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Kudrin Returns?

Why did Putin bring Alexey Kudrin back?

Alexander Mercouris

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The announcement that former Russian Finance Minister Alexey Kudrin has been appointed deputy head of Russian President Putin’s Council of Economic Advisers has provoked a stir.

This is not surprising. Few individuals in Russian politics polarise opinion as strongly as Kudrin does.

Kudrin’s admirers are to be found in the business community, amongst liberal economists and amongst people of generally elite backgrounds and liberal views. Amongst people of this sort Kudrin’s reputation is of the highest.

The wider Russian population – to the extent it is aware of him – however views Kudrin very differently, whilst his name is anathema across the very large “patriotic/left wing” section of Russia’s political spectrum

So who is Alexey Kudrin and why does he arouse such strong feelings? Kudrin was Russia’s Finance Minister from 2000 to 2011 as well as the Deputy Prime Minister in overall charge of the economy from 2007 to 2011.

Amongst his liberal admirers Kudrin is the official who is widely credited with engineering the economic boom Russia experienced during Putin’s first two terms as President. He is lauded for his rigidly orthodox free market economic thinking, his tight fiscal management, his refusal to run deficits, and for Russia’s early repayment of its sovereign debt just a few years after its humiliating default in 1998.

Above all he is credited with the creation of Russia’s two national savings funds, the Reserve Fund, which funds the national budget when it is in deficit, and the National Welfare Fund, which acts as Russia’s sovereign wealth fund.

Kudrin’s glowing reputation amongst people of elite and liberal backgrounds both in Russia and abroad is well illustrated by the awards they have showered on him.

He was named “Best Finance Minister of the Year 2005” by The Banker magazine, “Best Finance Minister of a Developing European Country”; in 2006 by the Emerging Markets newspaper (a journal published by the IMF and the World Bank) and “Best Finance Minister of the Year 2010” by Euromoney magazine.

Kudrin’s Russian critics have a very different view of him. They see him as a doctrinaire laissez faire Atlanticist, as the Finance Minister whose dogmatic insistence on cutting spending strangled the economy, causing its productive sectors to wither away as money which should have been used for investment was instead accumulated uselessly, becoming “dead money” in the two Funds.

In addition many Russians have not forgotten or forgiven Kudrin’s monetisation in 2005 of many of their Soviet era social security benefits, turning them from benefits in kind into benefits paid in money.

Given Russia’s historically high inflation and its two periods of hyperinflation in the 1990s this understandably was a very unpopular move and one which provoked widespread protests. Though in the West these protests are largely forgotten, they actually involved more people than the much better known protests which took place during the election season in 2011-2012.

Kudrin is also known to be a supporter of increasing the pension age – another reform that is for equally understandable reasons also very unpopular with many Russians. Beyond these very practical criticisms, much of the hostility to Kudrin within Russia has a distinct ideological hue.

In a country where opinion polls show a clear majority of the population favours a planned economy it is unsurprising that the man who was known as the most prominent economic liberal in the government became unpopular with many people. Russians also tend to conflate support for liberal economic policies with pro-Western political positions. As Russia’s relations with the West have deteriorated this has inevitably exposed economic liberals like Kudrin to charges that they are part of a pro-Western Fifth Column. In Kudrin’s case some of his actions have lent force to these fears.

Lastly but crucially, for many Russians an economic liberal like Kudrin who supports private business and private enterprise is almost by definition an apologist for the system that created the oligarchs – the hated class of plutocrats who emerged in Russia during the corrupt privatisations of the 1990s.

All these factors taken together explain why the individual who in the West was the most highly regarded official of Putin’s government in Russia is one of its least popular. The truth about Kudrin is that both the praise he gets and some – though not all – the criticism is overdone.

Kudrin as Finance Minister did indeed run a tight ship. He did indeed create the two Funds which did indeed help keep the economy stable by financing the budget deficit after the financial crash of 2008.

