Peter L. Berger's Blog, page 167
June 28, 2017
Temer Pledges to Battle Corruption Charges
Brazilian President Michel Temer on Tuesday vowed to stay in power and fight the bribery charges filed against him, inflaming a bitter political divide in a country battered by successive corruption scandals.
Mr. Temer, who was charged by the country’s attorney general on Monday with accepting about $150,000 in bribes and agreeing to take about $11.5 million more, maintained his innocence and rejected the accusations as “fictitious.” He also disparaged the evidence—contained in a plea bargain by Joesley Batista, the former chairman of meatpacking giant JBS SA —saying it came from a “confessed bandit.”
“They want to stop the country, stop the government, in a political act, with fragile and precarious charges,” Mr. Temer said in a televised address, apparently referring to Attorney General Rodrigo Janot and his team of prosecutors.
Temer has now earned the dubious distinction of being the first Brazilian president to be formally charged with a criminal offense while still in office. But his current predicament is more notable for continuity than change. The latest scandal marks three Brazilian presidents in a row—Lula, Dilma and now Temer—who have been under a cloud for corruption, as is virtually the entire political class. And as prosecutors expand the “Car Wash” probe, they are sure to ensnare even more politicians and further expose the profound rot of the political elite.
Temer might still survive the short-term leadership challenge, if his conservative support base in Congress follows through and votes against him standing trial. Whatever Temer’s fate, though, the bigger picture for Brazil is a troubling one: its political class appears irreparably tainted by corruption and unaccountable to the rising middle class it supposedly represents—and the scandal may not be finished quite yet.
A friendly reminder for Brazil, then, as a corruption scandal plunges it into political morass once again: republics without virtue do not last.
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Pipelines Still Playing Catch-up to Shale Boom
The shale revolution took everyone by surprise, both here in the United States and elsewhere in the world. No one expected hydraulic fracturing and horizontal well drilling to make the impact on American oil production that they have over the past ten years, but as welcome as this new flood of hydrocarbons has been, it’s also caused some problems. Chief among them: our pipeline infrastructure—the most extensive in the world—still isn’t robust enough to deal with these new supplies. Reuters reports:
Pipeline construction often lags production booms by years – if proposed lines are built at all – because of opposition from environmentalists and landowners, topographic obstacles, and permitting and construction challenges. That forces drillers to limit output or ship oil domestically, usually by rail – which is more costly and arguably less safe.
The crimped production, in turn, costs the economy jobs, keeps prices higher for consumers and stymies the nation’s long-held geopolitical goal of reducing dependence on foreign oil.
Shale was a surprise, but that’s not the only reason why our pipelines are still playing catch up. Consider that in many cases shale formations have not overlapped conventional oil fields already in operation. That’s especially true in the Dakotas, where the Bakken shale has reawakened an industry that had been lying dormant there for decades. Then too there’s the relatively quick nature of shale drilling: unlike conventional oil projects, shale operations are smaller scale and can begin and end on a much shorter time scale. That agility has helped producers adapt to the new low price environment, but it’s also made the process of giving those producers pipeline access a lot more difficult.
President Obama was quite fracking friendly, so there’s not all that much that President Trump can do to top his predecessor in terms of further encouraging the shale boom. But our pipeline network is still under-built, and fixing that problem wouldn’t just strengthen U.S. energy security, it could also dovetail nicely with some of Trump’s infrastructure goals.
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EU Levies €2.4B fine on Google
Europe has hit Google with an unprecedented fine. CNN reports:
European Union regulators slapped Google with a record €2.4 billion ($2.7 billion) antitrust fine on Tuesday, the latest broadside fired at big American tech companies doing business in the region.
The European Commission found that the U.S. tech giant denied “consumers a genuine choice” by using its search engine to unfairly steer them to its own shopping platform.[..]
“What Google has done is illegal under EU antitrust rules,” said Margrethe Vestager, the bloc’s top antitrust official. “It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”
[…] The Commission said that Google acted illegally by giving priority placement in search results to its own shopping service, while relegating results from rivals to areas where potential buyers were much less likely to click.
We have been following this case at TAI, as well as a slew of other EU “regulatory” assaults on U.S. tech companies, for some time. And as we’ve pointed out, these stem from the protectionist tendencies of the EU—which has no Googles of its own, and whose well-connected megacorporations are adept at leveraging government assistance on its behalf—as much as any transgressions the Silicon Valley giant may or may not have committed.
