Thursday, February 28, 2013

Redrawing of the geopolitics of the eastern Mediterranean region...

Redrawing of the geopolitics of the eastern Mediterranean region...

There was a bygone era that ended a little over four years ago when it used to be said that the Kremlin used energy as a "geopolitical tool". The threat perception propagated by cold warriors in the United States principally aimed at cautioning Europe against its rising energy dependency on Russian supplies.

Moscow was credited with the capacity to influence Western European policies with a hidden agenda to sabotage the trans-Atlantic partnership.

Meanwhile, unnoticed or unspoken, the geopolitics of energy has been transforming. The president in the White House, Barack Obama, has not wasted his breath over the Caspian energy content below rivalries. He has no special romance with Big Oil, unlike his predecessor in the Oval Office.

Ambassador Richard Morningstar, the United States special envoy on the Caspian, has quietly left the center stage and the "market" is slowly taking over. If Europe's energy business with Russia holds uncertain prospects today, it is more due to economic reasons than a messianic drive to diversify its sources of imports.

The Bill Clinton era in the geopolitics of Caspian energy, which ran through the George W Bush presidency, imbued with a great sense of rivalry over Russia's status as an energy powerhouse, is giving way. That is one of the messages to be pulled out from the announcement on Tuesday in Moscow that a subsidiary of the Russian energy giant Gazprom has signed a 20-year deal with Levant LNG Marketing Corp. for Israel's Tamar offshore gas field in the Mediterranean.

Russia looks east...
Without doubt, the Tamar deal rewrites the ABC of the geopolitics of energy security. But, first of all, what are the facts on the ground?

Tamar is one of two large offshore gas fields in Israel off the coast of the port city of Haifa - the other one being Leviathan. The Tamar gas field reserves are estimated at around 270 billion cubic meters (while the potential of the Leviathan is estimated at around 450 bcm.)

The Tamar floating LNG project (FLNG), which is expected to be commissioned in 2017, is one of the first of its kind anywhere in the world and would liquefy gas from Israel's Tamar and smaller Dalit fields at a floating liquefaction vessel at rate of 3 million tons per annum, which equated to 84 bcm of gas over the 20-year period of Gazprom's deal, roughly 30% of Tamar's estimated reserves.

The deal envisages that Gazprom will provide financial support to develop the FLNG project by way of an equity investment or financing, which is expected to be significant.

The deal allows Gazprom to exclusively purchase the LNG from the Tamar project, meaning an expansion of the Russian company's LNG exports and trading portfolio. A senior Gazprom official has been quoted as saying,
This is an important milestone for strengthening Gazprom's position in the global LNG market. We are confident that the deal will not only help strengthen and diversify Gazprom's LNG portfolio, but also help… build on our success in the Asia-Pacific region, where we have recently closed long and medium-term deals with numerous counterparts in India and North East Asia.
According to the International Gas Union, Russia was ranked as the world's eighth-biggest LNG exporter in 2011. Clearly, the deal is a major step forward in strengthening Gazprom's hand in the booming Asian LNG market. President Vladimir Putin exhorted only last week that Russia should make increased efforts in LNG to diversify its gas exports, which are focused on the weak European market.

The deal enables Gazprom (which is the world's biggest conventional gas producer) to export directly to the highly priced markets in Japan, South Korea, China and India that are not accessible via pipelines. In October, Gazprom signed a 20-year deal with India's GAIL to supply 2.5 million metric tons of LNG annually with deliveries beginning in 2019.

At the moment Russia has only export LNG plant (Sakhalin -2 where Gazprom operates with Royal Dutch Shell and Mitsui), which mainly supplies South Korea and India. Gazprom announced last week that it has a decision to build an LNG plant in Vladivostok in the Russian Far East to supply the Asia-Pacific region.

By the way, the deal on Tuesday also comes at critical time when Gazprom appears to be battling for its traditional monopoly on Russian gas exports with powerful rival business interests working in the Byzantine corridors of power in the Kremlin, who also claim the rights to export LNG.

However, the real significance of the deal lies in the redrawing of the geopolitics of the eastern Mediterranean region, which also happens to be currently in the cusp of the Arab Spring. The Tamar project is being implemented by a consortium dominated by Israeli companies - Delek Drilling, Avner Oil Exploration, Isramco Negev-2 and Dor Gas - in which the US oil major Noble has a 36% holding. (Noble holds a 39.7% interest in Leviathan as well.) That is to say, both Tamar and Leviathan are essentially US-Israeli ventures and Gazprom's deal could not have been forthcoming without an okay from the American and Israeli partners.

Now, Gazprom has also been eyeing participation in Israel's Leviathan gas fields. The Leviathan is expected to go online in 2016. Herein hangs a tale. Evidently, Russian President Vladimir Putin had big thoughts on his mind when he made Israel one of his first destinations for foreign visits in June soon after returning to the Kremlin in the last presidential election.

Put differently, the June visit underscored how Israel's discovery of the major gas fields in the eastern Mediterranean amounts to a tectonic shift in the geopolitics of the region. Moscow sees a big window of opportunity insofar as the Leviathan extends into Cyprus' southern waters. Noble Energy, which made the Israeli strikes, is also the lead player in the exploration off Cyprus and has already struck an estimated reserves of 7 tcf in the Aphrodite field, which is just 25 miles (40 kilometers) west of Leviathan. Indeed, the need arises for Israel and Cyprus to pool their efforts.

This has triggered a spate of high visits between the two countries, which also, interestingly, have one other thing in common - strained relations with Turkey. Ankara used to be Israel's strategic ally until two years ago when they drifted apart as Turkey's Islamist leadership regarded it expedient to put a distance with Tel Aviv so as to burnish its credentials as the "model" for the countries of the new Middle East emerging out of the Arab Spring.

Unsurprisingly, Turkey is furious that Israel is teaming up with its implacable enemies - Cyprus and by association Greece and has threatened to use military force to stop the drilling off southern Cyprus. Ankara also has a problem with Russia's energy exports in general, having ambitions of its own as the main energy hub between the west and the east.

A holistic picture...
Enter Russia. Russo-Turkish ties are passing through trying times in the recent period, while historically, Russia has close ties with Cyprus and Greece which follow the Orthodox faith.

Meanwhile, in recent years, Russian companies have also made major interests in Cyprus. It is a measure of the growing Russian stakes in the Cyprus economy - as well as Nicosia's benign perceptions of the Russian patronage - that Putin offered that country a $3.5 billion loan in 2010 to bolster its banking sector.

With the Cypriot economy suffering the effects of the economic meltdown in Greece, Nicosia has approached the Kremlin for another bailout to the tune of $5 billion. Moscow is brooding. Putin has offered that Russia could join any European Union bailout plan for Cyprus.

Moscow factors in that the gas discoveries have catapulted Cyprus from a mere Mediterranean backwater and tax haven for street-smart Russian businessmen into a potential regional energy power. The expert opinion is that Cyprus sits on gas reserves that could last for two centuries at its current level of consumption.

Moreover, Russia cannot afford to let Israel and Cyprus join hands to develop ties to begin exporting gas to the European market, as that would cut into Gazprom's traditional business as Europe's key supplier. Israel's maritime zone abuts that of Cyprus and the Leviathan extends into Cyprus' southern waters and there are plans to combine the Israeli and Cypriot exports to Europe via Greece. Given its strong ties with Cyprus and the rising influence of the "Russian lobby" in Israeli politics, Moscow is maneuvering into a position to handle a big chunk of the gas exports that might originate from the Leviathan fields.

