Category Archives: United States

China, Foreign Affairs, Government, Japan, Military, Russia, United States

Russian war games in a show of strength…

RUSSIA FLEXES ITS MILITARY MUSCLES

RUSSIA has just started the biggest military exercises since the Soviet era, involving 160,000 troops and about 5,000 tanks across Siberia and the far eastern region in a massive show of strength.

Throughout this week dozens of Russian Pacific Fleet ships and around 130 combat aircraft will take part in military manoeuvres. Part of those drills will be on Sakhalin Island in the Pacific, where thousands of troops have been ferried and airlifted from the mainland.

Russia’s deputy defence minister, Anatoly Antonov, has made clear and assured foreign military attachés that the exercises are not directed against any particular nation, though some military analysts believe the show of force is aimed at China and Japan.

A retired officer of the Russian military’s general staff, Konstantin Sivkov, gave an interview to the daily newspaper Nezavisimaya Gazeta and briefed that the Sakhalin part of the manoeuvres are intended to simulate a response to a hypothetical attack by Japanese and US forces.

Russia and Japan are currently in dispute over a group of Pacific islands, which Russia calls the Kurils and Japan calls the Northern Territories.

Russia tanks move across Sakhalin Island during military exercises seen by many as a warning to China and Japan.

Russia tanks move across Sakhalin Island during military exercises seen by many as a warning to China and Japan.

Mr Antonov said that Russia had warned its neighbours about the exercise before it started, and provided particularly detailed information to China, in line with an agreement that envisages a mutual exchange of data about military activities along their 2,700-mile border.

The Cold War-era rivals have forged what they have described as a ‘strategic partnership’ since the 1991 Soviet Union collapse, developing close political, economic and military ties in a shared aspiration to counter US power around the world.

Russia has supplied sophisticated weapons to China, and the neighbours have conducted joint military drills, most recently a naval exercise in the Sea of Japan earlier this month.

But many in Russia have felt increasingly uneasy about the growing might of China.

Russia and China had territorial disputes for centuries. Relations between Communist China and the Soviet Union ruptured in the 1960s, and the two fought a brief border conflict in 1969. It wasn’t until 2004 that Moscow and Beijing signed a new border treaty, which saw Russia yielding control over several islands in the Amur River. Some in Russia’s sparsely populated far east feared that the concessions might tempt China’s resolve or by teasing its appetite.

Alexander Khramchikhin, an independent Moscow-based military analyst, said the massive exercise held in the areas along the border with China was clearly aimed at Beijing. He said: ‘It’s quite obvious that the land part of the exercise is directed at China, while sea and island part of it is aimed at Japan.’

Mr Khramchikhin, who recently posted an article online portraying a grim picture of Russia being routed in a surprise Chinese attack, said that the war games along their shared border was intended to discourage China from harbouring expansionist plots. In his article, Mr Khramchikhin wrote: ‘China may now think that Russia has finally become more aware of what could happen.’

The manoeuvres are part of recent efforts to boost the military’s mobility and combat readiness after years of post-Soviet decline, but they have far exceeded previous drills in both numbers and territorial scope.

As part of the war games, held across several time zones, some army units have been deployed to areas thousands of miles away from their bases. Paratroopers have been flown across Russia in long-range transport aircraft, and some units were ferried to Sakhalin under escort of navy ships and fighter jets.

A decade of post-Soviet economic meltdown has crippled Russia’s military capability, with a lack of funds for building and maintaining equipment, and mass draft-dodging of soldiers due to corruption and bullying.

The Kremlin responded to weaknesses revealed in a brief conflict with Georgia in 2008 by launching reforms intended to turn the bloated military into a more modern, agile and rapid reaction force.

The government has also unveiled an ambitious arms modernisation programme, though this has come under attack by a number of analysts describing the proposals as ‘clearly insufficient’.

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Britain, Foreign Affairs, Government, Military, National Security, Syria, United States

Arming the Syrian rebels is looking less likely…

SYRIAN REBELS

Downing Street has ditched plans to arm the Syrian rebels after the Prime Minister has been warned that there is little point sending weapons unless he is prepared for all-out war with the regime of Bashar al-Assad.

General Sir David Richards, Chief of the Defence Staff, along with other commanders believe that sending small arms or ground-to-air missiles will hardly be worth it, since it would it would make little difference to the outcome of the conflict. Military chiefs have also said that even options like a no-fly zone (NFZ) would require air attacks on Syrian defences that would last weeks or even months.

The assassination last week of Kamal Hamami, a top commander of the Syrian Free Army, by a hardline group linked to Al-Qaeda, has compounded anxieties over plans by Britain and other Western countries to give military help to rebels fighting the Assad regime. Those fears are aggravated by the possibility that weapons and expertise provided to the rebels could be turned against the UK and her allies by radical Islamists. There are also growing rivalries between the Syrian Free Army and Islamists, who have sometimes joined forces on the battlefield.

But senior ministers and Whitehall officials have revealed that the Coalition is drawing up plans to help train and advise ‘moderate’ elements of the opposition forces who continue to battle with Assad’s forces.

The British Prime Minister has been keen to act on Syria and demanded last month an end to the EU arms embargo on the country to give him options. The EU reluctantly relented, but sending weapons to the beleaguered rebels in Syria remains an option open to the prime minister if parliament was to approve, though that does seem a remote possibility at the present moment given the lack of support among Tory whips.