However the praise for Kudrin’s tight fiscal management ignores the fact that fiscal policy has been no loser since he left the government in 2011. On the contrary the high oil prices in 2012 and 2013 enabled the government to avoid running deficits in those years even though Kudrin before his dismissal had actually planned for them.

Since then the government has managed to run lower deficits during the current recession than those Kudrin ran and planned for during the 2008 crisis. In 2015 the federal deficit was just 2.4% of GDP and though it will probably be higher this year the target is still 3% of GDP.

If Kudrin is a fiscal conservative and a supporter of balanced budgets the record shows his successors also are. In the Russian government and in the Finance Ministry, Kudrin’s fiscal conservatism is not the exception. It is the rule.

This point about Kudrin that is consistently overlooked by his admirers is that whilst he was a member of the government he worked as part of a team. The head of that team was not Kudrin but Putin.

It is Putin not Kudrin who must ultimately take the credit – or blame – for the tough fiscal discipline of the Kudrin years. It is because of Putin’s heavy emphasis on budget discipline that budget spending has continued to be tight since Kudrin left the government in 2011. It was also Putin more than Kudrin who insisted on early repayment of Russia’s debt.

As for the idea of setting up the two Funds, credit – or blame – for that does belong to Kudrin. However it could not have happened without Putin’s support. One must resist the temptation – irresistible to Kudrin’s admirers – of giving Kudrin all the credit for everything that went right under his watch whilst putting all the blame on Putin for everything that went wrong.

If one believes that keeping tight control of budget spending, accumulating reserves and paying off debt is the hallmark of a good manager, then the record shows the good manager in Russia’s case is Putin not Kudrin and that it is Putin not Kudrin who should be given the credit.

In fact Kudrin’s record as an economic manager is decidedly mixed. It is certainly true that Russia’s economy grew rapidly during Putin’s first two terms when Kudrin was Finance Minister and that Kudrin’s success in restoring order to Russia’s previously chaotic budget played a role in this.

However though Kudrin – with Putin’s support – kept a tight lid on government spending he was far too complacent about the borrowing and spending binge Russian companies were cranking up towards in the years immediately prior to the 2008 financial crash.

Several commentators warned at the time that the credit build-up – much of it in foreign currency loans from Western banks – was getting out of control. However the mounting concern appears to have passed Kudrin completely by. Presumably as an economic liberal and as a believer in the virtues of free enterprise he found it difficult to believe the private sector could do wrong.

The result was that the country found itself dangerously exposed in the weeks and months following the financial crash of 2008 as Western banks at the urging of their own central banks scrambled to get cash out of Russia as fast as they could by calling in their loans.

Money poured out of the country putting the very existence of some of the country’s biggest companies at risk. The panic fed on itself as investors then also began to pull out of Russian companies causing Russia’s two stock markets to crash. For a few terrifying weeks it looked as if the entire economy was about to collapse.

In the event the reserves Kudrin and Putin had built up in the previous years proved sufficient to avert disaster, though the single thing that saved the economy… from a much more severe crisis was the sharp recovery in oil prices that took place in the spring of 2009.

Kudrin was obviously not solely to blame for all this. However as the country’s Finance Minister and as the man in overall charge of the economy he must bear the principal blame. At a crucial moment he took his eye off the ball and it was as much a matter of good luck as of good management that the country came through.

By contrast one of the reasons why the Russian economy has proved so resilient in the face of the sanctions and the 2014 oil price collapse is precisely because the lesson of those terrible months in 2008 and 2009 has been learnt. Instead of resuming their wild borrowing and spending spree when the crisis abated Russian companies and businesses instead – at the urging of their government – reined their borrowing and spending in as they moved to hedge and consolidate their positions.

The result was that this time round with the help of a certain amount of support from the government and the Central Bank they have been able to meet their debt obligations without undue strain and without the economy spiralling into crisis.

I would add in passing that the much discussed fall in the Russian growth rate since 2012 is in part a consequence of this process. Reining in borrowing and spending and consolidating positions has inevitably led to a cut in investment causing growth to slow. In other words the frenetic growth of the immediate period prior to the 2008 crash (which touched an annualised rate of 9% in the months preceding the crash) has had to be paid for by a lower growth rate since then.

