Wednesday, August 24, 2016

Oil Prices Fall On U.S. Crude Stocks Build; Fears Over China Demand

By Mark Tay 
August 24, 2016

Oil prices fell on Wednesday as an unexpected build in U.S. crude inventories weighed on markets, along with concerns that Chinese crude demand could falter as Beijing clamps down on alleged tax evasion in the oil industry.

International Brent crude oil futures LCOc1 were trading at $49.32 a barrel at 0614 GMT (0214 ET), down 64 cents, or 1.3 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude was down 72 cents, or 1.5 percent, at $47.38 a barrel.

Robust Chinese crude demand growth has been driven by independent refiners, also know as teapots, who began to import crude last June after obtaining government crude import quotas and license.

But Beijing's crackdown on alleged tax evasion in the oil industry, targeting the teapots, threatens to put a lid on Chinese demand.

"The question now is whether the teapots will start cutting runs," a Singapore-based trader said, adding that falling Chinese demand would be a double whammy for the oversupplied crude market.

Reinforcing concerns about market oversupply, U.S. crude stockpiles surprisingly rose last week, even though gasoline inventories fell sharply and distillate stocks drew, data from industry group the American Petroleum Institute showed on Tuesday.

"We are seeing a little reaction on the API data which has posted higher inventories," said Ric Spooner, chief market analyst at CMC Markets.

Crude prices had risen on Tuesday after Reuters reported that Iran was sending positive signals that it could support joint action to prop up the oil market.

But analysts and traders remain skeptical that producers will come to an agreement at a meeting in Algeria next month as various OPEC members continue to have individual agendas to push.

Iraq's prime minister said on Tuesday the country had not yet reached its full oil market share, suggesting his government would not restrain crude output as part of any possible OPEC agreement to lift prices.

"I really can't see the sense for Saudi, in particular, to actually have some meaningful constraint on production because there is quite a lot of capacity of U.S. shale to come on quite quickly," Spooner said, adding that he could see prices drifting closer to $45 a barrel over the next few days.

Article Link To Reuters:

Stop Letting Political Correctness Interfere With The Anti-Zika Fight

By Betsy McCaughey
The New York Post
August 24, 2016

Health officials are bowing to political correctness instead of taking obvious steps to protect New York residents from the Zika virus.

New York has more Zika cases — 579 so far — than any other state. Officials warn pregnant women and their sexual partners not to travel to Zika-infested regions, because the virus causes horrific birth defects. But babies aren’t the only ones in danger. New research suggests adults may also suffer permanent brain damage after being bitten by a mosquito carrying Zika.

That’s reason enough to avoid travel to and from the Dominican Republic, the source of more than half the cases, or Puerto Rico, which is also Zika-infested.

So can New Yorkers feel safe by staying home and avoiding sex with a partner who’s been to a Zika-troubled region? For the moment, yes — but that could change with a single mosquito bite. The danger is that a tiger mosquito — local to the New York area — bites one infected person and then spreads the virus by biting other people.

That hasn’t happened yet, as far as we know. But more people coming to New York infected with Zika increase the risk local tiger mosquitoes will bite them and begin spreading the infection.

Epidemiologists say that risk is “considerable,” meaning 50-50. So why aren’t city health officials trying to slow the pace of Zika-infected arrivals?

Political correctness. “It won’t serve New Yorkers well if we create the impression that Zika is a Dominican problem or a Puerto Rico problem or a Guyana problem,” says Health Commissioner Mary Bassett.

Oh really? The goal should be to keep it from becoming a New York City problem.

Just to be clear, race and ethnicity have nothing to do with it. It’s geography. American citizens who travel to Zika hot spots as tourists put us in as much danger on their return as immigrants bringing it in. About 5 percent of those entering the United States who get tested for Zika test positive.

As of last week, Miami-Dade County, Fla., is another danger area. At least 34 people there have contracted the virus from local mosquitoes. “The more we’ve learned about the Zika virus, the nastier it is,” says infectious-disease expert Willliam Schaffner from Vanderbilt University.

Last week, scientists showed Zika causes brain damage in adult mice, indicating it might do the same in humans. It destroys the hippocampus, which affects memory, emotion and learning. “Zika can clearly enter the brain of adults and wreak havoc,” professor Susan Shresta of the La Jolla Institute of Allergy and Immunology explains.

Lab studies on mice are one thing. In real life, numerous adults infected with Zika have suffered damage to their nervous systems or brains, and some have died.

The risk of the virus spreading locally via mosquitoes is serious enough that New York City is spending millions of dollars spraying insecticides, reducing the puddles of water that serve as breeding grounds and randomly testing mosquitoes for traces of the virus.

But these same officials won’t take the simple step of alerting people that bringing this virus to New York is a selfish, antisocial thing to do. Deputy Health Commissioner Jay Varma says he doubts the “transmission risk is high enough in New York City” to discourage travel to and from Zika-affected regions. High enough to spend millions of dollars but not to talk frankly about travel?

Common sense dictates otherwise. If you want to visit family in the Dominican Republic, or go clubbing in Miami Beach, hold off until after mosquito season. It’s only a few weeks. Otherwise, you’re putting yourself and everyone else at risk. You could pick up Zika, and on your return, a mosquito here could bite you, then go on to bite your neighbor, starting the virus spreading. Not very neighborly.

And New York City health officials shouldn’t be afraid to say so.

Article Link To The New York Post:

Hillary’s A Terrible Liar — And It Could Doom Her Presidency

By John Podhoretz
The New York Post
August 23, 2016

The singular Nebraska politician (and later New School president) Bob Kerrey once observed of a fellow moderate Democrat: “Bill Clinton is an unusually good liar. Unusually good.”

I don’t think this is something people would say about his wife.

That Hillary Clinton is a liar is now inarguable. Indeed, it’s gotten so inarguable that people who dare argue she isn’t a liar are almost certainly lying, too — though, perhaps, only to themselves, to keep their spirits up.

The problem for Hillary’s apologists is that she’s so incredibly bad at it.

Bill’s brilliant lies provided cover for his defenders. Hillary’s lousy lies make her defenders look like fools. The pair of revelations in the past week demonstrates this.

First we learned she had told the FBI her plan to set up a private server for her e-mails had been presented to her as a welcome gift by her predecessor Colin Powell at a State Department dinner. At that point, the defenders came out in full force — see, it wasn’t her idea, and it had been done before, and so what!

Whereupon Powell first said he had no recollection of saying any such thing to her, and then angrily told a reporter he’d mentioned using AOL for his private correspondence a year after she’d set up the private server at home to handle all her communications.

“They’re trying to pin it on me,” said Powell, who has no dog in this fight and no reason to lie. Unlike Hillary.

So, on Twitter, the Hillary defenders found themselves resorting to the lamest sort of anti-Powell argle-bargle — “nyah nyah, Colin Powell said there were WMDs in Iraq.” Which is interesting, since Hillary Clinton also said there were WMDs in Iraq, and somehow they don’t go nyah nyah about her having said it.

The overall line of defense of Hillary then shifted to “she said this in unsworn testimony that should never have gone public.” Now that’s interesting, because it’s a little like someone else saying of the villain on an episode of Scooby-Doo that “she would have gotten away with it, too, if it weren’t for you meddling kids!”

More important than this, perhaps, was the discovery that her two chief aides, Cheryl Mills and Huma Abedin, were serving as transmission points between the State Department and the Clinton Foundation — the issue being what favors might be granted at State to the foundation’s donors and intimates.

“There is absolutely no connection between anything that I did as secretary of state and the Clinton Foundation,” Mrs. Clinton said last month. Bzzzzzt! And there goes the lie detector! Indeed, on Tuesday the AP revealed that more than half of the non-governmental meetings Clinton took while secretary of state were with foundation donors.

The lie detector also buzzed when she said she’d never forwarded any e-mails “marked classified,” which we now know she did.

As it did when she said she thought all her e-mails were somehow copied to a .gov e-mail address — something that only began happening at the State Department in 2015, two years after she quit.

As it did when she claimed in July 2015 that her e-mails had never been subpoenaed — a claim refuted the following day by Rep. Trey Gowdy, who said he had done so but had not made it public.

Bad lie after bad lie after bad lie after bad lie. It’s enough to make one remember how billing records from the Rose Law Firm, where she had worked in Arkansas, suddenly turned up in a closet on the third floor of the White House two years after she’d said they’d gone missing. They’d been under subpoena for two years.

That was 20 years ago. If she gets elected president and keeps going this way — and why wouldn’t she, really? — we can’t say we didn’t know and weren’t warned.

“This is more than Nixon ever sweated,” says a cameraman in the movie “Broadcast News” as Albert Brooks erupts in perspiration on the air.

Strictly in numerical terms, this is more than Nixon ever lied, too.

