Israel Spied on Iran Nuclear Talks With U.S.

Israel Spied on Iran Nuclear Talks With U.S.

Ally’s snooping upset White House because information was used to lobby Congress to try to sink a deal.

By Adam Entous
The Wall Street Journal
March 23, 2015

Soon after the U.S. and other major powers entered negotiations last year to curtail Iran’s nuclear program, senior White House officials learned Israel was spying on the closed-door talks.

The spying operation was part of a broader campaign by Israeli Prime Minister Benjamin Netanyahu’s government to penetrate the negotiations and then help build a case against the emerging terms of the deal, current and former U.S. officials said. In addition to eavesdropping, Israel acquired information from confidential U.S. briefings, informants and diplomatic contacts in Europe, the officials said.

The espionage didn’t upset the White House as much as Israel’s sharing of inside information with U.S. lawmakers and others to drain support from a high-stakes deal intended to limit Iran’s nuclear program, current and former officials said.

“It is one thing for the U.S. and Israel to spy on each other. It is another thing for Israel to steal U.S. secrets and play them back to U.S. legislators to undermine U.S. diplomacy,” said a senior U.S. official briefed on the matter.

The U.S. and Israel, longtime allies who routinely swap information on security threats, sometimes operate behind the scenes like spy-versus-spy rivals. The White House has largely tolerated Israeli snooping on U.S. policy makers—a posture Israel takes when the tables are turned.

The White House discovered the operation, in fact, when U.S. intelligence agencies spying on Israel intercepted communications among Israeli officials that carried details the U.S. believed could have come only from access to the confidential talks, officials briefed on the matter said.

Israeli officials denied spying directly on U.S. negotiators and said they received their information through other means, including close surveillance of Iranian leaders receiving the latest U.S. and European offers. European officials, particularly the French, also have been more transparent with Israel about the closed-door discussions than the Americans, Israeli and U.S. officials said.

Mr. Netanyahu and Israeli Ambassador Ron Dermer early this year saw a rapidly closing window to increase pressure on Mr. Obama before a key deadline at the end of March, Israeli officials said.

Using levers of political influence unique to Israel, Messrs. Netanyahu and Dermer calculated that a lobbying campaign in Congress before an announcement was made would improve the chances of killing or reshaping any deal. They knew the intervention would damage relations with the White House, Israeli officials said, but decided that was an acceptable cost.

The campaign may not have worked as well as hoped, Israeli officials now say, because it ended up alienating many congressional Democrats whose support Israel was counting on to block a deal.

Obama administration officials, departing from their usual description of the unbreakable bond between the U.S. and Israel, have voiced sharp criticism of Messrs. Netanyahu and Dermer to describe how the relationship has changed.

“People feel personally sold out,” a senior administration official said. “That’s where the Israelis really better be careful because a lot of these people will not only be around for this administration but possibly the next one as well.”

This account of the Israeli campaign is based on interviews with more than a dozen current and former U.S. and Israeli diplomats, intelligence officials, policy makers and lawmakers.

Weakened ties
Distrust between Mr. Netanyahu and Mr. Obama had been growing for years but worsened when Mr. Obama launched secret talks with Iran in 2012. The president didn’t tell Mr. Netanyahu because of concerns about leaks, helping set the stage for the current standoff, according to current and former U.S. and Israeli officials.

U.S. officials said Israel has long topped the list of countries that aggressively spy on the U.S., along with China, Russia and France. The U.S. expends more counterintelligence resources fending off Israeli spy operations than any other close ally, U.S. officials said.

A senior official in the prime minister’s office said Monday: “These allegations are utterly false. The state of Israel does not conduct espionage against the United States or Israel’s other allies. The false allegations are clearly intended to undermine the strong ties between the United States and Israel and the security and intelligence relationship we share.”

Current and former Israeli officials said their intelligence agencies scaled back their targeting of U.S. officials after the jailing nearly 30 years ago of American Jonathan Pollard for passing secrets to Israel.

While U.S. officials may not be direct targets, current and former officials said, Israeli intelligence agencies sweep up communications between U.S. officials and parties targeted by the Israelis, including Iran.

Americans shouldn’t be surprised, said a person familiar with the Israeli practice, since U.S. intelligence agencies helped the Israelis build a system to listen in on high-level Iranian communications.

As secret talks with Iran progressed into 2013, U.S. intelligence agencies monitored Israel’s communications to see if the country knew of the negotiations. Mr. Obama didn’t tell Mr. Netanyahu until September 2013.

Israeli officials, who said they had already learned about the talks through their own channels, told their U.S. counterparts they were upset about being excluded. “ ‘Did the administration really believe we wouldn’t find out?’ ” Israeli officials said, according to a former U.S. official.

The episode cemented Mr. Netanyahu’s concern that Mr. Obama was bent on clinching a deal with Iran whether or not it served Israel’s best interests, Israeli officials said. Obama administration officials said the president was committed to preventing Iran from developing nuclear weapons.

Mr. Dermer started lobbying U.S. lawmakers just before the U.S. and other powers signed an interim agreement with Iran in November 2013. Mr. Netanyahu and Mr. Dermer went to Congress after seeing they had little influence on the White House.

Before the interim deal was made public, Mr. Dermer gave lawmakers Israel’s analysis: The U.S. offer would dramatically undermine economic sanctions on Iran, according to congressional officials who took part.

After learning about the briefings, the White House dispatched senior officials to counter Mr. Dermer. The officials told lawmakers that Israel’s analysis exaggerated the sanctions relief by as much as 10 times, meeting participants said.

When the next round of negotiations with Iran started in Switzerland last year, U.S. counterintelligence agents told members of the U.S. negotiating team that Israel would likely try to penetrate their communications, a senior Obama administration official said.

The U.S. routinely shares information with its European counterparts and others to coordinate negotiating positions. While U.S. intelligence officials believe secured U.S. communications are relatively safe from the Israelis, they say European communications are vulnerable.

Mr. Netanyahu and his top advisers received confidential updates on the Geneva talks from Undersecretary of State for Political Affairs Wendy Sherman and other U.S. officials, who knew at the time that Israeli intelligence was working to fill in any gaps.

The White House eventually curtailed the briefings, U.S. officials said, withholding sensitive information for fear of leaks.

Current and former Israeli officials said their intelligence agencies can get much of the information they seek by targeting Iranians and others in the region who are communicating with countries in the talks.

In November, the Israelis learned the contents of a proposed deal offered by the U.S. but ultimately rejected by Iran, U.S. and Israeli officials said. Israeli officials told their U.S. counterparts the terms offered insufficient protections.

U.S. officials urged the Israelis to give the negotiations a chance. But Mr. Netanyahu’s top advisers concluded the emerging deal was unacceptable. The White House was making too many concessions, Israeli officials said, while the Iranians were holding firm.

Obama administration officials reject that view, saying Israel was making impossible demands that Iran would never accept. “The president has made clear time and again that no deal is better than a bad deal,” a senior administration official said.

In January, Mr. Netanyahu told the White House his government intended to oppose the Iran deal but didn’t explain how, U.S. and Israeli officials said.

On Jan. 21, House Speaker John Boehner (R., Ohio) announced Mr. Netanyahu would address a joint meeting of Congress. That same day, Mr. Dermer and other Israeli officials visited Capitol Hill to brief lawmakers and aides, seeking a bipartisan coalition large enough to block or amend any deal.

Most Republicans were already prepared to challenge the White House on the negotiations, so Mr. Dermer focused on Democrats. “This deal is bad,” he said in one briefing, according to participants.

