E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER Volume 32, No. 20, May 17, 2018

E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER
Volume 32, No. 20, May 17, 2018

Schiller Institute International Conference: Building a New World Order of Peace In just over six weeks, on the weekend of June 30-July 1, the Schiller Institute will bring together participants from around the world for a conference near Frankfurt, Germany, on the theme “Building a world order of peace based on the development of nations.” The Strategic Alert strongly urges its readers to attend the deliberations at this decisive moment in time. The introduction to the invitation lays out the challenge: “We have clearly arrived at a moment in the history of mankind in which our intellectual and moral capacity to survive as a species is being tested. If we continue on the path of the past years and persist in the motto that might is right and that the ‘unity of the western world’ supersedes truth, we face the immediate danger that, in the absence of a valid system of rules, a hot war will develop out of the various international flashpoints, which could well be the last one for mankind. “The doctrine of liberal interventionism has increasingly overridden international law and the UN Charter since 1999, claiming the lives of millions, making it possible for Islamist terror groups to emerge in the first place, and causing unprecedented refugee flows. In the process, numerous ‘false flag’ provocations have been added to the long series of wars based on deception, from the Gulf of Tonkin incident (Vietnam, 1964), the “baby incubator lies” (Kuwait, 1991), Operation Horseshoe (Kosovo, 1999), and the yellow cake hoax (Iraq, 2003), up to other false flag operations in the recent period, such as the Skripal affair and the alleged use of chemical weapons in Syria, in which the role of British service secrets has been fully exposed. The eastward expansion of NATO up to Russia’s borders, the demonization of President Putin, the attacks on China, and the attempted coup against President Trump are the results of the same ultimately futile attempt to maintain a unipolar world order. “We need a fundamental policy change, international law and the UN Charter need to be restored, and geopolitics must be explicitly replaced by the higher principle of the interest of mankind as a whole. The closest approximation to the new paradigm of international relations today is China’s New Silk Road program, which bases economic and scientific cooperation on the mutual advantage of sovereign nations....” For more information and to register for the conference, readers are welcome to contact the SAS at strategicalert@eir. de  or the Schiller Institute directly at Konferenz2018@schiller
institut.de (in any language) or by ringing Ulrike Wolff at (49) 611 - 205 2065. Asian Leaders Pledge a New Era  of Cooperation and Development An exciting dynamic is sweeping Asia, with the breakthrough diplomacy on the Korean peninsula being but the most spectacular aspect of it. While just a few months ago, the idea of a summit between the President of the United States and the Chairman of North Korea was still dismissed by most as pie-inthe-sky, a definitive date for a meeting between Donald Trump and Kim Jong-un has now been set (cf. below).  This will be the first summit ever between the leaders of those two countries. During the subsequent negotiations, economic development needs to be just as upfront as the issue of North Korea’s nuclear program if real progress is to be made. Those issues were clearly on the agenda of the May 8 meeting between Chinese Premier Li Keqiang and Japanese Prime Minister Shinzo Abe in Tokyo, the first such visit of a Chinese Premier in eight years, which reflects the marked improvement in relations since 2017 after years of growing tensions. The two leaders were joined the next day by South Korea President Moon Jae-in for a trilateral summit, during which they vowed to expand regional cooperation and work toward ensuring peace on the Korean Peninsula. They also agreed to meet on a regular basis to function as “inseparable trade partners.” This was the first summit of the three East Asian powers since 2015, when the Obama Administration was pressuring Seoul to join its anti-China “Asia pivot”. Li Keqiang stayed in Japan for further meetings, in which he emphasized the importance of cooperation in innovation and high-end manufacturing, and praised the “hard-won momentum of of improvement in bilateral relations”. Prime Minister Abe stressed that the two countries have now entered an “era of coordination” rather than competition. Just before heading for Japan, Li Keqiang was in Indonesia on May 7, where he met with President Joko Widodo. China is now the country’s third largest investor in the country after Singapore and Japan, and its leading trade partner. Relations between India and China have also been strengthened in spite of certain long-standing disputes. During 2017, bilateral trade rose by an impressive 18.6% to $84.4 billion. Given that these are the world’s two most populous countries, there is room for much greater growth. The Chinese-initiated 
