Wednesday, 29 January 2014

Natural gas set to change global energy market, despite low prices

Energy will always be the central driver of the world economic system. Oil and coal - and the struggle to supply them – defined the entire modern era. There never seems to be enough to go around, with more countries emerging every decade wanting to ensure their own sources of energy. Aside from the movement and migration of humans, no other “commodity” travels to more parts of the globe than hydrocarbon energy. Today the story has shifted to be all about gas.

New Zealand is a small part of this global energy economy. It exported just over $NZ2 billion worth of crude oil in 2012, according to NZ Statistics, most of this ending up in Australia. No natural gas exports of note are exported from New Zealand – yet - but a January 2013 estimate suggested 29.42 billion cubic metres could lie under the ground and ocean around the islands.

That’s small on the world scale, but if New Zealand were to extract and export natural gas, they would simply join the dozens of other nations pouring gas into the world system.

There’s so much natural gas on the market today that prices are extraordinarily low compared with crude oil. So low in fact, that countries without natural gas export systems aren’t yet sufficiently incentivised to join the parade.

The front month contract for natural gas as priced at Henry Hub (the yardstick for natural gas prices) is currently trading around $US4.40 per MMBtu (British thermal unit). This price reflects a whopping 25% jump from early November, which for any other energy commodity would be an excuse to break out the drills. But the rise is simply from $US3.45 per MMBtu, which puts into perspective just how cheap natural gas remains.

On the other side of the hydrocarbon family, WTI crude oil prices (West Texas Intermediate) have dropped to $US94 per barrel from a high of $US110 in September 2013. This drop, representing $US16, is only a 5% dip in the fluctuating history of oil demand over 2013.

Western nations have been churning out environmentally unfriendly carbon emissions for centuries. Burning coal and oil, for instance, is well understood to be acutely terrible for the rest of nature; a conclusion that scientists are gathering more evidence to prove each year.

Whether through the combined effort of the international environmental movement or through the invisible hand of Adam Smith’s market (or a mix of other causal reasons), the world is evolving towards greener and cleaner energy sources. The world’s new-found romance over natural gas isn’t yet enough to entirely supersede petroleum (oil is still necessary to create plastics, for instance), but it is one of the cleanest burning fuels we have.

Nuclear energy is far cleaner of course, but due largely to the widespread fear of earthquakes and natural disasters, many countries are sidestepping this option. In early 2014, Japan has almost no operational nuclear reactors following the 2011 Tohoku earthquake which drastically damaged a coastal plant and left a radioactive mess.

The bungled cleanup at the plant is casting a gloomy cloud over the concept of nuclear energy. Germany, in partial reaction to the Japanese earthquake, has decided to shut down the majority of its nuclear reactors. German Chancellor Angela Merkel cited Japan’s “helplessness” in dealing with the meltdown at the reactor as the reason she changed her mind about the viability of nuclear power.

Generation IV nuclear reactors are theoretical designs not expected to be available for commercial construction before 2030. These types will be considerably more reliable and safer than present second- or third-generation systems, and some countries could choose revert back to nuclear energy in the future. Taking steps to remove nuclear energy from Europe and Japan is already changing the energy landscape, just as it might radically alter it once more if they choose to take the nuclear path again in the future.

For now, the markets have spoken, and nuclear energy, despite its relatively robust safety record, has lost a crippling amount of consumer support around the world. This is having considerable downstream effects. The present trend away from nuclear energy is putting strain on the alternative energy options, especially crude oil. The prices outlined earlier reflect the growing demand for petroleum in the global economy.

However, natural gas, thanks to newly developed extraction techniques, is one of the cheapest options and, according to worldwide estimates, there’s plenty to go around.

The chief economist of the International Energy Agency, Fatih Birol, said recently that shale gas is changing the global economy irrevocably. Western countries are suddenly able to access previously untouchable deposits of enormous amounts of natural gas. The United States and Australia especially, may be in a position in the near future to become fully self-sufficient for their energy consumption needs. This will radically change the cost of doing business in these countries and manufacturing costs, both of which might even create employment.

But the biggest change will be when they can send their gas around the world en masse.

