Uniting democracies has been the key international political trend of the last hundred years. Understanding this trend and enabling it to continue is the key to world political development.
New Book by Streit Council Advisory Board Member Kenneth Weisbrode
In Old Diplomacy Revisited: A Study in the Modern History of Diplomatic Transformers, historian Kenneth Weisbrode asserts that Old Diplomacyis not really that old—many of its concepts and methods date to the mid-nineteenth century—while the practices of New Diplomacy emerged only a couple of generations later. Moreover, "Diplomacy 2.0" and other variants of the post-Cold War era do not depart significantly from their twentieth-century predecessor: their forms, particularly in technology, have changed, but their substance has not. In this succinct overview, Weisbrode reminds us that to understand diplomatic transformations and their relevance to international affairs is to see diplomacy as an entrepreneurial art—and that, like most arts, it is adapted and re-adapted with reference to earlier forms. Diplomatic practice is always changing, and always continuous. To read more about this book, click here.
Kenneth Weisbrode, Ph.D., joins the Streit Council's Advisory Board. He is an Assistant Professor of History at Bilkent University, Turkey and has written and edited several books, including Old Diplomacy Revisited: A Study in the Modern History of Diplomatic Transformers; Churchill and the King: The Wartime Alliance of Winston Churchill and George VI; and The Atlantic Century: Four Generations of Extraordinary Diplomats who Forged America's Vital Alliance with Europe. He is also the co-founder of the Toynbee Prize Foundation's Network for the New Diplomatic History, and holds a Ph.D. in History from Harvard University.
New Book by Streit Council Board Member Richard Rosecrance
In The Resurgence of the West: How a Transatlantic Union Can Prevent War and Restore the United States and Europe, Richard Rosecrance calls for the United States to join forces with the European Union and create a transatlantic economic union. A U.S.-Europe community would unblock arteries of trade and investment, rejuvenate the West, and enable Western countries to deal with East Asian challenges from a position of unity and economic strength. Through this great merger the author offers a positive vision of the future in which members of a tightly knit Western alliance regain economic health and attract Eastern nations to join a new and worldwide international order. To read more about this book, click here.
At the Washington D.C. Summit on Cross Continental Cooperation, held by the Institute for Cultural Diplomacy from November 4-7, Streit Council President Richard Conn Henry reviewed the history of the Streit Council, starting with Clarence K. Streit's self-publication of Union Now just prior to World War II, and continuing with the passing of the Atlantic Union Resolution in 1964. Henry also expounded his idea on a possible Amendment to the U.S. Constitution that, if adopted, would lead to a federal union with the European Union. His proposal can be found here.
Brendan Simms, Ph.D., joins the Streit Council's Advisory Board. He is a Professor of the History of European International Relations at the University of Cambridge, and is the founder and Chairman of the Board of the think tank Project on Democratic Union, which supports a full political union of the Eurozone. He also founded and is the President of the Henry Jackson Society, a think tank dedicated to fostering a strong British and European commitment to liberty; constitutional democracy; human rights; governmental and institutional reform; a robust foreign, security, and defense policy; and the transatlantic alliance. His publications include Three Victories and a Defeat: The Rise and Fall of the First British Empire 1714-1783 (2008) and Unfinest Hour: Britain and the Destruction of Bosnia (2001).
Transatlantic Relations and Global Governance News
Topic: The Ukraine crisis and Japan
20 August 2014 – Multiple sources
An official in the U.S. Treasury confirmed today that “the U.S. and Japanese governments are completely unified” on the need for sanctions on Russia to “encourage it to stop taking steps that…are destabilizing Ukraine.” According to the Reuters report, there is now “no concern” that “Japanese banks and companies would try to take advantage of loopholes in [Western] sanctions [in order] to provide Russian companies with funding.” Meanwhile, the BBC reports that Russia’s own “clumsy efforts” to overcome its short-sighted retaliatory ban on food imports from the West are meeting with failure as “experts say [it only] appears to be making things worse.” The price of imported pork has risen 6% in Moscow, but increased a whopping 23.5% in Saint Petersburg. But this pales in comparison to the impact on prices in Russia’s rural far east where “some meats have risen by 26% and fish [prices have risen] by 40%.”
