E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER

E.I.R.STRATEGIC ALERT
WEEKLY NEWSLETTER
Volume 28, No. 38 - September 18, 2014
The United States and Europe
Push More Wars in Eurasia
The strategic dangers considerably heightened over the past
week, both in respect to the Western “counter-terrorism”
strategy and to EU/NATO expansion to the East.
On Sept. 10, Barack Obama delivered a nationwide television
address in which he spelled out his plans for a war to destroy
the Islamic State in Iraq and the Levant (ISIL), while at the
same time maintaining his committment to back Syrian rebels
fighting to overthrow the Assad government in Damascus. This
“mission impossible” has already drawn sharp criticism from
a wide range of military specialists and Members of Congress
from across the political spectrum (cf. below).
The war plan he announced includes $500 million in new
aid to the Syrian rebels and the establishment of new training
bases in Saudi Arabia – the very country that has been key in
financing the radical jihadists from the beginning.
Moreover, in flagrant violation of international law, Obama
declared that he would be launching military actions against ISIL
forces inside Syria without the permission of the Assad government.
He also claimed that he would accomplish all of this without
deploying any American “combat boots on the ground”,
although recognizing that it would be a long struggle.
At the same time, the White House has excluded cooperation
with Iran or Syria, despite the fact that their exclusion virtually
assures that the British-Saudi led drive for a perpetual Sunni
versus Shiite confrontation will go forward.
Even as Obama was touting the support of the Sunni Arab
states for his new crusade, he was coming under scathing attack
for refusing to declassify 28 pages from the original report
into 9/11 that documented direct Saudi complicity in those
attacks. Moreover, in a supreme act of disrespect for the 9/11
families, Obama chose to dispatch Secretary of State Kerry to
Jeddah, Saudi Arabia, on Sept. 11, the very anniversary of the
2001 attacks.
The same week that war was escalating the Mideast, the U.S.
and the EU announced new sanctions against Russia that aim to
shut it out of the international financial system altogether. But
Moscow is deepening economic and security cooperation with
other countries (cf. below).
The Shanghai Cooperation Organization, for example, held
its annual conference Sept. 12, where plans were being finalized
for another new development bank. The SCO, which was
founded to combat terrorism in Eurasia, announced plans to
formally incorporate India and Pakistan as new full members
in 2015, and grant full membership to Iran once international
sanctions are lifted. Thus, security cooperation will cover all of
Central Asia, South Asia, Russia and China.
The sane option for the United States and Europe would be
to fully cooperate with the SCO in conducting a campaign to
weaken and eventually destroy all radical jihadist threats. That
would also entail working with both Iran and Syria. But the
goal of those governments for the moment is rather to foment
permanent war in the heart of Eurasia in a desperate attempt
to save their system.
Opposition to President Obama’s
“Anti-Terror” Drive Explodes
“This is war, despite the idiots in the White House,” was Lyndon
LaRouche’s conclusion, after listening to President Obama’s address
to the nation on Sept. 10 (cf. above).
LaRouche was attacking the dangerous spin coming from the
White House, which lied that what Obama was proposing was
not “war”, but “counter-terrorism”, because only Congress, under
the Constitution, has the authority to declare war. Obama,
in his speech, indicated that he does not need Congressional
approval to move ahead with his plans, and will not request it.
In the hours before and after Obama’s address, a slew of
commentators and elected officials joined LaRouche in identifying
the impeachable nature of Obama’s action, as the following
examples of comments demonstrate:
* Democratic Senator Manchin -- “I’m not sure what the definition
of war would be then.”
* Democratic Representative Himes -- “Do we as Americans
want to continue to cede war-making authority, which in the
Constitution is very clearly placed in the hands of the representatives
of the people (i.e., Congress), in the hands of one
man?”
* The 76-member Congressional Progressive Caucus put out
a statement, insisting there must be “a full and robust debate
in the Congress on the use of military force,” calling on House
Speaker Boehner to put forward legislation.
* Even the normally pro-war, pro-Obama New York Times
ran an op-ed by Yale University Law Professor Bruce Ackerman,
titled “Obama’s Betrayal of the Constitution,” in which
he wrote, “Nothing attempted by his predecessor, George W.
Bush, remotely compares in imperial hubris.” This is “a devastating
setback for our constitutional order.”
* Jack Goldsmith, a former official of Department of Justice
under George Bush, authored an article in Time magazine titled
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2 WEEKLY NEWSLETTER n°38 / 2014
“Obama’s Breathtaking Expansion of a Presidents Power to
Make War.”
