TUESDAY, DECEMBER 24, 2019

Volume 6, Number 254

EIR Daily Alert Service

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

• China Cuts Hundreds of Tariffs: ‘Recoupling’ at a Higher Level?
• Senate Judiciary Chair Lindsey Graham Lets Democrats Know, ‘Impeachment’s a Dead Cat’
• U.S.-Mexico ‘Operation Frozen’Moves Forward To Stop Illegal Arms for Drug Cartels
• Repo Short-Term Credit Crisis Indeed Has ‘Macroeconomic Effects’
• President Trump May Attend World War II Victory Celebrations in Moscow, Announces Lavrov
• Chinese Ambassador to France Calls on EU To Back Belt and Road
• Lavrov Tells ‘Great Game,’ Russia Is Ready To Discuss All Aspects of New START
• Putin Opens Rail Bridge over Kerch Strait, as First Train Departs St. Petersburg for Crimea
• Turkey, Greece, Libya, and the Struggle for Offshore Rights

EDITORIAL

China Cuts Hundreds of Tariffs: ‘Recoupling’ at a Higher Level?

Dec. 23 (EIRNS)—Today it is reported that China’s Finance Ministry, and the Customs Tariff Commission of the State Council, have announced tariff cuts on 859 imported products, totaling nearly 20% by value of China’s imports in 2018. Though pork was included, these are largely far afield from agricultural products, and the cuts appear not at all directly related to the U.S.-China “phase-one” trade deal about to be signed. They are, typically: fiber-optic cable, electrical machinery parts, industrial robots, medications, and many other industrial and household products. The cuts, according to Reuters’ report, in many cases bring the tariff on the product “below the most-favored nation level.” And Reuters added the report that the Finance Ministry scheduled another round of tariff cuts for July 1, 2020; those will be on IT products.

Bloomberg News, reporting the tariff cuts as “continuing Beijing’s drive to lower trade barriers and spur domestic demand,” emphasized they are not related to the U.S.-China trade deal, but intended to increase economic growth. Xinhua said the government “promised to give private companies equal treatment with state-owned enterprises in more industries.”

An American source pointed to China’s “Import Expo” as an ongoing policy change, which involves both decentralization of importing within the Chinese economy, and a kind of “recoupling” with other advanced industrial economies at a higher technological level. China is actively seeking to get imports from medium-sized U.S. companies and even new, small companies. It is putting more attention on this than on increasing imports of products distributed by multinationals which have always dominated foreign direct investment and trade with China. It is doing this to seek “high-quality economic development” and growth in China.

The government has, for example, been changing its import regulations to increase outreach from import companies to American small and medium-size enterprises (SMEs). U.S. companies may now establish wholly-owned import companies in China’s port cities, to use them to export directly (thus more profitably) to businesses in China’s hundreds of inland cities—something they have not been able to do before. The focus of this import drive, which is not a response to “trade war” at all, is household consumption and high value-added industrial goods.

This is a policy by which China, with its Belt and Road Initiative, as long actively pursued “win-win” links with Germany’s highly productive Mittelstand firms. It offers benefit to both countries. Logistical issues on the U.S. side, like Panama Canal-going vessels returning from the U.S. East Coast to China with empty containers, combine the need for more exports with the requirement for more infrastructure investment.

Overall cooperation between the two countries in issuing productive credit—in building a new U.S. infrastructure and in third countries—is the most important factor of all.

Note to Subscribers: EIR Daily Alert will not be published on Dec. 26 and Jan. 2, to allow staff to take Christmas and New Year’s Day off.

U.S. POLITICAL AND ECONOMIC

Senate Judiciary Chair Lindsey Graham Lets Democrats Know, ‘Impeachment’s a Dead Cat’

Dec. 23 (EIRNS)—Sen. Lindsey Graham, the Senate Judiciary Committee Chairman, told Fox News yesterday “This is the latest in a series of constitutional train wrecks orchestrated by Nancy Pelosi.” The U.S. House of Representatives is expected to send impeachment to the Senate this week. After voting up impeachment on Dec. 18, House Speaker Nancy Pelosi is delaying sending the articles of impeachment to the Senate, where Republicans have a 53-47 majority. “Impeachment is a dead cat. The Democrats should stop playing with it,” Graham asserted.

On Fox News’ “Sunday Morning Futures,” Graham told host Maria Bartiromo, yesterday, when she raised the original investigation of Trump, and the FBI’s abuse of the Foreign Intelligence Surveillance Act: “So, the Horowitz report is the first step in a long journey regarding FISA abuse. …  No, Comey, it wasn’t sloppy; it was criminal. I’m going to call every person who signed the warrant application…. We’re going to look long and hard at FISA abuse; we’re going to pass laws to make sure this never happens again. Accountability will only be successful if somebody gets fired, and I’m looking at Christopher Wray to fire somebody at the FBI. And somebody needs to go to jail, and I’m looking Durham to hold people criminally accountable for the laws they broke….

