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Yemen’s War Is Redrawing Middle East’s Fault Lines – Analysis

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By Conn Hallinan*

Yemen is the poorest country in the Arab world, bereft of resources, fractured by tribal divisions and religious sectarianism, and plagued by civil war.

And yet this small country tucked into the bottom of the Arabian Peninsula is shattering old alliances and spurring new and surprising ones. As Saudi Arabia continues its air assault on Yemen’s Houthi insurgents, supporters and opponents of the Riyadh monarchy are reconfiguring the political landscape in a way that’s unlikely to vanish once the fighting is over.

The Saudi version of the war is that Shiite Iran is trying to take over Sunni Yemen using proxies — the Houthis — to threaten the Kingdom’s southern border and assert control over the strategic Bab-el-Mandeb Strait into the Red Sea. The Iranians claim they have no control over the Houthis and no designs on the Strait. They maintain that the war is an internal matter for the Yeminis to resolve.

The Saudis have constructed what at first glance seems a formidable coalition consisting of the Arab League, the monarchies of the Gulf Cooperation Council (GCC), Turkey, and the United States. Except that the “coalition” isn’t as solid as it looks — in fact, it’s more interesting for whom it doesn’t include than whom it does.

Friends Like These

Egypt and Turkey are the powerhouses in the alliance, but there’s more sound and fury than substance in their support.

Initially, Egypt made noises about sending ground troops — the Saudi army can’t handle the Houthis and their allies — but pressed by Al-Monitor, Cairo’s ambassador to Yemen, Youssef el-Sharkawy, turned opaque: “I am not the one who will decide about a ground intervention in Yemen. This goes back to the estimate of the supreme authority in the country and Egyptian national security.”

Since Saudi Arabia supported the Egyptian military’s coup against the Muslim Brotherhood government and is propping up the regime with torrents of cash, Riyadh may eventually squeeze Cairo to put troops into the Yemen war. But the last time Egypt invaded Yemen,

While Turkish President Recep Tayyip Erdogan also pledged Ankara’s support for “Saudi Arabia’s intervention” and demanded that “Iran and the terrorist groups” withdraw, Erdogan was careful to say that he “may consider” offering “logistical support based on the evolution of the situation.”

Erdogan wants to punish Iran for its support of the Assad regime in Syria and its military presence in Iraq, where Tehran is aiding the Baghdad government against the Islamic State. He is also looking to tap into Saudi money. The Turkish economy is in trouble — its public debt is the highest it’s been in a decade, and borrowing costs are rising worldwide. With an important election coming in June, Erdogan is hoping the Saudis will step in to help out.

But actually getting involved is another matter. The Turks think the Saudis are in a pickle — Yemen is a dreadfully difficult place to win a war, and an air assault without ground troops has zero chance of success.

When the Iranians reacted sharply to Erdogan’s comments, the president backpedalled. Iran is a major trading partner for the Turks, and, with the possibility that international sanctions against Tehran will soon end, Turkey wants in on the gold rush that is certain to follow. During Erdogan’s recent trip to Tehran, the Turkish president and Iran’s Foreign Minister Mohammad Javad Zarif issued a joint statement calling for an end to the war in Yemen, and a “political solution.” It was a far cry from Erdogan’s initial belligerence.

The Arab League supports the war, but only to varying degrees. Iraq opposes the Saudi attacks, and Algeria is keeping its distance by calling for an end to “all foreign intervention.”

Even the normally compliant GCC, representing the oil monarchs of the Gulf, has a defector. Oman abuts Yemen, and its ruler, Sultan Qaboos, is worried the chaos will spread across his borders. And while the United Arab Emirates has flown missions over Yemen, the UAE is also preparing to cash in if sanctions are removed from Tehran. “Iran is on our doorstep, we have to be there,” Marwan Shehadeh, a developer in Dubai told the Financial Times. “It could be a great game changer.”

Pakistan Drifts Away

The most conspicuous absence in the Saudi coalition, however, is Pakistan — a country that’s received billions in aid from Saudi Arabia and whose current prime minister, Nawaz Sharif, was sheltered by Riyadh from the wrath of Pakistan’s military in 1999.

When the Saudis initially announced their intention to attack Yemen, they included Pakistan in the reported coalition, an act of hubris that backfired badly. Pakistan’s parliament demanded a debate on the issue and then voted unanimously to remain neutral. While Islamabad declared its intention to “defend Saudi Arabia’s sovereignty,” no one thinks the Houthis are about to march on Jeddah.

The Yemen war is deeply unpopular in Pakistan, and the parliament’s actions were widely supported, with one editorial writer calling for rejecting “GCC diktat.” Only the extremist Lashkar-e-Taiba organization, which planned the 2008 Mumbai massacre in India, supported the Saudis.

Pakistan has indeed relied on Saudi largesse and, in turn, provided security for Riyadh. But the relationship is wearing thin.

First, there’s widespread outrage in Pakistan over Saudi Arabia’s support of extremist Islamist groups, some of which are at war with Pakistan’s government. Last year, one such organization — the Tehrik-i-Taliban — massacred 145 people, including 132 students, in Peshawar. Fighting these groups in North Waziristan has taxed the Pakistani army, which must also pay attention to its southern neighbor, India.

The Saudis, with their support for the rigid Wahhabi interpretation of Islam, are also blamed for growing Sunni-Shiite tensions in Pakistan.

Second, Islamabad is deepening its relationship with China. In mid-April, Chinese President Xi Jinping promised to invest $46 billion to finance Beijing’s new “Silk Road” from western China to the Persian Gulf. Part of this will include a huge expansion of the port at Gwadar in Pakistan’s restive Baluchistan province, a port that Bruce Riedel says will “rival Dubai or Doha as a regional economic hub.”

Riedel is a South Asia security expert, a senior fellow at the centrist Brookings Institution, and a professor at Johns Hopkins. Dubai is in the United Arab Emirates and Doha in Qatar. Both are members of the GCC.

China is concerned about security in Baluchistan, with its long-running insurgency against Pakistan’s central government, as well as the ongoing resistance by the Turkic-speaking, largely Muslim Uighur people in western China’s Xinjiang Province. Uighurs, who number a little over 10 million, are being marginalized by an influx of Han Chinese, China’s dominant ethnic group.

Wealthy Saudis have helped finance some of these groups, and neither Beijing or Islamabad is happy about it. Pakistan has pledged to create a 10,000-man “Special Security Division” to protect China’s investments. According to Riedel, the Chinese told the Pakistanis that Beijing would “stand by Pakistan if its ties with Saudi Arabia and the United Arab Emirates unravel.”

The U.S. and Israel

The U.S. has played an important, if somewhat uncomfortable, role in the Yemen War.

It’s feeding Saudi Arabia intelligence and targeting information and re-fueling Saudi warplanes in mid-air. It also intercepted an Iranian flotilla headed for Yemen that Washington claimed was carrying arms for the Houthis. Iran denies it, and there’s little hard evidence that Tehran is providing arms to the insurgents.

But while Washington supports the Saudis, it has also urged Riyadh to dial back the air attacks and look for a political solution. The U.S. is worried that the war-induced anarchy is allowing Al-Qaeda in the Arabian Peninsula to flourish. The embattled Houthis were the terrorist group’s principal opponents.

The humanitarian crisis in Yemen is growing critical. More than 1,000 people, many of them civilians, have been killed, and the bombing and fighting has generated 300,000 refugees. The Saudi-U.S. naval blockade — and the recent destruction of Yemen’s international airport — has shut down the delivery of food, water, and medical supplies in a country that is largely dependent on imported food.

However, the Obama administration is unlikely to alienate the Saudis, who are already angry with Washington for negotiating a nuclear agreement with Iran. Besides aiding the Saudi attacks, the U.S. has opened the arms spigot to Riyadh.

Meanwhile, the Iran nuclear agreement has led to what has to be one of the oddest alliances in the region: Israel and Saudi Arabia. Riyadh is on the same wavelength as the Netanyahu government when it comes to Iran, and the two are cooperating in trying to torpedo the agreement. According to investigative journalist Robert Parry, the alliance between Tel Aviv and Riyadh was sealed by a secret $16 billion gift from Riyadh to an Israeli “development” account in Europe, some of which has been used to build illegal settlements in the Occupied Territories.

The Saudis and the Israelis are on the same side in the Syrian civil war as well. And for all Riyadh’s talk about supporting the Palestinians, the only members of the GCC that have given money to help rebuild Gaza after last summer’s Israeli attack are Qatar and Kuwait.

Kingdom of Fear

How this all falls out in the end is hard to predict, except that it is clear that, for all their financial firepower, the Saudis can’t get the major regional players — Israel excepted — on board. And an alliance with Israel — a country that’s more isolated today because of its occupation policies than at any other time in its history — is not likely to be very stable.

Long-time Middle East correspondent Robert Fisk says the Saudis live in “fear” of the Iranians, the Shia, the Islamic State, Al-Qaeda, U.S. betrayal, Israeli plots, even “themselves, for where else will the revolution start in Sunni Muslim Saudi [Arabia] but among its own royal family?”

That “fear” is driving the war in Yemen. It argues for why the U.S. should stop feeding the flames and instead join with the European Union and demand an immediate ceasefire, humanitarian aid, and a political solution among the Yemenis themselves.

*FPIF columnist Conn Hallinan can be read at dispatchesfromtheedgeblog.wordpress.com and middleempireseries.wordpress.com.

The post Yemen’s War Is Redrawing Middle East’s Fault Lines – Analysis appeared first on Eurasia Review.


An Environmental Turn In South China Sea Disputes – Analysis

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By Louie Dane C. Merced*

On 13 April 2015, the Philippine Department of Foreign Affairs (DFA) released a statement calling out China’s reclamation activities as causing “irreversible and widespread damage to the biodiversity and ecological balance of the South China Sea (SCS)/West Philippine Sea (WPS).” The DFA pointed out that China’s activities have so far caused destruction to over 300 hectares of coral reef systems, amounting to an annual economic loss of USD 100 million as well as constituting a threat to the livelihood of people s and communities in the littoral countries. The statement also criticized China for “tolerating harmful practices and harvesting of endangered species” protected under the Convention on Biological Diversity (CBD) and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). This is in relation to the number of incidents where Chinese fishers were foun d to be poaching giant clams, green sea turtles and other endangered species in the WPS/SCS, to which the Philippine government has already raised several protests.

The Philippines has long voiced out its concern and opposition to China’s reclamation activities, but much attention has been on how China’s unilateral actions violate the terms of the ASEAN-China Declaration on the Conduct of Parties in the South China Sea (DOC-SCS), how they create strategic dilemmas and military threats for other claimant states, and how they can undermine freedom of navigation and overflight in one of the world’s busiest sea lines of communication (SLOC). Thus, the recent statement on the environmental impact of China’s reclamation is a notable development as it emphasizes this equally critical but often overlooked angle of the SCS issue.

Ecological heart of Southeast Asia

Apart from its strategic location, its role in facilitating global trade, and its potential for hydrocarbon resources, the SCS, and its adjacent seas, is among the most abundant marine ecosystems in the world. A study by the UN Environment Programme in 2004 cited the high concentration of coral reefs in the seas of the region – 34 percent of the world’s coral reefs, despite occupying only 2.5 percent of the total ocean surface. The SCS, as the biggest body of water connecting the marginal seas of the region, plays a critical role in sustaining this vibrant marine environment.

The coral reefs in the SCS are vital to the marine biodiversity of the region as well as the food and economic security of littoral countries. They serve as the habitat and spawning ground for a variety of fish and other marine species. This is significant given that littoral states such as China, Indonesia, Vietnam, and the Philippines are among the largest fishing countries in the world, and fish constitutes a key part of diet of the people in the region. Coral reefs contribute to ecotourism and are also important sources of chemicals and compounds that have pharmaceutical and other economic value. In addition, coral reefs provide protection to coastal communities by reducing the impact of waves created by storms and other severe weather phenomena. This becomes of particular significance because coastal communities in the region are becoming more vulnerable to the adverse impacts of climate change and rising sea levels.

Given their importance, the coral reef ecosystems as well as the overall marine environment of the SCS must be protected. Dr. Edgardo Gomez, an eminent marine scientist from the University of the Philippines -Marine Sciences Institute (UP-MSI), studied how the massive scale of China’s construction over the rocks and shallow reefs are a clear source of environmental concern, as these involve dredging sand from the ocean floor and dumping them over entire coral reef systems. But apart from these, coral reefs are also threatened by illegal, unregulated, and uncontrolled fishing (IUUF) and other destructive practices (e.g. bottom trawling, cyanide poisoning, and use of explosives and dynamites) which are committed not only by fishers from China but also by those from other littoral countries. Aside from man-made activities, climate change and warming of the oceans also pose serious danger to the coral reefs.

Highlighting marine environment issues

Drawing attention to the destruction of coral reefs and the overall environmental degradation in the SCS demonstrates how the SCS dispute is not only a political, military, and economic concern among the claimant parties, but is also about the preservation of regional and global commons. Thus, every country has a legal and even moral responsibility to ensure that any activity in the SCS does not cause significant and long-term damage to the marine environment. A heavier responsibility, however, is placed upon the bigger countries given how the sheer scale of their actions can have wider impact on the environment. The challenge for bigger countries is to demonstrate that their commitment to marine environment protection is translated from rhetoric into action.

Expanding the discourse to include the environmental dimension also builds on the advocacy for a rules -based and norms-based approach to the SCS. This includes not only the UN Convention on the Law of the Sea (UNCLOS), but also the many international regimes and conventions such as CBD, CITES, and even customary international law. Framing the SCS disputes as an environmental concern and not just a sovereignty and jurisdiction issue broadens the number of stakeholders to include not only states but even non-state actors such as the private sector, civil society, environmental groups, and the scientific community.

Walk the talk

Perhaps most importantly, the Philippines, by drawing attention to the environmental issues in the SCS, must demonstrate that it is compliant with international agreements and that it is playing a proactive role in finding solutions to environmental challenges. These can be accomplished both through diplomacy and domestic policy.

On the diplomacy track, the Philippines should consistently call for greater cooperation in protecting the marine environment of Southeast Asia in fora such as the ASEAN, ASEAN Regional Forum (ARF) and the UN. It can also seek the greater inclusion of environmental issues in the proposed Code of Conduct (COC) in the SCS being crafted by ASEAN and China. Also, the Philippines’ chairing of the ASEAN Working Group on Coastal and Marine Environment (AWGCME), hosting of ASEAN Center for Biodiversity (ACB) and the Partnerships in the Environmental Management of the Seas of East Asia (PEMSEA), and participation in the Coral Triangle Initiative (CTI) provide the country important platforms to further promote marine environment protection.

The Philippines should also not be precluded from pursuing collaborative efforts with other claimant parties and regional stakeholders in conserving the marine environment. This would demonstrate that, beyond politics, the country’s environmental advocacy is driven by a genuine concern for the welfare and future of the whole region. Nevertheless, the application of international law through the arbitration case filed by the Philippines will still be considered as the long -term measure to not only manage and resolve the disputes, but to also promote a rules-based environmental governance of the SCS.

On the policy track, the Philippines should also ensure that it does not contribute to the further degradation of the marine environment, not only in the WPS/SCS but in the entirety of its own maritime domain. This can be attained by enhancing the enforcement of laws and regulations on fishing, developing the necessary physical infrastructure and technical capabilities on marine conservation, and empowering local coastal communities toward more sustainable use of the seas. The actions taken to combat IUUF, which resulted in the recent the lifting of the ‘yellow card’ warning by the European Union, is a good example of the Philippine government ’walking the talk’ in ensuring that fishing practices are not to the detriment of the marine environment. The challenge now is how these positive efforts can be sustained and strengthened.

As an archipelagic nation, the Philippines is fully cognizant of how the marine environment is crucial to the economic security and social well-being of littoral countries and the entire region. This is why the Philippines has been pointing out that China’s large scale reclamation threatens the fragile marine environment; these actions will have a negative impact on the environmental and economic security not only of the Philippines but also of the rest of ASEAN and other neighboring states.

*Louie Dane C. Merced is a Foreign Affairs Research Specialist with the Center for International Relations and Strategic Studies of the Foreign Service Institute. Mr. Merced can be reached at lcmerced@fsi.gov.ph.

The views expressed in this publication are of the authors’ alone and do not reflect the official position of the Foreign Service Institute, the Department of Foreign Affairs and the Government of the Philippines.

The post An Environmental Turn In South China Sea Disputes – Analysis appeared first on Eurasia Review.

Pakistan In China’s Eyes: Pawn, Pivot Or A Pointer To Its World View? – Analysis

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China’s engagement with Pakistan serves as a pointer to the way Beijing is likely to deal with the rest of the world as it redefines its pivotal global position.

By Iftekhar Ahmed Chowdhury*

Verbal grandiloquence or flowery terminologies are never in short supply when Chinese and Pakistani leaders choose to describe their bilateral relations. In his maiden trip to Beijing as Pakistan’s Prime Minister this time round, Nawaz Sharif, drawing from an analogy in nature, described these as “higher than the mountains, deeper than the seas”. Not to be outdone, the Chinese Foreign Minister Wang Yi, during a visit to Islamabad this February, citing a musical simile, said: “If ‘One Belt, One Road’ is like a symphony benefitting every country, then the construction of the China-Pakistan Economic Corridor is the sweet melody of the symphony’s first movement”. Some observers, unfamiliar with the linguist-culture of politics in the East, may tend to dismiss such expressions as mere hyperboles. But these metaphoric pronouncements, especially when they involve China, are often fraught with deep meaning, as the actual unfolding of the China-Pakistan bilateral relations so amply demonstrates.

The ‘One Belt, One Road’ initiative referred to above, and attributed to Chinese President Xi Jinping, is the centrepiece of his foreign policy. It depicts the Old Silk Route connecting China with Central Asia, and then with Europe beyond, and the new Maritime Silk Road, linking up the ports of powers friendly to China, combining together to provide a thrust to China’s ‘westward march’ in search of trade and resources in a drive to render China (and the entire region, as the Chinese would argue) stable and prosperous. The China-Pakistan Economic Corridor is an off-shoot of the Initiative that comprises a 2,000-mile stretch of infrastructural projects including roads, rail-links and pipelines, linking northwest China, far from Chinese coastal waters, with the warm-water port of Gwadar on the Arabian Sea, in the province of Baluchistan in Pakistan.

Conceptually the corridor is where the ‘Belt’ and the ‘Road’ actually meet. Also, it aims at relieving China’s nervous dependence on the narrow Strait of Malacca for shipping, seen as vulnerable to enemy interdictions at times of conflicts or war. The Chinese would provide US$ 46 billion for the projects along the Corridor, US$ 35 billion of which would be devoted to the energy sector to fill the gap of Pakistan’s critical power needs. In the cities and villages, Pakistanis have been known to suffer electricity supply cuts for as long as 14 hours a day! There has been some criticism in Pakistan that the path of the Corridor may have been tweaked to respond to Nawaz Sharif’s fraternal feelings for his brother Shahbaz Sharif, the Chief Minister of Punjab, and his fellow Punjabis, at the expense of the poorer province of Baluchistan. In South Asia generally, those in power sometimes see such benefits as being due to them because of their position, but the Pakistani Government vehemently denied these “allegations”. The Pakistani government is taking all the necessary precautions. Just in case some Baluchi tribesmen, often given to armed uprisings, try to show their discontent by attacking the Chinese workers, Islamabad decided to raise a force of 12,000 personnel.

The industrial plan is to add 10,400 megawatt of electricity to the supply capacity at a cost of US$ 15.5 billion by 2018. This would, coincidentally, though some might contend this point, also be the time when Nawaz Sharif would be seeking re-election, and since the project would fulfil one of his major election pledges, the prospects of his return to power, with a bit of help from China, would be bright. Thereafter, 6,600 megawatt more would be added, costing another US$ 18.6 billion, doubling Pakistan’s current production level of power. Understandably, Pakistan’s Planning Minister, Ahsan Iqbal, was ecstatic: “For Pakistan, it would be a game-changer,” he enthusiastically gushed, and most would agree. The amounts spent would not be in the form of traditional development aid, but as commercial credits and loans, by Chinese banks to Chinese companies and entrepreneurs. The fact that in the past Chinese loans have often been written off, have many a time warmed the cockles of the recipients’ hearts.

The visit, which saw as many as 50 accords signed, was not only about economics and trade. Military issues also figured. China offered to sell Pakistan nine conventional submarines. Their addition would double Pakistan’s current fleet, though some of their ageing craft could be retired before the new procurement is in place. Analysts have said, inspired by Israeli example, Pakistan may be seeking to place nuclear-tipped missiles on these conventional sea- based platforms. Thereby, Pakistan would shore up its second-strike capability in the case of any nuclear exchange. In strategic parlance, this is the capacity to be able to absorb a first- strike by an adversary, and have enough weapons left over to mount a massive retaliation. Submarines help this scenario in two ways: First, their mobility render them a difficult target to locate and destroy, and second, because submarine-based weapons are by nature less- precise, and imprecision of a weapon is a reason for the enemy to be extra-cautious in engaging in a conflict (as there is no telling what the nature of the collateral damage would be!) The Chinese could argue that by assisting Pakistan in developing a second-strike ability, it would actually be stabilising nuclear deterrence in South Asia.