The most important thing about this story isn’t the size of the fine or the attempt to make the fight transatlantic. The most important thing is that it reveals an essential truth about the power dynamics of the 21st century: instead of developing its own tech giants, the EU is fighting to regulate the behavior of tech giants that sprang up in other parts of the world.
That this failure to launch took place at a time when Europe had a huge surplus population of unemployed but highly educated young people, and when interest rates were at historical lows highlights the deep cultural and policy problems that put the EU, despite the wealth and talent and skills concentrated in the union, at a structural disadvantage in the 21st century.
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June 27, 2017
Trump Re-Draws Red Line in Syria
In response to intelligence that the Assad regime was preparing another chemical weapons strike in Syria, the Trump Administration last night stated that any further use of chemical weapons would result in American retaliation. As the Financial Times reports:
Two months after Donald Trump launched 59 cruise missiles at Syria in response to a gas attack that killed dozens of civilians, the White House on Monday night said the US had detected signs that the regime of Bashar al-Assad was planning another attack.
The Pentagon said the US had “observed activities at Shayrat air base that suggest possible intent by the Syrian regime to use chemical weapons again”. The US thinks the April attack originated from Shayrat — which was the target of its cruise missiles soon after.
The White House said that if Mr Assad conducted another chemical weapons attack, “he and his military will pay a heavy price”. Nikki Haley, US ambassador to the UN, said Russia and Iran would also be held responsible for any such action.
This latest episode gives us a chance to think through the logic underlying President Obama’s own decision not to act in the face of Assad’s earlier barbarities. President Obama and his advisors argued that enforcing the red line would somehow end up boxing the U.S. into a corner that would inevitably lead to the United States committing tens thousands of ground troops to the conflict. Many weeks after President Trump’s decision to launch a Tomahawk strike against Assad’s forces, the logic of President Trump’s decision still seems overwhelmingly transparent: use chemical weapons, and we’ll hit you with cruise missiles—nothing more, nothing less.
Of course, just because a red line on chemical weapons use doesn’t constitute a slippery slope for ever-increasing involvement doesn’t mean that the United States won’t get bogged down elsewhere in Syria. As we’ve noted recently, the fight in the country’s east presents ample opportunities for the Trump Administration to get sucked into a mess if it’s not careful. But on the narrow chemical weapons issue, President Trump’s willingness to enforce a real red line shows that sufficient force applied in a limited fashion to maintain a specific norm might just work pretty well.
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A Surveillance State With Chinese Characteristics
The Wall Street Journal has an excellent article out today about how China is boldly utilizing AI to track and change its citizens’ behavior:
China is rushing to deploy new technologies to monitor its people in ways that would spook many in the U.S. and the West. Unfettered by privacy concerns or public debate, Beijing’s authoritarian leaders are installing iris scanners at security checkpoints in troubled regions and using sophisticated software to monitor ramblings on social media. By 2020, the government hopes to implement a national “social credit” system that would assign every citizen a rating based on how they behave at work, in public venues and in their financial dealings.
China’s technology companies are helping lead the way, scooping up unprecedented data on people’s lives through their mobile phones and competing to develop and market surveillance systems for government use.
It’s not just online behavior. Facial-recognition technology is being used to shame and deter jaywalkers, and even to monitor (and deter) the religious:
The growing appeal of religion in China has unsettled the country’s officially atheist leadership. Three years ago, authorities began removing crosses from many places of worship in Wenzhou, and last year China’s State Administration of Religious Affairs ordered major churches, mosques and temples to be “fully covered” by surveillance cameras. Cameras were installed at the Wenzhou church holding the meeting and at others, including some trained on pews.
In an interview before the meeting, the pastor said local authorities told him the video feed went to police headquarters. “I assume the cameras have facial recognition. Why wouldn’t they?” he said. “I have Communist Party members and prominent business owners in my congregation. If they think their faces are being scanned when they walk through the door on Sunday, of course they’re going to stop coming.”
Police authorities in Wenzhou declined to comment on church surveillance.
And this is just the beginning. As China continues to pour massive amounts of money into artificial intelligence research, it will surely develop even more intrusive ways to follow, monitor, and coerce its citizens.
