The ESADEgeo Daily Digest, 28/07/2017

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Financial Times—M. Strothard & J. Politi / Macron nationalises shipyard to defend French ‘strategic interests’

  • President Macron made the decision to temporarily nationalize the STX France shipyard (the only one in France with facilities large enough to build aircraft carriers) to stop it from falling into Italian hands.
  • Bruno Le Maire, the French economy minister, said that the decision was aimed at defending “France’s strategic interests in shipbuilding” and guaranteeing that jobs remain in the country.
  • Italian state-owned shipbuilder Fincantieri earlier this year struck a preliminary deal to buy two-thirds of STX France.
  • The Italians declined Macron’s offer of a 50/50 split this week, with the Italian economy minister saying that Macron was failing to live up to the “pro-Europeanism and liberal values” he espoused in his presidential campaign.

Project Syndicate—J. E. Stiglitz / Why tax cuts for the rich solve nothing

  • Senate procedures dictate that to enact tax reform with a simple majority, rather than the 3/5 supermajority required to defeat an almost-certain filibuster by opposition Democrats, the reform must be budget-neutral for 10 years.
  • If corporate tax reform happens at all, it will be brokered behind closed doors. More likely is a token across-the-board tax cut: the losers will be future generations, out-lobbied by today’s avaricious moguls.
  • There is simply no theoretical or empirical basis for the claim that lower tax rates spur growth, especially in big countries like the US.

The New York Times—D. E. Sanger / Trump seeks way to declare Iran in violation of nuclear deal

  • President Trump has instructed his security aides to find a rationale for declaring that Iran is violating the terms of the nuclear deal.
  • American officials have already told allies they should be prepared to join in reopening negotiations with Iran or expect that the US may abandon the agreement.
  • Trump: “It’s easier to say [Iran complies]. It’s a lot easier. But it’s the wrong thing. They don’t comply.”
  • The chairman of the Senate Foreign Relations Committee, Bob Corker, called for a more nuanced approach. “Radically enforce it,” he said of the deal, demanding access to “various facilities in Iran.” ”If they don’t let us in,” Mr. Corker said, “boom.”
  • The State Department complained that an Iranian launch of a missile into space yesterday violated the spirit of the nuclear accord. Such tests of what are essentially carrier rockets are not prohibited by the agreement.

The New York Times—J. Horowitz / Italy plans naval mission off Libya to stop migrant boats

  • Italy’s prime minister Paolo Gentiloni convened top cabinet ministers on Thursday to discuss a plan to send Italian warships into Libyan territorial waters to combat smugglers.
  • The step came a day after Italy struck a long-elusive deal with Libyan authorities to give it a freer hand along the African coast.
  • The strategy needs the approval of parliament, which is scheduled to begin debating the potential deployment next Tuesday.
  • Issues pending clarification include what Italian warships would do if they encountered hostile human traffickers in foreign waters; whether they can stop arms and oil smugglers as well as human traffickers; and whether the migrants they might have to rescue should be returned to Libya.

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. 

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The ESADEgeo Daily Digest, 27/07/2017

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The New York Times—S. Lee Myers, et al. / How India and China have come to the brink over a remote mountain pass

  • The standoff between China and India –one of the worst border disputes between them in 30 years—began last month when Bhutan, a close ally of India, discovered Chinese workers trying to extend a road in a contested area. India responded by sending troops and equipment to halt the construction.
  • Few countries have been eager to confront China’s regional ambitions as directly with military forces, which has made India’s response to the construction so striking and, according to analysts from both countries, so fraught with danger.
  • India’s national security adviser is expected to attend a meeting in Beijing this week, which analysts say could signal whether any face-saving compromise is possible. But few believe that President Xi, ahead of the 19th Party Congress, will do anything that would seem weak in response to India’s moves.

POLITICO—A. Gurzu & L. Bayer / Commission succeeds in blunting US sanctions on Russia

  • Before Juncker started making tough public statements, EU civil servants lobbying in Washington managed to tone down the initial scope of the proposed US sanctions on Russia.
  • And in the run up to Tuesday’s House vote, the EU managed to “directly” add language to the amended text that calls on the US president to uphold unity with European partners through the implementation of sanctions.
  • The EU managed to raise the threshold so sanctions only kick in if Russian stakeholders have a participation of 33% or more in joint project with European companies.
  • Another alteration is designed to ensure allies would be consulted before any penalties are imposed that could hurt German access to natural gas from Russia.
  • Despite the softer tone of the proposed sanctions, many projects and companies could suffer. And the fight isn’t over: after obtaining House approval, now the Senate must pass the bill too.

