Monthly Archives: July 2014

Economic, Europe, European Union, Financial Markets, Government, Russia, Society, United States

Tough Western sanctions hit Russia…

RUSSIA

Europe has imposed the toughest sanctions against Russia since the Cold War, sending the rouble into a tailspin and prompting warnings that British firms will be hit hard.

EU leaders have agreed to embargoes against vast sectors of the Russian economy, designed to cripple its banks, energy firms and defence capabilities.

The most drastic measure will prevent Russia’s banks from issuing stocks or bonds in Europe, potentially forcing them into the arms of the Russian state for support.

Nearly half of the bonds issued by big state-run Russian lenders are in European markets. There will also be a blanket ban on all future arms sales to Moscow.

Another eight names of individuals and three firms will be added to an EU blacklist, meaning they will be subject to asset freezes and travel bans. Of those, four are described as personal ‘cronies’ of President Vladimir Putin.

President Barack Obama said the US has also expanded sanctions against Russia. He added: ‘If Russia continues on this current path, the costs on Russia will continue to grow.’ EU leaders said Russia would be shown that ‘destabilising Ukraine, or any other Eastern European neighbouring state, will bring heavy costs to its economy’.

‘Russia will find itself increasingly isolated by its own actions,’ they added. ‘Illegal annexation of territory and deliberate destabilisation of a neighbouring sovereign country cannot be accepted in 21st-century Europe.

‘Furthermore, when the violence created spirals out of control and leads to the killing of almost 300 innocent civilians in their flight from the Netherlands to Malaysia, the situation requires and urgent and determined response.’

The rouble crashed to its lowest level since early May against the dollar as leaders prepared to implement the new sanctions.

Downing Street conceded that the British economy, particularly financial services, would suffer.

BP warned sanctions could ‘adversely impact our business.’ BP has a 20 per cent stake in Russian energy giant Rosneft.

Moscow is likely to retaliate , with one group of Russian lawmakers suggesting banning international accounting firms and consulting groups from the country. Targets were said to be Deloitte, KPMG, Ernst & Young, PwC, Boston Consulting Group and McKinsey. David Cameron said: ‘We want to make it clear that Russia’s behaviour in destabilising another country – Ukraine – is unacceptable.’

In another dramatic escalation of tensions between Russia and the West, Mr Obama has accused Putin of conducting tests in violation of a 1987 nuclear missile treaty.

Mr Obama wrote to the Russian leader protesting about a breach US officials described as ‘a very serious matter’.

 

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Government, Israel, Middle East, Palestine, Politics, United States

Gaza: For a ceasefire to last there needs to be serious negotiation…

PALESTINE

Israel began its latest campaign against Hamas on July 8th. The mounting toll of innocents in Gaza should be reason enough for anyone with heartfelt compassion to demand a ceasefire. Gaza, and the Palestinians who live there, deserve more than just temporary truces, sometimes lasting for just a few hours, after which the attacks from Israel appear more aggressive and disproportionate. Since the start of the ongoing offensive more than 700 Palestinians have been killed with hundreds more injured – most of them civilians and many of them children. Some 35 Israelis have been killed, including three civilians.

It was after the ground invasion of Gaza on July 18th when the casualty rate on both sides soared. Hospitals have been hit and scores of buildings flattened, often with women and children inside. A single Palestinian family of 25, accused of sheltering a Hamas militant during a Ramadan fast was wiped out.

A ceasefire that attempted to revert to nothing more than the status quo would be a grievous mistake. If a more durable peace is to be built, the Israelis must seek a sovereign state for Palestinians. But they, including Hamas, must commit and reiterate their support for a government that disavows violence and recognises Israel. Unless a ceasefire is delivered on such terms, the invective poison of hatred will stir up all over again and the cycle of violence will be repeated, as it has done repeatedly since 2007.

In May, talks of a peace deal foundered. But one reason to be more optimistic now is that both sides have seen how a war has been ignited that neither really wanted. Israel has incurred higher military casualties than it had been expecting.

According to John Kerry, America’s Secretary of State, those recent talks broke down because of Israel. In frustration, Mahmoud Abbas, the Palestinians’ moderate leader, formed a unity government that Hamas backed. Whereas the US administration cautiously welcomed this development, Binyamin Netanyahu, Israel’s Prime Minister, railed against it, fearing a united Palestinian front. When in June three Israeli students wrongly identified as soldiers were kidnapped and murdered on the West Bank, the Israeli government instantly blamed the crime on Hamas. The group refused to claim responsibility for it, and subsequently rounded up more than 500 of its members who then, in retaliation, unleashed its multiplying rocket fire at Israel. Some of Hamas’ rockets have reached as far away as Jerusalem and Tel Aviv, one of which landed just a mile away from Israel’s international airport. These continuing missile launches led Mr Netanyahu to mobilise his forces and attack Gaza in the manner in which he has.

There can be no doubt that Israel’s first stated military aim is a legitimate one. That is focused on destroying Hamas’s stockpile of rockets, thousands of which have been fired indiscriminately in to Israel in the past decade, killing a score of Israelis and frightening millions more. Over time, the missiles’ range and sophistication have increased.