Actually, Moscow has a holistic picture of the energy map of the eastern Mediterranean. Its recent moves to foster ties with Lebanon and its entrenched stance on Syria can be seen partly at least in this light. Russia invited the Lebanese president Michel Suleiman to Moscow in late January.

The 3-D seismic surveys have shown that Lebanon probably has major gas fields within its maritime economic zone, which could even be bigger than the potential in offshore Cyprus. Syria lies along the same offshore strata, too. Suffice to say, the US Geological Survey estimates that the Levant Basin (which runs from Syria through the waters of Lebanon, Israel, Cyprus, the Gaza Strip and Egypt) contains 122 trillion cubic feet of gas and some 1.7 billion barrels of oil.

A 'de-ideologized' return...
It is no big secret that the Levant's conflict politics intersect with global energy strategies. Israel wouldn't want its export opportunities limited by Russia since Tamar and Leviathan offer a one-in-a-million chance for it to cultivate friendships and break out of its isolation. But the Tamar deal shows that Israel can be very pragmatic if the right mix of quid pro quo is forthcoming from Moscow.

What that Russian quid pro could be, time will tell. The Israeli government is yet to give approval to the Gazprom's Tamar deal. Meanwhile, Israeli press has reported that the criteria for foreign investment in the Leviathan gas field - qualifications in natural gas development, liquefied natural gas processing, etc. - suspiciously suggest that Gazprom is set to take a stake in the project.

A rough estimation would be that Israel would need more than $10 billion worth of export infrastructure alone. No wonder, rumors of a Gazprom acquisition refuse to die down.

To be sure, the Israelis will bargain an optimal deal, and that will most certainly include political elements. Israel has made no bones about its keenness to whittle down Russia's strategic ties with Iran, especially its arms sales. Israel would hope that Russia facilitates a smooth enough "regime change" in Syria for a shift that doesn't destabilize the region to its disadvantage.

On balance, however, it seems increasingly difficult to keep Russia out of the energy reserves of the Eastern Mediterranean, especially if the plan is to construct a liquefaction facility in Cyprus that would process and export the gas received from Israeli Leviathan and Cypriote Aphrodite - which is what Noble Energy has called for.

Russia's biggest advantage is that it is uniquely placed navigate its way around in the choppy waters of the Eastern Mediterranean, which is strewn with disputes over maritime borders and exclusive economic zones - involving Greece and Turkey, Israel and Lebanon, Cyprus and Turkey, and lately Syria and Turkey.

Post-Soviet Russia's "de-ideologized return" to the Middle East in a matrix where all that is permanent are its interests and all else is ephemeral and negotiable is beginning to show results as the Tamar deal dramatically testifies. After all, it is no small matter to foster friendships with Israel on the one hand and Iran, Syria and Lebanon on the other, with Cyprus and Greece on the one hand and Turkey on the other - and make almost all of them feel special about their Russia connection...With Vlad Putin Moscow casts wide net in Mediterranean...
Ambassador M K Bhadrakumar.

Tuesday, February 26, 2013

Beans will be of more value than US dollars after QEIII runs it's course...

Beans will be of more value than US dollars after QEIII runs it's course...
Buffett as a leading indicator...???By Martin Hutchinson

Warren Buffett's political pronouncements are intellectually vacuous hot air, yet I suspect he retains excellent investor's instincts about the future trajectory of the US economy. So when he manifestly overpays in a US$28 billion acquisition of the food producer H J Heinz, we should listen and ponder what the deal tells us about where we are going. On cool reflection, the answer to that question is manifestly a survivalist one. For Warren Buffett it's clear: when Cash is Trash, Beans are Queens!

As in many of his transactions, Buffett has negotiated a favorable structure in the Heinz purchase: $8 billion of his $12.5 billion commitment takes the form of 9% preferred stock, which will pay him a fixed dividend of more than four times the current 10-year Treasury bond rate. Nevertheless, his preferred stock will be junior to $12 billion of Heinz debt; if Heinz, including its debt, becomes worth only $15 billion, as it was in 2009, then the value of Buffett's preferred stock, his common stock and his partner 3G Capital's common stock will be only $3 billion between them.

In addition, Buffett will have little control over the investment; he is to leave the operating management to 3G Capital. One can understand the rationale for this. His saintly reputation in left-of-center circles would be severely dented if he were personally responsible for firing tens of thousands of unsuspecting US Heinz workers while relocating the entire operation to some low-wage hellhole.

Still, the theory is that any asset is worth more if Buffett buys it, even though the justification for Berkshire Hathaway's (NYSE:BRK-A and BRK-B) astronomical share price (which, however, has underperformed the S&P 500 Index over the past five years) looks a little bedraggled as a result of this transaction.

At first sight, it might seem that Buffett merely expects a burst of inflation, unaccompanied by a rise in interest rates. That is a reasonable supposition - one can imagine that even if inflation appeared, Ben Bernanke at the Fed or his probable successor, Janet Yellen, would be extremely reluctant to raise interest rates.

At most they would cut back somewhat on the additional "stimulus" provided by their foolish bond purchases. Instead they would allow inflation to rise to an alarming level, meanwhile allowing investors in short-term or long-term bonds to be subjected to hugely negative real returns (and in the latter case, severely negative nominal returns as long-term rates rose in spite of Fed opposition).

With over $40 billion of cash at the last balance sheet date (some of it tied up by insurance commitments) Berkshire Hathaway would be especially vulnerable to such an outcome. It would lose money in real terms on its short-term bonds and would be forced to recognize capital losses on its holdings of long-term bonds as interest rates rose. If it diversified its holdings into "inflation-proof" US equities, it would find their value eroded also, as corporate profits fell with rising debt costs and price-earnings ratios declined from their current high levels - as they did in the late 1970s.

The most obvious hedge against this eventuality would be to buy gold and silver. However, Berkshire Hathaway suffers from the problem that its purchases would be large enough to distort the relatively thin gold and silver markets. With the world's annual gold mine production being only around $150 billion, any attempt to shift a substantial portion of Berkshire Hathaway's holdings into gold would push the metal's price into an upward spiral.

There is however a simple alternative: the shares of gold and silver mining companies. These have wildly underperformed gold and silver prices in the past two years and are now heavily undervalued, unless you think precious metals prices are about to collapse.

The largest gold miner, Barrick Gold (NYSE:ABX), for example is on a forward P/E ratio of 6.3 times, little more than a third the 17 P/E ratio of the S&P 500 Index - and unlike ordinary companies, Barrick's earnings are not vulnerable to an upsurge in inflation - they would benefit hugely from it. Barrick's market capitalization is around $30 billion, large enough to be worth a Buffett takeover, and indeed there are several other possible mining stocks, all very reasonably valued, on which Buffett could practice his takeover skills if he wished.

A mining takeover is an equally good inflation hedge to a Heinz takeover, and much more reasonably priced. Thus Buffett, famously a value investor inspired by Graham and Dodd's 1940 masterpiece Security Analysis, must have some serious reason for not concentrating on the precious metals sector. I can think of two possibilities.

The first is that the political effects of Buffett launching into a major campaign of buying precious metals, or making takeover bids for mining companies, would be from his point of view highly counterproductive. Such a campaign would confirm that the fiscal and monetary policies of the past five years had been highly damaging, so much so that a rational investor had been forced to protect himself from a bond and stock market collapse and the inflationary erosion of his capital.

