Month: February 2018

It is safe to say that after years of disappointment, investor expectations were low ahead of today’s Deutsche Bank earnings report. Yet somehow, the biggest German lender failed to beat even the most pessimistic one.

Deutsche Bank, which had already guided for a slump, shocked markets when revenue that missed the lowest estimate and fell to the lowest in seven years amid declines at businesses from transaction banking to equity derivatives, and pretty much everything else. Even cost control – supposedly a key feature of CEO John Cryan’s tenure – was worse than expected. The company also reported a €1.3 billion loss for Q4, which while better than the company’s disastrous report last year, was €100mm worse than the lowest forecast and far worse than the consensus loss of €478mm.

“The results are disappointing again and we don’t see anything encouraging in them, reinforcing our doubts in the bank’s strategy and management,” said Michael Huenseler at Assenagon. “There’s no silver lining.”

In line with its US peers, revenues in the all important fixed income and currencies trading group fell 29% year-on-year, and combined FIC and FIC-related financing were 20% lower. Echoing JPM and Goldman, Deutsche said the division suffered from “low volatility, low institutional client activity and difficult trading conditions in certain areas“, Deutsche said in a statement.

Overall trading revenue at the investment bank, excluding financing, declined 27 percent, Deutsche Bank said.

Meanwhile, Q4 result in Deutsche’s investment banking division, which accounts for more than half of overall revenues, were also at the low end of analyst expectations: at €2.7bn, revenues were 16% lower than a year ago and 13 per cent below analyst expectations. The division reported a fourth-quarter loss before income taxes of €733m, more than two-thirds higher than a year ago.

Some more details from the abysmal quarter, via Bloomberg:

• Full-year net revenue of 26.4 billion euros; est. 27.26 billion euros
• 4Q net revenue EU5.71 billion, lowest since 2010
• 4Q sales and trading revenue EU886 million, down 27 percent
• 4Q loss 2.18 billion euros; estimate was for loss 2.24 billion euros
• 4Q common equity Tier 1 ratio 14 percent
• 4Q equity trading revenue 332 million euros
• 4Q debt trading revenue 554 million euros
• FY loss after tax 512 million euros

As Bloomberg notes, Deutsche Bank’s revenue has fallen in 8 out of the 10 quarters since Cryan took over as CEO.

To be fair, Deutsche did warn in early January that combined revenues in fixed income and equities trading and financing will be down by up to 22% – the five largest US investment banks reported an average drop of 19 per cent, according to data by Autonomous Research – but clearly the market was not prepared for it.

Deutsche shares tumbled more than 5% as a result, the biggest drop in 6 months, and the lowest since September.

 

Always keeping the faith, even as calls for his resignation have never been louder, Cryan again expressed the bank’s dissatisfaction with the results while holding out hope for a return to growth in 2018, saying that he expects higher returns with sustained discipline on costs and risks.

“We have made progress, but we are not yet satisfied with our results”, said chief executive John Cryan. For the full year, Deutsche reported a net loss of €500m, the third annual loss in a row. It was triggered by a €1.4bn non-cash charge caused by the US tax reform, which dented the value of deferred tax assets in the US.

Maybe there was a little silver lining: Cryan said that client activity picked up in January and he pointed to good economic growth in all major global markets. The bank is paying a one-off bonus to its corporate and investment bank as it seeks to strengthen the business, a move that is sure to stir the activist investors with demands for Cryan’s scalp.

Looking ahead, The lender also scrapped its 2018 target of lowering total adjusted costs to about €22bn this year and said total costs will be about €1bn higher, as business disposals that were supposed to reduce costs by €900m have been delayed or suspended.

Meanwhile Cryan is running out of time to show he can lead Europe’s largest investment bank back to strength. The Brit has defended his strategy, saying two weeks ago that his turnaround plan had entered a “third phase” in which growth should finally be restored and on a conference call on Friday that client activity picked up in January.

“What must frustrate investors, in the stock in particular, is the lack of positive news,” said Gildas Surry, a portfolio manager at Axiom Alternative Investments in London which manages about $1.3 billion, including Deutsche Bank bonds. “FICC down, financing down, costs up, loan provisions down.”

While it is unclear what if anything will help Deutsche Bank get out of its 3 year-long funk, it is increasingly obvious that one more quarter as bad as this one may be Cryan’s last.

 

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China’s rapid, credit-fueled boom is losing its punch as new credit creation is becoming less efficient at driving growth – despite the Communist Party reporting a 6.9% growth rate for 2017 (which conveniently surpassed the party’s “targeted” growth rate of 6.5% even though Chinese economic data is widely believed to be fabricated). And even though the risk of its economy collapsing in a mountain of bad debt remains ever-present, because there’s no telling when it’s “Minsky moment” will arrive, many economists believe its GDP will surpass the US some time during the next ten years, making it the world’s largest economy.

One UK think tank projected last year that China would overtake the US by 2032. But Honda implied an even faster shift in its latest sales guidance, where Japanese automaker behemoth projected that China will surpass the US as its largest market during the next couple of years, according to Reuters.

Sales in Asia have been so strong that the company lifted its full year profit outlook by 4%, with China leading the boom.

Indeed, while US sales stagnated last year, contributing to a 3% contraction in global sales, sales in China jumped 15.5% to 1.44 million units. In fact, Asia was the only region where Honda saw year-on-year sales growth in 2017. 

Honda, Toyota Motor Corp (7203.T), Nissan Motor Co (7201.T) and other Japanese automakers currently count the United States as their biggest market. But Honda has experienced explosive growth in China during the past three years, luring consumers with new offerings in the sport-utility vehicle (SUV) segment including its CR-V and Vezel models.

