Peter L. Berger's Blog, page 560

What LNG Has in Common With Oil

Oil isn’t the only commodity whose market has undergone a profound change over the past year. Liquified natural gas (LNG) was seen as the next big thing by many, as the supercooled hydrocarbon could be loaded on ships and sent around the world. Demand in Asia was high, and so too were the prices, incentivizing countries like Australia, Qatar, Russia, and the United States to beef up export capacity in an attempt to take advantage of what was seen as a burgeoning market. But Asia’s thirst for LNG seems to have been slaked in 2015 and the global market is now well oversupplied. As the WSJ reports, that has natural gas producers feeling the pain:

[T]he pessimism now surrounding the LNG industry was unmistakable at this week’s Gastech conference, a major annual industry event held in Singapore. One regular attendee, an LNG strategist at a Malaysian energy company, said she had never been to a gloomier energy event.

“The entire industry is worried because it is hard to tell when China’s demand will pick up again. Rising demand from smaller countries such as Pakistan, Egypt, and Bangladesh is not enough to offset the declining demand from north Asia,” she said.

One of the problems for LNG is the sums of money involved in the construction of import and export terminals—tens of billions of dollars needs to be invested on either end of an LNG shipment in order to liquify and eventually regassify the hydrocarbon. Here in the United States, construction of LNG import terminals was well underway before the shale boom kicked off, but the domestic glut of gas convinced companies to change tactics and start construction on export terminals.

That made sense when LNG was trading around $15 per million BTU—liquifying, shipping, and regassifying natural gas typically adds around $5 per mmBTU, and with domestic prices hovering around $3, the added cost of sending it abroad was justified when Asia was paying near $15 per mmBTU. Now, prices there have dropped under $8 per mmBTU, and LNG’s export boosters are left shaking their heads at the remarkable market turnaround.Meanwhile, the LNG oversupply could fundamentally change the way the commodity is priced, as Reuters explains:

Producers and importers of liquefied natural gas (LNG) are preparing to trade the fuel more actively on a spot basis as a looming supply surplus threatens to overwhelm decades-old bilateral contracts and pressure prices lower…Excess supply, along with rising demand, is key to establishing a liquid commodity market as in tight conditions producers and consumers tend to enter long-term fixed supply agreements rather than trade openly.

Whether it’s oil or gas, it’s certainly a buyer’s market today.

Israelis to Study Arabic Starting at Age 6?

A proposed bill in the Israeli Knesset will require that all Israeli school children study Arabic starting at age 6, The Times reports:

Jewish pupils in Israel will be required to learn Arabic from the age of six, under a proposed bill aimed at improving relations between the two communities.

Hebrew and Arabic are both official languages in Israel. The vast majority of Israeli Arabs, who make up a fifth of the country’s 8.3 million people, speak Hebrew but only a small fraction of Israeli Jews can speak Arabic.

The idea has pretty broad support. Doves in Israel support the bill as a way to build peace and understanding between the communities. Hawks want to prepare young people for military duty and to enable more Israeli Jews to understand the threats they face more explicitly.

Whatever the rationale, it’s a smart and good piece of legislation. Israel’s Jewish citizens need to be able to understand and communicate with their Arab fellow citizens and with their neighbors. Israel is a Middle Eastern country, and it needs to speak the language of the region (and one of its own official languages), even if much that is said is unpleasant. Further, raising a generation of educated professionals who speak Arabic is good for business. Many Israelis already study English. Well-educated Arabic- and English-speaking people living in the heart of the Middle East would be attractive hires for many American companies.Understanding each other better won’t necessarily lead to harmonious relations; no language divide separates Sunnis and Shias in much of the Middle East. But understanding is always a good place to start, and Israel should be congratulated for a step in the right direction if this bill passes.Meanwhile, we aren’t holding our breath for any Arab governments to mandate the study of Hebrew.

