Peter L. Berger's Blog, page 479

How Xi Jinping Is Changing China

A new report from the Council on Foreign Relations concludes that China’s economic trouble will mean more nationalism and corruption crackdowns from President Xi Jinping:

To strengthen his position at home, Xi “will probably intensify his personality cult, crack down even harder on dissent, and grow bolder in using the anticorruption campaign against elites who oppose him.” Internationally, Xi “may provoke disputes with neighbors, use increasingly strident rhetoric in defense of China’s national interests, and take a tougher line in relations with the United States and its allies to shift public focus away from economic troubles.”

To deal with Xi’s more assertive foreign and defense policies, the authors call for a new American grand strategy for Asia that “seeks to avoid a U.S.-China confrontation and maintain U.S. primacy in Asia.”

The report itself contains lots of insights and useful figures. For example:

Investment now accounts for roughly half of Chinese growth, an unprecedentedly high amount, and it is subject to diminishing returns, with one dollar of investment producing 40 percent less GDP growth today than it did a decade ago.

Meanwhile, the loans that underwrite these unproductive investments—such as China’s famed ghost cities, which are lled with buildings but lacking in tenants or businesses—threaten the country’s banking system and have pushed debt to 280 percent of GDP, according to a recent estimate from McKinsey & Company.

Bad loans. Diminishing returns on investment. China’s model is broken, and it’s hard to see how a more authoritarian regime is going to make things better. Campbell and Blackwill have done some good and important analysis in this report, ultimately trying to propose how the future of America’s China policy should look. We recommend you read the whole thing.

How Xi Xinping Is Changing China

A new report from the Council on Foreign Relations concludes that China’s economic trouble will mean more nationalism and corruption crackdowns from President Xi Jinping:

To strengthen his position at home, Xi “will probably intensify his personality cult, crack down even harder on dissent, and grow bolder in using the anticorruption campaign against elites who oppose him.” Internationally, Xi “may provoke disputes with neighbors, use increasingly strident rhetoric in defense of China’s national interests, and take a tougher line in relations with the United States and its allies to shift public focus away from economic troubles.”

To deal with Xi’s more assertive foreign and defense policies, the authors call for a new American grand strategy for Asia that “seeks to avoid a U.S.-China confrontation and maintain U.S. primacy in Asia.”

The report itself contains lots of insights and useful figures. For example:

Investment now accounts for roughly half of Chinese growth, an unprecedentedly high amount, and it is subject to diminishing returns, with one dollar of investment producing 40 percent less GDP growth today than it did a decade ago.

Meanwhile, the loans that underwrite these unproductive investments—such as China’s famed ghost cities, which are lled with buildings but lacking in tenants or businesses—threaten the country’s banking system and have pushed debt to 280 percent of GDP, according to a recent estimate from McKinsey & Company.

Bad loans. Diminishing returns on investment. China’s model is broken, and it’s hard to see how a more authoritarian regime is going to make things better. Campbell and Blackwill have done some good and important analysis in this report, ultimately trying to propose how the future of America’s China policy should look. We recommend you read the whole thing.

Academia Is Losing Its Mind

It’s not just right-wing populists who are worried that some academic humanities and social science fields are veering into irrelevance. The latest issue of the left-of-center magazine American Prospect has a depressing report by the leftist Occidental professor Peter Dreier on his experience submitting a bogus paper to a humanities conference and getting it accepted:

Six years ago I submitted a paper for a panel, “On the Absence of Absences” that was to be part of an academic conference later that year—in August 2010. Then, and now, I had no idea what the phrase “absence of absences” meant. The description provided by the panel organizers, printed below, did not help. The summary, or abstract of the proposed paper—was pure gibberish, as you can see below. I tried, as best I could within the limits of my own vocabulary, to write something that had many big words but which made no sense whatsoever. I not only wanted to see if I could fool the panel organizers and get my paper accepted, I also wanted to pull the curtain on the absurd pretentions of some segments of academic life. To my astonishment, the two panel organizers—both American sociologists—accepted my proposal and invited me to join them at the annual international conference of the Society for Social Studies of Science to be held that year in Tokyo.