Foreign Affairs—P. Barbieri & S. Vallée / Europe’s Hamilton moment

  • German reluctance to undertake reform of the euro is profound, but not insurmountable. In an age of Brexit and waning trans-Atlanticism, Europe is more valuable to Germany than ever before.
  • In the US, the building of common debt through the assumption of state debt in 1790 was a means to a higher political objective—namely the kernel of a U.S. federal government with tax-raising capabilities and its basic relations with states.
  • It is striking that the model that Germany has tried to promote for the eurozone, resting on tight budgetary constraints at the local level and limits on transfers from a federal structure, seems hard to sustain even inside its own federation.
  • Both the American and German experiences suggest that only a central budget with spending and borrowing capabilities allowing transfers and stabilization makes a union economically durable.
  • Today, Europe has a chance to build a new framework consistent with the history of federalism elsewhere: simple rules, but also a common budgetary authority with democratic legitimacy.

Foreign Policy—T. Herr & L. K. Bate / The Iranian cyberthreat is real

  • The GCC rift shows how future crises can be sparked by cyberoperations to manipulate information.
  • The next hack in the Gulf might not simply exploit Iran’s reputation as a regional boogeyman — it might be launched by Iran itself.
  • The country has demonstrated growing maturity in offensive cybersecurity, conducts extensive espionage against its neighbors, and is actively engaged in harassing Israeli government websites.
  • In the years after Stuxnet, the US-Israeli effort to stymie Iranian nuclear enrichment efforts, Tehran began making repeated efforts to gather information on industrial control systems in both countries.

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. 

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The ESADEgeo Daily Digest, 26/07/2017

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European Council on Foreign Relations—J. Hosa / Poland: The importance of being president

  • Polish President Andrzej Duda, who vetoed 2 of the 3 bills on the reform of the judiciary, must have realized that hundreds of thousands of protesters are not a negligible minority, but a force with legitimate concerns about the future of Polish democracy.
  • Support for the ruling Law and Justice (PiS) party –from which Duda comes—has never broken a ceiling of about 40% and currently hovers around 38%. That may be enough for it to stay in government, but President Duda needs over 50% of the vote to be re-elected. Thus, he has to remain in the centre.
  • Reactions from PiS show that it is as shocked by the veto as everyone else.
  • The chances are that PiS will try to override the presidential veto, but for that it would need to get a 3/5 majority in parliament, and it would mean PiS going to war with its own President.

South China Morning Post—S. Chen / Why Beijing is speeding up underwater drone tests in the South China Sea

  • China is testing large-scale deployment of underwater drones (or “gliders”) in the South China Sea with real-time data transmission technology, a breakthrough that could help reveal and track the location of foreign submarines.
  • This latest effort by China coincides with US President Donald Trump’s reported approval of a plan to give the US Navy more freedom to carry out patrols in the South China Sea.
  • Gliders have been used in the past year on US Navy destroyers to locate submarines, according to Western media reports.
  • Gliders can travel long distances without needing to recharge their batteries for weeks or even months. And because they produce virtually no sound, its existence can be unknown to the submarines.

Brookings—S. Pifer / Will Ukraine join NATO? A course for disappointment

  • Following the visit to Kyiv by NATO Secretary General Jens Stoltenberg earlier this month, President Petro Poroshenko said Ukraine would seek to meet the alliance’s membership criteria by 2020. However, Poroshenko is setting himself and Ukraine up for disappointment.
  • Ukraine has a right to choose its orientation, but it is difficult to see NATO saying yes to Ukraine in the foreseeable future.
  • Bringing Ukraine in with the ongoing disputes (the simmering conflict in the Donbas and the frozen conflict in Crimea) would mean that NATO would immediately face an Article 5 contingency against Russia.
  • In the meantime, Kyiv should continue to deepen its cooperation with NATO and incorporate the reforms that it would undertake in a membership action plan in its annual action plans with the alliance. Then, Ukraine needs to implement the plan, becoming a more modern and resilient European state.

