Monday, June 27, 2016

Key Energy -- Stock Symbol #KEG -- Is an Intraday Buy @ $.206; +/- .0125

Today's Stock In Play Is Vista Gold Corp. -- (Symbol #VGZ)

Monday, June 27, Morning Global Market Roundup: Sterling, Asian Stocks Languish In Brexit Hangover

By Hideyuki Sano and Nichola Saminather
June 27, 2016

Asian stocks fell and the British pound tumbled more than 2 percent on Monday as markets grappled with deep uncertainty sparked by Britain's decision to leave the European Union.

European markets look set for a bleak open, with financial spreadbetter CMC Markets expecting Britain's FTSE 100 .FTSE to fall 2.7 percent, and Germany's DAX .GDAXI to start the day down 2 percent.

Sentiment remained weak even as the volatility seen earlier in the session receded, but it was a far cry from the turmoil seen on Friday when the shock of Britain's exit vote drove global stocks to their biggest decline in nearly five years.

"Things are so uncertain that investors still do not have a clear idea how much of their risk assets they need to sell," said Hiroko Iwaki, senior foreign bond strategist at Mizuho Securities.

"But it is safe to assume investors are not yet done with all the selling they need to. I wouldn't be surprised to see another 10 percent fall in share prices," she added.

Among many questions Brexit triggered are just how much UK and European economies will slow, how the EU and Britain will negotiate their new relationship, and what European leaders will do to shore up the crumbling union.

U.S. S&P mini futures ESc1, the world's most traded stock futures, were flat at 2,018.20, erasing earlier declines, but hovered near Friday's 3-1/2 month low of 1,999.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS shrank losses to 0.3 percent. Companies with UK exposure in particular came under pressure.

Financial shares led declines in Australia and Hong Kong with the financial sector seen the among worst hit by Brexit if the City of London's investment products and services lose their prized "EU passports" allowing them access to the single market.

"We think Brexit could just be the first surprise in a re-calibration of the world away from globalization towards more inward-looking policymaking," Ajay Singh Kapur, equity strategist at Bank of America Merrill Lynch in Hong Kong, wrote in a note.

"Brexit has now possibly opened up more uncertainty about the European Union project, and the already beaten down Asian and emerging markets equity markets could receive asset allocation flows from Europe," he added.

Chinese shares extended gains, with the CSI 300 index .CSI300 and the Shanghai Composite .SSEC both up about 1.2 percent. Hong Kong, more vulnerable to global swings, slid 0.4 percent.

Japan's Nikkei .N225 also raced ahead to close up 2.4 percent, a partial rebound after Friday's hefty 7.9 percent fall. Japanese stocks were helped by stronger warnings from Japanese officials that they may intervene in currency markets to stabilize the yen.

Still, the safe-haven yen JPY= strengthened 0.3 percent to 101.89 per dollar.

The dollar index .DXY, which tracks the greenback against six major peers, advanced 0.6 percent to 95.987, remaining near its three-month high of 96.703 touched on Friday.

For developing economies, "the main risk is that the U.S. dollar strengthens from here and remains strong, which would sap emerging markets of liquidity via the trade and capital accounts, and hurt the pricing environment," Citi Strategist Markus Rosgen wrote in a note.

"A stronger U.S. dollar would also bring back fears of potential emerging market currency devaluations, which would not help the asset class."

The British pound fell 1.8 percent to $1.3432 GBP=D4, still some distance from the 31-year low of $1.3228 touched during Friday's wild trade.

The euro EUR= also came under further pressure, falling 0.6 percent against the dollar, amid investor concern that Brexit could feed the anti-establishment mood in Europe and even stoke talk of disintegration of the union.

"(There will be) sell-off in the euro as talk of other exit referenda builds," said Jerome Booth, chairman of New Sparta Asset Management in London.

"This sell-off will be more profound and long-lasting and will be not just against the dollar and yen but also against the pound. It will also raise fears of significant loss of value for holders of Euro-zone government bonds."

The euro fell to $1.1050, edging closer to Friday's 3-1/2-month low of $1.0912.

The euro's weakness helped to push the Chinese yuan to its weakest level against the dollar since December 2010 CNY=CFXS on Monday. It was last trading at 6.6389 per dollar after opening at 6.6360 per dollar, compared with the 5 1/2-year low midpoint level of 6.6375 set by the central bank, and after touching an intraday low of 6.6469.

But in a sign Britain's shock decision to leave the European Union may be encouraging Europeans to seek the safety of the status quo, support for Spain's conservative People's Party (PP) surged in Sunday's general election.

Oil prices reversed earlier losses to trade higher, making up some of the ground lost on Friday. International benchmark Brent futures LCOc1, which lost 4.9 percent on Friday, rose 0.5 percent to $48.65 per barrel. U.S. crude CLc1 edged up 0.1 percent to $47.70, after a 4.9 percent loss on Friday.

Demand for safe haven assets such as government debt and precious metals remained strong.

The 10-year U.S. debt yield dropped to 1.5105 percent US10YT=RR. On Friday, it fell as low as 1.406 percent, near its record low of 1.381 percent marked in July 2012.

U.S. interest rate futures have completely priced out any chance of a rate hike by the Federal Reserve this year and are pricing in less than 50 percent chance of a rate hike even by the end of 2017.

Gold rose 0.8 percent to $1,326.44 per ounce XAU=.

Article Link to Reuters:

Oil Prices Stabilize After Brexit Vote, But Refined Products Glut Looms

By Henning Gloystein
June 27, 2016

Oil prices stabilized on Monday as market participants better absorbed the shock of last week's vote in Great Britain to leave the European Union and recognized the referendum would have little effect on global fuel demand.

Brent crude futures were trading at $48.76 a barrel by 0650 GMT on Monday, up 35 cents from their last settlement.

U.S. crude was up 18 cents at $47.81 a barrel.

Both crude benchmarks had fallen around 5 percent on Friday amid plunging global financial markets as results from a referendum defied bookmakers' odds to show a 52 percent to 48 percent victory for the campaign to leave a bloc Britain joined more than 40 years ago.

But oil stabilized on Monday as analysts said that Britain's EU exit would have very little impact on physical oil trading.

"If we assume a 2 percent drop in UK GDP in response to the exit vote, which is on the high end of our economists' estimates, then UK oil demand would likely be reduced by 1 percent or 16,000 barrels per day, which is a 0.016 percent hit to global demand. This is extremely small on any measure."" said Goldman Sachs.

Of more concern to the market is a building refined products glut, especially in Asia.

"For near term oil, we remain most concerned about product oversupply, China demand, the macro outlook, and the likely return of production," Morgan Stanley said in a note to clients.

Chinese refiners have responded to the Asian oil products glut by exporting record amounts of gasoline and diesel fuel into regional markets, eroding refinery profit margins and swelling storage.

As a result, analysts said there is a possibility that refiners dial back production and curb orders for their main feedstock crude oil, potentially weighing on prices.

Despite this, Morgan Stanley added that "the medium term trend towards oil market rebalancing appears in place, barring a recession." This implies that oil prices would likely remain stable or rise as a supply overhang that pulled down prices by as much as 70 percent between 2014 and early 2016 is gradually brought down, bringing production back in line with consumption.

In shipping, Panama opened the long-delayed $5.2 billion expansion of its shipping canal connecting the Atlantic and the Pacific oceans on Sunday, but the facilities are still too small to handle oil super-tankers like Very Large Crude Carriers (VLCC).

Article Link to Reuters:

To Brexit or Regrexit? A Dis-United Kingdom Ponders Turmoil Of EU Divorce

By Guy Faulconbridge
June 27, 2016

To leave, or not to leave: that is the question. Still.

After Britain's historic vote to leave the European Union, there is no indication that a so-called Brexit will happen soon. It maybe never will.

Prime Minister David Cameron, who is resigning, has said he will not take the formal step to an EU divorce on the grounds that his successor should. Because the referendum is not legally-binding, some politicians are suggesting a parliament vote before formally triggering Brexit.

A petition on the UK government's website on holding a second referendum has gained more than 3 million signatories in just two days.

European leaders, facing the biggest threat to European unity since World War Two, are divided over how swiftly divorce talks should start. Paris wants haste and German Chancellor Angela Merkel is urging patience. European Commission President Jean-Claude Juncker said he wanted to "start immediately".

And on Sunday, Scotland's leader said Scotland may veto Brexit altogether. Under devolution rules, the parliaments of Scotland, Northern Ireland and Wales are required to consent to any EU divorce, according to a report by the House of Lords.

Most British politicians agree such a decisive 52-48 win for Leave in the referendum means a divorce must happen. Anything less would be a slap in the face of democracy.

"The will of the British people is an instruction that must be delivered," a choking Cameron said in his resignation speech, which marked the most tumultuous end to a British premiership since Anthony Eden resigned in 1957 after the Suez crisis.

Still, the upswell of chatter - #regrexit is trending big on twitter - over whether Britain might be able to reconsider speaks to the disbelief gripping this continent in the wake of a vote that has unleashed financial and political mayhem.

Sterling has plunged, and Britain's political parties are both crippled. Cameron is a lameduck leader, and the main opposition Labour party on Sunday attempted a coup against its leader, with nine top officials resigning.

