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CONFIRMED: UN report says West’s anti-Russian sanctions have failed

UN report says Western sanctions have had limited economic impact; questions their legality

Alexander Mercouris

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This article was first published by RussiaFeed

Though it has gone almost entirely unreported in the Western media, a reportprovided by a UN Special Rapporteur to the UN Human Rights Council appears to the first serious attempt by an international authority to assess the effectiveness of the sanctions the Western powers have imposed on Russia.

The report’s conclusions are that the sanctions have been ineffective in that they have done only marginal damage to the Russian economy and have been significantly more costly to the EU’s economy than to Russia’s, though they have caused real hardship to many individuals both in the EU and in Russia.

Most controversial of all, the report casts doubt on the legality of the whole sanctions regime imposed by the West on Russia.

On the possible illegality of the EU’s sanctions, I discussed this as far back as 2nd October 2014 in an article I wrote for Sputnik in which I made these points

There is only one international body that is authorised under international law to impose sanctions: the Security Council of the United Nations. Its authority to impose sanctions is clearly set out in Article 41 of the UN Charter …….Any decision by the UN Security Council to impose sanctions under Article 41 has the force of law. UN Member States (including the states that make up the EU) are legally bound to enforce them.

The EU has no international legal authority to impose sanctions without obtaining a mandate from the Security Council. Doing so challenges the authority of the Security Council to impose sanctions. It also violates the rules of the World Trade Organisation.

The EU nonetheless claimed for itself this power in a 2004 position paper…….The position paper however fails to explain the legal basis upon which the EU claims this power. It refers to Article 11 of the Treaty on the European Union. This is has been replaced by Articles 21 and 24 of the amended Treaty on the European Union. Neither the original Article 11 nor Articles 21 and 24 of the amended Treaty on the European Union, however, refer to sanctions.

Reference is sometimes also made to Article 28 of the Treaty on the European Union, …..Reference is also made to Article 215 of the Treaty on the Functioning of the European Union, …..None of these provisions however say the EU has the power to impose sanctions without a mandate from the Security Council.

Compare these words in my article for Sputnik of 2nd October 2014 with these words in the report of the Special Rapporteur

10. Unilateral sanctions against the Russian Federation qualify as “unilateral coercive measures” to the extent that they have been adopted by States — or regional organizations without a mandate of the Security Council acting pursuant to Article 41 of the Charter of the United Nations (see A/HRC/30/45, para. 14).

11.  It has been rightly noted that “[t]he prevailing view among international law specialists, however, is that autonomous sanctions cannot be legal per se and thus require international legal justification for their imposition”.

12. Sanctions on the Russian Federation should be expected to comply with the procedural and substantive conditions for recourse to lawful countermeasures, as set out by the General Assembly in its resolution 56/83 on the responsibility of States for internationally wrongful acts. In particular, the International Law Commission has noted that a “State which resorts to countermeasures based on its unilateral assessment of the situation does so at its own risk and may incur responsibility for its own wrongful conduct in the event of an incorrect assessment”.

13. Moreover, as the Special Rapporteur noted in his 2016 report to the General Assembly, “[s]uch responsibility could also be engaged in a situation where, even acting with proper justification, States (or international organizations) are found to have disregarded legal preconditions for recourse to countermeasures, such as the proportionality and reversibility of the measures” (see A/71/287, para. 11).

14. The view has been widely expressed that unilateral sanctions on the Russian Federation qualify as “third-party countermeasures” under international law, to the extent that they aim at responding to grave violations of obligations owed to the international community. However, it is to be noted that the permissibility of third-party countermeasures remains unsettled in international law, and was left open in General Assembly resolution 56/83.

(bold italics added)

In other words, since the sanctions were not imposed by the UN Security Council their legality is open to doubt, even if they are viewed as “third party countermeasures”, the legality of which is anyway “unsettled”.

To which I would add that as the Special Rapporteur’s discussion clearly shows, “third party countermeasures” are envisaged as unilateral actions (ie. actions taken without a mandate from the UN Security Council) taken by UN Member States.  The EU however is not a UN Member State but an international body, and its power to act is theoretically limited by the treaties which created it.  As I discussed in my article for Sputnik, none of these treaties give it authority to impose sanctions which have not been mandated by the UN Security Council.