Last year, its China sales jumped 15.5 percent to 1.44 million units, even as overall vehicle market growth slowed to just 3 percent year-on-year, the weakest in at least two decades.

In contrast, sales in the United States, for decades Honda’s largest country market, were largely stagnant at 1.64 million vehicles last year, and significant growth is unlikely given that overall vehicle sales in the country are widely expected to retreat after peaking in 2016.

In the third quarter, Asia including China was the only region where Honda saw year-on-year growth in vehicle sales, while sales at home, North America, Europe and other regions fell. Honda expects Asia to overtake North America as its biggest source of annual vehicle sales for the first time this year.

Because it relies on joint-ventures with local Chinese companies (as practically every foreign automaker is forced to do) Honda is scrambling to raise capacity, but said there might be some short-term difficulties until it completes a new plant in 2019.

Honda has been ramping up production in China, and Executive Vice President Seiji Kuraishi said that a further, significant rise in capacity would be difficult until it completes a new plant in 2019 through a joint venture with China’s Dongfeng Motor Group.

“We’re struggling to increase production in China, so it would difficult to match our sales in the U.S. market at the moment,” Kuraishi told reporters at a briefing.

“But given the current state of the market, it’s likely that China will overtake the United States soon.”

In keeping with China’s push to eventually phase out fossil fuels in cars to help combat its worsening pollution problem, Honda plans to launch a compact all-battery electric car in China later this year, and Kuraishi said that the company would also focus on developing car-sharing and other new mobility services for the country.

Expectations for stronger sales growth in Asia prompted Japan’s third-biggest automaker to raise its full-year forecast for operating profit to 775 billion yen ($7.06 billion), while it sees the yen averaging 110 yen versus the U.S. dollar in the year through March, from 109 yen previously.

While the latest forecast is an upgrade from a previous forecast for 745 billion yen, it still represents a 7.8 percent slide from a year prior, as costs for quality-related issues including recalls, along with investment for research and development offset higher sales and cost reductions.

Profit was 284.5 billion yen in October-December, up 37 percent from a year earlier, and exceeding a mean 281.6 billion yen estimate from 11 analysts polled by Thomson Reuters I/B/E/S.

2018 started off with a disappointment for the auto industry with total sales at 17.07mm SAAR (missing expectations and down from 17.76mm in Dec).

Meanwhile, after briefly spiking late last year, new car sales in the US started off 2018 with a disappointment. Domestic auto sales dropped notably to 13.10mm in January – that is the biggest Dec-to-Jan drop since 2010.

 

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Authored by Robbie Travers via The Gatestone Institute,

“If liberty means anything at all, it means the right to tell people what they do not want to hear,” George Orwell wrote in his ant-totalitarian novel, 1984. He would probably have frowned upon the latest UK Government blueprint to create a regulatory agency that will ultimately strangle freedom of expression.

Scrutiny against “Fake News,” is undoubtedly a positive development.  It means that at least people are questioning the news they are consuming. Yes, it is a problem that so much disinformation and misinformation exists. It is, however, a far bigger problem if they do not. The public’s resolve should be that disinformation is not combated by a regulatory body controlled by Government. Individual arguments, with evidence, is what belongs in a democracy, which can only survive if it is a marketplace of ideas.

If having a Government body decide what can and cannot be published – thereby creating a culture of both official censorship and self-censorship — is not enough to concern you, the briefest glance at what this newly created British body would consider “Fake News” should send you running into the street.

This new UK Government body would deem worthy of censorship “Satire or parody which means no harm but can fool people”. According to these geniuses, satire and parody are “Fake News.”

Satire often relies on mixing believability and absurdity — not necessarily to fool people but to point out serious problems in a more approachable way. This can be done to draw people’s attention to take a harder look at what they are consuming, or to make a wider political point humourously. The idea that satirical publications would be possibly removed and censored because people might believe them sounds disingenuous at best, and at worst autocratic.

It is easy to see how Governments might be tempted to censor criticism by satire or any other way. Someone might end up exposing truths that the government would rather were not made public. Someone high up might, God forbid, even be the butt of a joke. All jokes, then, will be required to conform to the Government’s opinions, while jokes that mock the opposition will be left untouched? Who regulates the regulators? Criminalising jokes is the first step toward the end of freedom. Look at Turkey, where President Recep Tayyip Erdogan has filed over 1,800 cases against cartoonists, and others who dared to make a joke at his expense.

This new British body, according to a UK Government Spokesperson, will reportedly be “tasked with combating disinformation” — but what counts as “disinformation”?

 

If “disinformation” is determined by Government, the Government is free to censor anyone who challenges its opinion, or what it might like its subjects to believe. Who would you trust to run the bureau that decides which political opinions are malicious and dangerous. and which should be censored because they are “fake”?

Even if you agree with the UK Government, that, say, Russia poses a dangerous geopolitical threat by spreading disinformation, it is the job of the government to let you hear it, and then tell you why it is not correct. The danger remains that while the current government might not abuse its powers of censorship, the next one might. Giving power to a Government you trust only means that, later on, you may well find out that you have given that power to a Government you may not trust.

 

Moreover, does this new body mean that individuals could be challenged for presenting alternative opinions, or for challenging facts released by a Government? What if such challenges could be deeply important? How, then, is one to expose, for instance, wrongdoing by the Government? Sadly, this kind of policy seems poised not only to become a reality in Britain; it seems to be setting up shop throughout Europe.

