Category: International Commerce

Call Your Congresscritter

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It looks like the Obama administration is planning to submit a fast track bill next week.

If this passes, expect the TPP (Trans Pacific Partnership) and (TTIP) Trans-atlantic Trade and Investment Partnership to follow soon after, and it both deals will pass under fast track, because there will be no meaningful public discussion:

Senators will introduce trade promotion authority legislation next week, a top Obama administration official said Thursday.

 Commerce Secretary Penny Pritzker expects a “fast-track” bill to be introduced early next week in the Senate and said in a call with reporters that she is “anxiously awaiting to see the language.”

 Pritzker is the first administration official to suggest a firm timeline for legislation that would grant President Obama “fast-track” powers for negotiating trade deals.

 Speculation has been swirling about when the Senate Finance Committee would start moving on a bill.

 Senate aides have said negotiations between Finance Committee Chairman Orrin Hatch (R-Utah) and ranking member Ron Wyden (D-Ore.) are making progress but that no deal had been struck.

The TPP and the TTIP suck.

They favor big big banks, big pharma, and big content over ordinary people, labor rights, environmental protection, and democracy.

As a bonus, it also appears that it would make state owned banks like the Bank of North Dakota, which has saved taxpayers millions, illegal. (It would probably make a US Post Office bank, which would serve to rescue poor Americans from predatory check cashing operations, illegal as well).

Background here.

Call, and tell them to vote no, and tell them that if they vote yes, you will not vote for them ever, in any election, primary or general.

This is particularly important if your Congressmen are Democrats, because there will be a full court press from the Obama administration, which supports fast track, and has negotiated the TPP and TTIP on this. They will argue that the credibility of the President depends on this.

If your Congressmen are Republicans, call and sound like a wingnut who will never forgive them for supporting that Kenyan Muslim Marxist Atheist Tyrant.  (The more unhinged you sound, the better)

You can make email contact from here, but a phone call (The Congressional switchboard number is (202) 224-3121), or a letter sent through the mail probably have more impact.

UK, France, Germany, and Italy to Join the Chinese led Asian Infrastructure Investment Bank, White House Unamused

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After many years with the Congress delaying IMF reform to allow greater influence for emerging market nations, China has created its own analogue, the Asian Infrastructure Investment Bank (AIIB).

The United States has responded by leaning on nations to not join the bank.

It’s not working. First, Britain joined the bank despite heavy US pressure:

The White House has issued a pointed statement declaring it hopes and expects the UK will use its influence to ensure that high standards of governance are upheld in a new Chinese-led investment bank that Britain is to join.

In a rare public breach in the special relationship, the White House signalled its unease at Britain’s decision to become a founder member of the Asian Infrastructure Investment Bank (AIIB) by raising concerns about whether the new body would meet the standards of the World Bank.

The $50bn (£33.5bn) bank, which is designed to provide infrastructure funds to the Asia-Pacific region, is viewed with great suspicion by Washington officials, who see it as a rival to the World Bank. They believe Beijing will use the bank to extend its soft power in the region.

The White House statement reads: “This is the UK’s sovereign decision. We hope and expect that the UK will use its voice to push for adoption of high standards.”

George Osborne – who has discussed the decision to become a founder member of the investment bank with his US counterpart, Jack Lew – has been the driving force behind developing closer economic ties between Britain and China. The chancellor has led the way in encouraging Chinese investment in the next generation of civil nuclear power plants in the UK and he ensured that the City of London would become the base for the first clearing house for the yuan outside Asia.

The US administration made clear in no uncertain terms its displeasure about Osborne’s decision to join the AIIB. A US official told the Financial Times: “We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.”

Britain was unsurprised by the decision of the US administration to air its concerns in public after the formal announcement that the UK would join the new investment bank. Sources said, in addition to the talks about British plans between the chancellor and the US treasury secretary, British and US officials have been in regular contact ahead of the announcement. UK officials say that, by joining the bank as a founding member, Britain will be able to shape the new institution.

In its statement to the Guardian, the White House national security council said: “Our position on the AIIB remains clear and consistent. The United States and many major global economies all agree there is a pressing need to enhance infrastructure investment around the world. We believe any new multilateral institution should incorporate the high standards of the World Bank and the regional development banks.

And then a week later, France, Germany and Italy joined the AIIB:

A senior US diplomat said it was up to individual countries to decide on joining a new China-led lending body, as media reports said France, Germany and Italy have agreed to follow Britain’s lead and join the Asian Infrastructure Investment Bank (AIIB).

A growing number of close allies were ignoring Washington’s pressure to stay out of the institution, the Financial Times reported, in a setback for US foreign policy.

In China the state-owned Xinhua news agency said South Korea, Switzerland and Luxembourg were also considering joining.

The Financial Times, quoting European officials, said the decision by the four countries to become members of the AIIB was a blow for Washington, which has questioned if the new bank will have high standards of governance and environmental and social safeguards.

The bank is also seen as contributing to the spread of China’s “soft power” in the region, possibly at the expense of the United States.

On Tuesday Washington’s top diplomat for east Asia signalled that the concerns about the AIIB remained but the decision on whether to join was up to individual nations.

“Our messaging to the Chinese consistently has been to welcome investment in infrastructure but to seek unmistakable evidence that this bank … takes as its starting point the high watermark of what other multilateral development banks have done in terms of governance,” US regional assistant secretary of state Daniel Russel said in Seoul.

If you think that this is really about transparency in the new bank, I have some of Saddam Hussein’s weapons of mass destruction that I want to sell you.

This is about the US maintaining hegemony over international financial institutions.

The maintenance of hegemonic control of international institutions, along with the maintenance of an overwhelming military force, seem to be the paramount goals of the United States.

It is also unsustainable.