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Russian Defense Minister Vows To Strengthen Navy
19 August 2014 – Defense News
Russian defense Minister Sergei Shoigu told a general security meeting that he expected to hear a detailed report about how to bolster naval forces with more advanced weapons over the next six years, in response to NATO’s pledge to halt the Kremlin’s push into Ukraine and feared expansion into eastern Europe. Currently, Russia has only one functioning aircraft carrier that was first commissioned in the Soviet era and has been lacking both funding and knowledge to develop a more modern class. The 10 active carriers available to the United States have posed one of the biggest obstacles to Putin, who promised ahead of his 2012 third-term election to nearly double Russia’s military spending over the coming decade to 23 trillion rubles ($635 billion, €475 billion). However, Russia’s current economic downturn has seriously threatened those plans. The defense ministry’s attempts in the past two years to procure new weapons from its huge network of defense production facilities were hampered by the discovery that plants effectively lacked the technology to produce modern weaponry in any significant quantity.
Advancing Ukraine Troops Take Fight to Heart of Pro-Moscow Rebellion
19 August 2014 – Reuters
The center of the rebel stronghold city Donetsk was transformed into a war zone today as Ukrainian troops advanced into areas of the city that had not previously seen fighting. While Ukrainian forces are just beginning to penetrate deep into the heart of Donetsk, Luhansk, the other major separatist-held city, is well into its third week without water and vital supplies of electricity. Ukrainian President Petro Poroshenko and Russian President Vladimir Putin are set to meet to discuss the situation in eastern Ukraine next week - their first face-to-face meeting since June. Their meeting will be preceded by German Chancellor Angela Merkel's visit to Kiev this Saturday. While there is hope for a diplomatic solution to the conflict, the increasingly successful Ukrainian offensive has some officials worried that Poroshenko will be disinclined to offer Putin a face-saving end to the crisis and will instead press on with military action.
TTIP Update XXXV
18 August 2014 – Computer World UK
Negotiations over the Transatlantic Trade and Investment Partnership (TTIP), an EU-U.S. free trade agreement, will resume in September. Investor protections in the agreement allow corporations to file lawsuits in international courts against governments for regulatory changes that incur losses. A completed text of the Canada-EU free trade agreement, officially known as the Comprehensive Economic and Trade Agreement (CETA), has been leaked and contains a similar investor protection provision. American companies could sue European governments under the CETA through Canadian subsidiaries. Tobacco multinational Philip Morris has used protections in previous treaties to sue governments over new health and tobacco advertising policies. Despite European Commission assurances that chlorine-washed chicken or hormone-injected beef will not be allowed into the EU under the TTIP, the issue still concerns many.
Topic: European Union Subsidizes Farmers Affected by Russian Agricultural Ban
18 August 2014 – Multiple sources
The European Union will provide farmers with €125 million until the end of November to ease the shock of Russia’s sanctions on agricultural products. Vegetables, fruit, dairy, meat, and fish from the United States, European Union, Australia, Norway, and Canada are excluded from the Russian market. €1.26 billion worth of fruit, €1.35 billion worth of dairy products, €769 million worth of vegetables, and €1.23 billion worth of meat and sausages were exported from the EU to Russia in 2013. Farmers who produce certain goods will be entitled to apply for this support. The Common Agricultural Policy (CAP) consists of €420 million emergency fund for economic shocks. With inflation at low levels since last November, the European Union does not want an excess supply of food to further lower prices. Some farmers will be compensated for not harvesting their goods. This will reduce supply. Others who give their produce to charities will be compensated in full by the EU. Bulgaria, Lithuania, the Netherlands, and Poland are particularly vulnerable given their previously high volumes of exports in agricultural goods.
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German envoy to Turkey summoned over spying allegations
18 August 2014 – BBC
The Turkish foreign ministry has summoned the German ambassador over reports of the German secret service, BND, eavesdropping on conversations between officials in the U.S. and Turkey. The report also claims a document from 2009 showed that Germany identified Turkey as a prime surveillance target. Turkey has demanded a "satisfactory explanation" from its NATO ally. According to Der Spiegel, a document from 2009 showed that Germany identified Turkey as a “prime surveillance target.”
IAEA expects progress by deadline in Iran nuclear inquiry
18 August 2014 – Reuters
According to International Atomic Energy Agency (IAEA) Director General Yukiya Amano, Iran has “begun implementing nuclear transparency measures” that will bring it into compliance with the organization’s mandates. Directro Amano “expect[s] that progress will be made over the next week” because he believes that he has obtained a “firm commitment” from the Iranian leadership to take the necessary steps to allay Western concerns that the country is using its “disputed nuclear program” to develop a nuclear weapon.
