Tuesday, September 13, 2016

China Is Dominating Scarborough Shoal. Here's Why It Matters.

Countering Chinese provocations requires tougher responses.

By Wallace C. Gregson
The National Interest
September 13, 2016

Scarborough Shoal is a settled issue. Not in a good way and not just as a result of Philippines President Duterte’s “ready, fire, aim” approach to statesmanship. It matters not if China builds new facilities there on yet more coral dredged from the seabed. Since the Shoal came to public prominence in 2012 following the Philippine arrest of Chinese fishermen it has been dominated by China’s Maritime Militias. This non-military state-controlled force, along with the ships of China’s Coast Guard, so effectively control the area that even the Philippine government advised its fishermen to avoid this traditional Philippine fishing area.

U.S. military forces, Navy carrier battle groups and Air Force aircraft, flying, sailing and operating wherever international law allows, do not affect who fishes these waters. The Philippine maritime auxiliary and coast guard forces—such as they are—cannot compete with the large state-supported fishing fleet and the Maritime Militia. Echoing the famous eunuch Muslim conscript Admiral Zheng He’s voyages, China’s masterful use of “Gray Zone Conflict” methods—operations between the traditional notions of war and peace – moot our military presence and vastly overawe maritime law enforcement assets of other South China Sea nations. The Philippines’ long neglect of such assets makes them particularly challenged.

This is no trivial issue. It threatens the collapse of the South China Sea ecosystem and raises the prospect of regional food shortages. China badly depleted its traditional fishing areas and now expropriates areas that other nations rightfully access. The “Global Commons” shrinks. Far from leading any international effort to preserve the marine resources of the South China Sea, China stands harshly criticized in the UN Permanent Court of Arbitration judgment for “permanent and irreparable harm to the coral reef ecosystem.” The United States’ new mid-Pacific marine sanctuary recently announced by President Obama is important—provided we can enforce it—but it will not compensate for the devastation of the South China Sea ecosystem.

Countering this and related provocations demands a comprehensive strategy. The specific South China Sea challenge requires specific responses, but those must be nested within a more effective regional, national and alliance strategy. Challenges abound. North Korea just detonated another, more powerful nuclear device despite U.S., UN and other efforts since the early 1990s to restrain its nuclear and missile programs. Japan endures Chinese and Russian aerial intrusions at numbers equal to highs experienced in the Cold War, testing their surveillance and response capabilities. Seaborne incursions into the Nansei Shoto – also known as the Okinawa Prefecture—increase in yet another manifestation of China’s Gray Zone efforts.

Before implementing a strategy, our relationships with China and Russia must be reevaluated. In 2009 President Obama told the Chinese delegation at the Strategic and Economic Dialogue that we would continue to talk about human rights because that is who we are. Within a few months we made a decision to forego that policy in view of other pressing issues. Since then the Chinese press has become even more restricted, dissidents more pressured and arrests more frequent. China claimed at the Sunnylands Summit that militarization of the South China Sea would stop. It has not. Three successive visits of three different U.S. Secretaries of Defense to Beijing begat three successive new military aircraft demonstrations. In November 2013 China suddenly announced the establishment of an Air Defense Identification Zone (ADIZ) over the East China Sea while openly coordinating a visit of VP Biden to Beijing within weeks coming via Tokyo. Worse, the ADIZ claimed rules and procedures more suited to territorial airspace than Global Commons areas, and promised application of "emergency defensive measures" in response to aircraft that refuse to follow the instructions. Then came the G-20 Summit in China and a calculated humiliation of the U.S. delegation. A relationship counselor might term this a one-way arrangement if not one of passive-aggressive abuse. We need to “reset”—to abuse an old phrase – our relationships. China must not be allowed to buy domestic stability at home through the creation of hardship, instability and dissatisfaction in other countries, including ours. We need to find our voice again on human rights, on the wanton destruction of the world’s common environmental heritage, on maritime and aerial intrusions, and many economic and trade matters. We’re allowed to be upset and to take action when our interests and those of our allies and friends are repeatedly assailed.

North Korea is a separate category, for their nuclear threat among many other reasons. China and Russia must be made aware of a compelling reality: if they are not willing or able to help us restrain North Korea, then we will have no choice but to strongly enhance and reinforce our alliance capabilities. And then we need to do just that.

A strong, active and engaged U.S. military is necessary. It’s not sufficient by itself but it is ever so necessary. A report by the Center for Strategic and International Studies said it best:

"Given rapid advances in Chinese military capabilities, the consequences of conflict with that nation and almost unthinkable and should be avoided to the greatest extent possible consistent with U.S. interests. It is therefore critical to achieve the right combination of assurance and dissuasion and to maintain a favorable peace before conflict occurs. At the same time, the ability of the United States to work with allies and partners to achieve those peaceful ends will depend on the perceptions, both of allies and partners and of China, of the U.S. ability to prevail in the event of conflict. U.S. force posture must demonstrate a readiness and a capacity to fight and win, even under more challenging circumstances associated with A2Ad and other threats to U.S. military operations in the Western Pacific."

A third component is to counter China’s Gray Zone challenges. This area is not suited for direct action by our military forces, but it is amenable to U.S. leadership and the active engagement of our allies and friends based on common interests and our undoubted ability to prevail.

Our pursuit of global efforts on climate change is well known. We should enlist a powerful coalition of nations to quickly begin strong and effective efforts to salvage the sea life and fisheries that may be saved in the South China Sea. That effort must then be extended to the rest of the region and then to the greater Pacific.

Creation of strong and numerous law enforcement capabilities among our allies and friends in the region must be greatly enhanced. This means not only ships, but also ubiquitous and pervasive surveillance means, creation of a “common operating picture” available for real-time location of all vessels, the creation of more ports and airfields around the littoral to support that, and more punishment for violators. Gray Zone force must result in countervailing Gray Zone force.

Article Link To The National Interest:

Will Obama Abandon Venezuela?

He’s shamefully silent on a recall vote to rescue the desperate country.

By Review & Outlook
The Wall Street Journal
September 13, 2016

President Obama believes the opening to Cuba is one of his great foreign-policy successes. He’d accomplish a lot more if he helped Venezuela before it closes down. Caracas came to a standstill Wednesday as residents stopped what they were doing for 10 minutes to protest the government’s refusal to allow a presidential recall referendum before year’s end. A million Venezuelans marched on the capital Sept. 1 demanding the vote.

President Nicolás Maduro, who took power in 2013 after the death of Hugo Chávez, would certainly be recalled in a fair vote. Venezuela has triple-digit inflation; shortages of food, medicine and basic household products; and a frightening crime wave. On a Sept. 2 tour of government housing projects in a low-income neighborhood on Margarita Island, Mr. Maduro was chased through the streets by a jeering mob clanging empty pots and pans. A video of the humiliating incident went viral.

Venezuela’s 1999 constitution lays out a nonviolent path to remove an unpopular president through a recall referendum in the third year of his six-year term. An affirmative vote triggers a new election. But the constitution also stipulates that if the vote is held in the fourth year, there is no new election. Instead the vice president takes over and serves the remainder of the term.

The government-controlled national electoral council is delaying a decision, and soon it will claim a vote can’t be held before the end of the year, though Mr. Maduro was elected a mere 40 days after Chávez’s death.

It is not too late for a 2016 referendum. But that won’t happen without pressure from the international community on Venezuela to respect its own constitutional norms. The Obama Administration once claimed that its outreach to the Cuban dictatorship would remove anti-American hostility in the region and make U.S. leadership more effective. So far there’s little evidence that Mr. Obama or Secretary of State John Kerry have been willing to use U.S. influence to defend Venezuelan democrats.

Some in Washington say Mr. Obama wants to avoid bloodshed. Others might say he is simply letting desperate Venezuela sink.

Article Link To The Wall Street Journal:

The Free-Trade Fear Market

By Noah Rothman
September 13, 2016

For so much of the 2016 presidential election cycle, the proposed Trans-Pacific Partnership free-trade agreement loomed large over the race despite the fact that few were cleared even to read it. The secrecy necessary to preserve the integrity of a sensitive multilateral negotiation among 12 signatory nations also created the conditions in which rumor and misinformation flourished. With the TPP now available to the public for review, however, many of the fear-mongering pronouncements of pro-labor Democrats and populist Republicans don’t stand up to scrutiny. More important, the debate to which Americans were privy over the nature of that agreement (and free trade, generally) did the public a great disservice.

