Wednesday, August 31, 2016

Holding The Line In Aleppo?

Obama keeps drawing red lines and backing down, destroying American credibility.

By Steve Chabot
The National Interest
August 31, 2016

The image of Omran Daqneesh, a five-year old Syrian boy pulled from a damaged building in rebel-held Aleppo covered in dried blood, has captured the world’s attention. Omran Daqneesh shows us the human cost of failing to enforce red lines. A “red line” is an unequivocal threat designed to get the other side to back down. But, for President Barack Obama, they work in the reverse: every time he draws a “red line,” he backs down.

In 2012, President Obama drew a “red line” against chemical warfare in Syria.

In 2013, he backed down.

At the United Nations in 2015, President Obama drew another “red line” that threatened the use of force if chlorine weapons were used in Syria. Once again he backed down.

During the current siege of Aleppo, the UN’s Special Envoy for Syria, Staffan de Mistura, stated that it appears that Syrian President Bashar Assad’s regime has used chlorine weapons against a rebel-held neighborhood. The Obama Administration has responded with a press release that did not threaten any consequences. U.N. Ambassador Samantha Power denounced the “horrific and continuous use of chemical weapons by Syria” without specifying whether any action would be taken against Assad.

Will Barack Obama ever enforce any of the “red lines” he has drawn against Syria’s use of chemical weapons?

In September 2012, President Obama said in a news conference, “We have been very clear to the Assad regime, but also to other players on the ground, that a red line for us is we start seeing a whole bunch of chemical weapons moving around or being utilized. That would change my calculus. That would change my equation.” With those few words, Obama mortgaged our reputation and credibility. But after Bashar Assad killed over 1,000 civilians with sarin gas in an attack outside of Damascus in 2013, Obama defaulted on his obligation. He wrecked our credibility.

Russian president Vladimir Putin swooped in with a diplomatic solution that supposedly disarmed Syria of its chemical weapons stockpile. Yet, the Assad regime continued using chemical weapons. A new U.N. report is likely to attribute a number of chemical weapons attacks over the past three years to the Assad regime. In March 2015, the Obama administration sponsored and passed a UN Security Council Resolution that threatened the use of force if chlorine weapons were used in Syria. A March 2016 report stated that 161 chemical weapons attacks were responsible for the deaths of nearly 1,500 civilians and 14,581 injuries. It estimated that nearly one-third of these used chlorine gas.

A majority of the attacks occurred after the 2015 UN Security Council resolution that threatened the use of force in retaliation for the use of chlorine gas against civilians. These are the costs of failing to enforce red lines. After the recent attack in Aleppo, will President Obama finally enforce the “red line” he drew in 2012?

Will he make good on his threats at the U.N. in 2015? Or, will he back down again?

President Obama’s actions in Syria in 2013 damaged America’s ability to make credible threats to its enemies and dependable promises to its allies. In an interview with Foreign Policy, former secretary of defense Chuck Hagel said of Obama’s August 2013 decision to back down, “There’s no question in my mind that it hurt the credibility of the president’s word when this occurred.” Hagel told Foreign Policy that his counterparts throughout the world told him that Obama’s decision to erase his “red line” shook their confidence in the forty-fourth president.

Both history and professional experience on the House Foreign Affairs Committee has shown me that credibility counts in foreign policy.

First, when leaders break their commitments, it demonstrates that they are incapable of managing a country’s foreign policy. Immediately after the Munich Crisis, it is true that then prime minister Neville Chamberlain was greeted with parades and public applause. However, when Hitler’s true colors were revealed, history was less kind to him. Today he is regarded as one of Britain’s worst prime ministers, and the critics of Munich, starting with Winston Churchill, are seen as having been far-sighted.

Second, when leaders back down, it hurts the reputation of the nation in the eyes of its enemies and its allies. To return to the pre-World War Two period, the crises over the Rhineland, the absorption of Austria and Munich demonstrated that weakness begets aggression. When leaders fail to make good on their threats, they will only encourage the most ruthless actors in the international system.

We are learning the same lesson all over again when it comes to the nuclear deal with Iran. A series of hearings held by the House Foreign Affairs Committee have shown that despite the diet of carrots that the Obama administration has fed the regime in Tehran, Iran remains a steadfast supporter (and exporter) of terrorism, an enemy of Israel, and a serial violator of human rights. After the nuclear deal was concluded, our allies throughout the Middle East felt the U.S. had abandoned them.

When faced with credible threats to use force, aggressors back down. During the Cold War, Soviet leader Nikita Khrushchev issued a series of threats over Berlin. When the Eisenhower and Kennedy Administrations refused to back down, Moscow blinked. When Khrushchev initiated the Cuban Missile Crisis, Kennedy put a naval quarantine in place around the island and demanded that the nuclear-tipped missiles be removed. Again, Moscow blinked, and within a year Khrushchev was removed from office by the Politburo for his recklessness.

Former defense secretary Hagel said, “A president’s word is a big thing, and when the president says things, that’s a big deal.” (We should add prime ministers and other heads of government and state to that list as well.) Anytime a leader draws a red line, she/he puts their country’s reputation for resolve on the line. Both the public and the international community watch to see if a leader is up to the task of managing the state’s foreign policy. Upholding or erasing “red lines” signals to a state’s enemies and allies whether it will back up its commitments.

After having decimated our credibility, how can we expect our allies to trust us? How can we expect our enemies to respect our threats? The recent progress being made against ISIS in Manbij, Sirt and on the outskirts of Mosul is welcome. However, it is important to remember our reputation and credibility is critical to ultimately defeating the Islamic State. The Assad regime recently bombed the city of Hasakah, home to American military personnel and our Kurdish allies battling ISIS. A Pentagon spokesman said such actions were not "well advised." A day later, the Syrian Air Force targeted Hasakah again. These are the costs of repeatedly backing down from “red lines.”

In 2012, President Obama drew a “red line” over Syria’s use of chemical weapons. He backed down, undermined America’s credibility and opened the door to Russian intervention in the country’s civil war. He drew another “red line” in 2015 at the U.N. Security Council. He threatened to use force if chlorine weapons were used in Syria. He backed down a second time. Amid reports that the Assad regime has used chlorine weapons in Aleppo, will the Obama administration honor its “red lines”? Or, will it just back down again?

For some, concepts like “red lines,” reputation and credibility are abstractions straight from the Beltway. In order to understand the cost of failing to honor a “red line,” think of the image of five-year old Omran Daqneesh. Then, think of the hundreds of thousands of men, women, and children just like him.

Article Link To The National Interest:

How Did Joe Biden Become Blusterer-In-Chief?

He acts like America’s favorite uncle, but he carries grave responsibilities.

By Robert W. Merry
The National Interest
August 31, 2016

Joe Biden has lost his rudder. Since his arrival in Washington nearly forty-five years ago, barely old enough to claim the Senate seat he had just won in Delaware, he has maintained a reputation for being at times out of control, for running off at the mouth in embarrassing and outlandish ways. This part of his persona has contributed to many Americans’ view of him as a lovable old uncle who always means well but can’t quite help himself when it comes to keeping within the bounds of propriety.

But he isn’t our uncle. He’s vice president of the United States, enjoying by all appearances a broad diplomatic portfolio, a mandate to speak for his president and country on major global challenges of our time. That carries with it a responsibility for careful wording and a degree of discretion.

He clearly tossed that responsibility aside last week when he traveled to Riga, Latvia, to tell leaders of the three Baltic nations that they needn’t pay any attention to the campaign rhetoric of the Republican presidential nominee, Donald Trump. Biden dismissed Trump’s suggestion that NATO nations should meet their alliance responsibilities if they want military protection under NATO’s Article 5. It was, said the vice president, “nothing that should be taken seriously.” Standing on foreign soil, he ridiculed the opposition candidate by saying, “I don’t think he even understands what Article 5 is.”

It’s true, of course, that American political rhetoric has become increasingly shabby in recent years, with a particularly deep descent into ugly politics in this campaign year, some of it displayed by Trump himself. But even in that context, it’s worth noting that just a few years ago it was considered totally inappropriate for an American political leader to attack a political opponent, much less ridicule him, on foreign soil.

Trump is ahead of his time, and certainly ahead of Biden and his boss, Barack Obama, in recognizing that NATO has become in many ways an obsolete alliance. It was formed when the Soviet Union threatened western Europe with 1.3 million Soviet and client-state troops positioned for an invasion of the heartland of Western civilization. This called for strong Western solidarity, with a commitment of action of the kind codified in NATO’s Article 5. Now those menacing Soviet troops are gone, along with the Soviet Union itself. Russia no longer controls the territories from which an attack could be staged, and it is NATO now that has become a provocative, destabilizing force by pushing with ever greater belligerency right up to the Russian border.