None of these points are ever made by Kudrin’s admirers, just as when they claim – as they often do – that the Russian economy has been badly managed during Putin’s period as President so that the economy is supposedly insufficiently diversified they somehow manage to forget who was actually in charge of the economy during most of the time that Putin has been President.

This same exercise in selective memory comes up whenever the circumstances of Kudrin’s leaving the government are discussed. Kudrin’s admirers tend to claim that Kudrin left the government because of disagreements between him and Putin over defence spending. Kudrin supposedly was unhappy that defence spending was getting out of control and was becoming unaffordable. Putin supposedly refused to listen and

Kudrin therefore left the government rather than carry out a policy he considered irrational and unrealistic. No part of this is true. The true reason Kudrin was dismissed from the government was not because there was a row between him and Putin over defence spending. Kudrin was dismissed from the government because he made public his strong disagreement with Putin’s decision to appoint Dmitry Medvedev Prime Minister after the so-called “tandem switch” in 2011 when Putin and Medvedev swapped jobs, with Medvedev stepping aside from the Presidency to allow Putin to stand for the Presidency in the 2012 Presidential election and Putin in return nominating Medvedev to be his Prime Minister.

kudrin:medvedev

Alexey Kudrin with then President Dmitry Medvedev

What is strange about the claims Kudrin quit the government over defence spending is that his row with Medvedev which led to his dismissal was carried out in the most public way imaginable on national television for everyone to see. Kudrin started it all by saying on US television that he would not be able to stay in the government if Medvedev was appointed Prime Minister. There was then a public row between Medvedev and Kudrin in Russia shown in full view on national television during which an ashen-faced Kudrin asked for time to speak to Putin only to be sacked by Medvedev on the spot.

The issue of defence spending came up incidentally during the row as Kudrin searched for a reason to justify his objection to Medvedev’s becoming Prime Minister. The reason he hit upon was that he disagreed with Medvedev’s commitment to higher defence spending. He did not however exactly say it was completely unaffordable. Rather he said he wanted to spend more money on education instead.

As to the reasons for Kudrin’s objections to Medvedev’s appointment those to this day remain unclear. There were suggestions Kudrin was disappointed not to have been appointed Prime Minister himself.

There were also suggestions that he had come in for some criticism from within the government for his failure to foresee and pre-empt the 2008 financial crisis (see above) and that his position was already becoming shaky and that this provoked him to lash out.

It seems there was also a plan hatched by someone in the government (probably the Kremlin spin-doctor Vladislav Surkov) for Kudrin to leave the government to head a loyalist liberal pseudo-opposition party. It seems that Kudrin was unenthusiastic about this idea. However the fact it was floated at all shows that at the time of his dismissal the idea of Kudrin leaving the government was already in the air.

The true reason for Kudrin’s row with Medvedev is in fact obvious to anyone who watches the television film of their row: the two men detest each other. Quite why they do is unknown. Possibly it was rivalry for Putin’s favour and resentment by Kudrin that Medvedev – whom he obviously considers his inferior – was stealing a march on him.

Kudrin’s and Medvedev’s mutual dislike does however show one thing. This is that there is no united liberal Atlanticist bloc inside the government. At the time of their row Medvedev and Kudrin were widely credited with being the two most prominent liberal Atlanticists in the government.

Their all too evident mutual dislike however makes it all but inconceivable that they could forge a united front together. Having managed to get himself thrown out of the government in the most public way imaginable Kudrin then committed an action that deeply angered his former colleagues in the government and which has ever since fuelled widespread distrust of him in the country.

During the protests that followed the parliamentary elections in December 2011 Kudrin turned up and spoke at a liberal opposition rally on Sakharov Avenue in Moscow. By doing so he appeared to burn his bridges with the government and seemed to be aligning himself with the pro-Western liberal opposition against Putin.