For those interested in the subject, the pro-free trade Cato Institute’s working paper on TPP—authored by trade scholars Daniel Ikenson, Simon Lester, Daniel Pearson, K. William Watson, and occasional COMMENTARY contributor Scott Lincicome—is enlightening. They studied what they define to be the 22 meatiest and reviewable chapters and scored them based on a set of criteria that gauges whether they will promote liberalism or protectionism. What they discovered was that, by and large, the agreement expands America’s access to markets abroad and generally liberalizes those markets while standardizing the rules of the road.

The handful of areas where the TPP failed to satisfy Cato’s scholars’ tastes were also illuminating as were those that received their nods of approval. In aspects of trade such as textile production, intellectual property rights, labor, and the environment, the TPP came up short. It is no coincidence that these are areas that are of most concern to the developing economies in Asia and South America.

It is because of this that Cato’s authors determine that TPP “would not pass the free-trade test,” if free trade is defined as borderless, virtually unregulated commerce that is not subject to a variety of politically motivated domestic constraints. “The TPP is not free trade,” they wrote. “Like all other U.S. trade agreements, the TPP is a managed trade agreement.” The authors further note: “If free trade purity is the benchmark, then the TPP fails the test.” But because purity is not the benchmark and the perfect is so often the enemy of the good, Cato’s pro-trade assessors give the agreement their approval.

Maybe the most important observation in the first few pages of this study is the authors’ attack on the political dialogue surrounding TPP. The disservice America’s political class and media did in rendering judgments on an agreement to which so few were privy was a disgrace. Opportunistic candidates like Bernie Sanders and Donald Trump—to say nothing of their enablers in alternative media—oversimplified the debate over free trade and rendered the discussion around it cartoonish.

The binary promoted by those who reflexively oppose free trade—a set of assumptions which presuppose that voters fall into either liberal or protectionist camps—obscures more than clarifies. All judgments are subjective, Cato’s authors admit; even their own. Free trade (or “managed trade”) creates winners and losers. For politicians and blogs with a core constituency, precisely who perceives themselves the winners and losers matters. The nuance of a massive, complicated multilateral trade agreement—with positives and negatives for every constituency—is subsumed in the mad dash to craft tawdry narratives for the benefit of a political career or a media venue’s bottom line.

This is the tragedy of TPP. Its detractors had largely won the argument before the effects of the agreement were ever widely known.

In the end, the TPP may already be so toxic that it will be dead on arrival in 2017, despite the fact that both Republicans and Democrats in Washington are deeply invested in the success of a Pacific trade deal. But even if economic anxieties have voters in a protectionist mood, free trade is a survivor. In 2008, Barack Obama pledged to earn the support of organized labor in office by renegotiating the NAFTA treaty. Then, as now, however, the public was never as anti–free trade as were the vocal minority of politically motivated donors and volunteers in the electorate. The potential real-world results of those destabilizing negotiations the middle of an economic downturn, however, forced the president to shelve that pander indefinitely. Similarly, scuttling a 12-nation trade deal, and sacrificing American political capital spent in securing it, is as unlikely as is the passage of TPP in its current form.

It is a truism that candidates are far more eager to talk tough on free trade than are presidents. We’ll see if the next president breaks with that long-standing precedent.

Article Link To Commentary:

Can Anyone Stop The Syrian War?

A new cease-fire brokered by Washington and Moscow just went into effect. But there’s a long list of ways the deal could fall apart.

Foreign Policy
September 13, 2016

As the sun set in Syria on Monday, the country’s citizens — and the United States and Russia — all hoped the guns of war would fall silent. After marathon negotiations, Moscow and Washington reached a deal in the morning hours on Saturday to reinstate the failed “cessation of hostilities” negotiated last February, enable humanitarian assistance to reach besieged areas in Syria, and pave the way for U.S.-Russian military cooperation targeting the Islamic State and al Qaeda affiliates in Syria.

The deal will begin with a 48-hour cease-fire, starting Monday evening. If it holds, the United States and Russia will begin jointly targeting the Islamic State and Jabhat Fateh al-Sham — the group formerly known as the Nusra Front — fulfilling a long-standing Russian demand.

The next step would be to use the agreement as a springboard for reaching a negotiated settlement to the conflict, by relaunching the stalled U.N.-led negotiations in Geneva. The U.N. special envoy for Syria, Staffan de Mistura, will consult with Secretary-General Ban Ki-moon on Sept. 21 about setting a date for the next round of intra-Syrian talks. Although the Syrian government declared its support for the deal, President Bashar al-Assad vowed on Monday that he will keep fighting the “terrorists” to reclaim all of Syria.

Skepticism abounds that this deal will succeed. Many argue that at best it will provide a short reprieve for Syrians living under daily bombardment by regime planes and suffering from starvation under sieges imposed by the Syrian army and pro-regime militias. A short-term improvement, however, is not nothing: As a survivor of the 15-year Lebanese civil war — during which hundreds of cease-fire deals were negotiated, only to be violated shortly thereafter — I can attest that even temporary reprieves mean a lot to people living in fear for their lives.

The deal’s success or failure hinges on the United States’ and Russia’s ability to force their allies on the ground to abide by its terms. Moscow’s record in sticking to its commitments and forcing the Assad regime to live up to international agreements, however, has been feeble. Russian bombing raids have abetted Assad’s ground forces laying siege to opposition areas, and the Kremlin recently rejected a U.N. report that found the Syrian regime used chemical weapons in violation of Security Council resolutions.

Beyond the trust gap, there is the simple fact that Washington and Moscow do not agree on the principal driver of the Syrian conflict. For Washington, the Assad regime is the central reason the war has spiraled out of control — it has irrevocably lost its legitimacy, U.S. officials believe, and can no longer restore the status quo. For Moscow, it is the terrorist groups sowing chaos in the region that deserve the lion’s share of the blame. These different diagnoses lead to different prescriptions: Washington prioritizes a diplomatic process that will transition Syria’s leadership away from Assad, while for Moscow there can be no end to the conflict until terrorist groups are denied a safe haven and state institutions, especially the military, are in control of security.

Despite these important disagreements, the United States and Russia have good reason to keep pursuing coordination in Syria. Moscow remains the only actor in the pro-regime coalition that — with a political agreement in place — could live with a new leadership in Damascus. It has the political and military capacity to act on that belief if it decides to do so. If Washington believes that the only way out of the Syrian conflict is a managed political transition, it has no option but to continue testing Moscow’s interest in a leadership change in Damascus.

Russia rejects the concept of ousting Assad not because it believes its interests in Syria are best served by keeping him in place, but because it is not confident it can secure an orderly transition. Since 2012, I have participated in multilateral and bilateral Track II Dialogues on the Syrian conflict — to date, the principal area of disagreement is the status of Assad. In conversations with Russian interlocutors who are close to Moscow’s political and military decision-making circles, it is the question of who would replace him — and how to achieve this transition without it devolving into chaos — that tops their list of concerns. Play a word association game with them and the phrase “managed transition in Syria” conjures up three words: Iraq, Libya, and Afghanistan.

Russian officials believe that any attempt at leadership change in Damascus through a military intervention would fail and lead to chaos: à la Iraq post-2003 and Libya in 2011. They argue that Middle Eastern societies cannot be democratized and that outside forces, especially the United States, are the least capable agents to effectuate democratic change in the region.

Instead, they argue that the best-case scenario is to arrange a power-sharing arrangement between Syria’s different political and societal components — including Assad. Moscow believes the Syrian military can, if given enough time, engineer and guarantee this arrangement. One preferred scenario for the Russian generals is the installation of a military council to oversee a transition period in Syria, akin to the February 2011 takeover by the Supreme Council of the Armed Forces in Egypt. Early in the Syrian conflict, this scenario was also floated in an internal report by the Gulf Research Center, a Saudi think tank.

There are at least three problems with this scenario. First, Moscow still does not see a role for the Free Syrian Army in this military council and has not sufficiently thought through how it can force the armed opposition groups to accept this proposal. Second, the Syrian army — battered by five years of war and increasingly eclipsed by the foreign militias fighting on Assad’s side — is in no condition to play the central role in a political transition that Moscow envisions. Third, the Assad family has been ruthless in eliminating anyone they suspect of being a contender for power. It will be very hard to entice Syrian generals to get on board with this idea — they would be risking their lives.

The cost of the Russian military intervention in Syria, in both lives and rubles, has so far been manageable. However, as the campaign reaches its one-year mark, officials in Moscow are increasingly concerned about the mission timeline. They have been down that path before in Afghanistan, and they do not want to find themselves again fighting an endless war on behalf of an unreliable local ally. They worry that as time passes, the cost-benefit ledger in Syria will no longer be in their favor. Moscow also understands that absent an international “buy-in” for a credible political transition plan, funding will not be available for any post-conflict reconstruction of Syria. And Russia, which is currently laboring under international sanctions, is not interested in footing the reconstruction bill itself.

