Today’s News 16th July 2018

  • The Gaping Holes In The Official Skripal Story

    Authored by Craig Murray,

    In my last post I set out the official Government account of the events in the Skripal Case. Here I examine the credibility of this story. Next week I shall look at alternative explanations.

    Russia has a decade long secret programme of producing and stockpiling novichok nerve agents. It also has been training agents in secret assassination techniques, and British intelligence has a copy of the Russian training manual, which includes instruction on painting nerve agent on doorknobs.

    The only backing for this statement by Boris Johnson is alleged “intelligence”, and unfortunately the “intelligence” about Russia’s secret novichok programme comes from exactly the same people who brought you the intelligence about Saddam Hussein’s WMD programme, proven liars. Furthermore, the question arises why Britain has been sitting on this intelligence for a decade and doing nothing about it, including not telling the OPCW inspectors who certified Russia’s chemical weapons stocks as dismantled.

    If Russia really has a professional novichok assassin training programme, why was the assassination so badly botched? Surely in a decade of development they would have discovered that the alleged method of gel on doorknob did not work? And where is the training manual which Boris Johnson claimed to possess? Having told the world – including Russia -the UK has it, what is stopping the UK from producing it, with marks that could identify the specific copy erased?

    The Russians chose to use this assassination programme to target Sergei Skripal, a double agent who had been released from jail in Russia some eight years previously.

    It seems remarkable that the chosen target of an attempt that would blow the existence of a secret weapon and end the cover of a decade long programme, should be nobody more prominent than a middle ranking double agent who the Russians let out of jail years ago. If they wanted him dead they could have killed him then. Furthermore the attack on him would undermine all future possible spy swaps. Putin therefore, on this reading, was willing to sacrifice both the secrecy of the novichok programme and the spy swap card just to attack Sergei Skripal. That seems highly improbable.

    Only the Russians can make novichok and only the Russians had a motive to attack the Skripals.

    The nub of the British government’s approach has been the shocking willingness of the corporate and state media to parrot repeatedly the lie that the nerve agent was Russian made, even after Porton Down said they could not tell where it was made and the OPCW confirmed that finding. In fact, while the Soviet Union did develop the “novichok” class of nerve agents, the programme involved scientists from all over the Soviet Union, especially Ukraine, Armenia and Georgia, as I myself learnt when I visited the newly decommissioned Nukus testing facility in Uzbekistan in 2002.

    Furthermore, it was the USA who decommissioned the facility and removed equipment back to the United States. At least two key scientists from the programme moved to the United States. Formulae for several novichok have been published for over a decade. The USA, UK and Iran have definitely synthesised a number of novichok formulae and almost certainly others have done so too. Dozens of states have the ability to produce novichok, as do many sophisticated non-state actors.

    As for motive, the Russian motive might be revenge, but whether that really outweighs the international opprobrium incurred just ahead of the World Cup, in which so much prestige has been invested, is unclear.

    What is certainly untrue is that only Russia has a motive. The obvious motive is to attempt to blame and discredit Russia. Those who might wish to do this include Ukraine and Georgia, with both of which Russia is in territorial dispute, and those states and jihadist groups with which Russia is in conflict in Syria. The NATO military industrial complex also obviously has a plain motive for fueling tension with Russia.

    There is of course the possibility that Skripal was attacked by a private gangster interest with which he was in conflict, or that the attack was linked to Skripal’s MI6 handler Pablo Miller’s work on the Orbis/Steele Russiagate dossier on Donald Trump.

    Plainly, the British governments statements that only Russia had the means and only Russia had the motive, are massive lies on both counts.

    The Russians had been tapping the phone of Yulia Skripal. They decided to attack Sergei Skripal while his daughter was visiting from Moscow.

    In an effort to shore up the government narrative, at the time of the Amesbury attack the security services put out through Pablo Miller’s long term friend, the BBC’s Mark Urban, that the Russians “may have been” tapping Yulia Skripal’s phone, and the claim that this was strong evidence that the Russians had indeed been behind the attack.

    But think this through. If that were true, then the Russians deliberately attacked at a time when Yulia was in the UK rather than when Sergei was alone. Yet no motive has been adduced for an attack on Yulia or why they would attack while Yulia was visiting – they could have painted his doorknob with less fear of discovery anytime he was alone. Furthermore, it is pretty natural that Russian intelligence would tap the phone of Yulia, and of Sergei if they could. The family of double agents are normal targets. I have no doubt in the least, from decades of experience as a British diplomat, that GCHQ have been tapping Yulia’s phone. Indeed, if tapping of phones is seriously put forward as evidence of intent to murder, the British government must be very murderous indeed.

    Their trained assassin(s) painted a novichok on the doorknob of the Skripal house in the suburbs of Salisbury. Either before or after the attack, they entered a public place in the centre of Salisbury and left a sealed container of the novichok there.

    The incompetence of the assassination beggars belief when compared to British claims of a long term production and training programme. The Russians built the heart of the International Space Station. They can kill an old bloke in Salisbury. Why did the Russians not know that the dose from the door handle was not fatal? Why would trained assassins leave crucial evidence lying around in a public place in Salisbury? Why would they be conducting any part of the operation with the novichok in a public area in central Salisbury?

    Why did nobody see them painting the doorknob? This must have involved wearing protective gear, which would look out of place in a Salisbury suburb. With Skripal being resettled by MI6, and a former intelligence officer himself, it beggars belief that MI6 did not fit, as standard, some basic security including a security camera on his house.

    The Skripals both touched the doorknob and both functioned perfectly normally for at least five hours, even able to eat and drink heartily. Then they were simultaneously and instantaneously struck down by the nerve agent, at a spot in the city centre coincidentally close to where the assassins left a sealed container of the novichok lying around. Even though the nerve agent was eight times more deadly than Sarin or VX, it did not kill the Skripals because it had been on the doorknob and affected by rain.

    Why did they both touch the outside doorknob in exiting and closing the door? Why did the novichok act so very slowly, with evidently no feeling of ill health for at least five hours, and then how did it strike both down absolutely simultaneously, so that neither can call for help, despite their being different sexes, weights, ages, metabolisms and receiving random completely uncontrolled doses. The odds of that happening are virtually nil. And why was the nerve agent ultimately ineffective?

