E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER Volume 32, No. 21, May 24, 2018

E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER
Volume 32, No. 21, May 24, 2018

Beyond a Multitude of Crises,  the “Bigger Picture” Is the Determining Factor The moving force behind international relations today is the win-win paradigm and its subsumed shift away from geopolitics. Nonetheless, there are any number of flash points that could quickly blow up into a major conflict. The world became painfully aware of that with the killings and mass shootings of Palestinian civilians by Israel military forces on May 14, just as the United States was opening its embassy in Jerusalem. At the same time, Israel and Iran have engaged in military actions and escalated threats that could engulf the entire Southwest Asia region. Resolution of the Korean crisis remains on due course, despite efforts by the “war party” to derail the process. In that context, the North Koreans strongly attacked a statement that White House national security adviser John Bolton had made weeks earlier, suggesting that the “Libyan model” of dismantling nuclear weapons could be applied to Pyongyang. Amid the ado, President Trump made clear that he had no intention of attempting to go for regime change as was later done in Libya (cf. below). On the trade front, negotiations between the United States and China, which were widely reported to be headed for a total failure, turned out to be overall productive, in particular after a private discussion between Vice Chinese Premier Liu He and Donald Trump in the White House and because of the close working relationship between President Xi and his American counterpart (cf. below). A major question mark remains what will happen with the P5+1 agreement with Iran, which the United States officially withdrew from on May 8. The Europeans, as well as Russia and China, have stated their adherence to the Joint Comprehensive Plan of Action (JCPOA), and the EU is apparently acting accordingly. The European Commission announced on May 18 the launching of a “formal process to activate the Blocking Statute” of 1996 and update it, to protect European firms that continue to do business with Iran. That statute would reportedly allow companies to recover damages caused by U.S. sanctions and to neutralize the effect of any foreign court decisions related to non compliance with those sanctions. The Europeans, however, might make more demands on Tehran, in particular as concerns the missile program. How Donald Trump will deal with this situation in the future is un
clear, but his decision to quash the JCPOA has not gone unnoticed in Pyongyang. There is already increasing opposition in Europe to the new sanctions that the U.S. Congress imposed on Russia, as well as to the threat to take punitive measures related to the Nord Stream 2 gas pipeline between Russia and Europe. The Poroshenko government is violently opposed to that project, which would bypass the Ukrainian territory and thereby Kiev’s ability to siphon off part of the deliveries. All this was discussed on May 18 by Vladimir Putin and Angela Merkel during their meeting in Sochi. Relations with Russia are key to the future of the world. In that light, the formation of a new government in Italy provides another indication of the shift in international relations (cf. below), delivering a potential blow to Brussels from which it may not recover. Preparations Down to the Wire  for Trump-Kim Summit Despite the last moment cancellation of the scheduled meeting between North and South Korean officials and conflicting statements coming out of Pyongyang, the Trump Administration continues to prepare for the scheduled June 12 meeting between President Trump and Chairman Kim Jong-un in Singapore. It will not be clear until the two leaders actually sit down face to face whether that historic summit will take place or not. While Pyongyang has freed three American prisoners and announced plans to permanently dismantle one nuclear weapons test site in the presence of international observers, they have also indicated that they will have strong conditions attached to any denuclearization plan, and they may demand to retain a small arsenal of existing nuclear bombs as a “guarantor” of US compliance. The North Koreans also issued strong statements last week condemning White House National Security Advisor John Bolton’s remarks from April, on the possibility of applying the “Libyan model” of destruction of nuclear weapons to North Korea. While those statements carefully differentiated between Bolton and the much more positive statements coming out of President Trump and his newly confirmed Secretary of State Mike Pompeo, the mood going into the talks has taken a turn for the negative. Indeed, White House sources report that Trump understood 