Following a meeting of the National Security Council, in which British military commanders were asked to present options on the conflict, the Government was told that although it might make them feel better (by sending weapons) it was hardly worth it in terms of altering the balance of forces on the ground. Whilst Syria is known to have good air defences, military chiefs have also said that engaging Syria militarily would mean weeks of bombing and air strikes. A decision to engage is one that couldn’t be undertaken half-heartedly.

But given the lack of organisation within the rebel movement, training and advising the rebels remain district possibilities for Britain. The UK is concentrating on areas where it feels it has the expertise to contribute. The supply of weapons into Syria is continuing to be made by Qatar and Saudi Arabia.

It is understood that military advisers could be stationed in Jordon to advise Syria rebel leaders on strategy and tactics. UK chiefs are wary of being accused of having British boots on the ground in Syria or by making any ground incursion into the country.

Ministers believe it could take 18 months of further conflict before Assad is forced to the negotiating table. The civil war has already claimed more than 100,000 lives with millions more displaced on the borders with neighbouring countries.

There is also frustration about the approach taken by US Secretary of State John Kerry in pushing regime figures to the negotiating table. There is little idea of the solution Mr Kerry is seeking. Knowing where you are trying to get to in order to get there should surely be central in any negotiations over Syria, but this underpinning remains distinctly absent even after almost three years of intense fighting.

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Banking, Britain, Economic, Financial Markets, Government, United States

Libor handed over to the Americans…

BLOW FOR THE CITY OF LONDON

The owner of the New York stock exchange has been handed responsibility for setting controversial LIBOR interest rates in a move slammed by MPs as a ‘tremendous blow’ to the City of London.

Earlier this week the Treasury confirmed that the key role will pass from lobby group the British Bankers’ Association (BBA) to transatlantic NYSE Euronext from early next year.

The process, which will still take place in London, will be overseen by City watchdog, the Financial Conduct Authority (FCA).

But while FCA head Martin Wheatley hailed this as ‘an important step in enhancing the integrity of LIBOR’, John Mann, a member of the Treasury Select Committee, blasted the decision.

The Labour MP said it was further evidence that British banks are being unfairly singled out for rigging LIBOR interest rates – while, he says, their US counterparts escape punishment.

He said:

… This is a tremendous blow to the prestige of the City of London and sends out the message that you can’t trust the British.

… What the Americans have been doing is selectively picking out British banks that have done wrong and selectively ignoring the same scandals that have been committed by their own banks… The Chancellor has failed to stick up for the City. French and Germans will be rubbing their hands with glee at the prospect of stealing other financial markets.

LIBOR – The London Interbank Offered Rate – is a key benchmark rate which is used to set mortgages for millions of homeowners and is linked to $300 trillion of financial contracts around the world.

The BBA was criticised for being asleep on the job as a number of banks, including Barclays, the Royal Bank of Scotland and UBS, routinely rigged rates under its nose.

This culminated in huge fines for these banks and the decision by an independent review headed by Mr Wheatley to strip the BBA of its role.

The decision to award the contract to the New York Stock Exchange-owner followed a bidding war orchestrated by an independent committee, headed by former journalist Baroness Hogg – now a senior independent director at the Treasury. NYSE Euronext, which owns the pan-European Euronext market and will pay £1 for BBA Libor Ltd’s assets, said it is ‘uniquely placed’ to restore the international credibility of LIBOR. BBA has refused to reveal how many of its employees work on LIBOR.

Failed bidders are understood to include financial information provider Thomson Reuters, which has calculated LIBOR on behalf of the BBA since 2005.

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COMMENT

The British Bankers’ Association, a wildly discredited organisation given its mishandling of LIBOR, the interest rate that sets the price for trillions of dollars of transactions across the world, has much to answer for. Its sclerotic behaviour under the BBA’s previous leadership failed to respond with any willpower to criticisms made by the Federal Reserve. Had it done so, it is possible that the LIBOR scandal – which wiped out the top management at Barclays – might never have happened.

Not that the Bank of England has totally clean hands in any of this. It may have had no direct responsibility for keeping Britain’s markets honest, but it can be accused of being lackadaisical in making sure the BBA acted on Fed criticisms and forced through reforms designed to erect Chinese walls between LIBOR setters and traders so that opportunities for rigging were stamped out.

Paradoxically, the Libor business that NYSE Euronext will inherit has shrunk dramatically. Post the Great Recession the LIBOR market has been in deep slumber because banks are so distrusting of each other, especially in the eurozone.

It’s possible that among the reasons for awarding the LIBOR contracts to NYSE Euronext rather than the London Stock Exchange is that London’s bid came in association with Thomson Reuters, the financial institution which set the reference rate under the old broken regime.

Thomson Reuters’ independence has been challenged recently by the New York State Attorney Eric Schneiderman who is critical of an arrangement under which premium customers get privileged access – a two second advantage – to the University of Michigan consumer confidence index. At a time when the City is under siege from Brussels over a variety of issues, it does seem bizarre that we should allow an interest rate market that grew in London in the 1970s, to escape US tax measures, to head back across the Atlantic.

And while several European banks, including Barclays, RBS and UBS, have paid a heavy price from US regulators for LIBOR manipulation, so far there has not been a single successful prosecution or settlement with an American bank. That in itself should raise many previously unanswered curious questions, as LIBOR setting now moves to the United States.

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