Geofinancial

Taiwan fails to lure mainland investors....

2012-02-13T03:13:00.000-08:00

Taiwan fails to lure mainland investors....?
By Jens Kastner

http://www.econmatters.com/2011/11/how-low-can-you-go-selling-out-taiwan.html

TAIPEI - Taiwan has gradually opened up to investments from China since 2009. Relaxations have been hugely controversial over concerns that the former arch-enemy would use its money as a means to achieve backdoor unification. But as of today, a noteworthy flow of Chinese foreign direct investments (FDI) toward Taiwan is conspicuous by absence. Aggregated they had only reached some US$150 million at the end of last year, a Lilliputian amount compared to 2011's total foreign investments in Taiwan of $9.53 billion. The Taiwanese government's red tape is not the only reason for the disappointing figure.

Those who have $150 million to spare could afford a fancy office tower on top of a Taipei subway station; or a massive cement factory in some Taiwanese backwater town; or two dozen topnotch helicopters. Anyway, $150 million is petty cash for China, the world's largest foreign exchange reserve holder with reserves as high as $3.2016 trillion, especially when considering that it's assessed Beijing would do almost anything to pocket Taiwan.

A comparison with other countries' FDI on the island makes the insignificance of the sum even clearer: Taiwan's largest investor last year, with investments worth $2.15 billion, were the Americans, while the Singaporeans came in second at $1.02 billion, followed by the Japanese at $0.97 billion. And in China, about 80,000 Taiwanese enterprises have invested with value totaling some astronomic $80 billion.

To make China inject cash into their economy, the Taiwanese implemented two waves of opening. Both of which were largely spurned.

In 2009, Chinese FDI was allowed in 192 items that were not considered sensitive, such as textiles, garments and clothing accessories, electronic components, computers, mobile phones, automobiles and plastics. As the industries involved were competitive, low profit or mature, this opening only brought in some $140 million. But when in March last year, panels and semiconductors together with 40 other sectors were put on the list, the amount was predicted to grow dramatically.

Chinese TV brands would form strategic alliances with LCD panel firms in Taiwan in order to stabilize their component supply, while the Taiwanese firms in turn would be able to afford technology upgrades to compete against rival South Korea, economists and officials predicted back then. They said the Chinese would put up with rules such as the one that prohibits them from having board control over their Taiwanese partners, or the one that only allows them to acquire a maximum 10% stake in existing Taiwanese technology companies.

Decisively belying this optimism, what was meant as a landmark relaxation only made the tiny difference of $10 million. As an outcome as surprising as embarrassing, Taiwan has not attracted any Chinese investment in anchor sectors, such as panels and chips, since.

Whether the Chinese will be more tempted to invest in the island's financial sector is left to be seen. In January, Taipei allowed banks from across the strait to acquire stakes in Taiwanese banks and financial holding companies. According to the new rules, qualified Chinese lenders may take up to a 5% stake in a single Taiwanese bank or financial holding company, but collectively their shares may not exceed a 10% ceiling. China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC) are rumored to harbor interest but have not filed applications to date.

Furthermore, under present rules, Chinese lenders are allowed to open one branch each in Taiwan. Applications by the Bank of China and the Bank of Communications to upgrade their representative offices in Taipei to branches were recently approved of. China's third and fifth-largest lenders by asset are now authorized to invest $40 million and $51 million, respectively.

An announcement on a third wave of opening to Chinese FDI is expected in March. Taiwanese officials indicated that Chinese firms will be allowed to build subways, roads and stations, among other infrastructure, but that their funds will still be banned in the property market to prevent speculation. It is furthermore relatively certain that neither will enterprises operating fixed networks and telephone services be allowed nor that restrictions on advertisements by Chinese companies will be relaxed.

In interviews with Asia Times Online, economists shed light on why China's firms don't take the bait. According to them, it's not only the island's rigid regulators who deserve the blame.

"The lacking of investment incentive is the main reason and strict regulations is the second one," said Peter Wang Yu-Ter, an economist at Ming Chuan University in Taipei. "This might be bad for Taiwan's economic development. But political factors are usually taken into account in any affairs between China and Taiwan."

The omnipresent political component in Taipei's decision-making comes about because the unification-wary among the Taiwanese fear that Beijing wants to control the island's economy via FDI while at the same time locking up Taiwan's own capital and talent in the mainland's.

Hong Honigmann, professor at National Tsing Hua University, pointed at yet more reasons for the absence of monetary windfall. He weighed in that according to the textbooks of economy, FDI tend to flow from developed countries into developing ones. "So if China invests in Taiwan, it could be called an adverse current."

Hong furthermore emphasized that a cross-strait investment agreement has yet to be signed, and that "FDI usually come along with flows of personnel and services, all of which being obstructed by Taipei when dealing with China."

A cross-strait investment agreement has despite intense negotiations failed to materialize as Taipei requests international arbitration which Beijing opposes as it would imply Taiwanese statehood. As indicated by Hong, obtaining Taiwanese visas is far more complicated for Chinese citizens than for nationals from Taiwan's other major FDI sources.

Ronald A Edwards, a specialist on China's political economy at Tamkang University in Taipei, singled out restrictions on the purchase of land as a major turn-off as well as significant political risks.

"Any sudden massive influx of investment from the mainland is bound to cause a political reaction in Taiwan that works against further investment and possibly also against mainland Chinese investors' chances to obtain the returns on their investment," Edwards said.

"Also, with Taiwan's presidential elections cycles being only four-year periods, there's the scare of possible roll backs of investment-related agreements should the DPP [anti-unification Democratic Progressive Party] take over the administration."

In far-away Vancouver, Yves Tiberghien, a China expert and associate professor at the University of British Columbia's Department of Political Science, argued that investments in Taiwan don't fit with China's FDI patterns anyway.

"Chinese outward FDI is mostly seeking to get natural resources, financial firms, or some industrial firms in Western powers. There is not much in Taiwan that Chinese firms cannot already have in the mainland. So, it could be mainly that - a question of demand."

Also Hu Sheng-Cheng, an economist at Academia Sinica, Taiwan's most renowned research institution, presented an intriguing explanation for China's lackluster investments.

He said that the presidential and legislative elections held in mid-January, in which Ma Ying-jeou of the Beijing-friendly Kuomintang (KMT) won re-election, showed that Beijing achieves its objectives without having to waste money on little lucrative investments in Taiwan. Shortly before the polls, a number of Taiwanese entrepreneurs active in China publicly endorsed the Beijing-friendly cross-strait approach of Ma, a move that likely contributed a good deal to his win.

"If mainland China wants to control Taiwan's economy, all it has to do is pressuring the big Taiwanese companies in China. They don't even have to come here investing for this," Hu said.

He concluded on a disturbing note. According to him, while China spurns investing in Taiwan's technology firms and their likes, it will be much more interested in the financial sector.

"Through the banking pipeline, the mainland can obtain detailed information about Taiwan's economic operations; this, and not FDI, will enable them to directly control Taiwan's economy."

Jens Kastner is a Taipei-based journalist.

China resource dig needs security....

2012-02-13T03:01:00.000-08:00

China resource dig needs security....and may be close cooperation with USA in South Asia....???
By Dong Yu

Many countries have contributed to Afghanistan's reconstruction. But it's only been since 2007 that China has attracted attention with its investments.

In November 2007, the Metallurgical Corporation of China (MCC) won the tender to invest over US$2.9 billion to develop the Aynak copper mine, which is the second-largest copper deposit in the world. This was not only the second-largest investment in Afghanistan in recent years - equivalent to one-third of all foreign aid spent in the country between 2002 and 2007 - but it also raised China to the top tier of investors. In a more recent deal in
October 2011, the PetroChina Company Ltd (CPNC) plans to invest about $300 million in three oil fields in northern Afghanistan.

As China becomes more and more concerned about the impact of the power vacuum created by the imminent US withdrawal, it has begun to accompany its economic investments with contributions on the security side as well.

Although China has sent its Snow Leopard Special Operation forces to protect its most important assets (such as the Chinese embassy) and personnel in this unstable region, the number of guards is very limited. Many more Chinese workers and businesses rely on the International Security Assistance Force and US security contractors for protection.

As a consequence, the United States and China, which have developed a competitive relationship around resource extraction around the world, might find common ground for cooperation in Afghanistan.

Whether China becomes more active in Afghanistan to protect its investments security depends on the scale of Chinese involvement and the priority of Afghanistan in China's regional strategy. At a time of rising tensions between Beijing and Washington, cooperation around Afghanistan could be a win-win for all concerned.

Jewel in China's crown?
After the Soviet Union's collapse in 1991, China increased its foreign engagement with its western neighbors in Central Asia and South Asia. It established and operated regional political, military, and economic cooperation mechanisms with Russia and the five Central Asia countries beginning in 1995. It also re-balanced its position between India and Pakistan, deepening its relations with India, the rising regional great power. After adopting a "Western Development" policy in 2000, Beijing has been constructing an energy transit network and consolidating defense in its western provinces, especially in Xinjiang and Tibet.

Besides its unique strategic position, Afghanistan's less known feature, its abundant mineral resources, is very attractive to resource-hungry China. China has become the second-largest net oil importer in the world since 2009. According to an International Energy Agency scenario, Chinese oil imports are estimated to grow from 4.3 million barrels a day in 2009 to 12.8 million barrels a day in 2035, rising from 53% to 84% of its total demand. It is also dependent on foreign imports of copper and iron for 80% and 53.6% of its needs respectively, and its consumption will grow by 5-10% per year.

In 1960s and 1970s, Soviet geological exploration revealed numerous mineral reserves in Afghanistan. After 2001, the US Geological Survey updated these findings and estimated that the untapped mineral deposits are worth $1 trillion.

Three kinds of resources are most valuable to China. Deposits in the Aynak region contain about 240 million tonnes of copper, one of the largest copper reserves in the world.

The largest iron deposit in the country, meanwhile, is the Hajigak deposit. The region contains 1.8 billion tonnes of iron ore, an enormous amount of which is world-class quality. Finally, most crude oil occurs in the Afghan-Tajik Basin, and most of the natural gas is located in the Amu Darya Basin. The estimated mean volumes of petroleum were 1,596 million barrels of crude oil, 444 billion cubic meters of natural gas, and 562 million barrels of natural gas liquid. On top of these traditional resources, US surveyors recently discovered a rare earth element reserve with at least 1 million metric tons of lanthanum, cerium, and neodymium in the Khanneshin area of Helmand province.

The drivers of China's involvement
After the US invasion in 2001, Beijing reestablished official diplomatic contact with the Transitional Authority and provided over $200 million in foreign assistance. Chinese state companies have conducted seven infrastructure construction projects, including important highways in Kondoz (2003-2005) and in Jalalabad (2003-2006). A province-owned enterprise helped to rebuild the water conservancy in Parvan in 2004. The twin telecom giants, Huawei and ZETA, also won some contracts of reconstructing and maintenance of the telecom systems in Kabul and Kandahar.

These early contracts were at a relatively low scale, and Chinese firms followed their government's foreign aid policy rather than their own economic interests. In bilateral trade, the total amount has increased 40-fold since 1999 to $716 million in 2011, but it is a one-sided exchange. Chinese exports of manufactured goods flood the Afghan local market, but China imports only about $12 million (about 1% of the total amount).

China so far has devoted most its energy and money to the Aynak Copper mine in Logar Province, 30 miles south of Kabul. According to the contract, MCC will build a complete production line of exploitation, concentration, and smelting, as well as a 400-megawatt power plant, vital transport infrastructure (probably the railway linking Afghanistan to Tajikistan), and social amenities (schools, clinics, and mosques) for the local communities. It is scheduled to begin operations around 2012 and 2013.

The US Institute of Peace (USIP) estimates the annual 19% royalties can bring an average $300 million annual income to the Afghan government and shift the focus of the Afghan economy away from the opium trade. It will create 5,000 direct and 30,000 indirect jobs. Both Kabul and the international community see this long-term investment as vital to Afghan reconstruction and development.

Another important energy contract, CPNC's $300 million oil exploitation project, concerns northern Afghanistan. The three oil fields in Zamarudsay, Bazarkhami, and Kashkari, which contain a total of 88 million barrels, are adjacent to Turkmenistan and Uzbekistan. Little is known about the terms of the contract, but the investment will include a production facility and a transport network (pipeline). Considering the low population in the region, there will be less local development of infrastructure investment than in Aynak.

These two investments comprise over 90% of Chinese FDI in Afghanistan. But this Chinese FDI amounts to little over 10% of the total FDI flowing into Afghanistan.

Emerging security concerns
Because of the Taliban's resurgence, it now operates in 80% of the country, including the provinces in the west and north. The number of violent incidents began to increase in 2009 and reached a high in 2010. Most attacks targeted the local population and the security forces.

Personnel connected to investment, business, and infrastructure projects have experienced a low incidence of violence. Nor is it evident that the Taliban and other Islamic extremists have specifically targeted Chinese. In 2004, in the only reported attack in Afghanistan that specifically targeted Chinese, militants killed 11 Chinese employees working on a Jalalabad highway project. The Aynak copper project is located in Logar province, a base for the Hizb-i-Islami Gulbuddin and the Haqqani Network. This makes the investment in Aynak more insecure compared with the oil project in Faryab and Sar-E Pol province of the northern Afghanistan.

Complicated tribal politics and rivalries also add uncertainty to China's investment strategy. Although the central government in Kabul has welcomed Chinese investors and guaranteed their security, the Chinese still face complex tribal politics in local areas. Moreover, the Islamic Movement of Uzbekistan (IMU), which has a direct relationship with the East Turkestan Islamic Movement in China's Xinjiang Uighur Autonomous Region, has set up camps in the two provinces to recruit and train Afghans. The IMU might instigate anti-Chinese sentiment and attack Chinese investments.

The primary security issue for Chinese business representatives is transportation of the extracted resources out of landlocked Afghanistan. At present, there are two major transportation routes between China and Afghanistan: land transport from Kabul to Karachi, then by ship to China, or land transport from Kabul to Bandas Abbas, then by ship to China. For the Aynak cooper mine, both the southern (Kabul-Karachi) and the western (Kabul-Bandas Abbas) routes are practicable.

However, both routes are expensive and time-consuming. The southern route also crosses through the unstable areas in eastern Afghanistan and northern Pakistan, where insurgent attacks are frequent. MCC plans to solve this transportation problem with a rail link between Afghanistan and Tajikistan. For the oil fields in the north, pipeline transit will be a much safer method than road/railway transportation. China can plug the new pipeline into the existing grand pipeline system in Central Asia, but this might involve further negotiation with neighboring Turkmenistan.

China's Central Asia strategy
China has been actively participating in almost every issue in Central Asia since the 1990s. On one hand, this reflects China's rising economic and political influence and military strength over the past two decades. On the other, China can't avoid engaging in the region given Central Asia's strategic centrality in geopolitics.

Consider, for instance, the twin issues of separatism and terrorism in China's troubled Xinjiang province. The tensions in the Xinjiang Uighur Autonomous Region are an important factor behind Beijing's eagerness to tie itself with Central Asia. In the 19th and 20th centuries, Uighurs and other Turkic ethnic groups made several failed attempts to establish an independent East Turkestan state. In addition to suppressing these rebels, China has also adopted special political, economic, social, and cultural policies to suppress the separatist sentiment, integrate local populations, and enhance their recognition within the PRC.

After the Central Asian states gained their independence in 1991, separatists gained popular sympathy in the Central Asian states and in Turkey, reinforcing separatist sentiment. Poor governance in Central Asia not only enabled the smuggling of weapons and personnel across borders but also encouraged the emergence of Islamic extremism in the region, such as the IMU.

What's more, the Central Asian Islamic extremist groups started to establish links with the Taliban and al-Qaeda in northern Afghanistan and Tajikistan. Some Uighur rebels and members of ETIM had received training both in al-Qaeda and IMU camps.

In response, China used trade and investment as tools to pressure Central Asian countries to end their support of the Xinjiang separatists. It further initiated multilateral military cooperation against the "Three Evil Forces" (terrorism, separatism, and extremism) in the region within the Shanghai Cooperation Organization (SCO). China included Afghanistan as a guest observer in the SCO and expressed its concerns about anti-terrorism efforts in Afghanistan. In this sense, Afghanistan is a geographically peripheral but strategically integral component of Chinese anti-separatism and anti-terrorism strategy in Central Asia.

The second component of China's strategy in the broader Central Asian region involves energy. The increased international dependence on oil and gas, as well as China's growing thirst, has sharpened competition over these fuels. At the same time, China has been diversifying its sources of energy in order to reduce its dependency on oil from Middle East. Given the fragility of the maritime supply line via the Indian Ocean and the Strait of Malacca in wartime, these factors make it more important to control Central Asia, as it is both a producer and a transit region.

Therefore, China has pursued the exploitation rights of several oil and gas fields in Central Asia through bids and purchases, including two agreements with Kazakhstan for $5 billion in oil-field development and $9 billion in pipeline construction. Both countries recently signed an accord to expand a pipeline network by more than 80% in September 2011.

Moreover, China's state-owned enterprises have also committed $100-$120 billion to projects in Iran (mostly in its oil fields), despite the long-term sanctions by the United States and Europe. Although facing political and economic difficulties, the Sino-Iranian network of oil pipelines would be another most important transit line on the continent. As such, Chinese investment in Afghanistan oil fields is part of its overall resource diversification in the region.

An equally important geopolitical factor is how China's further involvement in Afghanistan will affect stability in South Asia. The complicated interactions among Pakistan, India, and Afghanistan have produced a comparably complex policy in Beijing. China worries that Islamic extremists in Afghanistan and Pakistan influence not only Uighur separatism and security in Xinjiang, but also the effective governance of Pakistan, which is important for the further development of Sino-Indian relations.

On the other hand, China realizes it cannot ignore Pakistan's sense of insecurity that has been heightened by more Indian involvement in Afghanistan. It also sees India as both a strong competitor for Afghan natural resources and an encircling external power (through Afghanistan). Beijing has thus used its engagement with Islamabad to balance New Delhi's influence. China's higher profile at the Istanbul International Conference on Afghanistan in November reflects this approach.

Superpower cooperation
As the current great power in the region, the United States is the major variable influencing China's policy making. Traditionally. the United States has had few critical interests in Central Asia and has seldom made the region a high priority, except when the Soviet Union invaded Afghanistan. During the 1990s, the only US strategic interest in the region was the non-proliferation of nuclear weapons.

Only after the barbaric inside Job of 9/11 did the United States turn its attention back to the region. Now with the announcement of its new Asia strategy in October, the White House is shifting its focus to the Asia-Pacific region. At the same time, Washington is not eager to see China expand its influence in Afghanistan and its environs.

From a strategic perspective, then, China does not want to attract too much attention with its grand strategy in Central Asia. The United States and India have been very concerned about the westward expansion of China's influence into the Indian Ocean since 2006. They claim that China has a vision of a "string of pearls", trying to gain access to the Indian Ocean through strategic investments and military base constructions in Hainan Island, Cambodia, Myanmar, Sri Lanka,the Maldives, and the Gwadar port in Pakistan. If China further increases its involvement, such as sending military personnel to protect its investments in Afghanistan or to help train Afghan security force, Washington will take notice.

Chinese economic interest in Afghanistan may not be as important as its interests in other countries. Its investment in Afghanistan represents only a tiny proportion of its total overseas investment stocks - $168.6 million out of $3.1 trillion - which is even lower than its investments in Sudan and other African countries.

Moreover, China has been diversifying its acquisition of resources by making deals with many countries. It has also used mergers and acquisitions to secure stakes in mining, oil, and gas sectors.

Considering the importance of its investment security and Afghanistan's role in geopolitics, China will probably increase its involvement in Afghan issues alongside the gradual withdrawal of US and North Atlantic Treaty Organization forces. However, traditional geopolitical, strategic, and economic factors greatly constrain China's ability to become more active in Afghanistan.

Many articles and statements in the Chinese press support Chinese cooperation with the United States on Afghanistan reconstruction. For instance, as far back as 2004, Men Honghua of the International Strategic Institute of the Central Party School discussed potential Sino-US cooperation in failed states, including Afghanistan. According to a WikiLeaks cable, China has "expressed interest in cooperating with the US for delivery of non-lethal aid to Afghanistan" since 2006. But the Chinese government formally rebuffed the possibility of military cooperation in Afghanistan - namely the opening of a supply route for US forces - in 2009.

Particularly as US involvement in the Afghanistan War decreases, US-China cooperation can still go forward in the economic and cultural realms. China sends its workers to dangerous areas where US personnel are reluctant to go for construction and other infrastructure projects. In a region of great conflict, the United States and China might eventually find greater common ground....?

NEGATIVE Yield Bonds Are Coming, The Fed’s EXPLICIT Goal Is to Devalue the Dollar by 33% …

2012-02-13T01:48:00.000-08:00

NEGATIVE Yield Bonds Are Coming, The Fed’s EXPLICIT Goal Is to Devalue the Dollar by 33% …

As Forbes’ Charles Kadlec notes:

The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.

***

The Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of American’s hard earned savings over the next 4 years.

While that is stunning, it is actually par for the course for the Fed:

Here’s a chart of the trade weighted US Dollar from 1973-2009.

And here’s a bonus chart showing the decline in the dollar’s purchasing power from 1913 to 2005:

The giant banks – through their treasury borrowing committee headed by JP Morgan and Goldman Sachs – are also demanding the issuance of negative yield bonds.

In other words, the too big to fail banks want Americans to pay to have the luxury of holding their money in bonds.

American savers – and especially those living on fixed incomes and pensions – are going to get creamed.

1% US banks gamble $5 million per US household; $532 trillion total....

Reuters and wanttoknow.info provide prima facie evidence that the US 1% runs Wall Street as rigged-casino gambling to transfer wealth from the 99% to themselves. The amount of money fraudulently gambled is not millions of dollars, not billions, not even tens of trillions, but over five hundred trillion ($532,000,000,000,000).

Look at Demonocracy’s images to get an idea of this magnitude of money.

Let this sink in: $532 trillion means that the 1% US shitty disgusting Zioconned banksters gamble over $5 million dollars for every US household and $1.7 million for every American.....

It also means that the 1% has cooperation from “leadership” in Congress, law enforcement, and almost all corporate media to have this gambling as the core of the 99%’s mortgages and pension funds, with the criminal fraud of representing this as “investments,” “regulated,” and “fair.”

Ending global poverty would be accomplished with an annual investment of $100 billion a year for ten years. This would save the lives of a million children who die from preventable poverty each month, is less than 0.7% of the developed countries’ GNI, has reduced population growth rates in every historical case, and is the best way the CIA concludes to reduce terrorism. The annual amount to end poverty is 0.02% of what the top five US banks gamble every year.

Excerpts from Reuters:

(Reuters) – U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows…. Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.

Excerpt from www.wanttoknow.info:

OCC’s Quarterly Report on Bank Trading and Derivatives Activities: Third Quarter 2011
December 2011, OCC (U.S. Office of the Comptroller of the Currency, Administrator of National Banks)

http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/dq311.pdf

The OCC’s quarterly report on trading revenues and bank derivatives activities is based on Call Report information provided by all insured U.S. commercial banks and trust companies, reports filed by U.S. financial holding companies, and other published data. The notional amount of derivatives held by insured U.S. commercial banks decreased $1.4 trillion, or 0.6%, from the second quarter of 2011 to $248 trillion. Notional derivatives are 5.7% higher than at the same time last year. Derivatives activity in the U.S. banking system continues to be dominated by a small group of large financial institutions. Five large commercial banks represent 96% of the total banking industry notional amounts. Insured commercial banks have more limited legal authorities than do their holding companies.

Note: Graphs in this report show that the holding companies for the top five banks also control massive amounts of derivatives totaling $326 trillion! The holding companies JPMorgan Chase, BofA, Morgan Stanley, Citigroup, and Goldman Sachs have over $311 trillion in derivatives, 95% of the total U.S. market. So these banks and their holding companies combined own $532 trillion in derivatives, equivalent to roughly $75,000 for every person on the planet. What are the bankers doing? If the above link fails, click here.

After 15 years of my own research after US political leadership reneged on all promises (public and private) to end poverty after we led to create the Micro-credit Summit in 1997, here’s my best explanation of what’s driving economics:

How an economics teacher presents Occupy’s economic argument, victory

Petrodollars Pumping Zioconned US Policy on Iran, Backfire Looms....

2012-02-12T07:38:00.000-08:00

Petrodollars Pumping Zioconned US Policy on Iran, Backfire/Blowback Looms....

By Michael Winter,

As tensions between the US and Iran heat up, author Michael T. Winter believes the main reason behind America’s harsh stance is Tehran’s move to seek an alternative to the dollar as an oil currency.

Economic sanctions, spearheaded by the US and, less willingly, the EU could have a disastrous effect on both of their respective economies. If Iran cannot sell their oil to Europe, there are plenty of customers waiting in the wings, and if they come bearing not petrodollars, but gold and sovereign currencies, then all the better for Iran. These sanctions, if enforced, will in effect place a serious dent in the power of the petrodollar.

Any rhetoric regarding Iran’s nuclear program and the insistence on crippling it is nothing more than a US attempt to force regime change for one more receptive to maintaining the hegemony of the petrodollar.

The world now knows the truth about the US and how they conduct their affairs. US hostilities toward Iran have nothing to do with nuclear weapons development. If that were the case, then North Korea and Pakistan would be facing similar sanctions and threats, but they aren’t. The difference of course is in what lies beneath the ground – oil. Iran has it and the other guys don’t.