In any case, Pakistan, which has the fastest-growing nuclear armoury in the world – currently 100 to 120 warheads compared to India’s 80 to 100 according to some calculations, with the potential of the numbers rising to 200 by 2020 – has already been taking steps towards acquiring the second-strike capability. It is doing so by dispersing and concealing its weapons, a process that began during the tenure of President Pervez Musharraf, and hardening the silos where the arsenals are stored. This would make it well-nigh impossible for any rival to take out all the weapons at one-go, ensuring that some of these survive to continue the conflict. Again, in theory at least, the acquisition of a second-strike capability should make Pakistan feel more secure, and consequently, less trigger-happy.

In the times when China actually viewed Pakistan as a counterpoise to India – it is arguable if that is any longer so – it was no secret that China actively assisted Pakistan in achieving nuclear-weapon capability. This was particularly true in the 1980s and 1990s. China also provided ballistic missiles to Pakistan as delivery vehicles for such warheads, and also assisted Pakistan in their designing and manufacturing. The idea was to keep India engaged westward as China went ahead with advancing its own capabilities, not just in regional, but in global terms.

On the civil nuclear side, China helped Pakistan construct at least six reactors. This cooperation could actually benefit the Chinese through their access to Western, particularly European, nuclear technology that Pakistan possessed, such as centrifuges, but it is unlikely that the Chinese have actually taken advantage of that. China accords the same treatment to Pakistan as it perceives the US and its allies as extending to India in civil nuclear supplies. This is significant because both Pakistan and India are outside the Nuclear Non-Proliferation Treaty and, therefore, of some concern to the international community. Interestingly, Pakistan singlehandedly is holding up the Fissile Material Cut-Off Treaty at the Conference on Disarmament (CD) in Geneva, on the grounds that India’s ability to obtain fissile material for civilian use from the NSG would free the raw-material for manufacture of weaponry.

Cooperation in addressing terrorism is another objective of the Pakistan-China partnership. China is deeply concerned about extremism in its Muslim-majority Xinjiang province, especially among the ethnic Uighurs, and is well aware of the possibilities of the support they might be able to attract from Pakistan-based Islamists. But instead of laying blame and responsibilities on Islamabad’s door, China has acknowledged, and expressed empathy for Pakistan’s own terrorism issues, and chosen to articulate its desire to work closely with Pakistan on this subject. In fact, it is at Pakistan’s urgings that the Chinese had made direct contacts with Mullah Omar and the Taliban, and reached an agreement with them whereby the Taliban assured them that the territory controlled by them would not be used for attacks directed at Chinese soil. That agreement has held to date. Indeed, apart from Pakistan, China is the only country that has maintained continuous contact with the Taliban since 9/11, thanks to Pakistan’s support. There is an ironical parallel in that Pakistan was also the bridge that linked the United States and Pakistan in 1971, an event that radically changed global politics since.

This is not to say, one must add, that the Chinese would prefer a Taliban take-over in Afghanistan at any time in the future. China is too pragmatic for that. It knows that such an eventuality could destabilise Afghanistan, and the region, which cannot be to China’s advantage. China has been able to create a situation with Islamists outside China that the Chinese territory, would not for them, constitute a prime target. China’s policy in the Middle East has been carefully crafted to that end, playing a low-key role, avoiding taking sides, and not rushing in where angels would fear to tread, unlike some of its other Security Council counterparts. For instance, while Western states were egging on the Saudi and coalition bombings of Yemen that were causing mayhem, Xi Jinping called King Salman and urged both calm and talks. This was immediately after Pakistan turned down a Saudi request for military assistance. Soon afterwards, Saudi Arabia and allies called off the bombings, declaring “goals have been achieved” (‘Mission Accomplished?’) despite continued rebel Houthi advance. The Pakistani and Chinese moves were much too back-to-back to discount some calibration, at least consultation.

The ‘One Belt, One Road’ initiative, in which Pakistan fits in so neatly, can be placed on the backdrop of Xi’s ‘China Dream’ or ‘Chunguo Meng’. This entails equality in relationship with the other big power, with each retaining its characteristics (example, the United States), ‘win-win’ cooperation with all countries (including India), and ‘strategic partnership’ with ‘all-weather friends’ (Pakistan) stimulating benefits for them as also China. Chunguo Meng is posited domestically on the ‘Four Comprehensives’ i.e. building a moderately prosperous society, deepening reforms, administering in accordance with law, and strictly governing the Communist Party of China. Chunguo Meng embraces the idea of a broader global footprint for China, complemented by domestic stability and prosperity. In dealing with foreigners, the general dictum of “finding common grounds and avoiding differences” applies, but this by no means implies any concessions by Beijing on those differences. Any such idea would be a grave misreading of the Chinese mind.

This year’s 10.1% increase announced in March of China’s defence expenditure, above the last year’s figure of US$ 130 billion is designed to respond to afore-stated objectives. As Chairman of the Central Military Commission since late-2012, Xi has issued at least 22 sets of “decisions” (jue ding), far more than any of his predecessors. These encompass ‘proposals’ (fang an), and ‘regulations’ (gui ding) on a wide range of military issues, and have run simultaneously with his cleansing the military of corrupt and incompetent senior officers (“tigers”). Xi’s aim is to enable the 2.3-million strong Peoples’ Liberation Army (PLA) to play an effective role in allowing China (whose people had, in Mao Zedong’s words in 1949, “have stood up”) to do so on the contemporary strategic, political and economic arenas. This would include a two-layered navy with a high-end Near Seas component and a limited low- end capability beyond, though most analysts believe, focussed entirely on contested areas close to home. Without continually belabouring the same point about Western or established powers’ non-recognition of new realities and accordingly reforming global institutions which is never easy (as India is discovering with regard to its aspiration for a permanent seat in the United Nations Security Council), China is setting out to create new institutions, as evidenced in the Asian Infrastructure Investment Bank. It has replicated the Geneva-based World Economic Forum, with its own Boao Forum for Asia, and also the World Peace Forum (to which the author is a regular invitee). The Chinese leadership use these platforms to sound out global policy makers with their new ideas. The Chinese would be the last to claim the creation of a new world order (they do not even own up to ‘China’s rising’, which they prefer to call ‘China’s peaceful development’!), but the world would be unwise not to watch out for it.

China’s view of Pakistan is a metaphor of how it views the world. Pakistan, to the Chinese, is an entity that is usefully utilised at every stage of China’s involvement with the rest of the globe. It began with linkages created in the early-1960s (for which credit would be owed to the Pakistani strongman Ayub Khan and Chinese Premier Zhou Enlai) when Pakistan was still a formal US treaty ally, through the 1970s when Pakistan was a conduit to the United States, through 1980s and 1990s as counterpoises vis-a-vis the then Soviet Union and India, and now as a plank to contain radical Islamists and provide access to the West and warm waters. At each stage, a particular relevance was identified and emphasised. This is also the case now, with the just-concluded visit by Xi to Islamabad.

In northern Pakistan, there exists a code of Pakhtunwali that envisages three main components; hospitality, honour and revenge. Throughout the rest of Pakistan, the prevalent culture incorporates these norms or mores, in one way or another, in different pecking order and with varying degrees of importance assigned to each. It was the trait of ‘hospitality’ which reigned supreme when the red carpet was rolled out as Xi arrived in Pakistan, amidst unmatchable pomp and ceremony. The warmth of the reception was mind-boggling for some analysts. This was helped by the way the Chinese conduct their policies in countries they seek to befriend (For instance in Pakistan and Bangladesh in South Asia) where they ingratiate themselves with every significant segment of the community, separately and collectively, such as with political parties, the bureaucracy, the military, the business, the students, the media, the workers, the civil society, and women’s groups. It is no wonder that a recent Pew poll recorded that in Pakistan 78.5% of the population like the Chinese as opposed to 14% for the Americans, despite the allure of American life and culture to the young and old, the commonality of language and over US$ 31 billion the US has pumped into Pakistan as aid to better human lives! In Islamabad Xi received thunderous ovation at the Parliament, whose joint house he addressed, being the first foreign leader to do so, and was awarded the highest civilian decoration, the Nishan-e-Pakistan, that the Islamic Republic offers any Pakistani, or foreigner.

Despite the enormous package that Xi brought with him to Pakistan, the hosts did not see him as a Greek bearing gifts, the kind that caused tragedy to befall the unfortunate Trojans in the Homeric epic tale. The Pakistanis perceived the gesture as being inspired by affection (naturally with a modicum of self-interest involved on the part of the donor, as explained in this piece) that a visitor would be wont to display in their own culture. During the imperial era, Chinese Emperors often reciprocated tributes received with presents of even greater value. This was to display their superior position in the interaction. But in contemporary times, in China that is diplomatically evolved and behaviourally suave, Beijing is at pains to play by the rules of notional equality of powers, and does nothing to challenge this myth.

China’s relationship with Pakistan is in many ways a metaphor for how this emerging global power will view, and even deal with, the world. Loyalty will be rewarded. “All-weather friends” like Pakistan will have a role in every stage of China’s policy evolution, neither ignored, nor marginalised. But nor would they be allowed to be impediments to the unfolding of China’s overall global perceptions, such as the need to build healthy, meaningful and rewarding ties with the US or India. ‘Core interests’ would be protected by all possible means, be they the sovereignty over Tibet, one-China policy, or some of its territorial claims on land and sea, though what are identified as such may subtly alter over time.

Andre Gunder Frank, before he passed on in 2005, had said the only thing to fear about a ‘rising’ China is the US response to it. As China quietly, and almost inexorably, moves to position itself pivotally in the globe, it takes a pragmatic and mature view of this reality. The Columbia economist Geoffrey Sachs described China as ‘the most successful development story in the world history’. If this is truly so, China has achieved this position not by any aggressive implementation of its revolutionary ideals, at least not any longer, but by a resolute, but un-clamorous pursuit of its self-interest. In doing so, it has sought not to create enemies. For instance, on Pakistan, it has brought Washington around to its policies by showing that stabilising Pakistan, which is China’s goal, would also rebound to America’s benefit. The same for India. That the Pakistan policy is no constraint on cooperation with India, Xi had travelled to India to celebrate Prime Minister Narendra Modi’s birthday, and is looking to a fruitful visit to Beijing by the Indian leader soon.

“It does not matter whether the cat is black or white, so long as it catches mice” was Deng Xiaoping’s wise dictum that set the tone for a pragmatic and non-ideologically inspired view of the world. When America tended to look at the globe through the lens that showed it as ‘black or white’, Henry Kissinger brought to bear the sophisticated European complexities of ‘balance of power’ in almost a ruthless pursuit of national self-interest bereft of the encumbrances of unnecessary ethical considerations, especially when these were impediments to achieving the goals. Contemporary China has great respect for Kissinger. However, today’s ‘balance’ is more than that of military power. Numerous tangible and intangible factors come into play. Analysts may be forgiven for suggesting that today’s ‘New China’ is taking a leaf out of Kissinger’s book. It is more likely, though, that China is forging ahead at its own speed, in its own way, without any such reference in its own mind. There is an old Chinese proverb: “The helmsman must guide the boat by using the waves: otherwise, the waves would sink it”, wise counsel for Xi Jinping and his close comrades.

About the author:
*Dr Iftekhar Ahmed Chowdhury
is Principal Research Fellow at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore. He is a former Foreign Advisor (Foreign Minister) of Bangladesh. He can be contacted at isasiac@nus.edu.sg. Opinions expressed in this paper are those of the author, and do not necessarily reflect the views of ISAS.

Source:
This article was published by ISAS as ISAS Special Report 23 (PDF)

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The Asian Infrastructure Investment Bank: Considerations For The Philippines – Analysis

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By Andrea Chloe A. Wong*

In October 2014, the Asian Infrastructure Investment Bank (AIIB) was formally launched in Beijing. The Philippines, along with 20 other countries, signed the Memorandum of Understanding on the establishment of the AIIB as founding members. The bank’s main thrust is to provide funds for infrastructure development that will stimulate the economic growth in the Asia Pacific.

The AIIB is projected to help fund development projects in the region. This is regarded as a significant opportunity for developing countries to improve their infrastructure through the AIIB. According to the Asian Development Bank (ADB), the infrastructure needs in the region is projected at USD 750 billion in investments annually until 2020. The ADB’s annual lending approval of an esti-mated USD 13 billion is not enough to address the region’s infrastructure deficit.

Despite the potential benefits of the AIIB, there are suspicions surrounding its establishment–largely because it is an initiative of China. This initiative evidently grants China a more prominent role in the region commensurate with its growing economic and political clout. At present, the bank is still considered small. The majority of its initial capital base of USD 50 billion and its authorized capital of up to USD 100 billion comes from the Chinese government. But if the AIIB expands in the long term, China will increase its clout in regional financing and may have influence over what gets built and which countries will get priority. This anticipated power play makes the US, Japan, and South Korea even more cautious of a China-led AIIB. However, it remains to be seen how the country will control the institution and to what extent its leadership will impact the region.

Another concern regarding the AIIB is its ambiguity over the kind of lending policies, transparency standards, and governance principles it will adopt. Critics are also in doubt whether the AIIB will meet the environmental safeguards and social standards that the ADB and World Bank espouse. To deflect such skepticism, China’s President Xi Jinping assured the international community that the AIIB will follow multilateral rules and procedures and will adhere to “good practices” of existing international lending institutions. Such assurance may still be suspect given China’s lending history and investment practices in some developing countries, particularly in Africa. Since the AIIB has been recently has only recently been established, there is still uncertainty on what kind of norms and procedures China will promote. But in the long term, these issues will be critical in determining the organizational effectiveness and developmental impact of the AIIB in the region.

What is evident and indisputable, however, is that the AIIB aims to address China’s own economic and strategic goals. The Chinese government recognizes the importance of having better infrastructure in its neighborhood to advance Chinese business interests in those countries. Aside from economic gains, China hopes to earn political amity points from developing countries, particularly in Southeast Asia. However, an AIIB that is not fully controlled by China may gain more regional support, as Chinese direct invest-ments in neighboring countries raise more anxieties than goodwill.

This is especially true for the Philippines after it encountered controversies surrounding the infrastructure projects that were financed by China. The North Rail Project and the National Broadband Network were some of the high-profile Chinese-funded projects that were eventually cancelled due to allegations of corruption and irregularities. These projects produced national embarrassment for the Philippines and painted a negative image for China.

These multi-billion dollar ventures stirred relations between the two countries, and happened at a time when the Philippines urgently needed funding to finance its infrastructure projects. The Chinese government provides low interest rates and flexible loan terms, which are considered more favorable because of its adherence to the principle of non-interference in the recipient country’s affairs and sovereign integrity. Meanwhile, China likewise stands to profit from this financial undertaking, with stipulations in business transactions that will ultimately benefit its industries. Despite the potential benefits for both countries, such conditions led to impropriety and non-transparency on Chinese-funded projects in the Philippines.

The establishment of a China-led AIIB raised fears that it might resemble such bilateral investment deals. Chinese state banks provide funding for the infrastructure development of the recipient country, while its state-owned corporations implement and build the projects. In the case of the Philippines’ North Rail project, China agreed to provide a concessional loan worth USD 503 million to be financed by the Export-Import Bank of China. Meanwhile, the China National Machinery and Equipment Corporation and the China National Technical Import and Export Corporation were automatically designated as the project’s contractors. Such arrangement reinforces criticisms against Chinese loans and investments as basically self-serving since a significant portion of these funds eventually go back to China through its own corporations.

Despite these concerns, the Philippines has signed up with the AIIB to finance its needed infrastructure projects such as dams, railways, highways, and electricity grids. Its decision to be one of the bank’s founding members demonstrates the country’s high priority for its economic develop-ment regardless of previous controversies in investment deals and current security issues with China. To fully maximize the potential benefits of the AIIB, the Philippine government must continue with its institutional reforms to promote transparency and efficiency in the management and disbursements of foreign investments and loans. Moreover, it is expected to properly operationalize its Public Private Partnership program that encourages qualified companies to participate in the planning and implementation of development projects in the country.

While the much-needed regional funding provided by the AIIB reflects its value, there are some uncertainties over its potential developmental impact in the long term. China will have to prove that the AIIB is not merely a reflection of its government practice of investment and lending, which offers “cheaper rates, faster approval, and fewer questions.” It needs to demonstrate that the bank will adhere to international standards set by multilateral lending institutions to gain credibility and minimize suspicions from other countries. The prospect for a widely accepted AIIB looks promising as more developed economies become members, and are expected to promote the standards of developed countries in regional financing. Meanwhile, developing member-countries of the AIIB such as the Philippines will have to adhere and implement transparency, efficiency, and accountability in the utilization of loans and investments it receives. These are critical factors that will hopefully boost the prospects of the AIIB and advance infrastructure development in the region.

*Andrea Chloe A. Wong is a Foreign Affairs Research Specialist with the Center for International Relations and Strategic Studies of the Foreign Service Institute. Ms. Wong can be reached at aawong@fsi.gov.ph.

The views expressed in this publication are of the authors’ alone and do not reflect the official position of the Foreign Service Institute, the Department of Foreign Affairs and the Government of the Philippines.

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France’s National Front More Divided Than Ever

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(EurActiv) — Jean-Marie Le Pen has announced plans to establish his own political group, deepening the rift within the French National Front.

The National Front’s founder, Jean-Marie Le Pen, opened a new chapter in the feud with his daughter and party leader Marine, by announcing plans to start his own political group. The split between father and daughter, as well as within the party and the National Front (NF) delegation in the European Parliament, appears to be deepening.

Of the 24 MEPs initially elected for the NF in May 2014, 23 have stayed in the delegation. Some, like Christine Arnautu, are closer to the father, while others, including Louis Aliot and Florian Philippot, the party’s second in command, are firmly in the daughter’s entourage.

But Jean-Marie Le Pen, who has been an MEP since 1984, is an established veteran of the European institutions. He has numerous connections in both Brussels and Strasbourg.

He said he did not want “the NF to become like [Gianfranco] Fini’s movement [in Italy], a majority right wing movement, so that Philippot and a few others can become ministers”.

The National Front failed to assemble the 25 MEPs from seven different member states that is the minimum requirement to start a group in the European Parliament.

A source from the European Parliament said “the fact that the delegation is disagreeing will make it more difficult to make contact with other delegations, especially as the two MEPs that have been excluded, Aymeric Chauprade and Jean-Marie Le Pen, are the two with the best contacts among Europe’s other extreme right parties”.

A new extreme right group

“I will not create another party. I will create a group that will not compete with the NF,” said the party’s co-founder and honorary president, who was suspended on 4 May.

This new political formation, he explained, would be “a parachute against disaster, to re-establish the political line that has been followed for decades”.

Jean-Marie Le Pen, who was first elected to the French Parliament in 1956, said he “will fight as long as [he] has the strength”.

Marine Le Pen called an extraordinary general meeting on Friday to remove her father’s title of honorary president of the National Front. Le Pen senior had asked that the meeting be held in person, not “by mail”. “I will not be pushed aside, I believe we must re-establish real democracy in the movement,” Le Pen said.

This latest episode is the third crisis to hit the French National Front’s large European Parliament delegation since the 2014 elections. Last summer the party was rocked by one MEP’s calls to “eliminate” jihadists. Aymeric Chauprade, the member at the centre of the scandal, was forced to resign as president of the Movement for a Europe of Nations and Freedom, the pan-European party of extreme right groups.

Visibly at war with the party’s number two, Jean-Marie Le Pen said he expects his daughter to “choose between her father and Philippot”.

His latest round of provocations in April, though nothing new in themselves, changed the dynamic within the party. Marine Le Pen was forced to make an example of her father after he repeated his view that the Nazi gas chambers were nothing but a “detail of history”, defended marshal Pétain and spoke of the need to protect the “white world”.

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Is ASEAN Meeting Targets In Services Trade Liberalization? – Analysis

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By Jovito Jose P. Katigbak*

Given the robust performance of the services sector and its importance to global and regional economies, ASEAN needs to continue to facilitate its services trade. Two significant frameworks – AFAS and AEC Blueprint – were established to serve as regulatory mechanisms in trade in services regionally. However, much cynicism has been expressed on the effectiveness of both frameworks and it is unclear if ASEAN is meeting/missing targets in services trade liberalization.

Defining services and services trade

Services are defined as economic activities that add value, directly or indirectly, to another economic unit. They are heterogeneous and include a wide range of economic activities. In their “Services Trade and Policy ” (2009) paper, Joseph Francois and Bernard Hoekman recognize that this inherent diversity highlights the basic function that many services perform relative to overall economic growth and economic development: they are inputs into production. Hence, services greatly determine the productivity of the ‘fundamental’ factors of production – labor and capital – that produce knowledge, goods and other services.