There is also considerable opposition among Democrats to his
plan to finance anti-Assad forces in Syria. Retired military officials
have warned that it is virtually impossible to prevent arms
sent to “moderates” from ending up in the hands of jihadis, as
has happened repeatedly. Further discrediting Obama, just two
days after his speech, some U.S.-backed rebel groups signed a
truce with ISIL in order to fight the Assad regime together!
In addition, there is deep concern over reliance on Saudi Arabia
as a leading ally in the fight against ISIL, given the proven
track record of the Saudis as sponsors of extreme Sunni militants,
from bin Laden to ISIL. Former Senator Bob Graham,
who chaired the Joint Congressional Inquiry in the 9/11 attacks,
stated bluntly Sept. 12, that the Saudis “essentially are
the creator of ISIS and the primary source of its financial support
today.”
EU Escalates Economic Warfare against Russia
Despite the many warnings issued by industry leaders, European
Union leaders slapped a new round of economic sanctions
on Russia, that entered into effect Sept.12, in spite of the
progress that has been made in Ukraine. They include: stricter
rules on the export of “dual use” goods and a ban on exports
of equipment for Russian energy firms; an embargo on loans
with a maturity of over 30 days to state-owned banks and major
energy producers, and a ban on providing any equipment,
technology or assistance in oil and gas projects.
In addition, the EU decreed a travel and visa ban on 24 officials
of Russian and Eastern Ukrainian institutions, including
the Prime Minister of the Donetsk People’s Republic.
Moscow is contemplating “calm, measured” counter-measures
aimed at protecting national economic interests, officials
have stated. The economic damage will be immense for both
sides, but likely even greater for Europe because Russia can
count on the active support of the other four members of the
BRICS group (Brazil, India, China, South Africa) and of states
orienting toward this group, like Argentina, Egypt and Iran.
The boomerang of the sanctions against the EU was denounced
in Vienna on Sept. 11 by Team Stronach, one of the
three opposition parties in the Austrian parliament. The new
measures, they said, will make it difficult for Russian firms to
pay back their loans from banks, if their revenue is cut. This,
in turn, will also hit “systemic” banks, potentially in the range
of 40 billion euros, and threaten 11,000 jobs in Austria alone,
while necessitating new bailouts by the taxpayers.
From Germany, CSU parliamentarian Peter Gauweiler, who
arrived in Moscow Sept. 12 to attend the opening of the exhibit
on “German Arts and Literature in Russia”, called the sanctions
meaningless. Even more to the point, Eckard Cordes, the
chairman of the Committee on Eastern European Economic
relations, which represents some 200 companies with investments
in Russia, called the sanctions a “mistake”, in particular
because they jeopardize the still-fragile ceasefire in Ukraine,
and increase tensions.
Russian President Putin made the same point, noting that the
provocative stance of the EU and the U.S. appear to be aimed
at subverting the peace process, rather than supporting it.
China, Russia Setting up an Alternative
to SWIFT Payments System
So-called financial experts and Treasury officials in the West
have been boasting that the Russian economy will be totally
crippled by the sanctions imposed by the West, in particular by
cutting Russia’s banking system off from the global interbank
payments system known as SWIFT (Society for Worldwide Interbank
Financial Telecommunication).
But, to their dismay, China and Russia have moved to create
an alternative to SWIFT, which involves Russian banks using
China’s own UnionPay interbank transfer system. During
the visit of Russian deputy Prime Minister Shuvalov to Beijing
Sept. 9 and 10, he said that UnionPay is “ready for a full-scale
collaboration and will provide all infrastructural capacities for
that.”
Since Russia’s national interbank payments system is not
yet deployed, Russian banks will meanwhile set up accounts
in Chinese state banks, and Chinese firms will be able to make
loans directly to Russian companies, thus effectively opening
the Chinese payments-transfer system to the Russian banking
system.
The Chinese National Petroleum Company (CNPC) was also
enabled to invest $1 billion into one of the largest and most developed
petrochemical fields of Rosneft, the Vankor field. This
investment is also refinancing credit for Rosneft, which the EU,
in another bout of self-destructive sanctions announced Sept.
11, cut off from borrowing for more than 30 days.
Shuvalov and his Chinese counterpart Zheng Gaoli also
agreed on currency swaps for trade settlements, thus bypassing
the dollar system, an arrangement that was worked out in
July prior to the BRICS summit.