A new aim, also legitimate, is to destroy Hamas’s delicate infrastructure, especially the tunnels that provide access to Israeli territory. Guerrillas are sent in to murder Israelis, or to kidnap them as a means of barter for Palestinian prisoners in Israeli jails.

Nevertheless, war is not only about aims but conduct. Israel is wrong to hit buildings with no evident military purpose and houses packed with civilians, even if householders are harbouring Hamas fighters and its officials. Israel should know that this is always likely to be counterproductive. As the death toll among Gazans rises, Hamas will always be in a better position to promote its cause.

To stop the internecine warfare Hamas must stop firing its rockets into Israel. In return, Israel must commit and agree to honour an agreement from 2012 to lift the siege that has immiserated Gaza’s inhabitants since 2007 in an effort to marginalise Hamas. And Israel should free, or put on trial, some of the hundreds of Hamas prisoners rounded up over the past month on the West Bank, the larger part of a would-be Palestinian state.

Yet, the catastrophe and events that continually befall Gaza stems fundamentally from the refusal of Israel to negotiate in good faith to let the Palestinians have a proper state encompassing both Gaza and the West Bank. Why, many ask, does Mr Netanyahu still allow the building of Jewish settlements there, which makes the creation of a workable Palestinian state even less likely to emerge?

Whilst real mediation is necessary, geopolitically the region is extremely fraught. Egypt has to be involved, but its new military rulers detest the Islamists of Hamas as much as Israel does. Turkey and Qatar could help Hamas towards moderation but are loathed by Israel. The United States is still the one global player that has the political weight, however diminished, to bring everyone to the table. Mr Kerry has to do more than just stop the rockets.

 

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Britain, Economic, Europe, European Union, Financial Markets, Government, Politics, Society

The sanctions on Russia should not be borne solely by London…

EUROPE

Germany and the rest of the Eurozone trade far more with Russia than Britain does. Our European partners buy billions of pounds worth of oil and gas, hugely profitable cash-flows which props up the regime of Vladimir Putin.

Yet, Europe’s proposed sanctions on Russia have been carefully designed to inflict as much damage as possible on the City of London, while shielding other economies from collateral damage. The stench of hypocrisy fulminates through the corridors of power.

The aim of the European establishment is to punish Mr Putin, whose behaviour has been appalling. But the cost should not be borne solely by London. According to Europe’s plans, German companies will still be able to sell their wares with relative impunity; Italy will continue to receive their energy supplies courtesy of Moscow; and, France will deliver its warships to Russia as promised. The bulk of the cost will be paid for by British workers who will lose their jobs to satisfy Europe’s desire to be seen to be acting and doing the right thing.

This is the latest example of the European elites showing their expertise in turning every crisis to their advantage. The higher echelons of the European establishment are clearly seeking to use the need to punish Russia as an excuse to intensify their long-standing campaign against the City.

The EU often makes grandiose claims about being a global force for democracy and human rights. Splendid as those values are, time and time again the EU reveals itself as merely an alliance of competing national interests. On matters of global conflict, Brussels not only struggles to produce a united front, but also often ends up pursuing its own internal vendettas instead. This prejudice is seen within the corporatist view of the Eurozone elites when, for example, they are happy enough to sign massive energy deals with corrupt and authoritarian regimes, but don’t either like or understand the workings and mechanisations of genuine free markets. The creation of the single currency too saw much of the financial activity previously conducted in Frankfurt and Paris shift to London.

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Effective sanctions should mean moving beyond the freezing of Russian assets in EU capitals and foreign travel bans on Mr Putin’s inner circle. Financial services, defence, and energy are some of the areas that should come under tighter sanction.

Financial sanctions operate in two ways. They restrict the access of Russian companies to working and investment capital, impeding not just their growth but their continuing activity, so hurting the Russian economy. They also make overseas investors much less likely to continue investing in Russia, with a similar effect. Defence sanctions, essentially the sale of Russian military equipment to other EU members, has the same consequence with the additional value of Russia becoming increasingly isolated. Sanctions on energy can range from tougher regulatory action to an effective blockade on the sales of oil and gas to the EU. Germany’s recent withholding from Gazprom of permission to use a pipeline is illustrative of the effectiveness of such action.

Further sanctions like these would, however, act like a two-edged sword. Certainly, they will injure Russia’s economy, but they will also wound Europe. Some parts of Europe could not get through a winter without severe difficulties if homes and offices were not heated by Russian gas. Some economies remain distinctly shaky and probably wouldn’t want to commit to a sanctioning agenda that would likely rebound on their own trading position.

Of course, it is only right that where Mr Putin’s regime can be targeted, given his ongoing refusal to face up to the consequences of his support for Ukraine’s separatists, such action be taken. Weaning Europe from its addiction to Russian gas is one real way to punish the Russian president and his cronies. Germany gets around a third of its gas and oil from Russia. Given that energy accounts for around 68 per cent of Russia’s exports, an opportunity to hit the regime hard should have been taken by now.

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