Why Shale Is Suited for a Bear Market

Oil is trading just under $49 per barrel today, a far cry from a $114 high in June of 2014, and that plunge has forced oil majors to change how they’re doing business. Companies have been forced to slash capital expenditures, staring with high-cost, high-risk projects. But as Bloomberg reports, while these “megaprojects” are being abandoned, oil firms are starting to pay more attention to U.S. shale projects:

Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., ConocoPhillips and Hess Corp. have all either delayed or abandoned projects that range from the deep seas of the Gulf of Mexico to Canada’s oil sands and the U.S. Arctic. At the same time, Exxon and Chevron both announced plans to substantially increase U.S. crude production, largely as a result of their shale operations.

“What makes more sense in this environment: drill a $100 million well in the deepwater Gulf that might come up empty, or poke lots of holes in west Texas where you already know there’s oil for a few million apiece?” said Michael Webber, deputy director of the University of Texas Energy Institute.

One of the unique facets of American shale production is the relative speed at which a well can be drilled and brought online. True, the output decline of these fracked wells is steep, but the low cost of drilling a new one makes shale in some ways ideally suited for today’s market conditions. With cash-strapped companies increasingly risk-averse, smaller shale projects are looking more attractive.

This comes with the obvious caveat that shale projects only make sense when the companies involved can manage to turn a profit, and that’s a difficult proposition with oil below $50 a barrel. Thankfully for the industry, innovative new drilling techniques have allowed companies to find ways to still make money even as profit margins have shrunk dramatically.U.S. shale projects allow oil majors to stay nimble and keep overhead costs low, two very valuable assets in today’s bearish oil market. And, if they keep on this course, it’s American energy security that will win out.

Chinese Officials Warn of War with the U.S.

China clearly can bark, but will it bite? The Guardian reports that its leaders openly discussing the possibility of armed conflict with the United States:

China has warned the US that its “dangerous and provocative acts” in the South China Sea could lead to “a minor incident that sparks war”.

China’s naval commander, Admiral Wu Shengli, issued the warning to his American counterpart Admiral John Richardson during video conference talks on Thursday aimed at defusing tension in the region, according to a Chinese naval statement.“If the United States continues with these kinds of dangerous, provocative acts, there could well be a seriously pressing situation between frontline forces from both sides on the sea and in the air, or even a minor incident that sparks war,” the statement paraphrased Wu as saying.

Harsh words, but probably not a sign of worse things to come—at least not soon. Nevertheless, there is a danger that pressure back home will drive Beijing to become even more aggressive in the South China Sea, particularly now that a UN court in the Hague has agreed to hear the Philippines’ case that China is violating international law. The decision is a blow to China’s public relations, undermining its argument that it has been behaving legally and fairly. Particularly if the court finds against Beijing, Chinese nationalists will feel isolated and hurt.

All of this notwithstanding, is critical that the U.S. and other countries continue freedom of navigation activities and even intensify them in response to pressure. It is impossible to give up on this issue without a fundamental shift in the international system, one that would harm America’s Pacific alliances and create a new system based on Chinese supremacy. Further, precisely because China can afford to take it slow and escalate by increments, the U.S. and its allies should feel some urgency. The costs of confronting China are likely only to go up.Unfortunately, President Obama’s policy of strategic dithering is likely encouraging some in China to test him.

A Lull in the East

A new turn in the Minsk negotiating process has accompanied the sharp drop in fighting in Ukraine’s east over the past six weeks. Both on the battlefield and at the negotiating table, the changes have come from a growing realization in the Kremlin that its policy of aggression Ukraine is failing.

