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      Trump Has Sent in the Feds

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      US federal agents poured into Portland, Oregon, this month to crack down on anti-racism protests. They beat up peaceful protesters and fired impact munitions at demonstrators, seriously injuring one of them. They drove around the city in unmarked vans pulling people off the street.

      Oregon officials at every level — the city, the state and congressional representatives — have demanded that these agents of the Department of Homeland Security, the US Marshals Service and other federal authorities leave Portland immediately. The state has even filed suit against these federal agencies. The American Civil Liberties Union (ACLU) calls it a constitutional crisis.

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      President Donald Trump is doubling down, not backing down. He says that the paramilitaries are there to restore order. The Feds are preparing to descend on Chicago, and Trump is also warning Philadelphia and New York that they’re next. “Look at what’s going on — all run by Democrats, all run by very liberal Democrats. All run, really, by [the] radical left,” Trump said. “If [Joe] Biden got in, that would be true for the country. The whole country would go to hell. And we’re not going to let it go to hell.”

      Halfway around the world, meanwhile, the Russian authorities arrested Sergei Furgal, the governor of the far-eastern city of Khabarovsk, on charges that he orchestrated the murder of two men 15 years ago. Over the last week, tens of thousands of people have demonstrated on the streets of Khabarovsk demanding the release of this leader of the opposition to Russian President Vladimir Putin. Furgal and his supporters argue that the arrest is politically motivated.

      In Hong Kong, authorities are using a new national security law criminalizing many forms of protest to arrest several pro-democracy advocates, including the politician Tam Tak-chi, who was expected to run for the legislature in the September election. The action put an immediate damper on opposition efforts to select candidates for the vote. From Beijing, the Chinese Communist Party is cracking down on any challenges to its authority from the periphery, whether in Hong Kong, Xinjiang or Tibet.

      Embed from Getty Images

      Analysts of the new authoritarian wave that has swept across the world in the last few years have largely focused on power grabs in capitals. Leaders like Donald Trump, Vladimir Putin, and Xi Jinping have attempted to reduce the influence of legislative and judicial bodies in favor of their own executive power. They have targeted civil society and media. They have used the coronavirus crisis to consolidate their control.

      An equally important feature of this new authoritarianism is its intolerance for regional or local power bases that lie beyond executive reach. For countries that have federal structures, this means a conscious effort to strengthen the federal center at the expense of the regions. It’s part of the remaking of the nation-state in the 21st century, a reversal of the two-edged trend to devolve power to local authorities and delegate authority to international institutions.

      These nationalists don’t just hate globalists. They hate anybody who stands in their way, including just about any potential counterforce taking shape on the periphery.

      Trump and the New Civil War

      You might think that Trump’s embrace of the Confederate flag and Confederate generals is just an overture to his white nationalist supporters. It’s all that and more.

      Trump and his strategists are very consciously pitting states against each other in a replay of the pre-Civil War conflict over federal authority. Trump and his allies in predominantly red states want to reopen the US economy as quickly as possible, and he also wants to preserve the “freedom” of Americans to refuse to wear protective masks in public. This strategy echoes the arguments of southern states in the late 1850s to maintain their economic system without federal interference and to have the “freedom” to own slaves. Of course, the analogy is complicated by the fact that Trump is the head of the federal system.

      However, Trump disagrees with the public health authorities associated with the US government who support mandatory mask use. The president demonstrated his support of Georgia Governor Kemp, who unilaterally voided requirements to wear masks in Atlanta and other cities, by touching down unmasked in the state capital. Trump also backs those governors who reopened their economies prematurely and are reluctant to shut down again now that the coronavirus has returned with redoubled strength.

      The battle is shifting to a showdown over reopening public schools. Trump has ordered students to return in person for the upcoming school year, which will begin in some places next month. He has even threatened to withdraw federal funding from schools that don’t reopen.

      But the coronavirus is surging out of control in some states, including Florida, which is adding more than 10,000 new cases a day. If Florida were a country, it would be the eighth hardest-hit nation in the world. Only three countries are adding as many new cases of infection daily. And yet the governor of the state, Republican Ron DeSantis, is moving full speed ahead to bring children back to the local virus incubation centers otherwise known as schools.

      Trump might not have the public health agencies on his side. And the military balked at the president’s plan to send soldiers out onto the streets to suppress public protest.

      But the president has discovered that he still controls the security forces attached to other federal agencies. He deployed the National Guard in DC to tamp down protests last month, prompting a demand from the mayor of the nation’s capital for the president to withdraw the forces. Agents from both Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) were also used to police the demonstrations in the wake of the killing of George Floyd in May.

      Now, Trump is claiming that areas of the country under Democratic Party control are, in fact, swamps of anti-Americanism. He is deploying the classic vocabulary associated with dehumanizing America’s putative enemies prior to attack. This is no longer a conflict between red and blue. Trump is transforming America’s political divide into an existential battle between gray and blue, where the Feds are supporting a Confederate-friendly president and the rebellious states long for the return of a more perfect union.

      Trump’s use of federal paramilitaries is a classic tactic of autocrats to test how far they can push their authority and what forces they can count on in an emergency. The Black Lives Matter protests inadvertently provided Trump with that opportunity. Come election time in November, he’ll know which guns are on his side if he chooses to question the election results and stay in office.

      Where Dissent Flourishes

      Autocrats fear the periphery. It’s where dissent can germinate beyond the prying eye of the panoptical state. East Germany’s revolution in 1989, for instance, began with demonstrations every Monday in the southern city of Leipzig. The Romanian revolution a few months later was sparked by the Hungarian minority in Timisoara. The overthrow of Slobodan Milosevic in Serbia in 2000 began with protests by miners in Kolubara, an hour’s drive from Belgrade.

      Federal states face a continual tension between center and periphery that occasionally breaks the country apart (as with Yugoslavia and the Soviet Union). The Spanish government cracked down on Catalan moves toward independence in 2017, imposing direct rule for a time. Ukraine, Moldova and Georgia have all faced secession movements that have resulted in autonomous regions that claim statehood. Occasionally, breakaway regions achieve international recognition as states — Bangladesh, East Timor, South Sudan.

      The autocrat fears secession as well as anti-government protest. The first attacks the unitary power of the nation-state, the second challenges the unitary power of the ruler. It’s one and the same thing for the authoritarian nationalist.

      This is why Xi Jinping fears Hong Kong, Vladimir Putin worries about Khabarovsk and Donald Trump wants to stamp out dissent in Oregon. But it’s also why Turkey’s Recep Tayyip Erdogan has replaced the mayors of cities affiliated with the pro-Kurdish opposition party. It explains why India’s Narendra Modi has made it more difficult for state governments, particularly those led by the political opposition, to raise revenue. It’s why Brazil’s Jair Bolsonaro has clashed with state governors over their respective handling of the coronavirus pandemic.

