PG&E Shares Plunge 30% On Reports Of Possible Bankruptcy Filing

Hours after NPR reported that troubled California utility PG&E was weighing a sale of its natural gas division to cover potentially billions of dollars in fines that could result if its equipment is found to have caused the deadly and destructive wildfires in southern and northern California late last year and in 2017, Reuters followed up with a report that the company was weighing a(nother) bankruptcy filing for some or all of its business to protect itself from what could be billions of dollars in fines.

The report sent shares of the utility plunging 27% in late-day trading, sending them back toward their 15-year lows reached in November.

While the bankruptcy filing – which would be the company’s second after a similar chain of events left the company filing for Chapter 11 in 2011 – is far from assured, it’s one of several measures under consideration as the company braces for fines that could far exceed its insurance coverage, as well as dozens of lawsuits by victims who were impacted by the fires. There’s still the possibility that the utility is effectively bailed out by California lawmakers, who could pass a law allowing it to pass on costs associated with the fires to its customers.

PGE

The company is considering the move as a contingency, in part because it will soon take a significant financial charge for the fourth quarter of 2018 related to liabilities from the blazes.

A bankruptcy filing is not certain, the sources said. The company could receive financial help through legislation that would let it pass on to customers costs associated with fire liabilities, the sources said. But that is just a possibility, they said, so bankruptcy preparations are being made.

In another sign that bankruptcy wouldn’t be its first choice, Reuters said that as of Friday, the company was backing away from arranging a DIP loan – a step typically taken before a bankruptcy filing. However, the mere fact that it is contemplating such an option should be sufficient to scare what few equity investors PG&E has left.

The news is the latest shock to PG&E shareholders after the company said in November it expects to take a sizable charge to its Q4 earnings as it anticipates massive legal payouts related to the Camp and Woolsey fires, which killed at least 86 people and destroyed 18,500 homes and incinerated most of the Sierra foothills town of Paradise.

The company said in November it could face a “significant liability” exceeding its insurance coverage if its investigators determine that its equipment did indeed cause the fires.

Meanwhile, in addition to PG&E’s shareholders, the other biggest losers here are the citizens of California who now face an almost assured increase in their utility costs – either by a forced prefunding PCG’s legal reserve, or by having whatever utility monopoly is left take over and crank up the bill as customers have no other alternatives.

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GE Shares Rally On Report Apollo Weighing $40 Billion Bid For Aircraft-Leasing Unit

GE shares surged more than 5% in afterhours trade, building on an impressive YTD rebound, following a Bloomberg report that private equity giant Apollo has been talking to bankers about raising debt to buy part of GE’s jet-leasing business, GE Capital Aviation Services, for up to $40 billion. The report comes after several analysts questioned the value of GE’s aircraft leasing business following the recent bankruptcy of helicopter leasing company Waypoint Leasing, raising the possibility of a substantial writedown.

Apollo is reportedly looking to raise $30 billion in financing to purchase GE Capital Aviation Services as potential buyers weigh purchasing one of GE Capital’s biggest and most profitable assets. An acquisition would go a long way toward dismantling what’s left of the industrial giant’s financing arm. After touching its financial crisis low of $6.66 on Dec. 12, GE shares have rebounded 13% so far this year, and were up 6% on Friday.

GE

GE’s aircraft leasing unit, one of the world’s largest lessors of planes, has a fleet of almost 2,000 aircraft valued at about $40 billion. The unit expanded in 2015 after the $1.8 billion acquisition of Milestone Aviation, a helicopter lessor. Back in November, a research report by Gordon Haskett analyst John Inch prompted questions about the treatment of goodwill at Milestone after a peer helicopter lessor, Waypoint leasing filed for bankruptcy amid challenging industry conditions, prompting another leg lower in GE shares after he raised questions whether a writedown of the unit’s goodwill might be forthcoming. 

Aircraft

Here’s what we wrote at the time.

Why is this relevant to GE? Because as Inch also notes, in 2014 GE acquired Milestone Aviation – another provider of aircraft and helicopter leasing services  – for $1.8 billion in 2014, and assuming the industrial behemoth has not since written down Milestone’s goodwill, the helicopter business would account for nearly 75 percent of GE Capital’s reported goodwill of $984 million at third quarter of 2018, the analyst added according to Bloomberg.