If America’s poodle, the UK, ignored US pressure to join this bank, it is clear that the “Unipolar World” edifice created following the fall of the USSR is a model that the rest of the world is no longer willing to tolerate.

If the US is forced to go it alone on everything, we will eventually run out of the resources to destabilize unfriendly regimes, rain down Hellfire missiles from drones, prop up despots, and invade other countries.

It would be much better if the military and foreign policy establishment in the United States realized this, and went forward with a transition to a more sustainable, and more humane, path, but I am not holding my breath on that one.

Great Headline

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The story is pretty good too:

Stuffed bunnies were hopped up on meth, federal agents say

By Steve Strunsky | NJ Advance Media for NJ.com on March 24, 2015 at 1:15 PM, updated March 24, 2015 at 4:51 PM

Federal drug agents at JFK airport found a pair of plush toy bunnies stuffed with an unusual and illegal substance: a kilo of meth.

Drug Enforcement Administration agents at JFK recognized Lucas Dasilva, a suspected drug methamphetamine dealer wanted on drug charges in Florida, after he stepped off a flight to JFK from California on Friday, the New York Post reported.

Investigators said the 35-year-old was carrying a Brazilian passport with a fake name, plus luggage containing the two bunnies, according to the Post.

“A search revealed two stuffed rabbits which were unusually heavy and made a crunching noise when squeezed,” stated court papers quoted by the Post.

One of the bunnies was big and brown, while the other was small and white, the Daily News reported.

This is epic.

H/t Jim Romenesko.

This Does not Bode Well for the Euro or the Eu

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As you are no doubt aware if you follow the financial papers, the Swiss Central Bank abruptly ended its peg to the Euro, and then all hell broke loose:

One does not normally see sharp right angles in financial charts, but you could pretty much cut yourself on this chart of the volatility of the Swiss franc against the euro:



One straightforward takeaway is: Whoa, that volatility is super high! But perhaps a more useful takeaway is: Whoa, it was super low for a really long time! This is of course because the Swiss National Bank capped the franc’s value against the euro: The SNB wanted a price of no less than CHF 1.20 per euro, and the euro itself wanted a price of no higher than CHF 1.20 for reasons of its own, so the result was pretty much a peg at slightly above 1.20. In the 12 months ending on Wednesday, the euro traded in a range of 1.20095 to 1.23640 francs:

 ………

 That chart looks more jagged than it is, because you’re standing too close to it. Here, I’ve zoomed out by two days:

………

 On the other hand! Imagine being a retail foreign-exchange broker and letting your customers day-trade Swiss francs with lots of leverage. How much leverage would you feel comfortable giving them? Well, if daily moves are typically less than 0.1 percent, then that means that 95 percent of the time their positions will move by less than 0.2 percent in a day. So if you required 2 percent margin — that is, you demand $2 of cash from them for every $100 worth of Swiss francs that they trade — you’d feel pretty safe. That would mean that, 95 percent of the time, customers couldn’t lose more than one-tenth of their equity in a day — so if they lost money and skipped out on you, you’d be able to liquidate their positions without getting close to losing any of the money you’d lent them.

On the other hand when the euro/franc moves by 19 percent in a day, they’re gonna get utterly smoked, and so are you. This is roughly the boat in which FXCM Inc. finds itself. Like many other retail foreign exchange brokers, it offered 50:1 leverage on FX trades. And yesterday its “clients experienced significant losses” on the Swiss franc move, and “generated negative equity balances owed to FXCM of approximately $225 million.” id=”footnote-1421429157415-ref”>  And now it’s in talks with Jefferies Group for a large cash infusion to fix the problem. FXCM is also distinguished by just an unbelievable sense of irony:

FXCM Chief Executive Officer Drew Niv, in remarks published in Bloomberg Markets magazine’s December issue, said individual currency traders are enticed by the chance to control large positions with little money down.

 “Currencies don’t move that much,” he said. “So if you had no leverage, nobody would trade.”

Famous last word words. FXCM is basically insolvent now, and is relying on a loan from a “white knight”, in exchange for who knows what concessions.

Here is the scary quote about this:

As realized volatility gets lower, estimates of future volatility — and so estimates of future losses — get lower. And so position limits get higher, as banks feel safer with the risks they’re taking, because, on a historical basis, they don’t look that risky. And then the risk that didn’t look risky becomes the one that gets you.

So, what we have just had a major case of “It’s different this time” contagion because a non-EU member dropped a peg following months (years?) of denials.

We have another player, and one who is one of the EU’s  “stronger” members who is not on the Euro, but is on a peg, Denmark, which retains the Krone.

And Denmark is promising to do whatever it takes to keep their peg:

Denmark moved to quash speculation it may follow Switzerland and abandon its euro peg, delivering a surprise interest-rate cut to prevent the krone gaining further.

“We have the necessary tools to defend the peg,”Karsten Biltoft, head of communications at the Copenhagen-based central bank, said by phone. Asked whether Denmark could ever consider abandoning its currency peg, he said, “Of course not.”

Since the Swiss National Bank shocked markets on Jan. 15 by jettisoning its three-year-old euro peg, Scandinavia’s biggest banks have fielded calls from hedge funds and other offshore investors asking whether Denmark could be next. Danske Bank A/S (DANSKE) has sought to dispel the speculation, noting Denmark’s three-decades-old currency regime is backed by the European Central Bank, unlike the SNB’s former system.

………


The Danish bank today cut its deposit rate to minus 0.2 percent, matching a record low, from minus 0.05 percent and lowered its lending rate to a record 0.05 percent from 0.2 percent. While the bank can adjust rates at any time, it traditionally announces changes on Thursdays and mostly in connection with ECB moves.

Is it just me, or do the assurances of the bankers at Copenhagen not sound particularly credible right now?

