We were the change! Offshore energy development moves forward.
IER, February 2, 2009
With all of the news about the inauguration of President Obama, you probably missed a very good piece of energy news—the Department of Interior is working to open up 31 offshore areas for energy exploration and development. This is the first time in over 25 years that many of these areas will be opened for energy development. Your efforts were instrumental in pushing the Federal government to open up more areas for energy exploration!
Last summer IER was the first group to call on President Bush to end the moratorium on offshore energy exploration and development. IER’s efforts, the high price of oil, coupled with the will of the American people led President Bush to tear up the moratorium on offshore energy development and start the process for increased energy access.
After Bush’s actions, the drop in oil prices was immediate and dramatic. The Bush Administration put out the proposed rule and over 30,000 people used IER’s website to send comments to the Administration in favor of increased energy development. Your comments gave the Administration the support it needed to propose the new plan for offshore energy exploration.
Unlike many of the economic “stimulus” proposals being considered by Washington politicians, energy jobs are real jobs. Responsibly developing America’s abundant but off-limits domestic energy supply would create 160,000 new jobs alone, generating $1.7 trillion for local, state and federal tax revenue, and providing a major shot in the arm to a flagging national economy.
But the Obama Administration does not necessarily have to allow increased access to America’s vast domestic energy resources. Supporters of President Obama are already lining up against increased domestic energy access. Environmental groups have already sued to stop energy exploration in the Atlantic.
President Obama in his inaugural address stated that “We will not apologize for our way of life.” We completely agree. We hope President Obama will fully embrace American energy, produced by Americans, for Americans. Many of his supporters will continue to oppose the use of America’s energy resources, but as Obama noted in his inaugural address, “the time has come to set aside childish things.”
If you support increased domestic energy production, please click here and send a message to the Administration that you support America and America’s energy resources.
Monday, February 2, 2009
Ban Congratulates Iraqis on Violence-Free Provincial Elections
Ban Congratulates Iraqis on Violence-Free Provincial Elections
UN, New York, Feb 2 2009 3:10PM
Secretary-General Ban Ki-moon today congratulated the people of Iraq for “strongly exercising” their right to vote in provincial elections that took place over the weekend, in an atmosphere that he called “admirably free of violence.”
“He was deeply impressed by their resolve to participate in a process that should strengthen Iraq’s democracy and further the cause of national reconciliation,” according to a <"statement'>http://www.un.org/apps/sg/sgstats.asp?nid=3694">statement issued by Mr. Ban’s spokesperson, which added that the Secretary-General also commended Iraqi’s determination to ensure a credible electoral process.
Saturday’s provincial, or governate, elections – the first polls held in the strife-torn country in four years – took place in 14 of Iraq’s 18 provinces, with elections for the provinces of the Kurdistan Region and the Kirkuk Governorate to take place at a later stage.
Some 14,467 candidates vied for posts in 6,471 polling centres. In addition, there were 84,000 Iraqi observers, 420,000 party agents and around 400 international observers.
In his statement, Mr. Ban commended Iraqi’s determination to ensure a transparent and credible process through such massive monitoring and other measures, praising the work of the Independent High Electoral Commission (IHEC) and the staff involved at each step of the process.
He also expressed satisfaction that the UN Assistance Mission in Iraq (<"http://www.uniraq.org/">UNAMI) was “able to make helpful contributions to the process, including through its technical assistance,” and pledged UN support for further stages of the process.
The next stage of the election process includes the adjudication of formal complaints before results can be certified.
While noting that provisional results have yet to be announced, Staffan de Mistura, Mr. Ban’s Special Representative in Iraq, said that the UN is satisfied that the elections were conducted smoothly both procedurally and in terms of security
The polls “mark another important step in Iraq’s recovery,” he added.
“The United Nations was present in all 14 governorates and I myself visited polling centres in Anbar, Najaf and Baghdad,” he said. “I was very pleased to see Iraqis from all communities exercising their right to vote, particularly Iraqi women who turned out in large numbers.”
UNAMI, which Mr. de Mistura heads, has provided the Commission with advice and assistance on a broad range of electoral issues, including a nationwide revamping of the voter registry in order to increase accuracy and reduce the potential for multiple voting.
In a <"Newsmaker'>http://www.un.org/apps/news/newsmakers.asp?NewsID=9">Newsmaker interview with the UN News Centre released today, the Special Representative said that these elections were an important test for Iraq, since they are the first conducted by the Iraqis themselves, with UN assistance, and they are the first in which Sunnis voted in substantial numbers, among other factors.
In addition, he said, they are the first elections that will affect the day-to-day lives of Iraqi voters.
“These elections are about real power, in the sense that they are going to nominate the people who are on the ground, in the various district councils, and will be deciding on electricity, water, budget and jobs,” he said.
Feb 2 2009 3:10PM
________________
For more details go to UN News Centre at http://www.un.org/news
UN, New York, Feb 2 2009 3:10PM
Secretary-General Ban Ki-moon today congratulated the people of Iraq for “strongly exercising” their right to vote in provincial elections that took place over the weekend, in an atmosphere that he called “admirably free of violence.”
“He was deeply impressed by their resolve to participate in a process that should strengthen Iraq’s democracy and further the cause of national reconciliation,” according to a <"statement'>http://www.un.org/apps/sg/sgstats.asp?nid=3694">statement issued by Mr. Ban’s spokesperson, which added that the Secretary-General also commended Iraqi’s determination to ensure a credible electoral process.
Saturday’s provincial, or governate, elections – the first polls held in the strife-torn country in four years – took place in 14 of Iraq’s 18 provinces, with elections for the provinces of the Kurdistan Region and the Kirkuk Governorate to take place at a later stage.
Some 14,467 candidates vied for posts in 6,471 polling centres. In addition, there were 84,000 Iraqi observers, 420,000 party agents and around 400 international observers.
In his statement, Mr. Ban commended Iraqi’s determination to ensure a transparent and credible process through such massive monitoring and other measures, praising the work of the Independent High Electoral Commission (IHEC) and the staff involved at each step of the process.
He also expressed satisfaction that the UN Assistance Mission in Iraq (<"http://www.uniraq.org/">UNAMI) was “able to make helpful contributions to the process, including through its technical assistance,” and pledged UN support for further stages of the process.
The next stage of the election process includes the adjudication of formal complaints before results can be certified.
While noting that provisional results have yet to be announced, Staffan de Mistura, Mr. Ban’s Special Representative in Iraq, said that the UN is satisfied that the elections were conducted smoothly both procedurally and in terms of security
The polls “mark another important step in Iraq’s recovery,” he added.
“The United Nations was present in all 14 governorates and I myself visited polling centres in Anbar, Najaf and Baghdad,” he said. “I was very pleased to see Iraqis from all communities exercising their right to vote, particularly Iraqi women who turned out in large numbers.”
UNAMI, which Mr. de Mistura heads, has provided the Commission with advice and assistance on a broad range of electoral issues, including a nationwide revamping of the voter registry in order to increase accuracy and reduce the potential for multiple voting.
In a <"Newsmaker'>http://www.un.org/apps/news/newsmakers.asp?NewsID=9">Newsmaker interview with the UN News Centre released today, the Special Representative said that these elections were an important test for Iraq, since they are the first conducted by the Iraqis themselves, with UN assistance, and they are the first in which Sunnis voted in substantial numbers, among other factors.
In addition, he said, they are the first elections that will affect the day-to-day lives of Iraqi voters.
“These elections are about real power, in the sense that they are going to nominate the people who are on the ground, in the various district councils, and will be deciding on electricity, water, budget and jobs,” he said.
Feb 2 2009 3:10PM
________________
For more details go to UN News Centre at http://www.un.org/news
Great Depression: Policies that decreased competition in product and labor markets were especially destructive
How Government Prolonged the Depression, by Harold L Cole and Lee E Ohanian
Policies that decreased competition in product and labor markets were especially destructive.
WSJ, Feb 02, 2009
The New Deal is widely perceived to have ended the Great Depression, and this has led many to support a "new" New Deal to address the current crisis. But the facts do not support the perception that FDR's policies shortened the Depression, or that similar policies will pull our nation out of its current economic downturn.
The goal of the New Deal was to get Americans back to work. But the New Deal didn't restore employment. In fact, there was even less work on average during the New Deal than before FDR took office. Total hours worked per adult, including government employees, were 18% below their 1929 level between 1930-32, but were 23% lower on average during the New Deal (1933-39). Private hours worked were even lower after FDR took office, averaging 27% below their 1929 level, compared to 18% lower between in 1930-32.
Even comparing hours worked at the end of 1930s to those at the beginning of FDR's presidency doesn't paint a picture of recovery. Total hours worked per adult in 1939 remained about 21% below their 1929 level, compared to a decline of 27% in 1933. And it wasn't just work that remained scarce during the New Deal. Per capita consumption did not recover at all, remaining 25% below its trend level throughout the New Deal, and per-capita nonresidential investment averaged about 60% below trend. The Great Depression clearly continued long after FDR took office.
Why wasn't the Depression followed by a vigorous recovery, like every other cycle? It should have been. The economic fundamentals that drive all expansions were very favorable during the New Deal. Productivity grew very rapidly after 1933, the price level was stable, real interest rates were low, and liquidity was plentiful. We have calculated on the basis of just productivity growth that employment and investment should have been back to normal levels by 1936. Similarly, Nobel Laureate Robert Lucas and Leonard Rapping calculated on the basis of just expansionary Federal Reserve policy that the economy should have been back to normal by 1935.
So what stopped a blockbuster recovery from ever starting? The New Deal. Some New Deal policies certainly benefited the economy by establishing a basic social safety net through Social Security and unemployment benefits, and by stabilizing the financial system through deposit insurance and the Securities Exchange Commission. But others violated the most basic economic principles by suppressing competition, and setting prices and wages in many sectors well above their normal levels. All told, these antimarket policies choked off powerful recovery forces that would have plausibly returned the economy back to trend by the mid-1930s.
The most damaging policies were those at the heart of the recovery plan, including The National Industrial Recovery Act (NIRA), which tossed aside the nation's antitrust acts and permitted industries to collusively raise prices provided that they shared their newfound monopoly rents with workers by substantially raising wages well above underlying productivity growth. The NIRA covered over 500 industries, ranging from autos and steel, to ladies hosiery and poultry production. Each industry created a code of "fair competition" which spelled out what producers could and could not do, and which were designed to eliminate "excessive competition" that FDR believed to be the source of the Depression.
These codes distorted the economy by artificially raising wages and prices, restricting output, and reducing productive capacity by placing quotas on industry investment in new plants and equipment. Following government approval of each industry code, industry prices and wages increased substantially, while prices and wages in sectors that weren't covered by the NIRA, such as agriculture, did not. We have calculated that manufacturing wages were as much as 25% above the level that would have prevailed without the New Deal. And while the artificially high wages created by the NIRA benefited the few that were fortunate to have a job in those industries, they significantly depressed production and employment, as the growth in wage costs far exceeded productivity growth.
These policies continued even after the NIRA was declared unconstitutional in 1935. There was no antitrust activity after the NIRA, despite overwhelming FTC evidence of price-fixing and production limits in many industries, and the National Labor Relations Act of 1935 gave unions substantial collective-bargaining power. While not permitted under federal law, the sit-down strike, in which workers were occupied factories and shut down production, was tolerated by governors in a number of states and was used with great success against major employers, including General Motors in 1937.
The downturn of 1937-38 was preceded by large wage hikes that pushed wages well above their NIRA levels, following the Supreme Court's 1937 decision that upheld the constitutionality of the National Labor Relations Act. These wage hikes led to further job loss, particularly in manufacturing. The "recession in a depression" thus was not the result of a reversal of New Deal policies, as argued by some, but rather a deepening of New Deal polices that raised wages even further above their competitive levels, and which further prevented the normal forces of supply and demand from restoring full employment. Our research indicates that New Deal labor and industrial policies prolonged the Depression by seven years.
By the late 1930s, New Deal policies did begin to reverse, which coincided with the beginning of the recovery. In a 1938 speech, FDR acknowledged that the American economy had become a "concealed cartel system like Europe," which led the Justice Department to reinitiate antitrust prosecution. And union bargaining power was significantly reduced, first by the Supreme Court's ruling that the sit-down strike was illegal, and further reduced during World War II by the National War Labor Board (NWLB), in which large union wage settlements were limited by the NWLB to cost-of-living increases. The wartime economic boom reflected not only the enormous resource drain of military spending, but also the erosion of New Deal labor and industrial policies.
By 1947, through a combination of NWLB wage restrictions and rapid productivity growth, we have calculated that the large gap between manufacturing wages and productivity that emerged during the New Deal had nearly been eliminated. And since that time, wages have never approached the severely distorted levels that prevailed under the New Deal, nor has the country suffered from such abysmally low employment.
The main lesson we have learned from the New Deal is that wholesale government intervention can -- and does -- deliver the most unintended of consequences. This was true in the 1930s, when artificially high wages and prices kept us depressed for more than a decade, it was true in the 1970s when price controls were used to combat inflation but just produced shortages. It is true today, when poorly designed regulation produced a banking system that took on too much risk.
President Barack Obama and Congress have a great opportunity to produce reforms that do return Americans to work, and that provide a foundation for sustained long-run economic growth and the opportunity for all Americans to succeed. These reforms should include very specific plans that update banking regulations and address a manufacturing sector in which several large industries -- including autos and steel -- are no longer internationally competitive. Tax reform that broadens rather than narrows the tax base and that increases incentives to work, save and invest is also needed. We must also confront an educational system that fails many of its constituents. A large fiscal stimulus plan that doesn't directly address the specific impediments that our economy faces is unlikely to achieve either the country's short-term or long-term goals.
Mr. Cole is professor of economics at the University of Pennsylvania. Mr. Ohanian is professor of economics and director of the Ettinger Family Program in Macroeconomic Research at UCLA.
Policies that decreased competition in product and labor markets were especially destructive.
WSJ, Feb 02, 2009
The New Deal is widely perceived to have ended the Great Depression, and this has led many to support a "new" New Deal to address the current crisis. But the facts do not support the perception that FDR's policies shortened the Depression, or that similar policies will pull our nation out of its current economic downturn.
The goal of the New Deal was to get Americans back to work. But the New Deal didn't restore employment. In fact, there was even less work on average during the New Deal than before FDR took office. Total hours worked per adult, including government employees, were 18% below their 1929 level between 1930-32, but were 23% lower on average during the New Deal (1933-39). Private hours worked were even lower after FDR took office, averaging 27% below their 1929 level, compared to 18% lower between in 1930-32.
Even comparing hours worked at the end of 1930s to those at the beginning of FDR's presidency doesn't paint a picture of recovery. Total hours worked per adult in 1939 remained about 21% below their 1929 level, compared to a decline of 27% in 1933. And it wasn't just work that remained scarce during the New Deal. Per capita consumption did not recover at all, remaining 25% below its trend level throughout the New Deal, and per-capita nonresidential investment averaged about 60% below trend. The Great Depression clearly continued long after FDR took office.
Why wasn't the Depression followed by a vigorous recovery, like every other cycle? It should have been. The economic fundamentals that drive all expansions were very favorable during the New Deal. Productivity grew very rapidly after 1933, the price level was stable, real interest rates were low, and liquidity was plentiful. We have calculated on the basis of just productivity growth that employment and investment should have been back to normal levels by 1936. Similarly, Nobel Laureate Robert Lucas and Leonard Rapping calculated on the basis of just expansionary Federal Reserve policy that the economy should have been back to normal by 1935.
So what stopped a blockbuster recovery from ever starting? The New Deal. Some New Deal policies certainly benefited the economy by establishing a basic social safety net through Social Security and unemployment benefits, and by stabilizing the financial system through deposit insurance and the Securities Exchange Commission. But others violated the most basic economic principles by suppressing competition, and setting prices and wages in many sectors well above their normal levels. All told, these antimarket policies choked off powerful recovery forces that would have plausibly returned the economy back to trend by the mid-1930s.
The most damaging policies were those at the heart of the recovery plan, including The National Industrial Recovery Act (NIRA), which tossed aside the nation's antitrust acts and permitted industries to collusively raise prices provided that they shared their newfound monopoly rents with workers by substantially raising wages well above underlying productivity growth. The NIRA covered over 500 industries, ranging from autos and steel, to ladies hosiery and poultry production. Each industry created a code of "fair competition" which spelled out what producers could and could not do, and which were designed to eliminate "excessive competition" that FDR believed to be the source of the Depression.
These codes distorted the economy by artificially raising wages and prices, restricting output, and reducing productive capacity by placing quotas on industry investment in new plants and equipment. Following government approval of each industry code, industry prices and wages increased substantially, while prices and wages in sectors that weren't covered by the NIRA, such as agriculture, did not. We have calculated that manufacturing wages were as much as 25% above the level that would have prevailed without the New Deal. And while the artificially high wages created by the NIRA benefited the few that were fortunate to have a job in those industries, they significantly depressed production and employment, as the growth in wage costs far exceeded productivity growth.
These policies continued even after the NIRA was declared unconstitutional in 1935. There was no antitrust activity after the NIRA, despite overwhelming FTC evidence of price-fixing and production limits in many industries, and the National Labor Relations Act of 1935 gave unions substantial collective-bargaining power. While not permitted under federal law, the sit-down strike, in which workers were occupied factories and shut down production, was tolerated by governors in a number of states and was used with great success against major employers, including General Motors in 1937.
The downturn of 1937-38 was preceded by large wage hikes that pushed wages well above their NIRA levels, following the Supreme Court's 1937 decision that upheld the constitutionality of the National Labor Relations Act. These wage hikes led to further job loss, particularly in manufacturing. The "recession in a depression" thus was not the result of a reversal of New Deal policies, as argued by some, but rather a deepening of New Deal polices that raised wages even further above their competitive levels, and which further prevented the normal forces of supply and demand from restoring full employment. Our research indicates that New Deal labor and industrial policies prolonged the Depression by seven years.
By the late 1930s, New Deal policies did begin to reverse, which coincided with the beginning of the recovery. In a 1938 speech, FDR acknowledged that the American economy had become a "concealed cartel system like Europe," which led the Justice Department to reinitiate antitrust prosecution. And union bargaining power was significantly reduced, first by the Supreme Court's ruling that the sit-down strike was illegal, and further reduced during World War II by the National War Labor Board (NWLB), in which large union wage settlements were limited by the NWLB to cost-of-living increases. The wartime economic boom reflected not only the enormous resource drain of military spending, but also the erosion of New Deal labor and industrial policies.
By 1947, through a combination of NWLB wage restrictions and rapid productivity growth, we have calculated that the large gap between manufacturing wages and productivity that emerged during the New Deal had nearly been eliminated. And since that time, wages have never approached the severely distorted levels that prevailed under the New Deal, nor has the country suffered from such abysmally low employment.
The main lesson we have learned from the New Deal is that wholesale government intervention can -- and does -- deliver the most unintended of consequences. This was true in the 1930s, when artificially high wages and prices kept us depressed for more than a decade, it was true in the 1970s when price controls were used to combat inflation but just produced shortages. It is true today, when poorly designed regulation produced a banking system that took on too much risk.