Needless to say, the sight of Buffett engaging in rational self-protection in this way would cause a stampede by other investors into hard assets, further damaging the confidence-trickster flim-flam on which current worldwide fiscal and monetary policies depend for their sustenance.

To put no finer point on it: a precious metals or mining company purchase program by Buffett would be highly politically incorrect, something that appears to matter far more to Buffett than it did to his admirable Republican Congressman father Howard Buffett (R-Nebraska).

You may argue that Buffett is above such considerations, that his calm investor rationality simply determines the optimal asset allocation strategy without regard to vulgar political considerations. Very well, in that case there is only one conclusion to be drawn about Buffett's investment outlook: he must fear not simply an inflationary upsurge, but a collapse, at least temporary, of the fabric of Western civilization.

While either gold or silver has been the monetary instrument of choice for almost all major world civilizations, their value depends on the existence of an ordered civilization, with the rule of law and a substantial volume of monetary transactions. The exquisitely organized Song dynasty China was able to move to paper money for a century or so before the Mongol invasions, but China for most of history relied on silver as a means of exchange. Even when the country was suffering from hyperinflation in the 1940s, gold and silver were accepted as payment for the goods and services that were available.

However, as you can read in Jung Chang's Wild Swans, during the Maoist famine years of the "Great Leap Forward" of 1958-61, when market mechanisms ceased to operate, gold and silver were no longer useful, because possession of them endangered your position in a society that was full of informants and imprisoned the bourgeois.

Similarly during the Ukrainian famine of 1928-32, possession of gold and silver got you labeled as a "kulak" and subject to liquidation by Stalin's secret police.

In both cases however, food itself remained a highly acceptable means of exchange and could obtain you any kind of services available, or indeed antique furniture and jewelry if your taste ran to that sort of thing and you were confident your political connections made you safe from liquidation.

There is thus a more sinister potential implication of Buffett's Heinz purchase. He may believe that inflation will become extreme, that the monetary system will break down completely, that even gold and silver will become unacceptable stores of value in a period in which their value is after all itself a matter of fiat since gold at least has no practical use.

In that event, a breakdown of the monetary system would presumably be accompanied by a breakdown of the distribution system, causing the entire 310 million population of the United States to revert to barter and subsistence farming.

At that point, the most valuable commodities would become food staples and armaments. With baked beans piled in warehouses around Omaha, and a ketchup lake at an undisclosed location, Buffett could dominate the post-Apocalypse economy to an even greater extent than he dominates the present one. He would of course need a collection of bodyguards and a sophisticated means of self-defense, so maybe we should look for future Buffett purchases in the armaments sector.

Alternatively, Buffett may believe that the chance of a truly Apocalyptic economic outcome is small, but that a temporary period of post-Apocalypse-like conditions is still possible, during which his Heinz investment (and that in any armaments manufacturers) could prove immensely valuable.

The prospect of a breakdown of civilization may seem a remote one, but for five years we have suffered under monetary and fiscal policies more extreme than any previously attempted. Their eventual collapse is certain. Maybe Buffett's deep investment genius is telling us, in the face of his public political persona, his view on what form that collapse will take.

Martin Hutchinson is the author of Great Conservatives (Academica Press, 2005) - details can be found on the website 

Saturday, February 23, 2013

Gauging Our Energy Future...

Anyone who has ever invested in a financial product, such as a mutual fund, will be familiar with the disclaimer that, “Past performance is not indicative of future results,” casting the ultimate onus of responsibility for making an investment decision on the individual investor himself.  The same can be said for horizon scanners,  global futurists, experts and pundits alike who have the unenviable task of conceptualizing tomorrow’s future against a landscape of unknowns.  Admittedly, those in this business have missed some of the biggies in recent history, i.e. the collapse of the Soviet Union, the emergence of the Arab Spring, and the cascading and mounting effects of the internet and associated technologies on information sharing and political change.  In the energy world, the unconventional oil and gas revolutions are already reshaping global future energy supply and consumption patterns.  This goes both for energy consumers and producers.  Yet the impact of new hydrocarbons supplies will ultimately depend more so on how these resources are used rather than simply based on the fact that they can now be extracted on a cost-competitive basis.  

The International Energy Agency (IEA) is indeed one of those organizations tasked with giving future shape to unfolding events.  The IEA’s 2012 World Energy Outlook is based on defining discernible and statistically verifiable global supply and demand trends for global energy resources.  In its recent report, on the issue of unconventional oil and gas,  the IEA remarks that, “A surge in unconventional supplies, mainly from light tight oil in the United States, and oil sands in Canada, natural gas liquids, and a jump in deepwater production in Brazil, pushes non‐OPEC production up after 2015 to a plateau above 53 mb/d, from under 49 mb/d in 2011.”   The IEA goes on to add that, “The net increase in global oil production is driven entirely by unconventional oil, including a contribution from light tight oil that exceeds 4 mb/d for much of the 2020s, and by natural gas liquids. Of the $15 trillion in global upstream oil and gas investment that is required over the period to 2035, almost 30% is in North America.”  The Paris-based agency, which advises industrialized nations on their energy policies, said the global energy map "is being redrawn by the resurgence in oil and gas production in the United States" and that the US would produce more oil than Saudi Arabia by 2020.   

Not so fast

Jubilant observers in North America have emerged from the woodwork in the wake of this announcement decreeing a new era of future energy independence for the US without critically thinking through whether increased supply will necessarily lead to a sustained fall in energy prices particularly in the oil sector.  Unconventional gas provides a buffer to augment projected future US demand in power generation (the electricity sector where most gas is used) and will further help to keep a lid on gas prices.  The gas price-lid is derived from that fact that electricity can be generated from a host of other commodities as well such as coal, nuclear and hydropower all of which provide dependable base-load power generation.  In short the power market benefit from price competition is derived from fuel choice and the technical ability of power generating units to fuel-switch between feedstocks if necessary.  It is yet unclear and to what extent the US may evolve into a net gas exporter (in the form of LNG) but if it does this could work to the strategic and financial advantage of net gas import dependent states tied to gas deliveries from regional suppliers through piped gas as is the case in much of Europe.  In fact because of this technology-led shale gas revolution, in recent years much of the LNG originally destined for the US has been diverted to the European market putting downward price pressures on Algerian and Russian gas deliveries.  De-linking gas prices from oil in a competitive market atmosphere could also contribute to lowering gas prices where hub (spot-market) LNG is available.  Finally, such a de-link would allow European gas companies to argue for more flexibility in adjusting the price paid for gas in their long-term contracts with suppliers.  The key point here is that fuel competition in power generation is the key to price setting through fuel choice. 

Oil is a different animal.  A common current which run through many contributions to the Journal of Energy Security is that oil, conventional or unconventional, is an international fungible commodity whose price is set on international markets.  Regardless of whether a country is a net oil producer (allowing for exports) or consumer (dependent on oil imports) the price paid by the consumer is more or less a function of the oil market which is far from free.  Oil price manipulation is a rote exercise of those who control the vast majority of conventional world oil reserves, the OPEC cartel, which can turn on or off the oil spigot in response to non-OPEC oil supply augmentation from either conventional or unconventional resources.  In fact, at a recent joint meeting of the IEA Secretary General who spoke positively of the projected growth in US oil and gas output, Abdalla Salem el-Badri, Secretary General of the Organization of Petroleum Exporting Countries, said, "If this message keeps coming, there will be no investment" from the group's members and "consumers will lose."  In short el-Badri threatens that OPEC would curtail upstream investment which would lead to downward (future) pressure on oil supplies and sustained upward price pressure on the commodity regardless of how much unconventional oil the US produces. 
The fact is that el-Badri and others know that as long as oil monopolizes the transportation sector, where the vast majority of it is consumed, and as long as transportation fleets—regardless of their efficiency improvements—remain hamstrung by a lack of fuel choice at the pump oil prices will continue to rise unabated with consumers paying the ultimate price.   So while the IEA’s projections of future US and Canadian unconventional oil supply growth are welcome, they are neither a panacea for all energy-woes nor will they welcome in a new era of cheap oil unless the transportation sector is liberated from oil as a monopoly fuel for ‘planes, trains, automobiles’ and military equipment such as tanks.        