    Detective Sergeant Bailey attended the Skripal house and was also poisoned by the doorknob, but more lightly. None of the other police who attended the house were affected.

    Why was the Detective Sergeant affected and nobody else who attended the house, or the scene where the Skripals were found? Why was Bailey only lightly affected by this extremely deadly substance, of which a tiny amount can kill?

    Four months later, Charlie Rowley and Dawn Sturgess were rooting about in public parks, possibly looking for cigarette butts, and accidentally came into contact with the sealed container of a novichok. They were poisoned and Dawn Sturgess subsequently died.

    If the nerve agent had survived four months because it was in a sealed container, why has this sealed container now mysteriously disappeared again? If Rowley and Sturgess had direct contact straight from the container, why did they not both die quickly? Why had four months searching of Salisbury and a massive police, security service and military operation not found this container, if Rowley and Sturgess could?

    I am, with a few simple questions, demolishing what is the most ludicrous conspiracy theory I have ever heard – the Salisbury conspiracy theory being put forward by the British government and its corporate lackies.

    My next post will consider some more plausible explanations of this affair.

  • NHS Waiting-List In England Reaches Longest In 11 Years

    New figures released by NHS England today reveal the waiting list to be at its longest since August 2007 having steadily risen over the last few years to 4.1 million people awaiting treatment.

    Infographic: NHS waiting list in England longest since August 2007 | Statista

    You will find more infographics at Statista

    Responding to the figures, Chief Executive and General Secretary of the Royal College of Nursing, Janet Davies, said:

    “While he is not personally on the hook today…these figures should leave the new Health Secretary in no doubt as to the scale of the task ahead of him“.

    In terms of the action she sees as necessary for the NHS, she added:

    “Safe and effective patient care relies on having enough nurses, and the Health Secretary must urgently address the staff shortages that are crippling our healthcare system.

    As a reminder, in a tweet earlier this year, President Trump wrote:

    “The Democrats are pushing for Universal Healthcare while thousands of people are marching in the UK because their system is going broke and not working. Dems want to greatly raise taxes for really bad and non-personal medical care. No thanks!”

    With almost 10% of the UK population in front of you for treatment, he may have a point.

  • The Relentless Radicalization Of Sweden

    Authored by Judith Bergman via The Gatestone Institute,

    A new study of Salafism in Sweden, conducted by the Swedish Defence University, paints a bleak picture of the ongoing radicalization of Muslims in Sweden.

    The Salaf are the “pious ancestors” during the first three generations of the followers of Mohammed; its ideology has come to be associated over the last few decades with al-Qaeda and ISIS, as well as with local al-Qaeda affiliates. According to the study, Salafists, who believe in Islam as Mohammed’s early followers practiced it, tend to reject Western society in favor of a “pure” Islam: “Not all Salafists are jihadists, but all jihadists are Salafists”.

    Although the study does not give an estimate of how many Salafists are in Sweden, it does describe how Salafist milieus there have evolved and grown stronger, especially during the past decade, and lists several examples of the influence they wield in different Swedish cities and localities.

    The Swedish Defence University has published a new study that paints a bleak picture of the ongoing radicalization of Muslims in Sweden. (I99pema/Wikimedia Commons)

    “Salafists”, the authors of the study conclude, “…advocate gender segregation, demand that women veil themselves to limit ‘sexual temptation’, restrict women’s role in the public sphere and strongly oppose listening to music and some sports activities”

    According to the study, many Salafists also tell Muslims not to have Swedish friends, and refer to them as “kufr“, the Arabic term for a non-Muslim or “disbeliever”. One Salafist preacher, Anas Khalifa, said:

    “Does that mean that if you meet a Christian or Jew you should beat him or threaten him? No. There is no war between you and Christians and Jews in your school, for example. You hate him for Allah’s sake. You hate that he does not believe in Allah. But you want from your heart that he will love Allah. So you have to work with them, talk with them, because you want Allah to guide them”.

    The Salafists, apparently, have divided Sweden geographically between them. According to the study:

    “It is interesting that the Salafist preachers, on which the study focuses, appear to be more in cooperation with each other, rather than rivals. Instead, these preachers seem to divide their da’wa (mission) into different geographical areas…”

    The study’s findings from different cities where Salafists are active include:

    In Borås, some children will not drink the water at the school or paint with watercolors there, because they say the water is “Christian”. The police report that Muslim children have told their classmates they will cut their throats, while showing them beheadings on their mobile phones. There are examples of “adolescents arriving at mosques at the end of a school day to ‘wash’ themselves after having interacted with [non-Muslim] society”. Care workers [health care, child care, etc.] in the city have testified to how men exercise control over women, checking on them even in waiting rooms. One care worker said:

    “I realized that there is a network that controls the women so they won’t be left alone with the care workers. They are not given a chance to tell anyone about their situation. Many women live worse [lives] here than they would have in their former countries”.

    This kind of control of women appears to be taking place in practically all the Swedish cities mentioned in the study.

    In Västerås, religious influence is mixed with crime. “It could be a bunch of guys coming into the grocery store. If the woman at the cashier is not veiled, they take what they want without paying, they call the cashier ‘Swedish whore’ and spit on her,” said a police officer in the study. Other examples include Syrians and Kurds who run stores and restaurants in the area and are questioned by young Muslims about their religion. If the answer is not Islam, they are harassed. In other cases, boys as young as 10-12 years have approached older women in the area, asking them whether they are Muslim, telling them “this is our area”.

    In Gothenburg, according to the study, Salafists told Muslims not to vote in the most recent elections because it is “haram” (forbidden). “They said that on the day of judgment you will be responsible for the actions of all stupid politicians if you vote. They stood at polling stations… At one polling station they waved an IS [Islamic State] flag”, a local official told the authors of the study. According to one imam in the city, Gothenburg has been the capital of Wahhabism (a Saudi version of Salafism) in Europe since the 1990s.