“Did President Obama know about the counterintelligence surveillance of the Trump campaign? Did Vice President Biden know? How much information was provided to Susan Rice? I want to know how far up the chain the investigation went. I want to know why so many people could sign a warrant application so flawed….”

The Senator described the irregular and apparently unlawful procedures the Justice Department employed in its zeal to have President Donald Trump impeached. He showed, for example, that in May 2017, former Rep. Trey Gowdy questioned former CIA Director John Brennan, airing a clip from Gowdy’s questioning in Intelligence Committee hearings: “Do you know if the Bureau ever relied on the Steele dossier as any—as part of any court filings, applications, petitions, pleadings?” Brennan replied, “I have no awareness.” “Did the CIA rely on it?” “No.” Asked why not, Brennan continued, “It wasn’t part of the corpus of intelligence information that we had.” Graham simply said this was false, and he wanted to know if the CIA was part of an effort to get to the media the fact that Trump was “under investigation.”

Graham clearly suspects that the FBI and CIA actively worked, along with Steele, to get the dossier out to, and in, the media. He said he “would let [U.S. Attorney] John Durham decide” whether Brennan had committed perjury in that exchange with Gowdy. And how far “up the chain” this process went: “I want to know did President Obama, was he aware of the counterintelligence investigation of the Trump campaign? And I’d be shocked if he was not,” Graham said.

Graham said after the impeachment trial is over, “Working with Senator Johnson and Grassley, I’m going to ask questions about the role Hunter Biden played after Burisma came under investigation, after they raided the president of Burisma’s home. He picks up the phone. He calls the State Department…. So, the double standard here is unbelievable,” Graham said.

U.S.-Mexico ‘Operation Frozen’ Moves Forward To Stop Illegal Arms for Drug Cartels

Dec. 23 (EIRNS)—A meeting between top Mexican officials and U.S. Ambassador Christopher Landau on Dec. 20 sealed an agreement on a bilateral legal framework for combatting the illegal arms trade. This gets underway the agreement for both nations to work together to shut down—freeze—the gigantic cross-border illegal weapons traffic which gives the cartels overwhelming firepower, discussed since the shocking display of drug cartel military power in Culiacan, Sinaloa last October. An estimated 70% of the cartels’ weapons come from the United States.

Under the framework, Mexico and the United States shall establish, each on their respective territories, inspection posts for the purpose of curbing illegal arms crossing the border between the two countries, Mexico’s Secretary of Security and Citizen Protection Alfonso Durazo reported in a series of tweets on Dec. 20. Durazo added, without further details, that the program will use “intrusive and non-intrusive technology” on all border crossings, beginning with Tijuana, Ciudad Juárez, Nuevo Laredo, Ciudad Reynosa and Matamoros. How advanced that non-intrusive technology will be is of interest.

Durazo reiterated: “Because illegal arms trafficking threatens the security and interests of our countries, it is essential to jointly attack this problem, with the sole objective of protecting the life, security and integrity of the citizens of both countries.”

Bilateral cooperation on shutting down cartel money-laundering remains to be similarly attacked.

COLLAPSING WESTERN FINANCIAL SYSTEM

Repo Short-Term Credit Crisis Indeed Has ‘Macroeconomic Effects’

Dec. 23 (EIRNS)—At his Dec. 18 Federal Open Market Committee (FOMC) press conference, Federal Reserve Chair Jerome Powell insisted that the repo crisis “is a purely operational matter which has no macroeconomic consequences.” But one big “but” has already emerged.

OilPrice.com on Dec. 19 reported that the critical U.S. oil shale industry has “lost substantial access to capital” during the same four-month period in which the interbank lending market has cracked. The oil-shale sector, which has depended on short-term, even six-month and three-month loans, suffered a drop of −6% in 2019 (projected final result). Asset-backed securitization (of oil/gas revenue) is being used to try to get replacement for the lost capital funds.

A lot of mergers and bankruptcies are now on the agenda, with the mergers being buyouts of independent drillers by oil majors. But even this has turned down: Chevron just reported a $10 billion write-off of oilfield assets in Pennsylvania, West Virginia and Ohio (Marcellus Basin). Overall, production is up for 2019 only in the Permian Basin (this, despite 100 fewer rigs); it is down in the other basins in the Dakotas, Pennsylvania, and Eagle Ford in North Texas.

Consumer credit to U.S. households is also showing effects. Consumer credit has become increasingly a looting process, as it did in the three years before the 2008 financial crash; this process has been underway since approximately 2016.