This merits a debate in America, and Trump is fostering such a debate. The Trump case was adroitly presented in these spaces by Cato’s Ted Galen Carpenter, and thus I shall forgo plowing the same ground here. Suffice it to say that America’s commitment, through NATO, to protect the tiny Baltic States from invasion can’t be compared even remotely to the foreign-policy imperatives that drove the West toward its NATO unity in 1949 (nearly seventy years ago, in an entirely different world). On the contrary, it’s difficult to discern the national interest that is served by mounting commitments to go to war over tiny nations with no appreciable significance to American security.

On the same foreign trip, Biden went to Turkey to be treated with humiliating coolness by Turkish president Recep Tayyip Erdoğan, whose government has hinted at U.S. complicity in July’s failed military coup attempt and wants the extradition of a Turkish cleric living in Pennsylvania. These could be expected to unsettle U.S.-Turkish relations, but those relations already were unsettled by Turkey’s blasé attitude toward one of the foremost threats facing America and the West—the Islamic State, or ISIS, with its territorial hold on significant parts of Iraq and Syria. Turkey didn’t seem to care much about this particular threat and focused more on preventing territorial gains by Syrian Kurds near the Syrian-Turkish border.

Those are the same Kurds who, operating with American support and encouragement, have been the most effective force against ISIS in northern Syria, pushing it back and capturing numerous Islamic State strongholds. The Kurds even moved some twenty miles west of the Euphrates River, positioning them to control much of the Syrian-Turkish border.

When Erdoğan squealed in pain at this turn of events, the Obama administration promptly sided with Turkey and ordered its Kurdish ally to get back across the Euphrates. No doubt, the president was influenced by fears that recent events had pushed Turkey into the arms of Russia and Iran.

Leaving aside the merits of the administration’s stunning diplomatic dance, how should the United States have handled its decision to demand a Kurdish retreat? Answer: with diplomatic sensitivity, designed to avoid humiliating the Kurds. The best tack would have been a quiet approach, telling them without public fanfare what the United States wanted. Why alienate unnecessarily a loyal U.S. ally?

And how did Biden handle it during his stay in Turkey? With bombast and defiance. “We have made it absolutely clear,” he said publicly, that Kurdish forces “must move back across the river. They cannot, will not, and under no circumstances get American support if they do not keep that commitment, period.”

The Kurds did as they were told, but at what price in America’s fight against ISIS?

If Biden seems out of control in terms of his public pronouncements, his current state of mind is revealed by a remarkable interview he gave to the Atlantic’s Steve Clemons. It’s difficult to recall another sitting vice president who pounded his chest and danced around in verbal shadowboxing to the extent displayed by the vice president in that interview. An example:

“I can pick up the phone, call and go see Erdogan, as erratic as he may be, and say, ‘Look, this is in your interest. Let me tell you why.’ As Bibi [Netanyahu] said, they would not have normalized relations but for the fact that I convinced the Turks this was in their interest . . . I mediated.

“Or, you know, [Korean President] Park [Geun-hye] and [Japanese Prime Minister Shinzo] Abe. I go to see Abe and he says to me, ‘Will you help me with Park?’ And I call her and say, ‘Will you do this?’ And I don’t negotiate the agreement, but the end result was, because I had a personal relationship with both of them and trusted me, I could be an interlocutor, that was more like a divorce counselor, putting a marriage back together.

“But I can go down the list. I spent over an hour this morning with [Iraqi Prime Minister Haider al-] Abadi, and he’s calling me to ask me not only for help but advice. [After] the horrific bombings in Baghdad, I called him, and he said, ‘Can you help?’ And I said, ‘This is what you could do, and this is how you should do it.’ He asked me advice today and mentioned, ‘Well, so-and-so doesn’t like my deal.’ ‘Well, you should tell so-and-so’—meaning someone in Iraq, an opponent—‘why don’t you tell them this?’ He said, ‘You think that’ll work?’ I said, ‘Look, you know your politics better than I do, but I think it will work.’ And he goes, ‘OK, so how would you do it?’ So [it’s] as if I’m advising the minority leader on how to get something passed. But because of the relationship, not because I’m so smart—I’m pretty good at this stuff but that’s not it—they go, ‘Well, the guy’s not playing a game with me.’”

Assume all this is absolutely true, along with the rest of the remarkable braggadocio contained in the interview. Assume that Biden has leveraged his position and his global contacts to such an extent that he is able to mold and shape events at the highest levels of government and diplomacy throughout the world. Even then, these are not the words of a serious vice president. Serious vice presidents don’t place themselves at the center of the administrations they serve. But Biden even brags about not bragging. In recounting how Obama gave him the Iraq portfolio at the start of his administration, Biden explains his success in the role by saying, “The key is that they [his administration colleagues] realized that I wasn’t trying to get attention. I wasn’t going to be the guy claiming credit.” That was just before he said: “It makes sense to give me the problems that require husbandry every day. So I get Ukraine, I get Iraq, I get the relationship between Korea and Japan, I get Central America, I get Colombia.”

Biden’s Atlantic interview reveals the disposition of the man at the dawn of his career. Always susceptible to verbal intemperance and puffed up self-regard, he now displays those traits with greater abandon than ever. He has had a long and distinguished career, and he has earned the affection that he gets from his countrymen. But at the height of his fame, he somehow managed to slip into self-caricature.

Article Link To The National Interest:

The George W. Bush Administration Still Lives In A World Of Make-Believe

A recent review of my biography of President Bush reaffirms the arguments it seeks to dispute.

By Jean Edward Smith
Foreign Policy
August 31, 2016

Will Inboden’s recent review of my biography of George W. Bush illustrates the Bush administration’s ability to live in a world of make-believe. The errors he claims to have found in the biography exist not in the book but in his review.

Inboden begins by asserting that the conversation between Bush and French President Jacques Chirac on the eve of the Iraq war, in which Bush claimed the coming war was a battle against Gog and Magog before the final judgment, never took place. He also claims the source I cite, Kurt Eichenwald’s 500 Days, is by a partisan journalist “without any sourcing.”

Inboden is wrong on both counts. Eichenwald explicitly cites the article describing the role played by professor Thomas Römer, the biblical scholar at the University of Lausanne, who was consulted by Chirac’s office to interpret Bush’s remarks. The article is titled “George W. Bush et la Code Ezéchiel” and was published in Allez Savoir, the official journal of the University of Lausanne, in September 2007.

More importantly, Chirac himself confirmed the conversation in an interview with Jean-Claude Maurice, who was writing a book about Chirac. Maurice’s book, Si vous le répétez, je démentirai: Chirac, Sarkozy, Villepin (Paris: Plon, 2009), quotes Chirac at length about the discussion. Chirac said he was stupefied by Bush’s invocation of biblical prophecy and “wondered how someone could be so superficial and fanatical in their beliefs.”

Inboden’s denial of this incident sets the pace for his review, which is simply another attempt to rewrite history on Bush’s behalf.

Inboden’s next attack is on my attribution of the statement “We make our own reality” to Karl Rove. The statement appeared in a 2004 New York Times Magazine article by Ron Suskind, who attributed it to an “unnamed Administration official.” The journalist Mark Danner later said it came from “‘Bush’s Brain’ — for the unnamed official speaking to Suskind is widely known to have been none other than the selfsame architect of the aircraft-carrier moment, Karl Rove.” Danner is correct, and writers since have attributed the comment to Rove.

And so it goes. Inboden believes Bush’s war with Iraq has made America safer. He seems unaware that it was Bush who unilaterally changed the purpose of the war in Iraq when he announced on the flight deck of the USS Abraham Lincoln that we were going to bring democracy to Iraq. That instead of being liberators we were going to become occupiers. The military had not prepared for this, and neither had Secretary of Defense Donald Rumsfeld or Secretary of State Colin Powell. Diplomat Paul Bremer was named to head the occupation, the Baath Party was outlawed, the Iraqi Army dissolved, and the leadership council abolished. Bremer reported directly to the White House, and the progress that had been made toward restoring order was swept away. This was a personal decision made by Bush, facilitated by the White House staff, and the results have been horrendous.

Inboden attempts to place Bush in the same category as other presidents who often cited God in their public statements. All presidents do that. But Bush is the president who believed he was God’s agent put on Earth to destroy evil.

Overall, Inboden’s review represents an attempt to rewrite history based on Bush’s predilections. Bush was not America’s worst president, but the crises we face today because of the Islamic State are a direct result of his having led us to war unnecessarily. I have said elsewhere that the war in Iraq is the worst foreign policy decision ever made by an American president, and I see no reason to alter that assessment after reading Inboden’s review.

