’s political system in its modern history.
The package of 18 amendments would abolish the office of prime minister and give the president the authority to draft the budget, declare a state of emergency and issue decrees overseeing ministries without parliamentary approval.
Opinion polls have given a narrow lead for a “Yes” vote, which would replace Turkey’s parliamentary democracy with an all-powerful presidency and may see Erdogan in office until at least 2029. The outcome will also shape Turkey’s strained relations with the European Union. The NATO member state has curbed the flow of migrants – mainly refugees from wars in Syria and Iraq – into the bloc but Erdogan says he may review the deal after the vote. Some 55 million people are eligible to vote at 167,140 polling stations across the nation, which open at 7.00 am (0400 GMT) in the east of the country and close at 5 pm (1400 GMT). Turkish voters abroad have already cast their ballots.
The referendum has bitterly divided a nation which has already seen extensive political fracture over the past year, including one “failed coup” attempt last summer. Erdogan and his supporters say the changes are needed to amend the current constitution, written by generals following a 1980 military coup, confront the security and political challenges Turkey faces, and avoid the fragile coalition governments of the past. Opponents say it is a step towards greater authoritarianism in a country where around 40,000 people have been arrested and 120,000 sacked or suspended from their jobs in a crackdown following last July’s failed coup, drawing criticism from Turkey’s Western allies and rights groups, and resulting in the worst diplomatic relations between Turkey and Europe in recent history. Relations between Turkey and Europe hit a low during the referendum campaign when EU countries, including Germany and the Netherlands, barred Turkish ministers from holding rallies in support of the changes. Erdogan called the moves “Nazi acts” and said Turkey could reconsider ties with the European Union after many years of seeking EU membership.
On the eve of the vote, Erdogan held four separate rallies in Istanbul, urging supporters to turn out in large numbers. “April 16 will be a turning point for Turkey’s political history… Every vote you cast tomorrow will be a cornerstone of our revival,” he told a crowd of flag-waving supporters. “There are only hours left now. Call all your friends, family members, acquaintances, and head to the polls,” he said.
Erdogan and the ruling AK Party, led by Prime Minister Binali Yildirim, have enjoyed a disproportionate share of media coverage in the buildup to the vote, overshadowing the secular main opposition Republican People’s Party (CHP) and pro-Kurdish People’s Democratic Party (HDP). Erdogan has sought to ridicule CHP leader Kemal Kilicdaroglu, playing videos of his gaffes during rallies, and has associated the “No” vote with support for terrorism.
Kilicdaroglu has accused Erdogan of seeking a “one-man regime”, and said the proposed changes would put the country in danger. “This is not about right or left… this is a national issue… We will make our choices with our children and future in mind,” he said during his final rally in the capital Ankara.
The government says Turkey, faced with conflict to the south in Syria and Iraq, and a security threat from Islamic State and Kurdish PKK militants, needs strong and clear leadership to combat terrorism.
While recent polls suggest a pick-up in momentum for “yes”, they remain close, and the large share of “undecided” voters is adding to the uncertainty. According to Wall Street banks like Barclays, a “yes” outcome will likely result in a broad-based, yet potentially short-lived, relief rally driven by a reduction in near-term political uncertainty. In the event of a less-expected “no” outcome, Barclays expect a negative market reaction and positioning for this looks most attractive via FX options.
Below is a full preview of the Turkish referendum, whose outcome should be known sometime on Sunday night, courtesy of Barclays.
Turkey is heading for a public referendum on the presidential system on 16 April, this Sunday. The recent polls suggest a pick-up in momentum in favor of “yes” (Figure 1) and this is also evident in the latest surveys of pollsters such as Metropoll and Gezici, which show “yes” at around 53% as opposed to earlier surveys of below 50%. The “yes” and “no” outcomes still appear to be close on average, however, and the associated margin of error (2-3% according to pollsters) along with the large share of “undecided” voters underscores the binary nature of the referendum outcome.
Achieving 50%+ support for the “yes” campaign (AKP-MHP) might look relatively straightforward at first sight, given a combined voter base of 61% (November 2015 election results) and the almost perfectly aligned rhetoric and policies of the parties. Recall that the transformation of the political landscape before and in the aftermath of the November 2015 elections led to a firm macro-level consolidation of Turkish politics along two lines: the “nationalist front” (mostly AKP and MHP voters) and the “social democrat front” (mostly CHP and HDP voters).
However, polls suggest a less comfortable race for the “yes” campaign: i) a large number of MHP voters seem to still be unconvinced by the “yes” campaign, and ii) the true color of the “undecided voters” is hard to decipher: pollsters say voters are increasingly refraining from revealing their preference due to the mood created by the extraordinary state of affairs, and “undecided” voters could be skewed towards “no”. Metropoll argued that more than 75% of undecided need to vote “no” for it to win; while historically, undecided voters have tended to either vote for the status quo or not participate in elections. The low polling response rate due various factors (such as peer pressure in the South East and the Black Sea regions according to some pollsters) is yet another complication that could potentially be distorting the poll results.
Nevertheless, momentum has picked up in favor of “yes” based on the most recent polls, and this has also been echoed by the political expert media commentary. Among the key catalysts, experts note the following.
- The effectiveness of President Erdogan’s campaign to push the “yes” votes of the AKP electorate higher (from the 80% level to the 90% level), as well as its impact on convincing more of the MHP electorate to vote “yes”.
- The tailwind provided by escalating tensions with the Netherlands and the EU, which is likely to help consolidate the nationalist vote.
- The positive impact of the improving economic sentiment recently on the “yes” campaign (Figures 2 and 3).
- The tactical missteps of the main opposition party CHP (i.e. comments by party officials) influencing undecided AKP voters in favor of “yes”.