The General Agreement on Trade in Services (GATS) describes ‘trade in services’ through four possible modes: Mode 1: Cross border supply; Mode 2: Consumption abroad; Mode 3: Commercial presence; and Mode 4: Presence of natural persons. At the regional level, trade in services in ASEAN continues to be dynamic as its share of world services trade has improved from 4.6 percent in 2000 to just over 8 percent in 2012. ASEAN services export to the world market amounted to almost US$ 261 billion in 2011, which is twice more than US$ 121 billion in 2005. Likewise, ASEAN services import from the world market increased, magnifying from US$143 billion in 2005 to US$269 billion in 2011. More importantly, the services sector generates approximately 40 -50 percent of the national Gross Domestic Product (GDP) of ASEAN economies.

The AFAS and AEC Blueprint

At the 5th ASEAN Summit in Bangkok, ASEAN Economic Ministers (AEM) signed the ASEAN Framework Agreement on Services (AFAS) of 1995 which requires ASEAN Member States (AMS) to progressively enhance Market Access and guarantee equal National Treatment for services suppliers among ASEAN countries. In accomplishing these, AFAS is supposed to: 1) enhance efficiency and competitiveness and diversify services within and outside ASEAN; 2) eliminate substantially restrictions to services trade amongst Member States; and 3) progressively liberalize trade in services by promoting GATS-plus commitments.

Another landmark framework covering the facilitation of trade in services is the ASEAN Economic Community (AEC) Blueprint of 2007. It resulted in AMS agreeing to conduct subsequent rounds of negotiations under AFAS and schedule liberalization commitments until 2015 based on the parameters and timelines outlined in the Blueprint. The AEC Blueprint envisions a free flow of services within the region by removing substantially all restrictions on trade in services and increasing foreign (ASEAN) equity participation while allowing for overall flexibilities.

Notable achievements

To date, AMS, under the purview of AEM, have held six rounds of negotiations and have agreed on eight packages of commitments. ASEAN Finance Ministers and ASEAN Transport Ministers have added four more packages of commitments in financial services since 2002 to 2011, and another four in air transport services from 2004 to 2011.

As of the final quarter of 2012, all AMS have reached the liberalization target required by the eight packages of AFAS. Commi tments undertaken by AMS cover services sectors such as air transport, business, construction, distribution, education, environmental, financial, health care, maritime transport, telecommunications, and tourism. AEM have also concluded eight Mutual Recognition Arrangements (MRAs) for engineering, nursing, and architectural services, medical practitioners, dental practitioners, tourism professionals and framework agreements for MRA of surveying qualifications and accountancy services. These enable professional service providers certified or registered by the relevant authorities in their home country to be mutually recognized by other signatory AMS.

Challenges and unfulfilled promises

The liberalization of the services sector is a relatively new development compared with the trade in goods. The evolving and intangible nature of trade in services, along with the numerous rules and regulations that govern it (policy constraints), make it difficult for the international community and for ASEAN to frequently cope with the constant changes in services trade. The recent emergence of unique services sectors and sub-sectors (especially in e-commerce) which are not covered by the GATS and the AFAS have created more problems for the region in proactively managing services trade liberalization.

Hikari Ishido and Yoshifumi Fukunaga, in their “Liberalization of Trade in Services: Toward a Harmonized ASEAN++ FTA” (2012) policy brief, assessed the services restrictiveness index on AFAS. It found that the ASEAN average for the AFAS Seventh Package was very low at 0.36, with Thailand at 0.50, Cambodia at 0.41, Singapore at 0.36, the Philippines at 0.33, and Brunei as the lowest at 0.23. Based on the Hoekman Index,1-“fully liberalized”; 0.5-“limited (but bound)”; and 0-“unbound” (government has not committed to liberalize). Evidently, ASEAN registered a lower figure which highlights the region’s struggle in liberalizing its services trade.

Another criticism is the inability of AFAS and the AEC Blueprint to stimulate significant regulatory changes in Member States . According to ASEAN and the World Bank’s ASEAN Integration Monitoring Report (2013), six ASEAN countries – Philippines, Indonesia, Thailand, Malaysia, Vietnam, and Cambodia – registered an average Services Trade Restrictiveness Index (STRI) of 44, which is higher than the East Asia Average (41) and the World Average (29). Studies suggest that mode 4 gained the least commitment. Moreover, none achieved 0 which means a fully open market. Thus, a very restrictive policy stance in essential services sectors – professional, transport, telecommunications, and finance – adversely impact the goal of substantially eliminating restrictions to services trade. A diverse grouping of ten Member States, particularly their economy’s structure, also poses an arduous task for ASEAN in integrating and advancing services trade. Further complications arise due to the political positioning of non -State stakeholders with protectionist interests.

Balancing national and regional interests

Considering that 2015 is the initial deadline, ASEAN has missed liberalizing much in services trade. The region’s ambitious goal of an economic community where there is a free flow of services (including skilled labor) is primed to fall short of expectation come 2015. Restrictive and protectionist national policies and mechanisms ultimately hinder ASEAN’s push toward greater liberalization of trade in services.

The establishment of an AEC is a long and demanding process and it is high time for AMS to be more open and liberal than ever in meeting targets and realizing commitments. To achieve this, AMS must squash fear of local displacement by communicating carefully to its general public the tremendous benefits of an effectively managed services trade in an integrated region.

At the national level, attaining inclusive growth in the Philippines entails a vibrant services trade with other AMS and an efficient services sector with crucial inter-sectoral linkages. To become competitive, the country should also undertake significant policy adjustments particularly the relaxation/removal of unnecessary regulations to attract more foreign investments into the country. More importantly, human capital development through enhanced education and vocational training is vital in upgrading the country’s skills and capacities to perform better in an interconnected region.

*Jovito Jose P. Katigbak is a Foreign Affairs Research Specialist with the Center for International Relations and Strategic Studies of the Foreign Service Institute. Mr. Katigbak can be reached at jpkatigbak@fsi.gov.ph.

The views expressed in this publication are of the authors’ alone and do not reflect the official position of the Foreign Service Institute, the Department of Foreign Affairs and the Government of the Philippines.

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Burma: Parliament Hears Briefing On Marriage Bill Punishments

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Non-Buddhist men may face two years in prison or a 1.5 million kyat (US$1,500) fine, or both, if found to have violated the controversial Buddhist Women’s Marriage Bill, which is currently awaiting a second approval in Burma’s upper house.

The legislative assembly’s Joint Bill Committee on Monday briefed the upper house of parliament and suggested punishments for the bill – which forms part of the so-called package of four ‘race protection laws’ – if it is passed.

The act would punish a non-Buddhist man for marrying a woman if he is deemed to have coerced or forced her to sacrifice her religion. It has been heavily criticised from human rights and women’s rights activists.

After being passed in the upper house in February, it was approved by the lower house after being amended. Once parliament resumed on 11 May it was passed back to the upper house, where it needs be accepted before being signed off by President Thein Sein.

Suggestions and feedback on the bill from members of the public and civil society organisations will be accepted, said the committee.

The Joint Bill Committee’s briefing indicated that men would be subject to the punishments if found in contravention of Articles 19(f), 19(g) or 19(h) of the proposed law, which cover, respectively: allowing a Buddhist wife to freely practice her religious belief; allowing children the freedom to choose which religion to follow; and allowing a Buddhist shrine and images to be kept in the home.

The committee on the same day also presented a parliamentary briefing on the Population Control Healthcare Bill, also part of the race protection package, which had been returned from the president with his comments. The committee suggested terminology in the bill should be updated to conform to the newly adopted structure of the Ministry of Health.

In addition, the committee on Monday also briefed the lower house on the Television and Broadcast Law that had been recently passed, with amendments, by the upper house.

Many observers see the Race Protection bills as attempts to subjugate and control the Muslim community in Burma. In January, a collective of 180 civil society organisations presented a petition to parliament against the race protection bills, asserting that they are discriminatory toward women and can be seen as targeted discrimination against minorities.

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A Common Language To Boost Future Space Expeditions

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When astronauts first gazed down at our planet, humankind received a visceral reminder that we all come from one place. EU-funded scientists are confident that another giant leap forward in space exploration has just been taken with the establishment of a common data hub.

This hub, developed through the four-year IMPEX (Integrated medium for planetary exploration) project with nearly EUR 2 million in EU funding through FP7, addresses a key problem that has consistently hampered cooperation in space exploration; the fact that complex computational models used on various space expeditions have not been compatible. This means that the exchange and comparison of observational data between missions has not always been possible.

Thanks to IMPEX, scientists will now be able to compare observational data with simulation models, and essentially ‘speak the same language’ as scientists across the globe. The project has developed a portal that enables a huge amount of information received from past and ongoing missions to be available at one single point, along with tools to make this information accessible.

The four-year project has already been put into use. Scientists have been able to compare data taken from the European Space Agency (ESA)’s Venus Express mission launched in 2005 and NASA’s Messenger mission, which orbited Mercury between 2011 and 2015, with existing simulation models. Comparisons with observational data from ESA’s famous Rosetta mission, which performed the first soft landing on a comet in 2015, are expected to follow in the near future.

By comparing observational data with a simulation of the cometary environment, scientists hope to gain a much clearer understanding of how our solar system came into existence. Research into the magnetic fields surrounding Venus, Mercury and other objects in the solar system has also been advanced.

In order to get to this point however, the project first had to bring together experts from Austria, France, Finland and Russia to specify key requirements and outline possible obstacles. This enabled the team to design the functional and easy-to-use software and to define common data models. The project was then able to develop a single point of access to an impressive range of tools that can be used to work with different data in the field of plasma physics.

Within the IMPEX portal, the CDPP AMDA (Automated Multi-Dataset Analysis) tool provides simple access and easy-to-use data mining functionalities. Another tool is the CDPP 3DView, which enables scientists to simulate spacecraft trajectories. In fact, all IMPEX databases directly feed into 3DView, enabling an interactive combination of spacecraft orbits with in-situ measurements and simulation data.

Due for completion at the end of May 2015, IMPEX is expected to boost understanding and cooperation between modelling and space mission data experts, and help lay the groundwork for future missions in a cost-effective and highly collaborative manner.

Source: CORDIS

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South Africa: Betting On Mmusi Maimane For The Black Vote – OpEd

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In any other jurisdiction, winning an election by over 62% of the vote would be considered a landslide and that would be the end of it. Just not in South Africa. In last year’s national elections, though the African National Congress (ANC) won the majority of the vote and retained power, it was surprisingly not the only victor in that election. Here is why. Firstly, to share the spoils as it were, was the Economic Freedom Fighters (EFF) led by firebrand Julius Malema, which as a ‘new kid on the block’ garnered 29 seats of the National Assembly in its first major election. Then there was the Democratic Alliance (DA), which in keeping with historical trends saw its share of the national vote increase from 16, 66% in 2009 to 22, 22% in 2014.

All these were significant albeit small victories for South Africa’s opposition parties as they revealed a glimpse of how the political landscape in South Africa might shift in the future.

Just how big or how prompt that shift will be is inevitably dependent on the progress of the opposition parties in the rainbow nation in transforming their images into real national government contenders. South Africa is widely lauded for its democratic political and constitutional machinery which has close to 29 opposition parties. And for the most part, it is the DA that has posed the most realistic threat to the ANC’s hold on power, though now the case may be made for the EFF. However, with its radicalism and how its identity seems overly intertwined with its leader Julius Malema, it is difficult to see its existence as a going concern outside of Mr Malema’s leadership.

For all it has going for it, the DA has been shackled with a “white” party tag that it has been struggling to shake off. Given the brutal history of the apartheid era, and its subsequent legacy issues in the democratic South Africa, the DA has for the longest time been perceived as an elitist white party incapable of ably representing the interests of the black people.

Perceptions the party has been trying to erase. Even its former leader Helen Zille once conceded that it would be difficult to threaten the ANC`s two decade hold on power if the DA could not successfully rid itself of the “white” party tag.

Having lost its erstwhile parliamentary leader Lindiwe Mazibuko widely seen at the time as Zille’s heir apparent amid reports of a breakdown in her relationship with Helen Zille, the party was left with a credibility deficit amongst the black electorate. What ensued thereafter was a disastrous experiment wherein the DA attempted to thrust liberation struggle stalwart Dr Mamphela Ramphele to the helm of the party. But that ill-conceived plan failed as sudden as it was hatched, and Zille together with the DA were left with egg in the face.

Enter Mmusi Maimane, to fill the gap that has given the DA a lot of headaches, that of a“black face” of the party even though it asserts that it is a non-racial party. Maimane was elected as the first black leader of South Africa`s main opposition party, the Democratic Alliance at its recently ended electoral conference in Port Elizabeth. Could he be the DA’s smoking ace, who will attract the highly sought after black vote, that could well be the point of difference in future elections?

Mmusi Maimane is the representation of the progressive South African dream the DA is selling. A Soweto born, eloquent and charismatic leader, who once dabbled in entrepreneurship and has a BA in psychology and a Masters in theology. He even taught at the prestigious Gordon Institute of Business Science before making the seamless transition to politics where he was the DA’s mayoral candidate for Johannesburg in 2011. And to top it off, portraying the true notion of the rainbow nation, Mmusi Maimane is married to a white person.

Yet these are just but some of the attributes that have seen him labelled as ‘suspiciously black’ among some quarters. His ascension in the Democratic Alliance has been often described as merely ceremonial and that he panders to white interests and as such could not represent the black voter. One thing that even Mmusi Maimane does not deny is his obvious lack of experience. At just 34 years old, he would be expected to be finding his feet in South Africa’s political construct, yet he is now tasked with the formidable task of redefining and charting a new course for the DA. His, is a rise to power that could not have come at a more critical time for the DA. With just under a year to the 2016 local elections, Mmusi Maimane will have to galvanise the DA political machinery to present a competitive opposition to the ANC, and continue building towards the 2019 national elections.

The DA already governs 1 out of 9 South African provinces, a large metropolitan city and 26 local municipal authorities around the country. Whether the DA will give the ANC a run for its money under Mmusi Maimane’s leadership even in the face of a growing threat from the leftist EFF will be the major question on the minds of many. Earlier this year, some media reports noted how the EFF dominated the DA as the major opposition party in parliament as the EFF took President Zuma to task over when he would repay the money used to upgrade his private residence in his rural Nkandla.

That same February however, we saw a different side to Mmusi Maimane as he tore into President Zuma, describing him as a “broken man presiding over a broken society.” He further told President Zuma that he was personally not an honourable person following the violent confrontation between the EFF and state security agents at a joint sitting of the National Assembly early this year. This will most certainly put to rest the accusations of some who see him as a lame duck incapable of shifting the gears when the terrain gets tough.

Whatever his actual or perceived misgivings; the DA has nailed its colours to the mast by entrusting Mmusi Maimane to transform the party. And throngs of its supporters are sold onto his vision for the future of the party and have rallied behind his “Believe in Tomorrow” slogan. Whether he will be equal to the task or not is anybody`s guess. It will be interesting to see how the party will fare under his stewardship, and whether the DA will provide a more resurgent threat to the ANC as it provides a political home for the liberal black voter discontent with ANC’s rule.

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Getting A Slice Of The Pie: The Philippines In ASEAN-South Korea Relations – Analysis

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By Krista Kyla D. Seachon*

The 25th year of relations between ASEAN and South Korea in 2014 was highlighted by the commemorative summit held last December 2014 in Busan, South Korea. With the theme “Building Trust, Bringing Happiness,” ASEAN leaders met with South Korean President Park Geun-hye and issued a joint statement promoting increased political, economic, and socio-cultural cooperation. Given the growing interaction between ASEAN and South Korea, how can the Philippines take advantage of these relations and maximize its participation in ASEAN- ROK?

South Korea is committed to building a strong partnership with ASEAN

From being a sectoral dialogue partner in 1989, South Korea’s relationship with ASEAN was elevated to the summit level in 1997 and finally to a strategic partnership in 2010. Eventually, South Korea opened its mission and appointed a representative to ASEAN.

The growing cooperation between ASEAN and South Korea is evident in terms of regional trade and investments. ASEAN is South Korea’s second largest trading partner while South Korea is the fifth largest trading partner of ASEAN. The two-way trade between South Korea and ASEAN amounted to USD 135 billion in 2013, a three percent increase from the 2012 trade volume of USD 131 billion. With the signing of the ASEAN-Korea Free Trade Agreement (AKFTA), the two parties have sought to further expand trade volumes by setting a target of USD 200 billion in two-way trade by 2020. Meanwhile, Foreign Direct Investments (FDIs) from South Korea to ASEAN, amount to USD 3.5 billion in 2013.

Another reflection of ASEAN and South Korea’s strong partnership is in people-to-people connectivity. Every year, an average of five million tourists travel between ASEAN member states and South Korea. Data from the ASEAN-Korea Centre also reveal that nationals from ASEAN countries account for 23 percent or 330,000 people of the total number of foreign residents in South Korea.

Therein lies the problem

Among ASEAN states, South Korea’s trade volume with the Philippines remains dismally low. As of 2012, the country ranks 6thin bilateral trade at USD 770 million compared to Indonesia’s USD 29,631 million and Malaysia’s USD 2,294 million. As of 2013, Philippine exports to South Korea reached USD 3.4 billion while Philippine imports from South Korea amounted to USD 4.82 billion. From this data, a trade surplus in favor of South Korea currently exists. This is attributed to various issues surrounding the investment climate in the Philippines; problems on the utilization of natural resource endowments available in the country; and the low value added of products manufactured by local industries. Philippine economic diplomacy could encourage more Korean investments but these have to be paved with sound infrastructure and improved investment climate in the country.

In the area of tourism, the country has a long way to go if it wants to be on par with its neighbors, although the Philippines is currently undergoing infrastructure development and rehabilitation. Among ASEAN countries, the Philippines has the second highest tourist arrivals from South Korea – next only to Thailand –with 1,165,789 tourists in 2013. While the Philippines has a lot of pristine beaches and lush forests, interconnectivity of these tourist attractions to airports has to be addressed. While airports in neighboring ASEAN states have been vastly improving in the last decades, we have to overhaul our own—the Ninoy Aquino International Airport (NAIA) 1 hailed from 2011 to 2014 as one of the worst airports in the world.

In 2014, the Philippines ranked 52nd among 144 economies in the Global Competitiveness Index. The country’s ranking was up seven notches, from the 59th spot among 148 economies in 2013. Based on the ease of doing business report, however, there is still a lot of red tape just to start a business. In addition to streamlining requirements, there is also clamor for putting in place a consistent policy for investment to encourage more businessmen from South Korea to set up shop in the country.

Maximizing opportunities: implications for the Philippines

Given South Korea’s strong interest in the region, the Philippines should take advantage of this opportunity. South Korea is active in providing support for projects in ASEAN. This is seen through the establishment of the ASEAN-ROK Special Cooperation Fund (SCF) and the ASEAN-ROK Future Oriented Cooperation Fund (FOCP). Figures on the Regional Development Assistance from South Korea amount to USD 59 billion. The huge amount offered by South Korea for development programs remain underutilized by ASEAN countries. Philippine Permanent representative to ASEAN Amb. Elizabeth P. Buensuceso also stated that most projects are South Korea-initiated and there is a need to synergize ASEAN and South Korean priorities. Completed projects under the SCF and the FOCP are mostly exchange programs and knowledge transfer programs. The Philippines can take advantage of the funds available by proposing projects that are in line with tourism and infrastructure development, two key areas where South Korea has comparative advantage.

With the upcoming ASEAN integration, ASEAN countries are scrambling to improve their infrastructure and mechanisms in order to accommodate the changes that will be occurring in the region. The Philippines can take advantage of this as rationale to carry out needed reforms in developing infrastructure and improving the investment climate in the country. It cannot maximize its partnership with South Korea through ASEAN if it remains lackluster in its effort. But with a change of administration in 2016 looming, hopefully, the current administration will be able to cover all potholes in the Philippines’ bilateral relations with South Korea.

*Krista Kyla D. Seachon is a Foreign Affairs Research Specialist with the Center for International Relations and Strategic Studies of the Foreign Service Institute. Ms. Seachon can be reached at kkdseachon@fsi.gov.ph.

The views expressed in this publication are of the authors’ alone and do not reflect the official position of the Foreign Service Institute, the Department of Foreign Affairs and the Government of the Philippines.

The post Getting A Slice Of The Pie: The Philippines In ASEAN-South Korea Relations – Analysis appeared first on Eurasia Review.

Islamic State Financing And US Policy Approaches – Analysis

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By Carla E. Humud, Robert Pirog and Liana Rosen*

The Islamic State, also known as ISIL or ISIS, has been described by senior U.S. officials as one of the best-funded terrorist organizations. Its wealth has contributed to the group’s ability to finance sophisticated military operations across parts of Iraq and Syria. It also seeks to use its revenue to administratively control and govern the territory it has seized. In several respects, the Islamic State presents a unique policy challenge to combating terrorist financing. Its financial strength lies in its ability to secure large amounts of funding from primarily internal sources, its lack of reliance on international sources of funds, and its exploitation of ungoverned spaces and porous borders to move funds with impunity. These characteristics often place the organization’s finances beyond the reach of some of the most common counterterrorist financing policy tools.