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The EU's Apple Ruling Is A Victory For Tax Confusion

By Editorial Board
The Bloomberg View
August 31, 2016

The European Commission’s decision to impose a tax bill of 13 billion euros ($14.5 billion) on Apple is unjust and unnecessary. And the harm is not confined to a single company: The ruling has cast a cloud of uncertainty over Europe’s corporate-tax rules, potentially affecting all multinational investors.

EU Competition Commissioner Margrethe Vestager says Ireland violated state-aid rules, which prohibit the selective support of particular companies. She may well be right. If so, the offenders are Ireland’s tax authorities, not Apple, which believed it was in compliance with the relevant national law.

The ruling will be appealed, and the grounds appear to be strong. A decision that looks back to taxes due 10 years before the Commission even opened its probe seems quite a stretch, if legal certainty counts for anything. Tax agreements between national governments and individual companies aren’t uncommon. If they can be reviewed after such a long delay, and with such huge financial consequences, multinational companies cannot know where they stand tax-wise.

Meanwhile, in any event, the issue has moved on. Ireland is phasing out its controversial "double Irish" tax structure. And all the advanced economies have agreed to new standards of corporate taxation that will include country-by-country reporting by multinationals and other measures to end tax-dodging practices. Ireland retains its 12.5 percent corporate tax rate, and doubtless intends to keep its place as a tax haven for multinationals.

There’s a further flourish. Perhaps responding to the U.S. government’s ferocious complaints about Apple’s treatment, Vestager invited other governments to examine the ruling to see whether Apple’s supposed tax debt was due to them rather than Ireland. In effect, she told the U.S. that it might get a piece. Supposing the state-aid rules were indeed broken, that would at least come closer to punishing the principal offender, Ireland’s government. On the other hand, it would compound the commission’s basic sin -- that of rendering the EU’s corporate-tax regime even more of an unfathomable mess than it was to begin with.

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Pence's Parallel Campaign

By Margaret Carlson
The Bloomberg View
August 31, 2016

On a recent Saturday afternoon in the dog days of August, Indiana Governor Mike Pence came to Patrick Henry College in Purcellville, Virginia, a state the Republican presidential ticket has almost no chance of winning.

The vice-presidential nominee went through the standard conservative applause lines -- gun rights, law and order, and judges who will protect the right to life. He then ticked off the bill of particulars against Hillary Clinton -- Benghazi, the Clinton Foundation, asking “hardworking Americans” to pay for big government programs. Pence is blessedly bland -- what you get after pressing “1” for English. He happily intones his usual line, “We do well to remember a simple truth, one that I was raised on, and that is that there will always be more in America that unites us than will ever divide us."

And who would disagree except, perhaps, Pence's running mate, the guy at the top of the ticket? Donald Trump is the reason folks came to see Pence but he’s not central to Pence’s presentation. Pence and Trump rarely campaign together. If Trump is Lewis Black, Pence is Mr. Rogers rambling on about how a bill becomes a law. He sticks largely to what he would be talking about anyway: protecting coal, gun rights, expanding the military and honoring his Irish-American father who drove a bus for 40 years. Pence doesn’t need to be normalized. He is Everyman. If one of the shuttle vans to satellite parking got a flat, you could see Pence changing the tire.

When Pence talks about Trump, it’s as if he’s his imaginary friend, a plainspoken “Negotiator-in-Chief” who will run government (small) like the efficient business it should be. He doesn’t refer to the fact that the dealmaker spent the prior week laying down a fog of confusion about one of the centerpieces of the campaign, a proposal to deport undocumented immigrants. There were no minorities to be seen and he doesn’t bring up the Great Negotiator’s recent effort to reach out to black voters by painting a description of the hellish lives they supposedly lead in the war zones Democratic rule has relegated them to.

There’s little red meat but the crowd is happy enough to be there. This is as close as they are going to get to the Big Guy since the ticket is running up to 17 points behind in Virginia. Pence acknowledges the elephant who isn’t in the room. “I’m not The Man,” he said. "I'm a B-list Republican celebrity,” adding “But you all are kind to be here today.”

From the moment the No. 2 awkwardly turned his head as Trump puckered up for a kiss at the Republican National Convention, Pence has been less traditional attack dog than Trump’s anger translator, compensating for the top dog when he goes rogue. When Trump criticized the Muslim-American parents of Captain Humayun Khan, killed in Iraq, Pence said they “should be cherished.” Trump won’t release his tax returns, Pence said his would be forthcoming. Sometimes words escape him. Pence LOL’d when a reporter repeated Trump’s boast that he would eventually win 95 percent of black voters. That was before Trump expressed no sympathy for NBA star Dwyane Wade’s cousin shot down in Chicago while pushing her 3-week old baby's stroller. Instead, his first instinct was to Tweet out what it meant for him: “Just what I have been saying. African-Americans will VOTE TRUMP!”

And so it goes. Presidential tickets often resemble arranged marriages: the husband and wife don’t know each other and hope that their parents are right that they have a lot in common and that love will flourish in time.

In this case, it’s barely a merger, much less a marriage. When the door closes to figure out what the campaign needs to do or how to prepare for the debates, Pence is not in the room and may be out of the loop. On CNN on Sunday, Pence said that on immigration, there would be “no path to legalization unless people leave the country” and that Trump’s recent words to the contrary were just a “mechanism, not a policy.” We’ll learn if he guessed right when Trump gives a much-delayed speech on the topic on Wednesday in Arizona.

It’s easy to see why Trump chose Pence. There weren’t that many clamoring for the job. On the short list, Newt Gingrich was too mercurial. Even Trump knows one Trump is enough. Trump and his wife, Melania, were most comfortable with Governor Chris Christie, but his daughter Ivanka and her husband Jared Kushner put the kibosh on that. As U.S. attorney for New Jersey, Christie sent Kushner’s father to prison.

Pence was the last man standing. He would add discipline but would never upstage Trump (when he introduced his running mate, the Donald spoke for almost a half hour before mentioning his name). Pence has governing chops tempered by Tea Party anti-establishment cred for challenging John Boehner for the House speakership in 2006.

Most importantly, Pence provides social, cultural and family values balance. He is a conservative, church-going, Bible-reading, long-married Midwesterner with the hair God gave him. With Pence, voters know there will be an adult in the White House.

What's less easy to understand is why Pence accepted the job.The governor was facing a tough race for re-election in Indiana having brought congressman’s experience to the statehouse. Compared with the stellar record of his predecessor, Mitch Daniels, he fell short. He made unforced errors such as a taxpayer-funded news service that critics dubbed "Pravda on the Plains." His biggest blunder was the Religious Freedom Restoration Act, which guaranteed businesses the right, for instance, to refuse to bake a cake with a groom-and-groom on top, if it violated their faith. It caused the NCAA, Bruce Springsteen and Paypal to boycott the state. Pence signed a “fix” but not before his approval dropped 15 points.

Those who came to hear Pence in Virginia are not hurting. Loudon County is prosperous, with huge houses on large lots, late model cars, pet boutiques dotting the shopping centers and household income double the national median. But what drew them to the event wasn't how they are but how they feel. They share the resentment of the core Trump voter that they work hard and play by the rules but subsidize those who don’t.

With Republicans abandoning Trump on principle, it’s hard to see what Pence has to gain from all of this. He’s not likely to be first in line next time around or move up to the A-list of celebrities. He may avoid an embarrassing loss in Indiana but lose something else. He signed on to a campaign beyond the usual norms. However hard he tries to keep his own counsel -- and distance -- he’ll be remembered for his association with Trump forever.

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Why Did Iran Put Missiles At Fordo?

By Jonathan S. Tobin
August 31, 2016

One of the few concessions that the U.S. was able to obtain from Iran during the course of the negotiations that led to the Joint Comprehensive Plan of Action was an agreement to end all uranium enrichment at Fordo. The underground military facility built into a mountain was of great concern to the West and Tehran’s willingness to halt its nuclear work there was considered a sign that it was serious about giving up its quest for a weapon. But if the only thing going on Fordo these days is harmless research and production of medical isotopes, why did the Islamist state deploy its most sophisticated military weaponry there yesterday?

On Monday, Iranian television showed the deployment of the country’s new Russian-made S-300 missiles at Fordo. The advanced weapon systems were the source of much contention between the U.S. and Russia during the course of the nuclear negotiations as the West pleaded with Moscow not to deliver missiles that significantly upgraded Iran’s ability to defend its nuclear sites. But the sale eventually went through. Since the Obama administration labors under the delusion that it has definitively ended the nuclear threat—rendering concerns about Iran making places like Fordo impregnable moot—it didn’t make much of a fuss about the delivery of the missiles.

The administration appears to be clinging desperately to those delusions. Though State Department spokesman John Kirby said yesterday that the U.S wasn’t happy about the delivery of the missiles or the Iranian stunt at Fordo, he also admitted that Secretary of State John Kerry didn’t spend much time complaining about the issue when he met with Russian Minister of Foreign Affairs Sergei Lavrov last Friday in Geneva. The best that Kirby could do was to say the U.S. would be in contact with its allies regarding the presence of the missiles at Fordo.