At the heart of the issue is not Iran’s dubious attempt to build nuclear weapons, or even oil, but how that oil is paid for. In 1973, Richard Nixon promised King Faisal of Saudi Arabia that the US would protect Saudi Arabian oilfields from any and all interested parties seeking to forcefully wrest them from the House of Saud. It’s important to remember that in 1973, Saudi Arabia didn’t have a fraction of the military and ground forces it possesses today (almost exclusively US manufactured weapons) and the USSR was very much a threat.

In return Saudi Arabia, and by extension OPEC, agreed to sell their oil in US dollars only. As if that weren’t sweet enough, as part of the deal, they were required to invest their profits in US treasuries, bonds and bills. The real zinger is that all countries purchasing oil from OPEC had to do so in US dollars, or ‘petrodollars’.

This strengthened the US dollar, resulting in a steady US economic growth cycle throughout the 80’s and 90’s. Countries purchasing OPEC oil started buying US treasury bills, bonds and securities to ensure they could continue purchasing OPEC oil. This worked fine for the US until 2001.

No plan, however well formulated, functions smoothly indefinitely.

2001, enter Saddam Hussein. He floated a plan to sell oil for European currencies in lieu of petrodollars. Shortly after Iraq was ‘suddenly’ found to be seeking and stockpiling weapons of mass destruction – allegations spearheaded by the US. The world knows what happened, suffice it to say that Saddam is dead and Iraq is ‘back on track’, selling its oil for petrodollars once again.

Muammar Gaddafi harbored the Lockerbie Bombers and allowed various terrorist organizations establish training camps in Libya. He tried to buy a nuke from China in 1972. In 1977, he approached Pakistan, then India. He sought nerve gas from Thailand. In spite of well over fifty failed assassination attempts on Gaddafi by Israel, the US and the UK, Libya was left to its own devices for the most part. Seeking nukes and harboring terrorists is one thing, but threatening the petrodollar is quite another. Gaddafi made a fatal error when he decided to move away from the petrodollar in favor of other currencies. This simply was not tolerated by the US. Having already played the WMD card in Iraq, something new was pulled from the US ‘regime change’ grab bag. Within a year, ‘internal’ elements rose up in rebellion against Gaddafi and now he is dead. Long live the petrodollar.

Dominique Strauss-Kahn, former head of the International Monetary Fund (IMF), suggested last year that the Euro would be a more suitable oil reserve currency than the US Dollar. Within three months of that statement, allegations of rape ruined his career, derailing his bid for the French Presidency in the process. Soon thereafter, all charges were dropped, but of course, le dommage était fait – the damage was done. Christine Lagarde, DSK’s replacement as head of the IMF sees no reason to change the current arrangement, naturellement.

The Iran situation is a little trickier. The US has sought to dismantle Iran’s regime ever since the 1979 Iranian Revolution, so this round of hostilities, while not new, reflects a new level of intensity. Why, after thirty years of hostility, has the US ratcheted up its rhetoric? As Obama stated in his recent State of the Union address, when it comes to Iran and the insistence they dismantle their nuclear program, “no options are off the table”. By stating ‘no options’ this would include nuclear deployment as a deterrent.

The answer of course is that Iran is now seeking to disengage itself from the petrodollar dynamic. In 2005, Iran sought to create an Iranian Oil Exchange, thus bypassing the US controlled petrodollar. Fear that western powers would freeze accounts in European and London banks put an end to that plan.

But that was not the end of their attempts, and Iran sought other ways to get around the petrodollar noose. There are rumors that India, which imports 12% of their oil from Iran, has agreed to purchase oil for gold. Energy trade with China, importing 15% of its oil and natural gas from Iran may be settled in gold, yuan, and rial. South Korea plans to buy 10% of their oil from Iran in 2012, and unless Seoul sides with American and European sanctions, it is likely to use gold or their sovereign currency to pay for it. Also, Iran is already dumping the dollar in its trade with Russia in favor of rials and rubles.

Iran is breaking the back of the petrodollar. Others have tried, but Iran is succeeding. To understand how disastrous this is for the US, one must have a basic understanding of how critical a role the petrodollar plays in the economic health of the US.

Through King Faisal, Nixon elevated the US to supreme economic ascendency, not unlike Damocles in his desire to rule. Sitting on the (economic) throne of the world is great, but Nixon was either unaware of the sword dangling over the US economic system, or chose to ignore it in favor of reaping the rewards of the moment.

By creating the petrodollar paradigm, the US economy soared, as all countries of the world were required to amass US currency to purchase oil from OPEC nations. Sales of T-bills, securities and US bonds soared. US coffers fattened. With the US dollar as the world’s oil currency reserve, economic fortune favored the US. But with great reward comes great risk. While other countries exchanged their currency for the dollar, (forfeiting value in the process) the US simply printed more money to match their needs and purchase their oil – essentially for free. The best example is that while gasoline in the US cost $3.00 per gallon, in Europe that same gallon costs $6.00 or more.

Herein lies the danger. If Iran is successful in its bid to set up their own bourse, or oil exchange, then what need does the world have for all those US dollars? The answer is none at all. As Iran creating gold and sovereign currency partnerships with India, China, South Korea and Russia, the hegemony of the petrodollar will be destroyed.

The resulting sell-off of US dollars, T-bills, securities, bonds and assets will flood the already swollen world economy with even more useless dollars, ultimately devaluing it into a position where hyper-inflation becomes a risk.

So, while the US government sabre-rattles and prattles on and on about nuclear weapons and the threat Iran poses to the Middle East, the thin veneer of lies spouted by the elite controlled media is being stripped away, revealing the truth of their warmongering rhetoric.

The US, by their foolish insistence on enforcing embargoes and sanctions against Iran, is hastening the end of the petrodollar and ushering in the age of US dollar hyper-inflation. A practical example: One loaf of bread in a healthy economy is $1.00. In an inflationary economy it’s $1.75. In a hyper-inflationary economy, $500.00.

Bullies may be large and dangerous, but rarely are they intelligent.

Damocles wisely vacated the throne of Dionysius before the sword fell upon his head, but the US is foolishly refusing to step down from their economic dais in spite of the catastrophic effect current policy direction will mean for US citizens and the world economy....

Source: RT

Oil war in South Atlantic: Zioconned Great Britain vs. Latin America....

2012-02-12T07:34:00.000-08:00

Oil war in South Atlantic: Zioconned Great Britain vs. Latin America....

By Nil Nikandrov,

Buenos-Aires and other cities of Argentina have many monuments dedicated to the officers and men, who died on the Malvinas Islands. Hundreds of shields along the Argentinean roads carry a single line: Las Malvinas son Argentinas (Las Malvinas belong to Argentina). All the participants of that war of a long ago are regarded as national heroes…

At present a new escalation of tension between Argentina and Great Britain is being intensively discussed in the media. Does it mean that Las Malvinas (the Folkland Islands for Great Britain) may become the theater of war again? In the current situation a new war may become even fiercer – the reserves of the oil and gas fields which were discovered on the shelf of the archipelago are comparable with the reserves of the oil fields in the North Sea. The British experts, who estimate the reserves at 60 billion barrels, are probably lowering the real figure in order not to tease Argentine people.

Since it won independence in the early 19th century Argentina has always considered the Malvinas to be its territory. The archipelago’s geographical location close to Argentina, the history of economic development, the fight for keeping it an integral part of the country all these factors linked with the unsolved Malvinas dispute strengthen patriotism of Argentine people. Argentina has always seen Great Britain’s capture of the archipelago in 1833 as an act of colonial plunder. Winning back its sovereignty over the Malvinas has always been a crucial for Argentina’s foreign policy. When signing of the UN Charter in 1945 Argentina’s delegate said that his country would retain the right to own the Malvinas and the right to win them back.

General Leopoldo Galtieri, who headed the military junta in Argentina in September 1981, was ready to win back the sovereignty over the Malvinas Islands by means of weapon. Decades of fruitless diplomatic efforts prompted the Argentinean military to act more aggressively. London ping-ponged any attempts to resolve the dispute peacefully and ignored the mediating efforts of the UN, OAS and other international organizations. And the generals decided to play it tough.

In early April of 1982, the Argentinean army conducted Operation Rosario mounting an amphibious landing on the islands. Galtieri had no doubts that the US would be on the fence, as he had been assured by his sources in Washington. The success of the campaign was guaranteed: without Washington’s support Brits would have to put up with the loss of their “territories” in South America and refrain from repression in the region, which is 8,000 km away from the mother country.

But the Argentinean generals were wrong – US President Ronald Reagan supported his strategic ally. London broke up diplomatic relations with Argentina. The British government headed by “the Iron lady” Margaret Thatcher managed to put together and to send its “vengeance fleet” (of more than 100 ships, including three nuclear submarines, the Invisible and Hermes aircraft carriers, amphibious assault ships. Not only the British fleet but also the British air forces were superior to Argentina’s. The US special services accounted for most of the intelligence date which was delivered in time and informed the British command about the line-up and deployment of the Argentinean troops on the islands, combat ships’ coordinates, types of weapons etc. The US also hampered the replenishment of the Argentinean munitions first of all with France’s high accuracy anti-ship Exocet missiles. In the end the Argentinean army had to capitulate. The war lasted 74 days and ended on June 20. It took lives of 258 British and 649 Argentinean people.

The diplomatic relations between the two countries were fully restored only in February 1990. Five more years passed before the countries signed an agreement on joint exploration of oil and gas fields at the shelf of the Malvinas islands. The Argentinean-British commission was to supervise this cooperation. However the parties failed to establish a mutually beneficial partnership on production and sale of hydrocarbons. Brits were trying to take advantage of themselves accusing Argentineans of “selfishness and intractability”. The information on Britain’s plans to unilaterally give permission to its companies to start oil explorations in the area of the Malvinas caused a negative reaction of Buenos Aires.

In April 2007, at the first Energy summit of South America’s countries Argentina announced that it was to stop its cooperation with the UK on prospecting and exploitation of hydrocarbon reserves. In February 2010, President Cristina Fernandez approved the law, which obliged all foreign states to apply for license to enter a 500 km sea zone of Argentina. This zone includes the Malvinas islands, which are located 480 km away from the Argentinean coast.

In February 2010, the first drilling rig emerged on the Malvinas shelf. It was Britain’s Desire Petroleum company, which started its oil explorations. Buenos Aires did not hide its discontent: Britain is encroaching Argentina’s sovereignty, our combat ships will hamper the delivery of cargos which can be used for oil production. The words were followed by deeds: The Argentinean custom authorities started to ban the sail of “suspicious ships” carrying pipes and equipment oil production.

The Argentinean Navy and Air Forces intensified their exercises in the region. Gordon Brown, who was the British Prime Minister back then, knowing about unpredictability and emotionality of the Argentinean leadership warned it from spontaneous steps and using force saying that the islands were properly protected. The media reported on advanced alert status of the UK Navy and patrolling ships sent to South America. There were rumors in diplomatic circles on secret raids of the British submarines to the coast of Argentina.

Buenos-Aires took measures to offer rebuff to Britain’s “colonial ambitions”. It is promoting its interests in the UN. Argentina believes that the UN should interfere and make London follow the decisions of the General Assembly, the committee on decolonization and start negotiations. All the South American regional organizations such as Mercosur, Unasur, Selac, ALBA are supporting Argentina. Buenos Aires is trying to transform their solidarity into a kind of a resistance front against the “British colonialists”. One of the possible efficient measures which are being discussed is to restrict the entry of the ships with cargos for the British oil companies on the Malvinas to South American ports. Without support bases at the coast the oil operations of British companies won’t be so efficient. In response London announced plans to organize alternative sources of supply. At the same time it is also taking steps trying to divide the “South American Coalition”.

Venezuela’s President Hugo Chavez who had always been consistent in his pro-Argentinean evaluation of the situation at the Malvinas could not ignore the reports on intensification of Britain’s military presence in the South Atlantic. Two years ago he addressed the British Queen with an appeal “Leave the Malvinas alone, give up your ambitions for owning them. Hands off the Republic of Argentina!” In January, after the current British Prime Minister David Cameron had accused Argentina of “colonialism” Chavez showed his support to the government of Cristina Fernandez again. “Return the Malvinas to the Argentine people.” “No more empires!” “Doesn’t the UK government understand that it violates the norms of the International law?! He said that Britain violated basic principle of geography, history, time and space. The British fleet which was sent to the Malvinas in 1982 knew the goal of its mission – the islands have oil and gas reserves. Running short of oil reserves in the North Sea Brits are desperate. “Yankees”, who do not have hydrocarbons are desperate too”.

It should be mentioned that Chavez’ solidarity was taken by Western media as Venezuela’s readiness to protect Argentina if it is attacked by the UK. But Chavez is urging different actions: the Union of South American Nations (UNASUR) should first of all have a sound plan of collective actions on how “to return the Malvinas to Argentina.

As for the US it is making very reserved statements about that conflict: we are going to keep a neutral position. The statement is so far admissible both for Argentina and the UK. But in case of the conflict’s escalation Washington won’t think long. It is to support its strategic ally! After all, Argentina represented by Cristina Fernandez is close to “populists” and is making advances to ALBA bloc (Bolivarian alliance for the Americas Америки). Her defeat would mean a serious defeat for the anti-American forces in the region. The US’ real position also came to the fore when Anadarko Petroleum Corporation, an oil and gas company from Texas, started drilling works at the Malvinas shelf.

One more thing – the British Queen definitively remembers how outrageously Chavez addressed to her. Prince William has arrived at Mount Pleasant base on the Malvinas where he is to train as a pilot of a rescue service helicopter. In Argentina officials took this as a new provocation by the colonial power. This also became a response of the British Crown to Chavez: the Folkland Islands are the territory of the UK. The oil fields there are ours and we are not going to leave.

As we see, the new dispute around the Malvinas Islands and its oil reserves is now at an early stage. Now Argentina has good chances for historical revenge. Sooner or later, voluntarily or forcefully the invaders will have to leave.

Source: Strategic Culture Foundation

Highly educated young people are leaving the Eurozone in massive numbers....

2012-02-12T07:08:00.000-08:00

Highly educated young people are leaving the Eurozone in massive numbers....

Unemployment is a staggering problem in those Eurozone countries that are at the core of the debt crisis. Spain’s jobless rate jumped to 22.8%. Among 16 to 24-year-olds, it's an unimaginable 51.4%, up from 18% in 2008 when Spain’s crisis began with the collapse of its housing bubble. In Greece, youth unemployment reached 46.6%. In Portugal, it’s 30.7%, in Italy 30.1%.

And optimism, that essential source of energy for the younger generation, has been replaced by pessimism. Gallup reported that 80% of the people in the EU had a negative outlook on their local job situation. Crisis countries were at the extreme end of pessimism: in Portugal, 84% thought it was a “bad time” to find a job; in Italy, 91%; in Spain, 92%; in Ireland, 93%; and in Greece, 96%.

These numbers convey a sense of utter hopelessness. For young people, the vision of a good life that their society has imparted on them has gone up in smoke. A bitter irony: it’s the best educated generation ever—and the most pessimistic.

People deal with it the best they can. Some retrench. Even 35-year-olds move back in with their parents. They delay plans and wait for the situation to turn around. But others, the most energetic and entrepreneurial, those that the country needs to rebuild the economy, they don’t have that kind of patience. They pack up and leave to find a job elsewhere. And they are doing it in massive numbers.

Spaniards are heading mostly to Argentina whose economy has been booming over the last few years, though troubles are everywhere. The exodus reversed the flow from Argentina to Spain following Argentina’s bankruptcy in 2001. For many years a magnet for immigrants, Spain registered a net emigration of 50,000 people in 2011.

Portuguese prefer their former colonies. Angola, whose official language is Portuguese, has a wealth of natural resources, particularly oil and diamonds. Since 2002, after a quarter century of civil war, the economy has grown in the double digits every year, and Luanda has become the most expensive city in the world. According to the Organization for Economic Cooperation and Development (OECD), 70,000 Portuguese sought their fortunes in Angola in 2010 alone. Similar numbers are expected for 2011. For Portugal, with a population of only 10.5 million, it’s significant.

Other Portuguese try their luck in Brazil whose economy is in need of engineers and experts of all kinds. Brazil recently softened its immigration restrictions to attract the educated elite—and others have taken notice. For example, the number of Spaniards immigrating to Brazil jumped by 45% in 2011.

Ireland has had a net outflow of people since 2009. First, Polish immigrants who could no longer find work returned home, but then the Irish themselves set out mostly for Australia and New Zealand, which have favorable visa agreements with the EU. 40,000 left in 2011, many of them women.

Greeks head to Germany, an irony of sorts, given the bad will that mushroomed out of German efforts to impose proper accounting and strict austerity on Greece. Germany’s reluctance to do ever more to bail out the Eurozone has made it a global punching bag. Yet the numbers are already staggering. Read.... Germany Frets As Bailout Risks Balloon.

When educated and entrepreneurial young people leave their country in massive numbers, it impacts the economy for the long term. Their country invested heavily in their education, an asset, and now they put this asset to work in another country. There, they earn money, pay taxes, consume goods and services, and rent or buy a home—the exact activities that their own country must have to get out of the economic quagmire. Sure, emigration reduces the expenses for unemployment compensation and other services, but it drains the economy of energy, entrepreneurial spirit, can-do attitude, and knowhow.

And it worsens the debt crisis. For national debt to remain “sustainable,” young people need to stick around, start a productive career, consume, build up assets, move into those vacant homes that banks are holding, and pay taxes. But the exodus underway now doesn’t bode well for a long-term solution of the debt crisis—assuming that a country like Greece, well....

"The case of Greece is hopeless," Otmar Issing said. He should know. He was on the Bundesbank and the ECB. Another substantive voice in an increasingly loud chorus. But it’s legally impossible to kick Greece out of the Eurozone. So he suggested a procedure—a procedure that has been happening all along....

Austrian Central Bank: Bribery, Kickbacks, Money Laundering....

2012-02-12T07:02:00.000-08:00

Austrian Central Bank: Bribery, Kickbacks, Money Laundering....

Two central bank governors in Europe have gotten into hot water recently: Philipp Hildebrand, as chairman of the Swiss National Bank (SNB); and Ewald Nowotny, as governor of the Austrian National Bank (OeNB) and member of the ECB’s governing council. Hildebrand resigned after he tried to brush off an insider-trading scandal that is still making headlines in Switzerland; Nowotny is clinging to his jobs though he is tangled up in a criminal bribery, kickback, and money-laundering scandal involving Syria and Azerbaijan. But finally a major politician—though possibly the wrong one—called for his resignation.

“He is, in my opinion, ripe to resign,” Heinz-Christian Strache announced at a press conference on January 17 (YouTube). He is the top honcho of the right-wing populist Freedom Party of Austria (FPÖ) that currently has 18.5% of the seats at the National Council. Among his three reasons: Nowotny “failed completely” as top supervisor “in his own house.”

The scandal has been brewing for months. On November 28, the office of the state prosecutor in Vienna announced that the criminal prosecution had been expanded to over 20 suspects, including six current directors of the OeNB, among them Governor Ewald Nowotny, Vice Governor Wolfgang Duchatczek, and Director Peter Zöllner. Four people had already been arrested.

At the center is a subsidiary of the OeNB, the Oesterreichische Banknoten- und Sicherheitsdruck GmbH (OeBS). It prints money, literally. And it has been soliciting bank-note deals from foreign governments since 2000. According to the prosecution, OeBS paid €17 million in bribes to Syrian officials to obtain orders from the Syrian government. Payments were routed to offshore outfits, such as the Panamanian mailbox company Venkoy, whose representatives were in Switzerland. The prosecutor is further investigating €1.7 million in kickbacks that made their way back to Austria. Similar arrangements with Azerbaijan are also being investigated. Bits and pieces of the affair began to see the light of the day last June, when Austrian tax authorities raised questions about the deductibility of these payments.

Nowotny, Duchatczek, and Zöllner were accused of having known about the bribery of foreign public officials in connection with the acquisition of bank-note printing orders. The OeNB, of course, defended its directors: the accusations were based on statements by fired employees—implying that it’s nothing but a vendetta. Based on the information the directors had in front of them at the time, they’d assumed that the payments were for actual and legitimate services, and that the acquisition of orders complied with all applicable rules and laws, the OeNB said.

Alas, on November 9, the Vienna Kurier created a stir when it said that it had obtained a copy of the minutes of the OeNB Board of Directors meetings. And according to these minutes, the directors had known for years that millions of euros in bribes were being paid to acquire bank-note business from foreign governments.

For example, on March 24, 2010, the managing director of OeBS informed the OeNB board about a possible order from Azerbaijan for 150 million bank notes that carried a “commission” of 10%. How did the board react? “Duchatczek asked the managing director to initiate the acquisition activities so that the years 2011 and 2012 would be at capacity.”

The minutes show that over the years, Nowotny, Duchatczek, and their colleagues asked questions about various payments but then did nothing. For example, on December 15, 2008, Nowotny asked about the amount of a commission and the recipient in Azerbaijan. The managing director then “informed that there is a representative in Switzerland,” and that the commission would amount to 20% of the order. And that was that.

After the bribery of Syrian officials had first surfaced, along with €600,000 in “unusual expenses,” the OeNB tried to put out the brushfire and protect its directors by firing the managing director and the director of marketing at the OeBS (both were later arrested). Stated reason? An internal audit revealed “unlawful actions and withholding of information from the Supervisory Board.”

Maximum penalty for bribery in Austria is ten years in prison. But given the impunity with which top central bankers act, Nowotny might not even lose his job. How refreshing that the hullaballoo in Switzerland led to the quick resignation of the chairman of the SNB, though it might have few other consequences. Perhaps it has something to do with ownership. The SNB is a publicly traded corporation; entities like cantons hold 55% of its shares and individuals hold 45%—and they can put the SNB under pressure. Whereas the OeNB is owned entirely by the state.

Meanwhile, the battle over the ECB and the euro continues. “The fact that we profit massively from the euro doesn’t mean we have to accept every political horse-trade to save it,” said the president of Germany’s Association of Exporters—a swipe at Italy’s prime minister who’d demanded that Germans dig deeper into their pockets to bail out other countries. Now the German industrial elite are talking about an exit from the Eurozone....

Market Opportunities and Entry Strategies for Russia's Defense industry ....

2012-02-12T02:25:00.001-08:00

Market Opportunities and Entry Strategies for Russia's Defense industry ....

Russia is to supply $7.7 billion worth of armaments and military equipment to India this year, according to a press release by the Centre for Analysis of World Arms Trade (CAWAT).

“This year, Russia will supply arms and military equipment worth $7.7 billion to India, about 60% of Russia’s total arms exports and 80% of India’s arms imports,” CAWAT said in the release.CAWAT attributes this breakthrough in the Russian-Indian military and technical cooperation in 2012 to supplies within the framework of several large-scale programmes (the centre calculates the value of supplies on the basis of actual deliveries). It is reported that a considerable part of the supplies will be behind the original schedule, “which will entail this impressive result in 2012.”

“The transfer of the Vikramaditya aircraft carrier to the Indian Navy in December 2012 is expected to become the biggest project in price terms. Its modernisation cost has been adjusted a few times and now totals $2.34 billion. The second-biggest delivery is the planned supply of two 11350.6 frigates worth an estimated $1 billion. In third place comes a project worth up to $920 million, according to recent reports, involving lease to India of a project 971 Nerpa nuclear submarine in January 2012,” CAWAT said.

Furthermore, on the basis of the original arms supply schedule, in 2012 Russia will hand over to India about 40 Mi-17V-5 helicopters, 21 Su-30MKI fighters (licensed assembly under a 2000 contract), 12 Su-30MKI fighters (under a 2007 contract), and nine shipboard MiG-29K/KUB fighters.

Also this year, the two countries will continue the programmes to upgrade MiG-29 fighters, BPA Tu-142 aircraft, and Mi-17 helicopters, repair type 877EKM diesel-electric submarines, and supply Ka-31 helicopters, AL-55 and TRDD-50MT engines, Mi-17 flight simulator training systems, and Club-C anti-ship missile launchers, and some other programmes, CAWAT said on its website.The centre estimates India’s arms imports in 2002–2011 at $25.65 billion and, in 2012–2016, imports are projected at $51.4 billion.“In 2012, India will retain its status as the world’s biggest importer of arms and approach the $10 billion arms import landmark (with about $9.4 billion),” according to CAWAT.

Russia’s arms exports may reach a record $14 billion in 2012, a Russian think-tank said on Friday.

Russia’s state arms exporter Rosoboronexport sold $10.7 billion worth of weaponry in 2011 under contracts with 57 countries, but this number could be readjusted to $12 bln with the addition of direct sales of spare parts by Russian arms producers.

“We are expecting Russian arms exports to surpass $14 billion in 2012,” the Center for the Analysis of Strategies and Technologies (CAST) said in a report.

“Considering the current foreign orders portfolio, which is worth $41.5 billion, Russia may maintain this level of arms exports for at least three years,” the report said.

The Moscow-based CAST is an independent, private defense industrial and foreign policy think-tank with close ties to both Rosoboronexport and senior Kremlin officials.

According to the CAST report, Russia will deliver about 50 Su-family fighters to India, Vietnam, Algeria, Indonesia and Uganda.