Energy-hungry emerging nations in Africa and Asia are directly in their sights. American and Australian natural gas is hugely attractive, both because of their advanced logistics and their highly stable political systems. After all, a guaranteed supply of energy is just as important as actually having the energy resource itself.

In the Asia Pacific, and especially in China, demand for power and fuel is quickly outstripping supply. Yet advances in deepwater drilling techniques are presenting offshore oil and gas resources for recovery for the first time. It must be remembered that underlying the ongoing threats and counter-threats between China and Japan over a string of islands is the vast amounts of energy resources around those rocks.

One estimate at the US Energy Information Administration suggests the oil stores in the South China Sea could be close to 11 billion barrels and 190 trillion cubic feet of natural gas. Sure, the potential for military conflict over these resources remains low, but this may not always be the case as other South Asian nations grow and compete for similar resources in tight spots.

Demand for the revolutionary swamping of natural gas in China, India, Africa and other emerging markets continues to increase, but supplies are so far outpacing those needs. As long as gas prices remain low, companies are not likely to develop new projects, which could ultimately cause shortages in high-import countries. Nevertheless natural gas is here to stay. And the world energy system will look remarkable different this century because of it.

Monday, 27 January 2014

Syrian War Update: Peace talks, Hezbollah, and al Qaeda

As peace talks between interested world powers and the various Syrian belligerents play out in Switzerland, the fighting continues to rage in the Middle Eastern country. Representatives of the Syrian government and rebel forces opened in Montreux on January 25 the first face-to-face talks between the two sides since Syria's civil war began nearly three years ago. The earliest stages of the talks are focusing on a possible short ceasefire to allow humanitarian aid into besieged rebel-held areas in the city of Homs. Negotiations will also focus on the release of prisoners of conscience, such as women and children.

The two broad sides of the Syrian civil war also met again January 26 to discuss aid and prisoner releases. United Nations aid agencies have reported being stopped from delivering aid by Syrian authorities, despite Damascus' assurance that it would allow the distributions.

Russia, one of the sponsors of the talks, has offered official support for a proposed alliance between Bashar al Assad's regime and moderate opposition forces against Islamist groups like Jabhat al-Nusra and ISIL (Islamic State of Iraq and the Levant), which Russian Foreign Minister Sergei Lavrov has said have no place in the talks.

The talks were originally scheduled to begin January 24 but nearly collapsed amid fierce recriminations, forcing the delay. Iran was invited to the discussion by the UN, which angered the Syrian opposition. The United States requested that the Iran invitation be rescinded, which it duly was, before the negotiations began. Intervening as a veto power to disinvite Iran shows just how difficult and tentative the nascent rapprochement between the US and Iran will be in the future. A mix of backwards steps and positive forward progress can be expected as the two powers weigh each other’s true motivations and goals.

Syria’s divided opposition groups will make this negotiation process a long and arduous one. The Syrian National Coalition, the main exile opposition group, has threatened to eschew the talks when news was released that Iran was invited. Syria’s internal opposition party, the National Coordination Body (NCB) announced it will not attend the talks either. The attending rebel groups have also made it clear that they expect representatives of the al Assad regime to not arrive with a negotiating stance of potentially remaining in power.

The opposition expect the regime to only be talking about a peaceful transition, however, this is simply not in the interest of the al Assad ruling party. Mr al Assad is under no threat to negotiate away his control over the country. This clash of mindsets here will make it extremely difficult to negotiate over the next few months.

Ultimately, the negotiations in Montreux are unlikely to find a conclusion to the three-year conflict in Syria. The country is as divided as it ever was, and is now little more than a geographical representation than a true nation-state. The various factions of the Syrian opposition are linked only by their common goal of removing Syrian President Bashar al Assad from power.

Any ancillary goals they may wish for, down to which faction or ethnic group should replace the regime, are far from reconciled or mutual. The only force in the country at the beginning of 2014 with even a semblance of connectivity and coherency remains the Alawite regime (and maybe the al Qaeda groups). Mr al Assad still calls himself the President of Syria, but a more accurate description would see him as simply the strongest warlord in a country of warlords. For a large part, this is exactly why the fighting has dragged on so long.

