Friday, June 24, 2016

Ultrapetrol -- Stock Symbol #ULTR -- should make a quick and late rally and is an Intraday Buy $.32; +/- .01625

Revenge Would Be The Wrong EU Response To U.K. Exit

By Mark Gilbert
The Bloomberg View
June 24, 2016

The U.K. has voted for the "most expensive divorce proceeding in the history of the world," in the words of U.S. billionaire Wilbur Ross, with BBC projections showing voters backed "Leave" by 52 percent to 48 percent. The challenge facing both Britain and its newly ditched European partners now is to ensure that the separation doesn't deteriorate into acrimony and revenge.

The EU should regard the referendum result as a wake-up call. Discontent with how the bloc operates isn't restricted to Britain. A survey of more than 10,000 voters across Europe published by the Pew Research Center earlier this month showed rising dissatisfaction. The proportion of French respondents with a favorable view of the EU, for example, slumped to 38 percent from 69 percent in 2004; in Spain the deterioration was to 47 percent from 80 percent.

The most sensible EU response would be a retreat on at least some of the issues that were at the forefront of the U.K. referendum but are also pressure points across the bloc -- immigration, the centralization of decision making and the broader agenda of trying to impose "ever closer union" on a reluctant populace.

An alternative solution, however, might see the EU accept the reality of a two-speed Europe. That is, it could formalize an arrangement by which a core group led by France and Germany commits to fully-fledged union with shared fiscal powers, a central Treasury and common bond issuance and a full banking union -- a proper United States of Europe formed from a coalition of the willing. Those countries who don't want to be part of the core, including Britain -- or which cannot meet the requirements -- could remain fully-fledged members of the EU trading bloc and single market, without having to accept further integration. Either way, the EU can't proceed as it has before, as German Finance Minister Wolfgang Schaeuble acknowledged on Tuesday.

France should resist the temptation to pull up the financial-services drawbridge. Banking business is likely to flow naturally to Paris, Luxembourg and Frankfurt and away from London. Europe's banks are in enough trouble -- Deutsche Bank's shares are worth about half of what they were a year ago -- and attempting to prevent London from clearing or settling trades in euro-denominated securities risks smothering those trades rather than simply repatriating them.

At home, the ruling Conservative Party needs to heal the rifts caused by a divisive and ill-tempered campaign. Prime Minister David Cameron and Chancellor of the Exchequer George Osborne backed the "remain" side, trading barbs and insults with Conservatives Boris Johnson and Michael Gove, who fronted the "leave" campaign. With last year's surprise election win a fading memory and a risky referendum bet gone badly wrong, Cameron has resigned, reaffirming Enoch Powell's dismal maxim that all political careers end in failure.

Whoever becomes the next U.K. leader -- Johnson is currently favorite with the bookmakers -- should resist the temptation to lecture Britain's European partners. Any anti-European hubris on the part of the U.K. would be both inflammatory and unnecessary. Britain's leaders need to prove to business that they can secure viable trade agreements with Europe in the next two or more years of negotiations; otherwise investment will flee.

The Scottish question will also come to the fore again, given that polls prior to Thursday's vote showed twice as many Scots wanted to stay in the EU as wanted to leave. Denying Scotland a second referendum on whether to leave the United Kingdom would be undemocratic. The breakup of the U.K. seems an inevitable result of the referendum vote, and needs to be handled sensitively.

As predicted by countless international bodies and economists during the campaign, the EU vote casts a long shadow over the U.K. economic outlook. Futures markets had already suggested there was no chance of the Bank of England raising rates before February, with a much higher chance of lower rates. The central bank will probably have to consider cutting its benchmark rate from the 0.5 percent level that has held since 2009. That in turn will exacerbate the drop in the pound.

Osborne, though, should backtrack on his threat to introduce an emergency austerity budget that would increase taxes and reduce government spending. His mid-month warning that leaving the EU will leave a "black hole" in the U.K. budget of 30 billion pounds ($43 billion) was guesswork at best and scaremongering at worst. The fragility of Britain's recovery from recession means the last thing the country needs is yet more austerity.

It's still in Europe's self-interest for Britain to remain economically strong -- "a super-Singapore at the gates of Europe" as Markus Kerber,who represents 100,000 of Germany's biggest companies as head of the Federation of German Industries, put it in February. Punishing Britain to encourage other countries not to leave would repeat the campaign mistake of using scaremongering rather than accentuating the positive. The EU needs to start emphasizing the benefits of membership -- otherwise the U.K. will be just the first nation to decide that the privileges of membership aren't worth the subscription fees.

Article Link to The Bloomberg View:

Immigration: Obama Won By Losing

By Noah Rothman
June 24, 2016

Barack Obama took to the lectern in the White House Briefing Room on Thursday appearing physically exhausted. He had just been rebuffed by the Supreme Court, which, in a split decision, essentially upheld a lower court ruling invalidating his unilateral executive actions extending de facto amnesty to millions of illegal immigrants.

It turned out to be a clever performance. Obama got what he needed.

The president feigned frustration with a legislative process that had stalled, forcing him to take matters into his own hands. He railed against inaction in the Congress on immigration reform, which had led him to expand his pursuit of executive amnesty to millions of illegal immigrants who had lived in the country for an extended period. Calling the decision “heartbreaking,” Obama condemned a ruling that “takes us further from the country that we aspire to be.” But in fact, from Obama’s perspective, it’s a step in the right direction.

Republicans and constitutionalists can take heart in the ruling. It affirms the power of Congress in Article I of the Constitution to make law. The ruling also imposed limits in the discretionary authority of the executive to choose what laws it will and will not enforce. From a political perspective, however, the president’s legacy is furthered more by a Court ruling against him than one that ratified his “pen and phone” approach.

Republicans who might be concerned about the future of the Court under a Clinton (or, for that matter, Trump) presidency will be lulled into a sense of complacency by this ruling. They were not shocked into sobriety by the passing of Justice Antonin Scalia. Nor were they particularly concerned when another 4-4 split decision in March upheld a law that forces laborers who work in a field in which public sector unions operate to pay dues to an organization to which they may not even belong. Because this decision went conservatives’ way, the galvanizing and energizing effect of this ruling will be conferred exclusively upon the left.

Hillary Clinton called the ruling “unacceptable.” She has previously insisted that Obama’s orders are entirely within the bounds of existing law and precedent. What’s more, she has pledged to go further than the president in terms of executive actions relating to immigration should she become president. While this ruling will stay her hand, it also demonstrates to liberal voters that there is no way to enact immigration reform via pen stroke. It must come as a result of legislation, and that legislation will only be achieved if Democrats retake their majorities in Congress.

While running for the Democratic nomination, Hillary Clinton struck a position on amnesty well to the left of even Barack Obama. “We enhanced the border security. That part of the work is done,” Clinton insisted in a Democratic debate. She went on to say that the United States must “end” private and family detention of illegal immigrants. “The idea that a mother is living here, and her children are on the other side of the border is wrong and immoral,” Clinton added, pledging to import the entire immediate families of illegal immigrants who manage to cross the border. She added that signing a “comprehensive immigration reform with a path to citizenship” is a priority for her first 100 days in office.