Don’t expect much out of those consultations. America’s European allies are just as committed to the notion that they have effectively ended the nuclear threat and have no appetite for protests about Fordo, let alone action. As Kirby said, the U.S. is simply going to rely on the International Atomic Energy Agency inspectors to ensure that the nuclear deal is being enforced.

But the questions about the S-300s at Fordo go deeper than the obvious suspicions about illicit activities or secret nuclear work in the area. Iran knows that all the talk about “snapping back” sanctions if Iran violated the deal or the possibility that force might be used if a “break out” to a weapon were detected by the U.S. is just empty posturing. The U.S. and the Europeans couldn’t wait to dismantle the sanctions on Iran, and it’s not clear what, if anything, it is that Iran could do to convince the West to re-impose them.

The brazen deployment of advanced missiles at a supposedly clean site is one more example of Iran behaving as if it knows it can violate the nuclear deal with impunity. Just as likely is an Iranian strategy of pushing the envelope in terms of compliance that will make the transition to a weapon swift and easy once all of the provisions in the weak accord expire within the next 10-15 years. We already know that Iran has been cheating on the deal as it seeks to acquire illegal nuclear technology in Europe and has also violated other agreements on the testing of ballistic missiles that have no purpose but to provide a delivery system for the bomb that they still disingenuously claim they don’t want.

President Obama’s approach to Iran was always predicated on the notion that its leaders wanted a chance to “get right with the world.” That provided the rationale for a U.S. policy of allowing Syria to descend into chaos since action there would have offended an Iran that was determined to keep its ally, Bashar Assad, in power. But while Iran was grateful for Obama’s willingness to abdicate U.S. responsibilities in the Middle East, its enthusiasm for cooperation was limited to its desire to profit from the end of sanctions and the release of frozen assets that could strengthen its economy, thereby protecting the longevity of the theocratic regime and aiding its push for regional hegemony and support for international terrorism. Since the deal was concluded, Iran has taken every possible opportunity to flaunt its defiance of the West and the presence of the missiles at Fordo is just the latest instance.

Connecting the dots between all of these pieces of evidence about Iran’s current and future plans isn’t that difficult. But doing so requires a determination to look at the facts rather than cling to the administration’s failed hopes about the deal. It remains to be seen whether the president’s successors will be prepared to think clearly about the mess he is leaving them before it is too late to do something about it.

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How The Exxon Case Unraveled

It becomes clear that investigators simply don’t know what a climate model is.

By Holman W. Jenkins, Jr.
The Wall Street Journal
August 31, 2016

New York Attorney General Eric Schneiderman’s investigation of Exxon Mobil for climate sins has collapsed due to its own willful dishonesty. The posse of state AGs he pretended to assemble never really materialized. Now his few allies are melting away: Massachusetts has suspended its investigation. California apparently never opened one.

The U.S. Virgin Islands has withdrawn its sweeping, widely criticized subpoena of research groups and think tanks. In an email exposed by a private lawsuit, one staffer of the Iowa AG’s office tells another that Mr. Schneiderman himself was “the wild card.”

His initial claim, flounced to the world by outside campaigners under the hashtag “exxonknew,” fell apart under scrutiny. This was the idea that, through its own research in the 1970s, Exxon knew one thing about climate science but told the public something else.

In an Aug. 19 interview with the New York Times, Mr. Schneiderman now admits this approach has come a cropper. He reveals that he’s no longer focusing on what Exxon knew/said but instead on how it goes about valuing its current oil reserves. In essence, Mr. Schneiderman here is hiding his retreat behind a recent passing fad in the blogosphere for discussing the likelihood that such reserves will become “stranded assets” under some imaginary future climate regime.

His crusade was always paradoxical. The oil industry reliably ranks last in Gallup’s annual survey of public credibility. The $16 million that Exxon spent between 1998 and 2005 to support organizations that criticized speculative climate models is a minuscule fraction of the propaganda budgets of the U.S. Energy Department, NASA, NOAA, EPA, not to mention the United Nations’ climate panel, etc. etc.

The episode ends happily, though, if Mr. Schneiderman’s hoped-for political career now goes into eclipse. But we haven’t finished unless we also mention the press’s role.

The “Exxon knew” claim, recall, began with investigative reports by InsideClimate News and the Los Angeles Times, both suffering from the characteristic flaw of American journalism—diligently ascertaining and confirming the facts, then shoving them into an off-the-shelf narrative they don’t support.

We have since learned that both the L.A. Times (via a collaboration with the Columbia School of Journalism) and InsideClimate News efforts were partly underwritten by a Rockefeller family charity while Rockefeller and other nonprofit groups were simultaneously stoking Mr. Schneiderman’s investigation.

When caught with your hand in the cookie jar in this way, there’s only one thing to do, and last week the Columbia School of Journalism did it, awarding a prize to InsideClimate News.

For this columnist, however, the deeper mystery was cleared up last year when I appeared on the NPR show “To the Point” to discuss the subject “Did Exxon Cover Up Climate Change?” (Google those phrases) with ICN’s “energy and climate” reporter Neela Banerjee.

Ms. Banerjee has been collecting plaudits all year for her work. The work itself involved revisiting Exxon’s climate modeling efforts of the 1970s. Yet, at 16:28, see how thoroughly she bollixes up what a climate model is. She apparently believes the uncertainty in such models stems from uncertainty about how much CO2 in the future will be released.

“The uncertainties that people talk about . . . are predicated on the policy choices we make,” namely the “inputs” of future CO2.

No, they aren’t. The whole purpose of a climate model is to estimate warming from a given input of CO2. In its most recent report, issued in 2013, the U.N.’s Intergovernmental Panel on Climate Change assumes a doubling of atmospheric CO2 and predicts warming of 1.5 to 4.5 degrees Celsius—i.e., an uncertainty of output, not input.

What’s more, this represents an increase in uncertainty over its 2007 report (when the range was 2.0 to 4.5 degrees). In fact, the IPCC’s new estimate is now identical to Exxon’s 1977 estimate and the 1979 estimate of the U.S. National Research Council.

In other words, on the crucial question, the help we’re getting from climate models has not improved in 40 years and has been going backward of late.

For bonus insight, ask yourself why we still rely on computer simulations at all, rather than empirical study of climate—even though we’ve been burning fossil fuels for 200 years and recording temperatures even longer.

OK, many climate reporters have accepted a role as enforcers of orthodoxy, not questioners of it. But this colossal error not only falsifies the work of the IPCC over the past 28 years, it falsifies the entire climate modeling enterprise of the past half-century.

But it also explains the non sequitur at the heart of the InsideClimate News and L.A. Times exposés as well as Mr. Schneiderman’s unraveling investigation. There simply never was any self-evident contradiction between Exxon’s private and public statements. In emphasizing the uncertainty inherent in climate models, Exxon was telling a truth whose only remarkable feature is that it continues to elude so many climate reporters.

Article Link To The Wall Street Journal:

Trump’s Immigration Shift Is A Winner

The older whites cheering for walls and deportation don’t represent most of the GOP, let alone the country.

By Jason L. Riley
The Wall Street Journal
August 31, 2016

It’s anyone’s guess where Donald Trump really stands these days on illegal immigration. Even Donald Trump may not know for certain, which is why the Republican presidential nominee apparently feels compelled to clarify his stance in a speech scheduled for Wednesday.

Given the centrality of immigration to Mr. Trump’s presidential run, this ambiguity is noteworthy. No one puzzled over where Ronald Reagan stood on tax cuts or defense spending 10 weeks before Election Day in 1980. Barack Obama’s health-care ambitions were unwavering and clear to all in August 2008. If you knew nothing else about Mr. Trump’s candidacy this year, it was that he vowed to wall off the southern border and remove every cotton-pickin’ foreign national here illegally. Until the past week or so, that is.

To be accurate, skepticism about Mr. Trump’s sincerity on deportation isn’t new. In February, BuzzFeed reported that the candidate had told the New York Times in an off-the-record interview that his views on expelling illegal immigrants were more flexible than he had let on. Asked about the story, Mr. Trump allowed that “everything’s negotiable” but declined the Times’s offer to consider releasing the interview transcript.

Since then, Mr. Trump’s immigration shift has became more overt. In November he was proposing a “deportation force” to hunt down the undocumented. Last week, however, he said that giving millions of people the boot is impractical and that enforcement should focus on “the bad ones”—which is the Obama administration’s policy. For those who obey the law and contribute to society, Mr. Trump says that no citizenship should be offered and opposes “amnesty as such.” But if they “pay back taxes” he would be willing to “work with them.” Jeb Bush and Marco Rubio ought to sue for plagiarism.

