Security

Showing posts with label Security. Show all posts

Trump's Expanding PRC Blacklist: CNOOC, SMIC

♠ Posted by Emmanuel in China,Security at 12/01/2020 06:59:00 PM

If you think Trump's 2020 electoral defeat at the hands of Joe Biden have slowed his anti-China instincts, then you are sadly mistaken. Given that Biden has historically been sanguine about free trade, his policies towards China are expected to be more moderate than the orange China-basher. To preempt Biden, therefore, the Trump administration is speeding up plans to blacklist even more state-owned companies over their Communist Party links.

Reuters reports that China's largest energy company, CNOOC, and its largest chipmaker, SMIC. In reaction, their share prices declined significantly:

The Department of Defense (DOD) is poised to designate four more Chinese companies as owned or controlled by the Chinese military, bringing the total number to 35. A recent executive order issued by President Donald Trump would prevent U.S. investors from buying securities of the blacklisted firms starting late next year.
It was not immediately clear when the new additions to the blacklist would be published in the Federal Register, making the move official. But the list includes China Construction Technology Co Ltd and China International Engineering Consulting Corp, as well as Semiconductor Manufacturing International Corp (SMIC) and China National Offshore Oil Corp (CNOOC), according to the document seen by Reuters and four sources.
SMIC said it continued “to engage constructively and openly with the U.S. government” and that its products and services were solely for civilian and commercial use. “The Company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses,” it said in a statement. Shares in SMIC closed 2.7% lower on Monday.
CNOOC’s listed unit CNOOC Ltd, whose shares fell by almost 14% on Monday, said in a statement that it had checked with its parent and no formal notice from relevant U.S. authorities had been received.

What is the practical implication of this move, though? As mentioned, Biden will probably roll things back to try and bring the temperature down in Sino-US relations. What's more, some US fund managers may have to divest their holdings in these large PRC SOEs:

This month, the White House published an executive order, first reported by Reuters, that sought to give teeth to the list by prohibiting U.S. investors from buying securities of the blacklisted companies from November 2021.
The directive is unlikely to deal the firms a serious blow, experts said, due to its limited scope, uncertainty about the stance of the Biden administration and already-scant holdings by U.S. funds.
Still, top U.S. asset managers Vanguard Group and BlackRock Inc each own about 1% of shares of CNOOC’s listed unit CNOOC Ltd, and together own roughly 4% of outstanding shares of SMIC, disclosures show.

Like Trump's other scorched earth measures, the intent is not only meant to irreparably harm relations such that Biden's team can't fix them but to also show action on anti-China rhetoric. Unfortunately, Trump remains a political force Stateside, and he will be able to point to actions like this in the future should he choose to run again or endorse allies or relatives running for office.

Is China's TikTok Turning American to Avoid a US Ban?

♠ Posted by Emmanuel in China,Security,Technology at 7/22/2020 05:15:00 PM

So much international controversy over such a mindless diversion. That is TiktTok's current predicament.

This is just a follow-up on a previous post I made about how India banned TikTok's app there. During these difficult times, countries are understandably adapting protectionist stances. After all, it's the easiest strategy to pursue when confronted with hardship: blame foreigners for whatever ails your country. In the telling of US Secretary of State Mike Pompeo, TikTok is a Trojan horse for Chinese Communist encroachment into American life. For kicks, I am linking to a Fox News story for the first time ever (I think)--fitting since we're dealing with the realm of xenophobic post-truth here:

Secretary of State Mike Pompeo said Monday the Trump administration is considering restricting United States' users' access to the Chinese social media application TikTok over concerns it is potentially being used by the Beijing government as a means to surveil and propagandize people.

"With respect to Chinese apps on people's cell phones, I can assure you the United States will get this one right too," he said, adding that he did not want to dive into specifics and potentially "get ahead" of any presidential announcement.

"But, it is something we are looking at," he said, going on to warn Americans that they should be cautious in using TikTok, lest they want their private information "in the hands of the Chinese Communist Party.

Nevermind that Pompeo presents no evidence for this claim--eek, it's from China! is the extent of his exceedingly juvenile argument--but when has that deterred anyone from the Trump administration from bashing the PRC for whatever reason? To appease Trump, TikTok's parent company is proposing to hire 10,000 US workers:

TikTok said Tuesday that it plans to create 10,000 jobs in the United States over the next three years, a substantial increase from the roughly 1,400 employees it currently has in the country. The announcement comes as the company faces mounting criticism over its handling of user data and its ties to China through its parent company, ByteDance.

Which is all well and good, but is there any guarantee this appeasement strategy will work? Since it keeps highlighting that its CEO is American, why not go whole hog and become a majority American-owned company? Indeed, some investors are thinking of doing just that to get rid of this folly once and for all:

Beleaguered video app Tiktok could be split from its Chinese parent company Bytedance and sold off to US investors in a bid to curtail a mooted ban on the app in America, as questions over the company’s data protection policies face mounting criticism on both sides of the Atlantic. Tiktok’s $110bn (£86bn) parent firm Bytedance is in talks with a small group of US investors to sell off a majority stake in the viral video platform, according to Silicon Valley news site The Information [...]

ByteDance’s sale discussions have reportedly included the company’s founder and chief executive Zhang Yiming, and Neil Shen, a board member and a partner at Sequoia Capital’s Chinese branch. The sale plan would require investors such as Sequoia, General Atlantic and New Enterprise Associates to form a consortium, with Bytedance potentially retaining a minority stake in the video platform.

It is thought a formal split from China would allay spreading fears that the video platform’s parent company is beholden to Beijing authorities and could be used as a tool of Chinese state surveillance.

i myself am flummoxed by how something so lowbrow and inane can not only find so many devotees but also attract the attention of ardent protectionists. Would Bytedance be willing to offload its golden goose to assuage the concerns of an American madman and his minions? November nears, you know, and Joe Biden may not be as silly. Maybe Bytedance just has to wait Trump out.

Techno-Nationalism: India Bans PRC's TikTok

♠ Posted by Emmanuel in China,India,Security,Technology at 7/02/2020 12:44:00 AM

Slap Xi's image with sandals...and ban Tiktok too!

Well, well, well: In a previous post concerning whether India could boycott China after the recent, fatal border skirmish, I said "They can burn as many Xi pictures as they like, but their compatriots won't stop buying PRC-made goods anytime soon." As it turns out, techno-nationalism is alive and well but not in the way I had envisioned. (I am still correct on technical points since [1] what's transpired concerns services not goods and [2] it's a government ban instead of a consumer boycott). The jingoistic Modi government apparently couldn't help itself from taking a swipe at China.

Nationalism aside, Modi & co. are hitting China in a way that inflicts less damage on India. True, India still cannot restrict the purchase of PRC-sourced electronic equipment since they have limited domestic manufacturing capabilities for smartphones, 5G infrastructure, and so on. But, India has no lack whatsoever of software writing talent. So, India has banned Bytedance of China's TikTok app, nearly a third of whose users are in India:

For thousands of Indian content creators [...] TikTok was a window into fame and fortune. But on Tuesday, the app, owned by China's ByteDance, went blank on phones across India after the government banned it along with 58 other Chinese-origin apps which it considered a threat to national sovereignty. The move came weeks after a deadly skirmish between Indian and Chinese soldiers along the disputed Himalayan border.