Overall, it is hard to simplify the referendum to a probability exercise of an early election under yes/no outcomes, given that it is far more complex and the implications are unclear (both scenarios entail an early election possibility, in our view). While markets will likely perceive near-term political risks (i.e. an early election) to be lower in the scenario of a “yes” outcome, medium-term concerns about policy uncertainty and institutional strength are likely to remain; the Venice Commission opined that constitutional changes will remove checks and balances, leading to weaker institutions. The influence of presidential advisors on policymaking and the transformation to a “new economic model” would likely be solidified under a presidential system accompanied by an accommodative monetary policy bias, a potentially looser fiscal stance and an increase in quasi-fiscal spending focused on infrastructure projects via the sovereign wealth fund (SWF). We believe that, even in the event of a “yes” outcome, the likelihood of an early election in Q4 2017/Q1 2018 is still non-negligible as President Erdogan may choose to bring forward presidential elections (from August 2019).
* * *
Market implications for FX, local rates and sovereign credit
The market appears largely positioned for an outcome consistent with polls that suggest a “yes” result is most likely. In FX option markets, for example, the volatility-adjusted premium for USDTRY calls versus puts has recently dropped to multi-year lows and below-average kurtosis suggests little demand for negative tail-event protection (Figure 4). In bonds, TurkGB risk premia remain extremely low and currently offer less return than USTs on a hedged basis (Figure 5). Finally, in EM credit, Turkey YTD has outperformed the broader Bloomberg Barclays USD EM sovereign index, partially reversing the c.10% underperformance in 2016 (in total return terms).
YES: A “yes” outcome would likely result in a broad-based, yet potentially short-lived, relief rally
Despite the market’s anticipation of a “yes” outcome, we think the associated reduction in near-term political uncertainty would likely still deliver some relief rally, allowing a temporary reprieve for the TRY and a steeper curve in anticipation of a “gradual” unwinding of tight liquidity policy.
In FX, still-large TRY political risk premia and undervaluation suggest room for appreciation following a “yes” outcome. While our estimate of the lira’s political risk premia has reduced from 15pp at the end of January, it remains relatively large at 8pp (Figure 6). Furthermore, our short-term Financial Fair Value (FFV) model suggests a 4% undervalued TRY against the USD (Figure 7).
We believe risk-reward argues for being long TRYZAR targeting January highs of 3.90 with a stop-loss at 3.67 for a reward to risk ratio of 3:1 (spot reference: 3.73). We prefer this to short USDTRY as South Africa’s similarly low risk-adjusted real interest rate differentials and heightened political risk should provide a degree of protection in the event of a “no” outcome. The trade also remains positive carry.
In rates, very low bond risk premia suggest a rates rally following a “yes” is likely to be concentrated at the front end of the yield curve as market participants will likely price a gradual unwinding of the CBT’s liquidity tightening measures. As such, we reiterate our existing trade recommendation of paying the 1s5s TRY cross-currency swap spread targeting -30bp with a stop-loss of -100bp.
For Turkey sovereign credit, we maintain our Market Weight rating. This balances our concerns about a likely medium-term deterioration of Turkey’s credit metrics in a presidential system on the one hand with relatively attractive valuations and likely reduced near-term political uncertainty in a “yes” vote on the other hand. In the near term, we see potential for further spread compression of Turkey against South Africa, especially in the 5y sector of the curve (Turkey ‘22s vs SOAF ‘22s), with South Africa remaining vulnerable to adverse developments.
In the corporate credit space, we also have a Market Weight rating on Turkish banks and corporates. In the case of a “yes” vote, we would expect bank seniors to benefit more than corporates given the more significant spread pick-up relative to the sovereign. Higher beta seniors trading at a discount of over 100bp to the sovereign as well as new-style Tier 2s yielding over 7% are likely best positioned to benefit, in our opinion, although this could be met with more Tier 2 supply. We would expect the opposite reaction to a “no” vote, with IG-rated corporates and more expensive bank seniors as well as old-style Tier 2s to be less vulnerable in any sell-off.
NO: Positioning for a “no” outcome looks most compelling via FX options
The less-expected “no” outcome will likely result in larger market movements as a higher risk of an early election would increase risk premia in the local bond curve, weigh on the lira and increase FX implied volatility, in our view.
- India Claims 500 Pakistanis (Protecting ISIS) Killed In "Treasonous" US Bombing In Afghanistan
While US officials have upped their death count from the Afghan MOAB drop to 94, Indian authorities are claiming that at least 500 Pakistani nationals (who had been protecting the ISIS operatives in this area) were killed in the US bombing in Nangarhar province.
One India reports that the area that was targetted was controlled by the Islamic State and protected by the Pakistan army, sources say.
The operation that was jointly coordinated by the 201 Selab Corps of the Afghanistan army targeted the caves and tunnels that were used as hiding places by the IS. It is now clear that the Pakistan army was backing these IS operatives in Afghanistan, official sources also confirmed.
Indian agencies who are coordinating withe counterparts in Afghanistan have learnt that there are no civilians living in the area. There were a large number of stooges of the Inter-Services intelligence who have been protecting the IS operatives in this area. The US action comes at a time when there was a huge build-up of IS forces in Afghanistan.
Indian agencies say that the Pakistan army and the ISI were nurturing these operatives. The entire area that was bombed was under the control of the ISI officials backing the IS, sources also said. The impact of the bomb was so huge that it blew up at least 500 Pakistanis and an equal number of IS operatives.
So, while India seems pleased with the result of the US bombing, not everyone else is. Reuters reports that former Afghan president Hamid Karzai accused his successor on Saturday of committing treason by allowing the U.S. military to drop the largest conventional bomb ever used in combat during an operation against Islamic State militants in Afghanistan.
Karzai, who also vowed to "stand against America", retains considerable influence within Afghanistan's majority Pashtun ethnic group, to which President Ashraf Ghani also belongs. His strong words could signal a broader political backlash that may endanger the U.S. military mission in Afghanistan.
"How could you permit Americans to bomb your country with a device equal to an atom bomb?" Karzai said at a public event in Kabul, questioning Ghani's decision. "If the government has permitted them to do this, that was wrong and it has committed a national treason."
"I decided to get America off my soil," he said. "This bomb wasn't only a violation of our sovereignty and a disrespect to our soil and environment, but will have bad effects for years."