“A write-down of its Milestone assets could prove highly material to GE Capital,” Inch said.

While GECAS is a key business for GE Capital as it pulls back from other business lines, it generated only $271 million in profit in the third quarter, which makes the floated $40 billion purchase price a little generous.

Still, Apollo has a reputation for generously overpaying for acquisitions, and at least superficially it has the expertise to run the business, given its ownership of Merx Aviation. It also has a history of buying assets from GE, including an energy investment portfolio so who knows, perhaps $40 billion is a bargain although in light of some of Apollo’s other recent investments, that may be wishful thinking.

For GE, the sale would certainly be good news as it would help raise some badly needed liquidity for the cash-strapped firm, and, if GE can negotiate a good price for the business, it could mark an early victory for CEO Larry Culp, who took the reins at GE in October after John Flannery, who had served in the role for only 10 months, was unceremoniously pushed out.   

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Carlos Ghosn To Appear In Public For First Time Since His Arrest

For the first time since he was arrested on Nov. 19, former Nissan Chairman Carlos Ghosn is expected to appear in public for the first time during a hearing on Tuesday where Tokyo prosecutors have been tasked with justifying his continued detention before the court.

Ghosn’s lawyer on Friday demanded the hearing, which was granted by the court and set for Tuesday. Under Japan’s Constitution, allows those who have been charged with crimes to request a hearing where prosecutors must elaborate on the reasons for their detention.

Ghosn

While the hearing is unlikely to lead to his early release – as of now, he can be held until Jan. 11, though his term of detention may be extended again, as it has already been extended three times – WSJ said it could delay prosecutors who are working to build their case.

Japan’s constitution, mostly written by U.S. occupation forces shortly after World War II, allows people who have been arrested to demand an open court session at which the reason for their detention must be given. The provision, part of Article 34, is a version of the habeas corpus rights rooted in centuries of Anglo-American law.

Mr. Ghosn’s lawyer demanded such a hearing on Friday, and the court set it for Tuesday morning. The detainee is typically allowed to make a statement at the hearing.

Court data show that detainees in Japan rarely demand a hearing under Article 34, in part because it is unlikely to lead to their release. Only 583 requests were made in 2017, according to national statistics, out of hundreds of thousands of criminal cases. The judge at the hearing can fulfill the constitutional requirement simply by repeating prosecutors’ allegations and their reasons for wanting detainees behind bars, such as the risk they might destroy evidence if released.

However, Mr. Ghosn could delay prosecutors’ work by forcing them to prepare for the hearing. Also, the chance to give his side could influence local media and public opinion, improving the environment for an eventual trial even if it doesn’t immediately change the basic contours of the case. The trial is likely to be held before a three-judge panel.

It has been more than six weeks since Tokyo prosecutors boarded Carlos Ghosn’s private jet and arrested the legendary auto executive, setting off one of the biggest corporate scandals of the year. And in the intervening period, prosecutors have piled on additional charges to allegations that Ghosn conspired to mask his true compensation from regulators and repeatedly extended his detention. Ghosn, whose dramatic rise and fall was recently the subject of an extensive New York Times profile, has already been charged with masking his income during a period stretched from 2010 through this year, and with shifting personal trading losses to Nissan.

And earlier this week, as Ghosn’s lawyer maneuvered to have his client released, it appears that Tokyo prosecutors (or perhaps Nissan insiders working to undermine their former leader) have leaked another batch of allegations about Ghosn’s alleged wrongdoing. Following reports that Ghosn set up an internal Nissan slush fund to pay off a business run by Saudi associate Khaled al-Juffali, Nikkei Asian Review (a favorite repository for Ghosn-related leaks) reported Thursday that the same fund was also used to make payments to Nissan dealers in Oman and Lebanon received $32 million and $16 million (though the story didn’t cite a reason for the payments, the implication is that the payments may have been a reward for helping Ghosn in some way, perhaps with shifting his trading losses).

Nissan dealers in Oman and Lebanon received $32 million and $16 million, respectively, through Dubai-based Nissan Middle East, the sources said. This occurred around the same time that Ghosn paid a total of $14.7 million to a business run by Saudi associate Khaled al-Juffali, allegedly as compensation for help covering personal losses in the wake of the 2008 financial crisis.