Discussing the conflict in Switzerland is therefore more of a theatrical display by Western powers - and the United Nations - to show the world it is doing something to end the killing. The United States has been rebuffed multiple times in its efforts to lead a coalition of military force to remove the Syrian regime from power. The only success Washington has achieved is in formulating a program to dispose of Syria’s chemical weapons.

However, extracting Syria’s chemical weapons will not be an overnight job, and could take years or decades. Given the constant ebb and flow of the civil war, much of this weaponry is unlikely to be found and could leave the country via the many smuggling routes into the greater Middle East. To achieve this goal, Russia and the United States will continue to apply pressure to the Syrian regime and opposition groups to maintain the cease-fire while negotiators try to find some common ground for a political solution and take possession of the chemical weapons.

Meanwhile, the civil war front continues to burn.

2013 was a complex and bloody year for the civil war, with territory captured and recaptured numerous times by both sides. Syrian President Bashar al Assad’s forces still control the all-important strategic corridor connecting the ethnic Alawite core on the Mediterranean coast to Damascus. And contest for control over the Homs-Hama-Aleppo highway corridor is presently weighted to loyalist forces. Both regions are critical for the regime because of the high concentrations of civilian supporters living there, as well as Mr al Assad’s ethnic group of the Alawites.

Hezbollah, the Lebanese militant-political group, also threw their considerable weight behind the regime forces in 2013, even while sustaining relatively heavy losses. Their goal has been to maintain the connection between their stronghold in the Lebanese Bekaa Valley and Damascus to continue trade and free travel with the al Assad regime.

Although the fighting in Syria has required large amounts of men and materiel from the militant group, it has managed to ensure this connection and will likely keep this route open for the foreseeable future. However, on its home front in Lebanon, various Sunni Salafist groups backed by Saudi Arabia and other Gulf countries have begun targeting Hezbollah strongholds in an attempt to disrupt and distract the group from fighting in Syria.

Hezbollah’s political standing in Lebanon has been negatively affected by these attacks, which have ranged from crude to complex vehicle borne improvised explosive devices (VBIEDs) and mobile armed attacks, but the group should regain influence over Lebanon’s political process as it moves to counter the Sunni jihadist threat in Lebanon.

With expert military assistance from Hezbollah, continued arms and personnel deliveries from Iran, a divided and fratricidal opposition, a disinterested and distracted West, and with Turkey trying to look the other way, the commanding position of the Alawite regime is unlikely to change this year.

Aside from a drastic and strategically devastating military loss or the removal of support from one or all of Mr al Assad’s allies, the Syrian President can prosecute the civil war in whichever way he pleases. He has already shown to the international community on numerous occasions that his forces can target rebel positions at will and with any type of conventional weaponry the regime possesses in their arsenal.

During the talks in Switzerland, there will be an agreed cease-fire in Syria. Mr al Assad will use the time at the Montreux conference to bolster his forces in the north around Aleppo in preparation for the spring season. He will also look to reposition his limited resources along the corridor from Damascus to Aleppo where the bulk of the fighting in 2014 is likely to occur once again.

South of Damascus, near the borders of Jordan and Israel, will also see more fighting this year and the Israel Defence Force (IDF) will be monitoring this region closely. The Golan Heights demilitarised zone has already seen the exchange of artillery and rifle fire between Syrian and IDF troops. Israel will continue to plan for interdiction strikes into Syria using fighter aircraft if it receives intelligence about weapons or other threats moving into Lebanon or elsewhere.

The so-called “Geneva II” talks being held in Switzerland are certainly a significant step for the Syrian peace process. Many commentators have applauded the resolution of both sides to sit down and attempt to find common ground. Yet the assumption that there are only two sides to the conflict simplifies the fighting and disregards the various rebel factions holding mutually exclusive goals for transition. No group sitting at the table can rightfully claim to represent the opposition to Syrian President Bashar al Assad’s regime and this will severely limit the chances for a negotiated end to the fighting.

Although the inclusion of representatives from the Syrian regime at the talks is a sign that they also wish to talk, it by no means indicates Mr al Assad is ready to give up power. The civil war has raged for more than three years with no end in sight. Today Mr al Assad is under no pressure to negotiate his way out of control and this fact will not change in 2014. As the discussions continue to freeze in Europe, the various belligerents in Syria gear up for another fighting season as the weather in Syria begins to turn warmer.