In addition, Russia will supply India with 10 MiG-29K naval fighters and modernize 10 MiG-29s in service with the Indian Air Force to MiG-29UPG level. Myanmar will receive 14 MiG-29 of various modifications.

Russia may also start the deliveries of 24 MiG-29M2 fighters to Syria under a 2007 contract.

Russia will deliver Pantsir-S1E air defense systems to Algeria and the United Arab Emirates, Buk-M2E air defense systems to Syria, and Tor-M2E systems to Belarus.

Venezuela will receive Russian T-72 tanks, BMP-3 infantry fighting vehicles and BTR-80A armored personnel carriers.

Major deliveries of naval equipment to India will be carried out in 2012.

Russia is expected to hand over the long-awaited Vikramaditya aircraft carrier (former Admiral Gorshkov), and deliver two Talwar class frigates and a modernized Kilo class diesel electric submarine to the Indian Navy.

The $20 Billion Dogfight for an Indian Air Force Contract...

2012-02-12T02:11:00.000-08:00

The $20 Billion Dogfight for an Indian Air Force Contract...

http://www.wallstreetdaily.com/2012/02/09/fight-for-indian-air-force-contract/

It flies at over 1,500 miles per hour and has been called the complete combat aircraft.

But India doesn’t want it.

The consortium behind the Eurofighter, Typhoon, was ready for take off last month on an air defense contract worth $20 billion.

That was until French company, Dassault, swooped in and beat them to it, winning the chance to sell 126 of their Rafale aircrafts.

But the consortium – made up of the German and Spanish branches of EADS, Britain’s BAE Systems, and Italy’s Finmeccanica – haven’t yet had their hopes grounded.

This week, BAE’s CEO, Ian King, said “all options are still on the table,” suggesting the price for the Eurofighter contract may come down.

IHS Jane’s consultant, Endre Lunde, says France may still have the edge, with the transfer of nuclear technology between them and India perhaps the most crucial part of the deal:

“France, with its experience in this field, could be very important to them in terms of helping to develop that technology, developing that capability and not least building this in India. So both on a civilian side and a defense side, I think there’s significant potential to develop the relationship between India and France further.”

Precedent is not on the French side however.

The Rafale has lost a series of contests to U.S. competition, while in 2009 French President Nicolas Sarkozy prematurely announced that a sale of Rafales to Brazil was imminent, only to see talks drag on for another two years. Lunde says:

“France has been close before and it hasn’t turned out in the end, one example being the UAE, which was predicted to be a customer of the Rafale. That fell through and it’s now in negotiations with the Eurofighter.”

So although the French may have India’s fighter contract in its sights, the dogfight over who will ultimately prevail WILL produce more twists....

India plays fighter catch-up...
By Siddharth Srivastava

NEW DELHI - After over a decade of waiting, India has decided in the "mother" of defense deals, with France's Dassault Rafale fighter jets winning the multi-billion contract for 126 MMRCA (medium multi-role combat aircraft).

The value of the contract could be anywhere between US$12 billion and $16 billion, though some estimates have pegged it at much larger $20 billion. It is clear that this is one of the world's largest military aviation deals.

Welcoming the deal, French President Nicolas Sarkozy termed the deal "a vote of confidence in the entire French economy".

Indian defense deals are notorious for delays, corruption, indecision and red tape. However, a near emergency situation due to the country's depleted and outdated airstrike capabilities and potential security threats from neighbors had forced New Delhi to act on the matter.

The contract is the first foreign deal for Dassault's Rafale fighter jets and is a major fillip to the French arms industry. India's decision could win Dassault more contracts, with the United Arab Emirates a potential customer. An offset component in the deal ensures that part of the money will be re-invested in India's defense industry.

In its latter stages, competition for the fighter contract had become a race between the Eurofighter Typhoon and the Rafale, with the latter winning after an exacting technical and commercial negotiation process. Recent successes in operations in Libya and Afghanistan also played a part in tilting the deal to the French jet.

It was also not lost on anybody that the Congress-led New Delhi government, facing major allegations of corruption, has settled for the cheapest aircraft. It's estimated that the Typhoon would have cost some $5 billion more.

Eighteen fighter aircraft will now be delivered to India over the next three years, while the remaining 108 will be indigenously built by state-owned Hindustan Aeronautics Ltd via technology transfer.

After a bruising contest that also saw heavy doses of diplomatic pressure, Russia's MiG-35, Sweden's Saab Gripen, the American Boeing F/A-18 and the Lockheed Martin F-16 were rejected on "technical and operational" grounds.

There were several reports than an unhappy Washington was pushing New Delhi to re-consider the US aircraft. The final choice was, however, widely anticipated this month as funds were allotted in the annual budget (year ending March 2012) for the contract.

India has been looking to build a fighter jet fleet that will replace its crash-prone Russian MiG-21 interceptors and fill a gap between the long-range Russian Sukhoi-30s and lightweight indigenous Tejas LCA fighters.

While the Sukhois are a strategic guard against China, the Rafales are more aimed at Pakistan. The Rafale contract forms part of India's estimated $100 billion import-driven defense modernization exercise spread over a decade that comprises submarines, tanks, missiles, aircraft carriers, advanced radars, artillery guns and more.

According to the Swedish think-tank the Stockholm International Peace Research Institute, India was the world's biggest importer of arms between 2006 and 2010, accounting for 9% the global arms trade in the period.

Pakistan and China, two countries with which India has fought wars, are just as focused on military modernization. Pakistan continues to receive military aid from the United States as a partner in the global "war against terror", though India has for long held that such stockpiling of weapons only adds to instability in the region.

New Delhi feels that US-supplied armaments to Pakistan are more potent against a conventional enemy rather than against the amorphous terror networks that also spread over Afghanistan and need effective intelligence and pin-pointed operations, such as the one that killed Osama Bin Laden, to neutralize.

Pakistan's military, meanwhile, continues to be supported by Beijing through ballistic missiles that could destroy Indian cities.

China's military prowess is far ahead of India's. The country has managed to copy Western arms prototypes to build-up an effective domestic armament manufacturing capability that has reduced its dependence on arms imports. Given the closed nature of China's polity, nobody is quite sure about the level of investment and technical development in China's defense sphere.

Given such a scenario, India has no choice but to try and build an effective deterrent against China while matching the military capabilities of Pakistan, against whom the security threats are more immediate.

India is also making a conscious effort to move away from dependence on imports from Russia to countries such as Israel and the US, apart from deepening ties with traditional partners such as France, Sweden and Britain.

The Russian defense industry is seen as increasingly outdated in the absence of effective state support. Existing Russian defense platforms in India's possession are depleted due to lack of spare parts and post-sale maintenance. Despite the French fighter deal, India has already signed multi-billion dollar defense contracts with the US for transport and reconnaissance aircraft.

India’s Foreign Minister S.M. Krishna was in Beijing this week, inaugurating his nation’s new $10 million embassy and meeting with his Chinese counterpart as well as a range of high-ranking Communist Party officials. The biggest headline to emerge from the visit was invariably about the two countries’ commitment to reach $100 billion in bilateral trade by 2015. Sino-Indian summitry is notorious for its tiresome platitudespeak, full of stiff statements promising respect for the other’s sovereignty and even stiffer appeals to friendship and bonhomie between the two Asian giants. This is understandable. Presiding over vast, intensely nationalist publics, both governments need to tread lightly in order to stave off conflict. But there are reasons to expect a hardening of the geopolitical divide, despite Beijing’s and New Delhi’s talking points.

Read more ....

India upgrades its military with China in mind -- Newsday/AP
India Upgrades Military to Match China -- Time/AP
India relying on Russia for arms -- Russia & India Report
Old weapons, new threats fuel India's military build-up -- AFP
India military build up: too little too late? -- Express India
An India-China Military Conflict? – Analysis -- Eurasia Review

Japan Inc.'s endgame: $70 Billion in acquisitions, Seeking Salvation Overseas....

2012-02-11T02:05:00.000-08:00

Japan Inc.'s endgame: $70 Billion in acquisitions, Seeking Salvation Overseas....

Japanese companies spent $70 billion on acquisitions overseas in 2011—a record. Healthcare was the largest sector, $20.6 billion. Armed with a ferociously strong yen, they’re trying to escape the pressures at home. After the Fukushima disaster, one nuclear power plant after another has been taken off line for maintenance. And they stay off line. Now, only four of the 54 are still operating. Fossil fuel plants cannot keep up with demand during peak periods, and electricity rationing—a Third-World phenomenon—has become part of corporate life. Companies also face a stagnant economy and a dwindling working-age population.

And so they seek their fortunes overseas. For example, Sumitomo Mitsui Financial Group and Sumitomo Corp. are acquiring the aircraft leasing business of bailed-out Royal Bank of Scotland for $7.3 billion. But even smaller companies, including many that had not ventured abroad before, are jumping into the fray. For example, Takara Tomy Group acquired US toymaker RC2, and Toyo Seikan bought US based Stolle Machinery.

In addition, Japanese multinationals are expanding their existing production capacity overseas. On the forefront are the automakers. Mired in stagnation, high costs, and energy challenges at home, they’re now shifting production to plants overseas. Most recently, it was Honda and Nissan with investments in China, Mexico, and, yes, the US to produce cars for local and export markets. And one of them is outright exciting. Read.... Manufacturing Supercars in America.

Electronics makers are also struggling in Japan. Last year was particularly rough: the March 11 earthquake and tsunami, Thailand's historic floods that shut down whole segments of the components industry, the strong yen, a hesitating global economy, and shrinking consumer demand at home. And then, in the fourth quarter, TV sales cratered.

Japanese TV makers, known for innovative products and advanced technologies, got clobbered by competitors from Korea and other Asian countries. Sharp Corp. forecast a loss of ¥290 billion for its current fiscal year. Unit sales skidded 38%. It will shift production from TVs to small and midsize LCD panels for smartphones and tablets. Panasonic sang a similar song last Friday when it tried to explain its losses in its TV and semiconductor businesses. It had already announced in October that it would stop production at two of its plants in Japan. Sony, after an eight-year losing spree in its TV business, remains focused on it, incoming CEO Kazuo Hirai announced on Thursday. And he'd miraculously turn it around through unspecified cost cutting measures.

But there are consequences. Shifting investment and production to locations overseas contributed to the first annual trade deficit in more than 30 years—just when Japan can least afford it: national debt will surpass one quadrillion yen by March 2013, the end of the next fiscal year, the Ministry of Finance announced in January. About $14 trillion. A breathtaking 240% of GDP. By comparison, Greece’s debt is a paltry 160% of GDP.

The forecast is based on the budget that the cabinet approved on Christmas Eve when it hoped that no one would pay attention, apparently. After excluding two acknowledged accounting shenanigans, the deficit jumps to a horrid ¥54.4 trillion. The government will have to borrow 56.2% of every yen it spends in 2012, a record even for Japan. But the government has an ingenious solution: a miracle. For more on that vertigo-inducing debacle, read... The Endgame: Japan Makes A Move.

The other solution is a consumption tax hike from the current 5% to 8% by April 2014 and to 10% by October 2015. To make it more palatable, government officials have gone on roadshows. The revenues would be used to stabilize the tottering social security system and reinforce the welfare system, they claimed—rather than for corporate subsidies or for the bailout of TEPCO, owner of the Fukushima nuke. But sales taxes hit low-income workers the hardest. And according to recent polls, 79.5% of the Japanese are opposed to them.

Once it starts, it’s never enough. On Saturday, Prime Minister Yoshihiko Noda said that the consumption tax could be raised even beyond the 10% currently proposed. So the trend is clear.

Meanwhile, life goes on in its own manner. A convoy of 20 supercars was speeding down the Chūgoku Expressway, entered a left-hand bend at 90–100 mph, though the posted speed limit was 50 mph. The highway was wet. And the rest was very expensive.... Superlative Supercar Pileup (incl. video)....

As can be seen by the desperation of Japanese officials, consumption tax is the only one tax that can be increased to really make a different. Some commentators on Japan think that this will make a huge difference and will save Japan or give it some more time. What they miss is that raising the consumption tax will not come free and will have significant implications. That’s why they proposed to start increasing the consumption tax from 5% to 10% by 2015. They can’t raise it now, because it will kill their weak economy. They planned it from 2015, because they think there will be a global recovery by then, which I doubt. Then moved to 2020. There will never be a good time to raise the consumption tax in Japan. In my opinion their action will be too late. I mean, it will pass politically and economically only after the debt crisis start. I refer you to read an IMF report called: “Raising the Consumption Tax in Japan: Why, When, How?” to get an insight about the IMPACT OF A VAT INCREASE ON GROWTH, INFLATION, AND EQUITY. Contrary to the readers, I believe that the consequences of VAT increase will be worse. They write:

“Higher inflation expectations would be a positive development for Japan, which has been trapped by deflation for year”

I agree with the writers that inflation will happen right after the tax hike, as happened before.
I disagree about it's positive impact. Japan need deflation or the private sector won’t find the Japanese bonds attractive. 10 yrs Japanese bonds yield 1% now, but with deflation of 1%, it’s 2% real yield. What happens when inflation is 1%? The real yield is 0%. So by increasing inflation the bond appetite will decrease. With rising commodity prices, there could be additional inflation spike and that could be very negative. No matter what is publicly said, Japan need low deflation, more than inflation.

“Many have expressed concerns about the short-term impact of a VAT increase on the level of activity, but Japan’s own experience does not strongly support such views.”

I disagree again. VAT will decrease GDP because the Japanese economy is very weak. Any growth decrease will affect very negativly the finance of Japan. An increase of VAT will also add to the negative local views of the economy and will hurt the low-income population. I agree with the IMF analysts, that consumption tax is positive long-term, but we must live short-term now, because such an increase could not improve the situation and could expose how bad Japan is. There is another problem. Japan can’t implement the VAT increase fast. They can’t do an increase of 5% this year or next … they can increase by some degree with time so it’s a long-term measure. Again that will not help to improve much the finance of Japan and even if it do, it will be after 2015 as they plan to raise the VAT then.

Government spending is a huge positive for GDP, and if the money is borrowed, there is no negative impact on GDP as government deficits are not figured into it. However, growth through deficit spending borrows from the future, and for Japan, the future is about to arrive....

The Japanese will work out their problem one way or the other, but it will be at the expense of the younger generation. More taxes, fewer benefits, broken promises, maybe a selective default, less pay, etc. will be an ongoing part of their lives, and they all know it and have accepted it. Hyperinflation could happen, but I doubt it—any kind of inflation will, for the above reasons, make things worse.

The Zioconned USA is on the same track, but years behind. With the difference that we have about 30% inflation every decade... an insidious form of government tax and Fed-engineered theft....and utter corruption in DC, Wall Street and more....

South Africa to Lure Miners With $40 Billion Railways Boost....

2012-02-10T05:19:00.001-08:00

South Africa to Lure Miners With $40 Billion Railways Boost....

South Africa is ramping up spending on railways and roads to lure mining investment as the government fights off calls from within the ruling African National Congress to nationalize the country’s mines.

State-owned rail and port operator Transnet SOC Ltd. will spend 300 billion rand ($40 billion) over seven years to expand capacity on iron ore, coal and manganese export lines, President Jacob Zuma told lawmakers in his state-of-the-nation speech in Cape Town yesterday.

Mining “plays a critical role in the socio-economic development of the country,” Zuma, 69, said. “We remain committed to the creation of a favorable and globally competitive mining sector.”

Zuma’s government is battling to lure investment in mining as the ANC Youth League, led by Julius Malema, pushes for the seizure of mines in the world’s largest producer of platinum, chrome and manganese. An ANC-appointed task team to investigate the matter said nationalization would be a “disaster,” while recommending higher taxes.

“The mining industry has been battered by a lot of uncertainty with regards to policy, mostly centered around nationalization,” Kevin Lings, an economist at Stanlib Asset Management in Johannesburg, said in telephone interview. “They are trying to eliminate that uncertainty.”

Deterring Investment

Anglo American Plc, Xstrata Plc, Rio Tinto Group Plc and BHP Billiton Ltd. have operations in the country. Anglo American, the largest investor in South African mining, and AngloGold Ashanti Ltd. are among companies that have said the nationalization debate is deterring investment.

“There are no mixed signals about this,” Zuma said in an interview with the South African Broadcasting Corp. today. “Nationalization is not the ANC’s or the government’s policy.”

South Africa needs to boost mining to more than 10 percent of gross domestic product from about 6 percent, Trevor Manuel, head of the National Planning Commission, said on Feb. 6. Mining production declined 5.1 percent in the fourth quarter compared with a year earlier, the statistics agency said yesterday.

“President Zuma has made clear that the South African government is serious about growing the mining industry and making it more internationally competitive,” Anglo American spokesman Pranill Ramchander said in e-mailed comments. “We are particularly pleased with the commitment to develop and integrate rail, road and water infrastructure, developing the capacity of our ports and containing electricity price increases.”

‘Industrialize the Country’

Zuma is betting that increased spending on infrastructure projects will help offset slower growth in Africa’s biggest economy and reduce the highest jobless rate among 61 countries tracked by Bloomberg. High port costs and a lack of rail and power capacity have been cited by the government as one of the major obstacles to faster economic growth.

“The massive investment in infrastructure must leave more than just power stations, rail-lines, dams and roads,” Zuma said. “It must industrialize the country, generate skills and boost much-needed job creation.”

The government plans to send officials to the Middle East next week to seek investment from the region’s sovereign wealth funds, Collins Chabane, the minister in the presidency, said in an interview on SAfm radio today. Transnet’s finances are strong enough to fund the projects over seven years, the South African Press Association reported, citing Public Enterprises Minister Malusi Gigaba.

Growth Slows

South African Finance Minister Pravin Gordhan has pledged to cut the budget deficit to 3.3 percent of GDP in three years from 5.5 percent in the current fiscal year.

Growth will probably slow this year to below 3 percent from 3.1 percent in 2011 as Europe heads toward recession, Gordhan said on Jan. 26. That’s less than half the 7 percent annual expansion that’s needed to cut the jobless rate to 14 percent by 2020 from 23.9 percent currently.

Rail, road and water systems in the northern Limpopo province will help unlock coal, platinum, palladium, chrome and other mineral deposits in the region and encourage investment, Zuma said. Railway lines in the eastern Mpumalanga province will be expanded to connect coal fields to power stations, while transport links between the central Gauteng province and the eastern port of Durban will be improved, he said.

‘Lead and Guide’

Transnet will spend 200 billion rand on rail projects over seven years, including links that will enable it to transport 82 million metric tons of iron ore a year, up from 60 million tons currently, Zuma said. The rail operator will build a rail-line to carry 16 million tons of manganese to the Coega port on the country’s south coast.

The government will reduce port costs for exporters of manufactured goods, saving them 1 billion rand, the president said. Zuma has also asked Eskom Holdings SOC Ltd., the state power producer, to curtail planned price increases.

“We see our role as being to lead and guide the economy and to intervene in the interest of the poor,” he said.

South Africa’s rand weakened 1.1 percent to 7.6688 against the dollar by 11:54 a.m. in Johannesburg, trimming its gain for the year to 5.5 percent.

--Editors: Nasreen Seria, Gordon Bell, Ben Holland, Karl Maier.

Aussies are not sold on the F-35, JSF 'no match' for latest Russian fighters or Chinese radar....

2012-02-10T03:43:00.001-08:00

Aussies are not sold on the F-35, JSF 'no match' for latest Russian fighters or Chinese radar....

THE stealth qualities of the futuristic F-35 Joint Strike Fighter on order for the Royal Australian Air Force are overrated and the plane's combat performance greatly exaggerated, a defense lobby group has claimed....

Aussies’ modest proposal: Sell us F-22s, mate --

The complaints by Air Power Australia, longtime critics of the $16 billion JSF acquisition, were made last night before a public hearing of parliament's defense sub-committee.

Latest-generation Russian fighters such as the Sukhoi T-50 would easily defeat the F-35 in air-to-air combat, Air Power's Peter Goon said, referring to recent modelling tests by his organization.

"The aircraft we are planning to buy is carrying over 2000 pounds (900kg) of dead weight," Mr Goon said, referring to the JSF's big jet engines.

New Russian and Chinese air defense radars would also have little trouble detecting the JSF, a craft touted for its stealth qualities, he added....

The RAAF says it wants 100 US-designed JSFs to replace the decommissioned F-111 strike aircraft, with the first squadron supposed to be operating by 2018.

But the program has been mired in cost overruns and delays.

Last month US Defense Secretary Leon Panetta ordered the purchase of US JSFs to be delayed to allow Lockheed-Martin time to resolve production and technical shortcomings.

The company is contracted to deliver the first two training aircraft in 2014 with another 12 scheduled for 2015-17.

Defense Minister Stephen Smith has said he is now considering an option to order additional F/A-18F Super Hornets to fill any capability gap created by further JSF production delays....

Air Power Australia's website is here. One of the websites that I regularly read on the F-35 program is a transplanted American who now lives in Australia. His website is here.

The biennial 2012 Singapore Airshow, Feb. 14-19, the largest aerospace event in Asia and now among the world’s top three aviation events, will focus on regional fighter programs in Australia, Japan, Malaysia, South Korea and Taiwan.

Japan’s December decision to procure the Lockheed Martin F-35A fighter for its F-X program has given the Lightning II a boost in the region, despite reluctance within the Western market for the fighter. The $8 billion deal for 42 fighters will replace Japan’s aging Mitsubishi F-4EJ Kai Phantoms. The deal could evolve into an additional 100 to 120 F-35s to replace the Mitsubishi F-15J/DJ Eagles under the F-XX program in the middle of the decade.

The F-X program selected the F-35A over the Eurofighter Typhoon and Boeing F/A-18 Super Hornet.

South Korea has taken notice of Japan’s decision and the F-35 is seen increasingly in a favorable light, officials said. South Korea’s FX-3 fighter competition pits three fighters, the F-35A, Boeing F-15SE Silent Eagle and the Typhoon, in a $7.3 billion deal for 40 to 60 fighters. A decision is scheduled to be made in October.

Singapore is also considering the F-35 for its next fighter procurement. The nation-state is a Security Cooperative Participant member of the F-35 development program. However, officials said no decision is expected within this decade.

But the F-35 program hit a snag Down Under. Australia has just announced a review of its procurement of the F-35A and could defer the purchase until problems in the program are fixed. Australia has a requirement for up to 100 F-35A fighters, but has committed only to the first 14. Australia is a Level 2 participant in the F-35 development program.

Malaysia is debating the procurement of 10 fighters to replace MiG-29s. The Saab Gripen, Typhoon and Super Hornet are competing, but no decision is expected until after 2013.

BAE Systems and Lockheed are locking horns for the avionics upgrade and weapon systems integration on 135 KF-16C/D Block 52 fighters for the South Korean Air Force, estimated at $1 billion, and on 146 F-16A/B Block 20s for the Taiwan Air Force, estimated at $5.8 billion.

Both F-16 upgrade programs include the new Active Electronically Scanned Array (AESA) radar. AESA competitors for the refits are Northrop Grumman’s Scalable Agile Beam Radar and the Raytheon Advanced Combat Radar. Singapore is also a potential customer for the AESA for its F-16C/Ds and is watching both competitions closely.

The Jan. 31 announcement that the French Dassault Rafale defeated the Typhoon in India’s $11 billion contract for 126 fighter aircraft will spark discussion.

If Eurofighter and Boeing lose in South Korea and Malaysia, as they did in Japan and India, questions will be raised over the future of these fighters in the international market.

Airshow Attendance and Events

Despite the decline in the world economy, the biennial Singapore Airshow shows no sign of waning. This year’s airshow will be the largest to date with 900 exhibitors from more than 50 countries, including 22 country pavilions and 59 of the world’s top 100 aerospace companies, said Jimmy Lau, managing director of Experia Events, the show organizer.

“The Asia-Pacific region is riding on a wave of growth as the region continues to lead in providing new opportunities in the aerospace and defense industry,” Lau said. The Singapore Airshow is “strategically positioned as a gateway into this thriving region, [and] plays a crucial role as an effective springboard for industry players to tap into new opportunities.”

In 2010, the airshow closed with $10 billion in deals and announcements in spite of a recovering economy. This year will also feature a series of high-level conferences — the Singapore Airshow Aviation Leadership Summit and the Asia-Pacific Security Conference.

The show will have two pavilions this year focusing on new technologies: the Land Defense and Unmanned Systems Pavilion and the Green Pavilion. The Green Pavilion will feature an added component called “Deminars” or seminars and demonstrations combined, Lau said.

Airshow officials would not identify the number or types of government delegations visiting the show for security reasons, but the 2010 airshow saw 259 foreign government and international delegations from 80 countries and 43,459 trade attendees from 133 counties.

Security will be tight to safeguard delegations and exhibitors. Beyond the usual prohibited items, such as firearms and explosives, the exhaustive list includes spear guns, walking sticks with daggers, nanchakus, crossbows, spears and brass knuckles.

There will be much attention paid to Chinese exhibitors and delegations this year. Those attending the China Business Forum will hear presentations from Ng Pock Too, chairman and CEO from New Board Technology, and Zhang Xin Guo, executive vice president of the Aviation Industry Corp. of China.

Chinese companies exhibiting this year include China National Aero-Technology Import and Export Corp., Commercial Aircraft Corp. of China, AMECO Bejing and, for the first time at the show, Beijing Youtaishuncheng Technology Development Co. with a UAV exhibit.