President Barack Obama and Congress have a great opportunity to produce reforms that do return Americans to work, and that provide a foundation for sustained long-run economic growth and the opportunity for all Americans to succeed. These reforms should include very specific plans that update banking regulations and address a manufacturing sector in which several large industries -- including autos and steel -- are no longer internationally competitive. Tax reform that broadens rather than narrows the tax base and that increases incentives to work, save and invest is also needed. We must also confront an educational system that fails many of its constituents. A large fiscal stimulus plan that doesn't directly address the specific impediments that our economy faces is unlikely to achieve either the country's short-term or long-term goals.
Mr. Cole is professor of economics at the University of Pennsylvania. Mr. Ohanian is professor of economics and director of the Ettinger Family Program in Macroeconomic Research at UCLA.
WSJ Editorial Page: Tax avoidance and Democratic Party standards
Driving Mr. Daschle. WSJ Editorial
Tax avoidance and Democratic Party standards.
WSJ, Feb 02, 2009
So Tom Daschle, the erstwhile prairie populist and scourge of multiple Presidential nominees, failed to disclose and pay taxes on hundreds of thousands of dollars of income. He also waited months to pay up and told the Obama transition team about his tax oversights only days before his Senate confirmation hearing to become Secretary of Health and Human Services.
This one is going to be fascinating to watch, less for what it says about Mr. Daschle than what it will reveal about Democratic standards. Every Republican in America knows that if Mr. Daschle were a Reagan or Bush nominee he'd now be headed back to private life faster than you can say John Tower. That's the way Democrats have treated GOP nominees who were accused of far lesser transgressions than Mr. Daschle's tax, er, avoidance. The question is whether Democrats are going to treat Mr. Daschle according to the standard that Mr. Daschle set when he was running the Senate.
And what standard was that? Well, on taxes, you may recall that Mr. Daschle's Senate Democrats led the campaign against "Benedict Arnold corporations" that earn too much income overseas. The companies do this legally, in part to avoid a U.S. corporate tax rate (35%) that is the developed world's second highest, but that hasn't stopped the Daschle Democrats from comparing them to traitors.
Then there was the assault on legal tax shelters, led in the Daschle Senate by Democrat Carl Levin. The Levin hearings encouraged the Justice Department to prosecute employees who sold tax shelters for KPMG, though no tax court had found them illegal. Most of the KPMG charges were later thrown out of court, but not before careers were ruined and life savings spent on legal defense fees. Under political pressure in 2002, the IRS disclosed the names of users of a KPMG shelter, including William Simon Jr., a Republican candidate for California Governor. Democrats cried that Mr. Simon was a tax cheat, and he had to release years of tax returns to show otherwise.
Now we learn that Mr. Daschle failed to report some $255,000 in income from 2005 through 2007 for a car and driver supplied to him for personal use. The chauffeur service was provided by Leo Hindery, a big Democratic donor who also made Mr. Daschle a bundle by making him a limited partner in InterMedia Partners, a private equity shop.
As a legal tax matter, this isn't even a close call. Mr. Daschle says he used the car service about 80% for personal use, and 20% for business. But his spokeswoman says it only dawned on the Senator last June that this might be taxable income. Mr. Daschle's excuse? According to a Journal report Friday, "he told committee staff he had grown used to having a car and driver as majority leader and did not think to report the perk on his taxes, according to staff members." How's that for a Leona Helmsley moment: Doesn't everyone have a car and chauffeur, dear?
The Senate Finance Committee is also reviewing whether certain "travel and entertainment services" provided to Mr. Daschle and his wife Linda, an aviation lobbyist, should also be reported as income. The Washington Post reports that Mr. Daschle has earned more than $5 million over the past two years, including $220,000 from the health-care industry he's been nominated to regulate. Capitalism is wonderful, but at the very least Mr. Daschle's record strips the veneer from President Obama's moralizing that lobbying and special interest pleading are the root of all evil in Washington. In appointing Mr. Daschle, Mr. Obama is showing that lobbying is fine as long as it is done by people who agree with him.
Some Democrats said on the weekend that Mr. Daschle deserves to be confirmed because they "know" he is "honest." But that isn't the standard Mr. Daschle set for GOP appointees who had no ethical taint. In 2001, he established a new, 60-vote confirmation standard for Eugene Scalia to be Labor Department Solicitor, though Mr. Scalia had been approved in committee and would have won on the Senate floor. He also filibustered Miguel Estrada, a judicial nominee of wide renown, on the trivial grounds that the Bush Administration wouldn't release internal memos when Mr. Estrada had worked as a Justice Department staff lawyer.
We'll be watching in particular to see how Democrats Max Baucus and Kent Conrad handle the Daschle tax mess. Finance Chairman Baucus gave a pass to Treasury Secretary Tim Geithner, albeit for a lesser offense, and Mr. Conrad also voted to confirm Mr. Geithner though not without saying he wouldn't have done so in "normal" times. We assume by "normal" he doesn't mean when nominees are Republican. If nothing else, a vote to confirm Mr. Daschle will expose the insincerity of Democratic tax populism.
If Mr. Daschle were the stand-up guy his fellow Democrats say he is, he'd withdraw his nomination and spare them the embarrassment of confirming someone who thinks the tax laws apply only to other people.
Tax avoidance and Democratic Party standards.
WSJ, Feb 02, 2009
So Tom Daschle, the erstwhile prairie populist and scourge of multiple Presidential nominees, failed to disclose and pay taxes on hundreds of thousands of dollars of income. He also waited months to pay up and told the Obama transition team about his tax oversights only days before his Senate confirmation hearing to become Secretary of Health and Human Services.
This one is going to be fascinating to watch, less for what it says about Mr. Daschle than what it will reveal about Democratic standards. Every Republican in America knows that if Mr. Daschle were a Reagan or Bush nominee he'd now be headed back to private life faster than you can say John Tower. That's the way Democrats have treated GOP nominees who were accused of far lesser transgressions than Mr. Daschle's tax, er, avoidance. The question is whether Democrats are going to treat Mr. Daschle according to the standard that Mr. Daschle set when he was running the Senate.
And what standard was that? Well, on taxes, you may recall that Mr. Daschle's Senate Democrats led the campaign against "Benedict Arnold corporations" that earn too much income overseas. The companies do this legally, in part to avoid a U.S. corporate tax rate (35%) that is the developed world's second highest, but that hasn't stopped the Daschle Democrats from comparing them to traitors.
Then there was the assault on legal tax shelters, led in the Daschle Senate by Democrat Carl Levin. The Levin hearings encouraged the Justice Department to prosecute employees who sold tax shelters for KPMG, though no tax court had found them illegal. Most of the KPMG charges were later thrown out of court, but not before careers were ruined and life savings spent on legal defense fees. Under political pressure in 2002, the IRS disclosed the names of users of a KPMG shelter, including William Simon Jr., a Republican candidate for California Governor. Democrats cried that Mr. Simon was a tax cheat, and he had to release years of tax returns to show otherwise.
Now we learn that Mr. Daschle failed to report some $255,000 in income from 2005 through 2007 for a car and driver supplied to him for personal use. The chauffeur service was provided by Leo Hindery, a big Democratic donor who also made Mr. Daschle a bundle by making him a limited partner in InterMedia Partners, a private equity shop.
As a legal tax matter, this isn't even a close call. Mr. Daschle says he used the car service about 80% for personal use, and 20% for business. But his spokeswoman says it only dawned on the Senator last June that this might be taxable income. Mr. Daschle's excuse? According to a Journal report Friday, "he told committee staff he had grown used to having a car and driver as majority leader and did not think to report the perk on his taxes, according to staff members." How's that for a Leona Helmsley moment: Doesn't everyone have a car and chauffeur, dear?
The Senate Finance Committee is also reviewing whether certain "travel and entertainment services" provided to Mr. Daschle and his wife Linda, an aviation lobbyist, should also be reported as income. The Washington Post reports that Mr. Daschle has earned more than $5 million over the past two years, including $220,000 from the health-care industry he's been nominated to regulate. Capitalism is wonderful, but at the very least Mr. Daschle's record strips the veneer from President Obama's moralizing that lobbying and special interest pleading are the root of all evil in Washington. In appointing Mr. Daschle, Mr. Obama is showing that lobbying is fine as long as it is done by people who agree with him.
Some Democrats said on the weekend that Mr. Daschle deserves to be confirmed because they "know" he is "honest." But that isn't the standard Mr. Daschle set for GOP appointees who had no ethical taint. In 2001, he established a new, 60-vote confirmation standard for Eugene Scalia to be Labor Department Solicitor, though Mr. Scalia had been approved in committee and would have won on the Senate floor. He also filibustered Miguel Estrada, a judicial nominee of wide renown, on the trivial grounds that the Bush Administration wouldn't release internal memos when Mr. Estrada had worked as a Justice Department staff lawyer.
We'll be watching in particular to see how Democrats Max Baucus and Kent Conrad handle the Daschle tax mess. Finance Chairman Baucus gave a pass to Treasury Secretary Tim Geithner, albeit for a lesser offense, and Mr. Conrad also voted to confirm Mr. Geithner though not without saying he wouldn't have done so in "normal" times. We assume by "normal" he doesn't mean when nominees are Republican. If nothing else, a vote to confirm Mr. Daschle will expose the insincerity of Democratic tax populism.
If Mr. Daschle were the stand-up guy his fellow Democrats say he is, he'd withdraw his nomination and spare them the embarrassment of confirming someone who thinks the tax laws apply only to other people.
WaPo: The latest salmonella outbreak highlights gaps in the nation's food supply
Peanut Bummer. WaPo Editorial
The latest salmonella outbreak highlights gaps in the nation's food supply.
Monday, February 2, 2009; Page A12
EVEN THOUGH he's not caught up in this mess, Mr. Peanut must want to clobber the geniuses at Peanut Corporation of America (PCA) with his cane. The Food and Drug Administration revealed last week that the company's Blakely, Ga., facility knowingly shipped salmonella-tainted peanut products 12 times between 2007 and 2008 to locations in the United States and abroad. The company, based in Lynchburg, Va., has urged anyone in possession of its products made in the past two years to throw them out.
This is one of the biggest recalls in U.S. history and another example of vulnerability in the nation's food supply. None of PCA's peanut products are sold directly to consumers. But the FDA says that more than 70 firms used the company's goods in all manner of foods, from cookies and pet food to ice cream and cereal. Since the salmonella outbreak was discovered last summer, the Centers for Disease Control and Prevention believes that eight deaths and 501 illnesses spread across 43 states and Canada may be linked to the Georgia plant. The FDA alleges that not only did PCA knowingly ship bad merchandise but it went to another testing facility to get a clean bill of health after initially getting test results that were positive for salmonella. The company denies this allegation. The FDA said that the problems that led to the contamination were not fixed.
The FDA uncovered the problems by securing inspection reports done by the state of Georgia, using a special 2002 law meant to prevent bioterrorism. The agency last inspected the Blakely plant in 2001 and then contracted out the inspections to the Georgia Department of Agriculture. While this practice is not uncommon for the FDA, it speaks volumes about the lack of resources the agency has to protect the nation's food supply. According to Caroline Smith DeWaal, director of food safety at the Center for Science in the Public Interest, the FDA has lost more than 600 inspectors since 2004. "The fewer inspectors the FDA has, the more it relies on state inspectors," she told us.
Rep. John D. Dingell (D-Mich.) has reintroduced legislation that would give the FDA more money and authority over food safety, including the power to issue mandatory recalls of contaminated food. Rep. Diana DeGette (D-Colo.) will try again to get a bill passed that would require the FDA to devise a system that would make it possible to trace food and produce from the farm to the dinner table. Rep. Bart Stupak (D-Mich.) has a bill that would give the FDA more money and authority to conduct inspections. As we have learned over the past year, much of the food safety system in this country is based on the trust that manufacturers are introducing products into the food supply that are clean and safe. President Ronald Reagan had a mantra for dealing with Russia that is apt here: "Trust but verify." Congress must give the FDA and other relevant agencies the power to do it.
The latest salmonella outbreak highlights gaps in the nation's food supply.
Monday, February 2, 2009; Page A12
EVEN THOUGH he's not caught up in this mess, Mr. Peanut must want to clobber the geniuses at Peanut Corporation of America (PCA) with his cane. The Food and Drug Administration revealed last week that the company's Blakely, Ga., facility knowingly shipped salmonella-tainted peanut products 12 times between 2007 and 2008 to locations in the United States and abroad. The company, based in Lynchburg, Va., has urged anyone in possession of its products made in the past two years to throw them out.
This is one of the biggest recalls in U.S. history and another example of vulnerability in the nation's food supply. None of PCA's peanut products are sold directly to consumers. But the FDA says that more than 70 firms used the company's goods in all manner of foods, from cookies and pet food to ice cream and cereal. Since the salmonella outbreak was discovered last summer, the Centers for Disease Control and Prevention believes that eight deaths and 501 illnesses spread across 43 states and Canada may be linked to the Georgia plant. The FDA alleges that not only did PCA knowingly ship bad merchandise but it went to another testing facility to get a clean bill of health after initially getting test results that were positive for salmonella. The company denies this allegation. The FDA said that the problems that led to the contamination were not fixed.
The FDA uncovered the problems by securing inspection reports done by the state of Georgia, using a special 2002 law meant to prevent bioterrorism. The agency last inspected the Blakely plant in 2001 and then contracted out the inspections to the Georgia Department of Agriculture. While this practice is not uncommon for the FDA, it speaks volumes about the lack of resources the agency has to protect the nation's food supply. According to Caroline Smith DeWaal, director of food safety at the Center for Science in the Public Interest, the FDA has lost more than 600 inspectors since 2004. "The fewer inspectors the FDA has, the more it relies on state inspectors," she told us.
Rep. John D. Dingell (D-Mich.) has reintroduced legislation that would give the FDA more money and authority over food safety, including the power to issue mandatory recalls of contaminated food. Rep. Diana DeGette (D-Colo.) will try again to get a bill passed that would require the FDA to devise a system that would make it possible to trace food and produce from the farm to the dinner table. Rep. Bart Stupak (D-Mich.) has a bill that would give the FDA more money and authority to conduct inspections. As we have learned over the past year, much of the food safety system in this country is based on the trust that manufacturers are introducing products into the food supply that are clean and safe. President Ronald Reagan had a mantra for dealing with Russia that is apt here: "Trust but verify." Congress must give the FDA and other relevant agencies the power to do it.
Don't Push Banks to Make Bad Loans: Contrary to myth, commercial bank lending is up
Don't Push Banks to Make Bad Loans. By Vert Ely
Contrary to myth, commercial bank lending is up. So are standards.
WSJ, Feb 02, 2009
There is a widespread belief that banks are now refusing to lend as much as they should, and that Congress should pressure them to extend more credit to consumers and businesses.
In reality, banks as a whole increased their lending during 2008 -- the notion they haven't is based on a misunderstanding of U.S. credit markets. Pressuring banks to lend more could backfire.
Lost in too many discussions of the financial sector is that banks and other depository institutions account for only 22% of the credit supplied to the U.S. economy (down from 40% in 1982). "Shadow banking" -- notably asset securitization and money-market mutual funds -- now supplies 33% (up from 14%). Insurance companies, other financial intermediaries, nonfinancial firms and the rest of the world provide the balance.
As far as commercial banks go, Federal Reserve data released last week show that their lending increased 2.36% during the last quarter of 2008. For all of 2008, commercial-bank lending rose by $386 billion, or 5.63%, even as the economy slid into recession. Over that 12-month period, business lending jumped $152 billion, or 10.6%, real-estate loans were up $213 billion, or 5.9%, and consumer lending rose $73.5 billion, or 9%. Other categories of bank lending such as loans to farmers, broker-dealers and governments, declined $53.2 billion, or 5.4%.
Fed data also show that during the first three quarters of 2008, the total amount of credit supplied to the economy increased $1.91 trillion, or 3.8%, with $540 billion of that amount coming from foreign lenders.
Nevertheless, Treasury recently demanded that the 20 largest recipients of government capital investments start providing detailed monthly reports about their lending and investment activities. This new requirement could lead to government lending mandates. That would not be a good idea.
In the first place, the drop in stock-market and house prices has made millions of families feel poorer and led them to save more than in recent years. It has also encouraged them (especially Baby Boomers approaching retirement) to pay off debt. They don't need more debt.
More broadly, many of the most creditworthy neither need to nor want to borrow right now. Richard Davis, CEO of U.S. Bancorp, recently said that he is seeing the demand for loans diminish at his and other banks "from people and businesses spending less and traveling less and watching their nickels and dimes."
Lenders moreover have tightened lending standards, correcting an excessive laxness that contributed to our financial mess. Zero or very low down-payment mortgages are out, as are "covenant light" corporate loans. Likewise, lenders have trimmed credit-card limits and cut the amount of money available under home equity lines of credit as home values have declined.
And contrary to the "lend more" message broadcast from inside the Washington Beltway, bank examiners are criticizing weak loans and forcing banks to tighten lending standards. Bankers are caught in a vise between politicians and examiners.
A lot of the credit tightness is a reflection of the near-collapse of loan securitization. Recent Fed plans to buy asset-backed securities may help revive asset securitization, but bankers have no control over the fate of that initiative.
The economy is in recession and working off the consequences of a housing bubble fed by excessive mortgage credit. Given that loan demand typically falls during a recession, it's amazing that bank lending increased as much as it did last year. It was essentially flat during the 2001 recession.
Bankers should always lend prudently, as they are now doing. If they are jawboned or worse by Washington into reckless lending, the U.S. will set itself up for another debt crisis, even before the present mess has been cleaned up.
Mr. Ely, the principal in Ely & Co. Inc., is a financial institutions and monetary policy consultant.
Contrary to myth, commercial bank lending is up. So are standards.
WSJ, Feb 02, 2009
There is a widespread belief that banks are now refusing to lend as much as they should, and that Congress should pressure them to extend more credit to consumers and businesses.
In reality, banks as a whole increased their lending during 2008 -- the notion they haven't is based on a misunderstanding of U.S. credit markets. Pressuring banks to lend more could backfire.
Lost in too many discussions of the financial sector is that banks and other depository institutions account for only 22% of the credit supplied to the U.S. economy (down from 40% in 1982). "Shadow banking" -- notably asset securitization and money-market mutual funds -- now supplies 33% (up from 14%). Insurance companies, other financial intermediaries, nonfinancial firms and the rest of the world provide the balance.
As far as commercial banks go, Federal Reserve data released last week show that their lending increased 2.36% during the last quarter of 2008. For all of 2008, commercial-bank lending rose by $386 billion, or 5.63%, even as the economy slid into recession. Over that 12-month period, business lending jumped $152 billion, or 10.6%, real-estate loans were up $213 billion, or 5.9%, and consumer lending rose $73.5 billion, or 9%. Other categories of bank lending such as loans to farmers, broker-dealers and governments, declined $53.2 billion, or 5.4%.
Fed data also show that during the first three quarters of 2008, the total amount of credit supplied to the economy increased $1.91 trillion, or 3.8%, with $540 billion of that amount coming from foreign lenders.
Nevertheless, Treasury recently demanded that the 20 largest recipients of government capital investments start providing detailed monthly reports about their lending and investment activities. This new requirement could lead to government lending mandates. That would not be a good idea.
In the first place, the drop in stock-market and house prices has made millions of families feel poorer and led them to save more than in recent years. It has also encouraged them (especially Baby Boomers approaching retirement) to pay off debt. They don't need more debt.