Ghani's office said the strike had been closely coordinated between Afghan and U.S. forces and replied to Karzai's charges with a statement saying:
"Every Afghan has the right to speak their mind. This is a country of free speech."
Public reaction to Thursday's strike has been mixed, with some residents near the blast praising Afghan and U.S. troops for pushing back the Islamic State militants.
- Meet The Lawyer Who's Suing Saudi Arabia For Financing The 9/11 Attacks
I’ve stopped calling what our government has done a cover-up. Cover-up suggests a passive activity. What they’re doing now I call aggressive deception.
– Former Senator Bob Graham, co-chair of Congress’s 9/11 Joint Inquiry
With the recent arrival of our new baby daughter, free time for reading has been in extremely short supply as of late. That said, I did find some time yesterday while she was napping to read a fascinating and infuriating article published at Politico about a New York attorney’s mission to hold Saudi Arabia accountable for its role in financing the September 11, 2001 terrorist attacks.
Longtime readers will be aware of the fact that I’ve never accepted the U.S. government’s fairytale story about how the 9/11 attacks went down, and my suspicions of deep Saudi involvement were confirmed by last year’s release of the infamous “28 pages.” Here’s an excerpt of what I wrote at the time from the post, The 28-Pages Are Way Worse Than I Thought:
Shortly after the release of the infamous 28-pages earlier today, the White House issued a statement dismissing allegations of Saudi involvement in the attacks of 9/11. I believe such assurances are intended to prevent people from reading it in the first place, because if you actually read them, your mouth will be wide open the entire time in disbelief.
There are only two conclusions any thinking person can come to after reading the 28-pages.
1. Elements within the Saudi government ran the operations behind the 9/11 attack.
2. The U.S. government covered it up.
But don’t take my word for it. You should read it yourself.
If you missed that post the first time around, you should definitely check it out.
Moving along, a recently published Politico piece adds additional pieces to the puzzle, and makes it clear that the U.S. government continues to intentionally cover up Saudi Arabia’s increasingly obvious role in the terrorist attack. The following should make your blood boil, and lead you to wonder why the U.S. government continues to have such deep ties to this barbaric, terrorist-funding regime.
Here are excerpts from, One Man’s Quest to Prove Saudi Arabia Bankrolled 9/11:
When Jim Kreindler got to his midtown Manhattan office on Friday, July 15, 2016, he had a surprise waiting for him. Twice in the previous eight years, Kreindler had been in the room as then-President Barack Obama promised Kreindler’s clients he would declassify a batch of documents that had taken on near mythic importance to those seeking the full truth of who had helped plan and fund the September 11, 2001, terrorist attacks. Now, Kreindler learned, “the 28 pages” as they were known, were open for inspection and it was up to his team to find something of value. It wasn’t long before they did—a single, vague line about a Somali charity in Southern California.
That obscure reference would soon become part of the backbone of an argument that Kreindler and his firm have been making for a long time: Without financial and logistical support from members of the government of Saudi Arabia, the 9/11 attacks would have never taken place.
Sometimes it seemed as though Kreindler’s own government were actively working against the firm; agencies denied Freedom of Information Act requests and shared information with the Saudis as often as with his team. “I’ve stopped calling what our government has done a cover-up,” says former Senator Bob Graham, the co-chair of Congress’s 9/11 Joint Inquiry and the most prominent voice alleging a connection between the Saudis and the hijackers. “Cover-up suggests a passive activity. What they’re doing now I call aggressive deception.”
It seems to me the very country in the Middle East the U.S. government should be bombing, is precisely the one it defends most aggressively.
Saudi Arabia was Kreindler’s focus because many, including well-placed people like Graham, had long suspected that it had played a role in the plot, a charge the Saudis had always vociferously denied. Suspicions were fueled, however, by what the U.S. government had chosen not to reveal after the attacks. The post-9/11 Joint Inquiry, the first U.S. investigation led by the House and Senate intelligence committees, had exposed nearly 1,000 pages of documentation and evidence to public scrutiny. But upon its release in 2002, President George W. Bush ordered a small portion—the 28 pages—to remain classified. They were allegedly full of unpursued leads that hinted at a relationship between the 19 hijackers—15 of whom were Saudi nationals—and people possibly linked to the Saudi government. Then came the later 9/11 Commission, whose own members protested drastic, last-minute edits that seemed to absolve the Saudi government of any responsibility.
On March 20, 2017, for the first time in the case’s long history, the firm named the Kingdom of Saudi Arabia as its lead defendant. This was made possible because the Justice Against Sponsors of Terrorism Act, a bill that allows U.S. nationals to sue countries even if those countries have not been deemed a state sponsor of terrorism, had passed in September and survived Obama’s veto.
Now here’s the recent breakthrough in the case, which comes courtesy of information gleaned from a Somali man who was living in San Diego at the time of the attacks, Omar Abdi Mohamed.
By now, according to the agent’s later grand jury testimony, Schultz knew this to be untrue. As he and Mohamed were speaking, Schultz’s colleagues were rifling through that stucco home and finding deposit slips that told a very different story. Far from destitute, the Western Somali Relief Agency had received more than $370,000 in donations in less than three years. The vast majority of that money had come from the suburban Chicago branch of an international nonprofit called Global Relief, according to the indictment that the government would ultimately file against Mohamed. In the two years between Mohamed’s first interview and his second, Global Relief had been designated by the United States Treasury Department as a supporter of terrorism due to its alleged connections to Osama bin Laden and Al Qaeda, according to Schultz’s grand jury testimony. What’s more, the agents discovered checks that showed Mohamed quickly moved the cash he had received from Global Relief to a money transfer service that operated throughout the Middle East. For a nonprofit allegedly created to provide humanitarian assistance, the series of events looked suspicious. So did the fact that Mohamed refused to tell the truth.