Kudrin’s speech at the Sakharov Avenue rally in fact demonstrated something else: Kudrin’s complete lack of the most basic political skills needed by a successful politician. His speech at the rally was by common consent a disaster – a boring lecture from a former academic and technocrat that turned everybody off – very far from the rallying cry the situation demanded.

From that moment it was obvious to everyone including Kudrin himself that he could never successfully lead a political party or make himself a significant political force and that he represented no conceivable political threat or challenge either to Putin or to the government.

That realisation almost certainly explains Kudrin’s actions since then. Having realised that he had `no future as an opposition leader he began instead to try to work himself back into Putin’s favour.

The story of Kudrin’s career since then has been one of constant lobbying both by himself and by his supporters to bring him back into the government. Though during this period he regularly made coded criticisms of the government he always stopped short of direct attacks on it. The impression he gave was of someone who wanted the government to succeed but thought it was not being reformist enough. As is often the case with those in Russia who call for more reform he was vague about what was the reform he wanted but he tended to give the impression that he wanted to cut budget spending even more and wanted to raise the pension age.

It seems Kudrin finally persuaded Putin some months ago to bring him back and that the one issue that delayed his return was disagreement about the post he would be given.

In the event the post Kudrin was eventually given – deputy head of Putin’s Council of Economic Advisers – though important is advisory and hardly compares with the posts of Deputy Prime Minister and Finance Minister he held before he was sacked in 2011. If Kudrin held out for a more important position -as is likely – then he clearly didn’t get it. In fact it seems that both Medvedev and Sergey Ivanov (Putin’s Chief of Staff) vetoed any possibility of Kudrin being given executive posts either in government or in the Presidential Administration.

Why then did Putin bring Kudrin back?

There may have been an element… of political calculation behind the decision. Though Kudrin’s new post is hardly one of key importance his reappointment does carry important symbolism. It could be intended as a gesture to the West – where Kudrin is held in high regard – at a time when the anti-Russian policy the US and the EU have been following has been coming under increasing challenge.

More cynically, bringing Kudrin back into the fold might have been intended to keep him quiet and onside in the run-up to the pending parliamentary elections this autumn. More practically, it seems Kudrin is being asked to work on a national economic plan. Almost certainly this will include a recommendation to raise the pension age – a deeply unpopular measure which Putin is known however to have come round to. Possibly Putin is using Kudrin for political cover – looking to Kudrin to recommend an unpopular reform Putin realises is needed whilst setting Kudrin up as the fall guy who will take the flak if or rather when the measure is opposed.

However beyond these tough-minded political calculations personal factors have probably also played an important role. One must put aside the idea of major ideological differences between Putin and Kudrin. To the constant dismay of most of his supporters Putin’s record shows that he is a convinced economic liberal. Putin has never shown the slightest inclination to row back on the market reforms Russia has followed since the USSR’s collapse. If Kudrin is an economic liberal then the record shows Putin is one too.

As for Kudrin he is not quite the doctrinaire liberal or Atlanticist he is sometimes made out to be. He supported Putin’s action against Khodorkovsky and Yukos in 2004. As Deputy Prime Minister and Finance Minister he supported investment in Russia’s infrastructure. He also voiced support for the government’s policy of creating national champions in specific sectors of the economy.

Though a supporter of privatisation he never made this a fetish of his policy. Kudrin has also been careful not to challenge openly Putin’s foreign policy. Whatever his private thoughts on the matter he has never spoken out publicly against Crimea’s reunification with Russia. He surely knows that both for Putin and for the Russian public this question has become the touchstone of loyalty to the country.

Not only is there therefore enough common ground for Putin and Kudrin to work together in the future but there is a long history of close friendship and collaboration between them. Both Kudrin and Putin worked together in St. Petersburg in the 1990s for the city’s then mayor Anatoly Sobchak. Both Kudrin and Putin were then transferred to the Presidential Administration in Moscow when Sobchak failed to gain re-election in 1996. When Putin became the country’s President in 2000 he appointed Kudrin his Finance Minister and backed him in that post thereafter.

