Making Sense of the Events in The Middle East

MSM tends to report the events in Egypt, Yemen, Tunsia, Bahrain, Syria, and Libya as if they were all the same.  The same MSM, both western and Arab tend to paint the involvement of the EU, UK, and the US as purely self interests related to oil.  In both cases to do so does not create an understanding of the real complex and in all cases, country specific issues.  Nor does these same western countries relate the events in the region to events at home in their own countries.

Let’s address the “oil” issue first. The truth is that the entire global economy, including the side-liners like Russia, China, and India economies,  must have a SECURE supply of oil.  If anyone of these nations were really “after the oil”, Kuwait would be a US territory as well as Iraq.  That is not the case in either country and the US pays MARKET price to these countries for their oil, just like everyone else.  The same could be said of the european countries as related to Libya.  So from my perspective and vantage point, the oil imperialism argument, primarily kept in the mainstream by Iran, is just a red herring argument.

When we look at the divisions within the Arab countries, Iran is the nation, fomenting the issues.  What most Westerners fail to grasp is the fact that while Iran is primarily a Shia nation, they are NOT Arabs!  Iran is Persian.  One only has to look deeply at how Iran has constantly be meddling in the affairs of Iraq to understand why there is more concern in the Arab world over the activities of Iran than there are concerns about Western interference.

That is not to say that the Arab countries are all that secure with their relationships with the US and EU, but these concerns are more related to the consistency that may be demonstrated by the US and the EU and NATO related to assisting in the security and protection of Arab countries in relationship to Iran.  these concerns are well founded and have resulted from the fickle manner in which both the US and NATO have acted in the past.  These concerns were voiced again when US Secretary Gates visited Saudi Arabia last week.

The GCC countries are especially worried about the Iranians , their aggressiveness in the region, and their ability to disrupt the flow of oil to the world.  GCC foreign ministers on Sunday condemned Iran’s “blatant” interference in the State of Kuwait’s internal affairs, accusing Iran of “planting espionage networks on [Kuwait’s] territory” to undermine the country’s security and stability and the interests of its citizens. In a statement issued at the conclusion of their extraordinary one-day meeting, the foreign ministers commended Kuwait’s security bodies for uncovering the sleeper cell of spies believed to be working covertly on Iran’s behalf. The ministers also affirmed their support for all the measures taken by the State of Kuwait to protect its national security.

The statement further noted that the senior government officials had expressed concern at what they called “continuous Iranian interference in the domestic affairs of the GCC countries, by conspiring against those nations’ national security … and instigating sectarian sedition between their GCC countries’ citizens, independence, principles of good neighborliness, international laws, the Charter of the UN and OIC.” The foreign ministers also welcomed the return of calm and stability to the Kingdom of Bahrain, praising the spirit of the Bahraini people who it said had sought the country’s higher interests.

Bahrain has the capabilities and wisdom to dealing with its internal affairs, said the ministers, whilst stressing that they “strongly condemn the Iranian interference” in Bahrain’s affairs. The senior government officials also stressed the legitimacy of the deployment of Peninsula Shield forces in Bahrain, which they indicated was compliant with an earlier defense agreement binding the six GCC countries – Kuwait, Saudi Arabia, Bahrain, Oman, Qatar and UAE.

The GCC ministers further condemned the Iranian Shura Council’s national security and foreign affairs committee’s statement which claimed that Saudi Arabia’s policy was “playing with fire.” The Iranian statement, which also called on Saudi Arabia to pull out forces from Bahrain, “is a hostile position and is a provocative interference in the internal affairs of the GCC countries,” the ministers warned.

On Yemen, the foreign ministers voiced great concern over the deterioration of security and the growing divisions in the country, a matter that would undermine interests of citizens and economy as a whole. They called on all parties in Yemen to launch dialogue to ultimately reach reform and bring about social stability. The ministers said they respected the wishes and choices of the Yemeni people, adding that they would be establishing contact with the Yemeni government and opposition to address the conflict

Also on Sunday, the UAE’s Foreign Minister Sheikh Abdullah bin Zayed Al-Nuhayyan said that there is a “huge contradiction” between Iran’s words and its deeds towards the GCC countries. “The espionage networks that were arrested in the State of Kuwait are strange [things to] happen from a neighboring country that always claims to have good neighborly relations with us,” Sheikh Abdullah told a joint news conference with GCC Secretary General Abdullatif Al-Zayyani that followed the ministers’ meeting.