If Denmark is forced to drop its peg, all hell breaks loose, because it opens a Pandora’s box of asymmetries that have been growing in the Euro zone, and the EU over the past 3 decades.

It will not be pretty.

The Trade Deals Being Negotiated Just Got Worse

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In addition to the TPP and the TTIP, we now have the Trade In Services Agreement (TiSA), which looks to vitiate national privacy, net neutrality, and consumer protections:

The US is attempting to secure immunity from investigation for online security breaches by major US companies under negotiations between Washington and Brussels, according to leaked documents seen by the Guardian.

 Such a deal would prevent US companies that were operating inside the EU from being prosecuted by regulators or law officers for data breaches or claims of negligence in the host country, forcing European governments to pursue cases in the US courts.

 Public service unions said the Trade in Services Agreement (Tisa) talks in Geneva revealed how the US planned to protect homegrown businesses from regulations that might hinder their expansion into sensitive areas such as government data handling and healthcare.

 Rosa Pavanelli, general secretary of Public Services International (PSI), which represents 650 unions in 150 countries, said the leaked documents, obtained by the Associated Whistleblowing Press, confirmed her fears that “Tisa is being used to further the interests of some of the largest corporations on earth”.

 She said: “It is now clear the US wants to use its trade agenda to remove restrictions to data being held or processed in other countries.”

The Association of Whistleblowing Press link is here, and an earlier Wikileaks leak is here.

Here is nickel tour of what it all means:

  • Corporations to move any possibility liability to the most weakly regulated venue (“No Party may prevent a service supplier of another Party from transferring, accessing, processing or storing information, including personal information, within or outside the Party’s territory, where such activity is carried out in connection with the conduct of the service supplier’s business.”)
  • It has a broad carve-out for  national security that is a censor’s wet dream (“Nothing in [Articles X.1 – X.6] shall be construed to prevent any Party from taking any action which it considers necessary for the protection of its own essential security interests.”)
  • It would prohibit meaningful net neutrality regulation (“Each Party recognizes that consumers in its territory, subject to applicable laws, and regulations, should be able to: (a) access and use services and applications of their choice available on the Internet, subject to reasonable network management;”)

(emphasis mine)

The cynic in me understands why Obama came out in front of net neutrality regulation:  Once TiSA goes through, any FCC ruling is moot.

He gets to play at consumer protection while taking it all away with a fast track vote on the treaty.

This is Japanese for, “F%$# No.”

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In the realm of diplomacy, the statement that something is difficult is a polite way of saying, “No.”

But the significance of such a statement will vary across cultures.

From an American, it might mean, “I want a better deal.”

That being said, the Japanese are famously oblique about saying no, so when it’s the Japanese economy minister saying it, this is a remarkably strong statement:

Japan’s Economy Minister Akira Amari said on Saturday he saw progress in Asia-Pacific regional trade negotiations, although it would be difficult to reach an agreement by the end of the year, according to Jiji press.

Trade ministers from the 12 nations participating in the Trans-Pacific Partnership (TPP) pact held talks on the sidelines of an annual Asia-Pacific Economic Cooperation Forum (APEC) meeting in Beijing

This is a good thing.

The TPP is a very bad thing, even by the standards of trade agreement.

It is a neoliberal corporatist wet dream.

Get Ready to Eat Tainted Meat from China

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The WTO has just ruled that country of origin labels on meat are a violation of trade agreements:

Today’s ruling by a World Trade Organization (WTO) compliance panel against U.S. country-of-origin meat labeling (COOL) policies sets up a no-win dynamic, and the Obama administration should appeal the ruling, Public Citizen said.

If the administration were to weaken COOL, U.S. consumers would lose access to critical information about where their meat comes from at a time when consumer interest in such information is at an all-time high and opposition would only grow to the administration’s beleaguered trade agenda. If the administration again were to seek to comply with the WTO by strengthening COOL, then Mexico and Canada – the two countries that challenged the policy – likely would continue their case, even though cattle imports from Canada have increased since the 2013 strengthening of the policy.

The ruling further complicates the Obama administration’s stalled efforts to obtain Fast Track trade authority for two major agreements, the Trans-Pacific Partnership and the Trans-Atlantic Free Trade Agreement. Both of these pacts would expose the United States to more such challenges against U.S. consumer, environmental and other policies.

What Public Citizen does not get is that, “More such challenges against U.S. consumer, environmental and other policies,” is a feature, not a bug.

It is a goal of the neoliberal policy makers who create such deals to create a regulation free world.

They see it as leading to the Garden of Eden.

Me, I think that it’s more likely to lead to Lord of the Flies.

Never Stop Your Enemies from Stepping on Their Own Dicks

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If you ask me, and you’re not asking me but I’m saying so anyway, Georgia has suddenly become the most interesting Senate race in the country. It was mighty interesting during the Republican primary, but then slipped in status as the race devolved into a plain vanilla case of the Republican Business Robot holding a safe lead over the Centrist Democratic Robot. The Centrist Democratic Robot’s Robotic Centrist Democrat campaign strategy leaked, and the Republican Business Robot used it predictably to tar the Centrist Democratic Robot as a Terrorist ISIS Mexican Democratic Robot — the worst kind of robot there is.

But now, things — things are happening. The Republican Business Robot, David Perdue, apparently went on the record some years back describing how he’s spent “most of [his] career” outsourcing. This was in response to a direct question asking him, “Can you describe your experience with outsourcing?” It’s unambiguous and it reinforces the central attacks on both Perdue and Republican economic priorities. It is the sort of thing on which a late-stage move can be made.