If there is one consistent pattern to Putin’s career it is his fierce loyalty to his friends even when – as in Kudrin’s case – that loyalty has not been fully reciprocated. It is probably Putin’s sense of friendship and loyalty to Kudrin which more than anything else explains his decision to bring him back.

Whether Putin’s feelings of friendship and loyalty to Kudrin will be enough to outweigh Kudrin’s unpopularity in the country and with many of his colleagues is another matter. On balance it is unlikely. However by bringing Kudrin back Putin has brought back into the fold an old friend and collaborator with a history of loyal service.

Should Putin decide to take a more liberal turn in managing the economy after the 2018 election Kudrin is there to help him take it. Whilst perennial rumours that Kudrin will become Prime Minister in place of Medvedev are probably misplaced, it is very much in character of Putin to move to keep his options open, and by bringing Kudrin back he has done just that.

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Russia calls on US to put a leash on Petro Poroshenko

The West’s pass for Mr. Poroshenko may blow up in NATO’s and the US’s face if the Ukrainian President tries to start a war with Russia.

Seraphim Hanisch

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Russia called on Washington not to ignore the Poroshenko directives creating an active military buildup along the Ukrainian-Donbass frontier, this buildup consisting of Ukrainian forces and right-wing ultranationalists, lest it “trigger the implementation of a bloody scenario”, according to a Dec 11 report from TASS.

The [Russian] Embassy [to the US] urges the US State Department to recognize the presence of US instructors in the zone of combat actions, who are involved in a command and staff and field training of Ukraine’s assault airborne brigades. “We expect that the US will bring to reason its proteges. Their aggressive plans are not only doomed to failure but also run counter to the statements of the administration on its commitment to resolve the conflict in eastern Ukraine by political and diplomatic means,” the statement said.

This warning came after Eduard Basurin, the deputy defense minister of the Donetsk People’s Republic noted that the Ukrainian army was massing troops and materiel for a possible large-scale offensive at the Mariupol section of the contact line in Donbass. According to Basurin, this action is expected to take place on 14 December. TASS offered more details:

According to the DPR’s reconnaissance data, Ukrainian troops plan to seize the DPR’s Novoazovsky and Temanovsky districts and take control over the border section with Russia. The main attack force of over 12,000 servicemen has been deployed along the contact line near the settlements of Novotroitskoye, Shirokino, and Rovnopol. Moreover, more than 50 tanks, 40 multiple missile launcher systems, 180 artillery systems and mortars have been reportedly pulled to the area, Basurin added. Besides, 12 BM-30 Smerch heavy multiple rocket launchers have been sent near Volodarsky.

The DPR has warned about possible provocations plotted by Ukrainian troops several times. Thus, in early December, the DPR’s defense ministry cited reconnaissance data indicating that the Ukrainian military was planning to stage an offensive and deliver an airstrike. At a Contact Group meeting on December 5, DPR’s Foreign Minister Natalia Nikonorova raised the issue of Kiev’s possible use of chemical weapons in the conflict area.

This is a continuation of the reported buildup The Duran reported in this article linked here, and it is a continuation of the full-scale drama that started with the Kerch Strait incident, which itself appears to have been staged by Ukraine’s president Petro Poroshenko. Following that incident, the president was able to get about half of Ukraine placed under a 30-day period of martial law, citing “imminent Russian aggression.”

President Poroshenko is arguably a dangerous man. He appears to be desperate to maintain a hold on power, though his approval numbers and support is abysmally low in Ukraine. While he presents himself as a hero, agitating for armed conflict with Russia and simultaneously interfering in the affairs of the Holy Eastern Orthodox Church, he is actually one of the most dangerous leaders the world has to contend with, precisely because he is unfit to lead.

Such men and women are dangerous because their desperation makes them short-sighted, only concerned about their power and standing.

An irony about this matter is that President Poroshenko appears to be exactly what the EuroMaidan was “supposed” to free Ukraine of; that is, a stooge puppet leader that marches to orders from a foreign power and does nothing for the improvement of the nation and its citizens.

