world war 3

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Explaining The WTI-Brent Spread Divergence

Something totally bizarre has happened in the last three years. Oil in America has become much, much cheaper than oil in Europe. Oil in America is now almost $30 cheaper than oil in Europe.

This graph is the elephant in the room:

3 year brent spread

And this graph shows how truly historic a move this has been:

brent-WTI-spread

Why?

The ostensible reason for this is oversupply in America. That’s right — American oil companies have supposedly been producing much, much more than they can sell:

This is hilarious if prices weren`t so damn high, but despite a robust export market for finished products, crude oil is backing up all the way to Cushing, Oklahoma, and is only going to get worse in 2013.

Now that Enterprise Products Partners LLP has let the cat out of the bag that less than a month after expanding the Seaway pipeline capacity to 400,000 barrels per day, The Jones Creek terminal has storage capacity of 2.6 million barrels, and it is basically maxed out in available storage.

But there’s something fishy about this explanation. I don’t know for sure about the underlying causality — and it is not impossible that the oil companies are acting incompetently — but are we really supposed to believe that today’s oil conglomerates in America are so bad at managing their supply chain that they will oversupply the market to such an extent that oil sells at a 25% discount on the price in Europe? Even at an expanded capacity, is it really so hard for oil producers to shut down the pipeline, and clear inventories until the price rises so that they are at least not haemorrhaging such a huge chunk of potential profit on every barrel of oil they are selling? I mean, that’s what corporations do (or at least, what they’re supposed to do) — they manage the supply chain to maximise profit.

To me, this huge disparity seems like funny business. What could possibly be making US oil producers behave so ridiculously, massively non-competitively?

The answer could be government intervention. Let’s not forget that the National Resource Defence Preparedness Order gives the President and the Department of Homeland Security the authority to:

(c)  be prepared, in the event of a potential threat to the security of the United States, to take actions necessary to ensure the availability of adequate resources and production capability, including services and critical technology, for national defense requirements;

(d)  improve the efficiency and responsiveness of the domestic industrial base to support national defense requirements; and

(e)  foster cooperation between the defense and commercial sectors for research and development and for acquisition of materials, services, components, and equipment to enhance industrial base efficiency and responsiveness.

And the ability to:

(e)  The Secretary of each resource department, when necessary, shall make the finding required under section 101(b) of the Act, 50 U.S.C. App. 2071(b).  This finding shall be submitted for the President’s approval through the Assistant to the President and National Security Advisor and the Assistant to the President for Homeland Security and Counterterrorism.  Upon such approval, the Secretary of the resource department that made the finding may use the authority of section 101(a) of the Act, 50 U.S.C. App. 2071(a), to control the general distribution of any material (including applicable services) in the civilian market.

My intuition is that it is possible that oil companies may have been advised (or ordered) under the NDRP (or under the 1950 Defense Production Act) to keep some slack in the supply chain in case of a war, or other national or global emergency. This would provide a capacity buffer in addition to the Strategic Petroleum Reserve.

If that’s the case, the question we need to ask is what does the US government know that other governments don’t? Is this just a prudent measure to reduce the danger of a resource or energy shock, or does the US government have some specific information of a specific threat?

The other possible explanation, of course, is ridiculous incompetence on the part of US oil producers. Which, I suppose, is almost believable in the wake of Deepwater Horizon…

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Could America Get Sucked Into a China-Japan Conflict?

So China and Japan are both threatening conflict in their fairly brutal ongoing argument over a few tiny disputed islands (and their mineral rights):

Senkaku islands

With global growth slowing, both countries’ leaders might look to a war as a way to distract from economic woe. While a limited war between China and Japan over the islands — perhaps of the scale of the Falkland War between Britain and Argentina in the 1980s — would be unsettling for the global economy, the real question is whether or not such a conflict could spiral into something bigger. 

The first critical point to note is that both countries’ leadership are increasingly hawkish in tone and character. China is in many ways seeking to establish itself on the world stage as a global military and economic powerhouse. Countries seeking to establish themselves on the global stage have traditionally sought out conflict. Japan is an ideal candidate for Chinese hostility. There is a lot of resentment — Japan’s invasion and occupation of Manchuria was brutal, and filled with war crimes (war crimes that the Japanese continue to deny). But more than that, Japan is an American protectorate, dotted with American bases, and subject to a mutual defence treaty. If China is to eclipse the United States as a global superpower, China must be able to show that she can impose her will on America.

And Shinzo Abe, Japan’s new Prime Minister has made it his life’s work to change Japan’s pacifistic constitution. Japan is faced with a twenty year economic depression, falling birthrates, a population of “herbivore” males with an aversion to sexuality. Abe may see hostility against China as a gateway to greater nationalism, and greater nationalistic fervour as a gateway to a national recovery.

First of all, it is critical to note that the United States is not legally obligated under its with Japan treaty to intercede on Japan’s behalf. The treaty states that the United States is required to report any such event to the UN Security Council, instead:

Each Party recognizes that an armed attack against either Party in the territories under the administration of Japan would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional provisions and processes. Any such armed attack and all measures taken as a result thereof shall be immediately reported to the Security Council of the United Nations in accordance with the provisions of Article 51 of the Charter. Such measures shall be terminated when the Security Council has taken the measures necessary to restore and maintain international peace and security.

Very simply, this means that China can attack Japan without fearing an inevitable American retaliation. That fact alone makes a small skirmish fairly likely.

So what if China successfully captured the islands — and perhaps even more Japanese territory — as we can perhaps assume given China’s overwhelming size and military-spending advantages? Well, the United States and presumably the international community other than China’s allies would seek to diplomatically pressure China to stand down and reach a peaceful arbitrated resolution via the UN.

If China refused to stand down and accept a diplomatic solution — that is, if China was absolutely set on staring down the United States — then the United States would be forced to choose between providing military support to Japan — and possibly ultimately escalating up to a global war between China and her allies and the United States and her allies — or facing a humiliating climbdown, and accepting both Chinese sovereignty over the islands, as well as any other Japanese territory that China might have captured, as well as face the possibility of further Chinese incursions and expansionism in the Pacific in the future.

Who will blink first is uncertain. Only the Chinese really know how strong they are, how far they are willing to push, and how much of their threats are a bluff.

On the other hand, as I wrote last year:

The relationship between China and the United States today is superficially similar to that between Great Britain and Germany in 1914. Germany and China — the rising industrial behemoths, fiercely nationalistic and determined to establish themselves and their currencies on the world stage. Great Britain and the United States  — the overstretched global superpowers intent on retaining their primacy and reserve currency status even in spite of huge and growing debt and military overstretch.

Mutually assured destruction can only act as a check on expansionism if it is credible. So far, no nation has really tested this credibility.

Nuclear-armed powers have already engaged in proxy wars, such as Vietnam. How far can the limits be pushed? Would the United States launch a first-strike on China if China were to invade and occupy Taiwan or Japan, for example? Would the United States try to launch a counter-invasion? Or would they back down? Launching a first-strike is highly unlikely in all cases — mutually assured destruction will remain an effective deterrent to nuclear war. But perhaps not to conventional war and territorial expansionism.

The chance of global war in the near-term remains very low. But so long as China and Japan continue their antagonism, the chance of global war in the long-term is rising.

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The Great Pacification

Since the end of the Second World War, the major powers of the world have lived in relative peace. While there have been wars and conflicts  — Vietnam, Afghanistan (twice), Iraq (twice), the Congo, Rwanda, Israel and Palestine, the Iran-Iraq war, the Mexican and Colombian drug wars, the Lebanese civil war — these have been localised and at a much smaller scale than the violence that ripped the world apart during the Second World War. The recent downward trend is clear: Many thinkers believe that this trend of pacification is unstoppable. Steven Pinker, for example, claims:

Violence has been in decline for thousands of years, and today we may be living in the most peaceable era in the existence of our species. The decline, to be sure, has not been smooth. It has not brought violence down to zero, and it is not guaranteed to continue. But it is a persistent historical development, visible on scales from millennia to years, from the waging of wars to the spanking of children.

While the relative decline of violence and the growth of global commerce is a cause for celebration, those who want to proclaim that the dawn of the 21st Century is the dawn of a new long-lasting era of global peace may be overly optimistic. It is possible that we are on the edge of a precipice and that this era of relative peace is merely a calm before a new global storm. Militarism and the military-industrial complex never really went away — the military of the United States is deployed in more than 150 countries around the world. Weapons contractors are still gorging on multi-trillion dollar military spending. Let’s consider another Great Moderation — the moderation of the financial system previous to the bursting of the bubble in 2008.

One of the most striking features of the economic landscape over the past twenty years or so has been a substantial decline in macroeconomic volatility. Ben Bernanke (2004)

Bernanke attributed this outgrowth of macroeconomic stability to policy — that through macroeconomic engineering, governments had created a new era of financial and economic stability. Of course, Bernanke was wrong — in fact those tools of macroeconomic stabilisation were at that very moment inflating housing and securitisation bubbles, which burst in 2008 ushering in a new 1930s-style depression. It is more than possible that we are in a similar peace bubble that might soon burst. Pinker highlights some possible underlying causes for this decline in violent conflict:

The most obvious of these pacifying forces has been the state, with its monopoly on the legitimate use of force. A disinterested judiciary and police can defuse the temptation of exploitative attack, inhibit the impulse for revenge and circumvent the self-serving biases that make all parties to a dispute believe that they are on the side of the angels. We see evidence of the pacifying effects of government in the way that rates of killing declined following the expansion and consolidation of states in tribal societies and in medieval Europe. And we can watch the movie in reverse when violence erupts in zones of anarchy, such as the Wild West, failed states and neighborhoods controlled by mafias and street gangs, who can’t call 911 or file a lawsuit to resolve their disputes but have to administer their own rough justice.

Really? The state is the pacifying force? This is an astonishing claim. Sixty years ago, states across the world mobilised to engage in mass-killing the like of which the world had never seen — industrial slaughter of astonishing efficiency. The concentration of power in the state has at times led to more violence, not less. World War 2 left sixty million dead. Communist nations slaughtered almost 100 million in the pursuit of communism. Statism has a bloody history, and the power of the state to wage total destruction has only increased in the intervening years. Pinker continues:

Another pacifying force has been commerce, a game in which everybody can win. As technological progress allows the exchange of goods and ideas over longer distances and among larger groups of trading partners, other people become more valuable alive than dead. They switch from being targets of demonization and dehumanization to potential partners in reciprocal altruism. For example, though the relationship today between America and China is far from warm, we are unlikely to declare war on them or vice versa. Morality aside, they make too much of our stuff, and we owe them too much money. A third peacemaker has been cosmopolitanism—the expansion of people’s parochial little worlds through literacy, mobility, education, science, history, journalism and mass media. These forms of virtual reality can prompt people to take the perspective of people unlike themselves and to expand their circle of sympathy to embrace them.

Commerce has been an extremely effective incentive toward peace. But commerce may not be enough. Globalisation and mass commerce became a reality a century ago, just prior to the first global war. The world was linked together by new technologies that made it possible to ship products cheaply from one side of the globe to the other, to communicate virtually instantaneously over huge distances, and a new culture of cosmopolitanism. Yet the world still went to war.

It is complacent to assume that interdependency will necessitate peace. The relationship between China and the United States today is superficially similar to that between Great Britain and Germany in 1914. Germany and China — the rising industrial behemoths, fiercely nationalistic and determined to establish themselves and their currencies on the world stage. Great Britain and the United States  — the overstretched global superpowers intent on retaining their primacy and reserve currency status even in spite of huge and growing debt and military overstretch.

In fact, a high degree of interdependency can breed resentment and hatred. Interconnected liabilities between nations can lead to war, as creditors seek their pound of flesh, and debtors seek to renege on their debts. Chinese officials have claimed to have felt that the United States is forcing them to support American deficits by buying treasuries.

Who is to say that China might not view the prize of Japan, Taiwan and the Philippines as worthy of transforming their giant manufacturing base into a giant war machine and writing down their treasury bonds? Who is to say that the United States might not risk antagonising Russia and China and disrupting global trade by attacking Iran? There are plenty of other potential flash-points too — Afghanistan, Pakistan, Venezuela, Egypt, South Africa, Georgia, Syria and more. Commerce and cosmopolitanism may have provided incentives for peace, but the Great Pacification has been built upon a bedrock of nuclear warheads. Mutually assured destruction is by far the largest force that has kept the nuclear-armed nations at peace for the past sixty seven years.

Yet can it last? Would the United States really have launched a first-strike had the Soviet Union invaded Western Europe during the Cold War, for example? If so, the global economy and population would have been devastated. If not, mutually assured destruction would have lost credibility. Mutually assured destruction can only act as a check on expansionism if it is credible. So far, no nation has really tested this credibility. Nuclear-armed powers have already engaged in proxy wars, such as Vietnam. How far can the limits be pushed? Would the United States launch a first-strike on China if China were to invade and occupy Taiwan and Japan, for example? Would the United States try to launch a counter-invasion? Or would they back down? Similarly, would Russia and China launch a first-strike on the United States if the United States invades and occupies Iran?

Launching a first-strike is highly unlikely in all cases — mutually assured destruction will remain an effective deterrent to nuclear war. But perhaps not to conventional war and territorial expansionism. With the world mired in the greatest economic depression since the 1930s, it becomes increasingly likely that states — especially those with high unemployment, weak growth, incompetent leadership and angry, disaffected youth —  will (just as they did during the last global depression in the 1930s) turn to expansionism, nationalism, trade war and even physical war. Already, the brittle peace between China and Japan is rupturing, and the old war rhetoric is back. These are the kinds of demonstrations that the Communist Party are now sanctioning:

And already, America and Israel are moving to attack Iran, even in spite of warnings by Chinese and Pakistani officials that this could risk global disruption. Hopefully, the threat of mutually assured destruction and the promise of commerce will continue to be an effective deterrent, and prevent any kind of global war from breaking out. Hopefully, states can work out their differences peacefully. Hopefully nations can keep war profiteers and those who advocate crisis initiation in check. Nothing would be more wonderful than the continuing spread of peace. Yet we must be guarded against complacency. Sixty years of relative peace is not the end of history.

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Iran’s Imminent Nuclear Weapon

Here’s some context behind the claims that Iran will imminently possess a nuclear weapon.

It started a long time ago (but not, unfortunately, in a galaxy far, far away):

1984: Soon after West German engineers visit the unfinished Bushehr nuclear reactor, Jane’s Defence Weekly quotes West German intelligence sources saying that Iran’s production of a bomb “is entering its final stages.”US Senator Alan Cranston claims Iran is seven years away from making a weapon.

Seven years away? And did they have a bomb in 1991?

1992: Israeli parliamentarian Binyamin Netanyahu tells his colleagues that Iran is 3 to 5 years from being able to produce a nuclear weapon – and that the threat had to be “uprooted by an international front headed by the US.”

1992: Israeli Foreign Minister Shimon Peres tells French TV that Iran was set to have nuclear warheads by 1999. “Iran is the greatest threat and greatest problem in the Middle East,” Peres warned, “because it seeks the nuclear option while holding a highly dangerous stance of extreme religious militancy.”

1992: Joseph Alpher, a former official of Israel’s Mossad spy agency, says “Iran has to be identified as Enemy No. 1.” Iran’s nascent nuclear program, he told The New York Times, “really gives Israel the jitters.”

So was there a bomb by the late 1990s?

1995: The New York Times conveys the fears of senior US and Israeli officials that “Iran is much closer to producing nuclear weapons than previously thought” – about five years away – and that Iran’s nuclear bomb is “at the top of the list” of dangers in the coming decade. The report speaks of an “acceleration of the Iranian nuclear program,” claims that Iran “began an intensive campaign to develop and acquire nuclear weapons” in 1987, and says Iran was “believed” to have recruited scientists from the former Soviet Union and Pakistan to advise them.

1997: The Christian Science Monitor reports that US pressure on Iran’s nuclear suppliers had “forced Iran to adjust its suspected timetable for a bomb. Experts now say Iran is unlikely to acquire nuclear weapons for eight or 10 years.“

So now we’re looking at a nuclear-armed Iran by 2007. Scary stuff, right?

2007: President Bush warns that a nuclear-armed Iran could lead to “World War III.” Vice President Dick Cheney had previously warned of “serious consequences” if Iran did not give up its nuclear program.

2007: A month later, an unclassified National Intelligence Estimate (NIE) on Iran is released, which controversially judges with “high confidence” that Iran had given up its nuclear weapons effort in fall 2003.

June 2008: Then-US Ambassador to the United Nations John Bolton predicts that Israel will attack Iran before January 2009, taking advantage of a window before the next US president came to office.

May 2009: US Senate Foreign Relations Committee reports states: “There is no sign that Iran’s leaders have ordered up a bomb.”

And Iran still doesn’t have a bomb today — all of those reports, all of that scaremongering and warmongering was wrong. Both the CIA and Mossad agree that there is no specific evidence that Iran is working on nuclear weapons today. And many experts believe that even if Iran were working on a bomb it could take up to ten to fifteen years.

Yet, it seems that nothing except a war will satisfy Binyamin Netanyahu, who felt the same way about Iraq:

There is no question whatsoever that Saddam is working towards nuclear weapons.

And how did that work out? A hugely expensive war and occupation, American imperial overstretch, thousands of dead soldiers, hundreds of thousands of dead Iraqis and no weapons of mass destruction. We should judge people on their predictive record.

On one level, I understand Netanyahu’s paranoia especially in the context of the 20th Century and the holocaust. Iranian Generals have talked about annihilating Israel.

In August 2012, Brigadier General Gholam Reza Jalali, who heads Iran’s Passive Defence Organisation, said “No other way exists apart from resolve and strength to completely eliminate the aggressive nature and to destroy Israel.”  And just six days ago in September 2012 Brigadier General Amir Ali Hajizadeh threatened to attack Israel and trigger World War III, saying that “it is possible that we will make a pre-emptive attack” which would “turn into World War III.” In the same statement, Hajizadeh threatened to attack American bases in the Middle East as well. Hajizadeh said that as a result of this attack, Israel would “sustain heavy damage and that will be a prelude to its obliteration.”

All disturbing rhetoric, yet almost certainly baseless threats given the context of Iran’s technological and military disadvantage. Iranian missiles fired at Israel would likely be shot down long before they reached Israeli airspace by Israel’s advanced missile defence systems that can intercept even short-range fire from Gaza and Lebanon. And Israel’s nuclear submarines in the Persian Gulf would almost certainly retaliate in kind. As Shimon Peres noted in 2006: “The President of Iran should remember that Iran can also be wiped off the map.” Most importantly, if Iran attacked Israel, it seems far less likely that other powers would come to Iran’s aid.

Yet an attack on Iran by Israel could well trigger a larger conflict, sucking in Iran’s trade partners who do not want to see the flow of oil and resources out of Iran disrupted. Just this week China announced new contracts to provide super-tankers to deliver oil from Iran to China. Would Russia and China sit idly by and see their Iranian investments liquidated while America and Israel invade Iran and destroy its infrastructure? Would they sit idly by and see their ally deposed? China and Pakistan have both hinted that they could defend Iran if Iran were attacked. An attack on or invasion of Iran is an incredibly risky adventure — and in my view the real danger to Israel. And for what? To discover that like Saddam Hussein, Ahmadinejad is not working on a nuclear weapon, and all the hot air about weapons of mass destruction is once again just bullshit?

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Netanyahu’s Red Line

Netanyahu wants a red line on nuclear proliferation in the Middle East:

Where exactly should we draw it?

As Justin Raimondo notes:

Here is a nation which refuses to even admit it acquired nukes long ago, and which disdains the Nonproliferation Treaty, making the case for war against a neighbor that has indeed signed the NPT and is abiding by its requirements.

That treaty gives Tehran the right to develop nuclear power. Furthermore, there is zero evidence Iran is embarked on a nuclear weapons program: our own intelligence community tells us they gave that up in 2003 and show no signs of resuming it. Their own religious and political leaders have denounced the possession of nuclear weapons as sinful: the Israelis, on the other hand, haven’t bothered reassuring us they would never use the nuke they won’t admit they have.

In a rational world, Israel would be in the dock, answering for its unwillingness to come out of the nuclear closet and admit what the whole world knows by now.

The West has sent out a message that the only way for unpopular regimes to avoid invasion is to obtain nuclear weapons. North Korea sought and obtained nuclear weapons and their vicious and economically-failed regime has stayed in power. Qaddafi gave up his nuclear ambitions, and was soon deposed by British, French and American airpower. If Iran is seeking a nuclear weapon — and the CIA and Mossad, as well as the IAEA agree they that they are not currently doing so — perhaps the fact that nuclear-armed Israel and the nuclear-armed United States keep threatening non-nuclear Iran with attack has something to do with it?

And even assuming that they are going for a nuclear weapon, how close is Iran to a nuclear weapon? According to former IAEA consultant Clinton Bastin, possibly as much as ten to fifteen years away:

Dear Prime Minister Netanyahu:

Iran may be in your red zone, but can not score.

Sure, Iran could divert a few tons of 3.5% or a ton of 20% enriched uranium hexaflouride gas for enrichment to 90+%. But what then?

No one has ever made a nuclear weapon from gas. It must be converted to metal and fabricated into components which are then assembled with high explosives.

Iran lacks experience with and facilities for these processes which are very dangerous because of potential for a criticality accident or nuclear explosion. Iran would not jeopardize its important, fully safeguarded nuclear programs by an attempt to have a deliverable, one kiloton yield nuclear weapon ten to fifteen years later.

IMPORTANT NOTE: North Korea was able to make and test a nuclear explosive soon after withdrawing from safeguards because plutonium for reactor recycle was in a form usable for a weapon.

So let’s be clear about who is threatening who:

How would Americans feel if Iran had stationed troops and aircraft on the Mexican and Canadian borders and conducted military excursions into American territory, including funding and training armed dissidents to overthrow the American government (as happened to Iran in 1953 when America overthrew a democratically-elected Iranian government and imposed a dictatorship there)? How would Americans feel if Iran, Russia and China were blowing up American scientists and using computer viruses to attack American infrastructure? How would Americans feel if Iran, Russia and China imposed sanctions on America that led to hyperinflation of the dollar?  Under those circumstances, would America not seek the means to defend itself?

Iran is not blameless, and continues to provoke Israel through its support for Hamas and Hezbollah and through eliminationist rhetoric. But given the level of provocation from the Israeli and American side, it is astonishing that Iran remains free of nuclear weapons. Yet it is a fact that Iran is not armed with nuclear weapons, and it remains a fact that Iran has not attacked nor occupied any foreign lands since World War 2. Iran is not an expansionistic country.

As neocon provocateur Patrick Clawson essentially admitted in advocating for a false flag attack to get America to war, Iran is not likely to attack either the United States or Israel. So when it comes to drawing red lines, we in the West would do well to draw a red line around our behaviour — because right now, we in the West are the ones who are stirring up trouble by threatening to strike first.

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How to Get Into a War With Iran

This video of Patrick Clawson speaking at the Washington Institute for Near East Policy is just vile:

I frankly think that crisis initiation is really tough, and it’s very hard for me to see how the United States at present can get us to war with Iran.

Crisis initiation? This is pure warmongering, pure belligerence. This is bad-guy mentality, war-profiteering-mentality, unjustified-slaughter-mentality — a point that future historians will relish.

There is a very clear protocol as to how the United States would go to war with Iran, or any other country. If a country were to attack the United States or her allies, or to pose an imminent and immediate threat of attack — defined in international law as a threat that is “instant, overwhelming, and leaving no choice of means, and no moment for deliberation” — then the United States could following an Act of Congress go to war.

Article 51 of the UN Charter states the following:

Article 51: Nothing in the present Charter shall impair the inherent right of collective or individual self-defence if an armed attack occurs against a member of the United Nations, until the Security Council has taken the measures necessary to maintain international peace and security. Measures taken by members in exercise of this right of self-defence shall be immediately reported to the Security Council and shall not in any way affect the authority and responsibility of the Security Council under the present Charter to take at any time such action as it deems necessary in order to maintain or restore international peace and security.

Anything else — including any of the provocations and covert operations that Clawson is advocating — is pure warmongering and pure belligerence by the standards of international law, as well as any traditional standard of morality. The doctrine of preemptive war was raised as a defence by Nazis at the Nuremberg trials, and rejected out of hand.

It should only be expected that were a future administration to launch a belligerent war against any nation, that those lobbyists who lobbied for it and those policymakers who enacted it would at least be prepared to fight and die — and send their children to fight and die— on the front line. Anything less than that is pure and utter chickenhawkery.

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“Russia and China Will Pay a Price”

Hillary Clinton just made a very memorable statement.

I do not believe that Russia and China are paying any price at all – nothing at all – for standing up on behalf of the Assad regime.  The only way that will change is if every nation represented here directly and urgently makes it clear that Russia and China will pay a price

So — exactly what price must Russia and China pay? Should the United States stop buying the debt they issue to support bloated welfare states and fiscal irresponsibility? Should the United States stop exporting consumer goods that fill their stores, and keep their people fat and happy? No — I do not think it is Russia and China who would “pay” in the case of increased mutual antagonism. I think the United States will pay the greater price.

In any case, Russia denies the premise of her argument.

From RT:

Russia rejects in the strongest possible terms allegations that it supports President Assad in the Syrian conflict. US Secretary of State Hillary Clinton said Moscow and Beijing must ‘pay a price’ for backing Assad.

While I think Russia and China are the thing standing between Syria and another Iraq-style “democratisation”, I do not necessarily think Russia and China are doing the wrong thing. While the Assad regime is certainly inhumane and brutal, the rebels that Clinton seems so urgent to support seem little better — at least judging by their attempt to get British journalists killed in the name of propaganda, and their well-known affiliation with global jihadism.

As I noted back in February:

Can we honestly say that committing guns, blood and money to deposing Assad will guarantee peace and stability? Can we honestly say that the next regime might not be worse? I do not believe we can — especially considering that almost every nation involved in the “Arab Spring” has since elected Islamists to power.

Even with the support of the Arab league, is getting entangled into another messy and open-ended conflict in Russia and China’s backyard really a good idea?  Some voices in China are already rumbling that they would be willing to go to war to prevent an American takeover of Iran.

If avoiding nuclear proliferation is our goal, intervention is certainly a bad idea. Qaddafi’s deposition — in stark contrast to nuclear-armed North Korea — was a signpost to rogue regimes that the only way to ensure their survival is to pursue nuclear armaments.

The real question though, is what Hillary Clinton thinks she can achieve through throwing unveiled threats around and destabilising the fragile global system? Is she so fervently committed to expensive and bloody foreign interventionism that she is willing to risk creating a global diplomatic and political crisis in order to get what she wants? How far will she go to force the American agenda? Regional war? Global trade war? World war?

My guess is that her threats are completely hollow.

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The Absurdity of NATO

The whole world knows the name Gavrilo Princip, and that of he man he assassinated, Archduke Franz Ferdinand. Princip’s shot triggered the Austro-Hungarian invasion of Serbia that set in motion the chain of events leading to the Great War of 1914.

After Serbia appealed to Russia for help, Russia began moving towards mobilization of its army, believing that Germany was using the crisis as an excuse to launch war in the Balkans. Upon hearing news of Russia’s general mobilization, Germany declared war on Russia. The German army then launched its attack on Russia’s ally, France, through Belgium, violating Belgian neutrality and bringing Great Britain into the war as well.

Is it possible that a similar chain of events may have already begun unfurling with the Syrian downing of a Turkish F-4 fighter jet? Turkey have already invoked a full meeting of NATO,  claimed that Syria have fired on a second Turkish plane, and vowed that Syria’s actions “won’t go unpunished”.

The vast and sprawling system of national alliances that existed prior to the events 1914 were considered by policy makers of the time to be a counterbalance against excessive tension and the threat of war. The great powers created alliances ostensibly for the purpose of deterring war. The dominant view was that the potential for dragging in allies reduced the chances of an attack. In reality, it just meant that one spark could set the entire world aflame.

This is functionally the same as the interconnecting mesh of derivatives and shadow intermediation that foreshadowed the crash of 2008. As financial parties sold each other more and more “hedges“, the consensus of the time was that this made the system safer, as it allowed risk to be dissipated around the system. The theory was — and there were plenty of inaccurate mathematical models to back this up — that spreading risk around the system made the financial system safer. As it turned out, it didn’t. In the wake of MF Global and the London Whale, we know that the financial system has not learned the lessons of 2008. But it seems even more absurd that the diplomatic system has not really learned the lessons of 1914. 

The NATO system — set up to oppose the Warsaw Pact system, which no longer exists — functions the same way — rather than dissipating risk, it allows for the magnification of international tensions into full-on regional and global wars. In the late 20th century the threat of nuclear war proved a highly-effective deterrent which limited the potential for all-out-war between the great powers, offsetting much of the risk of the hyper-fragile treaty system. Yet the potential for magnifying small regional problems into bigger wars will continue to exist for as long as NATO and similar organisations prevail.

We do not know exactly what arrangements Syria has with Russia and China — there is no formal defensive pact in place (although there is one between Syria and Iran) though it is fair to assume that Russia will be keen to maintain its Syrian naval assets, a view which is supported by the fact Russia heavily subsidises the Syrian military, and has blocked all the UN-led efforts toward intervention in Syria.

After the Cold War, the Warsaw Pact was allowed to disintegrate. Until NATO is similarly allowed to disintegrate, the threat of magnification will remain large. Could a border skirmish between Syria and Turkey trigger a regional or even global war? Under the status quo, anything is possible.

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Does Syria Want a War?

We know for sure that Syria intentionally shot down a Turkish — and thus protected by NATO — warplane in its airspace. We also know that Syria is comfortable enough to admit it.

The AP reports:

Syria said Friday it shot down a Turkish military plane that entered Syrian air space, and Turkey vowed to “determinedly take necessary steps” in response.

It was the most clear and dramatic escalation in tensions between the two countries, which used to be allies before the Syrian revolt began in March 2011. Turkey has become one of the strongest critics of the Syrian regime’s brutal response to the country’s uprising.

Late Friday, Syria’s state-run news agency, SANA, said the military spotted an “unidentified aerial target” that was flying at a low altitude and at a high speed.

“The Syrian anti-air defenses counteracted with anti-aircraft artillery, hitting it directly,” SANA said. “The target turned out to be a Turkish military plane that entered Syrian airspace and was dealt with according to laws observed in such cases.”

It seems pretty clear that the Syrians know the consequences of their actions. NATO (including deluded US hawks who are happy to ignore the disastrous consequences of the drug war on the US border while talking up more intervention in the middle east) and the NATO-backed Syrian opposition has been looking for any excuse to get stuck into a new interventionist mission. We know that the NATO-backed opposition were prepared to try and get a British journalist killed in a false flag operation in order to trigger a Western intervention.

So why did Russia-armed Syria do it? And why (given the age of F-4 aircraft, it could easily have crashed of its own accord giving the Syrians a lot of plausible deniability) are they not at least denying that they shot it down?

Is it possible that the wider Eurasian anti-American coalition led by the Russians and the Chinese are confident that NATO will not intervene out of fear of triggering a wider war? After all the Russian naval base has been a great obstacle to NATO intervention. Libya didn’t have any Russian bases, and it took far less internal violence for NATO to intervene there.

Is it even possible that the Eurasians are trying to provoke NATO into another costly and damaging war? After all, the American Empire is much more indebted and militarily overstretched than it was before 9/11. Osama bin Laden’s goal of dragging the United States into the middle eastern quagmire, and thereby bankrupting America has been an unmitigated success. Could the Eurasians be trying to provoke a regional war in order to weaken NATO and draw attention away from their own weakened economic picture?

Or is this just a case of an overzealous Syrian military commander taking a potshot at an unidentified flying object and provoking a diplomatic crisis?

As someone who does not believe that war is in any way an economic stimulus and should be avoided beyond self-preservation, I hope that this crisis — and the wider Syrian situation — can be defused.

Those who want to see a big military-Keynesian stimulus may be hoping for an escalation…

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Springtime for the Military-Industrial Complex

The FT erroneously concludes that the boom-times are over for the military contractors:

The wars in Afghanistan and Iraq have been a boon to US contractors. The US has used so many of them in the conflicts that at times they outnumbered the military they supported. But the boom times are coming to an end and military service companies in particular are being squeezed.

Moody’s, the rating agency, expects revenue and margin pressure on defence service companies to become visible soon as the US Department of Defence, the world’s biggest military spender, negotiates tougher terms for contractors, reduces spending on them and brings its troops home from Afghanistan in time to meet the end 2014 deadline set by President Barack Obama.

In Iraq and Afghanistan the top contractor was Kellog, Brown & Root, the engineering and construction services company. It earned $40.8bn during the past decade, while Agility, the logistics company, and DynCorp, which specialises in security, earned $9bn and $7.4bn respectively, according to a US government report.

After a decade of unrivalled prosperity thanks to war and a booming global economy the defence service sector will have to work harder through innovation, as well as lean and well-focused management, to prosper.

In a word, nope. What cuts? The Obama budget aims to increase military expenditures far-above their already-puffed-up status quo:

Offering a military budget designed to head off charges that he’s weak on defense, President Obama unveiled a Pentagon spending plan that fails to cut any major procurement programs and calls for spending $36 billion more on the military in 2017 than it will spend this year.

Here’s what Obama intends to increase (and what Romney, of course, intends to increase more):

Yeah, America is spending more today drone-striking American citizens in Yemen, drone-surveilling Mexican drug lords and “turning our attention to the vast potential of the Asia-Pacific region” than she was during the cold war when a hostile superpower had thousands of nukes pointing at her.

Military contractors have nothing to fear. Whether it is the Pacific buildup to contain Chinese ambition, or drone strikes in the horn of Africa or Pakistan, or the completely-failed drug war, or using the ghost of Kony to establish a toehold in Africa to compete with China for African minerals, or an attempted deposition of Bashar Assad or Egypt’s new Islamist regime, or bombing Iran’s uranium-enrichment facilities, or a conflict over mineral rights in the Arctic, or (as Paul Krugman desires — and what the heck, it’s 2012, why not?) an alien invasion, or a new global conflict arising out of a global economic reset, it’s springtime for the military contractors. It’s everyone else who should be worried.