Read the Prospect piece to see Dreier’s full “proposal.” Here’s one representative sentence: “Self-delusion and self-discipline inhibits the reflective self, the postmodern membrane, the ecclesiastical impulse forbidden by truth-seeking and sun worship, problematizing the inchoate structures of both reason and darkness, allowing knowledge, half-knowledge, and knowledgelessness to undermine and yet simultaneously overcome the self-loathing that overwhelms the Gnostic challenge facing Biblical scribes, folksingers, and hip-hop rappers alike.” He also includes examples of the type of real humanities work that led him to undertake this experiment (he saw sentences elsewhere like: “Given the attitudes generated by our sense of a place, critical perspectives that only target overt structures within city systems are incomplete” and “Theoretical, conceptual and methodological choices must be framed in relation to concrete explanatory and interpretive dilemmas, not ontological foundations.”)

To make matters worse, most of this “postmodern” analysis is taking place within the context of a hermetically sealed political bubble. As our friends at Heterodox Academy have pointed out, just four percent of American academics in the humanities identify as conservative. This total homogeneity may be one reason that so much work in the humanities has become utterly disconnected from what the general public might consider to be valuable scholarly exploration.There is a good amount of anti-intellectualism and old-fashioned score-settling involved in attacks on the academy by right-wing pundits and populist politicians. But that reaction didn’t come out of nowhere. At a time when tuition and student debt are reaching crisis levels, the public is right to demand that the work it is funding (both directly, at public universities, and indirectly, at private universities, by subsidizing student loans) has some bearing on reality and some benefit to the rest of society. It’s time for academics to stop turning up their noses at reasonable critiques, and actually get their house in order.

Boris Nemtsov (1959-2015)

In memory of Boris Nemtsov, a hero not only of his country but of what I would call the Democratic International, I would like to offer a few broad conclusions that I have drawn from the horror of his fate. These are all sobering conclusions; but our times are schooling us in a new sobriety about history. We are learning, too, to be more sober about ourselves, about our own role in shaping history in the direction of our professed ideals—but the sobriety that I have in mind about the American role, and the Western role, in the campaign (such as it is) against contemporary tyranny and savagery is really more akin to disgust.