In Syria, regime looks to divide opposition in clever gamble

The situation on the ground in Syria has evolved from a polarised civil war with roughly two clear sides, into a fractious, multi-country covert intelligence war with a whole spectrum of belligerents. With the rise of ISIL (Islamic State of Iraq and the Levant) in Syria and northern Iraq, the jihadists have added a dangerous dimension to the conflict. ISIL and other jihadist groups are connected to al Qaeda. The Syrian regime will try to play the jihadists off against their rebel brethren in order to weaken both sides and create a winner. Isolating a particular group would allow the regime to crush the opposition much quicker than if it were combatting multiple groups.

Russian Foreign Minister Sergei Lavrov
Complicating the narrative over what to do about the jihadists in Syria is the clashing view of Syria's future in the international community. The opposition in Syria and their Western supporters want to move to a political transition, while the regime and its supporters in Iran and Russia say the discussions are about fighting the Islamist insurgency. Neither the West nor the Russians would like to see Islamist militants take control of the country, but their views on how to deal with the various groups are starkly different. Syrian President Bashar al Assad has noticed this and is moving to mould his own outcome.

Already, anonymous Western intelligence sources suggested in the Telegraph that the Syrian regime is cooperating with al-Qaeda groups even as these forces attack the Syrian military. Two groups, Jabhat al-Nusra and the more extreme Islamic State of Iraq and al-Shams (ISIS), have apparently both been helped in financing their arms purchases and operations by selling oil and gas from wells under their control back to the regime. While this tactic may be ideal in the short run, it is unknown how long Mr al Assad and his controllers in Tehran and Moscow can keep up the charade of proclaiming loudly that they are fighting “terrorism” in Syria, when evidence is emerging of blatant cooperation with al Qaeda groups.

The regime’s goal here is threefold. First it serves to divide opposition forces by cancelling the option for Sunnis jihadists to join the more secular and moderate groups of the Free Syrian Army (FSA). Groups such as the FSA - which is composed largely of defected Syrian troops - report that al Qaeda militants in Syria are making their goals less achievable because they must spilt their focus to fight both the regime and the jihadists on two fronts. Also reported by rebels and defectors is that Syrian President Bashar al Assad released jihadist prisoners from Syrian jails in an effort to swell the ranks of ISIS, ISIL, Jabhat al-Nusra, and other groups.

Their second goal is in reinforcing the public message to the West painting the rebel forces as infected with al Qaeda-backed fighters who have stated an intent to create a new Islamic Caliphate in based in Syria. Russian and Iranian spokespeople have already said publicly that the conflict in Syria is now a matter of stemming the tide of Islamic extremism, rather than just a strict civil war. Supporting the jihadists plays into the narrative of both the anti-war West who do not want to boost the groups (as well as the majority of those pushing for limited intervention), and the Russian and Iranian view.

Aside from being a good propaganda trick, cooperating with al Qaeda is a shrewd tactical move from Mr al Assad.

If the al Qaeda groups can be lifted above the FSA groups in terms of capability, this might have a further strategic effect down the line. As soon as ISIS or ISIL look to be gaining the advantage over smaller opposition forces, the United States may curtail its covert support of the moderate rebel groups for fear that the weapons and materiel may fall into the hands of al Qaeda. That would be a safe assumption on the part of the Pentagon given that jihadist groups are both more ferocious and experienced.

At this point, without assistance from the West, the moderate rebel groups would be in a weakened position and could be overwhelmed by both al Qaeda fighters and regime troops - potentially permanently. From the Syrian regime’s point of view, throwing a few bones to the al Qaeda fighters now does little tactical harm to their current strong control in the west of Syria, where they must ensure control at all costs. Regime troops have withstood al Qaeda offensives numerous times and it is conceivable this will be the case in the future should the jihadists gain military advantage over the other groups.

Tactically, if this were to happen, the fighting will have shifted into a new phase. Mr al Assad would have both stopped assistance from the West while also destroying a sizable chunk of the opposition. He would be left with a dangerous, but manageable al Qaeda insurgency. Iran and Russia would then be emboldened and vindicated in their initial assessment and may even be authorised by the international community to send their own military assistance to quell the jihadists on behalf of the al Assad regime. The regime would be both legitimate and strengthened, as much as the opposition would be weakened and maligned.