These are all measures that had been called for last April in a
15-point program of financial and economic defense presented
to President Putin by his economic advisor Sergei Glazyev, a
leading nationalist economist who has in the past brought U.S.
economist Lyndon LaRouche to Russia to address the Duma.
At the same meetings between Shuvalov and Zheng, Chinese
investment in Russian high-speed railways was also discussed.
UN General Assembly Condemns
Vulture Fund Assaults on Nations
On Sept. 9, the United Nations General Assembly overwhelmingly
supported a convention to protect nations from predatory
funds. The resolution, proposed by Argentina and backed
by the Group of 77+China, calls for creating a framework for
regulating debt restructuring processes, to prevent vulture
funds from blocking agreements with most creditors as they
have done in Argentina.
The vote was 124 in favor, 11 against (including the U.S.,
Germany and Japan), 44 abstentions. The text calls for “intergovernmental
negotiations” to create a framework, fostering
“predictability of the international financial system, and achieving
equitable and inclusive growth.”
In a nationally-televised speech the same evening, a very
happy President Cristina Fernandez de Kirchner told her fellow
citizens that “we should all feel very proud” of this great
“diplomatic success...which isn’t just Argentina’s but rather of
all nations of dignity which defend the rights of their people.”
Thanking those who supported the measure -- she particularly
highlighted the leadership of the G-77 + China -- and even
those who abstained “because of their commitments,” the Argentine
President then pointedly addressed the eleven countries
that voted against it:
“Perhaps some day they will understand that we need a
more balanced world, a more just one with more doves and
fewer vultures. We are fed up with the hawks and the vultures!
... The large nations may have looked the other way, but they
know that it’s not Argentina’s future that depends on these
things, but the future of the entire planet!”
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Draghi’s Bubble to End All Bubbles
The financial bubble obeys an iron law: its growth is also its
death. Thus, by announcing Sept. 4 measures to prop up that
bubble, Mario Draghi has moved it closer to its demise. The
measures are:
* a discount rate of 0.05% and an interbank rate of -0.2%;
* quantitative easing (QE) in the form of ECB purchase of
private asset-backed securities and ECB purchase of covered
bonds (usually issued by banks), both starting in the fourth
quarter;
* another LTRO wave of ECB ultra-cheap lending to banks, to
start “in two weeks”.
The latter is so-called “funding for lending,” and is supposed
to increase credit to the productive sector. In fact, after the
same scheme was implemented in the UK, bank credit to the
economy was lower than before.
The intention behind the ECB move is candidly described in
a 104-page study issued by Deutsche Bank strategist Jim Reid
released Sept. 11. “Over the last couple of decades the global
economy has rolled from bubble to bubble with excesses never
fully being allowed to unravel,” he writes.
Now, it has “migrated into the bond market,” and there is
nowhere left for it to go given that it is now in the hands
of governments and central banks. Therefore, “we think this
bubble needs to be maintained to ensure the solvency of the
current financial system.”
Accordingly, stock and bond markets surged after the announcement
of the ECB liquidity expansion. Some sources say
it is not only private banks and hedge funds which are speculating,
but central banks themselves are directly buying futures and
other derivative products in order to prop up the markets.
Banks are particularly happy with the Asset-Backed Securities
program. On Sept. 12, Jean-Claude Juncker stated that a
priority of his new EU Commission will be to revive the ABS
market. The plan was drafted for the ECB by Black Rock, itself
a major owner of such paper, and will allow banks to package
their toxic loans into securities, which the ECB will buy.
However, the ECB already plans to have at least part of that
debt be shouldered by taxpayers, i.e. government money. But
this desperate move will not prevent the bubble from bursting,
but only accelerate its explosion. Meanwhile, the recession in
the EU is becoming a depression, mass unemployment in some
countries has reached a real figure of 25% and in several cases
democratic institutions have been irreversibly compromised.
Scottish Referendum:
Soon an Un-United Kingdom?
As we go to press, the polls show no more than a two percentage
point difference between the Yes and No votes on Scottish
independence, in the referendum of Sept. 18.
Scotland’s first minister, Alex Salmond, who heads the Scottish
National Party, wrote in The Daily Record Sept. 12 that he was
now “more confident than ever” that Scotland would vote yes.
“Despite Westminster’s efforts we’ve seen a flourishing of national
self-confidence. It’s this revival in Scottish confidence that
tells me we’ll make a great success of an independent Scotland.”