Strategic foresight in the defense and security sector: resource focus

Another organization charged with looking at the impact energy and resources will have on our global future is NATO’s North American branch Supreme Allied Command Transformation (SACT).  SACT is presently leading a strategic foresight process examining inter alia what are the global security implications of future resource availability, access, and continued demand growth for all commodities including water availability and hydrocarbons.  Military organizations have two primary concerns in the energy-resource domain.  These are in improving military energy efficiency, with a particular emphasis on increasing military effectiveness, and in the cost of fuel.  To be sure, national and collective security organizations will always have access to oil and oil  derivatives as a fuel for military operations but at what cost?  Some fuel experts bristle at the idea that the Alliance is a single fuel military just as el-Badri bristles at the notion that US is ramping up oil production.  Regardless of how the message is couched, the fact remains that the Alliance is a single fuel military and this is a problem.

In this era of fiscal austerity, fuel use and costs  are major military operational and training considerations.  History (hindsight) is replete with instances of multinational training exercises being cancelled due, at least in part, to fuel costs.  In addition, (for example) a major challenge the US DoD is facing is how to reduce training related fuel-costs for US aviators and the services are making headway.  Moreover, against the background of the US ‘fiscal cliff’ looming, the DoD has requested budget authorization for $14 billion in fuel purchases for fiscal year 2013.  Foresight tells us there has to be a better way.

Hindsight tells us that in the oil patch,  emphasis has been and will remain for the foreseeable future, focused on the volatile Middle East.  Supply vulnerabilities either real or imagined are priced into the oil barrel.  On top of real instabilities, whether they be in the Niger Delta, Iraq or elsewhere  these also add to the cost of oil through price spikes when instabilities do occur.  Foresight may help us in imagining what reduced vulnerabilities could emerge from lessening oil use across both civilian and military sectors.  If we reduce the strategic importance of oil,  do we not reduce the strategic importance of the Middle East where resources are concentrated?  The strategic implications for the future, and for future capabilities, are almost mind-boggling. 

There is a creeping reality, which goes back to the IEA’s projection of future US unconventional oil and gas production, that disproportionate import dependence on Middle East oil could fracture and drive differences among and between Alliance members themselves.  Already the US and Canada are less dependent on Middle East oil than are their European Allies. The US has already announced a strategic pivot in its strategic emphasis away from Europe and towards Asia.  If Canadian oil sands, and US tight oil availability are perceived to buffer North American Alliance Members from oil supply vulnerabilities (but not future oil price shocks) who within the Alliance is going to do the heavy lifting in the future for protecting the Persian Gulf (as an example) from potential supply disruptions?  What will this mean for future Alliance capabilities and are European Member States willing to foot-the-bill for these capabilities in order to protect their collective national energy security in the presence of a (theoretical) reduced US military presence in the region in the future?  

Hindsight has and foresight will demonstrate that from a North Atlantic perspective present realities and future challenges are best addressed collectively.  When it comes to energy resources, this is not about militarizing energy nor is it about injecting a new role for the NATO Alliance in the energy domain.  This is about addressing future emerging security threats and challenges to the Alliance from cracks that can emerge from within the Alliance itself.  This is about addressing future energy challenges collectively and effectively to preserve Alliance solidarity, improve resilience and maintain resolve.  Hindsight tells us that NATO has succeeded in facing these challenges, come what may in the past, and foresight will prepare us for addressing them in the future.  Therefore while, “past performance may not be indicative of future results,” if experience holds true we indeed remain in a good position to shape our world or worlds to come but the heavy lifting remains before us.    
Kevin Rosner

Sunday, February 17, 2013

A rail alternative to Suez Canal...

As an alternative to the violence-plagued Suez Canal, Israel is on the verge of finalizing a rail route...
 Israel was created as a Western Geopolitical wedge from inception, in the middle of MENA, cutting the Levant from the Suez, cutting the Eastern flank of the Arab World from North Africa...and a strategic choke hold on the crucial maritime routes in the area...
Israel is close to finalising the route of a rail alternative to the Suez Canal as instability in Egypt has added to the urgency of a project to connect the Mediterranean with the Red Sea.

Last month 40 people were killed in protests in the three big Egyptian cities lining the canal, and some shipping groups had to suspend work for several days. President Morsi has warned of a “collapse of the State” if protests continue. Fees for using the canal are Egypt’s only reliable source of foreign currency, bringing in about $5 billion (£3.22 billion) of revenue a year.

Israeli officials have publicly denied suggestions that the plan threatens Egypt’s monopoly of one of the world’s most important trade routes. But privately they admitted that they were being asked to plan for the “day after” a closure of the canal.

“There are a number of scenarios that we need to prepare for, including the peace treaty between Israel and Egypt being challenged, or groups attempting to seize control of Suez in one of the ongoing protests there,” one senior Israeli official involved in the project said. “Israel, and the rest of the world, can’t sit around and wait for the day to come where we can’t transport goods between Asia and Europe. We have to create other channels.”

The project, funded by the Chinese Government, would include the construction of a port on the Red Sea coast near the Israeli city of Eilat, and a double-track railway line capable of carrying heavy cargo to the Israeli port of Ashdod on the Mediterranean coast.

Binyamin Netanyahu, Israel’s Prime Minister, has declared it a “national priority” as it would transform Israel into a major player in global shipping. Building on the project, expected to take a decade, could begin this year.

Shipping companies said that Egypt’s military has maintained a strong presence around the canal to ensure that trade is not affected by the protests.

However, Gil Miller, managing director in Israel for the shipping group Maersk Line, said that while neither Maersk nor its big competitors wanted to find an alternative to Suez, recent events had forced them to consider “contingency plans”.

“The few days of disruptions ... were concerning, but manageable. We have, however, prepared other options for our company that can be activated in a short time and we are looking at the route being built in Israel,” Mr Miller said.

Israeli media have estimated that construction of the rail line alone would cost $2 billion, and the enlargement of the ports near Eilat and Ashdod could cost billions more.

An Israeli diplomat said that there was a great deal of interest in the project in China and India, as well as other countries in the region that he could not name due to “sensitivity”.

This week Israel’s Government heard final plans for the route through Israel, which environmentalists claim would cause irreparable damage and be a source of pollution. Israeli officials said that they would hear objections to the route before approving the plans.

Eran Feitelson, a transport expert at the Hebrew University of Jerusalem, wrote in Haaretz newspaper: “For Egypt, the Suez Canal is an essential artery for economic survival; we are trying to create a threat to this artery.”

Wednesday, February 13, 2013

The illusory state of the Empire...

The illusory state of the Empire...By Pepe Escobar

Barack Obama would never be so crass as to use a State of the Union (SOTU) address to announce an "axis of evil".