In France, President Emmanuel Macron is leading a crusade against whatever some judicial official decides is “Fake News.” Macron says websites that carry fake news will be “banned” “in order to protect democracy,” supposedly because they present false narratives. Macron notes that France “needs” “emergency bans,” to silence websites regarded by the French Government as sharing “fake news” — especially, one assumes, during elections.

Even if judgements against some of these websites could be overturned in court, doing so would clearly be an enormous financial burden, as the would-be censors doubtless know. But what a handy way not to have one’s policies questioned! Opposition could be silenced, even if temporarily, while you run your citizens through a legal gauntlet worthy of Galileo; meanwhile the Government can have the run of the corral to shape a discourse that favours — itself. Governments also usually fight with endless time and endless resources.

Macron claims that he is attempting to “protect democracy.” No, one does not protect democracy by restricting the freedom of speech by the members of that democracy. Democracy means letting the people (demos) have open access to information and coming to their own conclusions.

Germany has already passed laws which demand that any “hate speech” or “fake news,” be removed from social networking. Immediately, the political opposition paid the price. Beatrix von Storch, a prominent member of parliament of the advancing AfD party, was suspended on January 2, the day after the law went into effect, for her twitter posts. What a nifty way to silence her and others — and their ability to challenge the Government.

Even more dangerous, Ireland‘s Government is proposing legislation that would mean individuals could spend up to five years in prison for disseminating supposedly “Fake News” on internet accounts. How could a threat of imprisonment not have a chilling effect on open discourse? In a free society, Government should not be able to jail an individual for sharing opinions with which it disagrees. As the Soviet dissident Natan Sharansky wrote in his book, “The Case for Democracy,” it is precisely the “The Town Square Test” that determines whether or not a society can even be considered free:

“If a person cannot walk into the middle of the town square and express his or her views without fear of arrest, imprisonment, or physical harm, then that person is living in a fear society, not a free society.”

The UK Prime Minister’s Spokesperson noted that , “We are living in an era of fake news and competing narratives.” All right, time to compete. Explain to the public why your narrative is better. Where is it written that narratives should not compete? Political discourse depends on having differing ideas clashing, enabling different individuals to test their ideas through talk rather than through jail. A society with a single narrative is inherently a totalitarian one — “Big Brother” — that does not tolerate anyone questioning its essential orthodoxies. Attempts to censor “competing narratives” is probably just a tip-off that certain individuals are afraid their political ideas will be unable to withstand the questions asked or the test of time.

If Macron, and other European leaders truly want to “defend democracy” — a premise that seems open to question — it is time they made the case for defending it by supporting freedom of speech, unassisted by the “bear hug” of a “protective” government. If the values of human rights, democracy and freedom are as great as many know them to be, then “Fake News” will quickly be exposed as merely that, and not pose a threat to “True News” for very long.

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Yigit Bulut, chief advisor to Turkish President Erdogan, has threatened Greece over the disputed islet of Imia in the Eastern Aegean Sea.

“Athens will face the wrath of Turkey worse than that in Afrin,” Bulut said in a Television show of a private network.

“We will break the arms and legs of officials, of the Prime Minister and any Minister, who dares to step on the Kardak/Imia islet in the Aegean,” he claimed.

 

Turkish president #Erdogan‘s chief advisor Yigit Bulut threatens #Greece, says Athens will face the wrath of #Turkey worse than #Afrin offensive, vows to break arms & legs of officials, PM or any Minister, who dare to land on disputed Kardak/Imia islet in Aegean. pic.twitter.com/XPmATUchnm

— Abdullah Bozkurt (@abdbozkurt) February 1, 2018

Yes, the video is in Turkish but who cares to translate full 40 seconds of a delirium talk?

As KeepTalkingGreece reports, Bultu’s threats come just a couple of days after Defense Minister Panos Kammenos sailed to Imia and threw a wreath into the sea to honor the three fallen soldiers during the Imia conflict in 1996.

 

Ankara does not miss a chance to challenge Greece’s sovereignty in the islets and islands of the Aegean Sea, escalate tension around Imia, and risk an ugly incident that could bring the two neighboring countries at the verge of an armed conflict as two decades ago.

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Via The Duran,

The leaders of the Visegrad Group (V4) were on common ground rejecting the compulsory relocation of refugees and the two-tier Europe concept, while stressing the need for a stronger Europe during their summit in Budapest on January 26.

 

Europe “needs to go back to the drawing board” because it has failed to achieve its goals, Hungarian Prime Minister Viktor Orban said at a panel discussion with his Visegrad Group counterparts, Slovakia’s Prime Minister Robert Fico, and Polish PM Mateusz Morawieck and Czech Republic’s Prime Minister Andrej Babis (both attending their first V4 summits). Orban stressed the need for a clause for the creation of a labour-based society and said Europe must return to the top in terms of technological development.

The Hungarian PM, who has been in a constant spat with Brussels over its policies on migration has been a key advocate of closer integration between V4 countries. Orban wants Central Europe to become stronger to counterbalance the German-French led EU.

He has repeatedly referred to V4 countries as the fastest growing region within the EU and as the engine of future growth for Europe. Orban also needs allies as he has become increasingly isolated in Western capitals due to Hungary’s widening democratic deficit.

V4 leaders stood firm in their concept rejecting united states of Europe concept, saying decisions taken by country leaders cannot be ignored. EU institutions should treat all member states equally and act strictly within the remits of their respective competencies. The right of member states to carry out domestic reforms within their competences should be respected,” the V4’s joint declaration read.