Schultz also knew something else. Mohamed had claimed that his one and only job was as a teacher’s aide. But ICE officials had just discovered that was also untrue. Even before his arrival in the United States, Mohamed had been employed as a “propagator” for the Kingdom of Saudi Arabia’s Ministry of Islamic Affairs, an agency long suspected of ties to extremists. For nearly a decade, Mohamed had received $1,750 a month to provide written reports on the local Islamic community. Even Mohamed’s listed reason for obtaining a religious worker’s visa, that he was to assist a San Diego imam, had been untrue. That same imam had told Schultz that Mohamed didn’t actually do any work. The mosque where he was supposedly first employed was just a small apartment. The story had been a ruse meant to help him gain entry into the United States.
This might have been the last anyone ever heard of Mohamed if it hadn’t been for a member of Kreindler’s team who noticed that one vague line in the “28 pages.” It was a reference to a Somali nonprofit that, according to an FBI agent, “may allow the Saudi government to provide al Qaeda with funding through covert or indirect means.” They knew of only one Somali nonprofit with Saudi ties in San Diego—Mohamed’s Western Somali Relief.
In their 15 years on the case, Kreindler’s team hadn’t persuaded the U.S. government to provide them much of anything useful. And it certainly hadn’t had any success with the government’s Saudi counterparts. But they had spent more than a decade legally compelling some of the largest charities in the Middle East to hand over documents. Many individuals within the U.S. government knew these charities had provided financial and logistical support for the people and groups American officials labeled as terrorists. This trove of documents had grown into a database made up of terabytes worth of information—the firm’s well-organized haystack. And after Kreindler started looking more closely at Omar Abdi Mohamed, the firm found a needle.
During his 2004 interview with ICE, Mohamed said he once had been visited by an official from the Saudi Ministry of Islamic Affairs, the same department from which he was receiving a monthly check. Mohamed gave the man’s name as “Khaleid”, though the last name he offered was garbled. The ICE agent helpfully provided him with one: Sowailem.
Khaleid Sowailem was, at the time, the head of Da’Wah, a department within the ministry whose stated goal is proselytizing. It’s a mission the Saudis accomplish by spending more than anyone in the world to build, staff and support madrassas and mosques to spread Wahhabism, the ultraconservative form of Islam unique to the kingdom and embraced by Osama bin Laden. It’s the main reason why one analyst once described Saudi Arabia as “both the arsonist and the firefighter” when it comes to global terrorism. It only made sense, then, that a man like Mohamed, a “propagator,” would be of interest to Sowaleim, the bureaucrat in charge of propagation.
Bob Graham had long suspected that men like Sowailem working in the Ministry of Islamic Affairs were the strongest link between the hijackers and the Saudis. “I came to the conclusion that there was a support network by trying to assess how the 19 hijackers could pull it off with their significant limitations,” Graham told me recently. “Most couldn’t speak English, most had never been in the United States, and most were not well educated. How could they carry out such a complex task?” Graham’s suspicions were heightened by the connections between the ministry and two men in what had come to be known as the San Diego cell.
The first man was Fahad al-Thumairy, an imam at the King Fahad mosque in Los Angeles who was known for his virulently anti-American views. Thumairy was also an employee of the Ministry of Islamic Affairs. The second was Omar al-Bayoumi, a garrulous man who many in San Diego’s Islamic community assumed to be a spy, since he could often be found walking around with a video recorder, taping everyone he encountered. Bayoumi was also paid by the Saudis—he had been employed in a series of ghost jobs since the ‘70s, according to the complaint. He was also the man who had made a claim that many U.S. investigators still find too coincidental to be true.
In a post-9/11 interview with the FBI, Bayoumi had said that he was dining in a Middle Eastern restaurant in Los Angeles in early 2000 when he happened to strike up a conversation with two complete strangers with familiar accents. A friendship developed, based off that single encounter. Bayoumi helped the strangers find apartments in San Diego; threw them a large welcome party; co-signed their leases and provided them money for rent; let them borrow his cellphone; even introduced them to people who helped them obtain drivers licenses and contact flight schools. Those two men were hijackers Khalid al-Mihdhar and Nawaf al-Hazmi, the first plotters to enter the United States, whose lives would end when American Airlines Flight 77 crashed into the Pentagon.
Yep, it’s all just a coincidence, surely.
The FBI has long believed that Bayoumi’s chance encounter came immediately after meeting with Thumairy. Shortly after that meeting, Bayoumi’s $3,000-a-month Saudi salary was bumped up to $7,000. To people like Graham, the implication was clear: Thumairy, a Ministry of Islamic Affairs employee, had tasked Bayoumi with helping the hijackers settle into a foreign country, and his Saudi employers had provided him with extra cash to do so.
Doesn’t really take a detective to figure that one out.
Kreindler’s team knew all of this, as did any student of 9/11. What they didn’t know was whether there was any link to Mohamed, or to the man whom ICE agents had identified as his boss. So Kreindler’s team took Sowailem’s name and plugged it into their database. They got a hit. Years before, Kreindler had received hundreds of thousands of pages of documents from a Saudi-funded charity called World Assembly of Muslim Youth, which according to the complaint, was linked to Al Qaeda. There, at the top of a single page, it found a note from Khaleid Sowailem written on official letterhead from the ministry. On that note was Sowailem’s phone number at the Saudi Embassy in Washington, D.C. They then plugged that number into the database and, again, out came a hit—this time, one that linked back to the men Kreindler and the rest of the world had already heard of.
According to heavily redacted FBI records gathered after 9/11, in the three months after Bayoumi allegedly randomly ran into and befriended the two hijackers, he also made nearly 100 calls to Saudi officials in the U.S. Thirty of those calls went to the number that Kreindler had uncovered as Sowailem’s direct line. What’s more, Kreindler’s team knew that in December 2003 the U.S. State Department had quietly revoked the diplomatic credentials of two dozen Saudi personnel. Kreindler knew that the State Department published complete lists of diplomats every quarter. They checked the last listing in 2003—Sowailem’s name was on it. They then checked the first listing in 2004—Sowailem’s name was gone.