Priebus: Shakeup Will Soon Push Trump Past Clinton

By Caitlin Huey-Burns
Real Clear Politics
August 24, 2016

Republican National Committee Chairman Reince Priebus likes what he is seeing from Donald Trump one week after the nominee’s campaign shakeup -- so much so that he predicted the GOP standard-bearer would be tied or ahead of Hillary Clinton after Labor Day.

The fingerprints of both CEO Stephen Bannon and Campaign Manager Kellyanne Conway are visible in Trump’s messaging this week, from his call for a special prosecutor to investigate the Clinton Foundation in the wake of new email revelations to his backing away from his earlier calls for mass deportation of undocumented immigrants.

"It's going to be important for us and for Donald Trump to continue down this measured path that he's on, and if he does that I think he's going to be tied or ahead at or just after Labor Day,” Priebus told reporters on a conference call Tuesday.

While Trump has found a way to turn attention away from his troubles and toward Clinton’s, he has also shown that old habits die hard. Amid news that former Secretary of State Colin Powell is pushing back at Clinton for claims that he advised her to use a private email server, Trump meanwhile was lashing out at the hosts of MSNBC’s “Morning Joe” for their coverage of him, threatening to expose an alleged affair. Trump’s campaign hasn’t reinstated access for multiple news outlets it had banned, and the candidate took to Twitter to criticize Washington Post journalists over a forthcoming book about him, even though he participated in lengthy interviews for it.

Trump and surrogates also have continued to raise questions and elevate conspiracy theories about Clinton’s health, with former New York City Mayor Rudy Giuliani saying evidence can be found on the Internet that she is not physically fit to be president.

And the Republican presidential nominee has drawn attention to himself by “softening” his stance on illegal immigration, as the campaign tries to figure out how to reconcile Trump’s hard-line approach with a more moderate general election message. During a town-hall style interview with Fox News host Sean Hannity Tuesday night, Trump said of deportation proceedings, "There certainly can be a softening because we're not looking to hurt people.”

At the same time, Trump seemed to have found a message intended to rally Republicans and take advantage of the release of 15,000 additional Clinton emails discovered by the FBI, some of which exposed a broken firewall between the Clinton family foundation and Hillary Clinton’s State Department. The GOP nominee called for a special prosecutor to investigate.

An analysis by the Associated Press on Tuesday found that while evidence of illegal activity is lacking, the emails reveal the frequency of intersections between those who met with Clinton in her official capacity as the nation’s top diplomat and those who donated to the foundation. At least 85 of 154 people from outside the government who met with Clinton at State donated to the foundation or pledged commitments, the AP found. Last week, her campaign announced the foundation would stop accepting foreign donations if Clinton is elected.

Priebus praised Trump’s call for an investigation into the matter by an independent counsel, and argued that conflicts of interest and possible ethical violations would persist in a Clinton White House.

Republicans have long seen an opening to use the perceptions of pay-to-play to exploit Clinton’s vulnerabilities when it comes to trust and honesty, but their own presidential nominee has passed up such opportunities by getting in his own way. In many respects, Trump’s outsider, anti-politician message aligns well with these charges, tapping into voters’ distrust and dislike of the political establishment.

Priebus believes that that message, combined with others, could help bring Trump back from significant deficits in national and battleground state polls. “People want to buy the change product,” he said, noting that the RNC has been working well with the new Trump management team and he feels good about where things are heading.

But there are also growing pains for the new team just 2 ½ months from Election Day. In an effort to broaden his appeal, Trump has been editing his strict and controversial immigration policy, which had been the cornerstone of his candidacy. The campaign scrapped a policy speech planned in Colorado this week in order to take more time to “fine tune” the proposals, particularly one regarding what to do with the estimated 11 million immigrants living in the United States illegally.

In an interview Monday with Bill O’Reilly of Fox News, Trump pointed to the Obama administration’s deportation policy as a model, saying he would use existing laws to deport “all of the bad ones” and have the rest “go through the process.” He also backed away from his earlier support for the Eisenhower administration's controversial “Operation Wetback” deportation program.

Trump has also tried to not alienate supporters drawn to his tough immigration message, reassuring them during a rally in Ohio this week that he still planned to build “the wall.”

Trump’s continued overtures to African-American and minority voters -- an effort aimed to make himself more palatable to traditional Republican voters put off by his rhetoric -- has been criticized for being both out of touch and condescending. He ventured off script this week by describing America’s inner cities as worse than war zones.

While the new management team’s influence has been apparent, strategists caution that Trump still holds the reins to his future.

“The biggest challenge between now and November is, if he wants to win, can he stay focused on message so that [gets] people to give him a second chance?” said Republican strategist Ron Christie. “The only person who can make that happen is Donald Trump. It’s not staff or consultants. The real question is, does he want to win or not?”

Article Link To Real Clear Politics:

Welcome To The Age Of Strategic Triage

"The history of great powers is rife with examples of states that tried to do it all, everywhere, and frittered away their dominance by failing to retain a balance between resources and obligations."

The National Interest
August 23, 2016

The next U.S. president will have to face the harsh reality of a war-weary public, contentious domestic politics, uneven economic growth, and a world in which America’s influence seems to be fading. Regardless of who wins this November’s election, the new administration will be forced to set priorities and concentrate national attention and scarce resources on the serious foreign-policy challenges facing this country.

Governing requires hard decisions concerning whether to maintain, expand, or shed commitments. The new administration will have to address questions pertaining to reducing operations in Afghanistan, maintaining obligations in Iraq, and expanding security commitments in the South China Sea. U.S. leaders must constantly evaluate the costs, risks, and potential benefits connected with the myriad of competing interests facing this country. Some obligations may promise too little gain to justify their expense in lives and resources. Others drag on, trying popular and elite patience. Some outlive their usefulness, siphoning resources from more pressing commitments.

Offloading burdens becomes necessary when a great power finds itself stretched too thin. For better or worse, the United States now presides over an age of strategic triage. While the word triage comes from the world of medicine, it is surprisingly useful for strategic deliberations. The Merriam-Webster Medical Dictionary defines triage as:

1: the sorting of and allocation of treatment to patients and especially battle and disaster victims according to a system of priorities designed to maximize the number of survivors.

Triaging is a commonsense method used by field hospitals in times of war or disaster to allocate scarce medical resources to save the most victims possible. Doctors recognize that some patients will recover without immediate medical attention, while others will die even with medical care. Identifying these two groups and excluding them from immediate care allows medical personnel to devote their energies to helping those whose chances of recovery improve with medical attention.

The goal is to wring the most life-saving value from the doctors’ labor. Makes sense, doesn’t it? Medical professionals apportion finite resources to save as many victims as they can.

The Logic of Strategic Triage:

Strategic triage is triage of a political nature, but like the public-health concept, it’s also about allocating finite resources where they can do the most good. But in this case the process benefits not the “victims”—allies, theaters, or operations of doubtful value—but the great power that took on these commitments. It’s a self-serving process conducted to bolster the well-being of the “physician.”

In international relations, health is measured in terms of a state’s military, economic, and diplomatic power and influence. Since all power is relative, it is incumbent on strategists to produce an accurate diagnosis of their country’s health, as well as the health of allies and adversaries. In the zero-sum game of global politics, in which one country’s gain is another’s loss, being healthy is necessary but not sufficient. This is particularly critical for superpowers like the United States, which must remain the strongest and healthiest of all because anything less simply means that the republic is losing ground to rivals.

After completing an accurate diagnosis, great-power strategists then develop a course of treatment that not only maintains but expands their nation’s unique strengths vis-à-vis its rivals. That’s essential because great powers need to effectively manage or cure short- and long-term ailments while seizing opportunities to reinvigorate their health. Only then can they tend to others.

A quick survey of U.S. interests around the globe reveals a dizzying array of competing interests, making an accurate diagnosis problematic. One way great powers have traditionally balanced competing interests is by establishing a clear hierarchy among them. Ideally, this involves a two-step process. The first step is a careful assessment of aims. The second step is to establish the type of aims that will be pursued. Both are required to formulate effective strategies with a reasonable chance of achieving the political aims.

Fortunately, the great Prussian military theorist Carl von Clausewitz has offered sound guidance on this matter. Clausewitz argues that the conduct of a state’s foreign policy must be governed by the pursuit of rational objectives. The value decision-makers assign to a political aim determines the amount of time and resources they are willing to invest to achieve the goal. That’s easier said than done, but it is still excellent guidance.

So the first step in determining national security interests is to measure the political aim’s importance and the costs associated with achieving it. This allows strategists and decision-makers to make logical decisions about the allocation of resources. The qualitative categorization of political aims and national-security interests enhances their ability to make rational choices.

Using this logic as a foundation, strategy must be based on the value of each political objective and judged by the resources and sacrifices required to achieve it. Clausewitz concludes, “Once the expenditure of effort exceeds the value of the political object, the object must be renounced […].” In other words, the value of any political aim is measured by its relative costs—the rate at which a combatant expends lives, treasure, and military resources of all types—and the time required to achieve the objective. Rate × time = total cost. Simple!

