Monday, July 30, 2012

Negotiating the World’s Cyber Frontier

RSIS presents the following commentary Negotiating the World’s Cyber Frontier by Benjamin Ho and Jennifer Yang Hui. It is also available online at this link. (To print it, click on this link.). Kindly forward any comments or feedback to the Editor RSIS Commentaries, at RSISPublication@ntu.edu.sg


No. 138/2012 dated 30 July 2012

Negotiating the World’s Cyber Frontier

By Benjamin Ho and Jennifer Yang Hui

Synopsis

The increasingly networked nature of the world has given rise to concerns over the use of cyberspace for global conflict. More and more countries are shoring up their cyber defenses against would-be aggressors. But with modern international relations largely defined by Westphalian rules of engagement, negotiating cyber frontiers will prove challenging.

Commentary

IN THE PAST MONTH security experts have uncovered the existence of a Mahdi trojan, a new Persian-language cyber spy network targeting Iran and diplomatic missions of several Middle Eastern nations. The campaign, which is believed to have started some eight months ago allow remote attackers to steal files from infected PCs, monitor emails and record key strokes, among others.

This latest discovery comes on the heels of an attack on Iranian network infrastructure in May by a computer virus known as Flame, a similar software said to be 20 to 40 times more powerful than Stuxnet, a worm which infiltrated Iranian uranium infrastructure in 2010. Notwithstanding Tehran’s charge that these attacks were the work of US and Israeli spy agencies, both countries have not publicly admitted responsibility for these actions.

With the multiplication of computer viruses that could reach transnational targets, governments have begun to ponder the feasibility of moving the governance of the cyberspace to a post-Westphalian model. Named after the Treaty of Westphalia that was signed in 1648, the existing system has guaranteed the principle of the sovereignty of states and the fundamental right of political self-determination, the principle of legal equality between states as well as the principle of non-intervention of one state in the internal affairs of another state. Moving forward, this may not be tenable.

Whither the ‘Nation State’?

One of the key challenges in cyberspace today is the problem of attribution. The nature of cyber attacks and cyberinfrastructure often spans several political jurisdictions, making it difficult to accurately pinpoint the national identity of a hostile agent. The multiple denial-of-service attacks carried out against Estonia in April and May 2007 highlighted the complicated nature of cyber warfare and the ambiguity surrounding international regulation.

Unlike armed conflict which is covered under the United Nations Charter (UNC) and customary international law, there is at present no clear or comprehensive framework within which states are able to shape policy responses to the threat of hostile cyber operations. The emphasis on preserving the state’s territorial integrity means that anything other than an armed attack is not expressly prohibited by international law.

The conduct of war in an age of cyberspace can be equally problematic. The provisions of the Geneva Convention necessitate a distinction between combatants and noncombatants in a battle. With cyberspace, however, this distinction becomes increasingly blurred. As Sun Tzu pointed out, the adept in warfare are able to subdue the army of the enemy without having resort to battles. In this respect, the ability to strike at the plans and strategies of the enemy, without attacking his cities is viewed as the supreme objective in war. Accordingly cyberspace opens up an entirely new battlefield as far as national security is concerned. The offensive player is now able to utilize greater means by which to wage war against his enemy. These include: intelligence gathering (open source or signals), information piracy, superimposition fraud, and perception management (sometimes known as psychological operations).

Furthermore, the increasing interconnectedness of information systems vital to a country’s critical infrastructure and the dual usage of such systems render discrimination far more complex in cyberspace than physical space. It may be extremely difficult to distinguish, for instance, the code in a computer that governs delivery of power to an early warning radar system (which may be a lawful target of a cyber attack) from the code that controls power to a hospital’s intensive care unit. The risk of unintended consequences and the possibility of collateral damage further complicate the targeting picture.

The Human Factor

While the Stuxnet attack demonstrated the possibility of remote control of a nation’s technological apparatus, this capacity would not have been possible without the meticulous reconnaissance of Iranian physical and technological architecture. According to a Stuxnet dossier released by Symantec, the attackers, among others, would have to (i) gain access to the schematics of the industrial control systems (ICS); (ii) set up a mirrored environment that include the necessary ICS hardware; (iii) obtain the digital certificates to avoid detection; and finally, (iv) introduce Stuxnet into the target environment, most likely by removable drive. All these suggest that substantial human effort is required.

Cyberspace has allowed the human factor to be amplified many times; a security breach from a single employee can potentially affect the entire system. Ironically, this results in a situation where a technologically advanced country has more to lose than a less endowed adversary. Existing vulnerabilities become more pronounced and state secrets can be easily broken as a result of individual negligence. Indeed, the usual categories related to national security - imposed by the Westphalian markers of geography and territory – becomes less salient in an age of cyberspace as state borders become increasingly porous.

Commanding Cyberspace

In July 2011, the US Department of Defense announced that it was developing strategies for operating in cyberspace, thus highlighting the importance of cyberspace as an operational domain in matters of national security. Other technologically advanced countries such as South Korea, the United Kingdom and Singapore have all invested substantial efforts in boosting their cyberspace capabilities.

Indeed, the past two decades have witnessed the unprecedented – and ubiquitous - influence of cyberspace on political and diplomatic affairs. From the development of net-centric concepts and defense transformation in the military to the use of technology in myriad facets of national policy (counterterrorism, financial systems, provision of energy), cyberspace has become an indispensable medium for achieving national objectives. The future will witness a more challenging cyber-environment for states to operate within; rethinking Westphalian norms of command and control is urgently needed.


Benjamin Ho Tze Ern is an Associate Research Fellow in the Centre for Multilateralism Studies and Jennifer Yang Hui is an Associate Research Fellow in the Centre of Excellence for National Security, both at the S. Rajaratnam School of International Studies (RSIS).

Sunday, July 29, 2012

Myanmar and North Korea: Birds of a feather on different paths?

RSIS presents the following commentary Myanmar and North Korea: Birds of a feather on different paths? by Kyaw San Wai and Ong Suan Ee. It is also available online at this link. (To print it, click on this link.). Kindly forward any comments or feedback to the Editor RSIS Commentaries, at RSISPublication@ntu.edu.sg

No. 137/2012 dated 27 July 2012

Myanmar and North Korea:
Birds of a feather on different paths?

By Kyaw San Wai and Ong Suan Ee

Synopsis

Myanmar and North Korea, after decades of isolation, have embarked on divergent paths following recent leadership changes. Will North Korea follow Myanmar’s return to the international community?

Commentary

Myanmar and North Korea have been East Asia’s pariah states for much of the past decade. Both underwent recent leadership changes and appear to be pursuing different paths on the international stage. The military junta which ruled Myanmar for the past twenty years transferred to a nominally civilian government led by President Thein Sein, its former Prime Minister. In North Korea, Kim Jong-Un was propelled into leadership by the death of his father, Kim Jong-Il. Whereas the Thein Sein administration has undertaken political and economic reforms, Kim Jong-Un has only hinted at potential change. Is it wise to tie these hints of North Korean change to hopes that it may follow Myanmar’s reformist lead?

Similarities and Differences

Myanmar and North Korea share certain similarities besides pariah status. The military remains the dominant political institution in both states. Both countries have been ruled by eccentric, isolationist authoritarian regimes for much of their post-independence histories. Disastrous economic policies have prevented these two resource-rich countries from achieving their economic potential. Myanmar and North Korea now have the lowest incomes in the region and are ranked 21st and 22nd respectively on the Fund for Peace and Foreign Policy’s 2012 Failed States Index. Both countries have poor human security records. There are also concerns of both states’ nuclear weapons programmes and ambitions.

Certain differences exist too: Myanmar has more interactions with the global community in the form of (limited) tourism, trade, (controlled) foreign media and literature exposure, and overseas Burmese communities. North Korea jealously guards its isolation and the state has been mostly successful in controlling information flows to the public, though this is changing due to the growing porousness of the Sino-North Korean border. Myanmar’s ASEAN membership has helped prevent complete diplomatic isolation, but North Korea has no similar multilateral ties.

Can North Korea follow?