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the stupidity of the Bolton remarks, given that Libyan leader Qaddafi was overthrown and brutally murdered in a regime change action led by the United States, France and Britain after he dismantled his weapons of mass destruction, and that Trump was angry that Bolton had inserted himself into a negotiating process that has been handled, from the outset, by Pompeo. President Trump clarified that “Libya is not a model that we have at all” in dealing with North Korea situations, and that a US-DPRK deal could lead to a new prosperous North Korea free from foreign threats. These latest developments are by no means a sign that the talks are off, or that Kim is walking away from his earlier statements, committing to the denuclearization of the Korean peninsula. There are continuous behind-closed-doors communications between the US and North Korean teams preparing the summit, and to date, those talks have been kept out of the media. Trump believes that once he and Kim sit down across the table from one another, they can come to an agreement on steps forward. Whatever statements are made in the run-up to the planned summit, the crucial question is: Will the meeting take place? North Koreans Look to Chinese Model  to Fight Poverty and «Open Up» A high-level North Korean delegation from the Workers Party of Korea spent two days in China in mid-May, visiting some of China’s key economic and agricultural development sites as well as scientific institutes and high-tech companies, before meeting President Xi on May 16. The delegation was led by Pak Thaesong, vice-chairman of the party’s Central Committee,  who reported he had been entrusted by Kim to study China’s economic model of “reform and opening,” and confirmed that the party’s new strategic line is to prioritize economic development. Pak Tae-song is reportedly also involved in discussions on “a revolutionary transformation of scientific education programs,” which Kim Jong-un had emphasized at a recent Central Committees plenum. In that light, other locations the delegation visited included the information center at the Chinese Academy of Sciences at Zhongguancun, known as China’s Silicon Valley, where more than 20,000 high-tech companies are located, as well as the Institute of Cereal Science at the Chinese Academy of Agricultural Sciences and an exhibition hall on agricultural technology. President Xi, according to CCTV , stated his support for “the improvement of North-South (Korean) relations, the promotion of dialogue between North Korea and the United States, denuclearization on the peninsula and North Korea’s development of its economy.” The Chinese leadership has been urging Kim Jongun not to cancel the June 12 summit with President Trump. Xi has encouraged the North Koreans to find their own path to economic development, and Kim has already declared that the official policy is to “reform and opening up” on the China model. Moreover, the director of the World Food Program, David Beasley, made a four-day visit to North Korea in May to assess emergency food needs there. Interviewed on China’s TV network CGTN May 12, Beasley said that he had found no threat of starvation in the D.P.R.K., but extensive threats of, and existence of, malnutrition. In that context, he raised China ‘s “amazing success story in addressing world hunger. What they have done is unprecedented, a kind of miracle, bringing 800 million people out of 
deep poverty. It is a model to be replicated, and we have called on China to aid other countries wherever needed, to replicate this success.” Tentative Agreement Reached  to Resolve U.S.-China Trade Dispute The looming trade crisis between the United States and China received a reprieve in a meeting between President Trump and Chinese Vice Premier Liu Hu on May 17. The latter was in Washington for talks on the issue after Donald Trump backed away from a measure to cut off access to the U.S. market for Chinese IT giant ZTE. Trump personally went against his own economics team in calling for a moratorium on the proposed measure. Otherwise, the trade talks between the American and Chinese delegations were reportedly heated with the Americans demanding the Chinese reduce their trade deficit with the U.S. by 200 billion dollars this year, a draconian measure which would have serious repercussion for the Chinese economy if it were done. Subsequent to the discussions of the delegations, Liu He met personally with Trump and indicated what his government