A spokesman for the Israeli embassy in Washington, Aaron Sagui, said Mr. Dermer didn’t launch a special campaign on Jan 21. Mr. Dermer, the spokesperson said, has “consistently briefed both Republican and Democrats, senators and congressmen, on Israel’s concerns regarding the Iran negotiations for over a year.”

Mr. Dermer and other Israeli officials over the following weeks gave lawmakers and their aides information the White House was trying to keep secret, including how the emerging deal could allow Iran to operate around 6,500 centrifuges, devices used to process nuclear material, said congressional officials who attended the briefings.

The Israeli officials told lawmakers that Iran would also be permitted to deploy advanced IR-4 centrifuges that could process fuel on a larger scale, meeting participants and administration officials said. Israeli officials said such fuel, which under the emerging deal would be intended for energy plants, could be used to one day build nuclear bombs.

The information in the briefings, Israeli officials said, was widely known among the countries participating in the negotiations.

When asked in February during one briefing where Israel got its inside information, the Israeli officials said their sources included the French and British governments, as well as their own intelligence, according to people there.

“Ambassador Dermer never shared confidential intelligence information with members of Congress,” Mr. Sagui said. “His briefings did not include specific details from the negotiations, including the length of the agreement or the number of centrifuges Iran would be able to keep.”

Current and former U.S. officials confirmed that the number and type of centrifuges cited in the briefings were part of the discussions. But they said the briefings were misleading because Israeli officials didn’t disclose concessions asked of Iran. Those included giving up stockpiles of nuclear material, as well as modifying the advanced centrifuges to slow output, these officials said.

The administration didn’t brief lawmakers on the centrifuge numbers and other details at the time because the information was classified and the details were still in flux, current and former U.S. officials said.

Unexpected reaction
The congressional briefings and Mr. Netanyahu’s decision to address a joint meeting of Congress on the emerging deal sparked a backlash among many Democratic lawmakers, congressional aides said.

Continue reading at:   The Wall Street Journal

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Republicans Warn Iran — and Obama — That Deal Won’t Last

Republicans Warn Iran — and Obama — That Deal Won’t Last

By Josh Rogin
BloombergView
March 9, 2015

A group of 47 Republican senators has written an open letter to Iran’s leaders warning them that any nuclear deal they sign with President Barack Obama’s administration won’t last after Obama leaves office.

Organized by freshman Senator Tom Cotton and signed by the chamber’s entire party leadership as well as potential 2016 presidential contenders Marco Rubio, Ted Cruz and Rand Paul, the letter is meant not just to discourage the Iranian regime from signing a deal but also to pressure the White House into giving Congress some authority over the process.

“It has come to our attention while observing your nuclear negotiations with our government that you may not fully understand our constitutional system … Anything not approved by Congress is a mere executive agreement,” the senators wrote. “The next president could revoke such an executive agreement with the stroke of a pen and future Congresses could modify the terms of the agreement at any time.”

Arms-control advocates and supporters of the negotiations argue that the next president and the next Congress will have a hard time changing or canceling any Iran deal — — which is reportedly near done — especially if it is working reasonably well.

Many inside the Republican caucus, however, hope that by pointing out the long-term fragility of a deal with no congressional approval — something Supreme Leader Ayatollah Ali Khamenei has also noted — the Iranian regime might be convinced to think twice. “Iran’s ayatollahs need to know before agreeing to any nuclear deal that … any unilateral executive agreement is one they accept at their own peril,” Cotton told me.

The issue has already become part of the 2016 GOP campaign. Former Florida Governor Jeb Bush came out against the negotiations in a speech at the Chicago Council last month. Former Texas Governor Rick Perry released a video criticizing the negotiations and calling for Congressional oversight. “An arms control agreement that excludes our Congress, damages our security and endangers our allies has to be reconsidered by any future president,” Perry said.

Republicans also have a new argument to make in asserting their role in the diplomatic process: Vice President Joe Biden similarly insisted — in a letter to then-Secretary of State Colin Powell — on congressional approval for the Moscow Treaty on strategic nuclear weapons with Russia in 2002, when he was head of the Senate Foreign Relations Committee.

The new letter is the latest piece of an effort by Senators in both parties to ensure that Congress will have some say if and when a deal is signed. Senators Bob Corker, Lindsey Graham, Tim Kaine and the embattled Bob Menendez have a bill pending that would mandate a Congressional review of the Iran deal, but Republicans and Democrats have been bickering over how to proceed in the face of a threatened presidential veto.

Still, Senators from both parties are united in an insistence that, at some point, the administration will need their buy-in for any nuclear deal with Iran to succeed. There’s no sign yet that Obama believes this — or, if he does, that he plans to engage Congress in any meaningful way.

To contact the author on this story:
Josh Rogin at joshrogin@bloomberg.net

To contact the editor on this story:
Tobin Harshaw at tharshaw@bloomberg.net

http://www.bloombergview.com/articles/2015-03-09/republicans-warn-iran-and-obama-that-deal-won-t-last

 

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Families See Hope for Justice in Palestinian Membership of ICC

Families See Hope for Justice in Palestinian Membership of ICC

By Khaled Alashqar
IPS – Inter Press Service News Agency
March 3, 2015

Sahar Baker (left), with Ahed Baker (right) and sister-in-law in front of their beach camp house, with photographs of the four cousins killed by Israeli gunboats in summer 2014 while playing football on the beach in Gaza. Credit: Khaled Alashqar/IPS

Sahar Baker (left), with Ahed Baker (right) and sister-in-law in front of their beach camp house, with photographs of the four cousins killed by Israeli gunboats in summer 2014 while playing football on the beach in Gaza. Credit: Khaled Alashqar/IPS

GAZA CITY, Mar 3 2015 (IPS) – “I have lost all meaning in life after the death of my child, I will never forgive anyone who caused the tearing apart of his little body.  I appeal to all who can help and stand with us to achieve justice and punish those who killed my child.”

As the tears rolled down her cheeks and with a rattle in her voice, 47-year-old Sahar Baker recalled the last moments of her ten-year-old son Ismail, who was killed along with three of his cousins after being targeted by Israeli gunboats while they were playing football on the beach during the Israeli attacks on Gaza last summer.

Sahar’s plea for justice may soon be one step nearer now that the Palestine Government is set to formally join the International Criminal Court (ICC), which deals with war crimes, crimes against humanity and genocide.

Palestinian President Mahmoud Abbas signed the Rome Statute, the ICC’s founding treaty, on Dec. 31, after the U.N. Security Council rejected a Palestinian attempt to set a deadline for Israel to end its occupation of territories it captured in 1967. U.N. Secretary General Ban Ki-moon has said the Palestinians will formally join the ICC on Apr. 1.

Mohammad Shtayyeh, a member of the executive committee of the Palestine Liberation Organisation (PLO), is reported as having said that a first complaint will be filed against Israel at the ICC on Apr. 1 over the Israeli war against Gaza last year and Israeli settlement activity.

Palestinian membership of the ICC “provides an opportunity to raise the issues on Israel’s use of force based on occupation and crimes against the people and the land in Palestine, where we did not have the capacity before to sue Israel for its crimes against the Palestinians,” Palestinian Foreign Minister Riad Al-Malki told the press during a visit to Brazil to attend the inauguration ceremony of President Dilma Rousseff at the beginning of January.

The Baker family, who live in a beach camp in Gaza, is now hoping that Palestinian membership of the ICC will open the door for the prosecution of Israeli leaders and army officers for their crimes.