Since it launched its undeclared, hybrid war in the Donbass in April of 2014, Kremlin policy has been to destabilize the reform government in Kyiv by engaging in low-intensity conflict that would not provoke opposition or counter-measures from the U.S. and Europe. Things didn’t go exactly according to plan, however. The success of Ukraine’s counteroffensive in the summer of 2014 prompted Moscow to escalate its intervention in order to bail out its proxies, which in turn led to major U.S. and EU sanctions that summer. Russia has been reeling since.Hammered by the combination of Western sanctions and plummeting oil prices, the Kremlin agreed to the two sets of ceasefires negotiated in Minsk, the first in September of 2014 and the second in February of 2015.  For Moscow, the purpose of the ceasefires was not to end the fighting. Rather, it was to provide a cover for the EU to lift sanctions while Moscow continued a low intensity war that, in the past 13 months, resulted in the conquest of over 700 additional square kilometers of Ukrainian territory and the death of several hundred Ukrainian soldiers.The only problem for Moscow is that the EU has not played along to their script.  Under strong German leadership, the EU made the decision to renew the 2014 sanctions in March of 2015 and then officially did so in June.  Meanwhile, with the further cratering of oil and gas prices globally, the Russian economy has gone into a sharp recession. The IMF predicts negative growth of 3 percent this year, and other economists see greater losses.  Russian officials claim that the sanctions account for 1-1.25 percent of GNP decline. As Sergei Ivanov, Mr. Putin’s Chief of Staff, told the Valdai group this past week in Sochi, Russia needs to get the sanctions lifted.While the Russian economy has been weakening, the Ukrainian military position in the East has gotten stronger. From Mariupol on the Sea of Azov in the south, pushing north to Donetsk and then Luhansk, the Ukrainians have dug in fortified defensive positions. Indeed, they have created three defensive lines. If the Russian punch through one, they will not get very far before finding the next one.What is more, the Obama Administration took the decision in late September to send counter-battery radar for missiles to Ukraine. Long-range Russian artillery has been responsible for over 80 percent of Ukraine’s casualties.  The radar, plus the heavily fortified lines, mean that it would be much harder for the Kremlin to gain additional Ukrainian territory at the current level of violence.  To break through those defenses, Moscow would have to use air power or at least ten to twenty thousand regular troops supported by heavy armor.  Such a sharp escalation would lead to additional sanctions and, most likely, substantial Western military aid to Ukraine.This explains the Kremlin decision to deescalate on the battlefield and to start cooperating on the diplomatic side.  The current state along the line of contact in Ukraine’s east is almost a ceasefire. (There are 30-40 fire incidents every day, but only a few Ukrainian fatalities since September 1.)At the October 2 Paris meeting with Presidents Hollande, Poroshenko, and Hollande and Chancellor Merkel, Vladimir Putin was by all accounts helpful.  He agreed, for instance, that the local elections in the separatist Ukrainian enclaves—the so-called Donetsk People’s Republic (DNR) and the Luhansk People’s Republic (LNR)—would be postponed until January. This stands in sharp contrast to the February 12 meeting of the four leaders in Minsk, when Putin was nothing short of truculent. (Perhaps that had something to do with the fact that, in violation of the Minsk I ceasefire, a combination of Russian special forces and local proxies had a good portion of Ukraine’s army nearly encircled at Debaltseve.)Putin also showed flexibility on other issues in Paris.  For instance, he agreed to a withdrawal of both light and heavy weapons at least 15 KM from the line of contact, and permitted OSCE monitors much more freedom to move around the DNR and LNR to ensure compliance. That said, parts of the DNR have remained inaccessible to the monitors since Paris. But the change of tone was noteworthy.Over the past couple of years, Putin has been relying on an aggressive foreign policy to maintain his popularity in Russia. After all, economic growth was beginning to stagnate even before the price for hydrocarbons started to crater in 2014. So it is no coincidence that the Kremlin has deescalated in Ukraine at the same time as it intervened in Syria. It would be an oversimplification to say that the decision on Syria was taken to divert attention from the retreat in Ukraine. Putin has long stated his support for the beleaguered President Bashar al-Assad in Damascus, and over the summer the Syrian dictator’s position had weakened considerably. But balance of power considerations don’t make for good propaganda. For domestic consumption, Russian media has highlighted the fact that Moscow has opened a “second front” against the West.With this latest turn of events, the pressure is momentarily off Kyiv to pass the constitutional legislation on decentralization mandated by Minsk II that would provide special status to the LNR and the DNR. Instead, the French and Germans are now pressing for Ukraine to pass a local elections bill for the occupied areas so that elections there can take place early next year. The problem for Ukraine is that as agreed at the Paris meeting, not all armed fighters need be out of these territories when the elections take place.The Ukrainians fear, naturally enough, that these armed men will “persuade” voters to vote for the Kremlin’s stooges.  Yet the Germans and French note that, according to the Minsk process, the local elections must be “in accordance with Ukrainian law,” and “with the highest international standards” and with a major presence and role for the OSCE.  They understand that it would be reasonable for Ukraine to write the legislation, including language and procedures designed to increase the likelihood of free and fair elections, in the face of these armed men. Based on my recent meetings with several dozen MPs from several parties in Kyiv, it seems likely that this election bill can get through parliament.If the Ukrainians manage this, the onus will shift to Moscow. The Kremlin’s current “light touch” in Ukraine will make it hard for them to agree to electoral safeguards ensuring free and fair elections—because their proxies have little chance of winning such a vote.Yet even during this period of accommodation, the Kremlin is conceding nothing.  At Valdai last week, senior Russian officials claimed that the constitutional bill on decentralization that passed its first reading in the Ukrainian parliament—to become law, constitutional legislation must pass twice, the second time by a two thirds majority—did not meet the Minsk requirement for “federalization.”  This reserves Moscow’s right to walk away from the Minsk agreement in the future. Moscow wants a bill that gives its Ukrainian enclaves a veto over Kyiv’s national security policy.  Kyiv will never accept this and Berlin and Paris will not side with Moscow on this question.Come January it is highly likely that the EU will renew the sanctions on Moscow.  As explained by numerous German, French and other EU diplomats, Moscow must implement all its Minsk obligations before the sanctions can be eased.  They understand that continuing sanctions is essential now that it was agreed in Paris to extend Minsk into next year.Once this bitter fact is absorbed in Moscow, we will see if the temporary lull in Kremlin aggression holds.  The Kremlin has all its options open.  It could maintain the lull, resume the low intensity war, or escalate sharply.  What Russia does may depend partly on the progress of its Syrian operation.  For Putin, foreign adventures are designed in part to bolster his political standing.  If his intervention in Syria is going well in January, he would have less political need to pursue a war policy in Ukraine.