The weekend brought more confusion. Mr. Trump’s running mate,Mike Pence, told CNN that “there’ll be no path to legalization, no path to citizenship unless people leave the country.” But when Trump campaign manager Kellyanne Conway was asked by Fox News whether her candidate still supported mass deportation, she answered that his approach was “softening.”

Mr. Trump’s supporters who feel betrayed by this evolution instead should take heart. Your candidate hasn’t gone wobbly. He’s gotten wise. Immigration restrictionism is a surefire political loser for the GOP in national elections, and Mr. Trump has finally figured that out. His signature issue propelled him through a crowded primary where pluralities won the day. But most Republicans who vote in the general election don’t take their cues on immigration policy from the talk-radio right. And Mr. Trump’s nasty tone has already cost him support not only among minorities but also among whites.

American views on immigration, including how to handle the large illegal population, are far more moderate than GOP restrictionists like to admit. When President Obama signed an executive action in 2014 that protected millions from deportation, he did so secure in the knowledge that most voters, including most Republican voters, supported his goal of granting legal status to undocumented aliens. The president’s unilateral approach was unpopular, and the courts have found it legally dubious. But in a Pew Research Center survey taken after the immigration order was issued, 70% of all respondents and 53% of Republicans said illegal immigrants who meet certain requirements “should have a way to stay in the country legally.”

Fox News surveys have revealed even stronger GOP support for some form of conditional amnesty. When pollsters asked if the U.S. should “allow illegal immigrants to remain in the country and eventually qualify for U.S. citizenship, but only if they meet certain requirements like paying back taxes, learning English, and passing a background check,” 68% of all respondents and 60% of Republican respondents said yes.

Mr. Trump has rejected the big-tent strategy that helped George W. Bush win two presidential terms. He is counting on overwhelming white support instead. But white voters are a declining share of the electorate, and young Republicans aren’t immigration hard-liners. A Public Religion Research Institute poll released in March found that 52% of Republicans overall and 63% of Republicans under 30 supported creating a pathway to citizenship for illegal immigrants. Sixty-five percent of white Americans with a college degree agreed, as did 54% of whites with a high-school education or less. The older white voters who cheered Mr. Trump’s anti-immigrant sentiments don’t even represent most of the GOP on immigration, let alone most of the country.

How immigrants affect America’s economy, culture and homeland security are debates that date to the nation’s founding and aren’t in any danger of going away. If we’re lucky, however, Mr. Trump’s candidacy will move us closer to settling the debate over whether anti-immigration is a winning issue for today’s GOP.

Article Link To The Wall Street Journal:

The U.S.’s Syria Policy Rests On A Treacherous Fault Line

By David Ignatius 
The Washington Post
August 31, 2016

The U.S. military campaign to seize the Islamic State’s capital, Raqqa, may be delayed because of a nasty fight between Turkey and the Syrian Kurdish militia known as the YPG.

Sadly, it’s a classic Middle East moment, when regional players’ mistrust of each other overwhelms their common interest in fighting the terrorist Islamic State. And, equally sadly, it’s a moment that illustrates the frailty of the United States’ Syrian policy, which has built its military plans on the treacherous fault line of Turkish-Kurdish enmity.

In disentangling this story, let’s start with the Syrian Kurds. U.S. military officials say they have consistently been the strongest force against the Islamic State. They drove the jihadists from Kobane in ferocious fighting in 2014 and 2015; in February, they captured the town of Shadadi , to the east of Raqqa; this month, they completed the encirclement of Raqqa by taking Manbij to the north.

I met some of the Kurdish fighters in May at a secret U.S. training camp in northern Syria. Hearing tales of their bravery, I could understand why U.S. Special Operations forces trainers have developed a deep respect for the YPG — and why they saw this militia (and its umbrella group, the Syrian Democratic Forces) as the backbone of the coming campaign to take Raqqa.

But the U.S. strategy always papered over a fatal weakness: Turkey regards the YPG as an affiliate of the Kurdistan Workers’ Party, or PKK, which it sees as a terrorist group. Turkey held its nose and agreed to allow the United States to conduct bombing missions from Incirlik air base in support of the YPG, and to allow the group to assault Manbij starting in May. But at some point, this shaky strategy was going to blow.

The fuse was lit by the failed Turkish military coup last month. On Aug. 24, without telling the United States, the Turks launched an offensive into Syria, pushing back not just Islamic State jihadists in Jarabulus but also Syrian Kurdish fighters in at least eight villages south of there. To complicate matters, the Turkish advance included CIA-trained fighters from the Sultan Murad Brigade. American proxies were fighting each other.

The recriminations have now begun in earnest: The Turks demanded that the Kurds withdraw from Manbij to east of the Euphrates; the Kurds demanded that the Turks withdraw north to Jarabulus, along the Turkish border. In a bit of Middle East realpolitik, Vice President Biden stood next to Turkish officials and proclaimed support for their invasion of Syria and their demand that the YPG retreat from Manbij.

And now? It will be no surprise that the YPG leadership has told Pentagon officials that unless the Turks pull back, the Kurdish role in the planned offensive against Raqqa is in question. Unfortunately, there’s no alternative force that can clear the terrorist capital anytime soon. Which means that the net outcome here may be a stay of execution for the Islamic State.

The Syrian Kurds may have overreached in expanding from the ancestral home they call “Rojava,” but they did so with tacit U.S. encouragement. That’s part of a pattern: Western powers over the past century have used Kurdish fighters when it suited their purposes, and then abandoned them when neighboring powers objected. That happened after 1918, when the allies ignored President Woodrow Wilson’s pledge to create a Kurdish homeland; it happened in 1947, when Iran crushed the short-lived Mahabad Republic; it happened in 1975, when the shah of Iran agreed to allow Iraq’s Saddam Hussein to suppress the Kurds, despite secret American promises of support.

Mullah Mustafa Barzani, the Kurdish leader, told my Post colleague Jim Hoagland in 1973: “America is too great a power to betray a small people like the Kurds.” How wrong he was. A more honest statement of American views was the comment attributed to then-Secretary of State Henry Kissinger in 1975: “Covert action should not be confused with missionary work.”

How can the United States build a firmer foundation for finishing the campaign against the Islamic State? Washington must help build governance for a post-Islamic State world. It should sponsor renewed peace talks between Turkey and the PKK. And it should make clear to all that the only durable future is a federalism that can give Kurds, Sunnis, Shiites, Turkmen and other minorities a sense of ownership and control in Syria and Iraq.

U.S. military power can’t save a house built on quicksand. Before we press on to evict the Islamic State from Raqqa, the United States needs to frame a clear understanding with the neighboring states about what comes next.

Article Link To The Washington Post:

Paul Wolfowitz In The Wilderness

A man famous for his neoconservative views finds himself swimming against foreign policy currents.

Politico EU
August 31, 2016

It’s an uncomfortable time to be Paul Wolfowitz. For more than four decades, the former World Bank president and U.S. deputy secretary of defense bent the ears of the most powerful people in Washington with his assertive advice.

But these days, like many Republican foreign policy experts and former military officials, Wolfowitz finds himself with what must surely feel like a disagreeable choice. Come November, he will have to choose between Donald Trump, the Republican presidential candidate whose unlikely rise is in no small part a repudiation of Wolfowitz’s neoconservative approach to foreign policy, and Hillary Clinton, a Democrat he can’t quite bring himself to support — at least in public.

“I wish there was somebody I could vote for with a good conscience,” he told POLITICO in the offices of the American Enterprise Institute, where he is a visiting scholar. “They’re both so far from what I believe in. There’s a little bit of hope for Hillary. With Trump, you just have to make this incredible bet that he doesn’t believe anything he says, and once he really sees the situation he’ll be different. But it’s an incredible gamble.”

Despite his political isolation, Wolfowitz has lost none of his professorial self-assurance. At 72, his hair is more gray than black, and as he talks he picks his words carefully, preferring a long pause to a question rather than an answer he might come to regret.

Never mind that Wolfowitz is most famous for his role in promoting the 2003 invasion of Iraq, a decision that cost the lives of hundreds of thousands of Iraqis, destabilized the entire Middle East, ultimately unleashed the Islamic State, triggered the largest refugee crisis since World War II and led to the rise of populism in Europe and the United States.

On nearly every recent question of foreign policy (Syria, Libya, Russia, refugees) Wolfowitz is swimming directly against the prevailing currents — even, with the rise of Trump, in his own Republican party.

Missed Opportunities

In the eight years that Barack Obama has been president, Wolfowitz has watched from the sidelines as the U.S. carried out what he sees as a destabilizing “retreat.”

“It encourages aggressive powers to try and expand, and it discourages our friends from having trust and confidence in us,” he said.