More broadly, many of the most creditworthy neither need to nor want to borrow right now. Richard Davis, CEO of U.S. Bancorp, recently said that he is seeing the demand for loans diminish at his and other banks "from people and businesses spending less and traveling less and watching their nickels and dimes."
Lenders moreover have tightened lending standards, correcting an excessive laxness that contributed to our financial mess. Zero or very low down-payment mortgages are out, as are "covenant light" corporate loans. Likewise, lenders have trimmed credit-card limits and cut the amount of money available under home equity lines of credit as home values have declined.
And contrary to the "lend more" message broadcast from inside the Washington Beltway, bank examiners are criticizing weak loans and forcing banks to tighten lending standards. Bankers are caught in a vise between politicians and examiners.
A lot of the credit tightness is a reflection of the near-collapse of loan securitization. Recent Fed plans to buy asset-backed securities may help revive asset securitization, but bankers have no control over the fate of that initiative.
The economy is in recession and working off the consequences of a housing bubble fed by excessive mortgage credit. Given that loan demand typically falls during a recession, it's amazing that bank lending increased as much as it did last year. It was essentially flat during the 2001 recession.
Bankers should always lend prudently, as they are now doing. If they are jawboned or worse by Washington into reckless lending, the U.S. will set itself up for another debt crisis, even before the present mess has been cleaned up.
Mr. Ely, the principal in Ely & Co. Inc., is a financial institutions and monetary policy consultant.
Extraordinary rendition and Human Rights Watch in the era of Hope and Change
Re: Rendition. By Mark Hemingway
The Corner/NRO, Feb 02, 2009
Buried in that LAT article on rendition Jonah linked below is a flip-flop from Human Rights Watch that would impress even the East German judge. Here's Human Rights Watch in April of last year:
The US government should:
·Repudiate the use of rendition to torture as a counterterrorism tactic and permanently discontinue the CIA's rendition program;
·Disclose the identities, fate, and current whereabouts of all persons detained by the CIA or rendered to foreign custody by the CIA since 2001, including detainees who were rendered to Jordan;
·Repudiate the use of "diplomatic assurances" against torture and ill-treatment as a justification for the transfer of a suspect to a place where he or she is at risk of such abuse;
·Make public any audio recordings or videotapes that the CIA possesses of interrogations of detainees rendered by the CIA to foreign custody;
·Provide appropriate compensation to all persons arbitrarily detained by the CIA or rendered to foreign custody.
Now here's Human Rights Watch in the era of Hope and ChangeTM:
The Corner/NRO, Feb 02, 2009
Buried in that LAT article on rendition Jonah linked below is a flip-flop from Human Rights Watch that would impress even the East German judge. Here's Human Rights Watch in April of last year:
The US government should:
·Repudiate the use of rendition to torture as a counterterrorism tactic and permanently discontinue the CIA's rendition program;
·Disclose the identities, fate, and current whereabouts of all persons detained by the CIA or rendered to foreign custody by the CIA since 2001, including detainees who were rendered to Jordan;
·Repudiate the use of "diplomatic assurances" against torture and ill-treatment as a justification for the transfer of a suspect to a place where he or she is at risk of such abuse;
·Make public any audio recordings or videotapes that the CIA possesses of interrogations of detainees rendered by the CIA to foreign custody;
·Provide appropriate compensation to all persons arbitrarily detained by the CIA or rendered to foreign custody.
Now here's Human Rights Watch in the era of Hope and ChangeTM:
"Under limited circumstances, there is a legitimate place" for renditions,
said Tom Malinowski, the Washington advocacy director for Human Rights Watch.
"What I heard loud and clear from the president's order was that they want to
design a system that doesn't result in people being sent to foreign dungeons to
be tortured — but that designing that system is going to take some time."
Violence in Pakistan: Trend Analysis December 2008
Violence in Pakistan: Trend Analysis December 2008. By Alok Bansal and T. Khurshchev IDSA, January 31, 2009
Excerpts:
Amidst apprehensions of a conflict between India and Pakistan after attacks on Mumbai on 26 November, as Pakistani security forces ostensibly diverted their attention from the Western to the Eastern borders, terror related violence showed an increase from 372 in November to 388 in December. Although there was no movement of troops from the Western borders to the East, Pakistani security forces allowed vast tracts of land in FATA and Swat Valley go under the control of Taliban. This was probably an attempt to put pressure on the West in the aftermath of Mumbai attacks, but only helped the militants to consolidate their position. As a result besides South and North Waziristan Agencies, the Taliban has established its writ in Orakzai Agency and Swat Valley. As the security forces toned down their operations against the militants, the causality figure of militants reduced significantly from 462 in November to 216 in December. Absence of any major military operations also ensured that the casualties of the security forces also reduced considerably form 56 in November to 23 in December. However, the casualties of civilians rose from 286 in November to 340 in December, as the militants utilized this breather to settle scores with pro-government tribal leaders and secular political activists. Nevertheless, the total number of deaths from violence reduced form 804 in November to 579 in December, but it would be wrong to discern a durable trend from it as the reduced casualties were mainly because of the throwing in of towel by the security forces. In keeping with the militants’ policy of sorting out allies of the government as well as those who dared to oppose their dictats, the kidnapping figure has risen sharply form 65 in November to 271 in December.
NWFP
Continuing the trend of last three months, NWFP continued to witness the most number of violent attacks in Pakistan. The number of violent incidents decreased from 184 in November to 178 in December, averaging almost six a day. During the month 307 people were killed and 209 injured as against 342 killed and 308 injured in the previous month. However, the number of injured are likely to be much more as the exact number of injured were often not reported in the media.
100 alleged militants were killed during the month as against 190 killed and 123 injured in November. The security forces arrested 248 alleged militants including 109 persons from Hangu on December 30, for their alleged involvement in sectarian violence during Muharram. On the other hand 191 civilians were killed and 172 received injuries in December, as against 111 killed and 157 injured in November. Similarly, number of people kidnapped by the militants has also increased to 70 in December from 32 the previous month and the figures include seven security personnel kidnapped in December and three in November. During the month 16 security personnel were killed and 36 injured as against 41 killed and 28 injured the previous month, thereby clearly indicating a marked lull in the security forces’ operations against the militants.
Like in the past, the main targets of the militants remained security posts, police stations, schools and shops selling CDs, wine and cosmetics. However, during the month, the supply convoys to NATO troops in Afghanistan were added to this list. In the biggest assault ever on this vital military supply line, over 300 vehicles and containers vehicles that carry goods from Pakistan for NATO troops in Afghanistan were destroyed. On 7 December, the Taliban torched more than 160 vehicles carrying NATO in Peshawar and the very next day, they again torched in Peshawar 53 vehicles destined for NATO forces in Afghanistan. The impunity, with which the attackers could target these high value targets in the heart of Peshawar city is indicative of state complicity. It appears that the security establishment in Pakistan wanted to use these attacks to ease the US pressure being put on Pakistan to act against the perpetrators of Mumbai attack. The strife between Tehrik-e-Taliban Pakistan (TTP) and other tribal groups remained unabated and its cadres beheaded two followers of rival cleric Pir Samiullah in Gwalerai area of Matta tehsil. Militants operating in the restive Swat valley announced unilateral ceasefire during Eidul Azha. On 26 December, Taliban in Swat district imposed a blanket ban on female education and warned the teachers of ‘severe consequences’. The militants also shot and injured a Chinese engineer and his security guard in Dargai on 24 December.
As against six suicide bombing in November, there were only three such attacks in December in NWFP, but they resulted in greater casualties. As against 28 people killed and 53 wounded in November in NWFP, 56 persons were killed and 71 injured in suicide attacks in December. Two of the three attacks were directed against the security forces and the third attack was at a polling station set up for a by-election in Bunir district.
FATA
Unlike the other parts of Pakistan, there was an increase in the incidents of violence in FATA, which increased from 108 in November to 122 in December. However the casualty rates dropped significantly and as against 337 killed and 109 injured in November, 201 persons were killed and 125 injured in December. 100 militants were killed and 63 injured in December as against 254 killed and 68 injured in the previous month. The security forces also arrested 31 alleged militants including Al Qaeda members as compared to 88 in November. Similarly, 87 civilian were killed and 31 injured as against 111 killed and 57 injured in the previous month. Besides, 185 (including 160 persons who were taken hostage by rival tribes in Kurram Agency on 16 December) civilians were kidnapped by the gunmen as against 23 in November. In the absence of any major operation by the security forces, only four security personnel lost their lives in the region as against eight in November. Besides, 15 security personals were injured and one was kidnapped.
During the month as the security forces halted their operations against the militants, the interregnum was utilized by the militants to exterminate a number of alleged US spies. At least nine such ‘spies’ were killed in five different incidents in North and South Waziristan itself. Each dead body carried a note accusing them of spying for the US. Around four hundred alleged Taliban surrendered to the authorities during the month mainly in Mohmand agency. In accordance with the trend observed in NWFP, lorries and tankers carrying supplies for International Security Assistance Force in Afghanistan were attacked while passing through the Khyber Pass and TTP claimed responsibility for these attacks.
The region also witnessed one suicide attack in December as against two such incidents in November. On December 5, seven tribesmen were killed and eight others injured when a suicide bomber blew up an explosive-laden vehicle near a jirga between Baramadkhel and Utmankhel tribes in Kalaya, the headquarters of Orakzai Agency. The tribes had actively participated in anti-Taliban tribal militias set up by the security forces.
Balochistan
The number of incidents in Balochistan remained constant at 30, but the casualties dropped significantly. Barring isolated incidents, the ceasefire announced by the three Baloch nationalist outfits in September was being adhered to. During the month, 11 persons were killed and 17 wounded in violent incidents as against 40 killed and 27 injured in November. Only two militants were killed in December as against 12 killed and 15 injured the previous month. However, the security arrested 40 alleged militants as against 17 in November. Eight civilians were killed and 17 injured as against 23 killed and 11 injured in November. Besides, 14 persons were kidnapped as against two in November. Similarly, only one security personnel was killed during the month as against five killed and one injured in November. Most of the attacks during the month were on pipelines and railway lines, besides a few attacks on security posts.
Other AreasTerror activities in other parts of the Pakistan remained at more or less the same level as in November. There were 58 incidents of violence in December as compared to 60 in November. 60 people lost their lives and 22 were injured in December as against 49 killed and 176 wounded in November. In December, 14 armed miscreants were killed and 96 arrested as against six killed and 37 arrested in November. Similarly, 44 civilians were killed and 20 injured in December as against 41 killed and 175 wounded in November. Two security personnel were also killed and two injured in December as against two killed and one injured in the previous month.
A number of political activists of PPP and MQM were killed in a number of incidents between 16 to 19 December in Karachi. In the recent past, criminal activities and violence in Karachi have shot up. In response a joint team of Sindh Police and Pakistan Rangers arrested more than 60 suspects, including Afghan nationals on 2 December and recovered huge quantity of arms, ammunition. Besides Karachi, in a major crack down, Islamabad police foiled terrorist attacks planned during Christmas, Benazir Bhutto’s death anniversary and the New Year’s Eve by seizing 650 kilograms of explosives and 520 detonators on December 26. Similarly, on December 30, Police in Lahore recovered a gas cylinder packed with 10-kilogram of improvised explosive device (IED) connected to a cell phone and a detonator from bushes.
ConclusionThere has been a significant decrease in violence in Pakistan that can be attributed to the reduced activities by the security forces and a carte blanche given to the militants after the attacks on Mumbai. TTP volunteered to fight against India along side Pakistani army and Baitullah Mehsud declared on December 24, “Despite our differences with the government, the protection of Pakistan and its people is as much our duty as it is of the armed forces” and claimed that ‘hundreds of thousands of suicide bombers’ were ready to defend Pakistan in case of war with India. He further added, “The armed forces and the nation do not need to worry about the western borders in case of an Indian attack”. The statements were meant to win the support of Pakistani public and prove his patriotic credentials and succeeded in its aims to a large extent.
Alok Bansal is Research Fellow and T. Khurshchev is Research Assistant at the Institute for Defence Studies and Analyses, New Delhi
Full article, with graphs and table, here.
Excerpts:
Amidst apprehensions of a conflict between India and Pakistan after attacks on Mumbai on 26 November, as Pakistani security forces ostensibly diverted their attention from the Western to the Eastern borders, terror related violence showed an increase from 372 in November to 388 in December. Although there was no movement of troops from the Western borders to the East, Pakistani security forces allowed vast tracts of land in FATA and Swat Valley go under the control of Taliban. This was probably an attempt to put pressure on the West in the aftermath of Mumbai attacks, but only helped the militants to consolidate their position. As a result besides South and North Waziristan Agencies, the Taliban has established its writ in Orakzai Agency and Swat Valley. As the security forces toned down their operations against the militants, the causality figure of militants reduced significantly from 462 in November to 216 in December. Absence of any major military operations also ensured that the casualties of the security forces also reduced considerably form 56 in November to 23 in December. However, the casualties of civilians rose from 286 in November to 340 in December, as the militants utilized this breather to settle scores with pro-government tribal leaders and secular political activists. Nevertheless, the total number of deaths from violence reduced form 804 in November to 579 in December, but it would be wrong to discern a durable trend from it as the reduced casualties were mainly because of the throwing in of towel by the security forces. In keeping with the militants’ policy of sorting out allies of the government as well as those who dared to oppose their dictats, the kidnapping figure has risen sharply form 65 in November to 271 in December.
NWFP
Continuing the trend of last three months, NWFP continued to witness the most number of violent attacks in Pakistan. The number of violent incidents decreased from 184 in November to 178 in December, averaging almost six a day. During the month 307 people were killed and 209 injured as against 342 killed and 308 injured in the previous month. However, the number of injured are likely to be much more as the exact number of injured were often not reported in the media.
100 alleged militants were killed during the month as against 190 killed and 123 injured in November. The security forces arrested 248 alleged militants including 109 persons from Hangu on December 30, for their alleged involvement in sectarian violence during Muharram. On the other hand 191 civilians were killed and 172 received injuries in December, as against 111 killed and 157 injured in November. Similarly, number of people kidnapped by the militants has also increased to 70 in December from 32 the previous month and the figures include seven security personnel kidnapped in December and three in November. During the month 16 security personnel were killed and 36 injured as against 41 killed and 28 injured the previous month, thereby clearly indicating a marked lull in the security forces’ operations against the militants.
Like in the past, the main targets of the militants remained security posts, police stations, schools and shops selling CDs, wine and cosmetics. However, during the month, the supply convoys to NATO troops in Afghanistan were added to this list. In the biggest assault ever on this vital military supply line, over 300 vehicles and containers vehicles that carry goods from Pakistan for NATO troops in Afghanistan were destroyed. On 7 December, the Taliban torched more than 160 vehicles carrying NATO in Peshawar and the very next day, they again torched in Peshawar 53 vehicles destined for NATO forces in Afghanistan. The impunity, with which the attackers could target these high value targets in the heart of Peshawar city is indicative of state complicity. It appears that the security establishment in Pakistan wanted to use these attacks to ease the US pressure being put on Pakistan to act against the perpetrators of Mumbai attack. The strife between Tehrik-e-Taliban Pakistan (TTP) and other tribal groups remained unabated and its cadres beheaded two followers of rival cleric Pir Samiullah in Gwalerai area of Matta tehsil. Militants operating in the restive Swat valley announced unilateral ceasefire during Eidul Azha. On 26 December, Taliban in Swat district imposed a blanket ban on female education and warned the teachers of ‘severe consequences’. The militants also shot and injured a Chinese engineer and his security guard in Dargai on 24 December.
As against six suicide bombing in November, there were only three such attacks in December in NWFP, but they resulted in greater casualties. As against 28 people killed and 53 wounded in November in NWFP, 56 persons were killed and 71 injured in suicide attacks in December. Two of the three attacks were directed against the security forces and the third attack was at a polling station set up for a by-election in Bunir district.
FATA
Unlike the other parts of Pakistan, there was an increase in the incidents of violence in FATA, which increased from 108 in November to 122 in December. However the casualty rates dropped significantly and as against 337 killed and 109 injured in November, 201 persons were killed and 125 injured in December. 100 militants were killed and 63 injured in December as against 254 killed and 68 injured in the previous month. The security forces also arrested 31 alleged militants including Al Qaeda members as compared to 88 in November. Similarly, 87 civilian were killed and 31 injured as against 111 killed and 57 injured in the previous month. Besides, 185 (including 160 persons who were taken hostage by rival tribes in Kurram Agency on 16 December) civilians were kidnapped by the gunmen as against 23 in November. In the absence of any major operation by the security forces, only four security personnel lost their lives in the region as against eight in November. Besides, 15 security personals were injured and one was kidnapped.
During the month as the security forces halted their operations against the militants, the interregnum was utilized by the militants to exterminate a number of alleged US spies. At least nine such ‘spies’ were killed in five different incidents in North and South Waziristan itself. Each dead body carried a note accusing them of spying for the US. Around four hundred alleged Taliban surrendered to the authorities during the month mainly in Mohmand agency. In accordance with the trend observed in NWFP, lorries and tankers carrying supplies for International Security Assistance Force in Afghanistan were attacked while passing through the Khyber Pass and TTP claimed responsibility for these attacks.
The region also witnessed one suicide attack in December as against two such incidents in November. On December 5, seven tribesmen were killed and eight others injured when a suicide bomber blew up an explosive-laden vehicle near a jirga between Baramadkhel and Utmankhel tribes in Kalaya, the headquarters of Orakzai Agency. The tribes had actively participated in anti-Taliban tribal militias set up by the security forces.
Balochistan
The number of incidents in Balochistan remained constant at 30, but the casualties dropped significantly. Barring isolated incidents, the ceasefire announced by the three Baloch nationalist outfits in September was being adhered to. During the month, 11 persons were killed and 17 wounded in violent incidents as against 40 killed and 27 injured in November. Only two militants were killed in December as against 12 killed and 15 injured the previous month. However, the security arrested 40 alleged militants as against 17 in November. Eight civilians were killed and 17 injured as against 23 killed and 11 injured in November. Besides, 14 persons were kidnapped as against two in November. Similarly, only one security personnel was killed during the month as against five killed and one injured in November. Most of the attacks during the month were on pipelines and railway lines, besides a few attacks on security posts.
Other AreasTerror activities in other parts of the Pakistan remained at more or less the same level as in November. There were 58 incidents of violence in December as compared to 60 in November. 60 people lost their lives and 22 were injured in December as against 49 killed and 176 wounded in November. In December, 14 armed miscreants were killed and 96 arrested as against six killed and 37 arrested in November. Similarly, 44 civilians were killed and 20 injured in December as against 41 killed and 175 wounded in November. Two security personnel were also killed and two injured in December as against two killed and one injured in the previous month.
A number of political activists of PPP and MQM were killed in a number of incidents between 16 to 19 December in Karachi. In the recent past, criminal activities and violence in Karachi have shot up. In response a joint team of Sindh Police and Pakistan Rangers arrested more than 60 suspects, including Afghan nationals on 2 December and recovered huge quantity of arms, ammunition. Besides Karachi, in a major crack down, Islamabad police foiled terrorist attacks planned during Christmas, Benazir Bhutto’s death anniversary and the New Year’s Eve by seizing 650 kilograms of explosives and 520 detonators on December 26. Similarly, on December 30, Police in Lahore recovered a gas cylinder packed with 10-kilogram of improvised explosive device (IED) connected to a cell phone and a detonator from bushes.