To complicate matters, Moscow and Washington are far from the only international players in Syria. Iran, Turkey, and Saudi Arabia are also prosecuting their own proxy wars there and have higher stakes in how the conflict unfolds than either the United States or Russia. Getting these countries on board is critical to any effort to de-escalate the Syrian war.

Turkey is increasingly becoming the indispensable player in the Syrian conflict. Ankara now sees the conflict in Syria through a domestic lens: It is more about the Kurds and less about Assad. For Ankara, a Syrian Kurdish fiefdom on its border under the control of the People’s Protection Units (YPG), the military wing of the Syrian-Kurdish Democratic Union Party, has been a long-standing red line. Turkey has long considered the YPG a terrorist organization and fears such a fiefdom in northern Syria would stir up greater unrest among its own Kurdish minority. Ankara and Tehran, which have long been on opposite sides of this conflict, can build common ground on the basis of their shared rejection of Kurdish independence.

There is also some convergence on how the major international actors in Syria view Assad’s position going forward. Turkey, the United States, and Russia all agree that he can play some role during the transition period — even as they disagree over the parameters of this role and what happens to him and his small entourage after the transition. Despite recent statements by Saudi Foreign Minister Adel al-Jubeir that Riyadh’s and Ankara’s stances “fully coincide with each other,” Assad’s participation during the transition period remains a point of contention between the two countries. Still, Riyadh is willing to let Turkey play a leading role in Syria partly because it trusts Ankara more than either Washington or Moscow and partly because Syria is now a distant third priority for a Saudi leadership that is increasingly consumed by its own domestic economic woes and the war in Yemen.

Although Turkey has announced its support for the recent U.S.-Russian deal, keeping it on board with the agreement will be a primary challenge for U.S. diplomats. Ankara will not be in favor of attacks that target its Syrian armed proxies, some of which have tactical alliances with Jabhat Fateh al-Sham. These ties are based on military priorities and not ideological affinities. The extremists have played a key role in trying to break the siege of rebel-held Aleppo, and many more moderate groups are loath to reject any force that could help them achieve that goal.

Friction with Turkey is just one of the many ways that this deal could fall apart. In the short term, so many different players could bring about its failure: Assad could not live up to the terms of the agreement, Saudi Arabia could play the spoiler if it feels its rebel proxies are being targeted, or Iran could undermine the deal if it fears that U.S.-Russian military cooperation is strengthening the rebel factions.

Still, we are at a stage where international stakeholders are closer to an understanding on Syria than they were a year ago. This is partly the result of multiple rounds of painstaking negotiations over the past four years and partly due to evolving political dynamics, which have created new common ground among warring parties. Nobody should expect the regime in Damascus to change: Time and again, Bashar al-Assad has proved that he will not transition himself out of power. The question is whether or not this agreement can push Assad’s patrons to seriously entertain his exit from the political scene — and thus take a giant step forward to ending this war.

Article Link To Foreign Policy:

Saving Refugees To Save Europe

By George Soros
Project Syndicate
September 13, 2016

The refugee crisis in Europe was already pushing the European Union toward disintegration when, on June 23, it helped drive the British to vote to Brexit the EU. The refugee crisis and the Brexit calamity that it spawned have reinforced xenophobic, nationalist movements that will seek to win a series of upcoming votes– including national elections in France, the Netherlands, and Germany in 2017, a referendum in Hungary on the EU refugee policy on October 2, and a rerun of the Austrian presidential election on December 4.

Rather than uniting to resist this threat, EU member states have become increasingly unwilling to cooperate with one another. They pursue self-serving, beggar-thy-neighbor migration policies – such as building border fences – that further fragment the Union, seriously damage member states, and subvert global human-rights standards.

The current piecemeal response to the refugee crisis, culminating in the agreement reached earlier this year between the EU and Turkey to stem the flow of refugees from the Eastern Mediterranean, suffers from four fundamental flaws. First, it is not truly European; the agreement with Turkey was negotiated and imposed on Europe by German Chancellor Angela Merkel. Second, it is severely underfunded. Third, it has transformed Greece into a de facto holding pen with inadequate facilities.

Most important, the response is not voluntary. The EU is trying to impose quotas that many member states strenuously oppose, forcing refugees to take up residence in countries where they are not welcome and do not want to go, and returning to Turkey others who reached Europe by irregular means.

This is unfortunate, because the EU cannot survive without a comprehensive asylum and migration policy. The current crisis is not a one-off event; it augurs a period of higher migration pressures for the foreseeable future, due to a variety of causes. These include demographic shortfalls in Europe and a population explosion in Africa; seemingly eternal political and military conflicts in the broader region; and climate change.

The agreement with Turkey was problematic from its inception. The very premise of the deal – that asylum-seekers can legally be returned to Turkey – is fundamentally flawed. Turkey is not a “safe third country” for most Syrian asylum-seekers, especially since the failed coup in July.

What would a comprehensive approach look like? Whatever its final form, it would be built on seven pillars.

First, the EU must take in a substantial number of refugees directly from front-line countries in a secure and orderly manner. This would be far more acceptable to the public than the current disorder. If the EU made a commitment to admit even a mere 300,000 refugees annually, most genuine asylum-seekers would view their odds of reaching their destination as good enough to deter them from seeking to reach Europe illegally – an effort that would disqualify them from legal admission.

Second, the EU must regain control of its borders. There is little that alienates and scares publics more than scenes of chaos.

Third, the EU needs to find sufficient funds to finance a comprehensive migration policy. It is estimated that at least €30 billion per year will be needed for a number of years, and the benefits of “surge funding” (spending a large amount of money up front, rather than the same amount over several years) are enormous.

Fourth, the EU must build common mechanisms for protecting borders, determining asylum claims, and relocating refugees. A single European asylum process would remove the incentives for asylum shopping and rebuild trust among member states.

Fifth, a voluntary matching mechanism for relocating refugees is needed. The EU cannot coerce member states to accept refugees they do not want, or refugees to go where they are not wanted. A scheme like the one used by Canada could elicit and match the preferences of both refugees and receiving communities.

Sixth, the EU must offer far greater support to countries that host refugees, and it must be more generous in its approach to Africa. Instead of using development funds to serve its own needs, the EU should offer a genuine grand bargain focused on the needs of recipient countries. This means creating jobs in refugees’ home countries, which would reduce the pressure to migrate to Europe.

The final pillar is the eventual creation of a welcoming environment for economic migrants. Given Europe’s aging population, the benefits migration brings far outweigh the costs of integrating immigrants. All the evidence supports the conclusion that migrants can contribute significantly to innovation and development if they are given a chance to do so.

Pursuing these seven principles, described in greater deal elsewhere, is essential in order to calm public fears, reduce chaotic flows of asylum-seekers, ensure that newcomers are fully integrated, establish mutually beneficial relations with countries in the Middle East and Africa, and meet Europe’s international humanitarian obligations.

The refugee crisis is not the only crisis Europe has to face, but it is the most pressing. And if significant progress could be made on the refugee issue, it would make the other issues – from the continuing Greek debt crisis to the fallout from Brexit to the challenge posed by Russia – easier to tackle. All the pieces need to fit together, and the chances of success remain slim. But as long as there is a strategy that might succeed, everyone who wants the EU to survive should rally behind it.

Article Link To Project Syndicate:

Erdoğan’s Tragic Choice

By Dani Rodrik
Project Syndicate
September 13, 2016

Ever since Turkish President Recep Tayyip Erdoğan won his first general election in late 2002, he has been obsessed with the idea that power would be wrested from him through a coup. He had good reason to worry even then. Turkey’s ultra-secularist establishment, ensconced in the upper echelons of the judiciary and the military at the time, made no secret of its antipathy toward Erdoğan and his political allies.

Erdoğan himself had been jailed for reciting religion-laced poetry, which prevented him from taking office immediately when his Justice and Development Party (AKP) assumed office in November 2002. In 2007, the military issued a statement opposing the AKP’s candidate for president – then largely a figurehead. And in 2008, the party narrowly escaped being shut down by the country’s top court for “anti-secular activities.”

The old guard’s efforts largely backfired and served only to augment Erdoğan’s popularity. His strengthening grip on power might have mollified him and led to a less confrontational political style. Instead, in the ensuing years, his then-allies the Gülenists – followers of the cleric-in-exile Fethullah Gülen – managed to whip Erdoğan’s obsession into paranoia.