The first conclusion is this. Freedom is not to be confused with democracy. Democracy is only one of the things that can be done with freedom. When a dictatorship crumbles, a society is emancipated outwardly but not yet inwardly. Or to put it differently, when you emancipate a society you mean emancipate the actually existing people who comprise that society, their demons as well as their angels. Evil has as much use for freedom’s energies, for the opportunities of liberty, as good. We have seen this confirmed in many countries in recent years; but the most repercussive instance of this harsh truth may be Russia in the years after the collapse of the Soviet Union. The exhilaration of that once unimaginable liberation has been crushed by the ascendancy of Russia’s demons. Where communism once was, there fascism now is, and imperialism; and there is also, once again, a minority of valiant souls who endeavor to combat the new repression and keep the truth alive.The second conclusion is this. There is moral and historical progress, but it is never linear, never direct, never final, and there is nothing inevitable about the emergence of democracy from the ruins of dictatorship. The push forward brings the pull backward—brings the bullets in Boris Nemtsov’s back. The much-discussed arc of history bends this way and that, cruelly and benevolently and cruelly again, inconsistently, contradictorily, fitfully, and provides no grounds for confidence that its ultimate end is justice. If we wish it to bend in a certain direction, we must do the bending. There are always interests and ideas that are ruthlessly dedicated to thwarting the emergence of a liberal order, or to its reversal. Historically speaking, liberalism may be essentially contested, and therefore always in need of support and assistance. And the fragility of liberalism imposes an obligation upon all the citizens of all the liberal orders to come to its defense. The cause is one cause. For us, the recognition of our kinship with democrats and dissenters in other countries—a kinship of values, which is infinitely more admirable than a kinship of blood—should be a matter of honor, and our failure to recognize these affinities, and the duties that they demand of us, should be a matter of disgrace.The third conclusion is this. Outrage without action is just a sanctimonious cynicism. There was outrage in the aftermath of Nemtsov’s assassination, just as there was outrage when Putin’s wild clients in Ukraine shot a civilian airliner out of the sky. But there were no consequences commensurate with the outrage. The American government now specializes in inconsequential outrage. Our anger impedes no crime, and makes no criminal think twice. This was the case also in Syria and elsewhere. Our president gives evidence of his ethical exquisiteness and then lets the atrocities be. The really striking thing about the sanctions against Putin is that the damage they cause economically does not inhibit him strategically. The billions add up and the Russian weapons and troops pour across the border. Indeed, we, the United States, are the ones with the inhibitions. As in other regions of the world, this is a struggle of inhibited good against uninhibited evil—which is to say, it is hardly a struggle at all. Why wouldn’t Putin take Mariupol?Our confusion brings to mind John Stuart Mill’s warning that “the profession of [the doctrine of non-intervention only] by free countries comes to this miserable issue, that the wrong side may help the wrong but the right must not help the right”. He proceeded to comment on a foreign policy crisis of his own time, and his words of 1859 read uncannily as a parable about 2015: “It might not have been right for England (even apart from the question of prudence) to have taken part with Hungary in its noble struggle against Austria… But when, the Hungarians having shown themselves likely to prevail in this struggle, the Russian despot interposed, and joining his force to that of Austria, delivered back the Hungarians, bound hand and foot, to their exasperated oppressors, it would have been an honorable and virtuous act on the part of England to have declared that this should not be, and that if Russia gave assistance to the wrong side, England would aid the right. It might not have been consistent with the regard which every nation is bound to pay for its own safety, for England to have taken up this position single-handed, but England and France together could have done it; and if they had, the Russian armed intervention would never have taken place, or would have been disastrous to Russia alone; while all that the Powers gained by not doing it, was that they had to fight Russia five years afterwards, under more difficult circumstances… The first nation which, being powerful enough to make its voice effectual, has the spirit and courage to say that not a gun shall be fired in Europe by the soldiers of one power against the revolted subjects of another, will be the idol of the friends of freedom throughout Europe. The nation which gives the word will soon find itself at the head of an alliance of free peoples, so strong as to defy the efforts of any number of confederated despots to bring it down. The prize is too glorious not to be snatched sooner or later by some free country; and the time may not be distant when England, if she does not take this heroic part because of its heroism, will be compelled to take it from consideration for her own safety.” The parable is inexact, obviously; but still it is chilling.The fourth conclusion is this. The twentieth century is not without lessons for the twenty-first. The cold war remains pertinent to the predicament in which we now find ourselves. This is, these days, a deeply heretical proposition. Obama denies it, because he regards the cold war as a tragic confrontation in which we, the United States, often behaved badly and from which we emerged with a lamentable sense of triumphalism. Putin denies it because he regards the cold war as an epic humiliation for Russia that must be reversed, as if the primary beneficiaries of the collapse of the Soviet Union were not the Soviet peoples themselves. The discontinuities of the current situation with the cold war are of course considerable; but there are continuities too, and when we banish the acknowledgment of those continuities from the discussion we deprive ourselves of moral and strategic wisdom.It is not merely that there are features of Putin’s Russia that perpetuate some of the features of Soviet Russia—the regional aggressions, the restoration of propaganda as the central instrument for the shaping of an entire population’s picture of the world, the imprisonment and murder of political opponents, the geopolitical paranoia, the obsessive (and utterly mendacious) characterization of its adversaries and its victims as fascists, and so on. (In the essay that she was writing at the time of her murder in 2006, Anna Politkovskaya wrote these mordant and macabre words: “I am an incorrigible enemy, not amenable to reeducation. I’m not joking. Some time ago Vladislav Surkov, Putin’s deputy chief of staff, explained that there were people who were enemies but you could talk sense into, and there were incorrigible enemies to whom you couldn’t and who simply needed to be ‘cleansed’ from the political arena.”) The mixed history of American policy during the cold war ultimately demonstrated the necessity, and the nobility, of taking upon ourselves the burden of a confrontation and rising to the responsibilities of a conflict with which, against our will and our weariness, we have been presented. It demonstrated also the long-term strategic sagacity of siding unequivocally with an oppressed population against an oppressing regime, and of standing ringingly with the liberal opposition, not only to give heart to good people but also because they are the people who may one day come to power and attempt to re-purpose it in conformity with principles that we share. If, as the administration believes, we were correct in attempting a policy of engagement, surely we are also correct also in admitting that our policy of engagement failed.Do we wish to honor the memory of Boris Nemtsov? Then let us be honest about the grimness of the situation in which we find ourselves. Do we wish to honor the memory of Boris Nemtsov? Then let us show our contempt for the dictator and the dictatorship that is responsible for his murder. Do we wish to honor the memory of Boris Nemtsov? Then let us stop searching for an “off-ramp” for Putin and find an on-ramp for ourselves. Do we wish to honor the memory of Boris Nemtsov? Then let us send dollars and weapons to our friends and comrades in Ukraine.

