WEDNESDAY, SEPTEMBER 14, 2016

Volume 3, Number 16

EIR Daily Alert Service

P.O. Box 17390, Washington, DC 20041-0390

EDITORIAL

Obama Is the Laughingstock of the World—Dump Him Now!

Sept. 13 (EIRNS)—Philippines President Rodrigo Duterte has added insult to injury to Barack Obama, announcing on Tuesday that he has cancelled the joint U.S.-Philippines patrols in the South China Sea, calling them needless provocations.  What’s more, he has announced that he is dispatching his defense minister to Moscow and Beijing to begin talks about arms purchases from those two nations.

President Duterte’s actions, coming 24 hours after he announced that he was kicking the U.S. Special Forces out of Mindanao, should serve as a powerful message to President Barack Obama:  You can’t spit in the face of world leaders and expect them to take it forever.

President Obama came back from his just-concluded final Asia tour to a torrent of criticisms for his outrageous behavior, in which he escalated the provocations against both Russia and China, bringing the United States closer to a total economic collapse and to a thermonuclear confrontation with Russia. Obama’s actions in Hangzhou were captured perfectly in a UPI story by Martin Sieff on Tuesday:  “Weak men bluster and bluff, then imagine they are strong…. That is what Obama did at the Group of 20 meeting…. Obama stood up—in his own imagination—to Russia and China.  In reality, he just plunged ahead on a course toward U.S. economic collapse through an endless clash with China.   Even worse, he took another step on the road toward thermonuclear confrontation and world war with Russia…. It plunges the United States and the American people far further down the road towards global war and existential crisis.”

Former U.S. Ambassador Chas Freeman seconded that warning, noting in an interview with Sputnik that Obama’s drone kill policy has “spread anti-Western terrorism with global reach to new corners of the globe.” No sooner had he returned to Washington than Obama announced that he was prepared to put his relationship with the Anglo-Saudi empire above any concern for the American people, by vowing to veto the JASTA bill, under which the families and survivors of the 9/11 attacks may sue the Saudi Royal Family for their support for the hijackers behind the worst terrorist atrocity on U.S. soil in history.

Obama has emerged as an isolated and reviled figure, in part, because the world is rapidly moving away from the British Empire geopolitics of permanent warfare and Malthusian genocide, which have been the hallmarks of the policies of the last two U.S. presidencies. Not only has the Philippines broken from Obama. The new Prime Minister of Vietnam was in Beijing for meetings with top Chinese leaders, including President Xi Jinping, and the two countries vowed to put their common interests above the areas of dispute and to settle the South China Sea issue through bilateral diplomacy. Russia and China have announced major new investments in energy infrastructure in India, Pakistan, and Turkey, and the New Development Bank of the BRICS nations has announced a ruble-denominated bond issue, for infrastructure investment in Russia. These kinds of initiatives being announced virtually daily, cumulatively represent the realization of the new paradigm of relations among the nations of the world.

The four concerts performed by the Schiller Institute Chorus in the New York-New Jersey area, commemorating the 15th anniversary of the Sept. 11, 2001 attacks, were attended by a total of 4,000 people, and the impact will reverberate for some time to come. The new paradigm of “win-win” cooperation among nations can only come about with a revival of classical culture, which is the foundation of scientific discovery and a celebration of human creativity.

U.S. POLITICAL AND ECONOMIC

Will Obama Actually Veto JASTA?

Sept. 13 (EIRNS)—Some Democrats in Congress are skeptical that President Obama will go ahead with his threatened veto of the JASTA bill, now that the bill has been formally put on his desk, with a ten-day deadline for him to decide. Leaders of the fight for the JASTA bill expressed confidence on Tuesday that the votes exist in both houses for a clear two-thirds majority to override any Obama veto. Obama has until Sept. 23 to act.

The mere threat of an Obama veto of JASTA has created turmoil among Democrats, who see it as a stab in the back from a President who has never cared about the Democratic Party since taking office. Republicans will jump all over an Obama veto and rightfully treat it as a betrayal of the American people, especially the survivors and family members of 9/11, in favor of the ever more-hated Saudis. Nancy Youssef wrote in Politico that “Obama’s 9/11 Veto Threat Jams Up Hillary Clinton.” Hillary Clinton has avoided any strong statement pro or con on JASTA, even though campaign spokesmen have said she is in favor of the bill. A showdown between Obama and the Congress on the issue will make it impossible for Clinton to avoid taking a clear stand.