Myanmar is undertaking a precarious course of both political and economic reforms in the face of a flare-up of civil war and communal unrest. For North Korea, the reforms will likely be economic, not political. Myanmar is also open to outside help and technical input, while North Korea appears unreceptive, still singing the hymn of self-sufficiency.

Some observers claim the Thein Sein administration is plagued by a reformist-hardliner split. Hardliners, either profiting from crony capitalism or against the erosion of military dominance, have reportedly stymied Thein Sein’s reforms. In North Korea, Kim Jong-Un will face similar setbacks should he embark on reforms which threaten the privileges of his father’s loyal apparatchiks.

Another obstacle is North Korea’s behemoth military, beneficiary and upholder of the Songun (military first) tradition. Similar to the Burmese Tatmadaw, the Korean People’s Army receives the lion’s share of the national budget and has influenced (if not outright dictated) government policy in other arenas. The military has much to lose in the event of reform, and will likely try its utmost to preserve its socio-political dominance. Myanmar, meanwhile is slowly trimming its military budget and the new commander-in-chief has both supported reforms and defended the military’s political role.

North Korea, like all communist countries, is heavily centralised. It also lacks civil society, opposition parties and popular intellectual exchanges with the outside world, and main decision-making is entrusted to (and entrenched within) the upper echelons of leadership. Hence, the impetus and approval for change must come from the youthful leader himself.

Will North Korea follow?

Even from the perspective of regime security or anchoring Kim Jong-Un’s legacy, there remain many reasons for North Korea to pursue reforms. Improving North Korea’s economic and agricultural productivity will arguably help stabilise the regime and consolidate public loyalty to the new leader. From a defence perspective, North Korea will need to improve its economic posture in order to retain its footing against South Korea.

China, neighbour to both reclusive states, will likely push for North Korean economic reform, with the view that it will decrease the likelihood of regime implosion and prevent a potential refugee crisis. As with Myanmar, China stands to benefit from an economically sound and politically stable North Korea, especially from investments and natural resource extraction.

Myanmar has begun courting Western investment and recently, President Barack Obama paved the way for US companies to (conditionally) invest in Myanmar. China is Myanmar’s biggest investor, but Japan, South Korea, Thailand, Singapore and India also contribute. Unless North Korea’s nuclear programme issue is resolved, its only sources of major investment, should reforms make conditions more favourable, will remain China and to a certain extent, Russia.

Looking Ahead

South Korean President Lee Myung-bak recently urged North Korea to follow in Myanmar’s footsteps. Despite their similarities, the differences between Myanmar and North Korea remain stark, the key divergence being North Korea’s persistent maintenance of its status quo. Myanmar has demonstrated flexibility in realising that its long-term interests will be better served by adopting a more open policy. However, North Korea does not appear to have reached that tipping point just yet – or perhaps its leader has, but the rest of the Politburo is slow to follow.

Recent weeks have shown signs of growing North Korean openness under the young Kim’s leadership. Socio-culturally, he has worked on cultivating a ‘fatherly’ image by reaching out to youth and showing a symbolic readiness to embrace elements of foreign culture by allowing certain Western influences, as demonstrated by a highly publicised Disney-inspired show. Politically, his official titling of “Marshal” and his unexpected dismissal of a top military leader has prompted speculation of a potential purge of his father’s cabinet allies and replacing them with his own. On the foreign policy front, North Korea has publicly cited its willingness to return to denuclearisation talks.

There also is an exciting economic impetus for reform: North Korea sits on as much as 20 million tonnes of rare earth minerals. If North Korea were to harness its mineral potential, the US, Japan and South Korea would certainly express interest. Is it prudent to peg these developments as clear and definite indicators of top-down reforms? Ultimately, as we know very little about its inner workings and decision-making processes, it is perhaps best to tread with informed caution and keep an open mind about North Korea’s prospects for opening up the way Myanmar has.


Kyaw San Wai, formerly a research analyst at the S. Rajaratnam School of International Studies (RSIS, is now a MSc (International Relations) candidate at the same institution. Ong Suan Ee, formerly senior research analyst at the Centre for Multilateralism Studies (CMS), RSIS, is currently a Masters of Public Health candidate at the Saw Swee Hock School of Public Health, National University of Singapore.

The world's most disputed waters

The world's most disputed waters
Last updated: 24 hours ago

Has China raised tensions in the South China Sea by establishing a new city on a disputed island?

China is provoking tensions in the South China Sea by establishing a new city on a disputed island. But with the rule of law and diplomacy failing to provide a solution, what lengths will China go to to protect its territorial claims?

On Friday, China named two senior military generals to head a garrison in the South China Sea - on a group of islands also claimed by Vietnam and Taiwan.

"This is kind of a chain reaction and it is difficult to say who provoked whom."

- Weixing Richard Hu, an associate professor at the University of Hong Kong

The US has criticised the move, saying it is against measures that are seen as potential threats. But calls for dialogue are being ignored and tensions in the most disputed waters in the world are once again escalating.

The city, called Xansha, has a supermarket, a bank and a hospital - but very little else. Indeed, it has only 1,000 inhabitants.

Xiao Jie, the mayor of Xansha, told those attending the ceremony to mark the birth of China's newest city: "The establishment of Xansha city is a wise decision made by the party and the government of China to protect the sovereign rights of China and to strengthen the protection and the development of the natural resources."

China seized the Paracel Islands in 1974 after a small but bloody conflict with the then South Vietnamese. Their importance lies in the fact that the waters around them contain rich fishing grounds and potentially vast oil and gas reserves.

"This is not just about who owns what. But it is also about power and status, not only at the regional level but at the international level."

- Alessio Patalano, the director of the Asian Security and Warfare Research Group

But the Paracel Islands are not the only disputed territory in the South China Sea. The Spratly Islands and the Scarborough Shoal are contested by six countries, including China, the Philippines and Vietnam.

The South China Sea, which contains hundreds of small islands, islets and rocks, covers an area of over three million square kilometres.

The International Crisis Group, a leading global think tank, has said in a report that the chances of a peaceful resolution to the dispute are diminishing. Without a consensus, it says the tensions in the South China Sea could easily spill over into armed conflict.

So, as China raises the Chinese flag in Xansha, has it also raised the tensions in the South China Sea? And why is China making these seemingly very provocative moves right now?

Joining Inside Story to discuss this are guests: Alessio Patalano, the director of the Asian Security and Warfare Research Group; Weixing Richard Hu, an associate professor at the University of Hong Kong; and Richard Weitz, the director of the Center for Political-Military Analysis at the Hudson Institute.

Wednesday, July 25, 2012

The Arab world in turmoil: Nasser’s legacy reprise

RSIS presents the following commentary The Arab world in turmoil: Nasser’s legacy reprise by James M. Dorsey and Mushahid Ali. It is also available online at this link. (To print it, click on this link.). Kindly forward any comments or feedback to the Editor RSIS Commentaries, at RSISPublication@ntu.edu.sg


No. 136/2012 dated 26 July 2012

The Arab world in turmoil:
Nasser’s legacy reprise

By James M. Dorsey and Mushahid Ali

Synopsis

A wave of anti-government protests in the Middle East and North Africa that is rewriting the region’s political map is sparking a reinterpretation of recent Arab history that could shape political attitudes of future generations.

Commentary

The rise of Islamist forces in Egypt and other nations in which popular uprisings have toppled autocratic leaders over the past 18 months constitutes the Middle East and North Africa’s latest attempt to take control of its own history. Islamist forces feed on their history of opposition to autocratic rule and a perception that nationalist, socialist and neo-liberal attempts at addressing the region’s national, social and economic issues failed. Newly independent Arab states were ruled either by men who had overthrown leaders who were leftovers of colonialism or claimed hereditary monarchical rights.

Destroying carefully constructed myths

The popular revolts, in contrast to past changes of leadership brought about by military or palace coups or hereditary succession, have created unprecedented space for free and public debate that is questioning if not demolishing carefully constructed myths, particularly those surrounding Arab nationalist leader Gamal Abdel Nasser. A colonel in the Egyptian army, Nasser’s toppling of the pro-British monarchy in 1952 in the Arab world’s most populous nation, positioned Egypt at the forefront of the struggle against Israel and post-colonial economic and social structures and for Arab independence.