The Winners and Losers of US LNG Exports

This week for the first time an export cargo of liquified natural gas left the U.S., sent by tanker on a voyage from a Louisiana port to a buyer in Brazil. The economics of these exports are nowhere near as favorable as they were when this idea was first conceived, but as the WSJ reports, American LNG could have a large effect on the global gas market, perhaps even greater than U.S. crude exports will have on the oil market:

[M]oving gas to a different continent is cumbersome and expensive. It requires a multibillion-dollar investment in a liquefaction facility that cools gas to 260 degrees below zero Fahrenheit. There also needs to be a specialized receiving facility on the other end. [ . . . ]

With all that, even at today’s depressed market, U.S. gas might cost at least double the domestic price once it reaches Europe. But that remains a good deal for the buyers, which is why the U.S. will soon impact the market.

There are a number of winners and losers to parse through here: If LNG demand picks up, American shale gas producers should see higher prices for their product and therefore stand to benefit from these exports. Asian markets, which for years paid a heavy premium for LNG imports (though that premium was all but erased by the beginning of 2015), will be delighted to see another reliable LNG supplier enter the market (the now nuclear-less Japan will be especially gratified). But it’s Europe that stands to gain the most from the prospect of a steady supply of American shale gas, because while these hydrocarbons won’t come cheap, they’ll also help the continent diversify away from Russian supplies that come with geopolitical strings attached.

Which brings us to the losers. U.S. households that may have grown used to staggeringly cheap heating bills may end up forking over a bit more in winter months in the coming years as our domestic glut is eased and prices edge back towards normalcy. Other LNG producers like Qatar and Australia won’t be thrilled to see shale gas entering a global market that is already quite well-supplied. It’s Moscow, however, that stands out as the biggest loser from U.S. LNG exports, because Gazprom’s most important customer base (Europe) is suddenly a lot less pliant now that it has other options.This couldn’t come at a worse time for Russia, either, whose national budget (which relies so heavily on oil and gas sales) is already feeling acute pain from the collapse in oil prices over the past 20 months. Couple that with the weakening of its grip over Europe’s gas market and you have a spectacular one-two punch.

The Age of Trump

How on earth did this happen?  Some, like Robert Kagan, think it is solely the result of a prolonged self-poisoning of the Republican Party. A number of shrewd writers—David Frum, Tucker Carlson, Ben Domenech, Charles Murray, and Joel Kotkin being among the best—have probed deeper. Not surprisingly, they are all some flavor of conservative. On the liberal (or, as they say now, progressive) end of the spectrum the reaction has been chiefly one of smugness (“well, that’s what the Republicans are, we knew it all along”), schadenfreude (“pass the popcorn”), and chicken-counting (“now we can get a head start on Hillary’s first Inaugural”). Their insouciance will be stripped away if Trump becomes the nominee and turns his cunning, ferocity, and charm on an inept, boring politician trailing scandals as old as dubious investments with a 1,000 percent return and as fresh as a homebrew email server. He might lose. He might, however, very well tear her to pieces. Clearly, he relishes the prospect, because he despises the politicians he has bought over the years.