Among the times he believes the U.S. should have taken a harder stance, he lists the 2009 Iranian uprising, the decision that year to scrap the missile defense program in central Europe, the gradual drawdown of American troops in Iraq, and, most recently, Obama’s choice not to provide weapons to Ukraine in its fight against pro-Russian rebels.

“I think [Russian President Vladimir] Putin would be more cautious if he faced the risk of more Russians getting killed in Ukraine,” he said. “And we’ve actually lowered that risk for him considerably.”

The civil war and humanitarian catastrophe in Syria too, is, in Wolfowitz’s view, a result of Obama’s decision not to get overly involved. The outcome was a vacuum that was quickly filled by extremists. Characteristically, the only recent foreign policy he cites as sensible is one of the most disparaged on both sides of the aisle.

“People will say that we should not have stood up to [Libyan strongman Muammar] Gaddafi,” he said. “They ignore the fact that if we had not at least done that, Libya today would look even worse. It would look like Syria.”

In the unlikely event that the next U.S. president would listen to him (Wolfowitz served as a foreign policy adviser to Jeb Bush’s failed primary campaign), he would advise him or her to reverse the retreat, beginning by addressing the issue of refugees.

“It’s a moral and humanitarian issue as well, but it has huge strategic consequences,” he said.

To begin with, he would suggest establishing a protected area for civilians, modeled on what was done for the Kurds in northern Iraq after the first Gulf War.

“I think it may need to be more than a no-fly zone, but the important thing is that a protected zone, a zone in which people can be safe without fleeing to Greece,” he said.

“I suspect that we could do a better job broadcasting to the Russian people what their government really is” — Paul Wolfowitz

Then, he would advise that the refugees slowly be resettled, in a system similar to what was established for those who fled Vietnam after the war, in which refugees were sheltered in neighboring countries and then gradually provided asylum in Europe and North America. Over more than 30 years following the fall of Saigon, some 1.3 million Vietnamese refugees were relocated to the United States.

“The resettlement process was a slow, drawn-out process, which in this case would have the additional advantage that you can seriously find out who’s a threat and who isn’t,” he said. “[Militants belonging to the Islamic State] aren’t going to want to spend two years in a refugee camp, especially not in Saudi Arabia.”

In the meantime, he would address the crisis in Ukraine by stepping up pressure on Putin. “I suspect that defensive arms to the Ukrainians would make a difference,” he said. “I suspect that tougher sanctions are available if we wanted them. I suspect that we could do a better job broadcasting to the Russian people what their government really is.”


As the situation in Iraq degraded and then quickly spiraled out of control, many expected (or at least hoped) Wolfowitz would follow in the footsteps of Robert McNamara, who served as secretary of defense during the Vietnam War and later confessed that the U.S. had been “wrong, terribly wrong” in its pursuit of the conflict. Instead, perhaps unsurprisingly, Wolfowitz has refused to retreat.

"Look, it was a long and painful and unfortunate experience — unfortunate in the sense that if we had the right strategy from the beginning … Iraq would be a completely different story,” he said.

Wolfowitz dislikes being referred to as the Iraq War’s architect, as he often is, not because he regrets the invasion, but because he believes the aftermath was mishandled. Advice to move quickly into counterinsurgency, he says, went unheeded.

“If things had been done the way I would have liked them done, they would have been done very differently,” he said.

That failure, Wolfowitz acknowledged, is at the root of his political marginalization today.

“If we had taken two years to get to where we got finally after four or five years, the whole story would be different,” he said. “I mean the political story of the United States would be different.”

Article Link To Politico EU:

Brexwhat? Why Brexit Won’t Necessarily Kill London’s Fintech Scene

How London’s financial technology startups are riding out Brexit — and even seeing new opportunities from the vote.

By Victor Reklaitis
Aug 31, 2016

You’ve probably heard that Brexit easily could kill London as a financial hub.

You might even think the city’s smaller companies — financial-technology startups, for example — are especially in trouble after the U.K. vote in June to leave the European Union.

The potential loss of passporting, the mechanism that allows businesses to seamlessly operate across the 28 EU nations, is definitely a real problem for big banks and insurance giants in the City of London. Some stalwarts of the Square Mile are even looking at moving their European base elsewhere.

But some fintech leaders in London see upside in the EU referendum result, while others argue it will take more time to see whether the vote actually ends up wrecking the sector. In other words, their programmers aren’t buying plane tickets to Berlin, Dublin or New York quite yet.

“There’s been a few hundred years of finance history — trading, infrastructure, legal and everything else. That’s just not going to go away overnight,” said Jeremy Sosabowski, chief executive of London-based financial-software developer AlgoDynamix.

Even so, many are watching for any weakening in the U.K.’s fintech sector, the generator of banking apps, high-tech tools for traders and more. London is the world’s fintech capital, according to an EY report, bringing in 6.6 billion pounds ($8.8 billion) in revenue last year. But rival cities in the U.S., Germany and Asia are close behind.

At the moment, though, U.K. fintech firms that sell their services abroad are benefiting from the pound’s GBPUSD, +0.0688% plunge after the Brexit vote — just like any exporters based in a nation with a weakened currency.

That jibes with consulting giant EY’s “Financial Services Brexit Tracker,” which is signaling the initial impact of the decision to leave the EU not been as bad as many feared.

AlgoDynamix closed a six-figure deal with a mid-sized U.S. hedge fund shortly after the Brexit vote, CEO Sosabowski told MarketWatch.

“They suddenly got a 10% discount,” said Sosabowski, whose company aims to provide early warnings ahead of market selloffs. “That’s literally what closed the deal.”

He sees his company weathering Brexit, since it doesn’t rely on the passporting mechanism that is important to other local finance companies. The system is used by British-based banks, for instance, to sell into the rest of the EU without jumping through regulatory hoops in member nations or setting up subsidiaries there.

“I think we’re quite OK, because we don’t need any sort of banking passport,” Sosabowski said. But for other companies, “that’s really going to be one of the critical bits, to see how that goes.”

The Uncertainty’s Uncertain Effect

Shortly after getting the job, U.K. Prime Minister Theresa May famously said “Brexit means Brexit,” but still no one really knows what an actual Brexit would look like. It’s even possible that the U.K. won’t ever leave the EU.

“One of the issues with Brexit is that there is just a lot of uncertainty around,” said Yvonne Dunn, a partner at law firm Pinsent Masons who focuses on tech, media and telecoms.

Anyone who tells you they have all the answers probably doesn’t at the moment, because there are too many variables at play right now, she added.

“No one believes at this stage that London is going to wither on the vine,” she added. “People are delaying decisions that they were previously ready to take until they see how it pans out. Uncertainty just doesn’t help.”

Jamie Campbell, head of customer strategy at Bud, argues that the Brexit uncertainty isn’t necessarily bad for business. The company provides a range of financial services in one spot via its website and mobile app.

“We’ll have to wait and see what the regulation impact is,” Campbell said. “But because we’re not a bank, and because we’re not regulated like a bank, it gives us an opportunity that others probably don’t get.”

A Chance For ‘Cheeky, Awesome Stuff’

And as fintech executives look at Brexit and then at this spring’s Panama Papers leak, which has shaken up offshore accounts, they see an opportunity for the U.K.

The country already has offshore havens like the Isle of Man, but it could try to get a bigger piece of the action. And that could lead to more business for the fintech sector.

“It looks like that party is coming to an end, so lots of offshore-held companies are looking for more respectable places,” Secco CEO Chris Gledhill said in a speech at the London Fintech Week conference. Secco is among the so-called challenger banks that are trying to take on the U.K.’s big four lenders.

The U.K. now has the chance to decide on which financial regulations to keep, which to tweak and which to kill, Gledhill said.

“We should take this opportunity to relaunch the U.K. as a startup in its own right,” he said. “We can do all sorts of cheeky, awesome stuff.”

The Bank of England — which has talked about launching its own cryptocurrency — should go for it, according to Gledhill. And the U.K. ought to make changes to attract more highly skilled workers, argued the Secco exec, who said he was among the minority in London’s fintech scene who voted in favor of leaving the EU.

“In a post-Brexit world, we could quite feasibly reach out to Europe and say, ‘Anybody who’s got some awesome blockchain skills, and you’re located outside the U.K., why don’t we give you a 20K relocation allowance to come and set up in London?” he said.

“I didn’t vote Brexit because I wanted to limit immigration. I actually want to increase the flow of talented [immigrants],” he added.

Buzz Off, Berlin

It’s not only the U.K. that’s hoping to attract overseas talent. During the London Fintech Week conference, an economic development official from Berlin generated headlines by claiming that more than 100 London startups had approached her organization about relocating to the German capital.

This led Secco’s Gledhill to say Germans “should sort out their own house first before coming over here.” Others just chuckled.