Putting aside the important though for the moment academic question of the legality of the sanctions – which may however become very important at some future time – what of their actual economic impact?

The Special Rapporteur has much to say about this, and it will make for uncomfortable reading for the supporters of the sanctions

51. Application of the unilateral coercive measures began at the start of 2014, a time when the price of oil fell substantially. Thus, two shocks occurred simultaneously: the “oil shock” and the “sanctions shock”. In view of the complexity of the mix of those causes, it is difficult to determine the discrete impact of the sanctions shock. According to some unofficial estimates provided to the Special Rapporteur in Moscow, they may have caused at most an average reduction of 1 per cent of the gross domestic product (GDP) of the Russian Federation between 2014 and 2016. It remains that the main adverse impact of the reversal of economic fortunes was attributable to the drop in oil prices……

53. In terms of macroeconomic analysis, the combined impact of the two shocks reduced growth from 1.3 per cent in 2013 to 0.7 per cent in 2014 and to – 2.8 per cent in 2015. As a result of adaptation to the post-shock situation, there was a turnaround in economic activity already in the first quarter of 2016, with a negative growth rate of – 0.02 per cent, despite the fact that oil prices remained low. That rate moved back into positive territory in 2017 without any lifting of unilateral coercive measures. Over the past 12 months, the rouble appreciated by 15 per cent against the dollar. This is evidence of a successful adjustment…….

62. Different data are provided by the media and academic circles in source countries estimating the cost incurred through the measures by source countries, especially in the European Union.

63. The most credible approximation is of $3.2 billion a month, according to a working paper by the Centre d’Etudes Prospectives et d’Informations Internationales.  In an interview with the Special Rapporteur, European farmers and a confederation of European agricultural cooperatives deplored that the losses were attributable to a political dispute between the European Union and the Russian Federation, in which European Union farmers had no role or responsibility yet were the ones that had to “pay the price”.

64. The rough estimate of the adverse impact of the sanctions on the Russian Federation, if disentangled from the oil shock, is an average loss of 1 per cent of GDP. That seems to be a reasonable figure since, after “digesting” the oil shock, the difference between actual and potential GDP for 2017 is of about 0.80 per cent according to the International Monetary Fund.  That output gap would amount to a direct loss therefore of some $15 billion per annum for the Russian Federation or a total of $55 billion so far.

65. The resulting overall income loss of $155 billion is shared by source and target countries. Although both source and target countries can internalize those losses, it is not clear that any partner is cowed by them or indeed that any rights holder, least of all European smallholder farmers, benefits from them. Meanwhile, business opportunities are forgone, curtailing the right to development of trading partners. Even if direct losses to the Russian Federation from unilateral coercive measures were twice as high as provided in the above estimate, source countries are having to suffer equally or more from the sanctions than the country they target. They may also be more vulnerable as, unlike the Russian Federation, they do not all have a consistent international trade surplus or such high foreign exchange reserves, which, in the case of the Russian Federation, remained consistently above $300 billion since sanctions were applied.

(bold italics added)

In other words the best estimate the Special Rapporteur has found of the cost of the sanctions to the Russian economy, coming however from a European source,  is that it is no higher than $15 billion a year, or $55 billion in total, which is less than 1% of Russia’s dollar denominated nominal GDP.

It turns out that the sanctions are actually costing the EU more than they are costing Russia: $100 billion since they were introduced, as opposed to the $55 billion they are estimated to have cost Russia.

Whilst this constitutes a smaller fraction of the EU’s GDP as compared to that lost by Russia – the EU’s GDP being much larger than Russia’s – the burden is falling unequally on the EU’s weaker member states, some of whom lack Russia’s depth of financial resources, whilst it is hitting certain sectors of the EU’s economy – such as the EU’s agricultural sector – disproportionately, with EU farmers complaining that they have been caught in the crossfire of a political quarrel in which they have no part.

The assessment that the sanctions have shaved off about 1% of Russia’s GDP is probably correct, but it needs to be heavily qualified.

The sanctions did cause the Russian economy real problems in the late autumn of 2014, when Russian companies found themselves facing heavy loan repayments on their foreign debt at a time of a cash shortage and a declining rouble caused by the oil price fall. With Western creditors refusing to roll over loans there was therefore a rush to convert roubles into euros and dollars to repay the loans, increasing the downward pressure on the rouble still further, and causing it in late December 2014 to crash.