The flying display will feature the Blair Aerosports’ Rebel 300, Singapore Air Force’s F-16 and F-15SG fighter jets, and the Royal Australian Air Force’s Roulettes flying Pilatus PC-9/A trainers. Despite rumors the F-22 Raptor would appear, Lockheed indicated the Raptor will be a no show.

Jung Sung-ki in Seoul, Paul Kallender-Umezu in Tokyo and Nigel Pittaway in Melbourne, Australia, contributed to this report.

Russia's Monopoly Over Gas About To Be Broken In Europe....?

2012-02-10T03:18:00.001-08:00

Is Russia's Monopoly Over Gas About To Be Broken In Europe with huge amounts of shale?

By Michael Kahn, Braden Reddall and Gabriela Baczynska

LESNIOWICE, Poland

When Wieslaw Radzieciak took office as the mayor of Lesniowice in the gently-rolling farmland of southeastern Poland 26 years ago, the Soviet garrisons that dotted the county were a stark reminder of which superpower was in control.

The signs of Russian occupation have vanished but over the past year a new superpower has moved in, its presence spelled out on the distinctive logos plastered on the trucks used by U.S.-based oil services company Halliburton.

It's all part of Poland's ambitious goal to exploit Europe's biggest estimated deposits of shale gas. Beginning in 2014, Warsaw wants to tap an estimated 5.3 trillion cubic meters of recoverable reserves of gas - enough, according to the U.S. Energy Information Administration, to supply Poland with more than 300 years of its domestic energy needs.

But the shale gas push is about more than energy. Poland wants to break its reliance on Russian energy and reduce Moscow's power over Europe. That is one reason why Warsaw has welcomed U.S. oil majors such as Chevron, Exxon Mobil, Conoco and Marathon, even though it risks igniting tensions with Russia.

"If this thing comes true, if the American technologies deployed here at some point are really able to produce this gas, then this means a winning situation for the whole of Europe really," Radzieciak said in an interview in his small office filled with sports trophies, banners from local teams and a large map of Poland on the wall. "It would create more competitiveness on the gas market, which is now dominated by Russia, and one side would not be able to force anything unilaterally anymore."

Western European capitals are just as eager as Poland to diminish Russian influence over supplies. Russia currently supplies 25 percent of deliveries to the European Union. Daniel Yergin, a Pulitzer-prize winning author and energy historian who included a chapter on shale gas in his latest book "The Quest," sums up Warsaw's thinking: "They're motivated to develop it economically and they're motivated to develop it politically."

But Russian officials, publically at least, dismiss the challenge, arguing it will prove Russian gas is cheap.

"Oh, we're so thrilled that they are starting to produce shale gas!" Sergei Komlev, head of contract structuring at Russia's state-controlled Gazprom told Reuters last week. "Look, we do not believe in this myth of shale gas, that it is cheap gas. It is not true."

FRACKING? NO PROBLEM

There is one good practical reason Poland has turned to U.S. companies to unlock its huge shale fields: American firms dominate shale gas technology.

The breakthrough came in 2003 when independent U.S. drillers, led by Devon Energy Corp, combined drilling at once-impossible angles, known as horizontal drilling, with hydraulic fracturing, or "fracking" - an older technology in which shale rock is cracked open by chemical-laced water blasted underground along with sand to prop the cracks open.

The United States produced 4.87 trillion cubic feet from shale gas in 2010, up from virtually nothing in 2000 according to the U.S. Energy Information Administration. The agency estimates shale gas will account for about 46 percent of U.S. natural gas production in 2035 -- an encouraging sign for Poland and other eastern European nations exploring unconventional gas.

But the torrid pace of shale development has also sparked a public backlash in the United States and elsewhere over fears that fracking pollutes groundwater and may cause earthquakes. Similar worries have led to a ban in France and Bulgaria and suspension in Britain. Fracking is also the subject of public debate in Germany.

A European Union study commissioned study found in January that EU law was enough for now to regulate shale gas exploration, although changes might be needed once Europe enters the development phase.

In Poland, so far, energy security concerns have trumped environmental worries. In comparison with countries such as Britain or Germany, the green movement is less powerful in coal-reliant eastern Europe. A late 2011 poll found that 73 percent of Poles backed developing shale while only four percent opposed exploiting the unconventional gas.

A short drive outside Lesniowice, workers at a Chevron-operated well-head keep a massive drill running 24 hours a day in search of the natural gas trapped in rock deposits.

"I have no worries at this stage, the technology seems 100 percent safe," said mayor Radzieciak, who estimated that potential revenues from shale could mean a more than 10-fold increase of his office's current annual budget of 10 million zlotys ($3.15 million). "People here are more opposed to wind farms than this."

THE FEARS IN MOSCOW

A Poland awash in gas could mean dwindling revenues and further loss of influence in a region Moscow once controlled with an iron fist. Are Russian officials too dismissive of the threat?

Moscow, some diplomats and oil analysts say, believes that Poland's weak infrastructure, among other problems, will slow the country's ability to exploit its gas.

"They are aware of the dangers," one Western diplomat said. "But they really don't believe shale will happen in Europe."

That could be why Gazprom felt confident enough to cut supply to Europe during the recent cold snap.

Others say Russia is only too aware of the shifting dynamic. Poland's investment in shale gas since 2009 has already shifted the terms of trade, according to Robert Hormats, the U.S. under-secretary of state for economic, energy and agricultural affairs. One obvious change: Russia and Poland renegotiated Poland's gas contract last year at terms very favorable to Warsaw.

Amy Myers Jaffe, an energy policy expert at the Baker Institute at Houston's Rice University, sees rival gas sources as a factor behind Russia's April deal with Exxon in which state-run Rosneft brought in the U.S. giant to accelerate its development of deepwater Arctic oil and gas.

Other analysts say Poland and other rivals were not a factor in that deal.

A Baker Institute report showed that Russia's market share of European gas fell from about a quarter to a fifth in the decade to 2010, partly due to increased use of natural gas diverted from the over-supplied U.S. market.

"Especially in gas, countries like Russia that were slow to the mark are losing market share and are going to lose more market share," she said. "There's a finite market which is going to go to shale, because I can do that quickly, and it doesn't require a $10 billion (LNG) installation where I have to put all that money at risk."

Poland currently relies on coal for most of its energy needs; natural gas, most of it Russian, accounts for about 13 percent of its supply. That gives Poland more leverage over Russia than is sometimes apparent.

"The last thing they (Moscow) want is anything that upsets their monopoly on gas," said William Perry, a former U.S. secretary of defense after a trip to Moscow to discuss nuclear proliferation. "I think it's fair to say that they are very concerned about it."

The Russian Energy ministry declined to comment.

POLAND'S BUMPY ROADS AHEAD

Much needs to be done in Poland if it is to wean itself off Russian supplies. Any boom will require thousands of skilled workers to build and operate wells and construct the roads and pipelines required to transport gas westward.

"For Poland to move forward . the key thing is going to be the scale-up," said John Claussen, Chevron's country manager for Poland.

One incentive for outside investors is the fact that gas prices in Europe are more than two times higher than in the United States. And with long-term contracts in Europe and Asia tied to oil prices, shale gas remains attractive despite worries about a weak economy that could cap future demand.

Poland's government has so far granted more than 100 exploration licenses, and hopes the eight currently active wells prove that extracting gas is viable-though the first two have so far been disappointing. [ID:nL5E8D74ST]

Malgorzata Maria Klawiter, an official from near Gdansk in northern Poland, remains optimistic. Gdansk has distributed 89 concessions covering about 85 percent of the region. In total, licenses cover 58,565 square kilometers, or some 18 percent of Poland's land.

Polish Deputy Foreign Minister Beata Stelmach said the next step is to enact legislation needed to attract investors and give them assurances they will see returns for exploration that can cost hundreds of millions of dollars.

"If we move to production level, then Poland's international position can change from a gas importer, to producer, or maybe eventually even exporter," Stelmach said. "This changes not only the domestic situation by improving energy security, but also strengthens the competitiveness of our country.

"Our Gazprom contract runs until 2022 and let's until then move within the framework of this contract. But, at the same time, we have to keep our fingers crossed to develop the shale gas project."

John Buggenhagen, the Warsaw-based exploration director for San Leon energy, said that while other former Soviet-bloc nations such as the Czech Republic, Hungary and Ukraine are exploring similar developments, it is Poland that offers the most promise.

"Look at the history of Poland," Buggenhagen told a recent shale gas conference in Warsaw. "We are only 23 years from the fall of communism and we are in an energy rush with a country that has been reliant on coal and on supplies from the east."

At Chevron's site outside Lesniowice, head of drilling Tim Nowak and his crew are doing all they can to make that happen. The site is a hive of activity with trucks owned by Halliburton parked in the lot, and drill parts and pipe casings strewn across the ground. The low rumble of the drill drones on in the background.

Nowak acknowledges the challenges of creating an industry from the ground up. But as he guides a tour around the first of Chevron's five exploratory wells in Poland, he remains positive. "Right now Poland is an exciting place to be," he said.

(Michael Kahn and Gabriela Baczynska reported from Lesniowice and Braden Reddall from San Francisco; with additional reporting by Melissa Akin and Vladimir Soldatkin in Moscow; Editing by Simon Robinson, Richard Mably and Sara Ledwith)

China Military Growth Spurs Asia Demand for Boeing, Lockheed....

2012-02-10T03:13:00.001-08:00

China Military Growth Spurs Asia Demand for Boeing, Lockheed....

By Kyunghee Park and Jasmine Wang

Feb. 10 (Bloomberg) -- China’s surging defense budget, the world’s second-biggest, is helping spur military spending across Asia, offering U.S. and European suppliers a chance to offset slowing demand at home.

Lockheed Martin Corp. and Boeing Co. fighters will be on display at next week’s Singapore Airshow as the two biggest U.S. defense contractors prepare to compete with Eurofighter and Saab AB for a $7 billion South Korean order. The contest follows similar competitions in Japan and India.

Asia-Pacific spending on fighters, missiles and other equipment is set to grow an average 4.2 percent annually to $114 billion in 2016, according to Frost & Sullivan, because of economic growth and tensions in areas including the South China Sea, the Korean peninsula and the Taiwan Strait. China’s defense budget, alone, may rise 14 percent each year through 2015, according to Goldman Sachs Group Inc.

“Increased government revenues means that more money is often available for defense spending,” said Tim Huxley, executive director at the International Institute for Strategic Studies Asia in Singapore. “Many parts of Asia are also insecure or governments have reasons to feel insecure.”

North Korean shelling and an attack on a warship killed 50 South Koreans in 2010. The Communist nation has an army of 1.2 million soldiers, ballistic missiles and enough plutonium for a half-dozen nuclear devices, according to U.S. military estimates.

China is working on its first aircraft carrier and the new J-20 stealth fighter. The country planned to increase military spending 13 percent to 601.1 billion yuan ($95 billion) last year, Li Zhaoxing, spokesman for China’s National People’s Congress, said in March. The nation is boosting the budget as it replaces aging fighters and places a greater emphasis on national security amid rising territorial tensions, Goldman Sachs analysts Ronald Keung and Tom Kim said in a Jan. 17 note.

Taiwan Fighters

Taiwan, which China considers to be a renegade province, is planning to upgrade 145 Lockheed Martin F-16s in a project that will cost about NT$110 billion ($3.7 billion), according to the Ministry of National Defense. The work may include installing new radars and navigation systems, according to a U.S. Defense Security Cooperation Agency statement last year.

South Korea is planning to purchase about 60 fighters, according to the Defense Acquisition Program Administration. The contenders will include Lockheed’s F-35, Chicago-based Boeing’s F-15, the Eurofighter Typhoon and Saab’s Gripen. The nation is also buying attack helicopters for its army and navy, as well as considering a purchase of unmanned aerial vehicles, according to the agency.

Japan Fighters

Lockheed, based in Bethesda, Maryland, won an order from Japan for 42 F-35 fighters in December. The jets may cost 1.6 trillion yen ($21 billion) to buy, operate and maintain over 20 years, according to the nation’s defense ministry. Singapore has also signed up as a development partner for the fighter jet. The U.S. has ordered about 2,440 in a $382 billion project that forms its biggest weapons program.

India last week named Paris-based Dassault Aviation SA as preferred bidder for a contract to supply 126 fighters. The planemaker’s Rafale was shortlisted with the Eurofighter Typhoon after the earlier rejection of offers from Lockheed, Boeing, Saab and Moscow-based United Aircraft Corp.

Eurofighter is now targeting the South Korean tender, along with opportunities in Malaysia and the Gulf, said Chief Executive Officer Enzo Casolini. The planemaker is a venture between BAE Systems Plc, Finmeccanica SpA and Airbus parent European Aeronautic Defence & Space Co.

Asia is “an important market,” Casolini said. “Exporting the Typhoon is also very important for the European industry and for the European economy.”

Eurofighter Slowdown

Eurofighter has slowed production as European governments cut military budgets amid austerity measures. Western European defense spending fell about 5 percent last year and may decline further this year, according to Fitch Ratings.

Asia-Pacific defense spending rose 14 percent last year, making it the fastest growing region, according to Frost & Sullivan. Japan is the biggest spender on defense in Asia behind China, with a $54.5 billion outlay in 2010, according to Stockholm International Peace Research Institute data. Third- ranked India spent $41.3 billion that year. The U.S. led global spending with a $698 billion budget.

China Jets

China is also seeking to take advantage of growing defense budgets by selling domestically developed equipment overseas. At the Singapore show, the export arm of Aviation Industry Corp. of China, the nation’s biggest aerospace company, will promote the JF-17 Thunder fighter, nicknamed Fierce Dragon, which was developed with Pakistan. It will also be highlighting the L-15 Advanced Trainer Jet, and the Yilong, or Pterodactyl, drone.

“These airshows give China defense companies a global stage, which reflects their growing power,” said Ken Zhang, a Beijing-based defense-company analyst with Founder Securities Co. Companies like AVIC also need to boost exports to help pay for research costs as they probably don’t get “fat margins” from sales to the Chinese military, he said.

Lockheed also sees Asia-Pacific demand for missile-defense technologies, replicating a trend seen in the last decade in the Middle East.

“We’re watching the same or similar types of overall security risks,” Chief Executive Officer Robert Stevens said in a Jan. 26 conference call with analysts. “The proliferation of technologies, the desire to get missiles of greater performance, longer range, more precision, and the desire for governments to have some protection against that ballistic-missile threat.”

Surveillance, Drones

L-3 Communications Holdings Inc., based in New York, has had interest from the region in its SPYDR manned, airborne intelligence, surveillance and reconnaissance system, as well as unmanned surveillance drones, Chief Executive Officer Michael Strianese said in a Jan. 31 conference call.

Raytheon Co., the world’s largest maker of missiles, expects 30 percent of bookings and 26 percent of sales in 2012 to come from outside the U.S., Chief Executive Officer Bill Swanson told analysts last month.

“Asia and the Middle East are important and are still growing,” Swanson said.

In the U.S., the biggest military market, Defense Secretary Leon Panetta presented an outline on Jan. 26 for $613 billion in spending for fiscal 2013. The proposal is part of an effort to cut $487 billion, or 8.5 percent, from $5.62 trillion in defense spending that had been planned for 2012 to 2021. Automatic spending cuts could force an additional $500 billion in reductions over a decade.

“The strong growth in emerging-market demand for defense equipment is a welcome respite to western military manufacturers,” Fitch said on Feb. 1. “In the medium term, the reliance on emerging markets for the defense sector will continue to grow.”

--With assistance from Sabine Pirone in London, Gopal Ratnam in Washington, Janet Ong in Taipei and Daniel Ten Kate in Bangkok. Editors: Neil Denslow, Vipin V. Nair

Mafiosi Magician Mario Dragui's ECB, Debt, cash and bonfires....

2012-02-10T02:13:00.001-08:00

Mafiosi Magician Mario Dragui's ECB, Debt, cash and bonfires....
By Chan Akya

So we have a deal. Do we have a deal? We have a deal. Well, kind of, but the finance ministers haven't signed off on it as yet. It may therefore change before you read this. It most certainly will change after you read this, irrespective of whether you read this on the intended publication date (February 10) or many months later. Welcome to the evergreen world of European sovereign debt restructuring.

This week's deal may or may not have been agreed? You see, here's how it is supposed to work. We give the Greeks 130 billion or so - no need to put a currency sign in front of the 130bn because it doesn't really matter. In return, the Greeks agree to 3.3bn of austerity - that is, budget cuts to that extent. No need to put a currency sign in front of this 3.3bn either, because it could be in baklava for all the good it will do for you anyway.

In any case, the 130 billion will be given to people to whom the Greeks owe money, not to the Greeks themselves. So it will be transferred from the European Central Bank (ECB) offices in Frankfurt through the clearing system in Frankfurt to banks in Frankfurt, and perhaps to the odd bank or two that dare to have branches in Paris or London instead. So to be clear, nothing will go to Athens anyway.

The Greeks also get some book entry adjustments. Instead of owing debt that looks like Mount Everest (this being an Asian publication), they will instead owe debt that looks like Mont Blanc. Even that mountain of debt will be worth, in terms of intrinsic purchasing power thanks to the below-market coupons they have to pay on it now and the next round of defaults, about the same as a pile that is as high as the average speed bump in Singapore but that is the denouement in the next act and one shouldn't rush to it quite yet.

Still with me? Marvelous. So these book entry adjustments are meant to lop 70% (50% from the principal balance and the rest from the losses suffered by the comically low coupon on the now-restructured debt) off the money owed by the Greeks to the private sector creditors, but they will be done voluntarily so that a miniscule amount of credit default swaps (CDS) outstanding on the debt is not "triggered". So an official sitting in Brussels (or is it Strasbourg?) gets to tick a box that says "Destroyed a useful little market that dared to speak the truth about European sovereigns".

Meanwhile, official creditors will get seniority so that they won't have to take any pain from this write-off. So that leaves the International Monetary Fund (IMF) and bilateral government aid donors (step forward, China) without the need to write off their debt. For IMF functionaries, this is useful because you don't have to write 100-page memos to the bosses explaining what happened (even if the situation was caused by those same bosses in the first place). Its even better for the central bankers from Asia or the Middle East because they, quite literally, dodge a bullet for buying Greek debt in the first place. So far, so good.

Except for the ECB, which purchased a bunch of the now-worthless debt of the same stock that was bought by the pirates; oops sorry I mean privates. It isn't allowed to take direct losses because that is the same as providing a financial benefit (this is the world of debt, stop trying to make logical sense of anything) to sovereigns, which the rules don't allow. Instead, the ECB would enter a complicated mechanism wherein it would take its Greek exposure and effectively exchange for paper to be issued by the European Financial Stability Facility (EFSF), which will then package them into an ABCD to sell to WXYZ. Okay, I may have made up the last two acronyms but you cannot be sure of that.

Yes, yes, but what about the contagion risks you ask, especially now that it looks like Portugal will be this year's big casualty. Oh that. Let's not get too wrapped up in it. You see the ECB has now made it easier for national central banks in Europe to accept pretty much any collateral in return for providing money to their banks.

You remember the three-year money supplied by the ECB at 1% in December? Well, there's hundred of billions, if not trillions, more where that came from. So when Portugal hits the reef later this year, its banks will be able to buy government paper, discount back with the national central bank for freshly printed money; and pocket the interest rate differential. Nice living, if you can get the job.

With all that monetary easing on the sly, we are talking hundreds of billions if not trillions. Once we talk numbers that big, the concept of value loses all meaning and you can see why I have insisted on not using currency signs in this article.

The Germans are apparently not too happy because they can't count very well with big numbers and all this talk of billions and trillions is proving quite vexing for them especially as the word "trillion" in German is spelled as "W-e-i-m-a-r". It also gives them a nasty nightmare about the chap who came after the Weimar Republic: a charming gentleman by the name of Adolf Hitler, to save you the trouble of looking up the Zioconned Wikipedia....

In any event, debt frenzy has now caught on in Europe, and there's a billion in bail-out money available for every outstretched hand. Amidst the frenzy, no one wants to listen to the Germans speaking sense. Indeed, the Greeks celebrated the bailout deal by having their national newspapers print images of Nazi flags being raised in Athens; about as clear as they can get about who they consider to be the villains of the piece.

Sheesh! You go and take money out of your pocket to help a fellow man in need and he calls you Nazi for doing that. The Germans are a hardy lot, who have impeccable manners and excellent financial sense. Where do they see this European experiment going now?

Suddenly, and as if the heavens themselves sent a message, we have news from Eastern Europe that provides an answer. With a worsening cold snap through Europe, the authorities in Hungary have taken to sending their cash notes to make fuel billets, that can then be used by the country's poor to burn and keep themselves warm. Cheaper than firewood, coal or natural gas, apparently.

Hungary, you will recall, is the Eastern European miracle economy that suddenly found out that printing loads of debt doesn't add up to an economic miracle. Its old forint aren't worth a lot these days, hence the move by the central bank to do something useful with them. At this rate, there will be surging demand for Zimbabwe dollars all over Europe, as they seek things to burn - such as the paper that Greek government debt is written on, rather than being collectors' items to be hung in people's toilets (I have a nice one from their past round of defaults in mine).
Imagine what the ECB can do with its trillions in euro currency notes in three years time when the next cold snap hits the continent. People from the Middle East and Russia, hoping to sell fuel at outrageous prices to the Europeans, will be sorely disappointed to learn about this new energy source....

India signals long-term partnership with Iran....

2012-02-10T01:51:00.000-08:00

India signals long-term partnership with Iran in trade and doubles Oil imports from Tehran....

http://www.indianembassy-tehran.ir/

India figured as Iran’s number one crude oil customer in January. That may be difficult to believe but it is indeed a statement of fact. Actually, India stepped up its imports of Iranian oil by 37.5 percent, which helped Iran offset a 50 percent cut in Chinese purchases resulting from a dispute in pricing. China now imports around 250000 barrels a day as against India’s 550000 barrels a day, according to a Wall Street Journal report.

Of course, what stands out is that New Delhi’s Iran policy is crystallising. India will concentrate on its self-interests in a highly fluid regional security scenario without in the least being ideological about the winds of change blowing through that region. This is the message one gets. Indeed, the US-Iran standoff is primarily geopolitical and it doesn’t concern India, which is in any case not in the business of ‘regime change’.

In all probability, Washington too will eventually get to see the futility of this standoff and will move toward engaging Tehran. Despite the western rhetoric, the fact remains that sanctions against Iran failed to work through the past 30 years. Even a noted Iran-baiter like French president Nicolas MOSSAD Sarkozy is warning that a military strike against Iran serves no purpose.

Now, coming back to India’s oil imports from Iran, Washington will continue to dissuade Delhi from trading with Tehran. The US state department spokesperson told reporters Tuesday that the talks with the visiting Indian foreign secretary in Washington included “how India might find alternative sources… This is a two-track policy, both to encourage countries to wean themselves from Iranian oil, but also to work with suppliers around the world to help countries find alternative sources of supply.”

However, what Washington overlooks is that India’s economic relationship with Iran as such is also at stake here. Without oil imports, India-Iran trade virtually packs up. Delhi’s robust efforts to work out a reliable payment mechanism for the trade with Iran underscores that it intends to not only sustain the present level of trade but do all it can to boost the trade by stepping up India’s exports to Iran. The government is mounting a “huge” business delegation to Iran in end-February to explore the opportunities for tapping those sectors that are being vacated by the western countries following their embargo against Iran. It is a long-term approach that India is adopting, keeping in view the fact that Iran is a rich country potentially which offers a big market for India’s exports.

The new payment mechanism — providing for 45% of Iranian oil to be settled for in Indian rupees — opens up interesting possibilities. Of course, Iran has the option to leave the money in the Indian state-owned UCO Bank at an interest rate of 4% or so. But to obviate currency risks, Iran may perhaps prefer to use the money to import from India or to use India as a trading hub to buy from third countries. Iran also can invest the money in Indian bonds or equities, which Delhi might welcome. In sum, the payment mechanism acts as a catalyst to build up the momentum of economic ties as well as broadening and deepening the partnership.

By M K Bhadrakumar

By BENOÎT FAUCON

India increased its imports of Iran’s oil to become its largest customer last month, partly offsetting a cut in Chinese purchases, as sanctions failed to significantly dent Tehran’s sales, people in the oil industry said.

Iranian crude exports to India rose to 550,000 barrels a day in January, up 37.5% from December. That coincided with a 50% cut in exports to China, the result of a pricing dispute. Indian officials declined to comment.China now imports around 250,000 barrels a day from Iran.

Some analysts question, however, whether India can keep Iranian oil imports at such levels.

“I don’t think India is insulated at all” from sanctions, said Trevor Houser, a partner at New York-based economic-research firm Rhodium Group. “So the question is just how long Tehran is willing to sell on credit and how long Tehran can go without hard currency.”

Iran has been more flexible than other suppliers to India when it comes to payments, and accepted a delay on billion of dollars of arrears after sanctions disrupted payments last year.

Many Indian refineries are geared toward Iranian oil, making it more straightforward and cheaper to refine. There is no sign India is getting Iranian oil at a discount.

Despite a pledge to find alternatives, South Africa has also increased its Iranian oil imports to 100,000 barrels a day, a person familiar with the situation said. South African officials declined to comment.

Overall Iranian crude exports remained steady in January, preliminary data show.