"The kaleidoscope has been shaken up not just in terms of our relationship with the EU but in terms of who runs our parties, who governs the country and what the country is made up of," said Anand Menon, Professor of European Politics and Foreign Affairs at King's College London.

"It is very hard to see where the pieces are."

Article 50

The law provisioning an EU member country's exit from the union is Article 50 of the Lisbon Treaty that is effectively the EU's constitution. It has never been invoked before.

Before the vote, Cameron had said Article 50 would be triggered straight away if Britain voted to leave. Over the weekend, several EU officials also said the UK needed to formally split right away - possibly at a Tuesday EU meeting.

But officials of the Leave campaign - including former London mayor Boris Johnson - are stepping on the brakes. They say they want to negotiate Britain's post-Brexit relationship with the EU before formally pulling the trigger to divorce.

European officials and observers say such a deal is unlikely, especially considering the thorny issues involved.

For example, it is unlikely that the EU would grant Britain access to the single market - key to allowing Britain trade goods and services in the EU - without London accepting the free movement of EU workers. But the biggest issue for those who voted to leave the bloc was limits on immigration - something the Leave campaigners promised.

Divided UK

On Sunday, a petition to call for a second referendum was gaining supporters, reaching 3.3 million signatories by the afternoon. David Lammy, a lawmaker for the opposition Labour Party, said it was within parliament's powers to call a second referendum and urged that it be done.

Perhaps the most vocal resistance to a British exit is coming from Scotland.

Scotland, a nation of five million people, voted to stay in the EU by 62 to 38 percent, compared to the 54 percent in England who voted to leave.

Under the United Kingdom's complex arrangements to devolve some powers to Scotland, Wales and Northern Ireland, legislation generated in London to set off an EU divorce would have to gain consent from the three devolved parliaments, according to a report by the House of Lords' European Union Committee.

Scottish First Minister Nicola Sturgeon told the BBC on Sunday that she would consider urging the Scottish parliament to block such a motion. It is not clear, however, whether such a scenario would ever materialize or be binding. Sturgeon's spokesman later said that the British government might not seek consent in the first place.

Moreover, Sturgeon is simply laying out the groundwork for a new referendum on Scottish independence from the United Kingdom --something the first minister said was "highly likely."


While there is no precedent for Article 50, the House of Lords has discussed how any Brexit would work. In May, it published a report after consultations with legal experts.

In the report, Derrick Wyatt, one of the professors involved, said that while it would be politically difficult, the law allows the UK to change its mind after invoking Article 50.

"In law, the UK could change its mind before withdrawal from the EU and decide to stay in after all," said Wyatt.

Article Link to Reuters:

Experts: Donald Trump Is Lying About His Fundraising Haul

After releasing fundraising reports that were anemic at best, Donald Trump’s campaign announced in one single email blast he had raised at least $3.3 million. If that figure seems impossible, that’s because it is.

By Tim Mak
The Daily Beast
June 27, 2017

If it only took one email for Donald Trump to raise more than $3.3 million, just think of the possibilities for the future of his campaign.

If it was true. Which it’s probably not.

Donald Trump’s fundraising operation has been riddled with rookie errors—it’s been unsophisticated, untested and very small throughout his presidential bid, leading digital marketing experts to question whether it would be possible to actually raise the extraordinary figures he claims to have raised in a single fundraising email he sent last week.

“Throughout the entire election process, Trump has has the weakest effort in terms sheer list size, the frequency of sending and the number of unique subject lines, which is an indicator of… sophistication. He really is vastly outgunned by political opponents on the Republican and Democratic sides,” said Jordan Cohen, the Chief Marketing Officer at Fluent, an advertising technology company that works with campaigns on both sides of the aisle.

The presumptive Republican nominee’s campaign was in free-fall last week when their financial disclosures showed they had just $1.3 million on hand at the beginning of the month, compared to Hillary Clinton’s $42 million.

Trump’s aides scrambled to right the ship, arguing within two days of the public disclosures that the businessman had received a miraculous infusion of donations to his campaign.

“We just started our online campaign. Online mailing [Tuesday] did over $3 million. Donald, in an unprecedented move, agreed to match the first $2 million personally that came in. So we did over $5 million online yesterday, and we’re just starting the effort,” national finance chairman Steve Mnuchin said in an interview with the Fox Business Network.

Meanwhile, Trump spokesperson Hope Hicks told marketing industry publication Advertising Age that the Trump campaign raised “$3.3 million on Tuesday and $3.4 million” on Thursday.

If those figures sound fantastical, it’s because they’re likely to be bogus.

Using a very sophisticated digital marketing operation, the 2012 Obama campaign’s most successful appeal for donations, with the subject line ‘I will be outspent,’ brought in $2.5 million.

And of course, who can forget when Trump misled the public about raising millions of dollars for veterans charities—forking over the cash only when called out through numerous media investigations.

Now digital marketing experts are viewing Trump’s current claims with deep skepticism.

“It’s just not plausible for Trump to have raised what he claims online from one email,” said Julia Rosen, the Director of Marketing at ActBlue, a progressive firm. “The Trump campaign has failed to do the basic digital organizing work, like collecting email addresses at every available opportunity. That’s meant he has an exponentially smaller list, and because he hasn’t been running a modern engagement program with the few people that are on the list, it’s likely the average list member is not very responsive to the rare asks Trump makes of them.”

Neither Trump’s digital director, Brad Parscale, nor its spokesperson, Hope Hicks, returned requests for comment.

Return Path, which evaluates digital campaigns by studying 2.5 million email users who have given them permission to view their email habits, took an in-depth look at the Trump campaign’s online fundraising efforts. Its data, first reported on by Advertising Age and also shared with The Daily Beast, sheds light on how unlikely it is that Trump was able to raise the money he claims to have.

Trump’s campaign made an elementary mistake in its first digital solicitation for donations last Tuesday: it used a new domain,, rather than Spam filters determine what is junk mail and what isn’t in part by looking at whether an email domain has sent emails before.

Because Trump’s email solicitation was sent from a new domain, a lot of spam filters caught the campaign.

From a digital marketing perspective, it was a disaster: due to spam filters, an incredible 60 percent of Trump’s appeals never even made it to individual inboxes, per Return Path’s data.

“Most of the emails were delivered to the spam folder, which is out of sight and out of view for his subscriber. Of those that reached the inbox, not a lot of people opened the email,” Thomas Sather, senior director of research at Return Path, told The Daily Beast. Sather added that an industry standard was for 10 percent or less of email appeals to be delivered to spam.

Of those emails that made it through to inboxes, just 12 percent were opened. Six percent of those emails were deleted without having been read, according Return Path’s data.

Trump also has a very small fundraising list: until last week, he had not sent out a single appeal for donations, largely the result of having funded his own primary campaign. But this means that his operation is seriously undeveloped.

“They have a very, very small list, especially when you compare that to other candidates, even those who have dropped out of the race,” Sather said.

Return Path’s data shows that Ted Cruz, who is no longer even in the presidential race, had a donor list that was 3.7 times larger in May than Trump’s donor list is today. And when you compare Hillary Clinton’s approximate donor list size with Trump’s, you find that Clinton’s list is seven times larger (Return Path measures the relative size of donor lists, but does not estimate overall donor list size).

In addition to this, marketing firm eDataSource estimated at the beginning of June that Trump’s list size was 1.1 million, compared to 9.4 million for Clinton and 5.3 million for Bernie Sanders.

Trump’s digital effort is also relatively unsophisticated compared to campaigns launched by Obama’s campaign in the past, which is considered a gold standard for political digital marketing. The Obama campaign used complicated A/B testing methods, writing up various donor appeals and shooting them out to small subsegments of their donor lists. The most successful marketing emails were then blasted out to the whole list.

Obama’s fundraisers also used segmentation: different marked groups would receive different donor appeals: for example, an individual who has previously donated would get a different email than an individual who has never donated.

Return Path’s data indicates that the Trump campaign made no efforts at segmentation or A/B testing.

“Could Trump have raised money through other digital efforts? It’s possible but it would be much more expensive. He could have raised money through social advertisements or Google AdWords [program],” Sather said, but the net donations would be far less because this is very expensive to do. This would also be rather unorthodox: the Obama campaign did the vast majority of their fundraising through email, which keeps costs down.

Taryn Rosenkranz, the founder of progressive digital marketing firm New Blue Interactive, said it was possible that the Trump campaign had expanded its list by using the Republican National Committee’s donors.

But Sather told The Daily Beast that Return Path’s data “conclusively” showed that Trump had not used the RNC’s list.

“I just don’t see how you could [raise these amounts of money] with a list that hasn’t been cultivated,” Rosenkranz said. “From the existing email list he has, there’s very little chance that he could raise that money from that email list.”

However, Donald Trump is getting an enormous amount of exposure, even though he is not paying for it.

From the ten day period from June 10 to June 19, not a single Trump campaign advertisement appeared in the nation’s top 60 media markets. Despite this fact, surveys taken by the advertising technology company Fluent show that 48 percent of Americans believed they saw a Trump television ad over a similar timeframe.

The reason that Cohen thinks that the fundraising figures, however unlikely, may be possible is that “Donald Trump and his campaign have defied convention wisdom,” and his relatively small list is made up of “the most fiercely loyal, the most fanatically supportive.”