The Central Bank and the Finance Ministry however acted quickly to plug the gap – which because of the size of their reserves they could easily do – so that after a brief wobble the situation was quickly brought back under control.

Since then the main effect of the sanctions has been to force Russian companies and banks to continue paying off their foreign debt more quickly than they would otherwise have done, with however nothing remotely like the temporary payment crisis of late December 2014 ever happening again.

Whilst this process of paying off debt has no doubt kept the rouble lower than it might otherwise have been, and has undoubtedly reduced investment in the Russian economy whilst it has been taking place, its ultimate effect once the loan repayment process is completed will be to leave Russian companies unburdened by debt, and therefore in a much stronger financial position going forward than the one in which they would otherwise have been if the sanctions had never been imposed.

With the Central Bank claiming that Russian banks will have paid off their foreign debt by the end of this year, this deleveraging process now looks to be drawing to a close, which is no doubt one reason why despite the continued high interest rates there has been a significant investment recovery in Russia this year.

In other words the effect of the sanctions on the Russian economy was to deepen what was by Russia’s historic standards still a relatively shallow recession caused by the oil price fall.  However they have also made the Russian economy come out of the recession in a better condition than the one it would have been in if they had not been imposed.

The result is that though Russia’s economy may be 1% smaller today than it would have been if the sanctions had not been imposed, the sanctions have created the conditions which will cause Russia’s economy in future to grow faster, and become bigger and stronger, than would have been the case if the sanctions had not been imposed.

Of course all this would not have happened if economic policy had not been competent and successful.  Here is what the Special Rapporteur has to say about that

55. The reasons why the impact of economic sanctions on the enjoyment of human rights was not more severe in the country seem related to the following facts:

(a) The Government applied very effectively a counter-cyclical policy by letting the rouble float and by increasing the share of the State sector to substitute for the sanction imposed ban on foreign funding for the corporate sector beyond 30 days, by reducing considerably the rate of inflation through conservative management of the economy and by ex-post compensation of inflation losses incurred by pensioners;

(b) The economy demonstrated great resilience and a capacity to adapt to new circumstances through Government-assisted restructuring to promote local funding of projects formerly funded by external sources;

(c) The diversification of the economy away from oil was given new impetus;

(d) Emphasis on research was increased, returning to an earlier stage when, in many sectors, including space technology, the Russian Federation was at the forefront (it should be noted that, according to Russian officials, cooperation with the United States in advanced space technology was maintained, including for the supply of engines for spacecraft, despite the ban on the export of advanced drilling technology by the United States); this enabled the Russian Federation to enhance its oil production in the Arctic by developing its own capacities for horizontal drilling and its production of shale oil, for which it had previously relied on foreign partners;

(e) Effective import substitution technologies were put in place, in particular in agriculture, to dispense with imports from the European Union that were the subject of retaliatory measures;

(f) A policy was quickly introduced to pivot towards other partners in Asia and other regions.

To this list of measures I would add the further measures the Russian authorities have taken since the sanctions to strengthen Russia’s financial system, which is the Achilles heel of Russia’s economy.  These measures require a separate discussion, but briefly the high interest rates to reduce inflation and encourage saving, and the Central Bank’s clearing up of the banking system through its policy of closing down Russia’s weakest banks, are just two.

These measures to strengthen the financial system are essential if the financial system is to fund Russia’s economic growth in the future, as in the absence of large scale investment from the West it will have to do.  They are the government’s and the Central Bank’s main priority at the moment.

The key point to grasp is that these steps – which are putting Russia in a better position to grow its economy in future – have in part at least been induced by the sanctions, and would either have been delayed or would not have happened at all without them.

One of the great paradoxes of the sanctions is that instead of weakening Russia they have provided the Russian government with the political cover to do things it needed to do, such as float the rouble and limit food imports, and which it probably had long wanted to do, but which it was previously too frightened to do because they would have been unpopular with certain influential sections of the population.

In his report the Special Rapporteur briefly touches on this

56. As in many other countries targeted by sanctions, there was a “rally around the flag” reaction, which led the population to accept the inconveniences caused by the unilateral coercive measures.

All of this calls into question the underlying assumption upon which the sanctions were based.