The ouster of Viktor Yanukovich was seen as the sure ticket to “freedom from Russia” for Ukraine, and it may well have been that Mr. Yanukovich was an incompetent leader. However, his removal resulted in a tryannical regíme coming into power, that resulting in the secession of two Ukrainian regions into independent republics and a third secession of strategically super-important Crimea, who voted in a referendum to rejoin Russia.

While this activity was used by the West to try to bolster its own narrative that Russia remains the evil henchman in Europe, the reality of life in Ukraine doesn’t match this allegation at all. A nation that demonstrates such behavior shows that there are many problems, and the nature of these secessions points at a great deal of fear from Russian-speaking Ukrainian people about the government that is supposed to be their own.

President Poroshenko presents a face to the world that the West is apparently willing to support, but the in-country approval of this man as leader speaks volumes. The West’s blind support of him “against Russia” may be one of the most tragic errors yet in Western foreign policy.

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Second Canadian Citizen Disappears In China

According to the he Globe and Mail, the man was identified as Michael Spavor, a Canadian whose company Peaktu Cultural Exchange brings tourists and hockey players into North Korea.

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Via Zerohedge…


For a trade war that was supposed to be between the US and China, Canada has found itself increasingly in the middle of the crossfire. And so after the arrest of a former Canadian diplomat in Beijing in retaliation for the detention of the Huawei CFO in Vancouver, Canada said a second person has been questioned by Chinese authorities, further heightening tensions between the two countries.

The second person reached out to the Canadian government after being questioned by Chinese officials, Foreign Minister Chrystia Freeland said, at which point Canada lost contact with him. His whereabouts are currently unknown and Global Affairs Canada said they are in contact with his family.

“We haven’t been able to make contact with him since he let us know about this,” Freeland told reporters Wednesday in Ottawa. “We are working very hard to ascertain his whereabouts and we have also raised this case with Chinese authorities.”

According to the he Globe and Mail, the man was identified as Michael Spavor, a Canadian whose company Peaktu Cultural Exchange brings tourists and hockey players into North Korea. He gained fame for helping arrange a visit to Pyongyang by former NBA player Dennis Rodman, and he met North Korean leader Kim Jong Un on that trip, the newspaper reported. Attempts to reach Spavor on his contact number either in China, or North Korean went straight to voicemail.

Spavor’s personal Facebook page contains several images of him with North Korean leader Kim Jong-un including one of him with both Jong-un and former Dennis Rodman at an undisclosed location.

Michael P. Spavor, right, pictured here with North Korean leader Kim Jong-un, second from right, and Dennis Rodman.

Another image shows the two sharing a drink on a boat.

The unexplained disappearance takes place after China’s spy agency detained former Canadian diplomat Michael Kovrig in Beijing on Monday, who was on leave from the foreign service. The arrest came nine days after Canada arrested Huawei Chief Financial Officer Meng Wanzhou at the request of U.S. DOJ. While Canada has asked to see the former envoy after it was informed by fax of his arrest, Canada is unaware of Kovrig current whereabouts or the charges he faces.

“Michael did not engage in illegal activities nor did he do anything that endangered Chinese national security,” Rob Malley, chief executive officer of the ICG, said in a written statement. “He was doing what all Crisis Group analysts do: undertaking objective and impartial research.”

One possibility is that Kovrig may have been caught up in recent rule changes in China that affect non-governmental organizations, according to Bloomberg. The ICG wasn’t authorized to do work in China, Foreign Ministry Spokesperson Lu Kang said during a regular press briefing in Beijing Wednesday.

“We welcome foreign travelers. But if they engage in activities that clearly violate Chinese laws and regulations, then it is totally another story,” he said, adding he had no information on Kovrig specifically.

