E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER Volume 33, No. 3, January 17, 2019

 E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER Volume 33, No. 3, January 17, 2019

 The Spirit of the New Silk Road Spreads, as Panic Grips the Trans-Atlantic Elites The underlying dynamic in the world today is actually quite positive, although one would never it from following the mainstream media in Europe and the United States, replete with catastrophic scenarios for the future. That very point was stressed by Helga Zepp-LaRouche in her international webcast on Jan. 11. First of all, China’s Belt and Road Initiative continues to offer mutual economic development to a growing number of regions, with Japan and India increasingly on board in Asia, and open to overcoming historic conflicts. And Africa, for the first time, can look forward to in-depth development of its infrastructure and economies. The process of reconciliation and rapprochement between North and South Korea is another striking example of the Silk Road spirit, with crucial input from US President Trump (cf. below). Moreover, Presidents Xi Jinping and Vladimir Putin have forged a very tight working relationship and are carefully coordinating on a number of issues. As for the warnings of a “trade war” between China and the United States, the recent round of negotiations was deemed positive by both sides, who expressed cautious confidence that a settlement will be reached. To that must be added the all-important intention of Donald Trump to put an end to the self-imposed role of the United States as “international policeman” of the world. That opens the way for diplomatic solutions to the various crises in the Middle East (or West Asia), and uprooting international terrorism, such as ISIS (cf. below). All that has freaked out the establishment in both Europe and the United States. All the more so as the financial system which is a mainstay of their power, is on the brink of an enormous crash. Just consider the catastrophic situation of the stock markets in 2018. The German DAX fell by 18.3%, the London Stock Exchange by 12.4%, and the French CAC40 by 11%. For Wall Street, 2018 was the worst year since 2008, with the S&P 500 index losing nearly 20% since late September. The main immediate worry of this establishment, however, is the President of the (still) most powerful country in the world, namely Donald Trump. Despite the failure thus far of the coup attempts in the United States via the “Russiagate” investigations, the coup plotters are clutching at ever more desperate straws. How else can one explain the preposterous stories run last weekend in two major “fake news” sources, the New York Times and the Washington Post. The New York daily reported, under the headline “FBI Secretly Opened Inquiry Into Whether Trump Was Secretly Working on Behalf of Russia,” that the FBI had opened a counter-intelligence investigation of the President shortly after he fired the FBI Director James Comey, to determine whether he was, in effect guilty of treason! Not to be outdone, an article by Greg Miller in the Washington Post of Jan. 13 claimed that Trump was secretly conspiring against the U.S. in his meetings and phone calls with Vladimir Putin, supposedly proven by the fact that he kept some aspects of these conversations secret from some of his “senior advisors”. Of course, there is nothing unusual or suspect about that, except if it concerns Donald Trump and Vladimir Putin. In response to the New York Times piece, Trump tweeted once again that “getting along with Russia is a good thing not a bad thing”. Thus creating an ever greater freak-out. China Commits to Pursue Technological Excellency and Innovation The stunning success of the Chang’e 4’s landing on the Moon has brought home the reality of China’s leading edge not only in space technology, but also in many productive sectors. Western industrialists who have worked with and in China for decades, such as Volkswagen’s, are already drawing the consequences and establishing not only production lines, but also R&D centers in China. At a press conference in Beijing on Jan. 7, VW head Herbert Diess noted that “So far we brought European technology to China. That is over.” China, and not Europe, has the technology companies and competence needed for the car of the future, Diess said, but that doesn’t mean that VW will disinvest in Germany. R&D departments in both China and Germany will be expanded, although “we have not succeeded in Europe in having the technology firms which are needed by the auto industry of the future.” In China, by contrast, there is “the right environment as well as the right competence.” Technological excellence and not the “trade war” narrative also explains why Apple sales in China have dropped, according to Italian Undersecretary of State for Economic Development and China expert Michele Geraci. The decline in their sales is due to the growth of domestic producers, which are as good as, or even better than Apple, Geraci suggested in an interview with Sky TG 24. In addition, social media in China reflect how EIR STRATEGIC ALERT 2 WEEKLY NEWSLETTER n° 3 / 2019 angry the population is over the attacks in the West against China’s tech giant