Donald Trump may have a dedicated cohort of supporters for whom illegal immigration is a key issue. Few polls, however, lend credence to the notion that they alone can elect a legislative majority that will enact their preferred immigration policies. As the Court demonstrated today, executive fiat has its limits. This ruling would constrain Trump as much as Clinton. For his part, Trump is overtly appealing to Bernie Sanders-backing liberals to flesh out his coalition of voters. The self-described socialist from Vermont appears disinclined to return the favor. “We cannot let their future, and the future of so many more vulnerable people, fall into the bigoted hands of Donald Trump,” Sanders said in a statement on Thursday in response to the Court’s ruling.

“I promise you this,” the president told reporters, “sooner or later, immigration reform will get done. Congress is not gonna be able to ignore America forever.” He’s right. The nation’s present immigration and naturalization system is an unsustainable status quo. The Supreme Court ruling made it much more likely that the immigration reform plan a future Congress passes will be to Barack Obama’s liking.

Article Link to Commentary:

Will Sit-In Make Congress Stand Up On Gun Control?

By Eugene Robinson
The Washington Post
June 24, 2016

WASHINGTON -- The extremely rare sit-in by Democrats in the House chamber may have been, as Speaker Paul Ryan claimed, a "publicity stunt." But it was a righteous one that may improve the prospects for meaningful gun control.

It won't happen immediately. Even after 49 innocent victims died in the Orlando massacre -- the worst such shooting in modern U.S. history -- Republicans remain adamantly opposed to any new legislation that might keep powerful weapons out of the hands of the next would-be mass murderer.

If Republicans care more about maintaining their standing with the National Rifle Association than saving lives, that's their choice. But polls show majority support for sensible new gun control measures -- and members of Congress should at least have to go on record. Democrats are demanding that the House do its job: vote yes or no.

One of the bills Democrats want the House to vote on should be a no-brainer: expanding background checks for gun purchases. The other, which would deny the right to buy guns to individuals on the terrorism watch list, is in my view a tougher question. The American Civil Liberties Union has expressed "deep concerns" about relying on an "error-prone and unfair watchlisting system" to regulate access to firearms.

I wish the subject of the protest were, instead, a bill to ban military-style assault weapons of the kind used by Omar Mateen and so many other mass shooters. But if we are ever going to get to that point, the logjam has to be cleared. Something dramatic had to happen.

Enter Rep. John Lewis, D-Ga., a hero of the civil rights movement who knows something about thousand-mile journeys that start with a single step. Lewis also knows something about sit-ins, having staged more than a few, and it was in his office that a group of House Democrats came up with the idea of occupying the chamber to demand gun control votes.

They achieved no success, of course -- not yet, at least.

The speaker of the House has sweeping powers and cannot easily be coerced into anything. Ryan called a recess and Republicans left the chamber, which meant that the C-SPAN cameras that televise House proceedings went dark; Democrats began streaming video of the sit-in via their cellphones. The spectacle of members of Congress sitting on the floor and staging a protest drew nationwide attention. Sympathizers dropped by, including Sen. Elizabeth Warren, D-Mass., who brought boxes of Dunkin' Donuts. As the sit-in stretched into the evening, well-wishers had pizza delivered to the Capitol.

Ryan eventually brought the House back into session, to show it could function despite the ongoing protest, and then finally, in the middle of the night, ordered a recess until July 5. Republicans were free to scurry out of town.

So did the protest have any real impact? Certainly some, and potentially a lot.

First, the tactic rallied Democrats in both chambers to the gun control cause and put Republicans on notice that the issue won't just go away. Mass shootings happen with depressing regularity, and by now everyone knows the drill: Congress argues about guns for a few days and then does nothing. The sit-in was not a part of the usual script, which makes the ending less certain.

Second, the protest drew widespread attention to the issue at a moment when the debate would otherwise be fading. Whether you thought the sit-in was courageous or absurd, you paid attention. Given what we know about public opinion, it is helpful for advocates of gun control to have the issue in the news. People say they want to keep dangerous weapons out of the hands of dangerous people. Republicans should have to explain why they disagree.

Third, and perhaps most important, the sit-in means that gun control will be an issue in the coming election. Is this smart politics? I believe it is.

Republicans are badly divided and will be led by a nominee rejected by much of the party establishment. Democrats see the potential for winning both the White House and the Senate and making major gains in the House -- but only if the party is united and enthusiastic. The gun issue can help motivate the party faithful.

Taking action to prevent Orlando-style killings should also appeal to independent voters. Republicans take the position that nothing at all should be done to keep the next mass shooter from buying an assault rifle. Do they really believe that swing voters agree?

The sit-in was a spark. It might start a fire.

Article Link to the Washington Post:

Iran's Foreign Policy Is In Chaos. How Should America Respond?

Hardliners and moderates are facing off, creating dilemmas for the United States.

By John Allen Gay
The National Interest
June 24, 2016

Iran’s foreign-policy establishment is in chaos. The last week has seen a catena of maneuvers by the system’s key players. Rumors, reassignments and threats have been the order of the day. Yet determining how America should respond won’t be easy; indeed, it requires a fundamental vision of the U.S. approach to Iran.

Things kicked off last week when a former leader of the Islamic Revolutionary Guard Corps (IRGC) alleged that Abbas Araghchi, a senior foreign-ministry official and nuclear negotiator respected by Western interlocutors, is a member of the IRGC’s external action wing, the Quds Force. The Quds Force has been linked to numerous terrorist plots, and its members face restrictions; as Al Monitor’s Arash Karami notes, this could lead “foreign delegations [to] request that Araghchi no longer be involved in ongoing negotiations over the implementation of the nuclear deal,” hindering those negotiations and thereby increasing pressure on Iranian president Hassan Rouhani.

Then, last Friday, Al Monitor’s Laura Rozen reported that Foreign Minister Mohammad Javad Zarif had “signaled that he has more authority on the Syria file than he has had until now, and that Iran may be prepared to show more flexibility to advance a political solution.” Rozen linked this to a meeting between the Iranian, Russian and Syrian defense ministers in Tehran earlier this month, which saw similar signals by Iran, and to the subsequent appointment of Secretary of the Supreme National Security Council Ali Shamkhani to handle “political, security and military affairs with Syria and Russia.” This would shift the Syria file away from the de facto control of the IRGC.

On Sunday, the Foreign Ministry announced a shakeup. Hossein Amir-Abdollahian, the deputy foreign minister for Arab and African affairs, was removed from his post and made an “adviser” to Zarif, allegedly rejecting a role as ambassador to Oman in the process; foreign ministry spokesman Hossein Jaberi-Ansari took his place, while Bahram Qassemi, former ambassador to a number of European countries, became the new spokesman. This little game of musical chairs seemed to confirm Zarif’s rumored empowerment, and implied a shift in Iran’s foreign policy. Amir-Abdollahian was seen as the IRGC’s man in the foreign ministry—as Muhammad Sahimi points out, he was in the foreign ministry’s Iraq department for much of the period of U.S. occupation there, at a time when Iran’s ambassador in Baghdad was a member of the Quds Force. Amir-Abdollahian’s area of responsibility in his latest post overlapped with areas where the IRGC, not administration of President Rouhani, have more impact.