Techno-utopians have long argued that emerging technologies inevitably tilt the playing field toward democracy by opening up repressive societies and driving demands for transparency. Unfortunately, that is almost certainly a gross oversimplification of the process, and probably a terrible misreading of how things will play out. Information is the basis of power in our century, and states are going to have much more power than ever before.
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Trump and Modi Hug Tight In First Meeting
Indian Prime Minister Narendra Modi received a warm embrace from President Trump during their first bilateral meeting, with the two leaders sounding a common line on counter-terrorism and security ties. The Nikkei Asian Review reports:
U.S. President Donald Trump and Indian Prime Minister Narendra Modi on Tuesday agreed to bolster security cooperation, while apparently sidestepping the more sensitive subject of U.S. visas for skilled foreign workers.
Trump’s remarks after the meeting focused on his security agenda, with the president pledging to “destroy radical Islamic terrorism.” He also revealed a plan to conduct three-way military drills with India and Japan in July, which he said would be “the largest maritime exercise ever conducted in the vast Indian Ocean.” […]
Security cooperation with India, Trump said, is “incredibly important.”
Trump and Modi’s warm words (and their meme-worthy hug) were accompanied by concrete announcements. Hours before their joint statement, the State Department officially sanctioned the leader of the Kashmiri separatist group Hizbul Mujahideen as a Global Terrorist. And the two sides were also able to announce several bilateral defense deals, including India’s purchase of a C-17 military transport plane and, more significantly, a $2 billion agreement to sell 22 Predator Guardian drones to India.
Those signals present a series of red flags for both Pakistan and China. Trump’s brokering of defense deals with India, affirmation of solidarity on counter-terrorism, and promises to improve intelligence sharing come just as the U.S. is conducting a review of its Afghanistan policy and mulling a tougher line toward Pakistan. For Islamabad, Trump’s friendly gestures toward Modi will harden fears that Washington sees New Delhi playing a key role in any long-term Afghanistan settlement.
The summit also gave China plenty of reason to worry. The Predator drone deal will allow India to surveil Chinese submarines in the Indian Ocean, and Trump’s stress on the expanded naval drills with Japan and India suggest that the U.S. will continue to be actively engaged there as China seeks to expand its presence. Trump also seemed to implicitly endorse India’s concerns about the China-Pakistan Economic Corridor with language in the joint statement that asked other countries to “[ensure] respect for sovereignty and territorial integrity” when pursuing infrastructure initiatives.
Finally, Trump praised India for helping to enforce sanctions on North Korea, while issuing an ominous warning. “The North Korean regime is causing tremendous problems,” Trump said, “and it’s something that has to be dealt with—and probably dealt with rapidly.” This, too, was a thinly veiled message to Beijing that comes as Trump’s patience with China is reportedly running out. Indeed, a senior administration official confirmed to the New York Times that Trump’s enthusiastic embrace of Modi was partly an expression of his displeasure with Beijing for failing to rein in Pyongyang’s nuclear program.
None of these messages will be lost on India’s rivals. Already, Chinese state media is warning that Modi could turn himself into a “pawn” of Washington, while Pakistan has decried the terrorist designation and Kashmiri leaders are warning of a “Trump-Modi nexus” that could doom their cause. Look for both Beijing and Islamabad to push back as Trump and Modi continue to cozy up.
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Blue Model Blues in the Blue House
South Korea’s most militant labour group has outlined plans for a big rally on Friday in an attempt to pile pressure on Moon Jae-in, the new president, to keep his election promises on labour reform.
The Korea Confederation of Trade Unions, which comprises more than 40 per cent of the country’s union members, expects tens of thousands to join the rally, at which they will press Mr Moon to raise the minimum wage, convert contract workers into full-time staff and cut working hours. […]
The pressure on labour adds to Mr Moon’s challenges in reviving the country’s stalled economy and creating jobs in an era of high wages, low productivity and high youth unemployment.
South Korean workers have slaved away for decades to bring the country out of the poverty and ruins of the Korean War in order to make South Korea a global powerhouse. The idea was that the hard work would pay off and that some day, and Koreans would be able to have the high salaries, short work weeks, long vacations and other perks of middle-class living enjoyed by Western workers in the developed world.