ConclusionThere has been a significant decrease in violence in Pakistan that can be attributed to the reduced activities by the security forces and a carte blanche given to the militants after the attacks on Mumbai. TTP volunteered to fight against India along side Pakistani army and Baitullah Mehsud declared on December 24, “Despite our differences with the government, the protection of Pakistan and its people is as much our duty as it is of the armed forces” and claimed that ‘hundreds of thousands of suicide bombers’ were ready to defend Pakistan in case of war with India. He further added, “The armed forces and the nation do not need to worry about the western borders in case of an Indian attack”. The statements were meant to win the support of Pakistani public and prove his patriotic credentials and succeeded in its aims to a large extent.
Alok Bansal is Research Fellow and T. Khurshchev is Research Assistant at the Institute for Defence Studies and Analyses, New Delhi
Full article, with graphs and table, here.
Conservative views on Deputy Attorney General Nominee David Ogden: Questions on Interpretation of the U.S. Constitution
Deputy Attorney General Nominee David Ogden: Questions on Interpretation of the U.S. Constitution. By Steven Groves
Heritage, February 2, 2009
On January 6, Barack Obama nominated David Ogden to be the next deputy attorney general of the United States, the second highest position in the U.S. Department of Justice. Reportedly hanging in Ogden’s office at the time of the nomination was a plaque commemorating his victory in a controversial 2005 death penalty case before the U.S. Supreme Court.[1]
That case, Roper v. Simmons, was controversial not only because it determined the constitutionality of the juvenile death penalty but also because, in deciding the case, a narrowly divided Supreme relied in part upon the laws and practices of foreign nations as well as other sources of foreign law and “the opinion of the world community.”
Although Ogden is certainly qualified for the position of deputy attorney general,[2] the views expressed in the brief he co-authored on behalf of the defendant in the Roper case are troublesome and should be explored during his Senate confirmation hearing before the Committee on the Judiciary, currently scheduled for February 5.
Relying on Foreign Sources of Law to Interpret the U.S. Constitution
The Supreme Court’s citation to foreign law in cases interpreting the United States Constitution is controversial and has sparked an ongoing debate within the U.S. legal community.[3] The Court’s decision to rely in part on foreign jurisprudence in reaching its decision in the Roper case is part of that debate.
The Roper v. Simmons Case. In 1993 in St. Louis, Missouri, Christopher Simmons, nine months before his 18th birthday, planned and carried out the cold-blooded murder of 46-year-old Shirley Crook. Following a plan that he had discussed in great detail with his friends, Simmons and an accomplice broke into Crook’s home, hogtied her with electrical wire, wrapped her head in duct tape, drove her to a bridge, and threw her into the Meramec River, where she drowned. Simmons subsequently bragged about the murder, explaining to friends that he killed Crook “because the bitch seen my face.” Simmons was subsequently arrested, tried, convicted, and sentenced to death.[4]
Simmons’ case was appealed through the Missouri legal system and ultimately argued before the U.S. Supreme Court, where Simmons was represented by a team of attorneys which included Ogden. Among the arguments made in the brief co-authored by Ogden and submitted to the Supreme Court was that, in making its decision, the Court should look to the laws, legal opinions, and decisions of foreign nations and international organizations regarding the death penalty.[5]
Ogden argued that the laws of foreign nations enjoy a direct cause-and-effect relationship with the interpretation of the U.S. Constitution: “Almost without exception, the other nations of the world have rejected capital punishment of those under 18, confirming that the juvenile death penalty is contrary to Eighth Amendment standards of decency.”[6] In other words, since the “other nations of the world” disfavor capital punishment for juvenile killers, it necessarily follows that the death penalty for juvenile killers in the United States is contrary to the Eighth Amendment to the Constitution.
United Nations Treaties and International Organizations. In support of this position, Ogden’s brief in Roper cites to the United Nations General Assembly’s adoption of the Convention on the Rights of the Child (CRC) in 1989, the terms of which bar the execution of persons who commit crimes while under the age of 18.[7] However, the United States did not vote in favor of the CRC in the General Assembly and has thus far—under both the Clinton and Bush Administrations—chosen not to become a party to the CRC.[8] The United States has excellent reasons not to ratify the CRC.[9] And yet Ogden’s brief maintains that since “every [other] country in the world” is a party to the CRC, the United States (including the Supreme Court) should follow its terms and outlaw the juvenile death penalty.
Ogden’s argument turns logic on its head. In effect, the Roper brief maintains that even though the United States has specifically chosen not to join the CRC, it should still be bound by its terms. Moreover, it necessarily follows that the Supreme Court should ignore the U.S. government’s decision not to ratify the CRC and impose upon the nation the CRC’s death penalty prohibition.
Citing to a 2002 report of the Inter-American Commission on Human Rights, Ogden’s brief in Roper also arguesfor the proposition that there is a new “international customary norm” barring the juvenile death penalty—a norm to which the United States is now bound.[10] The U.S., however, has never consented to be bound by the recommendation of the Inter-American Commission, which has no jurisdiction over U.S. persons and cannot compel the U.S. government. Moreover, neither that commission nor any other international organization has the authority to declare anything to be a binding, international norm.
In sum, then, Ogden’s brief maintains that the Supreme Court should interpret the U.S. Constitution with deference to (1) a global legal “consensus” allegedly reached by other nations of the world regarding the juvenile death penalty, (2) the provisions of a U.N. human rights treaty that the United States has never ratified and is not party to, and (3) a declaration by an international commission that has no authority over the United States. These three arguments have in common the desire to achieve by judicial proclamation that which could not be attained through the democratic process—either through Senate ratification of the CRC or through the amendment or repeal of the death penalty law in Missouri.
The death penalty is a serious issue for U.S. constitutional law that has been hotly debated in legal, social, cultural, and religious circles throughout America’s history and across the globe. The circumstances under which it should be imposed continue to present vexing moral questions, especially since 1958, when the Supreme Court under Chief Justice Earl Warren declared that the Constitution’s Eighth Amendment should be interpreted according to “evolving standards of decency.”[11] Regardless of whether one believes that imposing the death penalty on persons who committed heinous crimes while under the age of 18 is cruel and unusual, it is improper for the Supreme Court to rely on arguments foreign to U.S. law such as those made in Ogden’s brief in the Roper case.[12]
Questions for Ogden
If confirmed by the Senate as deputy attorney general, Ogden would be placed in a position of great influence over the policy of the Department of Justice, second only to the attorney general, whom he would “advise and assist … in formulating and implementing Department policies and programs.”[13] Accordingly, Ogden will have a major hand in counterterrorism policy, enforcement priorities, sentencing, and the decision whether to authorize federal prosecutors to seek the death penalty in appropriate cases. What role will the decisions of foreign courts and the “opinions of mankind” have on Ogden’s policy recommendations?
Ogden’s co-authorship of the Roper brief does not definitively establish that the arguments in the brief reflect his personal opinion, nor does it dictate how he will advise the attorney general on matters of legal policy. It is right and proper, however, to inquire of Ogden during his Senate confirmation hearing concerning his views on international sources of law and give him an opportunity to explain his beliefs regarding the interpretation of the U.S. Constitution. Such inquiries could include:
Given the major role that the deputy attorney general will have in determining the criminal legal policy of the United States over the next four years, the arguments advanced by Ogden in the Roper v. Simmons case deserve close scrutiny.
Although the Senate confirmation hearing of Ogden will certainly not determine the propriety of relying on foreign sources of law to interpret the Constitution, the Committee on the Judiciary should not ignore his opinions on such a crucial issue of constitutional interpretation.
Steven Groves is Bernard and Barbara Lomas Fellow in the Margaret Thatcher Center for Freedom, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.
Heritage, February 2, 2009
On January 6, Barack Obama nominated David Ogden to be the next deputy attorney general of the United States, the second highest position in the U.S. Department of Justice. Reportedly hanging in Ogden’s office at the time of the nomination was a plaque commemorating his victory in a controversial 2005 death penalty case before the U.S. Supreme Court.[1]
That case, Roper v. Simmons, was controversial not only because it determined the constitutionality of the juvenile death penalty but also because, in deciding the case, a narrowly divided Supreme relied in part upon the laws and practices of foreign nations as well as other sources of foreign law and “the opinion of the world community.”
Although Ogden is certainly qualified for the position of deputy attorney general,[2] the views expressed in the brief he co-authored on behalf of the defendant in the Roper case are troublesome and should be explored during his Senate confirmation hearing before the Committee on the Judiciary, currently scheduled for February 5.
Relying on Foreign Sources of Law to Interpret the U.S. Constitution
The Supreme Court’s citation to foreign law in cases interpreting the United States Constitution is controversial and has sparked an ongoing debate within the U.S. legal community.[3] The Court’s decision to rely in part on foreign jurisprudence in reaching its decision in the Roper case is part of that debate.
The Roper v. Simmons Case. In 1993 in St. Louis, Missouri, Christopher Simmons, nine months before his 18th birthday, planned and carried out the cold-blooded murder of 46-year-old Shirley Crook. Following a plan that he had discussed in great detail with his friends, Simmons and an accomplice broke into Crook’s home, hogtied her with electrical wire, wrapped her head in duct tape, drove her to a bridge, and threw her into the Meramec River, where she drowned. Simmons subsequently bragged about the murder, explaining to friends that he killed Crook “because the bitch seen my face.” Simmons was subsequently arrested, tried, convicted, and sentenced to death.[4]
Simmons’ case was appealed through the Missouri legal system and ultimately argued before the U.S. Supreme Court, where Simmons was represented by a team of attorneys which included Ogden. Among the arguments made in the brief co-authored by Ogden and submitted to the Supreme Court was that, in making its decision, the Court should look to the laws, legal opinions, and decisions of foreign nations and international organizations regarding the death penalty.[5]
Ogden argued that the laws of foreign nations enjoy a direct cause-and-effect relationship with the interpretation of the U.S. Constitution: “Almost without exception, the other nations of the world have rejected capital punishment of those under 18, confirming that the juvenile death penalty is contrary to Eighth Amendment standards of decency.”[6] In other words, since the “other nations of the world” disfavor capital punishment for juvenile killers, it necessarily follows that the death penalty for juvenile killers in the United States is contrary to the Eighth Amendment to the Constitution.
United Nations Treaties and International Organizations. In support of this position, Ogden’s brief in Roper cites to the United Nations General Assembly’s adoption of the Convention on the Rights of the Child (CRC) in 1989, the terms of which bar the execution of persons who commit crimes while under the age of 18.[7] However, the United States did not vote in favor of the CRC in the General Assembly and has thus far—under both the Clinton and Bush Administrations—chosen not to become a party to the CRC.[8] The United States has excellent reasons not to ratify the CRC.[9] And yet Ogden’s brief maintains that since “every [other] country in the world” is a party to the CRC, the United States (including the Supreme Court) should follow its terms and outlaw the juvenile death penalty.
Ogden’s argument turns logic on its head. In effect, the Roper brief maintains that even though the United States has specifically chosen not to join the CRC, it should still be bound by its terms. Moreover, it necessarily follows that the Supreme Court should ignore the U.S. government’s decision not to ratify the CRC and impose upon the nation the CRC’s death penalty prohibition.
Citing to a 2002 report of the Inter-American Commission on Human Rights, Ogden’s brief in Roper also arguesfor the proposition that there is a new “international customary norm” barring the juvenile death penalty—a norm to which the United States is now bound.[10] The U.S., however, has never consented to be bound by the recommendation of the Inter-American Commission, which has no jurisdiction over U.S. persons and cannot compel the U.S. government. Moreover, neither that commission nor any other international organization has the authority to declare anything to be a binding, international norm.
In sum, then, Ogden’s brief maintains that the Supreme Court should interpret the U.S. Constitution with deference to (1) a global legal “consensus” allegedly reached by other nations of the world regarding the juvenile death penalty, (2) the provisions of a U.N. human rights treaty that the United States has never ratified and is not party to, and (3) a declaration by an international commission that has no authority over the United States. These three arguments have in common the desire to achieve by judicial proclamation that which could not be attained through the democratic process—either through Senate ratification of the CRC or through the amendment or repeal of the death penalty law in Missouri.
The death penalty is a serious issue for U.S. constitutional law that has been hotly debated in legal, social, cultural, and religious circles throughout America’s history and across the globe. The circumstances under which it should be imposed continue to present vexing moral questions, especially since 1958, when the Supreme Court under Chief Justice Earl Warren declared that the Constitution’s Eighth Amendment should be interpreted according to “evolving standards of decency.”[11] Regardless of whether one believes that imposing the death penalty on persons who committed heinous crimes while under the age of 18 is cruel and unusual, it is improper for the Supreme Court to rely on arguments foreign to U.S. law such as those made in Ogden’s brief in the Roper case.[12]
Questions for Ogden
If confirmed by the Senate as deputy attorney general, Ogden would be placed in a position of great influence over the policy of the Department of Justice, second only to the attorney general, whom he would “advise and assist … in formulating and implementing Department policies and programs.”[13] Accordingly, Ogden will have a major hand in counterterrorism policy, enforcement priorities, sentencing, and the decision whether to authorize federal prosecutors to seek the death penalty in appropriate cases. What role will the decisions of foreign courts and the “opinions of mankind” have on Ogden’s policy recommendations?
Ogden’s co-authorship of the Roper brief does not definitively establish that the arguments in the brief reflect his personal opinion, nor does it dictate how he will advise the attorney general on matters of legal policy. It is right and proper, however, to inquire of Ogden during his Senate confirmation hearing concerning his views on international sources of law and give him an opportunity to explain his beliefs regarding the interpretation of the U.S. Constitution. Such inquiries could include:
- Reliance on foreign legal norms appears to have led to an incremental erosion of the number of crimes for which the death penalty is warranted. For instance, the death penalty is no longer available in cases where the defendant was a juvenile or mentally retarded at the time of the offense[14] or in cases of rape.[15] What is next? If the “world community” reaches a consensus that the death penalty should not be applied for the crimes of terrorism, treason, or other federal capital offenses, what will you recommend to the attorney general in such cases?
- If confirmed you will be involved in deciding which federal cases are appropriate candidates for the death penalty.[16] What weight will you give to the decisions of foreign courts and other “international norms” in your death penalty recommendations to the attorney general?
- International criminal legal norms are not limited to death penalty issues. For example, 135 nations apparently more “civilized” than the United States currently prohibit the imposition of the sentence of life without the possibility of parole (LWOP) for juvenile killers, while 44 U.S. states and the federal government currently permit such sentences.[17] Do you respect the sovereignty of each state in the Union to decide appropriate punishments for juvenile killers, including LWOP sentences? In your opinion, does foreign law trump the laws of 44 U.S. states as well as the laws of the very government for which you are seeking to serve as deputy attorney general?
- The legal systems of the world greatly vary from one another and from the U.S. criminal justice system. The criminal laws, social mores, and cultural traditions of other nations are also considerably divergent. Under what circumstances should the United States adopt the normative values and laws of other nations?
Given the major role that the deputy attorney general will have in determining the criminal legal policy of the United States over the next four years, the arguments advanced by Ogden in the Roper v. Simmons case deserve close scrutiny.
Although the Senate confirmation hearing of Ogden will certainly not determine the propriety of relying on foreign sources of law to interpret the Constitution, the Committee on the Judiciary should not ignore his opinions on such a crucial issue of constitutional interpretation.
Steven Groves is Bernard and Barbara Lomas Fellow in the Margaret Thatcher Center for Freedom, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.
Sunday, February 1, 2009
On BHO's executive orders on detainee treatment
Obama’s Torture Loopholes, by Prof. James Hill
Global Research, January 26, 2009
On January 22, 2009, President Obama signed a number of executive orders purporting to end the Bush administration’s abusive practices in dealing with treatment of terrorism suspects. Before Americans get too elated, however, they should look carefully at the inhumane interrogation practices these orders may still permit.
When first announced, the new president’s executive orders seemed cause for celebration, prompting the American Civil Liberties Union to feature a link on its website encouraging visitors to email the president and “Send Him Thanks!”
The ACLU summarized the new orders:
President Obama . . . ordered the closure of the prison camp at Guantรกnamo Bay within a year and the halting of its military commissions; the end of the use of torture; the shuttering of secret prisons around the world; and a review of the detention of the only U.S. resident being held indefinitely as a so-called “enemy combatant” on American soil. The detainee, Ali al-Marri, is the American Civil Liberties Union’s client in a case pending before the Supreme Court.
Like many reacting to the president’s orders, ACLU Executive Director Anthony Romero expressed unbridled enthusiasm:
These executive orders represent a giant step forward. Putting an end to Guantanamo, torture and secret prisons is a civil liberties trifecta, and President Obama should be highly commended for this bold and decisive action so early in his administration on an issue so critical to restoring an America we can be proud of again.[1]
Torture by US officials has long been illegal, but the president’s executive order entitled “Ensuring Lawful Interrogations” seems to clarify, to some extent, what activities are proscribed. Disappointingly, though, this order contains loopholes big enough to drive a FEMA camp train through them.
Loophole 1: Torture is prohibited only of persons detained in an “armed conflict.”
The executive order applies only to “armed conflicts,” not counterterrorism operations.
The order states in part:
Consistent with the requirements of the Federal torture statute, . . . the Detainee Treatment Act of 2005, . . . the [United Nations] Convention Against Torture, [the Geneva Conventions] Common Article 3, and other laws regulating the treatment and interrogation of individuals detained in any armed conflict, such persons shall in all circumstances be treated humanely and shall not be subjected to violence to life and person (including murder of all kinds, mutilation, cruel treatment, and torture), nor to outrages upon personal dignity (including humiliating and degrading treatment), whenever such individuals are in the custody or under the effective control of an officer, employee, or other agent of the United States Government or detained within a facility owned, operated, or controlled by a department or agency of the United States [emphasis added].
This sounds salutary: America should not torture people detained in armed conflicts. But are such conflicts the only situations in which the US military, federal agencies, and private security companies can detain people today in the name of the war on terror?
Hardly. Many US and foreign citizens have been detained in counterterrorism operations, which another of Obama’s January 22 executive orders carefully differentiates from armed conflicts.
In that other executive order, entitled “Review of Detention Policy Options,” a special task force is commissioned to review procedures for detention suspects. This order clearly distinguishes between “armed conflicts” and “counterterrorism operations”:
The mission of the Special Task Force shall be to conduct a comprehensive review of the lawful options available to the Federal Government with respect to the apprehension, detention, trial, transfer, release, or other disposition of individuals captured or apprehended in connection with armed conflicts and counterterrorism operations, and to identify such options as are consistent with the national security and foreign policy interests of the United States and the interests of justice.
As the president has made this distinction, so should we.
To date, counterterrorism operations have resulted in hundreds of arrests of persons in America and abroad, having nothing whatever to do with any armed conflict. Does President Obama wish limits on what is done to these people when detained and interrogated? His executive order on torture is silent on the issue.