No. Double O Bama, equipped with his exclusive license to kill (list), is way slicker. As much as he self-confidently pitched a blueprint for a "smart" - not bigger - US government, he kept his foreign policy cards very close to his chest.

Few eyebrows were raised on the promise that "by the end of next year our war in Afghanistan will be over"; it won't be, of course, because Washington will fight to the finish to keep sizeable counterinsurgency boots on the ground - ostensibly to fight, in Obama's words, those evil "remnants of al-Qaeda".

Obama promised to "help" Libya, Yemen and Somalia, not to mention Mali. He promised to "engage" Russia. He promised to seduce Asia with the Trans-Pacific Partnership - essentially a collection of corporate-friendly free-trade agreements. On the Middle East, he promised to "stand" with those who want freedom; that presumably does not include people from Bahrain.

As this was Capitol Hill, he could not help but include the token "preventing Iran from acquiring nuclear weapons"; putting more "pressure" on Syria - whose "regime kills its own people"; and to remain "steadfast" with Israel.

North Korea was mentioned. Always knowing what to expect from the horse's mouth, the foreign ministry in Pyongyang even issued a preemptive attack, stressing that this week's nuclear test was just a "first response" to US threats; "second and third measures of greater intensity" would be unleashed if Washington continued to be hostile.

Obama didn't even bother to answer criticism of his shadow wars, the Drone Empire and the legal justification for unleashing target practice on US citizens; he mentioned, in passing, that all these operations would be conducted in a "transparent" way. Is that all there is? Oh no, there's way more.

Double O's game
Since 9/11, Washington's strategy during the George W Bush years - penned by the neo-cons - read like a modified return to land war. But then, after the Iraq quagmire, came a late strategic adjustment, which could be defined as the Petraeus vs Rumsfeld match. The Petraeus "victory" myth, based on his Mesopotamian surge, in fact provided Obama with an opening for leaving Iraq with the illusion of a relative success (a myth comprehensively bought and sold by US corporate media).

Then came the Lisbon summit in late 2010, which was set up to turn the North Atlantic Treaty Organization (NATO) into a clone of the UN Security Council in a purely Western format, capable of deploying autonomous military interventions - preemption included - all over the world. This was nothing less than classic Bush-Obama continuum.

NATO's Lisbon summit seemed to have enthroned a Neoliberal Paradise vision of the complex relations between war and the economy; between the military and police operations; and between perennial military hardware upgrading and the political design of preemptive global intervention. Everything, once again, under Obama's supervision.

The war in Afghanistan, for its part, was quite useful to promote NATO as much as NATO was useful to promote the war in Afghanistan - even if NATO did not succeed in becoming the Security Council of the global American Empire, always bent on dominating, or circumventing, the UN.

Whatever mission NATO is involved in, command and control is always Washington's. Only the Pentagon is able to come up with the logistics for a transcontinental, global military operation. Libya 2011 is another prime example. At the start, the French and the Brits were coordinating with the Americans. But then Stuttgart-based AFRICOM took over the command and control of Libyan skies. Everything NATO did afterwards in Libya, the virtual commander in chief was Barack Obama.

So Obama owns Libya. As much as Obama owns the Benghazi blowback in Libya.

Libya seemed to announce the arrival of NATO as a coalition assembly line on a global scale, capable of organizing wars all across the world by creating the appearance of a political and military consensus, unified by an all-American doctrine of global order pompously titled "NATO's strategic concept".

Libya may have been "won" by the NATO-AFRICOM combo. But then came the Syria red line, duly imposed by Russia and China. And in Mali - which is blowback from Libya - NATO is not even part of the picture; the French may believe they will secure all the gold and uranium they need in the Sahel - but it's AFRICOM who stands to benefit in the long term, boosting its military surge against Chinese interests in Africa.

What is certain is that throughout this convoluted process Obama has been totally embedded in the logic of what sterling French geopolitical analyst Alain Joxe described as "war neoliberalism", inherited from the Bush years; one may see it as a champagne definition of the Pentagon's long, or infinite, war.

Double O's legacy
Obama's legacy may be in the process of being forged. We might call it Shadow War Forever - coupled with the noxious permanence of Guantanamo. The Pentagon for its part will never abandon its "full spectrum" dream of military hegemony, ideally controlling the future of the world in all those shades of grey zones between Russia and China, the lands of Islam and India, and Africa and Asia.

Were lessons learned? Of course not. Double O Bama may have hardly read Nick Turse's exceptional book Kill Anything that Moves: The Real American War in Vietnam, where he painstakingly documents how the Pentagon produced "a veritable system of suffering". Similar analysis of the long war on Iraq might only be published by 2040.

Obama can afford to be self-confident because the Drone Empire is safe. [1] Most Americans seem to absent-mindedly endorse it - as long as "the terrorists" are alien, not US citizens. And in the minor netherworlds of the global war on terror (GWOT), myriad profiteers gleefully dwell.

A former Navy SEAL and a former Green Beret have published a book this week, Benghazi: the Definitive Report, where they actually admit Benghazi was blowback for the shadow war conducted by John Brennan, later rewarded by Obama as the new head of the CIA.

The book claims that Petraeus was done in by an internal CIA coup, with senior officers forcing the FBI to launch an investigation of his affair with foxy biographer Paula Broadwell. The motive: these CIA insiders were furious because Petraeus turned the agency into a paramilitary force. Yet that's exactly what Brennan will keep on doing: Drone Empire, shadow wars, kill list, it's all there. Petraeus-Brennan is also classic continuum.

Then there's Esquire milking for all it's worth the story of an anonymous former SEAL Team 6 member, the man who shot Geronimo, aka Osama bin Laden. [2] This is familiar territory, the hagiography of a Great American Killer, whose "three shots changed history", now abandoned by a couldn't-care-less government machinery but certainly not by those who can get profitable kicks from his saga way beyond the technically proficient torture-enabling flick - and Oscar contender - Zero Dark Thirty.

Meanwhile, this is what's happening in the real world. China has surpassed the US and is now the biggest trading nation in the world - and counting. [3] This is just the first step towards the establishment of the yuan as a globally traded currency; then will come the yuan as the new global reserve currency, connected to the end of the primacy of the petrodollar... Well, we all know the drill.

So that would lead us to reflect on the real political role of the US in the Obama era. Defeated (by Iraqi nationalism) - and in retreat - in Iraq. Defeated soundly in Lebanon in 2006 by the valiant Lebanese Resistance. Defeated (by Pashtun nationalism) - and in retreat - in Afghanistan. Forever cozy with the medieval House of Saud - "secret" drone bases included (something that was widely known as early as July 2011). [4] "Pivoting" to the Indian Ocean and the South China Sea, and pivoting to a whole bunch of African latitudes; all that to try to "contain" China.

Thus the question Obama would never dare to ask in a SOTU address (much less in a SOTE - State of the Empire - address). Does the US remain a global imperial power? Or are the Pentagon's - and the shadow CIA's - armies nothing more than mercenaries of a global neoliberal system the US still entertains the illusion of controlling?

Monday, February 11, 2013

Khamenei plays hardball with Obama...

Khamenei plays hardball with Obama...

By M K Bhadrakumar

It was an extraordinary week in the politics of the Middle East and it ended appropriately by being rounded off with a reality check lest imaginations ran riot.

Three major happenings within one week would have to be taken as the inevitable confluence of a flow of developments and processes: the offer by the Syrian opposition of a bilateral dialogue with the Bashar al-Assad regime; the historic visit of an Iranian president to Egypt; and the public, unconditional offer by the United States of direct talks with Iran and the latter's ready acceptance of it.