Each of these payments came out of Nissan’s “CEO reserve,” an internal fund that Ghosn could tap at his discretion. Tokyo prosecutors, who have accused Ghosn of breach of trust over the al-Juffali payments, suspect that the ex-chairman may have had the fund set up to handle private issues. Investigators are looking into whether the ex-chairman diverted cash from the reserve for other personal uses outside the scope of those allegations.

Whether the Yokohama-based automaker made similarly large payments from the CEO reserve to other dealers elsewhere in the Middle East has not been confirmed, the sources said. Ghosn was raised in Lebanon.

The CEO reserve was set up at Nissan Middle East at Ghosn’s request around December 2008. This was not long after Ghosn’s personal asset management company suffered heavy paper losses on a currency swap contract with Shinsei Bank.

Ghosn has maintained that the payments to al-Juffali were legitimate payments for services rendered. So far, the Ghosn scandal has been marked by allegations and speculation that has been leaked to the press, only some of which has been followed up with formal charges. Ghosn has also been accused of procuring a no-show consulting position at Nissan for a relative, and with using “corporate housing” in Brazil and Lebanon purchased by the company as homes for his family.

Ghosn and his allies have sought to portray the charges as an extension of a palace coup inside Nissan, where Ghosn’s underlings were allegedly growing weary of his bruising management style. Recently, thanks largely to the NYT, that narrative has started to gain some traction.

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Iran To Sail Warships Into The Atlantic, Pushing Near US Waters

At a moment a US aircraft carrier group led by the USS Stennis is stationed in the Persian Gulf, putting Iran’s military on edge, the Iranian navy has announced plans to deploy warships to the Atlantic starting in March, in a clear attempt to increase the operating range of its forces and extend into the United States’ backyard. 

A top Iranian naval commander told the the Islamic Republic News Agency (IRNA) on Friday, “The Atlantic Ocean is far and the operation of the Iranian naval flotilla might take five months,” and also identified that among the deployed vessels will be its Sahand destroyer, touted as Iran’s latest domestic built stealth destroyer

The new Iranian destroyer Sahand sails in Persian Gulf waters, Iranian Army via AP

While suggesting that the ships could traverse the globe as part of the mission to extend operations, the IRNA described the Sahand as a “four-engine destroyer [that has] has been designed and made more advanced than its predecessor, Jamaran destroyer, with radar-evading capabilities.” The navy’s media statements issued by top ranking Rear Admiral Touraj Hassani  also suggested the mission was handed down from the highest levels of Iranian leadership. 

The Sahand is also known to be outfitted with a flight deck for helicopters and anti-aircraft systems, advanced missiles, and electronic warfare capabilities. 

This latest provocative statement comes after Admiral Hassani last month declared Iran would soon deploy two or three warships on a mission to Venezuela, which the US would see as the most brazen mission yet, following on the heels of Russian temporary deployment of long range nuclear capable bombers to the Latin America country and longtime enemy of Washington. 

Iranian military leaders have cited their intent to carry out such missions according to maritime law and in international waters, citing US carriers doing the same, just as American ships commonly pass near Iranian waters in the Persian Gulf. 

Friday’s statement comes after on Thursday US Secretary of State Mike Pompeo and Iranian Foreign Minister Javad Zarif engaged in a war of words via Twitter over Iran’s space program. 

Hours Pompeo claimed Iran was using “virtually the same technology as ICBMs” in a “defiant” Space Launch Vehicles launch that will “advance its missile program,” Iran’s Zarif shot back saying “Iran’s launch of space vehicles — & missile tests — are NOT in violation of Res 2231,” — the UN resolution which endorsed the Joint Comprehensive Plan of Action (JCPA) on Iran’s nuclear program — which the Trump administration pulled out of last May. 

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Supreme Court Will Hear Two New Gerrymandering Challenges

The U.S. Supreme Court will once again tackle the question of political gerrymandering—and whether there should be any limitations on the practice—later this year.

The justices announced Friday that they would hear a pair of cases appealing lower court ruling that struck down congressional districts for being unfairly crafted to benefit one party. In a case coming out of North Carolina, Republicans are appealing a district court ruling that struck down the state’s latest congressional map (drawn in 2016 after a previous map was also struck down by the courts) for being a partisan gerrymander. In the other case, Maryland’s Democratic attorney general is appealing a district court ruling that found the state’s congressional map, drawn in 2011, unfairly turned a Republican-leaning district into a Democratic one.