Moreover, we know that many Guantanamo detainees from Pakistan and Afghanistan were sold to US officials by bounty hunters paid up to $25,000 per detainee, regardless of innocence.[2] Are these persons to be considered “individuals detained in [an] armed conflict”? Or must they be arrested while fighting on the battlefield to fit this qualification? Put differently, are blameless, uneducated goat herders who were sold into detention by warlords and mercenaries exempted from the president’s clarified prohibition of torture, simply because they never stepped foot on a battlefield?
Another concern is the US military’s deployment in American cities, which began on October 1, 2008, according to the Army Times.[3] Perhaps this deployment is in preparation for social unrest in the event of an economic collapse. If martial law were declared in America , how would citizens be treated? What if they were detained in FEMA detention facilities? Could they be tortured under the umbrella of “counterterrorism operations” because that is different from “armed conflict”?
To Americans wishing to remain free of torture, a far greater threat than detention during armed conflict is that resulting from what the federal government labels as counterterrorism operations, conducted both on US soil and overseas. Unfortunately, President Obama has not yet clearly addressed torture in this category.
Loophole 2: Only the CIA must close detention centers.
President Obama has ordered the CIA to close detention centers, except those “used only to hold people on a short-term, transitory basis,” which can stay open indefinitely. Exactly how long a duration is “short-term” and “transitory” is unclear.
The executive order states:
The CIA shall close as expeditiously as possible any detention facilities that it currently operates and shall not operate any such detention facility in the future.
This sounds wonderful, but what about other federal agencies? Can the FBI, National Security Agency, Department of Homeland Security, and Defense Intelligence Agency maintain detention facilities where torture may occur? Can private military contractors like Blackwater do so? Under one interpretation of Obama’s executive order on torture, those facilities may still operate and even expand, provided the CIA doesn’t control them. Is it cynical to suspect this could be window dressing?
Loophole 3: Officials may still hide some detainees and abusive practices from the Red Cross.
On the Red Cross’s monitoring of detainees, the executive order reads:
All departments and agencies of the Federal Government shall provide the International Committee of the Red Cross with notification of, and timely access to, any individual detained in any armed conflict in the custody or under the effective control of an officer, employee, or other agent of the United States Government or detained within a facility owned, operated, or controlled by a department or agency of the United States Government, consistent with Department of Defense regulations and policies.
Here again, if a detainee is not one captured on the battlefield by US soldiers in an armed conflict, Obama’s order provides no guidance as to his fate. Government and private thugs may evidently still brutalize detainees obtained in counterterrorism operations and hide them from the Red Cross, unless and until the president issues a further executive order, or Congress passes a law, closing this loophole.
Loophole 4: Abuses not labeled “torture” may continue.
Obama’s executive order on torture does not label any particular practice “torture,” but instead requires that future interrogation practices conform to those outlined in the Army Field Manual. This may be in deference to Bush administration officials who authorized procedures like waterboarding while simultaneously declaring, “ America does not torture.” Debate in some circles will doubtless continue, therefore, over whether waterboarding; deprivation of food, water, and sleep; humiliation; and infliction of severe bodily pain and injury indeed constitute torture.
The executive order imparts the following limitations:
Effective immediately, an individual in the custody or under the effective control of an officer, employee, or other agent of the United States Government, or detained within a facility owned, operated, or controlled by a department or agency of the United States, in any armed conflict, shall not be subjected to any interrogation technique or approach, or any treatment related to interrogation, that is not authorized by and listed in Army Field Manual 2-22.3 (Manual). Interrogation techniques, approaches, and treatments described in the Manual shall be implemented strictly in accord with the principles, processes, conditions, and limitations the Manual prescribes [emphasis added].
By this language, waterboarding and other harsh interrogation procedures are prohibited by implication because they are not authorized by the Army Field Manual. But like other parts of Obama’s order, this prohibition apparently applies only to persons detained in an armed conflict. As discussed above, we are left to wonder whether detainees grabbed in counterterrorism operations can continue being tortured.
Conclusion
The loopholes in President Obama’s executive order on torture may permit cruel abuses of prisoners to continue, using a legal parlor trick. Labeling detainees the product of counterterrorism operations rather than of armed conflict, or holding detainees in detention facilities operated by entities other than the CIA, may allow government agents and private contractors conforming to the letter of the president’s order to continue practices most would consider torture. The president should close these loopholes or explain to Americans why he won’t.
James Hill is a partner in the law firm of McDermott Will & Emery, and a clinical assistant professor of radiology at the University of Southern California School of Medicine. The views expressed are solely his own.
Notes
[1] ACLU Press Release: President Obama Orders Guantรกnamo Closed And End To Torture; at http://www.aclu.org/safefree/detention/38455prs20090122.html?s_src=RSS
[2] See: Andy Worthington: The Guantanamo Files: The Stories of the 759 Detainees in America 's Illegal Prison. Pluto Press, 2007; and: Jeffery Rosen: Voices of Victims (a review of My Guantanamo Diary: The Detainees and the Stories They Told Me, by Mahvish Rukhsana Khan). The New York Times, August 10, 2008, at http://www.nytimes.com/2008/08/10/books/review/Rosen-t.html?fta=y
[3] Gina Cavallaro: Brigade homeland tours start Oct. 1. Army Times, September 30, 2008, at http//www.armytimes.com/news/2008/09/army_homeland_090708w
Global Research, January 26, 2009
On January 22, 2009, President Obama signed a number of executive orders purporting to end the Bush administration’s abusive practices in dealing with treatment of terrorism suspects. Before Americans get too elated, however, they should look carefully at the inhumane interrogation practices these orders may still permit.
When first announced, the new president’s executive orders seemed cause for celebration, prompting the American Civil Liberties Union to feature a link on its website encouraging visitors to email the president and “Send Him Thanks!”
The ACLU summarized the new orders:
President Obama . . . ordered the closure of the prison camp at Guantรกnamo Bay within a year and the halting of its military commissions; the end of the use of torture; the shuttering of secret prisons around the world; and a review of the detention of the only U.S. resident being held indefinitely as a so-called “enemy combatant” on American soil. The detainee, Ali al-Marri, is the American Civil Liberties Union’s client in a case pending before the Supreme Court.
Like many reacting to the president’s orders, ACLU Executive Director Anthony Romero expressed unbridled enthusiasm:
These executive orders represent a giant step forward. Putting an end to Guantanamo, torture and secret prisons is a civil liberties trifecta, and President Obama should be highly commended for this bold and decisive action so early in his administration on an issue so critical to restoring an America we can be proud of again.[1]
Torture by US officials has long been illegal, but the president’s executive order entitled “Ensuring Lawful Interrogations” seems to clarify, to some extent, what activities are proscribed. Disappointingly, though, this order contains loopholes big enough to drive a FEMA camp train through them.
Loophole 1: Torture is prohibited only of persons detained in an “armed conflict.”
The executive order applies only to “armed conflicts,” not counterterrorism operations.
The order states in part:
Consistent with the requirements of the Federal torture statute, . . . the Detainee Treatment Act of 2005, . . . the [United Nations] Convention Against Torture, [the Geneva Conventions] Common Article 3, and other laws regulating the treatment and interrogation of individuals detained in any armed conflict, such persons shall in all circumstances be treated humanely and shall not be subjected to violence to life and person (including murder of all kinds, mutilation, cruel treatment, and torture), nor to outrages upon personal dignity (including humiliating and degrading treatment), whenever such individuals are in the custody or under the effective control of an officer, employee, or other agent of the United States Government or detained within a facility owned, operated, or controlled by a department or agency of the United States [emphasis added].
This sounds salutary: America should not torture people detained in armed conflicts. But are such conflicts the only situations in which the US military, federal agencies, and private security companies can detain people today in the name of the war on terror?
Hardly. Many US and foreign citizens have been detained in counterterrorism operations, which another of Obama’s January 22 executive orders carefully differentiates from armed conflicts.
In that other executive order, entitled “Review of Detention Policy Options,” a special task force is commissioned to review procedures for detention suspects. This order clearly distinguishes between “armed conflicts” and “counterterrorism operations”:
The mission of the Special Task Force shall be to conduct a comprehensive review of the lawful options available to the Federal Government with respect to the apprehension, detention, trial, transfer, release, or other disposition of individuals captured or apprehended in connection with armed conflicts and counterterrorism operations, and to identify such options as are consistent with the national security and foreign policy interests of the United States and the interests of justice.
As the president has made this distinction, so should we.
To date, counterterrorism operations have resulted in hundreds of arrests of persons in America and abroad, having nothing whatever to do with any armed conflict. Does President Obama wish limits on what is done to these people when detained and interrogated? His executive order on torture is silent on the issue.
Moreover, we know that many Guantanamo detainees from Pakistan and Afghanistan were sold to US officials by bounty hunters paid up to $25,000 per detainee, regardless of innocence.[2] Are these persons to be considered “individuals detained in [an] armed conflict”? Or must they be arrested while fighting on the battlefield to fit this qualification? Put differently, are blameless, uneducated goat herders who were sold into detention by warlords and mercenaries exempted from the president’s clarified prohibition of torture, simply because they never stepped foot on a battlefield?
Another concern is the US military’s deployment in American cities, which began on October 1, 2008, according to the Army Times.[3] Perhaps this deployment is in preparation for social unrest in the event of an economic collapse. If martial law were declared in America , how would citizens be treated? What if they were detained in FEMA detention facilities? Could they be tortured under the umbrella of “counterterrorism operations” because that is different from “armed conflict”?
To Americans wishing to remain free of torture, a far greater threat than detention during armed conflict is that resulting from what the federal government labels as counterterrorism operations, conducted both on US soil and overseas. Unfortunately, President Obama has not yet clearly addressed torture in this category.
Loophole 2: Only the CIA must close detention centers.
President Obama has ordered the CIA to close detention centers, except those “used only to hold people on a short-term, transitory basis,” which can stay open indefinitely. Exactly how long a duration is “short-term” and “transitory” is unclear.
The executive order states:
The CIA shall close as expeditiously as possible any detention facilities that it currently operates and shall not operate any such detention facility in the future.
This sounds wonderful, but what about other federal agencies? Can the FBI, National Security Agency, Department of Homeland Security, and Defense Intelligence Agency maintain detention facilities where torture may occur? Can private military contractors like Blackwater do so? Under one interpretation of Obama’s executive order on torture, those facilities may still operate and even expand, provided the CIA doesn’t control them. Is it cynical to suspect this could be window dressing?
Loophole 3: Officials may still hide some detainees and abusive practices from the Red Cross.
On the Red Cross’s monitoring of detainees, the executive order reads:
All departments and agencies of the Federal Government shall provide the International Committee of the Red Cross with notification of, and timely access to, any individual detained in any armed conflict in the custody or under the effective control of an officer, employee, or other agent of the United States Government or detained within a facility owned, operated, or controlled by a department or agency of the United States Government, consistent with Department of Defense regulations and policies.
Here again, if a detainee is not one captured on the battlefield by US soldiers in an armed conflict, Obama’s order provides no guidance as to his fate. Government and private thugs may evidently still brutalize detainees obtained in counterterrorism operations and hide them from the Red Cross, unless and until the president issues a further executive order, or Congress passes a law, closing this loophole.
Loophole 4: Abuses not labeled “torture” may continue.
Obama’s executive order on torture does not label any particular practice “torture,” but instead requires that future interrogation practices conform to those outlined in the Army Field Manual. This may be in deference to Bush administration officials who authorized procedures like waterboarding while simultaneously declaring, “ America does not torture.” Debate in some circles will doubtless continue, therefore, over whether waterboarding; deprivation of food, water, and sleep; humiliation; and infliction of severe bodily pain and injury indeed constitute torture.
The executive order imparts the following limitations:
Effective immediately, an individual in the custody or under the effective control of an officer, employee, or other agent of the United States Government, or detained within a facility owned, operated, or controlled by a department or agency of the United States, in any armed conflict, shall not be subjected to any interrogation technique or approach, or any treatment related to interrogation, that is not authorized by and listed in Army Field Manual 2-22.3 (Manual). Interrogation techniques, approaches, and treatments described in the Manual shall be implemented strictly in accord with the principles, processes, conditions, and limitations the Manual prescribes [emphasis added].
By this language, waterboarding and other harsh interrogation procedures are prohibited by implication because they are not authorized by the Army Field Manual. But like other parts of Obama’s order, this prohibition apparently applies only to persons detained in an armed conflict. As discussed above, we are left to wonder whether detainees grabbed in counterterrorism operations can continue being tortured.
Conclusion
The loopholes in President Obama’s executive order on torture may permit cruel abuses of prisoners to continue, using a legal parlor trick. Labeling detainees the product of counterterrorism operations rather than of armed conflict, or holding detainees in detention facilities operated by entities other than the CIA, may allow government agents and private contractors conforming to the letter of the president’s order to continue practices most would consider torture. The president should close these loopholes or explain to Americans why he won’t.
James Hill is a partner in the law firm of McDermott Will & Emery, and a clinical assistant professor of radiology at the University of Southern California School of Medicine. The views expressed are solely his own.
Notes
[1] ACLU Press Release: President Obama Orders Guantรกnamo Closed And End To Torture; at http://www.aclu.org/safefree/detention/38455prs20090122.html?s_src=RSS
[2] See: Andy Worthington: The Guantanamo Files: The Stories of the 759 Detainees in America 's Illegal Prison. Pluto Press, 2007; and: Jeffery Rosen: Voices of Victims (a review of My Guantanamo Diary: The Detainees and the Stories They Told Me, by Mahvish Rukhsana Khan). The New York Times, August 10, 2008, at http://www.nytimes.com/2008/08/10/books/review/Rosen-t.html?fta=y
[3] Gina Cavallaro: Brigade homeland tours start Oct. 1. Army Times, September 30, 2008, at http//www.armytimes.com/news/2008/09/army_homeland_090708w
How "Child Safety" May Kill NYC Jobs
How "Child Safety" May Kill NYC Jobs. By Jeff Stier, Esq.
American Council on Science and Health, Wednesday, January 28, 2009
If Congress doesn't act quickly, tens of thousands of Americans will lose their jobs -- and several hundred New York businesses will get hit particularly hard.
The problem is the Consumer Product Safety Improvement Act, which Congress passed overwhelmingly last year because of fears about lead in toys from China. Bizarrely, the law threatens U.S.-based children's clothing makers as well as toy makers -- and even libraries. Its staggering, unintended consequences have prompted outrage from everyone from "mommy-bloggers" to some environmentalists.
In the name of safety, the law imposes absurd standards and insane testing requirements. These aren't based on science, but on political hysteria -- and they're a major burden on business. In this recession, they could close down countless companies whose products are perfectly safe.
One example: The law not only requires testing of components of children's clothing for tiny levels of lead, but also separate testing of each different style of clothes, even if made from the same materials.
What's worse, the Consumer Product Safety Commission interprets the law to apply to kid's clothing retroactively. So products already en route to stores -- even if they contain no lead -- will be illegal to sell after Feb. 10 if they haven't been tested.
Wal-Mart is telling its suppliers that everything it has in stock that hasn't already been tested must be out of stores by Feb. 1 -- even if that means sending the stuff back to suppliers.
This is creating chaos for everyone involved in making and selling children's items. Unless Congress acts now, tens of millions of dollars worth of safe children's clothing will be destroyed -- and that's from New York City clothing makers alone.
Dozens of small, family-owned New York businesses, already struggling, will shut down and/or lay off their workers. The city could lose a quarter to a half of its 8,000 garment-industry jobs within weeks. Cory Silverstein of Kids Headquarters on 34th Street fears he may have to lay off close to 100 of his 600 employees in the city.
Meanwhile, the test requirements will make children's clothing more expensive.
Opponents of this "safety" law include not just businesses but activists like Chicago writer and environmentalist Manda Aufochs Gillespie, a.k.a. "the Green Mama." She writes that it "has made things much harder than they need to be": Even products that already meet much-stricter organic-certification requirements, as well as European Union standards, are not exempt from the "safety" testing requirements.
Companies like Chapter One Organics are also angry -- because big business can absorb the costs and pass them along to consumers, while smaller companies will be forced out of business.
The law's onerous testing requirements may even apply to children's books. If so, until every single children's book is certified safe, libraries would be off-limits to children. So the American Library Association is lobbying for a quick fix to exempt libraries from the law.
But the law is so fundamentally flawed that it can't just be tweaked -- it must be repealed. Then, Congress can consider a more science-based approach to safety that protects children without destroying whole industries.
The immediate need, however, is for Congress to simply delay the law from taking effect. If it doesn't act now, thousands of small businesses will close and consumers will pay more for everything they buy their kids.
Jeff Stier is an associate director of the American Council on Science and Health.
American Council on Science and Health, Wednesday, January 28, 2009
If Congress doesn't act quickly, tens of thousands of Americans will lose their jobs -- and several hundred New York businesses will get hit particularly hard.
The problem is the Consumer Product Safety Improvement Act, which Congress passed overwhelmingly last year because of fears about lead in toys from China. Bizarrely, the law threatens U.S.-based children's clothing makers as well as toy makers -- and even libraries. Its staggering, unintended consequences have prompted outrage from everyone from "mommy-bloggers" to some environmentalists.
In the name of safety, the law imposes absurd standards and insane testing requirements. These aren't based on science, but on political hysteria -- and they're a major burden on business. In this recession, they could close down countless companies whose products are perfectly safe.
One example: The law not only requires testing of components of children's clothing for tiny levels of lead, but also separate testing of each different style of clothes, even if made from the same materials.
What's worse, the Consumer Product Safety Commission interprets the law to apply to kid's clothing retroactively. So products already en route to stores -- even if they contain no lead -- will be illegal to sell after Feb. 10 if they haven't been tested.
Wal-Mart is telling its suppliers that everything it has in stock that hasn't already been tested must be out of stores by Feb. 1 -- even if that means sending the stuff back to suppliers.
This is creating chaos for everyone involved in making and selling children's items. Unless Congress acts now, tens of millions of dollars worth of safe children's clothing will be destroyed -- and that's from New York City clothing makers alone.
Dozens of small, family-owned New York businesses, already struggling, will shut down and/or lay off their workers. The city could lose a quarter to a half of its 8,000 garment-industry jobs within weeks. Cory Silverstein of Kids Headquarters on 34th Street fears he may have to lay off close to 100 of his 600 employees in the city.
Meanwhile, the test requirements will make children's clothing more expensive.
Opponents of this "safety" law include not just businesses but activists like Chicago writer and environmentalist Manda Aufochs Gillespie, a.k.a. "the Green Mama." She writes that it "has made things much harder than they need to be": Even products that already meet much-stricter organic-certification requirements, as well as European Union standards, are not exempt from the "safety" testing requirements.
Companies like Chapter One Organics are also angry -- because big business can absorb the costs and pass them along to consumers, while smaller companies will be forced out of business.
The law's onerous testing requirements may even apply to children's books. If so, until every single children's book is certified safe, libraries would be off-limits to children. So the American Library Association is lobbying for a quick fix to exempt libraries from the law.
But the law is so fundamentally flawed that it can't just be tweaked -- it must be repealed. Then, Congress can consider a more science-based approach to safety that protects children without destroying whole industries.
The immediate need, however, is for Congress to simply delay the law from taking effect. If it doesn't act now, thousands of small businesses will close and consumers will pay more for everything they buy their kids.
Jeff Stier is an associate director of the American Council on Science and Health.