From 2008 to 2013, Gülenists in the police, judiciary, and media concocted a series of fictitious conspiracies and plots against Erdoğan, each more gory than the last. They ran sensational show trials targeting military officers, journalists, NGOs, professors, and Kurdish politicians. Erdoğan may not have believed all of the charges – a military chief with whom he had worked closely was among those jailed – but the prosecutions served their purpose. They fed Erdoğan’s fear of being toppled, and eliminated the remaining vestiges of the secularist regime from the military and civilian bureaucracy.

The Gülenists had another motive as well. They were able to place their own sympathizers in the senior ranks vacated by the military officers targeted by their sham trials. The Gülenists had spent decades infiltrating the military; but the commanding heights had remained out of reach. This was their opportunity. The ultimate irony of July’s failed coup is that it was engineered not by Turkey’s secularists, but by the Gülenist officers Erdoğan had allowed to be promoted in their stead.

By the end of 2013, Erdoğan’s alliance with the Gülenists had turned into open warfare. With the common enemy – the secularist old guard – defeated, there was little to hold the alliance together. Erdoğan had begun closing Gülenist schools and businesses and purging them from the state bureaucracy. A major purge of the military was on the way, which apparently prompted Gülenist officers to move pre-emptively.

In any case, the coup attempt has fully validated Erdoğan’s paranoia, which helps explain why the crackdown on Gülenists and other government opponents has been so ruthless and extensive. In addition to the discharge of nearly 4,000 officers, 85,000 public officials have been dismissed from their jobs since July 15, and 17,000 have been jailed. Scores of journalists have been detained, including many with no links to the Gülen movement. Any semblance of the rule of law and due process has disappeared.

A great leader would have responded differently. The failed putsch created a rare opportunity for national unity. All political parties, including the Kurdish People’s Democratic Party (HDP), condemned the coup attempt, as did the vast majority of ordinary people, regardless of their political orientation. Erdoğan could have used the opportunity to rise beyond Islamist, liberal, secularist, and Kurdish identities to establish a new political consensus around democratic norms. He had a chance to become a democratic unifier.

Instead, he has chosen to deepen Turkey’s divisions and erode the rule of law even more. The dismissal and jailing of opponents has gone far beyond those who may have had a role in the putsch. Marxist academics, Kurdish journalists, and liberal commentators have been swept up alongside Gülenists. Erdoğan continues to treat the HDP as a pariah. And, far from contemplating peace with the Kurdish rebels, he seems to relish the resumption of war with them.

Unfortunately, this is a winning strategy. Keeping the country on high alert against perceived enemies and inflaming nationalist-religious passions serves to keep Erdoğan’s base mobilized. And it neutralizes the two main opposition parties; both are highly nationalistic and therefore constitute reliable allies in the war against the Kurdish rebels.

Similarly, Erdoğan’s offensive against Gülen and his movement seems driven more by political opportunism than by a desire to bring the coup’s organizers to justice. Erdoğan and his ministers have endlessly griped about the United States’ reluctance to extradite Gülen to Turkey. Yet, nearly two months after the coup, Turkey has not formally submitted to the US any evidence of Gülen’s culpability. Anti-American rhetoric plays well in Turkey, and Erdoğan is not beneath exploiting it.

In his testimony to the prosecutors investigating the coup, the army’s top general has said that the putschists who took him hostage offered to put him in contact that night with Gülen. This remains the strongest evidence that Gülen himself was directly involved. A leader intent on convincing the world of Gülen’s culpability would have paraded his military chief in front of the media to elaborate on what happened that night. Yet the general has not been asked – or allowed – to speak in public, fueling speculation about his own role in the attempted coup.

And so Turkey’s never-ending cycle of victimization – of Islamists, communists, secularists, Kurds perennially, and now the Gülenists – has gained velocity. Erdoğan is making the same tragic mistake he made in 2009-2010: using his vast popularity to undermine democracy and the rule of law rather than restoring them – and thus rendering moderation and political reconciliation all the more difficult in the future.

Erdoğan has twice had the chance to be a great leader. At considerable cost to his legacy – and even greater cost to Turkey – he spurned it both times.

Article Link To Project Syndicate:

Putin Promotes The Next Generation Of Ideological Cronies

By Leonid Bershidsky
The Bloomberg View
September 13, 2016

President Vladimir Putin's recent appointees to posts that handle the administration's relations with civil society all have something in common: They embody the Russian autocrat's version of conservative ideology. Some of them have highly unorthodox ideas, and all have little sympathy for Western-style intellectualism.

The new appointments began in April, when Putin named Tatyana Moskalkova, a police general who had also been a legislator, to be Russia's human rights ombudsman. Moskalkova's police career is not the only reason she is a strange choice for the job. She is a fervent Orthodox Christian, and she was a vocal advocate of punishing the punk band Pussy Riot for trying to perform an anti-Putin song in a cathedral. She has also accused the West of using human rights as a political weapon. In a recent interview, Moskalkova insisted that there was no problem with gay rights in Russia, despite laws that ban "gay propaganda." She also asserted that Russia had no political prisoners, despite tough and arbitrary "extremism" laws.

In August, Putin replaced Sergei Ivanov, his chief of staff, with a career diplomat, Anton Vaino. In Russia, the presidential administration oversees politics and the civil society, so this is another important "interface" job. Vaino had co-written some dense academic papers on what is probably best described as futurology. Some of these mention an invention called the nooscope, which is described this way in a book co-written by Vaino:

"Design-wise, the nooscope uses the principle of the Russian nesting doll, this colorful image of geospheres -- concentric shells of different density and composition that make up the Earth. The seven shells of the nooscope represent the main spheres in which changes takes place and are registered... The nooscope, which consists of a network of special scanners for receiving and registering changes in the biosphere and human activity with the help of transactions (film frames of collective being) in the image of the crossroads of space, time and life, allows us to forecast and preempt crisis events on the road map of development."

Also in August, Putin named a former member of his staff, Olga Vasilyeva, to the post of education minister. Vasilyeva's academic interest is the Russian Orthodox Church in the Stalin era. She suggested that the Soviet strongman's manipulation of the church during World War II, when the regime stopped killing priests and relied on religion to help stoke patriotism, was a useful approach. Statements she has made also suggest that she believes the West destroyed the Soviet Union by, among other things, overdramatizing the history of the Stalin period.

Finally, Putin appointed Anna Kuznetsova as Russia's children's rights ombudsman. Married to a Russian Orthodox priest, she holds extremely conservative religious views. A non-governmental organization she managed in the Volga river city of Penza ran a competition among women's health centers, rewarding the ones that performed the fewest abortions. Kuznetsova, a mother of six, isn't just pro-life, though: She is also a participant in a group on the VK social network that is dedicated to denying the reality of the human immunodeficiency virus. And in 2009, in an interview to a Penza website, she spoke of her belief in telegony -- the theory that a woman's sexual contacts affect her future progeny, even if they don't result in conception.

After her appointment, Kuznetsova said she didn't remember these statements -- though she said they sounded like they could be the words of "a qualified biologist, at least a Ph.D." -- but the interviewer came forward to confirm that he had recorded her remarks.

If Putin were a U.S. president, these appointments would have been the equivalent of drafting top officials from the most extreme church congregations and conspiracy theory websites. This is something new for Putin: For most of his reign, his regime was distinctly non-ideological. Its interactions with society were handled by career bureaucrats who were interested in efficiency and budgets and whose views were irrelevant or extremely flexible. The more recent appointments show that Putin's embrace of what he calls conservative values -- a mix of Orthodox moral principles, Russian mysticism and anti-Western convictions -- is not just a ploy to distract Russians from recent economic difficulties.

Putin is doing his best to fill the ideological vacuum in Russia since the fall of Communism. His officials are now messengers of a new platform that roughly matches the views of the religious right in Europe and the U.S., but with a Russian flavor. The ideology is a work in progress, but its bearers appear to share the same basic tenets and the same emotions, even if they don't all share the same idiosyncratic beliefs. If the Putin system persists, its ideological platform will eventually crystallize, just as Soviet Communism did.

Article Link To The Bloomberg View:

Clinton Can Overcome Pneumonia, But Not Her Trust Problem

By Margaret Carlson
The Bloomberg View
September 13, 2016

Hillary Clinton became “overheated” and left the Sept. 11 memorial service abruptly after an hour and a half. Television cameras were rolling, allowing much of the world to see her being loaded into her van. She went to her daughter’s nearby apartment for a breather, emerged looking chipper, stopped for a picture with a child, and drove off.

