Category Archives: European Union

European Union, Government, Iran, Middle East, Politics, Society, United Nations, United States

Negotiations between Iran and the West on Tehran’s nuclear ambitions…

A NEED FOR AN AGREEMENT WITH IRAN

Expectations of an agreement over the Iranian nuclear programme have been high ever since the recent trip to Washington by Hassan Rouhani, Iran’s president, who declared to the United Nations he wanted better relations with the West. It is little surprise, however, that such a realisation has not been met. The immense difficulties facing the negotiations in Geneva in the last few days faded into the background amid speculation of a ‘historic deal’ and an imminent end to decades of mutual suspicion and misunderstanding. The Geneva talks concluded last weekend without any deal in sight, with many analysts branding the discussions a failure.

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There is still some cause for optimism. Since Mr Rouhani took over the Iranian presidency from the bellicose and belligerent Mahmoud Ahmadinejad in June, the rhetoric emanating from Tehran has been markedly softened in tone and style. With international sanctions – both EU and US – biting hard on ordinary Iranians, domestic pressure for a deal on its nuclear programme with the West cannot be ignored. Particularly so given that inflation is running at 40 per cent, and that Iran’s economy has shrunk by more than 5 per cent since the imposition of sanctions took effect. The number of families below the poverty line has doubled to four in ten, exasperated by several currency devaluations that have had an adverse effect on the net worth of many Iranian families. Assets have depreciated and net incomes have been seriously eroded. Focusing minds, too, is the threat of Israeli air strikes on Iran’s nuclear facilities, not to mention the Islamic Republic’s pivotal position in a volatile and unstable region, including that of Syria.

The difficulties for the West in reaching a mutual agreement with Tehran still rest upon two primary sticking points. One is the question about the future of the heavy-water reactor being built at Arak. The other is what to do with Iran’s existing stockpiles of highly enriched uranium and centrifuges. Tehran appears determined to retain its ‘rights to enrichment’ (enriched uranium is required and allowed for its medical programmes), though the international community, not unreasonably, remains sceptical. Enriching uranium to weapons grade material that would fit into the head of a ballistic missile is easily enough done.

Yet, we are far from stalemate. Just as those predicting immediate success were unduly hasty, so are those now rendering and calling for defeat. John Kerry, the U.S. Secretary of State, spent eight hours at the negotiating table, the longest such high-level talks between the US and Iran since 1979 – no small achievement in itself. Mr Kerry’s assertion that ‘we are closer now than when we came’ cannot simply be dismissed out of hand. With negotiations to restart in a week’s time – albeit between diplomats rather than foreign ministers – the process is far from over.

Coupled into the equation is the danger of the moment. Barack Obama’s critics in Congress, largely fuelled by Israeli’s inflammatory opposition to a deal, are already pushing for more sanctions. In Iran, the frustration of public demands for immediate relief could well erode support for further discussions that many Iranians feel infringe on national sovereignty. Apparent divisions in the international community, exemplified by France’s outspoken warnings about a ‘fool’s game’ before the Geneva talks were concluded, will not help either.

Perseverance in seeking a deal along current lines remains key as no other constructive alternative exists, but in reaching an agreement concessions will be required from both sides. The notion that the Islamic Republic continues with some degree of uranium enrichment may not be palatable and will be contested by those who remain deeply sceptical of Iran’s objectives. However, it is allowed under the Non-Proliferation Treaty (NPT), and – in return for close controls and even closer oversight by the International Atomic Energy Agency (IAEA) – it is a better and plausible option than either accepting an Iran with nuclear weapons or by attempting to bomb them out of existence.

A deal with Iran may have a high price, but the value will be enormous. This will not only patch up one of the world’s most dangerous and intractable disputes but, an accord between Iran and the West could also help to resolve any number of issues bedevilling the Middle East, not least the internecine civil war and bloody conflict in Syria.

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Banking, Britain, Economic, European Union, Financial Markets, Government, Society, United States

What the banking crash five years ago has taught us…

BANKING FIVE YEARS ON

THE last five years have been the most nerve jangling and traumatic in the modern history of the British economy and for the City of London.

It is only now, on the 5th anniversary of the collapse of the 158-year-old investment firm Lehman Brothers – and after intensive ministrations from the Bank of England – that the UK economy has started to splutter back to life.

However, the banking sector, which should be a bedrock of the economy, remains vulnerable and susceptible to external shocks, and to scandals of its own making.

The Central Bank administered strong economic measures, namely in the form of a staggering £375 billion of extra cash into the UK financial system.

It has held the official bank rate at a historic low level of 0.5 per cent for more than four years and it is currently heavily subsidising the cost of buying homes as well as supporting smaller enterprises through its Funding for Lending scheme.

Finally, it appears to be working, and forecasters are quickly revising their predictions upwards as every part of the economy – from the dominant services sector, to manufacturing and construction – has begun to take off.

In the Chancellor’s March Budget, the independent Office for Budget Responsibility (OBR) predicted that gross domestic product would expand by a miserly 0.6 per cent this year.

The Paris-based OECD has doubled its forecast to 1.8 per cent and some City forecasters say the economy is expanding by as much as 3 per cent.

House prices are moving up firmly in many areas and not just in overcrowded and overcooked London and the South-East.

The jobless rate is currently 7.7 per cent and falling more rapidly than many critics could have imagined.

But it would be wrong to get carried away. UK output is still 2.8 per cent below where it was before calamity struck in 2008. In contrast, the German economy has expanded by 2 per cent and the United States by 5 per cent.

Despite the new born optimism of many British forecasters, it is safe to say that the whole edifice of the UK upturn is built on worryingly fragile foundations.

No doubt, the most important lesson of the terrifying events five years ago is how important a functioning banking system is to the creation of wealth.

