Peter L. Berger's Blog, page 581

Putin Woos The Euros

Russian President Vladimir Putin met with European leaders and Ukrainian President Petro Poroshenko Friday to discuss further steps in de-escalating the conflict in Ukraine. The takeaway? The Minsk process, which was to see Ukraine get back control over its eastern border with Russia, will not complete by the end of the year. Part of the problem is that local elections in the breakaway so-called Donetsk and Luhansk People’s Republics will not take take place this month, as initially envisioned. Reuters:

“On the election issue … it will take longer. We don’t want elections to get held in eastern Ukrainian territories under conditions that would not respect Minsk,” said Hollande, speaking after hosting talks with the Russian, Ukrainian and German leaders.

“It’s therefore likely, even certain now, that — since we need three months to organize elections — we would go beyond the date that was set for the end of Minsk, that is to say Dec.31, 2015,” he told a news conference.German Chancellor Angela Merkel told the news conference: “The result (of Friday’s meetings) is that the Russian president committed to working towards … establishing the conditions that would allow elections to take place according to Minsk, based on Ukrainian law, in a coordinated fashion between the separatists in Donetsk and Luhansk and the Ukrainian government.”

A ceasefire, which has been more-or-less held since September 1, got another boost earlier this week when both Ukrainian government forces and separatist leaders agreed to pull back all heavy weapons, including tanks and mortars, from the front line. “This could mean the end of the war,” Denis Pushilin, the head of the parliament in the breakaway Donbas People’s Republic, said earlier this week.

But suspicions remain high that this might be more of a tactical pause for Putin rather than an attempt at permanent de-escalation. Ukraine’s Foreign Minister Pavlo Klimkin said ahead of the meeting that it’s still “all about the Russians turning up or turning down the temperature…creating instability and using this in a bid for trade-offs, concessions.” Poroshenko, leaving the summit, echoed these sentiments. Poroshenko was less sanguine, but nevertheless cautiously optimistic. “This means that there is a truce. The war will be over when the last piece of Ukrainian land is liberated. As long as we have occupied territories, the war is not over,” he said. In a sign that this read might well be correct, OSCE monitors for the first time on Thursday saw an advanced mobile Russian rocket system armed with thermobaric warheads, powerful enough to level a city block, deployed in the breakaway regions.Still, these early reports indicate that Russia may have convinced some Europeans it is serious about peace. The question is how many and by how much. The sanctions, which have taken their toll on the Russian economy, are due to be reviewed once again by European leaders by the end of the year. Putin doesn’t need to convince every European nation to break ranks for the regime to collapse. And as the fracas over migrant quotas showed, smaller countries no longer feel bound to toe the majority consensus line on hot-button European issues. If Putin plays his cards right, the Russian economy could get a much-needed boost early in 2016.

Pay Your Taxes for a Chance to Dodge Your Taxes

Greece’s desperation to get its citizens to stop dodging taxes has reached the point where the government has decided to bribe people to file their forms—with a chance to get out of taxes legally. The Times of London reports:

Under the plan to try and alter an ingrained culture of outright evasion and off-the-books cash transactions costing Athens an estimated €15 billion in receipts a year, Greeks who can produce VAT receipts will be eligible to enter a prize draw to win a free home, complete with a five-year property tax exemption.

Those who pay using credit and debit cards, leaving a paper trail that deters cheats, will also be rewarded with tax rebates on selected services, such as healthcare, that used to be tax deductible.

This is not the first time the Greek government has reached for what seems from the outside to be ludicrous measures to stop the cheats and fill its coffers:

Since Value Added Tax was hiked to 23 per cent to try to bolster Greece’s depleted coffers, evasion has soared. Last year the governing Syriza party came up with a plan to hire students as casual tax inspectors and informants. And tourists who tipped off the authorities to tas dodgers were to be rewarded with prizes, bonuses and free hoidays. However that scheme was scrapped following widespread ridicule.

As funny as this all is, it’s illustrative of why Greece has the problems it does—and of the scale of the challenge the EU is facing. It’s impossible to imagine this sort of thing being tolerated in Germany or Denmark; equally, it’s difficult to see a future where it’s no longer a factor in Greece. Those who dream of a united, German-ized Europe keep coming up against the north-south cultural divide. Until they have a good answer for how to fix it, the problems with integration are likely to continue.