Amir-Abdollahian was enough of a thorn in Arab sides that many inside and outside Iran suggested his removal implied an Iranian opening to Arab states on the Persian Gulf; Zarif even had to deny rumors that Amir-Abdollahian was removed at their request. Coupled with Zarif’s empowerment and the new role for Shamkhani (an ethnic Arab seen as friendlier to the Arab states), this suggested a coming reduction in tensions with the Gulf Cooperation Council and a stronger focus on the diplomatic track in Syria. And, to a lesser extent, Qassemi’s advancement could also hint at a turn toward Europe, as both of the previous spokespersons have moved on to prominent roles.

This diplomatic shift would comport with the Rouhani administration’s apparent desires. Though his time in office has seen the worst relations with the Gulf states in decades, there is a widespread perception that he favors friendlier relations with their governments and with the West, and that this is in service of a commerce-first vision of national power. (Former president Hashemi Rafsanjani, a key Rouhani ally, is associated with similar views.) The hardline factions, centered around the IRGC and Supreme Leader Ali Khamenei, tend to push for a more revolutionary approach to the region, distrust of the West (sometimes in favor of Russia, China or the third world), and autarky.

The Guards quickly hit back at the diplomats’ attempt to seize control of Iran’s foreign policy. General Qassem Soleimani, head of the Quds Force and an increasingly popular figure, issued a very sharp criticism of the Bahraini government’s revoking a prominent Shia cleric’s citizenship. In what hardline outlet Fars News branded an “unprecedented warning to the Al Khalifa regime,” Soleimani said that harming the cleric was a “red line” that would “set fire to Bahrain and the whole region” and “leave the people with no path other than armed resistance,” starting a “bloody intifada” and ending in the fall of the regime. Given Soleimani’s role in supporting insurgencies and terrorism around the region, this is rather like a mafia don saying “Nice restaurant you have there. Would be a shame if something happened to it.”

Soleimani’s statement was clearly intended as an Iranian threat to Bahrain, and an Iranian response would indeed be likely if Bahrain were to take further action against the cleric. (When Saudi Arabia executed a prominent Saudi Shia cleric in January, protesters seen as agents of the Iranian deep state ransacked the Saudi embassy in Tehran.) But it has also been interpreted as an answer to Amir-Abdollahian’s removal at the foreign ministry. As Al Monitor’s Karami points out, two Rouhani advisers publicly pushed for a peaceful approach to Bahrain, with one implying Soleimani’s remarks had created a “serious challenge” for the new deputy foreign minister. And Zarif seemed eager to counter Soleimani’s threat, saying that Iran “considers having good neighborly relations (with other countries) as its unwavering policy.” Ali Akbar Velayati, one of the Supreme Leader’s top advisers, seemed to split the difference between the Guards and the Foreign Ministry, saying that the “Al Khalifa and their regional and non-regional supporters need to know that they cannot stand against the will of a nation” while warning that harm to the cleric would lead to a “new phase of struggle.”

This back-and-forth is consistent with broader patterns in Iranian foreign policy: it has always been a battleground for domestic politics. Hardline actors have been particularly willing to take actions that keep tensions with “enemies” high, even when these actions damage Iran’s international standing. The IRGC’s intelligence arm, for example, has been detaining foreigners on apparently spurious charges. The moderates often can only try to control the damage.

How should America react to all this? On the one hand, Arab–Iranian tensions are harmful to the United States, and U.S.–Iranian tensions are even more harmful. Actions to ease conditions for pro-rapprochement elements in Iran would follow from this approach. Yet on the other hand, a senior Iranian official has issued a barely concealed threat of violence against Bahrain, which hosts a major U.S. military base and is more or less an ally. (To make it a little more complicated, Washington is also unhappy with how Manama has handled its domestic discord, including in the case of the cleric; Bahrain and its GCC allies, in turn, fear so much that America is abandoning them to Iran that they are lashing out in the region in wayshighly detrimental to American interests.)

When we focus on one side of the political equation in Iran, one set of U.S. policies would seem to follow; when we focus on the other, a different set of policies follows. If we want to help the moderate factions within the Iranian government, we should be happy with Amir-Abdollahian’s removal and encourage our Arab and European partners to seek a new understanding with Tehran. We could interpret the nuclear deal in a more lenient way and hold back from tougher sanctions in separate areas. We might even look at pursuing further negotiations, offering the Iranians a possibility of further concessions on our side. On the other hand, if we look at Soleimani’s statement, a firm statement of support for our ally, and possibly further actions (joint exercises, deeper military cooperation and so forth) would be natural.

The key problem is that these policies, pursued together, could undermine each other. The soft, moderate-centered approach would only amplify GCC concerns and would suggest U.S. indifference to an IRGC-funded “bloody intifada” outside the gates of its bases—the sort of signal that might make Iran more likely to see that as a viable policy approach if the cleric is harmed. (At that point, a pacific policy would become politically unsustainable, as would an attempt to resolve the Syrian crisis, empowered Zarif or no.) And a tough U.S. response would undermine those same moderate figures: their critics would argue that Rouhani and others had shown weakness, and they in turn would have to show their mettle. Further escalation could be the result, and securitizing politics tends to benefit, surprise, the security services. The latter concern is probably behind the Obama administration’s relative silence on this point (they’ve so far only noted that the Iranians had said some “pretty vituperative” things, and dissociated themselves from that).

That gets to a broader challenge in foreign policy: Should we treat states as “black boxes,” only paying attention to their behavior, not their internal politics? Or should we set policy to account for and even change other states’ internal politics? This is a particularly important question with Iran, with its tendency to have foreign policy used for internal ends and the fact that some of its political factions are more hostile to us than others. We thus often end up faced with Iranian actions intended to provoke a response from us that will empower more anti-American currents. The Iran hostage crisis fit that bill: America could not have ignored it, and it led to the end of the relatively moderate Mehdi Bazargan government.

Still, the black box approach may prove to be the wiser one with Iran, for three key reasons. First, because appearing pro-American is dangerous in Iranian politics, effective action to back factions we find congenial puts those factions in danger. (There was even an attempt to brand the moderate/reformist coalition in February’s elections the “English list,” after another of Iran’s perceived enemies; moderate clerics are accused of promoting “American Islam.”)

Second, and more importantly, excusing hardline actions to benefit moderates reduces both the price to Iran of taking those actions and the moderates’ incentives to rein in the hardliners. It can even allow Iranian leaders to play good cop, bad cop with us—the moderates can threaten us with what the hardliners will do if we don’t play nice; the hardliners can warn of what they’ll do to the moderates.

But third, and most importantly of all, Iran’s political system is not a normal political system where the president is in charge. There is a deep state linked to the IRGC and to various quasi-governmental economic institutions; there is also the Supreme Leader and the institutions he controls, including the Guardian Council, the intelligence services, and the judiciary. It would take a bit of sleight-of-hand to say that the foreign minister is the only legitimate interlocutor on Iranian foreign policy. Soleimani is not some idle kibitzer; he can bring about the “bloody intifada” he threatens. His chain of command, moreover, ends at Khamenei, not Rouhani or Zarif. It’s a similar story with actions by the murkier parts of the deep state: when vigilantes enjoy impunity, Iran is responsible; when they break into diplomatic compounds (a recurring problem), Iran is failing to live up to its obligations as a host.