Dozens Killed in Attack on Convoy Ukraine Says; Rebels Deny Firing Rocket
18 August 2014 – Reuters
After Russian, Ukrainian, French, and German foreign ministers failed to come to an agreement on a ceasefire during talks held in Berlin on Sunday, a convoy of buses carrying civilians fleeing fighting in eastern Ukraine was hit today by rocket fire. Ukrainian officials report that dozens of people, including women and children, have been killed. The Ukrainian military accuses pro-Russian rebel forces of firing Russian-made Grad missiles at the buses. The separatists refute these claims, saying that they do not have the capability of carrying out such an attack, and point out that Ukrainian forces have been using Grad rockets in eastern Ukraine. The attack on the convoy comes just after Ukrainian forces recaptured parts of the rebel-held city of Luhansk and were able to raise the Ukrainian national flag over the city. Luhansk was a rebel stronghold held by militants since April, and its fall may signal the coming defeat of pro-Russian rebels.
Belarussian oysters anyone? EU food trade looks to sidestep Russian ban
17 August 2014 – Reuters
Some European food exporters hope to circumvent Russia’s agricultural products ban by rerouting their goods through countries not targeted by the sanctions. Countries neighboring Russia could benefit from greater trade flows. Belarus and Kazakhstan have a customs union with Russia. “Of course there’s going to be a black market. They will still want their French…cheese and they’re still going to be able to get it,” said PDQ Specialist Couriers Director Luke Devlin. Belarus and Kazakhstan will continue to import EU food products. However, the Belarussian agricultural ministry said exporters are required to identify where their products come from. Switzerland, Serbia, and Turkey may be other possible options. Russians visiting European countries will be able to bring back food products for personal use. While this means there will be some agricultural trade between the EU and Russia, one Russian was arrested recently for bringing back 70 kg of pheasant, boar, and duck.
U.S. banks plan ahead for UK exit from EU
17 August 2014 – The Financial Times
American banks plan to move some of their operations to Ireland if the United Kingdom leaves the European Union in 2017. Many Asian and American banks are based in the UK, as it provides access to the European Single Market. “I don’t think people are making enough of it—a lot of…activities that cannot take place in London will not exist here anymore,” said one American bank executive. “I’m frankly looking at moving some activities to Ireland,” an American bank manager in the UK said. The European Union’s new banking union will soon come into effect, and the European Central Bank will become the Eurozone bank regulator. This could be a further divergence between the British and European financial systems, and U.S. banks are also considering their options on this issue.
Kiev says forces destroyed Russian armor inside Ukraine
15 August 2014 – Reuters
The Ukrainian government claims its artillery destroyed part of a Russian armored column heading that entered its territory. NATO confirmed the incursion, but has stopped short of calling it an invasion. The Russian government denied the allegation, accusing Ukraine of preventing the delivery of humanitarian supplies to areas devastated by fighting. Instead, Russian Defense Minister Sergei Shoigu said Moscow is “seriously concerned” about NATO activity and seeks a ceasefire to get into Ukraine. If confirmed, the incursion could trigger a new round of sanctions on Russia.
Iraq crisis: EU condemns “atrocities” by IS militants
15 August 2014 – BBC
A group of EU foreign ministers are holding an “emergency meeting” today in order to decide whether, and how, they will “arm [Iraqi] Kurds against [the Islamic State] insurgency.” The U.S. and France have already begun providing weapons to the Kurds, in addition to the U.S.’s “limited airstrikes against [Islamic State] targets,” but this is not enough, says French foreign minister Laurent Fabius who admonished the rest of the Union for its inaction. “When there are people dying,” Mr. Fabius said, “you have to come back from your holidays.” For their part, several EU countries are coming around to Mr. Fabius’ position. The UK says it will “favourably [sic] consider” arms requests from the Kurds, while the Czech Republic is already “working ‘on the preparation of military supplies’ to [send to] the Kurds.” Germany may be harder to convince, as it has so far only pledged “non-lethal military aid” to the Iraqi army.