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Asian Infrastructure Investment Bank has already approved funding for $1 bn worth of projects in India, and is reportedly considering some $1 bn more. India is by far the largest recipient of AIIB investment. Finally, Malaysia will more forcefully join the Belt and Road Initiative following the surprise victory of the coalition headed by former Prime Minister Mahathir, a staunch defender of economic development and national sovereignty, who is no friend of international financial institutions (cf. below). A key for consolidating the “Asia Century”, however, remains U.S.-North Korea diplomacy. Donald Trump’s decision to withdraw from the agreement with Iran could have a negative impact on the upcoming negotiations (cf. below). Trump-Kim Summit Now Set  for June 12 in Singapore The announcement of the summit between President Trump and North Korean counterpart Kim Jong-un was made after Secretary of State and former CIA Director Mike Pompeo completed his second unannounced visit to Pyongyang and returned with three freed Americans. In the meanwhile, Trump will confer with South Korean President Moon Jae-in on May 22 in Washington, to further prepare for the historic event in Singapore. It is also now likely that the U.S. President will meet with Chinese President Xi Jinping during his Asia visit, either just before or just after his meeting with Kim, and according to Japanese daily Mainichi Shimbun , Xi might even attend that meeting. Chairman Kim also made a second visit to China last week, further solidifying Xi’s role in the unfolding diplomatic process. Since Nov. 2017, Beijing has tightened implementation of economic sanctions against the DPRK, while consistently demanding the full denuclearization of the peninsula and posting 300,000 troops in the provinces bordering on North Korea. Regime security and economic investment will be two crucial demands of Kim if he is to go forward with the dismantling of his nuclear weapons and ICBM programs. Washington is demanding Complete, Verifiable, Irreversible Dismantling (CIVD) of those same programs. If an agreement is reached, it will mark the beginning of a protracted diplomatic process that will extend for months or perhaps for years. The talks would likely be enlarged to include President Moon, then President Xi, and ultimately, Russia and Japan as well, to re-establish the original Six Party format. As for the economic demand, Mike Pompeo made clear after his second visit to North Korea that if a denuclearization agreement can be reached, the Trump Administration is prepared to help North Korea to develop its economy and “achieve prosperity on the par with our South Korean friends.” Both South Korea and Russia have made clear that there are great economic benefits to be derived from a denuclearization pact. Russia has revived long-standing plans to build oil and gas pipelines into North and South Korea, as well as the linking of a South-North Korea railroad to the Trans-Siberian Railway.  During their historic meeting at the DMZ on April 27, President Moon reportedly gave Kim a thumb drive with a detailed plan for investment throughout the North Korean economy. According to Xue Li of the Chinese Institute of World Economics and Politics, Moon’s plans would likely enhance cooperation with the Belt and Road Initiative, in particular with railway connections hooking up to the lines in China, and from there to Central Asia and Europe. According to Xue, the South Korean leader also wants to apply South Korea’s advanced capacities to the development of the Russian Far East. One aspect 
of this would involve the development of the Tumen River area, where it forms the border between China and North Korea and Russia and North Korea. An “Improved Deal” with Iran Must Entail  a Comprehensive Plan for Development Just as diplomacy between the United States and North Korea was moving forward rapidly, President Trump announced the withdrawal from the Joint Comprehensive Plan of Action (JCPOA), the P5+1 agreement with Iran. The  US pullout has put pressure on both Iran and Europe to either renegotiate aspects of the original agreement or proceed without US involvement. The White House has given European and other international corporations between 90 and 180 days to divest of their economic programs in Iran, which is still a substantial window of time in which to initiate new negotiations. Nonetheless, it is a high-risk gamble by Donald Trump, one that could ultimately backfire and quickly spiral out of control, in particular given the Israel-Iran military provocations and the rising tensions over moving the American Embassy to Jerusalem. European countries, as well as Russia and China, have stated their continued support for the JCPOA, and Iranian President Rouhani has said that Iran will continue to comply with the conditions. But that could prove to be difficult, if the hardliners in the country strengthen their hand. The IAEA has certified that Tehran is in full compliance with the agreement and US Defense Secretary James Mattis has also recognized that fact. But Trump has called the JCPOA the “worst deal ever”, and indicated that he has another one, although he has not provided any details. That issue was taken up by Helga Zepp-LaRouche in her international webcast on May 9. “First of