EIR Daily Alert Service

THURSDAY, JUNE 1, 2017

Volume 4, Number 108

EIR Daily Alert Service

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

EDITORIAL

China’s Success Affects Battle for U.S. Infrastructure Investment

May 31 (EIRNS)—President Donald Trump may be near another major policy shift away from the dead era of “globalization”—this time, an American exit from Barack Obama’s zero-growth “Paris Accord”—and continues to be the target of relentless intelligence-state attacks. Featuring another major German media mooting of assassinating Trump, this time by Der Spiegel, the globalists are furious to be rid of him.

But Americans voted for a fundamental change in economic policy, to make America a great industrial and technological nation again. And now, the threat to Trump from the so-called “deep state” may be being matched by the challenge of the deep potholes, and the deep economic holes into which millions of Americans have fallen.

The Trump Administration will reportedly circulate to Congress by mid-June an outline for U.S. investment in new economic infrastructure, and ask for legislation on it over the Summer. Even as the investment Trump will ask for appears to be getting smaller than the $1 trillion he spoke about while campaigning, Democratic counterproposals are getting much bigger.

On behalf of the Democratic Progressive Caucus and constituency and labor groups backing them, about a dozen Democratic Representatives on May 25 presented a demand—in the form of a Congressional Resolution, not legislation—for more than $2 trillion in direct infrastructure investment by the Federal government over 10 years, with substantial focus on high-speed rail projects and new waterway and water-management projects. This followed a bill for $1.26 trillion in Federal grants for new infrastructure over just five years, introduced May 17 by Rep. Brian Higgins (D-NY).

Two factors are driving these proposals up: the alarming collapse of public infrastructure in major cities and states; and the excitement among those who know about China’s incredible Belt and Road infrastructure platforms and the public offers of China and Japan to invest in a U.S. infrastructure build.

Beijing’s May 14-15 “Belt and Road Forum for International Cooperation” summit was a stunning success. Schiller Institute founder Helga Zepp-LaRouche, who gave a “World Land-Bridge” presentation during the summit and has worked on the germ of this Belt and Road Initiative for decades, described it as participation in the shaping of world history toward the better. Lyndon LaRouche, the author of the conception from 1989 on, said today, “We’ve established something worldwide, and it’s good.”

China’s issuance of productive credit to drive upward other nations’ economies as well as its own, has been unique in the world for a decade, a policy both Confucian, and “Hamiltonian.” The Hamiltonian policy is palpable in America as a potential.

A telling Asia Times article on May 29 was called “OBOR: How Infrastructure Funding Trump’s Politics.” It begins by discussing Japan’s “surprising” turn toward China’s initiatives, the Belt and Road and the Asian Infrastructure Investment Bank (AIIB). But then, after reviewing the array of rail, port, power, etc. projects in many Asian countries, Asia Times turns to the United States.

“For the United States, China’s OBOR initiative has become a multi-dimensional challenge, influencing domestic matters as well as international politics. Primarily, China’s focus on multilateral development projects has highlighted an uncomfortable domestic issue for Trump: the decrepit state of America’s civil infrastructure and Congress’ resistance to the allocation of the funds needed to address it…. America’s second-largest city, Los Angeles, epitomizes the state of America’s crumbling infrastructure. Despite hoping to secure the rights to host the 2024 Olympics, the city is held back because of its potholed and traffic-congested roads, an aging telecommunications system, and the lack of reliable public transport. Mayor Eric Garcetti even made a heartfelt plea to Trump’s Transportation Secretary, Elaine Chao, to fast-track a $1.3 billion package for the city’s subway line—but it’s unclear whether the administration will indulge him.

“Garcetti may go to China for investment.”

It turns out that China’s biggest rail car manufacturer, CRRC Corp., is already building 64 new cars for the Los Angeles subways, and for other cities as well. These are company-bid contracts: but China’s President Xi Jinping and state bank leaders have made clear China could invest in providing credit for big new infrastructure platforms themselves, as well as helping build them; the same is true of Japan.

This requires an American national credit institution. A Hamiltonian national bank is needed, as the central credit source to make these projects possible.

