24.6.14

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Kurdistan Leader Calls for "Self-Determination"; Kurds Sell Oil to Israel; Kerry's New Definition of "Intervention"

Posted: 24 Jun 2014 01:54 PM PDT

Iraqi Kurdistan leader Massoud Barzani says 'the time is here' for self-determination.
Iraqi Kurdish President Massoud Barzani gave his strongest-ever indication on Monday that his region would seek formal independence from the rest of Iraq.

"Iraq is obviously falling apart," he told CNN's Christiane Amanpour in an exclusive interview. "And it's obvious that the federal or central government has lost control over everything. Everything is collapsing – the army, the troops, the police."

"We did not cause the collapse of Iraq. It is others who did. And we cannot remain hostages for the unknown," he said through an interpreter.

"The time is here for the Kurdistan people to determine their future and the decision of the people is what we are going to uphold."
Iraqi Kurds Deliver Oil to Israel

In a move that draws criticism from the U.S. State Department, Iraqi Kurds Deliver Oil to Israel.
Oil piped from Iraqi Kurdistan has been successfully delivered directly by the region's semiautonomous government for the first time, despite opposition from the U.S. and the Iraqi central government.

The Kurdish Regional Government said late Friday that one million barrels of its oil piped through the Turkish port of Ceyhan "was safely delivered to the buyers." The KRG declined to say who the buyers were.

The oil is currently being unloaded at an Israeli port, according to officials at the terminal.

The U.S. State Department confirmed the delivery, criticizing the semiautonomous region's unilateral sale without Baghdad's approval and warning buyers of its oil.
Criticism is Not Intervention

Criticism is not intervention. Nor is pressure. Nor is sending 300 military advisors to Iraq. Nor is sending the U.S. Secretary of State to Iraq in an attempt to stop the Kurds from "Going It Alone".

How do I know these things?

US secretary of state says "Troop Deployment to Iraq is Not Intervention".
US secretary of state John Kerry has urged Kurdish leaders to stand with Baghdad and insisted that the imminent deployment of American military forces is "not intervention" in Iraq's affairs.

As fighting continued for control of Iraq's largest oil refinery at Baiji, Kerry flew to the Kurdish region on an emergency trip through the Middle East amid fears that Iraq faces disintegration under the onslaught by Islamist militants – the Islamic State in Iraq and the Levant (Isis) – backed by disgruntled Sunni tribes.

In an interview with American journalist Andrea Mitchell, Kerry diminished the deployment of up to 300 irregular forces, expected to come largely from US army special forces.

"Well, that's not intervention," Kerry said.

Kerry characterized the so-called "advisory" mission – "planning, advising, some training and assisting" – as something short of intervention, since "we are not here in a combat role. We are not here to fight. And the president has no intention – none whatsoever – of returning American combat troops in Iraq to go back to where we were."

Ninety of those troops, organized into four teams, arrived in Baghdad on Tuesday to begin establishing a "joint operations center" with the Iraqi military, Pentagon press secretary Rear Adm. John Kirby said. They join 30 "advisers" already there on secondment from the US embassy.
Something Short of Intervention

Please note the new definition of intervention requires sending combat troops. Clearly that opens up all sorts of possibilities for U.S. "non-intervention" all over the world.

Kurds Mull Going It Alone

Bloomberg reports Kurds Mull Going It Alone.
U.S. Secretary of State John Kerry met with leaders in Erbil, the Iraqi Kurdish capital, today to make his case for national unity to the ethnic minority that may hold the only winning hand in the country's sectarian turmoil.

Kerry held talks with Massoud Barzani, president of the Kurdistan Regional Government, and other Kurdish leaders, bringing the same plea for cooperation he delivered yesterday to Shiite and Sunni politicians in Baghdad.

Kerry told CNN in an interview after a 50-minute meeting that Barzani "made it clear that he wants to participate in the process, that he wants to help choose the next government" of Iraq. Kerry didn't say Barzani disavowed Kurdish aspirations for independence.

A decision to go forward with independence would affect not only the future of about 17 percent of Iraq's population of 33 million, but also whether the nation of Iraq dissolves into a loose federation or disappears. Either outcome would be a tectonic shift in regional politics with implications for neighbors Turkey, Iran and Syria, which also have Kurdish minorities.