Russia's Drive for Global Economic Power: A Challenge for the Obama Administration
Russia's Drive for Global Economic Power: A Challenge for the Obama Administration. By Ariel Cohen, Ph.D., and Lajos F. Szaszdi, Ph.D.
Heritage, January 30, 2009
Full text w/references here
Until the recent global financial crisis, Russia's economic revival during the presidency of Vladimir Putin had helped to restore the country's standing as a major player in the world arena. Yet, prosperity has come with some unintended consequences. Russia's invasion of Georgia was fueled by Russia's economic growth and newfound wealth.
This economic comeback is largely the result of Russia's oil and natural gas exports, coupled with the high prices that other Russian commodities have enjoyed in world markets. With the seventh-largest oil reserves and the largest gas reserves in the world, and as the leading exporter of oil and gas, the Kremlin is using its energy exports, revenue from arms and metals sales, and investments abroad in the mining and energy sectors to extend Russia's influence worldwide.
The interruption of gas supply to Ukraine and the rest of Europe in January 2009 resulted in the worst energy crisis in Europe since the Arab Oil Embargo of 1973, and once again raised questions about Russia's reliability as an energy supplier.[1] In the recent past, Russia has already prevented Caspian oil and gas supplies from flowing freely to the European markets; has threatened to disrupt oil exports that pass through Georgian territory when it invaded Georgia last August; has acquired, and is in the process of acquiring, major European energy companies, as well as pipelines, refineries, and other assets in more than a dozen countries. Moscow is also targeting the strategic Middle Eastern oil sector and is displacing Western energy companies operating in OPEC founding member Venezuela.
Beyond that, Russia has dominant global positions in the strategic and precious metals sectors including titanium, platinum, and other precious metals used in aerospace industries, electronics, and military and automotive production. A major Kremlin-connected oligarch owns the world's largest aluminum company and has been accused of corrupt practices in the U.S., Germany, Nigeria, and Guinea, while the Russian banking sector is tied in with organized crime.
Moscow's expanding business interests have made Europe highly--and dangerously--dependent on Russian oil, gas, and raw materials. Russia currently supplies two-thirds of Europe's imported natural gas--42 percent of total European consumption; Central and Eastern European countries depend on Russian gas for more than 90 percent of their needs. By 2030, Europe will import 84 percent of its gas needs.[2] Europe has not developed alternative sources of gas, and has rejected nuclear power and coal. Since natural gas is supplied by pipelines controlled by Gazprom, the Russian state gas monopoly, these countries cannot easily turn to other suppliers. Thus, Europe has tied itself to dependence on a commodity supplier with a track record of geopolitical intimidation as opposed to a free-market relationship.
Severe repercussions for Europe's national security dependence on Russian energy are widely recognized by the European Union and individual countries. Europe has now "stepped up its attempts to reduce its exposure to potential Russian blackmail over energy supplies," reports Ian Traynor in The Guardian. The European Commission unveiled "an ambitious strategy aimed at weakening Russian giant Gazprom's domination of Europe's gas imports." "We must not sleepwalk into Europe's energy dependence crisis," said Jose Manuel Barroso, EU Commission President.[3] Russia is trying to replicate this model in other areas as well, such as electricity and raw-materials exports by state-owned corporations, as demonstrated below.
Russia also aims to become a major energy supplier and provider of raw materials to countries of the Asia-Pacific region, including China, Japan, South Korea, and the United States. Such a goal, if accomplished, will greatly enhance Russian leverage in the Pacific Rim.
Controlling Eurasia
Russia's war with Georgia was as much about Moscow's plans to annex South Ossetia and Abkhazia as it was to reassert economic domination of the Caucasus by force and prevent additional oil and gas pipelines from being built outside Russian control. Russia sent the signal by temporarily controlling the cargo port of Poti and Georgia's main highway and railway line and by threatening the safety--and thus the viability--of current and future oil and gas pipelines that bypass Russia.
The Russian invasion and partial occupation had the intended effect of persuading Kazakhstan to drop its investment plans for Georgia. The Kazakh state oil and gas company KazMunaiGas announced in September that it would abandon its plan to build an oil refinery in the Georgian port of Batumi, and not long before that, the Kazakh government also announced it would not build a grain-export terminal in the port of Poti. This terminal would have enabled Kazakhstan to export part of its grain production through an alternative route, bypassing Russia.[4]
For years, Russian energy policy was a crafty tool of power projection in Eurasia. Russian state-controlled entities like Gazprom used mysterious, economically useless affiliates to ensnare local political leaders in corruption, thus co-opting them. Examples include Rosukrenergo (with Ukraine) as well as Gazprom-Zeromax in Uzbekistan. Energy deals are used to entangle the local regimes, ensuring their political dependence on Moscow.
Moscow has not only used its resources and economic prowess to exert its influence in the former Soviet states of Eurasia. Russia's neo-corporatist state[5] is also pursuing an anti-American agenda and challenging the existing global economic system. It seeks control or influence of sectors that are of paramount importance to American and European security, such as special materials like platinum, titanium, and other rare metals; defense technologies, such as the European aircraft manufacturer EADS; and energy resources and infrastructure, such as U.S. Getty, Spain's Repsol, Germany's Ruhrgas, refineries, and a slew of companies in Germany, Hungary, Bulgaria, Poland, Serbia, Slovakia, and elsewhere. Russia seeks to establish platforms from which it can more easily conduct industrial and classic espionage, money laundering, and other covert activities, and increase political dependency through corruption. Moscow is also seeking influence in the developing world, as well as challenging the independence and security of Europe, including major powers like Germany and Italy, as well as Ukraine and Georgia, in which the United States has national security interests.
The Tools for Global Cooperation
The U.S. should cooperate with its friends and allies on combating excessive dependency (beyond 25-30 percent) on Russian strategic raw materials and energy exports, such as oil, gas, coal, and electricity. What is needed is a global security system for tracking investment activities by Russia and other anti-Western governments in industries and sectors with defense and security implications.
One of those tools is the Committee on Foreign Investment in the United States (CFIUS). CFIUS is an inter-agency committee of the United States government that reviews the national security implications of foreign investments in U.S. companies or operations. Chaired by the Secretary of the Treasury, CFIUS coordinates representatives from nine U.S. agencies including the Departments of Defense, State, Commerce, and Homeland Security.
The U.S. Treasury recently published final rules to strengthen security reviews of foreign investments in U.S. businesses. As the former Treasury Secretary Henry Paulson put it, the final regulations are intended to "strengthen the CFIUS process in a manner that reaffirms America's longstanding policy of openness to investment, consistent with the protection of our national security."[6] The regulations clarify that transactions in which a foreign entity acquires less than a 10 percent stake in a U.S. business are not automatically exempt from a CFIUS review. Under the new procedures, a foreign investor in a U.S. business considered "critical infrastructure" is encouraged to consult with the CFIUS panel before filing a formal notice. This is a wise step in improving oversight of investments in critical infrastructure, resources, and financial systems on which our nation and our alliances depend.
The U.S. should also increase cooperative effortsamong the international intelligence and law enforcement agencies and independent experts to keep track of how the Russian state and oligarchs may be laundering money and engaging in corruption and unfair competition. The Obama Administration should encourage, without dictating investment decisions,U.S. and other multinational companies to compete with Russian companies like Gazprom for pipeline and energy projects, as well as promote alternative market-based sources of energy and unconventional sources of fuels worldwide to counter any over-dependency on energy from countries such as Russia, Iran and Venezuela, which overtly seek to counter the West's economic and military strength.
Russia's Economic March
The geo-economic and geopolitical implications of Russia's economic power projection abroad cannot be overstated: As the Russian state's main source of revenues, and as a foreign policy arm, it enables the Kremlin to extend Russia's influence on a global scale. Moscow exercises economic--and political-- influence over countries that depend on its resources. Russian exports and investment projects are an instrument for establishing and developing strategic relationships through the export of commodities, arms, and nuclear technology.[7]
Since Vladimir Putin became president in spring of 2000, the Kremlin has backed the formation of "national champions" of the economy, state- or publicly owned corporate giants that are subservient to the government. Initially, the amalgamation of companies into big conglomerates was intended to help Russian companies compete successfully at home and abroad. But the massive corporations favored by the Kremlin soon became instruments of the Russian state's policy to dominate the national economy and to project its power abroad through a trade-based foreign economic policy.
These state and private corporate players are subject to the instructions of the government in both business and geopolitical priorities. So important are such strategic sectors like oil and gas or the military-industrial complex that, together with the big corporations that dominate these sectors-- Gazprom, Rosneft, LUKoil, and Rostekhnologii (Russian Technologies)--they constitute one of the pillars of the Russian state, along with the other pillars of power: the military, the intelligence services, the police and law-enforcement agencies, and the government bureaucracy.
Indeed, the Kremlin has been using energy exports as a tool of its foreign policy. The most notorious example of this practice is cutting off or threatening to cut off oil and gas exports to any country that adopts policies that go against Russia's national interests. A recent example was the September 1, 2008, announcement to reduce the flow of gas to the European Union, reportedly announced by the Russian gas monopoly Gazprom soon after the 27 EU member countries agreed to halt negotiations with Russia for a new partnership agreement. The EU measure came in response to Russia's war against Georgia in August.
In another example of the use of energy exports as a tool of foreign policy, Prime Minister Vladimir Putin, in a veiled threat to Europe, urged on the eve of the same EU meeting that the construction work on the East Siberia-Pacific Ocean (ESPO) oil pipeline, destined to export crude to the Asia-Pacific region markets, be accelerated.[8] The message was clear: If Europe does not want to buy Russian oil, Moscow can sell it to China, South Korea, and Japan. Currently, Europe imports from Russia a third of the oil and 40 percent of the natural gas it consumes.[9]
This is no coincidence, since Russia's global posture is directed by now-Prime Minister Putin and his associates--KGB veterans. As Putin's former economic adviser Andrey Illarionov described it, the Russian Federation is being run as a corporation.[10] Today, this "Russia Inc." operates essentially with a hierarchical structure in which Prime Minister Putin is the equivalent of the CEO and chairman of the board, with President Dmitry Medvedev as a member and chief operating officer. While President Medvedev is a civilian, Putin and many of his close allies are alumni of the Russian intelligence community. In a study conducted in 2006 by the Center for the Study of Elites at the Russian Academy of Sciences,of 1,016 senior government officials and elected members of Parliament, 26 percent belonged to the KGB or the post-Soviet intelligence agencies. That proportion grew to 78 percent when individuals with "unexplained gaps in rรฉsumรฉs, unlikely career paths or service in organizations affiliated with the KGB" were included.[11]
More than five years ago it was suggested that up to 6,000 active duty and reserve members of the Russian intelligence community occupied positions of influence in the state.[12] It can be concluded that the alumni of the Russian intelligence apparatus control the state by controlling the government's civilian bureaucracy, the military, and the country's main economic sectors. As Daniel Treisman, professor of political science at the University of California, Los Angeles, pointed out, in Russia "the security forces' takeover of corporate boardrooms is coming to define Putin's regime,"[13] during his presidency and premierships.
Moscow business insider Oleg Shvartsman suggested that the goal of the members of the Russian intelligence services who occupy senior positions in the corporate world is to gain wealth for themselves in addition to global power for Russia through business expansion abroad. There have been revelations by a businessman managing the assets of members of the Presidential Administration from the so-called "siloviki" (men of power). These are officials with links to the FSB (the Federal Security Service and the main successor to the KGB) and SVR (the Foreign Intelligence Service, formerly the KGB's First Main Directorate) through the obscure Finansgroup company which claims assets worth around $3.2 billion.[14] Thus, huge amounts of money in the hands of the former members of the Russian intelligence apparatus could be employed for personal use, while vast state revenues can be directed to fund clandestine operations and other state activities.
Massive money laundering operations through the Bank of New York[15] and Republic Bank of New York are well documented and were the subject of congressional hearings.[16] According to publications in the Russian media, the Austrian Raiffeisen bank is reportedly involved in suspicious activities in the Russian gas sector and other questionable business transactions with ties to intelligence services.[17] Back in 2004, Czech counterintelligence sources revealed that the SVR invested "huge sums in local real estate, hotels, casinos, and entertainment complexes" in the Czech Republic, probably in order to obtain front companies for intelligence operations, to strengthen the SVR's (and the Russian state's) influence in the country, and possibly as alternative sources of funding outside of the regular control of the Russian leadership.[18]
It is little wonder that earlier last year U.S. Attorney General Michael Mukasey cited Russia and other Eurasian nations as places where "organized criminals control significant positions in the global energy and strategic-materials markets. They are expanding their holdings in those sectors, which corrupts the normal functioning of these markets and may have a destabilizing effect on U.S. geopolitical interests."[19]He revealed that the U.S. government has re-assembled its Organized Crime Council to combat a new "hybrid criminal problem" involving alliances between foreign intelligence agencies and criminal groups. Mr. Mukasey said law-enforcement officials have "grave concern" about "so-called "iron triangles' of corrupt business leaders, corrupt government officials and organized criminals."[20]
Beyond Personal Wealth
The Russian leadership's ambition surpassed the drive for self-enrichment a long time ago. Putin and then-Defense Minister Sergey Ivanov meant every word when they set the goal for Russia to become a world energy superpower. In 2006, Vladislav Surkov, Deputy Head of the Presidential Administration, aide to President Putin and ideological chief of Putin's regime, declared that "the idea of Russia as an energy superpower is…fully consistent" with the country becoming competitive economically.[21] Yet, ever cautious, at that year's Valdai Club meeting, President Putin rejected the idea that Russia wanted to become an "energy superpower," assuring the audience that his government wanted instead to provide stable energy supplies to world markets.[22]
A key instrument in the dream of Russia as an energy superpower is Gazprom, the world's largest gas company and Russia's state-owned gas monopoly. Gazprom was the Kremlin's principal tool in the two gas supply interruptions to Europe, which were triggered by the gas prices disputes between Moscow and Kyiv.[23] Gazprom is rated as the company with the highest capitalization in Russia.[24] It is intended to become the core of a gas counterpart to OPEC, and its close energy ties with Iran, which has the second-largest gas reserves on earth, threaten market access and competitiveness, especially in the liquefied natural gas (LNG) sector, and as a result, stability of the world economy.
The recent agreement between Russia, Iran, and Qatar to form a "Gas Troika" (in the works for at least a year and a half) that would meet several times a year, could lead to unfair business practices, such as "the exchange of information about prices, development schedules and investment plans."[25] Russia, Iran, and Qatar hold 56 percent of global gas reserves, and the Iranian oil minister declared in October of last year that the three countries have reached an agreement on the formation of a "gas OPEC."[26] Less than a week later, Alexei Miller, Gazprom's deputy chairman of the board of directors and chairman of the management committee, said that the Gas Troika could become a formal organization in November of 2008.[27] Later, Anatoly Yanovsky, deputy energy minister, disclosed that at a December 23 summit in Moscow, 16 gas-producing countries, including the host nation, plan to sign a charter establishing an "organization of gas exporting countries."[28]
A Perfect Storm.
The international financial crisis has seemingly put a stop to Russia's dynamic efforts to expand its economic interests worldwide. Prime Minister Putin wrongly blamed the U.S. exclusively for the meltdown, which since May has affected Russia's stock exchanges, the RTS and the MICEX, with Russia's indexes losing thus far as much as 70 percent of their value.[29]
Several observers pointed out that the Russian invasion of Georgia made the financial problem worse, triggering a further outflow of capital out of fear of instability. Other problems have combined to create a perfect financial storm against Russia: International banks called loans of powerful oligarchs who before the crisis and their loss in value used their company shares as collateral for foreign loans; and oil prices and those of other commodities fell, including metals, causing grave financial damage to Russian state financing.[30]
Russia's financial benefits accruing from foreign trade are altering its international behavior. In early August 2008, the Russian government's Reserve Fund and National Welfare Fund held the equivalent of $162 billion, while its hard currency and gold reserves summed their highest point on August 8--the day Russian forces invaded Georgia--with more than $597 billion, the third-largestreserves in the world after China and Japan.[31] By December 5, Russia's hard currency and gold reserves were down to $437 billion, yet they lost $31 billion in one week from October 17 to 24, and $17.9 billion in the week of December 5.[32] These reserves are expected to continue to decline as the Russian government uses them to rescue the national economy from the effects of the international financial crisis, and if oil prices remain below $70 a barrel.[33]
The effects of the financial crisis in Russia have left many Russian companies and banks unable to repay their foreign loans without state intervention. Thus, the Russian Central Bank has provided liquidity to Russia's state development bank, Vnesheconombank (VEB): $50 billion to help enterprises in financial trouble pay their foreign creditors. This situation is allowing the Russian government to take over failing banks and acquire stakes in struggling companies, strengthening the power and influence of the state.[34]
The crisis has also caused Russia's most powerful billionaire businessmen, with close links to the Kremlin, to incur combined losses of up to $230 billion. The one with the highest losses according to Forbes is Oleg Deripaska, who, until the crisis, was the wealthiest man in Russia and who had lost more than $16 billion by early October of an estimated $28 billion fortune before the crisis. Deripaska is the owner of RUSAL, the largest aluminum and alumina producer in the world.[35] Other examples include Roman Abramovich, who by the third week of October lost over $20 billion after his shares in steelmaker Evraz plummeted. The owner of steel producer Novolipetsk Steel (NLMK), Vladimir Lisin, lost $22 billion by early October, and the fortune of Severstal's Alexei Mordashov went down from $21.2 billion by March 2008 to $5.3 billion by early October.[36] LUKoil's owner Vagit Alekperov's value of his 20 percent stake in the oil company fell from $19.5 billion to $7.2 billion by early October.[37]
All these private-sector companies with close Kremlin ties are involved in international trade and investment activities, serving as sources of tax revenues and hard currency for the Russian state, and as tools of the Kremlin to expand Russia's influence worldwide. The Kremlin might use this opportunity as well to try to gain controlling stakes of private companies that are in financial trouble, thus expanding the state's commanding role in the national economy and in the long term give it further resources and power, enabling foreign adventurism.
Despite the fact that it will be cancelling plans for more drilling and oil refining, private oil company LUKoil still intends to buy a 30 percent stake in Repsol, the Spanish national oil company, as well as a refinery in Sicily, and is putting together a $1 billion loan for that purpose.[38] It seems that the national corporate champions, such as LUKoil or Gazprom might see their expanding investment plans at home or abroad shelved due to lower oil prices, yet this is likely to be a temporary setback, depending on how quickly the international financial markets in general and foreign investor confidence in Russia in particular recover.
Yet, Russian businesses are feeling the brunt of the crisis. The abysmal loss of value of Russian banks and companies' shares has led Bloomberg to declare the stocks of Russian companies as the cheapest in the world. Indeed, there seem to be fears in Russian nationalist circles that the low value of Russian companies' stakes could lead to free-for-all acquisitions of Russian stocks by Western financial interests. To avoid this outcome, the Russian state, through its banks like VEB and institutions like the Deposit Insurance Agency, is providing the loans and guarantees needed by Russian banks and companies in distress. It is also using them to take control of failed banks.[39] But even the Russian state itself could go broke if the price of oil continues to fall.