Ironically, if this scenario were to play out, the Syrian regime could turn around and request military assistance from the United States and NATO to help fight al Qaeda forces in Syria. Also, if the regime can isolate and negate the FSA and other moderate groups, and put a ring around the al Qaeda forces, it could feasibly be in a position to both stay in power and put pressure on Saudi Arabia and the Gulf countries to publicly proclaim an end to supporting al Qaeda groups, which they presently do via covert means.

At this point, any public indication that a Gulf country is supporting al Qaeda would become too politically unpalatable for Riyadh to withstand, and their only move would be to cease assistance. Russia is very astute at leaking intelligence information to the world press and wouldn’t hesitate to loudly expose Saudi Arabia’s involvement in arming al Qaeda. Russian President Vladimir Putin  successfully tried similar tactics of divide and conquer in the North Caucasus in the late 1990s. Of course, this would in turn weaken the jihadist groups in Syria as their Saudi patron dries up or military assistance becomes more difficult to obtain.

As the negotiations continue between Iran and the US, and agreement towards a balance of power in the region and an agreed Iranian sphere of influence could assist Syria’s leverage to pressure the Sunni Arab states in the Saudi peninsula. Saudi Arabia is already worried that a d├ętente between Washington and Tehran places them directly under a new and growing Iranian sphere of influence.

A third goal for assisting the al Qaeda rebels is to force the remaining non-Alawite Syrians to align with the regime rather than the opposition. Convincing the world that al Qaeda is pulling the strings among the rebels is a complex game, but convincing Syria’s citizens that jihadist fighters are operating is probably an easier sell. Citizens can observe directly the impact that al Qaeda fighters have on towns and cities when they capture them. Sharia law especially can be a bitter pill to swallow for moderate and non-aligned Syrians used to secular law handed down from Damascus, and Jabhat al-Nusra are known to introduce cruel forms of control early in a takeover. Mr al Assad will be looking to convince these civilians through underhanded means that his protection is permanent and robust and a better option that al Qaeda's.

To an extent, the rest of the world sees the conflict similarly, which makes this path easier for the regime. The number one priority for the United States in the Middle East for 2014 will be the fluctuating talks with Iran. Washington would like to get more involved in Syria, but there are significant constraints on doing so. There is no more room to maneuver to intervene on a military basis, and the casus belli for invasion - Syria’s chemical weapons - is also disappearing quickly, which in itself is linked to the emergence of al Qaeda groups in Syria.

While the chemical weapons allegedly used midway through 2013 against a Syrian neighbourhood did cross US President Barack Obama’s self-imposed “redline” - apparently justifying ground invasion - the international community did not commit any overt military assets to the conflict. Threats of sea-based cruise missiles and airstrikes might have severely weakened regime forces, allowing rebel groups to gain the tactical advantage.

However, a major factor in the West’s decision not to intervene was the known presence of these multiple Sunni Salafist jihadist groups, linked to al Qaeda, operating on the ground in Syria. Weakening regime positions would open the way for both groups to take better control of the country. But this would likely result in only one winner. The al Qaeda groups have already shown themselves to be more competent and coherent fighters than most rebel groups. So essentially handing an entire country over to a jihadist militia was both strategically and tactically considered a bad move for NATO.

The West has its hands tied in Syria but will continue to send covert assistance to moderate rebel forces. This will become difficult and potentially dangerous if al Qaeda groups gain the upper hand. Syria’s President Bashar al Assad is trying to bring about a scenario in which he remains in power fighting a single coherent enemy, rather than multiple, while retaining links to power patrons in Russia and Iran.

Assisting al Qaeda fighters is one step towards this goal, but how effective it will be relies on whether he can limit the amount of destruction those fighters inflict on an already battle-weary - but loyal - Syrian military. Right now, the goal for the regime is to direct al Qaeda’s focus back on their fellow rebels, and vice versa. Ultimately, the more of these fighters that are killed battling each other, the better it will be for the regime.