      The new nationalists have defined “the people” in very specific ways to exclude portions of the population based on ethnicity, religion or politics. They are transforming the federal government into a tool to reward only those who support the ruler in the capital. They are attacking democracy, yes, but also reducing faith in governance more generally. What better way “to deconstruct the administrative state,” as alt-right guru Steve Bannon likes to say, than to turn the government into a body with no power beyond its military and police.

      The coronavirus and the economic downturn have brought the United States to its knees. But Trump also helped to hobble the nation. Now, he wants to deliver the knock-out blow all by himself.

      *[This article was originally published by FPIF.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      India Must Abandon Nehru’s Failed Non-Aligned Policy to Confront China

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      Troops from India and China have clashed this year in Ladakh and North Sikkim at the border between the two countries. Although there are immediate reasons for the clash, the deeper causes of India’s border disputes with both China and Pakistan are its post-independence historic blunders. India has catastrophically failed to establish, delineate and demarcate its boundaries when it was in a position to do so.

      Jawaharlal Nehru, the first Indian prime minister after independence in 1947, was a man of the leftist mold and so were many of his confidantes. They ignored reports of Chinese atrocities and progressive occupation of Tibet sent by Sumal Sinha, the Indian consul general in Lhasa, and Apa Pant, the dewan, the de facto prime minister, of the Himalayan kingdom of Sikkim, which at that time was a protectorate and is now a state of India.

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      Two influential Indians emerge with much discredit. One is V.K. Krishna Menon, India’s defense minister from 1957 to 1962, who resolutely maintained that India had nothing to fear from China. The other is K.M. Panikkar, India’s ambassador to China from 1950 to 1952, whose advice “proved to be unwise.” Panikkar persuaded Nehru to recognize China’s sovereignty over Tibet when Mao Zedong’s People’s Liberation Army (PLA) took over this de facto independent buffer state in October 1950. The historian T.R. Ghodbole records that Panikkar “advised Nehru not to raise the border issue” with China as the price for accepting the conquest of Tibet.

      One Indian leader shines in contrast. Sardar Vallabhbhai Patel, India’s first home minister and Nehru’s deputy, was prescient about the Chinese threat. He wrote a now well-known letter, to the prime minister, calling Chinese action “little short of perfidy.” Patel, a Gandhian from the right of the Indian National Congress party, argued that Chinese irredentism and communist imperialism were “ten times more dangerous” than Western expansionism or imperialism because it wore “a cloak of ideology.” The wise home minister died soon after writing this letter. Now, Indian policy was firmly in the hands of leftist ideologues who failed to take any of the steps he advocated to safeguard the country’s security interests.

      Misunderstanding China and Abandoning Tibet

      Nehru soon embarked on his misconceived policy of non-alignment. He wanted to be the moral leader of the Third World who pioneered a policy of peace in contrast to the militaristic policies of imperial powers. As a result, India failed to build up its own capabilities to defend its sovereignty and territorial integrity. Nehru forgot to heed the Roman doctrine that if “you want peace, be prepared for war; therefore, let him who desires peace get ready for war.” He also forgot the ancient Indian strategist Chanakya who postulated that “every neighbor is a potential enemy and an enemy’s enemy is a friend.”

      Embed from Getty Images

      It was this complete absence of strategic thinking that led to the debacle in Tibet in 1950. Even as China was building up its strength and repudiating so-called unequal treaties imposed by imperial powers, Nehru was content to swan around on the world stage as a moral, peaceful beacon for the world. It was this naive thinking that led the country to take the issue of Kashmir to the United Nations and fail to press home its military advantage in 1948. Back then, India was in a position to claim the entire state of Jammu and Kashmir, including the parts that China now controls.

      India failed to understand China’s worldview. Henry Kissinger, the former US secretary of state under President Richard Nixon, had his finger on the Chinese pulse in his book, “World Order.” He observes that China has considered itself as “the sole sovereign government of the world’ since its unification in 221 BC. It did not consider other monarchs as equal. They were mere “pupils in the art of governance, striving towards civilization.” The Chinese emperor commanded “all under heaven,” tianxia in Chinese parlance. China forms the central, civilized part, “the Middle Kingdom” of tianxia. It is supposed to inspire and uplift the rest of humanity.

      Chinese President Xi Jinping is the son of an ardent Maoist. Like Mao, he has emerged as a modern-day Chinese emperor. Xi has reintroduced this idea of tianxia. His first act when he became the leader of the Chinese Communist Party (CCP) in 2012 was to visit the Museum of Revolution. There he declared that China was ready to be a world leader “because of its 5,000-year-old history, the CCP’s 95-year historical struggle and the 38-year development miracle of reform.” This is the danger that Patel foresaw but Nehru did not.

      In 1950, India could have prevented the Chinese takeover of Tibet. It could have strengthened its garrison in Lhasa instead of withdrawing its troops, used its air force and supported the poorly equipped Tibetan forces. China was isolated internationally in the 1950s. The Western powers were anti-communist and did not like Chinese interference in Vietnam. China’s relations with the Soviet Union spiraled downward after 1955. India failed to build a coalition against China even when the West had shown interest in supporting the Tibetans. Indeed, as Atul Singh, Glenn Carle and Vikram Sood record in a detailed article on Fair Observer, India inexplicably turned down a permanent seat at the United Nations Security Council.

      Once China conquered Tibet, it was at India’s doorstep. In the 1950s, it stealthily took over 37,244 square kilometers of Aksai Chin and built a road connecting southern Tibet to Xinjiang. It also started claiming large chunks of Indian territory such as Arunachal Pradesh and parts of Ladakh. Indeed, the Chinese claim line extends right up to the plains of Assam.

      Singh, Carle and Sood have examined in some detail the various boundaries the British drew as their boundary with the Qing. China was in turmoil after its revolution of 1911-12 and Tibet was de facto independent. It was a buffer state where the British had many strategic assets, which India inherited but soon gave up to China. Released files of the Central Intelligence Agency reveal the extent of Nehru’s capitulation to Mao. India signed a treaty with China and inexplicably agreed to withdraw troops from Tibetan towns of Yatung and Gyantse, which were mainly trading posts, and also wind up the garrison in Lhasa. It handed over control of postal, telegraph and telephone facilities to the Chinese.

      Embed from Getty Images

      None of these concessions satisfied the Chinese. Instead, these missteps whetted the appetite of a resurgent Middle Kingdom. China did not accept any of the lines the British had drawn on the map and kept claiming more and more of Indian territory. Finally, war ensued. In 1962, China handed India a devastating defeat that continues to haunt the country to this day.

      The two countries severed diplomatic relations after the war. They restored them only in 1984. Since then, they have conducted several rounds of negotiations and signed several agreements but never been able to agree to define and demarcate the line of actual control (LAC), the de facto line dividing Indian and Chinese territory, or agree upon an international boundary. Despite India’s repeated efforts to get the LAC demarcated, the Chinese have been intransigent. It is far too convenient for them to have an undefined LAC, which allows them to alter it for strategic advantage whenever they have an opportune moment.

      China’s Expansionist Policy and Indian Response

      Chinese intransigence is the key reason why the two countries have been unable to come to an agreement. In 1960, Zhou Enlai, the Chinese premier, proposed formalizing the status quo. He suggested India keep what is now called Arunachal Pradesh while China would retain Aksai Chin. Later, Deng Xiaoping reiterated Zhou’s position. In 1962, Chinese troops largely withdrew from Indian territory and even vacated the strategic town of Tawang, a great center of Buddhist learning and pilgrimage.

      As per these actions, one could infer the Chinese took what they want. Sadly, this is not true. The Chinese have been consistently and persistently moving the goalposts. China now refuses to accept the McMahon Line in Arunachal Pradesh as the international boundary and is claiming Tawang again on the ground that the sixth Dalai Lama was born here. It is important to remember that the border alignment agreed by China with Myanmar follows roughly this very line.

      China has been constantly upgrading its military and building up its border infrastructure. It has also been breaching all the agreements that it signed with India. The only exception is the exchange of maps relating to the middle sector bordering the Indian state of Uttarakhand in 2005.

      This year, China has displayed unusual belligerence far exceeding past practices. It has exerted pressure in both North Sikkim and Ladakh. The proximate reason lies in India belatedly boosting its border infrastructure. It has built the world’s highest airfield at Daulat Beg Oldi (DBO). An all-weather road now goes east from Leh, the capital of Ladakh, to Durbuk and then further east to the Shyok river, from where it turns north and runs all along the LAC right up to DBO. This airfield sits at the base of a historic pass through the Karakoram and gives India access to Central Asia. It is also close to the strategic Siachen Glacier where India controls the commanding heights and dominates Pakistan.

      For decades, India neglected its border infrastructure. Defeat to China in 1962 scarred the country. Its policymakers went into a defeatist mindset. They thought good roads would be used by the Chinese to speed into Indian territory while rugged undeveloped terrain would slow down Chinese advance. Domestic organizations and foreign private companies have now dramatically altered the ground situation, especially in the western sector. This has made China nervous. It feels the China-Pakistan Economic Corridor (CPEC) — a trade route that is important for Beijing’s Belt and Road Initiative and its geopolitical strategy in South Asia — might be under threat. Indian troops could block off its access to Gilgit-Baltistan.

      Possibly as a reaction, Chinese troops have been pressing at strategic points on the Ladakh border such as Gogra Hot Springs, Depsang Bulge, Galwan Valley and Pangong Tso Lake. They want to make sure that the road India has built to its airfield at DBO comes within range of Chinese gunsights. Nibbling Indian territory has been the general strategy for a long time. The Chinese are infamous for following “salami tactics” not only with India but also with other neighbors like Vietnam or Japan.

      Increasingly, China appears to be unnerved by India’s strategic direction. In 2017, New Delhi was firm in defending Bhutan’s territory in Doklam Plateau, which China lays claim to. India has strengthened ties with Australia, the European Union and the US. The specter of the Quad, an alliance of India, Japan, Australia and the US, blocking the Straits of Malacca — an international waterway — haunts China. In particular, China fears that the US is backing India to be a counterweight to China in Asia.

      Under President Xi, China has been increasingly aggressive on its borders. It has also been repressive internally. China has tightened the screws on Hong Kong, Tibet and Xinjiang. The Belt and Road Initiative is another example of Chinese expansionism.

      China’s recent belligerence might come from a deep sense of insecurity due to several recent developments. The US has unleashed a trade war that has hit China’s export-oriented economy hard. Furthermore, capital and manufacturing have been moving to Indonesia and Vietnam. India has now made a play for that capital as well. In addition, Western countries have criticized China for its domestic as well as external actions. The COVID-19 pandemic has blotted its record and lowered its global image. India has supported the US in calling out China on its suppression of information about the pandemic and in instituting an inquiry into the origins of the COVID-19 disease.

      India has long borne the brunt of Chinese aggression. It has never raised the issue of an independent Tibet in the international arena. It was the first non-socialist country to recognize China. Yet China has consistently acted against India’s interests. It has used Pakistan as a proxy against India. Beijing has even provided nuclear technology and fissile material to Islamabad. It blocks India’s membership of the Nuclear Suppliers Group, an organization of nuclear-supplier countries. It has built a port in Sri Lanka and instigated the communist government in Nepal to act against India’s interests.

      The time has come for India to stand up to China’s bullying. The nation cannot allow China to keep gobbling up Indian territory. India has to keep modernizing its military, building up its border infrastructure and developing closer ties with other nations threatened by China. Most importantly, India has to recognize that China is its principal strategic enemy, both in the short and the long term. Therefore, India has no option but to cast off its failed non-aligned policy and ally with the US against China. Only a full-fledged military alliance between the world’s two largest democracies will deter the world’s biggest tyrannical regime.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      Under Pressure, Will Trump Wag the Dog?

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      As commentators in the US media continue to track and assess the accelerating decline of President Donald Trump’s prospects for reelection, some are wondering whether he will be tempted to organize a spectacular “October surprise” to magically overcome his ever-increasing gap in the polls. His behavior in recent days has appeared increasingly desperate, as demonstrated in this week’s shambolic Fox News interview with Chris Wallace.

      Some have speculated that Trump may now be feeling the need to assert leadership in foreign policy after singularly failing to do so on the real crisis at hand: the national response to the coronavirus pandemic. Alexis Dudden, an expert on Korea and Japan, evokes two hypotheses that concern North Korea: “If it strikes Trump’s fancy in the middle of the night to fly to Pyongyang and meet Kim in an effort to appear presidential, he will. If it strikes Trump’s fancy in the middle of the night to order a militarized attack on a North Korean nuclear facility in an effort to appear presidential, he will.”

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      The Intelligencer sees another scenario, one that is less speculative based on events that are already taking place. In an article with the title, “Could War With Iran Be an October Surprise?” the author, Jonah Shepp, reviews recent events concerning a series of mysterious explosions affecting Iran’s nuclear facilities. There is more than a strong suspicion that Israel is responsible for at least some of the unusual incidents. Shepp highlights the value escalation may have for Israeli Prime Minister Benjamin Netanyahu, who has been under extreme pressure for more than a year through a series of inconclusive elections and is now desperate to find a way to escape the possible consequences of his trial for corruption.

      Mitch Prothero, writing for Business Insider, suggests a direct connection between Netanyahu’s dilemma and Trump’s quandary in an article with the title, “Israel keeps blowing up military targets in Iran, hoping to force a confrontation before Trump can be voted out in November.” Trump may also be hoping that if Israel takes the lead, he will be justified in following through, with the hope that the nation would fall in line behind a wartime president.