According to Al-Monitor, some lawmakers could move aggressively to block the pending $1.2 billion arms sale to Saudi Arabia if Obama goes ahead with the veto. The release of the 28-page chapter from the original 2002 Joint Congressional Inquiry into 9/11 has “rekindled distrust of the Saudis,” Al-Monitor noted, and the day before the JASTA vote, four members of the Senate—Rand Paul, Chris Murphy, Al Franken, and Mike Lee—introduced a bill to block the sale, and 64 House members signed a letter drafted by Rep. Ted Lieu to President Obama, urging him to stop the arms sale.

If Obama does go ahead with the veto and sends the message back to Congress this week, it is anticipated that a vote to override the veto will take place before Congress recesses later this month. If Obama waits, it will occur in the lame-duck session following the November elections. But under any circumstances, this issue will be fought out and resolved this year.

STRATEGIC WAR DANGER

Can Minsk II Be Revived Before War Erupts?

Sept. 13 (EIRNS)—A series of dramatic developments over the past 24 hours suggests that a combined Russian-European diplomatic effort could finally move the Ukraine peace talks forward.

The Chicago Tribune reported this afternoon that Alexander Zakharchenko, commander of the Donetsk forces, went on Russian television to announce a unilateral cease-fire beginning at midnight on Wednesday (21:00 UTC Sept. 14). Zakharchenko called on the Ukraine government to join the cease-fire. The day before the Zakharchenko announcement, Ukraine President Petro Poroshenko told the media that a parliamentary vote on the constitutional changes granting autonomy to eastern Ukraine was imminent. On Sept. 12, Poroshenko participated in a phone discussion with German, French, and Russian officials, and today, German Foreign Minister Frank-Walter Steinmeier and French Foreign Minister Jean-Marc Ayrault arrived in Kiev for consultations with Poroshenko. On Sept. 14, Poroshenko will meet with the foreign ministers of Germany, France, Poland, and Britain. In the past 24 hours, Russian Foreign Minister Sergey Lavrov and French President Francois Hollande have both issued public statements, declaring that the Minsk II process is the only option for settling the Ukraine crisis, and must be implemented now.

Washington sources have emphasized that, while the Kerry-Lavrov talks have focused on Syria, the two have constantly discussed ways to revive Minsk II, and, at one point several months ago, it appeared that a breakthrough was near.

SCO Intelligence Services To Meet as Terrorism Threat in Central Asia Grows

Sept. 12 (EIRNS)—The Kazakh Telegraph Agency reported today that the intelligence services of the Shanghai Cooperation Organization (SCO) will discuss measures for prevention of terror acts involving suicide bombers during the 29th session of the SCO’s Council of the Regional Anti-Terror Group in Almaty, Kazakhstan. According to TASS, the session “will cover joint measures of authorized bodies for the prevention of terror acts involving suicide bombers, and joint measures for preventing the spread of radical religious ideology on the territory of SCO member states.”

The news report appeared on the day Russia’s Deputy FSB head Sergei Smirnov announced that upon investigation of the Aug. 30 suicide bomber attack on the Chinese Embassy in Bishkek, Kyrgyzstan, the FSB came to the conclusion that “individuals linked to Russia, China and Tajikistan were behind the attack,” RIA Novosti reported today. Smirnov said the FSB carried out its investigation along with the SCO investigators. The findings indicate that it is likely that various terrorists groups which operate in Russia’s North Caucasus, Central Asia, and China’s Xinjiang province are coming together to carry out joint operations.

Last week, Kyrgyzstan’s security service said that the recent bomb attack on the Chinese Embassy had been ordered by Uighur militants active in Syria and carried out by a member of the East Turkestan Islamic Movement, reported Asia-Plus out of Dushanbe.

Russia-China Cooperation Ensures a Balanced World Order, Says Patrushev

Sept. 13 (EIRNS)—Russian Security Council Secretary Nikolai Patrushev, in Beijing for the 12th round of Bilateral Strategic and Security Consultation which he co-chaired with Chinese State Councilor Yang Jiechi, stressed the strategic importance of the growing high-level cooperation between Russia and China that has developed in recent years. “We have been able to reach an unprecedentedly high level of interaction between Russia and China in all spheres. It’s important not only for development of our relations, but also for maintenance of a just, balanced world order based on observation of international law and territorial integrity of sovereign states,” he said.

