Thursday, 2 April 2015

Posted: 01 Apr 2015 03:24 AM PDT

E.I.R.STRATEGIC ALERT

WEEKLY NEWSLETTER

Volume 29, No. 14-15 - April 2, 2015

Asia Infrastructure Investment Bank Opens Way to a New Deal

As the March 31 deadline for founding the Asian Infrastructure Investment Bank neared, there was a veritable stampede of countries eager to line up at the door. After the initial 27 Asian countries had joined, Europe broke ranks with the United States in mid-March, with Great Britain taking everyone by surprise by signing on as a founding member, followed by France, Italy, Germany, Switzerland, Luxembourg, Austria, Denmark, the Netherlands and Spain.

Russia and Brazil, two BRICS members, also came on board, as did Turkey, New Zealand, Australia and South Korea, all hoping to benefit from the prodigious infrastructure projects China is ready to help finance throughout the world with the new bank.

That leaves the United States of Barack Obama looking very isolated, but continuing to issue empty threats. The French daily Le Figaro described the refusal of Europe to go along with Washington as a “declaration of war” and a “small Pearl Harbor for Washington.’’ It coincides, strategically, with European moves to prevent Washington from provoking all-out war – in Europe – against Russia.

But also in the United States itself, Obama is drawing scorn and anger for his pathetic attempt to prevent international recognition of China’s importance in the world economy. The arguments put forward – the AIIB’s alleged lack of regulations on good governance and environmental standards -- are themselves hypocritical. Just consider what dictatorships and regimes the International Monetary Fund and the World Bank have financed, and the corruption that is rampant in those institutions dominated by Washington. Not to mention the leniency which the U.S. governments have criminal banks such as HSBC.

Such Americans also point out that Obama’s famous “Asian pivot”, which is based on surrounding China with pro-American, anti-Chinese forces, is proving to be a fiasco, just as is the Trans-Pacific (free trade) Partnership which excludes China explicitly.

The purpose of the $100 billion AIIB on the contrary, as Chinese officials have stressed, is exclusively to finance rising infrastructure needs, primarily in Asia but not only, and not to use the credit as a means of blackmailing countries into adopting geopolitical stances. In that light, Beijing has repeatedly and explicitly invited Washington to join.

Thus, on March 31, leaders of more than 40 nations gather in Kazakhstan to launch the Asian Infrastructure Investment Bank. A number of them had participated in the just-concluded Boao Forum in China, at which President Xi Jinping spelled out the new vision of cooperation among all of the nations of Eurasia and beyond, and where the Chinese government issued a report with hundreds of projects to be built.

BRICS to Consolidate Development Bank, Independent of Euro-Atlantic Domination

In addition to the AIIB, another new bank designed to fund investments in the real economy will be created by the BRICS (Brazil, Russia, India, China, and South Africa) was signed into existence in July 2014 in Fortaleeza, Brazil. Experts of the $100 billion New Development Bank (NDB) are to meet in late April to establish unified criteria to be employed in evaluating and rating loans, projects, and countries. A network of 25 institutes in the BRICS countries is already working on developing common methodologies for combatting money-laundering.

In early July, the first Parliamentary Forum of the BRICS will be held in Moscow. An article announcing the event, written by Russia’s Ambassador to the United Kingdom and former Deputy Foreign Minister, Alexander Yakovenko, posted March 26 on Russia Today, captures the new thinking, rejecting geopolitics, which underlies the new BRICS dynamic, as opposed to the “hyper-liberalism” which still dominates the West. He wrote that all five members want to promote global development and “a global financial architecture that meets the requirements of the 21st century.”

“The BRICS parliamentary forum could address in earnest such questions and promote such values as sovereignty and independence of states, prevention of change of government by means of outside interference.

“BRICS member-states possess their common denominator of values that differs significantly from the Euro-Atlantic one, which over the last decades has largely mutated towards hyper-liberalism. The forum could provide a framework for discussion of possible ways of resolution of regional conflicts and reforming the existing international institutions, for example, the IMF. According to Russian parliamentarian Alexey Pushkov, practice shows that discussion of these questions on traditional European platforms leads nowhere. The majority, guided by Euro-Atlantic discipline, would block any draft resolutions containing assessments that differ from these narrow-minded attitudes, stuck in the Cold War past...”