Sahar’s cousin Ahed Baker, father of Zakaria (10) and grandfather of Ahed Atif (9), shares her pain and bitterness. He is still looking for a way to bring the Israeli army to trial for the murder of his son and grandson, another two of the four young cousins killed on the beach. He told IPS that he and his family would do everything possible to ensure that their case makes its way to the ICC.

“We will not forget how our children were killed in cold blood without any reason,” said Ahed. “We hope that the Israeli army commanders will be tried before international justice and that they will be punished for the killing of the children.”

Palestinian leaders have long waved the card of membership of the ICC as a form of pressure on the Israeli government in their attempt to secure a Palestinian state.

However, apart from its political and legal benefits, Palestinian membership of the international court has created some serious implications for the Palestinians.

Israel has already frozen the transfer to the Palestinian Authority of tax funds owed to it. These funds are generally allocated for the salaries of Palestinian public employees and government operating expenses in Gaza and the West Bank, and the freeze is hampering the functioning of the Palestinian Unity Government and undermine the already weak public sector in Palestine.

Israel has also indicated that further ‘punitive’ steps will be taken soon against the Palestinians as a result of joining the ICC. Membership of the ICC thus appears to be the start of a new lengthy battle for Palestinians.

Continue reading at:  IPS – Inter Press Service News Agency

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Mossad contradicted Netanyahu on Iran nuclear programme

Mossad contradicted Netanyahu on Iran nuclear programme

Spy Cables reveal Mossad concluded that Iran was not producing nuclear weapons, after PM sounded alarm at UN in 2012. 

Will Jordan, Rahul Radhakrishnan
Al Jazeera
February 23, 2015

 

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Less than a month after Prime Minister Benjamin Netanyahu’s 2012 warning to the UN General Assembly that Iran was 70 percent of the way to completing its “plans to build a nuclear weapon”, Israel’s intelligence service believed that Iran was “not performing the activity necessary to produce weapons”.

A secret cable obtained by Al Jazeera’s Investigative Unit reveals that Mossad sent a top-secret cable to South Africa on October 22, 2012, that laid out a “bottom line” assessment of Iran’s nuclear work.

It appears to contradict the picture painted by Netanyahu of Tehran racing towards acquisition of a nuclear bomb.

Writing that Iran had not begun the work needed to build any kind of nuclear weapon, the Mossad cable said the Islamic Republic’s scientists are “working to close gaps in areas that appear legitimate such as enrichment reactors”.

Such activities, however, “will reduce the time required to produce weapons from the time the instruction is actually given”.

That view tracks with the 2012 US National Intelligence estimate, which found no evidence that Iran had thus far taken a decision to use its nuclear infrastructure to build a weapon, or that it had revived efforts to research warhead design that the US said had been shelved in 2003.

Netanyahu plans to address the US Congress on March 3 and warn against the nuclear compromise currently being negotiated between Tehran and world powers.

Media reports and public comments by senior current and former officials have frequently indicated dissent from within Israel’s security services over Netanyahu’s alarmist messaging on Iran.

However, the document leaked to Al Jazeera makes clear that the Mossad’s formal assessment of Iran’s nuclear capacity and intentions differs from the scenario outlined by the prime minister at the UN.

The cable was relayed to South Africa’s State Security Agency (SSA) shortly after the September 2012 address in which Netanyahu had displayed a cartoonish diagram of a bomb with a fuse, marked with a 70 percent line and another “red line” at 90 percent.

The markers represented progress milestones in Iran’s uranium enrichment work. He argued that medium-enriched uranium (which Iran had begun producing, saying it was needed to fuel a research reactor producing isotopes to fight cancer) took Iran 70 percent of the distance to enriching weapons-grade material.

The Israeli prime minister told the UN General Assembly that “by next spring, by most at next summer at current enrichment rates [Iran] will have finished the medium enrichment and move on to the final stage”, in which he said they would enrich uranium to weapons grade.

‘Not the right way’

Earlier in 2012, former Mossad chief Meir Dagan had hinted at a disagreement with Netanyahu. In an interview in March, he warned of overstating the danger of Iran’s nuclear activities and of putting Israel on a path to war with Iran.

The spy chief said it would be a “stupid idea” to attack Iran before other options were considered. “An attack on Iran before you are exploring all other approaches is not the right way,” Dagan had said.

Continue reading at:  Al Jazeera

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The Great Game in the Holy Land

The Great Game in the Holy Land
How Gazan Natural Gas Became the Epicenter of An International Power Struggle

By Michael Schwartz
TomDispatch
February 26, 2015

Guess what?  Almost all the current wars, uprisings, and other conflicts in the Middle East are connected by a single thread, which is also a threat:  these conflicts are part of an increasingly frenzied competition to find, extract, and market fossil fuels whose future consumption is guaranteed to lead to a set of cataclysmic environmental crises.

Amid the many fossil-fueled conflicts in the region, one of them, packed with threats, large and small, has been largely overlooked, and Israel is at its epicenter. Its origins can be traced back to the early 1990s when Israeli and Palestinian leaders began sparring over rumored natural gas deposits in the Mediterranean Sea off the coast of Gaza. In the ensuing decades, it has grown into a many-fronted conflict involving several armies and three navies. In the process, it has already inflicted mindboggling misery on tens of thousands of Palestinians, and it threatens to add future layers of misery to the lives of people in Syria, Lebanon, and Cyprus. Eventually, it might even immiserate Israelis.

Resource wars are, of course, nothing new. Virtually the entire history of Western colonialism and post-World War II globalization has been animated by the effort to find and market the raw materials needed to build or maintain industrial capitalism. This includes Israel’s expansion into, and appropriation of, Palestinian lands. But fossil fuels only moved to center stage in the Israeli-Palestinian relationship in the 1990s, and that initially circumscribed conflict only spread to include Syria, Lebanon, Cyprus, Turkey, and Russia after 2010.

The Poisonous History of Gazan Natural Gas

Back in 1993, when Israel and the Palestinian Authority (PA) signed the Oslo Accords that were supposed to end the Israeli occupation of Gaza and the West Bank and create a sovereign state, nobody was thinking much about Gaza’s coastline. As a result, Israel agreed that the newly created PA would fully control its territorial waters, even though the Israeli navy was still patrolling the area. Rumored natural gas deposits there mattered little to anyone, because prices were then so low and supplies so plentiful. No wonder that the Palestinians took their time recruiting British Gas (BG) — a major player in the global natural gas sweepstakes — to find out what was actually there. Only in 2000 did the two parties even sign a modest contract to develop those by-then confirmed fields.

BG promised to finance and manage their development, bear all the costs, and operate the resulting facilities in exchange for 90% of the revenues, an exploitative but typical “profit-sharing” agreement. With an already functioning natural gas industry, Egypt agreed to be the on-shore hub and transit point for the gas. The Palestinians were to receive 10% of the revenues (estimated at about a billion dollars in total) and were guaranteed access to enough gas to meet their needs.

Had this process moved a little faster, the contract might have been implemented as written. In 2000, however, with a rapidly expanding economy, meager fossil fuels, and terrible relations with its oil-rich neighbors, Israel found itself facing a chronic energy shortage. Instead of attempting to answer its problem with an aggressive but feasible effort to develop renewable sources of energy, Prime Minister Ehud Barak initiated the era of Eastern Mediterranean fossil fuel conflicts. He brought Israel’s naval control of Gazan coastal waters to bear and nixed the deal with BG. Instead, he demanded that Israel, not Egypt, receive the Gaza gas and that it also control all the revenues destined for the Palestinians — to prevent the money from being used to “fund terror.”