      Both Shepp and Prothero focus on the sense of urgency felt in Israel to profit from what may be the last few months of Trump’s presidency before he becomes a lame duck, as now seems nearly certain. Prothero explains that, for the moment, Israel’s decision has been “to follow the Trump administration’s lead of exerting ‘maximum pressure’ on the Iranians.” Prothero quotes an EU intelligence official: “The attacks appear to be part of a campaign of “maximum pressure, minimal strategy.”

      Here is today’s 3D definition:

      Maximum pressure:

      In 21st-century diplomacy, political sadism directed against civilian populations to persuade them to respect interests and values that may be foreign to their culture 

      Contextual note

      Shepp calls Israel’s attacks “short-of-war actions.” He predicts that an administration led by Joe Biden, the presumptive Democratic presidential nominee, “would probably not continue Trump’s ‘maximum pressure’ approach to Iran and would not be as solicitous of Israel’s covert operations.”

      The EU official quoted above believes that “the Israeli plan here is to provoke an Iranian response that can turn into a military escalation while Trump remains in office.” The Israelis would thus aim at drawing the US deeper into a struggle that includes a very real potential of turning into a war. Trump is likely to play along if he believes it will make him look like a wartime president in the weeks before the November election.

      The situation is risky for numerous reasons. None of the parties would welcome war itself, but the ratcheting up of tensions to the point at which the fear of hostilities becomes palpable might be seen as the last-minute trick that allows both Netanyahu and Trump to hold onto the reins of power that appear to be slipping from their respective hands.    

      Historical note

      Following the disastrous experience of George W. Bush’s never-ending wars in the Middle East in what might be called more than maximum pressure on nations that fail to follow the American game plan, the past two US administrations have tended to turn to economic sanctions as the principal means of “persuading” governments to obey their dictates. Donald Trump has turned the policy into a reflex in his foreign policy. He routinely directs sanctions not only against recalcitrant nations but even against individuals, such as the members of the International Criminal Court who have dared to threaten an investigation of American or Israeli war crimes.

      In an article on Al Jazeera, Eva Nanopoulos reminds readers that it was US President Woodrow Wilson who first launched the idea of economic sanctions. Once the trauma of World War I had passed, Wilson got to work looking for ways of imposing order while avoiding the messiness of war. His promotion of the League of Nations was a crucial element. The key to making the League of Nations work could only be economic sanctions, which Wilson described in this way: “Apply this economic, peaceful, silent, deadly [and] terrible remedy. It does not cost a life outside the nation boycotted but it brings a pressure upon the nation which, in my judgment, no modern nation could resist.”

      Embed from Getty Images

      President Wilson invented the logic of maximum pressure that has become the most used and abused tool in the foreign policy toolbox under the Trump administration. “There always was a degree of irony in Wilson’s juxtaposition of peace and death,” Nanopoulos writes. 

      Paradox might be a more appropriate word than irony to describe a policy that is both “peaceful” and “deadly.” There can be no greater moral failure and manifestation of hypocrisy than the deliberate inversion of a widely understood moral concept. Because people spontaneously think of war as a form of organized killing, they can be persuaded to think that so long as a state of war doesn’t exist, economic sanctions, which indirectly but just as surely cause death and suffering, may no longer be considered killing. After all, if there is no smoking gun, no crime has been committed.

      Nanopoulos describes the result: “All served the same cause: to advance imperial ambitions without assuming the risks and responsibilities of war. With the establishment of the League of Nations, multilateral sanctions became part of an international arsenal used to effectively preserve the colonial status quo.”

      It has become customary to invoke the famous “rule of law” that we use to characterize the world order after 1945. The aftermath of World War II saw the creation of the United Nations and a global financial system given a stable structure at Bretton Woods. It didn’t eliminate war, but it kept wars local while developing global trade. Nations and the UN began deploying the threat and the application of economic sanctions. Still, we should not lose from sight the links to European colonialism and emerging American imperialism that Wilson built into the notion of sanctions when he described them as being both peaceful and deadly.

      Maximizing sanctions avoids war. But going to war can still have its merits, mainly in terms of electoral advantage for insecure and contested leaders. Margaret Thatcher demonstrated the principle in the Falkland Islands in 1982. This is traditionally called the tail wagging the dog. Whether it is done through war or simply through Wilson’s and Trump’s maximum deadly pressure, Shakespeare’s Macbeth probably had it right when — allowing for an appropriate adjustment in the spelling — he called it “a tale told by an idiot, full of sound and fury, signifying nothing.”

      *[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Click here to read more of The Daily Devil’s Dictionary on Fair Observer.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      The Political Implications of the Hagia Sophia Reconversion

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      On July 10, Turkish President Tayyip Erdogan issued a decree reconverting the Hagia Sophia museum into a mosque, thus realizing a long-cherished dream of conservative currents in Turkish society. Originally built as a cathedral by the Romans, the Hagia Sophia functioned as Istanbul’s main mosque throughout the Ottoman era. Its conversion into a museum in 1934 was one of a series of moves intended to distance Mustafa Kemal Ataturk’s new secular republic from the Islamic heritage of the defunct Ottoman Empire — and became a totem of conservative resentment toward the Kemalist regime.

      Why Making Hagia Sophia a Mosque Again Is Good News

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      The reconversion of Hagia Sophia should, therefore, be considered a significant symbolic achievement for the conservative side and a settling of scores with the early republican period. Erdogan is also seeking political gain by treating this issue as an identity battle between conservatives and secularists.

      A Tactical Move?

      According to a poll conducted in June by MetroPOLL, a majority of the Turkish population regard the Hagia Sophia controversy as an attempt by the government to divert attention from economic problems and reverse its declining support. Only 30% said they felt it was really just about a change of use from a museum to a mosque. This means that even among supporters of the ruling Justice and Development Party (AKP) and its ultranationalist junior partner, the Nationalist Movement Party (MHP), significant numbers consider the move to be more tactical than ideological — even if they ultimately agree with the outcome.

      Erdogan’s earlier statements also suggest that this is a tactical move. During campaigning for the local election in 2019, he responded angrily to a crowd that raised the topic of Hagia Sophia, pointing out that the adjacent Sultan Ahmad Mosque (Blue Mosque) is almost always empty during prayer times. He told his audience that he would consider reconverting the Hagia Sophia if they first filled the Sultan Ahmed Mosque. Given that this was consistent with previous remarks and little has changed since the exchange, political expediency now seems to have outweighed religious or ideological considerations. Erdogan expects reconversion to produce three political benefits.

      Erdogan’s Political Expectations

      The first benefit is to energize the more conservative segments of his power base by meeting one of their longstanding symbolic demands, in particular in light of the emergence of two splinter parties from the AKP, with the potential to appeal to this electorate. The prominence of the controversy suggests he has succeeded in this.

      The second benefit would be to distract the public from the country’s serious socioeconomic problems. Where the youth unemployment rate — including those who have given up seeking work — has reached 24.6%, the government would like to talk about anything but the economy. Here, Erdogan has gained relief, but probably not to the extent he hoped.

      Embed from Getty Images

      The third and most important benefit would be to establish yet another identity battle between conservatives and secularists. This is the arena where Erdogan feels most secure, and the Hagia Sophia issue appeared ideally suited for the AKP’s identity wars. Its symbolism is multi-layered.

      First of all, a fight over mosque versus museum slots easily into a religion/modernity binary. It can also be used to create an Islam/Christianity binary as Hagia Sophia was originally built as a church and functioned as such for nine centuries until the Ottoman conquest of Istanbul. Secondly, it awakens historical allusions and underlines the real or perceived dichotomy between the Ottoman Empire and the Republic. Reversing a decision taken by Ataturk also inflames existing debates over the early republican reforms. Finally, the move is also expected to provoke adverse international reactions, thus offering a perfect opportunity for Erdogan to breathe new life into his narrative of Turkey encircled by enemies, with Western powers subverting its sovereignty.

      Domestically, Erdogan would expect the reconversion to provoke uproar among secularist circles and lead the secularist People’s Republican Party (CHP) in particular to condemn the decision and mobilize public opposition. This would create another opportunity for him to stir the “culture wars.”

      In fact, however, the CHP and most of the other opposition parties avoided this ploy and either supported the reconversion or remained neutral. This approach is in line with the new strategy of CHP leader Kemal Kilicdaroglu, who has been careful to avoid such traps in recent years. While he has received much criticism from his party base — especially the secularist intelligentsia — for his calculated lack of interest in cultural conflicts, Kilicdaroglu seems to have been successful in preventing Erdogan from picking his fights.

      In light of the lack of domestic push-back, the Turkish president will focus on international condemnation to fan the flames of identity conflicts, presenting these reactions as interference in Turkey’s internal affairs — if not outright Islamophobia. Given that certain European countries have their own problems with accommodating Muslim places of worship, European criticisms can easily be framed as hypocritical and anti-Islamic.

      In that sense, Hagia Sophia is the perfect fight for Erdogan: it is symbolic, emotionally charged, politically polarizing and consolidates political camps. And all this is achieved with scant real-life consequences. European policymakers should follow the example set by the opposition parties in Turkey and deny Erdogan the trivial rhetorical fights he clearly seeks.

      *[The German Institute for International and Security Affairs (SWP) advises the German government and Bundestag on all questions related to foreign and security policy. An earlier version of this article was first published on the SWP website.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      Armenia and Azerbaijan Clash Again

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      The on-again, off-again conflict between Armenia and Azerbaijan over the border region of Nagorno-Karabakh became hot again on the weekend of July 11. Skirmishes are common in the contested region, which is known as Artsakh to the Armenian side, but this recent round of deadly attacks is the most serious escalation since the Four Day War in 2016 and is outside the typical point of contact. As usual, international calls for restraint and a diplomatic solution have been voiced, but internal politics between the two sides continue to amplify their serious disagreements. It seems as though the situation will continue to escalate, but the current circumstances are unlikely to spark a full-scale confrontation.

      As in the case of other post-Soviet frozen conflicts — as well as land disputes in the North Caucasus — the dispute over Nagorno-Karabakh is intrinsically linked to the early history of the 20th century. Shifts of power resultant from the loss of the Ottoman Empire in World War I, the collapse of the Russian Empire and the territorial delineations configured in the formative days of the Soviet Union and its subsequent break-up created borders that did not appease all sides of the local populations. Nagorno-Karabakh has an ethnic Armenian majority, but political maneuvering in the 1920s handed its jurisdiction, and thus international recognition, to Azerbaijan. Armenia continued to voice its discontent over this arrangement, but matters of borders and ethnicity remained contained while the territories were part of a wider empire with one central government.

      As the Soviet Union neared its end, the question of Nagorno-Karabakh reemerged as Karabakh Armenians sought the reconnection of the territory with Armenia proper. Subsequent political actions, including an unofficial referendum and a petition to the Supreme Soviet of the USSR to sanction the territorial transfer, infuriated the Azeri public. In 1988, the Nagorno-Karabakh War officially broke out just as inter-ethnic relations deteriorated, killing between 20,000 and 30,000 people. A further referendum in 1991, boycotted by Azerbaijan, quashed the prior plea to join Armenia in favor of the pursuit of independence for Nagorno-Karabakh. Fighting escalated to the point that both Armenia and Azerbaijan accused each other of ethnic cleansing. It was at this point that the international community turned its attention to the regional conflict in the South Caucasus.

      Contemporary Crisis

      In 1994, the Russian Federation mediated a ceasefire between Armenia, Azerbaijan and the Republic of Nagorno-Karabakh (as of 2017, officially the Republic of Artsakh). For the most part, this agreement has kept hostilities contained, minus the ongoing instances of low-level clashes and explicit violations by both sides. For example, the Four Day War in April 2016 witnessed Azerbaijan regain “two strategic hills, a village, and a total of about 2,000 hectares.” Nonetheless, Armenia has not fulfilled concessions required by UN Security Council resolutions, such as the withdrawal of its troops, leaving Azerbaijan perpetually frustrated.

      There has been a continued push for engagement and peace talks by the international community, primarily the Organization for Security and Co-Operation in Europe’s (OSCE) Minsk Group, chaired by Russia, France and the United States, since 1992. Still, there are no official relations between Armenia and Azerbaijan as a result, and it has been difficult to breathe life into peace talks in a decades-long conflict.

      It is unclear what exactly sparked the current round of hostilities between Armenia and Azerbaijan, but both sides blame the other for the escalation. The heightened tensions came only days after Azerbaijan’s president, Ilham Aliyev, declared that peace talks to resolve the conflict had essentially have stalled. One key difference between the current situation and those in the past is that the deadly encounter between forces did not occur directly in Nagorno-Karabakh, but rather in the northern Tavush section of the Armenian border.

      On July 12, the Defense Ministry of Azerbaijan announced that Armenia launched an offensive that consequently killed two Azerbaijani servicemen and left five others wounded. In retaliation, Azeri forces launched a counterstrike, setting the scene for yet another protracted spat. Attacks have continued almost on a daily basis since the outbreak of the current impasse, and there have been numerous reports of shelling, tank movements and the use of combat unmanned aerial vehicles and grenade launchers.

      While actions on the ground may be dramatic, they remain at a low level. On the other hand, authorities in Armenia and Azerbaijan up the ante through heightened threats and verbal tit-for-tats. This is typical of ethnic spats that rely heavily on nationalist rhetoric to amplify cohesive public support for military actions, whether offensive or defensive. In a case of a highly provocative statement that should raise eyebrows, the head of Azerbaijan’s Ministry of Defense press service stated that “The Armenian side should not forget that the latest missile systems, which are in service with our army, allow hitting the Metsamor Nuclear Power Plant with high precision, which can lead to a huge catastrophe for Armenia.”

      A retort by the Armenian Ministry of Foreign Affairs noted that such possible violations of international law are “an explicit demonstration of state terrorism and genocidal intent of Azerbaijan” as well as “leadership of Azerbaijan acts as a menace to all the peoples of the region, including its own people.”

      Too Late for Diplomacy?

      After 30 years of a tense and barely tolerated relationship, it seems unlikely that any political or diplomatic solution will result from this latest round of tensions. Indeed, a significant diplomatic effort has been expended to resolve the Nagorno-Karabakh conflict and wider disputes between Armenia and Azerbaijan to no avail. At this time, it is simply enough that the sides generally adhere to the 1994 ceasefire and engage with the Minsk Group. For instance, the OSCE institution released a press statement that the belligerents of the conflict must “resume substantive negotiations as soon as possible and emphasize the importance of returning OSCE monitors to the region as soon as circumstances allow.”

      International voices have all chimed in and called for restraint by both Armenia and Azerbaijan. Besides being a co-chair for the Minsk Group, Russia is understandably concerned about the clashes in its neighborhood. Deputy Foreign Minister Andrey Rudenko reiterated sentiments similar to the OSCE, calling on “both parties to immediately ceasefire and start negotiations in order to prevent a recurrence of these incidents.” On the other hand, Turkey’s Foreign Minister Mevlut Cavusoglu called on Armenia to “pull its head together” and subsequently expressed that “Whatever solution Baku prefers for the occupied lands and Karabakh, we will stand by Azerbaijan.”

      The Ministry of Foreign Affairs of the Republic of Artsakh consequently slammed the Turkish position, condemned the destabilizing actions of Azerbaijan in the Tavush region, and echoed the need to return to the OSCE table. With numerous political actors and geopolitical interests at play, the fight over such a small but strategically important swathe of land becomes much more complex once compounded by the factors of ethnicity, history and national pride.

      Embed from Getty Images

      But it seems unlikely that the current situation will transition into another full-scale war. Rather, it is fair to assume that actions on the ground could escalate for the short term, but any protracted operation would be a serious regional blow to civilian populations and the energy sector. The Nagorno-Karabakh War of 1988-1994 displaced some 860,000 on both sides, and a similar outcome is possible today, with skirmishes occurring in populated areas.

      Secondly, the Armenia-Azerbaijan borderlands are important transit points for oil and gas pipelines. Entities and media that follow energy markets have already raised concerns over the current fighting and how it may influence the flow of hydrocarbons. The ongoing situation around Tavush province is certainly more serious because it is closer to the South Caucasian Pipeline (SCP) that runs from the Azeri capital Baku to Tbilisi, Georgia, and then Erzurum, in Turkey. Furthermore, the SCP is part of the wider Trans-Anatolian Natural Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP) — a network set to deliver gas to Europe upon completion later this year. These factors will obviously be taken into consideration by Azerbaijan’s strategists as they move forward with their plans in the region. It would be short-sighted to destabilize this network when diplomatic options are at hand to at least keep the status quo for the sake of business.

      Additionally, the South Caucasus is a busy neighborhood, geopolitically speaking. In the case that the situation escalates and interests are at risk, one could expect greater involvement from Russia and Turkey. Although the Turkish Foreign Ministry gave a statement in strong support of Baku, it does not mean that Ankara would be willing to send forces. Moscow has little taste for engagement in a military operation either. Further, even the Collective Security Treaty Organization (CSTO) — a military alliance composed of countries from the Commonwealth of Independent States, including Armenia and Russia — promote a political solution rather than a military one. The international community and organizations openly promote a return to the Minsk Group’s negotiation table and, ideally, this will be the immediate result of the ongoing skirmishes.

      The clashes between Armenia and Azerbaijan are likely to continue in the short term just as their non-existent diplomatic relations will endure without the political will for an inclusive political solution. Tavush province has taken the spotlight between the foes right now, but the recent occurrences are being widely viewed as the greater Nagorno-Karabakh conflict due to the proximity and the historical antagonism over the border. While it is unfortunate that cross-border shelling and conflict has attracted international interest to the South Caucasus yet again, it is not unexpected as matters never really settle to a level of peaceful monotony in the region.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      Student Visa Debacle: All One Needs to Know About Trump’s Presidency

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      Let’s assume you had decided that American politics in the age of Donald Trump was simply too much, a risk of non-stop heartburn, high blood pressure and elevated angst. So, you checked out, perhaps burying yourself in literature or art, binging on TV or simply retreating somewhere off the grid. But November is fast approaching and, not wishing to neglect your patriotic duty to vote, it’s time to catch up now. But how?

      Just try digesting the bile fed the country and the world by Donald Trump! If only there were some way or some single issue that would make up for that time lost in your sublime isolation and could encapsulate all you needed to know about the leadership of Donald Trump without reading back issues of The New York Times, The Washington Post, The Economist or this fair publication.

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      Lucky for you, there is. Consider the US decision on July 6 to cease student visa issuances to foreign students intending to study at any one of America’s 4,000-plus universities and colleges and hundreds of boarding and secondary schools in the event those institutions went to all-online classes as a result of the pandemic. The decision affected not only those first-time students starting their schooling in the US in the fall. It also would have impacted those already here studying, or perhaps in their respective countries or elsewhere abroad for the summer for jobs, internships, research or family and would not be able to return to complete their studies if their respective institutions moved toward all-online instruction.

      It’s All About Reelection

      The first lesson one would learn is that for Donald Trump, it’s all about his reelection in November. Obviously, schools out of session or forced to resort to online classes to minimize pandemic health risks would not be a good look for his campaign. Among so many other things, it’s imperative for him that students are back in school and parents and guardians are back on the job, creating the vital economy on which he’s staking his reelection. He has no other achievement on which he can count.

      How does he do that? That is the second lesson of this sordid affair. His administration has utterly failed to present a cogent, effective plan for combatting the virus, which would have reduced infections, hospitalizations and, most importantly, deaths, and would have allowed these institutions to reopen in the fall, as those in Europe are planning to do. In fact, he’s effectively surrendered to the virus and resorted to a trademark of his presidency: bully the target group into submission.

      For elementary, middle and high schools, that has meant threatening those that resort to online classes with loss of federal support monies. That could mean billions in lost income for public schools already facing horrendous budget cuts. For colleges and universities, it was the visa suspension or cancellation policy. That is, institutions open classrooms or lose the income from more than a million foreign students who study in the US annually. That amounts to some $41 billion in tuition, fees, boarding charges, etc. Some 425,000 jobs may also be at stake.

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      A third lesson in understanding the US administration is how it approaches major policy decisions affecting the nation and its people. There was no consultation, no outreach to university presidents or educational organizations, no public vetting in advance, no intergovernmental policy deliberation, not even proforma sounding of businesses to get their thoughts. Rather, Trump brandished the blunt club of student visas and held it over the heads of these institutions. It was Trump’s way, or pay.

      Moreover, little thought was given to the economic contributions of these foreign students to the economies where they live and study. Restaurants, bars, apartment complexes, car rentals and dealers, shops, barbers and hair salons, grocery stores and many other businesses had already suffered when the majority of these institutions closed in late winter and the spring to minimize the risk of COVID-19 on their campuses. Now, Trump was going to foreclose any possibility of these businesses salvaging the year. It was a thoughtless, self-centered push to bend others to his misguided, ham-fisted will.

      Put Up a Wall, Even Against Legal Visitors

      Lesson four, and not surprising, is that there was also no thought given to the intangible contributions that foreign students make to their institutions and communities in terms of exposure to different cultures, languages, ideas, values and perspectives, all of which contribute to the uniquely enriching experience of university study in the US. Inability to understand this contribution is another characteristic of the Trump presidency, its xenophobia. That was always evident from his constant drumbeat over erecting a wall along the US-Mexican border.

      There was yet a fifth lesson, this administration’s patent inability to foresee the secondary and tertiary effects of its decisions and resultingly to be caught flatfooted when they arise. In this case, the administration was clueless to the firestorm of reaction that followed the announcement of the visa policy. Institutions such as Harvard and MIT immediately mounted a legal challenge. Universities in 20 states and the District of Columbia joined together to file a lawsuit against the Department of Homeland Security. Petitions signed by hundreds of thousands of foreign and American students — the latter of whom vote, by the way — flooded the administration and Congress.

      Major professional associations representing university admissions and counselors also issued strong statements in opposition to the administration’s ill-considered move. Media had a field day pelting the administration with all manner of justified criticism of the policy. Even administration supporters, including Republican members of Congress, were left scratching their heads in wonder how this would make Trump look good or benefit the country.

      Of course, it didn’t. At all. The administration was forced to back down from the visa edict only days after issuing it. The decision to announce it in the first place was a blunder of colossal proportions and emblematic of a presidency and administration foundering, heedless to the needs of the nation or to the damage it does when it acts on virtually every policy issue based on distorted impulse or dyspeptic gut instinct.

      So, to our somnolent citizen seeking to exit the torpor of three and a half years of escapism, there you have it. While you blissfully slumbered, America was led by a bullying, single-mindedly reelection-obsessed, blundering, club-wielding, visionless xenophobe. Now, ponder those and the many other failings of this president and apply them to foreign policy, national security, economic policy, racial equality and justice, trade, climate policy and more, and you’ve got a pretty fair idea of the state of the country under Donald Trump. You’re all caught up!

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      The West’s Middle Eastern Playbook

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      Success has many fathers, failure is an orphan, the wise ones say. I would add that failure suddenly gets you dumped like a hot potato in the hands of your benefactors. You don’t believe me? Just ask the Libyan has-been, Khalifa Haftar, at one time considered the best game in town by his foreign backers. The general knows a thing or two about hot potatoes.

      French President Emmanuel Macron has no qualms about claiming that France never supported Haftar. In the era of television and coronavirus social distancing, Macron was saved the embarrassment of looking us in the eye as he insulted our intelligence. Or perhaps he wasn’t. Unlike many of us, but still with a good memory, he was just too young to remember the French military helicopter shot down near Benghazi, killing three French soldiers in July 2016. Clearly, they were not there paying a social visit to Haftar, and not in a war chopper.

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      Nor would he remember the Javelin missiles discovered in the possession of Haftar’s forces that France procured from the Americans, probably using cash it withdrew from one of the two petrodollar ATMs. But to be fair to France, it did confess ownership of those missiles, explaining, “Those missiles were damaged! Awaiting destruction!” In Haftar’s possession, we may ask? Seriously?

      Granted, torpedoing a political process intended to bring an accountable transparent rule of law is anathema to Haftar’s regional supporters and for Russian President Vladimir Putin too, who, like his colleagues in Cairo, Riyadh and Abu Dhabi has fixed himself with job security until 2036 or eternity, whichever lasts longer. Installing another North African military junta makes sense — for them at least.  

      Ultimate Objective

      But what could possibly drive France to be involved in a destructive war with the ultimate objective to restore a brutal military dictatorship, which goes against everything the French people stand for? Moreover, France’s role in Libya has split the NATO alliance dangerously. French and Turkish warships recently faced each other as adversaries rather than allies in the Mediterranean Sea. Rather than work with a NATO partner who knows the dangers of, and has freed itself from, military rule, Turkey, Macron, in order to help bring a civilian-led political process in Libya, has taken the side of the region’s most ruthless dictatorships, Egypt, the UAE and Saudi Arabia, and also Russia, who must be applauding the NATO split.  

      By what measure of expression and democratic representation of the people does Macron’s policy reflect the will of the French majority? Probably the answer to that and other debacles of the Macron administration might come soon. The next election is in 2022, and the French do not suffer fools.

      Still insulting our intelligence, France insists it is engaged in fighting terrorism — everybody’s cause célèbre for rampage, plunder, death and destruction. From Afghanistan to Iraq and Yemen, to Libya and Syria, one wonders who has become more dangerous, more destructive, more criminal — the terrorists or those claiming to be fighting and saving us from them? 

      Embed from Getty Images

      The Soviet occupation of Afghanistan saw the creation of al-Qaeda by the CIA, which funded, trained and armed the group — complete with stinger missiles. Immediately after the Soviets left Afghanistan and America won that Cold War battlefield, the Afghans were dumped, only to be remembered when America itself decided to invade the country. Only this time, it is the Russians who are hitting back at the US there, if the reports on bounty money for dead Americans are to be believed.

      Even before the blood of Afghans and Americans dried up, Washington decided to launch another invasion, this time against weapons of mass destruction, or maybe to bring democracy, or maybe leading an anti-terrorism alliance. It took the maestro himself, Alan Greenspan, to admit what we already knew. In his book, “The Age of Turbulence,” Greenspan writes that “The Iraq war was largely about oil.” He goes on to say, “I am saddened that it is politically inconvenient to admit what everybody knows.” There, so much for WMDs and fighting terrorism and bringing democracy on the backs of war tanks.

      Western Playbook

      There is a playbook in the West, used in every modern-day invasion of the Middle East. In it, loud noises are never the not-so-hidden agendas. Pardon me for stating the obvious. The problem with that short-sighted destructive playbook is its unnecessary cost in blood and treasure.  

      In 2012, at the height of the Arab Spring and our optimism, I attended a conference in Istanbul discussing “rebalancing.” Advocating for the idea of rebalancing Arab-Western relations, I said that  “while we Arabs must refuse to be held hostage by the past, and we will continue to advocate a forward looking new page in our relations. The West must also free itself from its past.” The West tragically was unable to live with the prospects of new realities emerging in the Arab world and went ahead to help cut the knees of the democratic forces.

      Our argument for creating governments that do not rely on foreign powers for protection but on their own electorates to whom they will also be answerable was exactly what was feared. When I said, “The West must realize that the incoming governments of Arabia, unlike the outgoing dictatorships, will be answerable to their people, and therefore have less wiggle room to make decisions that only serve short term external interests over their people’s long-term interests,” a Western friend came to me and said, “That’s exactly why your revolution will not be allowed to succeed.” 

      That kind of shift in the West toward the Middle East would require accepting representative governments created through a transparent, accountable political process and accepting economic exchange based on fair value. An exchange we have always been happy to engage in, no bloody and expensive invasions needed. After all, the Arab world can neither drink its oil nor live in economic isolation.

      But the West has never been used to that type of relationship with us. Not when it was the colonial power nor later, as the protector of proxy regimes it helped create at the end of its colonial presence. That inability to accept a change in the region lies at the center of its policies — supporting the survival of military and other undemocratic regimes in the region whose existence is not protected by the mandate of the people they govern but by foreign powers. The price for that quid pro quo is paid economically and politically and is never at fair value for the people who matter — the growing populations.

      The vicious cycle is perpetuated. The more such arrangements are created at the top, the more unrest is created at the base against the ruling tyrants, which in turn leads to more dependence on foreign protection. Imagining the violent outcome is a no brainer, and it is clear before our very eyes.   

      Whether it is America and Britain in Afghanistan and Iraq, or France in Libya and elsewhere in Africa, that playbook has become more costly not just for the people in whose territories it is played out, but also in the streets of the nations that employ it. Tyranny comes in different shapes and forms. It is also dressed differently, and not just in turbans and military uniforms. Perhaps the worst is the one that comes deceptively in a suit and necktie, controlling the levers that drive the others.  

      *[This article was originally published by the Daily Sabah.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      COVID-19 and Populism: A Bad Combination for Europe’s Banks

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      As Germany takes over the EU’s rotating presidency, Chancellor Angela Merkel noted that the bloc is facing a triple challenge: the coronavirus pandemic — in retreat but still requiring constant vigilance — the EU’s steepest-ever economic downturn and political demons waiting in the wings, including the specter of populism. With the pandemic somewhat under control, European policymakers’ focus is shifting toward the knock-on effects of months of lockdown.

      Economies in Central, Eastern and Southeast Europe (CESEE) are in a particularly precarious situation, as a number of factors, from bad debt to populist legislation, are cramping the ability of the banking sector —which performs a vital role in stabilizing the economy through loans, payment holidays and other forms of financial support to local businesses in times of crisis  — to withstand a potential economic downturn.

      Bad Loans on the Rise

      A troubling report recently released by the Vienna Initiative (created during the 2008 financial crisis to support emerging Europe’s financial sector) has indicated that CESEE banks are facing a wave of bad loans, or non-performing loans (NPL), caused by the COVID-19 pandemic that could last past 2021. The issue of bad debt is by no means limited to CESEE countries, but the problem is exacerbated by populist political decisions in many nations in the region.

      European banking regulators had previously estimated that EU banks had built up adequate buffers to withstand a certain number of bad loans, with “strong capital and liquidity buffers” that should allow them to “withstand the potential credit risk losses.” But many banks in the CESEE region, operating in more volatile economies and with their reserves already whittled away by populist measures, are uniquely vulnerable if hit by too many NPLs.

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      At the heart of the problem is the fact that an excess of NPLs can drain banks’ capital reserves, making them reliant on support from governments and central banks. If the regulators and politicians don’t then put the necessary measures in place to support banks, the entire economy could be in danger of collapsing.

      Lenders in countries including Hungary, Czech Republic, Croatia, Slovakia and Bulgaria have sought reassurance from national authorities in recent months that they will receive the necessary protections should restrictive COVID-19 measures last much longer, particularly if the continent is hit by a second wave of the virus before a vaccine or an effective treatment is found. At present, it is unclear whether governments across Europe will be willing to continue with the same level of support packages to businesses and employees. 

      It’s not just a matter of renewing special coronavirus provisions. In return for providing additional financial support to businesses, lenders understandably expect reciprocal measures from governments and central banks. These include favorable tax measures, or the relaxation of excessive levies, so that banks are able to maintain their reserve levels, a lowering of countercyclical capital buffers and a guarantee of emergency financial support from central banks if necessary.

      Populist Measures Exacerbate Financial Strain

      In the wake of COVID-19, banking sector outlooks have already been revised to negative in several countries including Poland, Hungary, the Czech Republic and Croatia. These problems are in danger of being intensified by populist political decisions in many CESEE countries, where governments have a tendency to see punitive measures on banks as an easy way of shoring up popular support.

      In particular, many CESEE countries’ financial sectors are still suffering from 2015 decisions to convert loans taken out in Swiss francs into loans denominated in the euro or the local currency. The conversions came in response to a sudden surge in value of the Swiss franc, which had previously allowed lenders to offer low-interest loans. The forced conversions benefited borrowers but left the country’s banks to pick up the tab, making it difficult for them to build up capital buffers.

      While some countries which carried out the forced loan conversions, like Hungary, at least provided lenders with euros from the central bank to ease the blow, others, such as Croatia, left banks to shoulder the full loss. Croatia’s loans conversion, pushed through quickly ahead of the 2015 parliamentary elections, was applied retroactively, foisting a bill of roughly €1 billion on the country’s banks, many of which are subsidiaries of financial institutions from elsewhere in the EU. A pending court ruling on whether or not Croatian borrowers who had taken out Swiss franc loans could apply for further compensation could impose another €2.6 billion in losses on the banks at the worst possible time.

      Nor is the controversial loans conversion the only policy sapping CESEE banks’ capital reserves. As part of its coronavirus recovery plan, the Hungarian government announced a special tax on both banks and multinational retailers back in April. The additional banking tax was worth HUF 55 billion ($176 million). Prime Minister Viktor Orban had already announced the toughest COVID-19 measures of any central or eastern European country, including a suspension of all loan payments until the end of the year. The move ignored a call from Hungary’s OTP Bank for a reduction in taxes to help banks deal with the pandemic’s fallout.

      A number of other countries in the region, including the Czech Republic and Romania — though Romania later eliminated the levy — have raised banking taxes in recent years, making it harder for the financial sectors in these emerging economies to respond to the crisis and has left it in a more precarious position should the effects of COVID-19 continue into 2021.

      The CESEE region’s financial sector suffered greatly in the wake of the 2008-09 global financial crisis, and much work has been done in the intervening years to shield the sector from future downturns. The Vienna Initiative report, however, makes it clear that the region’s banks still face headwinds due to the COVID-19 crisis. Hopefully, policymakers across CESEE will take heed of the report’s findings and realize that trying to scapegoat banks in these uncertain times will only make them more vulnerable, leaving them ill-equipped to deal with the onslaught of loan defaults expected over the next 12 months.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More