Together, the two cases present a new opportunity for the high court to provide further legal guidance regarding partisan map-making before all 50 states are scheduled to redraw their congressional and state legislative district maps following the 2020 census.

But reformers probably should not get their hopes up just yet, in part because of what happened just a few months ago at the Supreme Court. In June, the court issued rulings in a pair of challenges to congressional district maps from Maryland and Wisconsin, but ultimately declined to place any limitations on partisan map-making. A case from North Carolina was also heard by the Supreme Court in 2018, but was remanded to a lower court without a ruling.

In the Wisconsin case, Chief Justice John Roberts authored a unanimous opinion outlining where the court stands on the question of gerrymandering. Roberts’ opinion made it clear that a successful challenge to partisan redistricting must rest on the disenfranchisement of individual voters, rather than on the claim that one political party has been harmed. “This Court is not responsible for vindicating generalized partisan preferences,” he wrote. In other words, specific cases of disenfranchisement are fair game—and, indeed, courts at all levels have for decades acted to strike down political maps that seem gerrymandered to limit the political influence of racial minorities, for example—but Roberts does not want to step into the middle of what is ultimately a political fight between Democrats and Republicans.

Paul Smith, a vice president with the Campaign Legal Center, which is working on the North Carolina case this year, said Friday he believed the new challenge was “following the road map” outlined by Roberts last year.

The other major reason why the Supreme Court has never ruled conclusively on gerrymandering has to do with the lack of an objective standard for identifying just how badly gerrymandered a district is. Without that, the court must deal with “a quantifying judgment that is unguided and ill-suited to the development of judicial standards,” is how the late Justice Antonin Scalia put it in a 2004 Supreme Court ruling that also declined to set substantial limits on gerrymandering.

Reformers thought they had cracked that problem last year. The Wisconsin case rested on a mathematical formula known as the “Efficiency Gap” that promised a quantifiable standard for gerrymandering. But, as I wrote in a Reason feature last year, the Efficiency Gap had its own flaws, and the court was not convinced.

The two cases before the court this year are more narrow than the statewide challenges from 2018, and thus seem to reflect Roberts’ guidance that the Supreme Court would only consider cases where specific voter disenfranchisement has occurred. The Maryland case, for example, deals exclusively with the state’s 6th district. Prior to 2011, that district occupied the relatively rural northwestern corner of the state and was decidedly Republican, but the current district includes a long tendril that stretches into the Washington, D.C., suburbs, where high concentrations of Democratic voters helped flip the district from red to blue.

There’s one other wrinkle as the court revisits the gerrymandering question: where does newly minted Justice Brett Kavanaugh stand on the issue?

He replaced Justice Anthony Kennedy, who was the court’s swing-vote on redistricting issues. In that 2004 redistricting case, for example, he sided with the conservatives in refusing to scrap Pennsylvania’s congressional map, but he wrote a concurring opinion that seemingly opened the door to future judicial intervention if a workable, objective standard could be found. In 2015, however, Kennedy sided with the four liberal justices in a case that upheld states’ authority to transfer redistricting powers to special commissions.

Last year, Kennedy declined to join the four liberal justices who signed a concurring opinion in the Wisconsin case. In that opinion, Justice Elena Kagan outlined a potential legal path forward for the broader, statewide approach to evaluating redistricting that Roberts eschewed. Once there is sufficient standing established, Kagan argued, then statewide evidence (such as the Efficiency Gap metric) and a statewide remedy could be on the table.

Kavanugh’s appointment is widely assumed to shift the court to the right, but there’s practically nothing in Kavanaugh’s judicial record to indicate how he would approach the thorny legal questions surrounding redistricting (something that Congress maybe could have asked about during his confirmation hearings, instead of focusing almost exclusively on his drinking habits during high school).

This year’s redistricting cases, then, present not another another opportunity for the Supreme Court to clarify it’s stance on how much gerrymandering is too much gerrymandering. It will also give states an idea of how the new majority on the court will view future redistricting cases. If Kavanaugh sides firmly with Roberts and the rest of the conservative wing, it will indicate that reformers must look elsewhere to put an end to state legislatures abusing their redistricting powers.