Iranian crude shipments to the European Union eased slightly, as refiners prepare for an embargo on Iran. Iranian officials say the embargo won’t affect the country because they can find other buyers.

That comes despite rising financial pressure on Iran and on other nations to stop buying its oil. The U.S. has sanctioned Iran’s central bank and is working to cut the country off from the network of international financial transfers, the conduit for oil revenue, and pressured Asian and African nations to reduce their Iranian oil imports alongside the EU embargo.

But sanctions haven’t yet deterred India. Iran’s ambassador to India, Sayed Mehdi Nabizadeh, said on Tuesday that India had agreed to pay for some purchases of Iranian oil in Indian rupees, a route that would avoid the risk of an interruption in banking transfers. Officials in India’s oil and external ministries declined to comment on reports of a deal.

Final figures for shipments to Europe—which include the EU and Turkey—fell by 7% in January to 650,000 barrels a day, according to a person in the oil industry familiar with the matter. Earlier, preliminary numbers pointed to a steady 700,000 barrels a day last month.

But direct deliveries—outside the SuMed pipeline—to Greece fell by 25,000 barrels a day to 85,000 barrels a day, the person said.

http://articles.economictimes.indiatimes.com/2012-02-09/news/31042084_1_india-and-iran-eu-sanctions-total-oil-imports

Banks would rather maintain fiction after fiction in order to hide utter corruption and Greed....

2012-02-09T05:26:00.000-08:00

http://www.youtube.com/watch?feature=player_embedded&v=gHsxLhY-EvE

Banks would rather maintain the fiction ....The ‘once in a 100 year tsunami’ argument is merely a justification for changing nothing...., deregulations and utter corruption at the Top be damned....

http://www.vanityfair.com/politics/2012/01/stiglitz-depression-201201

Stiglitz argues that for 30 years after the end of the Great Depression there was no financial crisis because a newly empowered SEC was on the beat, and everything worked. A deregulation trend that started under Reagan began stripping away those protections, with the eventual disastrous repeal of Glass-Steagle in 1999. The philosophical justification adopted by many economists, including Fed chairman Alan Greenspan, was that unfettered markets always lead to efficient outcomes....thus sweeping under the rug utter corruption and greed at the Top/down of ZOG USA and Wall street....

This belief was based on simplistic models assuming that markets were always perfect, always open, and that everyone had perfect information. Stiglitz’s own work on ‘information asymmetry,’ which earned him a Nobel Prize in economics in 2001, pulled the rug out from under this theory, because it showed that one party to a transaction always has more information than the other, often the seller.

The banks used this window to introduce super leveraged derivatives that had never been regulated, studied, or even understood. They then clawed open accounting loopholes that were so imaginative that not only were shareholders and regulators deceived about how much risk was involved, senior management was clueless as well. Instead of managing risk, they created risk.

A 2006 GDP that was 80% derived from real estate transactions and a savings rate that fell to zero meant that a severe crash was a sure thing. President Bush’s response was to unleash an extreme form of ‘trickledown economics,’ with the banks given $700 billion with no conditions attached. Intended to recapitalize the banks so they could resume lending to the mainstream economy, much of the money ended up being paid out in bonuses and dividends. Of the $180 billion used to rescue AIG, $13 billion went to Goldman Sachs, and much of the rest went to German and French banks. No wonder Main Street feels cheated.

The financial system is now more distorted than ever, with major institutions wards of the state, and smaller banks that actually lend to consumers and small businesses going under in record numbers, because the playing field is so uneven. There are too many structural conflicts of interest. The ‘once in a 100 year tsunami’ argument is merely a justification for changing nothing. Banks would rather maintain the fiction that the loans on their books are good, than make adjustments, meaning there will be more foreclosures in 2012 than in 2011 or 2010. No financial system has ever wasted assets on this scale, and the end result will be a national debt many trillions of dollars larger.

The $787 billion stimulus package was too small, and should have been at least $1.2 trillion, but there was no way Obama was going to get more out of this Senate. The 40% of the stimulus that was tax cuts was saved or put into Treasury bonds and created no immediate beneficial effects on the economy. More money should have gone to the states, which unable to deficit spend, are now a huge drag on the economy. But even this meager package was able to prevent the unemployment rate from rising from 14% to 22%, as it was set to do.... Any major spending cuts will produce ‘Hoover’ outcomes....

The outlook for the economy is bleak, at best...

Bulgaria at Euro-Caspian energy crossroads; Pipelines enter post-Nabucco era....

2012-02-09T02:21:00.000-08:00

Bulgaria at Euro-Caspian energy crossroads; Pipelines enter post-Nabucco era....
By Robert M Cutler

MONTREAL - Bulgaria, in southeastern Europe, is fast becoming a fiercely fought over territory amongst competing projects aimed at transporting Caspian natural gas to Europe.

US Secretary of State Hillary Clinton has just visited the country and is sending her Special Envoy for Eurasian Energy, Richard Morningstar, to Sofia next week. Alexei Miller, chief executive of Russian gas giant Gazprom is also scheduled to visit next week, following completion of a visit by a trio of Bulgarian government ministers to Moscow.

Morningstar's visit will come in the wake of a decision three weeks ago by the Bulgarian cabinet to ban the use of hydraulic fracturing ("fracking") technology by the US oil firm Chevron, after having awarded it a license to explore the potential of shale-gas reserves in the northeast of the country.

At stake is the geo-economic shape of the extended and complex regions around the Black Sea and Caspian Sea basins, stretching from southeastern Europe to Central Asia, not to mention the future of the energy ledger of the European Union, which already imports gas from Russia via the newly opened North Stream pipeline under the Baltic Sea to Germany.

The newly announced Trans-Anatolian Gas Pipeline (TAGP, running east to west across Turkey, also called TANAP after its initials in Turkish), agreed bilaterally between Azerbaijan and Turkey just weeks ago and to be four-fifths directly financed by Azerbaijan, has stolen a march on the long-planned multilateral Nabucco project, backed by the European Union.

When first announced at the end of December, the TAGP was assigned an initial design volume of 16 bcm/y. In January it was made public that the final capacity would be set at 24 bcm/y. This figure has recently been raised to 30 bcm/y, equivalent for all intents and purposes to Nabucco's projected design volume of 31 bcm/y.

At the same time, advocates of Russia's South Stream project are trying to get their foot in the door by the end of this year, claiming landfall in Bulgaria in order to circumvent conditions of the EU's new energy package. Yet it is difficult to see how South Stream would increase security of supply to Bulgaria, which already depends on Russia for 90% of its natural gas.

Although this represents only 10% of its total primary energy supply, half of that goes for electricity generation, another quarter for industrial production, and most of the remainder for transport systems. A third of Bulgaria's total energy consumption is sourced from highly polluting coat and peat, and nearly a quarter from nuclear plants. The desire to move to more environmentally friendly natural gas is clear.

A number of obstacles stand in the way of the successful completion of the South Stream pipeline. Perhaps the most notable is the same obstacle over which Russian political and gas industry officials have continually criticized the Nabucco project: no sources for the gas to be transmitted have been identified.

South Stream's projected volume has always been declared at 63 billion cubic meters per year (bcm/y), and it is now clarified that this would putatively consist of four 15.5 bcm/y strings. In practice, that could mean starting with one string of 15.5 bcm/y with the potential for scaling up if quantities ever become available.

Nor is the route definitely established. Up until the end of December, Gazprom had touted two legs for South Stream, one through southeastern Europe to Austria and the other across Greece to Italy. Six weeks after the inauguration of the present Greek prime minister, Lucas Papademos, a technocrat and political independent, Gazprom's Miller and Russian Prime Minister Vladimir Putin in a joint television appearance discussed with one another dropping the second of the two legs.

Yet four weeks later, after Miller met in Moscow with Antonis Samaras, the head of Greece's New Democracy party, the company issued a statement putting it back on the table. Two weeks after that, an unnamed former energy minister in Athens told the weekly New Europe that the construction of the southern branch would not begin before 2015 (if it ever did). Yet the design criteria for the South Stream pipeline remain officially unchanged.

It is of interest that in November last year, before the TAGP was officially announced, Bulgaria and Turkey agreed on a natural gas contract for supply of gas via the ITG to a 115-kilometer Interconnector Greece-Bulgaria (IGB). At the time, the volumes being discussed were on the order of 1-3 bcm/y, with the possibility this might rise to 5 bcm/y. That quantity exceeds Bulgaria's current needs and could therefore allow for gas being sold onwards to other southeast European countries.

A small additional number of relatively inexpensive reversible interconnectors in the region such as the IGB (such a the already completed Arad-Szeged line from Romania to Hungary) could implement a gas ring in Southeast Europe sourced from Azerbaijan.

Thus, although the Nabucco project increasingly looks to be falling by the wayside, the new TAGP project could in effect take its place, and Bulgaria could draw advantage from this development....

Pipelines enter post-Nabucco era....

http://www.silkroadstudies.org/new/inside/turkey/2010/100621B.html

For more than a decade, Nabucco was the only pipeline project (and lately, the frontrunner project) for transporting Caspian gas to the European Union. Nabucco relied exclusively on Azerbaijani gas for the pipeline's first stage (the hopes to add gas volumes from northern Iraq proved unrealistic in any usable time-frame).

The European Commission worked hard to align the financing and gas supply guarantees for Nabucco, a strategic project on three counts: its design capacity (31 billion cubic meters [bcm] annually), its market destinations (Bulgaria-Romania-Hungary-Austria-Germany, all of which need diversification from Russian Gazprom), and its role to provide a transportation solution for Azerbaijani and Turkmen gas through the same pipeline.

The European Commission's efforts notwithstanding, Nabucco lost momentum and, ultimately, credibility in its existing form. The tipping point may be traced to November-December 2011, when several adverse developments converged.

The European financial crisis deepened (and the prognoses worsened), indefinitely postponing any decisions by lending institutions to finance Nabucco. Nor did the project's management come forth with a long-expected correction to its cost estimates. The Shah Deniz gas producers' consortium in Azerbaijan could no longer postpone the investment decision in that project's Phase Two, which necessitates determining the transportation solution in early 2012.

With that clock ticking, Nabucco was seen to be far from ready with the solution. Conversely, the Nabucco project's planning assumptions outran the slow development of a trans-Caspian solution for Turkmen gas.

Ultimately, British Petroleum and Azerbaijan's State Oil Company (the most influential shareholders in the Shah Deniz producers' consortium) offered in October and December 2011, respectively, transportation solutions to replace Nabucco outright.

BP's concept, the South East Europe Pipeline (SEEP), however nebulous at this stage, would eliminate Nabucco in its entirety, replacing it with a non-strategic, 10 bcm per year concoction of other owners' pipelines along Nabucco's original route. BP is expected to develop this concept into a project.

The Azerbaijan-Turkey project, the Trans-Anatolia Gas Pipeline (TAGP; Turkish acronym TANAP), would replace Nabucco across Turkey's territory, with a planned capacity of up to 30 bcm per year, comparable with Nabucco's in strategic significance. This would necessitate one or several continuation pipelines into EU territory. A reconfigured Nabucco could become one such continuation pipeline within the EU, whether under the Nabucco brand or a different name.

Nabucco's six shareholders are staying with the consortium and the project (while the Austrian management is redoubling promotional efforts). No shareholder would quit the Nabucco consortium. However, Nabucco's German shareholder RWE is multiplying its public overtures to TAGP. Turkey's government (also a Nabucco shareholder through Botas) announces that it has done "more than its share" for Nabucco and is "prioritizing" TAGP, which is "easier to implement" than Nabucco.

Romania, historically the most loyal partner in the Nabucco consortium, is drawing its own conclusions from Nabucco's loss of momentum. Bucharest seeks to revive the AGRI proposal for liquefied natural gas (LNG) transportation from Azerbaijan via Georgia and the Black Sea to Romania. AGRI is yet another competitor (albeit a small one) against Nabucco over Azerbaijani gas.

TAGP does not invalidate Nabucco's basic rationale. At its core at least, that rationale is common to Nabucco and TAGP: transporting Azerbaijani and, potentially, Turkmen gas to Europe (rather than Russia) through a dedicated transit pipeline, on a route outside Russian control. However, Nabucco seems far from ready to proceed with implementation, while Azerbaijan is capable of implementing its TAGP project without delay from its own resources. Emerging as a significant "gas nation", Azerbaijan could no longer wait indefinitely for Nabucco to proceed.

Gas extraction in Azerbaijan is expected to reach 50 bcm annually by 2025, as new fields come on stream in addition to Shah Deniz. The lion's share of that production will be available for export to points west (Georgia, Turkey, Europe). At present, BP and possibly other Shah Deniz consortium members want a quick decision in early 2012 on how to sell those 10 bcm post-2017. Azerbaijan, however, must plan for the longer term and the larger volumes.

Azerbaijan holds the main cards as gas producer country, with cash reserves to build a pipeline that Europe seems unable to finance, and coherent planning that eludes Europeans outside the European Commission.

Thanks to Azerbaijan, moreover, Turkey can finally advance toward its goal of becoming a transit country for Caspian and Mideastern gas to Europe. Other transit projects, on which Turkey had based that hope, never came close to implementation via Turkey (Russian Blue Stream Two, Iranian gas, Nabucco, Arab Gas Pipeline from Syria) while gas projects in northern Iraq or offshore Cyprus look unrealistic for the foreseeable future.

Thus far, it is mainly Azerbaijan that has enabled Turkey to become a transit country for oil (Baku-Tbilisi-Ceyhan pipeline) and it is now poised to make Turkey into a major transit country for gas. Ankara could jeopardize that prospect, however, in case it reverts to its former ambitions to become a "hub" country, rather than a transit country.

Caspian gas politics and the investment decisions are clearly moving into a post-Nabucco era. Among the five rival solutions (TAGP, SEEP, Nabucco, ITGI, TAP), the Azerbaijan-led TAGP holds an unmatched combination of comparative advantages. Baku's decision to proceed with TAGP in partnership with Turkey has cut the decade-old Gordian knot of Caspian pipeline projects.

Vladimir Socor

A pipeline from Russia to South Korea through North Korea have been given a nod of approval...

2012-02-09T02:14:00.000-08:00

A pipeline from Russia to South Korea through North Korea have been given a nod of approval; grid-lines and railways on the Korean Peninsula (connecting to the trans-Siberian railway) to come forward as well....

http://davidfday.com/category/blog/russia/

The Russian winter of discontent....
By Yong Kwon

The Eurasian steppes historically represented a serious security dilemma for Russia's rulers; without natural barriers to hinder the advance of invaders, the flat Russian borderlands proved nearly impossible to defend using pre-modern means. In the post-Soviet era, the new Russian Federation no longer needs to fear steppe horsemen or Western European troops marching towards Moscow, but controlling the Eurasian landmass still represents a major administrative challenge.

In order to best maximize its own interests alongside other political heavyweights that hold stakes nearby, the Kremlin must create a coherent and cohesive foreign policy that spans several pivotal and conflict-ridden regions. With all things considered, it is only natural that Moscow's foreign policy has evolved to be pragmatic with a long-term outlook.

Looking out at the world from inside the Kremlin helps explain quite a few things about Russia's foreign policy behavior that is not so obvious from outside its walls. For example, Professor Daniel Drezner asked in a Foreign Policy blog in January why Russia is "freaking out" when the Barack Obama administration has done so much towards the "reset". [1] In particular, the article probes why China is not being as rhetorically aggressive as Russia when the administration's "pivot" appears to be directly confronting Beijing's foreign policy.

Drezner forwards several hypotheses ranging from Russia's diplomatic style to internal weakness stemming from institutional dysfunction and demographic decay. While these conditions may all be peripherally valid, the article fails on one basic presumption: that there actually has been a Russia-US reset.

Listening to Washington's rhetoric on relations with Russia, it sounds as though the Obama administration went to great lengths to appease Moscow. In reality, the most significant step the current White House took in improving relations with the Kremlin has been the ratification of the new Strategic Arms Reduction Treaty (START). While an important landmark in US-Russian relations, significant portions of the treaty were already formulated under the George W Bush Administration; in other words, it does not symbolize the "reset" that President Barack Obama forwarded when he came into office.

What the Russian leadership expects (or rather expected) from a "reset" is a change from the Bush-era policy of unilateralism and showing "commitment to the notion that Russia can be a viable and trustworthy partner to the United States regardless of the state of Russia's domestic affairs". [2]

Considering the events of 2011, the Obama administration has not executed foreign policy in ways that would appear to be fundamentally different from the preceding administration nor has it refrained from commenting publicly on Russia's domestic conditions (albeit in reaction to Moscow's own statements).

From presidential candidate Putin's perspective, the Libyan bombing campaign was a repetition of "Western" unilateralism under president George W Bush, even if the US managed to get an endorsement from the United Nations. Since an abstention on Libya was clearly not strong enough of a message to Washington, is it any wonder then that Moscow is so firmly against (alongside Beijing) any signs that may indicate Russian approval of North Atlantic Treaty Organization (NATO) intervention in Syria? The Russian leadership is not "freaking out" as Drezner suggests, it is simply reacting to past experience.

Ultimately, the US has no leverage over Russia because Washington has become a superfluous constant in areas where Moscow feels the need to expend greater attention. A key example is Northeast Asia.

Putin has long looked to the Far East as a key area of engagement for the Russian Federation. The giant Eurasian state's reorientation towards Northeast Asia is not only a natural response to the rapid economic growth in the region, but also an economic necessity as gas fields in Western Siberia become slowly depleted. Since Russia will not be able to easily extract the resources under the East Siberian permafrost without international investment and cooperation, relations with key economic players in the area must be vastly improved.

Naturally China is at the center of Russia's attention. Both as a partner in development, but also as a key market for the mineral wealth soon to be excavated. Therefore, standing with Beijing on key areas on contention such as Iran and Syria plays a dual role of securing Russia's long standing goal of balancing the influence of the United States in the Middle East and securing channels for further cooperation with the People's Republic of China.

However, Moscow does not want to be overly dependent on exports to China; ties with South Korea and Japan also need to be developed. Even here, among the closest allies of the US in the region, the Russian leadership does not need to mind the state of its relationship with Washington. Both Japan and South Korea are increasingly anxious about their over reliance on Middle Eastern oil being delivered over contentious sea lanes.

In particular, the widening of sanctions on Iran and rising tensions on the Straits of Hormuz have rattled both countries (See East Asian energy dilemma over Iran Asia Times Online, January 24, 2012 ). Unsurprisingly, Moscow's plans to develop infrastructure for the extraction of mineral resources in the Russian Far East have already created "conspicuous fixation for Russian suppliers". [3]

In fact, plans to develop a pipeline to South Korea through North Korea have been given a nod of approval by Kim Jong-eun and will proceed as planned. [4] Once the pipeline is established, one can expect more concrete plans for the construction of gridlines and railways on the Korean Peninsula (connecting to the trans-Siberian railway) to come forward as well. Such development would open South Korea to overland shipping to Europe, significantly cutting the cost of exports.

The key piece of the puzzle is North Korea. Since the mid-1990s, Moscow had looked to Washington's leadership to maintain stability on the Korean Peninsula and coax Pyongyang into negotiations. However, the US has simply opted out of that role by giving China the chance to develop closer ties with North Korea through economic cooperation and providing aid.

This is despite Pyongyang's acceptance of negotiations on its nuclear project with Washington alongside talks for food aid. Recent reports suggest that China has delivered 500,000 tons of food aid to North Korea. [5] If true, Washington's already diminished leverage over Pyongyang, alongside America's importance to Russia's development strategy, has been further reduced.

In terms of developing ties with Japan, Tokyo already wants to find a resolution to the Kurile Island dispute in order to re-orient its defense posture from facing Russia to develop naval and air power to better confront China. The necessary conditions for a resolution favorable to Moscow have already been laid down.

As evident in these key areas, Russia does see the need to link its interests to that of the United States as it had during the 1990s and the early 2000s. More than a reflection of Moscow's insecurities, recent developments actually show how much Washington's policies have reduced its position in the world.

At the same time, Russia's policies are largely reactive and not based on irreversible misgivings about the United States. As such, specific policy alterations on key issues such as Iran or North Korea could change the Russian Federation's outlook and rhetoric towards the United States.

For now, as the unusually frosty cold front blows over Eurasia, the Russians have come boldly forward against the United States for very pragmatic reasons. Considering how synonymous the Russian winter is with the myth of indomitable Russia, one must wonder whether it will favor Moscow once again.

Notes
1. Daniel W Drezner. Why is Russia freaking out more than China? Foreign Policy, January 19, 2012.
2. VolodymyrDubovyk. The US-Russia Reset. New Approaches to Research and Security in Eurasia Memo No. 171, 2011.
3. Adam N. Stulberg. Russia's Energy Security Dilemmas in Northeast Asia. New Approaches to Research and Security in Eurasia Memo No. 170, 2011.
4. Henry Meyer. North Korean Leader Kim Backs Natural-Gas Pipeline, Russia Says. Bloomberg Businessweek, February 3, 2012. 5. South Korean activists say North Korea has received food aid from China. Voice of America, January 31, 2012.

Canada has been "driven" into the arms of the Chinese....

2012-02-09T01:30:00.000-08:00

Zioconned Canada has been "driven" into the arms of the Chinese....and China’s Achilles’ Heel....

http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/chinas-canadian-energy-assets-are-adding-up/article2198656/

The Canadians might not be allowed to build a pipeline going south to the Texas Gulf Coast, so now they’re determined to build one going west to the Canadian Pacific Coast.

After President Obama rejected the Keystone XL pipeline last month, the conservative Canadian government has begun looking for another potential buyer for the oil that was intended for the pipeline. That buyer is China, the energy-craving economic giant that’s already invested more than $16 billion dollars in the Canadian oil industry in the last two years.

Canadian prime minister Stephen Harper went to China Tuesday with a delegation of 40 Canadian business leaders to discuss energy....

In a word: PIPELINE.

Among members of the Texas congressional, there’s regret and disappointment that the oil intended for the U.S. may now be purchased by China.

“It’s outrageous and unacceptable to drive our friends the Canadians into the arms of China,” Rep. John Culberson, a Houston Republican, told Texas on the Potomac. “Next to our national debt, the communist Chinese government is the biggest threat to American national security in the 21st century.”

Culberson blamed the Democratic administration for the latest twist in U.S.-Canadian relations.

“President Obama has once again strengthened the Chinese, weakened the United States and driven one of our best friends into the arm of our worst enemy,” he said.

Culberson isn’t the only Texan lawmaker who is sad and angry to see the Canadian oil going to China instead of United States.

“It means that we have to import from Saudi Arabia and other countries that may not be nearly as friendly toward the United States as Canada. It makes so much more sense to import from our Canadian ally,” Rep. Gene Green, the Democrat from Houston.

The Republican majority in the House of Representatives is still trying to make the pipeline happen through legislation that Green recognizes “probably hasn’t got a chance to pass through the Senate.”

http://winnipeg.ctv.ca/servlet/an/local/CTVNews/20120209/canada-china-free-trade-talks-120209/20120209/?hub=WinnipegHome

China’s Achilles’ Heel....

By Minxin Pei

With little in the way of force projection, China’s dependence on natural resources in unstable parts of the world could undercut its economic ambitions. There are limits to free-riding....

The seizure of 29 Chinese workers by Sudanese rebels in the southern part of Sudan last week exposed one of the most vulnerable links in China’s ambitious plan for extending its economic influence abroad. To be sure, this isn’t the first time workers sent by China to dangerous regions were kidnapped or harmed. Five years ago, three Chinese engineers were murdered by a militant group in Pakistan. When civil war broke out in Libya nearly a year ago, Beijing had to dispatch a fleet of ships and airplanes to evacuate more than 30,000 Chinese workers from the country.

Despite the release of the workers this week, such incidents – and there will be many similar ones in the future – raise several important questions about China’s strategy of “going out” in general, and its quest for natural resources in particular.

The motivations for Beijing to expand its economic reach across the globe are easy to understand. The Chinese economy is resource-intensive and depends on secure access to energy, minerals, and other commodities to sustain its growth. Unfortunately, the geopolitics and economics of natural resources are tricky. Most of them are located in unstable or war-torn countries, with poor infrastructure, corrupt governments, and intractable ethnic conflict. The global markets for natural resources are notoriously volatile and frequently go through boom-bust cycles. Worse still, as a late-comer to the scene, the low-hanging fruits have already been picked by entrenched and powerful Western multinationals, such as Exxon, Shell, BP, Rio Tinto, BHP, and the likes, which have established seemingly unchallengeable advantages in technology, capital, and risk management.

Faced with such a strategic landscape in the competition for natural resources, China has long concluded that it will risk letting its economic security held hostage by the vagaries of the market and the entrenched Western giants if it doesn’t make a concerted all-out effort to gain direct access to strategic natural resources. The policy and actions flowing from this strategic assessment in the past decade are easy to see: China has become the world’s most aggressive player in competing for access to natural resources. It has tied its foreign aid program to gaining concessions on exploiting natural resources. Its state-owned companies, supported by access to cheap (if not free) credit from Chinese banks, often outbid foreign competitors in securing contracts and exploration rights. It is willing to take excessive financial and security risks and encourages its companies to venture into areas, such as Sudan, Zimbabwe, and Congo, where their Western rivals don’t dare to tread.

But in executing this strategy, the Chinese have found themselves facing a fundamental dilemma: it’s a rising power with global economic interests, but no global power projection capabilities to protect these interests.

On most occasions, to be sure, China can free-ride on the security provided by the West, especially the United States. For example, with the U.S. Navy patrolling the sea lanes and keeping a close watch on conflict-prone areas, China gains free protection. One of the most illustrative cases is China’s $3 billion investment in an Afghan copper mine, which is protected by the U.S. Army.

Yet, free-riding has its limits. There are areas where conditions are so unstable that even Uncle Sam doesn’t want to risk the lives of its soldiers. Sudan is one such country.

If China insists on going it alone in its quest for resource security, its only option for protecting its sprawling interests is to develop commensurate power projection capabilities. This will be both costly and, more worryingly, cause anxieties among its neighbors and Western countries since it will entail sustained and massive increases in China’s military spending. This option, which will take years, if not decades, to implement, won’t meet the more immediate needs of providing security for Chinese economic interests in dangerous places anyway.

Without its own power projection capabilities, China will have to do one of two things.

First, it can simply do nothing and let itself be literally held hostage by the geopolitical and security risks prevalent in the regions where it has made valuable investments. This is hardly an attractive option because China risks losing its investments and its government, which has been subject to fierce criticisms in the Chinese cyberspace after the kidnapping of Chinese workers in Sudan, will appear weak, incompetent, and helpless.

Second, China can alter its existing go-alone strategy and join the West in ensuring collective resource security. This requires a fundamental change in Beijing’s mindset. (And obviously, similar adjustments are needed in the West as well.) Instead of viewing the quest for resources as a zero-sum game, China will see that its interests are closely linked with those of the West, and that it can make its investments and operations in far-flung regions more secure by pooling its efforts with those of the West.

Such a cooperative strategy will likely yield more benefits than China’s cut-throat competitive strategy. On the financial front, China won’t be wasting money trying to outbid its Western rivals (who will be partners). Its development aid will be more aligned with the goals of seeking conflict resolution and improving governance, rather than with obtaining competitive advantages in securing contracts. By partnering with the West in making resource-rich developing countries more stable, China will in fact reduce the risks of its investments and economic interests there. Even in crises such as the ongoing hostage drama in Sudan, a China in close cooperation with the West may seek direct assistance from its partners that have the requisite military capabilities in these areas. So for China, shifting its current strategy will be truly win-win.

To a Chinese leadership steeped in realpolitik and paranoia about the West, this proposal may sound naïve. But the alternatives are far worse. If Beijing stays on its present course of seeking resource security at any cost, it will run into crises far worse than the one they have just encountered in southern Sudan.....

What Canada's ills tell us about Iranian smugglers...

By Steve LeVine

The history of sanctions and smuggling suggests that China and India will be big winners from oil sanctions slapped on Iran -- among just a few remaining large buyers of Iranian crude, they will enjoy immense bargaining leverage with Tehran, and pay far lower than the global crude oil price. But how much will that discount be?

If a crisis faced by Canada is any clue, Iran's crude oil revenues -- $73 billion in 2010, accounting for most of the state budget -- are going to plunge: In Canada's case, a transportation bottleneck into the United States is forcing local producers to sell their crude at a 33 percent discount, the lowest price in some four years, write the Financial Times' Gregory Meyer and Ed Crooks. Specifically, we are talking a price of about $67 a barrel, compared with nearly $100 a barrel for the U.S. traded blend, called West Texas Intermediate.

(Before you round up a bunch of friends with pickup trucks and head for Hardisty, you'd need to buy a considerable number of barrels to profit from this anomaly. But one would expect deep-pocketed entrepreneurs to be figuring out how to add tanker cars to the rail line.)

Sanctions and bottlenecks are different animals -- the first can result in a seller's inability to legally market his product most places in the world; the second is a purely technical hindrance. Yet in action, they can behave similarly, and -- in the absence of hard data (at least that I have seen) on how much of a discount China, India, middlemen and smugglers are squeezing from Tehran (pictured above, Iranian President Mahmoud Ahmadinejad) -- Canada's suffering is instructive.

Last month, the Obama Administration rejected expansion of the Keystone Pipeline, which would have carried an additional 800,000 barrels a day of crude from Canada's oil sands to Houston. But, while that decision (likely to be reversed after the U.S. presidential election, regardless who wins) contributes to an atmosphere of uncertainty -- the nourishment of oil speculators -- it is not the specific reason for the bottleneck: Even if the expansion had been approved, it would not come on line for at least another year.

Instead, the trouble is that there is already a glut of supply, and too few ways to get it to refineries. What you have is a combination of booming Canadian oil production -- up by about 10 percent over the last year -- that is bumping up against rising North Dakota crude. In all, western Canada and North Dakota are producing some 2.5 million barrels of oil a day, a volume that continues to grow.

For some months, experts have suggested that conventional land transportation -- railroad cars, tanker trucks and alternative pipelines -- would manage to pick up the slack. But they are wrong. Producers do not know what to do with their crude. There is "full storage in Alberta [and] maxed-out truck and barge," Deutsche Bank oil analyst Paul Sankey told clients in a note yesterday.

If you look at prices, the transportation trouble actually goes back to the beginning of December, when the Canadian blend went from selling at an $11-a-barrel discount to West Texas Intermediate to an approximately $37 discount this week.

The bottleneck has attacked not only the select Canadian crude, but caused a chain reaction and forced down the price even of West Texas Intermediate. Residential and industrial consumers will not weep. Neither will China and India. But Iranian leaders might.

China-Canada boost ties...
By Robert M Cutler

MONTREAL - Canadian Prime Minister Stephen Harper in Beijing this week signed with Chinese Premier Wen Jiabao a declaration of intent for a Foreign Investment Promotion and Protection Agreement (FIPA), after 18 years of negotiations between the two countries. Separately, a US$1 billion fund will facilitate Chinese investment in Canadian resource companies.

Under FIPA's terms, Canadian mining companies would acquire legally binding rights and obligations in China, while Chinese investment in Canadian industries such as coal, iron ore, and potash would be likewise facilitated. The agreement, one of several reached this week, will enter into force following legal
review and ratification by the respective governments.

Chinese state-owned enterprises invested US$5 billion in Canada's resource sector in 2011 alone, nearly one-third of the nearly $18 billion they are reported to have spent buying oil and gas companies worldwide last year.

The Canadian side is hopeful that the FIPA with China will promote a better equilibrium in the balance of trade, as China has become Canada's second-most important trading partner after the US. In 2010, Canada's trade deficit with China was US$29.7 billion out of a total trade turnover (imports plus exports) of $54.7 billion.

The FIPA is not a full free-trade agreement - Canada has FIPAs in force with two dozen countries and is negotiating with nearly a dozen others - but the two sides this week made diplomatic noises about their interest in exploring the feasibility of one. Given the nearly two decades required to negotiate the FIPA, one should not anticipate a free-trade agreement anytime soon.

The FIPA is intended to give Canadian companies more protection against discriminatory and arbitrary practices and stabilize, or at least make predictable, their business environment in China. In practice, it is hoped that it will facilitate the implantation into China's economy of small- and medium-sized Canadian businesses that cannot afford to take big risks. The FIPA will not supersede Canada's existing foreign investment regime, so acquisitions and investments by Chinese firms in Canada will still be subject to review by Ottawa.

China at present accounts for 6% of Canada's world trade, and although Canada is even a smaller fraction of China's, the doubling of the level of bilateral trade in just two years has vaulted Canada into the list of China's top 10 trading partners.

Harper with his visit to China aims to diminish Canada's dependence on trade with the United States and follows President Barack Obama's decision not to build the TransCanada Keystone XL pipeline, which would have carried petroleum from Canadian oil sands in Alberta province to existing refining facilities on the US coast of the Gulf of Mexico.

Canada's oil sands are the third-largest crude deposit in the world, estimated at 170 billion barrels. The US State Department blocked approval of the pipeline on the pretext of insufficient time for environmental review. Observers of American politics attribute the decision to Obama's need to shore up support among left-of-center members of the US electorate, with a view towards the presidential elections in November this year. He has come under criticism for rejecting a jobs-producing project and forcing America's most faithful and dependable trading partner to seek other markets.

Canada is considering building the "Gateway" pipeline to carry crude from Albert to the Pacific coast in British Columbia, whence tankers could take the oil to China. The consultation and decision process will still take years, and the Keystone decision could be reversed should a Republican become president next year. Nevertheless, Harper has declared that "Canada's national interests" require the country to diversify its foreign trade, regardless of the ultimate fate of Keystone.

The Keystone decision is not at the origin of Canada's search for trade diversification but may accelerate this. As recently as 2000, trade with the US represented 85% of Canada's total international commerce. At the beginning of the present decade, that figure had fallen to slightly under 75% and it is projected to decline to roughly 67% by the end of the decade.

This evolution reflects, more than anything else, the creation of large middle classes in China itself and in numerous formerly "underdeveloped" countries across the world. International demand for Canada's raw materials, including industrial and precious metals, has increased as the now more affluent members of those population strata build houses, buy jewelry, and generally approach consumption profiles once, and not even two generations ago, achievable only in the industrially developed West and the Cold War-era 24 members of the Organization for Economic Cooperation and Development (OECD).

The FIPA declaration of intent was not the only document signed in Beijing between the two sides in the course of Harper's still ongoing five-day visit. Others covered the aviation, agriculture, energy, finance, telecommunications and science and technology sectors. A bilateral tax treaty dealing with double taxation was also agreed.

These general diplomatic and political agreements do not include a large number of particular cooperation agreements signed with specific Chinese firms by the over three dozen Canadian industry leaders who accompanied Harper to Beijing.

Notable among these is memorandum of understanding (MoU) between the large Canadian investment bank Canaccord and the Import-Export Bank of China to create a "Canada-China Natural Resource Fund" in order to facilitate Chinese investment in Canadian resource companies. The MoU calls for the fund to be capitalized to the tune of $1 billion in the first instance.

ZOG of USA says: Energy independence within reach....

2012-02-08T08:11:00.000-08:00

ZOG of USA says: Energy independence within reach With natural gas and oil output soaring, 2-decade-long decline is reversing....LOL [ That's in contradiction with what the 'Energy intelligence unit' says...]

By Rich Miller, Asjylyn Loder and Jim Polson

The United States is the closest it has been in almost 20 years to achieving energy self-sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo triggered a recession and led to lines at gasoline stations.

Domestic oil output is the highest in eight years. The U.S. is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal. Methanex Corp., the world's biggest methanol maker, said it will dismantle a factory in Chile and reassemble it in Louisiana to take advantage of low natural gas prices. And higher mileage standards and federally mandated ethanol use, along with slow economic growth, have curbed demand.

The result: The U.S. has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81 percent through the first 10 months of 2011, according to data compiled by Bloomberg from the Department of Energy. That would be the highest level since 1992.

“For 40 years, only politicians and the occasional author in Popular Mechanics magazine talked about achieving energy independence,” said Adam Sieminski, who has been nominated by President Barack Obama to head the U.S. Energy Information Administration. “Now it doesn't seem such an outlandish idea.”

Broad implications

The transformation, which could see the country become the world's top energy producer by 2020, has implications for the economy and national security — boosting household incomes, jobs and government revenue; cutting the trade deficit; enhancing manufacturers' competitiveness; and allowing greater flexibility in dealing with unrest in the Middle East.

U.S. energy self-sufficiency has been steadily rising since 2005, when it hit a low of 70 percent, the data compiled by Bloomberg show. Domestic crude oil production rose 3.6 percent last year to an average 5.7 million barrels a day, the highest since 2003, according to the Energy Department. Natural gas output climbed to 22.4 trillion cubic feet in 2010 from 20.2 trillion in 2007, when the Federal Energy Regulatory Commission warned of the need for more imports. Prices have fallen more than 80 percent since 2008.

At the same time, the efficiency of the average U.S. passenger vehicle has helped limit demand. It increased to 29.6 miles per gallon in 2011 from 19.9 mpg in 1978, according to the National Highway Traffic Safety Administration.

The last time the U.S. achieved energy independence was in 1952. While it still imported some petroleum, the country's exports, including of coal, more than offset its imports.

Environmental concerns

The expansion in oil and natural gas production isn't without a downside. Environmentalists say hydraulic fracturing, or fracking — in which a mixture of water, sand and chemicals is shot underground to blast apart rock and free fossil fuels — is tainting drinking water.

The drop in natural gas prices is also making the use of alternative energy sources such as solar, wind and nuclear power less attractive, threatening to link the U.S.'s future even more to hydrocarbons to run the world's largest economy.

Still, those concerns probably won't be enough to outweigh the benefits of greater energy independence.

Impact on trade deficits and national security

Stepped-up oil output and restrained consumption will lessen demand for imports, cutting the nation's trade deficit and buttressing the dollar, said Sieminski, who is currently chief energy economist at Deutsche Bank in Washington.

With the price of a barrel of oil at about $100, a drop of 4 million barrels a day in oil imports — which he said could happen by 2020, if not before — would shave $145 billion off the deficit. Through the first 11 months of last year, the trade gap was $513 billion, according to the Commerce Department. Crude for March delivery settled at $96.91 a barrel yesterday on the New York Mercantile Exchange.

The impact on national security also could be significant as the U.S. relies less on oil from the Mideast. Persian Gulf countries accounted for 15 percent of U.S. imports of crude oil and petroleum products in 2010, down from 23 percent in 1999.

“The past image of the United States as helplessly dependent on imported oil and gas from politically unstable and unfriendly regions of the world no longer holds,” former Central Intelligence Agency Director John Deutch told an energy conference last month.

That dependence was underscored in October 1973, when Arab oil producers declared an embargo in retaliation for U.S. help for Israel in the Yom Kippur war. The U.S. economy contracted at an annualized 3.5 percent rate in the first quarter of the next year. Stock prices plunged, with the Standard & Poor's 500 Index dropping more than 40 percent in the year following the embargo.

Car owners were forced to line up at gasoline stations to buy fuel. President Richard Nixon announced in December that because of the energy crisis the lights on the national Christmas tree wouldn't be turned on.

A ‘new normal'

Today, signs of what former North Dakota senator Byron Dorgan says could be a “new normal” in energy are proliferating. The U.S. likely became a net exporter of refined oil products last year for the first time since 1949. And it will probably become a net exporter of natural gas early in the next decade, said Howard Gruenspecht, the acting administrator of the EIA, the statistical arm of the Energy Department.

Cheniere Energy Partners may receive a construction and operating permit as early this month from the Federal Energy Regulatory Commission for the first new plant capable of exporting natural gas by ship to be built since 1969 in the U.S. Houston-based Cheniere said it expects the $6 billion plant to export as much as 2.6 billion cubic feet of gas per day.

The growth in oil and gas output means the U.S. will overtake Russia as the world's largest energy producer in the next eight years, said Jamie Webster, senior manager for the markets and country strategy group at PFC Energy, a Washington-based consultant.

While U.S. consumers would still be susceptible to surges in global oil prices, “we'd end up sending some of that cash to North Dakota” rather than to Saudi Arabia, said Richard Schmalensee, a professor of economics and management at the Massachusetts Institute of Technology in Cambridge....

Pakistan defiant on Iran gas pipeline....India pivots, and pivots again...

2012-02-08T05:38:00.001-08:00

Pakistan defiant on Iran gas pipeline....India pivots, and pivots again...LOL
By Syed Fazl-e-Haider

KARACHI - Pakistan on Tuesday gave an unequivocal assurance to Iran for early implementation of the US$7.6 billion Iran-Pakistan (IP) gas pipeline, a week after the toughest warning issued yet by the United States to Islamabad to shelve the project.

Islamabad and Tehran vowed to intensify work on the IP project during a meeting of the Pakistan-Iran bilateral talks, which began in Islamabad this week, led by visiting Iranian International Affairs

Vice President Ali Saeedlou and Pakistan's Finance Minister Hafeez Sheikh.

President Asif Ali Zardari gave an assurance on Tuesday that his country was committed to the early implementation of the project to meet the country's ever growing energy needs during his meeting with the Ali Saeedlou. Washington, which has intensified its efforts for increased economic sanctions against Iran, has serious reservations over the IP project.

Last week, a senior US diplomat reportedly warned Islamabad that any attempt to go ahead with the gas pipeline would be considered as "furthering Iran's nuclear program". The US has also offered to Pakistan alternative sources of energy in the form of imports of liquefied natural gas (LNG) at cheaper rates from Turkmenistan.

During his meeting with Ali Saeedlou, Sheikh assured him of the country's commitment to implementation of multi-billion-dollar gas and electricity import projects.

"Pakistan is fully committed to importing electricity and gas from Iran, and we are working on a fast-track basis to finalize these deals at the earliest," Dawn reported Hafeez Sheikh as saying.

The two sides also discussed ways to enhance banking cooperation and strike a currency swap arrangement to promote bilateral trade. Under the IP deal, the two countries signed in June 2010, Iran will export 21.5 million cubic meters per day of natural gas to Pakistan by the end of 2014.

The IP pipeline has reportedly reached Iran's border, while Pakistan has completed the survey for construction of pipeline on its side.

Last month, US President Barrack Obama signed a US defense funding bill that includes new sanctions on financial institutions dealing with Iran's central bank. The law is expected to have repercussions for Pakistan's plans to import gas from Iran and could make it difficult for the country to implement the IP pipeline project.

"Pakistan will be in for serious trouble if it does not abandon the project," The Express Tribune reported an American diplomat as saying. "Any country, any bank or any financial institution which tries to work with Iran will certainly be slapped with sanctions."

The US is dangling energy-deficient Pakistan both stick and carrot in a move to persuade it to abandon the IP gas pipeline. Washington has offered the country to provide gas at a rate approximately one-third of the price Iranian gas would cost to the country.

American energy companies have increased their gas supply in recent years, causing natural gas prices to fall 5.7% on January 12 to their lowest level in over two years. Iranian gas will cost $12 per million British thermal units (mmbtu) while LNG would cost $18 per mmbtu. The US could help Pakistan buy LNG at $4.5 per mmbtu.

The IP project is seen as an energy lifeline in Pakistan , which at present suffers chronic gas shortages affecting its industry and daily life. Petroleum Minister Asim Hussain has warned that the whole energy system of the country could collapse as the demand and supply gap of gas has reached 2.2 billion cubic feet (bcf). The gas in the system is 3.8 bcf while the demand has shot up to 6 bcf.

The IP project would help generate around 5,000 megawatts of electricity, which is equivalent to present peak shortage of power in the country. Local analysts believe that a land-based pipeline would be one quarter the cost than any other option, while the country could also earn about $200 million to $500 million annually in transit fees if the gas is exported to India or another third country.

Pakistan has settled all issues relating to IP gas pipeline project with the Iranian authorities, including a gas sale and purchase agreement (GSPA) and third-party certification for uninterrupted supply of gas from the source field to Pakistan for 30 years.

Under the IP pipeline construction plan, a 42-inch diameter pipeline would be installed to connect Balochistan, Sindh and Punjab through Khuzdar to Karachi, while the main pipeline would continue toward Multan in Punjab with a joint venture of major gas distributors Sui Northern Gas Pipeline Ltd and Sui Southern Gas Co.

Last month, US Stated Department spokesperson Victoria Nuland expressed concern over the IP project and said the law President Obama signed "forbids dealing with central Iranian banks".

"We've made absolutely clear over many months now our concern about this deal [the IP agreement] and we will continue to talk to Pakistan about it. Were it to go forward, how it might be impacted - again, this is the kind of conversation that we have to have with Pakistan and that we're starting to have now," Dawn reported Nuland as saying.

Islamabad however renewed its commitment to go with the IP project believing that US sanctions would not affect the project.

The pipeline was originally planned to extend from Pakistan to India in 1993. Pakistan has also been taking up the proposal of involving its closest ally, China, in the IP venture in a bid to deepen ties with Beijing as an alternative to increasingly fragile relations with the United States.

Financing and security of the pipeline are the two major issues confronting Pakistan for implementation of the IP project. The country plans to finalize an engineering and procurement deal for the construction of the IP gas pipeline project with China, which may also provide financing. In 2010, a visiting Pakistani delegation, led by Federal Water and Power Minister Naveed Qamar visited Beijing to seek investment, offering the contract for the IP gas pipeline to China.

Finance Minister Sheikh last month gave approval to the appointment of an Industrial and Commercial Bank of China (ICBC) led-consortium as financial advisor for the IP project.

After India's withdrawal from IP project in 2009, Beijing showed interest in building an Iran-Pakistan-China (IPC) pipeline.

Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a development analyst in Pakistan.

India pivots, and pivots again...
By Vijay Prashad

India faces a grave dilemma. It is the fourth-largest consumer of imported oil, and as a growing economy wedded to the carbon civilization, it needs to burn vast amounts of oil to maintain its growth rate.

The oil comes from a variety of sources, but mainly from the Gulf. The top five exporters of crude oil to India in 2011 in order of quantity were Saudi Arabia, Iran, Iraq, Nigeria and the United Arab Emirates. About 10% of India's imports of oil come from Iran.

Contradictory political pressures have put India's government in a serious bind.

As Subordinate ally to the Zioconned United States....
In the early 2000s, the United States wished to sequester India's respectable position within the Global South for its own parochial interests regarding Iran.

Knowing full well that it is energy dependent, India had begun to consider methods of bringing natural gas in from Iran's South Pars fields into Gujarat. Natural gas would be a sensible substitute for crude oil. There were two methods to draw the gas into the country. The first was to convert it into liquefied natural gas (LNG) and ship it to India. But this is an expensive proposition. The second was to run a pipeline from southern Iran through Pakistan into India. This Peace Pipeline would not only be a major boost for India's energy needs, but it would help create a material incentive for peace initiatives in South Asia.

To break the India-Iran ties, the George W Bush administration offered India a simple deal. It would remove sanctions against India that had come into place after India's nuclear tests of 1998. Unable to import certain technologies, India was eager to have these sanctions mitigated or withdrawn.

In exchange, the US would provide India with access to nuclear material from the Nuclear Suppliers Group, and so effectively recognize India as a nuclear power. This was despite the fact that the Indian government's own studies showed that nuclear power at best would only provide for 5% of India's energy needs and so not be a substitute for oil or natural gas.

In return, India would have to vote with the US against Iran in the International Atomic Energy Agency (IAEA).

India's bourgeois political parties went for the deal. In September 2005, India voted to find Iran in "non-compliance" with the safeguard obligations of the nuclear Non-Proliferation Treaty (NPT). What is remarkable here is that India is not a signatory to the NPT, yet it was able to judge Iran's actions based on it. This vote paved the way to move the Iranian case to the UN Security Council.

India voted in the IAEA once more in February 2006 to send the Iranian case to the Security Council. In December 2006, the US Congress ratified the US-India Peaceful Atomic Energy Cooperation Act. Its "Statement of Policy" noted pointedly that India was "to dissuade, isolate, and if necessary, sanction and contain Iran for its efforts to acquire weapons of mass destruction, including a nuclear weapons capability and the capability to enrich uranium or reprocess nuclear fuel and to the means to deliver weapons of mass destruction."

India yoked itself to the US agenda vis-a-vis Iran.

As partner with the Arab NATO and its silent ally...

India is the second-largest trading partner of the Gulf Cooperation Council (GCC) countries. The GCC, the "Arab NATO", was formed in 1981 as a shield against Iran. It has a long antipathy to Iranian assertion in the region, and considers Iran to be its principle adversary (rather than Israel, for instance). Saudi Arabia is the primus inter pares of the GCC. It is the largest seller of crude oil to India (the GCC countries supply India with 45% of its crude oil needs). In 2006, the Indian and the Saudis signed a major deal. [1] While in India, King Abdullah and Indian Prime Minister Manmohan Singh urged Tehran to "remove regional and international doubts about its nuclear weapons program."

The silent ally of the Arab NATO is Israel. Regardless of its open declarations of support for the Palestinians, the GCC is reluctant to do anything to ruffle the feathers of Tel Aviv, which would of course irritate the GCC's main partner, the United States. This opened the door for a strengthening of the India-Israel ties that germinated up in the 1990s and have flourished in the past few years. India now imports over US$5 billion of Israeli arms, making India its largest arms customer. [2]

As leading figure in the BRICS formation
Since 2003, India has been a central player in the creation of a new international formation of the "locomotives of the South": first as India-Brazil-South Africa (IBSA, 2003) and then as Brazil-Russia-India-China-South Africa (BRICS, 2009). The BRICS bloc is a serious challenge to Atlantic hegemony, mainly on the economic plane but increasingly in the political domain as well. On Libya, the BRICS countries articulated a common platform but their challenge fell apart at UN Resolution 1973 (when South Africa voted for the resolution on the urging of President Obama). On Syria, Russia and China exercised their Security Council veto while the others voted for the resolution. Political unity is not yet on the cards. This is a major limitation of the BRICS platform.

On Iran, the BRICS are more cautious. There is no appetite for war, or even for a limited military strike. There is even less appreciation for the sanctions regime set up by the Atlantic powers. These economic sanctions do not run through the UN, which means they are not legally binding. The US has been trying to force those who trade with Iran to stop doing so on pain of being sanctioned by the US in turn. It is hard for the US to muscle the Chinese, who have the upper hand as far as economic transactions are concerned. US Treasury Secretary Timothy Geithner rushed off in mid-January to Beijing and Tokyo, eager to get these East Asian states to honor the punitive US sanctions regime. China is plainly not interested. It supports the UN resolutions against Iran, but refuses to adhere to the much more rigorous European and US sanctions regime. China buys a fifth of Iran's oil. It cannot afford to isolate the country. Nor can India and Japan. For them, their energy needs trump the parochial political imperatives of the Atlantic powers and the GCC.