    Out of the 300 Swedish Muslims who joined ISIS in Syria and Iraq, almost one third came from Gothenburg. (In relation to their total population, more people have traveled from Sweden to join jihadist groups in Syria and Iraq than from most European countries — only Belgium and Austria have a higher proportion). Somali-Canadian preacher Said Regeah, speaking at the Salafist Bellevue Mosque in Gothenburg, has “raised the importance of people being born ‘pure’ and that only Muslims are pure. All are born as Muslims, but it is the parents who shape them to become ‘Jews, Christians, or Zoroastrians'”.

    The study also reports that non-Muslim business owners have experienced having their facilities vandalized with Islamic State graffiti and that Christian priests have received threats of decapitation. One man, Samir, said, “If you do not follow Islam, people ostracize you. There are parents here who put veils on their three-year-olds. It is unreal. We are not in Iraq”.

    Another man, Anwar, was denied service in a Muslim restaurant because he is not religious. He points out that society is letting secular Muslims down: “I don’t need a Bible or a Koran in my life. The only book I need is… the [Swedish] law. But if society isn’t even on your side, what can you do?”

    In the Stockholm area, the study estimates that there are currently up to 150 Salafist jihadists. Salafists are especially concentrated in the Järva area, a “no go zone”. Sometimes the jihadist and the criminal elements overlap, and these Muslims terrorize other people who live in the area. One woman said that Salafists and Islamists have come to dominate businesses, basement mosques, and cultural associations during the past ten years, and that “Swedes have no idea how much influence political Islam has in the suburb”. She described how even children are gender segregated and that religious leaders tell women not to tell the authorities if their husband abuses them. “Swedish laws are not applied in the suburbs”.

    The study concludes with a critique of Swedish authorities for their apparent inability to link individual radical Muslims to the “environments that form their ideas and in certain cases have facilitated the will to join more radical and violent groups”. The study mentions the following as an example:

    “When the then-National Coordinator Against Violent Extremism said that the question of why so many people chose to travel to IS from Sweden was ‘a million dollar question’, it is an illustration of the overall inability of Swedish authorities (with the exception of police and security police) to see that this problem has not emerged from a vacuum”.

    This inability — or possibly willful blindness — to see that jihadist terrorism does not emerge from a vacuum, but is nurtured in particular environments is hardly an exclusively Swedish situation. The insistence of so many European and other Western authorities to describe terrorist attacks as instances of “mental illness” illustrate it perfectly.

    The authors of the study also mention that schools and other local authorities do not know how to deal with the challenges created by the Salafists. The study mentions, for example, that a Muslim schoolgirl wanted to take off her headscarf to play hairdresser with the other children, but the Swedish personnel did not allow it out of respect for her parents’ wishes. In an example from a Swedish preschool, a little girl did not want to wear her headscarf but the Swedish personnel forced it on her, “even though it felt wrong”, because it was the parents’ wish. Swedish school personnel have also described that they do not know how to act when children want to eat and drink during Ramadan, but the parents have instructed that they must fast.

    The study is an important first step in Sweden finally acknowledging that there is a problem, but unless the relevant Swedish authorities — including the Swedish government and the political leaders, who refuse to acknowledge reality in Sweden — read and internalize it, the study will have been done in vain.

  • Beijing Sends Spy Ship To Monitor Rimpac Wargames After Being Disinvited

    A Chinese spy ship is currently monitoring the US-led Rim of the Pacific (RIMPAC) war games off the waters of Hawaii after Beijing was disinvited from the event, according to USNI News. The People’s Liberation Army Navy (PLAN) Dongdiao-class auxiliary general intelligence (AGI) spy vessel was first spotted near the event on July 11, though it has not entered the territorial waters of the United States.

    “We expect the ship will remain outside the territorial seas of the U.S. and not operate in a manner that disrupts ongoing RIMPAC exercise,” US Pacific Fleet spokesman Capt. Charlie Brown told USNI, adding “We’ve taken all precautions necessary to protect our critical information. The ship’s presence has not affected the conduct of the exercise.” 

    “We continue to uphold the principle of freedom of navigation and overflight in accordance with international law.”

    The spy ship’s presence was criticized by the commander of the exercise’s combined forces maritime component, Chilean Commodore Pablo Nieman.

    “It is very disappointing that the presence of a non-participating ship could disrupt the exercise,” Nieman said in a statement. “I hope and expect all seafarers to act professionally so we may continue to focus on the work at hand and building on the spirit of cooperation that gives purpose to this exercise.”

    The presence of the ship off of Hawaii can be used a tool to justify more U.S. presence operations closer to China, Andrew Erickson, a professor at the Naval War College, told USNI News on Friday.

    “The U.S. shouldn’t let China have it both ways,” he said. “No matter what Beijing says or does, U.S. forces must continue to operate wherever international law permits, including in, under, and over the South China Sea—a vital part of the global maritime commons that is 1.5 times the size of the Mediterranean and contains substantial areas that no nation can legally claim for itself or restrict access to in any way.” –USNI

    A similar Russian spy ship observed the RIMPAC games in 2016 when China was a participant. 

    On May 23 the Pentagon announced that it was disinviting China from the exercise due to the recent militarization of the South China Sea, while Vietnam was invited to participate for the first time. Also making their debut will be Israel and Sri Lanka. The People’s Republic of China (PRC) had participated in 2014 and 2016. 

    The 47-ship, five submarine exercise between twenty-six countries will feature over 200 aircraft and be manned by around 25,000 personnel according to the US Navy. It will also feature the first live firing of the Lockheed LRASM anti-ship missile. 

    For a full list of countries and vessels participating in RIMPAC, click here.

  • The Deadly Math Of America's Faux Prosperity

    Authored by Tom Luongo,

    Record Deficits, Stronger Dollar Equals Record China Trade Deficit

    Sometimes math is a real bitch.   Donald Trump is a smart guy.  I know he knows math.

    Too bad he’s ignoring it.

    Here’s the gig.  The title says it all.  Government spending is rising rapidly.  More actual money is flowing into the US economy.  Where is that spending going?  To buy cell phones, computers, cars, office supplies and all the rest.