The U.S. has said it wants Iraq to maintain its territorial integrity and seek a peaceful outcome through a new government that respects the interests of Sunnis, Shiites and Kurds. The Obama administration would strongly oppose Kurdish independence now as "another nail in the coffin of the Baghdad government," said Morton Abramowitz, a senior fellow in Washington at the Century Foundation and a former U.S. diplomat.
Turkey's Best Ally: The Kurds

New York Times contributing writer Mustafa Akyol says Turkey's Best Ally: The Kurds.
When the Iraqi city of Mosul was captured on June 10 by the armed militias of the Islamic State of Iraq and Syria, or ISIS, many world leaders were shocked and concerned. Turkey's leaders were more alarmed than most; ISIS militants stormed the Turkish consulate in Mosul and kidnapped 100 Turkish citizens, some of them diplomats.

Back in Turkey, a heated media debate abruptly came to a halt after Prime Minister Recep Tayyip Erdogan, in his usual authoritarian tone, asked the media "to follow this issue silently." Two days later, an Ankara court issued a gag order, banning all sorts of news and commentary on the events in Mosul. The reason, the court explained, was first "to protect the safety of the hostages" but also to prevent "news that depicts the state in weakness."

But Turks need to discuss their state's weaknesses, and the mistakes made in the multiple crises along the country's southeastern borders.

By focusing so singularly on toppling Mr. Assad, and turning a blind eye for quite some time to the anti-Assad extremists, it unwittingly helped create a monster.

Yet still there is one bright spot in the region — and it is a direct result of Mr. Davutoglu's "zero problems" vision: Iraqi Kurdistan, which is now Turkey's best ally in Iraq, if not the whole region.

This is deeply ironic, of course, because for decades Turkey was paranoid about Kurds and their political ambitions — both at home and abroad. The Erdogan-Davutoglu team, along with President Abdullah Gul, gradually turned this bitterness with the Kurds into reconciliation and eventually an alliance.

The alliance between Turkey and Iraqi Kurdistan has grown over the past five years, as Turkey invested heavily in the partly autonomous Iraqi region, opened a consulate in its capital Erbil, and Mr. Erdogan even befriended its leader, Masoud Barzani.

The relationship was further cemented earlier this month, when Ankara signed a 50-year deal with Iraqi Kurdistan's leaders, allowing them to export Kurdish oil to the world via a pipeline that runs through Turkey. The deal, which was opposed by Iraq's central government in Baghdad, indicates that Turkey now sees Iraqi Kurdistan as a strategic partner, and cares very little about the territorial integrity of Iraq that it used to obsess about.

It's no wonder, then, that a spokesman for Mr. Erdogan's party recently announced that Turkey would support Iraqi Kurds' bid for self-determination. "The Kurds of Iraq can decide for themselves the name and type of the entity they are living in," he said — a clear departure from traditional Turkish policy.
U.S. Wrong at Every Turn

On any critical foreign policy issue, especially in the Mideast, one should consider the likelihood the U.S. is wrong. In this case, it is clear that Mustafa Akyol knows what he is talking about, and Kerry doesn't.

Iraq has changed. There is no way to reinstall Sadaam Hussein and undo U.S. idiocies in the region. It would be best for all involved for the US to get the hell out of the way and let the Kurds deal with this as they see best.

Having totally messed up every step of the way, no one should welcome U.S. intervention no matter how Kerry labels it.

Iraq was once three pieces.

With Turkey no longer in opposition, Iraq will soon be split in pieces again. Contrary to Obama administration beliefs, the splitting up of Iraq is likely the best outcome now. The sooner this all happens the better.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Rebels Down Ukraine Helicopter in Ceasefire Violation; Putin Offers Concessions; Merkel's Misguided Threat

Posted: 24 Jun 2014 11:21 AM PDT

With the downing of another Ukraine helicopter by pro-Russia rebels, one would think tensions in the region would be up. Yet, analysts seem excited by a symbolic move from Putin.

Bloomberg reports Ukraine Rebels Down Chopper as Putin Makes Concessions.
Pro-Russian rebels in Ukraine shot down a government helicopter in violation of a cease-fire, killing nine troops just hours after President Vladimir Putin met a key European Union demand to help end months of fighting.