U.S. Navy Prepares Confrontation in the South China Sea

The United States is preparing to maneuver naval warships and aircraft close to China’s artificial islands in the South China Sea, in what would be the Obama Administration’s toughest response yet to Beijing. Reportedly, the White House is readying plans to send warships within twelve nautical miles of several of the islands—a move that China claims would be an illegal violation of its sovereignty. Citing a U.N. treaty, the United States argues that man-made outposts cannot be construed as legitimate territory. Foreign Policy has the story:

The move toward a somewhat more muscular stance follows talks between Chinese President Xi Jinping and U.S. President Barack Obama in Washington last month, which fell far short of a breakthrough over how territorial disputes should be settled in the strategic South China Sea.

A final decision has not been made. But the Obama administration is heavily leaning toward using a show of military might after Chinese opposition ended diplomatic efforts to halt land reclamation and the construction of military outposts in the waterway. The timing and details of the patrols — which would be designed to uphold principles of freedom of navigation in international waters — are still being worked out, Obama administration and Pentagon officials said.“It’s not a question of if, but when,” said a Defense Department official.

President Obama has been under increasing pressure from, for example, Arizona Senator John McCain to be more assertive in the South China Sea, and in the run-up to last week’s summit with Chinese President Xi Jinping, the White House promised to address the South China Sea disputes. Yet although Obama and Xi made some headway toward resolving other issues, their meeting concluded without any agreement about this issue, and China expert Bill Bishop remarks that these Defense Department comments may indicate the Xi–Obama meeting didn’t go as well as Chinese media outlets (and some American journalists) have been reporting. If the U.S. follows through on sending the ships, that could very well open a new, and more aggressive, chapter in recent Sino-American relations.

Let’s Make the Vatican Bank a Bank

On his recent visit to the United States, Pope Francis received a warm reception at the UN and Congress for his constructive, thoughtful messages on issues like climate change, poverty, inequality, and immigration. Goodness knows His Holiness doesn’t need more work, but we’d like him to adopt one more priority. Fortunately, this one is a natural for the Vatican in more ways than one. Not only does it complement Pope Francis’s social concerns, but it’s something he’s already working on: banking for the poor.