Huawei, which is leading to an undeclared boycott of Western competition, including Apple. Geraci also took the occasion to ridiculize those who warn of an ominous drop in Chinese GDP. “In absolute terms, this year’s 6.5% is worth more than the 6.8% of last year, because if we look at the value, every year China grows an average of $1-1.5 trillion, almost as much as Italy’s entire GDP. Every year, China grows in absolute terms as much as the entire GDP of a medium-size European country. This because, while the growth rate physiologically decreases, it’s starting from a higher basis.” Corroborating Geraci’s analysis, an article in Global Times Jan. 7 reported that Huawei’s success is due to its drive for innovation, but also to its cooperation with global partners, in spite of attempts by the United States to enforce “technological encirclement” of the country. The conclusion: “As long as China continues to innovate, carry out global and open collaboration and stick to further opening-up, it will provide the international market with more superior technologies and products that will benefit other countries. China’s technological advancement cannot be suppressed. The U.S. had better face up to this reality.” On Jan. 10, China’s Sci-Tech Ministry Wang Zhigang laid out the plans for 2019 at the National Science and Technology Work Conference in Beijing. The government intends to step up basic research efforts, enhance innovative capabilities, increase international cooperation and improve supervision and regulation regarding academic misconduct and unethical practices this year, he said. A Black Year for BlackRock in 2018 Knowing that the ECB’s “stress tests” of select European banks in 2016 and 2018 were carried by the BlackRock asset management fund, informed observers of the fund’s performance over the past year are asking whether BlackRock itself could pass such a test in its own line of business. In January 2018, its market value was $520 per share, but the figure had fallen to $380 by January of this year. In addition, the top management announced an unprecedented layoff of nearly 4% of total staff globally. In an internal memo, which was leaked to Switzerland’s finews.ch website and others, BlackRock President Rob Kapito explains the layoffs as an “investment” into the fund’s most important growth options. While the management of the fund proclaimed 2018 to be a year of excellent performance, the figures show a different trend: there was an as yet unexplained migration of large institutional investors from BlackRock in Europe in the range of almost €59 billion – from €60 bn in 2017 to only €1.3 bn in 2018 -- which kicked the fund off the list of Europe’s top ten funds. Critical analysts have warned repeatedly that the news on its splendid performance spread by BlackRock’s management was exaggerated and failed to reflect the crisis symptoms which have appeared. Since BlackRock is a systemic fund, its situation could have something to say about the real state of the system, one would surmise. After all, the fund is one of the former big winners of the crisis of 2008, with its asset market value rising fivefold in the ten years since. Adding to the firm’s woes is the investigation of its role in the “Cum-Ex” scandal, which led to raids of the fund’s offices in Germany last Oct. And Warburg Bank has filed a complaint against BlackRock for failure to pay the mandatory taxes on deals carried out for the bank. This brings additional negative news for BlackRock, even though many doubt that Warburg could have been unaware of the affair, since Cum-Ex worked through agreement among partnering banks. The spectacular character of the raids in Germany may have also contributed to dashing the ambitions of Friedrich Merz, the chairman of the advisory board of BlackRock’s German branch, who was hoping to be elected party chairman of the CDU in early December. The Cum-Ex affair occurred before Merz entered the fund’s top echelons, but here again, observers are wondering how the scandal could have escaped the attention of Mr. Merz. Protecting Community Banks and Separating the Banks: The Fight Is on in Italy While the Italian government is scoring some goals in the fight to defend national credit, it continues to talk about separating the banks (Glass-Steagall), but does not dare yet to implement it. On the defense of national credit, there have been two major moves in the past weeks: first, an amendment to the budget law puts credit unions under the protection of national law, and second, the government has moved to prevent a bail-in resolution in the case of the troubled Savings Bank of Genoa (Carige). The amendment on credit unions (BCC, Banche di Credito Cooperativo), which was drafted by the Budget and Finance Committees of Parliament, has now become law. It aims at exempting the two recently-created large holdings of Italian credit unions -- Iccrea and Cassa Centrale – from the international accounting standards used by the ECB under the Banking Union. Such standards estimate assets at mark-to-market value. Were this applied to those two holdings, it would depreciate the sovereign bonds they hold, generating a loss of €2.6 billion. Commercial banks hold sovereign bonds as part of