Credit card average interest rates, and delinquency levels, have both increased significantly—the former from 14% to 17%, the latter from 2.7% to 3.3%. Auto loan average interest rates have gone from 5.2% to 6.8% over those three years, while (90 days-plus) delinquencies have risen from 3.5% to 4.8%. The average amount of an auto loan has risen to just under $32,000—nearly the average price of a car—and typical auto loan term is now 68 months, but 72 and 84 months are no longer rare.

Significantly, for consumer credit as a whole, the (90 days-plus) delinquency rate for loans made by the 100 largest U.S. banks is 2.5%, almost unchanged; but for all the other 5,000 banks, it is 6%, and has doubled since 2016.

THE NEW GLOBAL ECONOMIC ORDER

President Trump May Attend World War II Victory Celebrations in Moscow, Announces Lavrov

Dec. 23 (EIRNS)—Russian Foreign Minister Sergey Lavrov announced today that President Donald Trump had expressed interest in attending the 75th anniversary of victory in World War II to be held in Moscow on May 9, 2020. This depends on President Trump’s schedule, Lavrov stated today during a session of the Russian Federation Council, the upper house of Russia’s Federal Assembly legislature.

“The U.S. President has received the invitation by [Russian President] Vladimir Putin, along with other leaders of the anti-Hitler coalition and other states, to take part in the celebrations timed to the 75th anniversary of victory on May 9 in Moscow on Red Square. President Trump has stressed the importance of this date many times, namely during my visit to Washington [on De. 10]. He has expressed interest in taking part in the events if his schedule allows it,” Foreign Minister Lavrov said, reported TASS.

Lavrov continued, “Currently, we are also discussing another date. In the run-up to May 9, the 75th anniversary of the Elbe Day [the meeting of Soviet and American troops at the Elbe River on April 25, 1945] will be observed. Our non-governmental organizations, along with Russian and U.S. veteran organizations, maintain regular contact and plan to mark this event.”

Chinese Ambassador to France Calls on EU To Back Belt and Road

Dec. 23 (EIRNS)—At the third session of the Silk Road Forum in Paris past week, China’s ambassador to France Lu Shaye urged the China and France and the EU to put aside their political differences to focus on their economies. Lu Shaye says China’s will to establish strong relations is unwavering.

In an interview with CGTN, he said: “We cannot let our differences of opinion, whether political or ideological, prevent us from cooperating with each other. There are concerns and different points of view and that is normal, because we are very different countries on several aspects—politically, economically and culturally. But we have to communicate with each other to see where the problems are. … Our differences of opinion are easy to resolve, so they themselves are not a concern. The Belt and Road is an open initiative that can develop our countries.”

Around 400 diplomats, experts and intellectuals from France and China gathered at the UNESCO world heritage center in Paris to evaluate and debate the BRI. The fact that France signed more than $50 billion worth of trade deals with China in 2019, was welcomed by Lu as a “positive outlook. That’s why China wishes the EU to join this initiative in order to have a win-win relationship for better growth.

“The results of this initiative over the past six years have been very convincing. For example, the rails between China and Europe have been transporting 20,000 convoys, stimulating exchanges between both parties. China wants to build as many partnerships as possible with every country.”

STRATEGIC WAR DANGER

Lavrov Tells ‘Great Game,’ Russia Is Ready To Discuss All Aspects of New START

Dec. 23 (EIRNS)—During a Dec. 22 interview with Channel One’s Bolshaya Igra (or “Great Game”) show, Russian Foreign Minister Sergei Lavrov repeatedly stressed that Russia is ready to move forward on the New START treaty. He said that Russia is prepared to include its Avangard and Sarmat missile systems in New START. “We told the Americans [at a bilateral consultative commission set up under the New START] that we have presented our new systems, including hypersonic weapons. We consider that the Avangard and Sarmat systems are covered by the treaty. We are ready to include these weapons and systems in the current New START (when it is extended),” Lavrov said, reported TASS. “We have already presented Avangard to the Americans and we will be ready to do the same with Sarmat at a certain stage,” he stated.

Lavrov also emphasized Moscow’s view that strategic stability isn’t just about offensive nuclear arms but is also about missile defenses, including the placing of missile defense weapons in space. “We have never denied the necessity to consider the entire spectrum of problems in the sphere of strategic stability with due account of all the aspects of this situation that can tell on strategic stability, including strategic offensive nuclear weapons, strategic non-nuclear weapons the Americans are developing as part of their prompt global strike concept, and missile defense,” he said. “Now that it is obvious that this missile defense system has nothing to do with the task of fend off Iran, but is a really global system, we insist on the discussion of problems linked with the plans to deploy weapons in outer space that have been announced not only by the Americans but also by the French,” Lavrov stressed.

