Posts Tagged ‘Middle East’

The petrodollar system is being undermined by exponential growth in technology and shifting geopolitics. What comes next is a paradigm shift…

 

In the summer of 1974, Treasury Secretary William Simon traveled to Saudi Arabia and secretly struck a momentous deal with the kingdom. The U.S. agreed to purchase oil from Saudi Arabia, provide weapons, and in essence guarantee the preservation of Saudi oil wells, the monarchy, and the sovereignty of the kingdom. In return, the kingdom agreed to invest the dollar proceeds of its oil sales in U.S. Treasuries, basically financing America’s future federal expenditures.

Soon, other members of the Organization of Petroleum Exporting Countries followed suit, and the U.S. dollar became the standard by which oil was to be traded internationally. For Saudi Arabia, the deal made perfect sense, not only by protecting the regime but also by providing a safe, liquid market in which to invest its enormous oil-sale proceeds, known as petrodollars. The U.S. benefited, as well, by neutralizing oil as an economic weapon. The agreement enabled the U.S. to print dollars with little adverse effect on interest rates, thereby facilitating consistent U.S. economic growth over the subsequent decades.

An important consequence was that oil-importing nations would be required to hold large amounts of U.S. dollars in reserve in order to purchase oil, underpinning dollar demand. This essentially guaranteed a strong dollar and low U.S. interest rates for a generation.

[ZH: Still, the underlying concept of how Petrodollar recycling, or as some call it, petrocurrency mercantilism works, leaves some confusion. So in order to alleviate that, here courtesy of Cult State, is a quick and simple primer that should hopefully answer all questions. From CultState:

So what is petrocurrency mercantilism?

It’s when a national bank and an energy producer collude to generate artificial demand for a currency at the expense of the purchasing power of other currencies.

The flowchart below shows how it all works.

Given this backdrop, one can better understand many subsequent U.S. foreign-policy moves involving the Middle East and other oil-producing regions.

Recent developments in technology and geopolitics, however, have already ignited a process to bring an end to the financial system predicated on petrodollars, which will have a profound impact on global financial markets. The 40-year equilibrium of this system is being dismantled by the exponential growth of technology, which will have a bearish impact on both supply and demand of petroleum. Moreover, the system no longer is in the best interest of key participants in the global oil trade. These developments have begun to exert influence on financial markets and will only grow over time. The upheaval of the petrodollar recycling system will trigger a resurgence of volatility and new price trends, which will lead to a renaissance in macro investing.

Let’s examine these developments in more detail.

First, TECHNOLOGY is affecting the energy markets dramatically, and this impact is growing exponentially. The pattern-seeking human mind is built for an observable linear universe, but has cognitive difficulty recognizing and understanding the impact of exponential growth.

Paralleling Moore’s Law, the current growth rate of new technologies roughly doubles every two years. In the transportation sector, the global penetration rate of electric vehicles, or EVs, was 1% at the end of 2016 and is now probably about 1.5%. However, a doubling every two years of this level of usage should lead to an automobile market that primarily consists of EVs in approximately 12 years, reducing gasoline demand and international oil revenue to a degree that today would seem unfathomable to the linear-thinking mind. Yes, the world is changing—rapidly.

Alternative energy sources (solar power, wind, and such) also are well into their exponential growth curves, and are even ahead of EVs in this regard. Based on growth curves of other recent technologies, and due to similar growth rates in battery technology and pricing, it is likely that solar power will supplant petroleum in a vast portion of nontransportation sectors in about a decade. Albert Einstein is rumored to have described compound interest (another form of exponential growth) as the most powerful force in the universe. This is real change.

The growth of U.S. oil production due to new technologies such as hydraulic fracturing and horizontal drilling has both reduced the U.S. need for foreign sources of oil and led to lower global oil prices. With the U.S. economy more self-reliant for its oil consumption, reduced purchases of foreign oil have led to a drop in the revenues of oil-producing nations and by extension, lower international demand for Treasuries and U.S. dollars.

China has agreed with Russia to purchase Russian oil and natural gas in yuan.
◦As an example of China’s newfound power to influence oil exporters, China has persuaded Angola (the world’s second-largest oil exporter to China) to accept the yuan as legal tender, evidence of efforts made by Beijing to speed up internationalization of the yuan. The incredible growth rates of the Chinese economy and its thirst for oil have endowed it with tremendous negotiating strength that has led, and will lead, other countries to cater to China’s needs at the expense of their historical client, the U.S.
◦China is set to launch an oil exchange by the end of the year that is to be settled in yuan. Note that in conjunction with the existing Shanghai Gold Exchange, also denominated in yuan, any country will now be able to trade and hedge oil, circumventing U.S. dollar transactions, with the flexibility to take payment in yuan or gold, or exchange gold into any global currency.
◦As China further forges relationships through its One Belt, One Road initiative, it will surely pull other exporters into its orbit to secure a reliable flow of supplies from multiple sources, while pressuring the terms of the trade to exclude the U.S. dollar.

The world’s second-largest oil exporter, Russia, is currently under sanctions imposed by the U.S. and European Union, and has made clear moves toward circumventing the dollar in oil and international trade. In addition to agreeing to sell oil and natural gas to China in exchange for yuan, Russia recently announced that all financial transactions conducted in Russian seaports will now be made in rubles, replacing dollars, according to Russian state news outlet RT. Clearly, there is a concerted effort from the East to reset the economic world order.