About a decade ago, in June 2005, a new President took office at the World Bank: Paul Wolfowitz, fresh from the Bush Administration. We had our doubts about his Iraq adventure, but we were willing to give him the benefit of the doubt because we thought he had an opportunity to change the behavior of an institution that is a key player in the global war on poverty. So we wrote an op-ed for the Wall Street Journal called “Why Can’t the World Bank Be More Like a Bank?“Back then, in addition to advisory work and “poverty counting,” the World Bank was still focused on project lending—an activity that a growing number of other public and private institutions were able to do, often more effectively. In that piece we proposed that the Bank should focus on critical areas that are underserved, partly because they are just not as profitable. Banking for the poor” was at the top of our list.At the time, by that most people meant micro-finance—namely, the provision of small loans to tiny businesses and individuals. But we preferred to start with the other side of the balance sheet: payments, deposits, savings, and investment. Worldwide, after thirty years of donor- and equity-based micro finance, at most 130 million customers had received loans. But there were still more than 2.5 billion people without bank accounts. In our view, that was the bigger problem. Here is how the problem looked then, and still, pretty much, looks today:Domestic Payments and Savings: First, billions of poor people lacked ordinary bank account services—mainly facilities for payments and savings. This compelled them to rely far too heavily on “mattress money” for savings and payments. This was not only inconvenient; it also increased the risks of theft, extortion, and corruption, and made it more difficult to advertise for business and accept payments (especially for the self-employed and small businesses), to save, and to accumulate the collateral required for loans.Remittances: Closely related to the first point, given the rapid expansion of international migration, there was a growing need for low-cost remittance services for overseas workers from poor countries who wanted to send payments back home to their families, to schools and to doctors.Reserve Savings Basket: Third, there was a huge need for a credible global financial institution to provide simple, low-cost, and secure savings accounts denominated in a basket of reserve currencies, as an alternative to unstable home currencies.To his credit, Wolfowitz invited us down to a meeting at his DC office and expressed enthusiasm, especially if we could make something work with non-profits or NGOs in Iraq. But he didn’t last long enough at the Bank to make a difference. Since then, his successors have devoted increased attention to what they now call “financial inclusion” and “financial literacy,” but there is still a long way to go, especially with respect to remittances.Indeed, since then, the need and opportunity for Banking for the Poor, ”BFP”—hey, every anti-poverty program in history has its acronym, and this is ours—has if anything increased. In particular, in the past decade the number of international migrants living abroad has soared to more than 250 million, while remittances have reached $450 billion a year, more than three times annual total official development assistance of $135–150 billion.Amazingly, for many poor countries, private remittances by the foreign diaspora of low-wage workers are now by far the largest source of foreign exchange, exceeding foreign aid, exports, and foreign direct investment.For example, take the tiny impoverished Caribbean country of Haiti, the poorest in the Western Hemisphere. Since the 2010 earthquake, which claimed at least 100,000 lives, the island has received a large amount of foreign aid and World Bank loans. But its most important single source of foreign exchange is the 2.2 million Haitians who work outside the country. Their “external GDP” is about three times the island’s, and each year they remit at least $2 billion, more than 20 percent of the country’s GDP.Furthermore, like remittances to many other poor countries, most of this is still subject to a 5 to 10 percent “cartel tax” exacted by the international remittance cartel, led by Western Union and its local bank partners. In Haiti’s case this cartel is composed of six dominant banks, including Western Union’s key partner, SogeBank, which controls at least a third of the market. Not surprisingly, Haiti’s transfer charges are among the highest in the hemisphere.In theory, with more than seven billion cell phones on the planet and a plentiful supply of e-wallet applications, this should be an easy problem to solve technically. But again, Haiti is a great negative example. In 2010–13, when the Gates Foundation and a local cell phone company tried to deploy an e-wallet application in Haiti without the remittance cartel’s support, they failed.Neither the World Bank nor anyone else has so far been able to help break the international remittance cartel in Haiti or most other places.Meanwhile, with the help of strong local government in middle-income countries like Brazil and South Africa, banking for the poor has become a proven concept over the past decade, with hundreds of thousands of new accounts established for very poor people. But on a global level, the cause still lacks a real champion—especially one willing to help crack the remittance cartel.But what about the UN and its brand new Sustainable Development Goals (SDG), you might ask? Doesn’t Pope Francis have the UN’s ear? And isn’t banking for the poor of interest to the UN SDG Committee? Well, true: 15 years ago this month, the UN convened a summit of 155 world leaders—the largest in history to that point—to declare eight new “Millennium Development Goals” for the year 2015. But banking for the poor was not on that list. Now, as that 15-year milestone passes, it is clear that there has been a bit of a shortfall, especially outside China, and especially for metrics like absolute poverty, “enrollment in school”, and several other MDGs that have proved hard to measure.We can debate exactly how large the shortfall has been. But the clearest indicator is that on the MDGs 15th anniversary the UN has just convened another even larger summit of world leaders, including Pope Francis, to declare yet another 17 new SDGs, this time with 169 targets and 1,063 indicators! Basically these subsume the original eight MDGs, and give world leaders another generous 15 years to realize them. Private sector managers around the world only dream of living under such lax standards: “Let’s see: I get 15 years to reach my goals, and if I miss them, I get new goals and 15 more years? Nice!”Remarkably, with all this “development banking” expertise at hand, that there is not one mention in all 17 new SDG goals of the fact that, as of 2015, more than 2.5 billion of the world’s poor still lack bank accounts and, therefore, access to the essential financial services that the rest of us take for granted.If we’re really interested in the “sustainability” of investment, education, consumption, production, and employment, as the SDGs are supposed to achieve, the provision of low-cost financial services to the poor should be a core goal, not a peripheral one. (We might start by adding basic financial services to the minimum basket of goods and services that one has to consume in order to avoid being considered one of the “global poor.”)Given that the World Bank and its fellow development banks have not been able to break the remittance cartel, should some other institution take the lead? Obviously, the Vatican Bank has new leadership and may be searching for a new mission.The New Vatican BankEver since Pope Francis became pontiff in 2013, one of his key concerns has been to clean up the Augean stables of the so-called Vatican Bank—formally known as the Institute for the Works of Religion, founded by Pius XII in 1942. Over time, the combination of secrecy, tax immunity, sovereign immunity, and global reach proved simply irresistible to a wide range of shady partners seeking laundry services, from the CIA and the Italian Mafia to big-ticket tax dodgers all over the world.Technically, the bank now still takes some deposits, as a kind of pass-through shell bank, and manages Church business, but it doesn’t make loans. It has recently declared itself the Vatican’s “central bank,” but that might refer to any number of financial activities. The bank is still being reorganized, but Pope Francis has already succeeded in installing new management and establishing new procedures for transparent operations at the Vatican Bank.This is a good start, but we invite Pope Francis to go farther. The SDGs may not recognize it, but world’s poor really do desperately need financial services. And they could really use a first-rate financial institution that will be in their corner —that will lead the way in working with other financial institutions around the globe to marshal new technology, cut through cartels and regulatory barriers, and design low-cost e-payments, e-savings, e-lending, and financial literacy services that the poor need to not just survive but prosper. He could start off by setting a goal of eventually providing free remittances to the poor—a target that is well within the reach of mobile technology.Now cynics may say that in fact the Vatican Bank has limited facilities and staff, and lacks the global distribution network, technology, and expertise in “BFP” needed to pull this mission off. But what are business partners for, if not to fill in the gaps in institutional capabilities? After all, it is not as if there is a shortage of financial institutions in the world. They just need to a little moral fiber and encouragement.In fact, the Catholic Church ideally suited to organize this effort. Not only does it have international aid organizations like Caretas that work with the poor every day, but it also has a huge global network of schools, hospitals, churches, and…why not train priests and nuns to help ordinary folk with financial literacy?Most important, though, if we’ve learned anything from forty years of experience with experiments in banking for the poor and micro finance, what’s been missing is not technology or networks or even capital, but a serious full-time commitment to serving the poor. Pope Francis clearly has that in spades.So let’s stop waiting around for other institutions to solve this problem. Let’s reinvent the Vatican Bank and unleash it to do what global financial institutions should have been doing all along. It’s a match made in Heaven!