Some level of engagement with the less traditional elements of the Iranian state can also be appropriate. In some areas, that might require direct contact; but in others a mere reply fits the bill. It is worth pointing out that some hardline actions undermine hardliners’ own stated goals. Soleimani’s remarks about Bahrain are a perfect example. Since before the revolution, Iran has pushed for a Persian Gulf free of foreign powers; with those powers gone, Iran would be the predominant state in the region. Yet by threatening regime change in a neighbor allied with the strongest of those powers, Soleimani only encourages more foreign presence, reducing Iran’s relative power. He also encourages the Gulf states to band together, again weakening Tehran. The BBC’s Mehrdad Farahmand, noting this dynamic, even called Soleimani’s remarks “a gift to the Saudis.” America’s can, therefore, can address both sides of Iran’s power equation in a way that doesn’t harm only one.

Article Link to the National Interest:

How America And Britain Planned To Destroy The Middle East's Oil

A secret plan to stop the Soviets from seizing the edge in the Cold War.

By Michael Peck
The National Interest
June 24, 2016

If Soviet tanks had invaded the Persian Gulf in the late 1940s, the U.S. and Britain had a plan.

Blow up the oil fields. Possibly by detonating nuclear weapons.

Declassified documents show that Anglo-Americans were so pessimistic in the early days of the Cold War about their chances of defending the Middle East, that they resolved to destroy the oil fields rather than let them fall into Soviet hands, according to writer Steve Everly. In an article published in Politico, Everly describes how in 1948, as the Soviets were blockading Berlin, the Truman administration approved a plan in which American and British oil companies, such as Aramco (Arabian-American Oil Company) and the Anglo-Iranian Oil Company (an ancestor of today’s BP) would cooperate in the destruction of their own oil facilities. A Central Intelligence Agency operative told British oil-company representatives "how their production operations in those countries would in effect be transformed into a paramilitary force, trained and ready to execute the CIA’s plan in the event of a Soviet invasion," Everly writes.

The goal of the American plan "was to keep the Soviets from tapping Saudi Arabia’s oil and refined fuels for up to a year in the event of an invasion," according to Everly. "The plan would unfold in phases, starting with destruction of fuel stockpiles and disabling Aramco’s refinery. Selective demolitions would destroy key refinery components difficult for the Russians to replace. This would leave much of the refinery intact, making it easier for Aramco to resume production after the Soviets were ousted."

American oil companies provided the CIA with technical advice, while covert CIA agents were embedded in Aramco. The plan remained in effect through the Eisenhower and into the Kennedy years. However, by the advent of the Eisenhower administration in 1953, the oil companies on both sides of the Atlantic were having second thoughts, fearful of economic losses and what would happen if the Arab nations in question discovered their potential fate.

That fate could have included mushroom clouds over Tehran and Riyadh. Doubtful that sufficient British troops could be found to hold the oil fields or that air strikes would knock them out, "the most complete method of destroying oil installations would be by nuclear bombardment," concluded a study for the British Chiefs of Staff that the National Security Archive has made available.

No one should be surprised by this scorched-earth plan. Had the Soviets invaded Western Europe during the Cold War, the U.S. would quite possibly—if not probably—have unleashed nuclear weapons to stop them. If Washington could turn Germany and France into radioactive rubble, then it could the Arabian sands into glass.

The oil field plan was rooted in the pessimism of the early Cold War, when Communism seemed on the offensive in places like Berlin and Korea, and no one could be sure if even Western Europe could be held. If the situation was that bad, then what hope could there be of mustering enough troops to keep Russian soldiers from dipping their toes in the Persian Gulf?

What is also interesting is how the specter—or more likely the bogeyman—of Soviet conquest of the oil fields persisted. In the late 1970s, the Carter administration created the Rapid Deployment Force to forestall any Soviet moves into the Persian Gulf. especially after Moscow's invasion of Afghanistan. How American paratroopers and light infantry would have fared against Soviet tank columns is debatable, but there looms an even larger question: Was America prepared in the 1970s and 1980s to use nuclear weapons on Saudi Arabia or Iran, solely to keep the oil out of Russian hands?

Article Link To The National Interest:

Time For Trump To Put Up Or Shut Up

Many observers think the real-estate mogul may not be as outlandishly wealthy as he claims.

By Jonah Goldberg 
The National Review
June 24, 2016

Donald Trump should put his money where his mouth is.

The real-estate mogul says he’s worth “in excess” of $10 billion. I think he’s lying, as does pretty much every expert and financial journalist who has looked into the question. Forbes has put his net worth at $4.5 billion. Bloomberg says it’s below $3 billion. Billionaire Mark Cuban has cast doubt on whether Trump is even a billionaire at all.

I’ve read the analyses, but common sense always told me he was full of it. Actual multi-billionaires tend not to waste their time recording videos hawking steaks in the Sharper Image catalog. They don’t bother with snake-oil schemes peddling dietary supplements. They don’t claim under oath that much of their net worth depends on how good a mood they’re in. And they don’t threaten to sue anyone who suggests they aren’t as rich as they claim.

This last point is especially significant. Trump’s business model is to exploit his brand as a super-successful Manhattan real-estate mogul. The fact that he is, in reality, a “relatively minor player” in that world, as economics writer Adam Davidson recently noted in The New York Times Magazine, is entirely beside the point. He’s selling the sizzle, not the steak (clearly, not the steaks).

That’s especially true overseas, where he does a large share of his business (he’s in Scotland for some grand opening right now). He’s nowhere near the richest man in America, but he’s arguably the American most famous for being rich. That opens doors in Eastern Europe and Asia. It also improves his mood, which apparently can be a real windfall.

I’ve talked to numerous political pros and quite a few actual billionaires, and the totally uncorroborated theory most of them hold is that Trump never expected to do this well. It was a P.R. stunt that got out of hand. The dog caught the car and now he doesn’t know what to do with it.

Circumstantial evidence for this can be found in Trump’s latest fundraising report. It was, by any objective measure, a disaster. I wouldn’t be surprised if RNC chairman Reince Priebus reacted to it the way that German guy did when he looked inside the Ark of the Covenant at the end of the first Indiana Jones movie.

In short, the alleged decabillionaire’s campaign is broke. In May, which should have been a boffo fundraising month, the campaign raised $3.1 million (Mitt Romney during the same period had raised $78 million). The Trump Train went into the crucial month of June with just under $1.3 million cash on hand. That is a pretty good number — for a congressman. Only 78 representatives and 43 senators have more cash on hand than the GOP’s presumptive nominee.

Perhaps more tellingly, the failed steak and vitamin mogul spent nearly a fifth of the money he raised on his own businesses and salaries for himself and his family. One of his biggest outlays was renting out the Mar-a-Lago club — which he owns. Odd.

During the primaries, Trump routinely insisted that he was turning down millions in donations from fat cats eager to board the Trump Train. “The week before last, a lobbyist . . . offered $5 million, ‘Please. I want to give you $5 million for the campaign,’” Trump recounted to reporters last August. “I said ‘I have no interest in taking that.’ In fact, I think it’s the first time he’s ever been turned down.”

That was back when Trump’s was the great self-funder. But he changed his mind a while ago. He wants help now, but it’s not forthcoming.

It seems strange that all of those super-rich friends would be eager to donate during the primaries but now have empty pockets. Perhaps such offers never happened. Or, maybe, no one wants to hand money to a guy who insists he could easily self-fund the whole thing with a fraction of his alleged wealth.