The No camp has led a totally negative campaign, with everyone
from Prime Minister David Cameron to the leaders of
Labor Party and the Liberal Democrats declaring that if the
independence vote wins, Scotland will fall into the darkest and
deepest of abysses. They have been using the same negative
tactics the EU uses: “we can’t end the Euro”, “you can’t vote
down the bailout memorandum.” In other word, there is no
future outside of the present disastrous reality.
Precisely this argument is what is attracting many undecided
votes to the optimism expressed by the Yes campaign. Unlike
Catalonia in Spain, Flanders in Belgium or Bavaria in Germany,
Scotland is among the poorer regions in the UK and despite
the fact that it has been the center of the country’s oil and gas
industry it has not only not benefited from these resources, but
has suffered the immensely from the de-industrialization policies
of the past four decades. The Yes voters truly believe the
Scots on their own can create a better future.
Underscoring this fact one pollster told the the Guardian:
“ultimately it comes down to whether people think they will
be better off with independence or better off staying part of
the Union... all the uncertainty and distrust that the Better
Together campaign was promoting, that negative image about
not knowing what’s going to happen with the economy, that’s
being replaced by the optimism and the enthusiasm of the Yes
campaign.”
If the UK becomes the Un-United Kingdom, a European De-
Union will not be far behind.
Western Cover-up of Responsibility
for MH17 Crash Begins to Crumble
The Dutch Safety Board finally released last week a preliminary
report on Flight MH17, which crashed over Ukraine July 17.
The report states that damage to the fuselage and the cockpit
“is consistent with that which may be expected from a large
number of high-energy objects that penetrated the aircraft
from outside.”
The preliminary report provides no evidence whatsoever of
a Russian role in the downing of the airliner – although that
alleged role was the grounds given for past sanctions taken by
the EU and U.S. as well as for the more recent ones.
Sources with a military background with whom the Alert
Service spoke, pointed out that the images of the damaged
cockpit section of MH17, that circulated on the internet well
before the Dutch report, do not show the impact of a missile,
even one which would have exploded at some distance from
the airliner, but rather the impact of aircraft machine gun fire.
That, in turn, points to Ukrainian airfighters that would have
fired, either intentionally or by accident, on the civilian airliner.
That evidence may also be known, according to one source, by
the German and U.S. governments, which are attempting to
cover it up.
A former senior German diplomat who has looked into the
case, has also come to the conclusion that Ukrainian airfighters
downed the airliner, and believes this is beginning to dawn on
the Dutch as well. This will sooner or later cause pressure on
the Dutch authorities to tell the truth, which will create a major
diplomatic clash with the U.S. and other Western governments
that are intent on concealing the evidence.
Indian Prime Minister Modi Pursues
Diplomacy Based on Development
Since becoming Prime Minister of India in late-May, Narendra
Modi has moved quickly to establish his reputation among the
Indian youth as a “man committed to development”, a reputation
he had earned during his three-term (2002-2014) chief
ministership of the State of Gujarat. Short of adequate finance
to develop India’s ramshackle infrastructure, which requires,
according to his own calculation, at least $1.5 trillion in the
next six years to make India ready to be an agro-industrial
powerhouse, Modi has focused on inviting large foreign investments
in the infrastructure sector to get the ball rolling.
The major investors will be Russia and China, bringing in
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4 WEEKLY NEWSLETTER n°38 / 2014
infrastructure-related technologies, such as high-speed trains,
and building smart cities and industrial parks. During the BRICS
Summit meeting at Fortaleza in July, Modi met with Russian
President Putin and discussed greater cooperation between the
two countries in the nuclear industry, trade and science and
technology. Subsequently, he has visited Japan where Prime
Minister Abe has pledged to invest $35 billion in India over
the next five years to build the Japanese bullet train in the
Mumbai-Ahmedabad rail-sector, as well as contributing to the
Delhi-Mumbai industrial corridor now under progress.
When Chinese President Xi Jinping visits India this week, the
two countries are expected to sign a pact that will open the
way for Chinese participation in new rail tracks. Reports indicate
Beijing is looking to invest another $50 billion in building
India’s ports, roads and a project to link rivers, which are part
of an infrastructure push that Modi has said is his top priority
to crank up economic growth.
Modi, who had earlier established personal comraderie with
many Japanese and Chinese leaders, is keen to combine his foreign
policy with his planned domestic economic development,
and is expected to lean heavily on BRICS, Japan and South
Korea’s economic and technological capabilities.