The Gulf Cooperation Council (GCC) countries are firmly behind the Bahraini King’s request to send Peninsula Shield forces to the Kingdom, he reiterated. Concerning events in Yemen, meanwhile, Sheikh Abdullah said the GCC countries would be contacting the government and opposition parties there in a bid to resolve their conflict. Al-Zayyani on his part said that there are currently numerous challenges facing the GCC countries, further reiterating the member states demand for “other countries not to interfere in the GCC countries’ affairs.

Meanwhile, Kuwait’s caretaker foreign minister Sheikh Dr. Mohammad Al-Sabah told a Kuwaiti daily Al-Qabas via phone following the meeting that the talks, as well as the concluding statement, “reflect the collective spirit of the GCC,” indicating that “GCC Foreign Ministers insisted on the common united fate of GCC countries,” whilst also noting that the Bahraini subject and current events in Kuwait were equally addressed during the meeting and stressing the cohesion of the GCC as a single unit. “The GCC proved to be capable of meeting its responsibilities, and showed that to the security of member states…meaning a threat to any GCC state is regarded as a threat to all countries of the region”.

Meanwhile, in the same article, Al-Qabas, also quoted GCC insiders as saying that the foreign ministers had agreed during the meeting that all the member states’ capabilities would be utilized to confront any potential threats against any member state. The sources further indicated that the senior government officials agreed on the principal measures that should be taken to face any Iranian threats, adding that an agreement was also reached to hold further top-level GCC meetings featuring senior security and defense personalities within the next couple of days to discuss the type of measures to be taken and the strategies to be utilized for their implementation.  The insiders further asserted that the GCC foreign ministers were unanimous in stressing the importance of eliminating “suspicious individuals” in member states, while ensuring that this process is not based on group identity. Other sources also revealed that an agreement was reached to “reinforce internal fronts” in the member states in order to confront any attempts to incite sectarianism.

Given these issues and the economic situations in each of the countries now experiencing internal conflicts it is crucial for the US, the EU, and NATO to develop a consistent and strong policy to support it’s vital Arab partners.  Players like Russia, China, and India are sitting on the sidelines looking for opportunities to exploit the failures of the US and EU policy in the region.  So far, their decision to remain on the sidelines, and even tacitily support Iran seems to have traction.  The politicians in the US and EU better get their act together before oil goes to $200 or $300 per barrel.  Commit to their Arab partners and support them unconditionally.

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Further Updates from the Currency War Front

Well, folks, it’s official – mark November 22, 2010 in your calendars.  With yesterday’s $8.3 billion POMO monetization, the Fed’s official holdings of US Treasury securities now amount to $891.3 billion, which is higher than the second largest holder of US debt: China, which as of September 30 held $884 billion, and Japan, with $864 billion.  The Fed is now buying about $30 billion per week, or about $120 billion per month, for the foreseeable future and beyond, it would mean that China would need to buy a comparable amount to be in the standing. It won’t. In other words, the Ponzi operation is now complete, and the Fed’s monetization of US debt has made it not only the largest holder of such debt, but made external funding checks and balances in the guise of indirect auction bidding, irrelevant. China is now not the one having the most to lose on a DV01 basis on that day when the inevitable surge in interest rates finally happens. That honor is now strictly reserved for America’s taxpayers.

In addition, Tuesday China and Russia sent a loud message to the FED.

Source: Asia One – Su Qiang and Li Xiaokun

St. Petersburg, Russia – China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.  Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

“About trade settlement, we have decided to use our own currencies,” Putin said at a joint news conference with Wen in St. Petersburg.

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities. The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.

“That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries,” he said.

Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.  The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communique. Details of the documents have yet to be released.

Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a “fair and reasonable new order” in international politics and the economy.

Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.

Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents.  Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government.

In related news on the situation in the EU comes the grim but expected news that the Spanish 3-month bill auction failed.  The debt agency sold only €3.26bn of the €4-5bn that was offered, at average yield of 1.743% vs 0.951% prior. What people must understand is that is nearly double the interest rate.  This debt service is the back breaker to the economy.  Tensions are surely going to start boiling over on the Emerald Isle.  If Greece was a big bomb to the EU and ECB stability, and Ireland was Greece’s big brother, then the Spanish economy is their bigger brother Bubba.  These three countries WILL require further bailouts and quite frankly more than the ECB can handle.  The death of the EU is like watching a shot buffalo go down in a Sam Peckinpah movie.