So the first key difference is that the government banned TikTok instead of there being a user backlash against the app (though some users support the Indian government's move):

TikTok was a sensation in India. With more than 600 million downloads, India accounted for 30 percent of its two billion downloads worldwide. ByteDance planned to invest $1bn in India, its top growth market where it employs 2,000 people [...]

Unlike Instagram, Facebook and Twitter, TikTok found resonance in India's hinterland as well as its cities, thanks to its less elaborate user interface, background music options and various special effects. Users - who ranged from top Bollywood stars to people in remote villages who became mini-celebrities - posted a wide variety of content, though jokes, dance clips and videos related to India's thriving movie industry dominated the platform.

And second--this is probably the key to the Modi government's thinking--there aren't many difficulties in cooking up homegrown TikTok alternatives. India is exceedingly good at software development, so why rely on China's?

Indian video-creation apps like Roposo, described on Google's app store as "India's own video app", and another named Chingari are likely to see a popularity surge after the TikTok ban.

Like Huawei, ZTE, and other Chinese telecoms firms, ByteDance's fate in overseas markets is inevitably tied to the PRC's image abroad. It's too bad since ByteDance has actually done more than you would expect to customize its offerings in overseas markets. It's the "reward" it gets from being a Chinese concern circa 2020.

Border Conflict: Can India Boycott China?

♠ Posted by Emmanuel in China,India,Security at 6/20/2020 07:11:00 PM

They can burn as many Xi pictures as they like, but their compatriots won't stop buying PRC-made goods anytime soon.

I have always been fascinated by territorial conflicts over uninhabitable lands. Due to its altitude, the area where Chinese and Indian forces had a border skirmish cannot sustain an appreciably-sized population of any sort. Moreover, the details of the encounter remain sketchy: Who initiated the conflict? If both sides were unarmed, why do casualties on both sides number in the double digits? There is still a lot we don't know.

Importantly from an IPE perspective, will there be economic consequences for this particular encounter? In particular, the Indians have been avid buyers of PRC tech goods--and count on Chinese sources of investment also. So despite Indian officials allowing for some public letting off of steam directed at China, there will likely not be a break in their commercial ties. Simply put, India does not have the production capabilities or an alternative supplier (ideally nearby) to China at the current time:

India imports more goods from China than any other country. And over the past decade, India and China have enabled each other's rise as emerging technology powerhouses. Chinese tech giants have invested billions of dollars into India's biggest startups, while its smartphone makers dominate the country's market and Indians have flocked to apps like TikTok.

Now, the dispute threatens those ties. Growing anti-China sentiment in India has already led to calls for a boycott of Chinese products and services, while new rules on foreign investment could constrain China's ability to cash in on India's internet boom.

What are the chances of a realistic Indian boycott of PRC tech? Slim to none:

China has created a significant place for itself in India's technology sector over the last five years, according to a report published by Indian foreign policy think tank Gateway House. Unable to convince India to sign on to its global infrastructure project known as the Belt and Road Initiative, China entered India's tech scene by flooding the market with cheap smartphones from brands such as Xiaomi and Oppo and plowing money into Indian startups.

Gateway House estimates that Chinese investors have poured some $4 billion into Indian tech startups since 2015. Alibaba (BABA), for example, has invested in Indian e-commerce company Snapdeal, digital wallet Paytm and food delivery platform Zomato. Tencent (TCEHY), meanwhile, has backed Indian messaging company Hike and ride hailing app Ola. Gateway House found that more than half of India's 30 unicorns — private firms worth more than $1 billion -— have Chinese investors.

Despite some new rules to curb PRC investments disguised as additional scrutiny of those emanating from countries India shares borders with--Pakistan isn't investing in Indian tech anytime soon--India can only hope to channel some PRC investment in areas which may generate some jobs there. It's a structural dependence India has on China:

"I don't think there's a widespread understanding of how difficult it would be to completely reduce India's reliance on China," said Ananth Krishnan, former Brookings India fellow and author of the report.

India relies on China for everything "from heavy machinery and all kinds of telecom and power equipment, to active pharmaceutical ingredients," said Krishnan, who is now a reporter with The Hindu newspaper. In his Brookings report, Krishnan estimated that the total current and planned investment from China into India is at least $26 billion. Trade between the two countries reached more than $87 billion in the 2018-2019 fiscal year, according to India's Department of Commerce. China was India's second largest trading partner that year, just behind the United States.

Also note that PRC smartphone makers have set up shop in India already, making them fairly entrenched in India's commercial scene:

Last year, four of the top five best-selling smartphone makers in India were Chinese: Xiaomi, Vivo, Oppo and Realme, according to market research firm IDC [...]

And all of them have manufacturing facilities in India. Doing so allowed the Chinese firms to both embrace Prime Minister Narendra Modi's "Make in India" program and avoid stiff import tariffs. Xiaomi manufactures 95% of the phones it sells in India locally. "So if you're talking about cutting down the sales or shipment for these guys, it also impacts the factories that they have in India," which will "absolutely" affect Indian jobs, said Kiranjeet Kaur, an analyst with IDC.

Both sides may allow or even foment some jingoistic posturing since they have nationalist-leaning leaders. But ultimately, India cannot wean itself of China at this point in time--much as it would like to. With China equally keen on securing export markets, this drama can only play out so far.

Trump Blocks US Public Pension's PRC Investments

♠ Posted by Emmanuel in Americana,China,Security at 5/09/2020 04:42:00 AM

US public pensions being invested in China post-Covid-19? Getouttahere!

A core idea in investing is that of "portfolio diversification": It's better not to put all your eggs in one basket so that they all do not break if that basket falls. For instance, we are witnessing an historic AmeriCollapse with a 14.7% unemployment rate and 20.5 million jobs lost in the wake of Trump's bumbling response to the COVID-19 outbreak Stateside. So, wouldn't you want to put at least some of your money elsewhere the economy isn't so dire like, say, China whose exports are on the mend?

The unsurprising answer from the Trump administration is, "@#$% no!" A few months ago, it was decided that more US public pensions would be invested abroad for "portfolio diversification" reasons. More specifically, this investment would track the MSCI All Country World Index. Curiously, the world's second largest economy, China, was only very recently included in this "World Index." The PRC's share of the MSCI gauge has steadily increased since its May 31, 2018 inclusion.

Now, let's put two and two together: US public fund managers were scheduled to begin buying foreign stocks--including an ever-increasing amount of PRC equities whose weighting was increasing in the MSCI index--just as Trump's blame game on China for everything that has gone wrong with the world since COVID-19's emergence intensified. When Trump caught wind of the imminent public pensions investment in Chinese stocks, he's [surprise!] tried to scotch the proceedings:

The Thrift Savings Plan (TSP) – the federal government’s retirement savings fund – is scheduled to transfer roughly US$50 billion of its international fund to mirror an MSCI All Country World Index, which captures emerging markets, including China. The Federal Retirement Thrift Investment Board (FRTIB) overseeing the fund made a decision in 2017 that the money should be moved by mid-2020. Opponents of the transfer in recent weeks have engaged in a last-minute effort to stop it [...]

