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Angry China warns US on North Korea: back off and talk or risk disaster

Commentaries in China’s official media show growing Chinese anger at US grandstanding and intransigence on the North Korean issue.

Alexander Mercouris

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If the Chinese or anyone else imagined that the sanctions resolution recently passed by the UN Security Council would calm tensions in the Korean Peninsula, they must by now be disabused of that illusion.

Though there have been no tests by North Korea since the UN Security Council vote – whether of ballistic missiles or nuclear weapons – the rhetoric instead of calming down has become heated.  Moreover for once it is Washington rather than Pyongyang that has taken the initiative in the war of words.

Thus after days of unwise bragging by President Trump about the UN Security Council resolution – which he claims (wrongly) to have sponsored, and which – to their intense irritation – he has “thanked” the Chinese and Russians for – we have had first President Trump’s “fire and fury” comment – which by the way looks to me calculated rather than spontaneous – and an almost equally belligerent statement from the US’s Defense Secretary General Mattis.

By now it should be obvious that there is nothing that delights the North Korean leadership more than calling the US’s bluff, so their response – wild and reckless threats of a missile demonstration around the US’s base in Guam – was exactly as might have been expected.

The US in turn is now responding by leaking plans of its “best of bad options” – attacking North Korea with its B1 bombers – even as everyone acknowledges that such a step is more likely to provoke North Korea than deter it.

It is difficult to discern much method in these actions, but on the assumption that the US has not entirely taken leave of its senses and that there is some thinking behind what it is saying and doing, it is possible to explain them in one of two ways

(1) President Trump and his administration have convinced themselves that it really was their threats and bluster which got the Chinese to agree to the sanctions resolution – even though that is certainly wrong – and that this has emboldened them to raise the temperature further in the belief that by doing so this will increase pressure the Chinese to give them more;

(2) President Trump and his administration have been spooked by the report from the Defense Intelligence Agency – uncorroborated though that is, and based on sources we can only guess – that North Korea’s ballistic missile and nuclear weapons programme has advanced much faster than expected, so that North Korea really does now have the capability to strike the US, and are overreacting to this news.

Of course these two explanations are not mutually exclusive, but on balance my opinion is that the more likely of the two – or the more important of the two – is (2).

Regardless, what is clear is that the Chinese are becoming increasingly exasperated and angry about this escalation of the rhetoric coming from Washington.  That this is so is confirmed by commentaries which have in China’s official media, notably the People’s Daily and Global Times.

Turning first to Global Times, an editorial there makes the obvious point that the US can never win a shouting match with North Korea for the simple reason that whilst every threat North Korea makes is immediately transmitted to the people of the US, the North Korean government’s total control of information means that the North Korean people will only hear of US threats against their country if the North Korean governments wants them to

The US can’t usually gain the upper hand in this war of words, as Pyongyang chooses whatever wording it likes, and what Washington says may not be heard by North Korean society. But US opinion has paid great attention to everything North Korea says.

The People’s Daily then made crystal clear China’s total opposition to US military action against North Korea

However, the bottom line on the nuclear issue on the Korean Peninsula is that there must not be any armed conflict there. There is no room for any related party to play with fire on the issue.

Exercising restraint is needed for making responsible choices to ensure peace, particularly at a moment approaching crisis

In truth it is little short of incredible that the military option against North Korea – a country which is now a nuclear power – is even being discussed.   Even some of Washington’s staunchest media allies understand its utter folly.  Here for example is what the London Times has to say about it in an editorial published today

If it really came to a pre-emptive US strike against Pyongyang, it is South Korea that would feel most of the fire and fury. North Korea has heavy artillery within shooting distance of Seoul, home to 25 million people. Despite the general anxiety about Kim’s intentions, it would be difficult indeed for the White House to sustain regional support for a US-led war…..

……An all-out attack on North Korea would certainly bring the country to its knees, given the overwhelming firepower of the US. The costs in civilian lives and the squandering of trust in the US in the region and across the world would make it a pyrrhic victory and an extraordinary tragedy. The other military option of limited punitive non-nuclear strikes every time Kim tests a missile would merely escalate the conflict without stopping the dictator. Attempting to topple the regime from within is, given Kim’s tight grip on the security machine, unlikely to succeed.

The People’s Daily then goes on to point out that it is US intransigence – specifically the US’s failure to abide by the agreements it reached with Pyongyang in the 1990s, and its refusal to negotiate with North Korea since then – which have brought the present situation about

It is fact that the DPRK missile and nuclear programs stalled during bilateral and multilateral talks, but multiplied over the past nine years since the six-party talks came to grinding halt, during which the United States sought to pressure and sanction Pyongyang.