“It was very amusing to see the number,” said Dunn from Pinsent Masons. She added it’s too soon to tell whether 100 or so startups would actually leave, but there is a threat.

“If you are sitting in Silicon Valley this weekend, about to launch in Europe, you probably would have 99 times out of 100 decided to launch in London — for lots of reasons — and port yourself into Europe,” Dunn told MarketWatch.

“Are you now having more of a debate with yourself and thinking, ‘Maybe I should go to Dublin or Berlin or somewhere else?’”

While London will continue to be the biggest fintech hub for the “foreseeable future,” the sector will become more decentralized and spread across Europe, argued Fintech Times founder Katia Lang in a recent column.

Fintech firms in London have talked about leaving the English capital. Executives from two different money transfer platforms, TransferWise and Azimo, have signaled they might move out, for example.

British companies will put some teams in other European cities, and French or German startup founders increasingly will stay in their home countries, rather than come to London, Lang suggested.

Article Link To MarketWatch:

Wednesday, August 31, Morning Global Market Roundup: Asian Shares Ease Ahead Of U.S. Jobs Data, Oil Slips

By Nichola Saminather and Lisa Twaronite 
August 31, 2016

Asian shares eased on Wednesday following modest losses on Wall Street, with investors awaiting U.S. jobs numbers for further signs the Federal Reserve may raise rates as soon as September.

The growing prospect for an imminent rate hike lifted the dollar against major currencies such as the yen.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.3 percent as traders looked to August U.S. non-farm payrolls due on Friday after a run of strong economic data and hawkish comments from Fed officials. The index still remains on track for a 1.8 percent gain in August.

"The potential for the Fed to gradually lead international central banks out of the current stimulus phase is making investors wary about pushing stocks up to higher valuations," Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote in a note.

Japan's Nikkei stock index .N225 added 0.8 percent, poised to rise 1.7 percent for the month, boosted by a weaker yen after upbeat U.S. data lifted the dollar overnight. Sluggish domestic data that increased the prospect of further easing by the Bank of Japan also supported stocks.

Japanese industrial output was flat in July from June, data showed earlier on Wednesday, underscoring fragility in factory activity and falling short of economists' median forecast for a 0.8 percent rise.

But on Tuesday, data showed July household spending fell less than expected and the jobless rate hit a two-decade low, offering some hope for policymakers.

BOJ board member Yukitoshi Funo said on Wednesday the central bank would make full use of its existing policy tools to move the country away from its "deflationary mindset."

"While the latest string of Japanese data has been decent with the jobless rate improving and retail sales rising strongly in July, Japanese officials are clearly still frustrated with the weak growth in the economy," said Kathy Lien, managing director of FX strategy at BK Asset Management.

Chinese shares were mixed, with the CSI 300 index .CSI300 gaining 0.1 percent and the Shanghai Composite .SSEC down 0.1 percent. They are on track for gains of 3.5 percent and 3.1 percent for the month, respectively.

Hong Kong's Hang Seng index .HSI was up 0.1 percent, poised to end August 5.3 percent higher.

The dollar was steady at 102.96 yen JPY= after rising as high as 103.135 yen overnight, its strongest since July 29. It was up 0.9 percent for the month.

If the U.S. currency breaks 103.50 yen, its next stop would be 104, Lien wrote in a note.

The dollar index, which tracks the greenback against a basket of six major counterparts, edged down 0.1 percent to 95.937 .DXY and remained near its overnight top of 96.143, its highest since early August. It was on track to rise 0.4 percent for the month.

The euro inched up 0.1 percent to $1.1158 EUR=, down 0.1 percent for August.

On Wall Street on Tuesday, markets logged losses, dragged down by shares of Apple Inc (AAPL.O) after antitrust regulators ordered the company to pay about $14.5 billion in back taxes to the Irish government.

The S&P 500 .SPX fell for the fourth time in five sessions, but was still within 1 percent of its record closing high set earlier this month.

The losses were capped by gains in financials, whose margins benefit from higher interest rates.
Friday's U.S. jobs report is expected to show employers added 180,000 jobs in August, according to the median estimate of 89 economists polled by Reuters. [ECONUS]

Fed Vice Chairman Stanley Fischer said an interview on Tuesday that the job market is nearly at full strength and the pace of interest rate increases will depend on how well the economy is doing.

Markets were pricing in a 24 percent chance of a U.S. rate hike next month as of Tuesday, according to CME Group's FedWatch tool. That probability would rise if the jobless figures are stronger than expected, showing U.S. employers continued their strong pace of hiring seen in recent months.

U.S. consumer confidence rose to an 11-month high in August, with households more upbeat about the labor market, data showed overnight.

Crude oil futures continued to slip after ending down for a second straight day on worries of oversupply and a strong dollar.

Brent crude LCOc1 was steady at $48.31 per barrel after shedding 1.8 percent on Tuesday, but remains on track for a 13.7 percent gain in August.

U.S. crude CLc1 was down 0.15 percent at $46.28 after losing 1.3 percent overnight. It is set to end the month 11.3 percent higher.

Spot gold XAU= edged up 0.3 percent to $1,314.61 an ounce after tumbling as low as $1,308.65 on Tuesday, its lowest since late June, pressured by the stronger dollar and growing expectations of higher U.S. rates. It is headed for a 2.7 percent decline in August.

Article Link To Reuters:

Oil Prices Dip On Stronger Dollar; Rise In U.S. Crude Stocks Data

By Mark Tay 
August 31, 2016

Crude oil futures fell in early trade on Wednesday as the U.S. dollar held around three-week highs and industry stocks data indicated a build in U.S. crude inventories.

International Brent crude oil futures LCOc1 were trading at $48.27 (36.9025 pounds) per barrel at 0052 GMT, down 10 cents, or 0.2 percent, from their previous close.

U.S. West Texas Intermediate (WTI) crude futures were down 16 cents, or 0.4 percent, at $46.19 a barrel.

The U.S. dollar index, which measures the currency against a basket of six majors, rose as high as 96.143 .DXY, its highest level since Aug. 9, on Tuesday.

A stronger greenback makes dollar-priced commodities like oil more expensive for holders of other currencies and possibly capping demand.

The dollar strengthened after recent hawkish comments by Fed Chair Janet Yellen and Vice Chair Stanley Fischer boosted expectations that a rate hike by the U.S. central bank at its September policy meeting could be on the horizon.

"The pullback in commodity prices is likely to continue in the short term with a stronger USD and weaker fundamentals," Australian bank ANZ said in a note.

U.S. crude stocks rose by 942,000 barrels in the week to Aug. 26 to 525.2 million, nearly in line with analysts' expectations for an increase of 921,000 barrels, data from industry group the American Petroleum Institute showed on Tuesday.

Official U.S. oil inventories data published by the EIA is due for release on Wednesday.

Concerns over refinery production outages caused by storm threats in the Gulf of Mexico have done little to support prices as a product glut in the United States persists.

"Prices didn't receive any support from news that nearly a quarter of the capacity in the Gulf of Mexico has been shut due to storms," ANZ bank said.

Article Link To Reuters:

Hanjin Shipping To File For Receivership; Rival Eyes Assets

By Joyce Lee, Chang-ho Lee and Se Young Lee
August 31, 2016

South Korea's Hanjin Shipping Co Ltd (117930.KS) said it would file for court receivership after losing the support of its banks, and the country's financial regulator said a rival operator will look to buy Hanjin's "good" assets.

Banks withdrew support for the world's seventh-largest container carrier on Tuesday, saying a funding plan by its parent group was inadequate to tackle the firm's 5.6 trillion won ($5 billion) in debt.

Hanjin Shipping also said one of its vessels, the Hanjin Rome, was seized in Singapore by a creditor on Tuesday, while another vessel, the Hanjin Sooho, was denied entry to a port in Shanghai.

South Korea's Financial Services Commission said Hyundai Merchant Marine Co Ltd (011200.KS), the country's second-largest shipping line, will look to acquire its rival's healthy assets, including profit-making vessels, overseas business networks and key personnel.

A Hyundai Merchant Marine spokesman told Reuters nothing had been decided on a potential acquisition of Hanjin assets and that the firm will hold talks with Hanjin's lead creditor, Korea Development Bank on future plans.

Hyundai Merchant Marine is also in the process of voluntary debt restructuring amid a global downturn for a shipping industry battered by sluggish trade and overcapacity.

The FSC also said Hanjin Shipping's receivership filing would have a limited impact on domestic financial markets.

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Here’s How The U.S. Navy Will Defeat Iran’s Speedboats

By David Axe
August 31, 2016

Four times last week, speedboats belonging to Iran's Islamic Revolutionary Guard Corps – a sort of government-sanctioned Islamic militia – harassed four American vessels patrolling the Persian Gulf.