Yang also emphasized the development of the China-Russia comprehensive strategic partnership of coordination, calling for “closer communication to carry out the important consensus reached by the two countries’ leaders,” Xinhua reported.

In a wide-ranging discussion on various important issues, Yang and Patrushev “discussed the situation in the Korean Peninsula and cooperation among the BRICS nations,” wrote Xinhua. Xinhua’s report also pointed out that the two leaders “stressed efforts to prevent an escalation of the situation in the Korean Peninsula, and to put the Korean Peninsula nuclear issue back on the table for dialogue and consultation.” Both leaders opposed the U.S. deployment of the THAAD anti-missile system in the Republic of Korea, wrote Xinhua.

In addition, TASS, in its report, said Patrushev and his Chinese colleagues discussed fighting against crime, terrorism, and color revolutions during consultations on law, social security and public order: “The discussion was held on the issues of bilateral cooperation between the prosecutor generals’ offices, cooperation in the fight against organized crime, drug trafficking and illegal migration,” the Security Council’s press service said in a statement, TASS reported.

Duterte Cancels U.S.-Philippine Naval Patrols in South China Sea, and Turns to Russia, China for Arms

Sept. 13 (EIRNS)—Philippines President Duterte continues his clear-headed dismantling of Obama’s military impositions on his country, implemented under the willing tool President Benigno Aquino III. Following Duterte’s declaration on Monday that all remaining U.S. Special Forces in Mindanao must leave (the U.S. has not yet received such an official order), he has now announced the cancellation of Obama’s deal with Aquino to carry out provocative joint naval patrols of “contested waters” in the South China Sea.

“We will not join any expedition or patrolling the sea. I will not allow it, because I do not want my country to be in involved in a hostile act,” Duterte said in a speech during the 48th anniversary of the 250th Philippine Airlift Wing at the Villamor Air Base, as reported in the Philippines Inquirer.

“I just want to patrol our territorial waters,” he said. “We do not go into a patrol or join any other army from now because I do not want trouble,” Duterte said. “I do not want to ride gung-ho style there with China or with America. I just want to patrol our territorial waters. Territory is limited to the 12-mile limit. That is ours.”

Bloomberg reported that Duterte, in a televised speech Sept. 13 before military officers in Manila, said that two unidentified countries had agreed to give the Philippines a 25-year soft loan to buy military equipment. But he also announced that Defense Secretary Delfin Lorenzana and technical people in the armed forces would visit China and Russia “and see what’s best.”

Reiterating that the Philippines would not engage in military provocations with the U.S. against China, he said the Philippines needs propeller-driven planes that it can use against insurgents and to fight terrorists in Mindanao. He said he wanted to buy arms “where they are cheap and where there are no strings attached, and it is transparent. I don’t need jets, F-16; that’s of no use to us. We don’t intend to fight any country.”

Vietnamese Prime Minister’s Visit to Beijing Promises Better China-Vietnam Relations

Sept. 12 (EIRNS)—In his meeting with visiting Vietnamese Prime Minister Nguyen Xuan Phuc in Beijing today, China’s President Xi Jinping urged China and Vietnam to resolve the South China Sea issue through bilateral relations. “Common interests between the two countries far outweigh the differences…. China and Vietnam can manage their differences and promote maritime cooperation through friendly negotiations,” Xi said, Xinhua reported. Xi also called on the two countries “to achieve substantial progress on the joint development of wider areas of the South China Sea at an early date, and transform maritime challenges into opportunities for cooperation.”

Reuters, citing a Chinese Foreign Ministry release, reported that Prime Minister Li Keqiang conveyed a message similar to President Xi’s, after his meeting with Phuc. “China and Vietnam should work hard together; scrupulously abide by their high level consensus; maintain maritime stability; manage and control disputes; promote maritime cooperation; continue to accumulate consensus; jointly maintain maritime and regional peace and stability, and create conditions for the stable development of bilateral ties.”

The Chinese Foreign Ministry also “cited Phuc as saying maritime issues should be appropriately handled in a peaceful way, on the basis of equality and mutual respect, and not allow maritime issues to affect the development of relations,” Reuters reported.