Yet, they are interconnected. First, the Syrian kaleidoscope is dramatically shifting despite the continuing bloodbath. Unless the European countries drop their arms embargo on Syria (which

expires on March 1 anyway) and decide to arm the rebels, the stalemate will continue.

The mood in Western capitals has shifted in the direction of caution and circumspection, given the specter that al-Qaeda affiliates are taking advantage. If anything, the hurricane of militant Islamism blowing through Mali only reinforces that concern and reluctance.

Suffice to say, what prompted the Islamist leader of the Syrian National Coalition, Moaz al-Khatib, last weekend to show willingness to take part in direct talks with representatives of the Syrian regime - and pushed him into meeting with Russian and Iranian foreign ministers - was as much the disarray within the Syrian opposition and his failure to form a credible "government-in-exile" as his acute awareness that the Western mood is now cautious about Syria.

To be sure, Iran played a signal role in the grim battle of nerves over Syria through the recent months. Strangely, it is Iran today, which is on the "right side of history", by urging dialogue and negotiations and democratic elections as holding the key to reform and change in Syria - or, for that matter, in Bahrain.

The shift in Syria has actually enabled Iran to cross over the Sunni-Shi'ite barriers that were tenaciously put up to isolate it. Thus, President Mahmud Ahmedinejad's historic visit to Egypt this week has a much bigger regional dimension to it than the restoration of the Iran-Egypt bilateral relationship. The trilateral meeting held between Ahmedinejad and his Egyptian and Turkish counterparts Mohammed Morsi and Abdullah Gul signified Iran's compelling relevance as an interlocutor rather than as an implacable adversary for the two major Sunni countries.

Interestingly, Morsi added, "Egypt's revolution is now experiencing conditions similar to those of Iran's Revolution and because Egypt does not have an opportunity for rapid progress like Iran, we believe that expansion of cooperation and ties with Iran is crucially important and necessary."

Needless to say, Iranian diplomacy has been optimal with regard to the Muslim Brotherhood-led regime in Cairo - neither fawning nor patronizing, or pushing and pressuring, but leaving things to the Brothers to decide the pace. Basic to this approach is the confidence in Tehran that the surge of Islamism in the Middle East through democratic process, no matter "Sunni Islamism", will ultimately work in favor of Iran's interests.

The cordial welcome extended by Sheikh Ahmed al-Tayyeb, head of Egypt's Al-Azhar, to Ahmedinejad and the strong likelihood of his visit to Tehran in a very near future also underscores the common desire to strengthen the affinities.

Simply put, the Syrian crisis has virtually receded from the Iran-Egypt field of play as a serious issue of discord. True, the Turkey-based Syrian National Council (SNC) continues to reject any negotiation with the Syrian regime, and the Muslim Brotherhood dominates the SNC. But this may also provide the window of opportunity for Turkey, Egypt and Iran to knock their heads together.

Besides, the SNC has no real influence over the rebel fighters, and Ankara feels exasperated at the overall drift of the Syrian crisis.

Thus, it was against a complex backdrop that US Vice President Joe Biden said in Munich last weekend that Washington is ready to hold direct talks with Iran over the country's nuclear energy program. Iran's immediate response was one of cautious optimism. Foreign Minister Ali Akbar Salehi reacted: "I am optimistic. I feel this new [US] administration is really this time seeking to at least divert from its previous traditional approach vis-a-vis my country."

However, by the next day, he had begun tempering the enthusiasm: "We looked at it positively. I think this is a good overture... But we will have to wait a little bit longer to see if their gesture is this time a real gesture... so that we will be making our decisions likewise."

Salehi subsequently explained, "A look at the past shows that whenever we have had talks with the Americans, including efforts to bring stability to Afghanistan, unfortunately the other side has failed to fulfill its obligations. You cannot use a threatening tone and say all options are on the table, on the one hand, [because] this is an apparent contradiction... Exerting pressure and [invitation to] talks are not compatible. If you have honest intentions, we can place serious negotiations on the agenda."

Obviously, Salehi spoke in two voices, and his retraction finally proved to be the "authentic" voice of Tehran. When the Supreme Leader Ali Khamenei broke his silence on Thursday, he rejected the possibility of direct talks with the US. He said, "You [Americans] are pointing the gun at Iran and say either negotiate or we will shoot. The Iranian nation will not be frightened by the threats... Some naive people like the idea of negotiating with America [but] negotiations will not solve the problems. If some people want American rule to be established again in Iran, the nation will rise up to them."

One way of looking at Khamenei's harsh statement on Thursday is to put it in the immediate context of the announcement of further sanctions against Iran by Washington the previous day, which the US administration has explained as "a significant turning of the screw" that will "significantly increase the economic pressure on Iran".

But it does not fully explain the manifest harshness and the comprehensive rejection by Khamenei. Meanwhile, three factors are to be taken into account. First, Iran's domestic politics is hotting up and the dramatic eruption of public acrimony between Ahmedinejad and the Speaker of the Majlis Ali Larijani last weekend testifies to a rough period when Khamenei will have his hands full as the great helmsman.

Indeed, a lot of jockeying is going on as the presidential election slated for May draws closer. Khamenei could factor in that the talks with the US are best held after the elections. (By the way, this may also be Obama's preference.) Second, Khamenei has flagged by implication that Tehran expects some serious goodwill gesture on the part of the US before any talks take place. He has recalled that the US did not act in good faith in the past - such as when Iran helped out in the US's overthrow of the Taliban regime in Afghanistan.

A third factor is that Khamenei genuinely sees that Iran is on the "right side of history" as regards the regional upheaval in the Middle East, whereas the US's regional strategies are getting nowhere. In sum, whereas the US propaganda is that the Iran sanctions are "biting" and the regime is in Iran feels besieged, it is in actuality a bizarre situation of Washington believing its own propaganda while the ground realities are vastly different.

If the propaganda has us believe that the regime in Tehran is living in fear of a Tahrir-like revolution erupting in Iran, Khamenei's words show no such traces of fear or timidity. On the other hand, Khamenei would have carefully weighed Obama's capacity (or the limits to it) to bulldoze the Israeli lobby and to initiate a genuine normalization process with Iran.

When Richard Nixon worked on China in the early 1970s, he had the benefit of a broad consensus of opinion within the US political establishment. On the contrary, when it comes to Iran, pride and prejudice influence still rule the roost for most consequential Americans.

Khamenei's message to Obama is to get serious and think through what he really wants instead of lobbing a vague offer through Biden with no strings attached and no commitments underlying it. The Iranian leader who has continuously dealt with successive US administrations through the past 22 years simply threw the ball into Obama's court and will now wait and see how the latter kicks it around when he is in Israel next month.

Ancient Knowledge (Full Movie) ...

Tuesday, February 5, 2013

Hollande visit: $10 bn Rafale deal details being worked out...