    It doesn’t matter if the purchase is made at Best Buy through a Purchase Order, the money still goes to stuff built and imported from China.  The second order effect is that even if it goes to subsidize a farmer in Iowa or a defense contractor in California, that money winds up in the hands of a consumer who does what?

    Goes to Best Buy and buys a new TV.  This isn’t rocket science folks, it is simple cause and effect.

    More money chases those goods.  Despite the naysayers, Apple is selling a crap-ton of $1200 phones…. built where?  China.

    So, the budget deficit thanks to record spending is fueling the very trade deficit with China that Trump is complaining about daily.

    Here’s the math.

    Big Badda Boom

    First up is the budget deficit numbers through nine months of fiscal year 2018, courtesy of Zerohedge.

    This resulted in a June budget deficit of $75 billion, better than the consensus estimate of $98BN, and an improvement from the $147 billion deficit in May and as well as slightly less than the deficit of $90.2 billion recorded in June of 2017.This was the second biggest June budget deficit since the financial crisis…

    …The June deficit brought the cumulative 2018F budget deficit to over $607BN during the first nine month of the fiscal year, up 16% over the past year; as a reminder the deficit is expect to increase further amid the tax and spending measures, and rise above $1 trillion.

    The post has a ton of charts to illustrate the point, but it’s mostly unnecessary.  The US Treasury is issuing debt at an astounding rate to cover this budget.  Spending goes up as tax receipts do thanks to lower tax rates and increasing growth.

    More Ticky, More Washy

    The second part of the title is the latest figures released on the trade deficit with China.

    Trump and Navarro Will Hate This Chart

    Taking this one step further we have the exploding interest payments on the $21 trillion pile of debt the US Treasury has racked up.  $1.18 trillion of which is owed to….?

    China.

    As anyone who runs a house knows, when you get a raise what happens to your debt load if you increase your spending to match the raise in earnings?

    Nothing.  It stays the same.

    If you are smart, your debt is all fixed-rate, so your monthly outlays stay the same.  But, guess what?  A lot of the US’s debt is inflation-linked TIPS (Treasury Inflation Protected Securities).

    TIPS are basically a variable-rate mortgage against your labor folks.

    So, debt-servicing costs are rising quickly with the slightest rise in interest rates.

    Because when you paying 1% on $100 a rise to 2% doesn’t hurt much.  But, when that 1% marginal rise in interest rate is on $20,000, now its real money.  In your household you cut back on spending.

    Does the government do that?  Nope.

    Keynesian thinking dominates economic thought.  Even Chicago School guys like Chief Economic Advisor Larry Kudlow are effectively Keynesian when it comes to money issuance.

    So, inherent in this equation is the increasing interest payments on a portion of the US’s debt held by China.  That’s not something tariffs can fix.

    Yuan Moar?

    The third part of the math is the Yuan.  China, to combat a slowing credit growth as the Fed pulls back on dollar liquidity is devaluing the Yuan to keep its banking system liquid.

    Cheap yuan means cheaper Chinese goods.

    Hybrid war tactics like tariffs and monetary policy adjustments are double-edged swords.

    For countries that don’t prepare themselves they are left vulnerable to shifts in central bank credit creation.  The severity of that vulnerability, however, can be managed by the opposing central bank.

    Remember last month when the TIC report told us that Russia dumped half of its US Treasury holdings?   It caused the yield on the 10-year note to rise above 3.00%, threatening a major technical breakdown which momentum traders could have piled onto and caused a whole lot more pain for the Treasury Department.

    And that was only just under $50 billion worth.

    China doesn’t have to start with such a drastic measure.  In fact, Russia held off on this course of action for the past four years.  In fact, after the Ruble crisis of 2014/15, Russia reloaded its stock of US Treasury ammunition.

    China, however, has started the Yuan devaluation process along with loosening monetary policy to support its domestic banking sector.  And expect this to continue as communications between the Trump administration and China’s Ministry of Finance is on hold.

    For President Trump, the math is clear.  And will continue to be clear.  And it is saying, “Stop blaming others for your problems.  Clean up your own house, first.”  In the short-term Trump will look like he’s winning this trade war.

    Capital inflow to the US will support this policy.  China’s stock markets will underperform the US’s. But, that will be a function of safe-haven flows, not because the US’s finances are structurally sound.

    The People’s Bank of China will respond with liquidity injections that will look increasingly desperate and will result in a wave of defaults and a slow-down.

    The dollar will rise and the trade deficit will persist.  So will the budget deficit.

    Because math.

    *  *  *

    To find out how to build a portfolio based around these big changes in the geopolitical arena, as well as stay one-step ahead of where we are headed, join my more than 120 Patrons at Patreon and subscribe to the Gold Goats ‘n Guns Investment Newsletter.

  • A Brief History Of US Covert Action In Syria – Part 1

    In part 1 of this corrective history of the Syrian proxy war which notable Middle East experts have lately urged is important and essential reading, William Van Wagenen thoroughly dismantles the dominant media myths that have persisted throughout seven years of conflict. 

    Part I: The Myth of US ‘Inaction’ in Syria, by William Van Wagenen via The Libertarian Institute

    When the Russian military intervened in the Syrian war in October 2015, many in the Western press complained bitterly, demanding that US planners intervene directly in Syria on behalf of the anti-government rebels in response. Reuters alleged that “The Middle East is angry and bewildered by US inaction in Syria,” arguing that “The question on everyone’s mind is: will the United States and its European and regional Sunni allies intervene to stop President Vladimir Putin from reversing the gains made by mainstream Syrian rebels after more than four years of war? Few are holding their breath.” 

    The Washington Post similarly argued that Russian president Vladimir Putin was “exploiting America’s inaction,” while the Guardian lamented the “western inability to care enough about the plight of Syrians.” As Russian and Syrian forces battled rebels one year later in Aleppo, more dramatic accusations of US inaction emerged, with Foreign Policy describing US policy in Syria under Obama as “inaction in the face of genocide.”