The incidents, while tense, ended bloodlessly. Still, they offered a glimpse into the kinds of methods Tehran could employ to potentially devastating effect during a shooting war.

Outgunned by the United States' much larger and more sophisticated weaponry, Iran's troops have, for decades, honed so-called "swarm tactics" that could reduce America's technological advantage.

Instead of trying to match the U.S. military weapon-for-weapon, Iran deploys large numbers of relatively unsophisticated systems on land, at sea and in the air. The idea is to overwhelm American forces, much in the way a single bee is a nuisance to a human being but a swarm of them could prove lethal.

The Pentagon is well aware of the danger Iran's swarms pose, however, and is devising new weapons to counter them, including small, precision-guided rockets and even lasers.

The August incidents came just hours apart. On August 23, four armed Iranian patrol boats sped to within 300 yards of the destroyer USS Nitze near the Strait of Hormuz. The 505-foot-long missile-armed destroyer fired off flares as a warning, and the Iranian boats withdrew.

A day later, three similar boats sailed tight circles around the U.S. patrol vessels USS Tempest and USS Squall. One Iranian boat sped toward Tempest on a collision course, which compelled Squall to fire warning shots with a heavy machine gun.

The Iranian boats withdrew only to return later the same day and harass the destroyer USS Stout. A few hours later, an Iranian boat played chicken with Tempest by speeding head-on toward it.

The U.S. Navy was apoplectic about the encounter with Tempest, in particular. “This situation presented a drastically increased risk of collision, and the Iranian vessel refused to safely maneuver in accordance with internationally recognized maritime rules of the road, despite several requests and warnings via radio, and visual and audible warnings from both U.S. ships,” said Commander Bill Urban, the U.S. Fifth Fleet spokesman.

This is hardly the first time Iranian speedboats have clashed – or nearly clashed – with American ships. In July, five Iranian boats came within 500 yards of the amphibious assault ship USS New Orleans. On August 15, Iranian boats launched rockets while conducting training exercises just a few miles from two U.S. ships. In 2015, Revolutionary Guard craft blew up a large target vessel that Tehran had built to mimic a U.S. aircraft carrier.

Similar incidents have occurred regularly for decades, and indeed have come to represent Iran's main method of provocation in the Persian Gulf and beyond. The Islamic Revolutionary Guard Corps employs swarm tactics in the air and on the ground, too.

The guard corps has bought scores of small, low-flying aircraft that it apparently hopes can overwhelm enemy defenses.

Its tactics complement those of the mainstream Iranian military. The Iranian navy, not to be confused with the guard corps’ naval arm, conserves its meager resources – large missile-armed warships -- for infrequent, long-range deployments to distant waters, in recent years hailing at Syrian and Chinese ports.

The navy's cruisers serve a mostly diplomatic function. In a sense, the navy is the good cop in Iran's at-sea dealings with other countries. The Islamic Revolutionary Guard Corps, meanwhile, plays the bad cop, which adds an element of uncertainty to the Persian Gulf that helps to keep Tehran’s rivals off balance.

But the United States isn't just rolling over in the face of the guard corps’ naval harassment. Historically, the U.S. Navy has trained and equipped its forces for battles with other well-armed navies also operating their own large warships. Its main weapons for such battles are large, multimillion-dollar cruise missiles, of which most ships can only carry a few. The threat from large numbers of nimble, inexpensive guard corps speedboats compelled the Americans to think differently.

In the 1980s, the Navy began bringing U.S. Army attack helicopters aboard some of its ships in the Persian Gulf. The Army copters' missiles and guns were ideal for blasting Iranian boats. In 1988, U.S. and Iranian forces fought a brief, violent skirmish that damaged or destroyed several Iranian vessels.

The U.S. fleet began adding Army-style missiles to its own helicopters. And in 2012, the sailing branch went a step further when it finally fielded a custom-made guided rocket of its own that is specifically optimized for defeating swarms of boats. The Advanced Precision Kill Weapon System is a 2.75-inch-diameter rocket with a laser seeker.

Navy and Marine Corps helicopters, as well as other aircraft, can carry pods, with each containing up to seven of the rockets. The copter shines a laser on enemy boats, or other targets, then fires. Each APKWS rocket heads for a different boat, in essence swarming the swarm with tiny lethal munitions.

The guided-rocket system has a 95-percent hit rate, according to the military. "This will give the helicopters a potent capability against swarming fast inshore attack craft," noted Jane's, a defense trade publication.

And that's not all. In 2014, the U.S. Navy fitted a new, large laser gun to the amphibious ship USS Ponce, which is permanently stationed in the Persian Gulf, where it acts as an at-sea base for helicopters, small boats and special operations forces. Big, slow and otherwise lightly armed, Ponce was uniquely vulnerable to the guard corps boat swarms.

The so-called Laser Weapon System , aimed by an operator holding a video-game-style controller, shoots a 30-kilowatt laser over a distance of several miles. As LaWS doesn't fire conventional missiles or bullets, instead drawing power from a generator, it essentially never runs out of ammunition. Perfect for wiping out a swarm.

The laser system is a one-off weapon – and, at $40 million, it didn't come cheap. But having proved that a laser can work in real-world conditions, the Navy is planning to build more and bigger lasers and, potentially, outfit all its front-line warships with them. If that happens, the Islamic Revolutionary Guard Corps swarms might finally meet their match.

Article Link To Reuters:

SWIFT Discloses More Cyber Thefts, Pressures Banks On Security

By Jim Finkle
August 31, 2016

SWIFT, the global financial messaging system, on Tuesday disclosed new hacking attacks on its member banks as it pressured them to comply with security procedures instituted after February's high-profile $81 million heist at Bangladesh Bank.

In a private letter to clients, SWIFT said that new cyber-theft attempts - some of them successful - have surfaced since June, when it last updated customers on a string of attacks discovered after the attack on the Bangladesh central bank.

"Customers’ environments have been compromised, and subsequent attempts (were) made to send fraudulent payment instructions," according to a copy of the letter reviewed by Reuters. "The threat is persistent, adaptive and sophisticated - and it is here to stay."

The disclosure suggests that cyber thieves may have ramped up their efforts following the Bangladesh Bank heist, and that they specifically targeted banks with lax security procedures for SWIFT-enabled transfers.

The Brussels-based firm, a member-owned cooperative, indicated in Tuesday's letter that some victims in the new attacks lost money, but did not say how much was taken or how many of the attempted hacks succeeded. It did not identify specific victims, but said the banks varied in size and geography and used different methods for accessing SWIFT.

A SWIFT spokeswoman declined to elaborate on the recently uncovered incidents or the security issues detailed in the letter, saying the firm does not discuss affairs of specific customers.

All the victims shared one thing in common: Weaknesses in local security that attackers exploited to compromise local networks and send fraudulent messages requesting money transfers, according to the letter.

Accounts of the attack on Bangladesh Bank suggest that weak security procedures there made it easier to hack into computers used to send SWIFT messages requesting large money transfers. The bank lacked a firewall and used second-hand, $10 electronic switches to network those computers, according to the Bangladesh police.

SWIFT has repeatedly pushed banks to implement new security measures rolled out after the Bangladesh heist, including stronger systems for authenticating users and updates to its software for sending and receiving messages. But it has been difficult for SWIFT to force banks to comply because the nonprofit cooperative lacks regulatory authority over its members.

SWIFT told banks Tuesday that it might report them to regulators and banking partners if they failed to meet a November 19 deadline for installing the latest version of its software, which includes new security features designed to thwart the type of attacks described in its letter.

The security features include technology for verifying credentials of people accessing a bank's SWIFT system; stronger rules for password management; and better tools for identifying attempts to hack the software.

(For a graphic on how hackers made off with millions, click

SWIFT is trying coerce members into prioritizing cyber-security by threatening to share confidential information about security lapses that banks want to keep private, said Shane Shook, an independent security consultant who advises central banks.

"That type of information sharing is something that no bank likes to see happen without their direct approval and involvement, because it can affect market confidence," Shook said.

SWIFT disclosed the new hacks after reports of previous incidents prompted regulators in Europe and the United States to urge banks to bolster cyber-security.

Other cases involving fraudulent transfer requests include the theft of more than $12 million from Ecuador's Banco del Austro and a failed attempt later in 2015 to steal money from Vietnam's Tien Phong Bank.

The attacks have prompted regulators globally to press banks to bolster defenses.

The Bank of England in April ordered UK firms to detail actions to secure computers connected to the SWIFT system, while the European Banking Authority in May said domestic authorities should stress test banks for cyber risks.

The Federal Reserve and other U.S. agencies told banks in June to review protections against fraudulent money transfers.

Six U.S. senators on Monday urged the G20 nations to agree when they meet at a summit this weekend on a “coordinated strategy to combat cyber-crime at critical financial institutions.”

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