Foreign Affairs—D. Skrpec / Croatia, Russia, and the Balkan Great Game

  • After the elections last September, the ruling Croatian Democratic Union (HDZ) turned away from its nationalist, ultraconservative base, moderating its rhetoric while focusing on economic recovery and pursuing a less aggressive foreign policy vis-à-vis the country’s Balkan neighbors.
  • To avoid snap elections after a controversial bailout, PM Plenkovic formed a surprising, even more centrist coalition with the liberal Croatian People’s Party in April.
  • However, the future of Plenkovic as PM is not certain. Conservative HDZ members have left in protest to form a new party. Should the country’s politics once again become polarized, hard-line conservatives could revive Croatia’s support for Bosnian Croats in their calls for their own autonomous entity.
  • Although central European countries such as Slovenia have succumbed to Russian business proposals and adopted a pro-Russian foreign policy, Croatia’s new government has remained a staunch ally in the West’s campaign to resist Russian expansion in the Balkans.

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. 

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The ESADEgeo Daily Digest, 25/07/2017

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Project Syndicate—R. N. Haass / Ten lessons from North Korea’s nuclear program

  • The Non-Proliferation Treaty is inadequate. Countries are not obliged to sign it, and they may withdraw from it, with no penalty. Inspections meant to confirm compliance are conducted largely on the basis of information provided by host governments, which have been known not to reveal all.
  • New diplomatic efforts, like the recent ban on all nuclear weapons organized by the UN General Assembly, will have no discernable effect.
  • There is a clear norm against the spread of nuclear weapons, but there is no consensus or treaty on what, if anything, is to be done once a country develops or acquires nuclear weapons.
  • The 2015 Iran deal delayed the risk that the country would develop nuclear weapons, but did not eliminate it. It remains to be seen what can be done vis-à-vis North Korea. Managing such challenges may not be satisfying, but often it is the most that can be hoped for.

The New York Times—L. Alderman / Greece looks to turn a corner after years of economic pain

  • Greece has announced plans to sell debt for the first time in years.
  • If investor interest is strong, it would be a landmark moment, but if Greece struggles to find buyers, the debt sale could represent yet another blow for a country.
  • While the government has not confirmed it, the bulk of the sale—consisting of five-year bonds—is expected to be used to roll over existing debt.
  • Greek PM Alexis Tsipras seems to have pivoted toward restoring political and economic stability, and the bond offering represents another step on that road.

Reuters—D. Lawder / IMF could be based in Beijing in a decade: Lagarde

  • IMF Managing Director Christine Lagarde said at a Center for Global Development event in Washington that, “if we have this conversation in 10 years’ time…we might not be sitting in Washington, D.C. We’ll do it in our Beijing head office.”
  • She added that the IMF’s bylaws call for the institution’s head office to be located in the largest member economy.
  • The IMF last revised its quota system in 2010, but is set to launch another review next year. According to Lagarde, the IMF will need to increase the representation of major emerging markets as their economies grow larger and more influential.

Financial Times—K. Hille / Chinese warships join Russia in Baltic naval drill

  • Chinese warships started exercises in the Baltic Sea for the first time on Tuesday, conducting a joint drill with Russia.
  • 3 Chinese and 10 Russian warships, as well as aircraft and helicopters, practiced live-fire combat against submarines, other warships and aircraft.
  • Russia and China have been holding joint naval exercises every year since 2012.
  • Tuesday’s drill comes as the Chinese navy makes its first permanent overseas deployment in more than 60 years at a base in Djibouti.

Foreign Policy—B. Allen-Ebrahimian / New UAE documentary claims Qatar complicit in 9/11 attacks

  • Sky News Arabia, linked to the Abu Dhabi ruling family, has announced the release of a documentary claiming that Qatar was behind the 9/11 attacks.
  • The documentary focuses on “Qatar’s long-term support for [9/11 mastermind Khalid Sheikh Mohammad], including protection and financial assistance, to achieve his terrorist goals and plans.”
  • Reports that a high-ranking Qatari minister shielded Khalid Sheikh Mohammad from the CIA in 1996 are certainly known, but they are hardly new.
  • Recently, Qatar also accused the UAE of being behind 9/11. “Emiratis, not Qataris, were among the hijackers who flew planes into the Twin Towers,’’ wrote the Qatari Ambassador to the US. “The UAE was singled out in the 9/11 Commission’s report for its role in laundering money to terrorists.”

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. 

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The ESADEgeo Daily Digest, 24/07/2017

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Financial Times—J. Brunsden & C. Weaver / EU ready to retaliate against US sanctions on Russia

  • Brussels is preparing to retaliate against the US if Washington pushes ahead with far-reaching new sanctions on Russia that hit Europe’s energy companies or other businesses.
  • The US House of Representatives is expected to vote on Tuesday on legislation approving sweeping new sanctions to be levied against Russia.
  • The White House press secretary announced on Sunday that the US administration supported the new language of the bill and suggested that President Trump would sign it.
  • Brussels is set to argue that the potential economic fallout for Europe from the planned US sanctions stretches beyond the Nord Stream 2 project, warning that they could hit other pipelines, energy projects and companies doing legitimate business with Russian counterparts.

The New York Times—The Associated Press / Turkish leader wades into Qatar dispute with Gulf tour

  • President Erdogan traveled to Saudi Arabia and Kuwait as part of a three-country Gulf tour aimed at helping break the impasse.
  • The top diplomats of Britain, France, Germany and the United States have visited the Gulf to try to resolve the dispute. President Erdogan is the fifth high-level visitor from outside the Gulf to try to do so.
  • While members of the anti-Qatar quartet have strong trade links with Turkey, its closeness to Qatar raises suspicions of President Erdogan’s motives.
  • In his first public comments on the dispute, Qatari Emir Tamim bin Hamad Al Thani said late Friday that Qatar is prepared to engage in dialogue, but that any resolution to the crisis must respect the country’s sovereignty and that any terms cannot be dictated from outside.

South China Morning Post—C. Wong / China’s defence spokesman warns India to ‘not take any chances’ over border dispute

  • On Monday, China issued its strongest warning yet to India over their month-long border dispute, saying Beijing will protect its sovereignty “at all costs”.
  • China said it plans to strengthen its “targeted deployment and exercises” along the disputed border, adding that India should “have no illusions” about its military’s capabilities or commitment.
  • The stand-off was sparked by a road construction project in a disputed border area at the tri-junction with Bhutan.
  • Speaking just a week ahead of the 90th anniversary of the founding of the People’s Liberation Army, the Chinese Defence Ministry spokesman said: “It’s easier to shake a mountain than to shake the PLA.”

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo.

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The ESADEgeo Daily Digest, 20/07/2017

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South China Morning Post—Z. Lu / US and China talks in Washington end in deadlock as threat of trade war rises

  • China and the US failed to reach an agreement on trade at the first Comprehensive Economic Dialogue in Washington on Wednesday, co-chaired by US Treasury Secretary Steven Mnuchin, US Commerce Secretary Wilbur Ross and Chinese Vice-Premier Wang Yang.
  • US delegation statement: “China acknowledged our shared objective to reduce the trade deficit which both sides will work cooperatively to achieve.”
  • The statement issued by the Chinese delegation said both sides would promote cooperation in the manufacturing sector, improve communication about macroeconomic policies, as well as cooperation in the financial sector and its supervision.
  • The threat of trade war still looms. On Wednesday, when asked by a reporter if he would impose tariffs on steel imports, President Donald Trump said it “could happen”.

The Guardian—P. Beaumont / Netanyahu attack on EU policy towards Israel caught on microphone

  • At a meeting with the leaders of Hungary, Slovakia, Czech Republic and Poland, Israeli PM Benjamin Netanyahu urged these countries to close their doors to refugees from Africa and the Middle East.
  • “I think Europe has to decide if it wants to live and thrive or if it wants to shrivel and disappear,” Netanyahu said, being caught on an open microphone. “I am not very politically correct. I know that’s a shock to some of you. It’s a joke. But the truth is the truth – both about Europe’s security and Europe’s economic future. Both of these concerns mandate a different policy toward Israel.”
  • “The European Union is the only association of countries in the world that conditions the relations with Israel, which produces technology in every area, on political conditions. The only ones! Nobody does it [...] It’s crazy. It’s actually crazy,” added Netanyahu, referring to the EU association agreement with Israel that has been held up because of current Israeli policies.
  • “The EU is undermining its security by undermining Israel,” said Netanyahu. “Europe ends in Israel. East of Israel, there is no more Europe.”
  • Netanyahu also made a rare public admission that Israel has struck Iranian arms convoys in Syria bound for Hezbollah “dozens and dozens of times”.

Foreign Affairs—S. J. Karam / Capitalism did not win the Cold War

  • If capitalism won in 1991, its victory was short-lived. In the years that have followed, it is cronyism that has captured an increasing share of economic activity.
  • “Cronyism occurs when government officials and business elites collude to benefit themselves in ways that would be impossible if they were limited to arms-length transactions.”
  • The phenomenon of cronyism does not affect only countries like Venezuela, or the BRICs. Cronyism and inequality have grown hand in hand in the United States since the mid-1990s.
  • Technology and the ability to leverage strong brands into new foreign markets have also played a role in increasing inequality. But there is no question that people who have been well positioned in extractive sectors have benefited disproportionately.

Financial Times—G. Meyer / Coal has no future, says US railroad boss

  • CSX, a US freight railroad company and one of the largest carriers of US coal, will not buy a single new locomotive to pull coal trains.
  • “Fossil fuels are dead,” CSX CEO Hunter Harrison said. “That’s a long-term view. It’s not going to happen overnight. It’s not going to be in two or three years. But it’s going away, in my view.”
  • North American railroads have reshaped their asset holdings, acknowledging that coal’s apex has passed.

 The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. 

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The ESADEgeo Daily Digest, 19/07/2017

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Financial Times—J. Shotter, et al. / Polish president threatens to veto Supreme Court bill

  • Poland’s President, Andrzej Duda, has threatened to veto legal reform that—according to critics—would undermine the independence of the country’s judiciary.
  • Duda said he would not sign a bill that could force some members of the Supreme Court to step down unless parliament accepted an amendment to another bill covering the National Judicial Council.
  • The amendment would mean three-fifths of MPs, rather than a simple majority, would be needed to appoint new members to the National Judicial Council. According to the former bill, this council would decide which Supreme Court judges would be kept on.
  • The parliamentary maneuvers led by the ruling Law and Justice Party (to which Duda used to belong) come as the European Commission considers whether to escalate action against Warsaw by triggering a formal warning mechanism never previously deployed against any EU member.

Brookings—D. Dollar & R. Haas / Expect more process than progress at U.S.-China Comprehensive Economic Dialogue

  • This week, the US is hosting the US-China Comprehensive Economic Dialogue. This week’s session is likely to produce agreement on a one-year action plan for tackling trade and investment impediments.
  • Although, to the dismay of many in the business community, the new action plan will likely be general and non-specific, Trump’s approach thus far demonstrates broad continuity with the US-China economic policy of his predecessors.
  • The US will not make concessions on China’s priorities, but neither does China feel the pressure to give in to US demands.
  • 2017 is not a promising year to negotiate reforms with China. With the 19th Party Congress to be held in autumn, no senior Chinese official will want to invite any appearance of capitulation to US pressure.
  • Any significant tariffs on steel could signal a more protectionist US stance, which would affect China directly, and likely lead to a hardening of China’s positions vis-à-vis the United States.

Foreign Affairs—E. Miller & K. Truitte / Filling the vacuum in Libya

  • The US and its European allies must do more to leverage both sticks and carrots to bring the warring Libyan parties and their regional supporters to the UN-led negotiating table in order to reach a lasting political accord.
  • It would be unwise to view instability in Libya solely through the lens of counterterrorism, as such a view obscures the true root of Libya’s problems: its governance vacuum.
  • There have been some positive developments in Libya lately, but the window of opportunity is closing fast. Foreign disputes, such as the ongoing diplomatic spat in the Persian Gulf between Qatar and a Saudi-led bloc (which back opposing proxies in Libya), could curtail progress toward negotiation.
  • As for oil, increases in revenues from rising production could either prove a great boon for the country or lead to more competition and instability.

The Economist / South-East Asia’s future looks prosperous but illiberal

  • Overall, the ten countries of the ASEAN grew at an annual rate of 5% over the past five years.
  • Across South-East Asia, liberal economics have won out, in part as a result of the Asian financial crisis. However, in political terms, the region is heading in the opposite direction.
  • It is Myanmar that most encapsulates the region’s democratic reversal. When the army ceded power last year to Aung San Suu Kyi, its Nobel-prize-winning opponent of 30 years, expectations were astronomically high. That has made her government’s repressive acts all the more bewildering.
  • Democratic institutions are not as weak in the region’s two biggest countries, Indonesia and the Philippines, as in the rest of the ASEAN, but in both countries liberals also have more cause for fear than hope.

Foreign Policy—S. Walt / The global consequences of Trump’s incompetence

  • Since the presidency of George H. W. Bush, “things [in terms of US competence in foreign policy] have gone from good to bad to worse to truly awful.”
  • Offshore balancing [the strategy proposed by Walt and John Mearsheimer] won’t work if other states have little or no confidence in U.S. judgment, skill, and competence.

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. 

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