It’s not complicated. You, Michelle Nunn’s campaign, make an ad quoting directly from the deposition. “Q: Can you describe your experience with outsourcing?” “A: Yeah, I spent most of my career doing that.” You just take this dialogue and cut the ad and then make like 10 more and show them all on every channel, for a month. Hey, look at that:

Perdue’s defense? That he is proud of his sending American jobs overseas:

U.S. Senate candidate David Perdue said Monday he is proud of outsourcing he has done in his career as a corporate executive, pushing blame for lost jobs back on Washington.

Perdue, a former CEO for Dollar General and Republican nominee to replace retiring Sen. Saxby Chambliss, was stung by his own words last week in an article on Politico.com. The Washington political news website quoted Perdue from a 2005 deposition where he said he “spent most of my career” outsourcing.

“Defend it? I’m proud of it,” he said in a press stop at The White House restaurant in Buckhead. “This is a part of American business, part of any business. Outsourcing is the procurement of products and services to help your business run. People do that all day.”

The deposition was taken as part of a lawsuit in the bankruptcy of Pillowtex, a failed textile company where Perdue was CEO in 2002 and 2003. In remarks Monday, he attempted to draw a line between his business decisions and Washington policies.

Yeah, this is going to go over to all those folks who lost their jobs in the textile industry.

There is a peculiar kind hubris that is a part and parcel to the American management class.

They cannot allow themselves to admit that what they do is not a heroic John Galtesque exercise, because once they do that, the fact that they are parasites (moochers) becomes inescapable.

The Eu Gets Real, Beotches

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The EU has routinely insisted that in accordance with EU rules, countries in crisis have to impoverish their ordinary citizens, cutting wages and the social safety net.

Well it looks like the EU will start going after money for the big guys now with Eurocrats going after Ireland’s tax deal with Apple, and Luxemburg’s and the Netherland’s deals with FIAT and Starbucks:

In a warning shot to companies shopping for tax deals around the globe, the European Commission publicly accused Ireland on Tuesday of giving illegal subsidies to Apple and cautioned that the country might need to collect back taxes from the company, which outside analysts said could reach into the billions of dollars.

These findings, which constitute a preliminary indictment of Apple’s past arrangements with Ireland, come as policy makers in the United States and Europe try to block some of the inventive maneuvers multinationals use to limit taxes in their home countries and reduce their worldwide payments as much as possible.

“The light bulb has gone off that trade wars by another name and conducted through the tax system are just as ruinous,” said Edward D. Kleinbard, a professor at the University of Southern California’s Gould School of Law and a former chief of staff to the Congressional Joint Committee on Taxation.

And from the European lowlands:

The European Union is to accuse US tech giant Apple of taking illegal aid from the Irish state through sweetheart tax deals over two decades, the Financial Times reported Monday.

A European Commission investigation into Apple’s tax affairs in Ireland, where it has enjoyed a rate of less than 2.0 percent, found that the company benefitted from illegal state aid, the FT reported citing sources close to the matter.

Ireland’s Department of Finance confirmed that the EU would be publishing a document on Monday but stressed that “the Commission has not formally decided that there is state aid” at play.

“Ireland is confident that there is no breach of state aid rules in this case and has already issued a formal response to the Commission earlier this month, addressing in detail the concerns and some misunderstandings contained in the opening decision,” the department added.

The European Union launched a probe in June into sweetheart tax deals negotiated by Apple, Starbucks and Fiat with three member states.

The investigation seeks to determine whether such arrangements offered by Ireland, Netherlands and Luxembourg give the companies an unfair competitive advantage and thus amount to illegal state aid.

Here’s a phrase that I did not expect to say, “Good job, European Union Bureaucrats.”

Follow this to its logical conclusion, please, and ban this sh%$.

Everyone but the corporations lose in this beggar thy neighbor strategy, and besides, Ireland really needs the money.

Good News Everyone!

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Good news everyone!


I invented a device that makes you read this in your head using my voice!

The language of negotiations differs in different societies.

In Japan, it is rare for someone to simply say no.

Instead, the culture is to obliquely mention difficulties, so the fact that the Japanese trade minister has stated that there has been no progress in the Trans Pacific Partnership (TPP) constitutes a major rebuke:

Japan’s Trade Minister Akira Amari said he and his U.S. counterpart made no progress in bilateral talks that are key to an ambitious multilateral trade deal.

 “Japan made a flexible proposal, but we weren’t able to make further progress,” Amari told reporters on Wednesday evening in Washington. “Further negotiations are undecided.”

This is unalloyed good news.

The TPP is not about free trade.  In most areas (except perhaps for Japanese agricultural products), tariffs are pretty minimal these days.

This is about allowing rent seekers in insurance, finance, and IP protected industries (pharma, software patents, music, etc.) to further increase their profits by manipulating the government rules, i that are integral to their business models.

It’s a good thing that labor, environmental, consumer, and safety regulations aren’t going to be crucified on a cross of “free trade”. ……… For a while, at least.

Jared Bernstein Calls for Dropping Reserve Currency Status for the Dollar in the New York Times

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His argument is rather similar to the one that I have, that the dollar’s status as a reserve currency artificially inflates the value of the currency, along with contributing to the excessive financialization of our economy, but the fact that a former Obama staffer is doing it in the Times is significant:

There are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?

But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

………

In 2013, America’s trade deficit was about $475 billion. Its deficit with China alone was $318 billion.

Though Mr. Austin doesn’t say it explicitly, his work shows that, far from being a victim of managed trade, the United States is a willing participant through its efforts to keep the dollar as the world’s most prominent reserve currency.

………

Note that as long as the dollar is the reserve currency, America’s trade deficit can worsen even when we’re not directly in on the trade. Suppose South Korea runs a surplus with Brazil. By storing its surplus export revenues in Treasury bonds, South Korea nudges up the relative value of the dollar against our competitors’ currencies, and our trade deficit increases, even though the original transaction had nothing to do with the United States.