all, any peace plan, or any security architecture has to take into account the security interests of all participating countries.” Iran has insisted on developing its own nuclear weapons program, she said, not only because of what happened to Saddam Hussein, and later to Muammar Qaddafi, but also because of the well-known secret that Israel has nuclear weapons. “So any agreement must include a security guarantee also for Iran, for it to work.” Then, “given the condition of the entire Middle East, after the destructive wars in Iraq, Syria, Yemen, Afghanistan, it is very clear that the only thing which will really solve the problems of this region would be what I have said many times before: You need the extension of the New Silk Road into the entire region, from Afghanistan to the Mediterranean, from the Caucasus to the Persian Gulf, and have a development plan for all of these countries as an integrated whole.” For that, Russia, China, India, Iran, Egypt, the United States, and European countries must agree to develop the region economically, and to rid it of terrorism. If President Trump has a more comprehensive plan, Helga Zepp-LaRouche hopes it will include such joint ventures, as the only way to stabilize the situation. A step in this direction was the decision taken by President Xi Jinping and India’s Prime Minister Modi in Wuhan in late April, to undertake joint development projects in Afghanistan. Moreover, China is opening a new train route to Iran connecting Tehran and Bayannur, a city in China’s Inner Mongolia region. Malaysia: Mahathir’s Surprise Victory Reflects World Paradigm Change A stunning and overwhelming victory was won on May 9 in Malaysia by the opposition coalition that former Prime Minister Mathahir Mohamad had put together to challenge the rul
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ing party, the UNMO, which he had previously led, as well as Prime Minister Najib Razak, his former protege. This is the first time since the independence from the British in 1957 that the UMNO coalition has been removed from government. Dr. Mahathir Mohamad, now 92 years old, served as Prime Minister of his country from 1981 to 2003, and famously stood up to George Soros and the IMF in the 1997-98 “Asia Crisis,” by rejecting their dictates to impose austerity, and imposing capital controls on the national currency, the ringgit. He declared currency speculation by Soros and his fellow vultures to be “unnecessary, unproductive and immoral.” He also fired his Deputy at the time, Anwar Ibrahim, who was backing the international financiers against his government. At the time, many EIR reports on the global financial crisis and on the crimes of George Soros, were being followed closely within the Malaysian government, while EIR took it upon itself to circulate Mahathir’s speeches and articles around the world, where other leaders suffering from “IMF conditionalities” were grateful readers. Mahathir, the longest-serving Prime Minister of Malaysia, voluntarily stepped down in 2003. But in 2015, he launched a fight against then Prime Minister Najib and his own party, over declining economic growth and corruption, which reached a peak with the scandal over a multi-billion dollar state investment fund (1MDB), billions of which are are still unaccounted for. Mahathir then formed his own party and joined a coalition (Pakatan Harapan, Alliance of Hope) which included several of his former enemies, including Anwar, and, to the shock of most experts, has now won the national election, and was sworn in as Prime Minister. In his press conference on May 10, the first question asked was about China and his view of the Belt and Road Initiative, since Mahathir had been highly critical of several recent deals in conditions he considered to be unfavorable to Malaysia. In response, Mahathir made clear that he fully supports the Belt and Road, and will work closely with China, while also reviewing some of the contracts. “As far as the Belt and Road problem is concerned,” he said, “we have no problem with that.” He recalled that he himself had written a personal letter to President Xi, “on the need of a land connection with Europe using trains, which are faster than ships.” China, he told Xi, has the technology to build such trains to transport goods to Europe, and to make Central Asia more accessible to China, Japan, and Southeast Asia. “That is our policy.” Like the Brexit vote, the election of Duterte in the Philippines, and the election of Donald Trump, the return to leadership by Dr. Mahathir Mohamad represents an unfolding global paradigm change, which could potentially have a major influence on resolving crises in the Mideast and elsewhere in the developing world. Mahathir is still deeply respected around the world, especially in the Islamic nations, for his defense of development and sovereignty against imperial controls. China’s Imports from Belt and Road Countries Are Booming A new report by China’s State Information Center shows that goods trade between China and countries participating in the Belt and Road Initiative (BRI) is growing fast. Total trade with the 71 countries considered part of the BRI increased by 13.4% in 2017 as  compared to 2016, according to a May 7 Xinhua article on the report. Trade is also becoming more balanced, as imports by China amounted to $666 billion equivalent (39% of 