And that’s the thing. If Trump’s worth $10 billion, spending $1 billion is no great sacrifice. He could still cover the bills for his private jet. Okay, maybe he’d have to sell something. Is that really too much to ask? The Founders pledged their lives, their fortunes, and their sacred honor. Surely he could pawn Trump Tower.

So, I ask you, Mr. Trump, just do it already. Put your money where your mouth is. You say you’re the only one who can save America. Henry IV said, “Paris is well worth a Mass.” Surely America is worth a tenth of your alleged fortune.

Article Link to the National Review:

The Enormous Political Risk Of Saudi Arabia's Oil Reform

Riyadh’s radical economic plan could shake up society.

By Sagatom Saha
The National Interest
June 24, 2016

On June 7, Saudi Arabia laid out its National Transformation Plan to shift away from an oil-based economy. To do so, the plan’s architect, Deputy Crown Prince Mohammed bin Salman, intends to create the world’s largest sovereign wealth fund, to float an IPO of the world’s most valuable oil company and to cut welfare for some of the world’s most heavily subsidized people. Given all of the superlatives, it’s hard not to speculate about the plan’s ambition and viability. And many have. GE has already made an enormous bet, promising to invest at least $1.4 billion in the country.

But even if he can check off all the items on his wish list, the deputy crown prince may not guarantee a prosperous future for his kingdom. By cutting subsidies and ceding some control over its oil industry, Saudi Arabia might surrender an asset rivaling oil in value: political order in a region engulfed in conflict.

The primary cause of difficulty will be the belatedness of the post-oil push. Large economic transitions are most attainable when coffers are full and revenues are high. Saudi Arabia is setting out on a path for diversification under a chronic deficit and persistently low crude prices.

To realize a diversified economy, Saudi Arabia would need to create an unprecedented private sector with six million new jobs by 2030—more if women enter the workforce in larger numbers. The oil boom between 2003 and 2013 created only one-third as many. Saudi Arabia hopes to create 450,000 non-oil jobs before 2020. However, the country needs to create 226,000 jobs a year just to accommodate new entrants.

The prospect of a smooth transition has already passed by. In past years, the kingdom could have invested its massive foreign exchange reserves into the same schemes it now hopes to realize. Instead, Saudi Arabia is using that money to plug deficits nearing $100 billion a year.

Compare that to reserves of $593 billion in February declining by $10 billion a month. Graver still, domestic fuel consumption threatens to squeeze Saudi Arabia’s only significant revenue stream: oil.

The Saudi populace relies almost entirely on domestic diesel and associated natural gas for power. Demand is growing so fast it will shave two million barrels a day from exports by 2020 at current rates. Ironically, Saudi Arabia needs these exports to finance the post-oil future.

The country has long benefited from commanding international oil markets and deriving vast revenues from its oil wealth. Now that boon is a burden.

Without a glide path, Saudi Arabia must find the investment—$4 trillion, by McKinsey’s estimate—to push Saudi Arabia toward a new economic future. Doing so could destabilize the kingdom, the world’s biggest oil exporter and a U.S. ally.

The tough timetable has already prompted several unprecedented decisions, most notably the move to float an IPO of Saudi Aramco. Even if only 5 percent of the company were sold as per current plans, it would be the largest offering in history, estimated at $100 billion.

Deputy Crown Prince Mohammed bin Salman framed the IPO in “the interest of more transparency, and to counter corruption.” Certainly, going public with even part of the company would nudge the kingdom’s finances toward transparency. This may be the problem.

Saudi Arabia, far more so than many of the region’s monarchies and autocracies, maintains an expansive, intricate patronage network of royal family members. While impossible to calculate the exact sum of “family allowances” sustaining the network, it was estimated at $37 billion in 1996 with revenues from one million barrels of oil going entirely to “five or six princes.” This figure has likely grown since.

Family stipends offer political stability in a country without direct hereditary succession and where opposing factions within the family loom large. Going public with their stipends endangers the long-standing bargain of cash for compliance.

Extraordinary letters from senior princes reveal family members have called for regime change, expressing extreme distaste for the current oil policy and the deputy crown prince himself. Opening Saudi Aramco’s books could right the country’s burgeoning fiscal deficit, but it gambles with insurrection from within the ranks.

The risk from the country’s elite is matched with risk from the general populace. Saudi Arabia has already started removing subsidies and cutting public spending. Although many of these expenditures are economic inefficiencies, they also form the basis of a payment-based social contract.

These cuts portend unrest at best, and Arab Spring turmoil at worst.

Earlier this year, Saudi construction workers torched buses in Mecca because they had not received wages in months. One former White House foreign-policy advisor said, “The conditions that produced the Arab Spring five years ago haven’t gone away, and they seem to be even more of a concern in Saudi now.”

Saudi Arabia sidestepped the wave of unrest in 2011 owing to its generous oil-financed welfare system.

Naturally, the Saudi government is introducing reform gradually, to avoid such a situation. However, cuts will need to be deeper and quicker to put the country’s finances back in order. In January, Saudi Arabia more than doubled gasoline prices. That increase only brought gasoline to only twenty-four cents a liter or about ninety cents per gallon, only a tiny step toward the goal of prices in line with the international market.

Meanwhile, the Saudi adult population will more than double in the next fifteen years, offsetting cuts to the system of payments and subsidies.

Saudi Arabia intends to phase out subsidies not only for petroleum products, but also for water and electricity over the next five years. The plan includes the introduction of sales and income taxes and cuts to government wages, meaning lower salaries for more than two-thirds of Saudis.

The first price hike for gasoline had Saudis rushing to fill their tanks within hours. What comes next could be worse. There is a long, well-established history linking subsidy cuts to political instability. Neighboring Yemen and fellow oil producer Nigeria are recent examples country where of price hikes incited violence.

The Saudi Arabia embarking on the National Transformation Plan will therefore be different political constraints than the Saudi Arabia of the oil boom. Those expecting economic change, like the deputy crown prince, should watch for political change as well.

Article Link to The National Interest:

World Stocks In Freefall As UK Votes For EU Exit

By Marc Jones and Wayne Cole
June 24, 2016

A British vote to leave the European Union sent sterling plunging on Friday and hammered equities across the world as turmoil swept through global markets.

Such a body blow to global confidence could well prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all the major central banks.

Risk assets were scorched as investors fled to the traditional safe-harbors of top-rated government debt, Japanese yen and gold.

Billions were wiped from share values as FTSE futures fell 7 percent FFIc1, EMINI S&P 500 futures ESc1 5 percent and Japan's Nikkei .N225 7.6 percent. European stock markets were set to open more than 10 percent lower STXEc1.

The British pound collapsed no less than 18 U.S. cents, easily the biggest fall in living memory, to hit its lowest since 1985. The euro in turn slid 3.2 percent to $1.1012 EUR= as investors feared for its very future.

Nearly complete results showed a 51.8/48.2 percent split for leaving, setting the UK on an uncertain path and dealing the largest setback to European efforts to forge greater unity since World War Two.

Sterling sank a staggering 10.1 percent at one point and was slumped at $1.3582 GBP=, having carved out a range of $1.3228 to $1.5022. The fall was even larger than during the global financial crisis and the currency was moving two or three cents in the blink of an eye.

"It's an extraordinary move for financial markets and also for democracy," said co-head of portfolio investments of London-based currency specialist Millennium Global Richard Benson.

"The market is pricing interest rate cuts from the big central banks and we assume there will be a global liquidity add from them in the next few hours," he added.