ALL OF THESE DEVELOPMENTS leave global financial markets vulnerable to a paradigm shift that has recently begun. In meetings with fund managers, asset allocators, and analysts, I have found a virtually universal view that macro investing—investing based on global macroeconomic and political, not security-specific trends—is dead, fueled by investor money exiting the space due to poor returns and historically high fees in relation to performance. This is what traders refer to as capitulation. It occurs when most market participants can’t take advantage of a promising opportunity due to losses, lack of dry powder, or a psychological inability to proceed because of recency bias.

A current generational low in volatility across a wide spectrum of asset classes is another indicator that the market doesn’t see a paradigm shift coming. This suggests that current volatility is expressing a full discounting of stale fundamental inputs and not adequately pricing in the potential of likely disruptive events.

THE FEDERAL RESERVE is now in the beginning stages of a shift toward “normalization,” which will lead to diminished support for the U.S. Treasury market. The Fed’s total assets stand at approximately $4.5 trillion, or five times what they were prior to the financial crisis of 2008-09. The goal of the Fed is to “unwind” this enormous balance sheet with minimal market disruption. This is a high-wire act a thousand feet in the air without a safety net or prior practice. Additionally, at some not-so-distant future date, the U.S. will need to finance enormous and growing entitlement programs, and our historical international sources for that financing will no longer be willing to support us in that endeavor.

The market participants with whom I met theoretically could have the ability to accept cognitively the points made in this article. But the accumulation of many small losses in a low-volatility and generally trendless market has robbed them of confidence and the psychological balance to embrace any new paradigm proactively. They are frozen with fear that the lower- return profile of recent years is permanent—ironic in an industry that is paid to capture price changes in a cyclical world.

One market legend with whom I spoke suggested he wouldn’t have had the success he enjoyed in his career had he begun in the past decade. Whether or not this might be true, it doesn’t mean that recent lower returns are to be extrapolated into the future, especially when these subpar returns occurred during the quantitative-easing era, a period that is an anomaly.

I have been fortunate to ride substantial bets on big trends, earning high risk-adjusted returns using time-tested techniques for exploiting these trends. Additionally, I have had the luxury of not participating actively full-time in macro investing during this difficult period. Both factors might give me perspective. I regard this as an extraordinarily opportune moment for those able to shed timeworn, archaic assumptions of market behavior and boldly return to the roots of macro investing.

The opportunity is reminiscent of the story told by Stanley Druckenmiller, who was promoted early in his investment career to head equity research at a time when his co-workers had vastly more experience than he did. His director of investments informed him that his promotion owed to the same reason they send 18-year-olds to war; they are too dumb to know not to charge. The “winners” under the paradigm now unfolding will be market participants able to disregard stale, anomalous concepts, and charge.

RELATEDLY, THERE IS a running debate as to whether trend-following is a dying strategy. There is plenty of anecdotal evidence that short-term and mean-reversion trading is more in vogue in today’s markets (think quant funds and “prop” shops). Additionally, the popularity of passive investing signals an unwillingness to invest in “idea generation,” or alpha. These developments represent a full capitulation of trend following and macro trading.

Ironically, many market players who wrongly anticipated a turn in recent years to a more positive environment for macro and trend-following are throwing in the towel. The key difference is that now there is a clear catalyst to trigger the start of the pendulum swinging back to a fertile macro/trend-following trading environment.

As my mentor, Bruce Kovner [the founder of Caxton Associates] used to say, “Nobody rings a bell at key turning points.” The ability to properly anticipate change is predicated upon detached analysis of fundamental information, applying that information to imagine a plausible world different from today’s, understanding how new data points fit (or don’t fit) into that world, and adjusting accordingly. Ideally, this process leads to an “aha!” moment, and the idea crystallizes into a clear vision. The thesis proposed here is one such vision.

Advertisements

 

The geopolitical reality in the Middle East is changing dramatically.

The impact of the Arab Spring, the retraction of the U.S. military, and diminishing economic influence on the Arab world – as displayed during the Obama Administration – are facts.

The emergence of a Russian-Iranian-Turkish triangle is the new reality. The Western hegemony in the MENA region has ended, and not in a shy way, but with a long list of military conflicts and destabilization.

The first visit of a Saudi king to Russia shows the growing power of Russia in the Middle East. It also shows that not only Arab countries such as Saudi Arabia and the UAE, but also Egypt and Libya, are more likely to consider Moscow as a strategic ally.

King Salman’s visit to Moscow could herald not only several multibillion business deals, but could be the first real step towards a new regional geopolitical and military alliance between OPEC leader Saudi Arabia and Russia.

This cooperation will not only have severe consequences for Western interests but also could partly undermine or reshape the position of OPEC at the same time.

Russian president Vladimir Putin is currently hosting a large Saudi delegation, led by King Salman and supported by Saudi minister of energy Khalid Al Falih.

Moscow’s open attitude to Saudi Arabia—a lifetime Washington ally and strong opponent of the growing Iran power projections in the Arab world—show that Putin understands the current pivotal changes in the Middle East.

U.S. allies Saudi Arabia, Egypt, Turkey and even the UAE, have shown an increased eagerness to develop military and economic relations with Moscow, even if this means dealing with a global power currently supporting their archenemy Iran. Analysts wonder where the current visit of King Salman will really lead to, but all signs are on green for a straightforward Arab-Saudi support for a bigger Russian role in the region, and more in-depth cooperation in oil and gas markets.

In stark contrast to the difficult relationship of the West with the Arab world, Moscow seems to be playing the regional power game at a higher level. It can become an ally or friend to regional adversaries, such as Iran, Turkey, Egypt and now Saudi Arabia. Arab regimes are also willing to discuss cooperation with Russia, even though the country is supporting adversaries in the Syrian and Yemen conflicts and continues to supply arms to the Shi’a regime in Iran.