THE NEW GLOBAL ECONOMIC ORDER

China’s Belt and Road Investments Are Extraordinary

May 31 (EIRNS)—China’s issuance of credit to build up other, particularly Asian and African, economies through new infrastructure platforms, continues to amaze U.S. and European econometric groups trying to map it—like PricewaterhouseCoopers (PwC), London School of Economics, Boston Consulting Group, and lately Wharton Business School. In a Wharton School newsletter published May 30, under the envious title “The U.S. Needs a Proactive Asia Play—or Risks Losing Ground to China,” the magnitude of this credit issuance is measured in one way.

The author writes that funds already invested in, or firmly committed to, the growing number of Belt and Road projects outside China, by China’s credit institutions, have come to total $292 billion as of the end of March 2017. This is in a period of less than three years since President Xi Jinping’s announced Belt and Road Initiative took shape; and only involves investments outside China’s own economy. Moreover, international lenders including those initiated by China—World Bank, AIIB, Silk Road Fund, New Development Bank (just launched by the BRICS nations), have together accounted for merely $8 billion of this.

It has all been national credit issued by China’s major institutions of that purpose: Exim Bank, China Development Bank, China state banks. And that—though Wharton doesn’t discuss this as such—on top of many trillions of dollars-equivalent in national credit issued to grow China’s economy since the financial crash, and to drive growth in other parts of the world and in years prior to the Belt and Road Initiative.

China is virtually the only nation in the world following this national credit policy over the period of trans-Atlantic collapse; the only nation doing so on such a scale; and of course, this is supposed to violate the monetarist rules of economy set out by those institutions “studying it.” Thus the constant cries that the “China debt bubble” must collapse, and/or will collapse the entire world economy.

Yet China is, in fact, deleveraging debt and writing off non-performing debt at the same time, particularly with negative amounts of liquidity going into its shadow banking sectors during 2016 and 2017 so far. Having started with the Glass-Steagall principle of separated lending banks having almost no exposure to securitization and derivatives markets, it is able to combine extraordinary credit issuance, extraordinary leaps in productivity in its infrastructure and major industrial sectors, very rapid employment growth, and bad debt write-off. The country has also lifted another 55 million rural poor out of poverty from 2012-2016.

Not that monetarist economists will believe this is possible.

Kenya Inaugurates Flagship Mombasa-Nairobi Standard Gauge Railway

May 31 (EIRNS)—Reporting on the inauguration of the 472.3 km Mombasa-Nairobi Standard Gauge Railway (SGR), International Railway Journal said that Kenya President Uhuru Kenyatta had flagged off the first freight and passenger train on May 31. The President’s press release referred to it as “the most outstanding of the transformative projects he has initiated since coming into office.” Kenya’s SGR is one of the flagship projects of the national development blueprint known as Vision 2030. The long-term development policy aims to transform Kenya into an industrialized middle income country by 2030. “This is a historic day and it is a day that everyone of us should feel proud to be a Kenyan,” said the President.

The Exim Bank of China provided 90% of the financing required for the $3.42 billion railway, which was constructed by China Road and Bridge Corp. CRRC Qishuyan was awarded a contract earlier this year by China Road and Bridge Corp. to supply 56 locomotives for the line. These included passenger locomotives, freight locomotives and shunters.

Following up on the next phase of expansion of the SGR, Uganda has announced plans to start building a $2.3 billion standard-gauge railway between its capital, Kampala, and the Kenyan border later this year. The 273 km electrified track, which will link Kampala and the Kenyan border town of Malaba, will be built by China Harbour Engineering (CHEC), and is due to be completed in the middle of 2020, Railway News had reported last January. Malaba is about 355 km northwest of Nairobi.

As with Kenya’s standard gauge railway, the work is being funded by China’s Export-Import Bank. The size of the loan, and the terms on which it is being offered, have not been made public. However, it was reported in 2014 that $8 billion would be sought, Railway News indicated.