Budgetary Woes
This petroleum windfall is also being used to win the loyalty of some European politicians. Such arrangements benefit Russian energy interests, as in Germany with regard to the Nord Stream gas pipeline consortium chaired by former chancellor Gerhard Schroeder for an annual compensation of 1,000,000 euros (about $1,270,000 in U.S. dollars).[40] Nord Stream also hired the Finnish prime minister as a consultant, triggering concerns in Europe about spreading corruption.[41] An extremely expensive project, the Nord Stream pipeline would reach from Russia along the Baltic Sea bottom to Germany, bypassing the Baltic states and Poland and denying them transit revenue, with spurs to the Netherlands and France. In Bulgaria, Hungary, Serbia, and Austria, the planned--and even more expensive--South Stream gas pipeline would stop the EU- and U.S.-backed Nabucco gas pipeline, which bypasses Russia. The cooperation of Schroeder and Hungarian Prime Minister Ferenc Gyurcsany is key in implementing Russian projects that undermine Europe's security of energy supply.
The anti-competitive practices of Russian companies are spreading in the West and are undermining the rule of law as well as sound economic practices and business ethics. Gazprom, Rosneft, and their subsidiaries negotiate and make energy deals with foreign energy companies.[42] Such opaque business partnerships are shrouded in secrecy, politicize the energy business, and are devoid of free and fair competition. Worse, the opaque nature of such agreements between state energy companies leaves an ample margin for corrupt practices that violate both the law and business ethics. One notorious example are the allegations made against the Austrian Raiffeisen bank, which has been accused by the Russian press of participating in a money laundering scheme that sent capital out of Russia and that involved senior Russian government officials with links to oil companies and ties to the FSB.[43]
What Russia Wants: "New World System"
Russia needs its oil price to be at least $70 a barrel in 2009 to avoid falling into budget deficits.[44] Its recent talks with OPEC may be directed at coordinating efforts to reduce oil production and thus raising the price of oil, a goal also pursued in earnest by OPEC members Iran and Venezuela, whose national budgets depend on $70 a barrel to balance their budgets.[45] The budget deficit may also constrain some foreign policy tools Russia uses.
Attending an OPEC meeting in Vienna in September 2008, Russian Deputy Prime Minister Igor Sechin, a friend of Putin's, said that "OPEC is one of Russia's key partners on the global oil market" and that "it is very important for us to create mechanisms of regular dialogue" with the oil exporting organization.[46]
With Russia and OPEC responsible for a combined total of 51 percent of the world's oil,[47] Moscow's cooperation with OPEC to coordinate oil prices and production quotas would be a requisite for the further expansion of Russia's influence in the world. Even though the idea of Russia joining OPEC has been rejected by Russian officials, one of LUKoil's vice presidents declared recently that Russian membership of OPEC "will be only good for Russia" for "the future of the Russian industry and [oil] price stability."[48] Cooperation with OPEC and the formation of a gas cartel are consistent with one of the objectives enunciated in the recent Foreign Policy Concept of the Russian Federation, which announced that Russia "strengthens strategic partnership with the leading producers of energy resources."[49]
Russia aims to challenge the current international financial system dominated by the U.S. and Western industrialized countries. At the St. Petersburg Economic Summit in 2007, President Putin called for a new world economic framework based on regional alliances, relegating Bretton Woods-era global institutions like the International Monetary Fund and the World Bank to the sidelines. He demanded that the new system reflect the rising power of emerging market economies like Russia, China, India, and Brazil, as well as the decline of the established powers: the United States, Japan, and Western European countries.[50]
Moscow is establishing "favorable political conditions for diversifying Russia's presence in the world markets through expanding the export range and geography of foreign economic and investment links of Russia."[51] At the same time, the Kremlin is promoting a multilateral, state-driven approach to the international economic and financial system to regulate the free markets globally, and using the ruble as the dominant currency in the Commonwealth of Independent States.
Speaking at the recent conference on the international financial crisis in Evian, France, Russian President Medvedev said that "the formation of new financial centers and strong regional currencies will act as new stability factors" in the face of the crisis. While suggesting that the current international U.S.-based "unipolar economic model" is inefficient, Medvedev alluded to the "multi-polar nature of the world and the complexity of globalization." Medvedev is proposing that "the global financial architecture be changed, the role of the current international institutions be reviewed, and new ones created to guarantee stability."[52] "It will take years to shape a new world system," Medvedev said.[53]
Another goal seems to be replacing the dollar in Russia's international trade transactions. Putin has proposed this goal to his Chinese counterpart Wen Jiabao for bilateral trade between Russia and China, which was estimated to reach $50 billion in 2008.[54]
Russia is following a multilateral approach to challenge the current international financial and trading system, as part of its overall strategy of pursuing a multilateral world system, through the Shanghai Cooperation Organization,[55] OPEC, a new gas OPEC, or new international financial bodies that would include China, India, EU member states, and challengers of the established international order such as Iran and Venezuela.
Influencing the international prices of oil and gas would be key for the economic recovery of the country as well as for funding military and industrial modernization and economic development programs at home.
Before the international financial crisis hit Russia, an increasing share of its resources had been directed at the rearming of the military with modern weapon systems, and at increases in funding of the Ministry of the Interior, and of the security and intelligence services, such as the FSB domestic security service, the SVR foreign intelligence service, the GRU military intelligence, and the Border Guards under FSB supervision. Before the crisis, the Kremlin planned to raise defense spending by 50 percent over three years, deploy an army rapid reaction force at a high level of operational readiness, and construct new nuclear-powered ballistic missile submarines.[56] It remains to be seen if the government's financial stabilization efforts at home will reduce spending in defense as well as activities of the Ministry of Foreign Affairs and of Russian government propaganda and information warfare.
Arms Exports Boost Russia's Power
Russia is also a major world weapons exporter. The Kremlin aims to forge long-lasting military relations and strategic partnerships with foreign countries through the export of arms. Russia's military exports extend to Europe, the Middle East, Central Asia, South Asia (primarily India), the Far East (mainly China), Southeast Asia, Africa, and Latin America. To further centralize government control over the production of the military-industrial complex, the Kremlin has created an industrial behemoth, Rostekhnologii (Russian Technologies), which agglomerates 426 state enterprises. These include the defense export enterprise Rosoboronexport, the aircraft manufacturing, non-ferrous metals, and shipbuilding conglomerates to name just a few. Russia's titanium exports corporation, VSMPO- Avisma, vital for Airbus and Boeing, is now controlled by Rostekhnologii, which is planning to develop it into one of the largest non-ferrous-metals companies in the world.[57] Rostekhnologii will centralize the planning and production of the various enterprises under its umbrella. It could also attempt to marshal together its various resources and coordinate its efforts to become a formidable competitor in the international market for arms, metals, and aerospace technology.
What the Obama Administration Should Do
If Russia were a friendly Euro-Atlantic power, the United States would be no more concerned about its economic activity than about that of France. Russia's use of state-dominated businesses to enhance its geopolitical posture and gain dominance over U.S. allies' energy supply, however, should raise deep concerns in the Obama Administration and in European capitals. Free-market competition is and should remain a fundamental principle of U.S. trade policy; but America and its allies have a duty to their citizens to monitor, and, where necessary, prevent, any country's anti-market, political, covert, or illicit efforts to undermine our markets or our security, which Russia increasingly is aiming to do.
For example, Russian's growing control of Eurasian energy resources and exports to Europe through non-market means is both strategically and economically burdensome, as well as dangerous. To better ensure that the U.S. and its allies have access to the energy that fuels their economies and their militaries, to prevent Russian domination in strategic sectors, and to counter corrupt and criminal activities of Russian corporations and tycoons, the Obama Administration should take early action to:
Conclusion: The Way Forward
Russia is being run as a corporation by the former senior members of the Russian intelligence community who strive to maximize profits and power, expanding global corporations for exports of raw materials and weapons. America's European allies and the newly independent states of Eurasia have already been subjected to Russia's heavy-handed policies and corrupt practices aimed at increasing their energy dependency, as well as a flurry of efforts to acquire critical infrastructure such as ports, pipelines, refineries, and energy distribution networks.
The Kremlin has made clear that it intends to diminish America's standing as a world leader by promoting a "multipolar" world, and using its military, economic, and "soft" power to re-establish Russia as America's near-peer competitor. The lower energy profits accruing to Moscow from the current global economic downturn can play a role in mitigating Russia's anti-status quo foreign policy, and slow down the growth and modernization of its armed forces. But the U.S. should not rely on these developments. The U.S. should develop comprehensive policies to handle Russia's economic power projection that is aimed at undermining American allies, power, and security interests, employing a mix of commercial, national security, intelligence, and diplomatic means.
Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security and Lajos F. Szaszdi, Ph.D., was a Consultant in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.
Heritage, January 30, 2009
Full text w/references here
Until the recent global financial crisis, Russia's economic revival during the presidency of Vladimir Putin had helped to restore the country's standing as a major player in the world arena. Yet, prosperity has come with some unintended consequences. Russia's invasion of Georgia was fueled by Russia's economic growth and newfound wealth.
This economic comeback is largely the result of Russia's oil and natural gas exports, coupled with the high prices that other Russian commodities have enjoyed in world markets. With the seventh-largest oil reserves and the largest gas reserves in the world, and as the leading exporter of oil and gas, the Kremlin is using its energy exports, revenue from arms and metals sales, and investments abroad in the mining and energy sectors to extend Russia's influence worldwide.
The interruption of gas supply to Ukraine and the rest of Europe in January 2009 resulted in the worst energy crisis in Europe since the Arab Oil Embargo of 1973, and once again raised questions about Russia's reliability as an energy supplier.[1] In the recent past, Russia has already prevented Caspian oil and gas supplies from flowing freely to the European markets; has threatened to disrupt oil exports that pass through Georgian territory when it invaded Georgia last August; has acquired, and is in the process of acquiring, major European energy companies, as well as pipelines, refineries, and other assets in more than a dozen countries. Moscow is also targeting the strategic Middle Eastern oil sector and is displacing Western energy companies operating in OPEC founding member Venezuela.
Beyond that, Russia has dominant global positions in the strategic and precious metals sectors including titanium, platinum, and other precious metals used in aerospace industries, electronics, and military and automotive production. A major Kremlin-connected oligarch owns the world's largest aluminum company and has been accused of corrupt practices in the U.S., Germany, Nigeria, and Guinea, while the Russian banking sector is tied in with organized crime.
Moscow's expanding business interests have made Europe highly--and dangerously--dependent on Russian oil, gas, and raw materials. Russia currently supplies two-thirds of Europe's imported natural gas--42 percent of total European consumption; Central and Eastern European countries depend on Russian gas for more than 90 percent of their needs. By 2030, Europe will import 84 percent of its gas needs.[2] Europe has not developed alternative sources of gas, and has rejected nuclear power and coal. Since natural gas is supplied by pipelines controlled by Gazprom, the Russian state gas monopoly, these countries cannot easily turn to other suppliers. Thus, Europe has tied itself to dependence on a commodity supplier with a track record of geopolitical intimidation as opposed to a free-market relationship.
Severe repercussions for Europe's national security dependence on Russian energy are widely recognized by the European Union and individual countries. Europe has now "stepped up its attempts to reduce its exposure to potential Russian blackmail over energy supplies," reports Ian Traynor in The Guardian. The European Commission unveiled "an ambitious strategy aimed at weakening Russian giant Gazprom's domination of Europe's gas imports." "We must not sleepwalk into Europe's energy dependence crisis," said Jose Manuel Barroso, EU Commission President.[3] Russia is trying to replicate this model in other areas as well, such as electricity and raw-materials exports by state-owned corporations, as demonstrated below.
Russia also aims to become a major energy supplier and provider of raw materials to countries of the Asia-Pacific region, including China, Japan, South Korea, and the United States. Such a goal, if accomplished, will greatly enhance Russian leverage in the Pacific Rim.
Controlling Eurasia
Russia's war with Georgia was as much about Moscow's plans to annex South Ossetia and Abkhazia as it was to reassert economic domination of the Caucasus by force and prevent additional oil and gas pipelines from being built outside Russian control. Russia sent the signal by temporarily controlling the cargo port of Poti and Georgia's main highway and railway line and by threatening the safety--and thus the viability--of current and future oil and gas pipelines that bypass Russia.
The Russian invasion and partial occupation had the intended effect of persuading Kazakhstan to drop its investment plans for Georgia. The Kazakh state oil and gas company KazMunaiGas announced in September that it would abandon its plan to build an oil refinery in the Georgian port of Batumi, and not long before that, the Kazakh government also announced it would not build a grain-export terminal in the port of Poti. This terminal would have enabled Kazakhstan to export part of its grain production through an alternative route, bypassing Russia.[4]
For years, Russian energy policy was a crafty tool of power projection in Eurasia. Russian state-controlled entities like Gazprom used mysterious, economically useless affiliates to ensnare local political leaders in corruption, thus co-opting them. Examples include Rosukrenergo (with Ukraine) as well as Gazprom-Zeromax in Uzbekistan. Energy deals are used to entangle the local regimes, ensuring their political dependence on Moscow.
Moscow has not only used its resources and economic prowess to exert its influence in the former Soviet states of Eurasia. Russia's neo-corporatist state[5] is also pursuing an anti-American agenda and challenging the existing global economic system. It seeks control or influence of sectors that are of paramount importance to American and European security, such as special materials like platinum, titanium, and other rare metals; defense technologies, such as the European aircraft manufacturer EADS; and energy resources and infrastructure, such as U.S. Getty, Spain's Repsol, Germany's Ruhrgas, refineries, and a slew of companies in Germany, Hungary, Bulgaria, Poland, Serbia, Slovakia, and elsewhere. Russia seeks to establish platforms from which it can more easily conduct industrial and classic espionage, money laundering, and other covert activities, and increase political dependency through corruption. Moscow is also seeking influence in the developing world, as well as challenging the independence and security of Europe, including major powers like Germany and Italy, as well as Ukraine and Georgia, in which the United States has national security interests.
The Tools for Global Cooperation
The U.S. should cooperate with its friends and allies on combating excessive dependency (beyond 25-30 percent) on Russian strategic raw materials and energy exports, such as oil, gas, coal, and electricity. What is needed is a global security system for tracking investment activities by Russia and other anti-Western governments in industries and sectors with defense and security implications.
One of those tools is the Committee on Foreign Investment in the United States (CFIUS). CFIUS is an inter-agency committee of the United States government that reviews the national security implications of foreign investments in U.S. companies or operations. Chaired by the Secretary of the Treasury, CFIUS coordinates representatives from nine U.S. agencies including the Departments of Defense, State, Commerce, and Homeland Security.
The U.S. Treasury recently published final rules to strengthen security reviews of foreign investments in U.S. businesses. As the former Treasury Secretary Henry Paulson put it, the final regulations are intended to "strengthen the CFIUS process in a manner that reaffirms America's longstanding policy of openness to investment, consistent with the protection of our national security."[6] The regulations clarify that transactions in which a foreign entity acquires less than a 10 percent stake in a U.S. business are not automatically exempt from a CFIUS review. Under the new procedures, a foreign investor in a U.S. business considered "critical infrastructure" is encouraged to consult with the CFIUS panel before filing a formal notice. This is a wise step in improving oversight of investments in critical infrastructure, resources, and financial systems on which our nation and our alliances depend.
The U.S. should also increase cooperative effortsamong the international intelligence and law enforcement agencies and independent experts to keep track of how the Russian state and oligarchs may be laundering money and engaging in corruption and unfair competition. The Obama Administration should encourage, without dictating investment decisions,U.S. and other multinational companies to compete with Russian companies like Gazprom for pipeline and energy projects, as well as promote alternative market-based sources of energy and unconventional sources of fuels worldwide to counter any over-dependency on energy from countries such as Russia, Iran and Venezuela, which overtly seek to counter the West's economic and military strength.
Russia's Economic March
The geo-economic and geopolitical implications of Russia's economic power projection abroad cannot be overstated: As the Russian state's main source of revenues, and as a foreign policy arm, it enables the Kremlin to extend Russia's influence on a global scale. Moscow exercises economic--and political-- influence over countries that depend on its resources. Russian exports and investment projects are an instrument for establishing and developing strategic relationships through the export of commodities, arms, and nuclear technology.[7]
Since Vladimir Putin became president in spring of 2000, the Kremlin has backed the formation of "national champions" of the economy, state- or publicly owned corporate giants that are subservient to the government. Initially, the amalgamation of companies into big conglomerates was intended to help Russian companies compete successfully at home and abroad. But the massive corporations favored by the Kremlin soon became instruments of the Russian state's policy to dominate the national economy and to project its power abroad through a trade-based foreign economic policy.
These state and private corporate players are subject to the instructions of the government in both business and geopolitical priorities. So important are such strategic sectors like oil and gas or the military-industrial complex that, together with the big corporations that dominate these sectors-- Gazprom, Rosneft, LUKoil, and Rostekhnologii (Russian Technologies)--they constitute one of the pillars of the Russian state, along with the other pillars of power: the military, the intelligence services, the police and law-enforcement agencies, and the government bureaucracy.
Indeed, the Kremlin has been using energy exports as a tool of its foreign policy. The most notorious example of this practice is cutting off or threatening to cut off oil and gas exports to any country that adopts policies that go against Russia's national interests. A recent example was the September 1, 2008, announcement to reduce the flow of gas to the European Union, reportedly announced by the Russian gas monopoly Gazprom soon after the 27 EU member countries agreed to halt negotiations with Russia for a new partnership agreement. The EU measure came in response to Russia's war against Georgia in August.
In another example of the use of energy exports as a tool of foreign policy, Prime Minister Vladimir Putin, in a veiled threat to Europe, urged on the eve of the same EU meeting that the construction work on the East Siberia-Pacific Ocean (ESPO) oil pipeline, destined to export crude to the Asia-Pacific region markets, be accelerated.[8] The message was clear: If Europe does not want to buy Russian oil, Moscow can sell it to China, South Korea, and Japan. Currently, Europe imports from Russia a third of the oil and 40 percent of the natural gas it consumes.[9]
This is no coincidence, since Russia's global posture is directed by now-Prime Minister Putin and his associates--KGB veterans. As Putin's former economic adviser Andrey Illarionov described it, the Russian Federation is being run as a corporation.[10] Today, this "Russia Inc." operates essentially with a hierarchical structure in which Prime Minister Putin is the equivalent of the CEO and chairman of the board, with President Dmitry Medvedev as a member and chief operating officer. While President Medvedev is a civilian, Putin and many of his close allies are alumni of the Russian intelligence community. In a study conducted in 2006 by the Center for the Study of Elites at the Russian Academy of Sciences,of 1,016 senior government officials and elected members of Parliament, 26 percent belonged to the KGB or the post-Soviet intelligence agencies. That proportion grew to 78 percent when individuals with "unexplained gaps in rรฉsumรฉs, unlikely career paths or service in organizations affiliated with the KGB" were included.[11]
More than five years ago it was suggested that up to 6,000 active duty and reserve members of the Russian intelligence community occupied positions of influence in the state.[12] It can be concluded that the alumni of the Russian intelligence apparatus control the state by controlling the government's civilian bureaucracy, the military, and the country's main economic sectors. As Daniel Treisman, professor of political science at the University of California, Los Angeles, pointed out, in Russia "the security forces' takeover of corporate boardrooms is coming to define Putin's regime,"[13] during his presidency and premierships.