Briefly Western policy makers grossly underestimated the size, sophistication and flexibility of the Russian economy when they imposed the sanctions, and assumed that the sanctions would cause the Russian economy to go into a tailspin, forcing President Putin to back down over Crimea and Ukraine or risk popular protests or even an oligarch led coup.  Instead, as the Special Rapporteur’s report shows, the Russian economy has successfully adjusted to the sanctions, whilst President Putin’s popularity remains at stratospheric levels.

Western policy makers made this mistake because their views of the Russian economy and of Russian society were formed during Russia’s ‘disaster years’ of 1989 to 1998, with their negative perceptions since then reinforced by the relentlessly negative and often grossly inaccurate way news about Russia is reported by the Western media and the West’s intelligence agencies.

The Special Rapporteur briefly touches on this

58. The Russian case study offers an opportunity to review the effectiveness of unilateral coercive measures applied by large advanced economies against one another. The example of the Russian Federation demonstrates the expected versatility of a relatively well-off country with a variety of resources, a highly trained population and a multiplicity of trading partners……..

60. In a context of globalization, for a country like the Russian Federation, which is fully integrated into the world economy, measures for trade diversion — whether through protectionism or through unilateral coercive measures — can be self-defeating if they lead to a “beggar-thy-neighbour” policy. It is fortunate therefore that the retaliatory measures themselves were limited in scope.

61. Furthermore, in such a globalized context, one must not lose sight of the possible backlash of unilateral measures, even without retaliation. Thus, for instance, one of the largest banks in the Russian Federation, Sberbank, has a part of its capital in equities of which one third is owned by foreign investors from sanctioning countries. Thus, when the bank cannot obtain foreign financing above 30 days for its clients, its profits are affected, which, in turn, reduces the price of its shares and causes losses for their owners also in source countries. Furthermore, every year the State floats internationally 10-year eurodollar bonds that are reserved for foreign purchasers and are heavily subscribed. In addition, every week it auctions other shorter-term bonds in roubles that are also subscribed by foreign buyers. Rationing of foreign loans to the Russian economy is therefore of limited effectiveness……

66. The wave of globalization that has engulfed the Russian Federation has spread the value chain across its borders with Europe and to a lesser extent has stretched to the United States. It is therefore becoming realistically impossible to disentangle the links of that value chain in a way that would introduce a clean cut of those links situated in the Russian Federation without weakening the rest of the chain through what has misleadingly been referred to come to as “surgically accurate” measures.

(bold italics in the original)

In other words, totally isolating an economy as large and sophisticated as Russia’s is realistically impossible, and would be completely self-defeating if it were ever attempted.  Even the limited ‘targeted’ sanctions which were imposed on Russia have had negative effects on the countries which imposed them, and have been largely unsuccessful because of Russia’s “variety of resources, highly trained population and multiplicity of trading partners”.

I said that the UN Special Rapporteur’s report would make uncomfortable reading for the sanctions’ supporters, and so it has proved.  The best indicator of this is that there have already been claims that Russia funded his report, claims which the Special Rapporteur has categorically denied .

What is true to say is that the Special Rapporteur – Idriss Jazairy – though obviously highly qualified – his UN profile reads as follows: “Mr. Jazairy has extensive experience in the fields of international relations and human rights with the Algerian Foreign Ministry, the UN human rights system and international NGOs. He was formerly the head of a UN specialized agency, IFAD. He holds a M.A. (Oxford) in Philosophy, Politics and Economics, and an M.P.A. (Harvard). He also graduated from the Ecole nationale d’Administration (France)” – is Algerian, and is therefore a citizen of a non-aligned country.  That makes him less vulnerable to US disfavour than other officials of UN agencies who are citizens of countries aligned to the US.

This puts the Special Rapporteur in a similar position to that of the unnamed Indian army officer who headed the UN investigation into the attack on the humanitarian convoy in Syria near Aleppo on 19th September 2016, which effectively cleared the Russians of claims they had been involved in that incident.

The Special Rapporteur’s report should not of course be the final word on this question.  As he himself says in his report, it is remarkable that the Western powers have failed to carry out a review of the effectiveness of the sanctions since they were imposed, even though the need for such a review is obvious

67. The unilateral coercive measures are intended to serve as a deterrent to the Russian Federation in the context of the prevailing political standoff in the region. They do however carry unintended effects on producers that have nothing to do with the situation, both in Europe and among the most vulnerable groups in the Russian Federation. The Special Rapporteur considers that, after three years of implementation of unilateral coercive measures targeting the Russian Federation, a review of their effectiveness in achieving their proclaimed goal is overdue.