was prepared to do. He emphasized that the personal working relationship between Presidents Xi and Trump was key to the achievements. In a communique released after that meeting, it is stated that China will purchase more from the United States, including agricultural products, which they have traditionally purchased, as well as energy, which may well involve the much discussed LNG exports from Alaska. The communique also indicated that China will buy more manufacturing goods and services, underlining the “need to create more favorable conditions” for such. In fact, the Chinese would like to purchase more hardware in the area of high technology, but cannot for now due to the tight restrictions that have been placed on them. Will they be loosened so that China can acquire the items they really need? The communique is not clear on that point. A U.S. delegation will go to Beijing to discuss the details of the agreement. In an interview with CCTV after the meeting, Vice Premier Liu expressed some satisfaction with his meeting with President Trump, but he also indicated that the underlying structural problems that lay at the basis of the imbalance in trade will take a longer time to resolve. Global Times gave rather positive coverage to the agreement, writing that it “has followed the win-win principle. The US will have the opportunity to reduce its trade deficit with China, while China will achieve the consistent purchase of US goods to benefit the development of the country and its people’s life.” In contrast, the China-bashers in the United States among the neocons and neolibs have launched a major mobilization in Congress to try and sabotage any agreement. New Italian Government Could Become  a Game Changer Internationally The new Italian government, formed by the “populist” M5S and Lega parties may upset the apple cart in Europe, even if its anti-EU positions have been watered down due to compromises with the establishment. The “Contract for a Government of Change” signed by the two leaders Luigi Di Maio and Matteo Salvini calls for changes in foreign and economic policies which, if implemented, would counter EU geopolitical schemes and throw a monkey wrench into its austerity regime. The contract characterizes Russia as a “potentially ever more relevant economic and commercial partner” and calls for lifting 
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sanctions. As for Brussels, it proposes to “examine the competencies of the EU by returning to the member countries those competencies that cannot be effectively managed at the level of the Union.” On the economic side, it recommends budget flexibility and a national investment bank, and last but not least, banking separation: “We must go towards a system in which the retail credit bank and the investment bank are separated, both as concerns their type of activity and as concerns supervision.” EU officials are already issuing warnings, with French Finance Minister Bruno Le Maire stating that if commitments on “debt, deficit and bank consolidation” are not kept, “the entire stability of the Eurozone is threatened.” Lega head Salvini answered calmly that “We will go to Brussels and negotiate. We are not Greece. We have a larger negotiating power, and greater economic strength than other countries”. Di Maio stated that we “will demand margins to be able to spend as second largest manufacturing power which pays 20 billion [to the EU] and gets 10-12 back.” Sen. Alberto Bagnai, a sovereignist economist who has now joined Lega, explained in a radio interview: “We do not want to make war against anyone, either the ECB or Europe. We simply want to put our country in shape to recover and express its potential.” That would be in the interest not only of Italy, but all of Europe, he explained, because forcing countries such as Italy “to operate below its capacities, is doomed to fail.” Bagnai, who is the majority speaker on the (current) government draft budget law, is also campaigning for the Belt and Road. Speaking at a rally in Sardinia May 17 for the coming regional elections, he noted that Sardinia has a central position in the Mediterranean that makes it an extremely important logistical hub. And therefore, we must negotiate with the EU – but maybe, first of all with ourselves – a certain new way of dealing with the fact that new routes from the East to the West – the famous Belt and Road, what they call New Silk Road – finds important terminals for instance in this region too. And this would be a way to help strengthen its development.” Italy will not leave the euro under the new government, but the EU integration schemes pushed by Jean-Claude Juncker, Mario