The conservative analysts offer a number of arguments—a shifting class structure, liberal overreach in social policy, existential anxiety about the advent of a robot-driven economy, the stagnation since the Great Recession, and more. They note (as most liberal commentators have yet to do) Trump’s formidable political skills, including a visceral instinct for detecting and exploiting vulnerability that has been the hallmark of many an authoritarian ruler. These insights are all to the point, but they do not capture one key element.Moral rot.Politicians have, since ancient Greece, lied, pandered, and whored. They have taken bribes, connived, and perjured themselves. But in recent times—in the United States, at any rate—there has never been any politician quite as openly debased and debauched as Donald Trump. Truman and Nixon could be vulgar, but they kept the cuss words for private use. Presidents have chewed out journalists, but which of them would have suggested that an elegant and intelligent woman asking a reasonable question was dripping menstrual blood? LBJ, Kennedy, and Clinton could all treat women as commodities to be used for their pleasure, but none went on the radio with the likes of Howard Stern to discuss the women they had bedded and the finer points of their anatomies. All politicians like the sound of their own names, but Roosevelt named the greatest dam in the United States after his defeated predecessor, Herbert Hoover. Can one doubt what Trump would have christened it?That otherwise sober people do not find Trump’s insults and insane demands outrageous (Mexico will have to pay for a wall! Japan will have to pay for protection!) says something about a larger moral and cultural collapse. His language is the language of the comments sections of once-great newspapers. Their editors know that the online versions of their publications attract the vicious, the bigoted, and the foulmouthed. But they keep those comments sections going in the hope of getting eyeballs on the page.Winston Churchill recalls in his memoir how as a young man he came to terms with hypocrisy, discovering the “enormous and unquestionably helpful part that humbug plays in the social life of a great people.” Inconsistency between public virtue and private vice is not altogether a bad thing. No matter how nasty the realities are, maintaining respectable appearances, minding the civilities, and adhering to the conventions is part of what keeps civilization going.The current problem goes beyond excruciatingly bad manners. What we increasingly lack, and have lacked for some time, is a sense of the moral underpinning of republican (small r) government. Manners and morals maintain a free state as much as laws do, as Tocqueville observed long ago, and when a certain culture of virtue dies, so too does something of what makes democracy work. Old-fashioned words like integrity, selflessness, frugality, gravitas, and modesty rarely rate a mention in modern descriptions of the good life—is it surprising that they don’t come up in politics, either?William James, a pacifist who understood this point, argued in “The Moral Equivalent War” that “intrepidity, contempt of softness, surrender of private interest, obedience to command must still remain the rock upon which states are built—unless, indeed, we wish for dangerous reactions against commonwealths fit only for contempt.” Just so. Trump might have become a less upsetting figure if he had not wriggled through the clutches of the draft in the 1960s.Trump’s rise is only one among many signs that something has gone profoundly amiss in our popular culture. It is related to the hysteria that has swept through many campuses, as students call for the suppression of various forms of free speech and the provision of “safe spaces” where they will not be challenged by ideas with which they disagree. The rise of Trump and the fall of free speech in academia are equal signs that we are losing the intellectual sturdiness and honesty without which a republic cannot thrive.There are other traces of rot. They can be seen in the excuses that political leaders and experts have begun to make as they cozy up to Trump. Like French bureaucrats in the age of Vichy, or Italian aristocrats in the age of Mussolini, they are already saying things like: “I can make it less bad,” “He’s different in private,” “He has his good points,” “He is evolving,” and “Someone has to do the work of government.” Of course, some politicians—Chris Christie, that would be you—simply skip the pretense and indulge in spite or opportunism as the mood takes them.This is not the first age in which politicians have taken morally disgraceful positions, even by the standards of their time. In the 1950s and 1960s there were flagrant bigots in Congress. But many of them were in other ways public spirited­—think Senator Richard Russell of Georgia, for example, who presided with dignity over the Senate Armed Services Committee for nearly two decades. Lyndon Johnson may not have opposed the evils of his time forthrightly, but he used the full extent of his wiliness to break through the institutionalized discrimination of the South. The villainy of today takes softer forms, but it is pervasive—politicians swallow their principles (such as they are) and endorse a candidate they despise, turn on a judge they once praised, denounce the opposition for behavior identical to their own, or press their branch’s prerogatives and rules to the Constitutional limit, and beyond.The rot is cultural. It is no coincidence that Trump was the star of a “reality” show. He is the beneficiary of an amoral celebrity culture devoid of all content save an omnipresent lubriciousness. He is a kind of male Kim Kardashian, and about as politically serious. In the context of culture, if not (yet) politics, he is unremarkable; the daily entertainments of today are both tawdry and self-consciously, corrosively ironic. Ours is an age when young people have become used to getting news, of a sort, from Jon Stewart and Steven Colbert, when an earlier generation watched Walter Cronkite and David Brinkley. It is the difference between giggling with young, sneering hipsters and listening to serious adults. Go to YouTube and look at old episodes of Profiles in Courage, if you can find them—a wildly successful television series based on the book nominally authored by John F. Kennedy, which celebrated an individual’s, often a politician’s, courage in standing alone against a crowd, even a crowd with whose politics the audience agreed. The show of comparable popularity today is House of Cards. Bill Clinton has said that he loves it.American culture is, in short, nastier, more nihilistic, and far less inhibited than ever before. It breeds alternating bouts of cynicism and hysteria, and now it has given us Trump.The Republican Party as we know it may die of Trump. If it does, it will have succumbed in part because many of its leaders chose not to fight for the Party of Lincoln, which is a set of ideas about how to govern a country, rather than an organization clawing for political and personal advantage. What is at stake, however, is something much more precious than even a great political party. To an extent unimaginable for a very long time, the moral keel of free government is showing cracks. It is not easy to discern how we shall mend them.