China Slowdown Threatens Nicaragua Canal

In recent years, Chinese investors have been promising one of the most ambitious infrastructure projects in history: a rival to the Panama Canal, routed through Nicaragua. And though Wang Jing, the billionaire backing the canal, lost 84 percent of his net worth in the recent Chinese stock market collapse, Wang’s aides say he isn’t giving up on the project. Bloomberg:

The company said that despite the economic setbacks and local protests against the canal’s construction, the project is moving forward. “I have no doubt that appropriate financial arrangements will be in place before construction commences,” Bill Wild, HKND’s chief adviser for the canal, said in an e-mailed response to questions. Company representatives for Xinwei declined to comment on Wang’s personal investments and declined a request for an interview with Wang.

Color us skeptical. Back in August, Bloomberg reporters visited Nicaragua but were unable to find much evidence of progress on the canal. Between that news and this development, we’re unconvinced that China’s $50 billion dreams will be realized. (The idea for the canal, by the way, has been floated for hundreds of years, and was under somewhat serious U.S. government consideration in 1929.)

Over the past decade, Chinese companies have been laying the groundwork for grandiose construction projects in developing countries, including in South America—where, since the Monroe Doctrine, world powers have often deferred to Washington. Now that China’s economy is faltering, it is likely that many of these ambitious efforts will either publicly be cancelled or quietly put on the back burner. Countries like South Africa, Nigeria, and Brazil are already reeling from the consequences of reduced Chinese demand for their commodities. They are likely to get hit again as Chinese plans for investment and infrastructure development are suspended.

Gun Control: More Racial Disparities Than the Drug War

Original ideas and measured arguments are hard to come by in the wake of mass shootings, like the one that occurred yesterday at a community college in Oregon. Emotions are running high, and liberal pundits are screaming at conservative pundits with an unusual level of venom about how they have blood on their hands for opposing new gun control laws. Conservatives, on the defensive, counter that the left is “politicizing tragedy,” or else recycle arguments that mass shootings can only be prevented by an even more well-armed populace.