Draghi, Emmanuel Macron and Angela Merkel are as good as dead. Will Former CIA Head John Brennan  Finally Be Indicted? Over the past weeks, the focus of the “Russiagate” scandal has shifted from targeting President Trump to an investigation of those forces who made up the charges that he colluded with the Russians to rig the 2016 election. And most of those under fire have been officials of the U.S. Department of Justice, especially from the FBI. Now, former CIA Director John Brennan has come under a spotlight, and he is reportedly extremely worried about what will happen next. The renewed focus on Brennan came when his former deputy director, Gina Haspel, was nominated to head the CIA. Haspel comes with significant baggage, as she was a direct participant in torturing suspected terrorists at a prison in Thailand, and has acknowledged that she was involved in destroying documents to cover up the illegal abuse. In spite of this, she was confirmed by the Senate, after some “arm-twisting” on her behalf carried out by Brennan and other past CIA directors, as well as by former Director of National Intelligence James Clapper, Brennan’s collaborator in pursuing Russiagate. Kentucky Senator Rand Paul sent a pointed letter to Haspel, 
asking whether she “or anyone else at the CIA ever cooperated with any foreign intelligence services” to conduct surveillance on his campaign, or any other campaigns, including President Trump’s.  Sen. Paul was, of course, posing a rhetorical question, as it has been reported that the U.S. side of the Russiagate investigation was initiated by Brennan in the early summer of 2016, following a meeting with the head of Britain’s Signals intelligence unit, the GCHQ. Paul pointed out in television interviews that it is illegal for the CIA to spy on Americans. Therefore, “Did John Brennan ask the British intelligence to spy on Americans for him?” In testimony before the Senate in 2017, Brennan himself acknowledged that he had personally intervened to push FBI Director James Comey to investigate Russian “meddling” in the election, and Trump’s alleged collusion with the Russians, which he had been informed of by British intelligence networks. In July 2016, at the time Trump received the Republican nomination for president, Comey set up a task force within the FBI, which was handed a phony dossier compiled by a “former” British operative from MI6, Christopher Steele, which became the basis for collusion charges. Moreover, numerous media have reported that the FBI deployed an undercover operative into the Trump campaign. This operative, who has not yet been officially identified, may have been responsible for introducing two minor Trump campaign officials, George Papadopoulos and Carter Page, to Russian officials. In other words, the CIA and FBI worked together to run a sting against the Trump campaign, in order to allow them to accuse Trump of collusion with Russia! Trump responded to that by tweeting that if the FBI really did “embed an informant” in his campaign, then “this is bigger than Watergate!” This provides an answer to the question raised by House Intelligence Committee chairman Nunes this week: “If they never had any evidence of colluding with the Russians,” he stated, referring to a report by his committee which reached that conclusion, “you have to ask yourself, why did they open this investigation?” Were Nunes to look into Brennan’s role and of the entire Deep State and British intelligence, instead of falling into mindless Russophobia, he would be able to answer his question. From the beginning, the charges against Trump were aimed at preventing him from breaking with the imperial doctrine of the neocons and instead cooperate with Russia’s President Putin.
Syria Uses Parity Price and Credit Policy  to Secure Nation’s Wheat Production The Syrian government took the decision on May 15 to buy up the entire upcoming wheat harvest from the nation’s farmers and to set up a credit facility to get them started. In addition, it will create a complete technical and logistical facility to support the farmers and collect the harvest, as well provide the farmers with subsidized fuel to complete their operations. On top of that, the government will pay the farmers almost twice the price of of imported wheat. This bold decision and the mass support it will promote could become as important in reconquering the territory of the nation as the Syrian army was. It amounts to a mass mobilization of the population to resettle and develop what otherwise could become abandoned farmland. Ensuring such stability and growth to the farming sector will also bring development to the local manufacturing sectors. 