Moscow business insider Oleg Shvartsman suggested that the goal of the members of the Russian intelligence services who occupy senior positions in the corporate world is to gain wealth for themselves in addition to global power for Russia through business expansion abroad. There have been revelations by a businessman managing the assets of members of the Presidential Administration from the so-called "siloviki" (men of power). These are officials with links to the FSB (the Federal Security Service and the main successor to the KGB) and SVR (the Foreign Intelligence Service, formerly the KGB's First Main Directorate) through the obscure Finansgroup company which claims assets worth around $3.2 billion.[14] Thus, huge amounts of money in the hands of the former members of the Russian intelligence apparatus could be employed for personal use, while vast state revenues can be directed to fund clandestine operations and other state activities.
Massive money laundering operations through the Bank of New York[15] and Republic Bank of New York are well documented and were the subject of congressional hearings.[16] According to publications in the Russian media, the Austrian Raiffeisen bank is reportedly involved in suspicious activities in the Russian gas sector and other questionable business transactions with ties to intelligence services.[17] Back in 2004, Czech counterintelligence sources revealed that the SVR invested "huge sums in local real estate, hotels, casinos, and entertainment complexes" in the Czech Republic, probably in order to obtain front companies for intelligence operations, to strengthen the SVR's (and the Russian state's) influence in the country, and possibly as alternative sources of funding outside of the regular control of the Russian leadership.[18]
It is little wonder that earlier last year U.S. Attorney General Michael Mukasey cited Russia and other Eurasian nations as places where "organized criminals control significant positions in the global energy and strategic-materials markets. They are expanding their holdings in those sectors, which corrupts the normal functioning of these markets and may have a destabilizing effect on U.S. geopolitical interests."[19]He revealed that the U.S. government has re-assembled its Organized Crime Council to combat a new "hybrid criminal problem" involving alliances between foreign intelligence agencies and criminal groups. Mr. Mukasey said law-enforcement officials have "grave concern" about "so-called "iron triangles' of corrupt business leaders, corrupt government officials and organized criminals."[20]
Beyond Personal Wealth
The Russian leadership's ambition surpassed the drive for self-enrichment a long time ago. Putin and then-Defense Minister Sergey Ivanov meant every word when they set the goal for Russia to become a world energy superpower. In 2006, Vladislav Surkov, Deputy Head of the Presidential Administration, aide to President Putin and ideological chief of Putin's regime, declared that "the idea of Russia as an energy superpower is…fully consistent" with the country becoming competitive economically.[21] Yet, ever cautious, at that year's Valdai Club meeting, President Putin rejected the idea that Russia wanted to become an "energy superpower," assuring the audience that his government wanted instead to provide stable energy supplies to world markets.[22]
A key instrument in the dream of Russia as an energy superpower is Gazprom, the world's largest gas company and Russia's state-owned gas monopoly. Gazprom was the Kremlin's principal tool in the two gas supply interruptions to Europe, which were triggered by the gas prices disputes between Moscow and Kyiv.[23] Gazprom is rated as the company with the highest capitalization in Russia.[24] It is intended to become the core of a gas counterpart to OPEC, and its close energy ties with Iran, which has the second-largest gas reserves on earth, threaten market access and competitiveness, especially in the liquefied natural gas (LNG) sector, and as a result, stability of the world economy.
The recent agreement between Russia, Iran, and Qatar to form a "Gas Troika" (in the works for at least a year and a half) that would meet several times a year, could lead to unfair business practices, such as "the exchange of information about prices, development schedules and investment plans."[25] Russia, Iran, and Qatar hold 56 percent of global gas reserves, and the Iranian oil minister declared in October of last year that the three countries have reached an agreement on the formation of a "gas OPEC."[26] Less than a week later, Alexei Miller, Gazprom's deputy chairman of the board of directors and chairman of the management committee, said that the Gas Troika could become a formal organization in November of 2008.[27] Later, Anatoly Yanovsky, deputy energy minister, disclosed that at a December 23 summit in Moscow, 16 gas-producing countries, including the host nation, plan to sign a charter establishing an "organization of gas exporting countries."[28]
A Perfect Storm.
The international financial crisis has seemingly put a stop to Russia's dynamic efforts to expand its economic interests worldwide. Prime Minister Putin wrongly blamed the U.S. exclusively for the meltdown, which since May has affected Russia's stock exchanges, the RTS and the MICEX, with Russia's indexes losing thus far as much as 70 percent of their value.[29]
Several observers pointed out that the Russian invasion of Georgia made the financial problem worse, triggering a further outflow of capital out of fear of instability. Other problems have combined to create a perfect financial storm against Russia: International banks called loans of powerful oligarchs who before the crisis and their loss in value used their company shares as collateral for foreign loans; and oil prices and those of other commodities fell, including metals, causing grave financial damage to Russian state financing.[30]
Russia's financial benefits accruing from foreign trade are altering its international behavior. In early August 2008, the Russian government's Reserve Fund and National Welfare Fund held the equivalent of $162 billion, while its hard currency and gold reserves summed their highest point on August 8--the day Russian forces invaded Georgia--with more than $597 billion, the third-largestreserves in the world after China and Japan.[31] By December 5, Russia's hard currency and gold reserves were down to $437 billion, yet they lost $31 billion in one week from October 17 to 24, and $17.9 billion in the week of December 5.[32] These reserves are expected to continue to decline as the Russian government uses them to rescue the national economy from the effects of the international financial crisis, and if oil prices remain below $70 a barrel.[33]
The effects of the financial crisis in Russia have left many Russian companies and banks unable to repay their foreign loans without state intervention. Thus, the Russian Central Bank has provided liquidity to Russia's state development bank, Vnesheconombank (VEB): $50 billion to help enterprises in financial trouble pay their foreign creditors. This situation is allowing the Russian government to take over failing banks and acquire stakes in struggling companies, strengthening the power and influence of the state.[34]
The crisis has also caused Russia's most powerful billionaire businessmen, with close links to the Kremlin, to incur combined losses of up to $230 billion. The one with the highest losses according to Forbes is Oleg Deripaska, who, until the crisis, was the wealthiest man in Russia and who had lost more than $16 billion by early October of an estimated $28 billion fortune before the crisis. Deripaska is the owner of RUSAL, the largest aluminum and alumina producer in the world.[35] Other examples include Roman Abramovich, who by the third week of October lost over $20 billion after his shares in steelmaker Evraz plummeted. The owner of steel producer Novolipetsk Steel (NLMK), Vladimir Lisin, lost $22 billion by early October, and the fortune of Severstal's Alexei Mordashov went down from $21.2 billion by March 2008 to $5.3 billion by early October.[36] LUKoil's owner Vagit Alekperov's value of his 20 percent stake in the oil company fell from $19.5 billion to $7.2 billion by early October.[37]
All these private-sector companies with close Kremlin ties are involved in international trade and investment activities, serving as sources of tax revenues and hard currency for the Russian state, and as tools of the Kremlin to expand Russia's influence worldwide. The Kremlin might use this opportunity as well to try to gain controlling stakes of private companies that are in financial trouble, thus expanding the state's commanding role in the national economy and in the long term give it further resources and power, enabling foreign adventurism.
Despite the fact that it will be cancelling plans for more drilling and oil refining, private oil company LUKoil still intends to buy a 30 percent stake in Repsol, the Spanish national oil company, as well as a refinery in Sicily, and is putting together a $1 billion loan for that purpose.[38] It seems that the national corporate champions, such as LUKoil or Gazprom might see their expanding investment plans at home or abroad shelved due to lower oil prices, yet this is likely to be a temporary setback, depending on how quickly the international financial markets in general and foreign investor confidence in Russia in particular recover.
Yet, Russian businesses are feeling the brunt of the crisis. The abysmal loss of value of Russian banks and companies' shares has led Bloomberg to declare the stocks of Russian companies as the cheapest in the world. Indeed, there seem to be fears in Russian nationalist circles that the low value of Russian companies' stakes could lead to free-for-all acquisitions of Russian stocks by Western financial interests. To avoid this outcome, the Russian state, through its banks like VEB and institutions like the Deposit Insurance Agency, is providing the loans and guarantees needed by Russian banks and companies in distress. It is also using them to take control of failed banks.[39] But even the Russian state itself could go broke if the price of oil continues to fall.
Budgetary Woes
This petroleum windfall is also being used to win the loyalty of some European politicians. Such arrangements benefit Russian energy interests, as in Germany with regard to the Nord Stream gas pipeline consortium chaired by former chancellor Gerhard Schroeder for an annual compensation of 1,000,000 euros (about $1,270,000 in U.S. dollars).[40] Nord Stream also hired the Finnish prime minister as a consultant, triggering concerns in Europe about spreading corruption.[41] An extremely expensive project, the Nord Stream pipeline would reach from Russia along the Baltic Sea bottom to Germany, bypassing the Baltic states and Poland and denying them transit revenue, with spurs to the Netherlands and France. In Bulgaria, Hungary, Serbia, and Austria, the planned--and even more expensive--South Stream gas pipeline would stop the EU- and U.S.-backed Nabucco gas pipeline, which bypasses Russia. The cooperation of Schroeder and Hungarian Prime Minister Ferenc Gyurcsany is key in implementing Russian projects that undermine Europe's security of energy supply.
The anti-competitive practices of Russian companies are spreading in the West and are undermining the rule of law as well as sound economic practices and business ethics. Gazprom, Rosneft, and their subsidiaries negotiate and make energy deals with foreign energy companies.[42] Such opaque business partnerships are shrouded in secrecy, politicize the energy business, and are devoid of free and fair competition. Worse, the opaque nature of such agreements between state energy companies leaves an ample margin for corrupt practices that violate both the law and business ethics. One notorious example are the allegations made against the Austrian Raiffeisen bank, which has been accused by the Russian press of participating in a money laundering scheme that sent capital out of Russia and that involved senior Russian government officials with links to oil companies and ties to the FSB.[43]
What Russia Wants: "New World System"
Russia needs its oil price to be at least $70 a barrel in 2009 to avoid falling into budget deficits.[44] Its recent talks with OPEC may be directed at coordinating efforts to reduce oil production and thus raising the price of oil, a goal also pursued in earnest by OPEC members Iran and Venezuela, whose national budgets depend on $70 a barrel to balance their budgets.[45] The budget deficit may also constrain some foreign policy tools Russia uses.
Attending an OPEC meeting in Vienna in September 2008, Russian Deputy Prime Minister Igor Sechin, a friend of Putin's, said that "OPEC is one of Russia's key partners on the global oil market" and that "it is very important for us to create mechanisms of regular dialogue" with the oil exporting organization.[46]
With Russia and OPEC responsible for a combined total of 51 percent of the world's oil,[47] Moscow's cooperation with OPEC to coordinate oil prices and production quotas would be a requisite for the further expansion of Russia's influence in the world. Even though the idea of Russia joining OPEC has been rejected by Russian officials, one of LUKoil's vice presidents declared recently that Russian membership of OPEC "will be only good for Russia" for "the future of the Russian industry and [oil] price stability."[48] Cooperation with OPEC and the formation of a gas cartel are consistent with one of the objectives enunciated in the recent Foreign Policy Concept of the Russian Federation, which announced that Russia "strengthens strategic partnership with the leading producers of energy resources."[49]
Russia aims to challenge the current international financial system dominated by the U.S. and Western industrialized countries. At the St. Petersburg Economic Summit in 2007, President Putin called for a new world economic framework based on regional alliances, relegating Bretton Woods-era global institutions like the International Monetary Fund and the World Bank to the sidelines. He demanded that the new system reflect the rising power of emerging market economies like Russia, China, India, and Brazil, as well as the decline of the established powers: the United States, Japan, and Western European countries.[50]
Moscow is establishing "favorable political conditions for diversifying Russia's presence in the world markets through expanding the export range and geography of foreign economic and investment links of Russia."[51] At the same time, the Kremlin is promoting a multilateral, state-driven approach to the international economic and financial system to regulate the free markets globally, and using the ruble as the dominant currency in the Commonwealth of Independent States.
Speaking at the recent conference on the international financial crisis in Evian, France, Russian President Medvedev said that "the formation of new financial centers and strong regional currencies will act as new stability factors" in the face of the crisis. While suggesting that the current international U.S.-based "unipolar economic model" is inefficient, Medvedev alluded to the "multi-polar nature of the world and the complexity of globalization." Medvedev is proposing that "the global financial architecture be changed, the role of the current international institutions be reviewed, and new ones created to guarantee stability."[52] "It will take years to shape a new world system," Medvedev said.[53]
Another goal seems to be replacing the dollar in Russia's international trade transactions. Putin has proposed this goal to his Chinese counterpart Wen Jiabao for bilateral trade between Russia and China, which was estimated to reach $50 billion in 2008.[54]
Russia is following a multilateral approach to challenge the current international financial and trading system, as part of its overall strategy of pursuing a multilateral world system, through the Shanghai Cooperation Organization,[55] OPEC, a new gas OPEC, or new international financial bodies that would include China, India, EU member states, and challengers of the established international order such as Iran and Venezuela.
Influencing the international prices of oil and gas would be key for the economic recovery of the country as well as for funding military and industrial modernization and economic development programs at home.
Before the international financial crisis hit Russia, an increasing share of its resources had been directed at the rearming of the military with modern weapon systems, and at increases in funding of the Ministry of the Interior, and of the security and intelligence services, such as the FSB domestic security service, the SVR foreign intelligence service, the GRU military intelligence, and the Border Guards under FSB supervision. Before the crisis, the Kremlin planned to raise defense spending by 50 percent over three years, deploy an army rapid reaction force at a high level of operational readiness, and construct new nuclear-powered ballistic missile submarines.[56] It remains to be seen if the government's financial stabilization efforts at home will reduce spending in defense as well as activities of the Ministry of Foreign Affairs and of Russian government propaganda and information warfare.
Arms Exports Boost Russia's Power
Russia is also a major world weapons exporter. The Kremlin aims to forge long-lasting military relations and strategic partnerships with foreign countries through the export of arms. Russia's military exports extend to Europe, the Middle East, Central Asia, South Asia (primarily India), the Far East (mainly China), Southeast Asia, Africa, and Latin America. To further centralize government control over the production of the military-industrial complex, the Kremlin has created an industrial behemoth, Rostekhnologii (Russian Technologies), which agglomerates 426 state enterprises. These include the defense export enterprise Rosoboronexport, the aircraft manufacturing, non-ferrous metals, and shipbuilding conglomerates to name just a few. Russia's titanium exports corporation, VSMPO- Avisma, vital for Airbus and Boeing, is now controlled by Rostekhnologii, which is planning to develop it into one of the largest non-ferrous-metals companies in the world.[57] Rostekhnologii will centralize the planning and production of the various enterprises under its umbrella. It could also attempt to marshal together its various resources and coordinate its efforts to become a formidable competitor in the international market for arms, metals, and aerospace technology.
What the Obama Administration Should Do
If Russia were a friendly Euro-Atlantic power, the United States would be no more concerned about its economic activity than about that of France. Russia's use of state-dominated businesses to enhance its geopolitical posture and gain dominance over U.S. allies' energy supply, however, should raise deep concerns in the Obama Administration and in European capitals. Free-market competition is and should remain a fundamental principle of U.S. trade policy; but America and its allies have a duty to their citizens to monitor, and, where necessary, prevent, any country's anti-market, political, covert, or illicit efforts to undermine our markets or our security, which Russia increasingly is aiming to do.
For example, Russian's growing control of Eurasian energy resources and exports to Europe through non-market means is both strategically and economically burdensome, as well as dangerous. To better ensure that the U.S. and its allies have access to the energy that fuels their economies and their militaries, to prevent Russian domination in strategic sectors, and to counter corrupt and criminal activities of Russian corporations and tycoons, the Obama Administration should take early action to:
- Ensure that CFIUS has the resources and support it needs to conduct its investigations according to the law. The U.S. should urge its allies to develop similar institutions and processes to perform their own national security evaluations and screenings.
- Increase cooperation among U.S. and allied intelligence services, law enforcement agencies, and independent experts to track Russian state and oligarch money laundering activities, corruption, and unfair competition practices. The Obama Administration should make the collection of actionable intelligence on questionable Russian activities by U.S. and allied law enforcement agencies a priority. Such intelligence is critical in gathering evidence necessary for achieving convictions in courts of law. Such intelligence includes, for instance, Russian banks providing credit card support for child pornography Web sites. The U.S. should exercise leadership in expanding international cooperation among law enforcement agencies to prevent and stop complex trans-border crimes, such as money laundering, and those that involve current or former Russian government officials; oligarchs with close ties to Russia's political leaders; intelligence operatives; and persons with ties to organized crime. When U.S. laws--such as the Patriot Act (especially Section 312, proceeds of foreign corruption), the Foreign Investment and National Security Act of 2007 (FINSA), the Defense Production Act of 1950 (DPA), money laundering laws, the Foreign Corrupt Practices Act, G-8 anticorruption initiatives, and similar laws in allied jurisdictions--are violated by Russian entities, the U.S. and its allies should not hesitate to vigorously prosecute the offenders and confiscate, through appropriate court proceedings, illegally laundered funds and properties acquired with illegally procured funds, and aggressively deny visas to those government and business figures involved in the illicit activities.
- Encourage U.S. and other multinational companies to compete in economically viable energy and infrastructure projects overseas through free-trade, diplomatic and security support, and regulatory and tax policies that will enhance free competition without government-directed investment decisions. U.S. companies should be encouraged to compete for the Libyan and Trans-Saharan gas pipelines, Turkmenistan's gas fields, and other geopolitically significant ventures, which Russia is targeting in India, Southeast Asia, Africa, and Latin America.
- Promote market-viable alternative energy sources and unconventional sources of fuels worldwide to counter strategic dependency on Russian, Iranian, and Venezuelan oil. This should be accomplished through deregulation and trade and tax policies that encourage innovation and investment to develop, and through commercializing new sources of energy that best meet the needs of individual regions and nations. Western economies will be better off by expanding the supply of transportation fuels and reducing their Russian energy imports, thus reducing the influx of revenue into Kremlin coffers.
- Expand security cooperation with Russia's energy-exporting neighbors and other countries that Russia is targeting for energy cooperation, including train-and-equip programs for military and security forces protecting pipelines, and officer corps education in U.S. military colleges. The U.S. should make use of NATO's Partnership for Peace program.
Conclusion: The Way Forward
Russia is being run as a corporation by the former senior members of the Russian intelligence community who strive to maximize profits and power, expanding global corporations for exports of raw materials and weapons. America's European allies and the newly independent states of Eurasia have already been subjected to Russia's heavy-handed policies and corrupt practices aimed at increasing their energy dependency, as well as a flurry of efforts to acquire critical infrastructure such as ports, pipelines, refineries, and energy distribution networks.
The Kremlin has made clear that it intends to diminish America's standing as a world leader by promoting a "multipolar" world, and using its military, economic, and "soft" power to re-establish Russia as America's near-peer competitor. The lower energy profits accruing to Moscow from the current global economic downturn can play a role in mitigating Russia's anti-status quo foreign policy, and slow down the growth and modernization of its armed forces. But the U.S. should not rely on these developments. The U.S. should develop comprehensive policies to handle Russia's economic power projection that is aimed at undermining American allies, power, and security interests, employing a mix of commercial, national security, intelligence, and diplomatic means.
Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security and Lajos F. Szaszdi, Ph.D., was a Consultant in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.
Subscribe to:
Posts (Atom)
Posts