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Anglo-American War Drive Escalates Against Russia

The growing support for the BRICS/AIIB worldwide is also driving the danger of confrontation with Russia, as panic spreads in London, on Wall Street, and at the Obama White House, over the imminent blowout of the trans-Atlantic financial system.

Faced with a potential loss of control over global affairs, the “War Party” in London and Washington is setting the stage for a showdown confrontation with Moscow, which led Lyndon LaRouche to insist that, to achieve peace, President Barack Obama must be removed from office.

The Royal Air Force conducted in mid March 28-29 the largest maneuvers in 30 years, directed against possible Russian air incursions, while NATO has continued its operations along Russia’s periphery. Operation Atlantic Resolve is expanding into southeastern Europe from Poland and the Baltics. About 200 paratroopers from the Vicenza, Italy-based 173rd Airborne Brigade dropped into Romania, last week, as part of a broader exercise called Saber Junction. More such exercises are planned in Romania, Bulgaria and across the Black Sea in Georgia. And, on March 28, the first 10 of an eventual 230 armored humvees being provided by the U.S. arrived in Kiev and were greeted personally by Ukrainian president Petro Poroshenko.

The latter, under pressure from London and from Victoria Nuland, continues to refuse to comply with the terms of the Minsk II agreements, reached in February, by rejecting negotiations with the leaders of the Lugansk and Donetz regions.

What is far worse, Kiev officials confirmed last week that Dmitry Yarosh, the head of the Right Sector neo-Nazi organization, has been offered a post in the Ministry of Defense (cf. below).

Russian President Vladimir Putin personally weighed in on the Moscow assessment of the strategic threat coming from NATO, in remarks to a meeting of the board of the Federal Security Service (FSB) March 26. He described the year 2014 as “not an easy one,” one in which tensions escalated in the Middle East and witnessed a state coup in Ukraine that provoked a civil war.

Those we “traditionally call our colleagues and partners,” he said, “are using their entire arsenal of means for the so-called deterrence of Russia: from attempts at political isolation and economic pressure to large-scale information war and special services operations. As it was recently stated quite openly: those who disagree will have their arms twisted periodically. However, this does not work with Russia; it never has, and never will.”

Putin went through the miliary buildup of NATO at Russia’s borders, noting that the United States had unilaterally withdrawn from the Anti-Ballistic Missile Treaty, and is now developing completely new systems.

The Russian President also called attention to the number of citizens from Russia and other CIS states, who are being trained by the Islamic State and could be used later against Russia. Finally, he noted that “Western special services continue their attempts at using public, non-governmental, and politicized organizations to pursue their own objectives, primarily to discredit the authorities and destabilize the internal situation in Russia.”

Bankers Panic, as Glass-Steagall Defines Who Is Qualified to Become U.S. President

The announcement by former Maryland Governor Martin O’Malley, two weeks ago, that reinstating Glass-Steagall would be a central feature of his potential campaign for President, is catalyzing a fight which has forced the big banks into open opposition (cf. SAS 12, 13/15). In response, officials from the leading Too Big to Fail (TBTF) banks have reportedly already met to plot a counter-strategy, and have threatened to withhold campaign contributions from all Democratic Party candidates for Congress, if Glass-Steagall is made an issue.

Reuters reported that JP Morgan representatives met with officials of the Democratic Party to deliver the threat, emphasizing “the need for a friendlier attitude toward the banks,” while Fox Business News reported that Citibank CEO Michael Corbat expressed concern that Senator Elizabeth Warren’s attacks on big banks “might gain traction in the general public.”

Warren, a co-sponsor of a Glass Steagall bill in 2014, has been hitting hard at Wall Street, though she has recently not stressed the need to break up the big banks. She also repeatedly has said she will not run for President, but many are urging her to do so.

However, there is growing recognition among many pollsters and commentators that the vast majority of Americans are convinced that the nation is economically headed in the wrong direction since at least 2008. Therefore, the potential is there to turn the 2016 elections into a referendum against Wall Street.

In a series of statements over the last two weeks, Lyndon LaRouche, who has been leading the campaign to restore Glass-Steagall since 2008, has welcomed O’Malley’s initiative, saying that support for the original legislation signed in 1933 under Franklin D. Roosevelt is the primary indication that a candidate is qualified to run for President.

He added that those presently seeking the Republican nomination, the “Seven Dwarves” -- Jeb Bush, Ted Cruz, Scott Walker, Marco Rubio, Donald Trump, Rand Paul, and Jindall of Louisiana -- must be preemptively defeated, using the “Glass-Steagall standard,” as all of them would continue to support bone-crushing austerity against government policies to aid the majority of the people, in favor of continued protection of the criminal activities of the TBTF banks.