As Bloomberg further notes, foreign non-governmental organizations are now required to register with the Chinese authorities under a 2017 law that subjects them to stringent reporting requirements. Under the law, organizations without a representative office in China must have a government sponsor and a local cooperative partner before conducting activities. ICG said this is the first time they’ve heard such an accusation from the Chinese authorities in a decade of working with the country. The company closed its Beijing operations in December 2016 because of the new Chinese law, according to a statement. Kovrig was working out of the Hong Kong office.

Meanwhile, realizing that it is increasingly bearing the brunt of China’s retaliatory anger, Trudeau’s government distanced itself from Meng’s case, saying it can’t interfere with the courts, but is closely involved in advocating on Kovrig’s behalf.

So far Canada has declined to speculate on whether there was a connection between the Kovrig and Meng cases, with neither Freeland nor Canadian Trade Minister Jim Carr saying Wednesday that there is any indication the cases are related. Then again, it is rather obvious they are. Indeed, Guy Saint-Jacques, who served as ambassador to China from 2012 to 2016 and worked with Kovrig, says the link is clear. “There’s no coincidence with China.”

“In this case, they couldn’t grab a Canadian diplomat because this would have created a major diplomatic incident,” he said. “Going after him I think was their way to send a message to the Canadian government and to put pressure.”

Even though Meng was granted bail late Tuesday, that did not placate China, whose foreign ministry spokesman said that “The Canadian side should correct its mistakes and release Ms. Meng Wanzhou immediately.”

The tension, according to Bloomberg,  may force Canadian companies to reconsider travel to China, and executives traveling to the Asian country will need to exercise extra caution, said Andy Chan, managing partner at Miller Thomson LLP in Vaughan, Ontario.

“Canadian business needs to look at and balance the reasons for the travel’’ between the business case and the “current political environment,’’ Chan said by email. Chinese officials subject business travelers to extra screening and in some case reject them from entering, he said.

Earlier in the day, SCMP reported that Chinese high-tech researchers were told “not to travel to the US unless it’s essential.”

And so, with Meng unlikely to be released from Canada any time soon, expect even more “Chinese (non) coincidences”, until eventually China does detain someone that the US does care about.

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Multipolar World Order in the Making: Qatar Dumps OPEC

Russia and Qatar’s global strategy also brings together and includes partners like Turkey.

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Authored by Federico Pieraccini via The Strategic Culture Foundation:


The decision by Qatar to abandon OPEC threatens to redefine the global energy market, especially in light of Saudi Arabia’s growing difficulties and the growing influence of the Russian Federation in the OPEC+ mechanism.

In a surprising statement, Qatari energy minister Saad al-Kaabi warned OPEC on Monday December 3 that his country had sent all the necessary documentation to start the country’s withdrawal from the oil organization in January 2019. Al-Kaabi stressed that the decision had nothing to do with recent conflicts with Riyadh but was rather a strategic choice by Doha to focus on the production of LNG, which Qatar, together with the Russian Federation, is one of the largest global exporters of. Despite an annual oil extraction rate of only 1.8% of the total of OPEC countries (about 600,000 barrels a day), Qatar is one of the founding members of the organization and has always had a strong political influence on the governance of the organization. In a global context where international relations are entering a multipolar phase, things like cooperation and development become fundamental; so it should not surprise that Doha has decide to abandon OPEC. OPEC is one of the few unipolar organizations that no longer has a meaningful purpose in 2018, given the new realities governing international relations and the importance of the Russian Federation in the oil market.

Besides that, Saudi Arabia requires the organization to maintain a high level of oil production due to pressure coming from Washington to achieve a very low cost per barrel of oil. The US energy strategy targets Iranian and Russian revenue from oil exports, but it also aims to give the US a speedy economic boost. Trump often talks about the price of oil falling as his personal victory. The US imports about 10 million barrels of oil a day, which is why Trump wrongly believes that a decrease in the cost per barrel could favor a boost to the US economy. The economic reality shows a strong correlation between the price of oil and the financial growth of a country, with low prices of crude oil often synonymous of a slowing down in the economy.