When the US and the EU announced their new sanctions regime, the BRICS states took umbrage. The Chinese have already increased their purchases of African oil. India and China considered paying for the Iranian oil via gold rather than dollars. The Indians buy their oil via the Turkish bank, Halkbank, whose manager, Suleyman Aslan, pledged to continue its work with its customers. After hasty negotiations, the Indians and the Iranians agreed on February 7 to trade oil for a payment mechanism that includes Indian rupees (for 45% of the crude) and other methods for the remainder. Iran's banks will open accounts in India to settle payments. This might be a way around the US sanctions that now target Iran's central bank. India's Finance Minister Pranab Mukherjee was uncharacteristically bold in late January, "We will not decrease imports from Iran. Iran is an important country for India despite US and European sanctions on Iran."

India is in a political bind. Its ruling class favors a close assignation with the United States, but this is not a practical alliance. The US demands far too much, including the subordination of India's own interests to the US agenda. Close relations with China are imperative, as is the creation of a healthy foundation of communication in South Asia with Pakistan and Iran to build trust not only for these countries but also for Afghanistan, which is too often at the mercy of Indian, Iranian and Pakistani games.

Currently, the economic needs of China and India will trump any attempt to fully strangle Iran's economy. The attack on the rial has already had catastrophic effects for inflation inside Iran. But if oil exports cease, it will bring Iran's economy to a stop. India is not acting here out of the principles of non-alignment or for the creation of a South-led alternative to the Atlantic bloc. Nonetheless, India's objective interest is a sufficient spur to timidly cross swords with the parochial interests of the Atlantic powers, who seem to want to gallop to war with Iran.

Pressure on India is on, and so are the inducements to substitute Iranian oil with oil from Iraq and Libya. India's ambassador to the United States, Nirupama Rao, has been suggesting that Iranian exports to India have decreased over the past two years. This would mean that India might be open to a new entente, not to depart from the nuclear shadows this time but to be liberated by the United States from its oil dependence on Iran. This is not propitious for the consolidation of a BRICS bloc.

Notes:
1. It's Love! India and Saudi Arabia Embrace, Counterpunch, March 1, 2010.
2. India's Reckless Road to Washington, Counterpunch, Dec 23, 2008.

Vijay Prashad is Professor and Director of International Studies at Trinity College, Hartford, United States.

Angela Merkel got extra special red-carpet treatment in China....

2012-02-08T05:33:00.001-08:00

Angela Merkel got extra special red-carpet treatment in China....

By Francesco Sisci

BEIJING - If a political Europe is ever to be born, its conception will have been in Beijing last week, during the visit of German Chancellor Angela Merkel. Within a period of about nine months, the gestational period for humans, we shall know if this new polity will be really born or we shall witness a miscarriage or an abortion.

In the Chinese capital, Merkel, in fact, spoke as the head of a European government, not simply as the leader of one EU member state; and indeed China, long fond of the political European Union, treated her as such.

China was interested in how the euro and Europe, perhaps politically united, might be saved. Merkel satisfied these concerns, pledging that the euro will not collapse. She thus implicitly admitted that Germany would step in to avoid gruesome disasters, which could ensue if major economies, like Italy, defaulted on their debts. This possibility is far from remote as some 300 billion euros (US$393 billion) of Italian bonds will be auctioned this year.

The pledge was required by Beijing to guarantee that China will not run away from the European bonds it already holds. In any case, not all Europe is the same. In the whole basket of European bonds, the German ones will be the favorites. This is also for a very practical reason: Germany alone makes up about half the European balance of trade with China.

This fact was reinforced also by German attitude in China. All EU countries speak for themselves and for the EU as a whole in China. Yet naturally Germany, the largest and most important economy in the union, is taken more seriously when doing so. This Chinese perception of Germany's strength in Europe and its interest in Beijing is further reinforced by the fact that the present ambassador of the European Commission in China is German, and he was strongly supported by Merkel.

But if Germany is Europe in China, it must be Europe also at home and in the world. The political union around Germany should be only a matter of time and details. Here, in the details, we know lodges and thrives the devil.

Despite the overall commitment, the present uncertainties in Europe prompt caution in China, where there is no rush to sell US bonds and buy European ones. In fact, notwithstanding its US$3.2 trillion of reserves, China knows it cannot attempt to save Europe. The Old Continent must save itself with a clear commitment and effective action from Europe itself.

Until here, Germany and China appear to have an entente cordiale almost made in heaven. From this point onward, however, the Chinese and European roads diverge.

The Chinese would like to see a major and quicker German effort in Europe, scared that any delay could increase the likelihood of accidents. Berlin has conversely so far preferred to push "delinquent" EU members with brinkmanship, threatening to let them go bust unless they move to reform their failing economies, and thus flaunting the anger of the average thrifty German taxpayers against the profligate southern European brethren like Greece, Portugal, Ireland, Spain and Italy (the infamous PIIGS). That is, Berlin has so far stated its confidence in managing the pace of reforms in Europe without fearing accidents. The problem is: how can one be so sure?

If this is the German stand, China is reluctant to stick too many of its reserves for Europe, even for virtuous Germany. How can China trust countries bundled in Europe, say some of the PIIGS, that Germany, the EU leader, claims to mistrust?

Therefore Chinese do not rule out International Monetary Fund intervention in the eurozone to build a firewall to protect the euro against market speculation. But this firewall should be for the 80-90% made up of European funds.

The statement by Chinese Premier Wen Jiabao last week, at the joint press conference with Merkel, was clear in this sense: "China is considering [ie has not decided on] increasing its stake in resolving the debt crisis through the channels of the European Stability Fund and the ESM", referring to the European Stability Mechanism, due to come into force in July.

According to Chinese economists - who are apparently in agreement with the Americans - the firewall of the euro should be around 1 trillion euros (US$1.3 trillion), about twice what is available today, to create the stability fund. This means that Germany should first increase its commitment in this regard.

In any case, even the Chinese consideration was already a concrete result for Merkel and the euro. After the vague statements indicating China's willingness to back up the euro, the European currency regained value against the dollar and the yen while the interest spread between some major European bonds dropped.

In this case, Merkel's journey to Beijing managed to buy time for eurozone countries to fix their balance sheets, lowered the pressure of rising spreads, and pushed Germany to come out in the open about its intentions to save Europe.

The German commitment in Europe, in any case, is not total or unconditional. There is still the possibility that some countries might exit the euro. So for China, partnering with Germany in Europe is the least risky bet.

In China, there is also great admiration for Germany. Berlin, according to many Chinese, proved its mettle when it was the first of the major developed countries to get out of the 2008 economic crisis.

These elements, then, drive Chinese interest in direct investment in Germany, home to technologies important for the future development of China. For example, its new fast railways are being built with German magnetic levitation technology. This attention is underscored by the fact that Wen in April, in just two months, will go to Germany for the Hannover industrial fair.

This success in China in turn could be a vote of confidence but also a burden for the yet-to-be-born political Europe. Germany is certainly the leader of the future political Europe but it can't be the entire Europe, Germany can't ignore this, as other European countries can't ignore the special role of Germany in China, the second-largest economy in the world.

Therefore the decisions on Europe can't just rest on the shoulders of wise Germany, and Germany should also consider some of the concerns of its profligate brethren, who with their debts helped to boost German coffers. Then they all should decide quickly what kind of Europe they want, otherwise a miscarriage will be almost certain or a deformed child will be born, a disaster for Europe and the Zioconned world....

Chinese Deflation and Currency Depreciation Coming Soon....?

2012-02-08T04:20:00.000-08:00

Chinese Deflation and Currency Depreciation Coming Soon....??? LOL

Gordon G. Chang, Contributor

On Friday, an economist with the State Council’s Development Research Center issued a warning that consumer prices could fall in the second half of this year. “China has corrected its excessive monetary policy tightening in the last quarter of 2011, but the speed and effort of turning-around are not sufficient,” wrote Wu Qing in a government newspaper, China Economic Times. “A typical deflation will emerge,” Wu predicted, if the central government does not take decisive action. The last month that China saw a year-on-year decline in consumer prices was October 2009.

This week, Beijing’s National Bureau of Statistics will issue the Consumer Price Index for January, and analysts expect another fall in the rate of inflation. In December, consumer prices, as measured by the index, rose 4.1% over the same month in 2010. That number was down from November’s 4.2% year-on-year figure. Inflation peaked in July at 6.5%.

The official inflation numbers undoubtedly mask the full extent of price increases, but they correctly show the trend. And should China actually fall into deflation later this year, as Wu suggests, that would be just another indication of a general falloff in economic activity.

And so would a decline in the value of the Chinese currency. Wu Qing also predicted that, unless the People’s Bank of China intervenes, the renminbi will depreciate this year. This seemingly startling forecast reflects behind-the-scenes mutterings in the Chinese capital about unwelcome declines in export surpluses due in large part to falling orders from Europe.

Whether because of market forces, as Wu suggests, or by official action, the Chinese currency is on a downward path. And a cheapening currency is another sign of a weakening economy.

Why do analysts question Beijing’s announcement of 8.9% GDP growth in Q4 2011? Because China’s other numbers suggest the economy is in fact faltering. It is, for instance, virtually impossible to reconcile the most recent government growth projection for this year—8.5%, from PBOC adviser Li Daokui—with Wu’s warnings of currency depreciation and second-half deflation. When we look at Beijing’s statistics for vehicles sales, property prices, or electricity consumption, we get the picture of an economy in trouble, growing at perhaps the same anemic rate as America’s.

What should Beijing do? Wu’s colleague at the prestigious Development Research Center, Zhang Chenghui, also suggested that the government loosen credit, writing that there is already “a shortage of money.” Yet Premier Wen Jiabao, China’s top economic official, still believes that the government must act to rein in the economy. Until he abandons his “fine tuning” policies by opening the money taps wide, China will continue to skid. So far, the most Mr. Wen has done is mandate one decrease in the bank reserve ratio requirement.

Despite mildly pessimistic forecasts for the current quarter, many analysts don’t worry about the downturn, arguing that it was what policymakers wanted all along. They’re probably wrong, because growth-obsessed central officials acted two years ago to stop property prices from rising further, not trigger declines. In any event, even those who trust the skills of the Beijing’s fabled economic planners must admit that the onset of deflation and a depreciation of the renminbi would indicate that events were passing beyond their control.

We are, as Wu Qing’s comments tell us, almost at that stage.

Enough Oil and Gas ?

2012-02-08T04:11:00.001-08:00

Enough Oil and Gas will buy you ALL of DC...?

By Jeffrey Folks

A report for November 2011 indicated that, for the first time in forty years, the U.S. was a net exporter of petroleum products. Liberals seized on this report as evidence that the U.S. needs no acceleration in drilling, no XL pipeline -- indeed, no new exploration or production of any kind.

This was the point of a politicsusa.com piece by Ray Medeiros appearing on January 2. In this piece, the author referred to drilling for energy independence as "the big GOP lie" and noted that America is already exporting oil products. The "ONLY real solution," Medeiros writes, is more government regulation and increased subsidies for green energy.

How mistaken liberals are, especially when it comes to energy independence.

First of all, the export of energy products such as refined fuel, kerosene, and lubricating oils bears no relation to the importation of oil, which still proceeds at 9 million barrels per day. If anything, the two figures operate inversely: the more refined products we export, the more unrefined oil we must import as feedstock for our refineries.

In reality, the U.S. still imports 51% of its oil despite the existence of vast undeveloped reserves to be found offshore and onshore. The fact that America imports 51% of its oil, at huge cost and from unfriendly regimes including Venezuela, is hardly an argument to halt drilling.

Yet that is the argument filling the pages of liberal media like the Huffington Post. America has an abundance of oil, we are told. After all, America is an oil exporter -- an outright falsehood, but one that sounds plausible to casual readers. And in the greatest lie of all, "we need not worry about future energy security. We have enough oil to be exporting it, so we need not look for more."

Not to be left behind by his green supporter, the president immediately seized on the report as grounds for eliminating $4 billion in annual tax adjustments for oil and gas companies -- tax breaks similar to those enjoyed by businesses in other sectors. The logic, apparently, is that oil companies that are able to export their products must be doing well, so $4 billion should be confiscated from them and handed over to solar and wind companies like Solyndra. That is the gist of Obama's suggestion that the "money saved ... be invested in new energy resources."

In point of fact, the International Energy Agency recently issued a warning that global oil supplies will be tight in 2012. Stockpiles are dwindling. Global demand for 2012 is estimated at 90.5 million barrels per day. At the end of 2011, global production was estimated to be 90.2 million bpd. With many of the world's older oil fields depleted, significant new production is needed to avoid a shortfall and price-squeeze.

The most recent economic reports in the U.S. and China, the world's top consumers of petroleum products, only add to the argument for increased oil and gas production. Increased employment in the U.S. will inevitably lead to more energy consumption. In China, where the overall economy has cooled along with the housing market, 2012 GDP is still predicted to expand at more than 8%. And while Europe may experience a mild recession, that slowdown is expected to be brief. Once Europe, China, and the U.S. return to normal levels of growth, demand for oil will increase well above 90 million bpd.

Along with increased demand will come higher prices, and this is where domestic production is so important. The 9 million bpd that America now imports acts like a tax on every American. At $100 per barrel, the cost of importing half our oil amounts to $328.5 billion per year. Imagine the economic effect of circulating that amount of money within our own economy rather than shipping it off to Venezuela, Saudi Arabia, Nigeria, and other suppliers.

One immediate effect of increasing U.S. oil and gas production would be increased employment. If the goal of energy independence were met, millions of new jobs would be produced -- an additional 9.2 million jobs, to be precise, the same number who now work in the energy sector. Not only that, but energy costs would be reduced for all Americans. And with a trade surplus rather than a deficit, America's currency would strengthen, thus lowering the cost of imports and reducing the prospect of inflation. Finally, government revenues from taxes and royalties would double along with production.

If increased production is such a good idea, why are the president and his leftist supporters so strongly opposed to it?

One can conclude only that the Democratic Party has put politics ahead of the nation's well-being. Despite the president's talk of support for increased domestic production, his administration has spent three years banning and stalling new production. So far in 2012, the Obama administration has nixed the Keystone XL pipeline, proposed national regulation of hydraulic fracturing, opposed arctic drilling, and continued its policy of slow permitting in the Gulf of Mexico. That does not sound like support for energy independence.

In fact, just about the only thing that the Interior Department has accomplished this year, other than to say "no" to fossil fuels, has been to order fast-tracking of mid-Atlantic wind farms off the East Coast. And those wind farms, it turns out, may never be built without Solyndra-like loan guarantees and subsidies. No one outside the Obama administration seems to think that mid-Atlantic wind farms are economically viable. If they did, they would be lining up to purchase leases instead of canceling projects, as NRG Energy did recently with the Bluewater Wind project off the Delaware coast.

Yet this president persists in thinking that the U.S. can meet 80% of its energy needs from wind and solar by 2035. Or at least he persists in saying so.

All the evidence points to the fact that America needs to increase its domestic supply of oil and gas, and soon. The left distorts the facts by suggesting that because the nation is exporting refined products, America has plenty of oil. That line is just the latest in a series of specious arguments: "we can't drill our way out of energy dependence" (actually, we can) or "oil companies aren't drilling all the leases they have, so they don't need more" (fact: drilling has a multi-year lead time and a large number of prospects don't pan out, so there will always be undrilled leases at any one time).

Another variation of the anti-drilling the argument is the idea that "more U.S. drilling won't lower gas prices, because the oil price is set on the world market." That argument flies in the face of a hundred years of history, during which the forces of supply and demand have largely set the price of a barrel of oil. The idea that additional production of 9 million bpd -- or even 2 million bpd -- would not lower prices is sheer environmentalist fantasy. If supply and demand did not determine price, the Arab oil embargo of 1973-74 would have had no effect on prices. In fact, the oil price surged from $12 a barrel in 1972 to over $100 a barrel (in today's dollars) before the crisis ended in 1982. It ended because higher prices spurred new exploration and production.

The left always resorts to distortions and outright lies whenever it is unable to win an argument on the merits. In this case, the merits of increased domestic drilling are clear. The United States will continue to rely on oil and gas for much of its energy well into the 21^st century. At present we are producing only 49% of the petroleum we need. Unless we wish to remain dependent on increasingly unreliable sources, we would do well to get behind an aggressive domestic drilling program.

Wall Street in panic mode As Anti-Insider Trading Bill Spreads...

2012-02-07T07:38:00.000-08:00

Wall Street in panic mode As Anti-Insider Trading Bill Spreads Wider Net Over Information Peddling....

Senator Chuck Grassley put an clause back into the Senate's anti-insider trader law that requires analysts who meet with Congressmen and their staffs to register their meetings.

The purpose of this clause is to bring transparency to the information peddling that represents a lucrative trade for hedge funds and banks that trade on insider information from the Congressmen themselves.

There is also large analyst trade in selling political information obtained privately to hedge funds. And rumour has it that quite a bit of that information spreads its way through the halls of the august Wall Street banks as well.

Wall Street apparently went into full court lobbying mode when they found out that Grassley had resubmitted this clause after they had successfully had it removed.

The clause only requires analysts to register their contacts and to disclose how they might be using the information provided by the Congress.

Information is power, and private access to public power is one of the great strengths of the Wall Street monied interests.

This bill might curtail the ability of JP Morgan and Goldman Sachs to obtain private information from the Finance Committees.

I am sure Mr. Obama, the great reformer who promised transparency, is solidly behind this move by the Republican Senator Grassley, right? Hard to tell right now.

Panic on Wall Street.

Bloomberg
Wall Street Sees Analysts Snagged by Political Intelligence Bill
By Phil Mattingly and Robert Schmidt
Feb 7, 2012 12:01 AM ET

A U.S. Senate measure that would place restrictions on people who gather and sell government information to hedge funds may entangle bank research analysts and others on Wall Street, according to lawyers and lobbyists. (The others are the conduits to the trading desks of the TBTF banks - Jesse)

The Securities Industry and Financial Markets Association, which represents firms including Goldman Sachs Group Inc. and JPMorgan Chase & Co., held a rare weekend call for members on Feb. 4 to discuss the measure, according to two people with direct knowledge of the call.

The provision, part of a broader bill that passed the Senate last week and is scheduled to face a House vote this week, may require analysts and others to register with Congress and disclose contacts with government officials, according to a legal analysis prepared for the group’s members.

“There are going to be a lot of entities and organizations who will not want their people anymore to contact government officials to get information which might be used for a number perfectly appropriate purposes,” Robert L. Walker, an attorney for Wiley Rein LLP who is listed as one of the authors of the legal memo, said of the impact of the provision. ('Jump you fuckers' as the Tea Party said before they turned corporate. lol - Jesse)

The broader bill would ban lawmakers, their staffs, and much of the executive branch from trading stocks, commodities or futures based on confidential information they learn on the job. Senator Charles Grassley, an Iowa Republican, succeeded last week in adding the provision that targets trading in so-called “political intelligence.” (There is nothing 'so-called' about it. That is what it is, and it is a form of corruption, albeit lucrative. - Jesse)

Such information may include conversations with lawmakers, congressional staff or other government officials about the future of legislation or regulations that have not been made public. That information has been targeted by lawmakers, who are pushing to identify firms and individuals in the business and force them to disclose their clients....

Nazarbayev is preparing for a strategic partnership with Germany.

2012-02-07T07:36:00.001-08:00

Nazarbayev is preparing for a strategic partnership with Germany....

February 7 to Berlin to visit President Nazarbayev of Kazakhstan. Germany hopes to conclude from this Central Asian country into a strategic partnership, which implies an exchange of raw materials to technology. will be held February 7-8 visit by Kazakh President Nursultan Nazarbayev to Germany, the first since 2009. In addition to meeting with Chancellor Angela Merkel (Angela Merkel), the program host provides performance Nazarbayev at the German Society for Foreign Policy (DGAP) and the Kazakh delegation dinner in East Committee of German Economy. During the visit the parties intend to conclude a large number of agreements, especially in the economic sphere. As acknowledged by the experts, the main document, which is calculated Nazarbayev signed and Merkel – is an agreement on strategic raw materials, industrial and innovative partnership. ”It is a unique agreement, embodying all the ideas of German Ostpolitik,” – said in an interview with Deutsche Welle, Alexander Rahr ( Alexander Rahr), director of the Center named Berthold Beitza German Society for Foreign Policy. A similar agreement is in Berlin with Russia, and now appears to Kazakhstan, he said. ”German companies have access to the resources of Kazakhstan, and Astana – preferences for acquiring new technologies”, – explained the essence of the contract Rar.Meanwhile, details of a future agreement, negotiations for which were, according to the parties, not easy, and lasted over a year, has not yet been disclosed. ”After signing this document, Germany will receive a” green light “for economic expansion in the region, which has long been eyeing in Berlin” – said the editor of German magazine Zenith Alexander von Hahn (Alexander von Hahn). Kazakhstan need another partner, Nazarbayev’s visit is needed to saving maneuver on the international scene, says German expert on Central Asia, Gunter Knabe (Günter Knabe).Kazakh leader set himself the task of rapprochement with Europe as a partner, who can not and does not want to be a threat for Astana. ”At a time when Kazakhstan is sandwiched between China and Russia, and is constantly weakening the U.S. position, Kazakhstan needs another partner,” – said Knabe. ”for Nazarbayev’s visit to Berlin – an opportunity not only to demonstrate its status as one of the main partners of the EU in the region,” – indicates the Alexander von Hahn. ”Kazakhstan needs international prestige. Country wants to see itself as a bridge between Europe, Asia and the Islamic world,” – adds Alexander Rahr of the German Society for Foreign Policy. ”The meeting with Merkel as a continuation of dialogue on the prospects of cooperation with Germany and the EU in a very difficult period of growing uncertainty,” – says von Hahn. Increasing uncertainty uncertainty, he said, there remains both in terms of who will be at the helm of the country after the departure of Nazarbayev and in regard to the rapidly changing geopolitical situation around Kazakhstan. ”I am referring to the growing crisis in Russia, the ongoing civil war in Afghanistan and the economic expansion of China”, – explained the browser. Against the backdrop of the fact that the West’s relations with Iran worsen, and the European Union in the near future is going to give up Iran’s energy resources, both Kazakhstan supplier of oil and gas may obtain additional benefits from their exports, predicts Gunter Knabe. ”Astana may be a winner, although she is not interested in the outbreak of open conflict between the West and Iran,” – said German expert. Nazarbayev, according to Knabe, do not forget that this position has allowed Kazakhstan to Berlin to take a critical position for the Kazakh elite, the chairman of OSCE in 2010. ”His visit to the President of Kazakhstan wishes to express gratitude for the service previously, and for what kind of assistance at the time, Germany had to ethnic Germans from Kazakhstan”, – said Knabe. Human rights activists are also preparing for the visit of the Kazakh president’s visit to prepare and human rights activists. Hugh Williamson of the German branch of Human Rights Watch said the government should raise the Federal Republic of Germany in the negotiations a number of issues of human rights issues and the political situation in Kazakhstan.”There are three most important themes: the last parliamentary elections, the investigation of the tragedy in Zhanaozen, as well as the problems of Kazakhstan’s labor laws,” – said Williamson. Human Rights Watch has plans this week to send the Chancellor of his appeal. According to the defenders of Germany should at least reconsider their plans for closer ties with Kazakhstan, and wonder whether Astana after the bloody events in Zhanaozen continue to be stable and reliable partner. Author: Michael Bushuev Editor: Vladimir Dorokhov Deutshe Welle , February 6, 2012

South Stream Becoming a Reality....

2012-02-07T02:49:00.000-08:00

South Stream Becoming a Reality....