NEW GLOBAL ECONOMIC ORDER

BRICS Bank President Plans To Issue Ruble-Denominated Bonds by Year’s End

Sept. 13 (EIRNS)—The President of the BRICS’ New Development Bank (NDB) K.V. Kamath told Sputnik in Moscow today that the NDB plans to issue its first ruble-denominated bonds before the year is over. Pointing out that issuance of such bonds will enable the NDB to broaden its operations in Russia, Kamath told Sputnik: “Raising ruble financing in the Russian capital markets would allow the Bank to efficiently step up its operations in Russia, and the proceeds of the bond will be used for financing infrastructure and sustainable development projects in the country.”

The plan to issue ruble bonds is a part of NDB’s plan to issue local currency-denominated bonds to facilitate financing of projects in respective countries. In June, NDB officials had said the bank would issue first yuan-denominated bonds, and was considering the release in Indian rupees. “Absolutely, it will happen indeed. We may agree on the first ruble-issue hopefully later this year…. It is too early to say how big these bonds can be. But in the last two days I understood that there is a clear opportunity for that,” Kamath said on the sidelines of the St. Petersburg International Economic Forum (SPIEF) last June when he was asked whether the NDB was also considering issuing ruble-denominated bonds.

COLLAPSING WESTERN FINANCIAL SYSTEM

New ECB ‘Guidelines’ To Keep Zombie Banks Breathing

Sept. 13 (EIRNS)—The European Central Bank has issued new “guidelines” for Europe’s too-big-to-fail banks to deal with the €900 billion in non-performing debt on their books, and the scheme is absolutely insane. Instead of facing the reality that the majority of the TBTF banks are already bankrupt and cannot function until they simply write off their vast gambling debts, the new ECB guidelines give the banks three years or more to deal with the mess they created for themselves by gambling with depositors’ funds. Vulture funds are unhappy with the new ECB guidelines, because they were expecting to grab up large chunks of non-performing debt at pennies on the euro, but the ECB clearly fears that a sudden write-down or sell-off of the bad paper could be a trigger for a major banking blowout, and they are opting to deny reality and kick the can far down the road.

Allowed To Take Deposits, Goldman Throws Them into Speculation

Sept. 13 (EIRNS)—As part of the all-sources Federal bailout of Wall Street in late 2008, “pure investment banks” Goldman Sachs and Morgan Stanley were granted bank holding company status to qualify them for bailouts, and thus allowed to set up depository banking units insured by the FDIC. This was a violation of the repealed Glass-Steagall Act, like most else that Wall Street had done since the middle 1990s.

Today Reuters reported an investigation it has made into Goldman Sachs’ use of its customer deposits. Their total has reached $123.7 billion, in part by buying GE Capital’s online savings accounts, in part by offering “high” interest rates of 1-1.05% on CDs and taking deposits from retail (i.e., non-corporate and not very wealthy) investors.

In brief, Goldman has set up a securities speculation team to gamble for high profits with the deposits; the team is headed by Goldman partner since 1998, Gerald Ouderkirk—the very partner “who made a name for himself structuring profitable bets against the mortgage market in the run-up to the financial crisis,” reports Reuters.

These deals—in which Goldman was covertly betting against its own large investors, to whom it was recommending mortgage-backed securities and collateralized loan obligations—were subject to a brutal exposé in 2011 hearings of Sen. Carl Levin’s Permanent Subcommittee on Investigations. Goldman subsequently got off with a $500 million SEC fine.

Now the investment bank, whose interest margins have recently fallen quite low, and which has been making profits primarily by internal cost-cutting, is getting to use Federally insured deposits to gamble higher. “Ouderkirk has been coordinating with executives across Goldman’s merchant bank, investment bank, private bank, and trading desks to find ways to use Goldman’s balance sheet most profitably,” Reuters reports.

Goldman claims Ouderkirk is on a much tighter top-management leash than JPMorgan Chase’s infamous London Whale, the trader who tried to corner the credit derivatives market with that bank’s huge deposit base, and lost. Reuters says that Goldman is using some of the deposit base for consumer loans, including mortgages. “But Ouderkirk’s team, which can put millions of dollars on the line with each transaction, may play a bigger role in increasing the profitability of Goldman’s bank.”

Wall Street continues to exhibit daily, examples of anything-but-prudent banking. Whether currently illegal or not, these definitely would be shut down by restoring Glass-Steagall.