Egyptians Invest in New Suez Canal
in a Patriotic Spirit
The decision by the Egyptian government to fund its New Suez
Canal Project through the sale of investment certificates to
Egyptian citizens has been a tremendous success. In the first
six days, over 39 billion Egyptian pounds (the equivalent of
5.5 billion dollars) were sold. While the project costs EGP 60
billion, the most optimistic estimate was that only 20 billion
would be sold and the rest would have to be financed by loans.
As Al Ahram Weekly wrote, they have been “selling like hotcakes”.
“This is for the country; the return on EGP100 is not so
important,” a maid told the weekly. Indeed, the general public
sees the certificates as an investment in the future.
The five year certificates are sold in 10, 100 and 1,000
pound denominations, with a 12% interest rate with a government
guarantee. According to central bank governor Hesham
Ramez, 90% of the funds raised were from individuals, and
only 10% from institutions such as insurance companies and
pension funds. The certificates are only available at three states
banks, which have extended banking hours to meet the demand.
Many Egyptians are emptying their savings accounts, or
buying the certificates as secure investment for the future of
their children.
While some free market economist and bankers claim this
method will have a negative effect on the ability of banks to
lend and therefore hurt the economy, quite the opposite has
happened.
Moreover, the price of the dollar has fallen in Cairo, as savers
are buying the certificates rather than dollars which they would
stash in their mattresses or in put a foreign bank account. Now,
they are investing in a national project, which is already putting
thousands of people to work.
Background Report:
China’s Vision Is Not Based on Geopolitics
Helga Zepp-LaRouche’s recent two week visit to China began
with a conference Aug. 25 on the new Silk Road at the Lanzhou
university, and ended with a major conference in Beijing Sept.
5, sponsored by China Investment magazine. Between the two,
as President of the international Schiller Institute, she gave
interviews to the public television station CCTV and to China
Radio International, in addition to many private meetings.
In a webcast Sept. 11, Zepp-LaRouche summed up her impressions
of her trip (http://bueso.de/node/7669). Not only
does China continue to make spectacular progress in building
infrastructure throughout the country at a pace unheard of
today in Europe, she stressed, but the government is simultaneously
striving to make sure that the population remains or
becomes conscious of its long and rich cultural heritage, such
as the Great Wall and the Silk Road.
The crucial conclusion she drew from her visit is: We must
make sure that the German population and others in Europe
and America acquire a correct understanding of what is going
on in China with its Silk Road and space policy.
What one generally hears from think-tanks in the West,
Zepp-LaRouche said, is that China is just wants to extend its
influence and further its imperial expansion. “Nothing could
be more wrong”, she commented. But these Westerners judge
China’s economic and space policies by projecting onto Beijing
their own pursuit of geostrategic interests, such as in the EU,
which is intent on expanding more and more. Why? Because
the EU considers, wrongly, that its geopolitical interests are in
blatant contradiction with those of others countries, such as
the US, Russia, China, the BRICS group.
But what is motivating Chinese policy, she said, and what
has become the guiding light for the BRICS and for a growing
number of countries around them “is not geopolitics. People
in the West cannot even imagine that countries exist that are
not operating on the basis of neo-liberalism, monetarism, positivism
and geopolitics, and whose axiomatics are perhaps not
identical with but are very similar to the thinking and principles
that Gottfried Leibniz put forward at the end of the 17th and
beginning of the 18th Centuries.” That is the outlook of China
today.
Many people may not understand that, or believe it, Helga
Zepp-LaRouche said. But she can assure them that China is operating
for the moment on the basis of 5,000 years of Chinese
history, more than that of any other country.
In her view, China is a cultural nation which is not imperialist,
whose interest is to further develop mankind. “Since the
reforms of Deng Xioaping at the latest, by applying the correct
scientific principles, China has realized the greatest economic
transformation of any country on this planet. And they are
now at the point where they are saying: We will transform the
other, still undeveloped regions of China, and raise the population’s
living standards, and above all we will make this model of
development available to all, in the form of the New Silk Road
being in the tradition of the old Silk Road. This is an open concept.
Everybody is invited to join in and contribute. It is explicitly
inclusive and not directed against the alleged geostrategic
interests of other nations or groups of nations.”
That is what we must get the West to understand.
E.I.R. STRATEGIC ALERT www.eir.de
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Verantwortl. f. d. Inhalt: Dean Andromidas, Claudio Celani
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