The view of a strong Europe based on the cooperation of integrated sovereign states was echoed by Mateusz Morawiecki, who also called for the creation of Europe’s own defence force  to be used against terrorism, the migration crisis and “Eastern aggression”, referring to Russia.

Hungary and Poland, allies for centuries, are at loggerheads with Brussels over many issues, with the populist governments of the “illiberal axis” Central European states seeking to push back EU power to retain national sovereignty.

Hungary’s has received sharp warnings for its controversial NGO law and attacks on civil society, while Poland has come under scrutiny since the rightwing Law and Justice (PiS) party won the election in late 2015 and swiftly acted to tighten control over publicly-owned media, as well as the judiciary.

The European Commission has triggered the “nuclear option” against Warsaw in December, which may lead to stripping Poland of its voting rights in the EU. Budapest has already made it clear that it would veto such decisions and the Polish government has done the same after the European Parliament adopted a resolution to trigger Article 7 against Hungary in May after the government approved controversial legislation on asylum seekers and NGOs and the Central European University.

Migration remains a divise issue

A major division between old and new member states has been the question of migration, as eastern states have been rejecting the EU’s migration quotas. The commission stepped up infringement procedures  in July against the Czech Republic, Hungary, and Poland for refusing to take part in the programme to redistribute 160,000 refugees from Italy and Greece.

On migration issues, the heads of Slovakia, the Czech Republic, Poland and Hungary restated their focus on “effective, responsible and enforceable (EU) external border protection to avoid obligatory quotas (being) applied, There was a consensus that key goal was not to “relocate but to prevent the pressure of immigration in Europe.”

The Hungarian PM called UN Secretary-General Antonio Guterres’ proposals about a global agreement on migration “dangerous”. “We insist on our tolerant, Christian way of life and refuse to give up the feeling of being at home,” he added.

The Visegrad countries rejected any plans for slashing development funds to countries that have differing views within the EU, especially on migration. The issue of punishing Poland and Hungary has resurfaced from time to time seen as a way of putting pressure on two renegade countries to respect democratic values.

At the summit, Orban also pushed for the EU enlargement to the Western Balkan region. The integration of Montenegro and Serbia would strengthen Central Europe and would stabilise the Balkan region, he said.

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At the turn of the year, and just over 2 months ahead of the Italian elections on March 4, we presented  a stunning observation from Citi, one suggesting that even before any potential political risk emerges in March, private investors had long ago fallen out of love with Italian BTPs and had taken to the hills.

As illustrated in the chart below, just about every other major investor type has  become a net seller (to the ECB) or a non-buyer of BTPs over the last couple of years. Said differently, for well over a year, the only marginal buyer of Italian bonds has been the ECB (dark blue).

Then, overnight, Jefferies was kind enough to collate the latest ECB sovereign debt flows data, and revealed another stunning finding: one of the biggest sellers to the ECB has been none other than Italian banks themselves!

Here is Jefferies analyst David Owen:

The breakdown below shows significant moves by the banks in all four largest euro area economies. However, the Italian banks are again in the spotlight; they reduced their domestic sovereign debt holdings by a hefty €12.6bn in December, and by €40bn (10.5% of outstanding stock) in Q4 as a whole. There is strong seasonality in the data, as banks book trading profits and dress-up their balance sheets for year-end; but even by previous standards, this move in recent months is unprecedented.

It is indeed, and as a side note, since the start of European QE, some €100 billion in Italian bonds have changed ownership: from Italian banks to the European Central Bank .

On one hand, this is good news as it suggests that Europe’s “doom loop” is finally breaking. Recall that the biggest risk facing Europe in the 2011-2013 period was the surging purchases of their own sovereign debt by local banks, which were too afraid to put money into other non-backstopped assets. And, according to some, the resultant record holdings is one of the reasons why the ECB launched QE: to send the prices of European sovereign bonds soaring, unblocking European bank balance sheets and allowing the traditional credit machinery to work again.

The flip side is that while European banks have been selling sovereign bonds, they have been shifting the proceeds into other, far riskier assets, assets which will tumble the moment the market prices in the departure of the ECB as Europe’s buyer of last resort.

And while it is unclear how long until that moment of epiphany occurs, keep an eye on Italian banks and their BTP holdings: once the reduction reverses, and banks start bidding up, it’s safe to assume that Draghi’s next QE program can’t be too far behind.

As for the political risk, and potential fallout from the upcoming Italian elections, fear not: by now the ECB is surely one of the biggest owners of Italian bonds, and if something unexpected happens, well Draghi will always pull something out of his sleeve, “whatever it takes.”

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Authored by Darius Shatahmasebi via TheAntiMedia.org,

It’s not clear if the United States knows what it is doing in Syria anymore. Having successfully toppled the Libyan government in 2011, former President Barack Obama subsequently spent a good three years attempting to bring about the fall of the Syrian government, under the guise of humanitarianism, that embroiled the region in chaos and civil strife.

Incessant calls for Syrian President Bashar al-Assad to formally step down, combined with the billions of dollars in arms and funding for radical Sunni jihadists who sowed the seeds of sectarianism and a bloody civil war in order to divide and conquer Syria, plagued Obama’s foreign policy for years. And let’s not forget the extensive strike plan Obama drew up in 2013, which would have almost certainly extinguished Assad’s presidency.

Unfortunately for the establishment, Obama’s strike plan didn’t have the approval of America’s warmongering partner in crime, the United Kingdom; and was strongly opposed by Russia. Most importantly, there was significant disapproval among the general public and military, and the U.S. knew it would never garner the support needed to carry out such an intervention.