Immigration Crisis & Debt Crisis to Meet in Greece

Between the euro crisis, the immigration crisis, “contagion”, and the austerity wars, you may have found it a bit hard to keep track of all the crises affecting the EU. But good news! Soon they might all just merge into one—in Greece. The Wall Street Journal reports:

The International Monetary Fund says it can’t lend to Greece without radical spending cuts by Athens or costly debt forgiveness by Berlin. Greece’s key European interlocutor, German Chancellor Angela Merkel, is under such political pressure at home over barely controlled migration inflows that she’s less able than before to take an unpopular stand over Greece’s debt woes.

The IMF’s tough demands for far-reaching fiscal retrenchment go well beyond what Syriza has signaled it is prepared to swallow, making Mr. Tsipras’s goal of a deal to unlock bailout money by late March improbable, European officials say. Some analysts believe Mr. Tsipras might opt for early elections if he can’t break the impasse with creditors.Meanwhile growing tensions and finger-pointing between Greece and other European Union countries, including Austria and Slovakia, over migration is deepening many Greeks’ perception that their country is being made a scapegoat. A backdrop of popular hostility toward the EU—which a record 81% of Greeks now mistrust, according to a European Commission survey released on Monday—makes it harder for Mr. Tsipras to sell fiscal austerity measures demanded by European creditors and the IMF. 

The Austrian-Balkan pact to shut the immigration pathway through south-eastern Europe and isolate the problem in Greece, which we have covered throughout this week, may have marked a serious escalation in the immigration crisis. It signaled that several EU countries no longer had faith in the bloc’s formal structures to deal with the problem, and as such severely restricted the room for maneuver in Brussels and Berlin going forward.

But it also, as this story indicates, piled more pressure on Greece at the worst possible time. The “Vienna Declaration” countries may think Greece is beyond help and/or unwilling to help itself, but there’s a reason European leaders have worried about contagion and precedent throughout both the financial and immigration crisis. Once a euro country defaults—once an EU nation is kicked out of Schengen—once a country that has cooperated (however grudgingly, at times) with Berlin’s & Brussels’ austerity programs over the years gets the shaft—then where do such things end? And what lessons will other EU countries draw from it?

Bolivians Reject Evo Morales’s Bid to Lift Term Limits

Across Latin America, the winds that propelled Leftist regimes have died down. In Argentina, we saw the end of the Kirchner reign and the election of the centrist Mauricio Macri. Brazil’s leftist President Dilma Rousseff is fighting to stave off her own impeachment. And Venezuelans have been struggling to escape the grip of Marxism. Now, even Bolivia’s Evo Morales, long a favorite of leftists around the world, is finding that his popularity has limits. The Telegraph reports:

Bolivia’s President Evo Morales has lost his bid to seek a fourth term, his first direct election defeat since taking office in 2006, according to official results released Tuesday.

Morales, 56, has been in power for a decade, thanks largely to support from indigenous groups and grassroots organizations in one of the Americas’ poorest countries.