Nasser embodied Arab nationalism, the quest for an independent and strong Arab world and the defence of the rights of the poor, despite being also the father of the repressive security state. He fortified his position with the 1956 nationalization of the Suez Canal, his leadership of the Non-Aligned movement, while playing off the United States against the Soviet Union, and his opposition to feudal monarchs in the Gulf, foremost among whom was the Al-Saud in Saudi Arabia. In doing so, he changed the region’s political map and influenced the Arab world’s first post-colonial generation. With Israel the lightning rod of the new generation of Arab leaders, anti-Israeli policies gave them political legitimacy, feeding on deep-rooted pro-Palestinian sentiment.

Nasser still embodies Arab nationalism for many who now voice criticism of his 16 years of autocratic rule and record of failed disastrous foreign, economic and social policies. In fact Nasser’s influence, considerably diminished by the disastrous six-day war of 1967 in which Arab militaries, including that of Egypt, were destroyed by Israel in a matter of days, is still evident 42 years after his death in 1970. In this year’s first democratic presidential elections a Nasserite candidate garnered a fifth of the vote. Nonetheless, Nasser’s legacy and that of autocrats who cloaked themselves in nationalism, is for the first time being openly debated in the media and political discourse. Fuelling the debate is criticism of 60 years of military rule in Egypt that started with the coup in which Nasser played a key role.

The debate is sharpened by the loss of appeal of Nasser’s pan-Arab philosophy in favour of an Arab world that increasingly perceives itself as a collection of individual states each with their own interests rather than a region in which common politics, culture and religion constitute the overriding unifier. In many ways it is the latest phase of efforts by Arabs to become actors in their own right after having failed to achieve their aspirations through various imported ideologies.

The future of Nasserism

The late Egyptian intellectual Mohamed Sid Ahmed, wrote 12 years ago: “The Nasserism of the future…will not entail the resurgence of a specific ideological platform, policies or a mode of rule. Rather, it will emerge as a refusal to bend to decisions dictated from abroad by agents inimical to Egypt's independence.”

Those words were never truer than today in both post-revolt Arab nations as well as those that have yet to experience political change but can no longer ignore public opinion. They put the onus on a crop of new primarily Islamist leaders that are emerging from the upheavals sweeping the Middle East and North Africa. Foremost among them is Mohammed Morsi, a leader of Nasser’s nemesis, the Muslim Brotherhood, elected president of Egypt in June just weeks before the 60th anniversary of Nasser’s coup.

Morsi’s challenge in a nation in which the military’s place as a modernizing force dates back to the 19th century, is complicated by the controversy over the role of the military in contemporary Egyptian politics. The Egyptian military, which last year toppled president Hosni Mubarak with a mandate to guide the country towards free and fair elections, effectively pre-empted the Brotherhood’s electoral victory by giving itself broad legislative and executive authority on the eve of Morsi’s election.

At stake in the ensuing convoluted tug of war between Morsi and the military is the quest for greater freedom and dignity that demands a change in the relationship between the state and the military, and which was the core driver of the popular revolts that have swept the Middle East and North Africa. Nasser embodied both sides of that divide.

Morsi is a representative of a group that despite operating underground for much of its 84-year old history, is marked by a quest for accommodation rather than confrontation. How he manages that divide will determine not only the ultimate success of the popular revolt that brought him to power but also perceptions of Nasser’s legacy and future interpretations of contemporary Arab history.

For its part the military appears bent on retaining that part of Nasser’s legacy that ascribes legitimacy to its role as protector of the Egyptian nation and enforcer of the security state, while allowing the Islamist parties to compete with the secular groups such as the Nasserites, for control of the civil administration. In reality the new dispensation in Egypt will be a hybrid militarist-Islamist-secularist reprise of Nasser’s legacy, while the turmoil continues in the Arab world.


The writers are Senior Fellows at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University.

North Korea: Regime Reform or Cosmetic Change?

RSIS presents the following commentary North Korea: Regime Reform or Cosmetic Change? by Sarah Teo. It is also available online at this link. (To print it, click on this link.). Kindly forward any comments or feedback to the Editor RSIS Commentaries, at RSISPublication@ntu.edu.sg



No. 135/2012 dated 26 July 2012

North Korea:
Regime Reform or Cosmetic Change?

By Sarah Teo

Synopsis

Kim Jong-un is showing signs of reforms in North Korea’s leadership. However, regime survival remains the top priority of Pyongyang.

Commentary

Since Kim Jong-un took over leadership of North Korea in December 2011, a number of developments have sparked off debate on the new leader’s goals for the reclusive state. Some experts assess that North Korea is slowly but surely undergoing some sort of reform, while others note that Pyongyang’s policy initiatives serve only to reinforce the personality cult surrounding the Kim family.

Recent developments in North Korea, which seem to signify some shift in the leadership’s policy, should be interpreted with the survival agenda of the Kim leadership in mind. Tools to prop up the Kim regime, including ideology, the military, and information control, are merely the means to sustain the leadership, even if Pyongyang seems to be taking positive steps towards ‘opening up.’

Changing times in North Korea

Surprising shifts have occurred in North Korea under the leadership of Kim Jong-un. In February 2012, North Korea agreed to suspend its nuclear and missile programmes, as well as allow foreign nuclear inspectors into the country, in exchange for food aid from the U.S. About two weeks later, however, North Korea launched a satellite to mark the 100th birth anniversary of North Korean founder Kim Il-sung. Although the launch failed, the U.S. and other states saw it as a cover for a long-range missile test and decried the move as a violation of UNSC resolutions, subsequently calling off the aid deal.

While the cycle of negotiations interrupted by provocations is not new for North Korea, its admission of the launch failure was unexpected. In 2009, when a similar failure occurred, North Korean state media applauded the “successful launch of [the] satellite.” The regime’s admission of its failure this time was thus seen as a relaxation of its tight control over information.

Likewise, when Disney characters appeared on North Korean television in July 2012, some speculated that the public embrace of Western cultural elements could be the first step to changing the North’s strong anti-U.S. stance. Indeed, the image of Kim Jong-un and the audience – consisting mostly of military officers – clapping for the Disney-costumed performers were at odds with North Korea’s frequent condemnation of the “U.S. imperialists.”

Most recently, the dismissal of Vice-Marshal Ri Yong-ho from all his posts and the subsequent appointment of Kim Jong-un as Marshal was seen as an attempt to consolidate the latter’s power over the military. Ri had reportedly been a close friend of former leader Kim Jong-il and was a strong supporter of the latter’s songun (military-first) policy. A source close to Pyongyang and Beijing was quoted by Reuters saying that Ri was sacked for opposing Kim Jong-un’s plans for economic reform.

What do these developments mean for North Korea?

Regime survival still the top priority

For the three-generation Kim leadership, regime survival has always been the ultimate aim. This goal has been sustained through various means. Domestically, Pyongyang feeds its citizens with propaganda, sends ‘dissidents’ to political prison camps or re-education camps, and restricts the flow of outside information into North Korea. Internationally, North Korea utilises its nuclear weapons programme to deter the threat of foreign invasion. Under Kim Jong-il, the military’s position was also elevated, and it was given priority over civilians in terms of resources such as food.

Kim Jong-un’s actions in the past eight months, however, suggest that Pyongyang may be changing its strategy, even though regime survival remains the leadership’s top priority. This change in strategy is likely to have occurred for two reasons.

First, North Koreans are gradually getting access to information from the outside world. A study published in May 2012 by research firm InterMedia concluded that despite the tight control over information, North Koreans are increasingly able to access foreign media such as DVDs and radio broadcasts. This means that their perceptions of their own country, as well as other states, could possibly change. In this new information landscape, domestic propaganda and a media blackout on outside information may not work as well as it used to.