It must be remembered that to keep oil prices low, OPEC countries are required to maintain a high rate of production, doubling the damage to themselves. Firstly, they take less income than expected and, secondly, they deplete their oil reserves to favor the strategy imposed by Saudi Arabia on OPEC to please the White House. It is clearly a strategy that for a country like Qatar (and perhaps Venezuela and Iran in the near future) makes little sense, given the diplomatic and commercial rupture with Riyadh stemming from tensions between the Gulf countries.

In contrast, the OPEC+ organization, which also includes other countries like the Russian Federation, Mexico and Kazakhstan, seems to now to determine oil and its cost per barrel. At the moment, OPEC and Russia have agreed to cut production by 1.2 million barrels per day, contradicting Trump’s desire for high oil output.

With this last choice Qatar sends a clear signal to the region and to traditional allies, moving to the side of OPEC+ and bringing its interests closer in line with those of the Russian Federation and its all-encompassing oil and gas strategy, two sectors in which Qatar and Russia dominate market share.

In addition, Russia and Qatar’s global strategy also brings together and includes partners like Turkey (a future energy hub connecting east and west as well as north and south) and Venezuela. In this sense, the meeting between Maduro and Erdogan seems to be a prelude to further reorganization of OPEC and its members.

The declining leadership role of Saudi Arabia in the oil and financial market goes hand in hand with the increase of power that countries like Qatar and Russia in the energy sectors are enjoying. The realignment of energy and finance signals the evident decline of the Israel-US-Saudi Arabia partnership. Not a day goes by without corruption scandals in Israel, accusations against the Saudis over Khashoggi or Yemen, and Trump’s unsuccessful strategies in the commercial, financial or energy arenas. The path this doomed

trio is taking will only procure less influence and power, isolating them more and more from their opponents and even historical allies.

Moscow, Beijing and New Delhi, the Eurasian powerhouses, seem to have every intention, as seen at the trilateral summit in Buenos Aires, of developing the ideal multipolar frameworks to avoid continued US dominance of the oil market through shale revenues or submissive allies as Saudi Arabia, even though the latest spike in production is a clear signal from Riyadh to the USA. In this sense, Qatar’s decision to abandon OPEC and start a complex and historical discussion with Moscow on LNG in the format of an enlarged OPEC marks the definitive decline of Saudi Arabia as a global energy power, to be replaced by Moscow and Doha as the main players in the energy market.

Qatar’s decision is, officially speaking, unconnected to the feud triggered by Saudi Arabia against the small emirate. However, it is evident that a host of factors has led to this historic decision. The unsuccessful military campaign in Yemen has weakened Saudi Arabia on all fronts, especially militarily and economically. The self-inflicted fall in the price of oil is rapidly consuming Saudi currency reserves, now at a new low of less than 500 billion dollars. Events related to Mohammad bin Salman (MBS) have de-legitimized the role of Riyadh in the world as a reliable diplomatic interlocutor. The internal and external repression by the Kingdom has provoked NGOs and governments like Canada’s to issue public rebukes that have done little to help MBS’s precarious position.

In Syria, the victory of Damascus and her allies has consolidated the role of Moscow in the region, increased Iranian influence, and brought Turkey and Qatar to the multipolar side, with Tehran and Moscow now the main players in the Middle East. In terms of military dominance, there has been a clear regional shift from Washington to Moscow; and from an energy perspective, Doha and Moscow are turning out to be the winners, with Riyadh once again on the losing side.

As long as the Saudi royal family continues to please Donald Trump, who is prone to catering to Israeli interests in the region, the situation of the Kingdom will only get worse. The latest agreement on oil production between Moscow and Riyad signals that someone in the Saudi royal family has probably figured this out.

Countries like Turkey, India, China, Russia and Iran understand the advantages of belonging to a multipolar world, thereby providing a collective geopolitical ballast that is mutually beneficial. The energy alignment between Qatar and the Russian Federation seems to support this general direction, a sort of G2 of LNG gas that will only strengthen the position of Moscow on the global chessboard, while guaranteeing a formidable military umbrella for Doha in case of a further worsening of relations between Saudi Arabia and Qatar.

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