    The idea that the United States has not intervened in Syria and is guilty of “inaction,” is a myth however. The United States and its Western and Gulf Allies have intervened in the Syrian conflict from early on. US planners have been fighting what the New York Times described as a “$1 Billion Secret C.I.A. War in Syria” while providing weapons to rebels through a program considered “one of the costliest covert action programs in the history of the C.I.A.” Starting in the fall of 2012, the US and its Gulf partners, under the direction of then CIA director David Petraeus, were openly sending “a cataract of weaponry” into Syria. It is likely that such shipments began much earlier without public acknowledgment, via the “rat line” from Libya, as reported by journalist Seymour Hersh. 

    US Special Envoy to Syria Michael Ratner, in a meeting with members of the Syrian opposition, explained that “The armed groups in Syria get a lot of support, not just from the United States but from other partners,” while Secretary of State John Kerry added in the same meeting, “I think we’ve been putting an extraordinary amount of arms in,” and “Qatar, Turkey, Saudi Arabia, a huge amount of weapons [are] coming in. A huge amount of money.”

    Sectarian Mass Murder

    Also a myth is the idea that any US intervention in Syria would seek to protect civilians. While allegations that Syrian and Russian forces were committing genocide in Aleppo proved baseless, US planners have themselves supported rebels intent on committing genocide and sectarian mass murder. This was clearly evident in the Syrian city of Latakia, which by the time of the Russian intervention in October 2015 was on the verge of falling to a coalition of Syrian rebel groups including al-Qaeda (known in Syria as the Nusra Front) and the US-armed and funded Free Syrian Army (FSA).

    Robert Worth of the New York Times writes that “In Latakia, some people told me that their city might have been destroyed if not for the Russians. The city has long been one of Syria’s safe zones, well defended by the army and its militias; there are tent cities full of people who have fled other parts of the country, including thousands from Aleppo. But in the summer of 2015, the rebels were closing in on the Latakia city limits, and mortars were falling downtown. If the rebels had captured the area — where Alawites are the majority — a result would almost certainly have been sectarian mass murder. Many people in the region would have blamed the United States, which armed some of the rebels operating in the area. . . Andrew Exum, who worked in the Pentagon at the time, told me that the military drew up contingency plans for a rapid collapse of the regime. The planning sessions were talked about as ‘catastrophic success [emphasis mine].’”

    Alawite civilians in Latakia faced the prospect of being massacred if rebels had been able to capture the city, due to the virulently anti-Alawite views of Nusra Front members. Nusra religious clerics draw on the writings of the fringe 14th century Islamic scholar Ibn Taymiyya to argue that Alawites are “infidels” deserving of death. Syria analyst Sam Heller described Nusra clerics as promoting “toxic — even genocidal — sectarianism.” Rebels from the FSA, which have fought alongside and “in the ranks” of the Nusra Front throughout the conflict, also posed a threat to Alawite civilians in Latakia. 

    Though typically considered moderate in the Western press, many FSA battalions have been armed and funded by the Syrian Muslim Brotherhood (MB). Thanks to the influence of Brotherhood ideologue Said Hawwa, the Syrian Brotherhood strongly promoted the anti-Alawite sectarian views of Ibn Taymiyya from the 1960’s until the 1980’s. This anti-Alawite sectarianism re-emerged in segments of the Syrian opposition, including in elements of the FSA, when peaceful protests and armed insurrection against the Syrian government simultaneously erupted in Syria in the spring of 2011.

    While the Syrian and Russian militaries managed to protect Latakia and prevent a massacre of the city’s Alawite civilians, the broader effort to prevent the fall of the country to al-Qaeda and its FSA allies exacted a huge toll on Syria’s Alawites. The Telegraph noted that already by April 2015, “The scale of the sect’s losses is staggering” and that of some 250,000 Alawite men of fighting age “as many as one third are dead” and that “Alawite villages nestled in the hills of their ancestral Latakia province are all but devoid of young men. The women dress only in mourning black.”

    Welcoming ISIS as a Bulwark against Assad

    While arming rebels threatening the massacre of Alawite civilians in Latakia, US planners were at the same time welcoming the potential massacre of Syrian civilians in Damascus. The Syrian capital was on the verge of falling to the Islamic State (ISIS) in the summer of 2015 after ISIS, with the help of Nusra, captured all of the Yarmouk Palestinian refugee camp in the southern Damascus suburbs. The New York Times acknowledged the ISIS threat to Damascus at this time, observing that “By seizing much of the camp” ISIS had “made its greatest inroads yet into Damascus,” while the Washington Post noted that “Their new push puts [ISIS] within five miles of the heart of the capital . . . even as they are on the retreat in Iraq.”

    In a private meeting with members of the Syrian opposition, Secretary of State John Kerry acknowledged that US planners had actually welcomed the ISIS advance on Damascus, in an effort to use it as leverage to force Assad to give up power. Kerry explained that, “the reason Russia came in is because ISIL [ISIS] was getting stronger. Daesh [ISIS] was threatening the possibility of going to Damascus. And that is why Russia came in. They didn’t want a Daesh [ISIS] government and they supported Assad. And we know this was growing. We were watching. We saw that Daesh [ISIS]was growing in strength. And we thought Assad was threatened. We thought we could manage that Assad might then negotiate. Instead of negotiating, he got Putin to support him [emphasis mine].”

    Because the US was bombing ISIS in defense of its Kurdish allies in Northeastern Syria and its Iraqi government allies in Northwestern Iraq, the fact that US planners at the same time welcomed the ISIS push on Damascus against the Syrian government was largely obscured.

    Had Damascus fallen to ISIS, it is clear that many civilians in the city, including Christians, Alawites, Shiites, members of the LGBTQ community, and pro-government Sunnis, would have been killed. While commenting on the Russian intervention, Michael Kofman of the Wilson Center acknowledged that “Assad may be irredeemable in the eyes of the United States, but it is equally clear that a high human price would be paid when the Islamic State [ISIS] or al-Nusra seizes the major population centers in Syria that he still controls.”