Second, the North Korean economy is in shambles. The CIA World Factbook estimates that North Korea’s GDP per capita in 2011 was US$1,800. In comparison, South Korea’s GDP per capita was estimated to be US$32,100. Foreign reports on North Korea’s economic woes cite the country’s isolation and mismanagement as the main sources of the problem. Food shortages and corruption worsen the situation. Despite official rhetoric in the 2012 Joint New Year Editorial that the country had made great strides towards becoming “an economic giant in the 21st century,” Kim Jong-un and his leadership should realise that the songun policy has been detrimental to the economy.

Defector accounts note that while North Koreans respected Kim Il-sung, many did not feel the same toward Kim Jong-il. In their book The Hidden People of North Korea: Everyday Life in the Hermit Kingdom, Ralph Hassig and Kongdan Oh write that North Korean defectors felt that Kim Jong-il “[did not] care about the people the way (they thought) his father did.” This view was reinforced by the songun policy, which directed resources away from civilians to the military.

It is thus no surprise that the latest Kim leader has fashioned himself after his grandfather rather than father. Much has been said about how much Kim Jong-un’s looks resembles Kim Il-sung’s. Like his grandfather, the younger Kim has opted for a more populist approach, visiting kindergartens and interacting with ordinary North Koreans. His apparent relaxation of information restrictions and penchant for reform may also signal a shift from his father’s leadership.

In the face of a new information environment and continued economic woes, it is essential for Kim Jong-un to legitimise his rule in North Korea. Only with the people’s support would the Kim regime enjoy little opposition – covert or otherwise – to its rule, allowing it to focus its resources on other more urgent issues. To cultivate popular support for the regime, methods used by Kim Jong-il are unlikely to be as effective as compared to the past. Kim Jong-un will need to continue finding new ways to establish popular support in the changing North Korea.


Sarah Teo is Senior Analyst with the Multilateralism and Regionalism Programme. S. Rajaratnam School of International Studies, Nanyang Technological University.

The Persistent Threat to Soft Targets

from STRATFOR

The Persistent Threat to Soft Targets
July 26, 2012 | 0904 GMT


Stratfor

By Scott Stewart

In the early hours of July 20, a gunman entered a packed movie theater in Aurora, Colo., and opened fire on the audience that had gathered to watch the premiere of the new Batman movie, The Dark Knight Rises. The gunman killed 12 people and injured 58 others. Though police are looking for potential accomplices, the attack appears to have been conducted by James Holmes, a lone gunman who, according to some police reports, may have had a delusional fixation on the Joker, a violent villain from an earlier Batman movie.

On July 18, just two days before the Colorado attack, a man reportedly disguised in a wig and posing as an American tourist in the Black Sea resort town of Burgas, Bulgaria, detonated an improvised explosive device hidden in his backpack as a group of Israeli tourists boarded a bus bound for their hotel. The blast killed five Israelis and the Bulgarian bus driver and wounded dozens more. It is unclear if the incident was an intentional suicide attack; the device could have detonated prematurely as the man placed it on the bus. In any case, the tourists clearly were the intended targets.

The Burgas attacker has not yet been identified. Based on his profile, there is some speculation that he could have been a grassroots jihadist. However, it is also possible that he was acting on behalf of Iran and that this attack was merely the latest installment in the ongoing covert war between Iran and Israel.

While these two attacks occurred on different continents and were committed by people with different motivations and objectives, they nonetheless have one thing in common: They were directed against what are referred to in security parlance as "soft" targets, or targets that do not have much security. Soft targets are much easier to attack than hard targets, which deter attacks by maintaining a comparatively strong security presence.
Evolution of Targets and Tactics

In the 1960s, the beginning of the modern terrorism era, there were few hard targets. In the 1970s, the American radical leftist Weather Underground Organization was able to conduct successful bombing attacks against the U.S. Capitol, the Pentagon and the State Department buildings -- the very heart of the U.S. government. At the same time commercial airliners were easy targets for political dissidents, terrorists and criminal hijackers.

Nongovernmental organizations were also seen as soft targets. The Black September Organization conducted an operation targeting Israeli athletes at the 1972 Olympic Games, and Ilich Ramirez Sanchez, known as Carlos the Jackal, and his compatriots seized the OPEC headquarters in Vienna in December 1975.

Embassies did not fare much better. During the 1970s, militant groups seized control of embassies in several cities, including Stockholm, The Hague, Khartoum and Kuala Lumpur. The 1970s concluded with the seizure of the U.S. Embassy in Tehran and the storming and destruction of the U.S. Embassy in Islamabad. The 1980s saw major attacks against U.S. diplomatic posts in Beirut (twice) and Kuwait.

Just as the Weather Underground Organization attacks prompted security improvements at the U.S. government buildings they had targeted, the attacks against U.S. and other embassies prompted increased security at their diplomatic missions. However, this turned into a long process. The cost of providing security for diplomatic posts strained already meager foreign affairs budgets. For most countries, including the United States, security was not increased at all diplomatic missions. Rather, security was improved in accordance with a threat matrix that assessed the risk levels at various missions. Those deemed more at risk received funding before those deemed less at risk.

In some cases, this approach has worked well for the United States. For example, despite the persistent jihadist threat in Yemen, the new embassy compound in Sanaa, which was completed in the early 1990s and constructed to the strict security specifications laid out by the Inman Commission in 1985, has proved to be a very difficult target to attack. However, as embassies became more difficult to attack, militants turned to easier targets. Often this has involved targeting diplomats outside the secure embassy compound, as was the case in the 2002 assassination of U.S. diplomat Laurence Foley in Amman, Jordan, and the April 2010 failed suicide bombing attack against the motorcade carrying the British ambassador to Yemen.

Transnational groups also changed regions to find softer embassy targets. This shift was evident in August 1998, when al Qaeda attacked U.S. embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania. Similarly, during the 1991 Gulf War, Iraqi agents attempted to conduct terrorist attacks against U.S. diplomatic facilities in Manila, Jakarta, Bangkok and Beijing -- far from the Middle East. The February 2012 attack against an Israeli Embassy employee in New Delhi is an example of both changing the region and targeting an employee away from the security of the embassy.

There was a similar trend with airliners, which initially were very vulnerable to attack. After many high-profile hijackings, such as that of TWA Flight 847, airliner security, particularly in the West, was increased. But as security was increased in one place, hijackers began to shift operations to places where security was less robust, such as Bangkok or Karachi. And as security was improved globally and hijackings became more difficult in the 1980s, attackers shifted their tactics and began using improvised explosive devices against airliners.

In response to security measures implemented after bombing attacks in the 1980s, attackers underwent yet another paradigm shift. In December 1994, Philippine Airlines Flight 434 was attacked with an improvised explosive device that had been carried onto the aircraft in separate components, assembled in the plane's restroom and left on board when the attacker left at an intermediate stop on a multiple city flight. This attack was a dry run for a plan against multiple airlines called Operation Bojinka. The operational mastermind of Bojinka, Khalid Sheikh Mohammed, would later plan the 9/11 attacks on the United States.

When security measures were put in place to protect against Bojinka-style attacks in the 1990s, jihadists adapted again and conducted the 9/11 attacks using a different method of attack. When security measures were put in place to counter 9/11-style attacks, jihadists quickly responded by shifting to onboard suicide attacks with concealed improvised explosive devices inside shoes. When that tactic was discovered and shoes began to be screened, jihadists changed to camouflaged containers filled with liquid explosives. Security measures were adjusted to restrict the quantity of liquids that people could take aboard aircraft, and jihadists altered the paradigm once more and attempted underwear bombing using a device with no metal components. When security measures were taken to increase passenger screening in response to the underwear bombing, al Qaeda in the Arabian Peninsula decided to attack cargo aircraft with improvised explosive devices hidden in printer cartridges. Currently, there is a concern that the next evolutionary step will be to hide non-metallic improvised explosive devices in body cavities or to surgically implant them in suicide bombers.