The Islamic State controls a variety of public resources and infrastructure in parts of Iraq and Syria, enabling it to assemble a “diverse financial portfolio.”1 Some of these resources, such as oil and antiquities, can be smuggled and sold for considerable profit. Others—agriculture and energy and water utilities—generate limited revenue and require a significant investment in inputs or technical expertise, but help the group portray itself as exercising the functions of a legitimate government. Activities such as kidnapping for ransom or the looting of state banks in Iraq are profitable in the near-term but not necessarily sustainable. In other cases, IS control over a set of resources is notable not solely for the revenue the group derives from it, but also for the extent to which it limits the ability of the Iraqi and Syrian governments to conduct trade, provide utility services, or feed its citizens.

Targeting the Islamic State’s finances is one of five core lines of effort to degrade and defeat the terrorist organization. General John Allen, the U.S. Special Presidential Envoy for the Global Coalition to Counter ISIL, stated in early 2015 that the United States cannot defeat ISIL through military efforts alone, and highlighted the need to deprive the group of access to financial resources.2 U.S. policy to counteract IS financing has concentrated on three primary areas: disrupting the group’s main sources of funding, restricting its access to the international financial system, and imposing sanctions on its senior leadership and financial facilitators. The United States also has sought to collaborate with international partners, including through cooperation on financial intelligence collection and analysis.

Although military airstrikes on IS-linked oil infrastructure and supply networks have already altered the organization’s financial profile, counterterrorist financing policy responses remain nascent. Policymakers continue to grapple with how to develop quick and effective responses to combat IS financing. Some caution that counter-finance tactics may need to be balanced with consideration of the economic harm such actions may inflict on civilian populations in IS- controlled territory. In the absence of alternatives, particularly for key resources such as oil, utilities, and agriculture, efforts to counter IS-financing could damage local economies and services and contribute to an expanding humanitarian crisis in the region.

Early international efforts to address IS financing have focused on gathering information and generating a common understanding of the organization’s financial capabilities. As part of the international Counter-ISIL Coalition, the United States, Italy, and Saudi Arabia are co-leading the Counter-ISIL Finance Group (CIFG), which met for the first time in March 2015. Several United Nations Security Council Resolutions have authorized international action against IS financing, most recently in resolution 2199 (2015), and, in an initiative co-led by the United States and Turkey, the Financial Action Task Force issued a report in February 2015 that describes IS financing typologies.

U.S. officials have sought to reduce expectations regarding the pace of efforts to combat the sources of IS revenue, emphasizing that counter-IS financing is a work in progress, requires further refinement, and is unlikely to result in immediate success. To date, the Obama Administration has not requested new authorities from Congress specifically to counter IS financing. As part of broader efforts to evaluate the Administration’s counter-IS response, Congress also has an interest specifically in evaluating U.S. efforts to target IS financing and to combat terrorist financing generally. In November 2014, the U.S. House Committee on Financial Services held a hearing on “Terrorist Financing and the Islamic State.” More recently, in March 2015, the Committee on Financial Services established a six-month bipartisan “Task Force to Investigate Terrorism Financing” in order to conduct hearings and investigations related to U.S. responses to terrorist financing issues.

What is the Islamic State?

The Islamic State organization is the successor to Al Qaeda in Iraq (AQI). Established in 2004, AQI pledged loyalty to Al Qaeda and targeted U.S. and coalition forces in Iraq. In 2006, AQI changed its name to the Islamic State of Iraq (ISI). Following the outbreak of unrest in Syria in 2011, ISI leader Abu Bakr al Baghdadi tasked Muhammad al Jawlani with establishing Al Nusrah Front (ANF) in Syria to fight the Asad government.3 ISI provided Jawlani with funding, manpower, and guidance, although ANF did not publicly acknowledge its ties to Al Qaeda. In April 2013, Baghdadi unilaterally announced a merger of ISI and ANF, under the name Islamic State in Iraq and the Levant (ISIL or ISIS). ANF and Al Qaeda leadership both rejected the merger, and Al Qaeda leader Ayman al Zawahiri ordered Baghdadi to confine his operations to Iraq. Baghdadi refused, and ISI began fighting in Syria under the name ISIL, eventually coming into direct confrontation with ANF and other Syrian opposition forces. In February 2014, Zawahiri publicly severed ties with ISIL, citing the group’s brutal tactics, infighting with other Sunni groups, and refusal to cede Syria operations to ANF. In June 2014 Baghdadi declared the establishment of an Islamic caliphate and changed ISIL’s name to the Islamic State.

Headquartered in the eastern Syrian city of Raqqah, the Islamic State operates primarily in northeastern Syria and northwestern Iraq. Through an extended military campaign against both government and opposition forces, the group gradually gained control over a roughly contiguous area along the Tigris and Euphrates rivers spanning hundreds of miles. In February 2015 congressional testimony, U.S. Director for National Intelligence James Clapper reconfirmed the intelligence community’s estimate that the Islamic State can muster “somewhere in the range between 20 and 32,000 fighters” but noted that there has been “substantial attrition” and the group has been turning to conscription in some areas. IS militants in 2014 beheaded three Americans captured in Syria; a fourth U.S. citizen was also killed while held by the group. The Islamic State has encouraged followers to conduct lone-wolf attacks in Europe and the United States. For additional information on the Islamic State and the U.S. response, see CRS Report R43612, The “Islamic State” Crisis and U.S. Policy, by Christopher M. Blanchard et al.

History of IS Financing

The Islamic State’s system of financing is likely shaped by the experiences of the group’s predecessor organizations, the Islamic State of Iraq (ISI) and Al Qaeda in Iraq (AQI). Captured battlefield documents and media reports provide the basis for what researchers know about how precursors to the Islamic State were funded. For example, documents describing ISI operations in Sinjar reveal a group that was reliant on incoming foreign fighters for funds, internal transfers from other areas under ISI’s control, local donations, and conflict loot.4 Other areas under ISI’s control were reportedly funded through oil revenue, agricultural production, ransom payments, and external donors.

Based on other captured financial records, a RAND study analyzed the finances of AQI in Anbar province during the group’s peak power and influence in 2005 and 2006.5 The RAND study concluded that regional financial managers wielded significant autonomy in budgetary decisionmaking. This was due partly to the preponderance of locally sourced revenue streams, including the theft and resale of local high-value goods, such as construction equipment, generators, electrical cables, and cars, as well as extortion. Notably absent from the financial records analyzed by RAND was data to suggest that the group profited primarily from oil smuggling or relied on wealthy foreign donors. The RAND study found that transfers of funds were conducted primarily through cash couriers, rather than the formal financial sector, and that the group was sufficiently profitable to redistribute some its wealth to other provinces and to other countries, including possibly to senior Al Qaeda leadership in Pakistan. Yet, the study also found the group to lack substantial cash reserves and thus to be dependent on consistent cash flows in order to keep pace with outlays for daily operations, particularly salaries.

Another battlefield document captured in 2008 appears to highlight the centrality of effective financial management for AQI’s operations. In this document, ISI fighters compiled a list of lessons learned, based on what they perceived as Al Qaeda’s failures in Iraq.6 Among them was a critique of its use of financial resources, describing a failure to distribute funding among local cells effectively and the lack of a regular funding source, particularly a foreign state sponsor.
U.S. and Iraqi forces to date have captured a limited number of internal Islamic State documents, which have not been publicly released. In June 2014, Iraqi special forces recovered a trove of documents on memory sticks and hard drives during a raid that killed Abdul Rahman al Bilawi, the Islamic State’s military chief of staff for Iraqi territory. Some media outlets were permitted to review a selection of the material, which reportedly included details of the group’s leadership structure as well as expenditure lists.

Sources of Revenue

According to congressional testimony by Patrick Johnston of the RAND Corporation in late 2014, the key difference between the financial activities of the Islamic State’s predecessors and its current financial profile is not the types of revenue sources, but the scale of activities.7 Between August 2008 and January 2009, ISI’s master financial ledgers in Mosul reportedly showed the group generating slightly less than $1 million in fundraising per month. In 2014, the Islamic State was able to generate the same amount—or more—per day. This section surveys specific IS revenue sources, some of which were initially cultivated by AQI and ISI.

Oil and Natural Gas Syrian Oil Sector

Before protests against the Syrian government began in March of 2011, the oil sector played an important role in the national economy and government accounts. Although not a large oil producer or exporter in the world market, Syria produced approximately 400,000 barrels per day of crude oil from its oil fields in the eastern part of the country, near the Iraqi border, while exporting approximately 150,000 barrels per day of crude oil, virtually all to Europe, including Turkey. The oil sector provided 25% of Syrian government revenues, and about 45% of total Syrian exports.

The escalating combat in Syria since 2011 has damaged the oil sector on both the demand and supply sides of the market. Demand for Syrian exports has evaporated as sanctions imposed by the United States and others, including, critically, the European Union, took effect. Fighting in Syria has damaged oil facilities, causing oil production to fall to approximately 20,000 barrels per day, or less, only 5% of average production before 2011. As a result, official exports have fallen to zero, and Syria has become a net importer of petroleum products. Syrian oil export facilities remain largely under government control while oil producing areas remain under rebel control, so exports are unlikely to resume without a political settlement even if facilities were physically repaired. In addition, combat conditions have caused international oil companies to suspend operations in Syria, leading to a shortage of trained personnel and compounding the effects of a shortage of equipment and parts due to the international sanctions.8

Syrian Oil and the Islamic State

Much of the physical and economic damage to the Syrian oil sector took place between March 2011 and June 2014, when IS forces expanded their control of oil producing regions in northeast Syria. The Islamic State organization needs and uses oil for a variety of purposes. Refined oil is needed to fuel ISIS vehicles as well as for civilian use within areas under IS control. Crude oil can be sold for cash to finance the group, or traded for refined products.

Selling IS oil is technically difficult because the group has no traditional export facilities or access to the open market. As a result, the group must ship its oil by truck to the Turkish border where oil brokers and traders buy the oil and make cash payments, or payments in kind of petroleum products. Because the Syrian government considers IS oil to be stolen contraband and because international sanctions limit the markets the oil can legally enter, IS oil trades at a steeply discounted price. Reliable, documented oil quantity and price data for IS transactions are unavailable due to their illegal nature. It has been reported that IS oil might have been selling for as little as $18 per barrel at the Turkish border, when Brent, a world price reference crude oil was selling for about $107 per barrel.9 Recently, the price of Brent has declined to about $65 per barrel, a decrease of over 50% since June 2014. The fall in world oil prices has likely further reduced the net price received by IS leaders for the oil they sell.

Iraqi Oil and the Islamic State

The status of the oil fields in northern Iraq, and of the Baiji refinery further south, have been in a state of flux since the summer of 2014. The situation is complicated by the existence of three organized military forces in the region; the Iraqi army, the Islamic State, and the Kurdish peshmerga forces, as well as other groups fighting the Iraqi government.
The Islamic State has been in control of a number of relatively small oil fields in northern Iraq, selling volumes of oil through Turkey in essentially the same manner as their sales of Syrian oil. In June 2014 the group captured the Bayji refinery which, with its production capacity of 170,000 barrels per day, supplied petroleum products for northern Iraq.10

While in IS hands, the refinery produced only a fraction of its rated capacity due to lack of both personnel and a secure oil supply. Iraqi forces retook the refinery five months later, although control of the city remained contested.

The Turkish border region also is a conduit for the sale of illicit Iraqi oil, both by the Islamic State, which holds several small fields in Iraq, and by the Kurds.11 In theory, Turkey could close the border to these activities, reducing the volume of contraband oil entering the world market. However, beyond the physical difficulty in closing the large and porous border, Turkey also faces the risk of retaliation by the Islamic State inside Turkish territory.

While IS forces are not in control of a modern operating oil refinery, the group has refined oil in crude, small, mobile refineries with capacities of about 300 to 500 barrels per day of petroleum products. Refined products may be more useful to the group than crude oil because these products (gasoline and diesel fuel) can be directly used to fuel IS military movements. Petroleum products may also be easier to sell to Turkish brokers because they can enter retail markets directly, avoiding the documentation attendant with processing at a legitimate refinery.

Natural Gas and the Islamic State

While crude oil can be moved using a variety of transportation modes, natural gas (used largely to fuel electric power generation) has more limitations. In Syria and northern Iraq, the only way to move natural gas is in the existing pipeline system. Due to the difficulty in capturing and selling natural gas, as well as the Islamic State’s interest in governing the areas it controls—most of Syria’s natural gas is used for power generation12—the natural gas system has suffered relatively little damage compared to the oil sector. It has been estimated that Syrian natural gas production has declined by about 32% from 2011 to 2013.

U.S. airstrikes in Syria have targeted oil facilities because of their importance to IS financing. It has been estimated that by early October 2014, U.S. airstrikes had destroyed about 50% of IS refining capacity. 13 Oil production facilities are also very vulnerable to airstrikes. In addition, reports suggest that since October 2014, Turkey might be acting to limit IS oil sales, and some claim that oil sales might have declined by 80%.14 However, others have noted that while the United States has targeted refineries, it has generally avoided strikes on oil wells because of the potential impact on civilians and because it seeks to preserve key oil infrastructure for the post- conflict period.15

Under Secretary of the Treasury for Terrorism and Financial Intelligence David Cohen in a November 2014 hearing reported that the Islamic State’s revenue from oil sales had dropped from $1 million a day to several million dollars a week.16 In January 2015, U.S. Secretary of State John Kerry stated that coalition strikes had destroyed nearly 200 oil and gas facilities used by the Islamic State.17 The resulting loss of revenue, Kerry said, was restricting the group’s operations and in some cases limiting its ability to pay salaries. In February 2015, a Pentagon spokesperson stated that money from illicit oil sales was no longer the Islamic State’s primary source of revenue, but did not say what had replaced it.18 It is difficult to assess which of the Islamic State’s revenue streams is the largest, in part because of the limited financial details that are publicly available, the group’s adaptation to shifting circumstances and opportunities, and the different ways that observers combine or disaggregate individual revenue streams when calculating their share of the group’s overall income.

Antiquities

Some analysts claim that the second largest source of revenue for the Islamic State is the sale of antiquities looted from areas under the group’s control.19 This includes items stolen from national museums, storage depots, or private collections, as well as those newly excavated from among the hundreds of archeological sites in the area. One archeologist from the Iraqi government’s Department of Antiquities stated that a third of Iraq’s archaeological sites are now under IS control.20 Items from these sites are sold in neighboring states or smuggled into Europe. As of early 2015, nearly a hundred Syrian artifacts looted by the Islamic State reportedly had been smuggled into Britain for sale, including Byzantine coins and Roman pottery and glass.21

Some maintain that the Islamic State collects a tax on antiquities excavated and smuggled out of its territory. 22 In some sites along the Euphrates River in Syria, the Islamic State reportedly grants licenses to excavation crews and oversees their work. 23 In the city of Manbij, the Islamic State reportedly has established an office to handle looted antiquities and a market for digging equipment such as metal detectors. Artifacts are sold to IS-approved dealers, who complete the transaction in U.S. dollars, and are then granted safe passage through IS territory. 24

Figure 1. Infrastructure and Resources in Islamic State Areas of Operation. Source: CRS

Figure 1. Infrastructure and Resources in Islamic State Areas of Operation. Source: CRS (Click to enlarge)

The group’s revenue from the sale of antiquities likely depends in part on the stage in the supply chain in which IS members are most involved, which may vary by locality In some cases the Islamic State reportedly imposes a tax of 20-50% on the excavation teams, which themselves only receive a small percentage of the items’ ultimate market price. In other cases, the group reportedly has established a direct relationship with buyers, likely netting a higher profit. Some U.S. estimates have placed the total volume of illicit trade at more than $100 million a year, 25 While government officials say that the majority of the trade is run by the Islamic State, reports suggest that many groups, including portions of the Syrian government, Free Syrian Army, other Islamist militias, criminal networks, and even foreign forces, also smuggle or trade in antiquities.26

Taxes, Extortion, and Asset Seizure

In a February 2015 report, the Financial Action Task Force (FATF), an international body focused on combatting money laundering and terrorism financing, found that the Islamic State finances itself largely through extortion rackets in its areas of operation. The report notes, “while ISIL frames its activities as ‘taxation’ or ‘charitable giving,’ it in fact runs a sophisticated protection racket where involuntary ‘donations’ purchase momentary safety or temporary continuity of business.”27 Another study estimates that the Islamic State generates up to $360 million per year though taxation and extortion.28

Bank looting. The U.S. Treasury Department estimates that the Islamic State in 2014 gained access to at least a half billion dollars in cash by seizing control of state-owned banks’ branches in the Iraqi provinces of Ninevah, Al-Anbar, Salah Din, and Kirkuk.29 The Islamic State approached private Iraqi banks differently, choosing instead to levy a tax of 5% on all customer cash withdrawals.30 More than twenty banks operating in Syria have branches in territory controlled by the Islamic State, but it is unclear whether they continue to function, and if so in what capacity.

Customs tax and passage fees. The Islamic State’s control of select border checkpoints has enabled the group to collect passage fees from those seeking to transport goods in or out of IS- held areas. Drivers moving goods from Jordan into IS-held parts of Iraq, for example, must pass through both Iraqi military and Islamic State checkpoints. Drivers have reported paying anywhere from $200 to $1,000 in fees and bribes to move goods into IS territory in Iraq.31 Once paid, IS militants provide drivers with a receipt to expedite passage through further checkpoints. A similar process exists for the smuggling of persons across the Turkey-Syria border. For a fee, Turkish smugglers reportedly “rent” a specific portion of the border in half-hour segments from an Islamic State official in order to facilitate the movement of people.32

Business tax. The Islamic State requires individuals wishing to do business in its territory to pay a percentage of their earnings to the group. Pharmacies in Mosul are taxed 10% to 35% of the value of drugs sold. Even before the Islamic State’s rapid territorial expansion in the summer of 2014, mobile phone companies in Mosul reportedly were required to pay the group in order to keep transmission facilities running.33 The Islamic State also taxes farmers and shopkeepers, describing the fees as zakat, or religious alms.34 The Iraqi Human Rights Ministry has claimed that the Islamic State imposes monthly taxes on students in Mosul and other cities under its control—$22 for elementary school students, $43 for secondary school students, and $65 for university students.

Utilities tax. The Islamic State’s partial control over energy infrastructure in some cases has enabled the group to demand payment for utility services. In Raqqah, the Islamic State reportedly collects $20 every two months from business owners in exchange for electricity, water, and security.35 One Syrian analyst claimed that the Islamic State charged residents for services that the Syrian government provided, such as telecommunications.36 However, the group has also tried to repair and administer utility infrastructure in areas under its control (see “Expenditures”) and likely taxes any additional services it is able to provide.

Religious tax. The Islamic State has imposed a protection tax, known as jizyah, on some Christian communities. Christians in Iraq reported that IS militants threatened them with death if they did not convert to Islam or pay jizyah. Reports conflict over the precise amount of the tax— some reports state that the Islamic State demanded that Christians pay half an ounce of pure gold to secure their protection,37 while other reports describe the tax as a few dollars per month.38 However, the Islamic State does not present all religious minorities with the option of paying the jizyah tax, especially if it considers a group to be polytheist. The Yazidis, whose faith incorporates elements of both Christianity and Islam, are viewed as polytheist by the Islamic State. In the Islamic State’s English language magazine Dabiq, the group defends its enslavement of Yazidis stating, “unlike the Jews and the Christians, there was no room for jizyah payment.”39

Kidnapping for Ransom

The Islamic State has generated significant income through the use of kidnapping for ransom. The United Nations estimates that the Islamic State collected $35-$45 million in ransom fees in 2014 alone—a higher annual yield than both Al Qaeda in the Arabian Peninsula (an estimated $20 million in ransom between 2011 and 2013) and Al Qaeda in the Islamic Maghreb (an estimated $75 million since 2010).40 A 2014 U.N. report on the Islamic State and the Al Qaeda-affiliated Nusrah Front states that the victims are mostly local residents, but also include a smaller number of foreign aid workers and journalists. However, the report also assesses that the group’s high level of fundraising from kidnappings for ransom is not likely to be sustainable.41

Reported ransoms amounts have varied. The Islamic State reportedly demanded a ransom of $100 million euros ($132.5 million USD) from the family of U.S. journalist James Foley, who was eventually killed, and requested the same amount from the families of two other American hostages.42 In contrast, France may have paid $18 million for four of its captured journalists in April 2014,43 and locals are said to be ransomed for anywhere between $500 and $200,000 each.44 While the U.S. and British governments refuse to pay ransom as a matter of policy, other European governments reportedly have paid to secure the release of their citizens, working through proxies and sometimes masking the money as development aid.45

External Support

The Islamic State receives financial support from individuals in Gulf and European countries, but observers generally agree that these amounts are modest in comparison to what the group generates internally. Analysts estimate that the Islamic State in 2013-14 accumulated up to $40 million from donors in Saudi Arabia, Qatar, and Kuwait.46 While the United States has worked with partner states in the Gulf to pass legislation curbing the flow of funds to the areas, implementation remains irregular. In October 2014, David Cohen, Under Secretary of the Treasury for Terrorism and Financial Intelligence stated that Kuwait and Qatar were still “permissive jurisdictions” for terrorism financing.47

The Islamic State also obtains a limited amount of funding from foreign fighters who travel to IS territory carrying hard currency. Some of these fighters continue to receive funds from abroad, which are wired to banks or financial companies located near IS territory.48

Agriculture

Through its seizure of land across the Euphrates and Tigris river valleys, the Islamic State gained control of a wide swath of the arable land on which a significant portion of Syria’s and Iraq’s staple crops are produced. IS control over these key agricultural areas has heightened concerns over food security, which had already been disrupted by ongoing civil conflicts. It is unknown exactly how much profit the Islamic State derives from the sale of agricultural goods. One study estimated that trading wheat and barley on the black market could generate an annual income of roughly $200 million for the Islamic State, assuming the group sells the goods at a 50% discount.49 FATF has described efforts by the Islamic State to “launder” crops by mixing stolen crops with harvests from other areas, in order to obscure their origin and facilitate their sale. On a smaller scale, the group also has profited by seizing agricultural machinery from local farms, and renting the machinery back to its original owners.50

The Islamic State has subsidized the cost of bread in areas under its control, most likely for propaganda purposes. IS recruitment materials emphasize the availability of food and in particular bread. To sustain this practice, the Islamic State would most likely need to reinvest much of its agricultural wealth in its territory or earmark crops for domestic consumption. Over time, the group’s need to sustain agriculture in its territory may result in a net drain on its resources, given the many inputs needed to sustain agriculture (fertilizer, seeds, pesticides) that were previously provided by the Iraqi and Syrian governments.