ECB survey finds deflation fears unwarranted
14 August 2014 – Deutsche Welle
The European Central Bank released the results of a survey of 59 financial gurus on Thursday. The report said the experts did not see a significant risk of deflation. On the contrary, inflation is believed “to be on an upward sloping path over the next few years as a result of the recovery in real economic activity and an unwinding of the downward impact of previous oil, food and exchange rate developments.” “In addition, stable inflation expectations and wage growth, although moderate, are considered to provide a floor to inflation,” the bank’s report also read. Eurozone inflation has been low for a long time. Inflation dropped from 0.5% in June to 0.4% in July. This is the lowest it has been since the end of 2009. The most recent statistics already show deflation in Greece, Spain, Portugal, and Slovakia. Deflation discourages consumer demand and corporate investment.
Euro zone economy grinds to halt even before Russia sanctions bite
14 August 2014 – Reuters
Second quarter Eurozone GDP neither improved nor contracted on the first quarter. The recovery has seen choppy growth, and the economy is vulnerable to external shocks—particularly European and Russian sanctions. Northern and southern European countries are locked in a battle over whether to prioritize debt reduction or employment and economic growth. French Finance Minister Michel Sapin said: “We must adapt the pace of deficit reduction to the exceptional situation…of growth that is too weak everywhere in Europe and the exceptional situation of inflation that is too weak across Europe.” Bundesbank President Jens Weidmann has rejected calls for further action from the European Central Bank. A survey by Reuters demonstrated that many economists think there is only a low chance that the ECB will introduce quantitative easing this year. With the escalation of the crisis in Eastern Europe, a third quarter recovery looks less likely.
U.S. trade deal might loosen Europe’s chemical safety rules
13 August 2014 – McClatchy
American chemical companies have found it difficult to enter the European Single Market because of more stringent European Union chemical regulations. The Transatlantic Trade and Investment Partnership (TTIP), a free trade agreement currently under negotiation between the United States and EU, could weaken EU chemical regulations. The TTIP will not only eliminate tariffs but also harmonize regulatory differences between the U.S. and EU in an attempt to cut costs for businesses working on both sides of the Atlantic. The EU prohibits a number of chemicals available in the U.S. that are associated with birth defects and cancer. For instance, potassium bromate, which is considered a carcinogen in the EU, is used in baking in the U.S. Society of Chemical Manufacturers Vice President Bill Allmond described EU regulations as “another enormous barrier to trade,” which the U.S. “industry cannot afford.” “The Europeans are not very keen on modifying their chemical directive,” said trade policy expert Gary Clyde Hufbauer of the Washington-based Peterson Institute for International Economics.
Syrian army takes town near Damascus in blow to rebels
14 August 2014 – Reuters
In a setback for the Syrian rebels, the combined forces of Bashar al-Assad and Hezbollah “almost [wrested away] full control” of the town of Mleiha, Reuters reports. Mleiha, which is only about four miles from Damascus, had been a “base” of sorts for rebel fighters, who used it “as a position from which to bombard the capital with mortars,” but Syrian state television asserts that “the [Syrian] army [is] achieving qualitative progress [and is] liquidating a large number of [rebels in the process].” This appears to be another in a string of recent victories for the Syrian army, which has “consolidated Assad's grip over central Syria and along the border with Lebanon.”
Euro-Zone GDP Fails to Grow in Second Quarter
14 August 2014 – The Wall Street Journal
Eurozone Gross Domestic Product neither grew nor contracted on the previous quarter in the second quarter of 2014. The Eurozone’s annual growth rate stands at 0.2%. The Italian, Cypriot, and German economies contracted. After a mild German winter facilitated construction and bolstered German first quarter GDP, it was expected that output would fall in the second quarter. The French and Czech economies stagnated. Latvia witnessed the highest growth rate at 1%. While the United Kingdom and United States have regained the output they lost in the financial crisis, the Eurozone is still 2.4% below its 2008 output. While second quarter GDP figures provide no indication as to the effects of this month’s European and Russian sanctions, recent surveys show a significant decline in German economic confidence. French President Francois Hollande wants to cut the country’s budget deficit to 3.8% of GDP this year. This is an unlikely goal, however, as output is only anticipated to grow at 0.5% and not the 1% that would make such a goal feasible.