    Suicide Bombers and US Anti-tank Missiles

    It is also clear that US planners were deliberately supporting al-Qaeda (Nusra), despite its genocidal intentions towards Syria’s Alawites, by flooding Syria with weapons. Because FSA brigades that received funding and weapons from the US and its Gulf Allies were fighting side by side with militants from Nusra throughout the country, in practice much of the money and weapons sent to the FSA ultimately benefited al-Qaeda.

    For example, US-made TOW anti-tank missiles sent by US planners to FSA groups in Idlib played a crucial role in helping Nusra conquer the entire province in the spring of 2015. Syria analyst Hassan Hassan observed in Foreign Policy during this period that “The Syrian rebels are on a roll” and that “The recent offensives in Idlib have been strikingly swift — thanks in large part to suicide bombers and American anti-tank TOW missiles,” which the FSA and Nusra deployed in tandem. Syria analyst Charles Lister, also writing in Foreign Policydescribed how US planners explicitly encouraged the FSA groups they were arming to fight alongside Nusra in Idlib. Rebel victories in Idlib, in particular the town of Jisr al-Shughour, allowed Nusra and the FSA to then threaten the massacre of Alawites in Latakia.

    When Russia intervened militarily in Syria in October 2015, US planners responded by immediately increasing shipments of TOW anti-tank missiles to FSA groups, some of which then helped Nusra capture the strategic town of Murek in central Syria one month later in November 2015.

    This prompted Daveed Gartenstein-Ross of the Foundation for Defense of Democracies (FDD) to observe that “it is impossible to argue that U.S. officials involved in the CIA’s program cannot discern that Nusra and other extremists have benefited” from CIA weapons shipments to Syrian rebels, “And despite this, the CIA decided to drastically increase lethal support to vetted rebel factions following the Russian intervention into Syria in late September.”

    “Deal with the Devil”

    Nusra did not only benefit from fighting alongside FSA rebels armed with US-supplied weapons, but acquired many of these weapons themselves. That Nusra regularly purchased weapons from the Western-backed military councils supplying the FSA was confirmed in October 2014, when the New York Times reported that Shafi al-Ajmi, a Nusra fundraiser, told a Saudi news channel that “When the military councils sell the weapons they receive, guess who buys them? It’s me.”

    That al-Qaeda was purchasing US supplied weapons seemed of little concern to US planners. When journalist Sharmine Narwani asked why US-supplied weapons allegedly meant for FSA groups were showing up in Nusra hands, CENTCOM spokesman Lieutenant Commander Kyle Raines responded: “We don’t ‘command and control’ these forces—we only ‘train and enable’ them. Who they say they’re allying with, that’s their business.”

    Obama administration officials themselves acknowledged tacit US support for al-Qaedaadmitting in November 2016 to the Washington Post that they had struck “a deal with the devil,” years before, “whereby the United States largely held its fire against al-Nusra because the group was popular with Syrians in rebel-controlled areas and furthered the U.S. goal of putting military pressure on Assad,” thereby confirming long standing Russian accusations that the US had been “sheltering al-Nusra.”

    Ben Rhodes’ Bombshell Confirmation

    More recently, Ben Rhodes, deputy national security advisor under the Obama administration, acknowledged providing military support to Syrian rebels, even though it was clear that Nusra comprised a good portion of the Syrian opposition as a whole. Rhodes explained that “there was a slight absurdity in the fact that we were debating options to provide military support to the opposition at the same time that we were deciding to designate al-Nusra, a big chunk of that opposition, as a terrorist organization.”

    Despite designating Nusra as a terror group already in 2012, US planners nevertheless provided weapons to the Syrian rebels, of which Nusra comprised a “big chunk,” for the next 7 years. As Sharmine Narwani observes, “U.S. arms have been seen in Nusra’s possession for many years now, including highly valued TOW missiles, which were game-changing weapons in the Syrian military theater. When American weapons end up in al-Qaeda hands during the first or second year of a conflict, one assumes simple errors in judgment. When the problem persists after seven years, however, it starts to look like there’s a policy in place to look the other way.”

    US planners welcomed rebel gains in Syria, including by rebel groups advocating genocide against Syria’s Alawite population, such as ISIS and Nusra, because these gains bolstered the broader US goal of toppling the Syrian governmentin an effort to weaken its close allies, Iran and Hezbollah. US planners wished to see rebel gains in Syria, in spite of the obviously catastrophic consequences for Syrian civilians, including for Syria’s Sunnis, which rebel success would bring. US support for the rebels belies the myth of US “inaction” in Syria, and the myth that any US intervention would be for the sake of preventing massacres and even genocide, rather than in support of it.

    * * *

    In parts 2 and 3, we will review US support for rebel advances in the spring and summer of 2015 in Idlib, Latakia, Palmyra, Yarmouk, and Homs, and further describe how these rebel advances nearly led to the massacre of Syrian civilians in two of the country’s main population centers, Latakia and Damascus, if not for the Russian intervention which halted the rebel advance.

  • Chaos At The NATO Summit Benefits Eurasian Integration

    Authored by Federico Pieraccini via The Strategic Culture Foundation,

    The chaos that has engulfed the NATO summit is yet further confirmation of the world’s transition from a unipolar to a multipolar order, with the return of great-power competition and different states jockeying for hegemony. Trump is adapting to this environment by seeking to survive politically in a hostile environment.

    The meeting of the NATO countries in Brussels highlighted the apparent intentions of the US president towards his allies and the Atlantic organization. Trump’s strategy is to oblige the European countries to halt energy imports from Moscow and replace them with liquefied natural gas (LNG) from the US at a price that is obviously not cheap. The gas would come from the US by ship, entailing huge logistical costs that are not the case with regard to physical pipelines between Europe and Russia. This issue directly affects Germany and the Nord Stream II project, a deal worth billions of euros.

    The reasons behind Trump’s behavior are twofold.

    On the one hand, we have the politics of “America First”, with the intention of increasing exports of LNG while boasting of “successes” to the base.

    The other purpose of Trump’s words is to highlight, sotto voce, the inconsistency of EU countries, who despite considering Russia an existential danger, nevertheless strongly depend on Russia’s energy exports.