68. The Special Rapporteur recommends that the review be engaged upon without delay in the search for effectiveness in the pursuit of desired outcomes and in a way that spares innocent civilians in source and target countries from unintended adverse human rights impacts.

Needless to say the reason no such review has taken place, or will take place, is because if it ever did take place it would simply confirm what the Special Rapporteur is saying in his report, which is that the sanctions are failing.  That of course is a truth the supporters of the sanctions do not want to face.

I will finish this discussion of the Special Rapporteur’s report with two further observations:

(1) Though the sanctions have not hurt the Russian economy in the way their authors intended, they have as the Special Rapporteur has pointed out caused real hardship to the individuals they have targeted.  Moreover it appears that this hardship is being aggravated by the unaccountable and arbitrary way in which they are being administered.  The Special Rapporteur’s report provides an example

……..a Russian businessman whose spouse was hospitalized in a western European clinic, found out upon attempting payment of her medical bill that his western bank account had been blocked and could not be drawn upon even for such humanitarian items of expenditure. This is all the more surprising since competent European Union authorities are committed to taking into account the “fundamental rights of designated persons and entities when granting exemptions” as provided by the European Union Guidelines on implementation and evaluation of restrictive measures (sanctions) in the framework of the European Union Common Foreign and Security Policy.

Unfortunately there is practically no possibility that the Special Rapporteur’s report will cause the EU to review its procedures so as to change the harsh and arbitrary way in which the sanctions are being administered.

(2) Though the authors of the sanctions of course refuse to admit their failure, I have no doubt that in private there is much anger and frustration that they have not produced the results expected of them.

Though obviously I do not know this for a fact, I strongly suspect that part at least of the reason for the latest sanctions law recently passed by the US Congress is anger caused by the failure of the existing sanctions.  As has now become standard (North Korea being another case in point) the response of those who called for the sanctions is not to admit their error and the failure of the sanctions but to demand more and more sanctions in the hope that that way they can be made to work.

The reality is that European opinion has now become too disillusioned with the existing sanctions to countenance significant further sanctions over and above the existing sanctions, especially given that the new sanctions which are being proposed would be directly contrary to the EU’s fundamental economic interests.  In Germany at least the talk is now increasingly of the need for a roadmap so that the existing sanctions can reduced and eventually lifted.  The recent German elections will only strengthen that talk.

Such talk will of course make the supporters of the sanctions even more angry, and even less willing to face the truth that the sanctions are failing, which is set out in the Special Rapporteur’s report.

That truth however cannot be denied forever.  The only question is how long it will take before it is accepted.  Past experience suggests that will take long.

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Republicans call Justice Department’s Bruce Ohr to testify, but where is British Spy Steele? (Video)

The Duran – News in Review – Episode 78.

Alex Christoforou

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Representative Mark Meadows tweeted Friday…

“DOJ official Bruce Ohr will come before Congress on August 28 to answer why he had 60+ contacts with dossier author Chris Steele, as far back as January 2016. He owes the American public the full truth.”

Lawmakers believe former Associate Deputy Attorney General Bruce Ohr is a central figure to finding out how the Hillary Clinton campaign and the Democratic National Committee paid PR smear firm Fusion GPS and British spy Christopher Steele to fuel a conspiracy of Trump campaign collusion with Russians at the top levels of the Justice Department and the FBI.

House Intelligence Committee Chairman Devin Nunes (R-CA) said Sunday to Fox News’ Maria Bartiromo…

So here you have information flowing from the Clinton campaign from the Russians, likely — I believe was handed directly from Russian propaganda arms to the Clinton campaign, fed into the top levels of the FBI and Department of Justice to open up a counter-intelligence investigation into a political campaign that has now polluted nearly every top official at the DOJ and FBI over the course of the last couple years. It is absolutely amazing,

According to Breitbart, during the 2016 election, Ohr served as associate deputy attorney general, and as an assistant to former Deputy Attorney General Sally Yates and to then-Deputy Attorney General Rod Rosenstein. His office was four doors down from Rosenstein on the fourth floor. He was also dual-hatted as the director of the DOJ’s Organized Crime Drug Enforcement Task Force.