Financial details of the over $10 billion deal for the purchase of 126 French Rafale medium multi-role combat aircraft (MMRCA) for the Indian Air Force are being worked out ahead of the visit by French President Francois Hollande to India next week.
"The financial details of the deal are being worked out," an external affairs ministry official told IANS.
"There are a lot of technical aspects of the deal, which are being worked out by the defence ministry," the official added, declining to say whether it would be inked on Feb 14, the day of official engagements of the French president in India.
French firm Dassault Aviation bagged the deal last year to provide the new generation fighter aircraft for the IAF after being declared the lowest bidder, pipping EAD's Eurofighter.
Eighteen of the 126 planes are to be purchased directly from Dassault, while Hindustan Aeronatics Limited (HAL) is to manufacture the other 108 under a licence at a facility in Bangalore.
Hollande is expected to come to India for a two-day visit, beginning Feb 13, but Feb 14 is his day of official engagements in India.
Both countries inked a civil nuclear deal in 2010, according to which two French reactors worth $10 billion are to be built at Jaitapur in Maharashtra.
However, there have been sustained protests by locals against the project.
Indian External Affairs Minister Salman Khurshid during his visit to Paris last month assured France of India's commitment to the 9,900 MW Jaitapur Nuclear Power Project.
French state-controlled nuclear group Areva and India's Nuclear Power Corporation Ltd. are in commercial discussions for the import of reactors for the Jaitapur plant.
Hollande, who was elected president last year, is to visit India along with his companion Valerie Trierweiler, a journalist.
She will be accorded the protocol of a First Lady, the official added.
The external affairs ministry official clarified that the Indian government has "never questioned" over who the visiting foreign dignitary wishes to bring along. During the visit of former president Nicolas Sarkozy in 2008, the government was to accord the rights of first lady to his then companion Carla Bruni, who decided against coming at the time, the official added.
Sarkozy and Bruni came to India during the 2010 visit as man and wife.
"The government of India has never questioned who the dignitary is accompanied by... could be his wife, daughter, or even the number of wives...," the official said.

Monday, February 4, 2013

Gas diplomacy time for Iran...

Gas diplomacy time for Iran...
By Chris Cook

After a long hiatus, the US-Iran policy logjam is showing encouraging signs of breaking.

On the US front, President Barack Obama has now been inaugurated, and is both free from worrying about another term and not unhappy at "Bibi" Netanyahu's setback in the recent Israel election. Obama has made pragmatic appointments in John Kerry and Chuck Hagel while his deputy, Joe Biden, is now offering direct US talks with Iran for the first time in many years.

For its part, Iran has now agreed to meet the P5+1 (the United Nations Security Council permanent members plus Germany) in Kazakhstan on February 25, which is a feather in the cap for President Nursultan Nazarbayev. Meanwhile, in Iran the continuing plunge of the riyal below 40,000 to the US dollar is

exacerbating ferocious in-fighting between the faction of President Mahmud Ahmadinejad and the two conservative factions who repelled the president's power grab early last year.

One of the key reasons for the collapse of the riyal is that vast amounts of riyals are being printed to finance Iran's energy subsidies, which now reflect crude oil prices at the financial bubble level of over US$115 per barrel.

The US is realistic enough to know that until the Iranian presidential election scheduled for June 14 is out of the way, there is no Iranian regime with whom they may meet and negotiate. But that need not mean that progress by the P5+1 is impossible prior to such bilateral US-Iran talks.

No deal It has been clear for some time that the terms offered to the US via the Swiss in 2003 - but which were spurned by the powerful US vice president Dick Cheney at a time when "Real Men Go to Tehran" was the neo-conservatives' war-cry - are still on the table as the basis for a US/Iran deal, and if so it is likely to be acceptable to the P5+1, including President Obama's administration.

The problem is that the Iranians do not believe that the conservative Republican-dominated US Congress will agree to lift sanctions without regime change in Iran, and having heard Richard Perle and John Hannah, among others, speaking in London last week at an ultra-conservative event in respect of Iran policy, I find it hard to disagree with Iran's pessimistic view. Clearly something new will be required to transcend this impasse, and I believe this may be found in energy co-operation.

20th century energy co-operation
In the same way that the lion and the gazelle may be seen together at the same water-hole, so it is that the most hostile of nations may co-operate in relation to energy. So for 40 years throughout the Cold War, the USSR reliably supplied natural gas and oil products to the West, who reliably paid for it. It is deeply ironic that it was only after privatization by oligarchs that gas supply to the West became less reliable due to the market presence of opaque middlemen.

Similarly, during the radical and often bloody period between 1979 and 1993 which followed the Iranian revolution, Ayatollah Khomeini's regime supplied oil to arch-enemy Israel using Marc Rich as an intermediary.

For various reasons, a resumption of Iranian oil supplies to the US is unlikely even if oil supply sanctions were lifted , but it is the painful financial sanctions that are the real blockage which must be addressed.

Software is the new oil
In my view one of the "big trades" of the 21st century is the exchange of the value of skills, knowledge and intellectual property for the value of renewable energy (megawatts) and for the value of carbon fuel saved - nega-therms of gas, and nega-liters of gasoline, diesel, and so on.

We have seen, post-Fukushima, how Japan has been investing massively in these areas while Germany is also closing down nuclear energy production in favor of renewables. The best example of the big trade is Denmark, which was hard hit by the 1973 oil shock and drastically changed its strategic energy policy to mandate "least energy cost" rather than "least dollar cost" energy production.

The result has been that while the country's gross domestic product has risen by 78% since 1980, Denmark's energy use has stayed the same, and its carbon fuel use has actually declined, through major investment in renewable energy and community heat infrastructure.

A Caspian energy accord
The energy ministers of the 10 Economic Co-operation Organization (ECO) nations are due to gather in Tehran between March 4 and March 6 for their Third Meeting, which was postponed from last October because of confusion in respect of Iran's proposal for an ECO "Energy Charter". This proposal for ECO energy co-operation was widely assumed to be competitive with the existing Energy Charter Treaty and associated Organization, when in fact it is complementary to them.

A more focused and gas-specific energy co-operation proposal is now being formulated that would involve the four ECO Caspian littoral states: Azerbaijan, Iran, Kazakhstan and Turkmenistan, all of which are gas producers with claims over Caspian resources.

Azerbaijan at present holds the ECO presidency and is the pivotal gas hub nation for exports of Caspian gas with a variety of pipeline projects mooted to transport gas to the West. Kazakhstan has been relatively slow to develop its resources but has good relationships with the P5+1, and its president is no stranger to radical policy proposals extending to a "petro" energy currency.

Turkmenistan, always a wild card, now appears to wish to avoid over-reliance on China as a customer for its gas and is looking for additional routes to market such as the ambitious Turkmenistan, Afghanistan, Pakistan, India (TAPI) pipeline.

So the time may now be ripe for a proposal for a Caspian Gas Accord, which would create a regional market framework, benchmark price, and gas "prepay" instrument, which could together be instrumental in stimulating regional energy co-operation.

Energy diplomacy
Perhaps one of the subjects on the table in Kazakhstan on February 25 might be a proposal to declare the Caspian a neutral and de-politicized zone for energy co-operation not just by the littoral nations but by other nations whose companies are active in development projects such as the Shah Deniz field, which is struggling for investment.

For its part, Iran - which is in difficulties as an investor in Shah Deniz - could perhaps contribute the use of its giant semi-submersible drilling rig as a shared Caspian resource.

Trust cannot be re-built overnight, but I believe that there is an "energy diplomacy" route available through energy co-operation for Iran and the P5+1 to begin to rebuild trust, so that in years to come, international investment in Iran's renewable energy, and the massive Iranian potential for carbon fuel savings, may come to render Iran's nuclear power plant at Bushehr an expensive anachronism.

Moreover, having mastered the technology Iran's immense intellectual resources may be re-deployed from the dead end of nuclear research to the greater challenge of making the transition to a low carbon economy through research into renewable energy technology and above all, the cheapest energy of all - carbon fuel saved. 

Sunday, February 3, 2013

The bitter irony of the financial crisis is just how common the putrid smell has become since...