Rubio Talks Up Vocational Education

With the media understandably focused on Marco Rubio’s devastating exchange with Jeb Bush over his Senate attendance record, the Florida Senator’s policy ideas aren’t getting that much play in the post-debate press. But one of his debate comments on education policy deserves to be generating more conversation (and likely will, if Rubio can consolidate his status as the party’s likely nominee):

We need to get back to training people in this country to do the jobs of the 21st century. Why, for the life of me, I do not understand why did we stop doing vocational education in America, people that can work with their hands; people you can train to do this work while they’re still in high school so they can graduate ready to go work. But the best way to close this gap is to modernize higher education so Americans have the skills for those jobs.

With college debt rising to unsustainable levels, and with a growing number of graduates of expensive colleges unable to find well-paying jobs, it’s critical that policymakers start experimenting with new ways to equip students with the skills and knowledge they need at a lower cost. An increased focus on vocational education should clearly be part of the mix—the four year-long liberal arts education isn’t for everyone, and data show that countries whose education systems emphasize practicable skills have lower unemployment rates.

That said, the United States probably can’t adopt a full-fledged German-style apprenticeship program. America has a high degree of labor mobility, and our educational system should give students a breadth of skills so that they have the flexibility to move from one company to another. And for all the failings of unaffordable four-year universities with bloated bureaucracies, it’s important that we don’t give up on liberal arts programs, which can go a long way toward fostering critical thinking and creativity in students with specific goals and aptitudes.Rubio isn’t the only politician emphasizing vocational education; Hillary Clinton also said last year that the country should “get back to really respecting vocational and technical work.” It’s encouraging to see leading politicians start to rethink a failing educational system. Let’s hope that some of this rhetoric can be translated into intelligent policy changes that maximize students’ leeway to choose the path that is right for them.