The Clausewitzian formula helps strategists determine when to abandon an enterprise short of attaining their aims. The cost of those aims may come to exceed the value of the political object, or the value assigned the political object may fall. In either case, the original goals no longer justify the expenditure of resources. Strategists should be prepared to revise their calculations to determine whether the enterprise is still worth its price. If not, Clausewitz warns them to shut down the endeavor—conserving what gains they can while cutting their losses.

Logic thus demands that decision-makers constantly tune the balance between a venture’s sunk and potential costs and the expected rewards of achieving the political objective. When cost/benefit logic no longer warrants political, economic, and military commitments, triaging the burden becomes the goal—even if it means altering political aims significantly, and even at the cost of reneging on pledges to allies.

Maintaining dominance in the international system over time, then, requires a great power capable of reconciling its national interests with its obligations to other states. That’s the essence of the rational calculus that is supposed to dominate the decision-making process.

Qualifying Aims:

We can break down interests into three qualifications: vital, important, and worthy but marginal aims. The more value the goal commands, the more readily leaders will devote resources to achieving or preserving it. World War II provides an excellent example: the United States placed extremely high value on defeating Imperial Japan and Nazi Germany. The nation mobilized millions of men and women and devoted much of its economy to the war effort. The value Americans assigned to their war aims, then, was commensurate with the resources they expended to win.

Important aims are those the United States deems worthy of serious attention but are not vital to the country’s survival. These include the challenges posed by global terrorist groups or civil wars in the Middle East, South Asia, and elsewhere that have upended entire regions while triggering crises within Europe.

Finally, marginal aims are attractive and worthwhile yet involve less obvious threats to national security. These include assistance in ameliorating humanitarian crises and the promotion of human rights and international law. The Obama administration’s tepid reaction to Russia’s military annexation of Crimea represents a good example of marginal American interests. Washington strongly condemned the invasion and annexation of Crimea but responded with only limited assistance to Ukraine and narrow economic sanctions against Moscow. This was classic cost/benefit analysis in action. U.S. officials voiced support for Ukraine’s sovereign rights, but their response was carefully calibrated to limit direct American involvement in the crisis.

The second step in appraising national-security interests is to determine the types of objectives to pursue. There are two types of political objectives, “positive” and “negative.” Positive objectives expand a country’s power and influence. Superpowers remain superpowers only if they remain perpetually on the lookout for opportunities to increase their power and influence relative to their adversaries.

The moment their relative power declines is the moment their hegemony begins to fade.

Perpetuating and expanding economic, military, and political dominance, then, is a positive objective that must be tended to with the utmost care and skill. American firms, often with government assistance, are always searching for new markets. On the political playing field, diplomats court new allies while developing strategies to gain advantage over rivals. More broadly, expanding open markets and spreading liberal democracy have been the positive pillars of U.S. foreign policy since the end of World War II.

Negative interests, by contrast, focus on preserving a nation’s power while preventing other nations from taking it. Conserving the United States’ hegemonic position requires Washington to fend off challengers who seek to weaken or replace its influence. Negative political objectives range from overcoming vital security threats that endanger the nation’s survival to countering efforts to wear down the nation’s dominant global influence.

Defense of the American homeland and that of key allies in Europe and Asia are two widely accepted negative objectives. Ensuring that the global commons remains open for trade and communication is another. Limiting the effects of global warming is quickly becoming another vital, negative political aim. Finally, holding China’s military rise and adventurism at bay commands greater and greater importance in American policy circles. In short, conserving a global status quo spells hard, painstaking work.

Three Examples of When and When Not to Triage:

Three examples illustrate the utility of employing this two-step evaluation of national security interests—ranking goals by importance, and by whether they are positive or negative—as a guide for assessing U.S. commitments. The first assesses how U.S. strategy towards China combines pressing political value with converging negative and positive aims. The second entails the negative aim of supporting Iraq in its battle against ISIS. This aim is of moderate political value and cost. And finally, there is the more problematic case of Afghanistan. The value of maintaining the status quo in Afghanistan may no longer merit an indefinite outlay of American resources.

U.S. strategy vis-à-vis China shows how negative aims can converge with positive political interests in Asia. Over the past two decades, China has become the only viable near-peer competitor boasting the potential to threaten U.S. regional hegemony. In response, Washington is pursuing a negative aim to limit China’s influence in East Asia. It has done so by increasing the U.S. Navy’s presence in the area, refurbishing relations with current and former allies, and reaching out to erstwhile foes like Vietnam.

Deployments of military hardware also signal U.S. resolve to allies and partners. For example, the deployment of the advanced antimissile system known as the Terminal High-Altitude Area Defense system (or THAAD) in South Korea reaffirms America’s security commitment to a valuable ally in Asia. THAAD ostensibly went to the peninsula to protect the South from North Korea’s burgeoning arsenal of missiles. Yet the antimissile emplacements also quietly put Beijing on notice that the allies can counteract China’s ballistic-missile inventory.

The United States, moreover, has long pursued positive economic interests in Asia, a region to which 28 percent of U.S. goods and 27 percent of service exports flow annually. Those percentages exceed the shares going to the European Union and to the United States’ NAFTA partners, Mexico and Canada. The Obama administration, furthermore, is pushing a Trans-Pacific Partnership trade agreement that would join the United States with 11 other countries along the Pacific Rim. Through the TPP and other economic outreach, the administration is pursuing positive interests that conform to historic U.S. policy aims—namely opening markets while reducing barriers to American goods and capital.

The U.S. “pivot” to Asia, then, is founded on solid, rational strategic calculations. But the strategy also comes with significant caveats and dangers. For example, reallocating ships, aircraft, and munitions to the Asia-Pacific region weakens the U.S. Navy’s capacity to project power in the Mediterranean, the Persian Gulf, and other important theaters.

There could also be unintended consequences to pivoting to the Far East. Rebalancing the U.S. Navy, for instance, could unwittingly signal irresolution to rivals like Russia and Iran. President Vladimir Putin could interpret the pivot as a license to launch new adventures in Ukraine and the waters around Europe. The refugee crisis in the Mediterranean, where hundreds of thousands are fleeing Syria, Iraq, and other war-torn countries, provides a daily reminder of the instability emanating from the Middle East and South Asia.

Clausewitzian calculations, then, warrant an effort of intense magnitude and open-ended duration in the Asia-Pacific. But there are opportunity costs to the pivot. Taken to its extreme, the rebalance might impel Washington to triage other regions.

U.S. strategy in Iraq, on the other hand, provides an example of a strategy seeking equilibrium between an important but not vital political aim coupled with limited efforts to achieve the goal of defeating the Islamic State. One can argue that the precipitous withdrawal of American forces in 2011 created the conditions for ISIS to flourish. However, U.S. strategy is now carefully calibrated to uphold a balance between the costs and benefits of American support of the Iraqi government’s efforts to defeat the terrorist group.

The absence of domestic political support for another major U.S. troop commitment to Iraq compelled the Obama administration to devise a moderate and patient course of action promising a reasonable chance of success. The cornerstone of U.S. military strategy is an air campaign designed to assist allied forces on the ground while degrading and destroying the military and economic capacity of the Islamic State to hold territory.

This strategy has the added benefit of limiting the scale of U.S. commitments. Washington currently restricts the number of American ground forces to fewer than 5,000, most confined to logistical support and a stringent train-and-assist mission. This reduces the risk to American forces while strengthening Iraqi security forces. Meanwhile, a relatively small contingent of U.S. Special Forces has undertaken reconnaissance and narrowly targeted search-and-destroy missions. Collectively, these three operational strategies furnish crucial assistance to Iraq’s war against the Islamic State while limiting costs to the United States in blood and treasure.

Yet this moderate course of action also comes with risks. Critics argue that the administration’s approach is too risk-averse. They contend that this strategy allows ISIS to retain control of significant swaths of territory in both Iraq and Syria for some time, even as the terrorist group expands to other areas in the Middle East, Africa and South Asia.

While this critique merits serious consideration, the current strategy has much to commend it. By imposing restrictions on the size and scope of U.S. military actions in Iraq, the administration has compelled local and regional forces to bear the brunt of the fighting. This allows the United States to proffer a helping hand and demonstrate commitment to its ally while greatly reducing American liability.

Washington’s strategy toward ISIS may prolong the conflict and allow other, less savory actors like Iran to claim credit for military gains. But that seems like a reasonable tradeoff in a region that has cost Americans so dearly for so little tangible gain. Strategic triage, then, is not final. So long as a patient like Iraq survives being triaged—even in an enfeebled state—the physician can renew care in some form and degree.

The continuing American presence in Afghanistan provides the most troublesome example of how difficult it is to balance the costs and benefits of the status quo. President Obama recently announced that the U.S. military will keep 8,400 troops in Afghanistan until the end of his term. The president also authorized U.S. forces to expand their engagement and granted them greater flexibility to pursue enemy forces.