Senator Marco Rubio, a Florida Republican, applauded reports of the move in a statement Thursday. “It’s outrageous that five unelected bureaucrats appointed by the previous administration have ignored bipartisan calls from Congress to reverse this short-sighted decision, and I applaud President Trump for directing his administration to take swift action preventing this from going forward,” he said.

Now, the Washington Post reports that assorted China bashers began alerting Trump administration figures to this process:

Roger Robinson, who served on the National Security Council under President Ronald Reagan, said he began meeting with top White House officials last summer to alert them that the Thrift Savings Plan’s new investment strategy could be seen as undercutting national security by subsidizing Chinese companies involved in weapons manufacturing and other interests detrimental to the United States. “The Thrift Savings Plan issue is a microcosm of the broader problems of U.S.-sanctioned Chinese companies and other corporate bad actors in our capital markets and Beijing’s noncompliance with federal securities laws,” said Robinson [...]

In response, Trump intends to appoint China-phobes to the said board and scotch the MSCI investments--especially since its index contains [heaven forbid!] PRC-listed stocks:

President Trump’s intensifying showdown with China over its handling of the coronavirus pandemic is expanding to a new battlefield: the retirement portfolios of 5.9 million federal employees and U.S. service members.

In recent days, White House officials have moved to seize control of a little-known board that administers the $557 billion federal retirement program for most active and retired federal employees and military members, with some aides eager to halt the flow of billions of dollars into an index fund that includes Chinese companies, according to two White House officials and an outside Trump adviser involved in the discussions.

Trump on Monday nominated three members to replace the majority on the Federal Retirement Thrift Investment Board, made up of five investment experts who oversee the retirement plan. All of their four-year terms have expired, and Senate Majority Leader Mitch McConnell (R-Ky.) and House Speaker Nancy Pelosi (D-Calif.) have not replaced those serving in the two seats they control.

With its new nominees, the White House is taking steps to block the plan’s $40 billion international fund from investing in a fund that contains about 11 percent of China-based stocks, according to people familiar with the strategy. “Obviously, the president doesn’t want this investment to take place and is looking for other alternatives,” said a senior administration official who was not authorized to speak about the nominations. “These individuals will be key to making that happen.”

The Trump administration is hiring those peddling protectionism...who would've thunk it?

The Rise of European CoronaProtectionism

♠ Posted by Emmanuel in China,Europe,Security at 5/02/2020 08:11:00 PM

I almost forgot to post this one: The "hollowing out of the industrial base" is a favorite belief of arch-protectionists like Trump's pseudo-economist, Peter "Death by China" Navarro. However, this belief knows no geographic boundaries or ideological predispositions. American or European, right or left, you'll find the same idea repeated ad nauseam. What's more, it's a sign of the times that the drumbeat for this kind of protectionism grows louder.

In the wake of 2020's Great Coronavirus Global Shutdown, European countries long since affected by the loss of the commanding heights of industry--coal, oil, steel, and so forth--see a further looming Chinese threat. With Western markets slumping, any number of European companies may be purchased at bargain bin--if not fire sale--prices. Hence European authorities want to prevent the Chinese swooping in to buy these virus-cheapened firms:

The EU plans to help block foreign takeovers of European companies struggling with the virus downturn. It wants to allow governments to invest in weak companies, which could include some form of ownership. While it called them "measures of last resort", the European Commission says it is consulting member states. A focus for the regulator is to counter unfair competition from state-owned firms, which are the backbone of economies such as China's.

It is now looking at further protection for businesses based in the EU, in light of the significant financial impact coronavirus lockdowns are having on them. "This in principle falls outside the scope of EU state aid control and can in particular be important for interventions by member states to prevent hostile takeovers of strategic companies by foreign purchasers," a spokesman for the European Commission said.

The justification you could have seen from a mile away: national security [duh]:

"As in any crisis, the industrial and corporate assets are under stress. The resilience of our industries, their capacity to continue to respond to the needs of EU citizens and the preservation of strategic assets and technology, is key," the spokesman added. The EU is worried that foreign investors may try to acquire European companies "in order to take control of key technologies, infrastructure or expertise". It says this "raises concerns as regards security".

How utterly predictable. In fact, you probably guessed this post's contents just by seeing its title--which is as hoped. CoronaProtectionism it is.

Why are US Firms Lame in 5G?

♠ Posted by Emmanuel in China,Security,Technology at 4/22/2019 04:01:00 PM

By failing to conform to GSM--the global telecoms standard--the US fell well behind the leading edge..

Recent times have witnessed the United States trying to stop Chinese telecommunications equipment manufacturers--most notably Huawei--from gaining market share abroad. The ostensible purpose is that the United States is concerned about Huawei and the rest accommodating Communist Party wishes to spy on other countries. If government buyers of this gear were to install Huawei gear, the explanation goes, it would make them vulnerable to Chinese spying that would hinder US intelligence cooperation.

But what American gear does the United States offer instead for those wanting to buy next-generation telecommunications equipment? Therein lies the rub: the United States does not have any vendor of gear that is as advanced as Huawei's. In 5G, the United States is arguably a laggard not because the government interfered too much but rather because it left the industry to its own devices, as the South China Morning Post explains:

How exactly did the US go from being the leader of modern telephony to also-ran within a matter of decades, allowing a Chinese company to become the 5G leader today?[...]

Experts and former US telecoms employees point to the confluence of several factors that ultimately led to the downfall of the industry, including its deregulation in 1996 and the lack of national mobile standards. Europe had already mandated the use of the GSM mobile network standard in 1987. US regulators, however, allowed carriers to go with whatever mobile standard they preferred. US carriers Verizon and Sprint chose to offer services using the CDMA mobile standard, developed by US firm Qualcomm – which operates on different frequencies to GSM, which AT&T and T-Mobile adopted.

Consumers who subscribed to a Verizon carrier, for example, would likely have to switch handsets if they wanted to change providers, as a device configured for CDMA might not run on a network supporting GSM. “In the US there were wireless networks like TDMA, CDMA and GSM, and any carrier could choose any of those if they thought that it would be best for their own growth plan … the US was like the Wild West,” said Thomas J. Lauria, a former AT&T employee, telecoms analyst as well as the author of the book The Fall of Telecom. “Europe managed itself more contiguously than the US, they did not have a lot of disparate networks and picked the [GSM] standard that everyone had to agree to.”

The government not insisting on standards was made worse by industry deregulation encouraging the adoption of multiple standards without penalty. They did not think highly of the European GSM effort [which established standards for 2G, 3G, 4G, 5G and so on]:

The existence of multiple mobile standards in one market was further encouraged by the deregulation of the US industry under the Telecommunications Act of 1996, in which the US opened up the market, removing the monopoly that AT&T had on phone services and allowing smaller carriers to sprout. The entry of multiple service providers, all of whom were free to adopt different standards, was at the beginning viewed as beneficial for consumers and the industry as a whole. AT&T spun off its equipment division into what became known as Lucent Technologies, which thereafter listed on the New York Stock Exchange and raised US$3 billion in its initial public offering – then the largest ever in American history.