Meet Zohr, Egypt’s New Energy Game-Changer

Two months ago, the Egyptian energy game changed. Italian oil major ENI discovered a “supergiant” gas field 120 miles off the country’s coast, a discovery that could end being the Mediterranean’s largest known field. ENI CEO Claudio Descalzi hailed the find as a “historic discovery” that would “transform the energy scenario of Egypt,” and it seems that Zohr—as the field has been named—may already be poised to do just that. Reuters reports:

A source at the ministry of petroleum said the government expects production at Zohr to begin at some point in 2018, seeing LNG imports begin to decline as soon as the field comes online, with the hope that Egypt can stop importing LNG by 2020.

These are the kinds of discoveries policymakers dream of when they wrangle with the constant pressure of energy security. More domestic production means less money spent snatching up supplies from abroad and dealing with the economic and often geopolitical costs of those sorts of relationships. The New York Times reports on how Egypt’s new energy landscape could affect regional diplomacy:

Egypt’s becoming more energy-independent could sidetrack efforts — backed by the United States — to use energy diplomacy to improve relations between Israel and its Arab neighbors. Israel has its own ambitions for offshore natural gas, including a long-gestating plan to sell gas to Egypt.

Israel’s own Mediterranean gas fields have so far failed to realize their touted potential as offshore development has been mired in domestic political debate. The Zohr field now complicates the prospect of production at Israel’s own Leviathan field, as Egypt was being considered as one of the major buyers of that flood of new gas. From Israel’s perspective, the discovery of a new source of natural gas in the region isn’t exactly welcome news, especially in a market fairly flooded with LNG.

The Zohr field could affect global oil prices, too. Thanks to a lack of cheap alternatives, Egypt is currently burning much of the oil it produces to generate power. Zohr’s gas could displace much of that oil for electricity generation, freeing up those crude supplies for exports. That will take a few years, but it does look like yet another supply of oil is poised to be unleashed on a market already awash in oil. Petrostates, take note.

No, the Sky Isn’t Falling

Few elections in Europe of late have elicited as much uniform editorial commentary and speculation in Western media as the recent parliamentary election in Poland. Several op-eds have flirted with an alarmist view that the era of stability and progress in Poland is coming to an abrupt end as the “right-wing roars back,” the “euroskeptics claim victory,” and “Kaczynski regains power.” With only a few notable exceptions much of the commentary is saying more or less the same thing: namely, that with the new PiS government things will get worse not just for Poland but for Europe as a whole, at a time when the continent is struggling already.