According to court documents filed in the case against him, starting in December 1998 and continuing until May 2001 Omar Abdi Mohamed wrote 65 checks—some as small as $370; others as large as $60,000—to Dahabshiil. The total amount, some $370,000, is roughly the same as what the 9/11 Commission estimated as the cost of the plot.
To the people at Kreindler, there’s something else suspicious about Mohamed’s money transfers. It’s not just that he lied about them to the government. Or lied about the fact that he conducted them while working for the Saudis. It’s also the timing. The transfers came just months after two massive truck bombs went off almost simultaneously in front of U.S. embassies in Kenya and Tanzania. One of the statements issued by 9/11 Commission staff shows that in the aftermath of those bombings, Vice President Al Gore made a trip to Riyadh with the express purpose of getting the Saudis to give American investigators more access to people who could shed light on Al Qaeda’s financial backing—people who were already in Saudi custody. The Saudis, the 9/11 Commission staff wrote, were “reluctant or unable to provide much help … the United States never obtained this access.”
Similar attempts to reach ICE’s Schultz and the FBI agent who helped investigate Mohamed were also unsuccessful. During Mohamed’s immigration trial, the government successfully persuaded a judge to suppress the evidence it had gathered against him, citing matters of national security. In late March, Jim Kreindler’s firm received a formal notice from the Justice Department that its request to review that evidence would be denied.
Can you believe this crap? Americans knowing the truth about 9/11 is considered a risk to “national security.” What a joke.
What happens next in Kreindler’s case against Saudi Arabia is unclear. JASTA allowed him and his firm to name the country as a defendant, but the bill has come under serious attack since its passage. (Congress overrode Obama’s veto, the first of his two terms.) Senators John McCain and Lindsay Graham have spent a considerable amount of time arguing against it, and continue to argue to water it down, saying that if other countries pass similar laws the nation hurt most by the trend may be our own. Then there is the Saudi lobbying apparatus, which at one point last fall numbered more than 10 firms and millions of dollars in fees per month. Just recently, the Daily Caller reported that U.S. military veterans were allegedly being offered what they thought were merely free trips to Washington, D.C., that were actually a Saudi-backed attempt by a lobbying firm to use former service members to argue against JASTA.
It’s always John McCain and Lindsey Graham. Always.
Least known of all is what might happen now that Donald Trump is president. During the campaign, Trump described Obama’s veto of JASTA as “shameful” and “one of the low points of his presidency.” Once in office, however, Trump has seemingly reverted to the status quo. He recently held a series of high-level meetings with Saudi deputies that the country’s delegates described optimistically as a “historic turning point” in the two allies’ relationship. Trump’s administration is now said to be weighing even greater involvement in Saudi Arabia’s war in Yemen, which the Saudis see as a proxy battle with Iran, its primary Middle East antagonist. The Trump State Department has also approved a resumption of sales of precision-guided weapons to the Saudis, a measure that was suspended late in the Obama administration.
For a prior article I wrote on JASTA, see: U.S. Corporations Side With Saudi Arabia Against the American People Over 9/11 Victims Bill
It seems exceedingly unlikely that Kreindler’s firm will receive anything like the sort of treatment it got from the U.S. government during its two decades-long case against Libya. Back then, the firm worked hand in glove with high-ranking officials in the State Department in order to resolve the Lockerbie case—paying victims’ families their settlement money was one of the conditions Qadhafi had to satisfy in order to have key economic sanctions finally lifted. In lieu of that level of support, Kreindler has identified a series of smaller measures Trump could take that would still help his case and, just as important, paint a fuller picture of the years and months of stateside planning prior to 9/11. Key among those are FBI reports that might shed light on who, if anyone, was helping the terrorists in the many other American cities in which they lived. As Bob Graham points out, the only reason the evidence in San Diego is compelling is because we actually know it, a result of some good detective work by a member of his Joint Inquiry staff. “I believe if we knew all the facts,” Graham says, “We would find that there were people similar to al-Bayoumi and Mohamed in southeast Florida, Virginia and New Jersey.”
That we don’t have definitive answers is a testament to the enduring secrecy that persists almost 16 years later. It’s also a testament to the patience of people like Kreindler, whose team has been working that whole time to get what it needs to prove its case, and who believes that no matter who is in office, there will only be one conclusion.
Presidents come and go, but support for the Saudi terrorist state is timeless.
So who does U.S. government work for anyway? Hint, not U.S. citizens.
- Doomsday Bunker Sales Soar After Trump's Military Strikes
For the rich and famous among us, the endgame has been relatively clear for a long time: according to the surge in ultra luxury “bunkers for billionaires” being built, the way all this ends is nothing short of a whole lot of mushroom clouds around the globe, with the world’s wealthiest hoping to protect themselves in deep underground bunkers designed for just such an eventuality. That these bunkers are also ultra luxurious and extremely expensive is just the status symbol today’s billionaires are eager to show as they carry humanity’s survival “to the other side.”
But who said that doomsday bunkers have to be unaffordable for the common man?
As CBS reports, while the Trump administration’s increased military strikes might cause fear for some people, for one North Texas man, it means big bucks. Nora Holloway of Dallas is one of those folks who is concerned about the state of the world. So, citing the recent bombings in Syria, Afghanistan and the growing tension with North Korea, Holloway posted online to see if anyone wanted to “go in” on an underground bunker.
“I’m in no position to buy one,” said Holloway. “However, I think that for a lot of people that is a serious concern and a lot of people have done so and will be doing so.”
They have indeed, and with doomsday bunkers no longer only confined to the 0.01%, it means Trump’s recent foreign policy overtures have led to a bonanza for bunker builders “for the rest of us.”
“If I took 30 people and I worked 7 days a week and 24 hours a day, I still wouldn’t be caught up right now,” said Clyde Scott of Rising S Bunkers in Murchison, Texas. Scott said there is around a three-month backlog for one of his subterranean shelters.
“They don’t really call me and ask me about the price or colors,” said Scott. “They say how fast can they get it.”