their capital and refinance or sell them at maturity, i.e. at par value. Investment banks, on the contrary, trade those bonds at market value on the secondary market for speculative purposes. Forcing the former to value their bonds at market value in the yearly balance sheet is a deliberate attempt to undermine their capital and thus their capacity to issue credit to the productive economy. On the second issue, after the ECB put the Saving Banks of Genoa Carige under receivership, the government reacted on Jan. 5 by extending unlimited guarantees to the bank as a step to pre-empt a bank resolution and a bail-in (expropriation) of shareholders, bondholders and depositors. In explaining the move, Deputy Prime Minister Luigi Di Maio issued a ten-point statement in which he indicated the government’s support for a Glass-Steagall system. Point 9 states: “We will fight in Europe to reform the system of banking supervision and we will implement a separation between commercial and investment banks.” The weak point here is that changing European law in favor of Glass-Steagall is more difficult than straightening out a pig’s tail. But implementing Glass-Steagall now, before the coming financial crisis, would undermine another attempt to blackmail governments into bailing out the speculators. The decision on Carige has nonetheless provoked angry reactions from pro-EU circles. Exemplary of this faction, the German daily Handelsblatt complained in a commentary Jan. 8 that “Euro states had agreed after the financial crisis that troubled banks should be resolved instead of bailing them out with taxpayers’ money. Shareholders, creditors and wealthy depositors should then take the losses.” Rather than that, “Rome is again helping a credit institution instead of resolving it.” EIR STRATEGIC ALERT n° 3 / 2019 WEEKLY NEWSLETTER 3 The High Speed Rail Line Turin-Lyon Is Indispensable for the Future The French party Solidarité et Progrès, chaired by Jacques Cheminade, and Movisol in Italy, chaired by Liliana Gorini, issued a joint statement on Jan. 10, urging the swift construction of the planned rail corridor between Lyon and Turin, two major industrial cities respectively in France and in northern Italy. The 270 km line, which involves a 57.5 km base tunnel under the Alps, is a win-win project, according to the statement, which goes on to explain why. “In view of the development of the Mediterranean region, which is necessary in itself and promoted by the New Silk Road, this project is indispensable. On the one hand, the average travel time between China and Europe by rail is now two weeks, as against 45 days by ship. On the other hand, the new corridor crossing the Alps will shorten by 1500 km the distance travelled by trains arriving from Asia, compared to the current route. “By the time the tunnel is to become operational, in 2030, trade between China and Europe will have increased significantly, because of Chinese investments and the rise in demand for products along the route. More than just a reasonable wager on the future, the Mediterranean corridor justifiedly anticipates the future development of the Eurasian region. “Circa 90% of the goods traded between France and Italy now go by road, with the different forms of pollution and the traffic jams that implies. With the Turin-Lyon corridor over 40% of the goods could be imported by rail, which means a yearly modal shift of one million trucks. As for passenger traffic, it is estimated that about 500,000 travellers per year would take the train instead of a plane. “Therefore, this project is the most environmental-friendly solution, in the context of mutual economic development....” The costs of stopping the project would be high, the statement notes, especially since 10 km of the tunnel have already been built as well as some 20 km of exploratory galeries. “The funding now planned (40 % Europe, 35 % Italy and 25 % France) appears well balanced, although a reduction of the Italian share could be considered. To give up would be both an economic error and a political mistake, condemning Mediterranean Europe to irrelevancy.... “As for the talk about a “pharaonic project”, remember that Switzerland, after approval by popular referendum, completed the building of the new Saint Gothard rail tunnel, which is 57 km long. “Would we Frenchmen and Italians be unable to accomplish together what Switzerland did alone? Just imagine how the future Mediterranean region, with its ports of Marseille, Genoa, Barcelona, Valencia and Tanger, will re-assume its historic role as a crossroads of the world! “The project still needs to be better steered with the integration of the economic, legal and financial aspects in order to the speed things up. We are optimistic but we also know that the world will not wait long for us.” British Military Intelligence Targets Germany in Covert Disinformation Operation Award-winning journalist Max Blumenthal, and Mark Ames, radio host of the Radio War Nerd podcast, have authored a bombshell exposé on an anti-Russian disinformation campaign spread by “Integrity Initiative”, which is spreading across Europe and is now about to infiltrate the United States. https:// grayzoneproject.com/2019/01/08/new-documents-reveal-acovert-british-military-intelligence-smear-machine-meddlingin-american-politics/ The organization Integrity Initiative (II) was virtually unknown until Nov. 2018, when the email servers of the “Institute for Statecraft”, a British think-tank funded by NATO and the Foreign Office were hacked (cf. SAS 2/19, 49/18). It has since been revealed that the Institute recently opened major operations targetting Germany, that are led by a certain Harold Elletson, who has been exposed as an MI6 agent. He claims that the Kremlin’s is spreading 21 “key messages”, i.e., untruths about Russia, that are believed by the population and must therefore must be debunked. These messages include: Germany and Russia had a ‘special relationship’ and should return to it; Russia has legitimate interests and the West should respect them; the West deceived Russia over NATO expansion; ‘Wikileaks’ and Snowden show the West has not been open in its dealings with Germany; the Georgian crisis was the result of Georgian aggression; Russia has a legitimate claim to Crimea; the Ukrainian revolution was actually a coup d’etat; sanctions against Russia are counter-productive and will damage the German economy; the Syrian crisis cannot be solved without Russian support, which has been instrumental in stopping the spread of ISIS.” The full list is available at https:// sputniknews.com/europe/201901071071265270-integrity-initiative-germany-criminal/ We will have more to say about this intelligence operation in future issues. It is also covered in-depth by Barbara Boyd on the larouchepac.com website. Xi Jinping Promotes Diplomacy between North Korea and United States Encouraging signs have been coming out from the White House with regard to a new meeting between North Korean President Kim Jong-un and President Trump. The North Korean leader wrote a personal letter to his US counterpart for the New Year, which was greeted warmly by Trump, who showed it off at a cabinet meeting on Jan. 3, saying that “We’ve really established a very good relationship” (cf. SAS 02/19). On Jan. 8, Kim traveled to Beijing with his wife, where he had talks with Chinese President Xi Jinping and where he celebrated his 35th birthday. While the Western media is indulging in all kinds of speculation about how this represents a “tilt” to China and away from the United States, it is actually a sign that the negotiations with Washington will be moving forward. Kim no doubt feels secure in the fact that he has this relationship with Beijing to rely on as he faces tough talks with the United States. Although Kim has a good relationship with the U.S. President, as both leaders have stressed, he knows that there are many people in the U.S. political establishment, and in the Trump Administration, who are not particularly happy about the current rapprochement with North Korea. And he must realize that Trump himself is under tremendous attack for his unconventional diplomacy. The Chinese leadership, in fact, has played a critical role in bringing about this positive direction in US-DPRK relations, which Trump has clearly recognized. During his stay, Kim also paid a visit to a technology development zone near Beijing. The idea that such projects could also be implemented in North Korea, provided the non-proliferation issue is resolved, is undoubtedly an incentive driving the North Korean leader in the direction of eliminating nuclear weapons. As Kim Jong-un was on his way back to Pyongyang, South Korea’s President Moon Jae-in also commented that he was confident that another Trump-Kim Summit would occur in the New Year, and that this in turn would pave the way for another EIR STRATEGIC ALERT 4 WEEKLY NEWSLETTER n° 3 / 2019 summit between the leaders of the two Koreas. “The second North Korea-United States summit -- to take place soon -- and a reciprocal visit to Seoul by Chairman Kim Jong Un of North Korea will be other turning points that will firmly solidify peace on the Korean Peninsula,” Moon said Jan. 10 during his annual press conference. He nevertheless added that “We will not loosen our guard until the promise to denuclearize the Peninsula is kept, and peace is fully institutionalized.” The South Korean President has also come under fire from his political opponents at home and from U.S. officials who feel that he has gone too far in his camaraderie with Kim Jong-un. His statement may help him fend off the criticism in his endeavor to bring peace to the peninsula. West Asia: Reality versus Disinformation in Trans-Atlantic Media The distance between the politicians and mainstream media in the trans-Atlantic world and reality in West Asia (the so-called Middle East) has never been greater. While the opponents of President Trump portray his decision to pull the troops out of Syria, and later out of Afghanistan, as a gift to Vladimir Putin and Iran, the fact of the matter is that this move could potentially be a gift to all nations in the region and other parts of the world, including the United States itself. At the same time, however, a plethora of statements have contradicted Trump’s announcement, claiming that the withdrawal is not yet decided, that it will take a long time, etc. A good part of the confusion is actually driven by officials inside the