While some jihadists have remained fixated on hardened airline targets, other attackers -- especially grassroot and lone wolf attackers who do not possess the ability to attack hardened targets -- have sought other, softer airline targets to attack. After Israeli airline El Al beefed up security on its airliners in the 1980s, the Abu Nidal Organization compensated by attacking crowds of El Al customers at ticket counters outside of airport security in Rome and Vienna in 1985. Then in November 2002, jihadists attempted to attack an Israeli airliner in Mombasa, Kenya, with SA-7 surface-to-air missiles. More recently, a dual suicide bombing in the arrival lounge of Moscow's Domodedovo Airport in January 2011 killed 35 and injured more than 160, proving that areas outside an airport's security measures are vulnerable to attack. Further illustrating this vulnerability was an attack at an airport in Frankfurt, Germany, in March 2011. In that attack, a jihadist killed two U.S. airmen and wounded two others at the airport's bus departure area.
Other Targets

As embassies and other government installations have become more difficult to attack, we have noted a discernable trend toward the targeting of hotels, which are similarly symbolic of Western influence and are often described in jihadist literature as spy dens and brothels. In many cities of the developing world, major hotels are frequented by foreign tourists, journalists, visiting officials and military officers, and local government and business leaders. In addition, high-profile restaurants have been attacked in places such as Bali, Indonesia, Mumbai, India, and Marrakech, Morocco. There have also been attacks on theaters in Moscow and Mogadishu, on schools in Beslan, Russia, and Toulouse, France, and on marketplaces all over the world.

As long as there are groups or individuals bent on conducting attacks -- whatever their motivation -- they will be able to find vulnerable soft targets to attack. It is impossible to protect every potential target. In fact, it is often said that when you try to protect everything, you end up protecting nothing. Not even the vast manpower of the Chinese government or the advanced security technology employed by the U.S. government can cover every potential target.

While attacks against soft targets are an unfortunate prospect in the contemporary world -- if not throughout all human history -- people are not helpless in defending against them. Terrorism is a continuing concern, but it is one that can be understood. Once understood, measures can be taken to thwart terrorist plots and mitigate the effects of attacks.

Perhaps the most important and fundamental point to understand about terrorism is that attacks do not appear out of nowhere. Individuals planning a terrorist attack follow a discernible cycle, and that cycle and the behaviors associated with it can be detected. The places where terrorism-related behavior can be most readily observed are referred to as vulnerabilities in the terrorist attack cycle.

As the attacks in Aurora and Burgas are investigated, authorities very likely will uncover behaviors in the perpetrators that could have prevented the attacks if they were properly investigated. Every attacker -- even a lone wolf assailant -- leaves evidence of a pending attack. This fact was brought up by the recent release of a report by the William H. Webster Commission into the investigation of 2009 Ft. Hood shooter Nidal Hasan. The report highlighted the mistakes made in the investigation of Hasan, who was brought to the FBI's attention prior to the attack.

But since it is impossible for any government to prevent all attacks, people have to assume responsibility for their own security. This means citizens need to report possible planning activity when it is spotted. Such reporting helped avert an attack in July 2011 against a restaurant outside of Ft. Hood, Texas.

The threat against soft targets necessitates practicing common sense security measures. It also involves practicing an appropriate degree of situational awareness of the environment a person is in, as well as establishing appropriate contingency plans for families and businesses.

Read more: The Persistent Threat to Soft Targets | Stratfor

Facts on China: Is It Time for America and Americans to Wake Up!!


Facts on China: Is It Time for America and Americans to Wake Up!!


China has 19% of the world’s population, but consumes ....
53% of the world's cement
48% of the world's iron ore
47% of the world's coal
.... and the majority of just about every other major commodity.

In 2010, China produced 11 times more steel than the United States.
cid:13FF7DA9DF564863897F06253894C61B@MYPC

New World Record: China made and sold 18 million vehicles in 2010.
cid:B94A0C202EE248E9AD21E9BD4AFA0B50@MYPC

There are more pigs in China than in the next 43 pork producing nations combined.
cid:61D6939EB587425FBA8429EF868947D2@MYPC
cid:EA0BD5C0EEF44354AE227779C62CCF97@MYPC

China currently has the world’s fastest train and the world’s largest high-speed rail network...
cid:067D2D2987274743B31F9ACEF48A38EB@MYPC

China is currently the number one producer in the world of wind and solar power, but don’t use it themselves. While they manufacture 80% of the world’s solar panels, they install less than 5% and build a new coal fired power station every week. In one year they turn on more new coal powered electricity than Australia's total output.
cid:C0E30DD2ABDD4F6793212D3965906521@MYPC cid:9CE44E50819E4F1081109463B641148F@MYPC

China currently controls more than 90% of the total global supply of rare earth elements...
cid:3BE672524FEE452CAC75922AE6662F64@MYPC

In the past 15 years, China has moved from 14th place to 2nd place in the world in published scientific research articles...
cid:45AE98D5FB7140568EDFFDCC41430B41@MYPC

China now possesses the fastest supercomputer on the entire globe.
cid:4927EEAA947C46B6B0381EA92C81EF33@MYPC

At the end of March 2011, China accumulated US $3.04 trillion in foreign currency reserves- the largest stockpile on the entire globe.
cid:81C49D38BEB046A2A934FD6FFD975566@MYPC

Chinese people consume 50,000 cigarettes every second…
cid:0E833E003482424E9759F413E30F02BB@MYPC

They are already the largest carbon dioxide emitter and their output will rise 70% by 2020. And we think we're saving the planet?

It will not make one iota of difference what we do in Australia, Canada, the United States or anywhere else in the world; for that matter, all the politicians are doing is increasing our cost of living and making our manufacturers uncompetitive in the world market, with their idiotic carbon tax, when countries like china are growing and consuming at these extraordinary rates!

Time to wake up!

Public Will Key to Overcoming Corruption

The East-West Wire is a news, commentary, and analysis service provided by the East-West Center in Honolulu. Any part or all of the Wire content may be used by media with attribution to the East-West Center or the person quoted. To receive Wire articles via email, subscribe here.


Public Will Key to Overcoming Corruption
HONOLULU (July 23, 2012) – Corruption is a common fact of life in many places, but it can be fought and conquered by the right combination of political will and a full dose of understanding about how corruption inevitably pays off for the few, not the many. That was a central message of Prof. Robert Klitgaard, a leading expert on corruption and institutional reform, who spoke at the East-West Center recently during an international conference on cutting-edge approaches to dealing with government and political corruption.

“There is corruption everywhere. Just like disease, it is inevitable,” Klitgaard said. “Where it kills you is when it becomes systemic.”

Klitgaard, a professor at Claremont Graduate University in California, was the keynote speaker at the annual conference of the International Public Management Network, hosted this year by the East-West Center and organized by G. Shabbir Cheema, director of the Center’s Asia Pacific governance and democracy initiatives.

Corruption has many definitions, but many at this conference used the standard definition of “the use of public office for private gain.” And it has become clear, conference participants agreed, that lessening corruption is central to efforts to improve governance, reduce poverty and stimulate economic growth.

The battle to end corruption, whether in the United States or abroad, faces the force of both apathy and cynicism, Klitgaard noted. People take the attitude: “There’s nothing we can do about it” or “all politicians are corrupt.” But, he said, there are plenty of real-world examples – from the Eastern European nation of Georgia to Singapore and Peru ­– where the cycle of apathy and cynicism has been broken and where corruption has given way to improved governance and a better quality of life.

What it takes, he said is demonstrating to people that they have the ability to change things if they would only recognize it. “People are sick of this,” he said. “If you can give them hope – once you show a leader or a people how they can change this, they can do it.”

When reformers emerge, he said, they tend to succeed when they put themselves in tune with what the general public wants – when they sense the underlying political will: “The key is for them to ask ‘What does the public really want? And how do we go after it?’”

One fruitful way of igniting the political will for change is to show by example, Klitgaard said. He cited, for example, the Republic of Georgia, once “one of the most corrupt places on the planet.” Corruption tainted everything from the top levels of government to the local traffic police, Klitgaard said. But in 2003, an inflamed citizenry exercised its political will through the “Rose Revolution.” An entrenched system was first shocked, then overturned. Corruption was not ended overnight, but a different set of expectations emerged.

There are several practical steps that usually occur in any successful battle against corruption, Klitgaard suggested. These include a decision to “fry big fish,” ­– that is, get rid of or make an example of those highly associated with corruption in the public mind. In Georgia, that included the forced resignation of president Eduard Shevardnadze.