A lot of apprehension seems to concern a supposed impending course-correction in Polish foreign policy, with predictions of deteriorating relations with Germany, tougher relations with Russia, and overt anti-EU sentiments doomed to dominate a divided NATO. But perhaps this sky-is-falling foreboding reveals more about the writers’ editorial biases than it does about the complexity of the political scene behind a potentially transformative election in the largest country in Central Europe.So how does such punditry actually square with what is going on in Poland today? What has just happened in Polish politics, and how is it likely to impact on the country’s foreign and security policy choices?First the easy part: There is no question that the latest balloting marks the end of an era in Poland. The Civic Platform (PO) government has had an eight-year run. The length of this term is impressive by any measure but is especially remarkable when judged against the combustible nature of Polish politics. The years that the Civic Platform (PO) held power saw its share of policy successes and failures. It was a period of strong economic growth and investment as well as accelerated military modernization in Poland, though the second term was a bit lackluster compared to the first. By the end of the second term, though, one did not have to be a fortune teller to predict early on that PO would most likely lose its third election bid. The anger aroused in the electorate over the government’s pension reform, its decision to increase the retirement age, scandals linked to the so-called “tape-gate” affair (when secret recordings of senior government ministers in various Warsaw restaurants were made public), the growing pressure from labor unions, especially among the struggling coal mining industry—all of these things signaled the upcoming change. The abrupt departure for Brussels by Donald Tusk, the party’s leader, whose appointment to the post of the European Council President left the PO government scrambling to consolidate under the prime ministership of Ewa Kopacz as it geared up for the double whammy of the presidential and parliamentary elections, combined with an impulse to replace the elites to produce a defeat for the party in power.Admittedly what has made the sting of PO’s defeat even sharper was the unanticipated loss by Bronislaw Komorowski of his bid for re-election as the country’s President in May—an upset delivered by a young and virtually unknown Andrzej Duda, a PiS-nominated candidate. Komorowski’s defeat threw PO into disarray and re-energized the opposition. In part because of Komorowski’s failed campaign, what could have been simply an electoral defeat for PO became a rout. Today PiS, with its 235 seats in the 460-seat parliament, is poised to create a government without the need to look for coalition partners—an historical first for Poland’s postcommunist democracy. And there is a fear among PO supporters that PiS may use its power to settle old political scores. We should know soon enough.Now for the more complicated part of the post-electoral landscape: What can we expect in terms of a foreign policy course-correction going forward? In the near term probably not much, notwithstanding campaign-trail rhetoric. The new foreign and security policy team currently being considered for the cabinet of ministers is by default less known in the West, no different than in any other case of post-electoral transition. To an extent the uncertainty among Western observers about the direction the new team will take stems from the fact that, for eight years of the PO-led government, we have grown accustomed to one group of interlocutors. The incoming team is also arguably less experienced overall—though some among them have extensive resumes of past government service or have worked in various Polish think tanks. But the apprehension that personnel change is bound to lead to policy change—and change for the worse—is at this stage unwarranted.The more serious charge is that PiS’s “nationalist orientation” will represent a setback for Poland’s position in Europe and will undermine the EU. The truth is we do not know, as the experiences of 2005–07, when PiS was last in power, are not necessarily a predictor. Moreover, the charges of nationalism and populism aimed at a government that has yet to be assembled are premature at this point and manifest the personal conflict and antagonism that has defined the narrative of government-opposition relations over the past eight years. This line of reasoning also reinforces the ultimately specious conviction that the only parameters of Polish foreign policy are those framed, on the one hand, by “Europeanism”—the avatar for the policy consensus articulated in Berlin, Paris or Brussels—and, on the other hand, by “nationalism,” which is taken to stand for locally brewed policy prescriptions and priorities, usually with an admixture of populism and historical politics. In reality this binary view has little relevance for policymaking in general, and few in the United States would argue that a foreign policy bereft of a domestic national context makes much sense, or that one can even exist.The preeminent concern about PiS’s electoral sweep when it comes to foreign policy is that it will deepen the fragmentation within the EU and make it more difficult to deal with Russia. Though the tenor of Poland’s interaction within the EU may indeed change, this view seems misplaced at present when it comes to relations with Russia. There is in fact not much daylight between the PO and PiS positions on how to respond to Russia’s annexation of Crimea and the hybrid war against Ukraine. Most likely in the near term the PO government’s hard line on Russia will be continued by PiS, as will its strong pro-NATO and pro-United States stands. On the other hand, the tenor of Poland’s intra-EU relations may become more assertive, but it is a stretch to draw parallels between PiS and British “euroskeptics,” as Poland has benefitted from the resource transfers from the EU and enjoys a broad consensus that EU membership enhances the country’s security.One area of apparent divergence between the outgoing and incoming Polish governments is the extent to which regional cooperation in the Baltic-Central European region can be leveraged to strengthen the country’s position and the region’s security. We will know soon enough whether the PiS criticism that the PO government willfully neglected its regional allies holds water, or if the divergent interests of individual so-called Visegrad Four states, especially when it comes to Russia, will continue to make regional cooperation on foreign and security policy difficult to achieve. If the so-called Visegrad Group (Poland, Czech Republic, Slovakia, and Hungary) can be revitalized, this would be a bonus, but it remains to be seen whether this is in fact achievable, and, if it is achievable, whether it can serve as a basis for a Central European security block in the region. This is an uphill battle at best.The largest issue set—namely, Poland’s relations with the United States and Germany—is unlikely to change in any fundamental way, though there will be shifting accents on how the policy process unfolds and where the principal emphasis is placed. Poland’s relations with the United States are broadly recognized as fundamental to the country’s security. The United States will remain the central security relationship for Poland, with NATO as its key security framework. With the approaching NATO summit in Warsaw in 2016 it will be important for the new government to show diplomatic skill as it works for a permanent NATO base on the country’s territory. This is an area where Berlin and Warsaw remain divided, and where U.S. leadership on setting the agenda for the summit will be essential.Likewise, Germany remains central to Poland’s position in Europe, and judging from the first official visits by President Duda and statements from various PiS politicians this relationship will remain a priority for the new government, even if from time to time Warsaw will take a strong position on issues it considers vital, such as Nord Stream 2, energy policy, and military bases along the northeastern flank of NATO. Poland is also likely to work to enhance its relationship with France. Clearly, there will still be disagreement on how to approach the resettlement of refugees both in Poland and across Europe, but the problem goes far beyond the parameters of Polish foreign policy and is now firmly a pan-European issue, potentially yielding a larger crisis in Transatlantic relations.On balance, the foreign policy menu for the incoming PiS government does not present a radical departure from what the PO government has generally prioritized. There is a risk that individual accents or the particular execution of an agenda item may quickly differentiate the overall tenor of foreign policy between the outgoing government and its successor. Still, the coming of a new government, emerging on the political scene in Poland after eight years in the opposition, should not be cause for commentators to run ahead of actual developments on the ground. In fact, if anything, PiS proved quite adept at running a campaign that appealed to a broad cross-section of Polish society, gaining a popular mandate unlike any government in Poland’s postcommunist history. This grants the new government unprecedented power, but also saddles it with unprecedented responsibility for the decisions it makes.It goes without saying that elections have consequences, and that an electoral sweep of the kind PiS has just achieved in Poland will reshape the country’s domestic politics, making it more conservative overall. But on foreign policy the shift is unlikely to be as pronounced as at home, for the country’s key interests, threats, and challenges remain the same. The supporters of the emerging new government, as well as its critics, would do well to take a breath, watch who gets the foreign and defense portfolios and what their priorities and policy vectors will be, and then pass judgment.