Then in 2014, the U.S. military found backdoor access by riding the international outrage and horror provoked by the radical group ISIS, which had attained huge swaths of territory in both Iraq and Syria. Anyone who had been paying attention knew deep-down that the focus on ISIS was essentially just a façade to pave the way for the U.S. military to take on Assad directly — though this scenario proved much harder than expected, after Russia’s formal intervention in 2015. With Russia backing the Syrian government directly, there was little the U.S. could do but direct most of its energy towards ISIS, with some minor, albeit noticeable, exceptions.

And then came Donald Trump, the alleged Russian stooge and lackey, who was going to focus on making America great again and who had proposed instead to work with Assad and Russia. Whether or not Trump has any say in the matter is unclear, but it became quickly apparent that the war-hawks in his administration are just as schizophrenic as their predecessors.

Working Through the Plan Alphabet and Back Around to Plan A

 

Secretary of State Rex Tillerson, right, waves after speaking to the Hoover Institution at Stanford University with former Secretary of State Condoleeza Rice, left, in Stanford, Calif., Wednesday, Jan. 17, 2018. In a speech at Stanford University, Tillerson signaled a deeper American commitment to the Mideast nation of Syria, saying the U.S. military will remain there for the foreseeable future. (AP Photo/Jeff Chiu)

Secretary of State Rex Tillerson initially maintained that Assad had to leave, but then appeared to change his mind. Trump’s ambassador to the UN, Nikki Haley, only added to the confusion. Barely days after this flip-flop, a chemical weapons attack in April last year immediately brought us back to another strike plan on the Syrian government; and the go-to mantra ever since appears to renew the longstanding call for Assad’s departure.

But why did the U.S. want to remove Assad so badly that it justified manufacturing an entire bombing campaign against another force? There are many competing theories, but Assad as a stalwart Iranian and Russian ally poses a major threat to the U.S. empire, as well as to adversarial states such as Israel and Saudi Arabia.

In 2009, Qatar put forward a proposal to run a pipeline through Syria and Turkey and into Europe to export gas from Saudi Arabia. The Assad government instead forged an agreement with Iran and Iraq to run a pipeline into Europe — leaving out Saudi Arabia, Qatar and Turkey completely. If these kinds of deals can be arranged under the cover of Russian air power, the United States risks losing out much of the region and its spoils to Russia and Iran.

Now that ISIS has been successfully (more or less) “defeated,” the U.S. is openly staying in Syria indefinitely to counter both Assad and Iran’s alleged expanding influence. Tillerson put it bluntly in mid-January this year:

“Continued strategic threats to the U.S. other than ISIS persist. I am referring principally to Iran. Iran has dramatically strengthened its presence in Syria by deploying Iranian Revolutionary Guard troops; supporting Lebanese Hezbollah; and importing proxy forces from Iraq, Afghanistan, Pakistan and elsewhere. Through its position in Syria, Iran is in a stronger position to extend its track record of attacking U.S. interests, allies and personnel in the region.”

“Syria remains a source of severe strategic problems and a major challenge for our diplomacy,” Tillerson added. “But the United States will continue to remain engaged.”

The U.S.-Turkey Debacle

 

Turkish troops take control of Bursayah hill, which separates the Kurdish-held enclave of Afrin from the Turkey-controlled town of Azaz, Syria, Sunday, Jan. 28, 2018. Turkish troops and allied Syrian fighters captured the strategic hill in northwestern Syria after intense fighting on Sunday as their offensive to root out Kurdish fighters enters its second week, Turkey’s military and Syrian war monitor reported. (DHA-Depo Photos via AP)

As reports began to emerge of Washington’s plan to build a 30,000-strong Kurdish and Arab force on Turkey’s border in Syria, it became quite clear that Turkey itself was days away from invading Syria directly. To no one’s great surprise, the Turkish military intervened in the days that followed, most notably in the city of Afrin, before announcing it would extend its operations right up to the border with Iraq.

The U.S. surely knew this would happen, yet continued to antagonize both parties to the fullest extent possible. Neither the U.S. nor Turkey has the legal basis to conduct military operations in Syria, yet the two of them believe they have the right to call the shots as to the best way of handling the situation. First, Turkey urged the U.S. to leave the area of Manbij because that is where the Turks have set their sights, getting closer to the border with Iraq. A top U.S. general immediately responded by saying the U.S. had no intention of leaving Manbij at all, further aggravating the situation.

The only consistent strategy employed by the U.S. that can be ascertained (to a point) is that of maximizing the chaos in Syria. Even as we speak, Russia has begun a peace process of its own in Sochi. Why did the U.S. decide to announce its unlimited troop presence in Syria days before the peace talks were to commence; and do they genuinely believe their presence in Syria contributes to any meaningful peace for that country?

Just as disturbing is America’s unrivaled ability to commit itself to wars left, right and center without any domestic democratic accountability or approval from the international community. As The New York Times notes, this new Syria strategy is “illegal under both the Constitution and international law.” It was illegal when Barack Obama began a covert war of aggression to topple the Syrian government as far back as 2011; it was illegal right up until he began bombing Syrian territory in 2014; and everything the United States has done right through the Trump administration until today is equally illegal.

The Times’ assessment that allows for the U.S. to be in Syria solely to defeat ISIS is questionable at best; but it proves one thing: not even the warmongering mainstream media can put a positive legal spin on the plan to stay in Syria to confront Assad and Iran: because there is no legal basis to do so.