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Prime Minister Engineer Imad Khamis explained at a cabinet meeting that “the state will remain the main supporter of national food security, and will never back down from that responsibility.” Ibero-America Needs to Join Belt and Road Initiative to End Poverty The Schiller Institute is circulating a resolu5tion across IberoAmerica intended to promote a widespread debate about why the area’s nations must join the Spirit of the Silk Road, and work with China’s Belt and Road Initiative. The resolution is headlined: “An Appeal to the Governments, Nations and Peoples of Ibero-America: The Science To End Poverty; If China Can Do It, Why Not We?” The resolution notes that 200 million of the 600 million inhabitants of Ibero-America and the Caribbean are officially classified as poor. But poverty is not a natural condition of mankind, it can be wiped out in a generation, as China has done. The resolution then discusses how China has achieved this, with an approach coinciding with the science of physical economy that economist Lyndon LaRouche has developed. The signers of the petition “call on our governments to fully join the Belt and Road Initiative.... That way, instead of poverty and drugs, our youth will have a future of great infrastructure projects.” Nigeria Pursues an Ambitious  National Railway Program Nigeria, the most populous nation of Africa with 180 million inhabitants, has taken the lead in the “rail revolution” which is to play a central role in the economic development of the country. The Buhari government has launched an ambitious plan to build a modern rail network, in cooperation with China but also with Western partners, for investments totalling $46 bn. The network will cover the entire nation and extend to neighboring countries, making Nigera a central hub for trade with Niger, Chad, Cameroon and Burkina Faso. Only this year, the government allocated funds that allow leveraging up to $8 billion, mainly from the Chinese Export Import Bank. In the last two weeks, two deals were signed, one to revamp the 3500 km-long narrow-gauge system and another one involving the standard-gauge Lagos-Kano line. The first deal was signed by President Buhari in Washington April 30, before he met Donald Trump at the White House. The work will be carried out by an international consortium led by General Electric and including Transnet of South Africa, Sino Hydro of China and APM Terminals (part of the Danish Maersk Group). Nigeria’s narrow-gauge rail system was conceived in the 1890s and built between 1898 and 1926. The new project, according to the Lagos-based daily The Day will have immense benefits: “increased economic productivity, job creation, private sector investment, human capacity development and muchneeded world class expertise. Worldwide, rail infrastructure has been proven to reduce costs and wastage of goods; increase economic trade between farmers/miners and industry and between traders and consumers; and grow business competitiveness and increase operational efficiency.” The second contract ($6.68 bn) was awarded on May 15 to the China Civil Engineering Construction Corp. (CCECC) for work on a major segment of the railway linking the country’s commercial center Lagos, in the southwest, to Kano in the north, which is expected to take two to three years. The CCECC had also been awarded the contract for the segment 
connecting the northern states of Kano and Kaduna, which began in 2016. The railway development program is a central part of the Nigerian strategy to shift the focus away from the production of crude oil as the country’s main export revenue, in favor of industrial manufacturing and modern agriculture. With this new emphasis, Nigeria has refused to sign the recent “Kigali Accords” for the creation of an all-African free trade zone, as the country will need protectionist measures for some time to come, in order to launch the economy. Construction of Eurasia Canal Would Transform Trade Routes in Central Asia President Nursultan Nazarbayev of Kazakhstan has again called for construction of a 700 km waterway, known as the Eurasia canal, to connect the Caspian Sea to the Black Sea, via the Manych depression in the Russian Caucasus. From the Black Sea, ships would then have access to the Mediterranean.  The President of landlocked Kazakhstan proposed the project on May 15 to the Supreme Eurasian Economic Council of the Eurasian Economic Union, which comprises the leaders of  Armenia, Belarus, Kazakstan and Russia. He also took the occasion to call for for building a Eurasia high-speed road, which would connect Europe to Asia through Russia and Kazakhstan. A report on the Eurasia Canal will be featured in the upcoming revised edition of EIR’s ground breaking report, The New Silk Road Becomes the World Land Bridge . The project was first proposed by President Nazerbayev in 2007 and endorsed at the time by Russian President Vladimir Putin. The Russian company Hydroproject and the Chinese Sinohdyro have carried out preliminary feasibility studies for it. The countries in that region lack direct access to the open seas which means they have to use the more expense modes of rail, road and air transport. While the region’s oil and gas resources can be transported via pipelines, their refined products, such as petrochemicals, cannot. The region also produces other bulk cargo including grains, cotton and minerals for all of which water transportation is much less costly. Moreover, it would free up much needed rail capacity for the containerized cargoes that have been increasing every year. Construction of the Eurasia Canal presents no exceptional technological challenges, and would require as few as six locks, far fewer than the shorter Main-Danube canal. It now takes goods leaving the East coast ports of China some 45 days to reach the Greek port of Piraeus. Shipping time from the East coast ports of the Caspian Sea to the port of Piraeus could be less than 7 days. Thus, cargo from China and Central Asia could be sent by rail and road to the Caspian ports and then loaded on ships, making that option an attractive alternative as part of the Belt and Road transportation network. Already now, there is a market of 75 million tons of cargo from throughout the region, which will expand as these countries develop.
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 Ger