Iran has been preparing for the oil embargo as well as a possible attack on its facilities. The Middle East Media Research Institute has prepared a summary of these efforts put together from sources within Iran. It is a long report, but well worth the effort, since it gives a great perspective on how the Iranians are interpreting the threats against it.
I doubt that I have to tell anyone in the US that it is hot in the US (some parts of the world are experiencing wetter and cooler conditions than normal). Indeed, it is miserably hot in South Hadley. These conditions will have serious international consequences, particularly if the accompanying drought continues. The international dimensions of climate change are vastly underreported.
A tour bus with a number of Israelis on board was blown up today in Bulgaria. The Israeli government immediately blamed Iran and vowed that retaliation would come. This incident comes as the most recent event in a strong of escalating tensions between Israel and Iran (via Syria). The escalation raises fears of a wider war.
As most of you know, Secretary of State Clinton has been making a whirlwind tour of the Middle East. While in Israel, she made a very strong statement about “preventing” Iran from obtaining a nuclear weapon. This statement is a little stronger than the language the US has used in the past concerning Iran and nuclear weapons (which is generally “not taking anything off the table.”) Needless to say, the new language was welcomed in Israel.
The US has forces all over the world, and it is engaged in a number of activities, some of which are loosely connected. David Vine refers to the US strategy as a “Lily-Pad” strategy. His perspective is fascinating and pulls together a number of different elements of American interests and objectives. For those of you interested in American foreign policy, this essay will be of great interest.
The sanctions against Iran have significantly disrupted the Iranian economy, but it is too soon to assess how complete the oil embargo has been. India announced a deal with Saudi Arabia which signals a major shift on India’s part. More importantly, both Saudi Arabia and the United Arab Emirates have announced the opening of new pipelines that bypass the Strait of Hormuz, limiting Iran’s ability to disrupt oil supplies in the case of war.
Source: Financial Times, 16 July 2012.
The Red Cross has declared that the conflict in Syria is now a civil war. The line between civil violence and a civil war is always difficult to draw, and I think that the Red Cross declaration fails to take into account that the opposition in Syria has yet to congeal into an organized opposition. Nonetheless, the declaration now means that the laws of war now apply to the conflict and that Assad and the Syrian military could be considered war criminals if they failed to discriminate between combatants and non-combatants. http://www.csmonitor.com/World/Latest-News-Wires/2012/0716/Syria-Civil-war-engulfs-Damascus Russia remains adamantly opposed to UN intervention in the conflict, so the point is moot for the helpless civilians right now. But it could harden Assad’s determination to stay in power.
I posted too soon. Yesterday I noted that relations between China and the Philippines had calmed down a bit in the South China Sea. Today, the BBC reports (http://www.bbc.co.uk/news/world-asia-18842839) that a Chinese naval frigate was stranded on one of the disputed shoals. The same article gives a nice map of the disputed territories.
UNCLOS refers to the United Nations Convention on the Law of the Seas. As you can see, the Chinese claim, based on Chinese history is quite different from International Law as it is presently understood. To be fair to the Chinese, however, there are many similar claims by many other nations as well.
A legal commission in Israel, appointed by Prime Minister Netanyahu, has decided that Israel is not an “occupying power” in the West Bank. The commission based its conclusions on many grounds, but it essentially argued that too much time has passed since 1967 to regard Israeli control as “external.” Stephen Walt, a longstanding critic of Israel’s occupation, has an important critic of this position in Foreign Policy. (http://walt.foreignpolicy.com/posts/2012/07/12/the_veil_falls)
I have posted several articles in the past about the territorial disputes in the South China Sea. The situation between China and the Philippines has calmed down a bit, but the disputes between China and Vietnam have heated up. The most recent ASEAN meeting tried to address the issues, but apparently little was accomplished. http://www.csmonitor.com/World/Latest-News-Wires/2012/0713/South-China-Sea-meeting-ends-in-stalemate Nonetheless, it is a step forward that there is a forum for such discussions and that ASEAN has acknowledged a role as a mediator.
There has been another massacre in Syria and the world continues to wring its hands and do nothing else. http://www.reuters.com/article/2012/07/13/us-syria-crisis-idUSBRE8610SH20120713?feedType=RSS&feedName=topNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FtopNews+%28News+%2F+US+%2F+Top+News%29 Russia and China still oppose anything that smacks of “regime change.” The opposition stems largely from the policy change in the Libyan intervention by NATO which went from simply protecting civilians to actually ousting Qaddaffi. It appears as if the Russians and the Chinese refuse to forget that shift.
The Pew Foundation has issued its report on a public opinion survey on how people perceive the economic situation in their own country. http://www.pewglobal.org/2012/07/12/pervasive-gloom-about-the-world-economy/?utm_source=Pervasive+Gloom+About+the+World+Economy&utm_campaign=Economic+Conditions&utm_medium=email
The striking thing about the poll is the extraordinary pessimism that seems to pervade most respondents. Germany is a clear exception to that trend. Don’t tell the Greeks.