As it stands, the U.S.’ strategy in Syria is beginning to make less sense by the day. Turkey, a longstanding opponent of the Assad government, now might be working to establish a formal dialogue with Assad himself, to counter what it deems to be the principal threat: the U.S.-backed Kurds.

According to Robert Fisk, reporting from on the ground in Syria, the city of Afrin hasn’t even been bombed by Turkey yet, while Turkey has been continuously threatening a grand offensive to retake the city. That’s because it’s Russia, not the U.S., that controls the airspace over the city of Afrin, and any incursion into Afrin would most likely need Russian approval. By Fisk’s research, if Turkey’s army wanted to take Afrin, it could do so in less than half an hour. So far, there have been signs of violence around Afrin, but not in Afrin itself. Indications are that Turkey is relying on its newfound proxy force instead, in the hopes of re-establishing a sizeable anti-Assad force of its own — one that can continue to fight for Turkey’s interests without compromising its position on the Kurdish question.

There’s a reason that Turkey is arresting journalists and critics of the invasion by the hundreds even as I type. With Western media relying on state-approved Turkish correspondents without the capacity for dissent, it is unlikely that those of us on the outside are getting the full picture. Fisk is most likely the only journalist on the ground who won’t be simply echoing Erdogan’s narrative, and already he has alleged that Turkey is conducting outright civilian massacres, not “surgical” strikes on “terrorists.”

Turkey is a member of NATO. It has invaded Syria just as the U.S. has, but with what appear to be polar-opposite interests.

According to Haaretz, the real reason Turkey is involving itself in the region is not to stop an independent Kurdish state, but to stop Assad from incorporating the current Kurdish political infrastructure into his own future Syrian state. Haaretz explains:

“Russia knows the survival of Assad’s regime and his control of the entire country depends to a large extent on his ability to assimilate the Kurdish districts into Syria, with the ideal scenario being one that allows the Kurds to run their federation as part of the Syrian state under Assad’s rule. The United States also sees the Kurdish federal system in Syria and the principles of the Kurdish constitution as being no less worthy of defending than the Kurdish region in Iraq.”

The media won’t admit it outright, but this too is a deal-breaker for the U.S., and hanging the Kurds out to dry and drawing Turkey into a direct confrontation might be the principal way in which the U.S. can continue to dismantle any hopes for a unified Syria in the not-too-distant future.

Where Are We Headed?

 

 

A U.S.-backed anti-government fighter mans a heavy automatic machine gun, left, next to an American soldier as they take their positions at Tanf, a border crossing between Syria and Iraq (Hammurabi’s Justice News/AP)

Clearly, Washington’s distaste for Assad lies in his geopolitical proximity to Iran and Russia. This should be no secret, as the U.S. has maintained its view of both countries as American arch-rivals right through the previous administrations.

As The Washington Post noted just days ago, the U.S. has finally admitted its true intention in Syria:

“After months of incoherence, the Trump administration has taken a step toward a clear policy on Syria and its civil war. In a speech last week, Secretary of State Rex Tillerson bluntly recognized a truth that both President Trump and President Barack Obama attempted to dodge: that ‘it is crucial to our national defense to maintain a military and diplomatic presence in Syria, to help bring an end to that conflict, and assist the Syrian people . . . to achieve a new political future.’

To do that, the United States will continue to deploy several thousand personnel in the country and help allied Syrian forces maintain control over enclaves in the southwest, near Israel and Jordan, and the northeast, on the border with Iraq and Turkey.” [emphasis added]

Yet as long as Russia maintains a military presence in Syria, with the capability of establishing a no-fly zone of its own in much of the country, there is little the U.S. can do regarding Assad without taking on Russia directly. In the meantime, however, it clearly can do its utmost to put a dent in Iran’s expanding influence. By allowing its proxy forces to take over the strategic areas of al-Tanf and parts of Deir ez-Zor, the United States will put a major hole in Iran’s ability to link itself to Iraq, Syria and Lebanon as directly as it otherwise could. This bridge of Iran-allied nations, known as the Shia Crescent, is Saudi Arabia’s worst nightmare.

In that context, however, the current stand-off will remain a stalemate for some time, as Iranian-backed troops will continue to render America’s military bases all but useless — as they have more or less taken control of the areas that surround the bases, cutting the U.S. military off from using the bases effectively.

Whether or not the U.S. is prepared to launch a direct strike on these forces and go further than merely cutting them off is unclear, but it seems unlikely at this stage. Given that the U.S. knows Israel is itching to bomb Syria and Lebanon to confront Iran’s growing military presence, it seems more likely that the U.S. will instead rely on Israel to kickstart such a war. At the same time, Washington can continue to rely on its proxy forces to take on the so-called Iranian threat, without fighting Iran directly.

Either way, America’s schizophrenic approach to the conflict and its desire to prolong the war as long as possible does nothing to ease the suffering of ordinary Syrians. It should be clear that the U.S. has no desire to bring peace to Syria, as it continues to violate international law and aggravate other major players in the region, all of whom have conflicting and contradictory visions for the future of Syria.

America’s current Syria strategy opens up the door for a war with Turkey and a potential war with Iran and Syria. All the while the U.S. loses its status as the so-called global leader, with Russia emerging unscathed from the conflict as the region’s major power broker.

 

The corporate media would do well to follow the footsteps of The New York Times and call this strategy what it is: illegal — not to mention chaotic and maniacal. There is no happy ending to this story; but the least Washington could do is allow Syria to resolve its problems on its own, without further igniting a regional bloodbath.