The Mombasa-Nairobi railroad has been designed with an axle-load of 25 tons, and could move 22 million tons/year at a speed of 80-100km/h for freight trains and 120km/h for passenger trains. The line is forecast to carry around 22 million tons of freight per year from Mombasa, representing 40% of the port’s throughput. President Kenyatta said the line will reduce the cost of moving a container between Mombasa and Nairobi from $960 to $480, International Railway Journal reported.

A video on the building of this railway was posted by News China TV.

Chinese Express Interest in Arctic ‘Silk Road on Ice’ with Russia

May 31 (EIRNS)—Speaking to reporters on May 26 after a meeting with Russian Foreign Minister Sergey Lavrov, Chinese Foreign Minister Wang Yi said that Russia’s proposal to jointly explore the Northern Sea Route was “a great idea,” and that “China welcomes this idea and supports efforts with partners in the region to develop a ‘Silk Road on Ice.’ ” Over the last five years or so, Russia has taken advantage of warming waters in the Arctic Ocean to develop transport and energy infrastructure in its Arctic territories. Moscow sees its Northern Sea Route, which stretches from the Bering Strait in the east to the Barents Sea in the west, as a prospective alternative to the other maritime routes currently linking Europe and Asia.

Professor Guo Peiqing, executive director of the Institute of Polar Law & Political Science at the Ocean University of China, says that a maritime route through the Arctic would be by far the safest maritime route for China’s New Silk Road initiative. Speaking to Sputnik, Guo suggested that the sea route could become an important incentive for further Eurasian economic integration.

The expert emphasized that Beijing is very interested in developing the Arctic region, particularly in the areas of trade and economic cooperation. “As far as cooperation is concerned, Russia is the priority nation for China,” Guo said. “We see how cooperation is developing in Yamal” where Russia’s Novatek, China’s CNPC, the Silk Road Fund and Total have a joint LNG project in the Arctic. “Cooperation on the Belkomur [railroad] project, running from Arkhangelsk, through the White Sea and to the Republic of Komi, and further into the Urals, looks very promising. China’s largest state corporations are looking to invest in that project,” he said.

Guo said that he is confident that the Russian Arctic cities of Arkhangelsk and Murmansk “will become the main transport hubs in Europe in the future, connecting the Arctic Sea Route, northern Europe and Russia’s interior. Therefore, this is a high priority direction, and we need to use it.”

Deutsche Bank Joins New Silk Road

May 31 (EIRNS)—Just in time, before Chinese Prime Minister Li Keqiang’s arrival today in Berlin for talks with Chancellor Angela Merkel, Deutsche Bank announced a partnership with China Development Bank for joint projects. This will make Deutsche Bank one of the first foreign lenders to participate directly in China’s Belt and Road Initiative.

A press release from Deutsche Bank Group today stated: “China Development Bank (CDB) and Deutsche Bank signed a Memorandum of Understanding at a ceremony in Berlin. The two parties expressed their interest in promoting the renminbi’s (RMB) internationalization and in financing economic cooperation between China, Germany and other Belt & Road Initiative (B&R) countries.” The agreement includes a pledge to finance projects with a scope of up to $3 billion for an initial duration of five years. Deutsche Bank also envisions getting a license from China to issue RMB-denominated loans in the country, which would visibly improve the competitive position of the bank on the Chinese inland market.

U.S. POLITICAL AND ECONOMIC

Trump May Be Taking United States Out of Paris Climate Fraud Agreement Now

May 31 (EIRNS)—President Donald Trump sent out a Twitter message this morning, “I will be announcing my decision on the Paris Accord over the next few days.”

Whereas Trump only requested “more time” when declining to sign a G7 communiqué affirming the 2015 Paris Accord, today numerous press reports are citing a “source who requested anonymity” saying that Trump and EPA Administrator Scott Pruitt are working out the terms of a U.S. withdrawal from the pact, which was signed in 2015 by Barack Obama. Late reports said that Trump was meeting with Secretary of State Rex Tillerson on the subject this afternoon.

Since a simple intention of withdrawing the United States from this anti-industrial, zero-population-growth accord could not be announced until 2019, and then would take effect only in 2020, it is possible that the President will instead declare the Paris Accord to be a treaty, which would require Senate approval. Some 20 Senators recently wrote to Trump asking him to do this, since as a treaty it would be voted down. The United States could then exit immediately.