By now we should have gotten used to the odor emanating from banks—bailouts, money laundering, Libor rate-rigging, the other misdeeds. But in Europe over the last few days, it was particularly dense.
A nauseating whiff came from Barclays today, when it leaked out that it has been under investigation by the Financial Services Authority and the Serious Fraud Office in Britain for illegal fundraising in 2008. Allegedly, the bank secretly loaned £5.3 billion ($8.4 billion) to one of Qatar’s sovereign wealth funds, which then turned around and with great public fanfare pumped that money back into Barclays—a scheme to raise capital on paper to escape a government takeover during the financial crisis.
Then Crédit Agricole, France’s third largest bank, announced €3.8 billion ($5 billion) in write-downs, mostly of “Goodwill” due to the “present macro-economic and financial environment.” Goodwill reflects money paid out for certain items in excess of their value—an expense that, by a quirk of accounting, is temporarily parked as an asset on the balance sheet to be expensed eventually. After the write-off, the bank will still have about €14 billion of Goodwill clogging up its balance sheet, and more write-offs are to come. It already wrote off €2.5 billion last year, when it agreed to sell its stake in the Greek bank Emporiki for €1, which it had acquired with impeccable timing in 2006 for €2.2 billion.
Greek banks... oh my! They’re being investigated by Greek financial crime prosecutors for €232 million in loans that they handed out to the ruling parties, Prime Minister Antonis Samaras’ New Democracy and the Socialist PASOK. “Suspected crimes against the state,” a court official called it.
The state funds political parties based on their share of the vote, and both parties pledged hoped-for state funding as collateral for these loans. But during the election last June, New Democracy’s share of the vote dropped from 33% to 29% and PASOK’s from 43% to 12%. With it, state funding suddenly collapsed, and some of the loans are turning sour.
Bitter irony: teetering Greek banks, hoping at the time to get bailed out by taxpayers in other countries, funded Greek political parties that then negotiated the bank bailouts with the EU for the benefit of bank investors [likewise, Proton Bank got bailed out in 2011 though it engaged in fraud, embezzlement, and money laundering, when a bomb exploded.... European Bailout Fund For Greek Money Laundering And Fraud]
Still on Friday, SNS Reaal, fourth largest bank in the Netherlands, was bailed out again—after already having been bailed out in 2008. This time, it was nationalized. The €10 billion package would cost taxpayers initially €3.7 billion. Stockholders and junior debt holders lost out too, but holders of senior debt and covered bonds were made whole.
There is never an alternative to bailouts. A collapse “would have unacceptably large and undesirable consequences,” according to Finance Minister Jeroen Dijsselbloemsaid. As brand-spanking new President of the Eurogroup, he thus confirmed: bank bailouts will be the norm in the Eurozone.
They’re worried that letting even a smallish bank fail could take down the electron-thin confidence in the entire financial system—just when the debt crisis has been officially declared “over.” And so, based on the operative set of rules, the Dutch government shanghaied its strung-out taxpayers, whose belts are already being tightened by austerity, into paying, once again, for the misdeeds of the bankers.
In Italy, a billowing scandal got new fuel. It kicked off with a criminal investigation into Monte dei Paschi di Siena, Italy’s third largest bank, for alleged market manipulation, false accounting, obstructing regulators, and fraud. The bank used derivatives to hide losses during the financial crisis, but these losses are now seeping from the woodwork. So Standard & Poor’s just cut the bank’s credit rating, fearing that the announced losses may just be the tip of the iceberg...
That form of financial engineering came to light when new management took a gander at the books. Now a government bailout is in the works. Because there is never an alternative. Taxpayers tighten your belts!
And on Thursday, Deutsche Bank waded deeper into its quagmire of “matters,” among them the Libor rate-rigging scandal, which might cost it €2.5 billion, and the carbon-trading tax-fraud scandal that broke with a televised raid by police on its headquarters. So, more write-downs are due, and the bank announced a €2.2 billion loss for the fourth quarter. “In 2013,” said co-CEO Jürgen Fitschen reassuringly, “we will be confronted with more developments in these and other matters.”
And other matters! More revelations to come. Already, there are estimates that these misdeeds would eventually amount to €10 billion. Now suddenly: “Building capital is our top priority,” said the other co-CEO Anshu Jain. He wants to do it without diluting current stockholders. “But in this uncertain world, I cannot exclude anything,” he mollified his audience.
Turns out, the bank intends to get rid of €16 billion in high-risk credit default swaps by end of March. It might boost its core Tier 1 capital ratio from 8% to 8.5%. More such sales are planned—a wholesale dumping of its credit correlation book, an outgrowth of the financial engineering it used to hide whatever needed to be hidden.
The bitter irony of the financial crisis is just how common the putrid smell has become since. And how routine it has become for these inscrutable institutions with their opaque financial statements to transfer risks and losses to the people. In the US, too, the smell refuses to evaporate. And nothing indicates that this will change anytime soon.
Weary of all this, the French—whose economy is spiraling deeper into crisis—expressed disdain for their political class; they’re dreaming of authoritarian leadership, a “real leader” who would clean up the mess and “reestablish order.” Could 87% of the French Really Want A Strongman To Reestablish Order?

Friday, February 1, 2013

Strategic ideas of the NATO thugs...

The strategic idea of the NATO thugs, is aiming at securing the northern borders of Israel against Hezbollah and the southern borders against any other threats; to eliminate the Russian naval base in the eastern Mediterranean, Syrian city of Tartous and to establish themselves for good at the Lebanese Qoleiat Air Base as a staging ground... NATO is planning to create a western strategic corridor to maintain energy-security in the case that oil supplies through the Strait of Hormuz are disrupted because of a war with Iran or otherwise...wild fires and social unrest in the wahhabi Kingdoms...

One of the first steps toward the implementation of the long-term strategic plan, is the partition of Turkey by creating separate Kurdish areas, thereby providing NATO a direct access to Russia´s soft underbelly in the Caucasus...and Vlad PUTIN knows this well...

This can ideally be used to dominate the Caucasian oil as well as support the Chechens against Russia in an ongoing low intensity conflict. Also, to create a viable independent Kurdish state, it would need a windpipe access to the sea. This can be provided via the southern coast of Turkey and the Northern Coast of Syria. Whether a Syrian government soldier or a Syrian Islamist "Nut" dies in the process, "both are equally beneficial to the US/NATO thugs and war criminals".

The cardinal strategic idea is to internalize the war within the Islamic world so that Europe and the USA become safer while the enemies of western civilization destroy each other...

NATO is a club of wolves and Turkey is the odd wolf in NATO. Once the wolves have eaten Syria, they will eat the odd wolf Turkey. Yes, Turkey has been getting huge funds from Saudi Arabia, especially the clown Islamist Freedom and Justice Party. The clown Islamist Party is corrupting Turkey´s secularism. On the other side, Turkey is playing as NATO´s best chattel...

To use a historic comparison. When Hitler started eating the lambs of Europe like the Sudetenland, Czechoslovakia and Austria, the world tolerated it. The limit was reached in 1939. It is comparable with the NATO, led by the USA, eating the lambs since 1991. First Yugoslavia, Serbia was destroyed, then came Kosovo, then came the barbaric inside job of 9/11, the cowardly assassinations of the most infamous White House Murder INC, Circa January 24th 2002, Afghanistan, Iraq, Lebanon in 06, Libya, Syria and Mali...

I think and hope that Syria and Lebanon would be the turning point...