Investors can expect Russia and Saudi Arabia to sign a multitude of business deals, some of which have already been presented. Moscow and Riyadh will also discuss the still fledgling oil and gas markets, as both nations still heavily depend on hydrocarbon revenues. Arab analysts expect both sides to choose a bilateral strategy to keep oil prices from falling lower. Riyadh and Moscow have the same end goal: a stable oil and gas market, in which demand and supply keep each other in check to push price levels up, but without leaving enough breathing space for new market entrants such as U.S. shale.

Putin and Salman will also discuss the security situation in the Middle East, especially the ongoing Syrian civil war, Iran’s emerging power, and the Libya situation. Until now, the two have supported opposite sides, but Riyadh has realized that its ultimate goal, the removal of Syrian president Assad, is out of reach. To prevent a full-scale Shi’a triangle (Iran-Iraq-Syria-Lebanon), other options are now being sought to quell Tehran’s power surge. Moscow is key in this.

Putin’s unconditional support of the Iranian military onslaught in Iraq and Syria, combined with its support for Hezbollah in Lebanon or Houthis in Yemen, will be discussed and maybe tweaked to give Riyadh room to maneuver into the Russian influence sphere. The verdict on this isn’t yet out, but Riyadh’s move must be seen

in light of ongoing Moscow discussions with Egypt, Libya, Jordan and the UAE.

A growing positive Putin vibe in the Arab world is now clear. The strong leadership of Russia’s new Tsar has become a main point of interest for the (former pro-Western) Arab regimes. The U.S. and its European allies have only shown a diffuse political-military approach to the threats in the MENA region, while even destabilizing historically pro-Western Arab royalties and presidents. Putin’s friendship, however, is being presented as unconditional and long lasting.

Even though geopolitics and military operations in the Middle East now are making up most headlines, the Saudi-Russian rapprochement will also have economic consequences. Riyadh’s leadership of OPEC is still undisputed, as it has shown over the last several years. Saudi Arabia’s eagerness to counter the free-fall of oil prices has been successful, but a much bigger effort is required to bring prices back to a level of between $60-75 per barrel. Russia’s role—as the largest of non-OPEC producers—has been substantial, bringing in not only several emerging producers, but also by putting pressure on its allies Iran, Venezuela and Algeria.

The historically important Moscow-Riyadh cooperation in oil and gas is unprecedented. Without Russia’s support, overall compliance to the OPEC production cut agreement would have been very low, leading to even lower oil prices.

The Saudi-Russian rapprochement could, however, be seen as a threat by the West and OPEC itself. Western influence in the region has waned since the end of the 1990s, not only due to the peace dividend of NATO, but especially because OECD countries are moving away from oil. Saudi Arabia had to find new markets, which happened with China and India. The Saudi future is no longer based on Western customers or support, but lies in Asia and other emerging regions. The FSU region has also popped up on Saudi screens. Investment opportunities, combined with geopolitical support and military interests, are readily available in Russia and its satellite states.

For OPEC, the Moscow-Riyadh love affair could also mean a threat. Throughout OPEC’s history, Riyadh has been the main power broker in the oil cartel, pushing forward price and production strategies; most of the time this was done in close cooperation with all the other members, most of them Arab allies. This changed dramatically after Saudi Arabia and Russia agreed to cooperate in global oil markets. Through the emergence of this OPEC/ non-OPEC cooperation, Moscow and Riyadh have grown closer than expected. The two countries now decide the future of global oil markets before they discuss it with some of the other main players like UAE, Iran, Algeria and Nigeria. King Salman’s visit is seen as another step toward a more in-depth cooperation in oil and gas related issues.

Besides global oil market cooperation, Saudi Arabia is and will become more interested to invest in natural gas development, not only to have an interest in Russia’s gas future but also to bring in Russian technology, investment and LNG to the Kingdom.

At the same time, media sources are stating that Saudi Arabia is NOT asking Russia to take part in the long-awaited Aramco IPO in 2018. Russian individual investors and financial institutions, however, are expected to take an interest.

Putin understands not only Russian chess tactics but also the Arab “Tawila” approach. Saudi Crown Prince Mohammad bin Salman already will prepare his Tawila strategy, putting enough stones on the table to ensure his successful end game. MBS, currently de-facto ruler of the Kingdom, is targeting a full house—Russian cooperation in energy, defense and investments—while softening Moscow’s 100% percent support of the Shi’a archenemy Iran.

For both sides, Moscow and Riyadh, the current constellation presents a win-win situation. Moscow can reach its ultimate goal in the Middle East: to become the main power broker and knock the US from the pedestal. For Riyadh, the option to counter the Iranian threat, while also bolstering its own economy and hydrocarbon future, is now within reach.

King Salman’s trip could go down in history as the point of no return for the West. Pictures of Russian President Vladimir Putin and King Salman of Saudi Arabia could replace historic pictures of King Saud and U.S. President Roosevelt (Bitter Lake, 1945). In a few years, King-to-be Crown Prince Mohammad bin Salman might tell his children that this was one of the pillars that changed not only the Middle East but also supported his Vision 2030 plan of becoming a bridge between the old (West) and the new (Russia-Asia).