If it had ended there, the incident would have been unfortunate, but wouldn’t have altered the course of the campaign. Instead, the public learned later that Clinton had been diagnosed with pneumonia on Sept. 9 and neglected to tell anyone.

The lack of transparency played right into Donald Trump’s hands. Clinton began her career as a staffer on the Watergate hearings, yet she has repeatedly ignored the central lesson of the scandal: It’s not the crime that gets you but the cover-up. Pneumonia is hardly a crime and neither is a private server, but by covering up both she made them seem worse. On Labor Day, she brushed off a coughing episode in Ohio merely as evidence that she is “allergic to Trump.” But four days later, a doctor put her on antibiotics for pneumonia and she didn’t find it worthy of comment. Too bad she didn’t get a prescription for truth serum.

Now the burden is on her to prove she’s fine. She would have to drop and do 20 push-ups to satisfy Trump that she is. Just as he tried to delegitimize Barack Obama with birtherism, Trump has tried to Swift Boat Hillary by delegitimizing her physically. For months, the Republican nominee has been stoking the charge that something serious is wrong with her physical and mental “strength and stamina.” His wingman, Rudy Giuliani, directs voters to go to the internet and look up “Clinton illness” and watch a ginned-up video that makes it look as if Clinton is having a seizure. After the coughing, Trump tweeted that the media wasn’t covering it enough.

Henceforth it will all be covered -- every sniffle and every pause that could be a sign that her mind is going. In addition to his medical diagnosis, Trump has taken to charging that she doesn’t “look presidential,” a catch-all that adds the dig that the little lady keeps a light schedule so that she can get home to bed early and isn’t, obviously, a perfect male specimen of health like Trump himself, even though, at 70, he’s two years older.

Trump himself has been somewhat wanting when it comes to his health records. First, he made public a laughable letter from his doctor -- idiosyncratically addressed “To Whom My Concern” -- that echoed Trumpian grandiosity with the assessment that the Donald would be “the healthiest individual ever elected to the presidency.” Then, with a good sense of timing, Trump got a physical last week, presumably at the hands of another physician, which he is releasing any day. He’s set to appear Sept. 15 on on “The Dr. Oz Show” to unveil “his personal health regime,” presumably without pictures of his fast-food habits on his plane.

After the episode Sunday, he knew enough to let the facts stand for themselves, congratulating himself for taking no “satisfaction” in her troubles. On Fox News on Monday morning, he sent her a Hallmark card hoping “she gets well soon.” He inched back to his usual self a bit later on CNBC, saying, “It was interesting because they say pneumonia on Friday but she was coughing very, very badly a week ago and even before that this wasn’t the first time.”

Getting pneumonia doesn’t mean you’re unhealthy. It’s one of the many occupational hazards of the endurance trial a modern campaign is. But Clinton’s going to have a hard time proving she’s healthy now.

Imagine an alternate drama. Clinton reveals before the weekend that she has pneumonia. She soldiers on. She kept her schedule, including the LGBT fundraiser with Barbra Streisand where the candidate offered her controversial description of some Trump voters as “deplorables.” She was up early Sunday, but the crowd, the sun (New York Congressman Joe Crowley said that he and Senator Chuck Schumer had soaked through their suits), and the sadness of the day were too much and she left after an hour and a half. Most people would think she was a trouper to play through the pain and wish her a long nap in a cool room with a bowl of chicken soup.

Instead, much of Sunday, no one knew what was going on. Information dribbled out. Her motorcade back to her home in Chappaqua, New York, was covered like O.J.’s ride in the Ford Bronco. Hours later, a statement from her doctor came out. That’s no way to overcome a trust deficit.

Still, Clinton has nine lives. Terrible things happen -- having to stand by her man after Gennifer Flowers, Whitewater, the health care debacle, Monica. But she has repeatedly turned adversity into triumph, not least by becoming the first First Lady to leave the White House a year early and win a Senate seat in a state she’d only visited as a tourist. She’s now the first female candidate for president. Memo to Trump and the men who love him: misunderestimate her “strength and stamina” at your peril.

Article Link To The Bloomberg View:

Bill And Hillary’s Lies Vindicate The Clinton Haters

By Rich Lowry
The New York Post
September 13, 2016

With the Clintons, mistrust always pays.

A couple of weeks ago, Hillary Clinton was yukking it up with Jimmy Kimmel over the absurdity of rumors that she was hiding something about her health. Look, she can open a pickle jar!

That feels so long ago now that her campaign has admitted that she was indeed hiding something about her health — a pneumonia diagnosis late last week.

Some of the diagnoses from afar of Hillary’s purported illnesses have been elaborate fantasies and she might have really been fit as a fiddle when she opened the famous pickle jar. But through her secretive handling of her pneumonia she has, once again, shown how it never pays to trust a Clinton.

Bill and Hillary have a way of treating the credibility of their allies as a disposable commodity, in this case including the credibility of a protective media.

The press had worked itself into a lather in recent weeks about the illegitimacy of inquiries into Hillary’s health. They were repaid by Clinton leaving reporters behind without notice at the 9/11 memorial; nearly collapsing when she was out of their view(the incident was captured on video by a bystander); giving them a wave and a misleading “feeling great” outside of Chelsea Clinton’s apartment, where she had gone to recover; leaving them behind yet again to go to her home in Chappaqua and see a doctor.

Her campaign initially said Hillary “overheated” (on a gorgeous and mild morning in New York City). Can happen to anyone right? Well, yes — and especially someone walking around with a case of pneumonia.

Bill and Hillary have attracted more than their share of kooky conspiracy theories, but they have also vindicated some of the darkest suspicions of their most passionate detractors.

Only a hater would have believed that Bill Clinton, embroiled in a sexual-harassment case, would have an affair with a White House intern. Only a hardened cynic would think that Hillary, serving as secretary of state and assured to make a front-running campaign for the Democratic presidential nomination, with every incentive to keep her nose clean, would mingle private and public business to aid her family’s already incredibly well-funded foundation. Only a kook would wonder about her occasional coughing fits.

And we know how all of that turned out. It is a cliché in the press to say that Hillary hurts herself by not being more transparent. But cover-ups have their advantages. If things had bounced differently, Bill might have been able to get away with denying his affair with Monica Lewinsky; we might never have learned of Hillary’s private server; and Hillary’s pneumonia diagnosis might have been kept under wraps, too.

Surely, the public had a right to know. Millions of people get pneumonia every year, and often it’s easily treatable, yet the condition is serious enough that Hillary’s doctor told her to scale back her campaign schedule. The public interest in disclosure took a back seat to Hillary’s interest in not giving any more fodder to critics questioning her vigor.

Clinton has now been caught being dishonest about an area where public skepticism is most justified. Politicians lying about or concealing health problems is a common feature of every political system the world over, democratic or totalitarian, East or West. Hillary would do well to adopt an uncharacteristic policy of complete transparency about her health records and perform the rest of the way without a disruption more serious than a stray sneeze.

Even if she does, the handling of her pneumonia is a preview of how a second Clinton White House would operate. If she’s elected president, inevitably, some outlandish allegation will arise. The Clintons and their defenders will dismiss it as a hateful fantasy, before — when all other options are exhausted — admitting it’s actually true.

This is the Clinton pattern over a couple of decades of stoking, and validating, their critics’ distrust.

Article Link To The New York Post:

Europe’s Bite Out Of Apple Shows The Need For U.S. Tax Reform

Apple’s $14.5 billion European tax bill is another clear reason for corporate tax reform.

By Jacob Lew
The Wall Street Journal
September 13, 2016

In February I wrote to European Commission President Jean-Claude Juncker and raised concerns about the commission’s state-aid investigations involving the tax practices of U.S. multinational companies. As I described in the letter, the commission’s novel approach to its investigations seeks to impose unfair retroactive penalties, is contrary to well established legal principles, calls into question the tax rules of individual countries, and threatens to undermine the overall business climate in Europe.

Most important for U.S. taxpayers, the European Commission’s actions also threaten to erode America’s corporate tax base. U.S. companies could claim foreign tax credits against their U.S. tax bill for any tax-related payments to European Union member states.

The commission’s latest action in this area—a $14.5 billion retroactive tax bill to Apple—has been broadly condemned by members of Congress, business leaders and tax professionals. It also has highlighted the urgent need for comprehensive business tax reform. To be clear, the U.S. Treasury agrees with the commission that there is a serious problem with tax avoidance around the world. American corporations alone are avoiding paying U.S. taxes by holding more than $2 trillion in deferred overseas income.