Taken together, these measures signal the prolonging of the fifteen-year American commitment to Afghanistan. The costs of the endeavor should give decision-makers pause. Some 2,365 U.S. servicemen and -women have perished in the conflict, while the estimated outlays far exceed $1 trillion. At the very least, the Obama administration should reevaluate whether the costs have exceeded the potential returns from a major commitment to a war that is seemingly unending.

Here a strategist might ask whether the cognitive bias of “sunk costs” has warped U.S. calculations. Economists warn against making decisions about future investments based on what has already been invested. Transposed to the strategic sphere, decision-makers must not invest more lives, treasure, and military hardware simply because they’ve already sunk so many lives, treasure, and hardware into an enterprise. Clinging to past investments flouts rationality.

Those gripped by the sunk-cost fallacy insist the Afghan war must continue in order to justify the sacrifices already made. The rise of the Islamic State in the aftermath of the U.S. withdrawal from Iraq, as well as the domestic political fallout, may be distorting the administration’s assessment of the value of the U.S. commitment to Afghanistan.

Lyndon Johnson famously disregarded the imbalance between the value of victory in Vietnam and the cost of attaining it. Johnson proclaimed, “I am not going to be the first American president to lose a war.” One wonders whether President Obama will utter some similar statement to explain his decision to remain tethered to Afghanistan. It is easy to add up costs, risks, and benefits, and conclude it is time to execute a strategic triage. But it is politically difficult, for a variety of reasons, to actually cut off support. This is true even when the costs have far outrun the potential benefits of remaining in Afghanistan.

Avoid Strategic Triage at Your Peril:

These three examples underscore the utility of strategic triage. Wise conduct of foreign policy requires constant reassessment on the part of all states—especially great powers such as the United States that must juggle a multitude of interests and commitments. The history of great powers is rife with examples of states that tried to do it all, everywhere, and frittered away their dominance by failing to retain a balance between resources and obligations.

Knowing how to reassess, reevaluate, and redefine aims is a difficult task involving unpalatable tradeoffs. In the end, however, strategic triage allows the United States to use its power more wisely. This hard-nosed approach helps U.S. leaders husband resources to protect vital national security interests and exploit new opportunities.

Article Link To The National Interest:

Russia’s Illusion Of Influence In The Middle East

Moscow’s position in the region is not as dominant as it might seem.

By Kamran Bokhari
Geopolitical Futures
August 24, 2016

Over the past several months, media reports have made it seem like Russia’s influence is growing in the Middle East. After all, Russian air support helped Syrian President Bashar al-Assad’s regime regain the upper hand against the rebels in Syria. Then, Turkey suddenly and intensely moved to improve ties with Russia – at a time when Turkish-American relations have deteriorated. Finally, and most recently, Russian strategic bombers conducted airstrikes in Syria after taking off from an Iranian air base.

Today, however, the serious geopolitical constraints that Russia faces in expanding its influence in the Middle East became quite apparent. The Kremlin’s Foreign Ministry spokeswoman said that Russia and Turkey remained at odds over Syria. Turkish Justice Minister Bekir Bozdağ said that anyone who accuses Turkey of aiding the Islamic State – which Moscow has done quite loudly – is an enemy. Elsewhere, within days of allowing Russian aircraft to take off from one of its bases, Iran rescinded the permission. Defense Minister Hossein Dehghan accused Russia of a “betrayal of trust” for publicizing the deal. These different but definitive signs underscore how uncomfortable Turkey and Iran are with getting too close to Russia.

Russian-Iranian Relations

Russia and Iran are on the same side as far as Syria is concerned. They are the principal allies of the Syrian regime and cooperate closely to ensure that Assad remains in power. Tehran and Moscow also have very close bilateral relations in a number of fields. Russia has helped Iran on the international front with regards to the latter’s controversial nuclear program.

That said, there is a huge debate within Iran on trusting Russia. Here we are not talking about the reformists versus hardliners. The mistrust runs deep within Tehran’s conservative establishment. Just the other day, Heshmatollah Falahatpisheh, a ranking hardline member of the powerful parliamentary committee on national security and foreign policy, warned that, in recent years, Russia had demonstrated “a different and volatile foreign policy.”

Criticizing the decision to allow Russian aircraft to use the Shahid Nojeh air base, the lawmaker remarked that whenever Iran was faced with a crisis, Russia had sided against it. The Iranians are well aware that Russia views Iran as a bargaining chip for extracting concessions from the Americans. Indeed, Russia supported the most recent wave of U.S.-led crippling sanctions against Iran in 2012 and for many years delayed the supply of the S-300 missile system to Tehran.

Iran’s problem with Russia really goes back centuries. The Russians and Persians fought a number of wars between the 17th and 19th centuries. In addition, in 1941, the Soviet Union (in coordination with Britain) invaded and occupied Iran. Even after the end of World War II, the Soviets supported the creation of the short-lived Kurdish and Azeri republics carved out of territory in Iran’s northwest. Contemporary Iran is well known for its hostile relations with the United States, but its relations with Russia have also been quite troublesome – though it is far less apparent.

Russian-Turkish Ties

Ever since the outbreak of civil war in Syria in 2011, Turkey and Russia have found themselves increasingly at odds. Turkey has been trying to oust Assad and is a principal supporter of the various rebel groups fighting the Russian-backed Syrian regime. Tensions remain contained until last year for many reasons – chief among them the fact that Turkey depends on Russia for more than half its natural gas needs. But when Russia began conducting airstrikes against the Turkish-backed rebels, Turkey shot down a Russian warplane last November.

Though they managed to avoid open conflict, Turkish-Russian relations were extremely hostile for the next six months. In June, the two sides cleared the air, with Turkish President Recep Tayyip Erdoğan offering a written apology for the downed plane to Russian President Vladimir Putin. Turkey needed to improve ties with Russia because its relationship with the U.S. had soured over differences on how to deal with Syria, and especially the threat from the Islamic State.

Then came the Turkey’s July 15 coup attempt, which Turkey accused the United States of being involved in given that the founder of the Gülen movement is based in Pennsylvania. At the same time, Russia was the first nation to issue a statement of support to Erdoğan after the coup, and it appeared that the die was cast for a realignment of Turkish foreign policy.

Indeed, there has been massive anti-American rhetoric in the past six weeks along with the warming of ties with the Russians. Erdoğan even met with Putin in St. Petersburg. But those were all atmospherics, because in the end Turkey, like Iran, cannot rely on Russia. Today’s developments have only made apparent what was the case all along. If Iran, which has had a close working relationship Russia, cannot fully trust the Kremlin, Turkey has many more reasons not to. Turkish and Russian interests have historically collided in the Black Sea region, where the two have fought wars and territories have exchanged hands. Even today, Turkish and Russian proxies are at war.

More important, Turkey needs the United States, which is why we see Ankara backpedaling on the demand for Fethullah Gülen’s extradition. Turkish Foreign Minister Mevlüt Çavuşoğlu today denied that Ankara ever accused Washington of being involved in the coup. Turkish media is arguing how getting a hold of Gülen is not worth the trouble. The Turks know that they can better pursue their interests by working with the United States than by flirting with Russia.

Conversely, Turkey cannot afford to simply rely on the United States. Ankara reached out to Moscow in part because of the need to balance the U.S. But the Turks swung too far away from the United States and now are repositioning. The miscalculation is to be expected in a country that is dealing with the fallout of an attempted coup. In the end, while Turkey will not get too close to the Russians, it will also keep its distance from the Americans.

These developments show how the Russians are at best a secondary player in the Middle East. Thus, moving forward, it will be more important to watch what the real regional powers, Turkey and Iran, do to come to terms with each other and the future of the Middle East.

Article Link To Geopolitical Futures:

Afghanistan's Unity Government Must Actually Unite

Ghani and Abdullah must put aside their differences, pettiness and egos.

By Ali Mohammad Ali
The National Interest
August 24, 2016

When the Office of the Director of National Intelligence published the Worldwide Threat Assessment of the U.S. Intelligence Community earlier this year, Afghanistan earned this assessment: “Political cohesion will remain a challenge for Kabul as the National Unity Government will confront larger and more divisive issues later in 2016, including the implementation of election reforms, long-delayed parliamentary elections, and a potential change by a Loya Jirga that might fundamentally alter Afghanistan’s constitutional order.”

At the time, the leaders of the National Unity Government and their senior officials disagreed with the prognosis of impending divisiveness. In contrast, they emphasized the likely challenges they would face as centering around threats from the Taliban, Al Qaeda and ISIS. The void of regional cooperation, particularly Pakistan’s inaction, brings the Taliban leaders to the negotiating table and denying them sanctuary in Pakistan.

Yet the rising tension between Ashraf Ghani and Abdullah Abdullah that was recently rendered embarrassingly public suggests that Afghanistan is indeed confronting a looming crisis of division. The frustrations of Ashraf Ghani and Abdullah Abdullah became public after Abdullah went on criticizing Ashraf Ghani in a press conference for not meeting him in the past three months, and calling the president unfit for the job. In response, to Abdullah’s criticism Ashraf Ghani’s office issued a statement called Abdullah’s comments irresponsible and not in line with the standard and spirit of governance.