 

A new bombshell joint report issued by two international weapons monitoring groups Tuesday confirms that the Pentagon continues to ship record breaking amounts of weaponry into Syria and that the Department of Defense is scrubbing its own paper trail. On Tuesday the Organized Crime and Corruption Reporting Project (OCCRP) and the Balkan Investigative Reporting Network (BIRN) produced conclusive evidence that not only is the Pentagon currently involved in shipping up to $2.2 billion worth of weapons from a shady network of private dealers to allied partners in Syria – mostly old Soviet weaponry – but is actually manipulating paperwork such as end-user certificates, presumably in order to hide US involvement.

The OCCRP and BIRN published internal US defense procurement files after an extensive investigation which found that the Pentagon is running a massive weapons trafficking pipeline which originates in the Balkans and Caucuses, and ends in Syria and Iraq. The program is ostensibly part of the US train, equip, and assist campaign for the Syrian Democratic Forces (SDF, a coalition of YPG/J and Arab FSA groups operating primarily in Syria’s east). The arms transfers are massive and the program looks to continue for years. According to Foreign Policy’s (FP) coverage of the report:

 

The Department of Defense has budgeted $584 million specifically for this Syrian operation for the financial years 2017 and 2018, and has earmarked another $900 million of spending on Soviet-style munitions between now and 2022. The total, $2.2 billion, likely understates the flow of weapons to Syrian rebels in the coming years.

But perhaps more shocking is the following admission that Pentagon suppliers have links with known criminal networks, also from FP:

 

According to the report, many of the weapons suppliers — primarily in Eastern Europe but also in the former Soviet republics, including Kazakhstan, Georgia, and Ukraine — have both links to organized crime throughout Eastern Europe and spotty business records.

The sheer amount of material necessary for the Pentagon program — one ammunition factory announced it planned to hire 1,000 new employees in 2016 to help cope with the demand — has reportedly stretched suppliers to the limit, forcing the Defense Department to relax standards on the materials it’s willing to accept.

It is likely that the organized crime association is the reason why the Pentagon has sought to alter its records. In addition, the sheer volume of weaponry continuing to ship to the Syrian battlefield and other parts of the Middle East means inevitable proliferation among unsavory terror groups – a phenomenon which has already been exhaustively documented in

connection with the now reportedly closed CIA program to topple the Syrian government. The associations and alliances among some of the Arab former FSA groups the DoD continues to support in the north and east remains fluid, which means means US-supplied weapons will continue to pass among groups with no accountability for where they end up.

One of the authors of the OCCRP/BIRN report, Ivan Angelovski, told Foreign Policy that, “The Pentagon is removing any evidence in their procurement records that weapons are actually going to the Syrian opposition.” The report is based on internal US government memos which reveal that weapons shipment destination locations have been scrubbed from original documents.

Is an EUC (End User Certificate) still an EUC if it doesn’t include an end user?

Balkan insight, which is hosting the original investigative report: “Seven US procurement documents were whitewashed to remove reference to ‘Syria’ after reporters contacted the Pentagon to enquire about whether the exporting countries – Bulgaria, Romania, Serbia, Ukraine and Georgia – had been informed of the destination.”

The fact that Foreign Policy, which is the foremost establishment national security publication in the world, would admit that the Pentagon’s Syria weapons procurement program is tied to East European organized crime is itself hugely significant. At this point the evidence is simply so overwhelming that even establishment sources like FP – which itself has generally been pro-interventionist on Syria – can’t deny it.

FP further reports that the Pentagon program “appears to be turbocharging a shadowy world of Eastern European arms dealers.” And adds further that, “the Pentagon is reportedly removing documentary evidence about just who will ultimately be using the weapons, potentially weakening one of the bulwarks of international protocols against illicit arms dealing.”

Map/Infographic produced as part of the OCCRP/BIRN report, itself confirmed by Foreign Policy magazine. Notice the map denotes that prior CIA weapons went directly to Idlib province (northwest, section in green) and the Golan border region (south). Both of these areas were and continue to be occupied by al-Qaeda (in Idlib, AQ’s Hay’at Tahrir al-Sham). In Idlib specifically, analysts have confirmed genocidal cleansing of religious minorities conducted by AQ “rebels” directly assisted by CIA weapons.

Late last month we featured the story of Bulgarian journalist Dilyana Gaytandzhieva, who was fired from her job after being interrogated by national intelligence officials for exposing the same Pentagon arms network which is the subject of the latest OCCRP/BIRN investigation. At the time, Al Jazeera was the only major international outlet which covered the story, which confirmed that Bulgarian agents interrogated Gaytandzhieva and “tried to find out her sources.” An anonymous source had leaked a large trove of internal government files connected to the arms trafficking to the East European-based Trud Newspaper journalist, which was the basis of her reporting. The newest investigation released Tuesday appears to include some of the same documents, also confirmed by Gayandzhieva.

Read the full OCCRP/BIRN investigation here.

Read Zero Hedge’s original coverage of the Pentagon’s Balkan arms pipeline here.

 

For the better part of a year now Americans have speculated over precisely what pressing national security issue may have prompted the Obama administration to take the extreme measure of unmasking the names of Trump officials captured in foreign intelligence reports…you know, because bypassing the typical warrant process and violating an American citizen’s fourth amendment protections is kind of a big deal.

So what was it…intelligence concerning an imminent terrorist attack…concrete evidence that Putin stole Hillary’s emails? No, according to CNN, National Security Advisor Susan Rice ultimately made the call to unmask Trump officials because Obama was offended that the crown prince of the United Arab Emirates traveled to New York last December, after the election mind you, without giving him a heads up first.

 

Former national security adviser Susan Rice privately told House investigators that she unmasked the identities of senior Trump officials to understand why the crown prince of the United Arab Emirates was in New York late last year, multiple sources told CNN.