The list is only growing with each bomb dropped and threat levied. “You should have got it 6 months ago,” said Scott. “You shouldn’t wait until the threat, until the fuse is lit on the rocket.”
To be sure, unlike the ultraluxury bunkers discussed previously, these are at best Spartan, but at least they are affordable to most people. The most basic model is 100 square feet of protection that is installed for around $45,000. Scott said the most common is a 500 square-foot model for a family of four that runs for around $120,000.
The bunkers have all the amenities of home, are solar powered and surrounded by 100 percent steel. Scott said only an imagination and wallet stand in the way.
“Doomsday crazy person, ‘prepper’ that’s all kind of nutty that people make them out to be…they don’t have $3.5 million to by a 5,500 square-foot bunker. Right?” questioned Scott.
While all of his clients are kept confidential, Scott said everyone from star athletes, Forbes 500 CEOs and maybe even an unsuspecting next door neighbor is investing underground without anyone noticing. “I’ve sold to billionaires and I’ve sold to average Joes,” said Scott. Holloway said she does not have the money but can at least dream.
“It would prepare people, myself specifically for what could and very well may happen in the future,” said Holloway.
A list of models can be found here. The most expensive model being offered is “The Aristocrat.” For $8.3 million, the model comes with a pool, bowling alley and gun range.
ECONOMY SURVIVAL SHELTERS, 8 X12 – MINI BUNKER – $39,500
STANDARD SURVIVAL SHELTERS, 10×20-BASE MODEL – UNDERGROUND BUNKER – $58,500
FREEDOM SERIES, 10×50 – FREEDOM SERIES, UNDERGROUND BUNKER – THE HOMESTEADER – $159,000
ADMIRAL SERIES, 20×50 – ADMIRAL SERIES – UNDERGROUND BUNKER – $288,000
XTREME SERIES, 2500SQFT – XTREME SERIES – UNDERGROUND BUNKER – THE GUARDIAN – $679,000
XTREME SERIES (BUNKER COMPLEX); UNDERGROUND BUNKER – “THE FORTRESS” – $1,009,999
“THE PRESIDENTIAL” LUXURY BUNKER: $4,200,000
“THE ARISTOCRAT” LUXURY BUNKER; “THE ARISTOCRAT” – $8,350,000
And while it hardly needs it considering the niche audience, here is the marketing material one creates to sell a $8 million bunker.
- Why The Equity Bull Market Must Continue (Or Else)
Interestingly, the last time Private and State & Local Government Pensions were fully funded was at the end of the stock market bubble in 2000. Pensions were 25 percent overfunded in 1999.
However, even with stocks making new highs, these pensions remain $2.33 trillion, or 27 percent of their assets, underfunded at the end of 2016. Surprising.
One would think the slope should be headed south as stocks rise, no? Just as it was from 1995 to 2000. On the contrary, unfunded entitlements are heading parabolic north.
Could be a combination of an under-allocation to equities since the rising pension entitlements, mainly in state and local government retirement funds. Probably more the result of the later.and financial crash (see charts) and
The Upshot? It seems the only way out of the pension mess — other than massive contributions, tax increases, or defaults — is a humungous equity bull market with pensions appropriately positioned. In aggregate, they seem to be gun shy after the financial crisis with their average aggregate equity allocation only about 50 percent of what it was at the start and first few years of the new millennium.
One caveat is the allocation data can be distorted and deceiving as equities are measured at their market value where some of the other assets are not.
The question is: Will Janet Yellen and President Trump do “whatever it takes to preserve” the pensions? And will it be enough?
- Does This Energy Deal Signal A Dollar Bear Market?
By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.
While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW: ExxonMobil
In January of this year, ExxonMobil spent a whopping $6.6 billion on new oil leases – a sizeable amount even for Exxon whose net income in 2016 was $7.8 billion.
This was their biggest deal since the buyout of XTO Energy in 2009 when, after largely ignoring shale oil for a decade, they played catch up shelling out $41 billion for XTO – all of it in Exxon stock. More on that in a moment…
A popular narrative around this deal is the following:
This is dollar bearish. After all, oil and the dollar are relatively inversely correlated so why would you go spend a bunch of money on oil assets if you thought the dollar was going materially higher?
You probably wouldn’t, so what makes Exxon special and why should we pay attention to them? Why have so many analysts been pontificating over Exxon’s moves? After all, companies, even behemoths like Exxon, get it wrong all the time.
Since Rex Tillerson, former CEO of Exxon had just been appointed Secretary of state, and it figures that old Rex would have spent some time on the golf course with the Donald, and after chatting about that cute new intern with the lazy eye, he would have gathered some insights into Trump’s game-plan.
And so to see XOM turn around and do this deal, it’s understandable to assume there’s some plausibility to a Trump administration that will actively devalue the dollar sending commodities in general and certainly the black stuff higher… at least in greenbacks.
Here’s a 20-year chart of Exxon Mobil.
There are many many things which affect prices. Investor psychology, currency risk, sector risk… and algos… Yes, those blasted algos which I’ll come to in a minute.
But first take a look at the valuations numbers for XOM.
If you really think that XOM is worth 44x Earnings then please share with me whatever drugs you’re taking.
Taking a look at earnings growth vs share price growth for the last five years (till Year end 2016) we can see that the share price increased by 7.2% from $84.76 to $90.89, all the while EPS decreased by 78.2% from $8.67 to $1.89. Whoah!
Ok, so the share price has backed up a fraction and is around $83 today not $90, but we’re still staring at an over 70% collapse in EPS. 78% actually. Essentially earnings are flat while the share price has been rocketing higher. Mmmm…
It’s worth remembering that commodity markets are cyclical. They do well in good times and poor in bad. Markets it is said are forward looking. In this respect maybe just maybe investors are thinking that XOM can grow into the valuation and are pricing in this growth. In order for this to happen then presumably we’re going back to $100 oil.
Here’s what I think is really happening:
Machines are buying everything from currencies to equities, bonds, and anything in between. The algos dictate where the capital gets allocated.
Where this matters for a company like Exxon is that it sits in a number of the “low vol ETPs” – I wrote about these animals before.