*  *  *

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A ‘post hoc’ attempt to present the US as a sincere broker in the peace process? 

Axios reports that amidst the current complete disconnect in relations between the White House and the Palestinian Authority there is serious consideration underway of moving forward with President Trump’s Middle East peace plan with or without the Palestinians at the negotiating table.

A senior administration official told the diplomatic correspondent for Israel’s Channel 10 news Barak Ravid that Trump may simply place his plan before the world “so the parties and international community can judge it at face value.” As quoted in Axios, the senior official elaborated on the plan as follows:

“Since it’s not done, we haven’t decided yet how we are going to put it forward and what happens if one of the sides isn’t ready to come to the table. We are not there yet. But we are very optimistic that all relevant countries who want to support a peace agreement between the two sides are still waiting for our plan, want to work with us and realize we cannot be replaced. Despite all of the false reports about our plan, we are confident it will be beneficial to both sides and both peoples.”

Israeli PM Benjamin Netanyahu with President Trump in Jerusalem during a May 2017 visit. Image source: AP via Politico 

As recently as a week ago Trump repeated his threat of cutting US aid to the Palestinian territories, telling reporters at the World Economic Forum in Davos that he could cut $700 million in annual U.S. aid “unless they sit down and negotiate peace.”

Trump has frequently visited the subject following the fierce international reaction to the early December move which gave formal US recognition of Jerusalem as the capital of Israel, which includes plans to relocate the US embassy from Tel Aviv to Jerusalem by the end of 2019. At Davos, just before a planned meeting held on the sidelines of the economic summit with Israel’s prime minister, Trump heightened his rhetoric, saying of the Palestinian side represented by Mahmoud Abbas, “They’re going to have to want to make peace, or we’re going to have nothing to do with them any longer.”

Trump added further, “We give them tremendous amounts, hundreds of millions of dollars. That money is on the table, because why should we do that as a country if they’re doing nothing for us?” And concluded by saying he simply wants “peace” and “to save lives”: “And what we want to do is help them. We want to create peace and save lives. And we’ll see what happens. We’ll see what happens. But the money is on the table.”

The December 6th announcement unleashed a wave of protest among Palestinians in the West Bank, Gaza, and Jerusalem which resulted in multiple deaths during clashes with Israel security forces. Dozens of rockets were also launched out of Gaza, with Hamas leadership calling for a new ‘intifada’ – or mass uprising against Israeli occupation – soon after Trump’s announcement. In addition, Vice President Mike Pence was twice forced to push back plans to visit Jerusalem and the West Bank town of Bethlehem, the latter which was canceled altogether as Palestinian officials declared their intent to snub the vice president during this visit.

Pence finally made the trip less than two weeks ago but failed to meet with Palestinian leadership, and gave a speech before Israel’s Knesset wherein he reaffirmed Trump’s commitment taking the next steps necessary to making the US recognition of Jerusalem a reality on the ground, saying “In the weeks ahead, our administration will advance its plan to open the United States Embassy in Jerusalem, and that United States Embassy will open before the end of next year [2019].” He further said, “Our president made his decision in the best interest of the United States,” and added, “The United States has chosen fact over fiction” while peppering his speech heavily with Old Testament references throughout while pledging to “stand with Israel because we believe in right over wrong, in good over evil, and in liberty over tyranny.”

The @WhiteHouse just tweeted this picture out as an ad for Trump’s State of the Union speech tonight. Regardless of how you feel about the state of Israel…does this make any sense at all? pic.twitter.com/9on1Yu3voS

— Daniel McAdams (@DanielLMcAdams) January 31, 2018

Palestinian officials have claimed that the US under Trump has fully abandoned its role as an “honest broker” – however its unlikely that the Palestinians ever genuinely perceived the Americans in that role to begin with, as US aid to Israel – the bulk of it in the form of military support – has for years been in the billions per year. In 2016 the US signed off on a record $38 billion military aid package to Israel over the next decade. Abbas recently summarized the Palestinian Authority’s reaction to the Jerusalem move by slamming the decision as the “slap of the century” .

And CNN reported the Palestinian Authority’s reaction to Trump’s Davos comments, as well as its view of the future prospect of a peace plan, as follows:

“If Jerusalem is off the table, then America is off the table as well,” President Mahmoud Abbas’ official spokesman Nabil Abu Rudeineh said in a phone call with CNN, reiterating that Palestinians no longer recognize the US as a mediator in any peace negotiations with Israel.

There will be no negotiations, Abu Rudeineh said, until the current American administration abides by international law and agrees to work toward a two-state solution, which would see a state of Palestine created along 1967 lines with East Jerusalem as its capital.

Per the Axios report, should the White House move ahead to present a Trump peace plan before the international community it will likely be a mere post hoc attempt to present Trump as a sincere broker in the peace process. A December 21 United Nations vote to condemn the US Jerusalem recognition was dubbed a “stunning rebuke” of the US President’s decision after 128 countries voted against the US and Israel, and with 35 abstaining. 

While Palestinian officials saw the move as a final nail in the coffin concerning the peace process, Trump ironically presented it as “the beginning of a new approach to conflict between Israel and Palestinians.”

He said during the December 6 speech rolling out of the plan, “This is a long overdue step to advance the peace process and work towards a lasting agreement.” Trump generally framed the decision as a way to put his own stamp on one of history’s oldest conflicts. “The record is in: after more than two decades of waivers, we are no closer to a lasting peace agreement between Israel and the Palestinians,” the president said at the time. “It would be folly to assume that repeating the exact same formula would now produce a different or better result.”