Pope: Attacking Israel’s Right to Exist is Anti-Semitic

Speaking to a delegation from the World Jewish Congress, Pope Francis declared that questioning Israel’s right to exist is anti-Semitic. The Catholic Herald (UK) reports:

“To attack Jews is anti-Semitism, but an outright attack on the State of Israel is also anti-Semitism,” Pope Francis told Lauder and his delegation. “There may be political disagreements between governments and on political issues, but the State of Israel has every right to exist in safety and prosperity.”

A Vatican spokesman confirmed the gist of the Pope’s remarks to CNN. His Holiness had previously told a journalist in June that, “Whoever does not recognize the Jewish People and the State of Israel falls in anti-Semitism.”

It is this stance, and not the Vatican’s controversial recognition of Palestine this summer, that is the break from the historical norm. The Pope was speaking on the 50th anniversary—a blink of an eye in the history of the church—of Nostra Aetate, the Vatican II document that repositioned the Catholic relationship with Judaism from one of antagonism to respect for the “people to whom God spoke first.” And for much of Israel’s history, Vatican-Israeli relations were poor: the Holy See did not recognize Israel diplomatically until 1993.So for all that Pope Francis is painted as pro-Palestinian, he’s actually very pro-Israel by historic standards. But now, in a time of increased anti-Semitism and anti-Zionism in Europe, Pope Francis’ comments are a rare—and repeated—ray of light.