The shockwaves affected all asset classes and regions.

The safe-haven yen sprang higher to stand at 102.15 per dollar JPY=, having been as low as 106.81 at one stage. The dollar decline of 4 percent was the largest since 1998.

That prompted warnings from Japanese officials that excessive forex moves were undesirable. Indeed, traders were wary in case global central banks chose to step in to calm the volatility.

One source told Reuters the Bank of England was in touch with other major central banks ahead of the market open there and the Bank of Japan Governor Haruhiko Kuroda it was ready to provide liquidity if needed to ensure market stability.

Other currencies across Asia and in eastern Europe as it woke up suffered badly on worries that alarmed investors could pull funds out of emerging markets. Poland, where many of the eastern Europeans in Britain come from, saw its zloty PLN= slump 7 percent.

Recession Fears

Europe's natural safety play, the 10-year German government bond, surged to send its yields tumbling back into negative territory and a new record low. [EUR/GVD]

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slid almost 5 percent, while Shanghai stocks .SSEC lost 1.1 percent.

Financial markets have been gripped for months by worries about what Brexit, or a British exit from the European Union, would mean for Europe's stability.

"Obviously, there will be a large spill-over effects across all global economies if the "Leave" vote wins. Not only will the UK go into recession, Europe will follow suit," was the gloomy prediction of Matt Sherwood, head of investment strategy at fund manager Perpetual in Sydney.

Investors duly stampeded to sovereign bonds, with U.S. 10-year Treasury futures TYc1 jumping over 2 points in an extremely rare move for Asian hours.

Yields on the cash note US10YT=RR fell 24 basis points to 1.49 percent, the steepest one-day drop since 2009 and the lowest yield since 2012.

The rally did not extend to UK bonds, however, as ratings agency Standard and Poor's has warned it would likely downgrade the country's triple A rating if it left the EU.

Yields on 10-year gilts were indicated up 20 basis points at around 1.57 percent GB10YT=TWEB, meaning higher borrowing costs for a UK government already struggling with a large budget deficit. Standard and Poor's has said it will strip the UK of its triple A credit rating.

Across the Atlantic, investors were pricing in even less chance of another hike in U.S. interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening.

"It adds weight to the camp that the Fed would be on hold. A July (hike) is definitely off the table," Mike Baele, managing director with the private client reserve group at U.S. Bank in Portland, Oregon.

Fed funds futures <0> were even toying with the chance that the next move could be a cut in U.S. rates.

Commodities likewise swung lower as a Brexit would be seen as a major threat to global growth. U.S. crude CLc1 shed $3.00 to $47.11 a barrel in erratic trade while Brent LCOc1 fell as much as 6 percent to $47.83 before clawing back to $48.18.

Industrial metal copper CMCU3 sank 3 percent but gold XAU= galloped more than 6 percent higher thanks to its perceived safe haven status. [GOL/]

Britain Votes To Leave EU, Unleashing Global Turmoil

By Guy Falconridge and Kate Holton
June 24, 2016

Britain has voted to leave the European Union, results from Thursday's referendum showed, a stunning repudiation of the nation's elites that deals the biggest blow to the European project of greater unity since World War Two.

Global financial markets plunged as complete results showed a near 52-48 percent split for leaving, on fears that the decision will hit investment in the world's 5th largest economy, threaten London's role as a global financial capital and foment uncertainty in the world's biggest trading bloc.

The pound suffered its biggest one-day fall in history, falling more than 10 percent against the dollar to hit levels last seen in 1985, while the euro slumped more than 3 percent.

“It’s a momentous day. It's an extraordinary event and the it will change the course of British history," said British Foreign Secretary Philip Hammond who had campaigned for a "Remain" vote.

The leader of the anti-EU UK Independence Party, Nigel Farage, hailed it as "independence day".

Quitting the EU could cost Britain access to the EU's trade barrier-free single market and mean it must seek new trade accords with countries around the world. President Barack Obama says it would be at the "back of a queue" for a U.S. pact.

The EU for its part will be economically and politically weakened, facing the departure not only of its most free-market proponent but also a member with a U.N. Security Council veto and powerful army. In one go, the bloc will lose around a sixth of its economic output.

The vote will initiate at least two years of divorce proceedings with the EU, the first exit by any member state. Prime Minister David Cameron is expected to notify his European counterparts within days.

Cameron had called the referendum in 2013 in a bid to head off pressure from local eurosceptics, including within his own party, and had led the campaign for a "Remain" vote.

His political future is now in doubt, with his Conservative Party rival Boris Johnson, the former London mayor who became the most recognizable face of the "leave" camp, now widely tipped to seek his job.

But Foreign Secretary Hammond said Cameron would stay on. "What the country needs now is a sense of continuity and stability," he said.

Futures trading predicted massive opening losses on share markets across Europe. Britain's FTSE futures and Germany's Dax futures fell about 9 percent. The euro zone's Euro Stoxx 50 futures sank more than 11 percent. Investors poured into safe-haven assets including gold, and the yen surged.

"We're in uncharted territory," an aide working in Cameron's office told reporters.

Yet there was euphoria among Britain's eurosceptic forces, claiming a victory over the political establishment, big business and foreign leaders including U.S. President Barack Obama who had urged Britain to stay in.

"Dare to dream that the dawn is breaking on an independent United Kingdom," said Nigel Farage, leader of the eurosceptic UK Independence Party. "This will be a victory for real people, a victory for ordinary people, a victory for decent people ... Let June 23 go down in our history as our independence day."

Asked if Cameron should resign, Farage said: "Immediately."

The United Kingdom itself now faces a threat to its survival, as Scotland voted 62 percent in favor of staying in the EU and is likely to press for a new referendum on whether to become independent after its 2014 vote to stay in the UK.

Scottish First Minister Nicola Sturgeon said Thursday's vote "makes clear that the people of Scotland see their future as part of the European Union". Northern Ireland's largest Irish nationalist party, Sinn Fein, said the result intensified the case for a vote on whether to quit the United Kingdom.

European politicians reacted with shock. "Please tell me I'm still sleeping and this is all just a bad nightmare!" former Finnish Prime Minister Alexander Stubb tweeted.

The world's biggest trading bloc could even face an existential crisis as surging populist and anti-immigrant movements across the continent issue their own calls to quit. Far-right leaders in France and the Netherlands immediately demanded referendums of their own.

French National Front leader Marine Le Pen declared "Victory for freedom!". Dutch far right leader Geert Wilders said: “We want be in charge of our own country, our own money, our own borders, and our own immigration policy."


Britain, which joined the then European Economic Community (EEC) in 1973, has always been an ambivalent member. A firm supporter of free trade, tearing down internal economic barriers and expanding the EU to take in ex-communist eastern states, it opted out of joining the euro single currency or the Schengen border-free zone.

Cameron's ruling Conservatives in particular have risked being torn apart by euroscepticism for generations.

World leaders including Obama, Chinese President Xi Jinping, German Chancellor Angela Merkel, NATO and Commonwealth governments had all urged a "Remain" vote, saying Britain would be stronger and more influential in the EU than outside.

The four-month campaign was among the divisive ever waged in Britain, with accusations of lying and scare-mongering on both sides and rows on immigration which critics said at times unleashed overt racism.