NATO Nears Agreement on Beefing Up Presence in Eastern Europe
13 August 2014 – Reuters
According to Polish Foreign Minister Radoslaw Sikorski, NATO states are close to an agreement on increasing the organization's presence in eastern Europe. NATO officials have proposed pre-positioning supplies and equipment in countries such as Poland in order to expedite the process of moving troops into eastern Europe if necessary. Sikorski has suggested permanently positioning two brigades in eastern NATO states, but it seems unlikely at this point that his proposal will be taken up. NATO convenes on September 4th for a summit in Wales, and officials from the organization hope to reach a consensus among member states by that time on what military actions to take in response to Russian aggression in eastern Ukraine.
More Philip Morris Style Cases is the Very Point of the Transatlantic Trade and Investment Partnership
13 August 2014 – Forbes
Corporations invest in countries for a number of reasons including favorable laws. Governments can change these laws to the detriment of corporate investments at any time. They can even nationalize corporations without compensation for losses. Investor protections in the EU-U.S. and EU-Canada free trade agreements allow corporations to file lawsuits against governments in impartial international courts for losses resulting from policy changes. Compensation for legal or regulatory changes that incur corporate losses could encourage foreign direct investment. National court systems are impartial to their respective nations, and thus compensation for losses would be determined by international tribunals.
EU’s East Braced for Sanctions Pain With GDP Set to Slide
13 August 2014 – Bloomberg
With a significant slowdown in the Eurozone recovery, Eastern European economies will particularly suffer if the Ukrainian crisis escalates further and more sanctions are imposed. While the Russian ruble has depreciated the most against the euro, the Hungarian forint, Czech koruna, and Polish zloty have also performed poorly. Morgan Stanley said the region is “vulnerable to a protracted conflict, especially in case of further escalation.” Russia has banned Lithuanian exports that account for 2.5% of its GDP. Hungarian Premier Viktor Orban has encouraged trade with Russia at the expense of Eurozone trade since 2010. Russia has loaned Hungary €10 billion to make an addition to a nuclear power plant. Hungary’s largest pharmaceutical company exports more of its products to Russia than any other market.
French to Arm Kurds as Europe Steps up Effort in Iraq
13 August 2014 – Bloomberg
France has joined the United States in becoming the second country to openly supply arms to the Kurdish regional government in an effort to bolster the Kurds against the advancing Islamic State in Iraq and Syria (ISIS). Though the U.S. has indicated that other countries in the region are also helping to supply weapons, none are doing so openly. Other European nations, such as Germany and the UK, are supplying humanitarian aid to the Kurds and to besieged Iraqi Christians and Yezedis facing genocide at the hands of ISIS. Plans are underway to evacuate the threatened minority groups by means of either a ground corridor or a mass airlift, but the terrain in area and the presence of militants complicate the humanitarian maneuvers. Following French and Italian calls for an EU-wide meeting on the situation in Iraq, EU foreign policy chief Catherine Ashton will likely convene the EU's foreign ministers this Friday.
Ukraine accuses Russia of cynicism over convoy; death toll rises sharply
13 August 2014 – Reuters
Ukraine’s Prime Minister Arseny Yatseniuk condemned Russia’s supposed “humanitarian aid convoy” at a government meeting today, calling it “an act of Russian ‘cynicism.’” Mr. Yatseniuk attempted to highlight the absurdity of Russia’s actions, saying that “[its] cynicism knows no bounds [because first] they send tanks…and bandits who fire on Ukrainians and then they send [them] water and salt.” Indicating that this is a government-wide rebuke, Interior Minister Arsen Avakov flatly declared that the convoy is tantamount to “provocation by a cynical aggressor” and that it “will [not] be allowed across the territory of Kharkiv region.”
Russia Begins Military Exercises in Island Chain Partly Claimed by Japan
12 August 2014 – Voice of America
Russia began military exercises in the Kurile Islands, a Pacific island chain partly claimed by Japan, dealing a potential blow to Japanese Prime Minister Shinzo Abe's efforts to keep the door open to dialogue with Moscow despite strains over the Ukraine crisis. Colonel Alexander Gordeyev, a spokesman for Russia's Eastern Military District, said more than 1,000 troops, five Mi-8AMTSh attack helicopters and 100 other pieces of military hardware would be involved in the maneuvers. A Japanese foreign ministry official in Tokyo said the ministry was checking whether the exercises were taking part on islands that Japan considers its territory. The islands are known as the Southern Kuriles in Russia and the Northern Territories in Japan. The dispute has strained relations Japan and Russia since the end of World War II, when Soviet forces occupied the four islands at the southern end of the Kurile chain. The row has prevented the two countries from signing a formal peace treaty.