The political crisis between the leaders of the National Unity Government comes at a time when Taliban are gaining momentum in strategic parts of Afghanistan. The Afghan National Defense and Security Forces are losing a key battleground. They are in full retreat from key strategic areas such as southern Helmand province. The presence of the Taliban around Lashkar Gah, in some places as close as only four or five kilometers from the provincial capital, suggest they intend to encircle the city similar to the siege of Kunduz last September, using the adjacent districts as a launching pad.

These moves show plainly the Taliban’s ambition to capture an important provincial capital. If the Taliban managed to capture Lashgar Gah, it would have incalculable political and security consequences for the Government in Kabul, and to the allied efforts of the international community, in particular the United States. Similarly, key districts in Kunduz, Baghlan and Takhar provinces fell into the hands of the Taliban.

Since the beginning of the year, the Afghan National Army has faced a dramatic casualty rate in the battlefield. Army recruitment has reached its lowest point to date and desertion has risen to an all time highest. These events are ultimately attributed to the weak leadership and lack of political will of the National Unity Government to implement desperately needed reforms.

There are also indications of growing ethnic polarization in the northern provinces of Afghanistan as a sizeable number of the former warlords are scheming ways to remobilize and re-arm their followers against the Taliban if the political and security situation deteriorates further. If such trends manifest, Afghanistan will face a heightened political and military fragmentation as the means of violence is decentralized in the hands of competitive rearmament by different groups, with their diverse agendas.

Another serious political threat facing the National Unity Government is former Afghan president Hamid Karzai, who has been engaged in ceaseless politicking with influential figures and groups from around the country. It is speculated that the hive of intrigues buzzing behind the walls of Karzai’s fortress next door to the presidential palace are aimed at manipulating a take over of an expected upcoming Loya Jirga (“grand council”) mandated to decide upon changing the Constitution, one of the provisions of the formation of the Unity Government. If Karzai has control, whether direct or indirect, over the outcome of the Loya Jirga, he could contrive to dissolve the NUG and establish a provisional government, headed by himself. This has served as an excuse for the NUG leaders to delay the Loya Jirga. Yet, these very delays are emboldening Karzai and leading to further deterioration of political legitimacy ultimately more harmful than Karzai’s meddling.

If any or all of these processes are allowed to continue unhindered—a re-armament by warlord militias, a territory grab by the Taliban, or further delay of the promises of electoral and constitutional reform of the Unity Government—it would drastically intensify the conflict, militarize the society even further and sabotage the precarious progress in strengthening the rule of law. There will be a deepening of the crisis of political legitimacy. Under these fragile circumstances, Afghanistan cannot afford any of those outcomes.

Afghanistan has long been a playground for shortsighted leaders who sold the future of the Afghan people in exchange for expediency, for their own gratification or glory, for power, or simply, for money. Ashraf Ghani and Abdullah Abdullah must break this pattern, by putting aside their differences, pettiness and egos. Instead, they must face up to the security crisis encircling the country, and the cracks in the ship that have started to leak as a result of inattention to the promises made at the outset of their discordant ascent to the palace. Now is the time to lay the foundation anew. It is time to deliver Afghans a reformed political structure, elections and security. It is time to actually become a unity government.

Article Link To The National Interest:

Jailing Jihadis For Destroying Treasures

How the International Criminal Court is prosecuting a Malian al Qaeda terrorist for the desecration of history in Timbuktu.

By Christoper Dickey
The Daily Beast
August 24, 2016

The monsters of al Qaeda and the so-called Islamic State probably never will be held to account the way the Nazis were at the Nuremberg Tribunals after World War II. The snarled red tape and convoluted politics of today’s international organizations will frustrate such grand designs for justice, even after the self-proclaimed “caliphate” is reduced to dust on the ground and unread footnotes in history.

But the trial going on at the International Criminal Court in The Hague this week gives us a hint of what can be done, and, indeed, what must be done.

The defendant, Ahmad al Faki al Mahdi, served the branch of al Qaeda in North Africa that very nearly took over all of the nation of Mali in 2012, until French troops intervened. The terrorists’ greatest prize was the ancient city of Timbuktu, al Mahdi’s hometown, and he did everything he could to show he supported his fanatical mentors’ gruesome diktats.

But al Mahdi is not on trial for the amputations, beheadings, torture, and rapes associated with the “holy war” waged by al Qaeda, ISIS, and their offshoots.

Al Mahdi is on trial for massacring history.

We have seen a lot of savage iconoclasm over the last 15 years. In 2001, the Taliban brought down the towering twin statues of Buddha in Bamayan, Afghanistan—a prelude to the operation by their allies in al Qaeda, who brought down the twin towers of the World Trade Center in New York only a few months later.

More recently we’ve seen the devastation wrought by ISIS on the ancient monuments of Nimrud in Iraq, and those of Palmyra in Syria: winged bulls turned to gravel with jack-hammers, the Temple of Baal erased from the map with high explosives.

These would-be holy warriors claim to have a direct line to God, a unique and exclusive understanding of His Truth. They are determined to destroy anyone and anything that does not fit their view, and they do all this in the name of Islam.

So it is worth noting that al Mahdi is on trial, specifically, for leveling the mausoleums of Muslim saints in a city that was one of the cradles of Islamic civilization, and that the prosecutor who leveled the charges against al Mahdi in court on Monday, Fatouh Bensouda, is a Gambian woman from a large Muslim family. She knows where this guy is coming from, which may account in part for the power and passion of her opening statement.

This trial, said Bensouda, is about answering “the destructive rages that mark our times, in which humanity’s common heritage is subject to repeated and planned ravages.”

The mausoleums al Mahdi destroyed were “the embodiment of Malian history, captured in tangible form, from an era long gone yet still very much vivid in the memory and pride of the people who so dearly cherished them.”
“Your honors,” Bensouda told the judges, “culture is who we are.”

Bensouda has been criticized for failing to make the ICC a new Nuremberg. But the criteria she has to work with are suffocating and contradictory.

The court has no jurisdiction over territories where the government is not a party to the Rome Statute that established the court in 1998. So the court has no territorial jurisdiction over the ISIS heartland that straddles Iraq and Syria, neither of which signed on.

The U.N. Security Council can refer cases, but the United States is not a party to the statute, and neither are Russia and China. That’s three of the five members. The United Kingdom, which did sign on, has discovered that its soldiers are the only people being investigated for crimes in Iraq, even now. (Some in the U.K. would like to see former prime minister Tony Blair charged, but that hasn’t happened.)

Theoretically, individuals can be brought before the court if they are from countries that are parties to it. ISIS has recruits who fit that criterion who are from France, the U.K., Germany, Belgium, the Netherlands, and Austria, among other countries. But the court is supposed to limit its actions to “those most responsible for mass crimes,” as Bensouda declared in April, and since “ISIS is a military and political organization led by nationals of Iraq and Syria,” that limits her ability to pursue them.

Al Mahdi’s case, however, was handed over to the court by the Malian government after al Mahdi was arrested in neighboring Niger last year, and it fits all the narrow criteria. Mali is a party to the Rome treaty, al Mahdi is a Malian citizen, and he was the head of the Hisbah, the “morality brigade” that went on a destructive rampage in Timbuktu for 10 days in June and July of 2012.

The depth and importance of the culture there, and the threats to it under jihadist rule, are the subject Joshua Hammer’s recent book The Bad-Ass Librarians of Timbuktu. He sees the case as “an important breakthrough and symbol to both the jihadis and their beleaguered subjects that these kind of crimes won’t go unanswered.”

“To be sure, there’s an argument to be made that the court should be channeling its resources in pursuit of those who stoned adulterers to death and chopped off hands and feet,” says Hammer, but this case “reminds the world that the destruction of cultural patrimony has been one of the jihadists’ most brutal and effective means of intimidating, demoralizing, and breaking the spirits of the people whose lands they occupy.”

As Bensouda put it, “To intentionally direct an attack against historic monuments and buildings dedicated to religion constitutes a war crime” and is “a profound attack on the identity, the memory and, therefore, the future of entire populations.”

We do not know how often Bensouda talked this way to al Mahdi before the trial, but this much we do know. When he stood before the court on Monday, he admitted his guilt.

“I would like to seek the pardon of the whole people of Timbuktu,” said al Mahdi. “I would like to make them the solemn promise that this was the first and the last wrongful act that I will ever commit. I seek their forgiveness.”

Even with his admission of guilt, he is facing many years in prison.

“I am pinning my hope on the fact that the punishment meted out to me will be sufficient for the people of Timbuktu, and Mali, and mankind to offer forgiveness,” he said.

Article Link To The Daily Beast:

How Erdogan Spins Flaws Into Gold

Turkish people are falling in love with Erdogan all over again in the post-coup era despite the emergency decrees, increasing terror attacks and continuous purges.