According to Axios’ report today, “Israeli Prime Minister Netanyahu said he will react to the Trump plan after he sees it but stressed he is ready to renew peace talks.” No doubt, the Israelis now see the US as firmly in their corner after the Jerusalem recognition, in line with the long-running Jewish claim on the contested capital. 

* * *

 Meanwhile, Axios summarizes the latest developments as follows:

• U.S. special envoy Jason Greenblatt held a series of meetings with Netanyahu, his advisers and several ministers over the last two weeks. Greenblatt also met with opposition leader Hertzog and briefed EU member states representatives in Tel-Aviv and East Jerusalem. He did not meet with any Palestinian officials but met with Palestinian students and private sector executives.

• On Wednesday, Greenblatt participated in an emergency meeting of the donor countries to the Palestinian Authority. The meeting focused on the crisis in the peace process and on the humanitarian situation in Gaza. The Palestinian Prime Minister Rami Hamdallah also participated in the meeting. It was the first time senior Palestinian and U.S. officials were around the same table since the Jerusalem announcement. Greenblatt and Hamdallah shook hands but didn’t hold a meeting.

• In his speech during the plenary meeting, Greenblatt referred to Hamdallah and said he hopes that the fact he is participating shows the Palestinians are still committed to the efforts to renew the peace process. Greenblatt also said President Trump’s announcement was just a recognition of reality and the connection of Israel and the Jewish people to Jerusalem. Greenblatt also said in his speech: “Did the President’s decision prejudge any final status issues? No. We have not taken a position on borders”.

• Greenblatt stressed that the Trump administration continues drafting its peace plan and called on the Palestinians to return to the peace talks: “Peace will not be achieved by walking away from negotiations. It is easy to walk away from the table. But that helps no one, and it reduces or perhaps eliminates the chances of achieving a comprehensive peace agreement. And that would be terrible for the Palestinian people”.

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Authored by Philip Giraldi via The Strategic Culture Foundation,

One has to ask why there is a crisis in US-Russia relations since Washington and Moscow have much more in common than not, to include confronting international terrorism, stabilizing Syria and other parts of the world that are in turmoil, and preventing the proliferation of nuclear weapons. In spite of all that, the US and Russia are currently locked in a tit-for-tat unfriendly relationship somewhat reminiscent of the Cold War.

Apart from search for a scapegoat to explain the Hillary Clinton defeat, how did it happen?

 

Israel Shamir, a keen observer of the American-Russian relationship, and celebrated American journalist Robert Parry both think that one man deserves much of the credit for the new Cold War and that man is William Browder, a hedge fund operator who made his fortune in the corrupt 1990s world of Russian commodities trading.

Browder is also symptomatic of why the United States government is so poorly informed about international developments as he is the source of much of the Congressional “expert testimony” contributing to the current impasse. He has somehow emerged as a trusted source in spite of the fact that he has self-interest in cultivating a certain outcome. Also ignored is his renunciation of American citizenship in 1998, reportedly to avoid taxes. He is now a British citizen.

Browder is notoriously the man behind the 2012 Magnitsky Act, which exploited Congressional willingness to demonize Russia and has done so much to poison relations between Washington and Moscow. The Act sanctioned individual Russian officials, which Moscow has rightly seen as unwarranted interference in the operation of its judicial system.

Browder, a media favorite who self-promotes as “Putin’s enemy #1,” portrays himself as a selfless human rights advocate, but is he? He has used his fortune to threaten lawsuits for anyone who challenges his version of events, effectively silencing many critics. He claims that his accountant Sergei Magnitsky was a crusading “lawyer” who discovered a $230 million tax-fraud scheme that involved the Browder business interest Hermitage Capital but was, in fact, engineered by corrupt Russian police officers who arrested Magnitsky and enabled his death in a Russian jail.

Many have been skeptical of the Browder narrative, suspecting that the fraud was in fact concocted by Browder and his accountant Magnitsky. A Russian court recently supported that alternative narrative, ruling in late December that Browder had deliberately bankrupted his company and engaged in tax evasion. He was sentenced to nine years prison in absentia.

William Browder is again in the news recently in connection with testimony related to Russiagate. On December 16th Senator Diane Feinstein of the Senate Judiciary Committee released the transcript of the testimony provided by Glenn Simpson, founder of Fusion GPS. According to James Carden, Browder was mentioned 50 times, but the repeated citations apparently did not merit inclusion in media coverage of the story by the New York Times, Washington Post and Politico.

Fusion GPS, which was involved in the research producing the Steele Dossier used to discredit Donald Trump, was also retained to provide investigative services relating to a lawsuit in New York City involving a Russian company called Prevezon. As information provided by Browder was the basis of the lawsuit, his company and business practices while in Russia became part of the investigation. Simmons maintained that Browder proved to be somewhat evasive and his accounts of his activities were inconsistent. He claimed never to visit the United States and not own property or do business there, all of which were untrue, to include his ownership through a shell company of a $10 million house in Aspen Colorado. He repeatedly ran away, literally, from attempts to subpoena him so he would have to testify under oath.

Per Simmons, in Russia, Browder used shell companies locally and also worldwide to avoid taxes and conceal ownership, suggesting that he was likely one of many corrupt businessmen operating in what was a wild west business environment.

My question is, “Why was such a man granted credibility and allowed a free run to poison the vitally important US-Russia relationship?” The answer might be follow the money. Israel Shamir reports that Browder was a major contributor to Senator Ben Cardin of Maryland, who was the major force behind the Magnitsky Act.

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