One exception last night came from Michael Dougherty, a columnist for The Week, who noted incisively that “the horror at gun violence and the horror at war on crime criminal justice policy are in deep tension.” Dougherty is right: Many liberals who believe adamantly in strict gun control laws believe just as adamantly that the legacy of tough-on-crime conservatism is responsible for the horrors of mass incarceration, and all the racial baggage it carries with it.Many gun control advocates seem to be under the impression that governments can pass new felony legislation that will take guns off the streets without requiring more aggressive policing, without putting more people in prison, and without the racial disparities in enforcement that characterize the rest of our criminal justice system. This is a fantasy: Gun control and tough-on-crime politics are two sides of the same coin. If governments are serious about cracking down on illegal guns in a meaningful way, they will need to use all of the same tools that they used to crack down on crime from the 1970s onward—tough criminal penalties (i.e., long prison sentences for offenders) and aggressive policing, especially in poor and minority neighborhoods that tend to have the highest rates of crime. Indeed, as Reason‘s A. Barton Hinkle pointed out, New York’s notorious stop-and-frisk policies, which left-wing mayor Bill DeBlasio led the charge against, was arguably one of the most effective gun control policies in the country.Moreover, all the evidence suggests that stricter gun laws would fall disproportionately on the same people who have always bear the brunt of tough criminal justice policies. The Washington Post‘s Radley Balko noted last year that “47.3 percent of those convicted for federal gun crimes were black — a racial disparity larger than any other class of federal crimes, including drug crimes.” According to the Bureau of Labor of Justice statistics, state, local, and federal governments arrested black people for gun crimes at a five times higher rate than they arrested whites. More than three out of four gun arrests were in urban areas. So people who empathize with the message of the Black Lives Matter movement—that young, black men in America’s cities are treated unfairly by the criminal justice system and that mass incarceration has devastated too many communities—should think further about what the draconian gun policies they pine for would actually entail.Most socially liberal gun control champions don’t see themselves as pushing policies that would abet racial profiling or worsen the problem of mass incarceration. They see themselves as going after their political enemies—socially conservative white men in red states. And it may in fact be possible to craft narrow gun policies—like requiring more background checks at gun shows—that would mostly affect people in this demographic. But few intelligent observers are under any illusions that this type of symbolic half-measure on gun control would meaningfully cut into America’s gun violence statistics. Meaningfully reducing gun violence in a nation with 300 million guns would probably require the type of confiscatory gun regulations enacted in Australia and some European countries. And the mechanics of enacting such policies could well contradict the vision for police and prison reform that has been gaining momentum on the left and right alike over the past year.

Misanalysis Makes a Mess

Does the Obama Administration support or oppose Russia’s brazen deployment of military force in Syria? Amazingly, it is tough to tell.