Ohr’s contacts with Steele, an ex-British spy, are said to date back more than a decade. Steele is a former FBI informant who had helped the FBI prosecute corruption by FIFA officials. But it is Ohr and Steele’s communications in 2016 that lawmakers are most interested in.

Emails handed over to Congress by the Justice Department show that Ohr, Steele, and Simpson communicated throughout 2016, as Steele and Simpson were being paid by the Clinton campaign and the DNC to dig up dirt on Trump.

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris examine the role Bruce Ohr played in Hillary Clinton’s Deep State attack against the Presidency of Donald Trump, and why the most central of figures in the Trump-Russia collusion hoax, British spy for hire Christopher Steele, is not sitting before Congress, testifying to the real election collusion between the UK, the Obama White House, the FBI and the DOJ.

Remember to Please Subscribe to The Duran’s YouTube Channel.

Via The Washington Times

Republicans in a joint session of House committees are set to interview former Associate Deputy Attorney General Bruce Ohr this month to gauge whether a complex conspiracy against Donald Trump existed among Hillary Clinton loyalists and the Justice Department.

“DOJ official Bruce Ohr will come before Congress on August 28 to answer why he had 60+contacts with dossier author Chris Steele as far back as January 2016. He owes the American public the full truth,” tweeted Rep. Mark Meadows, North Carolina Republican and member of the House Oversight and Government Reform Committee.

His panel and the House Judiciary Committee plan to hold a joint hearing to interview Mr. Ohr, according to The Daily Caller.

FBI documents show that the bureau bluntly told dossier writer Christopher Steele in November 2016 that it no longer wanted to hear about his collection of accusations against Mr. Trump.

But for months afterward, the FBI appeared to violate its own edict as agents continued to receive the former British spy’s scandalous charges centered on supposed TrumpRussia collusion.

 

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The US-Turkey Crisis: The NATO Alliance Forged in 1949 Is Today Largely Irrelevant

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Authored by Philip Giraldi via American Herald Tribune:


There has been some reporting in the United States mass media about the deteriorating relationship between Washington and Ankara and what it might mean. Such a falling out between NATO members has not been seen since France left the alliance in 1966 and observers note that the hostility emanating from both sides suggests that far worse is to come as neither party appears prepared to moderate its current position while diplomatic exchanges have been half-hearted and designed to lead nowhere.

The immediate cause of the breakdown is ostensibly President Donald Trump’s demand that an American Protestant minister who has lived in Turkey for twenty-three years be released from detention. Andrew Brunson was arrested 21 months ago and charged with being a supporter of the alleged conspiracy behind the military coup in 2016 that sought to kill or replace President Recep Tayyip Erdogan.

Erdogan has asserted that the coup was directed by former political associate Fetullah Gulen, who lives in exile in Pennsylvania, but has produced little credible evidence to support that claim. In the aftermath of the coup attempt, Erdogan has had himself voted extraordinary special powers to maintain public order and has arrested 160,000 people, including 20 Americans, who have been imprisoned. More than 170,000 civil servants, teachers, and military personnel have lost their jobs, the judiciary has been hobbled, and senior army officers have been replaced by loyalists.

Gulen is a religious leader who claims to promote a moderate brand of Islam that is compatible with western values. His power base consists of a large number of private schools that educate according to his curriculum, with particular emphasis on math and sciences. Many of the graduates become part of a loose affiliation that has sometimes been described as a cult. Gulen also owns and operates a number of media outlets, all of which have now been shut by Erdogan as part of his clamp down on the press. Turkey currently imprisons more journalists than any other country.

It is widely believed that Erdogan has been offering to release Brunson in exchange for Gulen, but President Donald Trump has instead offered only a Turkish banker currently in a U.S. prison while also turning the heat up in the belief that pressure on Turkey will force it to yield. Washington began the tit-for-tat by imposing sanctions on two cabinet-level officials in Erdogan’s government: Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul. Ankara has now also been on the receiving end of a Trump tweet and tariffs have been placed on a broad range of Turkish products, to include steel and aluminum.