Friday, 24 January 2014

Multiple Cairo blasts overshadow new constitution

At least one person was killed early January 24 when a vehicle-borne explosive device detonated near police headquarters in Cairo, Al Arabiya reported, citing Egypt's state television and its Interior Ministry...Initial reports also suggest two more blasts, a reportedly crude explosive device near the Behooth subway station and another near a police station in the Egyptian capital, killing 5 and injuring scores, according to RT...No responsibility has yet been claimed for some of the recent attacks, however militant group Ansar Beit al-Maqdis has claimed the police headquarters attack...Early images of the blast scene suggest a powerful explosion caused major facade damage to the building, indicating the driver may have been unable to gain access to the compound proper due to concrete barriers in place...The blast seat is in an open multi-lane highway in front of the building, which probably helped dissipate the explosion’s brunt around the building...The early morning timing of the explosion also explains the low casualties, and the relatively strong explosion could mean the attack was a protest against the regime rather than specified destruction...The explosions come just days after the January 18 constitution was overwhelmingly passed with 98.1 percent support giving the ruling military government enhanced political power...Supporters of ousted President Mohammed Morsi have threatened to complicate the military’s rule with militant activity...Violence already marred the first few days of constitutional voting as General Abdel Fattah al-Sisi announced his presidential bid and a potential return to democratic processes...Egypt’s military are likely to use their increased powers to clamp down harder on Islamist militants and Muslim Brotherhood supporters, further marginalising the groups.

Australian organised crime bust exposes terror networks

More than $US512 million worth of drugs and assets were seized over 2013 in Australia as part of an ongoing anti-money laundering operation, Australian Crime Commission said on January 23, Xinhua reported...Operation Eligo disrupted several money laundering networks which have been linked to Lebanese militant organisation Hezbollah and other terrorist groups...Organised crime in Australia, as well as human traffickers, were also targeted in the operation...Worldwide authorities seize several billion dollars worth a year from terrorists, organised crime, and cartels...The operation’s impact on international money laundering networks will be difficult to gauge, but is unlikely to be great...There has been little progress in stemming the activity between terror groups since 9/11...The United States and Europe remain the largest sources of money laundering in the world, financial crime costing the United States $US7 trillion each year...Operation Eligo offers extra evidence of terror networks moving illicit money through the international system relatively easily...The specific mention of Hezbollah as beneficiaries is also notable because the group is attempting to position itself as a political, rather than militant, group...Experts explain that Hezbollah’s political wing should not be considered divorced from its militant wing...Although there is little incentive for financial institutions to be proactive in stopping money laundering, combating the practice will require greater cooperation between law enforcement, banking industry, and private business.

Thursday, 23 January 2014

Thailand's political woes failing to mend despite promised elections

Thailand’s political crisis refuses to calm down. Historically, this is not an unusual situation for the tumultuous country.

But with the amount of economic growth predicted to wash over South East Asia in the coming years, any unrestrained instability could prevent Thailand from benefiting from the smorgasbord of expected economic development and foreign direct investment.

This would be a huge blow to the emerging economy, especially when the country occupies such a beneficial strategic geographic location and rich ethnic and cultural influence over the entire region. The time could be almost ripe for Thailand to assume unprecedented political sway over South East Asia, but it may miss this opportunity if it cannot sort out its deeply divided political polarisation.

In response to the last few months of widespread ongoing protests and increasing violence, the ruling Pheu Thai party ordered a 60-day state of emergency before demonstrations could shut down the country. The bloodshed is pushing Thailand into dangerous waters ahead of the controversial elections scheduled for February 7.

Politics is unpredictable in Thailand, and that’s being very generous. Traditional urban elite have pulled the political strings for years, but the rural masses are becoming more vocal. Protests are very common, and generally regarded as a tactic to theatrically vent an opposition’s dislike of an incumbent government, often without supplying a viable alternative.

Since the 2006 ouster of Thai leader and telecommunications tycoon Thaksin Shinawatra, anti-government protests have escalated since his sister Yingluck Shinawatra and her Pheu Thai party won democratic elections and resumed control over the South East Asian country last June. The Shinawatra clan has now scored back-to-back election victories for over a decade.