Another step, Klitgaard said, involves legal reforms to open up opportunities to more than just the well-connected elites. And quite often, it requires the pragmatic decision to pay more, in salary or incentives, for those at the top or in positions of influence ­­– including the local traffic cops – so the financial incentive for corruption is diminished.

The results in Georgia were impressive, he said: a quadrupling of the national GDP, high ranking internationally by Transparency International on ease of doing business and a surge in its position among the rankings of corrupt nations from one of the worst to one of the best.

Klitgaard cautioned that while the basic elements of combating corruption are universal, particular techniques vary from jurisdiction to jurisdiction.

For instance, the government of Peru launched a program of public surveys asking people, in effect, “how are we doing?” This led to a checklist of best practices and success stories which were highlighted in popular live TV broadcasts where cash prizes were awarded to popular and successful government services or agencies.

“It was a lot like American Idol,” he said.

In India, a clever use of social media led to a website called “Ipaidabribe.com,” on which people forced to pay for government services could share their experiences with each other and thus shame officials into changing their practices.

While many believe that a free and open democracy is the best means to end corruption, that is not always the case, Klitgaard said. Achieving democracy and ending corruption are parallel, but not identical goals.

He mentioned the case of Singapore, which he said was a “cesspool of corruption” in the early 1960s that has moved into the very top ranks of uncorrupt states through a hardheaded leadership style that is autocratic, if not openly dictatorial. Traditional civil liberties took a back seat to nation-building and institutional and economic stability, he noted. Today, Transparency International ranks Singapore No. 5 out of 183 countries in a list of how corrupt their country is perceived to be. (The United States is ranked at 24th.)

In the end, Klitgaard said, it is important to remember that “corruption is a system, not a moral transgression.” Once the system is shocked and begins to change, corruption diminishes and lives improve.

Monday, July 23, 2012

A new political entity in Mindanao? Challenges of election-related dysfunction and violence

RSIS presents the following commentary A new political entity in Mindanao? Challenges of election-related dysfunction and violence by Joseph Raymond S Franco. It is also available online at this link. (To print it, click on this link.). Kindly forward any comments or feedback to the Editor RSIS Commentaries, at RSISPublication@ntu.edu.sg



No. 133/2012 dated 23 July 2012

A new political entity in Mindanao?
Challenges of election-related dysfunction and violence

By Joseph Raymond S Franco

Synopsis

The Philippine government (GPH) and the Moro Islamic Liberation Front (MILF) have expressed confidence over the establishment of a “new political entity” (NPE) as part of initiatives to achieve a peace settlement by yearend 2012. However, election-related violence and other dysfunctions in the electoral process in Mindanao illustrate the challenges facing political participation in a post-peace process scenario.

Commentary

The Philippine Government (GPH) and the Moro Islamic Liberation Front (MILF) held their 29th round of Formal Exploratory Talks in Kuala Lumpur, Malaysia, on 18 July 2012. In a joint statement both GPH and MILF panels reaffirmed their optimism over the outcome. They agreed on the mechanics for a “transition committee” that is expected to help pave the way for a “new political entity” (NPE). This entity would replace the existing Autonomous Region in Muslim Mindanao (ARMM) once a political settlement is reached between the two sides. This development follows the successful conduct of the Bangsamoro Leaders Assembly (BLA) at the MILF’s Camp Darapanan, of engaging all peace stakeholders.

While the parties claim to be at the “door of an agreement”, this must be weighed against more substantive issues critical to the GPH-MILF peace process. The joint statement referred only to “continued discussions on power sharing”, without a definitive reference to actual solutions. However, as seen in the outbreak of clashes in 2008, the issue of power sharing (over the defunct Memorandum of Agreement on Ancestral Domain) was the critical issue used by hardliners on both the GPH and MILF side to scuttle the negotiations. Thus, it would be more realistic to look at the 18 July joint statement as indicative of limited success.

Perils of violence and voter registration

Even if a Final Peace Agreement is signed by the GPH and the MILF, there is no guarantee political violence would give way to political participation. In turn, the lack of meaningful political participation would make conflict-affected areas in Mindanao vulnerable to a slide back to secessionist conflict.

In the southern Philippines, specifically within the Autonomous Region in Muslim Mindanao (ARMM), dysfunctional politics manifest in multiple ways. The recent voter registration exercise in ARMM (09-18 July 2012) — intended to cleanse the rolls of fraudulent voters, saw a continuation of violent tactics. While electoral violence is not new in the Philippines, its persistence in the ARMM is doubly confounding to the central government considering the high level of attention accorded to it by Manila.

Through kinship ties, armed groups such as the MILF and the supposedly re-integrated Moro National Liberation Front (which signed a 1996 Final Peace Agreement) are drawn in feuds between warring political factions. The ten-day registration saw several violent incidents of shooting, lynching and bombings of election workers and ordinary registrants. These incidents bely the claim of the Philippines Commission of Elections (COMELEC) of the absence of “major peace and order problems”.

Flying and ferried voters

Politics in the region have been complemented by unscrupulous political factions with shrewd tactics to secure an electoral “victory”. The explicit goal of the registration exercise to “cleanse” voters’ lists of fraudulent identities was put to the test by various factions attempting to flout the rules. A report by COMELEC estimated that 50,000 minors (disqualified by age to vote) attempted to register after being ferried to registration sites by a coterie of local officials and candidates.

Another 50,000 illegal registrants were monitored by COMELEC to have been trucked in, with the intention to be “flying voters”— who are registered in multiple jurisdictions. The number of potential fraudsters is staggering, considering that the ARMM has been a key electoral battleground and has been a source of swing votes during national elections. Overall, the COMELEC is hopeful that biometrics can help weed out half a million ineligible voters out of the baseline figure of 1.7 million. However the dismissive response of the COMELEC was problematic - that “it is not their fault...we don’t want to penalise them [ineligible voters]. The penalty will simply be that they will not be allowed to vote. That’s good enough for us for the meantime”.

Violence, fraud and the roots of secession

The persistence of violence and fraud has far-reaching implication for the peace process. It reveals that even in spite of security guarantees, transparency measures, and capability-building accorded by Manila; meaningful political participation remains totally elusive in ARMM. Instead of being a showpiece of autonomy by a distinct polity, violence and fraud persist as hallmarks of a lack of governance.

A more fundamental issue is how dysfunctional political participation precludes genuine empowerment. The quote above summarizes and illustrates the sentiment that passive involvement in politics (or worse, manipulated involvement) is the way of life in Mindanao. It takes little leap of the imagination to assert that a feeling of political disempowerment is a major factor in stoking radicalisation and extremism. Insufficient corrective steps in the meantime, bode ill for the future of political participation in the ARMM, and by extension, the prospective “new political entity”.

Clearly, steps must be taken to ensure that a GPH-MILF final peace agreement would not merely mark an interregnum in the long history of political violence in Central Mindanao.


The writer is an Associate Research Fellow at the Centre of Excellence for National Security at the S. Rajaratnam School of International Studies.

Friday, July 20, 2012

FORGET LIBOR-GATE: Oil Market Manipulation Is Far Worse

EconMatters

Since the Global Community all the sudden seems to be preoccupied with Market manipulation even though the authorities knew it was a problem for over 5 years with Libor Rate Fixing. It is high time authorities look at the Crude Oil market which has been manipulated for the last decade and all the sophisticated participants know it is rigged or artificially higher than the fundamentals of the economy dictate. Consumers are paying an easy $35 dollars per barrel over what they would otherwise doll out for a barrel of oil if fund managers didn`t use the benchmark futures contracts as their own personal ATMs.

Just a month ago Crude Oil WTI was $78 a barrel and today it is $93. Do you think the fundamentals changed one bit to merit this price swing? Nope! Supply levels are all at record highs around the world. Is it Iran? Please!! It is all about the money flows, nobody takes delivery anymore. Assets have become one big correlated risk trade. Risk On, Risk Off. If the Dow is up a hundred, you can bet crude is up at least a dollar! It has nothing to do with fundamentals, inventory levels, supply disruptions, etc. It is all about fund flows.