It also revealed deeper splits in British society, with the pro-Brexit side drawing support from millions of voters who felt left behind by globalization and believed they saw no benefits from Britain's ethnic diversity and free-market economy.

A pro-EU member of parliament was stabbed and shot to death in the street a week ago by an attacker who later told a court his name was "Death to traitors, freedom for Britain".

Older voters backed Brexit; the young mainly wanted to stay in.

But in the end, concerns over uncontrolled immigration, loss of sovereignty and remote rule from Brussels appear to have trumped almost unanimous warnings of the economic perils of going it alone.

"People are concerned about how they have been treated with austerity and how their wages have been frozen for about seven years," said John McDonnell, finance spokesman for the opposition Labour Party, which had favored a Remain vote.

"A lot of people's grievances have come out and we have got to start listening to them."

EU Officials Gather

The Bank of England said it would take all necessary steps to secure monetary and financial stability. Global policymakers also prepared for action to stabilize markets, with Japanese Finance Minister Taro Aso promising to "respond as needed" in the currency market.

EU affairs ministers and ambassadors from member states gather in Luxembourg by 10 a.m. (0800 GMT) for previously-scheduled talks that will provide the first chance for many to react. A regular EU summit has been pushed back to next Tuesday and Wednesday, when Cameron may trigger Article 50 of the EU's treaty, the legal basis for a country to leave, setting in motion two years of divorce negotiations.

Even less clear at this stage is what sort of relationship Britain will seek to negotiate with the EU once it has left.

To retain access to the single market, vital for its giant financial services sector, London would have to adopt all EU regulation without having a say in its shaping, and pay a substantial contribution to Brussels coffers for market access, as Norway and Switzerland do.

EU officials have said UK-based banks and financial firms would lose automatic "passport" access to sell services across Europe if Britain ceased to apply the EU principles of free movement of goods, capital, services and people.

Aside from trade, huge questions now face the millions of British expatriates who live freely elsewhere in the bloc and enjoy equal access to health and other benefits, as well as millions of EU citizens who live and work in Britain.

Article Link to Reuters:

Hillaryism: A Tired Defense Of The Status Quo

Even her platitudes are more inspiring than her status quo policies.

By Charles Krauthammer
The National Review
June 24, 2016

“I believe in an America always moving toward the future.”

— Hillary Clinton, June 21

This was not the most important line in Clinton’s Ohio economic-policy speech, only the most amazing. Surely there cannot be a more vacuous, meaningless piece of political rhetoric. Every terrestrial entity from nematodes to the United States of America moves forward into the future quite on its own, thank you. Where else is there to go?

To be fair, however, spouting emptiness is tempting when you have the impossible task of running as the de facto incumbent in a ragingly “change” year. Clinton is trapped by circumstance. She’s the status quo candidate, Barack Obama’s heir, running essentially on more of the same when, after two terms and glaring failures both at home and abroad, Americans are hardly clamoring for four more years.

Historically speaking, they almost invariably do not. Which is why for the last 60 years, with only one exception, whenever one party has held the White House for two terms, it’s been unceremoniously turfed out. (The one exception: 1988, when Ronald Reagan was rewarded with a third term to be served by George H. W. Bush.)

How little does Clinton have to offer? In her recent speeches, amid paragraph upon paragraph of attacks on Donald Trump, she lists the usual “investments” in clean energy and small business, in school construction and the power grid, and of course more infrastructure.

That’s about as tired a ​cliché as taking the country into the future. Ever heard a candidate come out against infrastructure? Even Trump waxes poetic about the roads and bridges he will rebuild, plus erecting that beautiful wall.

Haven’t we been here before? All those shovel-ready infrastructure projects to be funded by Obama’s $830 billion stimulus? Where did the money go? Yet the one area of agreement among all candidates of all parties is that our infrastructure is crumbling still.

Defending the status quo today is a thankless undertaking. It nearly cost Clinton the Democratic nomination. Bernie Sanders campaigned loudly and convincingly against the baleful consequences of the Obama years — stagnant wages, income inequality, and a squeezing of the middle class. Clinton was forced to echo those charges while simultaneously defending the president and policies that brought on the miseries.

Not easy to do. She is left, therefore, with a pared and pinched rationale for her candidacy. She promises no fundamental change, no relief from the new normal of slow growth, low productivity, and economic stagnation. Instead, she offers government as remediator, as gap-filler. Hillaryism steps in to alleviate the consequences of what it cannot change with a patchwork of subsidies, handouts, and small-ball initiatives.

Hence the $30 billion she proposes to soften the blow for the coal miners she will put out of business. Hence her cure for stagnant wages. Employers are reluctant to give you a wage hike in an economy growing at 1 percent. So she will give it to you instead by decreeing from Washington a huge increase in the minimum wage.

Hillaryism embodies the essence of modern liberalism. Having reached the limits of a welfare state grown increasingly sclerotic, bureaucratic, and dysfunctional, the mission of modern liberalism is to patch the fraying safety net with yet more programs and entitlements.

It reflexively rejects structural reform. (That’s the project of Paul Ryan and his Reformicons.) The triangulating Bill Clinton was open to structural change, most notably in his 1996 welfare reform. Hillaryism is not.

She is offering herself as safety-net patcher. A worthy endeavor, perhaps, but, compared with the magic promised first by Sanders, now by Trump, hardly scintillating. Hence her campaign strategy: platitudes (the future), programs (a dozen for every constituency), and a heavy dose of negativity. Her speeches go through the motions on “vision,” while relentlessly attacking Trump as radical, extreme, and dangerous.

Her line of argument is quite straightforward: I’m the devil you know — experienced, if flawed; safe, if devious; reliable, if totally uninspired. I give you steady incrementalism. Meanwhile, the other guy is absurdly risky. His policies on trade, immigration, and national security threaten trade wars, social unrest, and alienation from friends and allies abroad.

The only thing missing from the Clinton campaign thus far is the nuclear option. Lyndon Johnson charged that Barry Goldwater was going to blow up the world. Literally. Johnson’s “Daisy” commercial counts down to a mushroom cloud.

Somewhere in the bowels of Clinton headquarters, a smart young thing is working on a modern version. Look for it on a TV near you.

Article Link to The National Review:

U.K. Faces Long Tussle Over Departure From European Union

‘Brexit’ vote spurs decisions about how to separate from the bloc

By Jason Douglas
The Wall Street Journal
June 24, 2016

LONDON—The U.K. and the European Union now must navigate an unprecedented separation while trying to prevent political and economic turmoil.

British broadcasters forecast a vote to exit from the EU. The result marks the beginning of the end for the U.K.’s 43-year involvement in European political and economic integration.

The vote isn’t legally binding, so Parliament now must pass laws to make Britain’s exit a reality.

The vote for Britain’s exit, or Brexit, from the EU will unleash a yearslong, highly bureaucratic tussle over how to actually achieve that. There is no clear road map. The vote marks the first departure from the modern-day EU, though Greenland in 1985 pulled out of a forerunner of the bloc, the European Economic Community.

In the U.K., the result is likely to have immediate repercussions for Prime Minister David Cameron, who campaigned to remain in the EU and who therefore suffered a bruising defeat.

Mr. Cameron is due to have his first post-referendum meeting with other EU leaders next week in Brussels at a European Council gathering scheduled for Tuesday and Wednesday.