Global Times for its part makes the point that all the threats and sanctions the US has thrown at North Korea have failed to prevent or even slow down its ballistic missile and nuclear weapons programme

Since 2006 when North Korea conducted the first nuclear test, the US and North Korea have been engaged in a longstanding battle of wills. As North Korea’s nuclear and missile technologies develop, it is more difficult for the US to win the battle over North Korea. Washington has underestimated Pyongyang’s disregard for all the prices it has to pay in its pursuit of nuclear weapons and missiles.

Yet despite the dismal failure of this approach, the US still persists with it, still expecting in the face of all experience that will time succeed

However, Washington only wants to heighten the sanctions and military threats against Pyongyang, which is adding fuel to the flames. The North Korean nuclear issue is heading toward confrontation.

More and more analysts tend to believe that no matter what warnings the US sends or however tough the UN Security Council sanctions are, there is little possibility of Pyongyang stopping its missile launches.

Both Global Times and the People’s Daily then point to the only feasible solution to the crisis: the resumption of direct talks between North Korea and the US.  Both however make the point that in order for these talks to succeed the US must bring itself to acknowledge North Korea’s security concerns.

Here is how Global Times puts it

North Korea has almost been completely isolated by the outside world. Under such extreme circumstances, Pyongyang will weigh all its possible options. Washington should stimulate Pyongyang’s desire to engage with the outside world and return to the international community…..

Now it is time the US seriously responds to North Korea’s concerns for national security.

Whilst the more authoritative People’s Daily goes further and expresses itself in more detail, setting out clearly the nature of North Korea’s security concerns and the North Korean realities the US must accept

….. the Untied States, it should commit itself to realizing the fundamentals it has recently reiterated on the nuclear issue on the Korean Peninsula, including seeking no regime change in the DPRK nor a speedy Korean reunification.

It is advised that Washington, Seoul and Pyongyang take into serious consideration China’s proposal that they start from addressing their pressing security concerns to build up mutual trust, effectively paving the way for restoring talks.

The People’s Daily also restates what China sees as the essential precondition for the success of any talk

Pyongyang should suspend its ballistic missile and nuclear programs while Washington and Seoul suspend their joint military drills.

The alternative is a drift towards armed confrontation in which North Korea is outmatched by the US but arguably has far less to lose.  Here is how Global Times explains it

Despite overwhelming strength of the US, Pyongyang can risk everything if there is a showdown between it and Washington. The US should avoid such a scenario and it needn’t feel disgraced because of it.

(bold italics added)

To the Chinese all this must seem so obvious that they are probably baffled by the US leaders’ inability to understand it even when it is so patiently spelt out for them.

Like the Russians the Chinese – highly realistic and rational people that they are – probability find it difficult to understand how the constant need to appear “strong” and “tough” drives the actions of US politicians, even when those actions lead to results which are totally – and predictably – disastrous for the US.

The simple fact is that no-one loses an election in the US because they are perceived to be “strong” and “tough”, or wins an election when they are perceived to be “weak” and “soft”, and that fact is enough to precondition the US to seek confrontation rather than compromise.

One however senses in these commentaries that Chinese patience with the US is now wearing extremely thin.  With the Chinese perhaps sensing that opinion in East Asia is turning against Washington on the Korean issue, Chinese willingness t0 go on working with Washington on the Korean issue may be near its end point.

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EU and Japan ink free trade deal representing over 30% of global GDP

The free trade agreement represents a victory for free trade in the face of growing protectionism

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In a bid to preserve free trade and strengthen their trade partnership, the European Union and Japan have finished a free trade zone agreement that has been sitting in the pipeline for years.

The present global economic outlook provided the needed spur to action to get the ball rolling again and now it has finally reached the end zone and scored another point for free and open trade against the growing influence of protectionism, which has been creeping up with alarming rapidity and far reaching consequences in recent months.

Under the deal, Japan will scrap tariffs on some 94% of goods imported from Europe and the EU in turn is canning 99% of tariffs on Japanese goods.

Between the European Union and Japan, the trade deal impacts about 37% of the world’s GDP, making it one of the largest and impactful of such agreements.

The Japan Times reports:

Top European Union leaders and Prime Minister Shinzo Abe signed an economic partnership agreement Tuesday in Tokyo, a pact that will create a massive free trade zone accounting for 37 percent of the world’s trade by value.