LaRouche has called this the “Bush League” policy, as it has been pushed by the two Bush Presidents, as well as by Obama, who is a puppet of those allied with the Bushes. Jeb Bush especially must be rejected, insists LaRouche, while Hillary Clinton, due to her obsequious promotion of Obama and his policies, is unfit to serve. EIR magazine will feature this story in its upcoming issue.

Strategic Relations with China Are a Major Priority of Greek Diplomacy

While the Greece and the European Union decision-makers remain at loggerheads, Greece is slated to play a key role in China’s Silk Road Economic Belt and 21st Century Maritime Silk Road initiatives, acting as a “bridge” between China and Europe. This is due both to the strategic role the Greek port of Piraeus plays for Chinese trade to and from Central and Eastern European countries, and to the fact that a large percentage of China trade is carried by Greek shipping companies.

Such perspectives were on the agenda of the official visit Greek Foreign Minister Nikos Kotzias and Deputy Prime Minister Yannis Dragasakis paid to Beijing last week. Following a meeting on March 25 with Kotzias, Chinese Foreign Minister Wang Yi called Greece’s container port of Piraeus, run by China’s COSCO Shipping company, a “paradigm of mutually beneficial cooperation” between the two countries.

Kotzias declared that they had agreed to formulate a “joint action plan for 2015-17” and proposals for cooperation in the economy and investments, as well as culture and education.

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Also on the agenda was Greece’s role in the construction of the China-Europe Land Sea Express Line, an initiative announced last December by Chinese Premier Li Keqiang at the summit of Central and East European Countries (CEEC) (cf. SAS 01/15). The line is based on a Budapest-Belgrade railway continuing down to Thessaloniki and then to the port of Piraeus. According to the Chinese, it will directly impact some 32 million people living in an area of 340,000 square kilometers.

The feasibility studies for the 400 km high-speed line between the Hungarian and Serbian capitals, Li said at the time, should be finished by June so that the railway can open in 2017. The train will travel at 200 kph, and cut the travel time from eight hours to less than three.

Li has called the the express line a “model for China-Europe cooperation on connectivity”, and emblematic of the Belt and Road initiative, which is based on win-win cooperation.

On March 27 Vice Premier Dragasakis met with his Chinese counterpart Ma Kai, after which both leaders participated in the opening ceremony of the “China-Greece Martitime Cooperation Year,” which will include a series of exchange activities, as well as seminars on oceanic science technology and maritime laws over the year.

German Savings Banks oppose EU “Capital Market Union”, as Italy Hits Savings

The head of the German Savings Banks Association (Deutscher Sparkassen- und Giroverband, DGSV), Georg Fahrenschon, is more than wary of the planned EU “Capital Markets Union” (cf. SAS 13/15). As we reported, the CMU is a scheme to have “the market” take over traditional banking practices such as extending credit to businesses and taking in deposits against interest, activities, as savings banks do.

Under the new plan, depositors will take their savings out of the banks, which are offering next to zero-interest rates, to invest them on the CMU, while small and medium enterprises will have to issue bonds on the same CMU in order to get loans. From there, all those securities can then be securitized and feed the financial bubble.

Fahrenschon is opposed to the strategy, as he stated at the German Mittelstand Savings Bank Forum March 26 in Berlin: “I must water down the wine of the Capital Market Union. Only 0.6% of our customer advisors say that ‘an active supplement of capital market-oriented solutions is required.’ And this attitude is not peculiar to Germany in Europe.”

Bank credits to companies in the Eurozone at the end of 2013 accounted for 89% of the total, with bonds at only 11%. In Germany, Fahrenschon said, only 0.1% of SME have used corporate bonds.

Fahrenschon listed three reasons why market-financing is not adapted to SME. 1. Not all companies are eligible (minimal emission is EU10 million, and some investors demand EU25 million); emissions are “too bureaucratic and too expensive;” and they are too risk-bearing, as the experience of the so-called “SME Bonds” shows. Usually, issuers are those firms which, for good reasons, cannot get normal loans from the banks.