Among Britain’s next steps will be determining when to start the process of severing its ties to Europe. Under Article 50 of the EU’s Lisbon Treaty, a member can give notice of its intention to leave, opening a two-year window for negotiating terms of withdrawal, meaning the U.K. technically remains a member until its formal departure. The time period can also be extended.

The government hasn’t spelled out exactly when it would seek to start the clock ticking. Some senior officials, including Mr. Cameron, have said they would enact Article 50 rapidly, however some supporters of Britain’s exit have said the U.K. wouldn’t need to rush.

One of the thorniest tasks will be to hammer out a trade deal between the U.K. and the EU’s remaining 27 members. It isn’t clear what access a post-EU U.K. would have to the bloc’s vast single market for goods and services, or what terms the EU would demand in return.

Pro-Brexit campaigners offered differing views during the campaign over what shape any new deal might take, citing EU arrangements governing trade with Norway, Switzerland and Albania. The terms of access to the EU’s market could be critical for the U.K.’s economic prospects.

Myriad other challenges face negotiators. Opposition to the free movement of EU citizens was one of the driving forces of the pro-Brexit camp. A British exit raises questions about the immigration status of current and future EU workers in Britain, as well as of the more than 1 million Britons living elsewhere in the EU.

The vote to leave also raises questions about the future shape of the U.K. itself. The debate underscored a divergence in public opinion between English voters and their often more pro-EU counterparts in Scotland, where nationalists harbor ambitions for a rerun of the independence vote they lost in 2014. Nationalist leaders in Scotland sent a strong signal before Thursday’s vote that they would push again for secession if Britain chose to leave the EU.

The result is expected to trigger a slide in the pound and a selloff in stocks, said Yianos Kontopoulos, a strategist at UBS Group AG. Both had been gaining in the days ahead of the vote in anticipation of a win for the pro-EU camp.

The world’s major central banks, including the Federal Reserve, the European Central Bank and the Bank of England, have signaled their readiness to step in and calm any turmoil in financial markets and, if necessary, make cash available in a variety of currencies to any banks that face a funding squeeze.

BOE Gov. Mark Carney has said the central bank will need to judge carefully whether to cut interest rates to support the U.K. economy should growth falter, or to lift borrowing costs to restrain inflation should the pound fall sharply.

Article Link to the Wall Street Journal:

The Myth Of A Tripartite Iraq

Although it is often claimed that a federal state with an autonomous region for Sunnis, Shiites and Kurds would stabilize Iraq, this proposition has little bearing to the realities on the ground.

June 24, 2016

Since the overthrow of Saddam Hussein in 2003 and breakdown of the Iraqi state, ethno-sectarian partition has become a popular political mantra. The assumption is that a federal state based on three autonomous regions — Sunni Arab, Shiite Arab and Kurd — is the most realistic way to stabilize Iraq and keep its borders intact. This claim has revived alongside the devastation and communal distrust created by the Islamic State (IS) and the territorial, demographic and political changes resulting from the campaign to counter IS.

The problem is that a tripartite Iraq has little bearing to realities on the ground, particularly in a post-IS context. Sunni Arab, Shiite Arab and Kurdish communities may be religiously and ethnically distinct and concentrated in particular regions, but they have also been dispersed across territories since the IS onslaught and are deeply fragmented. Internal boundaries and the uneven distribution of resources remain disputed between and within groups, creating additional challenges to reordering borders along clear ethno-sectarian fault lines. Instead of three self-sustaining regions, Iraq has become an amalgam of hyper-localized entities seeking self-rule and self-protection, while remaining dependent on Baghdad and prone to proxy conflicts.

A deeper look at Iraq’s three main communities reveals the complexities of reordering internal boundaries along ethno-sectarian lines. The Kurds may have gained extensive territories in the anti-IS campaign; however, their de facto borders have been drawn in blood and not through negotiation. Key Sunni Arab groups that largely populate the disputed areas, as well as Yazidis and Assyrians, regard these territories as their own, and demand some form of autonomy. Some seek integration into the Kurdistan Region while others want to remain tied to Baghdad. None want to see strong regions emerge alongside their own borders.

Among the Kurds, divisions run deep over claims to territories and their resources. Although the Kurdistan Regional Government (KRG) has gained de facto control over parts of Kirkuk and its oil fields and considers these territories an essential part of the Kurdistan Region, the Kirkuk governor, a Kurd from the Patriotic Union of Kurdistan (PUK), is calling for an autonomous region that may or may not be tied to the KRG. In the disputed area of Sinjar, the potential for conflict has emerged between Massoud Barzani’s Kurdistan Democratic Party (KDP) and groups affiliated with the Kurdistan Workers Party (PKK) that are present in the area, including the People’s Protection Units and some Yazidi forces. Underpinning these tensions are disagreements over KRG political priorities. While the KDP presses for an immediate referendum for Kurdish independence, other groups such as the PUK and Gorran focus on institution-building and greater decentralization within the region.

A single Sunni Arab region is even less likely to come to fruition. Iraq’s Sunni Arab community, which has profound grievances against the Baghdad government, is deeply fragmented and without a common leader or political agenda. Except for former Ninevah Gov. Atheel al-Nujaifi, who seeks a distinct Sunni Arab entity in Ninevah, most other Sunni Arab groups demand different forms of self-rule within existing or newly created provinces to reflect post-IS realities. These demands affirm their ongoing distrust of Baghdad, as well as fear of retaliation by Shiite, Kurdish and other Sunni Arab tribal groups in IS-liberated territories. Intracommunal distrust coexists with Sunni Arabs’ sense of Iraqi nationalism and their commitment to Iraq’s territorial integrity.

Nor do Shiite Arab communities seek their own Shiite region. To be sure, Iraq’s southern provinces continue to challenge Baghdad’s authority. People living in Basra insist on greater control of their oil resources and revenues and want privileges similar to what the KRG has enjoyed in Iraq since 2003. The Shiite religious establishment, or marja'iyya, also protects Shiite communities and has important sway over southern Iraq, reinforcing a distinct sense of Shiite identity and regionalism.

Still, Shiite Arabs, who comprise about 60% of Iraq’s population, are deeply fragmented. The political chaos in Baghdad is largely driven by competing Shiite power centers tied to local religious and political leaders, some of whom are influenced by Iran and others driven by Iraqi nationalism. The marja’iyya also continues to play an important role in bridging sectarian divisions at the societal level in an effort to overcome Sunni-Shiite Arab fractures.

The hyperfragmentation of the Iraqi state and society leads to fundamentally different challenges to stabilization than does a tripartite end-state. Competing groups are not only seeking greater self-rule, but are engaging with regional actors, namely Turkey, Iran and the Gulf states, to advance their political agendas and economic interests — while they also remain legally and financially dependent on Baghdad. These dynamics are reinforcing fragmentation, further hindering reconciliation and encouraging proxy conflicts and regional tensions.

Under these conditions, stabilization efforts should focus on strengthening state institutions and determining how the various component parts can live together. They should prioritize territorial federalism and decentralization, particularly by enhancing local institutions and the capabilities of provincial and regional administrations. This effort may also require creating new provinces and districts to reflect territorial and demographic shifts and the deep distrust that has emerged within communities. At a minimum, it will demand new revenue-sharing, development and security arrangements that empower local leaders in coordination with Baghdad, and which encourage the necessary deal-making across communities.

Article Link to Al-Monitor: