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Blackwater USA | Daily Brief

China

  • The U.S. House passed “the Uighur bill” 407-1. The bill would require the U.S. president to condemn discrimination against Muslims in China, call for the closure of “reeducation” camps in Xinjiang, and impose sanctions on a member of China’s politburo for the first time (in this case, Xinjiang Party Secretary Chen Quanguo). China denounced the bill, and threatened vague retaliation if it’s signed into law.
  • According to the NYT, Chinese scientists are exploring the possibility of using a DNA sample to create an image of a person’s face—which, presumably, could then be fed to surveillance and monitoring databases.
  • A California student filed a class-action lawsuit against the social media app TikTok, which stands accused of transferring user data to private servers in China (TikTok maintains that all user data is stored in the U.S., with backups in Singapore—but never in China).

Iran

  • A new U.S. financial intelligence report estimates that Iran is in worse economic shape than previously thought—largely due to sanctions and low oil prices. A WSJ article pasted below had good insights, including: “The protests underscore the difficult task the government is facing: It is trying to cut fuel demand at home so it can unlock new revenue by selling more fuel abroad through secret channels.”

Afghanistan

  • The head of Japanese NGO Peace Japan Medical Services (PJMS), Dr. Testsu Nakamura, was wounded in an attack in Nangarhar that left his driver and four bodyguards dead. Dr. Nakamura has worked in Afghanistan for over a decade, and Pres. Ghani even awarded him honorary Afghan citizenship for his work. IS was likely responsible, but hasn’t claimed the attack yet.

U.S.

  • The House Intel Committee released its 300-page impeachment report, and Republicans released their rebuttal. The media’s analysis of the two reports is as divided as the reports themselves.

Strategic Minerals

  • Glencore CEO Ivan Glasenberg said mining companies are still in talks with DRC to repeal unfavorable revisions to Congo’s mining code, but I doubt anyone’s holding their breath: they’ve been “talking” for almost two years now, to no avail.

Venezuela

  • Reuters had an insightful article underscoring a sentiment I’ve heard a lot lately: that opposition Pres. Guaido squandered his opportunity to oust Pres. Maduro, and “missed his moment” to do so. It sounds like Venezuelans particularly lost faith in him this week, in light of allegations of corruption among his senior supporters. Article pasted below.
  • Bloomberg says there is now around $2.7 billion worth of physical U.S. dollars circulating in Venezuela—that’s three times the total value of bolivars, including both physical bolivars and savings and credit accounts denominated in bolivars. Dollar-denominated transactions now represent about half of all trade in Venezuela, though they were prohibited until recently.
  • The 19 signatories of the 1947 Rio Treaty—who had previously used mostly diplomatic pressure against Venezuela—agreed to cooperate in pursuing new economic sanctions on Pres. Maduro’s regime. Each signatory will make its own decisions about how to follow up.

Guyana

  • ExxonMobil’s local subsidiary applied to drill 31 more offshore wells in Guyana—in the Stabroek, Kaietur, and Kanje blocks—following the success of the Stabroek wells it’s drilled to date.

Mexico

  • Bloomberg reports that drug cartels are extorting business owners in the previously-quaint town of San Miguel de Allende for “property taxes,” and have murdered some businesspeople who refuse to pay.
  • Travel + Leisure twice named San Miguel the “best city in the world,” and it attracts lots of retirees—including, reportedly, deposed Bolivian president Evo Morales (who’s rumored to be planning to spend his exile in San Miguel).
  • Local officials argue that the recent crime spree in San Miguel isn’t specific to the town, but is part of a nationwide—or regional—rise in crime. Perhaps.

Other News

  • Pres. Trump opened the 70th NATO summit by criticizing French Pres. Macron for Macron’s comments recent comments suggesting the alliance is irrelevant without strong U.S. leadership. I wouldn’t be surprised to see more bickering than cooperation throughout the summit.

Iran, Cut Off From Vital Cash Reserves, Faces Deeper Economic Peril, U.S. Says (WSJ)

Government has clung to solvency by evading sanctions, but U.S. sees crisis ahead

While Iran’s sanction-battered economy has sparked protests across the nation, U.S. officials cite new intelligence suggesting Tehran’s finances are more dire than previously thought and bringing it closer to a financial crisis.

Tehran’s sophisticated sanction-evasion efforts have offset some of the losses from plummeting oil exports due to global U.S. sanctions pressure. But according to new U.S. financial intelligence, the government is scraping the barrel on foreign-exchange reserves, a critical indicator of the country’s ability to control economic forces and to import equipment and supplies.

That shortfall, combined with the oil drop-off and a widening trade deficit, puts Iran in even greater economic duress than in 2013, when the government of President Hassan Rouhani was pressured into starting official nuclear negotiations with global powers, U.S. officials say. The state of Iran’s economy is clouded by unknowns, as the country’s economic statistics aren’t always considered reliable or transparent, and intelligence from U.S. allies indicate Iran’s government may have sufficient amounts of off-book income to ease its shortfall.

Still, the unrest in Iran, sparked by a hike in gasoline prices, points to a well of resentment from a population exhausted by deepening sanctions. The protests underscore the difficult task the government is facing: It is trying to cut fuel demand at home so it can unlock new revenue by selling more fuel abroad through secret channels.

The new U.S. assessment suggests Iran is approaching a point where it confronts a choice between returning to negotiations or lashing out with new attacks on U.S. allies and global energy supplies, U.S. officials and experts said.

“They are in a state of panicked aggression,” said a senior U.S. administration official, referring to recent assaults that include attacks against energy supplies and deployment of precision-guided missiles in Lebanon and Syria. Iran denies carrying out attacks on oil tankers and Saudi infrastructure.

The key measure in the U.S. assessment is the country’s foreign-exchange reserves, representing the emergency cash that countries use to pay off trade debt, safeguard currency and stave off financial turmoil. In Iran, the currency reserves are estimated by the International Monetary Fund to be at $86 billion currently, or 20% below the level in 2013, when world-wide financial pressure forced Iran to negotiate on its nuclear program.

But the situation likely is more challenging still. Brian Hook, the U.S. State Department’s special envoy for Iran, said classified intelligence suggests Tehran has access to only 10% of those cash reserves, as sanctions against the financial sector prevent the government from tapping them.

“If Iran is going to prevent further price acceleration, then it’s going to have to burn through even more reserves,” Mr. Hook told The Wall Street Journal. “Given current sanctions on all of the top revenue-generating exports, this is simply not sustainable for the regime.”

Even if Iran has access to the full amount projected by the IMF, the fund estimates Iran will burn through another 20% next year to keep its exchange rate stable and hold down inflation, which at 36% this year is slightly higher than in 2013. Doing so would leave the central bank able to cover less than a year’s worth of imports, the projections show.

“If Iran is running dangerously low on these reserves, that could trigger a balance-of-payments crisis and a further collapse of its currency, greater hyperinflation and mass layoffs as it can’t buy the machinery and technology it needs to power its economy,” said Mark Dubowitz, chief executive of the Foundation for Defense of Democracies, a think tank that has pushed for tougher sanctions against Tehran.

Iran’s representatives at the IMF and the United Nations didn’t respond to requests for comment on the latest U.S. assessments. Mr. Rouhani acknowledged in mid-November that Washington’s oil embargo had created the most “difficult and complex conditions” since the Islamic cleric Ayatollah Ruhollah Khomeini led an armed revolt against the last shah of Iran in 1979.

U.S. officials say mismanagement and corruption are partly to blame for Iran’s economic woes, but they are exacerbated by oil and trade. The 70% fall in oil exports due to U.S. sanctions pressure reduced Iranian crude sales to an estimated 500,000 barrels a day, less than half the 2013 level of around 1.1 million barrels. Though all of Iran’s major exports fall under sanctions, enforcement has been most rigorous on crude.

Largely because of the oil restrictions, Iran is running a trade deficit amounting to 3% of its gross domestic product. In 2013, before the start of negotiations with the U.S. and world powers, it was running a trade surplus of 7% of GDP.

All this is occurring as the country battles its deepest economic contraction in more than three decades, based on IMF data.

Normally, countries would cover a trade deficit by borrowing money, or if desperate, by tapping their foreign-currency reserves. Iran, frozen out of U.S. financial markets and struggling to access Europe’s banking system, has limited borrowing ability and is relying on its shrinking pool of reserves and cash it earns from covert sales of goods abroad.

Losing the ability to either borrow or tap its reserves could lead to a crisis requiring international intervention, such as what happened in Greece in 2010.

Mr. Hook wouldn’t specify what the U.S. assessment of Iran’s condition is based upon. The IMF’s figures for foreign-exchange reserves are an amalgamation of official Iran numbers and fund estimates, without details on how much of those reserves is actually accessible.

To be sure, Iran’s two decades of sidestepping previous U.S. and U.N. sanctions has helped Tehran master ways to help keep its economy afloat, such as oil smuggling and other tactics.

Western intelligence officials say Iran also has been able to effectively capitalize on opposition to Washington’s Iran policy in many countries, including among some European allies. A willful blindness to sanctions-busting means Tehran is able to keep cash and goods flowing, the officials said. The Europeans have set up facilities meant to evade U.S. sanctions because they believe the sanctions are bad policy.

Iran’s non-crude sales are another key lifeline. Its non-crude export revenue—largely made up of oil products such as gasoline and petrochemicals—rose to $10 billion in the three months up to July 21, up 6% compared with the same period last year, according to the Iranian customs administration.

“We have unofficial or unconventional sales, all of which are secret, because if they are made known America would immediately stop them,” Iran’s oil minister Bijan Zanganeh said in June.

Iran recently decided to cut gasoline subsidies for Iranians, in line with the new economic emphasis. It aimed to reduce consumption at home, putting more gasoline into the overseas market and plugging its budget deficit to avoid tapping shrinking cash reserves. But the move triggered mass protests from a population already at the end of its tether.

Hamid Hosseini, secretary-general of the Iran-Iraq chamber of commerce, said the reduction in domestic demand could boost Iran’s gasoline exports by 190,000 barrels a day—generating extra annual revenue of $5 billion. He said most of these supplies would likely go to Iraq and Afghanistan, which are already substantial buyers of Iran’s refined products.

Mr. Hook is skeptical that sanctions evasion and non-crude sales can overcome the U.S. sanctions campaign.

“The profound effect of U.S. sanctions cannot be offset by smuggling,” he said. “The marginal economic benefit cannot alleviate the pressure on the Iranian economy or the regime’s budget.”

‘Missed his moment’: opposition corruption scandal undermines Venezuela’s Guaido (Reuters)

Venezuelan opposition leader Juan Guaido’s faltering efforts to oust President Nicolas Maduro are facing a new challenge in the form of an influence-peddling scandal that has left disillusioned Venezuelans wondering if Guaido’s moment has passed.

Guaido on Sunday said the opposition-controlled congress would investigate alleged wrongdoing within its ranks after website Armando.info reported that nine opposition lawmakers had advocated for a businessman linked to Maduro’s government.

To a dozen Venezuelans interviewed by Reuters around the country, the scandal has marked another blow to Guaido’s reputation and to their hopes of seeing the back of the deeply unpopular Maduro, who has presided over a five-year economic crisis and an expanding authoritarian state.

For Mario Silva, an engineer waiting by a bus stop in the crumbling western city of Maracaibo, it was time to move on. “Guaido missed his moment,” the 60-year-old said.

When Guaido declared an interim presidency in January in a bold challenge to Maduro, Silva joined millions of Venezuelans in celebrating the arrival of a fresh-faced politician who had united the oft-fractured opposition and was untainted by its previous scandals.

Silva had backed the “socialist revolution” led by the late Hugo Chavez and for a while supported his successor, Maduro, until, he said, Venezuela’s worsening poverty and widespread corruption became too obvious to ignore.

“I saw Guaido as a salvation for the country, but he, like Chavez, disappointed me,” Silva said.

Guaido has been recognized by more than 50 countries as Venezuela’s legitimate leader. But, despite growing U.S. sanctions, Maduro has retained the support of the military and control of state apparatus.

Last month, Guaido struggled to launch a new wave of street protests. Attendance was a fraction of the crowds he drew earlier this year.

His flagging momentum has caused some of his fellow lawmakers to start jostling for a new leadership battle, though most have not yet started criticizing him publicly, according to interviews with analysts and politicians.

“The political reality we have had in Venezuela for the last 10 months has finished,” said Dimitris Pantoulas, a Caracas-based political analyst. “It’s the end of this era of harmony and unity.”

Emilio Grateron, the national coordinator for Guaido’s Popular Will party, said in an interview that Guaido remained the “indisputable leader” of the opposition, but acknowledged the scandal had opened a “rupture.”

ILLICIT PAYMENTS SUSPECTED

On Sunday, Armando.info, a Venezuela-focused news outlet, reported that the nine implicated lawmakers had written letters of support to the U.S. Treasury and others for a Colombian man named Carlos Lizcano who authorities were investigating over his possible links to Alex Saab, another Colombian who is under U.S. sanctions.

However, the news outlet said, the lawmakers wrote the letters despite being aware of evidence that tied Lizcano to Saab, who has been accused of corruption associated with Maduro’s state-backed food distribution program.

Guaido said he suspected the legislators received illicit payments in exchange for writing the letters and called it “unacceptable to use a state institution to attempt to whitewash the reputation of thieves.”

It was not immediately evident if the legislators broke the law. The opposition parties involved issued statements deploring the alleged corruption and promised to remove the lawmakers in question. Lizcano and Saab have not commented.

Grateron said the affair affected a “tiny group of morally weak” lawmakers and was not on the same scale as the vast state corruption committed by Maduro’s government.

Maduro’s government, which regards Guaido as a U.S.-backed coup monger and has consistently denied opposition accusations of corruption in its own ranks, has cautiously celebrated the scandal.

Meanwhile, Maduro’s grip on power seems to be strengthening. According to local pollster Datanalisis, Guaido’s support had already dipped from 61% in February to 42% in November – before news of the scandal broke.

“We can’t become what we are challenging, we can’t denounce a corrupt regime and then join those who are corrupt,” said Ruben Iriarte, a 49-year-old businessman in the eastern city of Ciudad Guayana.

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