The view that economic pressure will force the Turks to yield could be mistaken and demonstrates that the Administration does not include anyone who knows that Americans have been unpopular in Turkey since the Gulf War. The threats from Washington might actually rally skeptical and normally pro-western Turks around Erdogan but U.S. sanctions have already hit the Turkish economy hard, with the lira having lost 40% of its value this year and continuing to sink rapidly. Foreign investors, who fueled much of Turkey’s recent economic growth, have fled the market, suggesting that a collapse in credit might be on the way. Those European banks that hold Turkish debt are fearing a possible default.

It is a spectacle of one NATO member driving another NATO member’s economy into the ground over a political dispute. Erdogan has responded in his autocratic fashion by condemning “interest rates” and calling for an “economic war” against the U.S., telling his supporters to unload all their liquid valuables, gold and foreign to buy the plummeting lira, a certain recipe for disaster. If they do that, they will likely lose everything.

Other contentious issues involved in the badly damaged bilateral relationship are conflicting views on what to do about Syria, where the Turks have a legitimate interest due to potential Kurdish terrorism and are seeking a buffer zone, as well as Ankara’s interest in buying Russian air defense missile systems, which has prompted the U.S. to suspend sales of the new F-35 fighter. The Turks have also indicated that they have no interest in enforcing the sanctions on Iran that were re-imposed last week and they will continue to buy Iranian oil after the November 4th initiation of a U.S. ban on such purchases. The Trump Administration has warned that it will sanction any country that refuses to comply, setting the stage for a massive confrontation between Washington and Ankara involving the Turkish Central Bank.

In terms of U.S. interests, Turkey, which has the second largest army in NATO, is of strategic value because it is Muslim, countering arguments that the alliance is some kind of Christian club working to suppress Islam in the Middle East. And it is also important because of its geographic location close to hot spots where the American military is currently engaged. If the U.S. heeds Trump’s call to cut back on involvement in the region, Turkey will become less valuable, but currently, access to the Incirlik Airbase, near Adana and the Syrian border, is vital.

Indeed, Incirlik has become one of the flashpoints in the argument with Washington. Last week, a group of lawyers connected politically to Erdogan initiated legal action against U.S. officers at Incirlik over claimed ties to “terrorists” linked to Gulen. The “Association for Social Justice and Aid” has called for a temporary halt to all operations at the base to permit a search for evidence. The attorneys are asking for the detention of seven named American Colonels and Lieutenant Colonels. General Joseph Votel, head of U.S. Central Command based in Germany is also cited. If the lawyers are successful in court, it will mean a major conflict as Washington asserts the rights of the officers under the Status of Forces Agreement, while Turkey will no doubt insist that the Americans are criminals and have no protection.

Another trial balloon being floated by Erdogan is even more frightening in terms of the demons that it could be unleashing. Abdurrahman Dilipak, an Islamist columnist writing in the pro-government newspaper Yeni Atik, has suggested that there might well be a second terrorist attack on the United States like 9/11. Dilipak threatened that if Trump does nothing to reduce tension “…some people will teach him [to do] that. It must be seen that if internal tensions with the United States continue like this that a September 11 is no unlikely possibility.” Dilipak also warned that presumed Gulenist “U.S. collaborators” inside Turkey would be severely punished if they dared to go out into the streets to protest in support of Washington.

If recent developments in Turkey deteriorate further it might well suggest that Donald Trump’s instinct to disengage from the Middle East was the right call, though it could equally be seen as a rejection of the tactic being employed, i.e. using heavy-handed sanctions and tariffs to compel obedience from governments disinclined to follow Washington’s leadership. Either way, the Turkish-American relationship is in trouble and increasingly a liability for both sides, yet another indication that the NATO alliance forged in 1949 against the Soviet Union is today largely irrelevant.

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Is This The Most Important Geopolitical Deal Of 2018?

After more than 20 years of fraught diplomatic efforts, the five littoral Caspian nations agreed upon a legal framework for sharing the world’s largest inland body of water.

The Duran

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Authored by Olgu Okumus via Oilprice.com:


The two-decade-long dispute on the statute of the Caspian Sea, the world largest water reserve, came to an end last Sunday when five littoral states (Russia, Iran, Turkmenistan, Kazakhstan and Azerbaijan) agreed to give it a special legal status – it is now neither a sea, nor a lake. Before the final agreement became public, the BBC wrote that all littoral states will have the freedom of access beyond their territorial waters, but natural resources will be divided up. Russia, for its part, has guaranteed a military presence in the entire basin and won’t accept any NATO forces in the Caspian.