In recent years we have made considerable progress toward combating corporate tax avoidance by working with our international partners through what is known as the Base Erosion and Profit Shifting (BEPS) project, agreed to by the Group of 20 and the 35 member Organization for Economic Cooperation and Development. But the fundamental problem remains: America’s broken business tax system. The Apple decision, and the bipartisan reaction to it, may present a new opportunity to make reform a reality. That opportunity should not be lost.

There is widespread agreement that our business tax system needs to be fixed. To that end, I have repeatedly urged Congress to act on President Obama’s proposed plan for business tax reform and infrastructure investment. Our current tax code is riddled with loopholes that allow corporations to artificially lower their tax bills by shifting income from higher-tax countries to low- or no-tax jurisdictions. The combination of the relatively high U.S. corporate rate, our complicated system for taxing multinational businesses, and our aging infrastructure has encouraged and facilitated the erosion of our tax base and made America a less attractive place to do business.

The president’s framework for business tax reform, first released in 2012 and updated this year, would create an environment in which business considerations drive decision-making. It would modernize our business tax system and enhance our economic competitiveness by lowering the maximum corporate income-tax rate. It would eliminate dozens of outdated tax preferences and take steps to prevent corporate inversions. It would also limit the ability of companies to use excessive interest deductions to lower their tax bills artificially.

Moreover, the president’s plan directly addresses the problem of U.S. multinational corporations parking income overseas to avoid U.S. taxes. The plan would make this practice impossible by imposing a minimum tax on foreign income. After paying such a tax, companies could repatriate all of their overseas income without additional costs.

Although revenue-neutral in the long run, the president’s plan would generate substantial one-time revenues largely by taxing the over $2 trillion that U.S. corporations are currently holding overseas. The administration has proposed using part of this revenue to fund an urgent and long-neglected national need—the transportation and infrastructure investments required to foster and protect America’s future economic growth. Without substantial investments in our roads, highways, bridges, and transit systems, Americans will continue to waste millions of hours in traffic each year, our productivity will suffer, and our competitiveness will decline.

Additional revenue would allow the U.S. to go beyond funding the basic maintenance of existing infrastructure. Instead, we would fuel economic growth and keep the U.S. economy competitive through bolstering infrastructure in a long-term, sustainable and responsible way. This approach would support the creation of new jobs, help small businesses, and make transportation faster, safer and less expensive.

The administration has made substantial progress over the past several years in making our tax code fairer and growing the economy, and there is a growing bipartisan consensus about the need to reform our business tax system. The European Commission’s state-aid investigations have further highlighted the issue and created additional urgency.

For the remaining months of this administration, we will continue to make the case for business tax reform and infrastructure investment. I hope that the high level of attention following the European Commission’s actions will help to lay the foundation for the new Congress to take action in the early days of a new administration. By coupling a new framework for business tax reform with continuing collaborative efforts to strengthen international standards, we can effectively address the problem of corporate tax avoidance. A more efficient business tax system would reap significant economic benefits at home and abroad.

Article Link To The Wall Street Journal:

NeverTrump For Dummies

The nominee has more in common with Kanye West than with Steve Wynn.

By Bret Stephens 
The Wall Street Journal
September 13, 2016

Q: How can you call yourself a conservative columnist when you’re rooting for Hillary Clinton in this election?

A: Because Donald Trump is anti-conservative, un-American, immoral and dangerous.

Q: And Hillary Clinton is a conservative who personifies all that we hold dear as Americans and has a terrific record in government?

A: Not at all. She’s conventionally liberal, politically opportunistic and ethically challenged.

Q: And you support her?

A: I wish it weren’t so. But what’s the choice?

Q: The choice is a Republican candidate who may disagree with Wall Street Journal orthodoxies on trade and immigration but otherwise wants to cut taxes and regulations, strengthen defense, appoint conservative judges, and take advice from people like Mike Pence and Paul Ryan.

A: You seem to think we elect a policy menu. My fundamental objection to Mr. Trump is that he is unfit, as a person, to be president.

Q: Oh, please. I’ll grant he’s a bit rough around the edges, but that’s because he’s a non-politician. He’s also a brilliant businessman who made billions of dollars.

A: I might believe that claim if he would release his tax returns, or if six of his businesses hadn’t gone bankrupt, or if he hadn’t been involved in more than 4,000 lawsuits, or if he didn’t routinely shortchange his suppliers or stiff his charities.

Q: Spoken like an elitist who doesn’t know what it’s like to run a business.

A: The successful entrepreneurs I know run their businesses with prudence, openness and integrity.

Q: Still, you can’t argue with success.

A: What Mr. Trump has achieved isn’t success. It’s notoriety. He has more in common with Kanye West than he does with Steve Wynn.And he isn’t just rough around the edges. He’s rotten to the core.

Q: Why, because every so often he says something ill-considered or politically incorrect? We’ve all said things we regret. Hillary lies all the time.

A: The difference is that Mrs. Clinton lies tactically to protect herself politically. Mr. Trump lies compulsively to aggrandize himself or belittle vulnerable people, whether it’s a handicapped reporter or a bereaved mother.

Q: They’re both flawed characters. But we’re electing a president, not the pope. And as a conservative, his views are much closer to mine.

A: Mr. Trump’s nativist brand of politics is much further removed from conservatism than Mrs. Clinton’s mainstream liberalism.

Q: And how do you define conservatism?

A: A principled commitment to limited government, free markets, constitutional rights, equal opportunity, personal responsibility, e pluribus unum and Pax Americana.

Q: Trump believes in most of that.

A: Except he doesn’t, starting with the Constitution. His plan to end birthright citizenship runs afoul of the 14th Amendment. His threat to “open up those libel laws” so he can sue his critics is a threat to press freedom. His attack on “Mexican” Judge Gonzalo Curiel was an assault on the American creed.

Q: That was just Trump spouting off.

A: What you call “spouting off” is an insight into Mr. Trump’s mind. It betrays an instinctive illiberalism. That’s why he attracts so much praise from Jean-Marie Le Pen and David Duke. It’s why he keeps praising Vladimir Putin.

Q: Trump praises Putin because he’s popular at home, respected abroad and gets things done. That used to be true of U.S. presidents like Eisenhower, but it isn’t true of Barack Obama. Isn’t it time we had an effective leader?

A: Putin isn’t respected. He’s feared. Any thoughtful conservative would sooner have an incompetent democratic government than an efficiently autocratic one.

Q: We’ve got $19 trillion in debt, a murder rate on the rise, Islamic State on a rampage, and millions of working-age men who have given up looking for work. Sorry, but these are not normal times.

A: We’ve overcome worse—think of the 1970s. What isn’t normal is the sudden taste for buffoonish leaders preaching drastic remedies. It’s one thing for the Philippines to elect a character like Rodrigo Duterte. It’s another for his American equivalent to become leader of the free world.

Q: This is America, with institutions to provide checks and balances against an overreaching president. Speaking of institutions, what have you got to say about the fact that we’re one justice away from losing the Supreme Court to liberals for a generation?

A: What makes you so sure that a man who disdains a strict interpretation of the Constitution would appoint strict constructionists?

Q: Look, with Hillary I know what I’m getting and it’s a disaster. With Trump, there’s a chance he’ll keep his promises and grow in office.

A: If you’re truly confident in American institutions, then we’ll ride out Mrs. Clinton just as we have Mr. Obama. As for Mr. Trump, the man you see as nominee is the man you’ll get as president, only with more vanity and vastly more power. As the man himself likes to say, “You think I’m going to change? I’m not changing.” That’s one promise you know he’ll keep.

Article Link To The Wall Street Journal:

U.S. Bombers Fly Over South Korea In Show Of Force After Nuclear Test

By James Pearson and Ju-min Park
September 13, 2016

Two U.S. B-1 bombers flew over South Korea on Tuesday in a show of force and solidarity with its ally after North Korea's nuclear test last week, while a U.S. envoy called for a swift and strong response to Pyongyang from the United Nations.

Speaking in the South Korean capital on Tuesday, Sung Kim, the U.S. envoy on North Korea, added that the United States remained open to authentic, meaningful dialogue with Pyongyang on ending its pursuit of nuclear weapons.

"Our intention is to secure the strongest possible (U.N. Security Council) resolution that includes new sanctions as quickly as possible," Kim told a news briefing after meeting his South Korean counterpart.

He said the United States would work with China, North Korea's major diplomatic ally, to close loopholes in existing resolutions, which were tightened with Beijing's backing in March.

"China has been very clear that they understand the need for a new U.N. security council resolution in response to the latest North Korean nuclear test," Kim said.