On the one hand, in his United Nations speech, President Obama offered a thinly veiled denunciation of Russia when he pointedly stated that “some major powers assert themselves in ways that contravene international law.” But on the other hand, Secretary of State Kerry lauded the “fundamental principles” Washington shares with Moscow in Syria and even stood next to his Russian counterpart at a press conference just hours after Russian warplanes attacked rebels—anti-Bashar al-Assad but not pro-ISIS—in an in-your-face display of Moscow’s true priorities. After lamely calling for Assad’s departure for four years, one cannot fault America’s regional allies for interpreting President Obama’s cynical acceptance of Assad’s continued and open-ended rule as a blessing of sorts for the muscular defense of the embattled Syrian leader by the new Russia-Iran axis.How did we get caught in this muddle? How did the perfectly natural American outrage at the brutal nihilists of ISIS shape-shift into a supine response to the most direct and serious Russian challenge to America’s global position in four decades, a nonchalant acceptance of Iran’s deployment of troops and materiel to the Mediterranean littoral, and a willingness to legitimize the continued rule of a maniacal despot responsible for more than a quarter million killed and the depopulation of nearly half his entire country?The answer is that this policy is the logical extension of a principle that has been at the heart of President Obama’s approach to the Middle East for the past seven years. This is the idea that the world had consigned to history “20th-century threats” to global peace – especially, the appetites for power, prestige, and wealth of voracious states—leaving in its wake only the still serious but very different “21st-century challenges” of failed states, climate change, and so on.As applied by the Obama Administration, this idea has had three corollaries. The, first, following the Bush Administration and public opinion in the wake of the September 11 attacks, is that Sunni jihadist terrorism—represented first by al-Qaeda and now by ISIS, a threat fueled by the blinding corruption, ideological extremism, and gross mismanagement of Sunni-led states—represents an existential threat to the West, akin to the thousands of Soviet warheads once aimed at American cities. Against this threat, it is legitimate to deploy American military assets, but only in targeted and limited ways, such as dispatching Seal Team Six to kill Osama bin Laden.That is because of the second corollary, which holds that America cannot and should not wield power to navigate the threats of disorder the way it wielded power to confront traditional aggressors; indeed, wielding such power (so the argument goes) only aggravates some of the most dangerous threats we face and diverts us from the alleged real job of “fixing” the root social and political causes of disorder. But the 21st-century world is also one of opportunities, not just limitations. One such opportunity was the third corollary—the opportunity to bring Iran in from the cold, where it could be transformed from a radical, nuclear-proliferating, renegade state into a rule-abiding, status quo partner in the fight against the jihadists.Each of these ideas is wrong. Some are obviously wrong; clearly, for instance, rapacious states have survived into the postmodern era, and old-fashioned force must sometimes be used to protect our allies and interests against them. As for Iran, whatever the wisdom of a narrow arrangement to postpone its nuclear weapons ambitions, it is farcical to believe that the Supreme Leader can be a true partner of the United States in any common enterprise. The spectacle of American diplomats chasing after the Iranians at the United Nations last week to engage their help in an array of regional concerns, only to be rebuffed, was both sad and revealing.The most difficult of these wrong ideas for Americans to internalize is the real scope of the terrorist threat. The enormity of 9/11 made “Never Again” the motto of two administrations, with “Again” defined so broadly as to include everything from cataclysmic attack to lone-wolf incidents in Times Square, Chattanooga, and Fort Hood. The result is to blur the distinction between terrorism that can threaten the fiber of a nation, against which successive Presidents rightly unleashed the full power of our military, intelligence, and law enforcement capabilities, and terrorism that—however horrific—may be the unacceptable but perhaps inevitable price of leading the world’s liberal democracies.Where does ISIS fit in this? Its potential to execute or certainly inspire terrorism short of a 9/11 mass casualty attack is significant, given the allegiance to it by many Muslims, its resources, and the total war it preaches against the rest of the world. But that threat still remains largely potential, with the likelihood of a catastrophic ISIS attack on the homeland not substantially greater today as a result of its success in creating a caliphate in western Iraq and eastern Syria.To be sure, even if ISIS is not now a threat to the homeland, destroying it is justifiably an urgent priority for international action. ISIS has enslaved as many as ten million people, threatens to seize even more of Iraq and Syria, and is a major contributor to the downward spiral of dysfunction not only destroying the Middle East but sending hundreds of thousands of refugees looking for shelter in Europe. But urgent is not the same as important. The important priority is preventing the Russian-Iran alliance from demolishing the regional security system by establishing a substantial security presence inside Syria, from which the two could—separately and together—project power throughout the Levant, cynically exacerbate the refugee crisis, and advance security, diplomatic, and possibly even energy policies to protect their friends and interests.Taken together, the Administration’s wrong assumptions led it to an analysis that misreads the Middle East situation and a set of policies that misprioritizes the urgent (rolling back ISIS) over the important (preventing anti-American, anti-Western powers from rearranging Middle East security to their benefit). But it’s not too late. If the Russian-Iranian power-play in Syria, like the Soviet invasion of Afghanistan a generation ago, compels the President to reassess his policy, he will find that has realistic options. The smartest of those options fall far short of launching another ill-fated Iraq-style massive military operation, which is the usual “alternative” option asserted by the President’s advisers. Specifically, the President should operate on the basis that, while defeating ISIS cannot be the highest priority, hitting it hard can also checkmate both Vladimir Putin and Iran’s chief strategist, the Revolutionary Guards commander Qassem Suleimani. This includes rapidly increasing operations against ISIS—with more U.S. ground forces deployed as advisers, forward controllers, raiders, and in some cases armored spearheads—with the goal of retaking terrain. We should reach out to Turkey to create a safe-zone in northern Syria, get as serious about a CIA-led anti-Assad/anti-ISIS rebel-training program as we were with the mujaheddin in Afghanistan, and reinforce local allies (including Israel) with the military assets to counter the best the Russians can put into the field. Whatever relations we have with the Russian-Iranian coalition should be limited to safety-oriented mission de-confliction.For President Obama, playing by “Putin/Suleimani rules” won’t be easy, but it may be just what it takes to restore a sense of balance and proportion to our Middle East policy and counter the very real Russian-Iranian threats to our allies and interests.