In a related but contrary development, the Italian Parliament adopted March 23 the reform of the Credit Unions (Banche Popolari) pushed by the government. The bill provides for abolishing the statute of the ten largest credit unions and turning them into public companies (plc), so that this important commercial loan and savings sector can become prey to financial sharks.. The targeted credit unions represent 95% of the sector for a total of up to 500 billion assets – mostly commercial loans.

Credit unions, contrary to the rest of the banking sector, have increased commercial loans in the past years.

The chairman of the Senate Industry Committee, Massimo Mucchetti, voted against the bill although he is from Prime Minister Renzi’s party. He warned that those banks would easily end up in foreign hands.

Exclusive Interview: IMF Imposes Vicious Austerity on Ukraine in Exchange for... Peanuts

On March 11, the International Monetary Fund finally agreed to extend a $5 billion loan to Ukraine, as part of a $17.5 billion package over the next four years, provided the country maintains stability. In a discussion with EIR March 15, Dr. Natalia Vitrenko, economist and chairman of the opposition Progressive Socialist Party of Ukraine, pointed out that the IMF program is in no way sufficient to offset the deindustrialization process underway. “It is admitted that restoring the economy of Ukraine would take $340 billion. Instead there are small doses, restoring nothing.” (Politically, however, it does serve to fuel the anti-Russia campaign, which is the main purpose.)

At this point, Vitrenko said, 35% of Ukraine’s factories are not working: “25% of them have lost their markets, and another 10% no longer even physically exist. In 2014, GDP fell by 7%. In the negotiations with the IMF, the government presented an optimistic scenario and a pessimistic one. Under the ‘optimistic’ scenario, they anticipated a further 5.5.% drop in GDP; under the pessimistic one, an 11.5% decline. Two such years in a row means a catastrophe, with mass unemployment.”

In order to obtain the IMF loan, the Supreme Rada (parliament) had to pass eight laws imposing drastic conditions:

* The official state budget deficit is to be cut to 4.1% of GDP, while it was at 13.5% in 2014. That cannot be done.

* The gas price for households will rise by 280% in April, and electricity rates will be increased in a five-stage process until they are 3.5 times the present rate.

* state sector pensions will be sharply cut, while persons in every job category will have to work five additional years to qualify for a full pension.

Vitrenko charges that these decisions are in violation of Article 22 of the Constitution, which guarantees a minimum subsistence level to the population.

In a video on her website, Vitrenko gave some figures on inflation of basic necessities in 2014: sugar up 40%, apples 67%, eggs 260%, cooking oil 150%, beef 150%, heating 160%, metro and bus fares 200%.

While trade with Russia plummeted, the much taunted exports to the EU rose by a mere 1.5% in 2014.

Vitrenko issued a severe warning in her interview to EIR, saying the policy of the West will not only lead to war with Russia, but also to creating millions of desperate people, many of them armed. “Every type of criminal activity is rising: petty crimes, robberies, criminal hostile takeovers of businesses. Death rates are rising. Ukraine has been turned into a cheap-labor reservation in the center of Europe, full of desperate people.”

Neo-Nazi Right Sector Leader Offered Post in Ukraine Defense Ministry

According to Ministry of Interior advisor Anton Gerashchenko, a Member of Parliament, Ukrainian President Petro Poroshenko has offered the ultra-nationalist Right Sector leader Dmitri Yarosh a post in the Ministry of Defense.

This is particularly ominous as the responsibilities of the anti-Russian Yarosh are to include the coordination of “volunteer” units with the Ukrainian military in eastern Ukraine. At the

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same time, leaders of ten Right Sector battalions confirmed they received an offer have join the Ukrainian National Guard, and would agree on the condition that their units’ structure and leadership be preserved intact.

While claiming that Yarosh’s appointment would bring the neo-Nazi volunteer units under control of the Ukrainian military, the opposite is true. The Ukrainian military will be brought under the influence of the radicals, particularly in eastern Ukraine, where they are deployed.

This is the same Yarosh and the same Right Sector that immediately rejected the Minsk agreements of February, and stated their paramilitary units would continue fighting. In May, 2014, Yarosh hailed the massacre of 41 ethnic Russians burned alive in Odessa, as “another bright day in our national history.”

Since March 2014, there has been a Russian arrest warrant for Yarosh, based on evidence of his involvement in the first Chechen War against Moscow.

Meanwhile, President Poroshenko stated March 26 that building the “Great Wall of Ukraine” to keep the Russians out is a top priority for the regime. As of early March, more than 137 kilometers of anti-tank ditches have been dug, and more than 86 kilometers of artificial obstacles set up on the Ukrainian-Russian border.