………

But while more balanced trade might raise prices, there’s no reason it should persistently increase the inflation rate. We might settle into a norm of 2 to 3 percent inflation, versus the current 1 to 2 percent. But that’s a price worth paying for more and higher-quality jobs, more stable recoveries and a revitalized manufacturing sector. The privilege of having the world’s reserve currency is one America can no longer afford.

It’s really nothing new, but the fact that it’s Mr. Bernstein and the New York Times does appear to indicate that this idea is gaining currency.

About f%$#ing time.

Europe is About to Go Pear Shaped

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Both the Europeans and the Ukrainians are going to have a long ans cold winter.

While it is clear that the hostilities between the Ukraine and Russia would put a crimp in gas supplies, it turns out that the current billing dispute is almost certainly going to be a bigger problem.

You see, the Ukrainian Government has taken the dispute to arbitration, and any deal that they might cut with the Russians could be used against Gazprom in that proceedings:

But let’s not get into that again today. In the slipstream of the talks this weekend in Minsk between Putin and Poroshenko, a precious little detail seems to have escaped the western press entirely. But I think all our fine journalists will soon have to address it.
You may remember that in an earlier phase of the dispute between Ukraine and Russia (not to be confused with the Kiev vs rebels fight), no agreement was reached on the payment of a $4.5 billion gas bill that Russian Gazprom said was overdue from Ukraine’s Naftogaz. And Gazprom demanded pre-payment for any future gas deliveries to Ukraine.

 Kiev, instead of paying the bill, claimed Russia had overcharged it for the already delivered gas, by $6 billion, going back to 2010. And brought its argument before the Arbitration Institute of the Stockholm Chamber of Commerce.

 Now maybe, just maybe, someone in the Kiev camp should have paused right before that moment, and consulted with their western backers in Brussels and Washington. Perhaps not so much Washington, but Brussels for sure, and Berlin. And Athens. Rome. Prague. Warsaw.

ou see, a pending case before the Arbitration Institute of the Stockholm Chamber of Commerce can apparently take 12-15 months to resolve. And perhaps Europe doesn’t have that much time. Which is what Putin hinted at at a press-op he did after the weekend Minsk talks. What it comes down is that even if Russia wanted to accommodate Ukraine, it can’t. On strictly legal terms, nothing political.

 What’s more, Gazprom had already paid Naftogaz in advance for the use of Ukraine pipelines, but the payment was returned. And that can have grave consequences not just for Kiev, but for almost all of Europe. Lots of countries get their gas through these pipelines.

 It looks like the EU, and especially Germany, has started to smell – potential – trouble:
EU Suggests Russia, Ukraine Sign Interim Gas Agreement

The E.U. has suggested an interim agreement on the gas supplies between Russia and Ukraine without waiting for a Stockholm arbitrary court decision, E.U. Energy Commissioner Gunther Oettinger said in a news conference following his meeting with Ukrainian President Petro Poroshenko late Tuesday Two cases are before the Stockholm court, but the hearings will take 12-15 months, which is too long, while Europe needs an interim solution for this winter, Oettinger said In June, Russian gas giant Gazprom switched Ukraine off gas over the unpaid debt and filed a $4.5 billion suit to the Stockholm arbitration court. Later, Kiev reciprocated by sending a suit to the court against Gazprom for making Ukraine overpay $6 billion for gas since 2010, setting too high prices in its contract.

The Russian Legal Information Agency has this:

Putin: Naftogaz Suit Against Gazprom Axes Discount For Ukraine

The fact that Ukraine’s Naftogaz has invoked arbitration proceedings against Gazprom prevents Russia from giving Ukraine a gas price discount, President Vladimir Putin said in Minsk where he met with Ukrainian President Petro Poroshenko. “We cannot even consider any preference solutions for Ukraine since it pursues arbitration,” Putin said. “Russia’s possible actions in this sphere could be used against it in the court. We couldn’t do it even if we wanted to.” After Gazprom switched to a prepayment system for gas deliveries to Ukraine on June 16, Naftogaz turned to the Arbitration Institute of the Stockholm Chamber of Commerce. Naftogaz wants Gazprom to cut the price for gas and to get back $6 billion that Ukraine has allegedly overpaid since 2010.

Gazprom in turn is seeking to recover Ukraine’s $4.5 billion debt for gas deliveries. Putin said Russia offered a compromise solution during the talks held before Gazprom switched to the prepayment scheme. “We reduced the price by $100,” Russian President said. Gas talks between Russia, Ukraine and the European Union went on from April to mid-June. Kiev said it would not repay its $4.5 billion debt unless Russia agreed to supply gas at a lower price. Russia offered a discount, but Ukraine turned down the offer. Russia then said it would only resume gas supply talks after Ukraine paid off its debt.

More signs of German nerves are here in a piece from the European Council on Foreign Relations – I kid you not, they exist -, along with a nice but curious admission:

 Has Germany Sidelined Poland In Ukraine Crisis Negotiations?

As Germany takes over leadership of the European Union’s efforts to solve the Ukrainian crisis, Poland is questioning the motivations and strategies behind Berlin’s new diplomatic activism. The initiatives of German Foreign Minister Frank-Walter Steinmeier and Chancellor Angela Merkel are being followed closely in Warsaw – and often with mixed feelings. Is Berlin trying to mastermind a compromise with Russia on Moscow’s terms, ignoring Kyiv’s vital interests? And as Poland is increasingly edged out of the conflict resolution process, has Berlin-Warsaw co-operation on EU Ostpolitik broken down?

As an aside, if I were trying to make sure that there wasn’t someone actively trying not to be a turd in the punchbowl in negotiations with Russia, I would sideline Poland as well.

The (historically justified) political culture of Poland, and many other former Warsaw Pact nations is such that they are more driven a desire for payback than a realistic evaluation of their long-term interests.

Poland was, along with France and Germany, one of the countries that orchestrated the political shift in Ukraine in February. Since then, Warsaw has played a central role in forging a bolder EU response to Russia’s aggression and in providing meaningful assistance to the Ukrainian government. However, as the conflict has worsened, Warsaw has become less visible as an actor in crisis diplomacy. Polish Foreign Minister Radek Sikorski was not invited to join his German, French, Russian, and Ukrainian counterparts in the negotiations on conflict resolution held in Berlin in early July and early August. Before Ukrainian President Petro Poroshenko and Russian President Vladimir Putin agreed to meet at the Customs Union summit in Minsk on 26 August, the idea had been floated of holding another high-level meeting in the “Normandy format” of France, Germany, Russia, and Ukraine.

Kiev is either so high on the EU, US and NATO support it was promised, or so desperate over its latest battlefield losses, that it goes for all on red, probably thinking, and probably rightly so, that the western press will swallow anything whole. Tyler Durden:

Ukraine Accuses Russia Of Imminent Gas Cut-Off, Russia Denies, Germans Anxious

So much for the Russia-Ukraine talks bringing the two sides together as even Germany’s Steinmeier could only say it’s “hard to say if breakthrough made.” Shortly after talks ended, Ukrainian Premier Yatsenyuk stated unequivocally that “we know about the plans of Russia to cut off transit even in European Union member countries,” followed by some notably heavy-on-the-war-rhetoric comments. The Russians were quick to respond, as the energy ministry was “surprised” by his statements on Ukraine gas transits and blasted that comments were an “attempt at EU disinformation.”

Here’s what Putin said at the press op after the talks:

 Answers To Journalists’ Questions Following Working Visit To Belarus

Currently, we are in a deadlock on the gas issue. You see, this is very serious matter for us, for Ukraine and for our European partners. It is no big secret that Gazprom has advanced payment for the transit of our gas to Europe. Ukraine’s Naftogaz has returned that advance payment. The transit of our gas to European consumers was just about suspended. What will happen next? This is a question that awaits a painstaking investigation by our European and Ukrainian partners.

We are fulfilling all the terms of the contract in full. Right now, we cannot even accept any suggestions regarding preferential terms, given that Ukraine has appealed to the Arbitration Court. Any of our actions to provide preferential terms can be used in the court. We were deprived of this opportunity, even if we had wanted it, although we already tried to meet them halfway and reduced the price by $100.

The ball is squarely in the western court. Of course many will think and hope that Russia will give in because it needs the revenue, but the problem with that is it could cost the country too much (admittedly, that’s not the only problem). $6 billion to Ukraine for starters, then potentially many more billions on future deliveries to Kiev, and then there’s the rest of its contracts with two dozen or so European nations.

From a legal point of view, this may not be about what Moscow wants to do anymore, but about what it can. The Arbitration Court case may have tied its hands. And unless Europe wants a cold winter, it must seek a solution. Putin, who holds degrees in both judo AND law, understands this. But he didn’t set this up. Western and Kiev hubris did. Certain people got first too pleased with, and then ahead of, themselves.

BTW, I also learned another reason that the Russians do not like the EU deal, it has the effect of severely curtailing Russian exports to the Ukraine:

Putin pointed to another rather difficult but highly interesting legal ‘technicality’ as well, which involves Ukraine moving closer to the EU economically:

We once again pointed out to our partners – both European and Ukrainian partners – that implementation of the association agreement between Ukraine and the EU carries significant risks for the Russian economy. We have shown this in the text of the agreement, directly pointing to specific articles in that agreement. Let me remind you that this concerns nullifying Ukraine’s customs tariffs, technical regulations, and phytosanitary standards.

The standards in Russia and Europe currently do not correspond. But, as you recall, the most classic example is the introduction of EU technical regulations in Ukraine. In that case, we would not be able to supply our goods to Ukraine at all. We have different technical standards. And according to the European Union’s standards, we will not be able to supply our machine-building products there, or any industrial goods. If that happens, we cannot accept Ukrainian agricultural production goods in our territory, because we have different approaches to phytosanitary standards. We feel that many problems would occur.

If we do not achieve any agreements and our concerns are not taken into account, then we will be forced to take measures to protect our economy. And we explained what those measures would be. So our partners must weigh everything and make corresponding decisions.

So, even the EU actions, which were far less bellicose than those of the US State Department, begin to look more and more like a deliberately hostile act, even without considering the traditional Russian paranoia and xenophobia.

I think that Putin considers this a nearly existential threat to Russia, and he is responding accordingly.

H/t naked capitalism.

BTW, just to throw some more fuel on the fire, the Ukrainian PM just announced he will pursue NATO membership:

On Aug. 29, the Ukrainian prime minister said he will pursue NATO membership for his nation by asking parliament to overturn a law banning foreign alliances.

Separately, the NATO secretary general said Russia is undertaking direct military operations designed to destabilize the Ukraine—and that NATO will “fully respect” any change in the Ukraine’s non-aligned status. He made the comments today after an extraordinary meeting of the NATO-Ukraine Commission held at the Ukraine’s request.

………

“The Ukrainian government is submitting a bill to parliament on the abolition of the non-aligned status of the Ukrainian state and on the resumption of Ukraine’s course towards NATO membership,” Prime Minister Arseny Yatsenyuk said in an announcement.

Ukrainian law forbids the nation from forming alliances that would economically or politically entangle the country with the Russian Federation. Overturning this law would remove any legal barriers from Ukraine joining NATO, a goal which the alliance has said it supports.

This is stupidly and provocative.

We are going to see a war in Europe in the next few years, the only question is whether it will be cold, or hot.

And Now the Banksters Want Our Drinking Water

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Seriously, these guys are a bigger threat to our way of life than Osama bin Laden ever was.

Yes, if they just turn Wall Street’s full potential on the supply of water, everything will be great, because ……… magic sparkle pony fairy dust:

The problem of water scarcity is growing at an alarming rate. By 2050, experts forecast a 55% increase in the amount of water required to meet demand from rising populations, food production and industry. Failure to meet that demand will have devastating consequences: water shortages will become chronic, leading to the proliferation of water riots and water wars. According to UN estimates, $1.8 trillion in new investments will be needed over the next 20 years to avoid such a calamity. The question is:

 Whence Will That Money Come?

 According to the wise masters of big capital and finance, there can only be one source: the ever-knowing, ever-perfect financial markets. Writing in the Daily Telegraph, Andrew Critchlow argued the case for financializing water:

Markets can play an important role in providing future water security (DQ: Note the use of the term “water security,” not “water independence” or “water sustainability”). The City can help to fund vital water infrastructure and the creation of a futures market to trade water would help to create a baseline pricing mechanism against which regional water tariffs could be fairly set

 “Water will become something that is traded, there will be a market for it and this could happen in the next decade,” said Usha Rao-Monari, chief executive officer of Global Water Development Partners – an affiliate of New York-based investment giant Blackstone, the world’s largest private equity firm with a reported $280bn under management

The reasoning is clear: in order to create more efficient distribution of the world’s most vital resource, we need to create myriad new layers of middlemen and financiers and have them trading billions (if not trillions) of dollars in derivatives of that scarce resource on global commodity exchanges. It will be the Enron-ization of water, as the exact same people who almost destroyed the global economy with mortgage-backed securities and credit default swaps and who have corrupted the basic pricing mechanism of just about every commodity market on the planet will be entrusted to determine the price of the water we consume.

 “It’s intuitively appealing to talk about water as a traded asset,” said Deane Dray, a Citigroup analyst who heads up global water-sector research. “If you look at projections over the next 25 years, you’ll see that global water supply and demand imbalances are on track to get worse.”

What will this mean for the rest of us?

Well it ain’t anything good:

As a result of this huge influx of Wall Street money, the food commodity markets are now 80% speculation, with the volume of financial transactions between 20 and 30 times as large as the real transactions. As Kaufman told Wired magazine, the direct consequence has been volatility two standard deviations above the 1990’s norm:

We’ve seen the price of food become more expensive than ever three times in five years [DQ: sparking food riots and revolutions throughout the developing world]. Normally we’d see three price spikes in a century. And part of the reason is this new kind of commodity speculation in food markets.

If you aren’t worried about what Wall Street will do if it gets control of safe supplies of drinking water, you are either catatonic, deluded, or a follower of Ayn Rand. (But I repeat myself.)

Remember, the most recent WTO talks broke down because the US, and Wall Street, wanted to shut down poorer nations’ ability to stockpile staple foods to avoid being held hostage by speculators.

Be very, very afraid.

India Stands Firm, and the Rest of Us Benefit

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The latest round of WTO talks have collapsed over the issue of allowing Wall Street to loot food supplies:

The World Trade Organization failed Thursday to ratify an agreement designed to streamline the global trade system, frustrating a late push by U.S. officials to convince India to reach a compromise that would have secured a deal.

“I do not have the necessary elements that would lead to me to conclude that a breakthrough is possible,” WTO Director General Roberto Azevedo said. “We got closer—significantly closer—but not quite there.”

The WTO reached an agreement in December on the Indonesian resort island of Bali to streamline customs procedures. The deadline to ratify that agreement was Thursday, but India declined to do so without a parallel agreement allowing developing countries more freedom to subsidize and stockpile food.

Some economists have estimated that the Bali agreement, which seeks to standardize customs practices and remove red tape, could save WTO members more than $1 trillion eventually.

Failure to achieve a consensus before the WTO’s own deadline deals a severe blow to the Geneva-based body’s credibility, already tenuous after years of stalled talks on tariff reductions. The trade-easing deal was viewed as a way to create some momentum.

As a raft of regional trade deals moves ahead, the WTO’s ability to act as a catalyst for global trade liberalization is in doubt.

India had insisted for weeks that it wouldn’t sign off on the Bali pact unless the group comes to a faster accord on exempting food-subsidy and stockpiling programs like India’s from current WTO rules that limit them.

Remember when international food prices spiked a few years ago because of aggressive market manipulation by Wall Street in the US and the City in London?

The “subsidies” in question are providing sub-market price food to poor people in those countries, and stockpiles to mitigate market manipulation by the banksters.

India wants a permanent solution to this, they (correctly) consider it a matter of national security, but what they got was non-binding language that would render any attempt to protect their citizens from the vicissitudes of the market inoperative by 2017.

I approve.

If You Did Not Already Think that the TPP Sucked

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The gushing endorsement of the international trade deal by corrupt subprime lendor, union buster, and enthusiastic Obama supporter Commerce Sec. Penny Pritzker should remove all doubt:

The North American Free Trade Agreement (NAFTA) and other U.S. trade relationships are outdated and need an “upgrade”, U.S. Commerce Secretary Penny Pritzker said on Tuesday during a trade visit to Mexico.

Attitudes toward labor and the environment as well as e-commerce and new technology have shifted trade concerns since NAFTA was signed, so the U.S. government is focusing on the Trans-Pacific Partnership (TPP), which would establish a free-trade bloc stretching from Vietnam to Chile, she said.

“NAFTA was a groundbreaking agreement 20 years ago and it has served all of the North American countries well,” Pritzker said of the 1994 treaty between the U.S., Mexico and Canada. “But now it’s time to be looking at how can we upgrade our trade relationships.”

In the article, she is described as a, “a businesswoman and heiress to the Hyatt Hotel fortune who has been a prolific fundraiser for U.S. President Barack Obama,” but that is a weak description of their relationship.

She has bankrolled his career from the very start. She was his first patron, and arguably his biggest supporter among the top tenth of the 1%.

She has also been virulently anti-labor in her business and public actions, and she and her family paid themselves big bucks as they drove Superior Bank into the ground.

Between, her, Rahm Emanuel, and Arne Duncan, and the full throated support of all of them from Barack Obama, it is no wonder that I’ve concluded that the President is a corporate tool.

H/t Crooks & Liars.

Thank You Harry Reid

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The Majority Leader of the Senate has come out against fast track authority for trade deals:

President Barack Obama’s push for authority to fast-track trade deals has hit a big setback in the form of opposition from his top fellow Democrat in Congress, but it is far from dead.

Senate Majority Leader Harry Reid’s warning to policymakers on Wednesday “just to not push this right now” reflects concern about the domestic political agenda ahead of November’s congressional elections, when free trade could be a damaging issue for many Democrats.

The unusually blunt public opposition came less than 24 hours after Obama noted the need for fast-track power in his State of the Union address, albeit less forcefully than business lobbyists and pro-trade Republicans would have liked.

The White House called Reid’s office shortly after his comments to voice displeasure, a top Democratic party aide said.

“They were really upset,” the aide said. But the aide said the White House did not try to get Reid to shift his position.

These guys were really upset because they, like the staffers who negotiated NAFTA for Clinton and Bush I, made some serious bank as lobbyists and consultants.

I really hope that it’s not, as Yves Smith’s sources say,  “Another gambit is more likely: to make some cosmetic changes and try to get the bill passed during the lame duck session, on the assumption that some Democrats (particularly those who are leaving office) will use the cover and change positions.”

The TPP, and it’s European equivalent, the TTIP, are egregiously bad deals, not just for the United States, but for the whole world, because they are predicated on the idea that democracy and transparency must be almost completely eschewed in the interest of unregulated global investment flows and IP based looting through draconian copyright and patent provisions.

These are abysmally bad deals for everyone but banksters, big pharma, and the cocaine addicted brothers in law of senior studio and record label executives.

Not Enough Bullets

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The tech companies are trying to dodge taxes again:

Silicon Valley has launched a last-ditch attempt to derail plans devised by the G20 group of countries to close down international loopholes that are exploited by the likes of Google, Amazon and Apple to pay less tax in the UK and elsewhere.

The Digital Economy Group, a lobbying group dominated by the leading US digital firms, has written to the OECD, the Paris-based thinktank tasked by G20 leaders with drawing up reforms, saying it is not true that communications advances have allowed multinational groups to game national tax systems.

Suggesting that any leakage of tax revenues flowing from the complex corporate structures of digital groups is merely coincidental, the Digital Economy Group says: “Enterprises that employ digital communications models do not organise their business operations differently as a legal or tax matter.”

Their denial of tax engineering follows a string of tax scandals in Europe and the US in the past two years. In the UK, Google bore the brunt of criticism from Margaret Hodge, who chairs the public accounts committee, after it emerged that Google – which the Guardian understands is a member of the DEG – had been allowed to pay £3.4m in tax to HMRC in 2012 despite UK revenues of £3.2bn.

“Merely coincidental,” my ass.  0.09% tax rate?  This is not a boating accident.

I guess that you need all that money you save from tax cheating that you can pay your senior executives obscene bonuses.

How about throwing these motherf%$#ers in jail.

The Snowden Clause

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Have you heard of the new clause in many overseas contracts?

It is a clause requiring that a suppliers are forbidden from storing any related data in the United States:

By now, we’ve heard from tech companies such as Facebook, Google and Cisco Systems that the National Security Agency’s spying poses a threat to their international business and, in Cisco’s case, is already hurting it. So what does that threat look like, exactly, at ground level?

Some companies are apparently so concerned about the NSA snooping on their data that they’re requiring – in writing – that their technology suppliers store their data outside the U.S.

In Canada, a pharmaceutical company and government agency have now both added language to that effect to their contracts with suppliers, as did a grocery chain in the U.K., according to J.J. Thompson, chief executive officer of Rook Consulting, an Indianapolis, Indiana-based security-consulting firm. He declined to name the companies, which are using Rook to manage the segmentation and keep the data out of the U.S.

The US is already choking off its domestic technology industry with insane draconian IP protections, and now we have this.

We are an empire which is sacrificing all on our need for hegemony.

Props to Krugman………

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A few days ago, Paul Krugman announced that the Trans Pacific Partnership (TPP) was no big deal.

I think that he got this very wrong, because he viewed it through the lens of comparative advantage, which is, after all pretty much his specialty in economics.

It was a classic, “When all you have is a hammer, everything looks like a nail,” error.

He misses the fact that the objections to the TPP have nothing to do with so-called free trade, and everything to do with it being structured to benefit the rent seekers in IP and finance by strengthening the regulations on IP, and by preventing meaningful regulation on finance and capital flows, in addition to the very basic infringements on sovereignty that the entire regime entails.

Well, Krugman has admitted that his initial comments were hasty and a bit ill considered:

Dean Baker takes me to task over the Trans Pacific trade deal, arguing that it’s not really about trade — that the important (and harmful) stuff involves regulation and intellectual property rights.

I’m sympathetic to this argument; this was true, for example, of DR-CAFTA, the free trade agreement with Central America, which ended up being largely about pharma patents. Is TPP equally bad? I’ll do some homework and get back to you.

This reflects well on him.

It’s an admission that he did not consider the issues as comprehensively as he should have, with a promise of further comments, without any excuses.