Russian energy companies can explore the Caspian’s 50 billion barrels of oil and its 8.4 trillion cubic meters of natural gas reserves, Turkmenistan can finally start considering linking its gas to the Turkish-Azeri joint project TANAP through a trans-Caspian pipeline, while Iran has gained increased energy supplies for its largest cities in the north of the country (Tehran, Tabriz, and Mashhad) – however, Iran has also put itself under the shadow of Russian ships. This controversy makes one wonder to what degree U.S. sanctions made Iran vulnerable enough to accept what it has always avoided – and how much these U.S. sanctions actually served NATO’s interests.

If the seabed, rich in oil and gas, is divided this means more wealth and energy for the region. From 1970 until the dissolution of the Soviet Union (USSR) in 1991, the Caspian Sea was divided into subsectors for Azerbaijan, Russia, Kazakhstan and Turkmenistan – all constituent republics of the USSR. The division was implemented on the basis of the internationally-accepted median line.

After the dissolution of the Soviet Union, the new order required new regulations. The question was over whether the Caspian was a sea or a lake? If it was treated as a sea, then it would have to be covered by international maritime law, namely the United Nations Law of the Sea. But if it is defined as a lake, then it could be divided equally between all five countries. The so-called “lake or sea” dispute revolved over the sovereignty of states, but also touched on some key global issues – exploiting oil and gas reserves in the Caspian Basin, freedom of access, the right to build beyond territorial waters, access to fishing and (last but not least) managing maritime pollution.

The IEA concluded in World Energy Outlook (WEO) 2017 that offshore energy has a promising future. More than a quarter of today’s oil and gas supply is produced offshore, and integrated offshore thinking will extend this beyond traditional sources onwards to renewables and more. Caspian offshore hydrocarbon reserves are around 50 billion barrels of oil equivalent (equivalent to one third of Iraq’s total oil reserves) and 8.4 trillion cubic meters of gas (almost equivalent to the U.S.’ entire proven gas reserves). As if these quantities were not themselves enough to rebalance Eurasian energy demand equations, the agreement will also allow Turkmenistan to build the Trans-Caspian pipeline, connecting Turkmenistan’s resources to the Azeri-Turkish joint project TANAP, and onwards to Europe – this could easily become a counter-balance factor to the growing LNG business in Europe.

Even though we still don’t have firm and total details on the agreement, Iran seems to have gained much less than its neighbors, as it has shortest border on the Caspian. From an energy perspective, Iran would be a natural market for the Caspian basin’s oil and gas, as Iran’s major cities (Tehran, Tabriz, and Mashhad) are closer to the Caspian than they are to Iran’s major oil and gas fields. Purchasing energy from the Caspian would also allow Iran to export more of its own oil and gas, making the country a transit route from the Caspian basin to world markets. For instance, for Turkmenistan (who would like to sell gas to Pakistan) Iran provides a convenient geography. Iran could earn fees for swap arrangements or for providing a transit route and justify its trade with Turkey and Turkmenistan as the swap deal is allowed under the Iran-Libya Sanctions Act (ILSA, or the D’Amato Act).

If the surface water will be in common usage, all littoral states will have access beyond their territorial waters. In practical terms, this represents an increasingly engaged Russian presence in the Basin. It also reduces any room for a NATO presence, as it seems to be understood that only the five littoral states will have a right to military presence in the Caspian. Considering the fact that Russia has already used its warships in the Caspian to launch missile attacks on targets within Syria, this increased Russian presence could potentially turn into a security threat for Iran.

Many questions can now be asked on what Tehran might have received in the swap but one piece of evidence for what might have pushed Iran into agreement in its vulnerable position in the face of increased U.S. sanctions. Given that the result of those sanctions seems to be Iran agreeing to a Caspian deal that allows Russia to place warships on its borders, remove NATO from the Caspian basin equation, and increase non-Western based energy supplies (themselves either directly or indirectly within Russia’s sphere of geopolitical influence) it makes one wonder whose interests those sanctions actually served?

By Olgu Okumus for Oilprice.com

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