However, China and Russia, which strongly oppose a recent decision by the United States and South Korea to deploy an advanced anti-missile system in the South to counter the North's missile threat, have shown reluctance to back further sanctions.

"Both sides think that North Korea's nuclear test is not beneficial to peace and stability on the Korean peninsula," China's official People's Daily newspaper said on Tuesday following a high-level China-Russia security meeting in Beijing.

"At present, we must work hard to prevent the situation on the peninsula continuing to escalate, and put the issue of the nuclearization of the peninsula back on the track of dialogue and consultation," it said.

Force And Solidarity

The pair of supersonic B-1 Lancer strategic bombers, based in Guam, were escorted by South Korean and U.S. fighter jets, in a low-altitude flight over South Korea's Osan Air Base, which is 77 km (48 miles) from the Demilitarised Zone border with the North and about 40 km (25 miles) from the South's capital Seoul.

North Korea's weapons enhancements, including the testing of various types of missiles this year at an unprecedented rate, have alarmed neighbors South Korea and Japan.

A group of lawmakers in South Korea said on Monday the country should have a nuclear force of its own, either by acquiring weapons or asking the United States to redeploy tactical nuclear weapons withdrawn under a 1991 pact for denuclearization of the Korean peninsula.

Kim, the U.S. envoy, said there was no need to reintroduce nuclear weapons in South Korea.

North Korea has refused the U.S. demand that it accept denuclearization as a condition for holding dialogue.

"It's a question of North Korean intentions and commitment. If North Korea is ready to talk to us sincerely, I think we can work with that within the six party process," Kim said.

The so-called six party talks aimed at ending the North's nuclear program involve the United States, Russia, Japan, South Korea, China, and North Korea but have been stalled since 2008.

South Korea said on Monday the North is ready to conduct an additional nuclear test at any time after setting off its most powerful blast to date on Friday.

Article Link To Reuters:

Trump Luxury Hotel Opens Just Blocks From The White House

By Ian Simpson
September 13, 2016

Republican presidential nominee Donald Trump opened the latest outpost in his real estate empire on Monday, a luxury hotel in a historic building five blocks from the White House that underwent a two-year, $200 million renovation.

While staff members at the 263-room Trump International Hotel planned little hoopla for what they described as a "soft opening," about 40 protesters opposed to the New York real estate developer's presidential run gathered outside. The opening came eight weeks before the Nov. 8 election.

"It kind of fits his personality that he finds a way to be on Pennsylvania Avenue, one way or another," said protester Judy Byron, 70, a Washington artist.

The hotel, which includes a $20,000-a-night suite, is less than a mile (km) down Pennsylvania Avenue from the White House. The hotel is housed in Washington's third-tallest building, the 1899 Old Post Office, built in the Romanesque Revival architectural style.

Trump said on Twitter he had stopped by the property "to thank all of the tremendous men & women for their hard work!"

The protesters criticized some of Trump's positions, including a promise to build a wall along the Mexican border to block illegal immigrants. Protest organizer Andrew Castro of Baltimore said: "We're out here building a wall against racism."

Dozens of people filtered in and out on Monday afternoon, some to gawk and others pausing for a drink at the hotel's bar.

On his way in, Ric Hedlund, who works in port development, said he had been impressed by the renovations of a building that he said was previously "a dump."

"I'm going in to drink Trump wine," said Hedlund, who added he also supported Trump as a candidate.

Trump's daughter Ivanka, who helped negotiate the 60-year lease with the U.S. government and oversaw the building's revamp and design, said the project had come in a year ahead of schedule and under budget.

"We have really positioned this hotel to not only be the finest hotel in D.C. but in the country," she said in a telephone interview.

A grand-opening ceremony is planned for next month.

Trump attended the 2014 groundbreaking for the renovations alongside local Democratic officials before launching his presidential campaign last year.

While Trump's name is hard to escape in his native New York, where it adorns structures including the Trump Tower as well as a Bronx golf course, the hotel marks his most visible presence in Washington.

His comments describing some Mexican immigrants as criminals prompted celebrity chefs Jose Andres and Geoffrey Zakarian to pull out of the project. Trump has sued them.

Article Link To Reuters:

Tuesday, September 13, Morning Global Market Roundup: Asia Stocks Gain, Dollar Slips On Fed Governor's Dovish Comments

By Shinichi Saoshiro
September 13, 2016

Asian stocks rose on Tuesday, boosted as Wall Street rallied overnight after Federal Reserve governor Lael Brainard calmed markets with remarks that appeared to reduce the prospects of a near-term interest rate hike.

The dollar, on the other hand, nursed losses against its peers after Brainard reiterated her dovish views.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.6 percent. Japan's Nikkei .N225 erased earlier gains to stand little changed as the yen advanced.

South Korea's Kospi .KS11 rose 0.5 percent and Australian stocks advanced 0.3 percent. Hong Kong's Hang Seng .HSI rose 1.1 percent and Shanghai .SSEC was flat.

Reaction was limited to a run of Chinese data that included industrial output, which rose a better-than-expected 6.3 percent in August. ECONCN

While some investors had speculated that Brainard would switch over to the more hawkish camp, the Fed governor said Monday she wanted to see a stronger trend in U.S. consumer spending and evidence of rising inflation before the Fed raises rates.

The comments solidified the view the U.S. central bank would leave interest rates unchanged next week.

"We can stick with our main scenario that the Fed won't raise rates in September. All the talk about a possible rate hike in September turned out to be noise," said Koichi Yoshikawa, executive director of finance at Standard Chartered Bank's Tokyo branch.

Future traders are now pricing in a 15 percent chance of a hike at the Fed's Sept. 20-21 policy-setting meeting, down from 21 percent earlier on Monday, according to the CME Group's FedWatch Tool.

U.S. stocks racked up their strongest gain in two months on Monday, with the Dow rising 1.3 percent .DJI and the S&P 500 .SPX gaining 1.5 percent.

The dollar dipped 0.3 percent to 101.580 yen JPY= after shedding 0.8 percent overnight. The euro nudged up 0.1 percent to $1.1238 EUR= while the dollar index .DXY stood little changed at 95.112 after losing about 0.2 percent the previous day.

In the global bond market, the recent sharp rise in yields was halted for now after Brainard's comments. Yields had been rising as bond prices fell in the face of perceived limits to monetary policies of major central banks such as the European Central Bank and the Bank of Japan.

The benchmark 10-year U.S. Treasury note yield US10YT=RR stood at 1.643 percent after touching a 2-1/2 month high of 1.697 percent earlier on Monday. The 30-year Japanese government bond JP30YTN=JBTC yielded 0.530 percent, pulling away from a six-month peak of 0.565 percent struck the previous day.

Crude oil prices dipped as investors sold into the previous day's gains and on concerns over increased drilling in the United States. Brent crude LCOc1 was down 0.6 percent at $48.00 a barrel after rising 0.65 percent overnight on a weaker dollar and stronger U.S. equity markets.

Copper climbed off a 12-week low as U.S. rate hike jitters subsided. Three-month copper on the London Metal Exchange CMCU3 edged up 0.2 percent to $4,658 a tonne after plumbing $4,582 a tonne on Monday, the weakest since June 20.

Meanwhile, the markets pondered political developments in the United States and its potential financial implications.

"Hillary Clinton's September 11th medical episode and revelations of a recent pneumonia diagnosis may have pushed markets to begin taking a closer look at presidential candidate Donald Trump, whom markets appear to see as less predictable," said Andrew Meredith, co-managing director at Tyton Capital Advisors in Tokyo.

Presidential candidate Clinton almost collapsed at an event on Sunday, suffering from pneumonia, although she said on Monday she could resume presidential campaigning in a couple of days.

Article Link To Reuters:

The Largest Wealth Transfer In History Has Already Begun

The superrich will transfer $3.9 trillion to the next generation by 2026.

By Quentin Fottrell
September 13, 2016

Unhappy with your inheritance? Then you might find it difficult to read this.

Ultra high-net-worth individuals will transfer $3.9 trillion to the next generation by 2026, according to “Preparing for Tomorrow: A Report on Family Wealth Transfers,” released Monday by global wealth consultancy Wealth-X and insurance brokerage and consulting firm NFP. This reflects a 5% decline from the report’s 2014 estimate of $4.1 trillion, but this is because the massive global wealth transfer among the world’s newest superrich has already begun. The biggest concern for the world’s superrich was “succession and inheritance issues” (67%), a recent survey by global real estate consultants Knight Frank found.