August 24, 2016

If a political leader fails repeatedly, it is expected that he will eventually lose power. Throughout his reign as prime minister and president, Recep Tayyip Erdogan has admitted many times to being deceived by his allies and best friends. His failures have had a high cost for the country. Syria’s President Bashar al-Assad, the pro-Kurdish Peoples' Democratic Party and the Fethullah Gulen movement, just to name a few, have all managed to mislead Erdogan. Indeed, Gulenists have fooled Erdogan multiple times since the December 2013 corruption scandal. In his frequent public speeches, Erdogan is notorious for uttering a comment and then vehemently retracting or denying it at another appearance.

In any other time and place, a political leader who flip-flops this frequently would pay for it in the next election. This is not the case in Turkey. On the contrary, in every election Erdogan has come out stronger, and in every public gathering he has managed to attract a bigger audience than any other leader in the country. This has been a major embarrassment for the pundits who repeatedly claim Erdogan’s power has diminished.

So what is Erdogan’s secret? How could there be growing support for a political leader who has repeatedly been conned in domestic and international politics?

Between July 16 and Aug. 8, Al-Monitor asked several participants at pro-democracy rallies in Ankara and Istanbul these questions. Here is a brief explanation of Erdogan’s exceptionalism in their eyes:

The most commonly expressed reason: “He is one of us.” Even though Erdogan lives in a palace and travels with hundreds of security personnel, people still view him as approachable and friendly. The way that Erdogan expresses himself — simple, one dimensional, easy to follow — resonates with many who attend these rallies. It is palpable that Erdogan lulls them into a sense of comfort, security, predictability and long-lost sense of national pride. Even though almost every other week the country is rocked by a brutal terror attack costing dozens of lives and millions of dollars, people believe the security issue is not caused by Erdogan, but persists despite his best efforts.

Next is the determination that everyone against Erdogan is against Islam, and therefore must be punished. The way that Erdogan utilizes language and symbolism is vague but potent. Even if at the end of the speech the listener is not quite sure what the point was, he is filled with emotion. Erdogan’s words are much like the jingles of his campaign. They manage to whip submission and fear into a highly emotional crowd that is ready to cheer for whatever he says.

This unconditional love and acceptance ties into the second reason they do not demand accountability or question if he is fit to be the leader of a democratic country while repeatedly failing to deliver on his promises. One Istanbul street vendor who is also from Erdogan’s hometown of Rize told Al-Monitor, “Erdogan has been fooled because he is good-hearted. Why punish him for the crimes of the others? The ones who deceived Erdogan are the guilty ones, and hence they are ones we should punish.”

An American scholar who has resided in Turkey for the last decade concurred with these statements, saying, “Erdogan’s magic lies in the fact that he can consistently renew and reinforce symbols. His hand gestures, his slogans, his songs, they appeal to the people and instill a sense of belonging in them. When he says he was cheated, people do not think of it as he failed, but rather he comes out clean and the failed policy is indeed now a betrayal. He is seen as a good Muslim because his heart is in the right place.”

Indeed, accountability is not a word that is heard much in the news or in daily conversations in Turkey. As on Aug. 3, one bureaucrat waving a Turkish flag in front of the National Intelligence Agency told Al-Monitor, “Erdogan only bows before God.” The way that accountability is viewed in Turkey nowadays is not based on facts but rather on emotions, and Erdogan is exceptional in his ability to detach meaning from fact.

Erdogan’s magic is potent but it still requires a few tools handled with finesse. One of the most important is the media. Erdogan acknowledges the importance of journalists, whether they are complimentary or critical of him, and rewards and punishes accordingly. The best way to grab people’s attention and hold it in Turkey is through television.

Erdogan has a near monopoly over what appears in the news day in and day out. After the coup attempt and the state of emergency declaration, media restrictions and the purge of critical journalists (even those unrelated to the Gulen movement) have skyrocketed. The education system is under strict surveillance, and regulations require strict obedience from both teachers and college professors. Anyone who steps out of line risks losing a job and being scolded over social media as a spy, traitor or even a terrorist. To make matters worse, all branches of art from caricature to theater, ballet and sculpture are suffocating with disappearing state funds, arbitrary government regulations and increasing purges.

Yet the crowds attending the massive orchestrated rallies believe this is all for the good of the country. One participant at an Aug. 6 rally in Taksim, Istanbul told Al-Monitor, “He is the man! He does not need deliberation that will only slow him down. If he made all the decisions on his own, without all these obstacles like the Constitutional Court or opposition parties, we will be much better and richer. All these institutions slow him down.”

Another reason for this blind support is the security deficiency. Since the elections of June 7, 2015, Turkey’s vulnerability has increased. When times are rough, the nation is constantly called to stand united, stay alert and snitch on their neighbors, and the easiest way to safety means standing up for the leader, Erdogan.

To Erdogan’s rescue in blaming all that is gone wrong on those who betrayed him are his beloved conspiracy theories. The United States, for example, is the usual suspect for everything wrong in Turkey, an easy enemy du jour. On the news, Turks have been watching nightly confessions of Gulenists who tell the country about several terror incidents that have happened due to their own deliberate ignorance of intelligence and deliberate failure to comply with standard security procedures. Israel-bashing, which used to be a favorite activity for the AKP elites, is no longer popular. Now that Erdogan has agreed to normalization of relations and scolded the Islamists who dared to speak against him, no one dares to include the Mossad as a potential culprit.

Overall, we see that common sense and logical discussions are disappearing from the Turkish social space, signaling a troubling intellectual decay. Erdogan has managed to control almost all artistic expression that could affect the Turkish mindset and tarnished the reputation and credibility of anyone who dares to speak up against him. Hence, when he says he is betrayed, the masses keep clapping and feeling proud of him.

As one scholar told Al-Monitor, “Erdogan’s politics is anesthetic to the masses, hence the real pain is not yet acknowledged.’’ Perhaps that is Erdogan’s magic.

Article Link To Al-Monitor:

How Erdogan Spins Flaws Into Gold

The Iran Nuclear Deal And The Case For Keeping Tehran Out Of The WTO

Sanctions aimed at a single WTO member, like Iran, constitute discrimination and contradict the spirit of the entire organization.

By David S. Jonas and Elizabeth Urrutia
The Jerusalem Post
August 24, 2016

The Iran deal is signed, nuclear-related sanctions are lifted and Iran has announced its intent to pursue full World Trade Organization (WTO) membership. Some WTO members, like Switzerland and the UK, are already expressing support for Iran’s bid. The United States, however, should not be one of them.

The US should oppose Iranian membership until the Iran deal’s restrictions expire.

Iran first applied to the WTO over 19 years ago. The US, believing Iran sought nuclear weapons in violation of the Nuclear Nonproliferation Treaty (NPT), opposed Iranian accession and delayed the application for several years. When Iran agreed to suspend its nuclear program in 2005, the United States yielded, allowing Iran to become a WTO observer state and begin the process toward full membership.

Iran’s application has progressed little since then.

With recent increased international support, however, Iran is poised to acquire full membership, realistically within the next few years.

WTO membership is a negotiated process that may be, and has been, delayed for any number of reasons, including political disputes. That said, Iran has partially completed the process, is highly motivated to accede and its bid has more international support than ever before. Facilitating Iranian membership is also in the WTO’s interests. Iran remains the largest economy outside the 162 member WTO, and its accession would bring the organization that much closer to universality.

Importantly, WTO membership promises Iran certain treatment from the US and other WTO members.

The WTO and its governing agreements normally prohibit members from discriminating between trade partners. Once Iran becomes a member, the US will be obliged to treat Iran as it would any other trade partner.

While exceptions to this principle exist, they apply only in strict circumstances. Non-discrimination – like reduced trade barriers, predictability, and competition – is a basic principle of the WTO multilateral trade system. Exceptions, even for national security, are rarely successful and generally frowned upon in the WTO regime.

Sanctions aimed at a single WTO member, like Iran, constitute discrimination and contradict the spirit of the entire organization.

Though the US could justify discriminatory sanctions against Iran, such sanctions undermine America’s credibility as a WTO member and provide Iran with a potential cause of action under the WTO dispute resolution system.

While the US lifted some sanctions against Iran after signing the deal, many remain in place – i.e. those imposed by the United Nations (UN) for Iran’s human rights violations, support of terrorism, etc. The US, as a UN member, is obliged to maintain these sanctions, even if that means contradicting its obligations as a WTO member. Thus, Iranian WTO membership creates immediate conflict for the US as a member of both the WTO and the UN.

Iranian WTO membership would become even more problematic if Iran violated the Iran deal, prompting the US to reimpose nuclear-related sanctions – a likely scenario given Iran’s rejection of international norms and legal obligations, particularly regarding nuclear nonproliferation. Iran violates even legally binding international obligations, let alone mere political commitments like the Iran deal. A party to the NPT and a UN member, Iran has repeatedly violated its safeguards agreement and contravened UN Security Council resolutions. Iranian noncompliance becomes even more likely once it accedes and WTO membership ceases to be an incentive.

Given the sanctions still imposed by the US, US obligations as a WTO and UN member, the desire to incentivize Iran’s full compliance with the Iran deal, and Iran’s past noncompliance, the US should wait until the deal expires to support Iranian WTO membership.

Turkish Military, U.S.-Led Coalition Launch Operation To Sweep Islamic State From Syria Town

By Humeyra Pamuk and Umit Ozdal
August 24, 2016

Turkish special forces units and jets supported by warplanes from the U.S.-led coalition launched an operation in northern Syria on Wednesday to wipe out Islamic State militants along the border with Turkey, Turkish officials said.

The Turkish army began firing artillery rounds into the Syrian border town of Jarablus at around 0100 GMT (0900 ET) and Turkish and U.S. warplanes pounded Islamic State targets with airstrikes as part of the operation, Turkish military sources said.

It was the first time warplanes from NATO member Turkey have struck in Syria since November, when Turkey shot down a Russian jet near the border, and the first known incursion by Turkish special forces since a brief operation to relocate the tomb of Suleyman Shah, a revered Ottoman figure, in February 2015.

Turkey and the United States hope that by sweeping Islamic State from the border, they can deprive it of a smuggling route which long saw its ranks swollen with foreign fighters and its coffers boosted by illicit trade.

White and grey plumes of smoke rose from atop the hills of Jarablus, visible from the Turkish town of Karkamis across the border. The boom of artillery fire was audible as tanks opened fire from just inside Turkish territory.

Turkish military sources said a ground incursion had yet to start, but a group of Turkish special forces had entered Syria while Turkish and U.S.-led coalition jets hit four Islamic State targets and Turkish artillery struck more than 60 targets. Tanks were being positioned to secure the border, they said.

"The aim of the operation is to ensure border security and Syria's territorial integrity while supporting the U.S.-led coalition against Islamic State," one military source said, adding work to open a passage for ground forces was underway.

U.S. Vice President Joe Biden is due in Turkey later on Wednesday, the most senior U.S. official to visit since a failed July 15 coup shook confidence in the ability of the NATO member to step up the fight against Islamic State.

Turkey had vowed on Monday to "completely cleanse" Islamic State militants from its border region after a suicide bomber suspected of links to the group killed 54 people at a Kurdish wedding in southeastern city of Gaziantep.

Counter-terrorism police launched dawn raids targeting Islamic State members across Istanbul on Wednesday, the Dogan news agency said.

Turkey is also concerned about the growing influence of Syrian Kurdish militant groups along its border, where they have captured large areas of territory since the start of the Syrian war in 2011. Ankara sees them as tied to the Kurdish militants fighting an insurgency in Turkey.

At least nine mortar shells from Jarablus had landed into Turkish border town of Karkamis and nearby on Tuesday, forcing many residents to flee the town, a Reuters witness said.

The Syria operation also came as Syrian rebels backed by Turkey had said they were in the final stages of preparing an assault from Turkish territory on Jarablus, aiming to preempt a potential attempt by Syrian Kurdish YPG militia to take it.

Pre-Empting Kurdish Forces

The Kurdish YPG militia, a critical part of the U.S.-backed campaign against Islamic State, took near complete control of Hasaka city on Tuesday. The group already controls swathes of northern Syria where Kurdish groups have established de facto autonomy since the start of the Syria war.

Their growing influence has alarmed Ankara, which is fighting its own insurgency with militants from the outlawed Kurdistan Workers Party or PKK, who officials blame for an escalation of attacks in the southeast of Turkey.

Ankara is focused on preventing the YPG or its allies building on recent advances against Islamic State by capturing Jarablus. The U.S.-backed Syria Democratic Forces alliance (SDF), including the YPG, captured the city of Manbij, just south of Jarablus, from Islamic State earlier this month.

A Syrian rebel with one of the Turkey-backed groups said the fighters were waiting for the signal to enter Jarablus and a second rebel said around 1,500 fighters were now gathered at a location in Turkey to take part.

Turkey is still in shock after the failed July coup by rogue solders who tried to overthrow President Tayyip Erdogan and the government, killing 240 people and triggering a purge of suspected coup supporters in the army and civil service.

Angered by a perceived lack of Western sympathy over the coup, Turkey has chilled ties with Washington and the European Union while ending a diplomatic row with Russia and proposing more military cooperation with Moscow in fighting Islamic State.

Those growing ties between Ankara and Moscow are worrying Turkey's Western allies.

Turkish Deputy Prime Minister Numan Kurtulmus said this week that northern Syria should not become the domain of one group and that a "secure zone", an internationally policed buffer area Turkey proposed in the past, should be reconsidered.

Article Link To Reuters:

Samsung, Tencent Surge In Race To Become Asia's Most Valuable Firm

By Nichola Saminather
August 24, 2016

Tencent Holdings Ltd and Samsung Electronics Co Ltd are racing to be crowned Asia's most valuable company as expectations for robust earnings growth push their share prices to record highs.

Their surge - both have gained by a third this year - has made them the world's best performing large-cap tech stocks and highlights how these nimble Asian firms are thriving while rivals Apple Inc and Alibaba have struggled.

"These companies can grow earnings despite weaker global growth," said Andrew Gillan, head of Asia ex-Japan equities at fund managing firm Henderson Global Investors, which is overweight on Asian technology firms.

"The operating fundamentals of the Chinese internet sector particularly have surprised positively in the most recent quarterly results."

While many investors remain upbeat about Samsung and Tencent, some caution the firms are vulnerable to rapid swings in sentiment on any sign of slowing momentum. Samsung and Tencent have been more volatile than the Asia tech sector and the broader market this year.

On Wednesday, Samsung said sales of its latest flagship smartphone were out-stripping supply, but second-half profits could still take a hit if production shortfalls are not fixed and a recovery in components demand fails to eventuate.

Moody’s Investor Service also warned that Samsung’s profit margins might narrow in the second half because of seasonal factors in the consumer electronics business and competitive pressures.

For Tencent, the market expectations that are driving shares higher are themselves a risk, according to Nomura. A faster-than-expected slowdown in personal computer game revenue, aggressive spending and new products or business models from competitors could weigh on earnings, the bank warned.

The Numbers

Samsung and Tencent have added about $30 billion in market value since Thursday, surging to all-time highs. Tencent is valued at $249 billion, only 4 percent smaller than the most valuable Asian firm, China Mobile, at $259 billion. Samsung is now worth $239 billion.

Tencent is now the world's 12th-biggest company by market value and Samsung the 17th-largest, Thomson Reuters data shows. That's up from Nos. 26 and 33 respectively just five months ago, according to a PricewaterhouseCoopers ranking released March 31.

Samsung shares' have significantly outperformed Apple's - the Korean firm has leapt 50 percent over the past year, while the U.S. company has gained 3 percent amid concern about weak sales in China.

The gap between Samsung's price-to-earnings ratio of 12.4 and Apple's 12.7 is now the narrowest since late 2011, although Samsung is still worth less than half the $586 billion Apple, according to Thomson Reuters data.

Samsung's share price growth spurt comes after years of struggle in its smartphone business which left investors impatient for higher returns.

The firm revived mobile profits by restructuring its product line-up this year and is seeking ways to sustain earnings momentum. Buybacks and higher dividends have also boosted shares.

Tencent is significantly more expensive than Samsung. The Chinese internet firm, whose popular WeChat and Weixin messaging apps in China saw active monthly user numbers jump 34 percent in the second quarter, trades at 46.8 times earnings, closing in on Facebook's 59.

China's slowest economic growth in 25 years and some questionable acquisitions have clouded the outlook for Chinese e-commerce giant Alibaba, but Tencent has managed to thrive thanks in part to its focus on rapidly growing mobile gaming.

Tencent outshone peers including Baidu with a forecast-beating 47 percent jump in second-quarter profit, after it diversified into areas such as music, video and advertising.

HSBC expects further earnings growth, driven by new income streams such as advertising, premium content, cloud services and finance.

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As China E-Commerce Booms, Private Equity Sees Room For Growth In Storage Space

By Elzio Barreto 
August 24, 2016

When U.S. private equity heavyweight Warburg Pincus [WP.UL] started looking at China's logistics sector in late 2009, there were more modern warehouses in Boston than in the whole of the world's most populous country.

But as Chinese consumers embarked on an online shopping spree, demand has soared from appliance makers, express delivery firms and e-commerce companies such as Alibaba Group Holding Ltd and Inc, far outpacing supply and prompting a parallel binge in investment in warehouses and logistics businesses.

Deep-pocket investors including Carlyle Group LP, Canada Pension Plan Investment Board (CPPIB) and Warburg Pincus have splashed $12 billion on the sector in China since 2013, says real estate consultancy Jones Lang LaSalle.

"The thinking was even if it didn't necessarily scale to the size we were anticipating, we had a good sense that while Boston is a pretty decent size city in the U.S., China should have far more modern warehousing space over the longer term," said Jeffrey Perlman, who heads Southeast Asia at Warburg Pincus and also focuses on real estate investments across Asia Pacific.

"We were taking that directional bet that, with this transformative shift from a manufacturing-based economy to a service-, consumption-based economy, ultimately you need to store the goods somewhere."

Although China's economy expanded in the second quarter at the slowest pace since the global financial crisis of 2008-09, online shopping revenues have soared and are expected to double to 7.5 trillion yuan ($1.13 trillion) in 2018 from last year, consumer and internet consultancy iResearch estimates.

Online retail as a percentage of total retail in China has grown steadily to 12.6 percent, and is forecast to reach 17 percent in 2018, according to iResearch and China's National Statistics Bureau.

By comparison, U.S. e-commerce sales accounted for 8.1 percent of total sales in the second quarter of 2016, underscoring the fast adoption of online shopping in China, where consumers with rising incomes use smartphones to order everything from appliances and clothes to flowers and pizza.

India, another emerging Asian giant with a burgeoning middle class, has seen a similar trend and is also attracting investment in warehouses.

"These changes are structural changes," said Jimmy Phua, head of real estate Asia at CPPIB. "Certainly competition has been increasing. What we know, what we see is no secret, the world sees it as well. Other investors, other managers, can see that in this sector there will be sustained growth."

Rents Pressured

China's logistics market reached 1 trillion yuan in 2015, led by an increase in so-called storage spending that includes warehousing, processing and packaging of goods.

CPPIB has committed $2.6 billion to China's logistics market, including a $1 billion investment unveiled late in 2015 in a venture with Goodman Group.

Warburg Pincus-backed e-Shang has grown into one of the largest logistics providers for e-commerce companies including, with Thomson Reuters publication IFR saying the company could raise $1 billion in a 2016 initial public offering (IPO).

To be sure, the surge in investments has created an oversupply of warehouses and pressured rents, particularly in smaller cities, while increased competition from new players has made it harder to secure land in top-tier cities such as Beijing and Shanghai, analysts and investors said.

Still, investors expect the impact on rents will be less severe for large, more modern warehouses that have been the focus of private equity firms, while the oversupply of logistics space will likely be limited to lower-tier cities.

Real estate consultant DTZ Cushman & Wakefield forecasts warehousing space will grow 10 percent a year through 2020.

"E-commerce particularly is growing at rates that are significantly higher than the overall GDP growth, that's a huge demand driver for the logistics sector," said Jason Lee, Carlyle Group LP's head of Asia real estate.

Carlyle-backed China Logistics Property Holdings Co Ltd, which just went public in Hong Kong in a $459 million IPO in July, is spending 2.1 billion yuan in 2016 to add some 1.1 million square meters (11.8 million square feet) of new warehousing space to its portfolio this year and build new warehouses that will be completed in 2017.

With planned investments of $1.8 billion through 2019, the company expects to build 34 new logistics parks, adding 4.5 million square meters of space, according to its IPO prospectus.

Hong Kong-based real estate private equity firm Gaw Capital Partners, which joined last year with logistics company Vailog China to develop and buy warehouses, is raising a second investment vehicle after making a $300 million push last year.

The second vehicle, with co-investments from sovereign wealth funds and pension funds, will close in the next 3-6 months and will be at least the same size, said Kenny Gaw, president and managing principal at Gaw Capital.

"I can't predict how the growth of e-commerce will be in the next 10 years, but it's still one of the fastest growing sectors in China," Gaw said. "And China will remain the biggest e-commerce market in the world."

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Asian Stocks Slip On Profit-Taking; Oil Falls

By Saikat Chatterjee 
August 24, 2016

Asian stocks edged lower on Wednesday as strong U.S housing data overnight increased the chances of an interest rate increase in coming months, prompting some investors to take profits, while oil prices slipped after a surprise jump in U.S. inventories.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.4 percent in early trade. It has risen more than 14 percent since late June, and hit a 1-year high last week, helped by increased interest in emerging markets after a shock vote by Britain to exit the European Union.

Since late July, emerging market funds have seen net inflows of some $13.2 billion, more than developed market funds in terms of assets under management, according to Institute of International Finance data.

Within the region, Hong Kong stocks .HSI slid 0.8 percent on Wednesday as investors sold financials, while Japanese markets .N225 led gainers, rising 0.6 percent.

"China's stock markets have benefited from Brexit-related capital flows but that impact is fading and we are cautious on the market outlook given increasing signs of economic weakness," said Francis Cheung, head of China and Hong Kong strategy at brokerage CLSA.

While Hong Kong's benchmark index has rallied 18 percent since late June, on a price-to-earnings basis, it still remains around one standard deviation below a 20-year average, indicating investors are not fully convinced about the durability of the gains.

Compounding the anxiety, recent Chinese economic data has been anything but cheerful. Both exports and imports fell more than expected in July and government officials have repeatedly said the economy is facing downward pressure.

However, the pessimism around China has been balanced by growing optimism around emerging markets as some investors such as bond giant PIMCO are slowly turning more bullish, citing a rebound in growth and improving economic fundamentals.

On a year-to-date basis, MSCI's emerging market index .dMIEF00000PUS has outperformed the world index .dMIWD00000PUS on a total returns basis, with most of the gains seen since June, according to Thomson Reuters Datastream.

U.S. housing-related stocks .HGX jumped 2 percent on Tuesday after the Commerce Department reported new U.S. single-family home sales soared unexpectedly in July to near nine-year highs. Stocks in both Europe and the U.S. ended higher.

Global central bankers gather in Jackson Hole, Wyoming, late this week with investors focused on a speech by Fed Chair Janet Yellen on Friday, hoping for more clues on policy.

"At this juncture, the consensus is coalescing around the view that Yellen will bait the market enough to sustain further rate normalization expectations for this year without telegraphing a September hike," analysts at OCBC in Singapore wrote in a note.

In currency markets, the spike in new U.S. home sales pushed the dollar to 94.6 against a trade-weighted basket of currencies =USD after a drop of more than 2 percent ar this month.

The Australian dollar AUD=D3 looked set to add to recent gains as Australia's relatively higher interest rates attracted overseas investors.

Oil prices tumbled, reversing early gains, after the American Petroleum Institute (API) reported on Tuesday that U.S. crude inventories rose by a surprising 4.5 million barrels last week.

Brent crude LCOc1 fell 1 percent to $49.46 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 slipped 1.3 percent to $47.48 in early deals.

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Dollar Edges Up, As Investors Wait On Fed, Jackson Hole

By Lisa Twaronite 
August 24, 2016

The dollar edged up on Wednesday, moving off lows touched against the yen overnight, as markets looked to a gathering of global central bankers in Wyoming for clues on whether the Federal Reserve is poised to hike interest rates again.

Data on Tuesday showed new U.S. single-family home sales unexpectedly rose in July, reaching their highest level in nearly nine years as demand increased broadly, brightening the housing market outlook.

Central banks will gather in the mountain resort of Jackson Hole later this week, with markets focused on a speech by Fed Chair Janet Yellen on Friday.

Recent hawkish comments from Fed Vice Chairman Stanley Fischer and New York Fed President William Dudley have raised some investors' expectations that Yellen might also take a less cautious tone.

The dollar inched 0.2 percent higher to 100.45 yen JPY= after nudging below 100 yen overnight to 99.925. The pair has been mired in a narrow 99.55-102.83 range this month amid a dearth of directional cues, with liquidity low as many market participants take summer holidays.

"My forecast for the next few months is around the current range, because investors are worried about economic uncertainties, and the U.S. election is coming soon" in November, said Harumi Taguchi, principal economist at IHS Markit in Tokyo.

The dollar index, which tracks the U.S. unit against a basket of six major rivals, was up 0.1 percent at 94.650 .DXY.

News that North Korea fired a submarine-launched missile had little impact on foreign exchange trading. The missile flew about 300 miles (480 km) before splashing into the Sea of Japan, a U.S. defense official said.

"It could have been an excuse for some people to trade, but it wasn't a major factor," said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities.

Instead, markets are waiting for Jackson Hole for any fresh signals on the U.S. monetary policy outlook.

"The number two and number three officials have spoken. Will what she says be different?" Imaizumi said, referring to Yellen.

Minutes from the Fed's July 26-27 policy meeting showed officials were divided over whether to raise rates soon, with some insisting that more solid economic data were needed before any tightening.

The euro was down 0.1 percent against the greenback at $1.1294 EUR=, though it crept 0.1 percent higher against the yen to 113.43 EURJPY=.

Data on Tuesday showed that surprisingly strong growth in France supported stable euro zone private business activity during August, underpinning the euro.

Sterling slipped 0.2 percent to $1.3172 GBP= after it touched a three-week high of $1.3210 overnight after manufacturing exports data suggested that Britain's economy is holding up surprisingly well in the aftermath of its vote to exit the European Union.

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