European Council President Donald Tusk and European Commission President Jean-Claude Juncker hastily arranged their visit to Tokyo after Abe was forced to abruptly cancel plans to attend a July 11 signing ceremony in Brussels in the aftermath of flooding and mudslides in western Japan.

Japanese officials said the signing is particularly important to counter intensifying protectionism worldwide triggered by U.S. President Donald Trump.

Negotiations on the pact between Japan and the EU, which started in 2013, had stagnated for a time but regained momentum after Trump took office in January 2017.

“We are sending a clear message that we stand together against protectionism,” Tusk said at a joint news conference with Abe after they signed the agreement.

“The relationship between the EU and Japan has never been stronger. Geographically we are far apart, but politically and economically we could be hardly any closer,” Tusk said. “I’m proud today we are taking our strategic partnership to a new level.”

Tusk stressed that the EU and Japan are partners sharing the same basic values, such as liberal democracy, human rights and rule-based order.

Abe also emphasized the importance of free and fair trade.

“Right now, concerns are rising over protectionism all around the world. We are sending out a message emphasizing the importance of a trade system based on free and fair rules,” he said.

The pact will create a free trade bloc accounting for roughly 30 percent of the world’s gross domestic product. Japan and the EU hope to have the agreement, which still needs to be ratified by both parties, come into force by March.

Under the EPA, tariffs on about 99 percent of Japan’s exported goods to the EU will eventually be eliminated, while duties on 94 percent of EU’s exported items to Japan will be abolished, according to the Foreign Ministry.

The EPA will eliminate duties of 10 percent on Japan’s auto exports to the EU seven years after the pact takes effect. The current 15 percent duties on wine imports from the EU will be eliminated immediately, while those on cheese, pork and beef will be sharply cut.

In total, the EPA will push up domestic GDP by 1 percent, or ¥5 trillion a year, and create 290,000 new jobs nationwide, according to the government.

“The world is now facing raging waves of protectionism. So the signing ceremony at this time is particularly meaningful,” a senior Foreign Ministry official said earlier this month on condition of anonymity.

“The impact for Japan is big,” the official said.

Fukunari Kimura, an economics professor at Keio University, said the EU is now trying to accelerate the ratification process.

“This is a repercussion of President Trump’s policies. They will try to ratify it before Brexit in March of next year,” he said in an interview with The Japan Times last week.

But the deal has raised concerns among some domestic farmers, in particular those from Hokkaido, the country’s major dairy producer.

According to an estimate by the Hokkaido Prefectural Government, the EPA will cut national production in the agriculture, fishery and forestry industries by up to ¥114.3 billion a year, with Hokkaido accounting for 34 percent of the predicted losses.

“The sustainable development of the prefecture’s agriculture, forestry and fisheries industries is our top priority. We need to make efforts to raise our international competitiveness,” Hokkaido Gov. Harumi Takahashi said during a news conference July 10.

Japan and the EU had reached a basic agreement on the EPA in December.

Tokyo also led negotiations on the Trans-Pacific Partnership free trade pact after Trump withdrew the U.S. from the deal in January 2017.

In March, 11 countries including Japan signed the so-called TPP11, or a revised TPP pact that does not include the U.S.

“The Japan-EU EPA is another important step for Japan to strengthen its trade relationship with key trading partners, and demonstrate that trade liberalization is alive and well, even if the United States is taking a different stance,” wrote Wendy Cutler, a former acting deputy U.S. Trade Representative, in an email sent to The Japan Times last week.

“The EU deal also reduces Japanese dependence on the U.S. market and thus increases its leverage to resist unreasonable trade demands by the United States,” she wrote.

According to the Foreign Ministry, the EU, which accounts for 22 percent of the world’s GDP, was the destination for 11.4 percent of Japanese exports in 2016. In the same year, the figure for the U.S. was 20.2 percent and 17.7 percent for China.

In 2016, Japan’s exports to the EU totaled ¥8 trillion, while reciprocal trade was ¥8.2 trillion.

The deal provides tariff relief for both parties and can improve the quantity of trade between them, expand the economy and create many jobs. It also helps to further diversify their trade portfolios in order to mitigate the prospect of a single global trade partner wielding too much influence, which in turn provides a certain amount of cover from any adverse actions or demands from a single actor. In this way, current trade dependencies can be reduced and free and diversified trade is further bolstered.