The Paris Agreement commits signers to “keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius,” states the UN’s website for the “Framework Convention on Climate Change.”

STRATEGIC WAR DANGER

Putin Tells Le Figaro: ‘Stop Inventing Imaginary Russian Threats’

May 31 (EIRNS)—Two days after his Paris meeting with Emmanuel Macron, Vladimir Putin gave a long interview to Le Figaro which was published today, in which the paper headlined its front page, “Stop Inventing Russian Threats.”

Putin went through all the issues that were covered in the tte-à-tte with Macron and gives his views about each of them. (See EIR Daily Alert for Tuesday, May 30, 2017.) Of particular interest was Putin’s response as to whether the mistrust with Macron had been overcome: “I can tell you that the new President of the French Republic has his own vision of things in the international domain. On the whole, it is a very pragmatic vision. And it is certain that we have points of convergence which will allow us to work together.”

The Russian President’s first remarks on Syria are notable:

“First, I would like to note the constructive approach of Turkey and Iran, and, of course, the Syrian government, which, together with Russia, have managed to achieve a ceasefire. The ceasefire would not have been possible without the so-called Syrian armed opposition. It was the first and very important step toward peace.

“Another step, which is no less important, is the agreement on establishing the so-called de-escalation zones. Currently there are four such zones. We believe this is an extremely important milestone on the way to peace, if I can phrase it this way, because it is impossible to talk about a political settlement without stopping the bloodshed. Now, in my opinion, we are all facing a different task, which is technically and I would even say technologically completing the creation of these de-escalation zones, agreeing on their boundaries and how government bodies will function there, as well as how these de-escalation zones will communicate with the outside world.

“Incidentally, President Macron mentioned this when he was speaking about humanitarian aid convoys. Generally, I believe that the French President is right, and it is one of the points of contact where we can cooperate with our French colleagues. Once the de-escalation zones are formalized, I do hope that at least some elements of cooperation will begin between the government and those people who will control the de-escalation zones.

“I really hope (and what I am about to say is very important) that these zones do not become a prototype for the future territorial division in Syria. On the contrary, I expect that these de-escalation zones, if peace is established, and the people who will be controlling them, will cooperate with the official Syrian authorities. This is how an environment of basic interaction and cooperation can and must be built. The next step is a purely political reconciliation and, if possible, the development of constitutional regulations, a constitution and holding elections.” (The complete English translation appears on the Kremlin website.)

ISIS Hits Kabul’s Embassy Area, Killing at Least 90

May 31 (EIRNS)—In Kabul’s Wazir Akbar Khan, where most, if not all, embassies are situated, a massive car bomb killed at least 90 people, wounding another 400, this morning. These fatality and casualty figures are based upon the information provided by the Afghan government’s media center cited by ABC News. ISIS has claimed responsibility for the deadly blast in Kabul, the local 1TV channel reported. The attack is the deadliest in the Afghan capital since an ISIS suicide bomber killed nearly 100 people, all Shi’ites, at a protest demonstration last summer.

Reacting to the deadly news, Russia’s Foreign Minister Sergey Lavrov said: “The horrible terror attack is yet another ominous sign to abandon double standards, take full-scale coordination with all foreign players, bolster support for the Afghan government in its fight against terrorism, and abandon any attempts to use anything happening around Afghanistan for geopolitical games,” TASS reported.

The growth of ISIS in Afghanistan in recent months has pushed Russia, along with Iran and China, to advocate talks with the Taliban with the intent to bring the Taliban to share power in Kabul. According to Moscow’s observation, neither the Taliban nor the Ghani administration in Kabul, who are expending their energy and resources fighting each other, will be able to eliminate ISIS fighting individually. But if they join hands, and they are helped by neighboring countries, ISIS can be eliminated.