The New York meeting preceded a separate effort by the UAE to facilitate a back-channel communication between Russia and the incoming Trump White House.

The crown prince, Sheikh Mohammed bin Zayed al-Nahyan, arrived in New York last December in the transition period before Trump was sworn into office for a meeting with several top Trump officials, including Michael Flynn, the president’s son-in-law, Jared Kushner, and his top strategist Steve Bannon, sources said.

The Obama administration felt misled by the United Arab Emirates, which had failed to mention that Zayed was coming to the United States even though it’s customary for foreign dignitaries to notify the US government about their travels, according to several sources familiar with the matter. Rice, who served as then-President Obama’s national security adviser in his second term, told the House Intelligence Committee last week that she requested the names of the Americans mentioned in the classified report be revealed internally, a practice officials in both parties say is common.

Of course, CNN attempts to downplay the gravity of these new revelations but somehow we suspect that Obama getting his feelings hurt over a breach in travel protocol of a foreign dignitary is not a valid reason to spy on American citizens…though we’re not lawyers.

CNN noted that it’s unclear precisely which Trump officials Rice discussed at the House meeting, and thus which officials were ultimately unmasked, but multiple sources apparently confirmed to them that Zayed met at the time with Flynn, Kushner and Bannon. The three-hour discussion focused on a range of issues, including Iran, Yemen and the Mideast peace process, according to two of CNN’s sources who insisted that opening up a back-channel with Russia was not a topic of discussion.

 

A senior Middle East official told CNN that the UAE did not “mislead” the Obama administration about the crown prince’s visit, but acknowledged not telling the US government about it in advance. The meeting, which took place December 15, 2016, the official said, was simply an effort to build a relationship with senior members of the Trump team who would be working in the administration to share assessments of the region.

“The meeting was about ascertaining the Trump team’s view of the region and sharing the UAE’s view of the region and what the US role should be,” the official said. “No one was coming in to sell anything or arrange anything.”

Meanwhile, Republican responses on the hearing have been mixed with Trey Gowdy saying it appears as if Rice did nothing illegal while White House press secretary Sarah Sanders simply deferred on the legality of her actions.

 

Rep. Trey Gowdy, a South Carolina Republican who is helping lead the House investigation, told the Daily Caller “nothing that came up in her interview that led me to conclude” that she improperly unmasked the names of Trump associates or leaked it to the press.

Sarah Sanders, the White House press secretary, did not say explicitly whether Trump still believes Rice committed a crime but added the issue of leaking and unmasking needs to be investigated.

“We’ve seen illegal leaking of classified materials, including the identities of American citizens unmasked in intelligence reports,” Sanders told CNN. “That’s why the President called for Congress to investigate this matter and why the Department of Justice and Intelligence Community are doing all they can to stamp out this dangerous trend that undermines our national security.”

Just to summarize, Susan Rice unmasked the names of American citizens, which effectively means she spied on them without a warrant, because President Obama was offended that the crown prince of the UAE met with the newly elected administration without first giving him a heads up? Does that sound reasonable to everyone?

Then again, maybe this entire story from Rice/CNN is complete bullshit and was only concocted as a way to avoid admitting that the Obama White House was pissed they lost an election and basically turned the entire U.S. intelligence apparatus into a political weapon to dig up any dirt they could find on an adversary.

So, what say you?

“Nation state as a fundamental unit of man’s organized life has ceased to be the principal creative force: International banks and multinational corporations are acting and planning in terms that are far in advance of the political concepts of the nation-state.”

— Zbigniew Brzezinski, “Between Two Ages: The Technetronic Era”, 1971

“I’m going to continue to push for a no-fly zone and safe havens within Syria….not only to help protect the Syrians and prevent the constant outflow of refugees, but to gain some leverage on both the Syrian government and the Russians.”

Why is Hillary Clinton so eager to intensify US involvement in Syria when US interventions in Afghanistan, Iraq and Libya have all gone so terribly wrong?

The answer to this question is simple. It’s because Clinton doesn’t think that these interventions went wrong. And neither do any of the other members of the US foreign policy establishment. (aka–The Borg). In fact, in their eyes these wars have been a rousing success. Sure, a few have been critical of the public relations backlash from the nonexistent WMD in Iraq, (or the logistical errors, like disbanding the Iraqi Army) but–for the most part– the foreign policy establishment is satisfied with its efforts to destabilize the region and remove leaders that refuse to follow Washington’s diktats.

This is hard for ordinary people to understand. They can’t grasp why elite powerbrokers would want to transform functioning, stable countries into uninhabitable wastelands overrun by armed extremists, sectarian death squads and foreign-born terrorists. Nor can they understand what has been gained by Washington’s 15 year-long rampage across the Middle East and Central Asia that has turned a vast swathe of strategic territory into a terrorist breeding grounds? What is the purpose of all this?

First, we have to acknowledge that the decimation and de facto balkanization of these countries is part of a plan. If it wasn’t part of a plan, than the decision-makers would change the policy. But they haven’t changed the policy. The policy is the same. The fact that the US is using foreign-born jihadists to pursue regime change in Syria as opposed to US troops in Iraq, is not a fundamental change in the policy. The ultimate goal is still the decimation of the state and the elimination of the existing government. This same rule applies to Libya and Afghanistan both of which have been plunged into chaos by Washington’s actions.

But why? What is gained by destroying these countries and generating so much suffering and death?