Russia to Boost Trade with Egypt
12 August 2014 – Voice of America
Russia will increase exports of wheat to Egypt and imports of other agriculture products from it, the two countries discussing the potential for free trade following the banning of most food imports from the United States, the European Union, Australia, Canada and Norway last week in retaliation for Western sanctions over the crisis in Ukraine. Increased Egyptian shipments of products such as potato, onion, garlic and oranges will compensate for up to half of the shortfall of these products caused by the ban. Egypt is currently the world's biggest wheat importer and the largest buyer of Russian wheat. The North African country bought 3.6 million tons of Russian wheat in the marketing year to end-June. Putin and al-Sisi discussed on Tuesday the creation of a free trade zone between Egypt and the Moscow-led Customs Union of Russia, Belarus and Kazakhstan.
Ukraine Crisis Takes Toll on Germany’s Economy, Powerhouse of the Eurozone
12 August 2014 – The New York Times
Some observers predict Eurozone GDP to increase by 0.1% on the first quarter in the second quarter of 2014. Eurostat, the European Union statistical agency, is to release GDP figures on Thursday, August 14. German economic confidence has reached its nadir since December 2012, German economic research institute ZEW announced on Tuesday. Further escalation of the conflict in Ukraine and the sanctions war between Russia and the West could send the Eurozone into recession in the second half of the year. European Central Bank President Mario Draghi said Europe would be most adversely affected by the crisis after the ECB’s policy meeting last Thursday. Economist Carsten Brzeski of ING Group said increasing domestic consumption should be a priority for European officials to offset Russian sanctions. With Russia being one of Germany’s main trade partners, the country is particularly vulnerable. The Eurozone officially came out of recession in the second quarter of 2013. However, growth has been very sluggish, and the London-based Center for Economic Policy Research described the recovery as a “prolonged pause” in the recession. France is on the edge of recession, while the Italian economy is already contracting. Federal Reserve Vice Chairman Stanley Fischer said the slowing recovery in Europe hindered U.S. economic growth.
Five Things to Know Ahead of the Eurozone GDP Report
12 August 2014 – The Wall Street Journal
Second quarter German GDP will likely be down 0.1% on the last quarter. The economy grew by 0.8% in the first quarter compared with the last quarter of 2013. Western and Russian sanctions bode ominously for the second half of the year. French GDP is predicted to grow by 0.1% this quarter compared with the last. The Italian economy is already experiencing another contraction, while the Spanish economy grew at a quarterly rate of 0.6% in the second quarter. ECB President Mario Draghi thinks countries that have implemented structural reforms will fare better; Portugal’s GDP growth rate will give one an indication as to whether this theory is correct. While the United States and United Kingdom have achieved pre-crisis GDP levels, Eurozone GDP is still well below its 2008 pre-crisis zenith. The ECB’s Eurozone growth estimate for 2014 still stands at a very optimistic 1%. The ECB has been pressed to implement quantitative easing.
Ukraine May Block Russian Humanitarian Aid Convoy
12 August 2014 – BBC
280 trucks have departed from Moscow in the direction of the Ukrainian border laden with what Russian officials describe as almost 2,000 tons of humanitarian aid including grain, baby food and medicine. The supplies are intended for the residents of the increasingly cut-off Luhansk region, where thousands are facing food and power shortages. Russia already has 45,000 troops massed on the Ukrainian border, and NATO Secretary-General Anders Fogh Rasmussen said yesterday that Russia could use humanitarian assistance as a pretext for a military invasion of Ukraine. Therefore, Ukrainian officials insist that the convoy stop at a government-controlled border crossing and transfer all the cargo to the control of the International Red Cross. Although Russian President Vladimir Putin announced yesterday that the Russian humanitarian mission is cooperating with the Red Cross, officials from the humanitarian organization clarified today that their organization was not yet cooperating fully with the Russian mission.