Vietnam is one of the emerging markets that captivated a large number of investors–after labor costs started rising in China, many turned to Vietnam as the next place for manufacturing. Unfortunately, the situation in Vietnam has deteriorated rapidly, and the Vietnamese economy is not doing well. http://www.foreignpolicy.com/articles/2012/07/11/the_end_of_the_vietnamese_miracle
The Russians have sent seven warships into the Mediterranean, led by an anti-submarine destroyer. http://www.washingtonsblog.com/2012/07/u-s-and-russia-send-numerous-warships-to-middle-east.html The Russians have a naval base at the Syrian port of Tartus, a long-coveted warm water port for the Russian navy. The US, in the meantime, apparently ordered a third aircraft carrier group, the USS Stennis, into the Persian Gulf, to join with the USS Abraham Lincoln and the USS Enterprise. http://www.zerohedge.com/news/third-us-aircraft-carrier-returning-unexpectedly-mideast-ahead-schedule The Stennis move was not expected, but one can deduce that the Americans fear the enhanced Russian presence in the region. So a new stand-off is emerging: the Russians, the Syrians, and the Iranians vs. the Americans, the Israelis, and the Saudis. Where the Chinese stand in this matter is unknown–the Chinese are sympathetic to the Syrians and the Iranians, but may not wish to support the Russians. Nonetheless, anything that takes the US eye off of East Asia is a welcome move for the Chinese.
For those of you who are still mystified by the LIBOR scandal, here’s a very good explanation of how Barclay’s made lots of money manipulating interest rates. http://www.businessinsider.com/how-barclays-made-money-on-libor-manipulation-2012-7. The Economist also has a great article on the scandal: “The Rotten Heart of Finance.” http://www.economist.com/node/21558281
We have had a fairly hot and dry summer in South Hadley, but not nearly as hot as in some other areas of the US. Many are reluctant to attribute this weather to climate change (there is, in fact, a huge difference between weather and climate), but some scientists are beginning to make the connection in public. http://www.washingtonpost.com/blogs/capital-weather-gang/post/noaa-scientist-80-percent-chance-todays-heat-records-due-to-climate-change/2012/07/10/gJQAdv9waW_blog.html. The situation in India also appears to be somewhat precarious. http://www.livemint.com/2012/07/09224449/Is-India-facing-another-drough.html?atype=tp
The world just gets weirder every day. Today, France, Germany, and the Netherlands all sold government bonds at a negative interest rate. Such a rate means that investors are actually paying the states to hold their money safely. The following data are from “Mish’s Global Economic Trend Analysis.” The blog is supremely pessimistic on European economic affairs, but it has almost invariably been accurate in its assessments.
- Germany: Germany sold 3.290 billion euros of six-month Treasury bills, known as Bubills, at an average yield of -0.0344%. The record lows was previously -0.0122% seen at an auction Jan. 9.
- France: France sold EUR 3.917 billion of 13-week Treasury bills at an average yield of -0.005%, down from 0.048% a week ago, and it sold EUR 1.993 billion of 24-week Treasury bills at an average yield of -0.006%, down from 0.096% last week.
We should take this development as a fear index: investors are truly worried that bad stuff is happening and they simply want security, and they are willing to pay for such security. The reason? Investors are convinced that both Spain and Italy are close to a sovereign debt default.
- Yield on 10-Year Spanish Government Bond closed at 7.062%
- Yield on 10-Year Italian Government Bond closed at 6.015%
Yields of 7 percent on 10 year bonds are almost impossible to repay–at the end of 110 years, the state essentially has to pay back twice what it borrowed.
To make matters worse (and even more complicated), China is experiencing price deflation, a phenomenon usually associated with a serious recession or depression. This chart gives a good idea of how prices are following the pattern of 2007-08.
The global economy is getting difficult to interpret.
I apologize for not posting the last few days–I was in Maine with my college buddies celebrating the 4th of July. We had a great time re-enacting the Age of Aquarius.
I missed out on much news apparently–I didn’t have internet access. I’m still obsessing about the LIBOR scandal. It bothers me a great deal that the American media has paid so little attention to what is a breathtaking example of greed gone wild. The American media pays a lot of lipservice to what it calls the “free” market. When evidence surfaces that one of the most important determinants of interest rates in the world is in fact a manifestation of very rich interests colluding to set a price independently of supply and demand, I am at a loss to explain the silence. But there is not a single person in the United States who was unaffected by this crime, mostly by paying higher interest rates than they otherwise would have had to.
The BBC has an interesting article on how liberal (Western) ideas infiltrate into China. The transmission of ideas is an age-old process, but it seems to have accelerated through all the mechanisms afforded by globalization. How the Chinese government can manage this process remains to be seen.
World Politics News 