Lucent’s revenues grew rapidly by providing new entrants with networking equipment, and initially offered a variety of products compatible with different mobile standards, including CDMA, TDMA, GSM and AMPS. But multiple standards also meant that it was difficult to achieve economies of scale, so Lucent eventually bet on CDMA and UMTS – neither of which took off in Europe and most of Asia, costing it expansion opportunities in international markets.

“The US vendors were not convinced that GSM would become a global standard,” said Bengt Nordstrom, chief executive of Stockholm-based consultancy Northstream. “Instead, they supported all the technical standards in the US for their customers there. In many aspects, the era from the early 1990s to mid 2000s was lost time for the US mobile industry.” “From a US perspective and mentality, it is hard to understand why a technology not coming from the US should be better,” he added.

I have an issue with the pro-government intervention argument in that the US federal government could have insisted on a standard which ultimately lost out in the global market. Still, the episode does point out the downsides to allowing a fast-moving industry too much leeway in deregulating and tolerating the proliferation of incompatible standards. The end result is what we have today: Americans telling people not to buy Chinese 5G gear to which US-based companies offer no real alternatives.

Grindr, a US National Security Threat

♠ Posted by Emmanuel in Americana,China,Security at 3/27/2019 04:07:00 PM

Fat, old guys like Trump and Xi need not apply on Grindr, but their geopolitics still shape the app's governance.

Never let it be said that American protectionism was always staid. As it turns out, the Committee On Foreign Investment in the United States (CFIUS) is now forcing the divestment of the gay dating app Grindr by its Chinese owners who bought the service in 2016. It may sound strange, but it's true: gay bureaucrats on Grindr appear to be a security concern since they may disclose too much about their employment to boys they meet [hunky PRC spy guys, mayhaps?] in this Chinese-owned digital playground:

Chinese gaming company Beijing Kunlun Tech Co Ltd is seeking to sell Grindr LLC, the popular gay dating app it has owned since 2016, after a U.S. government national security panel raised concerns about its ownership, according to people familiar with the matter.

The Committee on Foreign Investment in the United States (CFIUS) has informed Kunlun that its ownership of West Hollywood, California-based Grindr constitutes a national security risk, the two sources said.

CFIUS’ specific concerns and whether any attempt was made to mitigate them could not be learned. The United States has been increasingly scrutinizing app developers over the safety of personal data they handle, especially if some of it involves U.S. military or intelligence personnel.

Kunlun had said last August it was preparing for an initial public offering (IPO) of Grindr. As a result of CFIUS’ intervention, Kunlun has now shifted its focus to an auction process to sell Grindr outright, given that the IPO would have kept Grindr under Kunlun’s control for a longer period of time, the sources said.

The grounds for the CFIUS forcing divestment are unknown, but we can pretty much guess the general rationales based on other FDI transactions involving the Chinese and personal data that have been proscribed:

CFIUS’ intervention in the Grindr deal underscores its focus on the safety of personal data, after it blocked the acquisitions of U.S. money transfer company MoneyGram International Inc and mobile marketing firm AppLovin by Chinese bidders in the last two years.

CFIUS does not always reveal the reasons it chooses to block a deal to the companies involved, as doing so could potentially reveal classified conclusions by U.S. agencies, said Jason Waite, a partner at law firm Alston & Bird LLP focusing on the regulatory aspects of international trade and investment.

My belief is that it's the most pathetic American excuse for protectionism yet, but your mileage may vary.

Techlash: Huawei Strikes Back at Canada, US

♠ Posted by Emmanuel in China,Security,Technology at 3/04/2019 02:37:00 PM

I suppose the headlines Huawei garners is related to what's at stake with 5G coming into wider commercial use. Will China be able to capitalize on its little-doubted technical advantage in 5G, or will the US be able to negate this advantage by getting its allies to boycott PC 5G gear over "security" concerns? Previously we talked about its attempts to use soft power--gaining influence not through the use of coercion but rather through attraction. Apparently, though, there are limits to the Huawei folks' patience with trying to win friends and influence people. Not having been very successful swaying North American (US and Canadian) public opinion, Huawei is now resorting to old-fashioned litigation.

In Canada, detained CFO Meng Wanzhou's lawyers intend to sue the government with her extradition to the United States imminent:

Ms Meng's claim - filed in British Columbia's Supreme Court on Friday - seeks damages against the Royal Canadian Mounted Police (RCMP), Canadian Border Services Agency (CBSA) and the federal government for allegedly breaching her civil rights under Canada's Charter of Rights and Freedoms. She says CBSA officers held, searched and questioned her at the airport under false pretences before she was arrested by the RCMP.

Her detention was "unlawful" and "arbitrary", the suit says, and officers "intentionally failed to advise her of the true reasons for her detention, her right to counsel, and her right to silence".

And speaking of the Yanks, Huawei is also preparing a case in US of A aimed at restrictions on federal purchases of its gear over alleged spying concerns:

The Chinese electronics giant Huawei is preparing to sue the United States government for banning federal agencies from using the company’s products, according to two people familiar with the matter.

The lawsuit is due to be filed in the Eastern District of Texas, where Huawei has its American headquarters, according to the people, who requested anonymity to discuss confidential plans. The company plans to announce the suit later this week.

The move could be aimed at forcing the United States government to more publicly make its case against the Chinese equipment maker. It is part of a broad push by Huawei to defend itself against a campaign led by the United States to undermine the company, which Washington sees as a security threat. Executives have spoken out strongly against America’s actions, and new marketing campaigns have been aimed at mending the company’s image among consumers.

I don't think that Huawei actually expects the federal ban on purchases of Huawei telecoms gear to be overturned. Rather, it's an effort intended to force the US government to identify rationales for banning Huawei from federal procurement. Once identified, these rationales could serve the basis for further PRC legal action against the United States. You do have to wonder though how much mileage legal action will get them, or whether public opinion only turns more against them in North America. (PRC) heavy-handed actions do not necessarily right (North American) heavy-handed actions.

Huawei’s Soft Power Charm Offensive

♠ Posted by Emmanuel in China,Security,Technology at 2/25/2019 03:51:00 PM

With the United States portraying Chinese telecommunications gear manufacturer Huawei as the devil incarnate seeking to infiltrate the rest of the world, a Huawei pushback was perhaps inevitable. But the question is, how exactly do you counter the American accusations of large-scale PRC espionage being facilitated by this seller of telecoms equipment? It appears that tactics differ based on the audience in question.

Canada, where the Huawei CFO has been detained by officials for violating US-led sanctions on Iran, is receiving ads that refrain from suggesting anything unusual is going on with Canada-PRC relations (like, say, putting Canadian citizens on death row in retribution). Soft power it is, then:

As a nasty diplomatic feud deepens between the two countries over the tech company, involving arrests and execution orders, it hasn’t gone unnoticed that Huawei’s bright red fan-shaped logo is plastered prominently on the set of “Hockey Night in Canada.” TV hosts regularly remind the 1.8 million weekly viewers that program segments are “presented by Huawei smartphones.”

The cheery corporate message contrasts with the standoff over the arrest of Huawei Chief Financial Officer Meng Wanzhou on a U.S. warrant. In what looks like retaliation, China detained two Canadians and plans to execute a third — heavy-handed tactics that, because they leave some Canadians with the impression the privately owned company is an arm of the Chinese government, give its sponsorship a surreal quality.

What's at stake here commercially speaking is substantial, and is no less than the future of technology. Huawei is advanced in the manufacture of 5G gear that will undergird the next generation of telecoms equipment. However, the United States is trying to convince everyone else that it's a "Trojan horse" for china's Communist Party to infiltrate global networks for sinister purposes.

Hence, the public relations contest is ramping up:

The TV deal is one of many examples of how Huawei, the world’s biggest telecom gear producer and one of the top smartphone makers, has embarked on a global push to win consumers and burnish its brand. It sponsors Australian rugby, funds research at universities around the world, and brings foreign students to China for technical training. It has promoted classical music concerts in Europe and donated pianos to New Zealand schools.

Its efforts are now threatened by the dispute with Canada and U.S. accusations that it could help China’s authoritarian government spy on people around the world. “Huawei’s marketing plan up until Dec. 1 (when Meng was arrested) was working very well,” said Guy Saint-Jacques, a former Canadian ambassador to China. Now, “public opinion is changing toward China and Huawei.”

At stake for Huawei are lucrative contracts to provide new superfast mobile networks called 5G. The U.S. says Meng helped break sanctions and accuses Huawei of stealing trade secrets. It also says the company could let the Chinese government tap its networks, which in the case of 5G would cover massive amounts of consumer data worldwide. U.S. Secretary of State Mike Pompeo pressed that point to European allies on a tour this week.

5G is a challenge to American technological dominance; that much is apparent from the alarm raised by US government officialdom. What I would like to know, though, is the alternative proposed by the Yanks. How can the rest of the world meet their technology upgrading needs with non-Huawei (or ZTE for that matter) gear? Are there other European, American or non-Chinese Asian suppliers they recommend instead? It seems to me that this round of technological upgrading from the American standpoint is not so much about the benefits on offer but about bashing manufactures from a particular nation. That is, the framing is almost entirely negative about the downsides of buying Chinese without identifying upsides of not doing so.

It's in this respect where Huawei can accentuate the positives for 5G adoption and contrast such a message with the relentlessly dour American vision of technological apocalypse. After all, soft power is about persuading through attraction instead of (obtuse) threats the Yanks are brandishing nowadays.

The EU Vehicle to Evade US Sanctions on Iran

♠ Posted by Emmanuel in Middle East,Security at 1/31/2019 07:29:00 AM

Recently, the Trump administration's intelligence officials testified to Congress. In so doing, they contradicted the American president's beliefs and positions again and again. Being ever so shameless, Trump in so many words said these appointees of his were wrong and he was right on Syria, ISIS, North Korea, Iran, etc. For this post, US sanctions on Iran are of particular interest since--as far as the American spooks can tell--Iran has not violated the terms of JCPOA. That is, the agreement the US pulled out of in order to reimpose sanctions on Iran has been faithfully followed even after America, not Iran, reneged on the deal not to enrich uranium:

Europe has remained united in its support for the Iran nuclear deal. Germany, France and Britain maintain that Iran has complied with the deal’s conditions and that the agreement is the best way to prevent Iran from building nuclear weapons. In the Worldwide Threat Assessment report that was presented by Coats and other intelligence officials, U.S. officials appear to agree with prior analyses by their European counterparts, writing that Iran is not attempting to build a nuclear weapon. That assessment raises questions over the basis for Trump’s claim in May that Iran was seeking nuclear weapons.

We've been waiting for the Europeans to do something about this matter. Since they view continuing Iranian compliance as something worth living up to in keeping JCPOA alive, they have been trying to figure out how to keep trading with Iran by shielding European firms from American sanctions. Henee the special purpose vehicle (SPV) they soon intend to put into operation. The SPV would buttress the EU's efforts to get European firms not to comply with US sanctions without consulting Brussels first:

Germany’s foreign minister says the European Union is on the verge of setting up an alternative channel to send money to Iran that would side-step U.S. sanctions against the Islamic republic. Foreign Minister Heiko Maas said Monday that Germany has been working notably with Britain and France but also other EU partners in recent months to set up the “special purpose vehicle.”

He says their aim is to ensure that “business not sanctioned by the U.S. can be upheld, and there is a suitable instrument for international payments.” The EU has struggled to keep alive the Iran nuclear since President Donald Trump pulled out of it last year. The bloc has already introduced measures to stop European companies from complying with the U.S. sanctions without authorization from Brussels.

The danger, as you may have surmised, is not really from Iran but from the Trump administration. It promises to hit European firms using the forthcoming SPV with fines and sanctions. Actually, part of the reason why the SPV's workings haven't been disclosed is to avoid Americans figuring out Europe's strategy to avoid sanctions on its firms ahead of time:

Senior EU officials have been saying for weeks that the financing mechanism would be up and running soon, but they have hesitated to provide details amid European concern that Trump would target the country where it is based and any others taking part.

The White House has been warning the Europeans that they could face stiff fines and penalties should they try to circumvent the sanctions.

So the situation is one where US intelligence officials effectively concede that their European counterparts are right and Trump is wrong on Iran's intentions and actions. Still, the Trump administration is threatening Europeans with penalties for dealing with a country living up to its obligations (Iran). It's a topsy-tury world we live in, indeed.

Fears of US Treating Hong Kong as ‘China’

♠ Posted by Emmanuel in Americana,China,Security,Trade at 12/16/2018 04:50:00 PM

What makes Hong Kong still a global business hub may be under threat from Donald Trump.

With many Chinese cities having become nearly as developmentally advanced as Hong Kong, the question has always been what comparative advantage this "Special Administrative Region" still has. It used to be the gateway to the mainland, until mainland cities could pretty much do anything for foreigners what Hong Kong could. To cut a long story short, the "one country, two systems" idea has another differentiation that has continued Hong Kong's economic relevance.

You see, Hong Kong is regarded as a different entity from the PRC proper by the United States government. As such, it has some advantages the mainland does not such as trading privileges for "dual use" (civilian and military purposes) technologies. However, this unique status is being endangered by the Trump administration which is concerned that Hong Kong may be a backdoor for trading in these sensitive technologies on behalf of Communist China.

Is the United States soon going to lump Hong Kong with the rest of mainland China? Traders in Hong Kong fear this prospect:

Hong Kong business groups are starting to worry the Trump administration will open the door to ending the financial hub’s preferential trade status, rendering it “just another Chinese city” as its government gets closer to Beijing.

The U.S.-China Economic and Security Review Commission stoked fears last month with a recommendation that Congress reassess Hong Kong’s special trading status for some sensitive U.S. technology imports. It said Beijing’s statements and legislative actions “continue to run counter to China’s promise to uphold Hong Kong’s autonomy.”

If President Donald Trump acts on the recommendation, it would only impact dual-use technology with consumer and military applications -- like carbon fiber used to make both golf clubs and missile components -- that represent about 2 percent of U.S. exports to Hong Kong. But the blow to the city’s image may be irreparable.

Trump isn't exactly a stickler for democratic practices, but it's precisely Hong Kong's perceived kowtowing to the mainland that may land its status in trouble:

The U.S. Consulate in Hong Kong declined to comment when asked whether Trump was considering any action against the city. It pointed to a statement last month from Consul General Kurt Tong, who said “we are quite focused on the importance of the ‘one country, two systems’ framework” that allows Hong Kong to maintain a distinct economic, legal and political system.

In its annual May report on the city’s autonomy, the U.S. consulate said “certain actions” by China were inconsistent with its commitment to allow Hong Kong to exercise a high degree of self-governance. But it found that the city “generally” maintains a high degree of autonomy, “more than sufficient to justify continued special treatment.”

How independent is Hong Kong from mainland pressure? Given the cutthroat level of competition among Chinese cities, even the aforementioned 2% allowed trade in "dual use" technologies may be what sets it apart in this day and age and still means something. Trump, however, may have different ideas about Hong Kong's role in the world.

Trump Antagonizing Turkey is a Really Bad Idea

♠ Posted by Emmanuel in Credit Crisis,Middle East,Security at 8/10/2018 05:51:00 PM

Perhaps someone should tell Trump of US bases in Turkey prosecuting the War on Terror.

Here we go again: some months ago, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt embargoed Qatar over its alleged support for terrorism. Qatar, after all, has comparatively cordial relations with the likes of Hamas and Hezbollah. There's also the matter of state-funded broadcaster Al Jazeera continuously blasting Qatar's neighbors over authoritarian rule when Qatar just happens to be an, er, absolute monarchy. What right did the network have to criticize the likes of Saudi and the Emirates?

Enter Trump. Ever so vainglorious, he suggested that the embargo against Qatar was a good idea, and that he encouraged leaders of some of these countries to isolate Qatar besides. Whether the ignoramus was aware that thousands of American troops "fighting terrorism" were stationed in Qatar or not, Trump had to backtrack on his Qatar-bashing a few days later:

But Qatar is also home to the Al Udeid Air Base, which hosts more than 10,000 American servicemen. The air base is the main regional center for air missions against ISIS.

Trump mentioned the base in a May 21 speech in Saudi Arabia, calling Qatar a "crucial strategic partner," but MSNBC reported Thursday that a source close to the President suggested that Trump was perhaps unaware that there were American troops stationed in the oil-rich nation.

"I think it is fair to say that if there is a crisis this would be the first time he was briefed on exactly where our bases are in the region," Nicole Wallace said.

At present, global financial markets for stocks, bonds and currencies are being roiled by Trump fighting Turkey over the release of some evangelical minister jailed over what appears to be a trumped-up charge. Adding fuel to the fire, he's just announced forthcoming additional tariffs on Turkish steel and aluminum. What started the entire imbroglio were negotiations that broke off over the release of one Andrew Brunson, the pastor detained in Turkey. Likely to please his base of evangelical voters who overlook his enormous and ever-growing portfolio of seven deadly sins, Trump probably calculates that destroying the world's 19th most populous country is a small price to pay for a few more votes come election time Stateside. "Stick it to the "Mooslems"!" is probably the Trumpian rallying cry of them moment.

But, there's also the small, neglected detail that Turkey is a key part of the Western security equation in that part of the world:

It is unlikely that the United States and Turkey will resolve their differences anytime soon. But given Turkey’s geostrategic location—in the backyard of Russia, and bordering Iraq, Iran, and Syria—the United States has an interest in maintaining the relationship. Turkey, meanwhile, does not need to add to its economic woes. The hope, at this point, is that as both Erdogan and Trump play to their bases, they’ll refrain from actions that would be hard to walk back from without embarrassment to either leader’s large ego. Despite the shifts of recent decades, the United States and Turkey still need each other. And the temporary political benefits domestically probably don’t outweigh that.

While it is indeed true that Turkey under Erdogan is moving away from democracy and towards authoritarianism, so is the United States under Trump. Still, it's inadvisable that the American blowhard offend the Turkish blowhard enough as to blow up the postwar security arrangement underpinning NATO. That is, NATO has sought Turkey as a moderating force with regard to Muslims participating in regional security arrangements to counterbalance accusations of religious prejudice. Not that Erdogan is reserved in fanning such insinuations:

President Erdogan described the sanctions on his ministerial colleagues as a “Zionist Evangelist plot” and vowed to retaliate in kind by imposing sanctions on the American counterparts of the Turkish ministers.

Pro-government Turkish newspapers are baying for United States troops to be kicked out of Incirlik, a Turkish air base used in the fight against Islamic State militants and other critical missions, but the Turkish government has not moved in that direction yet.

Insofar as Trump's USA is really punishing Turkey without much enthusiasm from other NATO allies, this brouhaha may be another case of him blowing up long-established relations for the sake of (perceived domestic) electoral gains. But, who would NATO turn to if Turkey boots the US bases out of the country? Where would the Yanks go then? The answers aren't clear, and you do hope Trump is apprised of this potential complication should he continue to punish Turkey over perceived personal slights.

EU Firms Main Targets of US Sanctions on Iran

♠ Posted by Emmanuel in Europe,Middle East,Security,Trade at 5/12/2018 03:51:00 PM

I guess there are good reasons these folks don't dislike Europeans as much.

One thing the Trump administration has delivered on, for better or worse, is pursuing "unisolationism." Ask the Europeans. Withdrawing from the Paris Agreement on climate change, criticizing Europeans for not contributing enough to NATO's defense, putting the Transatlantic Trade and Investment Partnership (TTIP) on the back-burner, and now reneging on a deal to obtain Iran's compliance on not enriching weapons-grade uranium (JCPOA)...the list goes on and on.

The last is very interesting: isn't it meant to reimpose US sanctions on Iran? For all intents and purposes, American firms still had significant reservations about doing business in Iran after that deal was struck. With the benefit of hindsight--Trump's election and all that--they were right not to seek much business there. However, the Europeans did not seem to have as many reservations. The end result is that, because American firms doing business with Iran were rather few, the real Western victims of this policy change are European firms. It works indirectly: the United States will apply sanctions against firms doing business with Iran like before, and European ones are hardly exempted:

The EU is scrambling to find ways to safeguard huge business deals with Iran, amid the threat of US penalties. Washington is re-imposing strict sanctions on Iran, which were lifted under the 2015 international deal to control the country's nuclear ambitions. On 8 May President Donald Trump denounced the deal, saying he would withdraw the US from it.

Since the deal took effect in 2016 major European firms have rushed to do billions of dollars' worth of business with Iran, and now thousands of jobs are at stake. Many of those firms fear their business ties with the US could be at risk if they continue to do deals with Iran past a November deadline.

Ie there anything the Europeans can do to insulate them from American sanctions on deal-doers with Iran? The bottom line is that all the other existing parties want to keep JCPOA intact, including the Europeans. However, the mechanisms which they can use to evade US overreach are iffy:

There is an existing EU "blocking statute", from 1996, aimed at countering US sanctions linked to communist Cuba. Now EU officials say they are revamping the statute to avoid the latest US restrictions on firms doing business with Iran.

But there are doubts about the statute's legal power. Reuters news agency says Shell and some other European firms with big operations in the US prefer to push for US waivers on a case-by-case basis. US authorities have imposed hefty fines on banks for processing Iranian transactions, including UK-based Standard Chartered, HSBC and Lloyds. France, Germany and the UK all say they remain committed to the nuclear deal with Iran and to expanding business ties, provided Iran sticks to its commitments.

Well, good luck with that. Speaking of which, here's a list of European deals now at risk:

Total (French) signed a deal worth up to $5bn to help Iran develop the world's largest gas field, South Pars
Norway's Saga Energy signed a $3bn deal to build solar power plants
Airbus clinched a deal to sell 100 jets to IranAir
European turboprop maker ATR (an Airbus-Leonardo partnership) agreed to sell 20 planes to Iran
Germany's Siemens signed contracts to upgrade Iran's railways and re-equip 50 locomotives
Italy's state rail firm FS signed a $1.4bn deal to build a high-speed railway between Qom and Arak
France's Renault signed a joint venture deal, including an engineering centre and a production plant, to boost Renault's production capacity in Iran to 350,000 vehicles a year

Going by the amounts proceeding the dollar signs above, it's not going to be a small loss of business for European firms if they comply with American sanctions. Many were particularly appalled when the US ambassador to Germany told German firms to start drawing plans to withdraw from business deals with Iran. However, the course of action European firms will take obviously depends on how much they business they stand to lose in America should they ignore America's reimposition of sanctions. Chinese firms not doing much business Stateside are not under pressure, and may even pick up business once the Europeans leavee, for example.

On CFIUS Dissuading Jack Ma's MoneyGram Purchase

♠ Posted by Emmanuel in China,Security at 1/03/2018 04:27:00 PM

Is this ant a PRC Communist apparatchik? The CFIUS apparently thinks so.

There is a long history of Chinese companies being prevented from purchasing American firms on highly questionable "national security" grounds. The source of this discrimination is the Committee on Foreign Investment in the United States (CFIUS). What is interesting here, though, is that the PRC national attempting to buy an American firm was no less than Chinese multibillionaire Jack Ma. Unlike the often faceless heads of Chinese state-owned enterprises, Ma is a global icon and the founder of his own immense business empire.

What's more, he actually visited the orange-hued Donald at Trump Tower prior to the latter assuming the presidency in hopes of gaining better business treatment Stateside. Promising to create a "million jobs," Ma appeared to be successful at sucking up to Trump then. Well, I guess the story continues: Ma tried to buy the US money transfer firm MoneyGram to append to his online financial services concern Ant Financial. However, the US government foreign investment watchdog CFIUS again raised longstanding concerns about a privately-owned Chinese firms' alleged Communist Party ties to deny the purchase of a fairly minor US company (its market capitalization is well under $1B at the time of writing):

Ant Financial’s plan to acquire U.S. money transfer company MoneyGram International Inc (MGI.O) collapsed on Tuesday after a U.S. government panel rejected it over national security concerns, the most high-profile Chinese deal to be torpedoed under the administration of U.S. President Donald Trump[...]

Ma, a Chinese citizen who appears frequently with leaders from the highest echelons of the Communist Party, had promised Trump in a meeting a year ago that he would create 1 million U.S. jobs[...]

The companies decided to terminate their deal after the Committee on Foreign Investment in the United States (CFIUS) rejected their proposals to mitigate concerns over the safety of data that can be used to identify U.S. citizens, according to sources familiar with the confidential discussions.

If you are persistent enough, the identity of anyone using a commercially available cash transfer service can likely be revealed. However, the real security-related question is whether Jack Ma would have motives to obtain this kind of information. It is here where CFIUS' reasoning goes off-track in my opinion. First, you have to believe that the Communist Party would be interested in obtaining the identity of MoneyGram users. Given that the amounts transacted are usually small ones among retail clients, it's kind of hard to believe that the PRC would have interested in the transactions of economic migrants and suchlike.

Second, you would also have to believe Ma's Communist Party ties are such that he would willingly give up such information. Again, this is unlikely in that such a breach, if revealed, could torpedo the operations of MoneyGram/Ant Financial altogether. Why pay for the brand if you were to tarnish it in this manner by forking over identities to the reds?

It's truly farfetched that Jack Ma would have acted as a Communist infiltrator. Maybe CFIUS watches too many spy movies, but I believe that the security risk would have been negligible insofar as MoneyGram doesn't handle the transfers of exceptionally large amounts of money for clients whose financial transactions would be of interest to inquiring minds like those of the Communist Party.

Alibaba Buying MoneyGram: US Protectionism Revisited

♠ Posted by Emmanuel in China,Security at 4/01/2017 05:33:00 PM

The use of "national security" grounds to discourage Chinese investment in the United States has been a recurrent issue for would-be PRC FDI in the US. Especially now in the age of Trump who encourages employment Stateside, it's ironic that American politicians would still dissuade foreigners from setting up shop in the so-called land of the free.

So it is particularly galling that Jack Ma of Alibaba fame is getting the full-on "national security" treatment. Not only did he meet Trump at Trump Tower before Trump assumed office, but he also vowed to help create American jobs. However, he is now being thwarted in his efforts to expand his money transfer service operations to North America through buying MoneyGram International.

As far as I am concerned, money transfer is an innocuous service in this day and age. There is no particular technology crucial to American security involved in sending money overseas. Nor is there a "terrorist" threat in China the Yanks are especially concerned with. Nevertheless, two American congresspersons have somehow found sinister motivations in the proposed purchase of MoneyGram:

On Friday, two members of the House of Representatives urged the Committee on Foreign Investment in the U.S. to conduct a "full and thorough" investigation of Ant Financial’s proposed acquisition of MoneyGram International Inc., a money-transfer service.

"The proposal merits careful evaluation as it would provide Chinese access to the U.S. financial infrastructure, a move that would pose significant national security risks if completed," Congressman Kevin Yoder and Congresswoman Eddie Bernice Johnson wrote in a letter to Treasury Secretary Steven Mnuchin.

Formerly a financial-services affiliate of Alibaba Group Holding Ltd. and controlled by Ma, Ant made its bid in January for $880 million, or $13.25 a share. In March, Leawood, Kansas-based rival Euronet Worldwide Inc. came in at $15.20, saying its offer had a better chance at regulatory approval. Dallas-based MoneyGram entered a confidentiality agreement with Euronet in late March to further consider its unsolicited proposal.

I suppose that if American lawmakers see "national security" concerns in hog farms, then they can certainly see sinister machinations at hand when a Chinese firm proposes purchasing a money transfer franchise. The other would-be purchaser of MoneyGram, Euronet, has been making claims that know-your-customer (KYC) regulations would allow the Chinese access to sensitive information:

Euronet CEO Michael Brown wrote to Mnuchin this week arguing Ant’s offer raises national security concerns because money transmitters collect confidential data on users which the government requires them to retain for several years. Money transmitters also get confidential requests from the U.S. Treasury’s Financial Crimes Enforcement Network about transactions that may be connected to terrorism or money laundering.

Yoder and Johnson reiterated those concerns in their letter on Friday, pointing out that Ant Financial is partly owned by Chinese state institutions. This could give a foreign government access to critical infrastructure and could be used for "intelligence purposes, location tracking, and identifying vulnerabilities for coercion," they said.

The total Chinese state-owned or state-affiliated ownership of Ant Financial is just below 15 percent, according to a person familiar with the matter. Those investors are passive and the entities don’t participate in Ant’s management or board, the person said. They asked not to be identified talking about Ant’s ownership structure.

Those who make money transfers via MoneyGram are not likely to be movers and shakers of international capitalism but rather migrant workers. These are small amounts we're dealing with, and I hardly think Chinese authorities would be keen on their personal information.

In this respect at least Trump is right: If Jack Ma wants to invest and create jobs in the US honestly, what's the matter? While Ma is certainly friendly with the Communist Party, sharing information on those making small money transfers Stateside is hardly one of his priorities. He just wants to make money; fancy that. No more, no less.

Philippines' Duterte: Killer of Druggies...& Foreign Investment

♠ Posted by Emmanuel in FDI,Security,Southeast Asia at 9/23/2016 03:51:00 PM

Damage control surpasses the realm of art into science when the person whose offensiveness you're trying to contain is the Philippine President Rodrigo "Digong" Duterte. Despite the woeful history of a zero tolerance approach to narcotics worldwide--nowhere has the "war on drugs" worked as intended--Duterte is intent on learning this the hard way. Being very think-skinned, Duterte takes any perceived slight very badly, hurling insults at any and all critics.

As it so happens, those who have raised concern about human rights abuses as the body count piles up via extrajudicial killings in his "war on drugs" represent the world's most powerful countries.
President Barack Obama refused to meet Duterte at an ASEAN gathering in Laos after being cursed as a "son of a whore" over possibly raising the issue of human rights. More recently, Duterte threw the middle finger at the European Parliament over mentioning similar human rights concerns, adding an f-bomb to get his point across.

While the shallow and stupid are doubtlessly happy about Duterte sticking it to leaders of wealthy countries--screw the imperialists and so on and so forth--the sensible are left holding the bag in mending relations with increasingly antsy international counterparts. Consider that, for every single day in September so far, foreign investors have reduced their holdings of Philippine equities. This turn of events has prompted Philippine central bank officials to come out en masse to downplay Duterte's offensive outbursts. These include eight-time [!] best central banker in the world awardee Amando Tetangco:

Philippine central bank Governor Amando Tetangco sought to soothe investors spooked by President Rodrigo Duterte’s rhetoric around his anti-drug war, with stocks poised for the longest outflow since 2007.

“If you take out the noise and look at the fundamentals, look at the economic program, look at the quality of the members appointed to the economic team, then these are all solid,” Tetangco told bankers, traders and fund managers late Thursday in Manila.

Tetangco joins a host of economic officials including Finance Secretary Carlos Dominguez, who on Wednesday said economic policies have been clear and consistent since Duterte took office in June. S&P Global Ratings this week warned of “rising uncertainties surrounding the stability, predictability, and accountability” under the new government.

Meanwhile, money is leaving the country continuously:

Money that flowed into the Philippines after the May elections is drying up. Philippine stocks slid 0.7 percent on Friday, and foreign funds have been selling for 21 straight days as of Thursday, the longest outflow since 2007.

The peso slumped to an eight-month low against the U.S. dollar and is the worst-performing Asian currency after the yuan this year. Foreign direct investment shrank 41 percent in June from a year earlier.

The irony remains that, if you make the reasonable assumption that this "war on drugs" will be as futile as every other, he will have given his country significant political and economic handicaps besides by acting this way. Who benefits?

Do Saudis Dump '$750B' After US 9/11 Bill Passes?

♠ Posted by Emmanuel in Middle East,Security at 9/10/2016 06:03:00 PM

Saudi Arabia vowed to slash '$750 billion' worth of US assets if 9/11 victims' families were allowed to sue it. We'll see.

Back to the realm of geopolitics: Earlier this year, Saudi Arabia warned that they stood ready to unload hundreds of billions worth of American assets were the US congress to pass a bill allowing families of victims of the 9/11 attacks to sue Saudi Arabia for damages. Maintaining that their country had no direct involvement in the attacks, Saudi officials threatened to sell off up to "$750 billion" in American assets. From the NY Times in April:

Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks...

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States.

OK, that was the story in April. Fast-forward to the present time and US lawmakers have not taken Saudi threats seriously as the bill passed unopposed through the lower house:

The unopposed House vote Friday to allow families of Sept. 11 victims to sue Saudi Arabia begins a diplomatic nightmare for President Barack Obama.

The legislation is sure to antagonize a key U.S. ally in the Middle East which already has tense relations with the administration. While Obama is likely to veto the bill, the House’s passage by voice vote raises the possibility Congress could override him, for the first time in his presidency, and make the measure law. The bill passed the Senate by a voice vote in May.

"The Saudis will see this as a hostile act," said Dennis Ross, Obama’s former Middle East policy coordinator. "You’re bound to see the Obama administration do everything they can to sustain a veto."

The bill would carve out an exception to sovereign immunity -- the legal doctrine which protects foreign governments from lawsuits -- if a plaintiff claims to have suffered injury in the U.S. from state-sponsored terrorism.

My belief is that the Saudi government did not directly fund the 9/11 attackers. However, that monies it has spent buying off hard-line extremists could have indirectly funded the attacks is not out of question. It would be up to the 9/11 victims suing KSA to demonstrate culpability via a money trail, which appears difficult to establish. What is more immediately interesting though is whether the Saudis merely bluffed about dumping American assets. Treasury records indicate that the country holds $98.3 billion in US Treasuries as of June 2016. Saudi Arabia may hold more though through indirect purchases:

Saudi officials have said enactment of the law could lead them to sell off the kingdom’s U.S. Treasury debt and other American assets, which totaled $750 billion, the officials told U.S. lawmakers and others in the government, according to the New York Times. The Saudi government held $117 billion in U.S. Treasury debt in March, according to Treasury figures obtained by Bloomberg. The kingdom may have additional holdings not included in the data on deposit with the New York Federal Reserve Bank, in entities in third countries, or through positions in derivatives.

Saudis can also sell off tangible investments in the US, though the stock of FDI of Middle Eastern countries as a whole in the US appears to make $100B a stretch. Moreover, hard assets are not as liquid and take time to sell.

So the questions for Saudi Arabia over the next few days are as follows: First, US lawmakers having called their bluff, will the Saudis really unload hundreds of billions worth of assets? Second, do they really have $750B to unload in US assets? Saudi Arabia officially states that it has $572B in reserves, but it's a dwindling amount as low oil prices take its toll on the nation's coffers. Accelerating the reduction of its rainy-day funds at the current time would seem an unwise move.

I'd say it's the Saudis' own exercise in Trump-style hyperbole, but we needn't wait much longer to see how things pan out.

9/12 UPDATE: Obama intends to veto, to no one's surprise:

President Barack Obama will veto legislation that would allow families of Sept. 11 victims to sue Saudi Arabia, a measure vehemently opposed by the U.S. ally, White House press secretary Josh Earnest said on Monday.

The measure passed both the House and Senate unopposed by voice votes, with the House acting on Friday to send the bill to Obama just ahead of the 15th anniversary of the terrorist attacks. The lack of public opposition suggests Congress could override Obama’s veto for the first time in his presidency and make the measure law.

"The president does intend to veto this legislation," Earnest told reporters on Monday. The administration had opposed the legislation, arguing it would set an international precedent that would expose the U.S. government and American soldiers to legal jeopardy in foreign courts.