While refusing to concede until the very end, Morales has promised to respect the official results of Sunday’s vote on a constitutional reform that would let him run for re-election to extend his time in office to 19 years. His current term ends in 2020.

If there’s one place where President Obama’s restrained foreign policy might be said to have borne fruit, it’s Latin America. In the Obama era, it’s become more difficult for Latin American populists to blame Washington for their countries’ problems. But even if staying uninvolved in Latin America might have worked thus far, that’s already starting to change. President Obama himself plans to visit Argentina next month. And with political turmoil in Brazil and looming civil conflict in Venezuela, Obama’s successor will likely have to spend even more time looking south.

Why Today’s Oil Price Rebound Fizzled

Well this is something of a rarity in recent times: Brent crude hit $37 per barrel for the first time this year on growing concerns over supply disruptions in Iraqi Kurdistan and Nigeria. Reuters reports:

Pipeline outages in Iraq and Nigeria have removed more than 800,000 barrels of crude oil per day from the market for at least the next two weeks. The disruptions should offset recent increases to supply from Iran, analysts said [. . .]

Brent crude futures were trading at $35.12 a barrel, down 17 cents from their last close, but rose to $37 earlier in the session, the highest since Jan. 5. For the week, Brent was up about 7 percent.

That rebound was short-lived, however, as Brent has now settled back down at $35.19, and America’s West Texas Intermediate benchmark is actually down $.18 on the day. But while the price recovery didn’t last, this story does tell us something about the current market.

A supply loss of nearly one million barrels per day is no small thing, and yet in today’s market it doesn’t seem capable of spooking traders in any significant way. The world is awash in oil, and producers from small U.S. shale firms to OPEC’s petrostates are all keen on selling even more crude than they already are. As Iraq and Nigeria struggle to keep their own production going, suppliers elsewhere are keen to step in and snag any opening in the market.That’s especially true for American shale producers, who have drilled but not yet fracked a huge backlog (also known as a “fracklog”) of wells, waiting for prices to creep back up before they start operations. This means that any sustained price rebound is going to induce a new flood of U.S. supplies—one of the reasons why OPEC hasn’t moved to reduce its own output.Today’s rally was brief, in part because even a loss of about 850,000 barrels per day isn’t enough to erase the global glut. But even if it had kicked off a more serious uptick, U.S. shale would be there to bring it right back down again.

Drowning in Moderation

Iran goes to the polls today for Parliamentary elections. While we’ll have to wait for Sunday for the official results, the conditions under which the elections are being held make it look like a rigged game. Sohrab Ahmari writes in the Wall Street Journal:

Half of the original 12,000 or so candidates for the 290-seat Majlis were disqualified ahead of the election. As were 75% of the 801 candidates for the 88-member Assembly of Experts—including Hassan Khomeini, the grandson of regime founder AyatollahRuhollah Khomeini. That leaves a ratio of candidates to seats in the Assembly of Experts of less than two.

Most of the disqualified belonged to the so-called reformist and moderate factions of the regime. Even if every single disqualification were reversed, however, it wouldn’t matter a wit, since the regime’s popular branches are subservient to its unelected institutions. Above them all sits the supreme leader, and the pre-election purge means whoever succeeds Mr. Khamenei is likely to share his views on all important matters.[..]On the domestic front, the regime has launched a fresh crackdown against degar-andishan, dissidents or “other-thinkers”—poets, film makers, journalists and novelists who question its rule. Tehran is also warning off Iranian-Americans eager to cash in on their commercial connections now that international sanctions have been lifted. Security forces in October arrested Siamak Namazi, an American energy consultant who had long advocated for the removal of sanctions and a Washington-Tehran opening. On Monday, Mr. Namazi’s U.S. citizen father, Baquer, was arrested after apparently being lured back by the regime.

Computer programmers have a saying: garbage in, garbage out. In this case, if you are running an electoral system with fewer than two people competing per seat, and you’ve removed many of the moderates… you’re unlikely to see many moderates among the winners. Or much moderation from the government to follow.

Of course, we could be surprised on Sunday. But right now, it looks like the oft-promised moderation that was supposed to follow the Iran deal is nowhere to be found. Which means more regional aggression, more war, more death—nukes or no nukes.