Trump Administration, such as National Security Advisor John Bolton. During his recent visit to Israel and Turkey, Bolton created a major crisis with the Turkish leadership, which is involved in a delicate process, together with Russia, and Iran, of figuring out how to ensure the smooth withdrawal of American forces, while at the same time securing the border areas of Turkey where Kurdish militant groups, such as the YPG and PKK are active, which Turkish government considers as equally dangerous terrorists as ISIS. In the meantime, the withdrawal of U.S. troops withdrawal has already begun, according to Col. Sean Ryan, the U.S. military spokesman in Baghdad, quoted by AFP. According to Iraqi media reports, some troops have arrived at the Al-Asad base in AlAnbar in Western Iraq near the Syrian border. The Pentagon has said it will continue to provide support to the anti-ISIS coalition. From Damascus, Syrian Deputy Foreign Minister Faisal Mekdad admitted for the first time that talks are talking place with the Kurdish groups working under the U.S. coalition in the region east of the Euphrates region. He expressed optimism about the eventual outcome of the talks, which are mediated by Russia, stressing that the Kurds in Syria are part of the Syrian state and nation, and that they should remain so. The U.S.-backed Syrian Democratic Forces (largely Kurdish) have also recently intensified their talks with the government in a bid to resolve their disputes and seek a peaceful settlement, but also to prevent a Turkish military invasion of the northern part of the country. Overall, Moscow continues to play the central role in diplomatic efforts. The proverbial ball to keep an eye on is the process led by Russia aimed at stoppping the regime-change wars (or “forever wars”, as Trump calls them), and restoring an international order based on sovereign nations engaged in economic and security cooperation. That is the decisive process ongoing on the ground in West Asia, as opposed to what is being discussed in the media in the U.S. and Europe. U.S.-Mexico Relations Moving in the Direction of Win-Win Cooperation? While the “news” media today are full of reports on the government shutdown in Washington over President Trump’s insistence on funding a wall between the United States and Mexico, there has been next to no coverage of the agreement between the two countries on development aid aimed at reducing the poverty which has been the leading factor in migration to the U.S. (cf. SAS 1, 2/2019). In that light, it is useful therefore to review the process of the past six weeks. On Dec. 1, the very day that Andres Manuel López Obrador was inaugurated as Mexico’s President, he signed a joint declaration with the Presidents of Guatemala, El Salvador and Honduras (the “Northern Triangle” nations), to support a Comprehensive Development Plan for the region. The recent caravans of immigrants headed for the U.S. through Mexico have consisted largely of impoverished people from those three countries, including many who are victims of the terrorist gangs running drugs there. Of the initial $20 billion pledged in aid by the four Presidents, 75% of the funds will go to projects which create jobs, emphasizing infrastructure, with the other 25% going to border control and law enforcement. The Trump Administration is said to have pledged $5.8 billion for the Central American countries, and $4.8 billion for projects in southern Mexico. Mexican Foreign Minister Marcelo Ebrard, following a meeting with U.S. Secretary of State Pompeo, welcomed the news of U.S. participation. A phone conversation then took place between AMLO and Trump on Dec. 13, to discuss the programs for job creation in Mexico and the Northern Triangle, was described by the Mexican President as “respectful and friendly.” AMLO is wasting no time implementing a new investment policy for Mexico. He announced on Dec. 23 a $400 million development plan for the Isthmus of Tehuantepec, which includes $151 million to expand and modernize the ports of Salina Cruz on the Pacific Ocean, and Coatzacoalcos on the Gulf of Mexico, upgrading rail transport and highways which connect the two ports, and building a new gas pipeline. Such projects are designed to expand trade, in conjunction with the new USMCA agreement, which will replace the North American Free Trade Agreement, NAFTA. AMLO had described NAFTA in his inauguration address as “a disaster, a calamity” for Mexico. Acting to counter the actual causes of the border security crisis is certainly the right approach to take. Unfortunately, Democratic Party leaders in the U.S. Congress, led by House Speaker Pelosi and Senate minority leader Schumer, prefer in engage in hypocritical posturing against President Trump, for opportunistic political reasons. In fact, many Democrats have supported much larger spending for border security and building a fence than Trump is now demanding for the “wall”. And the fact of the matter is that President Obama was known as the “deporter-in-chief”, because of the unprecedented number of illegal Mexicans and others that he had deported. E.I.R. STRATEGIC ALERT www.eir.de Published by: E.I.R.GmbH, Bahnstr. 4, 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 Germany