Finally, back in the US, in addition to the impacts of QE2, the mortgage situation as related to the big banks is far from going away.  To put things in clear perspective, the banks bundled, and sold to investors, junk paper consisting of bundled questionable mortgages.  In most cases, those same banks kept the seconds on those mortgages.  However, now the investors do have recourse.  These bundled packages required the banks to “buy back” any equity that was in default or foreclosure.  The bottom line to this is that the top five banks, between the bad second mortgages and the default clauses on the crap they dumped on investors, are on the hook for nearly $400 Billion, which is more than the equity value of those top five banks.

In view of the fact the currency wars have unquestionably erupted, these elements represent the perfect storm.  As a side, the “fear” index on Wall Street today was the highest recorded since 1987.  These events are moving along the worst case scenario lines.  Watch very carefully.

War in the Winds

When you look at events combining in the model space, the winds of war are starting to blow in earnest.  We have known for a number of months that a military option was going to be played against Iran.  It was only a matter of time and quietly negotiating consent from allies and other interested partners.  Interestingly in achieving that consensus, the players calling for action include quietly a number of GCC countries.  This is to me one of the strongest indicators that the military option is being moved forward is  when Israel and GCC nations are silent partners in calling for military options to be exercised.  However, it is not the only indicator. There are several others, including the inability of OPEC to stabilize oil prices above $75/BBL.

In addition, the financial crisis seems recalcitrant in nature and the EU is threatening to precipitate the second leg down in D2.  G7 nations are facing crushing deficits and shrinking revenues, coupled with persistent high unemployment and decreased consumer spending.  Remember the rhythms between D1 and D2.  War was the final answer for D1 and it looks stronger every day that it is the solution to D2. Below are two more reasons that I will go on record that the military activities will be initiated against Iran between July 11 to August 1st. By who? How? I can’t really say, but as I said the winds of war are starting to blow.  First two months ago, a ship load of bunker buster bombs were shipped to Diego Garcia, remember, now below:

By fleet diplomatic footwork, US Secretary of State Hillary Clinton assembled a sanctions package for submitting to the UN Security Council Tuesday, May 19, which Western diplomats admitted contained few new measures, but gained the reluctant assent of Russia and China, as well as the UK, France and Germany. She achieved this by heavily diluting the original draft. That too will be further revised and watered down in the weeks of haggling ahead before it is approved.
The Obama administration gave ground on severity in order to salvage the last vestige of its sanctions strategy from the disastrous impact of the deal Brazil and Turkey brokered with Iran the day before, whereby half of Iran’s low-enriched uranium would be deposited in Turkey to be swapped for 19.5 percent processed material within a year.

That deal was regarded in Washington as a maneuver to delay the fourth round of sanctions. The secretary of state responded with a package of measures without the teeth for deterring Iran from driving forward toward a nuclear weapon but, as she admitted, it was the best possible in the circumstances.  The measures fall short of a total arms embargo against Tehran, although some additional arms are banned, or blacklisting Iran’s central bank. Iranian ships will be watched for contraband but only boarded in the territorial waters of UN member-states, not on the high seas.States are asked to take appropriate, though not mandatory, measures, exercise vigilance against Iranian bank transactions and “be wary” of dealing with the Revolutionary Guards Corps and the companies it controls.

debkafile http://www.debka.com reported on Tuesday, May 18 in the wake of the Brazilian-brokered deal in Tehran:

The US-led Six-Power bloc, known also as the Vienna Group, was given the sole option of endorsing the deal even though Tehran bluntly declared its intention to continue to enrich uranium up to 20 percent inside the country, in defiance of all previous UN Security Council resolutions. Turkish foreign minister Ahmed Davutoglu said supportively that he saw no need for further sanctions against Iran. As an administration official admitted to debkafile early Tuesday, “the international climate manufactured in Tehran had tossed harsh sanctions against Iran on the rubbish heap because there are no takers.”
The Israeli Prime Minister Benyamin Netanyahu convened his inner cabinet in Jerusalem Tuesday, May 18, to decide how to handle the crisis created by the Brazilian-Turkish-Iranian uranium enrichment accord.