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ACCORDING to the former Chancellor, Alistair Darling, Britain was ‘on the brink of what could have been a complete and utter calamity’.

Cash machines at the Royal Bank of Scotland and Lloyds Banking Group came within two hours of running dry. The economy’s restoration to full health cannot possibly happen until these two banking High Street giants have been restored to the private sector.

Yet, half-a-decade on from the near collapse of these two banks, the struggle over how to re-privatise them is nowhere near being resolved.

Consider RBS. Stephen Hester, the man brought in on a salary of £1.2 million by Gordon Brown to turn the bank around, resigned after a fractious relationship with Chancellor George Osborne. At the behest of the Parliamentary Commission on Banking, merchant bankers NM Rothschild is investigating how to split off RBS’s flawed investment-banking arm from the retail operation that serves the public and small firms.

Until it reports, the important job of extending credit to new and growing businesses has been put on hold and the process of returning the Government’s 80 per cent in the bank to the public has been suspended.

Lloyds, though, does look in far better shape. Under an EU ruling, it has separated out 632 High Street branches and relaunched them under the revised TSB banner.

But its return has been less than smooth.

In the aftermath of the financial crash, the bank emerged as one of the biggest providers of Payment Protection Insurance (PPI) policies in which customers were mis-sold expensive insurance schemes to cover debt repayments. It was required to spend £4.3 billion in compensation, part of an industry wide bill of some £14 billion.

PPI is just one of the egregious scandals to emerge since the financial crisis. In June of 2012 Barclays Bank agreed to pay a fine of £290 million for rigging the LIBOR interest rate that helps to set the cost of corporate loans, mortgages and other commercial transactions.

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BRITAIN’S highest paid banker, Bob Diamond – who earned more than £100 million in his years at Barclays – was forced to resign.

Even the most respected and safest names in British banking have found themselves in the dock.

The mighty HSBC admitted it had been involved in money laundering activities for Mexican drug cartels and Middle East terror groups.

London-based Standard Chartered was forced to own up to billions of pounds of sanctions-busting transactions with Iran.

And to top it all, the world’s largest and most blue-blooded bank of all, JP Morgan lost $6 billion in 2012 at its London branch after engaging in high risk trading in credit default swaps.

There are now signs, at least, that regulators in the U.S. and Britain have forced a clean-up of our banking system by imposing heavy fines and penalties and by forcing the errant institutions to accumulate fresh capital.

But looming over the City is the spectre of the eurozone, which is caught in a ‘doom loop’ – a self-perpetuating cycle that relentlessly racks up both national debts and those of banks.

The recovery, then, at best is being built on the most fragile of foundations.

Even if our banks manage to overcome the already formidable problems, the medicine itself already used poses its own future dangers in the shape of surging inflation and higher interest rates that could eventually be as frightening as the events of five years ago.

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Britain, European Union, Government, Middle East, Politics, Syria, United Nations, United States

Syria, chemical weapons and direct intervention…

SYRIA

Television and media images from Syria have been truly horrendous. Pictures have been depicted showing dozens of bodies laid out in rows, many of them children. Others, including very young infants, are seen suffering convulsions and spasms – symptoms that are typical of a major gas attack.

Ghastly as the images are, however, is all as clear cut as it seems? Photographs and video productions have been circulated by Syrian opposition activists; their release, as a UN team arrived to investigate the reported use of chemical weapons, maybe perceived as being opportunistic with powerful propaganda value.

The conundrum here is whether any leader, even one as beleaguered and brutal in defence of his presidency as Bashar al-Assad, be so heedless and perverse of the consequences as to launch such an attack just as the UN inspectors were arriving. Assad has denied he did it, but many say he would have if he had done it.

The alternative is even less plausible – that the Syrian rebels staged, exaggerated or even manipulated an attack on areas they hold with the intention of persuading both the UN inspectors and international opinion towards a Western intervention.

Whichever it is, we should constantly bear in mind the barbaric and brutal lengths to which a desperate regime will go to keep power.

Whilst the response from most international leaders has been one of outrage, comments have been tempered, rightly, with a measure of caution. ‘If proven’ is the crucial phrase that has emanated from Britain, France, and from others who are calling for more direct action. Legally, it is also a pointer as to what the priority should now be: to establish, so far as is possible, the truth of what happened. To fulfil that end, the UN inspectors must be granted immediate and unfettered access to the area of the alleged atrocity.

Establishing the truth is vital because the stakes are so high. The use of chemical weapons in the Syrian conflict was defined by President Obama as a ‘red line’ when he said almost a year ago that if the Assad regime deployed chemical weapons, ‘the whole calculus would change’. This was widely interpreted as a condition for the U.S. to intervene, either directly or by arming the rebels.

Yet, nor can it be excluded that the rebels have attempted to orchestrate something in which they might force America’s hand. So far, an EU investigation has only reported small scale use of sarin nerve gas on both sides. But if such an extensive attack, as seems to have taken place this week, is found to be the work of Syrian government forces, that could not but ‘change the calculus’.

Crucially, though, would it (or should it) prompt Western intervention? Intervention can take various forms, from air strikes targeting Syrian weapons, cruise missile launches from the naval fleet operating in the region, or a full ground incursion with boots on the ground. But as we know from Iraq and Afghanistan, even limited intervention tends to produce perverse and unwieldy results. In Syria it could be even more riskier, given the regional complexity and its ever more volatile neighbourhood.

At the present moment, doing nothing seems less perilous than direct intervention. Being sucked into a bloody civil war that is increasingly sectarian with regional alliances taking hold – Iran and Hezbollah siding with the Assad regime, and Saudi Arabia arming the rebels – direct intervention would certainly appear the worse of two evils. But even now the case has still not been made for direct intervention in Syria.

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