Syria. Roughly two-thirds of Syria is too arid to support agriculture; food crop cultivation is limited to areas along the northern border with Turkey and parts of western Syria.51 The northeastern provinces of Ar Raqqah, Al Hasakah, Dayr az Zawr and Aleppo traditionally have produced 74% of Syria’s wheat crop, according to the Syrian Ministry of Agriculture,52 but these provinces are now controlled or heavily contested by the Islamic State.

IS control over Syria’s breadbasket region has severely affected the state’s centralized food distribution system—on which civilians across the country traditionally relied—by impeding the transport of domestic wheat stores from areas of cultivation in the northeast to the major urban centers in the west. Prior to the war, the central government maintained over 140 collection centers where state representatives purchased most of the wheat harvest at above market prices. By 2014, only 31 collection centers were still operational,53 and many farmers were unwilling to risk the journey to a center to sell their harvests. This has exacerbated the food shortage in the country, where the U.N. Food and Agriculture Organization (FAO) estimates that 6.8 million Syrians face severe food insecurity.54

IS territorial gains also have limited the central government’s ability to produce bread, Syria’s primary food staple. Many of Syria’s flour mills—concentrated in Aleppo in the north55—now fall in areas of IS or opposition control.

Iraq. The FAO estimates that about one-third of Iraq’s wheat and nearly 40% of Iraq’s barley is grown in areas currently controlled by the Islamic State.56 IS fighters moved into northern and western Iraq in the summer of 2014, just after the wheat harvest. Farmers had deposited their wheat crop in government silos in preparation for purchase by the Iraqi Grain Board. Many of these silos were instead taken over by the Islamic State,57 enabling militants to acquire an estimated 1.1 million tons of wheat—one-fifth of Iraq’s reported annual wheat consumption.58

Expenditures

The Islamic State has established a network of ministries to govern the territory it controls and has sought able administrators. IS leader Abu Bakr al Baghdadi in a July 2014 audio recording called for “scientists, scholars, preachers, judges, doctors, engineers and people with administrative expertise of all domains” to move to the Islamic State, which required their expertise.59 In December 2014, the IS Office of Zakat—a finance ministry equivalent— announced that it would give a series of assessment tests to recruit new staff. The office said it was seeking candidates with PhDs in Islamic law and economics, as well as those with high school diplomas.60 The Islamic State in late 2014 also announced plans to mint its own currency out of gold, silver, and copper,61 but as of early 2015 this had not materialized. Iraqi sources in January 2015 stated that the Islamic State had established its own bank in Mosul, which granted loans and accepted deposits.62

The Islamic State approved a $2 billion dollar budget for the year in early 2015, including a projected $250 million dollar surplus,63 designed to cover the costs of operations in both Iraq and Syria. Some have argued that despite this budget, the group does not generate enough revenue to fully cover all of its expenses. In addition to the cost of military operations, the Islamic State must also provide salaries, maintain and repair infrastructure, and fill other state functions, such as the provision of social services.

Salaries

One significant expenditure is salaries, the provision of which may also be an incentive for potential recruits. At the beginning of the uprising in 2011, the monthly minimum wage for public sector employees in Syria ranged between 9,765 and 14,760 Syrian pounds ($176-$266).64 By 2013, the steep drop in the value of the Syrian pound reduced public sector wages by about 60% to an equivalent of $68-$103.65 By contrast, the Islamic State is estimated to pay approximately $400-$600 monthly to each fighter, with married fighters receiving an extra stipend per wife and child.66 Some Nusrah Front fighters reportedly claimed in 2013 that their siblings and cousins fought for the Islamic State because the pay was better.67

Both the Syrian and Iraqi governments continue to pay the salaries of state employees in IS-held areas, and this may offset some of the group’s expenses. While the Iraqi government has taken steps to prevent the transfer of hard currency into IS-held areas, it sends employee salaries to neighboring cities, such as Kirkuk. Government employees travel to these areas to withdraw their salaries in cash, and the Islamic State then taxes the salaries at rates of up to 50%.68 FATF contacts in Iraq estimate that the Islamic State could receive the equivalent of hundreds of millions of dollars annually from taxing state employee salaries.

Infrastructure
The group must also maintain—and in many cases repair—key infrastructure in areas it controls in both countries, particularly to provide electricity and water. In Syria, both the government and opposition groups have targeted power plants and substations since the onset of unrest in 2011. In December 2014, the Syrian Minister of Electricity stated that Syria’s electricity production was less than a quarter of pre-unrest levels.69 The Islamic State, through its Projects Directorate of the Public Services Authority in Raqqah, issued three tenders in late November 2014 for the installation of aerial cables between several power substations in eastern Syria.70

The Islamic State may partially control water infrastructure, though it lacks the technical expertise needed to keep key facilities operational. For example, when the Islamic State seized control of the hydroelectric Euphrates dam in Raqqah, it decreed that the dam should operate at full capacity, despite the fact that Syrian government engineers had previously assessed that the dam only had the capacity to serve as a strategic reserve of water. While electricity spiked in the IS capital of Raqqah, the dam’s reservoir saw a record six-meter drop, creating water levels too low for the operation of pumps used to funnel drinking water to 5 million people in the dam’s vicinity.71 As the breakdown in water sanitation and distribution networks forces residents to procure water from untreated sources, reports from IS-controlled towns describe the spread of waterborne diseases such as Hepatitis A and typhoid. The World Health Organization in February warned that poor sanitation in Syria was likely to produce a cholera outbreak.

Social Welfare

IS leaders have emphasized services to civilians as a core part of the group’s mission, and the IS budget is expected to cover monthly subsistence expenses for the poor, disabled, orphans, and widows, in addition to payment to families of those killed in coalition airstrikes. Within its territory, the group runs schools, an Islamic court system, a Consumer Protection Authority, and local police forces. IS members distribute produce to families, run a food kitchen in Raqqah, and maintain an Office for Orphans to help place children with families.72 The group’s recruitment strategy depends in part on its ability to portray life in IS-held areas favorably, leading it to dedicate funds to a range of social projects unrelated to military objectives.

Policy Tools and Issues

In addition to military strikes against revenue-generating targets like oil facilities, as part of the Obama Administration’s strategy to “degrade and ultimately defeat” the Islamic State, the U.S. Department of the Treasury leads U.S. government efforts to apply financial measures that will undermine the group’s finances. These financial measures include a mix of targeted financial and economic sanctions, as well as enhancements to the international financial regulatory system.
In October 2014 remarks at the Carnegie Endowment for International Peace, David Cohen, Under Secretary of the Treasury for Terrorism and Financial Intelligence, outlined the three key prongs in the U.S. government’s strategy to combat IS financing as follows:

  • disrupt its main sources of funding;
  • restrict its access to the international financial system; and
  • block access to assets and resources of its senior leadership and financial facilitators.73

U.S. efforts have prioritized collaboration with international partners, including cooperation on financial intelligence collection and analysis.74 One goal of such ongoing information sharing is to improve the international community’s understanding of how the group raises, moves, and uses funds and other assets.75

Status of U.S. Responses by Sector

This section surveys U.S. policy efforts to combat IS financing in several key sources of funds, including oil sales, kidnapping for ransom, local criminal and extortion activities, and foreign donors, including donations and other financial support provided by foreign fighters. The section also describes U.S. policy efforts to block two key conduits for the movement and administration of IS funds, including IS-affiliated financial facilitators and the exploitation of local bank branches and other financial institutions.

Oil Sales. Although coalition military operations against the Islamic State are not primarily conducted for the purpose of combating IS financing, airstrikes on IS-linked oil infrastructure and supply networks in Syria and Iraq have contributed to the U.S. government’s counter-financing efforts. The United States also has sought cooperation with Turkey and the Kurdistan Regional Government in northern Iraq to prevent oil products believed to have originated in IS-held territory from crossing their borders. Turkish and Kurdish authorities have begun to take steps along their borders to seize shipments of oil suspected to have links to the Islamic State, although reports suggest that a wide range of illicit goods continues to be smuggled.76 As part of these efforts, the Treasury Department has sought to identify brokers in the oil supply chain who are purchasing IS oil. Although acknowledging that black market oil sales often involve transactions outside the formal financial system, Treasury officials claim that U.S. financial sanctions could reach oil facilitators involved at other points along the oil supply chain.77

Coalition airstrikes have targeted mobile refineries in the region, some of which are controlled by the Islamic State and some of which are privately owned. The destruction of mobile refineries has reduced the availability of refined oil products and increased the price of fuel in the region. Some analysts suggest that the removal of mobile refining capabilities in IS-controlled areas has caused the group to sell crude oil elsewhere, which may slow but not eliminate its ability to generate funds through the black market sale of crude oil. Observers note, however, that although airstrikes may pressure the Islamic State financially and may afford coalition members time and space to maneuver, airstrikes alone are unlikely to prove decisive in the group’s financial defeat.78

Kidnapping for Ransom. In order to prevent the Islamic State from generating funds through kidnapping for ransom operations, the U.S. government has sought to redouble its efforts to develop an international consensus against the payment of ransoms to terrorist groups and to ensure that such policies are implemented in practice.79 The Treasury Department has committed to applying sanctions against those who demand or receive ransoms on behalf of the Islamic State. With respect to U.S. citizens, the U.S. government aims to prevent kidnappings from occurring and, at the President’s direction, to apply any military, intelligence, law enforcement, and diplomatic capabilities to secure the release of American hostages.80

In October 2014, the Under Secretary of the Treasury for Terrorism and Financial Intelligence noted that “there is obviously more work to be done” with respect to galvanizing international commitments against kidnapping concessions.81 Media reports indicate that several foreign governments have paid ransoms to the Islamic State in order to secure the freedom of its kidnapped citizens. Several U.S. citizens have been taken and subsequently killed by the Islamic State, inciting public concerns regarding the U.S. government’s policy position against paying ransoms and extending political concessions in exchange for the release of U.S. hostage victims.82 Although hostage rescue operations in other parts of the world have proven successful, the Obama Administration has acknowledged that its effort in mid-2014 to rescue several U.S. citizens held by the Islamic State had been unsuccessful.83 The families of several IS victims have continued to criticize the U.S. no-concessions policy.84

Local Criminal and Extortion Activities. The Treasury Department has acknowledged that its counterterrorism finance tools are “not particularly well-suited to the task” of disrupting revenue that the Islamic State generates from extortion and other local criminal activities.85 Treasury officials have acknowledged publicly that a key counter-financing challenge centers on how to address the ongoing use of transport vehicles operating through the region, which are suspected of continuing to smuggle supplies and cash into IS-held territory as well as contraband goods, including antiquities, out of IS-held territory for sale.86 Some observers see the Islamic State’s ability to benefit from local criminal activities as fundamentally connected to its ability to control territory—and suggest, in turn, that military efforts to reverse the Islamic State’s territorial gains are complementary to efforts to combat IS finances. In the long term, many view the response to local criminal activity as a responsibility of local law enforcement. Although the U.S. government has expressed interest in identifying and designating for economic sanction IS members who oversee the group’s extortion and criminal rackets, observers widely speculate that such efforts may have minimal effect on the group’s finances while the Islamic State continues to control territory. When applied unilaterally, U.S. tools to combat the financing of terrorism historically have been most effective in targeting funds as they flow internationally and intersect with financial institutions that may fall within U.S. jurisdiction.

Foreign Donors. Although the Islamic State is not currently dependent on foreign donors for fundraising, there are indications that the Islamic State continues to receive external donations. To this end, the Treasury Department has argued that a key component of the U.S. government’s strategy against the Islamic State should include long-standing efforts to prevent the group from accessing external funding sources, particularly those from wealthy Gulf State donors. U.S. officials have sought to increase cooperation on combating terrorist financing with the governments of Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates.87 “Even though ISIL does not currently rely heavily on the traditional donor model for terrorist financing, that is no reason to relax our efforts in this area,” a Treasury official remarked. “Particularly as we make progress in disrupting ISIL’s current sources of income, and as ISIL gains additional prominence in the global terrorist movement, we must be prepared for the possibility that wealthy extremists will increasingly seek to fund it.”88

Foreign Fighter Fundraising. Although not widely considered to be a major source of IS funds, donations provided by foreign fighters may also present a resource to the Islamic State. They are also a logistical and international cooperation challenge for analysts to track and stem, representing some tens of thousands of possible funding streams from nearly 100 countries worldwide.89 According to a Financial Action Task Force report, foreign fighters may contribute financially to the Islamic State in several ways: they can self-fund their travel expenses to the region, carry cash overseas for the benefit of the group, and contribute funds toward IS operations.90 Some observers have encouraged the U.S. Department of Justice to focus on prosecuting IS supporters through existing U.S. terrorist financing and material support statutes (e.g., 18 U.S.C. 2339A, 2339B, and 2339C).91 According to Justice Department press releases, more than a dozen defendants have been charged in the United States with offenses related to the foreign fighter threat in Syria—at least two of whom have pled guilty to attempting to provide material support to the Islamic State.92

IS-Affiliated Financial Facilitators. The Obama Administration continues to view targeted economic sanctions as “an effective tool for… helping to dismantle criminal and terrorist networks.”93 The United States designates the Islamic State as a foreign terrorist organization (FTO) and specially designated global terrorist (SDGT), and also targets several associated individuals as specially designated individuals (SDNs) (who engage in or support acts of international terrorism) pursuant to multiple authorities, including Section 219 of the Immigration and Nationality Act, as amended (8 U.S.C. 1189), and Executive Order (EO) 13224 (“Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support Terrorism”).94 To date, the Treasury Department has reported having imposed sanctions on some two dozen individuals affiliated with the Islamic State or its predecessor, AQI.95 Since the U.S. government formally recognized a distinction between the Islamic State and Al Nusrah Front (ANF) in May 2014, more individuals linked to ANF have been targeted for sanction than the Islamic State. This has raised questions among some observers regarding the pace and capacity of the Treasury Department to identify key actors associated with the Islamic State.96 It is possible that the low number of public designations reflects the Islamic State’s limited reliance of international financial facilitators.

The U.N. Security Council also requires its member states to block assets, deny visas, and prohibit arms trade with the Islamic State and its associates. On May 30, 2013, the U.N. Security Council updated its Al Qaeda sanctions list to include the Islamic State and ANF as among the aliases for AQI.97 This update allowed the U.N. Security Council’s Al Qaeda sanctions committee to list and sanction Islamic State-affiliated individuals.98 Several U.N. Security Council resolutions in 2014 urged member states to continue to contribute information pertinent to the listings of Islamic State-affiliated individuals.99 On February 12, 2015, the U.N. Security Council unanimously adopted resolution 2199, which reaffirmed and clarified the applicability of U.N. sanctions on IS-related individuals and entities that provide active and passive financial support to the Islamic State, ANF, and others associated with Al Qaeda.

See Appendix for a list of U.N.- and U.S.-sanctioned individuals publicly described as affiliated with AQI, the Islamic State, or ANF.

Exploitation of Local Bank Branches and Other Financial Institutions. Through cooperation with Iraqi authorities and the international financial community, the Treasury Department also is seeking to limit the Islamic State’s ability to conduct international financial transactions through local bank branches located throughout IS territory. Some 90 Iraqi bank branches reportedly are located in IS-controlled or contested territory.100 For its part, the Iraqi government has reportedly issued national directives to its banks to prevent wire transfers to and from bank branches in territory where the Islamic State operates, as well as the sale of hard currency to these banks.101 The Mosul Development Bank, headquartered in Mosul, also reportedly moved its center of operations to Baghdad.102 Central to such efforts are private sector reports filed with the Treasury Department on suspicious activity and currency transactions, as well as the implementation of regulatory compliance systems, pursuant to provisions of the Bank Secrecy Act (BSA; 31 U.S.C. 5311 et seq.), including the USA PATRIOT Act of 2001 (P.L. 107-56), which amended the BSA in parts. Where there are indications of IS financing, the Treasury Department shares such financial intelligence with appropriate authorities.103 Several Syria-based banks, including more than 20 Syrian financial institutions, may continue to operate in IS-occupied territory and may continue to maintain links with the international financial system. Existing sanctions and special measures on financial institutions in Syria—pursuant to the Treasury’s sanctions program against the government of Syria, which began in 2004—have at least partially limited the Islamic State’s ability to exploit bank branches in parts of Syria where the group operates.104

The Treasury Department is also working with foreign counterparts to conduct enhanced due diligence on financial activity from IS-controlled territory. In congressional testimony, the Under Secretary of the Treasury for Terrorism and Financial Intelligence reported that financial activity in areas where the Islamic State operates has declined and banks under IS influence are losing access to the international financial system. The Treasury and other financial regulators face the challenge of preventing the Islamic State from exploiting banks in its controlled area while ensuring that financial restrictions do not unintentionally hamper civilian populations from local commerce. Although the extent to which the Islamic State relies on banks remains unclear, observers suggest that efforts to restrict local banks from access to the international financial system may not affect the Islamic State’s ability to leverage and exploit banks within IS- controlled territory.105 A further policy challenge includes how to identify and prevent unregulated money services businesses in the region from providing support to the Islamic State. According to a recent report by the Financial Action Task Force, information known about the role of financial institutions and money and value transfer services in IS-occupied territory remains too “sensitive” to be publicly disclosed.106

Conclusion: Implications for U.S. Policy

The Islamic State’s ability to draw on multiple sources of funding poses a challenge to U.S. and international efforts to contain and degrade the group’s strength. The diverse sources of revenue may well safeguard the group, at least in the short term, from shocks that could result from the disruption of any single revenue stream. For example, although some observers have expressed hope that recent reductions in the global price of oil may disrupt the Islamic State’s financial base, the group seems to have found viable alternative fundraising opportunities, including local extortion, kidnap for ransom schemes, increased import duties, and receipt of donations from foreign benefactors.108 In several respects, however, the Islamic State depends on controlling territory in order to finance its operations; if the group loses or fails to seize additional territory, its financial strength may not be sustainable in the long term.