China’s total imports by value), while exports reached $775 billion. That means a total of some $1.45 trillion, which is double the current amount of total trade between the United States and China. In terms of the rate of growth, for the first time, imports by China from these 71 countries grew more rapidly than exports, with an increase of 20%, while exports were up by 8.5%. The fastest rate of growth in 2017 was with Central Asian countries, followed by trade with Central and Eastern Europe. So much for the line peddled by Germany’s Mercator Institute, London’s Chatham House, and other think tanks, that the CEE and Central Asian countries joining the BRI are getting lots of debts, but not much more. The Center also reported that China’s largest category of exports to Belt and Road countries is that of mechanical and electrical products, which also represents a large category of its imports from them, along with fossil fuels. The majority of the trade was made by private companies on the Chinese side. Also significant is the increase in trade between Russia and China. According to Chinese Commerce Ministry spokesman Gao Feng, bilateral exchange of goods amounted to $31.2 billion in the January-April 2018 period, which is nearly a 30% increase over the same period in 2017, and it may well exceed $100 billion for the entire year of 2018. Gao attibuted this to the consistent stabilization of the Russian economy and growth of market demand. Of note is the expansion of cooperation in investment, aerospace, construction and infrastructure projects. Is EU Poised for a Showdown with China? At its summit in June, the European Union is expected to adopt the so-called “Europe-Asia Connectivity” plan, which has the pretention of being Europe’s “alternative” to China’s New Silk Road strategy. It will then be presented at the EU-China Summit in July. In preparation for that document, all the EU ambassadors to Beijing, with the exception of the Hungarian, issued in mid-April a confidential report stating that Chinese policy “runs counter to the EU agenda for liberalizing trade and pushes the balance of power in favor of subsidized Chinese companies.” China’s commitment to the WTO rules, they charge, was nothing more than lip-service not translated into “concrete actions”. After Germany’s Handelsblatt reported on that joint statement on April 16, Chinese Foreign Ministry spokesperson Hua Chunying countered on April 19 that EU leaders themselves have shown the report by Germany’s business daily to be inexact, since they have expressed interest in participating in the Belt and Road Initiative (BRI). “French President Emmanuel Macron called on the whole Europe to actively engage in the initiative during his visit to China. British Prime Minister Theresa May said that the Belt and Road Initiative has far-reaching influence over the globe and she hopes that the UK and China will carry out cooperation under the initiative to promote global and regional economic growth.” The Netherlands Prime Minister Rutte has said as much. Hua stressed the Belt and Road Initiative followed market rules and standards for high-quality sustainable development, adding that many trade barriers do exist in the world, but none of them have been created by the Belt and Road Initiative. However, Mrs. Hua’s statement was overly diplomatic, as the EU’s approach to China’s initiative is duplicitous. The EU-Western Balkans Summit to be held in the Bulgarian capital of Sofia on May 17, is expected to define a different view of “connec
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tivity” than that of the Chinese. EU Council President Donald Tusk and EU Commission President Jean-Claude Juncker will attempt to strongarm the participants into refusing any cooperation with China that is not approved by Brussels. A special case will be made with Croatia, because of the Paljesac Bridge project to connect the northern and southern parts of the country without going through Bosnia and Herzegovina. The contract was won by the China Road and Bridge Corporation (CRBC), but the losing bidders, Austria’s Strabag and an Italian-Turkish consortium, challenged the decision in court, arguing that the CRBC enjoyed state subsidies, which is in violation of EU law. Their case was rejected by the Commission and the Court. The Croatian government seems firmly committed to going ahead with this key infrastructure project, which is long overdue. The question now is whether the EU will renege on the €357 million funding it had announced. Prosecutorial Fraud Exposed  in “Russiagate” Probe in the United States In the last days, the systemic abuse of power (in addition to blatant political bias), which has characterized the actions of special counsel Robert Mueller in “Russiagate” has been exposed in three separate courtrooms, and in the U.S. Senate. * Prosecution of former Trump campaign chair Paul Manafort. In this case, Judge T.S. Ellis III accused Robert Mueller of acting with “unfettered power”, in expanding the “scope” of his investigation beyond that intended when his office was established. While he was charged with investigating possible collusion between