The problem is that the blue model crisis is not just a Western thing. Automation and competition from low-wage workers is eating away at manufacturing wages worldwide. Unfortunately, there aren’t any easy or simple solutions to this. And the unresolved political pressures are going to make Korea and other countries harder to deal with in international politics, with their leaders increasingly under pressure to “put Korea first” and “make Korea great again.” Hold on to your hats!
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The Chaos of the Qatar Crisis
On Friday, the Saudi-led bloc finally issued its demands to Qatar. The highlights of the 13-point list, per The Guardian, include:
Curb diplomatic ties with Iran and close its diplomatic missions there. Expel members of Iran’s Revolutionary Guards and cut off any joint military cooperation with Iran. Only trade and commerce with Iran that complies with US and international sanctions will be permitted.
Sever all ties to “terrorist organisations”, specifically the Muslim Brotherhood, Islamic State, al-Qaida and Lebanon’s Hezbollah. Formally declare those entities as terrorist groups.
Shut down al-Jazeera and its affiliate stations.
Shut down news outlets that Qatar funds, directly and indirectly, including Arabi21, Rassd, Al-Araby Al-Jadeed and Middle East Eye.
Immediately terminate the Turkish military presence in Qatar and end any joint military cooperation with Turkey inside Qatar.
It remains unclear what took so long to compile this list. Last week the State Department said that it was “mystified” by the failure of the Saudi-led bloc to issue clear demands. The list itself doesn’t contain any real surprises, in fact it’s almost identical to an apparently fake list that circulated on social media soon after the crisis broke out.
That the Saudi-led bloc has been unprepared and incompetent is one thing, but the U.S. response has been troubling. President Trump on June 9th seemed to take credit for precipitating the crisis just hours after Secretary of State Tillerson had pushed for mediation. What might generously have been described as a Good Cop/Bad Cop approach is now starting to look more like a lack of strategy and coordination within the Trump Administration. On June 14th, just days after the President’s hardline stand in which he accused Qatar of involvement in financing terrorism, Secretary of Defense Mattis signed a $12 billion deal with the Qataris to purchase F-15s. After pushing for the Saudis to issue demands, Tillerson described the ultimatum as “very difficult for Qatar to meet” and urged a conciliatory approach.
Even accepting the most generous reading of the Administration’s approach, there’s evidence that it’s starting to backfire. Last night, Iran’s President Rouhani spoke with Sheikh Tamim, the Emir of Qatar, to offer his support. Turkey has rushed to deploy troops to the peninsula, and while their deployment is small it includes a number of armored vehicles that they’ve been keen to display in regional media parading through Doha. If the goal here was for Saudi, the UAE, and Egypt to pose a united front against Qatar and Hamas, then Egypt already seems to have broken that front in signing a deal to restore electricity to the Gaza strip last week. Even Congress seems to be uncomfortable with what’s going on. Senator Corker, chairman of the Senate Foreign Relations Committee, wrote in a letter to Tillerson today that he would not vote for future arms sales to the GCC until the crisis is resolved.
Speaking of Tillerson, recent media reports about the State Department are both unflattering and concerning. Among other revelations, the New York Times reported over the weekend that:
Three foreign ambassadors — one from Asia and two from Europe — said they had taken to contacting the National Security Council because the State Department does not return their calls or does not offer substantive answers when it does.
Most Americans’ eyes glaze over when they hear the phrase “interagency process” or read about “State department reform.” The number of people outside of Washington, D.C. who could name a former Assistant Secretary of State for Near Eastern Affairs could probably fit into a single room. Unfortunately, that does not make those issues and positions any less vital. President Trump has often said that he intends to put American interests first and to drain the swamp. But in affairs of state it’s awfully difficult to find out where your interests lie or how deep the swamp is without sound advice and steady hands. That the State Department is in need of reform is beyond dispute (see James Jeffrey’s essay in our latest issue), but there’s little reason to think that the subject matter experts who occupy the Assistant Secretary of State positions are where the swamp should be drained.
The crisis over Qatar, in the grand scheme of things, appears to be minor. We don’t know what the Saudi-led bloc will do when their 10-day ultimatum is up, but compared with North Korea or the issues in Eastern Syria there’s little reason to think that the crisis will spiral into World War III. But the smallness of the crisis makes the mixed messaging, lack of coordination, and absence of apparent American strategy or goals for resolving the crisis all the more troubling. Filling the State Department and the National Security Council with experienced advisors to help carry out the President’s agenda would go a long way towards assuaging such doubts.
The post The Chaos of the Qatar Crisis appeared first on The American Interest.
Even Shale’s Secondary Effects Are Staggering
Hydraulic fracturing and horizontal well drilling have given American companies access to vast new reserves of oil and gas, and have dramatically increased the production of hydrocarbons here in the United States. Since 2010, the U.S. has added roughly 5 million barrels of oil per day, and natural gas production is up roughly 33 percent over that same time period.
The effects of this energy revolution have been felt the world over—they’ve brought gasoline prices down for American drivers while remaking the global oil market. But here in the U.S., they’ve been an enormous boon to an industry most Americans are likely unfamiliar with: petrochemicals. As the WSJ reports, cheap petrochemical feedstocks (a byproduct of oil and gas drilling) are pushing the U.S. petrochemical industry to new heights:
The scale of the sector’s investment is staggering: $185 billion in new U.S. petrochemical projects are in construction or planning, according to the American Chemistry Council. Last year, expenditures on chemical plants alone accounted for half of all capital investment in U.S. manufacturing, up from less than 20% in 2009, according to the Census Bureau. […]
“It’s a tectonic shift in the hemispherical balance of who makes what to essentially feed the manufacturing sector,” said Dow Chief Executive Andrew Liveris, referring to the growth of production in the U.S. His company now plans to double down on its U.S. expansion with a $4 billion investment in a handful of projects over the next five years. […]
The new investment will establish the U.S. as a major exporter of plastic and reduce its trade deficit, economists say. The American Chemistry Council predicts it will add $294 billion to U.S. economic output and 462,000 direct and indirect jobs by 2025, though analysts say direct employment at plants will be limited due to automation.
That’s a lot of money, and it’s a staggering number of jobs. This is one of the unheralded consequences of this new energy renaissance that the U.S. finds itself in, and it’s creating a rosier economic outlook for years to come.
This big win for America has also produced a number of losers, namely Middle Eastern petrostates who in years past had looked to petrochemicals as an important industry to help them diversify away from simply pumping and exporting crude oil and natural gas. But thanks to cheap shale-sourced petrochemical feedstocks, the lion’s share of new investment money in the industry is heading the United States’ way. Once again, shale is lifting the U.S. up even as it puts petrostates in peril.
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June 26, 2017
Release the Kraken
North Sea oil and gas production has been waning for years now, leading to major energy security concerns for the United Kingdom. But as fields mature and companies face down the technically difficult and extraordinarily expensive task of decommissioning inactive offshore rigs, bright spots still remain for production in the region. The latest comes to us courtesy of the FT, which reports on the Kraken, a new field that has come online just in time to save the British oil company Enquest from insolvency:
EnQuest has started producing oil from its Kraken field in the North Sea, one of the most significant projects in the region in the past 10 years, paving the way for it to pay down its hefty debt load…Kraken has an estimated life of up to 25 years and is forecast to produce 50,000 barrels of oil a day at peak. Cash generated from production will help EnQuest strengthen its stretched balance sheet, which came under significant strain as the company was forced to press ahead with the costly project while crude prices crashed.
We live in a new oil reality, characterized by low prices and a heightened focus on increasing productivity while reducing expenses. The shale boom has made the global oil market much more competitive, and companies have had to become leaner and meaner to survive. That’s been borne out in the North Sea, where producers have fought tooth and nail to cut costs to stay afloat plumbing a resource well past its prime. Average operating costs in the North Sea have fallen 45 percent over the past few years, and EnQuest’s Kraken project has been similarly streamlined. The FT continues:
The company has fought hard to reduce the costs of the Kraken development, and the final gross capital expenditure cost of $2.5bn was $700m lower than the original budget when it was sanctioned in 2013.
EnQuest said the 13 wells at Kraken that had been drilled so far were being brought online in a “phased manner” in an effort to maximise long-term productivity. The field’s production capacity would increase next year as further wells came on stream, the company added.
Back in March, a different British oil firm announced the discovery of a new oil field that analysts said was “likely to be the biggest new oil discovery beneath UK waters this century.”
The North Sea drilling industry’s best days are still almost certainly behind it, but its future isn’t as grim as it once looked, thanks to new finds and a steady pursuit of cost cutting. That’s an important development for UK, European, and global energy security.
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