EU plans Russia sanctions talks with Latin American countries
11 August 2014 – FT
The EU plans to hold talks with countries such as Brazil and Chile to dissuade them from stepping in to replace Europe’s banned agricultural exports to Russia. Since banning food imports from the EU and the U.S. last week, Russia has been courting Latin American replacements. Several countries and trade groups in South America have said that Moscow’s measures could offer them a lucrative windfall. Seneri Paludo, Brazil’s secretary for agricultural policy, said Russia’s embargo could also allow Brazil to export more corn and soyabeans to the country and that Brazil has authorized about 90 new meat plants immediately to start exporting chicken, beef and pork to Russia. Chile is also tipped as a leading beneficiary of Russia’s embargo on European fish. While individual companies could sign new contracts with Russia, it would “be difficult to justify” countries pursuing diplomatic initiatives to fill the gap left by the EU, the U.S., Norway and Australia.
Do Trade Sanctions Work? One Economist Tackles a Question for our Time
11 August 2014 – The International Business Times
When Iran was prohibited from exporting goods to the United States and Europe in 2006, the country rerouted exports to other markets including Afghanistan, Brazil, China, India, Nigeria and South Africa. Despite having to drop prices, monthly non-oil exports have risen from just over $1.5 billion in early 2006 to over $2.5 billion in 2011. Non-oil products were used to determine the effectiveness of trade sanctions in part because western oil companies were not fully barred from purchasing Iranian oil until 2012. Economist Jamal Ibrahim Haidar of the Paris School of Economics argues that Iran only approached the negotiating table when it was cut off from the SWIFT network in 2012. Investors use the telecommunications network to transfer information on financial transactions. Financial sanctions appear to have a more punitive effect on countries than trade sanctions. Europe can export find new markets for its agricultural products assuming its farmers are willing to lower prices. Russia has been prohibited from amassing capital on European markets.
Ukraine May Force Changes in Russian Gas Transit to Europe
11 August 2014 – Reuters
Ukrainian Prime Minister Arseny Yatseniuk announced that parliament would debate imposing sanctions on Russia that could affect Russian banks and the flow of Russian gas through Ukraine. The European Union depends on Russian gas piped through Ukraine for about one-sixth of its total natural gas needs. Spokespeople for the Ukrainian gas grid Naftogaz said today that they are confident that Russian gas could continue to be piped through Ukraine to the rest of Europe even if such sanctions are imposed. Currently, European countries purchase gas from Russia at Ukraine's western border with the European Union, but Naftogaz officials say that their company will be able to continue pumping gas through Ukraine if European countries purchase the gas at Ukraine's eastern border. If the sanctions are passed, they will put increased pressure on gas sources in other European countries.
11 August 2014 – Multiple sources
Amid the turmoil caused by the advance of the jihadist Islamic State, Iraqi prime minister Nouri al-Maliki stated today, in the face of widespread opposition, that he intends to “stand for [election to] a third term.” According to the BBC, this comes after a “public snub” by Iraqi President Fouad Massoum, who called on deputy parliament speaker Haider al-Abadi to “form a new government” that can better “protect the Iraqi people.” Meanwhile, Reuters reports that forces loyal to Maliki “took up strategic positions” in the capital, indicating that he has no intention of bowing to U.S. pressure not to “block popular demands for change.” Nouri al-Maliki will find “little international support” for his maneuvers, according to U.S. Secretary of State John Kerry. A State Department spokeswoman added that the U.S. “reject[s] any effort to achieve outcomes through coercion or manipulation of the constitutional…process” and that it “‘fully supports’ [President] Masoum [sic] as guarantor of Iraq's constitution.”
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Sanctions will deepen euro area deflation
10 August 2014 – CNBC
Russia’s ban on agricultural products will create excess supply in Europe and therefore weaken inflation even further. A major French agriculture lobby wants surplus production taken off the market. Reduced food prices would hurt already greatly subsidized European farmers. One Dutch news source said the price of spinach in Zaltbommel fell by €0.30 a kilogram in the aftermath of Russia’s announcement. Farmers affected by Russian sanctions could receive up to €400 million, the European Union said. Despite Russian threats for months, the European Union seems surprised and ill-prepared to limit the negative consequences of Russia’s agricultural sanctions. A European Commission group is trying to analyze the consequences of the sanctions.
Putin’s European Food Ban Bad For Russia, Good For Brazil
10 August 2014 – Forbes
Russia will lose the most from its ban on agricultural products from Western countries, economist Craig Botham of Schroders said. On the other hand, Brazil, the world’s largest meat exporter, will reap the benefits. “Russia’s embargo on agricultural products is more likely to negatively impact the Russian economy than it is those it used to import from,” he said, adding that “[d]omestic consumption exceeds production for a number of the banned items, so Russia will not be able to fill the gap domestically.” Increasing domestic yields will take time and the ban is effective immediately; thus, Russia must quickly find alternative and probably more expensive importers. Russia is particularly dependent on Western countries for poultry, pork, and dairy products. The greatest threat would be the further escalation of sanctions and countersanctions. If Russia cut off energy exports to Europe, European energy prices would skyrocket, and Russia would lose its main source of revenue. The sanctions could push inflation, already above 7%, even higher. The central bank has currently set rates at 8%. In the past month the Russian ruble has fallen 6.7%.
Something’s got to give in Italy: better it be Draghi with a bag of cheap loans
10 August 2014 – The Guardian
European Central Bank President Mario Draghi criticized his fellow countrymen in a speech last month in London. Italy, which holds the Council presidency, persuaded Germany to be more flexible in the application of the Stability and Growth rules in exchange for backing Juncker as the next Commission president. However, Draghi said that enforcement of the rules, and not flexibility, were important to maintain Eurozone stability. He said: “To unwind the consolidation that has been achieved, and in doing so, divest the rules of credibility, would be self-defeating for all countries.” At the latest ECB policy meeting last Thursday, Draghi said he was preparing for the possible future use of quantitative easing, but that it was still not necessary at the current time. However, the French, Dutch, and Italian economies are in a poor state and need quantitative easing now. Draghi wants sweeping labor market reforms, greater ease of business, and an end to uneconomical subsidies.
Afghans sign unity government deal with U.S. backing
8 August 2014 – BBC
After accusations of irregularities and amid fears that partisan elements would attempt to form a parallel government, the two contenders in Afghanistan's presidential election, Ashraf Ghani and Abdullah Abdullah, have signed an agreement to "form a united government." It is not yet known what this power sharing agreement will entail, but both sides appear to be pleased with the deal. Mr. Abdullah called it "another step [toward] strengthening national unity [and the] rule of law in the country" and Mr. Ghani agreed, stressing that it is most important now to focus on "[what] unites us.""
Russia Arrests Ukrainian Officers for “War Crimes”
8 August 2014 – BBC
On Sunday, around 400 Ukrainian troops crossed into Russian territory, and though many have been escorted back across the border, Russian authorities that they intend to charge five Ukrainian officers with war crimes. While the jurisdiction and mechanism with which Russia would prosecute these officers is unclear, Russia is alleging that they were responsible for the deaths of civilians in the Luhansk region. While the five officers admit that they took part in campaigns in the Luhansk region, they deny that they used heavy weapons to bombard houses containing non-combatants. The fate of the officers is, at this point, unclear.
Draghi on rates and Russia - ECB press conference as it happened
7 August 2014 – The Guardian
The European Central Bank took no action at its latest policy meeting ahead of President Mario Draghi’s Italian vacation. However, Draghi has hired a consultant to design a quantitative easing scheme and said the bank will implement it if the outlook changes in the medium-term. Draghi also said it was “likely” that a capital markets union would be established in the future. This might mean the introduction of Eurobonds. The bank’s June stimulus measures have led the euro to depreciate, while low inflation has worsened by 0.01% due to lower energy prices. While short-term inflation predictions have become less optimistic, Draghi said long-term they are still the same. Competitiveness in the Eurozone has increased due to structural reforms, he said. The Bank of England kept its main interest rate at 0.5%.
In Reprisal, Russia Imposes Trade Sanctions on the West
7 August 2014 – New York Times
Russian Prime Minister Dmitri Medvedev announced today that Russia is imposing a one-year ban on the import of all beef, pork, fruit, vegetables, and dairy products coming from the United States, the European Union, Canada, Australia, and Norway. Currently, Russia imports about a quarter of its food - 75%, or roughly $30 billion – of which comes mainly from the EU and the U.S. Banking officials therefore expect the ban to produce at least a short-term negative effect on the Russian economy as the country finds alternate producers, but these effects are projected to be moderate. Russia is also considering reimposing a Soviet-era policy barring western airlines from using Russian airspace, a move that would increase flight times and prices globally. The food ban is seen as retaliation against Western sanctions on Russia that have been steadily increased as a result of the ongoing Russian-supported conflicts in Crimea and eastern Ukraine.
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