Saudi Arabia’s Terror Bombing of Yemen Violates International Law

Saudi Arabia and allies, with reported logistical and intelligence backing from the United States, has been engaged in massive aerial bombardment of the Yemeni capital, Sana’a, and several other cities, killing dozens of citizens and soldiers as of March 26. The sorties of “Operation Firmness Storm” were launched after the national forces under the leadership of the Houthis and their Ansarullah armed group managed, within a few days, to take over the southern part of Yemen, after taking over Sana’a in September 2014.

The Saudis and their allies in the region, widely cited in Western media, falsely claim that what Ansarullah did was a “Shi’a coup” against the legitimate government of President Abedrabbo Mansour Hadi. In fact, the latter’s term in office ended in February 2014 and was prolonged for one year, thus he can no longer claim to be President.

And while the Houthis are Zeidi Shi’as indeed, they are supported by many non Shi’a forces, and have acted as a national force to unite the people against a corrupt government and a Saudi-manufactured political agreement that kept the country split, and corruption alive.

In a matter of a few months, Houthis and their allies managed to rid large parts of the country of al-Qaeda terrorists, which the U.S. and its allies had failed to do in more than 10 years. Just in the last few weeks, they were about to completely eliminate al-Qaeda and ISIS from Southern Yemen and had launched a national dialogue on the formation of a national government and on reform of the Constitution.

Once Ansarullah and their allies took over Aden on March 25, the Saudis began the bombing campaign to eliminate any hopes of a national dialogue. A republican Yemen, with a religiously tolerant culture, has been the Wahhabi Al-Saud’s worst nightmare, as the two countries are connected by long borders and by historical contacts.

Complicating the situation was the Iranian covert and overt support for the Houthis, which fed the propaganda that they were Iranian/Shi’a agents.

Moreover, the Saudis and Gulf states have put pressure on Egypt to support the anti-Houthi campaign, playing on the Egyptian concern over the passage to the vital Suez Canal from Yemen’s Bab El-Mandib Strait.

However, without an international and regional Egyptian-Iranian diplomatic intervention, the entire Arabian Peninsula will be set ablaze. Shi’a minorities in Saudi Arabia and Bahrain can be mobilized to destabilize the Saudis. The Saudis calculate that the Iranians will not intervene directly lest they sabotage their chances of successful negotiations with the United States over its nuclear program and lifting the sanctions. That may prove to be a grave miscalculation.

Egypt Has Great Plans for Agriculture and Energy Development

As reported in the last issue, the Egypt Economic Development Conference (EEDC) in Sharm El-Sheikh March 13-15 was a huge success. In addition to the projects already mentioned, the government has adopted a plan for reclaiming 4 million feddans (circa 1.7 mllion hectares) of agricultural land from the desert west of the Nile Valley. Development of the desert areas and building a chain of new agro-industrial and urban centers is a key to resolving the demographic imbalance in the country, where the 89 million Egyptians are concentrated in only 6% of the country’s land area, while vast tracts of desert that are fertile lands are undeveloped.

The Minister of Agriculture, Dr. Salah Hilal announced at the EEDC that Memorandums of Understanding and protocols had been signed with investors to immediately reclaim and cultivate 218,000 feddans. He added that the National Agricultural Research Institute will provide complete scientific studies to the investors, and that he will personally assist in facilitating the projects.

Hilal also stated that President El-Sisi instructed that all these projects be integrated agro-industrial complexes

The big question now is how to generate enough power for the planned industrial revolution. At the end of 2013, Egypt had 31 GW of total installed generating capacity. In addition to the 1000 MW nuclear power plant that Russia will build in north-western Egypt on the Mediterranean in Al-dhabaa, Germany’s Siemens and American General Electric (GE) were awarded the largest contracts, which should add more than 10 Gigawats, or one third of the existing capacity within 2-3 years.

However, there is no extra gas, oil, or coal available in Egypt to fuel these power plants, and importing these raw materials from international markets is far too costly. Therefore, the next largest contracts were signed with BP (British Petroleum/ 14 US$ billion) and Eni of Italy (5 US$ billion) to explore and develop new primarily gas and also oil fields offshore of the Mediterranean coast of Egypt.

Note to Subscribers

Due to the Easter holidays, your next issue will be dated April 16, 2015

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Wednesday, 1 April 2015

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