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Congresswoman Flees From Reporters Asking About “Impeach The Motherfu*ker” Comment

Democratic Rep. Rashida Tlaib fled from reporters asking about her statement that she would help Democrats “impeach the motherfucker” in reference to President Trump. 

“If you’re unapologetic about your comments, Congresswoman, why not talk to us?” asked journalists 

After her comments went viral, Tlaib doubled down, defending her remarks in a Thursday morning op-ed, and stating that she was “elected to shake up Washington, not continue the status quo.” 

Apparently defending herself in front of cameras is a bit too much for someone elected to shake things up.

Addressing Tlaib’s comments during a Friday afternoon press conference, President Trump said “I thought her comments were disgraceful…I think she dishonored herself, and I think she dishonored her family.”

 

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Tucker Carlson Thinks the Problem With America Is Market Capitalism: New at Reason

|||LUCAS JACKSON/REUTERS/Newscom

f there were any doubt of the direction the Trump-dominated GOP is taking, Tucker Carlson’s monologue on Fox News Wednesday should remove it. Carlson’s not a political leader, but he’s a bellwether, and his words are already being cheered by prominent conservatives. Meant as a rebuttal to Mitt Romney’s New Year’s Day op-ed, the speech wasn’t original, but it reveals the degree to which Republicans have embraced the populist authoritarianism they once condemned.

Carlson began with several swipes against “bankers” who exploit the working class to line the pockets of spooky elites. If that anti-capitalist lingo sounds familiar, so does his contemptuous shrug at the ways free markets improve lives. “Does anyone still believe that cheaper iPhones or more Amazon deliveries of plastic garbage from China are going to make us happy? They haven’t so far.” This is a time-worn rhetorical technique of freedom’s enemies, who sneer at material standards of living in order to elevate abstract social goals over the needs of actual people. In fact, cheaper consumer goods have benefited Americans immeasurably. Some 85 million now own iPhones, for instance, and use them not as trinkets, but as work tools or devices to keep in touch with loved ones. And while Amazon may deliver “plastic garbage,” it also delivers syringes to diabetics, toys for special-needs kids, and even prosthetic limbs for the disabled—all, of course, made of plastic. Freer markets and abundant, affordable imports, have made the average American wealthier than Rockefeller, and 90 times richer than the average human being, writes Timothy Sandefur in his latest at Reason.

View this article.

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Can New Jersey Ban the Distribution of Computer Files That Can Help Make Guns?

A hearing is scheduled on January 15 in a U.S. District Court in Austin, Texas, in a federal lawsuit over the state of New Jersey’s law that bars distributing digital information that could assist in making a gun to anyone in that state who is not a registered or licensed gun manufacturer.

Defense Distributed, a company founded by Cody Wilson, inventor of the first plastic 3D-printed pistol, and dedicated to distributing hardware and software aiding in home gunsmithing, is involved in a multi-front legal battle over the distribution of their digital files. In this particular case, they are insisting that the Jersey law violates “violates the First Amendment, Commerce Clause, and Supremacy Clause.”

Their argument in Defense Distributed and Second Amendment Foundation vs. Gurbir Grewal (New Jersey’s attorney general) seeking a temporary restraining order and preliminary injunction against enforcing the law is that New Jersey has:

enacted a criminal law for the purpose of silencing one specific entity’s speech…Proof lies in the words of the New Jersey Governor that signed the bill and the Attorney General charged with enforcing it. They are not hiding from the fact that New Jersey created a speech crime for Defense Distributed in particular. They are embracing it. New Jersey’s Governor signed Senate Bill 2465 at a public ceremony with Attorney General Gurbir Grewal and the bill’s leading legislative sponsor, Senator Joseph Cryan….The official statements delivered in conjunction with Senate Bill 2465’s enactment prove that this law is an integral part of the censorship effort against the Plaintiffs…This is not a matter of inference. The Governor and Attorney General both said so expressly and repeatedly, in no uncertain terms.

Their argument is based on the principle that computer code counts as speech protected by the First Amendment. As the suit says, “New Jersey’s law obviously imposes content-based speech restrictions, in that its penalties apply only to speech with this content: ‘digital instructions’ that ‘may be used to program a three-dimensional printer to manufacture or produce a firearm, firearm receiver, magazine, or firearm component.'”