“I’m not in a position to say they’re lying. It is a huge number, but it is theoretically feasible,” Cohen said, however adding that on digital matters, “Trump has not really done anything, and has been on the record saying he doesn’t need to be data-driven.”

Other experts took a harder bottom line: Rosen said that Trump’s national finance chairman’s claim of $3.3 million in one day of fundraising through “online mailing” is just impossible.

“Trump’s email list is too small, not engaged properly and the campaign failed at some really basic practices when they sent the email,” she told The Daily Beast. “It’s yet another sign that Trump’s small unprofessional staff is hurting his ability to to run a modern political campaign.”

Article Link to The Daily Beast:

Markets Were Rational, But U.K. Voters Weren't

By Matthew A. Winkler
The Bloomberg View
June 27, 2016

It was 22 years ago this month when the U.S. was preparing for combat. North Korea's expanding nuclear weapons program prompted President Bill Clinton to order reinforcements. The administration was lining up votes in the U.N. Security Council to impose economic penalties on the Pyongyang government, which repeatedly denounced sanctions as a "declaration of war." Any investors could see what was coming. Right?

So how did markets correctly anticipate that this run-up to war would not lead to war? How did they foresee the outcomes of the Quebec sovereignty referendum of 1995, the euro crisis of 2010, the U.S. debt ceiling crisis of 2011, Scotland's vote on independence in 2014 and the Greek debt crisis of 2015? Or, if all that was so easy, how did markets fail to discern the probability of Britain voting last week to leave the EU?

This time was different. Unlike their elected officials, too many voters proved too proud to be rational. As much as an hour after the polls closed on Thursday, the pound had rallied to 1.50 from 1.48, consistent with the widespread expectation that the British people would accept the consensus view of domestic and international prime ministers and presidents, finance ministers, business leaders and economists and vote to remain in the EU. They expected the U.K. to support this outcome because it was the best outcome for the U.K. That was their mistake.

When the "leave" votes appeared to exceed "remain," markets lurched and wiped out billions of pounds, according to data compiled by Bloomberg. A lurch like that confirms that investors were surprised. Sterling plummeted a record 8.05 percent to a 31-year low.

The North Korea episode is among dozens of momentous events during the past 35 years when markets successfully calculated the odds of democratic governments finding a way to pursue peace and stability. Seoul's KOSPI Index plunged prior to President Clinton's escalated military preparedness on June 16 and rallied days before a diplomatic agreement was reached, outperforming the rest of Asia in 1994. Measured in U.S. dollars, South Korea's return was even greater, reflecting the strength of the won against all currencies.

The same prescience (or rationality) showed during Greece's last year. Doubts about the viability of the EU, the euro and Greece had persisted since the financial crisis 2007-8. The euro had declined about 13 percent against the dollar through the first five months of 2010, and predictions were widespread that the 16 countries sharing the euro were destined to fail as an economic entity, with breakup inevitable. By May 2012, the benchmark 10-year Greek bond was paying the equivalent of 30 cents on the dollar amid predictions the government would default.

Markets, which aren't ideological but do provide a daily reference of relative value, weren't buying it. The euro gained 9.4 percent in the second half of 2010 and advanced another 11.9 percent through 2015 when 19 countries accepted it as their national store of value. Last year, when another Greek government was back in the headlines reportedly on the verge of default and soon to exit the euro, the investor George Soros said Greece was going down the drain. During this time the yield on the benchmark Greek bond never got close to its 2012 low yield of 30 percent, instead fluctuating between 7 percent and 18 percent. Greek debt, protected by the shared European currency, proved to be the best investment globally from July through the end of 2015, Bloomberg data show.

Markets tend toward rationality even when elected officials are the ones threatening rash action. Throughout July 2011, the Republican-led Congress refused to raise the U.S. debt ceiling, putting the country on the brink of default. Investors were correct in assuming these lawmakers wouldn't deliver on their threat; the yield declined to 2.56 percent from 2.65 percent that month before dropping to 2.34 percent one year later. Since June 2011, investors received a total return of 18.7 percent from U.S. Treasury securities, when global sovereign debt delivered 7.1 percent, German bunds 1.8 percent and investment-grade corporate bonds 14.3 percent. Markets interpreted the Quebec referendum of 1995 and the similar one in Scotland no differently, anticipating outcomes that were rational.

But Britons' vote to leave the EU is unlike any other event in modern times. Investors didn't imagine a majority of voters choosing a result that proved unprecedented in its immediate and devastating impact on the British pound. The scope of this misjudgment, derived from a combination of complacency and wishful thinking, was revealed in minutes. While sterling suffered its biggest one-day decline since 1980 on June 24, the 8.05 percent loss was almost twice that of Sept. 16, 1992, the so-called Black Wednesday, when the Conservative government was forced to withdraw the pound from the European Exchange Rate Mechanism against a tide of speculation led by Soros. The toll of Thursday's vote on the pound was more than double any of the eight worst days since 1981, and its almost 13 percent reversal in less than a week dwarfed any of the previous currency debacles, according to data compiled by Bloomberg.

Britons' decision and the Korean crisis are bookends two decades apart during which financial markets proved most reliable as leading indicators. As the polls opened Thursday, the pound was the surest reflection of confidence that Britain would decide to remain within the EU. Sterling was the No. 2 best-performing currency among 31 actively traded currencies this year and its volatility had diminished the most of any currency from being the most treacherous a week earlier, according to Bloomberg data.

Investors still are in shock. Capitalism and free trade, which are inextricably linked to democracy in meeting the 21st-century challenges of globalization, urbanization and climate change, are under siege in Europe, the center from which international trade and markets illuminated the world. The words of Britain's Foreign Secretary Sir Edward Gray, spoken more than a century ago amid World War I, ring true today: "The lamps are going out all over Europe, we shall not see them lit again in our lifetime."

Article Link to the Bloomberg View:

The Progressive Case Against Elizabeth Warren For VP

Elizabeth Warren is a hero to many progressives—which is why she should not be Hillary Clinton’s running mate.

By Jay Michaelson
The Daily Beast
June 27, 2016

Elizabeth Warren is deservedly a hero to progressives who supported Bernie Sanders over Hillary Clinton. She is fearless, fierce, and focused on economic inequality, campaign finance, and the corruption of the 1%.

That’s exactly why she’d make a terrible choice for vice president. Here are five reasons.

1. It’s not just the economy, stupid.

As we saw in the Democratic primary, non-white voters are not primarily interested in the economic issues that were the bread and butter of the Sanders campaign. This should not be surprising. White supremacy has reared its ugly head in the Republican Party, every week brings another acquittal of a police officer brutalizing an African American suspect, and the supposedly post-racial Obama presidency has been anything but post-racist, from #oscarssowhite to #blacklivesmatter.

The 1% is the main villain of many white progressives, but not of most non-white Democratic voters. The problem with Senator Warren isn’t simply that she is a white woman like Hillary; it’s that her message and her experience are about economic issues.

That may motivate all my friends in Brooklyn, but it’s the wrong message to send to the people of color who delivered Clinton the presidential nomination. (Of course, many people of color voted for Bernie, but they are in the minority.) Progressives, whoever we supported in the primary, need to check our privilege and remember that others don’t see the world the way we do.

2. The (Small) Positives

Then there are the usual reasons.

Typically, vice presidential nominees add something to the ticket, either in terms of profile (e.g., Biden was strong on foreign policy where Obama was weak; Quayle was young where Bush Sr. was old) or in terms of states they can help carry.

What does Warren add? Her home state of Massachusetts is safely blue. Her demographics are identical. While her economic agenda will presumably motivate the Bernie base, the truth is that enough of that base is probably going to vote Democratic anyway, given Trump’s absolute odiousness. Some will peel off to Trump, Jill Stein, or Gary Johnson, but it’s hard to see a repeat of 2000 (when Florida’s Nader voters cost Al Gore the election) with an overt racist on the other side.

Those are not big enough positives. By contrast, Clinton can tack toward the center and govern with a larger mandate by picking Tim Kane, the senator from Virginia. With Julian Castro, the Hispanic head of Housing and Urban Development she can inspire Latino and black voter registration, and offer a powerful counterpoint to the build-a-wall-and-deport-them-all message of Trump. With Labor Secretary Tom Perez, she gets some of each: Warren’s progressive credentials, Castro’s Latino background, and Kaine’s gravitas.

And then there’s the cold, calculating part. Kaine could swing Virginia, and Castro could make even Texas competitive. (Remember, unless Republicans are successful in their voter suppression efforts, changing Demographics will likely turn Texas blue by 2024.) No such benefit with Warren (or Perez, for that matter).

However you slice it, Warren’s net benefits to the Clinton campaign are small. The negatives, however, are potentially large.

3. The Negatives

In addition to not adding enough, Warren could actually hurt Clinton in two ways.

First, it’s awful to admit, but as my colleague Michael Tomasky pointed out last month, an all-female ticket could alienate some Neanderthal male voters, particularly in swing states.

It’s not just the sex of the candidates; it’s also he kind of challenge they pose to masculinity. Clinton has spent two decades morphing from the strong (to chauvinists: shrill) feminist of her early years to an overly coached hybrid of strong-but-not-too-strong female political presence. As Jimmy Kimmel perfectly satirized in a hilarious sketch of manplaining to Hillary how to talk, one consequence of these decades of coaching is the candidate’s tendency to appear wooden and insincere. But it does make her more palatable to Middle America.

Warren, on the other hand, has been blissfully free from such constraints. Her constituents don’t mind that she’s a fierce, outspoken woman; on the contrary, many love it. I love it. But politics isn’t about convincing me; it’s about studying and empathizing with other people—in this case, scared white middle-class men who aren’t Trump’s hard core reactionary base but who might tip either way. It sucks, but it’s true that a Clinton-Warren ticket will cost some of their votes.

Just as white progressives need to think beyond their concerns and accept that people of color have different ones, so we also need to think beyond our comfort zones and imagine what it would be like to really be on the fence between Clinton and Trump. Thinking like that voter—however much we may dislike him—an all-powerful-female-liberal ticket is a huge liability.

Second, while again most of my personal Facebook feed is thrilled by the idea of Clinton saying F-You to her Wall Street backers, F-You is rarely a good fundraising pitch. True, Bernie was able to mount a transformative campaign on small donations. But will the Bernie Army really turn out for Hillary if she gave Wall Street the shaft and ran with Warren instead? At the very least, it’s a risky proposition. More likely, no.

Without a backup plan, a grand F-You gesture to Wall Street is like telling your boss to take this job and shove it, without anything else lined up. Once again, this sucks, but is there another way?

And it’s not just money; it’s votes, too. Clinton can pick up significant numbers of what used to be called ‘Rockefeller Republicans,’ folks who are basically small-government fiscal conservatives, but who find Trump’s race-baiting appalling. They, too, might be on the fence between the two candidates – and they, too, might be pushed over by a divisive (though, again, awesome) VP pick.

Simply put, if we like that pick too much, they probably won’t like her/him enough.

4. The Senate Balance

Even if Senator Warren’s positives and negatives evened out, progressives need her in the Senate. Were she to leave her seat, attaining a Democratic majority—or, dream of dreams, super-majority—becomes that much harder. Under Massachusetts law, the governor—in this case, Republican Charlie Baker—appoints a temporary replacement to fill a senate vacancy for the 145 to 160 days until a special election. If Senator Warren were to resign in November, that could conceivably swing the Senate for the first 100 days of the Clinton administration.

Senator Harry Reid and others have proposed some possible workarounds, such as an earlier resignation (a risky move, since Warren could be out of a job if Clinton loses) that would limit the damage.

But even if the workarounds work, there’s no guarantee that a Democrat would succeed Senator Warren in a special election. This is the state that elected Scott Brown, after all. Taking Elizabeth Warren out of the Senate decreases the chances of Democratic control of the Senate.

And given the shenanigans we’ve seen from Senate Republicans lately—such as ignoring their oath office and declining even to entertain a Supreme Court nomination—that’s no small matter. It’s yet another serious cost of a Warren VP candidacy.

5. Don’t Muzzle Elizabeth Warren!

Besides, let’s think from the left for a moment. Let’s assume that Hillary Clinton governs as a centrist, like her husband, especially on economic issues. A Vice President Warren would surely be bound by loyalty to not criticize her boss too much or too frequently. Yes, she would have the inside track to influence the president. But she would lose her existing platform as an independent who speaks truth to power.

In many ways, a Vice President Warren would be a gift to Wall Street. Keep your friends close and enemies closer, right? With Elizabeth Warren effectively quieted by the political responsibilities of her new job, progressives would lose perhaps their most eloquent and forceful voice on economic issues. It’s easy to imagine the Clinton administration sidelining the vice president if she became too nettlesome. Whereas if she remains in the Senate, she can call out President Clinton when she kowtows to Wall Street and can help define the progressive agenda for the future.

Even in the campaign, Warren as a Clinton supporter can hold Clinton accountable from the left in a way that Warren as a running mate could not. She doesn’t have to tow the party line. She can side with Bernie’s camp on key platform issues. She can say things that might be too unpopular, disagreeable, or radical for Clinton herself to approve.

Yes, as Veep, Warren could have an insider’s effect on policy. But do progressives really want her to be co-opted by a centrist administration?

Neither Julian Castro nor Tim Kaine nor Tom Perez is a perfect choice either. Castro is young and inexperienced (Trump could run Clinton’s anti-Obama wake-up-at-3am ads against him), Kaine moderate and uninspiring, Perez anathema to conservatives. But none of them carries the kind of negatives that Warren has, and each has different strong positives (what a contrast a Latino VP would make to a nativist, anti-immigrant ticket, for example) that make up for them.

So, yes to everything Elizabeth Warren stands for, and can stand for in the future. No to constraining all of that potential within a small, VP-candidate box. She will have more power outside of it.

Article Link to the Daily Beast:

Where In The World Was Trump?

June 27, 2016

Foreign trips are not unusual for presumptive presidential nominees. In 2008, Barack Obama went to Israel and Afghanistan before heading to Europe to receive rock-star-like adulation. In 2012, Mitt Romney went to Israel and London. So if Donald Trump had decided to go abroad to demonstrate his foreign policy chops, it might have been cited as evidence of a more professional and serious approach to the election. But that’s not what brought Trump to Scotland on Friday.

Trump was taking care of business, but not the business of running for president. He was promoting his golf courses.

We have become used to the unusual from Trump, but this was still an extraordinary decision. Trump’s campaign is still in a state of chaos, with Hillary Clinton killing him in fundraising and the GOP looking largely unprepared and outgunned in an election where the Democrats already start out with huge advantages. Yet Trump was taking valuable time out not to plan or to fundraise or to work on uniting a deeply divided party. He was seeking to prop up his private business interests.

I suppose that shouldn’t come as a surprise. He is the same man who directed about one-sixth of all the money that he spent on his campaign in May and $6 million since he started running to Trump-owned businesses. But even if no one expects Trump to act in a seemly manner, there is still something utterly bizarre about a candidate prioritizing personal moneymaking in the midst of a presidential campaign. If he was looking to do something to add weight to the claims of those who believe his candidacy is one big scam, he could not have done better than to have dragged the political press to his financially failing Scottish golf courses.

Of course, in one sense Trump’s timing couldn’t have been better, since he arrived in Scotland the day after Britain voted to leave the European Union. As our Noah Rothman noted on Friday, the notion that there is some sort of analogy between the English throwing off the yoke of Brussels and Trump’s protectionist and isolationist agenda is bogus. But his presence there launched a thousand commentaries about anti-establishment revolts and the notion of a revived sense of blood-and-soil politics triumphing over globalism.

What Trump said in Scotland again betrayed his utter ignorance of the world (his claim that everyone in Scotland was celebrating when in fact the Scottish had opposed Brexit) and his crass instincts that always revolve around the amount of profit he can make out of any situation (his statement that it would be to his benefit if the pound sterling crashed and that he would also find a way to make money off of these circumstances if it held steady).

He also added one more flip-flop to the already impressive list of examples of his “flexibility.” After months of standing by his determination to ban Muslim travel to the United States, he said that he would let in Scottish Muslims and only prohibit those from “terror countries.” If so, that’s a saner approach to national security. Since that may change tomorrow, too, it’s useless holding on to it as an indication that he is either wising up or actually has firm beliefs about anything other than his own self-aggrandizement. In that sense, his press spokesperson Hope Hicks’ claim that “nothing has changed” is true if by that she means that Trump still hasn’t a principled bone in his body.

We know none of this will bother his core fan base that won him the GOP nomination. But if his goal is to be elected president, he’s going to have to expand upon that by winning over mainstream Republicans and independents that are still disgusted by his antics. But the Scottish junket was more proof that he isn’t serious about actually winning the election.

If Politico’s survey of the members of the Republicans’ all-important rules committee is to be believed, there doesn’t appear to be any chance that they will revolt against Trump (and, it must be admitted, the voters) and allow delegates to vote their consciences at the convention. But if those delegates were paying attention to the latest news about the Trump circus, they got more proof that Trump is still prioritizing his personal brand and businesses and failing to use the most scarce resource until November—time—to build a campaign that can compete with the Clinton machine. That is an act of colossal irresponsibility and a demonstration that he views the GOP nomination as merely an asset to leverage his personal interests. It serves to justify any effort on their part to stop him.

If the Trump train isn’t stopped by some extraordinary coup de main in Cleveland, several months from now Republicans will have to ask why they let a disaster unfold rather than trying to stop it. The honest among them will have to admit they were just pawns in a grand con that led the cause of conservatism and the GOP into an electoral disaster that might have been averted. The rest can go golfing in Scotland while Hillary Clinton thanks the political gods for a venal opponent like Trump.

Article Link to Commentary:

Campaigns Gear Up For July Conventions

By Caitlin Huey-Burns
Real Clear Politics
June 27, 2016

The presidential campaigns this week enter a phase when they must balance new political developments with administrative priorities three weeks ahead of the party conventions.

The candidates will likely focus on digesting the implications of the United Kingdom’s vote to withdraw from the European Union for their respective audiences while making the logistical preparations for the conventions and the fall campaign.

For now, the candidates’ schedules are thin, as the campaigns will likely focus on fundraising, vetting vice presidential candidates, hiring additional staff, and planning programming for the conventions. This week, both candidates could have key moments.

Hillary Clinton will campaign with Massachusetts Sen. Elizabeth Warren in Cincinnati on Monday morning, part of the presumptive Democratic nominee’s showcasing of party talent and possible vice presidential contenders. It will be Warren’s first joint campaign appearance with Clinton, and her populist messages on the economy could have even more resonance among the party base, given the fallout of the U.K. vote, which strike at some similar economic themes.

Donald Trump has not yet released his campaign schedule for the week, but is returning from a trip to Scotland with potential momentum from current events. The presumptive GOP nominee drew parallels between the U.K.’s decision to break from the E.U. -- which he originally backed and called “a great thing” -- to his own themes in the election, including angst over immigration, globalization, and the economy, as well as foreign policy decisions that affect those issues.

Trump drew some ire for his trip abroad, which occurred at the same time as the U.K. vote only coincidentally, as he was there to promote his newly renovated golf resort and did not meet with any foreign leaders or officials, as is typical for a presidential campaign. Yet, the messages from across the pond were welcome for his message. This all comes as Trump’s campaign is in the middle of a significant reshuffling, having fired manager Corey Lewandowski last week amid controversies and poor fundraising numbers.

The presumptive nominee sought to turn a page on the campaign last week with a speech criticizing Clinton, but it remains to be seen whether the “on message” version of the candidate will survive. One key test of whether Trump has altered his tune will come at the next rally, which won’t likely include Teleprompters or prepared speeches.

The Republican’s campaign is also preparing for the convention, where Trump has said he will announce his running mate. The mystery surrounding the choice has been more about who would agree to run with him than about whom he might choose. Ex-campaign manager Lewandowski told CNN that Trump has narrowed his list to four.

The Clinton team meanwhile is busy vetting potential running mates, including Virginia Sen. Tim Kaine, Housing and Urban Development Secretary Julian Castro, and Warren. Thus far the campaign has dropped no hints as to when she will announce who’s joining her on the ticket.

Before campaigning with Warren on Monday, Clinton was scheduled to attend a fundraiser with the Cincinnati Mayor John Cranley Sunday night.

Fundraising has become a top priority for the Trump campaign and for the Republican National Committee. Chief strategist for the RNC, Sean Spicer, said on Twitter that the joint effort has raised $5 million online so far. Trump’s campaign has started to ramp up digital grassroots fundraising, an endeavor that many critics say should have been done much earlier to avoid the struggles it is now experiencing. The campaign’s recent filings reported just over $1 million in cash, raising questions about the candidate’s ability to run an organization befitting the presidency.

In a notable move, Trump announced that he had forgiven $50 million in personal loans to the campaign, meaning contributions by donors will directly pay for the campaign, and will not be used to repay the candidate. The move was a signal to donors reluctant to invest in a candidate who had not fully invested in himself. New fundraising efforts, including the absolution of the loans, won’t be confirmed until July 20, the next filing deadline.

Article Link to Real Clear Politics:

Russia And America: Destined For Conflict?

It's in the U.S. national interest to explore better relations with Russia from a position of strength.

The National Interest
June 27, 2016

THE NEXT American president will face the most serious challenge from Russia since the end of the Cold War or, for that matter, since the early 1980s, when the United States and Yuri Andropov’s Soviet Union actively confronted one another around the globe. Russia today is increasingly an angry, nationalist, elective monarchy, and while it is still open for business with America and its allies, its leaders often assume the worst about Western intentions and view the United States as the “main enemy”—indeed, a new poll finds that 72 percent of Russians consider the United States the country most hostile to Russia. Worse, Moscow has been prepared to put its money where its mouth is in proceeding with a massive military modernization. The Russian government is simultaneously tightening domestic political and police controls and seeking new alliances to balance pressures from the United States and its allies and partners.

It is important not to oversimplify this situation. It is not a reenactment of the Cold War; history rarely repeats itself so precisely. Vladimir Putin’s Russia is not a superpower and its top officials are realistic about their country’s military, geopolitical and economic limitations. Russia does not have a universal ideology predicated on the West as an enemy. In fact, Putin and his associates regularly profess interest in resuming cooperation with the United States and its allies—on terms acceptable to the Kremlin. The Russian government is eager to obtain foreign investment and access to Western technology, which requires normalcy in relations with the West.

We cannot be sure how Putin and his associates would respond if the United States and its allies were prepared to reshape their policy towards Russia by defining their interests more narrowly, being less categorical about Russian domestic practices, putting a premium on avoiding confrontation and, when possible, even engaging in cooperation with Russia. All that can be said at this point is that Russia’s trajectory is alarming, but probably not yet irreversible.

ONE REASON for avoiding a sense of inevitable confrontation with Russia is that Moscow’s truculence is primarily a function of what America does rather than who it is. To the extent that Russia has an ideology, it is an assertive nationalism that allows cooperation with any nation that does not challenge Russian geopolitical interests or its system of government. Russia thus maintains good relations with authoritarian countries like China and Qatar, and with democracies like India and Israel. In part because its leaders are pragmatic rather than messianic, Russia’s authoritarianism is still relatively soft and incorporates many democratic procedures including meaningful if not entirely free or fair elections, a judicial branch that is autonomous most of the time and a semi-independent media. Transitions to democracy in other countries are only a problem for Russia’s live-and-let-live foreign policy when the Kremlin sees them as either destabilizing (as in some cases in the Middle East) or anti-Russian (as in some cases in its immediate neighborhood).

While a U.S.-Russian conflict is not inevitable, Russia’s estrangement from the West after the Cold War probably stemmed from the unrealistic and contrasting expectations held on both sides. When Mikhail Gorbachev and his liberal allies like Foreign Minister Eduard Shevardnadze, Central Committee Secretary Alexander Yakovlev, and foreign-policy aide Anatoly Chernyaev began articulating and implementing Gorbachev’s “new thinking,” which emphasized universal human values at the expense of national interests, they assumed that the Soviet Union could cease being a global superpower, give up its system of alliances, rely increasingly on foreign economic assistance and still benefit from others’ deference to Moscow as a key player in world affairs. If Soviet leaders had consulted Russia’s own history, they would have realized how profoundly unrealistic their expectations were.

Sergei Witte, who became Russia’s first constitutionally appointed prime minister under Czar Nicholas II following the country’s humiliating defeat in the Russo-Japanese War, would have immediately foreseen what was to come. “It was not because of our culture or our bureaucratic church or our wealth and welfare that the world respected us,” Witte wrote.

[The world] respected our strengths, and when they saw to an exaggerated degree that we were not as strong as they thought, that Russia was "a colossus on clay legs," then the picture changed immediately, domestic and foreign enemies raised their heads, and the indifferent stopped paying attention to us.

Of course, the Soviet Union did not suffer a military defeat in the 1980s like the Russian Empire’s loss in 1905. Nor did the changes in Russian government, policy and philosophy follow a domestic rebellion; instead, they were imposed from the top by a leadership that decided it was on the wrong side of history. Notwithstanding the motives of Gorbachev and, later, President Boris Yeltsin, Western officials showed little gratitude for their roles in destroying the Soviet empire once it became clear that a Russia collapsing upon itself was unwilling to use force and had very little remaining economic leverage. Similarly, while most Russians not only counted on massive Western assistance but even thought of themselves as Western allies in destroying the USSR, most in the West, particularly in central Europe, determined that the time had finally come to act on historical grievances against Moscow or felt that a weak, corrupt and unstable Russia did not deserve to be taken seriously, much less accepted as an equal partner with the United States and the European Union.

The clash of expectations could not have been more consequential. Russia’s experiment with democracy went sour almost from the beginning, when the Clinton administration pressed Boris Yeltsin to accelerate radical and painful economic reforms. Masterminded by young, pro-Western economists who had neither experience operating within a democratic system nor compassion for ordinary citizens, these dramatic changes required authoritarian means precisely because they impoverished the vast majority of Russia’s population. The Clinton administration and other Western governments consistently told Yeltsin he had no choice but to stick with free-market reforms.

Neither Yeltsin’s de facto coup d’├ętat in 1993, which culminated in tanks shelling a Russian parliament elected under the same perestroika-era system that brought Yeltsin to power, nor the demonstrably fraudulent 1996 presidential elections diminished the Clinton team’s enthusiasm for nation building in Russia. As a power-hungry former Communist Party secretary, Yeltsin didn’t need much encouragement to continue on a course that consolidated and expanded his authority inside Russia. Nevertheless, he got all the encouragement and support he needed for an unholy bargain under which the Clinton administration willingly turned a blind eye to his transgressions at home while Yeltsin himself ensured that Russia would defer to U.S. foreign-policy preferences. Yeltsin increasingly relied on media manipulation, new constraints on the legislative branch through a revised constitution and growing power for domestic security agencies. When an ailing Yeltsin appointed a little-known former KGB officer and newly minted director of the Federal Security Service named Vladimir Putin as Russia’s prime minister, the more vigorous de facto successor had all the tools he needed to rule much more firmly.

When it became clear in early 1996 that Boris Yeltsin was extremely unpopular and had little chance of reelection, a coalition immediately emerged to prevent Communist leader Gennady Zyuganov from coming to power. It included new tycoons who benefited from Yeltsin’s corrupt privatization, the security services (whose authority and prestige Yeltsin restored) and the bulk of the media, much of which was owned and operated by Russia’s oligarchs expressly as an instrument of political influence. Russia’s media portrayed the unreformed Communists as a mortal threat to democracy that only Yeltsin’s reelection could avoid, ignoring the fact that Yeltsin’s opponents also included a democratic candidate: Grigory Yavlinsky from the generally pro-Western Yabloko Party. With financial and media support, and a helping hand from Washington (which was managing IMF disbursements to aid Yeltsin), Yavlinsky could have had a chance. Yet the market-oriented democrat Yavlinsky opposed radical reforms because of their devastating impact on the Russian people. He also opposed the corrupt tycoons and criticized U.S. interference in Russian domestic affairs and NATO’s intervention in the Balkans. Yeltsin was reelected with massive electoral fraud after suffering a heart attack hidden from voters that left him unable to perform his duties. Western support for ill-conceived and damaging economic reforms and Western disregard for Russian democratic procedures helped the West lose its moral authority in Russia.

More fundamentally, Russia was unprepared for democracy. Russia had not managed to build organized democratic parties with mass support among the population. In Russia’s history and culture, a strong czar was viewed as a protector against abusive boyars—wealthy nobles who would otherwise exploit ordinary people. Many Russians saw delegating this authority to the voters as a deceitful cop-out that would benefit the rich and powerful and their backers in the United States and Europe. After their experience with Communist ideology it was natural for many people, particularly intellectuals, to view liberal democracy as the answer. Once confronted with the reality of how democracy was working in Russia, their interest in foreign ideas declined dramatically.

THE DARING combination of NATO expansion and growing interventionism further accentuated Russia’s alienation from the West. Remarkably, NATO failed to consider how its dramatically different conduct would affect relations with Russia or world politics in general. With post–Cold War triumphalism increasingly seeping into conventional wisdom, most assumed that when the United States and major European powers wanted to do something in the international arena, they could impose their will without significant costs. Though this new NATO assertiveness was not deliberately directed against Russia, few within the alliance took seriously Moscow’s concerns—which were met by most with either indifference or contemptuous disregard. Rarely if ever did U.S. leaders critically assess how they themselves would react if a powerful (and not even necessarily hostile) alliance sought to add Canada and Mexico to its ranks while excluding the United States.

The Yeltsin government was again a reluctant partner if not a willing collaborator in cultivating this sense of impunity. Radical reformers in the Yeltsin government, particularly Foreign Minister Andrei Kozyrev, acted as if winning favor in Washington and Brussels was a paramount Russian national interest. This may have been quite reassuring to NATO elites, but it inexorably led many Russians to view Kozyrev and others as quislings and moved Russian public opinion further in an anti-Western direction—meaning that any reassurance Kozyrev provided was false and short-lived.

Advocates of NATO expansion argued that Russia could not really object to the process. Neither Washington nor anyone else signed an agreement with Gorbachev or Yeltsin to limit NATO to its current membership, they said. And anyway, the central and eastern European countries themselves were asking to join. Beyond that, advocates said, expansion would actually make Russia more secure because new members under NATO’s security umbrella would be less afraid of their former imperial master and would accordingly be better able to set aside their past grievances to begin new relationships with Moscow. Since Yeltsin was instrumental in achieving relatively peaceful independence for the Baltic states by refusing to allow Russian citizens to participate in any military action against them, some expected Estonia, Latvia and Lithuania to be especially grateful. Nevertheless, all these arguments were either incomplete, superficial or just plain wrong.

It is true that the George H. W. Bush administration did not provide any formal guarantees that NATO would not expand further east. That was perfectly appropriate since neither Gorbachev nor Yeltsin asked for a legally binding agreement. Nevertheless, as their memoirs and other documents make clear, President Bush, James Baker and Brent Scowcroft may not have considered post-Communist Russia to be a superpower, but they did view it as a friendly power. They intended to treat Moscow with respect and dignity and to work to provide it what they saw as an appropriate place in the new European security architecture. This attitude discouraged Gorbachev and Yeltsin from insisting on legally binding guarantees.

With this in mind, the Clinton administration had every legal right to proceed with NATO expansion. What U.S. officials had no right to do was to think that they could move NATO’s borders further and further east without changing Russia’s perception of the West from friend to adversary. The first Bush administration had no plans to expand NATO and was hesitant to involve the United States in the emerging civil wars in the Balkans. Clinton-era NATO interventions in Bosnia (with Russia’s reluctant consent) and Serbia (without Russia’s consent or a United Nations mandate) could not but shape Moscow’s views. The Iraq War and 2011 Libya intervention cemented NATO’s transformation in Russian eyes from a nonthreatening organization to a military alliance prepared to act without a UN endorsement and in disregard of Russian perspectives around the globe.

Irrespective of NATO, Russia remained weak for some time, without real allies or friends, and eager to integrate itself into a world order dominated by the United States and Europe. Dmitri Medvedev’s term as Russia’s president was a last-gasp attempt to realize this goal, but even with Medvedev’s more amiable leadership, NATO continued to dismiss efforts like Foreign Minister Sergey Lavrov’s proposal to negotiate a European security treaty without much debate. Many in the West feared that it could create anxiety among some new members over NATO’s security guarantees.

Yet if Russia was not a threat, as Western leaders insisted it was not, why would avoiding the Baltic states’ anxiety be a higher priority than stabilizing U.S. and European security relations with Russia, a huge country with almost 150 million people and a massive nuclear arsenal? This is especially difficult to answer when the Baltic states themselves could not have felt particularly threatened since only one of them, Estonia, was prepared to spend 2 percent of its GDP on defense in line with NATO guidelines. Latvia was spending 1.3 percent and Lithuania 0.8 percent, all while pursuing polarizing anti-Russian polemics.

Both Bill Clinton and George W. Bush ignored George Washington’s famous warning in his Farewell Address about the perils of permanent alliances: “Sympathy for the favorite nation, facilitating the illusion of an imaginary common interest in cases where no real common interest exists, and infusing into one the enmities of the other, betrays the former into a participation in the quarrels and wars of the latter without adequate inducement or justification.” This should be “particularly alarming to the truly enlightened and independent patriot.”

In the absence of a serious foreign-policy debate, few Americans understood what an ambitious project Washington was undertaking in allowing NATO’s expansion and interventionism to proceed blindly until the alliance had incorporated most of Europe. Yet looking at the last two centuries of Europe’s history, a nation or a group of nations has only attempted to dominate Europe three times. Napoleon Bonaparte, World War I’s victorious allies and the Third Reich each tried and failed. Napoleon and Hitler were defeated by a countercoalition; the World War I allies created an unsustainable security architecture in Europe that contributed to the rise of Nazism and World War II. Moreover, while Westerners may believe that NATO’s eastward expansion has been peaceful and voluntary, Russians see it as inseparable from NATO’s European and global military exploits. How could bringing small new members into NATO and mollifying them outweigh the danger of provoking Russia’s anti-Western militarism?

Even short of catastrophic scenarios like the Napoleonic Wars or World War I and World War II, setting the West and Russia on a collision course comes at a significant price. The most dramatic example is September 11, which might not have happened if the Clinton administration and the George W. Bush administration had worked with Russia as a strategic partner in confronting Al Qaeda in Afghanistan. Despite Russian disillusionment with the United States during the 1990s, Vladimir Putin approached the Clinton administration with a suggestion for joint action against Al Qaeda and the Taliban in 1999. Russia, with its connections to Central Asia and strong ties with the Northern Alliance in Afghanistan, could have delivered a devastating blow against the Taliban and Al Qaeda in 2000, possibly disrupting their ability to plan a complex operation like the 9/11 attacks. Despite Al Qaeda already demonstrating its capability and determination by attacking two American embassies and the USS Cole, the Clinton administration refused this overture out of frustration with Russian defiance in the Balkans and perceived interference in Georgia, where Moscow claimed Chechen rebels were hiding. The price was September 11. Only after Al Qaeda killed three thousand Americans was the Bush administration prepared to work with Russia, which helped mobilize the Northern Alliance as an effective ground force against the Taliban.

Later, in 2013, another round of U.S.-Russian animosity damaged cooperation between the two countries’ security services. Again angered by heavy-handed Russian policies in the North Caucasus, the Obama administration was reluctant to exchange information about people from the region settling in the United States. As a result, Washington did not quite ask the right questions and Moscow did not quite volunteer complete answers, enabling the Tsarnaev brothers to carry out the Boston Marathon bombing. These disasters could easily be overshadowed if Russia decides that the United States is a defining threat and begins building its foreign policy around a zero-sum conflict, possibly even involving others, like North Korea.

EVIDENCE OF Russia’s flaws under Putin is abundant and growing. In addition to restrictions on political freedom, there is pervasive corruption. Putin has launched a high-profile campaign against this traditional Russian evil, but so far those at the top remain immune. And as long as those close to the leader are untouchable, using their spouses, children and associates to engage in massive illegal self-enrichment, it is very difficult to persuade others to forswear what they see as their fair share.

A flexible attitude to the truth, natural to people with secret-service backgrounds, exposes Russia to legitimate criticism. Moscow’s denial of military involvement in eastern Ukraine is a case in point. If Russia openly acknowledged—as the United States normally does—that it supports insurgents in the Donbass, it would be easier for the Kremlin to accept that it was a rebel surface-to-air missile that downed Malaysian Airlines Flight 17 in 2014. Moscow could remind the world of other such tragedies, including cases when the United States, Israel and even Ukraine mistakenly attacked civilian airliners. Russian officials could also argue that the fault lies with the Ukrainian side, because Kiev used its air force to attack its own citizens and the insurgents fired on the assumption that the airliner was a combat aircraft. Official denials made Russia’s position nearly impossible to defend and raised questions about the credibility of Moscow’s other foreign-policy pronouncements. The list of Russia’s transgressions is long.

It is difficult to know whether Russia’s hysterical anti-Western campaign and growing militarization have developed unstoppable momentum. But chances are that because of the country’s economic constraints and the absence of credible allies, the Putin government may be open for business after the next U.S. presidential election. Kremlin officials have certainly learned that they cannot count on China to save their economy.

At a recent meeting of Russia’s new Economic Council, chaired by Vladimir Putin, former finance minister and Putin-appointed Council vice chair Alexei Kudrin called for reducing geopolitical tensions in order to attract foreign investment that would allow the stagnant Russian economy to grow. Putin’s response was noncommittal, blaming others while promising to protect Russian national interests. This fueled public discord among Putin’s advisers about which direction to take.

The United States should explore whether a new beginning is possible. If there is a chance, it will not require one-sided concessions from the United States. What it will require is a first-ever serious discussion about post–Cold War U.S. interests and priorities around the world and a sober evaluation of how Russia fits into them.

In Ukraine, for example, Moscow clearly wants to interpret the Minsk agreements in a way that not only provides the Donbass with meaningful autonomy, but also allows regional governments in eastern Ukraine to prevent the country from joining NATO. Many in Ukraine and their supporters in the West consider this an unacceptable concession. But why? Does the United States, or Western Europe, really want Ukraine in NATO? Does America even intend to permit Ukraine to join NATO? If not, why create the impression in Russia that this may be Washington’s long-term objective?

Many say that without Ukraine Russia cannot be an empire. This is true, to a point. Conversely, however, Russia’s elite and much of its public believes that Russia can never be secure if Ukraine becomes a hostile nation and particularly if it joins a hostile alliance. Russian leaders have already seen how NATO’s new members have changed the character of the alliance in its dealings with Moscow. A NATO influenced by not only Poland and the Baltic states, but also Ukraine, may form an existential threat for Moscow. This in turn would place both Ukraine’s and NATO’s security in terrible jeopardy—a development that America should seek to avoid.

Relations between the two sides have deteriorated to dangerous levels. It’s in the U.S. national interest to explore better relations with Russia from a position of strength, something that will require both patience and realism in acknowledging that the effort may not succeed. If Moscow refuses to oblige, Washington should do whatever is necessary to protect its interests. Since this is likely to be risky and costly, it should not be America’s first choice.

Article Link to the National Interest:

Demystifying Iron Dome

The successful missile-defense system doesn't herald similar gains against ballistic missiles.

By Peter DombrowskiCatherine Kelleher, and Eric Auner
The National Interest
June 27, 2016

BARACK OBAMA encountered an unprecedented welcome when he visited Israel in March. He was greeted at the airport not just by the usual dignitaries but also by a hot new weapon—Israel’s Iron Dome missile-defense system against short-range rockets. A battery was stationed only a few footsteps from Air Force One, so the president could walk over and congratulate his hosts on their successful use of the antimissile weapon during Israel’s Operation Pillar of Defense in November 2012.

The Israel Defense Forces (IDF) launched Operation Pillar of Defense on November 14 in response to increasing rocket attacks from the Gaza Strip as well as other actions by militant Palestinians. The seven-day operation involved Israeli air strikes against Hamas targets in Gaza, but there was no ground invasion such as the one launched in 2008–2009, called Operation Cast Lead. The IDF had four Iron Dome batteries in operation prior to Pillar of Defense and deployed a more advanced fifth battery during the operation. According to the IDF, the system, developed by Israel with joint U.S. and Israeli funding over the past decade or so, provided a sense of security to many Israelis by preventing injury, loss of life and property damage. Reports indicate that some Israelis even ignored air-raid sirens, remaining exposed in the hopes of photographing an Iron Dome interception.

Iron Dome’s scorecard will need closer scrutiny as more technical and verified evidence becomes available, but there is ample justification for praise and expectations of continued operational success. According to the IDF, some 1,500 rockets were fired on Israel during the course of Operation Pillar of Defense. Reports indicate about a third of these rockets (five hundred or so) targeted population centers; of those, 84 percent (over four hundred) were successfully intercepted by Iron Dome (though some technical experts have suggested that the actual success rate was probably significantly lower). Whatever the actual number of intercepts, enthusiasts in both the United States and Israel have viewed this as a breakthrough in the long-debated issue of missile defense. Some have argued that Iron Dome shows the way toward achieving Ronald Reagan’s transformative 1980s vision of strategic defense, a world where ballistic missiles are “impotent and obsolete.”

Moreover, American experts and political leaders have argued for years that a new, global missile age is emerging, in which a widening array of more numerous and capable short-range rockets, cruise missiles, and intermediate- and long-range ballistic missiles will pose stark challenges for even the most advanced militaries. Israel faces ongoing attacks from relatively unsophisticated and inaccurate rockets today; tomorrow it may face Syrian Scuds (currently being used against rebel groups within the country) or a range of Iranian ballistic missiles. Armed conventionally or not, China, Pakistan, North Korea and, more discreetly, a few other states are developing missiles and marketing them internationally. Despite multilateral efforts to control the spread of missiles—including the Missile Technology Control Regime, the Proliferation Security Initiative and the Hague Code of Conduct against Ballistic Missile Proliferation—few expect this Pandora’s box to be shut.

Iron Dome is certainly one response to this new missile age, but much of the recent commentary on the subject overestimates the importance of recent Israeli successes. Iron Dome does represent a significant new capability that may have a positive effect on regional-security dynamics in the Middle East and perhaps beyond. Such quick-response programs developed in the United States and elsewhere can contribute to the defense of key population centers and critical infrastructure against limited attacks, and that in turn can bolster psychological resilience. Furthermore, the U.S.-Israeli effort may pave the way for greater missile-defense collaboration among like-minded nations facing similar threats.

But many thorny strategic and operational issues remain. Despite its utility in meeting Israel’s unique security challenges, Iron Dome is not a game changer, nor does it validate—at least not yet—Reagan’s vision of a global strategic-defense capability. Despite a growing (but incomplete) consensus on the need for some level of missile defense, the vision of “impotent and obsolete” ballistic missiles remains firmly out of reach for the foreseeable future.

Whatever its ultimate strategic significance, the Iron Dome technology has served to reinvigorate the American debate on the utility of missile defense. Until recently, the relatively quiet and scholarly tone surrounding U.S. missile policy has contrasted sharply with the public cries and critiques that characterized what we have labeled the “three waves” of emotional debate regarding missile defense over the past four decades. These include the debates in the 1960s over deployment of what became the limited Safeguard system; Reagan’s space-based concept of the 1980s; and George W. Bush’s plan for a ground-based system purportedly designed to protect the United States and parts of Europe from an Iranian attack. Ever since the Obama administration’s introduction of the European Phased Adaptive Approach (EPAA) in 2009, there have been at most ritual acknowledgements of the “requirement” for missile defense—as in the 2010 New Strategic Arms Reduction Treaty preamble and elsewhere. Further, in the United States and elsewhere there has been only relatively low-level expert debate, even in the face of a National Academy of Sciences report that posited significant problems with current programs.

This essay will assess Iron Dome’s potential impact on U.S. and international efforts to deploy multitiered national, regional and global missile-defense systems. We will look at the antimissile system’s history and construct a preliminary baseline evaluation of its performance last fall. Finally, we will consider the strategic implications of Iron Dome and how it or similar systems might contribute to U.S. and Israeli missile-defense efforts.

ISRAELI EFFORTS to develop a missile shield go back three decades and are intertwined with the Jewish state’s close collaboration with the United States. The two countries signed a memorandum of understanding in 1986 to develop missile defense and to facilitate Israeli participation in Reagan’s Strategic Defense Initiative (SDI). Missile defense became even more salient for Israeli leaders after Iraq fired conventionally armed Scud missiles at Israel during the Gulf War of 1991. In that episode, hastily deployed Patriot missiles helped limit civilian terror and, while their operational effects were significantly oversold in the initial reports, may have thwarted some Scuds as well. Since then, Israel and the United States have cooperated on several missile-defense programs, including joint technology development, industrial cooperation, and a program of testing and exercises in addition to shared funding, which continues to this day. Further, a sophisticated U.S. radar system in the Negev desert presently represents the only permanent U.S. ground presence in Israel.

Israel’s current missile-defense goal is to construct a layered defense against ballistic missiles, cruise missiles, rockets and other air threats. Hostile or potentially hostile states surrounding Israel have emphasized rockets and missiles in their force planning over traditional war-fighting platforms and capabilities. The air forces of hostile neighbors in particular are in many cases increasingly obsolete, due in part to Western technology-denial efforts. In both the 2006 and 2008–2009 conflicts, Israel’s enemies attempted to rain rockets on Israel, forcing the IDF to initiate complicated, costly and politically problematic ground operations. Israel’s aim was to destroy missiles and launchers used against the country and to take out safe havens available for enemy missile operations.

Far more than the United States, Israel sees its adversaries’ air and missile capabilities (including conventionally armed ballistic missiles) as part of a continuous spectrum of threats to its population and forces. The basic Israeli concept is to deploy active and passive defenses as well as offensive capabilities against known and perceived threats, as was recently seen when Israel attacked targets in Syria to prevent the transfer of Iranian Fateh-110 missiles to Hezbollah. Moreover, some analysts believe that Israeli intelligence agencies will undertake phase-zero (i.e., precombat) operations against rocket and missile manufacturers, their potential launch sites and associated personnel. Active defense, as understood in Israel, involves a multitiered matrix of systems that to date are in a variety of stages of development, deployment and readiness.

Iron Dome, representing the lowest-tier system, is intended to intercept relatively unsophisticated rockets. It was designed by Rafael Advanced Defense Systems Ltd., a private Israeli defense firm with very close ties to the IDF that builds high-tech defense systems for air, land, sea and space. It uses the explosive-tipped Tamir interceptor to destroy rockets at a range of four to seventy kilometers. Iron Dome relies on a widely publicized capability to almost instantly discriminate between rockets targeted against populated areas and those that will drop in uninhabited areas; thus, it seeks to intercept only the threatening rockets. According to Israeli missile expert Uzi Rubin, former head of the Israel Missile Defense Organization, this ability to discriminate contributed to an estimated exchange ratio of one interceptor fired for every three rockets fired at Israel during Operation Pillar of Defense. But perhaps its greatest technological success is its ability to detect, track, aim and explode ordinance in a very limited time window, which is particularly difficult within the short distances that characterize Israeli combat space.

An Iron Dome battery includes an ELM-2084 S-Band phased-array radar, fire-control center and typically three launchers capable of carrying twenty Tamir interceptors. The Tamir is three meters long and uses a proximity-fused explosive warhead to destroy rockets in midair. Israeli media have reported that shrapnel resulting from Iron Dome has damaged property, but there has been no in-depth public analysis of the danger posed to civilians by interception-generated shrapnel. Each battery costs approximately $50 million, while interceptors cost approximately $50,000 each. Statements from Israeli officials indicate that Israel may need up to thirteen batteries to provide full coverage to threatened areas.

But Israel’s primary missile interceptor is the Arrow system, developed by the state-owned Israel Aerospace Industries in collaboration with Boeing. It includes interceptors, radars, battle management and fire-control capabilities. The Arrow 2, which carries a fragmentation warhead, is currently in service, while the longer-range Arrow 3 is under development. Arrow 3, a two-stage, solid-propellant, hit-to-kill interceptor, has not yet completed a successful intercept test, but the Congressional Research Service says it may be deployed by 2014.

Another system called David’s Sling (sometimes known as Magic Wand) is designed to strengthen the middle tier of the Israeli defense against shorter-range ballistic missiles, cruise missiles and heavy rockets. A project of Rafael and Raytheon, David’s Sling completed its first successful intercept test (conducted jointly by Israel and the United States) in November 2012. Israel may deploy the system as early as next year.

THE UNITED States has not sought to make use of Israeli missile-defense systems, including those it funded and/or developed jointly. Even before Operation Pillar of Defense, some in the U.S. Congress called for the United States to coproduce the system or use it to protect U.S. deployed forces. In November, Reuters quoted an unnamed Israeli official as saying coproduction is not an option “right now.” Members of the U.S. House Armed Services Committee expressed concerns in 2012 that the United States is not benefiting as fully as it should from Israel and suggested that future U.S. funding be conditional on U.S. access to Iron Dome technologies.

Obama’s redirection of American missile-defense programs in 2009 toward regional defense partnerships offers a path of understanding on the nature and extent of U.S. interest in defensive systems, as well as about the potential impact of Iron Dome and its related systems. Obama’s policies represent what we call the “fourth wave” of U.S. efforts to protect against nuclear-tipped ballistic missiles, long an aspiration among U.S. military planners and politicians, particularly among congressional Republicans. Wave I began when the United States first contemplated the Sentinel program in the 1960s and ultimately installed Safeguard, its first operational missile-defense system, in the mid-1970s following years of heated discussion on the strategic and technological merits. Perhaps the highest political endorsement came during Wave II with Reagan’s 1983 SDI speech envisioning a system, primarily space-based, that would render the use of nuclear-tipped missiles anywhere and at any stage of launch to be ineffective, if not futile. U.S. missile-defense ambitions were scaled down following the end of the Cold War, with the George H. W. Bush and Clinton administrations advocating a more limited defense of the nation against long-range missiles. However, Japan and the United States did decide in the mid-1990s to develop bilateral arrangements for a theater-level defense system in order to address Japan’s increasing sense of vulnerability to a North Korean attack.

The George W. Bush administration moved decisively toward what we see as Wave III, reinvigorating the idea of a “national” missile defense. This represented a substantial shift from the SDI, and the beginning of a new, albeit rough, consensus about the purpose of missile defenses in the twenty-first century. The administration moved forward with the Ground-Based Midcourse Defense system based in Alaska and California, withdrew from the Anti-Ballistic Missile Treaty with Russia and announced plans to create a third national missile-defense site overseas, with deployed interceptors in Poland and a radar site in the Czech Republic. The system was declared to be capable of protecting the U.S. homeland, and parts of Europe, from a potential nuclear-armed intercontinental ballistic missile (ICBM) threat from Iran.

In reconfiguring the George W. Bush plan in 2009, the Obama administration launched Wave IV. While retaining, and in 2013 modestly expanding, the two existing “national” missile-defense sites, it is pursuing multilayered regional missile shields based largely on the seaborne Aegis air- and missile-defense system in Europe and Asia to supplement and integrate with the older, relatively successful, shorter-range Patriot and Terminal High Altitude Area Defense systems. The most developed and widely discussed of these is the EPAA, intended to be linked to a coordinated air- and missile-defense system within NATO. Also included in the plan are regional systems with new or additional radars in Japan, the Asia-Pacific area and the Persian Gulf.

Notably, U.S. policy makers have not clarified Israel’s role in this region-by-region approach. On the U.S. Missile Defense Agency’s website, Israel is listed as a cooperative partner in the Middle East (but not in Europe or the Asia-Pacific), even though the United States has announced no specific plans for data sharing, technology transfers or joint command-and-control efforts among the various Middle East partners, which include Qatar, Saudi Arabia and the United Arab Emirates. Nevertheless, the United States continues to fund Israeli missile-defense efforts.

U.S.-Israeli cooperation may serve as a model for how the United States will pursue missile-defense relationships with other allies. Indeed, missile defense likely will become an increasingly important tool for reassuring key allies and building alliances. The United States provided approximately $70 million for Iron Dome in 2012, partly to reassure Israelis facing increasing rocket attacks. This number rose to $211 million in 2013, and the U.S. Missile Defense Agency requested $220 million for 2014. Similarly, when Turkey recently felt threatened by missiles from neighboring Syria, the United States, Germany and the Netherlands provided Patriot batteries as a sign of NATO solidarity. It remains to be seen whether the United States will pursue a more robust suite of activities with new partners, such as joint testing, technology development, and software and data sharing.

Obama’s approach shares substantial continuities with that of his predecessor. Both focused primarily on the threat of small numbers of relatively unsophisticated missiles from outlier regimes such as Iran and North Korea, and both forwent efforts to intercept large numbers of more sophisticated Russian or Chinese ICBMs. The Obama administration also continued and expanded the cooperative efforts and multinational exercises (such as the Nimble Titan series) of its predecessor, including with Israel. U.S. policy makers and the public now largely see missile defense as a key element of U.S. strategy, and thus remain committed to significant investment in research and development.

Iron Dome’s effect on Israel’s security situation and the goal of a lasting Middle East peace remains an open question. Iron Dome may render Israel less vulnerable to short-range rockets as weapons of terror and coercion, but it could also spur Israel’s enemies to increase their offensive forces to counter Israel’s defensive systems, including Iron Dome.

In any case, Iron Dome is likely to have a significant effect on Israeli behavior. Like any state, it must respond to its citizens’ desire for protection. In the absence of defenses, it must rely on offensive action—including operations such as the 2008–2009 Operation Cast Lead—to demonstrate resolve against rocket attacks. A shield against such rockets could provide leeway for Israeli leaders to seek alternate means of handling conflicts, perhaps even including expanded efforts to seek diplomatic solutions. On the other hand, if Israelis feel secure behind their defensive shield, they may not feel any need to engage in talks that would require concessions.

Meanwhile, Israel’s opponents might change their own tactics in an effort to overwhelm or outflank the defensive capability represented by Iron Dome. The Arabic-language media saw Iron Dome differently from the image highlighted in the Israeli or Western media. Writers in mainstream Arabic-language outlets saw little change in the resolve of “resistance groups” to paralyze Israeli society and economic life while demonstrating an ability to resist even in the face of Israeli counterforce operations. Further, some interpreted the lack of an Israeli ground incursion as successful Hamas deterrence of Israeli forces. If these accounts significantly influence or accurately reflect the Palestinian leadership’s thinking, they cast doubt on Iron Dome’s potential impact on the behavior of Israel’s adversaries. Most tellingly, a strong majority of Palestinians interviewed in several polls saw the lack of an Israeli ground invasion (in contrast to 2008–2009) as a victory for Hamas and a way of paralyzing normal Israeli life while furthering Palestinian goals.