So essentially what happens is the algos buy the low vol equities and ETPs, and ironically their buying depresses the volatility even more, causing the algos to recalibrate and add additional weightings to the equities exhibiting low volatility, causing more buying.
Think of a fat kid eating candy. It tastes good so he stuffs more into his face, and that too tastes good so he shovels some more in. When he vomits we don’t know but vomit he will.
So while the stock price is elevated you have to ask yourself the question: What would you do if you were Exxon management, staring at an overvalued stock price and being in the business of energy?
I know what I’d do…
I’d use my paper to acquire relatively undervalued assets. It’s the perfect trade and it’s got bugger all to do with my view on the dollar. Even if I overpay a little on the asset if I’m doing so with very overvalued paper then net-net I’m arbitraging the value difference.
Cast your vote here and also see what others would do
Have a good weekend!
“Just remember that a pat on the back is only 18 inches from a kick in the behind.” — Rex W. Tillerson
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- North Korean Missile "Blows Up" During Launch; President Trump Aware, Has "No Further Comment"
The initial official reactions to the failed missile launch are beginning to hit the wires:
U.S. Pacific Command on North Korea missile launch:
U.S. Pacific Command detected and tracked what we assess was a North Korean missile launch at 11:21 a.m. Hawaii time April 15. The launch of the ballistic missile occurred near Sinpo.
The missile blew up almost immediately. The type of missile is still being assessed.
U.S. Pacific Command is fully committed to working closely with our allies in the Republic of Korea and in Japan to maintain security.
Additionally, Secretary of Defense Mattis says President Trump is aware of the situation and has "no further comment” on failed North Korean missile test.
The big question is whether Trump will retaliate while VP Pence is in South Korea.
* * *
As we detailed earlier, after Saturday came and went without any provocation out of North Korea on its national holiday, many asked if Kim Jong-Un had finally learned his lesson.Well, according to South Korean news agency, not only did Kim not learn any lesson – or heed Trump's warning that a nuclear test or missile launch would be grounds for a US military strike – but Kim was not even successful in properly defying the US as according to the Joint Chiefs of the South Korean army, North Korea fired an unidentified missile but the test failed. The incident occurred a day after Kim Jong Un oversaw an elaborate military parade in the center of Pyongyang as the world watched for any provocations that risk sparking a conflict with the U.S.
According to a US official quoted by CBS, the launched missile was not an intercontinental ballistic missile, which North Korea has claimed to possess but has never successfully tested. It’s unclear why the missile failed.
The missile "blew up almost immediately" on its test launch on Sunday, the U.S. Pacific Command said, hours before U.S. Vice President Mike Pence was due in the South for talks on the North's increasingly defiant arms program.
As Yonhap further reports, North Korea's attempted missile launch on Sunday ended in failure, South Korea's Joint Chiefs of Staff (JCS) said.
“The North attempted to launch an unidentified missile from near the Sinpo region this morning but it is suspected to have failed,” the South’s Office of the Joint Chiefs of Staff said in a statement
The missile launch attempt came amid rising tensions with the United States that is sending an aircraft-carrier strike group to waters off the Korean Peninsula to deter potential North Korean provocations such as a nuclear test.
As VoA reports, there is still no information on the type of missile the DPRK tried to launch from Sinpo, where North Korea has a submarine base. What we do know, however, is that the time of the missile launch was at 06:20 am Korean time, and as Reuters also adds, the missile launched earlier this month flew about 60 km (40 miles) but what U.S. officials said appeared to be a liquid-fueled, extended-range Scud missile only traveled a fraction of its range before spinning out of control.
“It appears today’s launch was already scheduled for re-launching after the earlier test-firing” Kim Dong-yub, a military expert at Kyungnam University's Institute of Far Eastern Studies in Seoul.
“This launch can possibly be a test for a new type of missile or an upgrade,” Kim added. The North has said it has developed and would launch a missile that can strike the mainland United States but officials and experts believe it is some time away from mastering all the necessary technology.
Tension had escalated sharply in the region amid concerns that the North may conduct a sixth nuclear test or a ballistic missile test launch around the April 15 anniversary it calls the "Day of the Sun."
That said, in light of the recent NYT report that the US has been able to sabotage and remotely control North Korean launches for years courtesy of cyberattacks, one does wonder if the US did not play at least a minor role in this attempted, but failed, launch.
Three years ago, President Barack Obama ordered Pentagon officials to step up their cyber and electronic strikes against North Korea’s missile program in hopes of sabotaging test launches in their opening seconds.
Soon a large number of the North’s military rockets began to explode, veer off course, disintegrate in midair and plunge into the sea. Advocates of such efforts say they believe that targeted attacks have given American antimissile defenses a new edge and delayed by several years the day when North Korea will be able to threaten American cities with nuclear weapons launched atop intercontinental ballistic missiles.
Sabotage or not, at this moment Vice President Mike Pence is en route to South Korea on Saturday night for meetings with officials amid increased tensions in the region over Pyongyang's nuclear program and missile tests.
As we await more information, the immediate question is whether the mere intent to test the US' resolve, even if such an attempt was ultimately a failure will be sufficient for the US to commence bombing Pyongyang. Recall that two days ago, NBC reported that the US is prepared to launch preemptive strikes on North Korea in case Kim Jong-Un was planning on conducting a nuclear test. One can probably extrapolate the same logic to ballistic misisle launches, especially now that North Korea revealed a new, far bigger ICBM during the Saturday parade.
We expect the answer whether the US will strike North Korea to be revealed within the next few hours.
Meanwhile, courtesy of Stratfor, here are four possible scenarios on what happens next:
A Red Line at the 38th Parallel
A Range of Options
Action against North Korea could take many shapes or forms, from a limited strike to a large-scale military offensive targeting all of North Korea's military assets. On the lowest end of the scale, the United States could launch a strike to punish North Korea for continuing to develop its nuclear and missile arsenal and to deter it from pursuing nuclear weapons in the future. A punitive strike may be limited to a single base or facility in the country, with the threat of further action down the line if Pyongyang doesn't alter its behavior. Though this kind of attack offers the best way to keep the situation from escalating, it would by no means ensure that North Korea heeds the United States' warning and eases up on its nuclear and missile development. Nor does it eliminate the risk that Pyongyang may respond to the strike in kind.