COLLAPSING WESTERN FINANCIAL SYSTEM

City of London Financial Times Fears Financial Crash Looming

May 31 (EIRNS)—The City of London Financial Times on May 30 followed its Frankfurt-based competitor Handelsblatt of three weeks earlier, in publishing articles by bank researchers noting that a 2008-like debt crash may be near, triggered by an unrepayable U.S. corporate bubble. The article, by author Dombisa Moyo and financial editor Gillian Tett, is headlined “Global Debt Woes Are Building Up To a Tidal Wave.” But it places most of the weight of danger on debt bubbles in the United States.

“U.S. companies have added $7.8 trillion of debt since 2010 and their ability to cover interest payments is at its weakest since 2008,” the authors note—not getting into principal repayments. Both corporate and consumer debt have reached levels beyond those of 2008 not only in the United States, but also in the U.K.

The authors say, “The threat of a looming crisis is not solely down to the absolute volume of debts. At least three things make the situation especially precarious. First, debt—particularly dollar denominated—is becoming more expensive…. Second, the ability to repay debt is under strain in countries whose revenues stem disproportionately from commodities.” And finally, growth in the United States and Europe is very slow, and “any recession will cause a nasty shock to the system.”

SCIENCE AND INFRASTRUCTURE

Russia’s Floating Nuclear Power Plant Gets Ready for Installation

May 31 (EIRNS)—In an email interview, deputy CEO (Special Projects) in Russia’s state atomic energy corporation Rosatom, Pavel Ipatov told the Indian news agency IANS that the floating nuclear power plant (FNPP) “construction is at its closing stage. The plant has already been floated out; fitting-out is under way.” It has been undergoing “mooring trials” since last July to test the FNPP’s performance efficiency, which are scheduled to be completed by October.

The floating nuclear power plant, named “Akademik Lomonosov,” for the 18th-century Russian scientist and poet Mikhail Lomonosov, is being built in Baltiysky Zavod shipyard in St. Petersburg. It contains two KLT-40C naval propulsion reactors with a 35 MW capacity each. These are mounted on a barge that is 144 meters long by 30 meters wide. The plant does not self-propel, but must be towed to its destination and docked at the required port. Operation is previewed for 2019 in the Chukotka district, in Northwestern Russia.

According to Ipatov, “we see significant potential in Southeast Asia and other regions of the world. Memorandums of cooperation on floating nuclear power plants projects have been signed with China and Indonesia. … We hope that FNPP technology will also gain interest in South Asia, including India, not only in terms of new opportunities to provide power supply to remote areas, but in terms of building extra seawater desalination facilities, too.” According to IANS, the floating nuclear power plant will have a desalination unit producing up to 240 cubic meters of water per hour.

OTHER

U.K. Labour Party Closing Election Gap, Campaigns for Infrastructure Bank

May 31 (EIRNS)—The British snap election called by Conservative Prime Minister Theresa May will be held June 9. While the Tories are still leading in the polls, the gap with the Labour Party is closing—and polls are not to be trusted in any case. In that light, Labour Party leader Jeremy Corbyn and his shadow chancellor of the exchequer (Britain’s treasury minister) John McDonnell are campaigning on an infrastructure platform which includes a call for a National Investment Bank “that will bring in private capital finance to deliver £250 billion of lending power,” according to Labour’s Manifesto. The bank would include government and private funding, but be privately run with government support.

McDonnell said last year, when the plan was first announced “to mobilize £500 billion,” that £350 billion would come from government and the rest from private investment in the bank. He proposed a network of regional banks, inspired by Germany’s government-owned development bank, Kreditanstalt für Wiederaufbau, which he said could rescue Britain’s communities from decay and rebuild Britain’s industries after years of neglect, as reported in the Guardian on July 18, 2016. He said the plan would create 100,000 new jobs.

The program focuses on rebuilding the U.K.’s rail, energy, and its rail system through re-nationalization and investment.

“By mitigating the risks and giving a firm, government-backed commitment to funding, it will draw in the private financing that has otherwise been wary of financing infrastructure in the U.K.,” McDonnell said at the time.

Otherwise, the Labour program calls for rolling back the cuts in general welfare implemented under previous governments, in health, pensions, and more. In energy, it calls for phasing out coal and funding renewables, but also outlaws fracking and is pro-nuclear. Sources in the U.K. indicate that the ban on fracking could win over many who would otherwise vote Green.

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