Here’s what I think:  I think Washington is involved in a grand project to remake the world in a way that better meets the needs of its elite constituents, the international banks and multinational corporations. Brzezinski not only refers to this in the opening quote, he also explains what is taking place: The nation-state is being jettisoned as the foundation upon which the global order rests. Instead, Washington is  erasing borders, liquidating states, and removing strong, secular leaders that can mount resistance to its machinations in order to impose an entirely new model on the region, a new world order. The people who run these elite institutions want to create an interconnected-global free trade zone overseen by the proconsuls of Big Capital, in other words, a global Eurozone that precludes the required state institutions (like a centralized treasury, mutual debt, federal transfers) that would allow the borderless entity to function properly.

Deep state powerbrokers who set policy behind the smokescreen of our bought-and-paid-for congress think that one world government is an achievable goal provided they control the world’s energy supplies, the world’s reserve currency and become the dominant player in this century’s most populous and prosperous region, Asia. This is essentially what Hillary’s “pivot” to Asia is all about.

The basic problem with Washington’s NWO plan is that a growing number of powerful countries are still attached to the old world order and are now prepared to defend it. This is what’s really going on in Syria, the improbable alliance of Russia, Syria, Iran and Hezbollah have stopped the US military juggernaut dead in its tracks. The unstoppable force has hit the immovable object and the immovable object has prevailed…so far.

Naturally, the foreign policy establishment is upset about these new developments, and for good reason. The US has run the world for quite a while now, so the rolling back of US policy in Syria is as much a surprise as it is a threat. The Russian Airforce deployed to Syria a full year ago in September, but only recently has Washington shown that it’s prepared to respond by increasing its support of its jihadists agents on the ground and by mounting an attack on ISIS in the eastern part of the country, Raqqa. But the real escalation is expected to take place when Hillary Clinton becomes president in 2017. That’s when the US will directly engage Russia militarily, assuming that their tit-for-tat encounters will be contained within Syria’s borders.  It’s a risky plan, but it’s the next logical step in this bloody fiasco. Neither party wants a nuclear war, but Washington believes that doing nothing is tantamount to backing down, therefore, Hillary and her neocon advisors can be counted on to up the ante. “No-fly zone”, anyone?

The assumption is that eventually, and with enough pressure, Putin will throw in the towel. But this is another miscalculation. Putin is not in Syria because he wants to be nor is he there because he values his friendship with Syrian President Bashar al Assad. That’s not it at all. Putin is in Syria because he has no choice. Russia’s national security is at stake. If Washington’s strategy of deploying terrorists to topple Assad succeeds, then the same ploy will be attempted in Iran and Russia. Putin knows this, just like he knows that the scourge of foreign-backed terrorism can decimate entire regions like Chechnya. He knows that it’s better for him to kill these extremists in Aleppo than it will be in Moscow. So he can’t back down, that’s not an option.

But, by the same token, he can compromise, in other words, his goals and the goals of Assad do not perfectly coincide. For example, he could very well make territorial concessions to the US for the sake of peace that Assad might not support.

But why would he do that? Why wouldn’t he continue to fight until every inch of Syria’s sovereign territory is recovered?

Because it’s not in Russia’s national interest to do so, that’s why. Putin has never tried to conceal the fact that he’s in Syria to protect Russia’s national security. That’s his main objective.  But he’s not an idealist, he’s a pragmatist who’ll do whatever he has to to end the war ASAP. That means compromise.

This doesn’t matter to the Washington warlords….yet. But it will eventually. Eventually there will be an accommodation of some sort. No one is going to get everything they want, that much is certain. For example, it’s impossible to imagine that Putin would launch a war on Turkey to recover the territory that Turkish troops now occupy in N Syria. In fact, Putin may have already conceded as much to Turkish president Tayyip Erdogan in their recent meetings. But that doesn’t mean that Putin doesn’t have his red lines. He does.  Aleppo is a red line. Turkish troops will not be allowed to enter Aleppo.

The western corridor, the industrial and population centers are all red lines. On these, there will be no compromise. Putin will help Assad remain in power and keep the country largely intact. But will Turkey control sections in the north, and will the US control sections in the east?

Probably. This will have to be worked out in negotiations, but its unlikely that the country’s borders will be the same as they were before the war broke out. Putin will undoubtedly settle for a halfloaf provided the fighting ends and security is restored. In any event, he’s not going to hang around until the last dog is hung.

Unfortunately, we’re a long way from any settlement in Syria, mainly because Washington is nowhere near accepting the fact that its project to rule the world has been derailed. That’s the crux of the matter, isn’t it? The bigshots who run the country are still in denial. It hasn’t sunk in yet that the war is lost and that their nutty jihadist-militia plan has failed.

It’s going to take a long time before Washington gets the message that the world is no longer its oyster. The sooner they figure it out, the better it’ll be for everyone.

The most important event of the past 70 years is the change in the international order, from a US unipolar domination to a new multipolar reality. The fundamental question lies in understanding how this transition is taking place, its consequences and root causes

The transition in the international order, from a pre-WWI multipolar world to a post-WWII bipolar world, cost humanity a world war involving millions of deaths. The next stage, distinct from the conflicts between the USSR and the US, ended with the fall of the Berlin Wall in 1989, but without the tragedy of direct confrontation. This fundamental historical difference has its own intrinsic logic governing the relationship of forces between powers. The USSR was a country in decline, unable to continue its role on the international stage as the premier anti-hegemonic power.

The transition from a bipolar to a unipolar reality could have had nuclear consequences, but an agreement between the powers avoided this danger. The upshot was an unconditional surrender of the USSR, with catastrophic consequences in economic and cultural terms for the superpower to come to terms with, but at least without the explosion of a large-scale conflict.