Alternatively, the United States could elect to launch a more comprehensive punitive or preventive strike in an attempt to physically interrupt the nuclear and missile programs' maturation. The strikes would still be limited, focusing only on nuclear and missile infrastructure to signal that the United States is not trying to orchestrate a change in the country's leadership. This kind of operation, such as a strike on a single target, would encourage North Korea to curb its response so as not to provoke further attacks — though a full-scale retaliation could not be ruled out.
If Washington judges that Pyongyang is likely to launch a counterattack regardless, it may decide a comprehensive campaign to degrade or eliminate North Korea's retaliatory capacity would be most prudent. This scenario would best position the United States and its allies against a North Korean response, but it would entail significant risks, virtually guaranteeing full-blown war on the Korean Peninsula. Consequently, a campaign of this magnitude would require buy-in from regional actors — something that has yet to manifest — and a buildup of military assets far greater than what the United States has deployed in the region so far. A more limited strike, be it a focused punitive strike or a larger one targeting nuclear and missile infrastructure, is more likely at this point. In the meantime, the Pentagon has rerouted several carrier strike groups to the waters surrounding the Korean Peninsula.
Weighing the Risks
Such an operation could involve cruise missiles as well as fixed-wing aircraft conducting strikes against various facilities across North Korea. Prime targets include the nuclear reactor or uranium enrichment facility at Yongbyon, as well as North Korean nuclear scientists. Should the United States plan more extensive strikes aimed at disabling all elements of the North Korean nuclear program, it may also deploy special operations forces to go after underground facilities that airstrikes couldn't easily or reliably destroy. But the broader the target set, the greater the risk of retaliation. North Korea has a hefty arsenal of short- and medium-range missiles that it could launch at nearby targets, including U.S. military facilities elsewhere in the region. Pyongyang's conventional artillery, moreover, could also do significant damage to northern areas of South Korea, reaching as far as the country's capital. U.S. military planners would likely view this kind of escalation as an unacceptable risk.
The United States will base its decision about whether and how to strike North Korea in large part on the kind of reaction it anticipates from Pyongyang. North Korea has many reasons to mount a credible retaliation to any action taken against it, not only to maintain the appearance of a powerful actor on the global stage but also to ensure domestic stability. A weak response from North Korean leader Kim Jong Un's administration could undermine its legitimacy among the country's public or perhaps prompt a palace coup. At the same time, however, Pyongyang understands that a significant retaliation would meet with a commensurate response, which could cripple North Korea's military capabilities.
If the United States determines the country is unlikely to take that kind of chance, it will have little else standing in the way of a military strike. Short of that scenario, however, Washington may still be willing to assume the risks of a limited retaliation. The United States could consider the launch of a small number of missiles that might be intercepted, for example, or incursions by North Korean special operations forces into South Korean territory to be acceptable consequences. Even low-level naval skirmishes may not be considered too great a repercussion. Still, anticipating the scale of North Korea's response is a daunting and treacherous gamble.
Then there's China's response to consider. Until now, Beijing has stressed diplomatic solutions to ease the rising tension, all the while warning against the chain reaction that military action against Pyongyang could set off. Beijing has consistently made clear that its red line on the issue is war or instability on the Korean Peninsula; China wants to make sure that it has a pliable buffer state along its northeastern border.
In the event of a military strike against North Korea, China could intervene, either to support the North Korean government or to facilitate a power transition without jeopardizing order in the country. Its options for intervention range from military backing for Pyongyang to support for a U.S.-led military campaign to a decapitation strike. But whatever path it chooses, it will stay focused on ensuring the North Korean state's continuity and preventing any scenario that could lead the Korean Peninsula to unify under a competing power.
The United States would doubtless risk a response in kind from China should it launch a military strike without consulting Beijing. And if Washington were to launch a full-scale campaign against North Korea, or if a limited attack spirals into a war, the likelihood of a Chinese military intervention to secure its interests on the Korean Peninsula will climb. Along with its desire to keep a buffer between its territory and U.S. forces in South Korea, China is worried about the threat of spillover from a potential conflict in North Korea.
What to Watch Out For
The window has not closed on a diplomatic solution to the problem. Pyongyang may decide to postpone its nuclear test, and the United States, in turn, could delay military action in favor of tougher sanctions. Still, given the high stakes at play, Stratfor will be watching closely for early warnings of impending military action.
Defensive Preparations Near the North-South Border
South Korea is always on alert during its northern neighbor's test cycles. And because it is a prime target for North Korea's prospective retaliatory action, the country is anxious about the possibility of a military strike — all the more so as it deals with prolonged political instability at home. South Korea's acting president has ordered his military to intensify preparations. But reports have yet to surface that the country is bolstering security at the border.
A Shutdown at China's Border
Overall, we are on the lookout for any sign that China is changing its military posture or taking steps to evacuate foreigners from North Korea. Reports suggest that China is mobilizing troops along the border, though we have not been able to verify these claims. Nonetheless, Air China — one of two airlines with service to North Korea — has announced that it is canceling flights to the country starting April 17. As one of the only countries that operate flights to North Korea, China may be trying to prove that it is willing to ramp up its economic pressure on Pyongyang. Otherwise, it may have canceled the flights simply because of low passenger turnout. The move could also be a precautionary measure, though, and we're watching to see whether it indicates that China is preparing for a military crisis.
Changes in Travel Plans or Diplomatic Activity
Changes to the itinerary of U.S. Vice President Mike Pence's impending 10-day tour of the Asia-Pacific region would be a red flag. He is expected to celebrate Easter with U.S. forces in South Korea. A sudden uptick in diplomatic activity between the United States and China, likewise, could signal imminent action in North Korea.
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