The Islamic State’s appropriation of illicit trafficking networks for its financial gain is a testament to the enduring nature of cross-border smuggling in the region, which the Saddam Hussein regime used in the 1990s to evade U.N. sanctions against Iraq and exploit the U.N. Oil-for-Food program. The existence of long-standing smuggling routes in the region also suggests that dismantling the smuggling routes will be difficult. Researchers suggest that the diversity of the Islamic State’s funding sources necessitate a counter-finance response that is similarly diverse.109

Moreover, the U.N. Security Council’s Analytical Support and Sanctions Monitoring Team cautions that the international community’s success or failure at stemming IS resources could have implications for the long-term threat posed by the Al Qaeda movement:

The importance of the significant financial assets—and the potential for continuing revenue—of ISIL should not be underestimated. Should the leader of ISIL, or individuals within the network with access to funds, choose to fund Al-Qaida core or other parts of the Al-Qaida movement, the potential for a revived (and well-funded) transnational terrorist architecture will grow.110

Many observers recognize that a strategy focused on counter-finance may weaken, but not destroy, the Islamic State. For its part, the Department of the Treasury has cautioned against expectations that efforts to combat the Islamic State’s finances will bear fruit quickly. In remarks to the Carnegie Endowment for International Peace, Under Secretary Cohen warned that “efforts to combat its [Islamic State] financing will take time. We have no silver bullet, no secret weapon to empty ISIL’s coffers overnight. This will be a sustained fight, and we are in the early stages.”111

Even if efforts to eliminate the Islamic State’s external sources of funding are unequivocally successful, the Islamic State will likely continue to benefit from local donations and extortion schemes within the territory it controls. To this end, some have emphasized the importance of developing the capacity of local and regional partners to target IS financial facilitators and local revenue sources that are not within U.S. reach.112 Such efforts, however, may inflict hardship on local populations where the Islamic State operates and some suggest that counter-finance tactics should be balanced with a consideration of the suffering that such actions may cause. Moreover, some caution that the Islamic State, known for its sophisticated propaganda skills, may blame the international community for any economic distress that local populations may experience.113

Nevertheless, some observers argue that international pressure against the Islamic State’s revenue streams, particularly oil-related revenue, has contributed to the group’s declining financial prospects. Many observers also foresee vulnerabilities in the organization’s longer-term financial stability. Replenishing battlefield resources, including equipment repairs and salaries for fighters, along with other costs associated with administering territory under its control, may ultimately stress its financial capabilities. According to a Treasury official, the long-term trajectory of the Islamic State’s financial profile may already be toward decline:

While we are actively working to disrupt ISIL’s financial activities, it is important to note that the sources of ISIL’s wealth—notably the money stolen from banks and revenues from oil sales—are either no longer replenished or diminish over time, we expect ISIL will increasingly struggle to finance its operations. Just like any commercial enterprise whose income is less than its expenses, ISIL’s financial strength will diminish unless it is able to find alternative sources of revenue or take additional territory.114

Some observers have criticized the Treasury Department’s response to the Islamic State for closely resembling the counter-terrorist financing campaigns of years past—despite recognition that the Islamic State, in key respects, presents a unique financial profile. U.S. officials, too, have acknowledged the Islamic State’s unique financial capabilities, and note that the U.S. government, particularly the Treasury Department, faces an urgent challenge to adapt existing counter-terrorist financing tools and techniques to respond to the Islamic State.115 Policymakers may choose to evaluate the effectiveness of the Treasury Department’s efforts to combat IS financing and assess whether its current resources and capabilities are sufficient to meet the challenge that the Islamic State presents.

Congressional Outlook

As the 114th Congress continues to consider and evaluate U.S. policy responses to address the Islamic State, a focus of concern may center on whether U.S. counterterrorist financing tools are capable of diminishing IS sources of funds. Key questions may include whether current U.S. efforts are effective and sufficiently resourced, or require new legislative authorities, to respond to the Islamic State’s ability to accumulate and distribute funds.

Although Congress has been active in evaluating U.S. policy responses and options to address the Islamic State, particularly the military response and prospects for congressional authorization for the use of military force, legislative proposals to stem the Islamic State’s access to and use of funds have been limited.

Two bills introduced in the 113th Congress addressed Islamic State financing, including H.R. 5431, the Isolating ISIS Act; and H.R. 5463, the End Financing to ISIL Act. Islamic State financing is a topic that is often discussed in congressional hearings on broader topics, including U.S. counterterrorism strategy and regional responses to the situation in Iraq and Syria. The House Committee on Financial Services did, however, hold a hearing specifically on “Terrorist Financing and the Islamic State” on November 13, 2014.116

For FY2015, the 113th Congress appropriated $112.5 million to the U.S. Department of the Treasury’s Office of Terrorism and Financial Intelligence in P.L. 113-235, the Consolidated and Further Continuing Appropriations Act, 2015 (up from $102 million in FY2014). The Explanatory Statement accompanying the FY2015 bill additionally specified that the Treasury Department should “fully implement sanctions… applicable to the Islamic State of Iraq and the Levant” among others, and should “promptly notify the Committees on Appropriations of the House and Senate of any resource constraints that adversely impact the implementation of these sanctions programs.”117 For FY2016, the Treasury Department requested $109.6 million for its Office of Terrorism and Financial Intelligence and stated that its request supports efforts to combat IS finances.118

In August 2014, Senators Bob Casey and Marco Rubio sent a letter to Secretary of State John Kerry, urging the Obama Administration to designate the Islamic State as a “Transnational Criminal Organization” (TCO), pursuant to Executive Order (EO) 13581.119 EO 13581 authorizes the establishment of a targeted financial sanctions regime against TCOs, similar to those already in place against SDGTs, pursuant to EO 13224.

“Although ISIS is already under both U.S. and international sanctions, we should employ all available tools to curtail these activities and disrupt its financial networks,” the letter to Secretary Kerry stated. “We believe the State and Treasury Departments should also consider designating ISIS as a TCO, which would send a strong signal to our partners in the region that we are prioritizing cutting off ISIS’s financial support.”

The 114th Congress may also address IS financing policy issues through the recently established Task Force to Investigate Terrorism Financing. On March 25, 2015, the U.S. House Committee on Financial Services passed a resolution to establish this six-month bipartisan task force, with the goal of conducting hearings and investigations related to U.S. responses to terrorist financing issues, including the issuance of possible reports to the committee that detail findings and policy recommendations to enhance U.S. responses.120

*About the authors:
Carla E. Humud, Analyst in Middle Eastern and African Affairs

Robert Pirog, Specialist in Energy Economics

Liana Rosen, Specialist in International Crime and Narcotics

Source:
This article was published by the Congressional Research Service.

 

Appendix

(click on images to enlarge)

Table A-1. U.N. and U.S. Sanctions Designations

Table A-1. U.N. and U.S. Sanctions Designations

Table A-1. U.N. and U.S. Sanctions Designations

Table A-1. U.N. and U.S. Sanctions Designations

Table A-1. U.N. and U.S. Sanctions Designations

Table A-1. U.N. and U.S. Sanctions Designations

Table A-1. U.N. and U.S. Sanctions Designations

Table A-1. U.N. and U.S. Sanctions Designations

Notes:
1. Muhammad al-’Ubaydi et al., The Group That Calls Itself a State: Understanding the Evolution and Challenges of the Islamic State, Combating Terrorism Center at West Point, December 2014.
2. Gen. John Allen, Special Presidential Envoy for the Global Coalition to Counter ISIL, statement submitted for the conference “Taking the Fight to ISIL: Operationalizing CT Lines of Effort Against the Islamic State Group,” Washington Institute for Near East Policy, February 2, 2015.
3. “Senior Administration Officials on Terrorist Designations of the al-Nusrah Front as an Alias for al-Qaeda in Iraq,” Special Briefing via teleconference, December 11, 2012.
4. Muhammad al-‘Ubaydi et al., The Group That Calls Itself a State: Understanding the Evolution and Challenges of the Islamic State, Combating Terrorism Center at West Point, December 2014.
5. Benjamin Bahney et al., An Economic Analysis of the Financial Records of al-Qa’ida in Iraq, RAND National Defense Research Institute, 2010.
6. Brian Fishman, Dysfunction and Decline: Lessons Learned from Inside Al Qa’ida in Iraq, Combating Terrorism Center at West Point, Harmony Project, March 16, 2009.
7. Patrick B. Johnston (RAND Corporation), testimony on “Countering ISIL’s Financing” before the U.S. House Committee on Financial Services, November 13, 2014.
8. This section is based on the Energy Information Administration, Country Analysis Brief, Syria, available at http://www.eia.gov/countries/cab.cfm?fips=SY.
9. See Ma’ad Fayad, ISIS in Control of 60 Percent of Syrian Oil, ASHARQ AL-AWSAT, July 11, 2014, available at http://www.aawsat.net/2014/07/article55334174.
10. Borzou Daragahi, Iraqi Forces Retake Key Oil Refinery from ISIS, Financial Times, November 28, 2014.
11. The Iraqi government and the Kurdish Regional Government (KRG) agreed to an oil export deal in December 2014.
12. “Syria: the struggle over electricity,” Economist Intelligence Unit, October 3, 2014.
13. Keith Johnson, Has the U.S. Turned Off the Islamic State’s Oil Spigot? Foreign Policy, October 7, 2014.
14. Ibid.
15. “Islamic State keeps up Syrian oil flow despite U.S.-led strikes,” Reuters, October 24, 2014.
16. House Financial Services Committee hearing on Terrorist Financing and the Islamic State, November 13, 2014.
17. Remarks by Secretary of State John Kerry at a joint press conference with UK Foreign Secretary Hammond and Iraqi Prime Minister Abadi, January 22, 2015.
18. Department of Defense Press Briefing by Rear Adm. Kirby in the Pentagon Briefing Room, February 3, 2015.
19. See for example, “Terrorist Financing and the Islamic State,” testimony of Matthew Levitt, Director, Stein Program on Counterterrorism and Intelligence, Washington Institute for Near East Policy, to the House Committee on Financial Services, November 13, 2014.
20. “How Does ISIS Fund Its Reign of Terror?” Newsweek, November 14, 2014.
21 “Islamic State Is Selling Looted Syrian Art in London to Fund Its Fight,” Washington Post, February 25, 2015.
22. “ISIS Antiquities Sideline,” New York Times, September 2, 2014.
23. Ibid.
24. “Syrian ‘Monuments Men’ Race to Protect Antiquities as Looting Bankrolls Terror,” Wall Street Journal, February 10, 2015.
25. Ibid.
26. Samuel Hardy, “The Lure of Antiquities in the New York Times and the Trap of Poor Evidence in War Zones,”
Conflict Antiquities. https://conflictantiquities.wordpress.com.
27. FATF Report, Financing of the Terrorist Organization Islamic State in Iraq and the Levant (ISIL), February 2015.
28. Jean-Charles Brisard and Damien Martinez, Islamic State: The Economy-Based Terrorist Funding, October 2014.
29. Jennifer L. Fowler, Deputy Assistant Secretary of Terrorist Financing and Financial Crimes, the Treasury Department. Statement submitted for the conference, “Taking the Fight to ISIL: Operationalizing CT Lines of Effort Against the Islamic State Group,” Washington Institute for Near East Policy, February 2, 2015.
30. FATF Report, Financing of the Terrorist Organization Islamic State in Iraq and the Levant (ISIL), February 2015.
31. See for example, “Can Islamic State Feed the People It Conquers?” Bloomberg News, December 10, 2014; “Islamic State Issues Fake Tax Receipts to Keep Trade Flowing,” McClatchy, September 3, 2014; and “A Dangerous Road Ahead,” Washington Post, November 30, 2014.
32. “All It Takes to Cross from Turkey to ISIS-held Syria is $25,” World Post, February 26, 2015.
33. “Al Qaeda Sinks Roots in Mosul,” Al Monitor, October 24, 2013.
34. “ISIS Imposes Tax on Agricultural Production,” Syria Report, June 9, 2014; “How ISIS Rules,” New York Review of Books, February 5, 2015.
35. “Life in a Jihadist Capital: Order with a Darker Side,” New York Times, July 23, 2014.
36. “The Islamic State is Failing at Being a State,” Washington Post, December 25, 2014.
37. “Iraqi Christians Flee After ISIS Issue Mosul Ultimatum,” BBC, July 18, 2014.
38. “Life in a Jihadist Capital: Order with a Darker Side,” New York Times, July 23, 2014.
39. Islamic State, Dabiq, Issue 4, October 2014, p. 14-5.
40. Statement by Ms. Yotsana Lalji, 1267 Al-Qaida Monitoring Team, November 24, 2014. Some of these figures appear to be based on estimates from unnamed Member states (see S/2014/770, paras.50-51 at http://www.un.org/ga/search/view_doc.asp?symbol=S/2014/770). Other estimates are higher—see, for example, “Paying Ransoms, Europe Bankrolls Qaeda Terror,” New York Times, July 29, 2014.
41. “The Islamic State in Iraq and the Levant and the Al-Nusrah Front for the People of the Levant: report and recommendations submitted pursuant to resolution 2170,” U.N. Analytical Support and Sanctions Monitoring Team, November 3, 2014.
42. “Foley Case Lays Bare Debate over Paying Ransom,” Associated Press, August 21, 2014.
43. Matthew Levitt, “Countering ISIL Financing: A Realistic Assessment,” statement submitted to the Washington
Institute for Near East Policy, February 2, 2015.
44. “How Does ISIS Fund its Reign of Terror?” Newsweek, November 14, 2014.
45. “Paying Ransoms, Europe Bankrolls Qaeda Terror,” New York Times, July 29, 2014.
46. Matthew Levitt, “Countering ISIL Financing: A Realistic Assessment,” statement submitted to the Washington Institute for Near East Policy, February 2, 2015.
47. Remarks by Under Secretary (Treasury) for Terrorism and Financial Intelligence David Cohen at the Carnegie Endowment for International Peace, “Attacking ISIL’s Financial Foundation,” October 23, 2014.
48. FATF Report, Financing of the Terrorist Organization Islamic State in Iraq and the Levant (ISIL), February 2015.
49. Jean-Charles Brisard and Damien Martinez, Islamic State: The Economy-Based Terrorist Funding, October 2014.
50. FATF Report, Financing of the Terrorist Organization Islamic State in Iraq and the Levant (ISIL), February 2015.
51. “Syria: 2012 Wheat Production Outlook Is Favorable Despite Ongoing Conflict,” USDA Foreign Agricultural
Service, June 12, 2012.
52. Ibid, p4.
53. “Syria Plans to Import 1 Million Tonnes of Wheat as War Rages,” Hellenic Shipping News, October 23, 2014.
54. Food and Agriculture Organization of the U.N. (FAO), Crop Prospects and Food Situation, No.4, December 2014.
55. “Syria’s War Halves Wheat Harvest, Erodes State Share,” Reuters, July 25, 2013.
56. GIEWS Country Briefs –Iraq, FAO, October 15, 2014. http://www.fao.org/giews/countrybrief/country.jsp?code= IRQ.
57. “For Islamic State, Wheat Season Sows Seeds of Discontent,” Reuters, January 20, 2015.
58. Jean-Charles Brisard and Damien Martinez, Islamic State: The Economy-Based Terrorist Funding, October 2014.
59. “Baghdadi Vows Revenge in Announcing ‘Islamic State,” Al Monitor, July 3, 2014.
60. “ISIS Announces New Job Openings, Enforces Cleanliness and Order on Its Streets,” Syria Report, December 8,
2014.
61. “Islamic State to Mint Gold Coins,” Wall Street Journal, November 14, 2014.
62. “Islamic State Group Sets Out First Budget, Worth $2bn,” Al Araby al Jadeed, January 4, 2015.
63. Ibid.
64. Country Reports on Human Rights Practices (Syria), U.S. Department of State, 2011.
65. Country Reports on Human Rights Practices (Syria), U.S. Department of State, 2013.
66. “In Northeast Syria, Islamic State Builds a Government,” Reuters, September 4, 2014; “How the Islamic State Buys Power,” Haaretz, September 1, 2014.
67. “My Captivity: Theo Padnos, American Journalist, on Being Kidnapped, Tortured and Released in Syria,” New York Times Magazine, October 29, 2014.
68. FATF Report, Financing of the Terrorist Organization Islamic State in Iraq and the Levant (ISIL), February 2015.
69. “Syria’s Electricity Output at a Quarter of Pre-uprising Level—official,” Syria Report, December 22, 2014.
70. “ISIS Issues Tender to Carry Electrical Works in Raqqa,” Syria Report, November 11, 2014.
71. “’Water War’ Threatens Syria Lifeline,” Al Jazeera, July 7, 2014.
72. “The Islamic State of Iraq and Syria has a Consumer Protection Office,” Atlantic, June 13, 2014.
73. David Cohen (Under Secretary of the Treasury for Terrorism and Financial Intelligence), “Attacking ISIL’s Financial Foundation,” remarks at the Carnegie Endowment for International Peace, October 23, 2014. See also Cohen’s prepared testimony for a hearing on “Terrorist Financing and the Islamic State” before the U.S. House Financial Services Committee, November 13, 2014.
74. On October 17, 2014, for example, the Departments of State and Treasury co-hosted a meeting of the “International Working Group on Sanctions Targeting ISIL, al-Nusrah Front (ANF), and the Asad Regime,” a group of more than 20 countries and international organizations, to identify measures to financially isolate and undermine the Islamic State. U.S. Department of the Treasury, “Readout of the International Working Group Meetings on Sanctions Targeting ISIL, Al-Nusrah Front, and the Asad Regime,” press release, October 17, 2014.
75. The U.S. government, along with the Turkish government, spearheaded one such effort through the Financial Action Task Force (FATF) to develop a “common understanding” of the Islamic State’s financing situation. Jennifer Fowler (Deputy Assistant Secretary of the Treasury for Terrorist Financing), U.S. Efforts to Counter the Financing of ISIL, remarks, Washington Institute for Near East Policy, February 2, 2015. Financial Action Task Force, Financing of the Terrorist Organisation Islamic State in Iraq and the Levant, February 2015. See also Financial Action Task Force (FATF), “FATF Action on the Terrorist Group ISIL,” October 24, 2014, http://www.fatf- gafi.org/documents/documents/fatf-action-isil.html.
76. See for example Desmond Butler, “Turkey Cracks Down on Oil Smuggling Linked to IS,” Associated Press, October 6, 2014; Barbara Slavin, “U.S. Official Claims Gains in Curtailing IS Oil Smuggling,” Al-Monitor, December 8, 2014; Jonathan Schanzer and Merve Tahiroglu, Bordering on Terrorism: Turkey’s Syria Policy and the Rise of the Islamic State, Foundation for Defense of Democracies, November 2014; Constanze Letsch, “To the Wire: The Smugglers Who Get People into Syria for Islamic State,” The Guardian, March 12, 2015.
77. Jennifer Fowler (Deputy Assistant Secretary of the Treasury for Terrorist Financing), U.S. Efforts to Counter the Financing of ISIL, remarks, Washington Institute for Near East Policy, February 2, 2015.
78. Muhammad al-’Ubaydi et al., The Group That Calls Itself a State: Understanding the Evolution and Challenges of the Islamic State, Combating Terrorism Center at West Point, December 2014; Rebecca Shabad, “Treasury Official Outlines Plan to Bankrupt ISIS,” The Hill, October 1, 2014.
79. See for example United Nations (U.N.) Security Council Resolutions 2133 (2014), 2160 (2014), 2161 (2014), 2170 (2014), and 2195 (2014), which express the U.N. Security Council’s determination to prevent terrorist-perpetrated kidnapping and hostage-taking incidents and secure the safe release of victims without ransom payments or political concessions. See also Global Counterterrorism Forum, Algiers Memorandum on Good Practices on Preventing and Denying the Benefits of Kidnapping for Ransom by Terrorists, April 2012; and Group of Eight Leaders’ Summit, Communique, Lough Erne, UK, June 18, 2013. U.S. policy on concessions is outlined in U.S. Department of State, Foreign Affairs Manual, Vol. 7, Sec. 1823.
80. David Cohen (Under Secretary of the Treasury for Terrorism and Financial Intelligence), “Attacking ISIL’s Financial Foundation,” remarks at the Carnegie Endowment for International Peace, October 23, 2014.
81. Ibid.
82. The four U.S. citizens known to have been kidnapped and killed while in IS custody as hostages included: James Foley, Steven Sotloff, Abdul-Rahman Peter Kassig, and Kayla Mueller.
83. Nigel Duara and W.J. Hennigan, “Kayla Mueller Was Among Hostages U.S. Commandos Tried to Rescue,” Los Angeles Times, February 10, 2015.
84. See for example Marisa Schultz, “Kayla Mueller’s Dad: Bergdahl Swap Dashed Hopes of Daughter’s Survival,” New York Post, February 22, 2015.
85. David Cohen (Under Secretary of the Treasury for Terrorism and Financial Intelligence), “Attacking ISIL’s Financial Foundation,” remarks at the Carnegie Endowment for International Peace, October 23, 2014.
86. Jennifer Fowler (Deputy Assistant Secretary of the Treasury for Terrorist Financing), U.S. Efforts to Counter the Financing of ISIL, remarks, Washington Institute for Near East Policy, February 2, 2015.
87. For a discussion of the challenges in implementing counterterrorism finance laws and regulations in certain Gulf State jurisdictions, see Matthew Levitt (Washington Institute for Near East Policy), prepared testimony for a hearing on “Terrorist Financing and the Islamic State” before the U.S. House Financial Services Committee, November 13, 2014.
88. David Cohen (Under Secretary of the Treasury for Terrorism and Financial Intelligence), “Attacking ISIL’s Financial Foundation,” remarks at the Carnegie Endowment for International Peace, October 23, 2014.
89. Jennifer Fowler (Deputy Assistant Secretary of the Treasury for Terrorist Financing), U.S. Efforts to Counter the Financing of ISIL, remarks, Washington Institute for Near East Policy, February 2, 2015.
90. Financial Action Task Force, Financing of the Terrorist Oraganisation Islamic State in Iraq and the Levant, February 2015.
91. See for example Jimmy Gurulé (Notre Dame Law School), prepared testimony for a hearing on “Terrorist Financing and the Islamic State” before the U.S. House Financial Services Committee, November 13, 2014.
92. See U.S. Department of Justice press releases: “Two Minnesotans Charged with Conspiracy to Provide Material Support to the Islamic State of Iraq and the Levant,” November 25, 2014; “North Carolina Man Pleads Guilty to Attempting to Aid International Terrorist Organization,” October 30, 2014; and “Colorado Woman Sentenced for Conspiracy to Provide Material Support to a Designated Foreign Terrorist Organization,” January 23, 2015.
93. White House (Obama Administration), National Security Strategy, February 6, 2015.
94. FTOs are designated pursuant to Section 219 of the Immigration and Nationality Act (8 U.S.C. 1189), as added by Section 302 of the Antiterrorism and Effective Death Penalty Act of 1996 (P.L. 104-132) and subsequently amended. On May 14, 2014, the U.S. Department of State updated its FTO designations to revise AQI’s listing by adding the alias “Islamic State of Iraq and the Levant (ISIL)” as the group’s primary name. On May 14, 2014, the Treasury Department updated its list of Specially Designated Global Terrorist (SDGT) entities to include the “Islamic State of Iraq and al-Sham,” the “Islamic State of Iraq and Syria,” and the Islamic State of Iraq and the Levant” as aliases for AQI. Also on May 14, 2014, the U.S. Departments of State and Treasury disassociated al-Nusrah Front (ANF) from AQI. See U.S. Department of State, “Terrorist Designations of Groups Operating in Syria,” press release, May 14, 2014 and U.S. Department of the Treasury, Office of Foreign Assets Control, Terrorism: What You Need to Know about U.S. Sanctions, http://www.treasury.gov/resource-center/sanctions/Programs/Documents/terror.pdf.
95. David Cohen (Under Secretary of the Treasury for Terrorism and Financial Intelligence), “Attacking ISIL’s Financial Foundation,” remarks at the Carnegie Endowment for International Peace, October 23, 2014. See also Cohen’s prepared testimony for a hearing on “Terrorist Financing and the Islamic State” before the U.S. House Financial Services Committee, November 13, 2014.
96. See for example testimony by Jimmy Gurulé (Notre Dame Law School), for a hearing on “Terrorist Financing and the Islamic State” by the U.S. House Financial Services Committee, November 13, 2014.
97. United Nations, “Security Council Al-Qaida Sanctions Committee Amends Entry of One Entity on Its Sanctions List,” press release, May 30, 2013.
98. The full name of the Al Qaeda sanctions committee is the “Security Council Committee Pursuant to Resolutions 1267 (1999) and 1989 (2011) Concerning Al-Qaida and Associated Individuals and Entities.”
99. See for example U.N. Security Council Resolutions 2161 (2014), 2170 (2014), 2178 (2014), 2192 (2014), and 2195 (2014). See also U.N. Security Council Presidential Statements S/PRST/2014/14 (July 28, 2014) and S/PRST/2014/23 (November 19, 2014).
100. Financial Action Task Force, Financing of the Terrorist Organisation Islamic State in Iraq and the Levant, February 2015.
101. Jennifer Fowler (Deputy Assistant Secretary of the Treasury for Terrorist Financing), U.S. Efforts to Counter the Financing of ISIL, remarks, Washington Institute for Near East Policy, February 2, 2015.
102. Financial Action Task Force, Financing of the Terrorist Organisation Islamic State in Iraq and the Levant, February 2015.
103. David Cohen (Under Secretary of the Treasury for Terrorism and Financial Intelligence), “Attacking ISIL’s Financial Foundation,” remarks at the Carnegie Endowment for International Peace, October 23, 2014.
104. For an overview see Office of Foreign Assets Control, Syria Sanctions Program, updated August 2, 2013, http://www.treasury.gov/resource-center/sanctions/Programs/Documents/syria.pdf. See also Financial Crimes Enforcement Network, “Amendment to the Bank Secrecy Act Regulations—Imposition of Special Measure Against Commercial Bank of Syria, Including its Subsidiary, Syrian Lebanese Commercial Bank, as a Financial Institution of Primary Money Laundering Concern, final rule, published in the Federal Register, Vol. 71, No. 50, March 15, 2006, pp. 13260-13267.
105. Patrick B. Johnston (RAND Corporation), prepared testimony for a hearing on “Terrorist Financing and the Islamic State” before the U.S. House Financial Services Committee, November 13, 2014.
106. Financial Action Task Force (FATF), Financing of the Terrorist Organisation Islamic State in Iraq and the Levant, February 2015.
108. Geoff D. Porter, “The Impact of Crude’s Collapse on the Islamic State,” Combating Terrorism Center at West Point, blog post on CTC Perspectives, January 13, 2015.
109. Muhammad al-’Ubaydi et al., The Group That Calls Itself a State: Understanding the Evolution and Challenges of the Islamic State, Combating Terrorism Center at West Point, December 2014.
110. Analytical Support and Sanctions Monitoring Team, Sixteenth Report of the Analytical Support and Sanctions Monitoring Team Submitted Pursuant to Resolution 2161 (2014) Concerning Al-Qaida and Associated Individuals and Entities, United Nations Security Council, S/2014/770, October 29, 2014.
111. David Cohen (Under Secretary of the Treasury for Terrorism and Financial Intelligence), “Attacking ISIL’s Financial Foundation,” remarks at the Carnegie Endowment for International Peace, October 23, 2014.
112. Patrick B. Johnston (RAND Corporation), prepared testimony for a hearing on “Terrorist Financing and the Islamic State” before the U.S. House Financial Services Committee, November 13, 2014.
113. Muhammad al-’Ubaydi et al., The Group That Calls Itself a State: Understanding the Evolution and Challenges of the Islamic State, Combating Terrorism Center at West Point, December 2014.
114. Jennifer Fowler (Deputy Assistant Secretary of the Treasury for Terrorist Financing), U.S. Efforts to Counter the Financing of ISIL, remarks, Washington Institute for Near East Policy, February 2, 2015.
115. David Cohen (Under Secretary of the Treasury for Terrorism and Financial Intelligence), “Attacking ISIL’s Financial Foundation,” remarks at the Carnegie Endowment for International Peace, October 23, 2014.
116. U.S. House of Representatives, Committee on Financial Services, “Terrorist Financing and the Islamic State,” hearing, November 13, 2014, http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=398424.
117. Title I, Department of the Treasury, of Division E, Financial Services and General Government Appropriations Act, 2015, in Congressional Record (House), Vol. 160, No. 151, Book II, December 11, 2014.
118. U.S. Department of the Treasury, FY2016 Congressional Justification, http://www.treasury.gov/about/budget- performance/Pages/cj-index.aspx.
119. Office of Senator Bob Casey, “Casey, Rubio Urge Administration to Take Steps to Cut Off ISIS Financing,” press release, August 26, 2014; White House (Obama Administration), Executive Order 13581: Blocking Property of Transnational Criminal Organizations, July 25, 2011.
120.U.S. House of Representatives, Committee on Financial Services, “Task Force to Investigate Terrorism Financing Resolution of 2015,” resolution, http://financialservices.house.gov/uploadedfiles/task_force_resolution_terrorism_financing.pdf.