Here Comes Iran…

As Russian attacks continue into their second day, once again targeting rebels directly threatening Assad rather than focusing on ISIS exclusively, Iran appears to be dispatching ground troops for direct combat roles. Reuters reports:

Two Lebanese sources told Reuters hundreds of Iranian troops had reached Syria in the past 10 days with weapons to mount a major ground offensive. They would also be backed by Assad’s Lebanese Hezbollah allies and by Shi’ite militia fighters from Iraq, while the Russia would provide air support.

“The vanguard of Iranian ground forces began arriving in Syria: soldiers and officers specifically to participate in this battle. They are not advisers … we mean hundreds with equipment and weapons. They will be followed by more,” one of the sources said.So far, direct Iranian military support for Assad has come mostly in the form of military advisers. Iran has also mobilized Shi’ite militia fighters, including Iraqis and some Afghans, to fight alongside Syrian government forces.

If these reports prove to be true, and a coordinated push by Syrian and Iranian ground forces backed by Russian air power soon begins, we will know with even more certainty what Russian President Vladimir Putin and Iranian Quds Force commander Qassem Soleimani discussed in July (when Soleimani flew to meet with Putin in Moscow in direct violation of a UN travel ban).

Russian Economy in Deep Trouble

As everyone’s eyes are fixed on the Russian fighters zooming through the skies over Syria, things aren’t actually so glamorous back in the Motherland. Bloomberg has the story:

[Anatoly] Anisimov, 50, has put his plans on hold as he digs in for what could be Russia’s longest recession in almost two decades. “Nothing good awaits us next year either,” he says.

Across the Russian economy, businesses have shelved investment plans, worried that the ruble might extend its decline if oil prices slide further and that geopolitical tensions could bring new economic headwinds.

The prospect of a prolonged slump is a challenge for the Kremlin, which has relied on rising living standards to boost popular support, as well as foreign investors, who have bet billions on Russia as a growth market.

Russian President Vladimir Putin’s popularity for most of the past fifteen years has rested on comfortable economic growth. Yet due in part to low oil prices and Western sanctions over Ukraine, Russia’s share of global output is expected to shrink to its lowest level since the collapse of the Soviet Union by the end of next year.

So far, Putin’s nationalist rhetoric, his adventures in Ukraine, and his efforts to portray Russia as a force for stability in a world full of terrorists and weak-kneed Westerners have seemingly compensated for weak economic conditions. But while it isn’t prudent to confidently predict the political fortunes of a leader as durable and savvy as Putin, a less influential Russian economy will certainly have important effects on the Kremlin’s agenda. Russia will, for example, have to spend a larger percentage of its GDP on military and economic efforts to prop up leaders like Bashar al-Assad. It may not be coincidental that Russia is playing a bigger role in geopolitics amid tough economic conditions at home, but it is certainly a difficult act to pull off.

VW’s Not the Only One Fooling Car Tests

The ripples from the VW cheating scandal have spread far these last two weeks, and the fallout isn’t over yet. According to a new study from the Department of Energy’s Oak Ridge National Laboratory, a significant gap exists between the mileage American cars demonstrate during federal testing and the mileage they actually get during road conditions. And, researchers warn, that gap has widened.

The study found that engine efficiency in U.S. cars was overestimated by roughly 15 percent from the 1990s into the 2000s, but that over the last three years that same metric was off by between 23 and 25 percent. In other words, the newest cars on the road could be providing consumers around a quarter less mileage than their manufacturers—and federal regulators—claim.This isn’t just a story of false advertising; lower gas mileage means higher greenhouse gas emissions and more local pollutants. Reuters cites a study released two years ago by the International Council on Clean Transportation, in which researchers found that the gap between cars’ emissions on the test track and those on the actual road more than quadrupled from 8 percent in 2001 to 38 percent in 2013.It seems Volkswagen owners aren’t the only ones out there being duped.