With this, the Oslo Accords were officially doomed. By declaring Palestinian control over gas revenues unacceptable, the Israeli government committed itself to not accepting even the most limited kind of Palestinian budgetary autonomy, let alone full sovereignty. Since no Palestinian government or organization would agree to this, a future filled with armed conflict was assured.

The Israeli veto led to the intervention of British Prime Minister Tony Blair, who sought to broker an agreement that would satisfy both the Israeli government and the Palestinian Authority. The result:  a 2007 proposal that would have delivered the gas to Israel, not Egypt, at below-market prices, with the same 10% cut of the revenues eventually reaching the PA. However, those funds were first to be delivered to the Federal Reserve Bank in New York for future distribution, which was meant to guarantee that they would not be used for attacks on Israel.

This arrangement still did not satisfy the Israelis, who pointed to the recent victory of the militant Hamas party in Gaza elections as a deal-breaker. Though Hamas had agreed to let the Federal Reserve supervise all spending, the Israeli government, now led by Ehud Olmert, insisted that no “royalties be paid to the Palestinians.” Instead, the Israelis would deliver the equivalent of those funds “in goods and services.”

This offer the Palestinian government refused. Soon after, Olmert imposed a draconian blockade on Gaza, which Israel’s defense minister termed a form of “‘economic warfare’ that would generate a political crisis, leading to a popular uprising against Hamas.” With Egyptian cooperation, Israel then seized control of all commerce in and out of Gaza, severely limiting even food imports and eliminating its fishing industry. As Olmert advisor Dov Weisglass summed up this agenda, the Israeli government was putting the Palestinians “on a diet” (which, according to the Red Cross, soon produced “chronic malnutrition,” especially among Gazan children).

When the Palestinians still refused to accept Israel’s terms, the Olmert government decided to unilaterally extract the gas, something that, they believed, could only occur once Hamas had been displaced or disarmed. As former Israel Defense Forces commander and current Foreign Minister Moshe Ya’alon explained, “Hamas… hasconfirmed its capability to bomb Israel’s strategic gas and electricity installations… It is clear that, without an overall military operation to uproot Hamas control of Gaza, no drilling work can take place without the consent of the radical Islamic movement.”

Following this logic, Operation Cast Lead was launched in the winter of 2008. According to Deputy Defense Minister Matan Vilnai, it was intended to subject Gaza to a “shoah” (the Hebrew word for holocaust or disaster). Yoav Galant, the commanding general of the Operation, said that it was designed to “send Gaza decades into the past.” As Israeli parliamentarian Tzachi Hanegbi explained, the specific military goal was “to topple the Hamas terror regime and take over all the areas from which rockets are fired on Israel.”

Operation Cast Lead did indeed “send Gaza decades into the past.” Amnesty International reported that the 22-day offensive killed 1,400 Palestinians, “including some 300 children and hundreds of other unarmed civilians, and large areas of Gaza had been razed to the ground, leaving many thousands homeless and the already dire economy in ruins.” The only problem: Operation Cast Lead did not achieve its goal of “transferring the sovereignty of the gas fields to Israel.”

More Sources of Gas Equal More Resource Wars

In 2009, the newly elected government of Prime Minister Benjamin Netanyahu inherited the stalemate around Gaza’s gas deposits and an Israeli energy crisis that only grew more severe when the Arab Spring in Egypt interrupted and then obliterated 40% of the country’s gas supplies. Rising energy prices soon contributed to the largest protests involving Jewish Israelis in decades.

As it happened, however, the Netanyahu regime also inherited a potentially permanent solution to the problem. An immense field of recoverable natural gas was discovered in the Levantine Basin, a mainly offshore formation under the eastern Mediterranean. Israeli officials immediately asserted that “most” of the newly confirmed gas reserves lay “within Israeli territory.” In doing so, they ignored contrary claims by Lebanon, Syria, Cyprus, and the Palestinians.

In some other world, this immense gas field might have been effectively exploited by the five claimants jointly, and a production plan might even have been put in place to ameliorate the environmental impact of releasing a future 130 trillion cubic feet of gas into the planet’s atmosphere. However, as Pierre Terzian, editor of the oil industry journal Petrostrategies, observed, “All the elements of danger are there… This is a region where resorting to violent action is not something unusual.”

In the three years that followed the discovery, Terzian’s warning seemed ever more prescient. Lebanon became the first hot spot. In early 2011, the Israeli government announced the unilateral development of two fields, about 10% of that Levantine Basin gas, which lay in disputed offshore waters near the Israeli-Lebanese border. Lebanese Energy Minister Gebran Bassil immediately threatened a military confrontation, asserting that his country would “not allow Israel or any company working for Israeli interests to take any amount of our gas that is falling in our zone.” Hezbollah, the most aggressive political faction in Lebanon, promised rocket attacks if “a single meter” of natural gas was extracted from the disputed fields.

Israel’s Resource Minister accepted the challenge, asserting that “[t]hese areas are within the economic waters of Israel… We will not hesitate to use our force and strength to protect not only the rule of law but the international maritime law.”

Oil industry journalist Terzian offered this analysis of the realities of the confrontation:

“In practical terms… nobody is going to invest with Lebanon in disputed waters. There are no Lebanese companies there capable of carrying out the drilling, and there is no military force that could protect them. But on the other side, things are different. You have Israeli companies that have the ability to operate in offshore areas, and they could take the risk under the protection of the Israeli military.”

Sure enough, Israel continued its exploration and drilling in the two disputed fields, deploying drones to guard the facilities. Meanwhile, the Netanyahu government invested major resources in preparing for possible future military confrontations in the area. For one thing, with lavish U.S. funding, it developed the “Iron Dome” anti-missile defense system designed in part to intercept Hezbollah and Hamas rockets aimed at Israeli energy facilities. It also expanded the Israeli navy, focusing on its ability to deter or repel threats to offshore energy facilities. Finally, starting in 2011 it launched airstrikes in Syria designed, according to U.S. officials, “to prevent any transfer of advanced… antiaircraft, surface-to-surface and shore-to-ship missiles” to Hezbollah.

Nonetheless, Hezbollah continued to stockpile rockets capable of demolishing Israeli facilities. And in 2013, Lebanon made a move of its own. It began negotiating with Russia. The goal was to get that country’s gas firms to develop Lebanese offshore claims, while the formidable Russian navy would lend a hand with the “long-running territorial dispute with Israel.”

By the beginning of 2015, a state of mutual deterrence appeared to be setting in. Although Israel had succeeded in bringing online the smaller of the two fields it set out to develop, drilling in the larger one was indefinitely stalled “in light of the security situation.” U.S. contractor Noble Energy, hired by the Israelis, was unwilling to invest the necessary $6 billion in facilities that would be vulnerable to Hezbollah attack, and potentially in the gun sights of the Russian navy. On the Lebanese side, despite an increased Russian naval presence in the region, no work had begun.

Meanwhile, in Syria, where violence was rife and the country in a state of armed collapse, another kind of stalemate went into effect. The regime of Bashar al-Assad, facing a ferocious threat from various groups of jihadists, survived in part by negotiating massive military support from Russia in exchange for a 25-year contract to develop Syria’s claims to that Levantine gas field. Included in the deal was a major expansion of the Russian naval base at the port city of Tartus, ensuring a far larger Russian naval presence in the Levantine Basin.

While the presence of the Russians apparently deterred the Israelis from attempting to develop any Syrian-claimed gas deposits, there was no Russian presence in Syria proper. So Israel contracted with the U.S.-based Genie Energy Corporation to locate and develop oil fields in the Golan Heights, Syrian territory occupied by the Israelis since 1967. Facing a potential violation of international law, the Netanyahu government invoked, as the basis for its acts, an Israeli court ruling that the exploitation of natural resources in occupied territories was legal. At the same time, to prepare for the inevitable battle with whichever faction or factions emerged triumphant from the Syrian civil war, it began shoring up the Israeli military presence in the Golan Heights.

And then there was Cyprus, the only Levantine claimant not at war with Israel. Greek Cypriots had long been in chronic conflict with Turkish Cypriots, so it was hardly surprising that the Levantine natural gas discovery triggered three years of deadlocked negotiations on the island over what to do. In 2014, the Greek Cypriots signed an exploration contract with Noble Energy, Israel’s chief contractor. The Turkish Cypriots trumped this move by signing a contract with Turkey to explore all Cypriot claims “as far as Egyptian waters.” Emulating Israel and Russia, the Turkish government promptly moved three navy vessels into the area to physically block any intervention by other claimants.

As a result, four years of maneuvering around the newly discovered Levantine Basin deposits have produced little energy, but brought new and powerful claimants into the mix, launched a significant military build-up in the region, and heightened tensions immeasurably.

Gaza Again — and Again

Remember the Iron Dome system, developed in part to stop Hezbollah rockets aimed at Israel’s northern gas fields? Over time, it was put in place near the border with Gaza to stop Hamas rockets, and was tested during Operation Returning Echo, the fourth Israeli military attempt to bring Hamas to heel and eliminate any Palestinian “capability to bomb Israel’s strategic gas and electricity installations.”

Launched in March 2012, it replicated on a reduced scale the devastation of Operation Cast Lead, while the Iron Dome achieved a 90% “kill rate” against Hamas rockets. Even this, however, while a useful adjunct to the vast shelter system built to protect Israeli civilians, was not enough to ensure the protection of the country’s exposed oil facilities. Even one direct hit there could damage or demolish such fragile and flammable structures.

Continue reading at:  TomDispatch

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The Real American Exceptionalism

The Real American Exceptionalism

From Torture to Drone Assassination, How Washington Gave Itself a Global Get-Out-of-Jail-Free Card

By Alfred W. McCoy
TomDispatch
February 24, 2015

“The sovereign is he who decides on the exception,” said conservative thinker Carl Schmitt in 1922, meaning that a nation’s leader can defy the law to serve the greater good. Though Schmitt’s service as Nazi Germany’s chief jurist and his unwavering support for Hitler from the night of the long knives to Kristallnacht and beyond damaged his reputation for decades, today his ideas have achieved unimagined influence. They have, in fact, shaped the neo-conservative view of presidential power that has become broadly bipartisan since 9/11. Indeed, Schmitt has influenced American politics directly through his intellectual protégé Leo Strauss who, as an émigré professor at the University of Chicago, trained Bush administration architects of the Iraq war Paul Wolfowitz and Abram Shulsky.

All that should be impressive enough for a discredited, long dead authoritarian thinker. But Schmitt’s dictum also became a philosophical foundation for the exercise of American global power in the quarter century that followed the end of the Cold War. Washington, more than any other power, created the modern international community of laws and treaties, yet it now reserves the right to defy those same laws with impunity. A sovereign ruler should, said Schmitt, discard laws in times of national emergency. So the United States, as the planet’s last superpower or, in Schmitt’s terms, its global sovereign, has in these years repeatedly ignored international law, following instead its own unwritten rules of the road for the exercise of world power.

Just as Schmitt’s sovereign preferred to rule in a state of endless exception without a constitution for his Reich, so Washington is now well into the second decade of an endless War on Terror that seems the sum of its exceptions to international law: endless incarceration, extrajudicial killing, pervasive surveillance, drone strikes in defiance of national boundaries, torture on demand, and immunity for all of the above on the grounds of state secrecy. Yet these many American exceptions are just surface manifestations of the ever-expanding clandestine dimension of the American state. Created at the cost of more than a trillion dollars since 9/11, the purpose of this vast apparatus is to control a covert domain that is fast becoming the main arena for geopolitical contestation in the twenty-first century.

This should be (but seldom is considered) a jarring, disconcerting path for a country that, more than any other, nurtured the idea of, and wrote the rules for, an international community of nations governed by the rule of law. At the First Hague Peace Conference in 1899, the U.S. delegate, Andrew Dickson White, the founder of Cornell University, pushed for the creation of a Permanent Court of Arbitration and persuaded Andrew Carnegie to build the monumental Peace Palace at The Hague as its home. At the Second Hague Conference in 1907, Secretary of State Elihu Root urged that future international conflicts be resolved by a court of professional jurists, an idea realized when the Permanent Court of International Justice was established in 1920.

After World War II, the U.S. used its triumph to help create the United Nations, push for the adoption of its Universal Declaration of Human Rights, and ratify the Geneva Conventions for humanitarian treatment in war. If you throw in other American-backed initiatives like the World Health Organization, the World Trade Organization, and the World Bank, you pretty much have the entire infrastructure of what we now casually call “the international community.”

Breaking the Rules

Not only did the U.S. play a crucial role in writing the new rules for that community, but it almost immediately began breaking them. After all, despite the rise of the other superpower, the Soviet Union, Washington was by then the world sovereign and so could decide which should be the exceptions to its own rules, particularly to the foundational principle for all this global governance: sovereignty. As it struggled to dominate the hundred new nations that started appearing right after the war, each one invested with an inviolable sovereignty, Washington needed a new means of projecting power beyond conventional diplomacy or military force. As a result, CIA covert operations became its way of intervening within a new world order where you couldn’t or at least shouldn’t intervene openly.

All of the exceptions that really matter spring from America’s decision to join what former spy John Le Carré called that “squalid procession of vain fools, traitors… sadists, and drunkards,” and embrace espionage in a big way after World War II. Until the creation of the CIA in 1947, the United States had been an innocent abroad in the world of intelligence. When General John J. Pershing led two million American troops to Europe during World War I, the U.S. had the only army on either side of the battle lines without an intelligence service. Even though Washington built a substantial security apparatus during that war, it was quickly scaled back by Republican conservatives during the 1920s. For decades, the impulse to cut or constrain such secret agencies remained robustly bipartisan, as when President Harry Truman abolished the CIA’s predecessor, the Office of Strategic Services (OSS), right after World War II or when President Jimmy Carter fired 800 CIA covert operatives after the Vietnam War.

Yet by fits and starts, the covert domain inside the U.S. government has grown stealthily from the early twentieth century to this moment. It began with the formation of the FBI in 1908 and Military Intelligence in 1917. The Central Intelligence Agency followed after World War II along with most of the alphabet agencies that make up the present U.S. Intelligence Community, including the National Security Agency (NSA), the Defense Intelligence Agency (DIA), and last but hardly least, in 2004, the Office of the Director of National Intelligence. Make no mistake: there is a clear correlation between state secrecy and the rule of law — as one grows, the other surely shrinks.

World Sovereign

America’s irrevocable entry into this covert netherworld came when President Truman deployed his new CIA to contain Soviet subversion in Europe. This was a continent then thick with spies of every stripe: failed fascists, aspirant communists, and everything in between. Introduced to spycraft by its British “cousins,” the CIA soon mastered it in part by establishing sub rosa ties to networks of ex-Nazi spies, Italian fascist operatives, and dozens of continental secret services.

As the world’s new sovereign, Washington used the CIA to enforce its chosen exceptions to the international rule of law, particularly to the core principle of sovereignty. During his two terms, President Dwight Eisenhower authorized 104 covert operations on four continents, focused largely on controlling the many new nations then emerging from centuries of colonialism. Eisenhower’s exceptions included blatant transgressions of national sovereignty such as turning northern Burma into an unwilling springboard for abortive invasions of China, arming regional revolts to partition Indonesia, and overthrowing elected governments in Guatemala and Iran. By the time Eisenhower left office in 1961, covert ops had acquired such a powerful mystique in Washington that President John F. Kennedy would authorize 163 of them in the three years that preceded his assassination.

As a senior CIA official posted to the Near East in the early 1950s put it, the Agency then saw every Muslim leader who was not pro-American as “a target legally authorized by statute for CIA political action.” Applied on a global scale and not just to Muslims, this policy helped produce a distinct “reverse wave” in the global trend towards democracy from 1958 to 1975, as coups — most of them U.S.-sanctioned — allowed military men to seize power in more than three-dozen nations, representing a quarter of the world’s sovereign states.

The White House’s “exceptions” also produced a deeply contradictory U.S. attitude toward torture from the early years of the Cold War onward. Publicly, Washington’s opposition to torture was manifest in its advocacy of the U.N. Universal Declaration of Human Rights in 1948 and the Geneva Conventions in 1949. Simultaneously and secretly, however, the CIA began developing ingenious new torture techniques in contravention of those same international conventions. After a decade of mind-control research, the CIA actually codified its new method of psychological torture in a secret instructional handbook, the “KUBARK Counterintelligence Interrogation” manual, which it then disseminated within the U.S. Intelligence Community and to allied security services worldwide.

Much of the torture that became synonymous with the era of authoritarian rule in Asia and Latin America during the 1960s and 1970s seems to have originated in U.S. training programs that provided sophisticated techniques, up-to-date equipment, and moral legitimacy for the practice. From 1962 to 1974, the CIA worked through the Office of Public Safety (OPS), a division of the U.S. Agency for International Development that sent American police advisers to developing nations. Established by President Kennedy in 1962, in just six years OPS grew into a global anti-communist operation with over 400 U.S. police advisers.  By 1971, it had trained more than a million policemen in 47 nations, including 85,000 in South Vietnam and 100,000 in Brazil.

Concealed within this larger OPS effort, CIA interrogation training became synonymous with serious human rights abuses, particularly in Iran, the Philippines, South Vietnam, Brazil, and Uruguay. Amnesty International documented widespread torture, usually by local police, in 24 of the 49 nations that had hosted OPS police-training teams. In tracking torturers across the globe, Amnesty seemed to be following the trail of CIA training programs. Significantly, torture began to recede when America again turned resolutely against the practice at the end of the Cold War.

The War on Terror 

Although the CIA’s authority for assassination, covert intervention, surveillance, and torture was curtailed at the close of the Cold War, the terror attacks of September 2001 sparked an unprecedented expansion in the scale of the intelligence community and a corresponding resurgence in executive exceptions.  The War on Terror’s voracious appetite for information produced, in its first decade, what the Washington Post branded a veritable “fourth branch” of the U.S. federal government with 854,000 vetted security officials, 263 security organizations, over 3,000 private and public intelligence agencies, and 33 new security complexes — all pumping out a total of 50,000 classified intelligence reports annually by 2010.

By that time, one of the newest members of the Intelligence Community, the National Geospatial-Intelligence Agency, already had 16,000 employees, a $5 billion budget, and a massive nearly $2 billion headquarters at Fort Belvoir, Virginia — all aimed at coordinating the flood of surveillance data pouring in from drones, U-2 spy planes, Google Earth, and orbiting satellites.

According to documents whistleblower Edward Snowden leaked to the Washington Post, the U.S. spent $500 billion on its intelligence agencies in the dozen years after the 9/11 attacks, including annual appropriations in 2012 of $11 billion for the National Security Agency (NSA) and $15 billion for the CIA. If we add the $790 billion expended on the Department of Homeland Security to that $500 billion for overseas intelligence, then Washington had spent nearly $1.3 trillion to build a secret state-within-the-state of absolutely unprecedented size and power.

As this secret state swelled, the world’s sovereign decided that some extraordinary exceptions to civil liberties at home and sovereignty abroad were in order. The most glaring came with the CIA’s now-notorious renewed use of torture on suspected terrorists and its setting up of its own global network of private prisons, or “black sites,” beyond the reach of any court or legal authority. Along with piracy and slavery, the abolition of torture had long been a signature issue when it came to the international rule of law. So strong was this principle that the U.N. General Assembly voted unanimously in 1984 to adopt the Convention Against Torture. When it came to ratifying it, however, Washington dithered on the subject until the end of the Cold War when it finally resumed its advocacy of international justice, participating in the World Conference on Human Rights at Vienna in 1993 and, a year later, ratifying the U.N. Convention Against Torture.

Even then, the sovereign decided to reserve some exceptions for his country alone. Only a year after President Bill Clinton signed the U.N. Convention, CIA agents started snatching terror suspects in the Balkans, some of them Egyptian nationals, and sending them to Cairo, where a torture-friendly autocracy could do whatever it wanted to them in its prisons. Former CIA director George Tenet later testified that, in the years before 9/11, the CIA shipped some 70 individuals to foreign countries without formal extradition — a process dubbed “extraordinary rendition” that had been explicitly banned under Article 3 of the U.N. Convention.

Right after his public address to a shaken nation on September 11, 2001, President George W. Bush gave his staff wide-ranging secret orders to use torture, adding (in a vernacular version of Schmitt’s dictum),“I don’t care what the international lawyers say, we are going to kick some ass.” In this spirit, the White House authorized the CIA to develop that global matrix of secret prisons, as well as an armada of planes for spiriting kidnapped terror suspects to them, and a network of allies who could help seize those suspects from sovereign states and levitate them into a supranational gulag of eight agency black sites from Thailand to Poland or into the crown jewel of the system, Guantánamo, thus eluding laws and treaties that remained grounded in territorially based concepts of sovereignty.

Once the CIA closed the black sites in 2008-2009, its collaborators in this global gulag began to feel the force of law for their crimes against humanity. Under pressure from the Council of Europe, Poland started an ongoing criminal investigation in 2008 into its security officers who had facilitated the CIA’s secret prison in the country’s northeast. In September 2012, Italy’s supreme court confirmed the convictions of 22 CIA agents for the illegal rendition of Egyptian exile Abu Omar from Milan to Cairo, and ordered a trial for Italy’s military intelligence chief on charges that sentenced him to 10 years in prison. In 2012, Scotland Yard opened a criminal investigation into MI6 agents who rendered Libyan dissidents to Colonel Gaddafi’s prisons for torture, and two years later the Court of Appeal allowed some of those Libyans to file a civil suit against MI6 for kidnapping and torture.

But not the CIA. Even after the Senate’s 2014 Torture Report documented the Agency’s abusive tortures in painstaking detail, there was no move for either criminal or civil sanctions against those who had ordered torture or those who had carried it out. In a strong editorial on December 21, 2014, the New York Times asked “whether the nation will stand by and allow the perpetrators of torture to have perpetual immunity.” The answer, of course, was yes. Immunity for hirelings is one of the sovereign’s most important exceptions.

As President Bush finished his second term in 2008, an inquiry by the International Commission of Jurists found that the CIA’s mobilization of allied security agencies worldwide had done serious damage to the international rule of law. “The executive… should under no circumstance invoke a situation of crisis to deprive victims of human rights violations… of their… access to justice,” the Commission recommended after documenting the degradation of civil liberties in some 40 countries. “State secrecy and similar restrictions must not impede the right to an effective remedy for human rights violations.”

The Bush years also brought Washington’s most blatant repudiation of the rule of law. Once the newly established International Criminal Court (ICC) convened at The Hague in 2002, the Bush White House “un-signed” or “de-signed” the U.N. agreement creating the court and then mounted a sustained diplomatic effort to immunize U.S. military operations from its writ. This was an extraordinary abdication for the nation that had breathed the concept of an international tribunal into being.

The Sovereign’s Unbounded Domains

While Presidents Eisenhower and Bush decided on exceptions that violated national boundaries and international treaties, President Obama is exercising his exceptional prerogatives in the unbounded domains of aerospace and cyberspace.

Both are new, unregulated realms of military conflict beyond the rubric of international law and Washington believes it can use them as Archimedean levers for global dominion. Just as Britain once ruled from the seas and postwar America exercised its global reach via airpower, so Washington now sees aerospace and cyberspace as special realms for domination in the twenty-first century.

Under Obama, drones have grown from a tactical Band-Aid in Afghanistan into a strategic weapon for the exercise of global power. From 2009 to 2015, the CIA and the U.S. Air Force deployed a drone armada of over 200 Predators and Reapers, launching 413 strikes in Pakistan alone, killing as many as 3,800 people. Every Tuesday inside the White House Situation Room, as the New York Times reported in 2012, President Obama reviews a CIA drone “kill list” and stares at the faces of those who are targeted for possible assassination from the air.  He then decides, without any legal procedure, who will live and who will die, even in the case of American citizens. Unlike other world leaders, this sovereign applies the ultimate exception across the Greater Middle East, parts of Africa, and elsewhere if he chooses.

This lethal success is the cutting edge of a top-secret Pentagon project that will, by 2020, deploy a triple-canopy space “shield” from stratosphere to exosphere, patrolled by Global Hawk and X-37B drones armed with agile missiles.

As Washington seeks to police a restless globe from sky and space, the world might well ask: How high is any nation’s sovereignty? After the successive failures of the Paris flight conference of 1910, the Hague Rules of Aerial Warfare of 1923, and Geneva’s Protocol I of 1977 to establish the extent of sovereign airspace or restrain aerial warfare, some puckish Pentagon lawyer might reply: only as high as you can enforce it.

President Obama has also adopted the NSA’s vast surveillance system as a permanent weapon for the exercise of global power. At the broadest level, such surveillance complements Obama’s overall defense strategy, announced in 2012, of cutting conventional forces while preserving U.S. global power through a capacity for “a combined arms campaign across all domains: land, air, maritime, space, and cyberspace.” In addition, it should be no surprise that, having pioneered the war-making possibilities of cyberspace, the president did not hesitate to launch the first cyberwar in history against Iran.

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Year of the Sheep, Century of the Dragon?

Year of the Sheep, Century of the Dragon?
New Silk Roads and the Chinese Vision of a Brave New (Trade) World

By Pepe Escobar
TomDispatch
February 22, 2015

BEIJING — Seen from the Chinese capital as the Year of the Sheep, the malaise affecting the West seems like a mirage in a galaxy far, far away. On the other hand, the China that surrounds you looks all too solid and nothing like the embattled nation you hear about in the Western media, with its falling industrial figures, its real estate bubble, and its looming environmental disasters. Prophecies of doom notwithstanding, as the dogs of austerity and war bark madly in the distance, the Chinese caravan passes by in what President Xi Jinping calls “new normal” mode.

“Slower” economic activity still means a staggeringly impressive annual growth rate of 7% in what is now the globe’s leading economy. Internally, an immensely complex economic restructuring is underway as consumption overtakes investment as the main driver of economic development. At 46.7% of the gross domestic product (GDP), the service economy has pulled ahead of manufacturing, which stands at 44%.

Geopolitically, Russia, India, and China have just sent a powerful message westward: they are busy fine-tuning a complex trilateral strategy for setting up a network of economic corridors the Chinese call “new silk roads” across Eurasia. Beijing is also organizing a maritime version of the same, modeled on the feats of Admiral Zheng He who, in the Ming dynasty, sailed the “western seas” seven times, commanding fleets of more than 200 vessels.

Meanwhile, Moscow and Beijing are at work planning a new high-speed rail remix of the fabled Trans-Siberian Railroad. And Beijing is committed to translating its growing strategic partnership with Russia into crucial financial and economic help, if a sanctions-besieged Moscow, facing a disastrous oil price war, asks for it.

To China’s south, Afghanistan, despite the 13-year American war still being fought there, is fast moving into its economic orbit, while a planned China-Myanmar oil pipeline is seen as a game-changing reconfiguration of the flow of Eurasian energy across what I’ve long called Pipelineistan.

And this is just part of the frenetic action shaping what the Beijing leadership defines as the New Silk Road Economic Belt and the Maritime Silk Road of the twenty-first century. We’re talking about a vision of creating a potentially mind-boggling infrastructure, much of it from scratch, that will connect China to Central Asia, the Middle East, and Western Europe. Such a development will include projects that range from upgrading the ancient silk road via Central Asia to developing a Bangladesh-China-India-Myanmar economic corridor; a China-Pakistan corridor through Kashmir; and a new maritime silk road that will extend from southern China all the way, in reverse Marco Polo fashion, to Venice.

Don’t think of this as the twenty-first-century Chinese equivalent of America’s post-World War II Marshall Plan for Europe, but as something far more ambitious and potentially with a far vaster reach.

China as a Mega-City

If you are following this frenzy of economic planning from Beijing, you end up with a perspective not available in Europe or the U.S. Here, red-and-gold billboards promote President Xi Jinping’s much ballyhooed new tagline for the country and the century, “the Chinese Dream” (which brings to mind “the American Dream” of another era). No subway station is without them. They are a reminder of why 40,000 miles of brand new high-speed rail is considered so essential to the country’s future. After all, no less than 300 million Chinese have, in the last three decades, made a paradigm-breaking migration from the countryside to exploding urban areas in search of that dream.

Another 350 million are expected to be on the way, according to a McKinsey Global Institute study. From 1980 to 2010, China’s urban population grew by 400 million, leaving the country with at least 700 million urban dwellers. This figure is expected to hit one billion by 2030, which means tremendous stress on cities, infrastructure, resources, and the economy as a whole, as well as near-apocalyptic air pollution levels in some major cities.

Already 160 Chinese cities boast populations of more than one million. (Europe has only 35.) No less than 250 Chinese cities have tripled their GDP per capita since 1990, while disposable income per capita is up by 300%.

These days, China should be thought of not in terms of individual cities but urban clusters — groupings of cities with more than 60 million people. The Beijing-Tianjin area, for example, is actually a cluster of 28 cities. Shenzhen, the ultimate migrant megacity in the southern province of Guangdong, is now a key hub in a cluster as well. China, in fact, has more than 20 such clusters, each the size of a European country. Pretty soon, the main clusters will account for 80% of China’s GDP and 60% of its population. So the country’s high-speed rail frenzy and its head-spinning infrastructure projects — part of a $1.1 trillion investment in 300 public works — are all about managing those clusters.

Not surprisingly, this process is intimately linked to what in the West is considered a notorious “housing bubble,” which in 1998 couldn’t have even existed. Until then all housing was still owned by the state. Once liberalized, that housing market sent a surging Chinese middle class into paroxysms of investment. Yet with rare exceptions, middle-class Chinese can still afford their mortgages because both rural and urban incomes have also surged.

The Chinese Communist Party (CCP) is, in fact, paying careful attention to this process, allowing farmers to lease or mortgage their land, among other things, and so finance their urban migration and new housing. Since we’re talking about hundreds of millions of people, however, there are bound to be distortions in the housing market, even the creation of whole disastrous ghost towns with associated eerie, empty malls.

The Chinese infrastructure frenzy is being financed by a pool of investments from central and local government sources, state-owned enterprises, and the private sector. The construction business, one of the country’s biggest employers, involves more than 100 million people, directly or indirectly. Real estate accounts for as much as 22% of total national investment in fixed assets and all of this is tied to the sale of consumer appliances, furnishings, and an annual turnover of 25% of China’s steel production, 70% of its cement, 70% of its plate glass, and 25% of its plastics.

So no wonder, on my recent stay in Beijing, businessmen kept assuring me that the ever-impending “popping” of the “housing bubble” is, in fact, a myth in a country where, for the average citizen, the ultimate investment is property. In addition, the vast urbanization drive ensures, as Premier Li Keqiang stressed at the recent World Economic Forum in Davos, a “long-term demand for housing.”

Markets, Markets, Markets

China is also modifying its manufacturing base, which increased by a multiple of 18 in the last three decades. The country still produces 80% of the world’s air conditioners, 90% of its personal computers, 75% of its solar panels, 70% of its cell phones, and 63% of its shoes. Manufacturing accounts for 44% of Chinese GDP, directly employing more than 130 million people. In addition, the country already accounts for 12.8% of global research and development, well ahead of England and most of Western Europe.

Yet the emphasis is now switching to a fast-growing domestic market, which will mean yet more major infrastructural investment, the need for an influx of further engineering talent, and a fast-developing supplier base. Globally, as China starts to face new challenges — rising labor costs, an increasingly complicated global supply chain, and market volatility — it is also making an aggressive push to move low-tech assembly to high-tech manufacturing. Already, the majority of Chinese exports are smartphones, engine systems, and cars (with planes on their way). In the process, a geographic shift in manufacturing is underway from the southern seaboard to Central and Western China. The city of Chengdu in the southwestern province of Sichuan, for instance, is now becoming a high-tech urban cluster as it expands around firms like Intel and HP.

So China is boldly attempting to upgrade in manufacturing terms, both internally and globally at the same time. In the past, Chinese companies have excelled in delivering the basics of life at cheap prices and acceptable quality levels. Now, many companies are fast upgrading their technology and moving up into second- and first-tier cities, while foreign firms, trying to lessen costs, are moving down to second- and third-tier cities. Meanwhile, globally, Chinese CEOs want their companies to become true multinationals in the next decade. The country already has 73 companies in the Fortune Global 500, leaving it in the number two spot behind the U.S.

In terms of Chinese advantages, keep in mind that the future of the global economy clearly lies in Asia with its record rise in middle-class incomes. In 2009, the Asia-Pacific region had just 18% of the world’s middle class; by 2030, according to the Development Center of the Organization for Economic Cooperation and Development, that figure will rise to an astounding 66%. North America and Europe had 54% of the global middle class in 2009; in 2030, it will only be 21%.

Follow the money, and the value you get for that money, too. For instance, no less than 200,000 Chinese workers were involved in the production of the first iPhone, overseen by 8,700 Chinese industrial engineers. They were recruited in only two weeks. In the U.S., that process might have taken more than nine months. The Chinese manufacturing ecosystem is indeed fast, flexible, and smart — and it’s backed by an ever more impressive education system. Since 1998, the percentage of GDP dedicated to education has almost tripled; the number of colleges has doubled; and in only a decade, China has built the largest higher education system in the world.

Strengths and Weaknesses

China holds more than $15 trillion in bank deposits, which are growing by a whopping $2 trillion a year. Foreign exchange reserves are nearing $4 trillion. A definitive study of how this torrent of funds circulates within China among projects, companies, financial institutions, and the state still does not exist. No one really knows, for instance, how many loans the Agricultural Bank of China actually makes. High finance, state capitalism, and one-party rule all mix and meld in the realm of Chinese financial services where realpolitik meets real big money.

The big four state-owned banks — the Bank of China, the Industrial and Commercial Bank of China, the China Construction Bank, and the Agricultural Bank of China — have all evolved from government organizations into semi-corporate state-owned entities. They benefit handsomely both from legacy assets and government connections, or guanxi, and operate with a mix of commercial and government objectives in mind. They are the drivers to watch when it comes to the formidable process of reshaping the Chinese economic model.

As for China’s debt-to-GDP ratio, it’s not yet a big deal. In a list of 17 countries, it lies well below those of Japan and the U.S., according to Standard Chartered Bank, and unlike in the West, consumer credit is only a small fraction of total debt. True, the West exhibits a particular fascination with China’s shadow banking industry: wealth management products, underground finance, off-the-balance-sheet lending. But such operations only add up to around 28% of GDP, whereas, according to the International Monetary Fund, it’s a much higher percentage in the U.S.

China’s problems may turn out to come from non-economic areas where the Beijing leadership has proven far more prone to false moves. It is, for instance, on the offensive on three fronts, each of which may prove to have its own form of blowback: tightening ideological control over the country under the rubric of sidelining “Western values”; tightening control over online information and social media networks, including reinforcing “the Great Firewall of China” to police the Internet; and tightening further its control over restive ethnic minorities, especially over the Uighurs in the key western province of Xinjiang.

On two of these fronts — the “Western values” controversy and Internet control — the leadership in Beijing might reap far more benefits, especially among the vast numbers of younger, well educated, globally connected citizens, by promoting debate, but that’s not how the hyper-centralized Chinese Communist Party machinery works.

When it comes to those minorities in Xinjiang, the essential problem may not be with the new guiding principles of President Xi’s ethnic policy. According to Beijing-based analyst Gabriele Battaglia, Xi wants to manage ethnic conflict there by applying the “three Js”: jiaowang, jiaoliu, jiaorong (“inter-ethnic contact,” “exchange,” and “mixage”). Yet what adds up to a push from Beijing for Han/Uighur assimilation may mean little in practice when day-to-day policy in Xinjiang is conducted by unprepared Han cadres who tend to view most Uighurs as “terrorists.”

If Beijing botches the handling of its Far West, Xinjiang won’t, as expected, become the peaceful, stable, new hub of a crucial part of the silk-road strategy. Yet it is already considered an essential communication link in Xi’s vision of Eurasian integration, as well as a crucial conduit for the massive flow of energy supplies from Central Asia and Russia. The Central Asia-China pipeline, for instance, which brings natural gas from the Turkmen-Uzbek border through Uzbekistan and southern Kazakhstan, is already adding a fourth line to Xinjiang. And one of the two newly agreed upon Russia-China pipelines will also arrive in Xinjiang.

The Book of Xi

The extent and complexity of China’s myriad transformations barely filter into the American media. Stories in the U.S. tend to emphasize the country’s “shrinking” economy and nervousness about its future global role, the way it has “duped” the U.S. about its designs, and its nature as a military “threat” to Washington and the world.

The U.S. media has a China fever, which results in typically feverish reports that don’t take the pulse of the country or its leader. In the process, so much is missed. One prescription might be for them to read The Governance of China, a compilation of President Xi’s major speeches, talks, interviews, and correspondence. It’s already a three-million-copy bestseller in its Mandarin edition and offers a remarkably digestible vision of what Xi’s highly proclaimed “China Dream” will mean in the new Chinese century.

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