China’s Pivot to Europe, with British Characteristics

Xi Jinping’s visit to the United Kingdom was marked by fanfare, red carpets—and heated criticism. For the critics, London seemed too eager to trade silence on human rights and liberal democracy for investment from Chinese companies. Others countered that China offers a great opportunity to diversify the British economy, a potential market of 1.3 billion consumers, and a chance to reinforce London’s role as a global financial hub. The trade and investment deals signed by Cameron and Xi seemed to vindicate Chancellor Osborne, who had said that Britain should “take a risk” with China.

Whatever one may think of this closer relationship, it should not come as a surprise; it’s just another example of Britain’s trademark foreign policy pragmatism. The historical record of the British Empire’s dealings with the Middle Kingdom provides a good example of this pragmatic tradition. London had neither the will nor the means to colonize China as it did India, the Jewel of the Crown. But the imposition of the Unequal Treaties allowed it to develop spheres of influence in order to profit from trade, leading to the development mostly of the coastal areas. Later on, it was a British territory that was the key to the opening of the Chinese economy under Deng Xiaoping. Hong Kong was the crucial ingredient for attracting foreign investment into continental China, and its handover in 1997 was carried out with this in mind. Neither London nor Beijing wanted to curtail the financial clout of this small territory. Moreover, the United Kingdom was the first Western country to say yes to the Asian Infrastructure Investment Bank, and London largely refrained from commenting on the Umbrella Movement and related protests in Hong Kong.The reasons for Britain’s focus on China aren’t merely the increasing global weight of the Chinese economy; the ongoing debates over Britain’s role in Europe are also a factor. The referendum next year to decide whether the United Kingdom stays in the European Union weighs heavily in any analysis of Downing Street’s foreign policy. If the “Brexit” scenario becomes reality then London has to have other cards up its sleeve. On the Chinese side this closer relationship should come as even less of a surprise. It is one more chapter in the long chain of investments by Chinese state-owned and private companies in Europe in search of quality and technology. This explains why, for instance, Chinese firms have bought the Swedish Volvo, the Italian Pirelli, and the French Club Med. These investments have also become increasingly diversified, ranging from the banking to the health sector. In the United Kingdom there are several examples, albeit with different levels of engagement: The House of Fraser, Standard Bank, and Thames Water, among others. This is to say that today Beijing has a very solid presence in many European countries. Its strongest European bilateral relationship, naturally, is with the powerhouse Germany, but it also has invested in struggling economies such as Greece.The strategic implications of this new reality have stirred strong debates, such as the one over Beijing’s investment in the Greek port of Piraeus. Should there be areas where, for strategic reasons, China is not allowed to invest? There are essentially two reasons for saying “yes.” The first deals with the state-led capitalism that characterizes China. High-dollar deals mean one is dealing not merely with Chinese companies but the state and its one-party regime as well. The second reason has to do with the fact that Beijing is testing the boundaries of Washington’s influence, particularly in China’s near abroad. U.S. allies have to take all of this into consideration when framing their foreign policy priorities.This discussion was raised to a whole new level with the inclusion of a nuclear deal between London and Beijing. This means that China (together with France) will be a partner in the construction of a nuclear facility in Britain. One would think this pushes British pragmatism too far, but only time will tell. Regardless, this will only be the first of many such dilemmas. By dint of its new deals, Beijing has gained a voice in European business. How China will use this capital remains to be seen, but, regarding the thorny issue of British membership of the European Union, the Chinese Foreign Ministry’s official statement at the end of the visit is bound to disappoint Euroskeptics:

China hopes to see a prosperous Europe and a united EU, and hopes Britain, as an important member of the EU, can play an even more positive and constructive role in promoting the deepening development of China-EU ties.

In 1793, the Manchu Qianlong, who reigned longer than any other Emperor, wrote in a letter to king George III: “We have never valued ingenious articles, nor do we have the slightest need of your country’s manufactures.” How the world has changed.