With the end of the bipolar model, however, began what some historians declared to be the «end of history»: the transition from a multipolar world, to a bipolar world, to end in a unipolar world. From the point of view of Washington, the story ended with only one global power remaining, thereby granting the United States the power to decide matters for the whole world.

The scenario in which we live today, in terms of international law and the balance of forces, is almost unprecedented in history if looked at in the present context. It is true that the current transition from a unipolar to a multipolar reality is something similar to what has been seen in previous decades, with the transition from British hegemony in the late-nineteenth century to a multipolar situation in the period preceding the two world wars. Nevertheless, resorting to this historical analogy is difficult, given the relative absence of international rules compared to a century ago. Therefore it is difficult to use the earlier transition period to make assumptions about future trends.

The causes of change

The attitude of the US over the last 25 years has been focused completely on the achievement of global hegemony. The dream of having control over every event, in every corner of the world, has ironically led to accelerating the end of America’s unipolar moment. Of course the deep meaning of the word “control” can be expanded upon, examining the merits of the cultural, economic and military impositions that result from a constant quest for global domination.

The US has chosen an impassable road that is full of contradictions to justify their rise as a global power. In two decades we have witnessed the dismantling of all the key principles of the balance of power between Russia and the United States, necessitating the change in international relations from unipolar to multipolar. Similarly, the ratio of economic and military power between China and the United States has significantly worsened, culminating in the dangerous dispute over the South China Sea. The abandonment of the Kissinger doctrine governing relations with Beijing, and the failure of the Clinton reset with Moscow, have pushed two global powers, Russia and China, to forge an alliance that allows for a world where there are more powers on the international stage and not just Washington as the central focus of global relations.

The failure of the foreign doctrine of the United States was a direct consequence of the arrogance and the utopia of being able to dominate the planet, seeking to extend indefinitely the unipolar moment and forging a worldwide system culturally and economically based on the will of Washington, reinforced by a power and military posture without precedent.

Consequences

Had Washington thought more carefully about the consequences of their actions, and thereby employed a more considered strategic vision, it would certainly have opted for different choices. As a demonstration of this, we note Washington’s attitude in the Middle East, the deciding ground for prospects of continued US global hegemony.

Much of Washington’s remaining capacity to influence global decisions is attributable to the dollar and the trading of goods such as oil in that currency. With the appearance of a world with more regional or global powers, it is easy to guess that the rise of the Iranian Republic has consequences for the whole of the Middle East region. The odds are evident that Tehran, culturally, economically and militarily, will be the first regional power. Washington has realized this and has decided to reach an agreement with the Islamic Republic in order to remain relevant in the region and not to be cut off from future agreements. Washington also seeks, in doing so, to counterbalance the situation with her most influential regional allies, Saudi Arabia and Qatar.

It is a strategy that in the Middle East has had a negative impact in the immediate present for Riyadh, Doha, and in some ways even Ankara, who have all opted for an autonomous and interventionist approach in the region without much consultation with Washington. Nevertheless, the choice to include Iran as a dialogue partner for the Middle East balance has allowed Washington to conserve the illusion that in the future it will maintain an important role in regional decisions. This is a decision that has created many problems with historic allies, but Washington hopes, with a view to the future, to have made an appropriate choice. This also explains why so many of the neoconservatives and liberals (the promoters of a prolonged unipolar doctrine, the cause of so many failures ) are clearly opposed to this agreement.

Washington and its establishment have opted for a cultural and economic confrontation with Moscow, possibly militarily with Beijing in the South China Sea, in the process impelling the emergence of a multipolar world in which more powers have the ability, by joining together, to resist the will of the greater global power. In fact, it is easier to frame the international balance in a multipolar model that is slowly becoming bipolar.

We consider that Russia and China (and to a lesser extent Iran) do not possess the military capability to successfully oppose American power in a conventional conflict on a grand scale. For this reason, it is easy to understand that shaping a multipolar international order perhaps remains quite optimistic at this time. It is similarly optimistic to maintain a unipolar world order that remains anchored in the illusions of the American elite.

Reality rather shows us a bipolar world, where the alternative pole to the US is represented by the union and alliances (cultural, economic and military) of Beijing, Moscow and Tehran. And their partnership has resulted in a change in the pattern of international relations. The cause of this union is to be found in the will of the US elites to prolong their unipolar moment. Instead of opting for an agreement with another global power (probably China) and seal the international stage in a realistic model with two poles, facing no real opposition, Washington has exacerbated the differences by pushing countries like Russia, China, Iran and India closer and closer together, forging what currently might be termed a temporary bipolar model of world order.

The certainty is that the future will turn fully into a multipolar model, and this obliges Washington to struggle in every way possible to remain relevant. To date, apart from nuclear agreements, every choice has been counterproductive and wrong. Will Washington’s elites ever learn, or will they eventually become irrelevant?

By Finian Cunningham

 

We really have entered a macabre twilight zone when US-led warplanes are massacring civilians in several countries – and yet Washington and its allies condemn others for war crimes.

Of course, governments that act criminally cannot be expected to be honest. But what about nominally independent organizations like the United Nations and Western media? The collective deception is damning of systematic complicity.

What makes it more disturbing is that if criminality can be so capriciously covered-up by institutions that are relied upon for law and accountability then the world really is in a dangerous, dark place.

The latest atrocity involved US coalition aircraft reportedly killing 15 women and injuring 50 others when they hit a funeral procession near the northern Iraqi city of Kirkuk on Friday.