the Trump team and Russians, Manafort is accused of financial dealings that pre-date by many years the 2016 election campaign. Judge Ellis has thus demanded to see the full, unredacted “scope” memo from Deputy Attorney General Rosenstein. * Indictment of 13 Russians and 3 Russians accused by Mueller of running a “troll factory” to help get Trump elected. Here, the Special Counsel never expected that he would have to produce any evidence, as the Russians named would never come to trial. Instead, one of the firms named has gone to court, demanding that Mueller submit to extensive discovery, as required by law. The judge in the case denied Mueller’s  request for postponement. * The guilty plea coerced from former National Security Adviser Michael Flynn. This case presents the greatest threat for the whole investigation, as Judge Emmet Sullivan has demanded that Mueller’s team present exculpatory evidence, which had been withheld. Mueller’s team got Flynn to admit he had told a lie to the FBI (about a perfectly legal meeting with the Russian ambassador), by applying classic prosecutorial measures most often used in organized crime cases, including threats to prosecute family members, and to extend the investigation so as to bankrupt the defendant, through soaring legal costs. Judge Sullivan demanded that Mueller produce an unredacted FBI interview report of the interrogation of Flynn, which will show that the agents involved in his interrogation stated that they found no deception on his part. That was also acknowledged by former FBI Director Comey during Congressional testimony on March 15, 2017. On May 11, Senator Charles Grassley wrote to FBI Director Wray and Rosenstein, demanding the release of documents in the Flynn case, which his committee had requested since Feb. 2017. Grassley then addresses Comey’s flip-flop in the case, between what he had stated to Congress,and what he is now claiming on his book tour. 
These challenges threaten to unravel the thin fabric of Mueller’s investigation, opening the way for shutting down the entire fraudulent assault on the Trump presidency. Wall Street Fears Argentina’s Macri  Won’t Survive the Crisis Argentina is in the throes of a deep financial crisis, which has seen the peso plunge by 11% since late April, forcing the government of neo-liberal Mauricio Macri to raise interest rates to a whopping 40% on May 4, in a desperate attempt to stem the decline. But that was to no avail. By May 11, the peso had plummeted to a record 24.24 to the dollar, despite the Central Bank’s $1.1 bn. intervention that day, after draining $6 billion from reserves in the previous two weeks. On May 8, President Macri sent his Finance Minister Nicolás Dujovne to Washington to beg the International Monetary Fund (IMF) for a $30 bn. standby loan. The mere thought of going to the IMF is anathema to most Argentines, who associate it with the traumatic crisis of 2001, brought on by years of the Fund’s usurious debt policies and economic looting, which resulted in default, social upheaval and unprecedented economic crisis. It was a source of great pride when, in 2006, then-President Néstor Kirchner paid off the country’s entire debt to the IMF and severed all ties to it. “There is life after the IMF,” he famously said. Yet Macri is desperate. In late April, JP Morgan sparked the currency run when it began to dump its holdings of Lebacs, a short-term, peso-denominated Central Bank bond which has served to attract hot money and build up a speculative bubble. Other investors followed suit, dumping Lebacs, and other bonds and public paper to purchase dollars. Nothing the government has done so far to stem the currency slide has worked, and foreign financial centers are now worried that Macri won’t survive. This is not just a currency crisis, however. Over the past two years, Macri has adopted the typical neoliberal scheme of an export-led economy, which collapsed when the price of soybeans dropped on the international markets. At the same time, they have gutted the country’s industrial base, opened it up to a flood of foreign imports, rewarded speculation by lifting all bank and currency regulations, and assaulted living standards through deep austerity. The government is in full-blown panic mode. While its economics team will spend the next six weeks negotiating with the IMF, there’s little question that the Fund will demand shock application of the austerity policies that Macri wanted to apply more gradually: privatize the pension system, reform the labor code to eviscerate workers’ rights, and slash the budget to the bone to reduce the fiscal deficit. Knowing that these policies would likely provoke a social explosion, Macri has reportedly been contacting leaders of G-7 countries, urging them to use their influence with the IMF to argue on Argentina’s behalf for less onerous conditionalities.
E.I.R. STRATEGIC ALERT        www.eir.de  Published by: E.I.R.GmbH,  Bahnstr. 9a, 65205 Wiesbaden Tel.: 0611/73650, Fax: 0611/9740935, Email:  info@eir.com Verantwortl. f. d. Inhalt: Dean Andromidas, Claudio Celani Subscription: EUR 3000/ ISSN  0936-7527 © E.I.R. GmbH  Alle Rechte vorbehalten, auch die des Nachdrucks von Auszügen, derphotomechanischen Wiedergabe und der Übersetzung, Printed in German