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The man behind Ukraine coup is now turning Greece against Russia (Video)

The Duran – News in Review – Episode 57.

Alex Christoforou

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On July 11, Greece said it would expel two Russian diplomats and barred the entry of two others.

The Duran reported that the formal reason is alleged meddling in an attempt to foment opposition to the “historic” name deal between Athens and Skopje paving the way for Macedonia’s NATO membership. Moscow said it would respond in kind.

Nothing like this ever happened before. The relations between the two countries have traditionally been warm. This year Moscow and Athens mark the 190th anniversary of diplomatic relations and the 25th anniversary of the Treaty of Friendship and Cooperation between the Russian Federation and the Hellenic Republic. They have signed over 50 treaties and agreements.

Greek news daily, Kathimerini says the relationship started to gradually worsen behind the scenes about a couple of years ago. What happened back then? Geoffrey Pyatt assumed office as US Ambassador to Greece. Before the assignment he had served as ambassador to Ukraine in 2013-2016 at the time of Euromaidan – the events the US took active part in. He almost openly contributed into the Russia-Ukraine rift. Now it’s the turn of Greece. The ambassador has already warned Athens about the “malign influence of Russia”. He remains true to himself.

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris connect the dots between the Ukraine coup and Greece’s recent row with Russia, and the man who is in the middle of it all, US Ambassador Geoffrey Pyatt.

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Via Sputnik News

Actions similar to the expulsion of Russian diplomats from Greece do not remain without consequences, said spokeswoman for the Russian Foreign Ministry Maria Zakharova.

“We have an understanding that the people of Greece should communicate with their Russian partners, and not suffer from dirty provocations, into which, unfortunately, Athens was dragged,” Zakharova said at a briefing.

“Unfortunately, of course, we are talking about politics. Such things do not remain without consequences, do not disappear without a trace. Of course, unfortunately, all this darkens bilateral relations, without introducing any constructive principle,” she added.

On July 11, the Greek Kathimerini newspaper reported that Athens had decided to expel two Russian diplomats and ban two more from entering the country over illegal actions that threatened the country’s national security. The publication claimed that the diplomats attempted to intervene in a domestic issue, namely the changing of the name of the Former Yugoslav Republic of Macedonia (FYROM) to the Republic of North Macedonia, the agreement for which was brokered by Skopje and Athens last month.

The Russian Foreign Ministry has vowed to give a mirror response to Greece’s move.

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Russia just DUMPED $80 billion in US debt

The US Treasury published a report naming those countries that are the largest holders of US bonds. The list includes 33 countries, and for the first time Russia is no longer in it.

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Russia has stopped “inching towards de-dollarization” as I wrote about on July 3rd, and has now energetically walked out of the list of largest holders of US government bonds, hence this update. For the two months ending in May 2018, Moscow has offloaded more than $80 billion in US Government debt obligations.

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The $30 billion “minimum” listing Rubicon has been crossed by Russia.

As of the end of May, Russia had bonds worth only $ 14.9 billion. For comparison: in April, Russia was on the Treasury list with bonds totaling $48.7 billion. Even then it was offloading US$ debt securities as Russia owned in March over $96 billion. At the end of 2017, Russia had US treasury securities worth $102.2 billion. It is anyones guess what Russia will own when the June and July figures are released in August and September – probably less than today.

This simply serves as a confirmation that Russia is steadfastly following a conservative policy of risk diversification in several areas such as financial, economic, and geopolitical. The US public debt and spend is increasingly viewed as a heightened risk area, deserving sober assessment.

So where have all the dollars gone? The total reserves of the Russian Central Bank have not changed and remain at approximately the equivalent of $ 457 billion, so what we are seeing is a shift of assets to other central banks, other asset classes, just not US$ government bonds.

During the same time (April-May) as this US$ shift happened, the Russian Central Bank bought more than 1 million troy ounces of gold in 60 days, and continues.

For comparison sake, the maximum Russia investment in US public debt was in October 2010 totaling $176.3 billion. Today it is $14.9 billion.

The largest holders of US government bonds as of May are China ($ 1,183.1 billion), Japan ($ 1048.8 billion), Ireland ($ 301 billion), Brazil ($ 299.2 billion), Great Britain ($ 265 billion).

Using the similar conservative metrics that the Russian Central Bank has been rather successfully applying through this geopolitically and economically challenging period with the US and the US Dollar, it may not stretch the imagination too much that other countries such as China may eventually follow suit. Who will finance the debt/spend then?

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