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Vatican To Recognize Palestinian State

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The Vatican announced Wednesday it will be recognizing Palestinian statehood in a new treaty, a significant symbol from a body deeply invested in the religious history of the Israeli-occupied holy sites, The New York Times reported.

After decades of conflict, formal recognition by the Vatican would grant the Palestinian Authority a new level of legitimacy with international communities, some of which hold close religious ties with Israel.

The Vatican website said the agreement for the new treaty “has been concluded” and would be submitted for formal approval in the near future.

Catholic leader Pope Francis has been alluding to his support for a Palestinian state for some time, and the Vatican has been informally referring to the nation as “state of Palestine.”

Israel has been wary of the international community’s increasing support for Palestine, as it continues to face pressure from the US to step toward a two-state solution. In 2012 the UN upgraded Palestine’s delegation status to a nonmember observer state.

Original article

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Derailed Amtrak Train Was Going 100 Mph On Sharp Curve – Report

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The Amtrak train that derailed outside Philadelphia on Tuesday night may have been going too fast, taking a sharp curve at over 100 mph. Federal investigators have recovered the black box from the wreckage, as the death toll rose to seven.

Citing two unnamed sources close to the investigation by the National Transportation Safety Board (NTSB), the Wall Street Journal reported the train had been moving at twice the speed limit of 50mph when it hit a sharp turn and jumped the track at about 9:30pm local time on Tuesday.

NTSB board member Robert Sumwalt told reporters speed was just one factor being considered by the investigators, adding the probe would also focus on the condition of the tracks and equipment, crew training and the performance of the five-person crew.

“We have a lot of work to do,” he told Reuters, giving no estimate of how long the investigation would take.

Rescue workers are still searching through the wreckage of Amtrak train number 188. Seven people have been confirmed dead, and more than 200 have been treated for injuries at Philadelphia hospitals. The authorities have not yet accounted for all 243 people aboard.

Vice President Joe Biden, who took more than 8,000 Amtrak trips while representing Delaware in the US Senate, said he was “deeply saddened” by the tragedy.

“Amtrak is like a second family to me, as it is for so many other passengers,” Biden said in a statement. “For my entire career, I’ve made the trip from Wilmington to Washington and back. I’ve come to know the conductors, engineers, and other regulars – men and women riding home to kiss their kids goodnight – as we passed the flickering lights of each neighborhood along the way.”

Passenger rail services along the Northeast Corridor, the busiest in the US with 12 million passengers a year, remain on hold. Commuter rail services that share Amtrak’s tracks in the Philadelphia area have also been suspended.

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Time For China To Refresh ‘Blood Alliance’ With North Korea – Analysis

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By Emre Tunç Sakaoğlu

It is no secret that relations between Beijing and Pyongyang have been strained for the last three years, especially since the young Kim Jong-un took the helm of North Korea in late 2012, only months after which the secluded nation carried out its third and most powerful nuclear test. With China assuming a leadership role in the implementation of the UN Security Council sanctions targeting the recalcitrant Pyongyang, relations between the so-called ‘blood allies’ were shaken to their foundations according to many observers. Against such a backdrop, a series of subsequent missile launches by the North Korean military that followed the same year have only made things worse.

A deepening rift

Meanwhile, the heated political rivalry within the Korean Workers’ Party between the fragile pro-reform clique and the conservative inner-circle – i.e. the spin-doctors of the Kim dynasty which continue to prey on scarce national resources through implicit channels despite long-crippled public finances – culminated in the purge and the subsequent December 2013 execution of Jang Song-thaek, Kim’s assertive uncle who had solid commercial ties and political affinity with top authorities in Beijing. Considered by Beijing as the last remaining flicker of hope for the “smooth” rationalization of the North Korean political economy, Jang was ironically accused of “wasting” and “selling out” North Korea’s natural resources by offering foreign partners prices below market rates.[1] Not surprisingly, shockwaves immediately hit Pyongyang’s traditionally-robust economic ties with Beijing as well, completely dashing the prospect for the first-ever bilateral summit that could have taken place in the months ahead between China’s new president Xi Jinping and Kim Jong-un.

The multifaceted trend of divergence between Pyongyang and Beijing was once more blatantly demonstrated by the harsh wording of an internal decree that was issued by the central committee of the Korean Workers’ Party in April 2014. The official text denounced China’s policies under Xi Jinping and their central concept, the “Chinese Dream”, daringly accusing Pyongyang’s main economic and political patron of “getting into bed with imperialists”.[2] Apparently, the bilateral relationship was tenser than ever, so much so that Xi Jinping paid a state visit to Seoul in the following months, without visiting Pyongyang. By not doing so, he thereby broke a long-held diplomatic tradition of highly symbolic importance. Indeed, he has met with South Korea’s President Park Geun-hye six times since both leaders came to power in 2012.

According to Dong-A Ilbo, a leading South Korean media outlet, the number of mutual exchanges in human resources and military delegations between North Korea and China were down by one-third from a year ago in 2014; while the number of bilateral economic exchanges hit rock bottom after Kim Jong-un came to power.[3] That was mainly due to the fact that the prolonged reign of the Kim dynasty itself, under which Pyongyang has been defying Chinese calls to abort an aggressive nuclear program and has even halted much-needed economic reforms by purging the pro-Chinese Jang Song-thaek, began to be seen as the main obstacle thwarting a possible revitalization of the relationship in the long-run.

North Korea: strategically indispensable

However, China could not afford to sacrifice a long-established strategic pillar like North Korea, which nevertheless continues to play a key role as both a major military ally in Northeast Asia and a strong buffer against the U.S.-led alliances in the region marked by American military installations in South Korea and Japan. And it is clear that the Kim dynasty is here to stay, holding on to power as persistently as ever. Seeing this, China has been seeking a fresh start with North Korea for the last couple of months, trying to amend the recently damaged ties with the rogue regime as it comes to feel the effects of a steep decline in its traditionally-prevalent influence over Pyongyang. In this direction, Beijing made two timely moves through which, while rightfully attracting Pyongyang’s attention in a light-footed fashion, it managed to avert both “swallowing its words” and upsetting other relevant actors like Russia and South Korea.

Firstly, Chinese Foreign Minister Wang Yi signaled that President Xi Jinping is considering a bilateral summit with North Korean leader Kim Jong-un, during a press conference following the annual session of the National People’s Congress early last March. Here, the Chinese FM emphasized the “traditional friendship” that underlies the “blood alliance” between Beijing and Pyongyang, hinting at the Chinese government’s policy reorientation towards North Korea.[4] And secondly, the Chinese Foreign Ministry announced Beijing’s plan to hold a military parade on September 3 to mark the 70th anniversary of WWII in Asia later that month. According to the relevant statement by the Chinese Foreign Ministry, Chinese President Xi Jinping will oversee the parade and related events, which include a reception and an evening gala.[5] The events may be the first-ever foreign trip made by Kim Jong-un as president, considering that he attended neither the Asia-Africa Meeting in Indonesia last April nor the May 9 events in Moscow and despite his apparently urgent desire to show up at a high-profile multilateral setting.

Choosing ‘September 3′ over ‘May 9′

Anonymous diplomatic sources quoted by South Korea’s Yonhap News Agency said last month that Pyongyang is either already invited to the upcoming events in question, or will eventually receive an invitation thereto.[6] Previously, China’s Ministry of Foreign Affairs stated at a regular briefing in Beijing that all the parties involved in the Asian front of WWII are invited to the September events, but it refrained from further elaborating on North Korea’s attendance.[7] Nevertheless, it would be accurate to assume that Kim will most probably attend. The WWII commemorations will certainly be his first – and maybe only – opportunity to meet in person with Xi in the near future, and to demonstrate solidarity with traditional friends – i.e. China and Russia – in the face of the U.S. and Japan before a global audience. Because the highly speculative question of which destination he’d choose for his first foreign visit has long been receiving wide coverage in the international media, he may even feel obliged to attend the Beijing events in order not to spoil his last chance to play the nuclear “drama queen”.

Moreover, Kim’s attendance in the war memorial parade in Beijing that is scheduled to take place this September can even reinvigorate the Six-Party Talks – the multilateral talks aimed at dismantling Pyongyang’s nuclear facilities – that were stalled over sampling issues in late 2008. That is because Chinese FM Wang Yi extended an invitation to the WWII commemoration events to South Korean President Park Geun-hye during an official visit to Seoul late last March. Like Kim, Park previously rejected Moscow’s invitation to the May 9 events, and she has every reason to stand in solidarity with the winners of WWII against “Japanese aggression”. Taking advantage of the larger regional context, China may prove cunning enough to position itself at the center of regional diplomacy, and leave the leaders – or at least the top representatives – of Russia, the U.S., and even Japan no chance but to settle for such fait accompli.

Considering that Japan and South Korea, which otherwise tend to regard each other with disfavor, are pushed together due to North Korea’s endless provocations; Beijing could not be more interested in convincing Park to attend the events. Beijing also believes that in case Park accepts China’s intermediation and meets with Kim in Beijing, the U.S. administration will have a hard time convincing South Korea to install THAAD – an advanced missile defense system which nominally targets North Korea but ultimately threatens China’s deterrence capacity. In the final analysis, there is no doubt that both Koreas as well as China will benefit greatly from Beijing’s diplomatic proactivism in the upcoming months, as it aims to lay the foundation of an ultimate regional security scheme. The question of whether the U.S. and Japan, or even Russia, which may feel circumvented by its once “junior” ally, will like the idea still raises controversy. Yet this will be irrelevant if China succeeds.

Endnotes
[1] Nathan Beauchamp-Mustafaga, “China-North Korea Relations: Jang Song-thaek’s Purge vs. the Status-quo,” China Analysis, no. 47 (2014): 1-4, http://www.centreasia.eu/sites/default/files/publications_pdf/note_china_north_korea_relations_after_jang_song_thaek_s_purge_february2014_0.pdf .

[2] Zachary Keck, “North Korea Slams Xi Jinping and the Chinese Dream,” The Diplomat, June 17, 2014, accessed May 6, 2015, http://thediplomat.com/2014/06/north-korea-slams-xi-jinping-and-the-chinese-dream/ .

[3] “How N. Korea-China Summit can be Meaningful,” The Dong-A Ilbo, March 9, 2015, accessed May 6, 2015, http://english.donga.com/srv/service.php3?biid=2015030959468 .

[4] “How N. Korea-China Summit can be Meaningful.”

[5] “China to Hold Parade, Invite Leaders to Mark World War II Anniversary,” Voice of America, March 3, 2015, accessed May 6, 2015, http://www.voanews.com/content/reu-china-to-hold-parade-invite-leaders-to-mark-world-war-ii-anniversary/2665568.html .

[6] “Kim Jong-un Invited to China’s War Memorial Parade: Sources,” Yonhap News Agency, April 14, 2015, accessed May 6, 2015, http://english.yonhapnews.co.kr/national/2015/04/14/29/0301000000AEN20150414003300315F.html .

[7] Kang Jin-kyu, “Kim Invited by China to WWII Commemoration,” Korea JoongAng Daily, April 15, 2015, accessed May 6, 2015, http://koreajoongangdaily.joins.com/news/article/Article.aspx?aid=3003103 .

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The Arab Boat: It’s An Arab-Palestinian Nakba, And We Are All Refugees – OpEd

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In a western capital far away from Gaza and Cairo, I recently shared a pot of tea with an “Egyptian refugee”.

The term is familiar to me, but never have I encountered an Egyptian who refers to himself as such. He stated it as a matter of fact by saying: “As an Egyptian refugee ..” and carried on to talk about the political turmoil in his country.

It made me shudder as I tried to conjure up a possible estimation of Arabs who have been made refugees in recent years. But where does one start the estimation if we are to set aside the Palestinian Nakba in 1948? Or forget the successive waves of ethnic cleansing of the Palestinians that followed, and disregard the various exoduses of Lebanese civilians as a result of Israeli invasions and civil war?

Iraq can be the start – the country that served as a foundation of everything Arab. Their culture, history and civilisation, which extends to the very beginning of human civilisation, ushered in the new Arab exodus.

The American promise to bomb it “back to the stone age” was worse than expected. Millions of Iraqis became refugees after the US-led war, a situation that was exacerbated in the mid-2000s with the invasion-provoked civil war.

Last year alone over two million Iraqis were displaced, most of them internally as a result of the so-called Islamic State’s violent takeover of numerous territories in northern and western Iraq.

A recent report by the Geneva-based Internal Displacement Monitoring Centre (IDMC) finally placed the crises in Syria, Iraq, Libya, etc, in a larger context, accentuating the collective Arab tragedy. “These are the worst figures for forced displacement in a generation, signaling our complete failure to protect innocent civilians,” according to Jan Egeland, head of the Norwegian Refugee Council, the organization behind IDMC.

War and conflicts have resulted in the displacement of 38 million people, of whom 11 million were displaced last year alone. This number is constantly fortified by new refugees, while the total number of people who flee their homes every single day averages 30,000; a third of those are Arabs who flee their own countries.

Yes, 10,000 Arabs are made refugees every day, according to IDMC. Many of them are internally displaced people (IDPs), others are refugees in other countries, and thousands take their chances by sailing in small boats across the Mediterranean. Thousands die trying.

“I am a Syrian refugee from the Palestinian al-Yarmouk camp in Damascus,” wrote Ali Sandeed in the British Guardian newspaper. “When I was small, my grandmother used to tell us how she felt when she was forced to flee to Syria from her home in Palestine in 1948, and how she hoped that her children and grandchildren would never have to experience what it feels like to be a refugee. But we did. I was born a Palestinian refugee, and almost three years ago I became a refugee once more, when my family and I had to flee the Syrian war to Lebanon.”

“’I thought the boat was my only chance,” was the title of the article in which Sandeed described his journey to Europe via boat.

Many of Yarmouk’s refugees are refugees or descendants of Palestinian refugees who once lived in northern Palestine – in Haifa, Akka and Saffad. Reading his testimony immediately summoned the chaotic scenes as the refugees fled the Zionist invasion of Haifa in 1948.