    To be fair to Trump, these same EU countries — fearful of Moscow but ready to do business with it — do not even spend 2% of their GDP on defense, while the US commits closer to 4%. For Trump this is surreal and intolerable. The NATO Summit began more or less with this anomaly, conveyed by Trump in front of the cameras to Jens Stoltenberg, the Secretary General of NATO, with Pompeo and the US ambassador to NATO on either side of him doing their best to remain impassive.

    The photo-op with Merkel did not go any better. Needless to say, the American media is being driven into a tizzy. The headlines blare: “Trump betrays the allies”; “End of NATO”. CNN is in a state of mourning. Brzezinski’s daughter (yes, that Brzezinski ) almost vomited from the tension on MSNBC’s Morning Joe.

    In truth, Trump is engaging in a lot of public relations. When he makes these performances in front of the cameras, he is speaking directly to his electoral base, showing that he is keeping his promises by putting “America First”. To be honest, it would be more appropriate to declare, “America, b****h!”

    To back his words up with actions, he slaps his allies with tariffs and sanctions against Russia, and now Iran, incurring huge losses for Europe. He mocks leaders like Merkel and Trudeau in public, and has humiliated Macron in front of the world.

    In practical terms, Trump does not care whether Germany buys LNG from the United States. If this is to ever occur, then it will take 20 years, given the cost and time needed to build dozens of LNG facilities on the European and American coasts.

    The summit between Trump and Putin in Helsinki could even lead to more drama if Trump wants to drive the media, liberals, neocons and his European allies into further conniptions.

    It depends on the issues on his checklist that he has to deal with before the November midterm elections. I do not rule out seeing Kim Jong-un in Washington before then, or a summit between the US, Israel and Palestine — anything that will play to the desired optics. The issue is just that: all image, no substance.

    Trump is focussing principally on triumphing in the November midterms, and to do so he needs to look like a winner. He will be keen to ensure the moneybags of the Israel lobby and Saudi Arabia keep flowing. In doing so, he will probably even win the 2010 presidential election. There is always the possibility that the Fed and other financial conglomerates will decide to commit harakiri and blow up the economy with a new financial crisis in order to get rid of Trump. It would be the deserved end of the US empire.

    European politicians also await the midterms with great anticipation, hoping that this will be the end of the Trump nightmare. They still live in the same dreamworld of Hillary Clinton, believing that Democratic victory is possible and that Trump’s election was simply an anomaly.

    They will not have woken from their nightmare when they come to realize that Trump has increased the number of Republicans in the House and Senate. Perhaps at that point, with sanctions in place against Russia and Iran and with huge economic losses and the prospect of another six years with Trump, a coin will drop for someone in Europe, and Trump will be seen as the catalyst for breaking ties with Washington and looking east towards a new set of alliances with China and Russia.

    In conclusion, we are experiencing the full effects of the Trump presidency, which is destructive of and devastating for the neoliberal world order. As I said at least a year before he was elected, Trump is accelerating the decline of the United States as a lodestar for the West, representing Washington’s swan song as the only superpower.

    It is not “America First”, it is Trump First. There is no strategy or logic behind it. There are only friendships, his personal ego, and the need to remain in the saddle for another six years. Meanwhile, get your popcorn ready in anticipation of the Helsinki summit.

  • A Problem Emerges For Japanese Stocks: The Biggest Market "Whale" Can't Buy Any More

    When it comes to Japan’s risk assets, it is a widely – in incorrectly – accepted that only the Bank of Japan matters: and with Kuroda now a proud owner of nearly 80% of the country’s ETFs and the BOJ a top 10 shareholder in nearly 40% of listed companies, one can see where this perception comes from.

    However, when it comes to Japanese, and international, stocks there is one whale that is far more impactful than even the BOJ when it comes to capital allocation and the fate of risk assets: Japan’s gargantuan Government Pension Investment Fund (or GPIF) – the largest in the world –  which manages 156 trillion yen ($1.41 trillion), and whose assets are broken down in 4 main categories: Japanese bonds, Japanese stocks, overseas bonds and overseas stocks. As the Nikkei notes, the GPIF earned the moniker as a “whale” in the stock market due to its massive holdings of domestic stocks. Previously, a greater weight was given to less risky domestic bonds, which amounted to 62% of total assets as recently as 2012.

    The historical distribution of the GPIF’s asset holdings is shown in the chart below: what is notable is that as a result of a mandated shift in its asset allocation several years ago, the fund which traditionally had a conservative posture with the bulk of its assets – usually as much as 70% – in the form of domestic bonds, had since shifted to a stock-heavy allocation, with the target allocation for domestic and foreign stocks rising to 50%.

    And here a problem has emerged, because the GPIF’s portfolio has exceeded its 25% allocation target for domestic stocks for the first time, a milestone that – unless the world’s largest pension fund changes  its strategy for stable returns – could have severely adverse consequences for local risk assets.

    According to a filing last Friday, Japanese equities accounted for 25.14% of the GPIF’s portfolio at the end of March. That equates to over 40 trillion yen worth of shares covering roughly 2,300 issues.

    Just like the BOJ, the fund is believed to be a major shareholder in many companies listed in the Tokyo Stock Exchange’s first section. In fact, the GPIF is often seen as a tack-on to the BOJ, because as the GPIF sells its Japanese bond holdings to the BOJ usually at prices well above market value, it opens up more space to buy equities, thereby creating a feedback loop in which the BOJ’s purchases of JGbs indirectly result in higher stock prices, with the GPIF as a conduit.

    For now the strategy of dumping Japan’s pensions into the stock market has been a smashing success: in fiscal 2017, the GPIF posted an investment return of 10.08 trillion yen. There is just one problem: with the whale by far the biggest market player in Japan’s stock market, its buying was sufficient to lift stock prices, thereby creating a virtuous cycle in which the more the GPIF bought, the greater its return.

    That may soon be over, however, now that the GPIF has hit its limit on how much domestic stocks it can buy.