Separatists downed an Mi-8 chopper with a shoulder-fired missile in the eastern city of Slovyansk at about 5 p.m. local time, killing everyone on board, a spokesman for the Defense Ministry, Vladyslav Seleznyov, said on his Facebook page.

Earlier today, Putin asked lawmakers in Moscow to rescind the authorization they gave him on March 1 to use force in Ukraine, a conciliatory gesture that sent shares and the ruble higher before he traveled to EU-member Austria. The EU yesterday demanded Russia overturn the mandate, which helped fuel months of volatility in Russian and Ukrainian markets. Putin's spokesman, Dmitry Peskov, said the Russian leader was trying to stabilize Ukraine after peace talks started yesterday.

"This is most certainly long-awaited positive news in the Ukrainian crisis, but by no means is the Ukrainian crisis over," Lilit Georgian, a senior analyst at Ihs Global Insight, said by e-mail. "The Russian move is rather symbolic, considering the likelihood of a direct intervention has not been high anyway. Moreover, Moscow could safeguard its interests through the armed pro-Russian insurgents, as well as through economic means."
Rather symbolic, or completely meaningless? If Putin never intended to invade Ukraine, and I believe he never did, then rescinding the authorization to use force was meaningless.
German Chancellor Angela Merkel told members of her party yesterday that Russia faces full economic sanctions at a June 26-27 EU summit unless it takes verifiable steps to calm the crisis in Ukraine by Friday, according to two people present at the meeting.

Ukraine remains to be convinced that Putin's moves are more than a tactical retreat to avoid broader sanctions, Yuriy Yakymenko, head of political research at the Razumkov Center, said by phone from Kiev.
Definition of "De-escalation"

"If rebels stop their attacks on Ukrainian government troops, if they stop taking hostages, if Russian mercenaries leave Ukraine, if weapons are taken back to Russia, then we'd say that the process of de-escalation has started," said Yakymenko.

If Yakymenko implies all of those need to happen, don't expect de-escalation any time soon. If he means any of those, there may be de-escalation over time.

Merkel's Misguided Threat

The German threat of "full economic sanctions at a June 26-27 EU summit" is either a foolish bluff or economic silliness.

Putin is not going to respond to sanctions other than perhaps shut off all gas to Europe if pushed hard enough.

Germany the Sanctions Big Loser

Sanctions are a lose-lose game and Germany would be the big loser as explained by Saxo Bank chief economist Steen Jakobsen in Unvarnished Ukraine Update; Steen Jakobsen on Impact of Ukraine on Germany.

From Steen ...
The Ukraine crisis will go on for much longer than anyone wants, everyone will lose and world growth will disappoint again, but the real issue behind the scenes is Europe's lack of a coherent energy policy. The present green energy policy is a mess. Green energy is inefficient, tax burdening and nowhere near close to meeting rising energy demand from Europe.

Europe is energy deficient. EU dependency on imports is increasing for all fossil fuels. Oil imports reached 83.5 per cent in 2009 and 64.2 per cent for gas, according to the EU Commission.

The biggest loser will be Germany. There are more than 6,200 German companies engaged in business with Russia. The Economist states that 300,000 German jobs are at risk, German business investment into Russia exceeds €30bn, excluding financing from German banks, but more importantly Germany imports 70 per cent of its energy of which 25 per cent comes from Russia.

Angela Merkel and her government have been caught out by a failed energy policy, which has made electricity a luxury good for many German households. But even worse, she decided that she would rather be dependent on Mr Putin than on nuclear power.

The biggest consequence of the Ukraine conflict could be a revisiting of the 1970s energy crisis, including energy rationing. After close to 30 years of doing this job I am realizing that energy is everything in explaining growth, investment, sentiment and market returns.

Understand energy and its marginal price of production and its delivery and you have the keys to predicting the world. Sadly Europe and the US is stuck in using Sir David Frost's definition of diplomacy: "Diplomacy is the art of letting somebody else have your way."
Merkel will likely back off her threat, instead imposing symbolic (meaningless) additional sanctions. We find out in the next three days.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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