This $3.9 trillion expected to be transferred is equal to 13% of all assets of ultrahigh-net-worth individuals, enough to purchase outright the 10 largest companies in the world: Apple, Google parent Alphabet GOOG, +1.23% Microsoft MSFT, +1.49% ExxonMobil XOM, +0.52% Berkshire Hathaway BRK.A, +1.55% Amazon AMZN, +1.49% Facebook FB, +1.25% Johnson & Johnson JNJ, +0.79% General Electric GE, +1.26% and China Mobile CHL, +0.21% Looking ahead to 2020, the Wealth-X/NFP report sees the wealth of the world’s superrich increasing by 54% to $46 trillion. Some 64% are self-made, and 19% inherited some wealth before creating significantly more themselves.

Last year, ultrahigh-net-worth individuals — defined as those with assets of $30 million or more — aged 80 or over were on average seven times wealthier than those under 30 years old. Despite the higher media profiles given to young Silicon Valley millionaires and billionaires like Facebook Chief Executive Mark Zuckerberg, there are many more who are significantly older. “We estimate that, in total, there are over 14,000 ultrahigh-net-worth individuals likely to transfer assets in the next 10 years,” the report states. This number is larger than the total ultrahigh-net-worth population of China (12,050) or the U.K. (10,650).

The rich appear to be leaving the middle class behind. Most U.S. middle-income households (81%) had flat or falling income between 2004 and 2014, according to recent U.S. Congressional Budget Office data analyzed by the McKinsey Global Institute, a global management company. And 61% of middle-income households say their incomes are either not advancing or they’re staying the same as they were last year: “Most people growing up in advanced economies since World War II have been able to assume they will be better off than their parents. Yet this overwhelmingly positive income trend has ended.”

What’s more, the past 35 years have been a period of extraordinary wealth creation by billionaires, according to the UBS/PwC “2015 Billionaire Report” released last month, with some 917 billionaires who are self-made. “Only the ‘Gilded Age’ at the beginning of the 20th century bears any comparison,” it states. Then fortunes were created from industrial innovation, in sectors such as steel, cars and electricity. Now they are being made from the consumer industry, technology and financial innovation in the U.S. and Europe, as well as consumer products and infrastructure booms in emerging markets.

If these trends continue, the Forbes 400 will see their average wealth skyrocket to $48 billion by 2043 — more than eight times the amount they hold today, according to a report released last month by the Urban Institute, a nonprofit and nonpartisan policy group. The average wealth for white families would increase by 84% to $1.2 million versus $108,000 for African-Americans (27% growth). The American dream is only available to only certain members of society, says Dedrick Asante-Muhammad, a director at the Corporation for Enterprise Development, a nonprofit based in Washington. “It is money in the bank, a first home, a college degree and retirement security.”

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Oil Prices Fall On Profit Taking, Eyes On China Data

By Mark Tay
September 13, 2016

Oil prices fell in early trade on Tuesday on concerns over increased drilling in the United States and as investors took profits after oil prices rose close to 1 percent in the previous session.

Markets will also be keeping a close eye on Chinese activity data due for release later in the day for clues on the demand strength for crude.

Brent crude futures were trading at $47.98 per barrel at 0109 GMT, down 34 cents, or 0.7 percent, from their last settlement.

U.S. West Texas Intermediate futures were down 41 cents, or 0.9 percent, at $45.88 a barrel.

Traders said the price falls on Tuesday were an indication that increasing oil drilling activity in the United States was still a concern even as crude prices closed higher on Monday because of a weaker dollar.

"People are seeing that rally we had on a very big decline in (U.S.) inventories last week is a bit of a selling opportunity," said CMC Market chief market analyst Ric Spooner.

Oil's 4 percent price decline since Sept. 8 partly reverses a 10 percent rally early in the month, which was fueled by speculation that oil exporters could cap production.

"Investor appetite (for commodities) remains subdued," Australian bank ANZ said in a note. "Any disappointment in economic data released in China today will see prices come under further downward pressure."

China is due to release August monthly industrial output and retail sales data, as well fixed-asset investment figures.

China's state oil refiners are readying to export more diesel and gasoline in coming months as a bleak outlook for what is typically the nation's period of greatest consumption sends shivers through an already saturated global market.

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U.S. Gulf Oil Imports Set To Rebound

By Devika Krishna Kumar
September 13, 2016

Crude oil imports into the U.S. Gulf Coast rebounded in the week to Sept. 9, as the effects of a storm in the region faded, according to a report from Thomson Reuters Oil Research and Forecasts on Monday.

The Thomson Reuters Oil Research team forecast the weekly EIA number for PADD 3 imports, which includes "refinery row" in the U.S. Gulf, at 20.2 million barrels last week, up nearly 3 million barrels from the 17.3 million barrels reported by the U.S. Energy Information Administration for a week earlier.

The forecast is solely for waterborne imports focusing on the different PADD regions as defined by the EIA, since the dataset is vessel-based.

The effects of Tropical Storm Hermine interrupted shipping routes and production last week, leading to a massive fall in imports to the region and the largest weekly drop in stockpiles since December 2012. [EIA/S]

Overall weekly U.S. crude stockpiles tumbled by the most since 1999.

However, the storm eventually turned to the northeast and did not harm key facilities in the Gulf, as many had feared. The immediate rebound in imports, as a result, could trigger a fresh wave of selling in crude, some traders said.

Bloated inventories are still a major concern among oil bulls hoping for a balanced market after grappling with two years of oversupply.

The majority of oil imports into the Gulf region arrive in large vessels. Crude from Canada is transported by pipeline.

Middle Eastern imports into PADD 3 rebounded over 30 percent during the week, led by Kuwait and Saudi Arabia, according to the report.

Last week, one shipment each from Kuwait and Saudi carried about 1 million barrels and discharged in the Louisiana Offshore Oil Port (LOOP), the report said.

Article Link To Reuters:

Fed Looks Unlikely To Hike Next Week After Brainard Warning

By Jason Lange and Karen Pierog
September 13, 2016

The Federal Reserve should avoid removing support for the U.S. economy too quickly, Fed Governor Lael Brainard said on Monday in comments that solidified the view the central bank would leave interest rates unchanged next week.

Brainard said she wanted to see a stronger trend in U.S. consumer spending and evidence of rising inflation before the Fed raises rates, and that the United States still looked vulnerable to economic weakness abroad.

"Today's new normal counsels prudence in the removal of policy accommodation," Brainard, one of six permanent voters on the Fed's rate-setting committee, told the Chicago Council on Global Affairs.

She said the U.S. labor market was not yet at full strength, which means "the case to tighten policy preemptively is less compelling."

Brainard did not comment on the specific timing of future rate policy changes but she held firm in arguing for caution in what could be the last word from a Fed policymaker before the central bank's Sept. 20-21 meeting.

Policymakers will go into the meeting divided, with some concerned current low rates will fuel a surge in inflation while another camp, which includes Brainard, has argued that the Fed should not rush to raise rates.

Many other policymakers think the U.S. job market is near full strength and Fed Chair Janet Yellen argued in July the case for rate increases has strengthened.

"I think circumstances call for a lively discussion next week," said Atlanta Fed President Dennis Lockhart, who will not be a voter at next week's policy review but will participate in discussions.

Brainard said on Monday the labor market might still tighten further without putting pressure on inflation.

"The response of inflation to unexpected strength in demand will likely be modest and gradual, requiring a correspondingly moderate policy response," she said.

U.S. stock prices rose following Brainard's comments while the dollar weakened and yields on U.S. government debt fell. Traders trimmed their odds for a September rate hike to 15 percent from 24 percent on Friday, according to CME Group. Investors still saw just higher than 50/50 odds for a December hike.

The central bank last raised borrowing costs in December, ending seven years of near-zero rates. Policymakers signaled in June they could still hike rates twice in what remained of 2016.

Over the last year, Brainard has been one of the Fed's most vocal defenders of low interest rate policy, arguing the United States is vulnerable to economic troubles in Asia and Europe.

She said on Monday the low interest rate policies across advanced economies could make the United States more vulnerable to spikes in the value of the dollar which could put downward pressure on inflation.

Republican Presidential candidate Donald Trump accused the Fed on Monday of keeping interest rates low because of political pressure from the Obama administration.

Minneapolis Fed President Neel Kashkari said "politics does not play a part" in the Fed's deliberations and that current low U.S. inflation means there is no "huge urgency" to hike.

Inflation has been below the Fed's 2 percent inflation target for the last four years.

Viewed as an influential voice of caution within the Fed's Washington-based board of governors, Brainard was the U.S. Treasury's undersecretary for international affairs from 2010 to 2013.

Article Link To Reuters: