Streetwise Professor

February 18, 2017

Putin Is So Smart That He Outsmarted Himself–You Should Have Listened to Me, Vlad

Filed under: History,Military,Politics,Russia — The Professor @ 2:29 pm

Apparently there is buyer’s remorse in Moscow, as Putin and his coterie are disappointed at Trump’s failure to change dramatically the relationship between the US and Russia. Don’t believe me? The WaPoo and the FT say so.

This is no surprise to me at all. Indeed, from the time that the hysteria over alleged Russian manipulation of the US election broke out, I said Putin should be careful what he asks for, because it was be unlikely that Trump would behave as expected–and hoped, in Moscow, apparently. There are several reasons for this, some of which I pointed out at the time.

The first is Trump’s mercurial nature. Counting on what he says at time t to be reliable information for forecasting his behavior at T>t is a mugs’ game, because much of what he says is for tactical value and to influence negotiations, and because he changes his mind a lot, in part because he does not have strong ideological convictions.

I think Trump’s stand on Nato–an issue of particular importance to Putin–is a classic example. There is good sense at the core of Trump’s position: European Nato states have been free riding for years. He wants to get them to stump up more money. What better way than to threaten to ditch Nato? He has quite clearly put the fear into them. Then he dispatches his reasonable emissaries–Mattis and Tillerson–to lay out the framework of a modus vivendi.

The second is that Trump’s assertion of an independent United States with attenuated ties to traditional multilateral organizations is hardly helpful to Putin. This is especially true because part of Trump’s program along these lines is to revitalize the US military. Russia has strained mightily to overcome the decrepitude of its 1990s military, and has managed to recapitalize it sufficiently to make it a credible force. Even after these efforts, however, it can only dimly see the tail of the American military in the distance. If Trump goes into super-cruise mode, Russia’s expenditures will have largely been for nought. Closing the military gap required the US not to compete. Trump made it clear he would compete. How could Putin have desired that?

Nato was already the US military plus a few European military baubles hung on for decoration. A stronger US military makes Nato stronger, regardless of what the Europeans do. If the Europeans kick it up a bit too, well that all really sucks for Vlad.

The third is something that has only become manifest in the past months. Namely, the Democratic loss left them desperate to find a scapegoat. Russia has become that scapegoat, and anything said that is remotely positive about Russia unleashes paroxysms of fury–not just from Democrats, but from many Republicans as well. Any positive move that Trump would take towards Russia would be seized upon as evidence of a dark bargain with the Kremlin. So (as he acknowledged in his press conference) he has no political room to deal with Russia. Indeed, if anything he might be forced to being more Russophobic Than Thou in order to put this issue to rest.

That is, the dynamic created by his intervention has completely undermined Putin’s purpose. A self-inflicted wound.

There is yet more irony in this development. Along with their spawn, 1980s peaceniks who shrieked that Reagan’s robust stance with the Soviet Union threatened the earth with nuclear annihilation now sound like those in the hard right in the ’80s who thought Reagan was a wimp, and a traitor for talking with Gorbachev. Trump, of all people, is the one lamenting that defusing conflict and talking with the Russians would reduce the risk of nuclear holocaust.

All this calls into considerable doubt Putin’s vaunted tactical and strategic acumen. If indeed Russia intervened heavy-handedly in the US election, it is not turning out well for Putin. And evidently he recognizes this, and is sharply reducing his ambitions. Maybe, pace Stalin, we’ll see him write an article where he claims Russia is dizzy with success, and needs a respite to consolidate its gains.

Truth be told, I do not think that Putin thought that his machinations (whatever they were–and I am skeptical about some of the more lurid claims) would result in Trump’s election. I surmise that his objective was to damage Hillary, in the full expectation that she would win and it would be advantageous to deal with a weakened president. But, he was too clever by half, outsmarted himself, and now has to deal with an unpredictable dervish capable of turning any which way.

Viewed in this light, Putin is less Sorcerer, than Sorcerer’s Apprentice, who cast a spell he could not control: authoritarians who have been in control too long have a tendency to do that, because they are convinced of their own greatness. Whatever his intent, the unintended consequences of his actions have arguably left him worse of than if he had left well enough alone. I do not believe that it was his intent to elect Trump. When Trump was elected, he let his mind run wild with the possibilities, but he has now come crashing to earth.

Wiley Coyote comes to mind. That Acme Election Kit (or would it be the Acmeski Election Kit) hasn’t worked quite as planned, has it Vlad?

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February 13, 2017

The Intelligence Community Coup Continues

Filed under: History,Military,Politics,Russia — The Professor @ 8:27 pm

Update (2239 CST, 2/13/17). The pack has caught its quarry: Flynn has resigned. The taste of blood will just excite their appetite for more. Further, this will show that leaking works. Unless this is rooted out ruthlessly, this administration will die the death of 1000 leaks. Regardless of what you think of Trump, the ramifications of this are disturbing indeed.

The hounds are baying at the heels of National Security Advisor Michael Flynn. Flynn’s sin was to discuss sanctions with the Russian ambassador Sergey Kislyak before inauguration. Flynn denied this when the issue was allegedly raised.

Flynn’s denial has been challenged by the Washington Post, which relied on descriptions of intercepts of Flynn’s communications with the Russian ambassador. Flynn’s alleged dishonesty has allegedly led Trump to “evaluate” his status.

The substance of Flynn’s conversation with the Russian ambassador was benign. The WaPoo reports it thus:

Two of those officials went further, saying that Flynn urged Russia not to overreact to the penalties being imposed by President Barack Obama, making clear that the two sides would be in position to review the matter after Trump was sworn in as president.

“Kislyak was left with the impression that the sanctions would be revisited at a later time,” said a former official.

“Cool your jets.” Wow. How incendiary. Even if the interpretation placed on Flynn’s alleged words is correct, he did nothing more to say that sanctions would be part of broader discussions with Russia. This is a surprise why, exactly?

I further note that the WaPoo is basically serving as a ventriloquist’s dummy, dutifully mouthing “a former official’s” interpretation. (My nominee for the “former official”: Ex-CIA director and all around slug John Brennan.) Everything about “making clear” and “left with the impression” is the “former official’s” interpretation. Does he read minds? Kislyak’s in particular?

If Flynn is to be axed because he dissembled, every figure from every past administration should be sanctioned in some way. It’s almost amusing how the WaPoo is SHOCKED! SHOCKED! at the thought. FFS. Ben Rhodes comes out and says that the Obama administration lied to the media and the public as a matter of policy, and the WaPoo shrugged its shoulders so hard it took months of chiropractic treatment to straighten out.

And none of this is the real story. The real story is that this is just another act in the intelligence community’s attempted coup of the duly elected president of the United States. Consider the facts here. First, the intelligence community was surveilling Flynn’s communications. Second, it leaked those communications in order damage him and the president of the United States over a matter of policy disagreement.

The chin pullers seriously intone that Flynn may have violated the Logan Act, i.e., that he was conducting diplomacy as a private citizen. But if he was a private it was unlawful to surveil him without a warrant, or if his communications were intercepted while communicating with a legitimate target of surveillance, his communications had to be discarded/minimized, and certainly NOT leaked. (Exceptions include those communicating with Al Qaeda and other terrorist organizations. Russian ambassadors don’t count.)

If he was not a private citizen, the Logan Act allegation is bullshit. In that case, Flynn had some official status, and his communications were almost certainly classified, which would make leaking them a crime.

So whatever way you cut this, someone in the intelligence community has committed a crime, or multiple crimes.

This episode also gives the lie to the IC’s justification for not providing anything more than a Wikipedia entry to document alleged Russian hacking of the election. Recall that the IC claimed that releasing specific communications was impossible, because it would compromise sources and methods.

Um, this leak about Flynn doesn’t?

Evidently–and not surprisingly–the IC’s concerns about “sources and methods” are oh-so-situational, aren’t they?

This is all beyond the pale. Yet anti-Trump, pro-IC fanboyz (e.g., the execrable John Schindler) think it’s just great! Trump is the security risk, so everything’s fair! The ends justify the means!

Um, no. If these IC people have a basis to believe that they should resign publicly. They are not judge and jury. To arrogate those roles is a violation of the constitutional order, and they should be terminated forthwith, and prosecuted if they are revealing classified information. (Funny how Schindler was all for hanging Hillary from the highest tree for jeopardizing classified information on her server, but he’s all in with these leaks.)  Those who are currently outside government should be prosecuted as well.

The irony meter has exploded from being overloaded, but I will mention another irony: Schindler, Brennan, and other critics of Snowden constantly said that he should have taken his concerns through channels, rather than leaking classified material based on his own political views. More situational “ethics”: apparently this “go through channels” dictum is not operative when Trump or Flynn are involved.

Yet another irony: those baying the loudest here also constantly intone ominously about the threat that Putin and the siloviki pose. But what is the siloviki (one component of it anyways) but senior intelligence personnel acting outside the law in order to exercise power and decapitate political enemies and rivals? So those who warn of the danger of the Russian siloviki grab their pom-poms and lead the cheers for American siloviki.

Why is this happening? I think the problem is overdetermined, but there are a couple of primary drivers.

First, there is intense bad blood between Flynn and the CIA. This apparently goes back to Flynn’s opposition to the CIA’s glorious endeavors in Syria, most notably his incredibly prescient prediction of the rise of ISIS, and his insinuation that this would be the direct result of US policy (acting largely at behest of the oil ticks in the Gulf), either intentionally or unintentionally. This is payback, and also an attempt by the CIA in particular to defend its prerogatives against someone who is deeply skeptical of its (disastrous) machinations.

Second, it is a well known strategy of those who want to attack the king to strike at his trusted retainers first. This isolates the king; makes him reluctant to rely on others (because in so doing he makes them targets too); and sends message to those who dare to support the king.

It is for this reason that I believe that Trump will not throw Flynn to the hounds, at least not now when the baying and panting is at its most intense. He knows that it would just encourage his enemies to select a new fox once they tear this one to pieces. And he also knows that eventually they will be emboldened to go after him directly.

Regardless, this is an extremely dangerous turn of events. The intelligence community (which has a litany of failures to its “credit”) cannot be allowed to use leaks and surveillance to undermine the legal order, either because of a policy disagreement, a dislike of the man elected president, or to protect its institutional interests (including protecting it from being held accountable for past failures). Once upon a time the left–the Washington Post prominent among them–told us the same. But that was then, and this is now.

PS. I suggest you also read Spengler’s take on this, which is similar to mine.

 

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January 28, 2017

Trump’s Finger Is On the Button!

Filed under: History,Politics,Russia — The Professor @ 12:43 pm

Fearing Trump, the Union of Concerned Scientists has advanced the Doomsday Clock, indicating their belief that the risk of nuclear war has increased. This is actually quite confusing. After all, the Clock has historically waxed and waned based on the perceived (by the pointy heads at the UCS, anyways) threat of a nuclear exchange between the US and the USSR, and since its demise, Russia. So wouldn’t Trump’s supposed softness on Russia and the prospect of a rapprochement between Trump and Putin (which elicits shrieks of horror from the Democrats) reduce the risk of such an event? Shouldn’t the clock have moved backwards, not forwards?

But that’s not the button I refer to in the title. Actually, I should have written buttons, plural, because what I am thinking of is Trump’s pushing of the progressive left’s buttons. We’re only a week into his administration, and already he has pushed so many of their buttons that they are on the brink of psychological collapse–many past the brink, actually.

I could mention several examples, but one stands out even though it is the most symbolic and least substantive of the things he’s done since January 20: the announcement that he will return a portrait of Andrew Jackson to the Oval Office.

Trump’s core constituency is Jacksonian America (as Walter Russell Mead and then I pointed out in 2015), but truth be told, most Jacksonians don’t know a lot about him. Pace Willie Dixon, he’s just one of those Dead Presidents they’d like to get their hands on: “Jackson on a 20 is really great.” But the left does know Jackson, and hates him with a passion: he is one of their bêtes noires. Slaveholder. Ferocious Indian fighter. Author of the Indian Removal Act (a/k/a Trail of Tears). Unabashed American nationalist (heaven forfend!). Further, the left also hates his political heirs: they are the kind of people that an execrable candidate for DNC chair said it would be her job to shut down.

So Trump’s announcement regarding the portrait probably didn’t really make a ripple in his Jacksonian constituency, and that’s not why he did it. But it did unleash an uproar among the progressives–and that’s exactly why he did it. A very deliberate push of a prog button.

Personally, I have considerable ambivalence about Jackson. Much of the criticism is presentism that ignores the historical context: of course men of the 19th century frontier thought and decided differently than those on the Upper West Side for whom Harlem is the frontier. Jackson’s greatest modern biographer, Robert Remini, argues that Jackson believed that removal was the only way to prevent the annihilation of the eastern tribes at the hands of rapacious whites. Others clearly disagree, and believe that Jackson was motivated by bigotry and hatred. The point is that the story is much more complicated than the morality play presented by the left.

Jackson’s economic policy was a very mixed bag. He was in favor of small government, and was the last president to leave the US with no government debt. But his banking policy was disastrous, and was directly responsible for the Panic of 1837.

Politically, of course, he was the avatar of populism and popular democracy. This is is also a mixed bag, but the pluses are bigger and the minuses smaller when the government is small than when it is large.

He was a slaveholder, but an ardent foe of secession, as his actions during the Nullification Crisis showed.

He was also one of the most consistently successful military commanders in US history, beating both Red Coats and . . . Indians (and Spaniards too) in both conventional and unconventional warfare.

But the progressive left is anything but ambivalent about Jackson. To them he is a devil figure, which Trump surely knows–and which is why his portrait will hang in the Oval Office.

As men, Jackson and Trump have myriad differences. Their biographies are obviously utterly different. Where Trump only mused about shooting people in the street, Jackson actually did it. But they have some great similarities, and these will loom large during Trump’s presidency. Both are outsiders who express their disdain for the system and the supposed elite–and the disdain is returned with interest. Neither is constrained by elite convention, and indeed, each takes great glee at sneering at convention and brutally trampling the political establishment. Both rely on advisers who are outside the establishment. Both easily take offense, hold grudges–and take revenge.

It is therefore deeply symbolic that one of Trump’s first acts was to restore Jackson to a place of prominence in the White House. It is pushing the left’s buttons, yes. But he is also signaling how he will act as president. Aggressive–indeed, truculent. In your face. Defiant of the political establishment. Totally unafraid of confrontation and driven to prevail–utterly.

I fully expect that Trump will share other similarities with Jackson. I think that it is likely that his economic policy will be a mixed bag with extremely varied effects: protectionist insanity will sit juxtaposed with a sensible rollback of regulation and the administrative state. Trump will face international issues as president that dwarf anything Jackson had to, but his American nationalism will also lead to very varied effects, as did Jackson’s various foreign engagements (most as a general, rather than president, as in Florida).

And along the way he will push many buttons. But not the nuclear one.

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January 25, 2017

Live From Moscow! Rosneft Kabuki!

Filed under: Commodities,Derivatives,Economics,Energy,Russia — The Professor @ 3:31 pm

Today it was announced that Putin will indeed meet with Glencore’s Ivan Glasenberg,  QIA’s Sheikh Abdullah Bin Hamad Al Thani, and  Intesa Sanpaolo SpA Managing Director Carlo Messina. According to Bloomberg,

Putin will talk about “the investment climate, the reliability of Russia for foreign investors and prospects for expanding cooperation,” Peskov said on a conference call. The Kremlin said Jan. 23 that Sechin was keen to underline the significance of the deal with Glencore and Qatar and to outline new projects.

Yes, this is all about portraying the Rosneft stake sale as a normal deal, and as an indication that Russia presents a normal investment climate.

In fact, the deal does nothing of the sort. The bizarreness of what is known, that the curtain of secrecy that prevents so much from being known, show that the deal is highly abnormal by the standards of the US, Europe, Japan, and other major investment regions.

A Russian analyst puts his finger on it: this is PR, not reality:

The deal meant Rosneft avoided buying back the 19.5 percent stake itself. That would have been seen as “Russia’s demise” in the search for investors, according to Ivan Mazalov, a director at Prosperity Capital Management Ltd., which has $3.5 billion under management.

“It was important for Russia to win a PR battle that Russia is open to do business and that investors consider Russia as a good destination for their capital,” Mazalov said by e-mail.

But that’s the thing. We don’t know for sure that Rosneft avoided buying back the 19.5 percent stake. It apparently did not buy all 19.5 percent, but there is the matter of that missing 2.2 billion Euros. Further, who knows how the complex structure of shell companies involved the deal parses out actual economic ownership? And even if Rosneft isn’t putting up money or taking economic exposure to the stake, it’s pretty clear that some Russian entity or entities are.

But the show must go on! This Frankenstein’s monster of a deal must be made to look like the epitome of commercial normalcy: Since henchman Igor (Sechin, that is) is obviously not up to the task, Herr Doktor Putin himself must make an appearance to calm the agitated villagers.  Ivan Glasenberg is no doubt quite happy to play his part, because Glencore apparently made out very well in the deal, due in large part to the offtake agreement that went along with it. And il Signor Messina has stumped up Euros 4.5b, so he is certainly going to chew the scenery.

So who you gonna believe, Putin and his troupe, or your lyin’ eyes?

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January 24, 2017

Rosneft & Glencore & QIA & ???: More Kabuki

Filed under: Commodities,Economics,Energy,Politics,Russia — The Professor @ 7:58 pm

Today Reuters ran a long article summarizing all of the holes in the official Russian story about the sale of the Rosneft stake. Nice of them to catch up: there is nothing in the article that wasn’t discussed here, or in RBC reports, from six weeks to two weeks ago.

The main question is who is covering the €2.2 billion hole. My leading candidates: (1) a Russian state bank (likely VTB) providing debt financing, or (2) Rosneft buying its own equity from Rosneftgaz (perhaps using funding from a Russian state bank directly, or indirectly via proceeds from its recent bond sale). One factor in favor of (2) is the web of shell companies involved in the deal: these could be used to conceal the faux nature of the “privatization” and the supposed transfer of foreign money to the budget in an amount equal to the announced purchase price. The money could be used to launder Russian money, making it look like it was coming from a foreign source.

Recall that when it was doubted Rosneft would find a foreign buyer, the fallback plan was to have the firm purchase its shares from Rosneftgaz, and then sell them to a foreign buyer later. Option (2) would be a variant on that.

Regardless, even if the details are not known, it is abundantly clear that the privatization was not the clean, blockbuster deal originally announced. It is a stitched up job intended to obscure the failure to make a straight, uncomplicated sale to foreign buyers.

Interestingly, Rosneft has allegedly paid $40 million in legal fees. (H/T @leenur.) In 2017. That’s about $2 million/day, and if the deal was done in 2016, that’s when the legal expenses would be expected to be incurred. This is consistent with this being very much a work in progress. Or maybe, a work in regress.

But the Kabuki play must go on! Sechin is inviting Putin to meet with Glencore, QIA, and Intesa:

The chief executive of Russia’s biggest oil firm Rosneft on Monday asked President Vladimir Putin to receive the company’s partners Glencore, Intesa and the Qatar Investment Authority (QIA), the Kremlin said.

Trading house Glencore and the QIA recently became Rosneft shareholders in a multi-billion-dollar deal partly funded by Italian bank Intesa.

Rosneft boss Igor Sechin said at a meeting with Putin on Monday that Rosneft was planning new projects with the three partners and they wanted to tell Putin about the prospects for those projects, the Kremlin said in a statement on its website.

This is clearly intended to lend Putin’s authority to the deal (as he already did in his end of year Q&A). Bringing in Putin and the alleged principals for a Sovok PR gimmick is pathetic, and amusing–and amusing because it’s so pathetic!

Any such act will not end the questions. It will just bring attention to the deal, and any attention will only bring the questions to the fore.

Not that we can expect to get any answers from the Russians, or from QIA. But why the UK authorities and the LSE seem so complacent about the participation of a UK/LSE-listed company in such a dodgy deal, with such little disclosure, is beyond me. Glencore may argue that it has disclosed the basics of its involvement, but without knowing about the structure of the entire deal it is evaluate the accuracy of those disclosures, in particular relating to what Glencore’s real economic exposure is. The relevant parties in the UK should be pressing hard for much greater disclosure from Glencore.

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January 20, 2017

Who is the Reactionary on Nato and the EU? Not Trump

Filed under: History,Military,Politics,Russia — The Professor @ 7:31 pm

So it’s official. Donald John Trump is now president of the United States. Buckle in. It will be a wild ride.

One reason it will be wild is that Trump has much contempt for the status quo, and shows no hesitation in saying so. He gave a taste of things to come in an interview last week. He questioned the viability of the EU, saying that it disproportionately benefited German at the expense of other countries. He also called Nato obsolete.

The reaction was immediate and hysterical. Was this warranted?

Not in my view.

Take Germany. Trump was making an observation. It is an opinion shared by large numbers of Europeans, especially in the south. It is a reasonable observation. And that’s probably why the Europhiles are freaking out: they know that the EU is under great strain and that its popular support is thin and wavering, and would prefer that everybody Believe! Believe! so Euro-Tinker Bell lives.

But what about dissing Germany, our stalwart ally? First, anti-American sentiment is very strong in Germany, and is often expressed by government officials. Second, the German government has often made unfavorable comments about American policy.  If you can’t take it, don’t dish it out.

Given all the frenzy about Trump’s alleged affinity for Russia and threat it poses to the west and western solidarity, let’s remember that there are very strong pro-Russian elements in Germany. Especially in the business community. Germany, don’t forget, is the country of “Putin Verstehers”–Putin understanders. It’s ex-chancellor is on the board of a Gazprom subsidiary, and Germany has actively supported Nord Stream against the objections of neighboring EU countries. Putin can only dream that Trump will be as accommodating to Russia as Germany has been. So don’t put the onus on Trump for compromising western interests in dealing with Russia. Merkel’s worries about that are far closer to home, as in her coalition partners, notably her Foreign Minister.

Insofar as Nato is concerned, it is obsolete, in the sense that it has not updated its mission, strategy, or capabilities in response to dramatic changes that have occurred in the last 25 years, let alone the nearly 70 years since its founding. Indeed, it is arguable that Nato is not just obsolete, but dysfunctional.

Nato countries spend piteously small amounts on defense, and the capability that they get is not worth what little they do spend. Germany spends around 1 percent of GDP on defense. There have been times recently that German troops had to train with broomsticks. Recently 2/3s of its combat aircraft were inoperable. It has zero capability to deploy anything overseas. The Dutch have no tanks. I could go on. Suffice it to say that Europe does not put its money where its mouth is when it comes to Nato. They pay lip service, rather than for troops and weapons. I would take their pieties about Nato more seriously if they actually sacrificed anything for it.

(By the way, this is why Russian hyperventilating about the Nato threat is absurd. It poses no military threat, beyond that which the US poses unilaterally. Indeed, for reasons that I discuss below, the European Nato Lilliputians tie down the American Gulliver.)

Another example of dysfunction is Montenegro’s impending bid to join Nato. Just what is the rationale for this? There is none: Montenegro brings no military capability, but just adds an additional obligation.

But it’s worse than than. Nato’s biggest weakness is its governance structure, which requires unanimity and consensus in major decisions. This is flagrantly at odds with one of the principles of war–unity of command–and makes Nato decision making cumbersome and driven by the least common denominator. Nato’s governance, in other words, makes it all too easy for an adversary to get inside its decision loop.

Coalitions are always militarily problematic: Napoleon allegedly rejoiced at the news that another nation had joined one of the coalitions against him. Nato’s everybody gets a vote and a trophy philosophy aggravates the inherent problems in military coalitions.

Put differently, decision making power in Nato bears no relationship to contribution and capability. This is a recipe for dysfunction.

So what is the point of adding yet another non-contributor (population 620K!) whose consent is required to undertake anything of importance? This is madness.

It is especially insane when one considers that Montenegro is a Slavic country with longstanding ties to Russia, and in which Russia has a paternalistic interest. Parliamentary elections last year were extremely contentious, with the pro-western incumbents barely hanging on. Post-election, there were allegations of an attempted coup engineered by the Russians. The country is extraordinarily corrupt. All of which means that if you are concerned about Russia undermining Nato, Montenegro is the last country you would want to admit. It is vulnerable to being suborned by Russia. Outside of Nato-who cares what Russia does there? Inside of Nato-that is a serious concern, especially given the nature of Nato governance.

But apparently current Nato members believe that it would be really cool to collect the entire set of European countries: frankly, I can think of no other justification. There is no better illustration of how Nato has lost its way, its strategic purpose, and its ability to think critically.

So yes, Trump is more than justified in raising doubts about Nato, and if questioning the relevance of the organization is what is needed for people to get serious about it and to reform it to meet current realities, then he’s done a service.

Following the shrieking and moaning on Twitter today during the inauguration, it struck me that the most prevalent theme was that Trump is turning his back on X years of US policy in this, that, and the other thing. The reaction shows that the real conservatives–in the literal, traditional sense of the word meaning unflinching defenders of the old order and status quo–are on the leftist/statist side of the political spectrum. They are petrified at the thought of disturbing in the least way the existing order. To them, it is apostasy even to question this order. Trump is challenging all their verities, and it drives them to apoplexy.

The EU and Nato are two examples of institutions that are supposedly sacrosanct, but which Trump has had the temerity to question. The defense by the real conservatives–the real reactionaries, actually–on the left and left-center has been unthinking and reflexive. They refuse to acknowledge the rot and decay that exists, and which threatens the viability of the things they claim to admire. Rather than neurotically projecting their fears on Trump, they should thank him for giving them the opportunity to reform dysfunctional bodies, and join in the work of reforming them. Not that I expect that they will, because this is not in the nature of conservatives and reactionaries.

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January 13, 2017

Dossiergate: The Rogue Intelligence Operation Here Is Not Russian

Filed under: Politics,Russia — The Professor @ 7:36 pm

It pains me to do it, but I feel compelled to comment on the Trump dossier. I will not call it the “intelligence dossier” because it is the antithesis of that. It is a retard dossier, but the retarded has become a political reality. And because the story of its release has very troubling implications.

I will just try to focus on a few high level points.

First, the document’s credibility is undermined by its narrative voice, which is best described as third person omniscient. This is is often reserved for bad fiction written by amateurish writers, which is the case here. There is no way that any private intelligence operative, ex-MI6 or not, would have so many sources who knew so many important people who were present when said important people had conversations about extremely sensitive–and indeed explosive–topics.

Second, even overlooking that, the chain of transmission of each story is rather long. A source observes the principals (e.g., Putin and Ivanov) having a conversation; tells that to a (presumably) Russian contact of Christopher (not Remington!) Steele; who tells Steele who then transcribes it and passes it along. Even in a game of telephone with honest players there is an appreciable opportunity that the story will become garbled along the way, especially since at least one translation was likely involved for each story. And why should we possibly believe any one of the participants in these chains, each of whom had incentives to lie and embellish? Consider Steele’s (presumably Russian) intermediaries. They were no doubt paid, and their income was dependent on the putative salience of their information. Passing along “I had lunch with Ivanov’s chief of staff. He had borscht” wouldn’t command a very high price, would it? Dishing dirt about Ivanov conversations with Putin would be much more valuable. And who could verify the stories? Who could even cross check basic facts? So spice it up!

Especially when it appears that the buyer of the information (both at the first stage, Steele, and his downstream political customers) hardly seems to be skeptical, and has a definite desire for the lurid, the incentives of the intermediaries to make stuff up are strong indeed. Not to mention the fact that the alleged sources (if they exist) have an incentive to tell the stories they want heard.

In other words, this type of communication is inherently unreliable. The incentives to fabricate are strong, and the penalties for fabrication are negligible.

Third, some of the stories are real clangers. I’ll focus on two.

The first story claims that in 2015 Sechin told Carter Page, an alleged Trump emissary, that if Trump would lift sanctions, Sechin would sell Trump the 19.5 percent share of Rosneft to be privatized. Look, I think Sechin can be a moron, but there’s no way he could possibly think that would work. Just how would Trump hide the acquisition of such a large asset? How would he pay for it? How would he possibly deal with the political maelstrom that this acquisition would cause? Maybe Sechin envisioned a Russian-style (or Mafia-style) acquisition, in which a straw buyer would take ownership, but Trump would be the economic beneficiary. But even that would be wildly unworkable.

The second story–stories actually–relate to Sergei Ivanov, Putin’s now ex-chief of staff. A note about Ivanov. He is a scary guy. A real Chekist, who served in the KGB, SVR, and KGB. He was reputed to be a Chekist’s Chekist. He is the kind of guy about whom you could say (and about whom I did say): “Be careful what you ask for if you desire getting rid of Putin. Somebody like Ivanov could take his place.” And he is exactly the kind of guy you would expect not to be blabbing about things said in confidence to Putin, or with anyone else.

In the dossier, several conversations between Ivanov and Putin are described. In one set, Ivanov is harshly critical of the attempts to influence the US election. On July 30, the dossier claims that the Kremlin is concerned that the operation is spinning out of control. On 5 August, Ivanov allegedly (I will drop the “allegedly” hereafter) tells a confident who tells Steele’s source that he is angry at the turn of events, and blames Peskov for screwing things up. Pesky is “scared shitless” that the operation is resulting in huge blowback, and that he will be blamed. Ivanov claims to have opposed the operation from the beginning, and claims Medvedev does too.

Five days later (!), Ivanov claims that Putin is “generally satisfied with the progress of the operation to date.” So pleased, in fact, that he has a drink with Ivanov to celebrate!

I’ll pause here for a second, to give you the opportunity to test your knowledge about Putin. See the problem with this story?

Yes: Putin is a teetotaler. Maybe it was just Ivanov drinking, but this detail hits a very false note.

But even overlooking that, according to the dossier, in 5 days the Kremlin goes from being “scared shitless” about the blowback, to being generally satisfied.

But wait! Two days after Putin and Ivanov were toasting the success of the influence operation, Ivanov is fired unceremoniously–and shockingly. The next month, the dossier claims that Ivanov was fired because he had given Putin “poor advice” on the operation. Whereas the earlier telling in the dossier portrays Ivanov as an opponent of the operation, by mid-September the dossier claims that Ivanov (and the SVR!) had advised Putin that the operation “would be effective an plausibly deniable with little blowback.” The blowback was so severe that Putin ordered everyone to dummy up, and deny, deny, deny.

August 10th (or thereabouts)–“Серге́й, Давайте выпьем за успех нашего дела!” August 12th, Putin does his Donald Trump imitation: “вы уволены!”

Maybe there is a way of squaring all this, but I don’t see it. Is he [Ivanov] a supporter of the deal, or ain’t he? Was he afraid of blowback from Peskov’s stupidity, or was he convinced there would be no blowback? Was Putin bipolar, and serially displeased, pleased, displeased, pleased?

One possibility is that Ivanov was changing his story in response to shifting political winds in the Kremlin. But if that’s so, every other source could have been doing so as well. And recognizing that, no statement in the entire freaking dossier can be taken at face value. Instead, even if the statements were made (a big if), they were all self-serving tales told to advance the tellers’ interests.

I am not the only one to call BS on all this. My colleague, Paul Gregory, does so as well, and he has much deeper experience in Russia, including long work in Soviet archives (including some intelligence documents). He too ridicules the Sechin offer, though I don’t think (as Paul does) that Sechin was offering the stake for free.

Paul’s conclusion is that the document was written by a Russian, probably with background from the security services.

Wrap your head around the possibilities inherent in that, especially when you consider the twisted ways that spies think. Given the impact the document has had, and assuming that this impact was anticipated by those who prepared it (or at least, provided the stories that Steele typed up), and the “Putin hacked the election to help Trump” is not the only hypothesis in the running. Please submit your hypotheses in the comments.

One last point. As I mentioned in response to a comment by elmer earlier today, the way this document came to light is very disturbing and casts a very ominous light on the US intelligence agencies. This document, by multiple tellings, has been circulating for some time. Harry Reid referred to it in a letter to the FBI (or at least, that’s obvious in retrospect). Multiple journalists have admitted that they had seen it. No media organization would report it, however, because it was so clearly unsubstantiated, and incapable of being substantiated.

But lo and behold, the dossier is allegedly mentioned in an intelligence briefing given to Trump. “Trump told about possible kompromat” is a legit story, right? And that makes the source of the claim that US intelligence forwarded to Trump a legitimate story, right? So soon after the story about the briefing hits, Bottom Feeder–excuse me, Buzz Feed–publishes it.

In other words, a necessary condition for the release was that the intelligence community tells Trump about it. In the public interest, of course. (And in the event, it was a sufficient condition as well.)

Spare me. This document had been around more than a crack whore, so of course Trump knew of its existence. He didn’t need some anal retentive type from Langley to tell him about it. The briefing served no public purpose. But it did serve the purpose of green lighting the release of the document.

It could be that the CIA/FBI/DNI etc. knew what the media’s Pavlovian response would be to the LEAK about the briefing, and didn’t need to collude with CNN or whomever to ensure that things would play out as they did. Or perhaps the intelligence community did collude with some in the media. That’s of secondary importance. What is of primary importance is that the intelligence agencies–with the assistance along the way of John McCain–most likely deliberately schemed to ensure the publication of this document days before Trump’s inauguration.  A document that they had to know was full of falsehoods, and likely a falsehood in its entirety. (If they didn’t know, we are just screwed in a different way, being served by asses instead of demons.) And a document that was sure to have explosive political consequences.

In other words, there is a rogue intelligence operation here, and it isn’t Russian.

This is beyond the pale, and bodes very ill for the coming months.

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January 6, 2017

Send in the Clowns: The “Intelligence Community’s” Wikipedia Page on Russian Attempts to Influence the 2016 Election

Filed under: History,Politics,Russia — The Professor @ 9:30 pm

The “intelligence community’s” serial effort to beclown and degrade itself reached a new low today with the release of the much touted report that we were breathlessly told would prove that Russia (a) hacked the DNC and Podesta, (b) provided this information to Wikileaks, and (c) did so with the specific intent of securing a Trump victory (or, a Hillary defeat). It did none of these things. If anything, this report was less substantive than the one that was previously released.

As an indication that even the IC is hardly proud of this effort, the report was released exactly at the time you would do so with the intent of burying it: late in the afternoon of a Friday. Apparently even the FBI, CIA, DNI, etc., are ashamed for prostituting themselves to Hillary, the DNC, and the lame duck administration.

One thing that had been promised–by leaks, of course–that the report did not deliver was the identity of the party who delivered the DNC and Podesta emails to Wikileaks:

US intelligence has identified the go-betweens the Russians used to provide stolen emails to WikiLeaks, according to US officials familiar with the classified intelligence report that was presented to President Barack Obama on Thursday.

So why didn’t the public report name names? And don’t tell me that the IC is loath to disclose such information for fear that it would compromise precious methods and sources. In the past, the government has determined that a hacking offense was so egregious that naming and shaming–and indeed indicting–was necessary. In 2014, the government indicted Chinese military personnel that it alleged had hacked private US corporations. It took this measure precisely because it believed that this was necessary to deter future such acts:

“This is a case alleging economic espionage by members of the Chinese military and represents the first ever charges against a state actor for this type of hacking,” U.S. Attorney General Eric Holder said.  “The range of trade secrets and other sensitive business information stolen in this case is significant and demands an aggressive response.  Success in the global market place should be based solely on a company’s ability to innovate and compete, not on a sponsor government’s ability to spy and steal business secrets.  This Administration will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market.”

“For too long, the Chinese government has blatantly sought to use cyber espionage to obtain economic advantage for its state-owned industries,” said FBI Director James B. Comey.  “The indictment announced today is an important step.  But there are many more victims, and there is much more to be done.  With our unique criminal and national security authorities, we will continue to use all legal tools at our disposal to counter cyber espionage from all sources.”

“State actors engaged in cyber espionage for economic advantage are not immune from the law just because they hack under the shadow of their country’s flag,” said John Carlin, Assistant Attorney General for National Security.  “Cyber theft is real theft and we will hold state sponsored cyber thieves accountable as we would any other transnational criminal organization that steals our goods and breaks our laws.”

“This 21st century burglary has to stop,” said David Hickton, U.S. Attorney for the Western District of Pennsylvania.  “This prosecution vindicates hard working men and women in Western Pennsylvania and around the world who play by the rules and deserve a fair shot and a level playing field.”

The administration has represented that what transpired in 2016 was far worse than what the Chinese did. So why no indictment? Why no names? The double standard here is flagrant.

It gets better. Earlier this year the US indicted two Russians, and the FBI admitted it had reverse hacked into Russian computers. Or better yet, it indicted seven Iranians allegedly members of the Iranian Revolutionary Guard Corps in March. At the time, Reuters characterized this as part of an administration policy to confront publicly foreign state hackers. And check out what our soon-to-be-erstwhile Attorney General said at the time:

“An important part of our cyber security practice is to identify the actors and to attribute them publicly when we can,” Lynch said Thursday. “We do this so that they know they cannot hide.”

“An important part of your cyber security practice is to identify the actors and to attribute them publicly when we can.” That was then, this is now, apparently.

As for what is in the report, well, there is nothing, really. There are five pages of ex cathedra assertions of “assessments” that Russia intervened in the election with the intent of aiding Trump/hurting Hillary. These are mere appeals to authority, with zero–literally no–supporting factual evidence. (And even these appeals to authority are hedged with caveats that intelligence judgments can be wrong. Believe us. We know.)

At times the report descends to farce. It cites the fact that Russian information/propaganda outlets attacked Hillary and appealed to the Trump constituency as evidence of Russian intent to sway the election. But it also states that Russian reticence in explicitly supporting Trump is also evidence of the very same intent:

  • Beginning in June, Putin’s public comments about the US presidential race avoided directly praising President-elect Trump, probably because Kremlin officials thought that any praise from Putin personally would backfire in the United States.

When diametrically opposed facts are used to support the same conclusion, you know you are not dealing with an intellectually serious, and intellectually honest, attempt to find the truth. You are dealing a hack job intended to reach a pre-determined conclusion.

Astoundingly, the report’s discussion of the events of 2016 consumes an entire five pages (and even that is padded), but its analysis of RT runs for seven. Apparently Captain Obvious obtained his commission in the intelligence services, and was seconded to write this report, because reading it you’ll learn that RT is a Russian propaganda outlet that has taken an anti-US line for years. Who knew? Did you know that? I surely didn’t!

I did, actually. In fact, I should sue the IC for plagiarism, because to support its case of Russian attempts to influence US politics it notes that RT was an early mouthpiece for the Occupy movement, precisely because of a desire to sow dissension in the US. Which I pointed out in November, 2011.

For this the CIA needs a black budget of tens of billions of dollars?

And citing Zhirinovsky as some representative of official Russian policy? Are you kidding me.?The man is a buffoon who provides Putin with a useful foil, and as an outlet for the whackier nationalist fringe.

There is no secret that Putin views the US as an adversary, and arguably an enemy. He likely does so because he actually believes it. He also likely does so because it is useful for domestic political reasons. Regardless, this is not news.

And it provides only the sketchiest circumstantial case in support of the allegation of a hack of emails, released via Wikileaks, undertaken at Putin’s direct order to interfere with the 2016 election.

I have an open mind. I am perfectly willing to evaluate fairly a serious case, backed by evidence. This is what I do for a living. I obviously have no illusions about Putin, or RT, or Zhirinovsky, so I am clearly not predisposed to take their side. But this report provides no evidence to support its sweeping “assessments.” It is little more than a Wikipedia page. It is, quite frankly, an insult to the intelligence of the American people.

Furthermore, it is being used to call into question the results of the election, and thereby undermine the legitimacy of the incoming president. This is a very serious–even grave–action that should only be undertaken with great caution. It is imperative to provide real evidence. Indeed, given the serious implications of these assertions, it would be defensible, and even necessary, to disclose some of the classified information supporting the “assessments” laid out in the report.

The failure even to pretend to present a serious case is an affront to the American people which actually trivializes the very serious allegations that have been made. It is quite befitting a low, dishonest administration unable to depart with grace, dignity, and honor, and respect for the electorate.

 

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January 5, 2017

Rosneft/Glencore/QIA: More Answers Mean More Questions

Filed under: Commodities,Economics,Energy,Russia — The Professor @ 8:01 am

Soon after I posted yesterday, news stories reported that the Rosneft-Glencore-QIA deal had closed. But questions still remain.

Here’s the Rosneft statement:

“As part of the previously agreed privatization deal all sides in the project, including Rosneftegaz and the consortium of foreign investors – one of the world’s largest sovereign funds, Qatar Investment Authority, and a leading Swiss commodity producer and trader Glencore – as well as financial and legal consultants, financial institutions and creditors, have finalized all corporate and technical closure and payment procedures,” the statement read.

I had to take that from Sputnik, because, curiously, there is no statement on Rosneft’s website. Yes, I know it’s the holidays in Russia, but still.

Also, look at this part: “have finalized all corporate and technical closure and payment procedures.” But on December 16, it was reported that Sechin had told Putin that the funds had been transferred to the Russian budget. Putin said so during his end-of-year gabfest. But the release says that only payment procedures have been finalized. So, whence the money that appeared in the Russian budget?

There is still the open question of the arithmetic. The moneys supposedly pledged by Glencore, QIA, and Intesa don’t add up to the purchase price. Close to 20 pct is pretty big for rounding error. So where’s that coming from?

I found this interesting:

“The technical procedures for closing (the deal) required the preparation and signing of more than 50 documents and agreements,” Rosneft said in a statement. “All this reflects the unprecedented complexity of the deal.”

Why so complex? Indeed, unprecedentedly so? What are the complexities? Many players who have not been named publicly? A complicated set of indemnities, collateralization agreements, guarantees and cross guarantees?

Another intriguing fact. Glencore announced the closing on Tuesday, 3 January. This is the sum and substance of the statement:

The Company announces that final settlement has been completed and closing achieved for the transaction described in its release of 10 December 2016.

I know Glencore is still a Swiss trading company at heart, but it is a public company now and such firms are usually somewhat more forthcoming about large transactions. Some even brag a little. Or a lot. Glencore’s statement is like a legal notice in a newspaper.

So the deal is done. Apparently, beyond that, we know little. And the principals are quite obviously very happy to keep it that way. Which is revealing in its own way.

Update. A Russian reporter kindly tells me that the Rosneft press release is available on its website. On the Russian language site, go to: “Shareholders and Investors” section > Disclosure of information > Main shareholder Rosneftegaz and open the first from the top pdf-release. It’s a PDF in Russian, moreover, meaning that you just can’t translate it in Chrome. How could I possibly have missed that?

Meanwhile, English language version of the home page of the Rosneft website tells you that “Rosneft launches Italian Cafe Chain A-Cafe in Moscow.” So we know what’s really important.

 

 

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January 4, 2017

The Rosneft Deal: One Step Closer to Reality

Filed under: Commodities,Derivatives,Economics,Energy,Russia — The Professor @ 4:51 pm

After-a thinking-a about it-a for almost a month-a, Italian bank Intesa Sanpaolo has apparently decided to stump up €5.2 billion to fund the Rosneft-QIA-Glenocre transaction.

A few interesting aspects to this, beyond that it took so long to commit after Rosneft said it was a done deal in the first week of December.

First, by my arithmetic, the deal is still short about €1.9 billion short. Intesa is putting up €5.2 billion, QIA €2.8 billion, Glencore €.3 billion. That’s €8.3 billion. The deal is for €10.2 billion. So where’s the other money coming from?

Second, Intesa is saying they will lend now, and syndicate the loan later. That’s not unheard of, but it’s not typical. Not least because Intesa’s bargaining position is weak now: potential syndicate members will know that Intesa has to unload the risk, and be patient in the hope of getting better terms.

Third is this gem at the end: “The underwriting, to be syndicated, has strong protection in terms of collateral and guarantees.” So who is providing the guarantees? What is the substance of the guarantees?

We have Glencore’s statement about indemnity, and some basis to believe that Gazprombank is the provider. But does QIA have a guarantee as well?

In any event, the deal looks more real than it did last month. But there are still open questions.

 

 

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