So how this affects the average Joe is that if Wall Street is having a good day, i.e., fund flows are going in, then Average Joe is having a bad day and paying more for Gas. Yes, it is that simple. A good day for Wall Street is a bad day for consumers at the pump these days as Capital flows into one big Asset Trade: Risk On!

It should be separate in that equities respond to stock valuations, and energy responds to the market conditions of supply and demand. But that isn`t the case in the investing world today, it is all about Capital Flows in and out of Assets. The economy could be doing really poorly, Oil inventories can be extremely high, the economic data very bleak but Oil will go up and consumers will pay more at the pump just because some Fund Manager pours capital into a futures contract. The Fund Managers goals are in direct opposition to the consumers who actually uses the product. Funds flows and not supply and demand ultimately carry the day in the energy markets, and that needs to change!

The key is equities, crude oil (both Brent and WTI) are essentially equities for Fund Managers to trade in and out of and they make a fortune in these instruments. When I refer to Fund Managers this includes Hedge Funds, Oil Majors, Pension Funds, Investment Banks etc. This is part of the reason that the price of oil can be so varied in value within a 3 month span. WTI can literally be $110 one month and $80 the next because of pure funds going in or coming out of the futures contracts.

The volatility really is where they make their money, they have deep pockets and they make a fortune moving crude oil around like a puppet on a string. If you think in terms of each dollar price move in the commodity being equal to $1,000 and the size that these players employ on a monthly and quarterly basis you start to see the value of buying thousands and thousands of futures contracts and capitalizing on these huge moves in the commodity.

Start out a quarter at $80 a barrel , buy a bunch of futures contracts and put them in the portfolio along with your other holdings like Apple, IBM, and Johnson and Johnson and run them up just like any other asset class in the first quarter to hit your numbers. Use the media to hype Iran or any other potential supply disruption scenario and Voila you end the quarter at $110 and you have made far more gains in your Crude Oil asset class than lowly Apple by comparison. It’s the biggest game on Wall Street!

Notice how European equities are at 11 week highs and look at the Spike in the Brent contract. Fund managers pump money into these asset classes and once earnings are over, they will pull their money out so they are not left holding the bag when the damage to the economy ensues as consumers and the economy slows due to the burden of artificially high Oil prices on discretionary income.

The economic downturn has a lot of negative effects, and consumers should be benefitting from lower fuel costs as a result of slower economic conditions. However, Fund Managers will not let the Fundamental Oil Price take hold in the market place, their gain is consumer`s loss. Right now Oil prices should be at least $75 a barrel based on current supply levels, and the facts regarding near recessionary levels of unemployment, weak manufacturing, and constrained housing production taking place in the economic landscape. Gas prices are not matching the GDP numbers or the capacity utilization rate of business activity in the economy.

But Fund managers are laughing all the way to their Hamptons and Connecticut mansions while average “Joe Blow Consumer” has to pawn household items or charge up their credit cards to fill up their gas tanks each week. This Oil manipulation is really putting a crimp on consumers and makes it extremely difficult to get this recovery off the ground because just as the economy starts recovering fund managers slap it back down with their run up of oil prices. This leads to growth being constrained and even sputtering, consumers start reeling, and the entire supply chain is negatively affected because of these artificially high energy prices. The fund managers then dump their holdings and short the market, and the entire cycle starts over every three to six months or so. The volatility is great for them, but really hurts economic stability.

Also, this is one major reason why a QE3 program will neverwork because it just adds fuel to this process. And any benefits to the economy are quickly offset by even more inflated energy prices. The Fed giveth on one hand, and the Economy suffers on the other hand. A no win situation which Ben Bernanke is well aware of from the last failed attempt in QE2 which just plays right in line with the ideal Fund Manager strategy of manipulating price by creating artificial demand through paper trading of markets. The last thing they need is more paper to artificially accumulate positions and distort market prices to an even greater extent.

Hopefully, Ben Bernanke and crew have learned their lesson is this regard, which it is hard to target a QE Program without artificially inflating all assets, even those that are essential to everyday living, and end up hurting the very people that you are trying to help. In this case, Fed Policy would be a contributing factor towards the same Market Price Distortion of Fund Managers that ultimately needs to be fixed.

So what is the solution to all this madness? Everybody in the market knows the culprits, so why doesn`t this practice ever get addressed? The same reason Libor manipulation went on for so long, all the watchdogs are completely incompetent or lobbied to death on these financial matters. Obama tried to squash the fund managers with the SPR release, but even then word got out long before the actual lever was pulled, and it took 2 months to coordinate. Can you say too little too late? Consumers were already paying $4 gas for months before any action was carried out.

Day Trading isn`t even the problem here it is the buy and holders who accumulate large positions for swing trading that ultimately do the real damage and price distortion in the Oil Markets. Legitimate regulation on Fund Managers who accumulate and hold these large positions in the form of enforcing delivery obligations would clear up this malfeasance real fast. I guarantee you if it was a requirement for any Fund Participant to take delivery of any Futures contract held more than 3 days that there would be a significant re-pricing in the Oil market, as well as adding price stability as true market conditions would dictate price.

And based upon actual inventory levels over the last 5 years, this suggests price should have been very stable as inventories have not fluctuated much during this era. Even with all the turbulence here and there, actual supply has never been an issue with inventory levels all near the highs of the 5 year range for this period.

Day Traders can continue to practice their craft in the Oil markets because it can be argued that they don`t move price significantly, and actually create better pricing by adding liquidity to the market for participants if they actually did need to hedge production or set up physical delivery of the commodity. An example would be an Airline getting a fair price when they enter the market to hedge price due to an active Day Trading market.

So the next time you fill up your gas tank, just realize that this price is an artificially high fixed, manipulated price due to the Position Trading of the Fund Managers. Libor Gate pales in comparison to the actual pass through effects of price manipulation in the Oil Markets. If you think Consumers are being screwed by artificially fixed Libor Rates, and Politicians have finally stepped forward after years of abuse and neglect, then you should really be outraged by the Oil Price Manipulation.

Consumers have been paying on average for the last five years by conservative estimates a good 35% over fair market prices for Oil related products due to this Manipulation on behalf of Position Traders. Again, I label the group with the catch all term “Fund Managers” defined earlier in this piece, but I am not referring to just the standard definition of Fund Manger. Any Market participant who accumulates a large position and holds over time which results in the distortion of market mechanism price discovery due to not actually taking physical delivery of the commodity is inclusive of this label “Fund Manager” and part of the problem that needs to be addressed.

So how long will it take politicians and the CFTC to address this manipulative practice that is a decade in the making in the Oil Markets? My guess is it will just continue as usual because regulators and politicians are either corrupt or incompetent to address the issue and consumers are too busy working their ass off to even have the time or energy to revolt against this practice.

There isn`t a “Gotcha” moment like Libor Gate, rather just a slow steady business practice that drains consumers of their resources like just another societal Tax on their consumption. A repugnant tax I am calling attention to: the “Gotcha Bells” should start resonating in policy holders’ ears, and they should finally start addressing this seedy Oil Market and its blatant Market Manipulation of Price.

Read more posts on EconMatters »

Thursday, July 19, 2012

Bain, Romney, the CIA and (God help us) Howard Hughes

Thursday, July 12, 2012
Bain, Romney, the CIA and (God help us) Howard Hughes (UPDATED -- A mystery solved)

Well well well. Turns out Romney was the head honcho of Bain Capital for at least three years longer than he has long claimed. Previously, he told us that he quit Bain in 1999.

And a Massachusetts financial disclosure form Romney filed in 2003 states that he still owned 100 percent of Bain Capital in 2002. The state forms also show that he earned at least $100,000 as a Bain “executive” in 2001 and 2002. A former SEC commissioner told the Globe, “You can’t say statements filed with the SEC are meaningless. This is a fact in an SEC filing.”

So why would he lie about such a thing? There is something decidedly odd about Bain.

In a previous post, we tentatively explored the possibility that Mitt Romney formed Bain Capital (a spin-off from the original Bain group), at least in part, as a money-laundering front for spies, back in the days of clandestine wars against the Nicaraguan contras and the FMLN of El Salvador. Turns out I wasn't the first to think along these lines -- see, for example, the 2011 thread here and the January, 2012 post here.