    * * *

    The GPIF’s impact on Japan’s stock market in recent years has been staggering. Shinzo Abe’s government, hoping to boost the “wealth effect” by creating higher stock prices, resolved to reduce the GPIF’s reliance on Japanese government bonds while boosting stock holdings instead. In October 2014, the GPIF revised portfolio allocations and set a 50% aggregate target for equities at home and abroad.

    According to the Nikkei, since 2014, the GPIF has bought an estimated 6.36 trillion yen more in domestic equities than it sold, equal to about 1% of the TSE first section’s market value.

    “That computes to lifting the Nikkei Stock Average by about 1,000 points,” said Masahiro Nishikawa, chief fiscal policy analyst at Nomura Securities.

    To be sure, worried that domestic investors will dump their shares now that the “whale” is no longer a backstop buyer for Japanese stocks, GPIF President Norihiro Takahashi said that although Japanese equities have topped the 25% goal, the ratio can exceed the target by a few percentage points. “Investment will not stop.” Translated: please don’t start a liquidation cascade.

    And yet despite wishful thinking, “the GPIF is now less likely to be a force that elevates the market as it did in the past” the Nikkei admits, for the simple reason that it can no longer aggressively invest in stocks absent yet another change to its  asset allocation target.

    Japanese bonds still occupy the largest slice of the GPIF’s portfolio, but to a lesser extent. As shown in the chart above, the allocation to bonds stood at 27.5% at the end of fiscal 2017, well below the 35% target. A big reason why the fund has had trouble procuring the bonds is because another whale, the Bank of Japan, is also mass purchasing JGBs.

    Meanwhile, with the GPIF’s buying having created its own bullish sentiment, now that the buying is over the fund has two options: risk a sudden drop in the market, one which comes as the BOJ is creeping ever closer to its own QE end as Japan runs out of JGBs for sale, or expand the fund’s allocation to stocks further. And in an attempt to keep the party going a little longer, it is obvious that the choice will be the latter. Unfortunately, as both a Japanese and global recession – and market crash – gets ever closer, all this will do is jeopardize even more Japanese pensions.

    The real question is just how angry Japan’s population, already the oldest in the world, will be once it learns that much – or all – of its pensions were lost in the government’s vain pursuit of further market gains, and to keep Abe’s popularity rating high. With the US economic cycle already the second longest in history, we doubt we will have long to wait for the answer.

  • China GDP Growth Slows After Record Contraction In Shadow Banking Credit

    Following the largest contraction in ‘shadow banking system’ credit, and a record low for M2 growth, fears were building that China’s economic growth prospects may lag expectations.

    By way of background for tonight’s economic data deluge, here are the lowlights.

    The drop in shadow bank was particularly sharp for the second month in a row: this has been the area where Beijing has been most focused in their deleveraging efforts as it’s the most opaque and riskiest segment of credit. And, as the chart below show, the aggregate off balance-sheet financing posted its biggest monthly drop on record in June

    the lass granular M2 reading also posted a growth slowdown, rising only 8.0% in June, down from May’s 8.3%, below consensus of 8.4%, and the lowest on record.

    Both of which do nothing to help China’s credit impulse. Investors see China’s liquidity tightening…

    Commenting on the ongoing slowdown in China’s credit creation, Goldman said that the latest money and credit data highlighted the challenges the government is facing in loosening monetary policy.

    But before we shift to the market’s perceptions, don’t forget, China’s trade surplus with the US just hit a Trump-tantrum-creating record high…

    Oh, and don’t forget, Chinese stock markets have tumbled…

    And bond markets have collapsed as defaults surge…

    And Yuan has plunged…

    So the big picture was not rosy heading into tonight’s big data deluge.

    Early signs for June pointed to weakness. The official and Caixin PMIs indicated a slowdown in momentum – with export order gauges weakening.

    China stocks were down, Yuan flat, and China 10Y bonds 3bps lower in yield as the data hit.

    And this is what the data looked like..

    • China Q2 GDP YoY MET EXPECTATIONS rising 6.7% – equal to the weakest since Q1 2009 (against expectations of +6.7% but slowing from Q1 growth of 6.8% YoY)

    • China Retail Sales YoY BEAT rising 9.0% (against expectations of +8.8% and notably up from May’s 8.5% YoY – the lowest since May 2003)

    • China Industrial Production YoY MISS rising just 6.0% – weakest since Dec 2015 (against expectations of +6.5% and well down from May’s 6.8% YoY)

    • China Fixed Asset Investment YoY MET EXPECTATIONS rising 6.0% – the lowest on record (against expectations of +6.0% and down from May’s 6.1% YoY – record low)

    Visually – down and to the left…

    Not pretty. It is clear that momentum in the world’s second-largest economy is slowing amid deleveraging and intensifying trade friction with the US…

    Though there is one silver-lining, as Bloomberg’s Enda Curran notes, the rebound in retail sales is noteworthy as it’s an indicator of confidence in the wider economy. Granted it was from a low base in May, but it shows that consumer confidence is holding up, despite the trade tensions – although auto sales are down 7% YoY (and petroleum is up 16.5% YoY). Also bear in mind that retail sales print is likely flattered by the fact that the yuan tumbled over 4% from end May through June.

    In case those charts look a little odd to you, they do to us too… and amid the world’s craziest decade ever in terms of monetary policy experimentation, extremes of leverage and debt, nuclear armageddon proximity, and now global trade wars, somehow, China has managed to crush all uncertainty out of its business cycle…

    It’s almost as if they rigged it?!

    In many respects today’s numbers are already history (with most analysts expecting China to have an overall ‘OK’ first half of the year), it’s the second half that will be tougher.

    Huatai Securities estimated in a report over the weekend that if the U.S. implements its tariff plan on $200 billion of Chinese imports, China’s exports growth should decrease by 0.8 percentage point and GDP growth by a quarter percentage point.

    Finally, as a reminder,  if investors are hoping for China to reflate its way back out of this, Chinese billionaire Zhang Baoquan has a warning (via iFeng: 张宝全:中国人缺乏投资工具 把不动产当硬通货)

    China now has two ‘bombs’, one ‘bomb’ is a real estate bubble and the other is a local debt. Any explosion to the Chinese economy is devastating.

     

Digest powered by RSS Digest