SCIENCE AND INFRASTRUCTURE

Russia Proposes Gas Pipeline Projects in Pakistan and India

Sept. 13, 2016 (EIRNS)—Russia is proposing to build gas pipelines in Pakistan and India.

RT Global Resources, a wholly owned subsidiary of government-controlled Rostec, will seek $1 billion in funding for the construction project of North-South gas pipeline in Pakistan, said Deputy Energy Minister Yury Sentyurin, according to TASS. “More than $1 billion. This is not investment—but attracted funding. The Russian side undertakes the responsibilities to bring these financial resources,” he told TASS.

According to Sentyurin, this is an ongoing project between the Rostec subsidiary and Pakistan’s state gas-supplying company, ISGAL, which have established a special purpose company, responsible for the implementation of the project. A commercial agreement is expected to be signed in October, when they will hold a second meeting of the Russian-Pakistani Committee for the Coordination of Economic Activities. Construction could begin in December 2017 of the 1,100-km gas pipeline linking liquefied natural gas (LNG) terminals in the port of Karachi, in the south of Pakistan, with the city of Lahore, in the north.

In India, Gazprom has begun consultations with the Ministry of Petroleum and Natural Gas of India and Indian companies on supplying gas to India. The meeting of the second working group was to be held today in New Delhi. The issue of gas supply to India is still at the stage of “examining the feasibility,” and it may take “another year at least,”  Sentyurin said.

U.S. Company Plans To Resurrect Pebble Bed High-Temperature Gas-Cooled Nuclear Technology

Sept. 13 (EIRNS)—Developing a very promising advanced nuclear energy technology that has been twice started and twice abandoned, a small company, X-Energy, based in Maryland, is developing a test bed for a pebble bed high-temperature gas-cooled reactor (HTGR). The higher temperature recovered from the fission process, the company explains, allows a more efficient conversion to electricity, and the availability of high-quality process heat for industry, and could be applied to desalination techniques.

The design of their reactor is based upon the work that was done in South Africa, which in turn originated in Germany. Both of those projects were never completed. The South Africa pebble bed HTGR project was just terminated in 2010, and it is reported by the Energy Collective that several of the key executives of the X-Energy company are veterans of that pebble bed modular reactor (PBMR) project. The South African project was abandoned after significant progress had been made in the design of the advanced pebble fuel pellets. Westinghouse, which had partnered with South Africa, pulled out of the program in 2010.

X-Energy is looking for a site in Texas to build a test reactor, working with the University of Texas Permian Basin and the Odessa Development Corp. in Ector County. The company secured a $40 million grant from the U.S. Department of Energy last January under its next-generation nuclear technology program, and has invested $13 million of its own funds to develop the technology. The commercial-scale reactor is to be the Xe-100, able to produce 80 MW of electricity and provide 200 MW of process heat.

OTHER

Argentina’s Macri Holds ‘Mini-Davos’ in Desperate Plea for Foreign Investment

Sept. 13 (EIRNS)—Argentine President Mauricio Macri today opened the two-day Business and Investment Forum in Buenos Aires which he calls a “mini-Davos,” attended by 2,000 CEOs and executives from multinational corporations and investment banks, as well as local bankers and businessmen. The Argentine President is hoping that the high-level attendees will be convinced by his rosy picture of the economy and the government’s investor-friendly policies to cough up billions of dollars in investment.

The “flood of dollars” Macri predicted would rain down on the country hasn’t materialized. In July, he told CNBC that he expected at least $100 billion in new investment, and maybe even $130 billion over his four years in office. But, El Destape reported today that, according to the Argentine Political Economy Center (CEPA), the only commitments thus far are for $18 billion. The tax amnesty that was supposed to bring in $20 billion from Argentines who had stashed their dollars overseas, has so far flopped.

Macri has lost control of the situation. He faces mass protests in every part of the country; the Argentine Industrial Union (UIA) and representatives of small and medium-sized businesses are demanding a halt to the flood of foreign imports which are hurting domestic industries and the regional economies; and now Macri’s Vice President is coming under investigation for stashing money of an unknown origin in her home.

No wonder the government announced that the “mini-Davos” would be conducted only in English, and reporters were warned that anyone daring to ask an attendee an “uncomfortable” question will be immediately expelled from the conference.

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