My own inquiry began with Vanity Fair's revelatory piece, which notes that early Bain investors included publishing magnate Robert Maxwell -- whose Mossad ties have been established beyond the point of reasonable debate -- and the Poma family of El Salvador, one of the "14 families" supported by the CIA during that nation's civil war.

Most responses to the VF piece focused on Romney's penchant for hiding taxable income in offshore accounts. That's important, but I'm more interested in the Central American connection.

In 2007, Romney gave a speech filled with his usual blather: "Jimmy Carter told us that our problems were the fault of the American people..." (No he didn't. No politician would ever say that. Romney must think his listeners are rubes.) Toward the end of the speech, the Mittster listed the guys who helped to get Bain Capital going:

My partners were Ricardo Poma, Miguel Duenas, Pancho Soler, Frank Kardonski, and Diego Ribandinarea.

We have already discussed Poma. He was one of the founders of the fascist ARENA party of Roberto D'Aubuisson -- a party that ran the death squads which ruthlessly murdered anyone who challenged the oligarchy's control. The CIA aided -- arguably controlled -- the death squads.

Miguel Duenas hailed from another of the 14 families; in fact, the Duenas clan may have been the worst thing ever to happen to El Salvador. It turns out that Miguel Duenas -- I presume that we're dealing with the same fellow -- ran the Banco Commericial of El Savador, which determined which farmers would and would not get credit. A nice little arrangement, this was; the Duenas family used it to control a massive share of the country's cotton and coffee production. In a country where small farmers had once been allowed to own and work their own land, the Duenas clan expropriated their fields and reduced the farmers to near-slavery. The National Guard kept the serfs in line.

One of the most interesting names on our list is the late Frank Kardonski. Born in Panama, he created the Panaminian Stock Exchange, owned Tower Bank, and did much to promote Panama as a place of foreign investment. Of course, during this period (the 1980s), Panama became a haven for anyone hoping to launder drug loot.

Here's the bit I like best:

In 1990, Kardonski’s family bought Key Biscayne Bank from Charles “Bebe” Rebozo, a longtime Key Biscayne resident and longtime friend of former President Richard Nixon.

Bebe Rebozo was the president's hideously mobbed up pal, and his bank was a notorious haven for mafia money. Is the bank still used for such purposes? I don't know. Perhaps readers in Florida can tell me more.

(A younger man named Frank Kardonski -- who may be related to Romney's old pal, judging from the facial resemblance -- runs an airline that operates between Florida and Central America. Readers of Daniel Hopsicker will no doubt raise an eyebrow.)

"Diego Ribandinarea" should actually be spelled Diego Ribadeneira. I believe that Romney's reference goes to the Diego Ribandinarea who became Ecuador's ambassador to Peru and previously served as foreign minister. I've seen no derogatory information about this guy. Of course, the CIA has a long history in Ecuador; see here and here. In 2008, the president of Ecuador, Rafael Correa, charged that that the CIA controls that country's military intelligence service and much of the police. Judging from the brief bio here, Ribadeneira seems to have devoted his life to diplomatic service, not business -- so it's a little odd to see Romney mention him as the co-founder of an American venture capital firm. (Could we have the wrong Diego...?)

The only online reference to Pancho Soler -- another offspring of the El Salvadoran aristocracy -- occurs in this rather wild tale, set in the 1970s, when Pancho was a young Harvard grad and good friend to the son of the brutal (CIA-backed) Nicaraguan dictator Anastasio Somosa. The story concerns Howard Hughes, who made a bizarre journey to Nicaragua after being "kidnapped" from his infamous Las Vegas hideaway.

(Sources differ as to whether Hughes left voluntarily. At roughly the same time he changed lodgings, the Bond film Diamonds Are Forever was shot in Vegas. In that movie, bad guys kidnap a millionaire obviously modeled on Hughes. In other words, life and art imitated each other simultaneously.)

Help, readers, help! I'd like to contact the author of the above-linked story, Gordon Fischer, and ask him if he can tell me more about Soler. Unfortunately, Fischer can be reached only via Facebook -- and as you probably know, I just don't do Facebook. If you do do FB, could you drop Mr. Fischer a line and tell him of my interest in Soler? My email address is in the upper right-hand corner of this page.

Here's where things get really weird. As noted above, I'm not the first person to wonder if Romney is "spooked up." Alas, most of the writers who have offered such speculation publish on websites that most respectable writers would hesitate to cite. (Then again, many respectable writers would hesitate to link to Cannonfire. C'est la vie.)

A typical example may be found here, on a web page festooned with all of the usual wacky conspiracy cliches. You'll see references to the Illuminati, David Icke, Henry Makow, Satanic Ritual Abuse, survivalism and a whole bunch of other crap that makes me sigh and roll my eyes like Al Gore during the first debate. The proprietor of that site, one Paul Drockton, "states Gold and Silver the ONLY Protection During Financial Collapse." Guys like Drockton have been issuing similar statements, in a similarly illiterate fashion, since I was a kid in the 1960s.

Nevertheless, oddball web sites can sometimes provide good leads. Example:

Mitt Romney, for example, has very close ties to a high-level agent from Israeli military intelligence, the woman he made CEO of Bain & Company.

This reference goes to Orit Gadiesh, who was part of Romney's gubernatorial transition team. She joined Bain & Company (the precursor company to Bain Capital) in 1977, at the tender age of 26. Before that, she was the assistant to Ezer Weizman, the Israeli Minister of Defense and later President.

The Gadiesh/Romney association has, predictably, inflamed vulgar anti-Semitic sentiments; examples may be found here and here and here. I think it is possible to distance oneself from the bigots while also confessing that, yes, Gadiesh really is pretty damned spooky.

Our "kooky" friends have given us other leads worth pursuing. For example: Did you know that the Managing Director of Bain Capital (between 1989 and 2002) was Robert C. Gay?

Conspiracy buffs of an earlier generation knew that name well, since Gay's father was Frank William "Bill" Gay, the Chief of Staff for Howard Hughes during that strange period when the spooks more or less took over the Hughes operation. Bill Gay hired the infamous "Mormon Mafia" that insulated Hughes from the outside world.

(What's that? You didn't know that spooks took over the Hughes empire? Then you really must read Michael Drosnin's Citizen Hughes, which offers a hilarious depiction of how, during this period, Hughes made life miserable for his "agency" babysitter, Robert Mayheu. The latter's company, Mayheu & Associates, had previously inspired the Mission Impossible TV show. As for Drosnin himself -- oh, don't get me started!)

And that brings us to...

The Hughes thing. Folks, you have no idea how much I do not want to talk about Howard Hughes. I've put off writing this very post for days because the prospect of diving into a big steaming toxic vat of Hughesiana just seemed so bloody depressing.

In previous decades, Howard Hughes inspired enough bizarre speculation to fill the Sedan Crater. Alas, he does not intrigue the current generation the way he fascinated your grandparents. The few who do care about Hughes nowadays tend to be weird and disagreeable people, even by conspiracy buff standards, and I don't want to get into any online debates with that lot.

But, but, but...

God damn. It's just inescapable. Every time you look into Mitt Romney's associations, you keep running into Howard's ghost. Just look at what we have seen so far:

1. Soler. Bain Capital co-founder Pancho Soler apparently had something to do with arranging Hughes' sojourn in Nicaragua in the 1970s. (Side note: Did you know HH was there for the big 1972 earthquake? A long time ago, the L.A. Times claimed that the poor old guy rode out the big one bouncing around in the back seat of a car parked on a Managua side street.)

2. Kardonski. Another Romney partner, Frank Kardonski, took over Bebe Rebozo's old mafia bank in Key Biscayne. As this bio puts it:

One of the ways that Rebozo helped Nixon was to obtain large campaign contributions from Howard Hughes.

Long story there. You already have the gist of it.

3. The Gays. As noted, Bain's Managing Director was the son of the guy who managed Hughes' business affairs -- during the time when American spooks were quietly taking over the day-to-day running of Hughes' company. As we shall s