On December 29, 2011, Turkey and Russia signed an agreement to allow the South Stream natural gas pipeline to transit the Black Sea waters in Turkey's economic zone. This was an important development, in that South Stream now has the necessary permissions to bring the Russian pipeline system to Europe via the Southern corridor. Russian Prime Minister Vladimir Putin was so excited by the development that he ordered Gazprom to move up the date to begin construction from 2013 to 2012.
There has been much speculation that the pipeline is a bluff--designed to either stop Nabucco construction or to force Ukraine to bend to Moscow's will. The truth may be more obscure. US Special Envoy for Eurasian Energy Richard Morningstar commented in a recent speech, "The Russians have...taken to building the South Stream Pipeline, although they are the only ones who know why."
The fact is that, regardless of what the original thoughts may have been concerning the pipeline, Russia has made so many commitments concerning this pipeline that it would be almost impossible for them to back out. There are three Western European private companies who are partners in this project. It is extremely doubtful that Germany's Wintershall (a division of BASF), Italy's ENI, and France's EDF would incur start-up expenses in support of a Russian political ruse. Gazprom still controls 50% of the consortium and could unilaterally kill the project, but it would incur the wrath of its other partners.
The same goes for the various governments that have signed on. Bulgaria has hired a company for a feasibility study, Slovenia has created a JV to build and operate their share of the pipeline, Serbia looks forward to being a key transit center, Greece (now to be on a spur instead of the main line) has identified the pipeline as a national priority, etc.
Much has been made that South Stream has not identified where it will get the 63 bcm annually it needs to fill the pipeline. In fact, South Stream never planned to identify new sources of gas, but to use the gas that is presently transiting the Ukrainian pipeline system, according to South Stream CEO Marcel Kramer. European Energy Review published an interview with Kramer on this subject. "The basic and overriding target of Russia is to ensure the technical, managerial and economic reliability of its gas supply. That is where South Stream comes in. Don't forget that the pipeline system in Ukraine is in a poor state. It's being said that it is old, dilapidated, without an integrated management system. To upgrade the entire route through Ukraine would also cost a lost of money. Then you get into questions of ownership, operatorship, who puts up the money, the chances of political interference. The bottom line is, is this an arrangement that the buyers of gas in Europe can rely on? If you put all this together, the answer is clear," he said.
Ukraine, of course, is opposed to the new pipeline. Energy Minister Yuri Boiko called South Stream a threat to Ukrainian national interests. "We will always be against it," he said according to UPI.
Another question has been whether there is sufficient demand for Russian natural gas to justify the building of the pipeline. Andrea Bonzanni, former consultant to the UN and the World Bank, wrote in World Politics Review that the mid- to long-term outlook for gas demand does not seem to justify the construction of both Nabucco and South Stream.
The Russians believe Europe has a long-term need for additional gas, justifying the construction. After a meeting between Gazprom Chairman Alexi Miller and Bulgargaz executive director Dimitar Gogov, UPI reported the participants issued a statement that both sides "share the opinion that given the inevitable gas demand growth in Europe, timely implementation of South Stream would meet the interests of millions of European consumers." Miller has said, "It is clear that there will be need for additional pipeline capacities" that would help mitigate risks that could have a serious impact on the European market, according to Platts. Alexander Medvedev, deputy chair of the Gazprom Management Committee, wrote in Today's Zaman, "The fact that South Stream is primarily an investment in energy security, not in boosting the market share of Russian gas, also means that it does not compete with other pipeline projects that intend to import fresh supply volumes from other possible gas sources. South Stream does not oppose these projects." RIA Novosti quoted Gazprom's Medvedev, "Even if we take into account the Nord Stream, the South Stream, the Nabucco and liquefied natural gas, all the same, the shortage of gas supplies to Europe will be some 530-700 billion cubic feet."
Some within the European Union appear to agree with this analysis. European Energy Commission Gunther Oettinger said "we don't want to block South Stream," and arranged for South Stream executives to make their case to the commission in May. At that meeting, the Russians took the opportunity to make the case that South Stream is a continuation of Russian trans-border pipelines, and third parties should not have access to it. Ths would guarantee a Gazprom monopoly on the project flow. CEO Kramer said requiring the pipeline to open to competitors would affect the project's rate of return, and could make the project more "difficult" to carry out, according to the New York Times. Oettinger, however, remained adamant: "If South Stream...gives access to gas independents active in Russia, then South Stream would deliver on two essential criteria: namely diversification of routes and counterparties. That means a stronger contribution to European diversification efforts," he said in a speech reported by the Wall Street Journal.
Whether the doubters or the believers are correct, however, it appears that the construction of the pipeline will begin within the next twelve months....

Confidence in Nabucco fades....

2012-02-07T02:15:00.000-08:00

Confidence in Nabucco fades....
By Vladimir Socor

Confidence in the viability of the Nabucco gas pipeline project - at least in its version envisaged from 2004 to 2011 - seems to be fading all around. On January 25, the Nabucco consortium's management disclosed that it has submitted "amended" proposals to the Shah Deniz gas producers' consortium in Azerbaijan at the end of December 2011.

The producers' consortium will select one of the five competing pipeline projects for transporting 10 billion cubic meters (bcm) of Shah Deniz Phase Two gas to Europe annually, starting in 2017. Shah Deniz producers are now expected to announce a final investment decision in Phase Two of gas extraction by March, along with the final choice of a transportation solution.

Nabucco's "amended" proposals are not known publicly, but the project's Austrian management has dropped a few hints. It seeks at this late stage to remedy one of Nabucco's built-in weaknesses, namely, the absence of a major gas-producing company among the consortium's partners.

The consortium would also accept the entry of new shareholders that would contribute gas supplies or financing, and it would negotiate about some combination or even merger with one of the rival pipeline projects (rather than pressing for exclusivity as heretofore).

RWE, a German partner in the Nabucco consortium, would prefer a less costly, lower-capacity option for transporting Azerbaijani gas to Europe. This preference is unrelated to RWE's negotiations with Russian Gazprom over joint projects in Germany and elsewhere. Those negotiations have already failed. According to RWE CEO, Juergen Grossmann, the company simply needs to limit its financial exposure and reduce capital expenditures. The Azerbaijan-Turkey project for a Trans-Anatolia Gas Pipeline, announced at Christmas 2011, looks attractive to RWE,

Almost certainly, the unpublished amended proposals go further than that. At a minimum, they acknowledge, if only implicitly, that Nabucco has not lined up the gas volumes and investment funding that would justify the pipeline's design capacity of 31 bcm annually and the construction costs involved (unless and until Turkmen gas becomes available).

In the absence of financial commitments to a 31 bcm pipeline, Nabucco has fallen out of synchronism with the Shah Deniz field development schedule. That schedule necessitates an investment decision and the choice of a bankable transportation solution in early 2012, so as to launch Phase Two of production in this same year and the first commercial gas flow by 2017.

Nabucco's own development trails behind the producers' planned timeframe. Conversely, Nabucco at 31 bcm looks premature, as long as Turkmen gas has not yet crossed the Caspian Sea to the South Caucasus. If and when that happens, Turkmen gas could make possible or indeed necessary a Nabucco Two.

Last year, Nabucco's Austrian management admitted that the pipeline's costs would exceed the initial 8 billion euro (US$10.4 billion) estimate, which dated back to 2005. The management announced in 2011 that it would revise that estimate, but the result is not known. Others are estimating the construction costs in the range of 10 billion to 14 billion euros. These are educated guesses; meanwhile, the absence of publicly available cost updates from the consortium itself tends inevitably to erode confidence.

Vague, unsubstantiated references to future gas supplies to Nabucco from northern Iraq cannot encourage investors either, nor reassure potential gas consumers downstream. References to Iraqi gas fail to cite any dedicated volumes or clear timeframes; imply a feeder pipeline, Iraq-Turkey, at substantial additional cost to the Nabucco project; and seem to overlook daunting political uncertainties and risks in Iraq.

Nabucco representatives' briefings are, however, correct to insist on the project's unique advantages and promises. These include: the Nabucco Intergovernmental Agreement (legally binding treaty among Turkey, Bulgaria, Romania, Hungary, and Austria), the project support agreements (national commitments to the project), right-of-way, licensing and permitting issues, European Union legal and regulatory framework covering the project, are all signed and wrapped up. The FEED (front-end engineering design) process seems fairly advanced after some changes last year.

The European Commission's political backing was also a unique asset to Nabucco, reflecting the latter's strategic value to European energy security. That backing came close to facilitating credits to Nabucco from European lending institutions, had the other conditions fallen into place. The commission's hard work to promote a trans-Caspian pipeline for Turkmen gas could also have enhanced investor and consumer confidence in the Nabucco project.

Those unique advantages notwithstanding, the gas volumes and the funding are not yet lined up for a project on Nabucco's ambitious scale. Those hard-won advantages can be conserved for a reconfigured Nabucco (Nabucco Two) as a follow-on project, in the event that Shah Deniz producers select one of Nabucco's rival pipelines for transporting Azerbaijani gas to Europe. Those rivals are smaller, better attuned to the guaranteed gas volume from Shah Deniz, and thus more bankable, compared with Nabbucco.

Among those five rival pipeline projects, two are backed by the most influential partners in the producers' consortium. These are: Azerbaijan's State Oil Company with the project for a Trans-Anatolia Gas Pipeline (TANAP, from the Georgia-Turkey border to the Turkey-Bulgaria border); and British Petroleum with its concept of a South East Europe Pipeline (SEEP, from Turkey to Hungary, with interconnectors farther afield). Thanks to the participation of these influential producers, TANAP and SEEP seem better placed than Nabucco or the other rival pipeline projects to be selected for the transportation of Shah Deniz Gas to Zioconned Europe....

ILLUSION OF RECOVERY – FEELINGS VERSUS FACTS....

2012-02-07T01:03:00.000-08:00

ILLUSION OF RECOVERY – FEELINGS VERSUS FACTS....

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as the final and total catastrophe of the currency involved.” – Ludwig von Mises

The last week has offered an amusing display of the difference between the cheerleading corporate mainstream media, lying Wall Street shills and the critical thinking analysts like Zero Hedge, Mike Shedlock, Jesse, and John Hussman. What passes for journalism at CNBC and the rest of the mainstream print and TV media is beyond laughable. Their America is all about feelings. Are we confident? Are we bullish? Are we optimistic about the future? America has turned into a giant confidence game. The governing elite spend their time spinning stories about recovery and manipulating public opinion so people will feel good and spend money. Facts are inconvenient to their storyline. The truth is for suckers. They know what is best for us and will tell us what to do and when to do it.

The false storyline last week was the dramatic surge in new jobs. This fantastic news was utilized by the six banks that account for 80% of the stock market trading to propel the NASDAQ to an eleven year high and the Dow Jones to a four year high. The compliant corporate press did their part with blaring headlines of good cheer. The entire sham was designed to make Joe the Plumber pull out one of his 15 credit cards and buy a new 72 inch 3D HDTV for this weekend’s Super Bowl. When you watch a CNBC talking head interviewing a Wall Street shyster realize you have the 1% interviewing the .01% about how great things are.

What you most certainly did not hear from the MSM is that the NASDAQ is still down 42% from its 2000 high of 5,048. None of the brain dead twits on CNBC pointed out the S&P 500 is trading at the exact same level it reached on April 8, 1999. Twelve or thirteen years of zero or negative returns are meaningless when a story needs to be sold. On Friday the hyperbole utilized by the media mouthpieces was off the charts, leading to an all-out brawl between the critical thinking blogosphere and the non-thinking “professionals” spouting the government sanctioned propaganda. Accusations flew back and forth about who was misinterpreting the data. I found it hysterical that anyone would debate the accuracy of BLS (Bureau of Lies & Swindles) data.

The drones at this government propaganda agency relentlessly massage the data until they achieve a happy ending. They use a birth/death model to create jobs out of thin air, later adjusting those phantom jobs away in a press release on a Friday night. They create new categories of Americans to pretend they aren’t really unemployed. They use more models to make adjustments for seasonality. Then they make massive one-time adjustments for the Census. Essentially, you can conclude that anything the BLS reports on a monthly basis is a wild ass guess, massaged to present the most optimistic view of the world. The government preferred unemployment rate of 8.3% is a terrible joke and the MSM dutifully spouts this drivel to a zombie-like public. If the governing elite were to report the truth, the public would realize we are in the midst of a 2nd Great Depression.

The unemployment rate during the Great Depression reached 25%. Without the BLS “adjustments” the real unemployment rate in this country is 23%. Cheerleading and packaging the data in a way to mislead the public does not change the facts:

There are 242 million working age Americans. Only 142 million Americans are working. For the math challenged, such as CNBC analysts, that means 100 million working age Americans (41.5%) are not working. But don’t worry, the BLS says the unemployment rate is only 8.3%. Things are going so swimmingly well in this country the other 33.2% are kicking back enjoying the good life.
The labor force participation rate and employment to population ratio are at 30 year lows. The number of Americans supposedly not in the labor force is at an all-time record of 87.9 million. A corporate MSM pundit like Steve Liesman would explain this away as the Baby Boomers beginning to retire. Great storyline, but the facts prove that old timers are so desperate for cash they have dramatically increased their participation in the labor market.

The data being dished out by the government on a daily basis does not pass the smell test. The working age population since 2000 has grown by 30 million people. The number of people working has grown by only 4.7 million. A critical thinker would conclude the unemployment rate should be dramatically higher than the reported 8.3%. But the government falsely reports the labor force has only increased by 11.8 million in the last eleven years. They have the gall to report that 17.9 million Americans just decided to leave the workforce. The economy was booming in 2000. It sucks today. Don’t more people need jobs when times are tougher? The Boomers retiring storyline has already proven to be false. The fact that 46 million (15% of total population) people are on food stamps is a testament to the BLS lie. A look at history proves how badly the current figures reek to high heaven:

2000 to 2011 – Not in Labor Force increased by 17.9 million.
1990′s – Not in Labor Force increased by 5 million.
1980′s – Not in Labor Force increased by 1.7 million.

The Not in the Labor Force category is utilized to hide how bad the employment situation in this country really is. They conclude that 17 million out of 38 million Americans between the ages of 16 and 24 are not in the labor force. That is complete bullshit. From the time I turned 16, I worked. Everyone I knew worked. I worked through high school and college. It is a lie that 45% of these people don’t want a job. If you dig into their data, you realize the horrific state of employment in this country:

74% of 16 to 19 year olds are not employed
85% of black 16 to 19 year olds are not employed
31% of black 25 to 54 year old men are not employed
40% of 20 to 24 year olds are not employed
22% of 25 to 29 year old males are not employed
22% of 50 to 54 year old males are not employed
According to the BLS, 11% of men between 25 and 54 are not in the labor force

Not only is real unemployment at Depressionary levels, but those that do have jobs are falling further and further behind. Wages have gone up less than 2% in the last year and have been rising at an annual rate below 3% for the last four years. According to our friends at the BLS, inflation has risen 3% in the last year. This is almost as ludicrous as their unemployment rate. Anyone living in the real world, as opposed to the BLS model world, knows that inflation on the things we need to live has been rising in excess of 10%. It is a fact that if you measure CPI exactly as it was measured in 1980, at the outset of our great debt inflation, it exceeds 10% versus the fake 3% reported without question by the MSM to a non-thinking public. A poor schmuck making the median salary of $25,000 who gets a 2% raise thinks he has $500 more to spend when in reality he has lost $2,000 of purchasing power. Federal Reserve created inflation is an insidious hidden tax that destroys the 99%, while enriching the 1%.

Until Debt Do Us Part

“Insanity is doing the same thing, over and over again, but expecting different results.” – Albert Einstein

The recovery storyline being touted by the oligarchy of politicians, bankers and media is designed to make consumers feel better. This is a key part of their master plan. Any honest assessment of the financial disaster that struck in 2008 would conclude it was caused by too much debt peddled to too many people incapable of paying it back, too few banks having too much power, the Federal Reserve keeping interest rates too low for too long, and that same Federal Reserve doing too little regulating of the Too Big To Fail Wall Street mega-banks. I wonder what Albert Einstein would think about the “solutions” rolled out to fix our debt problem. Would he find it insane that total credit market debt has actually risen to an all-time high of $53.8 trillion, up $533 billion from the previous 2008 peak? Our leaders have added $6.1 trillion to our National Debt in the last four years, a mere 66% increase. This unprecedented level of borrowing certainly did not benefit the American people, as real GDP has risen by $96 billion, or 0.7%, over the last four years.

Would Einstein find it insane that the governing elite would encourage the 4 biggest banks, that were the main culprits in creating a worldwide financial collapse, to actually get bigger? The largest banks in the U.S. now control 72% of all the deposits in the country versus 68.5% in 2008. The Too Big To Fail are now Too Bigger To Fail. Rather than liquidating the bad debts, breaking up the insolvent banks, selling off the good assets to well run banks, firing the executives, and wiping out the shareholders & bondholders foolish enough to invest in these badly run casinos, the powers that be chose to protect their fellow .01% brethren and throw the 99% under the bus.

Ben Bernanke, in conjunction with Tim Geithner and his masters on Wall Street, implemented a zero interest rate policy designed to enrich the Wall Street banks, force investors into the stock market, and encourage Americans to borrow and spend like it was 2005 again. Rather than accepting that our economy has been warped for decades, with over-consumption utilizing debt as the driving force, and allowing a reset, the Federal Reserve insanely encouraging banks and consumers to do the same thing again. We do know Bernanke has stolen $450 billion of interest income going to savers and senior citizens and handed it to Jamie Dimon, Vikrim Pandit, Lloyd Blankfein and the rest of the Wall Street cabal. The “austerity is bad” storyline is pounded home on a daily basis by the politicians, corporate chieftains, Wall Street billionaires, and MSM pundits. The definition of austere is “practicing great self-denial”. Did you see the mob scenes on Black Friday? Americans are incapable of any self-denial, let alone great self-denial, and the masters of our country will not allow it to happen. One look at our GDP figures confirms the non-austerity occurring in this country. In 2007, prior to the collapse, consumer spending accounted for 69.7% of GDP. Today, consumer spending accounts for 71% of GDP, with investment accounting for 12.7% of GDP. In the good old days of 1979 prior to the epic debt bubble, when the financial industry do not run this country, consumer spending accounted for 62% of GDP and investment accounted for 19% of GDP. What an insane concept. You spend less than you make and save the difference. You then invest that money where you can get a reasonable return (.15% in a money market account is not exactly reasonable).

As Ludwig von Mises pointed out, a false boom created by credit expansion will ultimately collapse. We had the chance in 2008 – 2009 to voluntarily abandon the Wall Street induced credit expansion and allow our country to reset. The pain and misery would have been great, especially for the 1% who own most of the stocks, bonds and peddle the debt to the ignorant masses. As you can see in the chart below, the powers that be need debt per employed American to grow at an ever increasing rate to maintain their power and wealth. The miniscule reduction in debt from 2009 to 2011 was unacceptable. The governing powers will not be satisfied until von Mises’ final currency catastrophe is achieved.

Bernanke and his Wall Street puppet masters’ plan is actually quite simple. It’s essentially a confidence game. A confidence game (also known as a con, flim flam, gaffle, grift, hustle, scam, scheme, or swindle) is an attempt to defraud a group by gaining their confidence. The people who commit such tricks are often known as con men, con artists, or grifters. The con man often works with one or more accomplices called shills, who help manipulate the mark into accepting the con man’s plan. In a traditional confidence game, the mark is led to believe that he will be able to win money or some other prize by doing some task. The accomplices may pretend to be random strangers who have benefited from successfully performing the task. Bernanke and the 1% are the con men. They are attempting to defraud the 99% by convincing them their “solutions” will benefit them. The shills acting as accomplices are Wall Street bankers, bought off economists, politicians, journalists, and mainstream media pundits. You are the mark. The game has multiple facets but is based on more freely flowing low interest easy debt. The con man has reduced interest rates to zero at the behest of his puppet masters. The Wall Street accomplices offer enticing financing to the marks for big ticket items like automobiles, furniture and electronics. As the marks go further into debt, the Wall Street shills report record earnings ($26 billion from loan loss reserve accounting entries), consumer spending rises and GDP goes higher. The mainstream media accomplices dutifully report an improving economy. The government accomplices massage the employment and inflation data and declare a jobs recovery with no inflation. The marks are supposed to feel better about the future and spend even more borrowed money. This is what is considered a self-sustaining recovery by the psychopaths running this country.

All you have to do is open your daily paper to see the confidence game in full display. Last week the MSM reported another surge in automobile sales. Our beloved American automobile manufacturers are back baby!!! Automobile sales are now pacing above 14 million on an annual basis. This is up from the depths of the recession in 2009 when the annual rate was below 10 million. We’ve breached the Cash For Clunkers level and there is nowhere to go but up. The storyline is that Obama was right to save GM and Chrysler with your tax dollars. They are now making splendid vehicles (except for the exploding Chevy Volts) and employing millions of Americans. This is a true American comeback success story. Clint Eastwood should do a commercial about it.

There is one little problem with this storyline. It’s bullshit. Remember GMAC? You bailed them out when all their subprime auto and mortgage loans went bad in 2009. They have a brand new business plan. Change your name to Ally Bank and start making as many subprime auto loans as possible. You will be happy to know that according to Experian, 45% of all auto loans being made today are to subprime borrowers. What could possibly go wrong? In addition, the average loan term has grown to almost 6 years. Executives at Ally Financial said that subprime car lending had become “very attractive” because profit margins on the loans more than cover the cost of expected losses from borrowers who fail to repay what they owe. I’m sure they have everything completely under control. Gina Proia, a company spokeswoman, said the company places “greater emphasis on the higher end of the nonprime spectrum” and only lends to people who show they can pay. I can’t believe they are restricting their loans to only people who they think can pay. I’m surprised Obama isn’t condemning them for such restrictive loan terms. If you open your paper to the auto section you will see financing offers of $0 down-payment, and 0% interest for 7 years across the board on most models. But why buy, when you can lease a luxury automobile for $300 per month? It is simply amazing how many vehicles you can “sell” when “credit challenged” Americans can rent them for seven years. I wonder if this explains why I see dozens of $40,000 luxury autos parked in front of $25,000 dilapidated hovels during my daily commute through West Philadelphia. It also seems the Big Three are “selling” a few extra vehicles to their dealers in January as pointed out by Zero Hedge. No need to let a few facts get in the way of a feel good story.

Ford month-end inventory 86-day supply at end of Jan. (492k vehicles) vs 60-day supply (466k) as of Dec. 31
Chrysler had 83-day supply (349k units) end of Jan. vs 64-day (326k units) as of Dec. 31
GM month-end inventory 89-day supply (619k units) vs 67-day supply (583k) Dec. 31

The facts prove the issuance of billions in easy credit is creating the illusion of recovery. Non- revolving (auto & student loans) consumer credit outstanding is now at an all-time high of $1.7 trillion. Even with billions in bad debt write-offs since 2009 the amount outstanding has risen by $100 billion. Does this sound like austerity is gripping the nation? The Federal government is dishing out student loans like candy, as hundreds of thousands of students get worthless degrees from for-profit diploma mills like the University of Phoenix and its ilk. By keeping them occupied in school, the government is able to keep them in the Not in the Labor Force category. Not to be outdone, our friends at GE Capital, Wells Fargo and the other too big to fail entities have been doing their part on the revolving credit side of the scam. I’ve recently been seeing an ad by the largest U.S. furniture retailer, Ashley Furniture, offering 0% interest with no payments for 7 years. I don’t know about you, but my kids destroy a couch in less than 7 years. Wells Fargo Credit doesn’t seem too worried. A critical thinker might ask, how can Wells Fargo possibly make money offering these terms? But there is the rub. Ben Bernanke is loaning Wells Fargo money at 0% so they can perpetuate the confidence game. These insane bankers truly believe they can kick start this moribund debt saturated economy by issuing billions more in debt to people incapable of repaying them. Einstein would be amused.

The McKinsey Group put out a report a couple weeks ago analyzing the amount of American household debt and optimistically concluding that it could be back on a sustainable path by 2013. Mike Shedlock pointed out that sustainable is in the eye of the beholder. It seems the bright fellows at McKinsey haven’t grasped the concept of regression to the mean. First of all their analysis is flawed because real disposable personal income is actually declining and Ben Bernanke’s master scam is working and Americans are now adding to their household debt. The little blue line has turned upwards since they gathered their data. Secondly, as Mish so accurately points out, the sustainable level of household debt is really at the levels prior to the debt bubble that began in the early 1980s. That is a debt level of approximately 70% of disposable personal income, as opposed to the current level of 110%.

The implications of household debt levels regressing to their long-term mean would be catastrophic to the 1%. Their kingdom of debt would come crashing down. Their power and wealth would be swept away. This is why it is so vital for them to create the illusion of recovery. Their confidence game is built upon an ever increasing flow of credit expansion. It will not work. There is no avoiding the final collapse of a boom created solely by credit expansion. Those in power will never voluntarily relinquish their grand game of pillaging the wealth of the nation, so economic collapse will be the ultimate result. They will continue to use propaganda, printing presses, and half-truths to further their agenda. But those who examine the facts will come to a logical conclusion that we are being sold a great lie.

“Half the truth is often a great lie.” – Benjamin Franklin

If real unemployment is nearly 25%, what do you suppose it would be with your “therapeutic” austerity measures? Austerity is a prescription for the destruction of liberal civil society. It means fascism. That would be the real world outcome of the Ron Paul libertarian daydream applied to 21st century mass society. He’s got good intent and fine principles, but he belongs to another time.

The 1% create this deflationary environment. Don’t kid yourself about inflation. People don’t have any money. It is a lack of money fueling this economic trauma. Commodities price inflation is pure speculation, not increased demand. In a world wide slowdown, the price of oil rises, in spite of falling demand. Pure manipulation. The market is rigged to force prices always upwards.

The solution is regulation to prevent commodities speculation. Regulation to curtail the derivatives market and force it into the daylight. Regulation to break up the TBTF banks. Regulation to get rid of the Fed insider’s club. The people need credit at low cost. Instead it is being given to speculators. There are no low interest rates for consumers. 40% or more of debt is usurious interest paid to so-called “investors”, parasites.

We need more transparent government to regulate and get rid of the libertarian sonsofbitches now in control, playing their insider games and fucking the people.

Nobody with an IQ above 100 is going to risk their savings to create a new business in the predator controlled USSA, and that’s why employment will continue to fall until the system completely collapses (probably due to hyper-inflationary efforts to mask the truth with fiat toilet paper).

The USSA is finished. And almost certainly, mankind is finished. Humans are dumber than rocks, dumber than any other species. No other species honors, defends, supports, sanctions and finances the predators who prey upon them. Only humans do that. MORONs....

Its breathtaking. How long can this tottering tower of debt continue to sway in the financial breeze. My fear is that the collapse will lead to worse than the great depression. Because in some ways we have already virtually arrived, and there must be further to go, another huge drop, before the “Great Recession” becomes the “Greater Depression”....