Thanks to Palestinian and Israel’s new historians like Ilan Pappe, we know so much about what has taken place when the tens of thousands of people attempted to escape for their lives using small fishing boats:

“Men stepped on their friends and women on their own children. The boats in the port were soon filled with living cargo. The overcrowding in them was horrible. Many turned over and sank with all their passengers.” (Pappe, The Ethnic Cleansing of Palestine, p. 96)

The brutality and sense of despair embodied in that scene is repeated every single day in various manifestations throughout Arab countries: Iraq, Syria, Libya, Yemen and so on. If the destination of these refugees were illustrations via small arrows, the arrows would be pointing in many different directions. They would overlap and they would, at times, oppose one another: innocent people from all walks of life, sects and religions dashing around in complete panic along with their children and carrying whatever they could salvage.

The Palestinian Nakba (the catastrophe of war, displacement and dispossession of 1948) has now become the Arab Nakba. Palestinian refugees know too well what their Arab brethren are going through: the massacres, the unredeemable loss, the despair, and the sinking boats.

One recalls a question that persisted in the minds of many when the so-called Arab Spring first began in early 2011: “Are Arab revolutions good for Palestine?”

It was impossible to answer. Not enough variables were in place for any intelligent assessment, or an educated guess even. The assumption was: if Arab revolutions culminate in truly democratic outcomes, then, naturally, it would be good for the Palestinians. This assumption followed the simple logic that, historically, Arab masses – particularly in poorer Arab countries – perceived Palestine as the central and most common struggle that unified Arab identity and nationalism for generations.

But not only did democracy not prevail (with the Tunisian exception) but many millions of Arabs joined millions of Palestinians in their perpetual exile.

What does that mean?

My Egyptian friend, who declared himself a “refugee,” told me: “I am optimistic.”

“I am too,” I replied, with neither one of us feeling a bit surprised by the seemingly curious statements.

The source of optimism is twofold. Firstly, Arabs have finally broken the fear barrier, a prerequisite essential for any popular movement that opts for fundamental change. Secondly, now most Arabs are equally sharing the burden of war, revolution, destitution and exile.

That is far from being a “good thing,” but it certainly accentuates the element of urgency in the collective Arab fate.

“We are in this together,” I told my Egyptian friend. Indeed, it is as if all Arabs are riding on a single, overcrowded dinghy and we must all make it to the other side safely. Sinking in not an option.

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Iran State Terror Sponsor, Says Obama

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Gulf countries are right to be concerned about Iran as a “state sponsor of terrorism,” US President Barack Obama has said, talking exclusively to Asharq Al-Awsat, which marks his first ever interview with an Arab newspaper.

“Iran clearly engages in dangerous and destabilizing behavior in different countries across the region. Iran is a state sponsor of terrorism. It helps prop up the Assad regime in Syria. It supports Hezbollah in Lebanon and Hamas in the Gaza Strip. It aids the Houthi rebels in Yemen. So countries in the region are right to be deeply concerned about Iran’s activities, especially its support for violent proxies inside the borders of other nations,” Obama told the newspaper.

The president was speaking ahead of the Camp David on Thursday, in which he will host GCC leaders.

Obama said the main priorities for the Camp David summit is to “further strengthen our close partnerships, including our security cooperation, and to discuss how we can meet common challenges together. That includes working to resolve the conflicts across the Middle East that have taken so many innocent lives and caused so much suffering for the people of the region.”

He told the newspaper: “There should be no doubt about the commitment of the United States to the security of the region and to our GCC partners.”

Obama is expected to brief the Gulf delegates on the framework Iranian nuclear agreement.

“When it comes to Iran’s future, I cannot predict Iran’s internal dynamics. Within Iran, there are leaders and groups that for decades have defined themselves in opposition to both the United States and our regional partners.

“I’m not counting on any nuclear deal to change that. That said, it’s also possible that if we can successfully address the nuclear question and Iran begins to receive relief from some nuclear sanctions, it could lead to more investments in the Iranian economy and more opportunity for the Iranian people, which could strengthen the hands of more moderate leaders in Iran. More Iranians could see that constructive engagement—not confrontation—with the international community is the better path,” the president said.

Also in the interview, Obama said has not given up hope for a two-state solution to the Israel-Palestinian conflict but said tensions in the region and “serious questions about overall commitment” have made progress difficult.

“It’s no secret that we now have a very difficult path forward. As a result, the United States is taking a hard look at our approach to the conflict,” Obama said. “We look to the new Israeli government and the Palestinians to demonstrate — through policies and actions — a genuine commitment to a two-state solution,” he added.

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After The Nuclear Deal, New Regional Arms Race – OpEd

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Ordinarily, a final nuclear deal between Iran and the world powers should be viewed as a timely blessing and breakthrough for regional peace and tranquility, by virtue of removing the tensions over Iran’s nuclear program and thus presenting a new opportunity for regional cooperation, particularly in Persian Gulf region. Yet, while this remains a distinct possibility, unfortunately it co-exists with another, less sanguine, possibility that in the aftermath of a nuclear deal the region will witness a heightened arms race with debilitating consequences for regional stability.

This more ominous development stems from the overt signs that the U.S., France, and other Western powers intend to boost their respective military-industrial complexes through hefty, multi-billion dollar new arms sales to Saudi Arabia and other Persian Gulf emirates of the Gulf Cooperation Council (GCC) under the pretext of “allaying” the latter’s concerns about Iran’s power after the deal. In fact, there are unconfirmed reports in the world media that the Camp David summit with the Arab leaders is intended as the occasion to expand U.S. arms sales to the region, irrespective of the ‘snub’ given by some Arab rulers.

Coinciding with a five day truce on Yemen, which has been turned into a GCC arms clearing house, albeit at the expense of thousands of civilian victims, the Camp David meeting is ostensibly geared to reassure America’s Arab allies of sustained U.S. support, but it will likely showcase President Obama as a shrewd arms salesman using the Iran threat to funnel more expensive arms to the rich Arab nations, following the footsteps of France’s President, Francois Hollande.

In his recent tour of the region, Hollande managed to secure multi-billion dollar arms sales to Saudi Arabia and Qatar, as a reward for France’s hard-line politics vis-à-vis Iran and its willingness to even fathom direct proxy role in the Saudi-led carnage in Yemen. According to reports, France has signed a $7 billion dollar deal to sell 24 Rafale fighter jets to Qatar, a similar deal with UAE might be in the works, and has also inked agreements with Saudi Arabia for 20 military and non-military projects worth “several billion euros.” This is on top of last year’s French sale of fighter jets, air-to-air missiles, frigates, and cruise missiles to Egypt worth nearly $6 billion dollars.

Not to be outdone by France, the U.S. is now determined to boost its arms sales to the GCC states, who spent more than $100 billion dollars on weapons in 2014. Last year, Saudi Arabia was the fourth highest military spender in the world, after U.S., China, and Russia, and its military spending was up by 17 percent. Other GCC states have followed the same pattern of sharp increases in their military spending. Qatar for example announced new weapons purchases worth $23.9 billion in 2014.

Clearly, given the huge military contracts that are nowadays rationalized under the rubric of “beefing up security” to deter Iran’s “threat,” the Western powers are not genuinely interested in any Iran-Saudi thaw and or the emergence of a collective security arrangement that would ensure the oil-rich region’s stability. Rather, a managed inter-regional rivalry is conducive to those arms contracts that, in turn, create thousands of jobs and help the economies of arms-exporting nations, as readily admitted by France’s defense minister recently.

But, the downside of a post-nuclear deal arms bonanza for Western military contractors, fully rationalized by certain think tanks in the West, is that it fuels a new asymmetrical arms race in the region that breeds instability and tension, in light of the fact that the GCC states outspend Iran in terms of military expenditure by a huge margin (i.e., 12 to 1 or even more depending on the hitherto undisclosed 2015 numbers). A more conservative estimate has appeared in the journal Foreign Policy worth quoting at length:

“In 2014, U.S. allies in the GCC outspent the Iranians by a margin of more than seven-to-one, investing over $113.7 billion in their militaries compared to Iran’s $15.7 billion. The United States has long given its Gulf allies some of its most advanced military equipment, such as the F-15 and F-16 fighter jets that it sold to Saudi Arabia and the UAE. Riyadh alone spent more than $80 billion on defense in 2014. And Saudi air defenses — bolstered by advanced F-15 fighters, top-of-the-line intelligence, surveillance, and reconnaissance (ISR), and missile defense capabilities — are more than capable of defending the kingdom from Iran’s conventional military attacks.”

Needless to say, from the prism of Iran’s national security, these are unsettling developments that raise serious national security concerns for the country. After all, the purpose of multilateral nuclear negotiations has never been to act as the spigot for destabilizing arms flow to Iran’s vicinity. This is tantamount to Western powers’ exploitation of the nuclear issue for their own benefits thinly-disguised as legitimate moves to “contain Iran.” The ruse of containment has, however, certain debilitating consequences for regional stability by virtue of fueling a new stage in regional arms race and heightening Iran’s security concerns.

Henceforth, it is incumbent on the U.S. and other Western powers to reassure Iran that they are not following the sinister script of manipulating the nuclear deal for the sake of massive new arms infusions in the region, which would belie their pretensions of concerns about regional stability, otherwise their relentless desire to quench the thirst of their military contractors for more and more weapons contracts with Iran’s Arab neighbors will inevitably harm not only the cause of regional stability but also détente with Iran.

This article was published at Iranian Diplomacy.

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Saudi Arabia Continues To Turn Screws On US Shale – Analysis

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By James Stafford

Saudi Arabia continues to ratchet up production, taking market share away from U.S. shale producers.

According to OPEC’s latest monthly oil report, Saudi Arabia boosted its oil output to 10.31 million barrels per day in April, a slight increase over the previous month’s total of 10.29 million barrels. That was enough for the de facto OPEC leader to claim its highest oil production level in more than three decades.

Saudi Arabia has increased production by 700,000 barrels per day since the fourth quarter of 2014 in an effort maintain market share. The resulting crash in oil prices is forcing some production out of the market, and Saudi Arabia intends for the brunt of that to be borne by others.

There is a lag between movements in the oil price and corresponding changes in production. OPEC says there was a 23-week time lag between the fall in rig counts and the resulting dip in oil production in the United States. But the effects of the oil price crash are now being felt. New data from the EIA says that U.S. oil production is declining. Having already predicted a 57,000 barrel-per-day decline for May, the agency now says that another 86,000 barrels per day in output will vanish in June.

In other words, as Saudi Arabia ramps up, U.S. shale is being forced to cut back. This story has been told many times over the past few months, but the data is finally confirming the success of Saudi Arabia’s strategy, albeit a minor one thus far.

But at the same time, Saudi Arabia’s (and OPEC’s) influence is much more limited than it was in the past. Despite Saudi Arabia producing at its highest level in more than 30 years, oil prices have climbed back from their lows. WTI has jumped more than 36 percent since March, now trading above $60 per barrel. Brent has surpassed $66 per barrel, up more than 26 percent in two months. That is obviously good for Saudi Arabia, but oil prices may not have stayed low enough to do real lasting damage on U.S. shale.

The rise in oil prices came despite Saudi Arabia’s best efforts at flooding the market. There are several reasons for this. First, demand is starting to kick back in, which is soaking up some of that extra crude flowing around. Refinery throughputs are at three-month high, with 92 percent of refining capacity in use.

A few other contributors to higher oil prices came in the form of a stronger-than-expected economic performance in Europe, as well as monetary stimulus in China. Both of those developments indicate stronger demand for oil in the months ahead. OPEC forecasts demand for 2015 to rise by 1.18 million barrels per day, an upward revision from previous estimates, and a higher rate of growth from last year’s 0.96 million-barrel-per-day increase.

Another reason for higher prices is that the U.S. dollar has weakened a bit, and since oil is priced in dollars, a weaker dollar translates into higher prices.

Also, on the supply side, until May U.S. producers managed to steadily increase output, achieving gains in efficiency that kept production flowing even though rigs fell out of service.

Nevertheless, Saudi Arabia may still have the upper hand. Oil inventories in the U.S. are still at 80-year highs, which should keep a lid on prices. That will continue to inflict damage on U.S. drillers. Several companies have declared bankruptcy, the latest being American Eagle Energy Corp., a Colorado driller. More could soon be coming. Some companies have hedged their production in order to protect themselves from the downside of oil prices. But as those positions expire, more will become exposed to low oil prices.

OPEC and the International Energy Agency project that global oil production is still 1.5 million barrels per day higher than consumption. The glut isn’t over yet.

Moreover, hedge funds have piled into long positions on crude oil. The record level of bullish bets on oil prices suggests that oil has been pushed higher by speculation. That means that a correction could push prices back down, as has happened in the past.

In summary, while foregoing price targets, Saudi Arabia has managed to maintain its market share throughout the oil bust, with adjustment coming from higher cost producers. That’s exactly what it set out to do.

Source: http://oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Continues-to-Turn-Screws-On-U.S.-Shale.html

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The Nuclear Debate In South Korea – Analysis

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The security situation in the Northeast Asia has emerged more complex and volatile now than ever before because of North Korea’s incessant pursuit of accumulating military muscle and nuclear weapons program. This has caused a sense of unease in its immediate neighborhood, South Korea. The latest in Pyongyang’s pursuit of military capability was the “successful” test-firing of a submarine-based ballistic missile, a technology that would offer the nuclear-armed state a survivable second-strike nuclear capability. As claimed by Pyongyang, this ‘world-level strategic weapon’, adds to its already existing huge military arsenal. North Korea is not bothered if its acts are violating UN resolutions that prohibit Pyongyang from conducting ballistic missile tests. “Development of a submarine-launched missile capability would take the North Korean nuclear threat to a new level, allowing deployment far beyond the Korean peninsula.”
Though South Korea is tied to a security alliance relationship with the US and is thus protected, there lurks a fear in some sections of the South Korean society that the US might not intervene to defend even if North Korea crosses the threshold and uses nuclear weapons because of larger strategic consequences for the region and the world. This has given rise to the idea of whether it is the appropriate time to revisit its nuclear options and acquire some to deter the North from possible adventurism. There are some influential law makers and hard-line columnists who have started articulating such a view and shaping public opinion towards acceptance to the idea of their country going nuclear even if that could mean abrogation of the security alliance with the US. Even in the US, there exists an opinion, howsoever small that may be, that the US should no longer be the world’s policeman and that its allies should look after their own security needs.

Adding to the debate of whether South Korea goes nuclear or not is the opinion of Charles Ferguson, president of the Federation of American Scientists, who in a recent report said that external geopolitical and internal domestic political circumstances could lead to “trusted allies, such as South Korea or Japan” developing nuclear weapons to cope with a nuclear-armed North Korea. There exists a similar debate too in Japan despite extreme negative public sentiment on the nuclear issue. So, the question arises is, who makes the first move? If Japan decides to go nuclear first, South Korea shall not wait for long and vice versa. Can both resist temptations to revisit their nuclear options? This is a troubling question to which security analysts, including the present author, are seeking answer. With no definitive answer in the horizon, this remains at the moment a purely speculative academic exercise, which is why this analysis.

Nevertheless, what Ferguson says is worth analyzing. According to him, “if the United States were perceived to not be able to reliably and credibly counter the threats posed by China and North Korea, prudent military planners in Japan and South Korea would want to take steps to have their own nuclear capabilities”. He further adds: “Finally, if Japan crosses the threshold to nuclear weapon acquisition, South Korea would feel compelled to follow suit. South Korean leaders would then not want to be vulnerable to both nuclear-armed North Korea and Japan”. Ferguson claims that South Korea is capable of making 2,500 kilograms of “near-weapons-grade plutonium” annually from four pressurized heavy water reactors (PHWRs) at its Wolsong power plant, North Gyeongsang Province. This would be enough to build 416 nuclear bombs every year. The scientist observed in the report, “once South Korea has at least a few bombs’ worth of plutonium and has confidence in its missile systems, it could go for a quick breakout that would most likely be used to signal North Korea, China, Japan and the United States”. The report argues that “one plausible purpose of this signaling of these initial ‘diplomatic’ bombs would be to prod Washington as well as Beijing to engage seriously on the denuclearization of North Korea.” The report observes: “Hypothetically, if North Korea perfects its nuclear weaponry and becomes a clear threat to the South… and if the U.S. doesn’t provide a nuclear umbrella on the peninsula, Seoul would have no choice but to develop its own nuclear program.”
Ferguson argues that “South Korea could then leverage its base of a handful of nuclear bombs and implement its potential to make dozens of nuclear warheads annually from near-weapons-grade plutonium produced from its four PHWRs”. The scientist feels that “the initial steps could take place conceivably within a five-year period”. He further claims that the HANARO research reactor at the Korea Atomic Energy Research Institute in the central city of Daejeon could also be used to produce up to 11 kilograms of weapons-grade plutonium annually if operated at full power. He, however, cautioned that his intention is not to argue for South Korea’s acquisition of nuclear bombs, adding that the best option for South Korea and Japan at the moment is for the US to continue to demonstrate its resolve to provide conventional and nuclear extended deterrence.

Such views are being articulated for some time both in Japan and South Korea. Coming now from a top US scientist as a sort of endorsement, the issue becomes more compelling for debate. Is Ferguson’s opinion a kind of cautionary warning on the establishments in Washington and Beijing that their failure to get North Korea to abandon its nuclear program could compel Seoul and Tokyo to revisit their own nuclear options as threat perceptions intensify? Ferguson’s remarks at a closed-door meeting of nuclear experts in Washington D.C. on 27 April seems to be a discreet message to Washington and Beijing that North Korea’s nuclear issue ought to be handled more seriously and solution found at the earliest.

The significance of the argument in the report that Seoul can build dozens of nuclear bombs in a short time period because it is capable of making and transporting nuclear warheads and its nuclear reactors already have enough plutonium to make such weapons cannot be taken lightly as such claims came after South Korea and the US struck a deal over the revision of their 1974 nuclear cooperation agreement on April 22. The deal opens the door for Seoul to expand its commercial use of nuclear energy in accordance with the Treaty on the Non-Proliferation (of Nuclear Weapons) Treaty (NPT). In that case, Seoul may violate the NPT and consider joining the nuclear arms race if it determines that Pyongyang’s nuclear threat reaches a level which Washington and Beijing cannot control.

The report claims Japan’s possible attempt to acquire nuclear weapons may trigger Seoul to develop such weapons on its own. But the argument also can go the other way that Seoul’s decision to acquire nuclear weapons may precipitate a decision in Tokyo to acquire some of them on its own as well. It does not matter if spent fuel or enriched uranium is used to build nuclear bombs as long as their devastative potentials are in their possession. Seoul won the right to deal with spent nuclear fuel, secure a stable supply of nuclear fuel and promote the export of nuclear power plants in its agreement with the US on April 22.The two sides also agreed to lift the “gold standard” that legally binds US partners not to perform uranium enrichment and reprocessing.

The revised Seoul-Washington nuclear cooperation deal allows Seoul to secure long-term advance consent from Washington to conduct the early stages of “pyroprocessing.” Though the report also expressed concern that Seoul may exploit “pyroprocessing,” an experimental process for recycling spent fuel, to make nuclear weapons, Korean scholars rubbish to such possibility. According to a scholar at the Sejong Institute, “it is generally perceived that pyroprocessing has less chance of being converted into a program to produce nuclear weapons because it leaves separated plutonium mixed with other elements.” He further argues that “South Korea’s export-dependent economy will suffer heavily if the international community imposes economic sanctions as punitive measures for developing nuclear weapons.”

Other local experts also hold the view that a nuclear scenario for their country is highly unlikely, but could not be unthinkable if Seoul feels it has been pushed into a corner. The truism is that South Korea relies heavily on exports. Its economy has developed through trust with the international community and therefore it is highly unlikely that it will develop its own nuclear program without a clear justification for doing so. Seoul wants that the US and the international community to continue to put pressure on North Korea over its nuclear program and provide a nuclear shield. If Seoul is reassured of this guarantee, it would have no reason to develop its own nuclear weapons. Moreover, the government has not endorsed a pro-nuclear view and that is reassuring.

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Pakistan: Dozens Killed In Attack On Shiites In Karachi

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At least 47 people were killed and 20 injured in Pakistan’s southern city of Karachi when an armed commando entered a bus packed with Shiite Muslims and opened fire.

The men, women and children, Ismaili Shiites who make up 20% of the population in the Sunni majority nation, were headed from the Ismaili Al-Azhar Garden Colony to a pilgrimage site in the Ayesha Manzil area.

At the Safoora cross-way eight gunmen on motorbikes got on the bus and indiscriminately opened fire using 9 mm pistols. The attack was claimed by the outlawed Sunni Jandullah group, known for attacks against the Shiite minority it considers blasphemous. Medical authorities indicated a possible rise in the toll due to the severe conditions of some of the victims.

The attack sparked outrage around the nation due to the charitable and peaceful nature of the Ismaili Shiites, known for their progressive Islamic views and whose spiritual leader Prince Karim Aga Khan is a globally renowned philanthropist.

Condolences also arrived from Indian Prime minister Narendra Modi, who on Twitter said “the attack in Karachi is deeply saddening and utterly condemnable. Our thoughts are with the families of the deceased”.

The post Pakistan: Dozens Killed In Attack On Shiites In Karachi appeared first on Eurasia Review.

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