American-led coalition warplanes, including from Britain, France, and Turkey, are bombing Iraq, supposedly to help defeat the Islamic State (Daesh) terror group.

Shamefully, the Western news media, which have been blaring allegations of war crimes against Russia over its military operations in Syria, were largely silent on the massacre near Kirkuk.

Only days before that barbarity, there were several other mass atrocities committed by American allies elsewhere in the Middle East.

In Syria, two F-16 fighter jets belonging to NATO member Belgium killed six civilians in the village of Hassadjek, near Aleppo.

Within hours of that murderous assault, warplanes from Turkey, another NATO member, were responsible for killing some 150 Syrian civilians in multiple air raids also in Aleppo countryside, according to Syrian state media.

Meanwhile, in Yemen, the US-backed Saudi air bombardment continued its slaughter of innocents despite cynically declaring a non-entity ceasefire earlier in the week. Three farmers were killed in Saudi air strikes in Saada province – almost a week after American and Saudi warplanes massacred 140 people attending a funeral ceremony in the capital Sanaa. Another grotesque “anti-terror” operation.

Washington and its allies are now openly bombing sovereign countries without any legal mandate. As such, these actions constitute the crime of aggression – the most grave violation of international law. This is a redux of 1930s fascist banditry by Western states who haughtily pontificate to Russia.

In Syria, the US-led coalition including Britain and France have been carrying out air strikes on that country for over two years, killing hundreds of civilians – all in the name of “fighting terrorism”. Three months ago, in late July, US and French warplanes murdered over 100 civilians, including women and children, in and around the town of Manbij, near Aleppo, in wave after wave of bombings.

Occasionally, the Western news media do give reports on such crimes. But, generally, their duty is to minimize, by describing such incidents as unfortunate “collateral damage”, if not to willfully cover-up, as in the latest atrocity near Kirkuk.

Nevertheless, the entire hideous Western charade is gradually being exposed.

In Syria, for nearly six years the Arab country has been almost completely destroyed by a US-led covert war for regime change. To achieve this illicit objective, Washington and its NATO and regional allies funded, armed and directed a proxy army of the most vile terror groups.

When Russia and Iran intervened last year to help their Syrian ally against this international criminal conspiracy, the country was brought back from the brink of devastation. The terrorist proxy army supported by Washington, London, Paris, Turkey, Saudi Arabia and Qatar, has been routed from hundreds of towns and villages.

Syria is being liberated from a scourge unleashed in March 2011 by US-led insurgents under the guise of a “pro-democracy uprising”. That narrative has always been absurd for anyone with critical thinking. Head-chopping jihadists for democracy? Sword-wielding Saudi and Qatari despots advocating pluralist elections?

Besides, Syria already had a relatively robust democracy under President Bashar al Assad. Before the US-led war for regime change, Syria enjoyed a reputation for religious freedom, peaceful coexistence and benign social development.

The Western media, in the service of promoting their governments’ geopolitical agenda, have grossly distorted events in Syria. Instead of investigating a Western-backed criminal subversion involving state-sponsorship of terrorism, the media have violated honest, independent journalism with outright lies and fabrications. The Western public have been told that Washington and its allies are bombing a (sovereign) country to “defeat terrorism” when in fact any genuine, critical inquiry shows the opposite to be the case.

In the northern city of Aleppo, the Syrian army supported by Russia is liberating tens of thousands of civilians who have been held under siege, against their will, by the West’s terror proxies since 2012.

Western media coverage on Aleppo is a diabolical sham. The US, British and French governments, as well as other Europeans, are jumping up and down with accusations of war crimes against Russia and its Syrian ally.

Scarcely any evidence is presented to substantiate these unhinged Western claims of what is happening in Aleppo. Virtually all the information that the West relies on for its allegations is sourced from Western and Saudi-funded organizations such as the so-called White Helmets and Aleppo Media Center, both of whom are embedded with proscribed terror groups like Jabhat al Nusra and Ahrar al Sham.

The Western capacity for denial is astounding. The vast majority of Aleppo residents – some 1.6 million people – are living willingly under the protection of the Syrian army. Yet the Western media never report this. Rather they focus on a minority district besieged by terrorists whom they lionize as “heroic rebels”.

Even when verifiable live broadcasts in Aleppo, set up at the humanitarian aid corridors established by Russian and Syrian authorities, demonstrate beyond doubt that the truces are flagrantly violated by the Western-beloved “rebels”, still the myth-making continues. During three days of humanitarian pause to help vacate civilians, the militants were seen shelling neutral transport arrangements and of holding people as human shields.

However, Western media vaguely and mendaciously report on “lack of security” hampering aid delivery.

Washington and its European allies, primarily Britain and France, as well as UN chiefs Ban Ki-Moon and Staffan de Mistura, the special envoy to Syria, are a disgrace. So too are the Western corporate news media who have lied all the way to conceal the real criminals in Syria.

In this mayhem and madness, it might seem perhaps counterintuitive to be optimistic. But good reason for optimism is that Western governments and their servile media are exposing themselves for the criminals and liars that they are.

The rogue-state behavior of Washington and its allies has become so rampant it is no longer possible to hide.

The public anger and disdain for this murdering cabal is fueled not only by what they see in Syria and the region. People all around the world are making the connection that US-led warmongering and dirty wars are rooted in the same murdering and plundering capitalist system that is killing their own societies and communities.

People are realizing more than ever that the high and mighty Western leaders who presume to sit as judges casting condemnations on others are actually the lowest, most despicable criminals.