But the fact is that sanctions with real bite had never been more than a will-o’-the wisp in the first place.
For months, President Obama chased the unreachable goal of unanimous UN Security Council approval of sanctions as empowerment for tough, unilateral US and European penalties against Iran. Russia and China had circled around the draft but never climbed aboard. So when Vice President Joe Biden declared in the last week of April that a fourth round of tough sanctions would be in place by the end of the month – or in early May, at latest, he knew they were off the table and hoped only to calm Israel and Iran’s Arab Gulf neighbors and fend off their clamor for tangible action to stop Iran’s nuclear progress.

And US Secretary of State Hillary Clinton was whistling in the dark when she warned the foreign ministers of Brazil and Turkey Thursday night May 13 that they were wasting their time if they hoped their mediation bid would have any practical impact on Tehran’s nuclear aspirations. Both knew that Washington was being relentlessly driven back by Beijing and Moscow on a sanctions draft: US negotiators had more or less agreed on the quiet to draw its teeth by giving up on a total embargo on the sale of sophisticated weapons systems to Iran and energy export restrictions.
The same US official admitted that restrictions on arms sales had been watered down to “very moderate” and provided no real bar to the sale of warplanes and missiles to Iran. The final blow was delivered in Tehran Monday by two non-permanent Security Council members, Brazil and Turkey, dropping out.  In Jerusalem, Prime Minister Benyamin Netanyahu convened his inner cabinet of 7 ministers on the crisis. Both he and defense minister Ehud Barak have come in for extreme criticism in military circles for allowing Israel’s hand to be held by the false prospect of painful sanctions stopping Iran’s development of a nuclear bomb in its tracks.

Barak in particular was accused of misleading the public by his constant assurances that it was up to the United States to deal with a nuclear-armed Iran and the issue was well in hand. Both knew the truth, namely that the Obama administration’s efforts to gather a coalition of world powers for the imposition of effective sanctions had never realistically got off the ground.

debkafile’s military sources report a decision by the Obama administration to boost US military strength in the Mediterranean and Persian [Arabian]Gulf regions in the short-term with an extra air and naval strike forces and 6,000 Marine and sea combatants. Carrier Strike Group 10, headed by the USS Harry S. Truman aircraft carrier, sails out of the US Navy base at Norfolk, Virginia Friday, May 21. On arrival, it will raise the number of US carriers off Iranian shores to two. Up until now, President Barack Obama kept just one aircraft carrier stationed off the coast of Iran, the USS Dwight D. Eisenhower in the Arabian Sea, in pursuit of his policy of diplomatic engagement with Tehran.
For the first time, too, the US force opposite Iran will be joined by a German warship, the frigate FGS Hessen, operating under American command. It is also the first time that Obama, since taking office 14 months ago, is sending military reinforcements to the Persian Gulf. Our military sources have learned that the USS Truman is just the first element of the new buildup of US resources around Iran. It will take place over the next three months, reaching peak level in late July and early August. By then, the Pentagon plans to have at least 4 or 5 US aircraft carriers visible from Iranian shores.
The USS Truman’s accompanying Strike Group includes Carrier Air Wing Three (Battle Axe) – which has 7 squadrons – 4 of F/A-18 Super Hornet and F/A-18 Hornet bomber jets, as well as spy planes and early warning E-2 Hawkeyes that can operate in all weather conditions; the Electronic Attack Squadron 130 for disrupting enemy radar systems; and Squadron 7 of helicopters for anti-submarine combat (In its big naval exercise last week, Iran exhibited the Velayat 89 long-range missile for striking US aircraft carriers and Israel warships from Iranian submarines.)
Another four US warships will be making their way to the region to join the USS Truman and its Strike Group. They are the guided-missile cruiser USS Normandy and guided missile destroyers USS Winston S. Churchill, USS Oscar Austin and USS Ross.

debkafile’s military sources disclose that the 6,000 Marines and sailors aboard the Truman Strike Group come from four months of extensive and thorough training to prepare them for anticipated missions in the Persian Gulf and the Mediterranean.

So keep your attention focused to the Gulf.  Will the storm dissipate or will the winds of war blow harder?  I am opined to support the later as most likely.