In addition, “the statute covers not just actual distribution of the ‘instructions’ at issue, but also an ‘advertise[ment]’ of instructions or an ‘offer’ of instructions. But of course, if no actual delivery of the instructions occurs, none of the state interests that could possibly justify the statute come into play.”

The attorney general of New Jersey explicitly said regarding the law in question that:

bad actors were trying to take advantage of loopholes because no law squarely addressed printable guns or ghost guns. So we had to rely on other laws, like our public nuisance law or our assault weapons law, to fight back…a law right on point strengthens law enforcement’s hand even more. And so today, there is no question that printable guns and ghost guns are deadly, and selling them in New Jersey is illegal. And that’s why I’m so proud to support Governor Murphy’s efforts and the legislature’s efforts to close those loopholes, to stop the next Cody Wilson, to fight the ghost gun industry…

In addition to the speech claims, the suit further insists New Jersey’s law violates the commerce clause as that clause “does not allow a state to ‘regulate conduct that takes place exclusively outside the state,'” Defense Distributed further argues that the law violates the Supremacy Clause by attempting to outlaw certain acts legal under the federal Communications Decency Act of 1996 and to override a federal decision to license Defense Distributed to distribute computer files that can facilitate gunmaking.

New Jersey had been threatening Defense Distributed with such legal actions even before the new law at issue in this suit was passed, as Attorney General Grewal indicated above. This suit insists that since “[New Jersey’s] demands could not allege that the speech at issue violated any statute because, at that point, no state had dared to enact such a law” the state passed the law merely to bedevil them. This injunction request is meant to stop them from getting away with it.

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Washington Offenders Could See Clemency for Pot Convictions

|||Jeff Halstead/ZUMA Press/NewscomMisdemeanor pot offenders in Washington state could get clemency for their infractions.

Gov. Jay Inslee addressed the Cannabis Alliance’s annual conference on Friday, just a few days after The Atlantic reported that he is “laying the groundwork” for a presidential run in 2020. There, Inslee announced that his new Marijuana Justice Initiative would include pardons for pot convictions.

The proposal would not apply to all pot convictions—only those with misdemeanor convictions for possession would be eligible.

Inslee hasn’t always been so open. While running for governor in 2012, he opposed a legalization measure on the grounds that it conflicted with federal law. But now he agrees that punishment should not continue “for something that is no longer illegal in Washington state.” According to a 2012 report by the Drug Policy Alliance, 240,000 possession arrests were made in Washington state in the 25 years prior to legalization.

Even as several states legalize marijuana, some residents still face the consequences of old laws. Some governments have made efforts to avoid the problem—Canada, for example, sought to expedite record sealings for offenders after legalizing possession in 2018.

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China Releases Footage Of “Mother of All Bombs” Dropped By Nuke Capable Jet

On Friday China unveiled video from a successful test of its most powerful non-nuclear weapon, dubbed the “Mother of All Bombs” in reference to a weapon previously used by US forces in Afghanistan. The official Xinhua news agency published details of the weapon for the first time while calling it the “Chinese version of the ‘Mother of all Bombs'”.

It is reportedly 5-6 meters long and its massive weight means the delivery vehicle, in this case China’s H-6K long range nuclear capable bomber, can only carry one at a time.

While China has denied that it is a thermobaric bomb — an explosive that uses oxygen in the surrounding air to generate a high-temperature explosion — its incredible size mimics the 22,000-pound GBU-43 Massive Ordnance Air Blast (MOAB) bomb that US forces dropped in Afghanistan’s Nangarhar province targeting a jihadist hideout tunnel complex in April of 2017.

Still frame from official test footage of the Chinese “MOAB”

While the Chinese bomb is long, it actually reportedly weighs less than the American version, according to military analyst Wei Dongxu, who was quoted by the semi-official Global Times further as saying, “The massive explosion that was generated would easily wipe out land fortifications.”

The short video of the test was published to the website of state arms manufacturer Norinco and shows the bomb producing a massive ball of fire and black smoke over a nondescript plain. 

Chinese media gave no details as to the date, location or range of the bomb blast, but the video was first released on Chinese social media on Wednesday, Jan. 2.

It remains, however, the US is the only military that has ever actually used such an oversized non-nuclear device in battle. 

In 2017, following the April 13 MOAB blast in Afghanistan, US Central Command (CENTCOM) released aerial video confirming the bomb was used against ISIS in Afghanistan. 

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