When speaking about the possibility of extending New START, Lavrov emphasized that it was still unclear. He noted that Russian President Vladimir Putin said at a recent meeting with senior officials from the Defense Ministry and the Russian Armed Forces that Moscow was “ready to extend the treaty right away without any preconditions.”

The complete translation of the transcript of his interview is posted to the Foreign Ministry’s website.

SCIENCE AND INFRASTRUCTURE

Putin Opens Rail Bridge over Kerch Strait, as First Train Departs St. Petersburg for Crimea

Dec. 23 (EIRNS)—Russian President Vladimir Putin went to Crimea on Dec. 23 to join a ceremony for officially opening rail service on the bridge from Taman in mainland Russia to Kerch on Crimea, and by videoconference ordered the train to leave from St. Petersburg.  For several months from now, the rail connection will be open for passenger transfer, and freight transport along the route will be opened sometime later in 2020. Construction of the road part of the bridge was completed a year ago, reported the U.S. Radio Free Europe.

Crimeans voted in 2014 to rejoin the Russian Federation.

The President told fellow Russians: “Today we have a pleasant and a very important occasion. It is important for Crimea, Sevastopol, the entire south of Russia and the whole of Russia, because, of course, such infrastructure facilities as this tremendous bridge will influence the entire economy.

“However, I would like to tell you that today, we are not launching the traffic but restoring it, because originally train traffic to St. Petersburg—and the first train will be from St. Petersburg to Sevastopol—was launched 145 years ago.

“Over the course of Russian history, this train service has been interrupted only three times: during the 1917 October Revolution, during the Great Patriotic War and in 2014. You have restored it…. Congratulations on this. This is a great occasion.

“You know, there is also another important thing: not just that millions of cars have used the bridge since it was opened or that millions of passengers will travel this way next year. This is also a great occasion. Almost 14 million passengers and 13 million tons of cargo are expected next year.

“There is something more important. It is more important that your hard work, talent, perseverance and determination have proven that Russia is capable of implementing infrastructure projects at the global level. This is not just the largest bridge in Russia, but also the longest in Europe….

“Thank you very much for your persistence and your talent, thanks to everyone: builders, engineers, scientists, archeologists and environmentalists. This is a great, enormous and powerful team uniting people from all across Russia from the Far East to its European part.”

In November, the privately owned Grand Service Express railway company announced that the first train would depart from St. Petersburg for Sevastopol on Dec. 23 and would travel 2,741 km in 43.5 hours. The segment from Moscow to Crimea’s capital, Simferopol, is scheduled to depart on Dec. 24 and travel 2,009 km in 33 hours.

OTHER

Turkey, Greece, Libya, and the Struggle for Offshore Rights

Dec. 23 (EIRNS)—The move by Turkish President Recep Tayyip Erdogan to illegally grab offshore economic zones continues to heat up the diplomatic situation in the Eastern Mediterranean. This involves two Memoranda of Understanding between Turkey and Libya’s Tripoli-based Government of National Accord (GNA). One is a security agreement, which includes a promise by Erdogan to send military forces if “invited” by the government, and the other involves mapping out exclusive economic zones between the two countries. No other government recognizes these agreements.

In another step in Greece’s diplomatic offensive, on Dec. 22 Athens Foreign Minister Nikos Dendias visited Benghazi, Libya where he met the commander of the Libyan National Army (LNA), Gen. Khalifa Haftar, and administration officials Abdullah es-Sinni and Abdulhadi al-Havic. The visit was quickly denounced by the GNA Foreign Minister Mohamed Taher Siala on the ministry’s social media account. Dendias’ Benghazi visit follows a Dec. 12 visit to Athens by Aguila Saleh Issa, President of the Benghazi-based Libyan House of Representatives.

Dendias then traveled to Cairo to meet Egyptian Foreign Minister Sameh Shoukry, and from there to a meeting with Cypriot Foreign Minister Nikos Christodoulides in Larnaca, Cyprus. Greece, Egypt, and Cyprus have various agreements concerning their exclusive economic zones which are contiguous.

Greece and Cyprus have similar agreements with Israel and an agreement concerning a pipeline is expected to be signed on Jan. 2. The proposed pipeline will begin at Israel’s Levantine Basin offshore gas reserves, to the Greek island of Crete and then to the Greek mainland, and on to Italy. The agreement will be signed in Athens by Greek Prime Minister Kyriakos Mitsotakis, Cypriot President Nicos Anastasiades and Israeli Prime Minister Benjamin Netanyahu.

It is an open question as to whether Italy will join this project since Italian Prime Minister Giuseppe Conte had earlier expressed opposition to it. Cyprus, Greece, and Israel already signed an agreement on the 1,900 km pipeline earlier this year in the presence of U.S. Secretary of State Mike Pompeo.

The question now is what Erdogan will do next.

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