The current ruling party boasts heavy support from rice farmers and other rural peasantry, as well as from the entrepreneurial sector and nationalists. This electoral base put their faith in the Pheu Thai government and expected their living conditions to rise. But corruption and unpopular policies have slowed this progress, turning once-stalwart supporters into disgruntled farmers.

On the other side, opposition parties have been dominated in the polls throughout this time and there’s little reason to feel hopeful for chances of their success in the upcoming elections. The necessary reforms needed for the opposition parties simply aren’t being made.

The Thai government has already begun deploying soldiers to demonstration hotspots to help maintain order. But ongoing violence between the two opposing sides threatens to work against Shinawatra’s government regardless of which side commits it. Putting troops on the streets to monitor protesters - who actually represent the very electoral base many of the soldiers hark from - is a risky move for the Shinawatra government.

This is because Thailand has experienced 12 successful political coups since 1932.The memory of these coups is still fresh in the minds of Thai voters. While the opposition activists claim Shinawatra’s government is inherently corrupt, the prospect of provoking the military into bringing down the government doesn’t necessarily sound like a suitable alternative.

Shinawatra’s party received a healthy majority victory in the last elections, and still commands high levels of popularity among voters. The latest round of protests was sparked when the Pheu Thai party proposed an amnesty for ex-leader Thaksin Shinawatra, who had to flee into exile after corruption charges, to return to Thailand.

As might be predicted, the opposition took offence and Shinawatra’s government quickly called early elections to cool the protests before they got out of hand.

A Thai bomb squad unit examine the site of a blast at
Victory monument in Bangkok on Jan 19, 2014 - AFP
Early elections seemed like a good idea at the time because polls showed Shinawatra’s party well in the lead with a high chance of re-entering power. The problem for the government is that the demonstration’s momentum has refused to slow. This week, with recent reports of grenade attacks, the political and security situation is clearly swiftly deteriorating.

Twenty-eight protesters were injured in Bangkok on January 17 when an unknown attacker threw a grenade at a demonstration led by Suthep Thaugsuban, the leader of the People's Democratic Reform Committee protest group. Mr Thaugsuban was present at the event but managed to escape injury.

Elsewhere, two fragmentation grenades exploded at an anti-government demonstration near Bangkok's Victory Monument on January 19, wounding at least 28 people, police said.

Even though the military have tried to take a more subtle and disengaged level of intervention in the country’s politics, the last thing they want to see is Thailand grind to an economic halt. Protesters have openly called for the military’s support in their cause and the army are closely connected to the country’s autocratic past.

Lending some psychological support to the Shinawatra government’s position is that while the military may spot an opportunity to unseat the regime on the side of the opposition and restore calm, the generals know very well that such a move would further alienate the country from their mutual goal of reaching economic success.

But if the Pheu Thai party were to be successful in February’s elections, they would still have to deal with grave bureaucratic and legal disputes before carrying on their control of the country unencumbered.

On the other hand, if the opposition gets their way in the upcoming elections, they will have simply achieved the removal of the Shinawatra government. If they can convince the military to give them support in this goal, then their legitimacy may be bolstered, but that is a tentative result at best. This wouldn’t fix the political quagmire at the heart of Thailand’s problems, in fact it may entrench them.

The structural problem plaguing Thailand is not one particular government’s weaknesses, but deep divisions between the political parties and both side’s unwillingness to wean their members off the temptations of corruption which has long defined their leadership.

Just like a living organism, the country is already at the limits of what it can tolerate in terms of political polarisation and desperately needs a change. Unfortunately, the nearby elections are unlikely to mend these issues quickly enough.

Wednesday, 22 January 2014

Peace talks in Syria unlikely to make progress

Syria Civil War zones of control (at August 2013) - courtesy BBC
The Syrian National Council, the biggest bloc in Syria's opposition outside the country, said January 20 that it would quit the Syrian National Coalition to protest peace talks in Geneva with the regime, AFP reported January 21... United Nations Secretary General Ban Ki-moon invited Iran to the peace talks, dubbed “Geneva II”, drawing objections from the United States and opposition spokespeople...Syrian President Bashar al Assad will attend the talks in a position of strength, having shown the world it can withstand the military threats of the United States and prosecute an internal civil war with virtual impunity...Mr Assad is simply not under significant pressure to negotiate with the rebel forces...Opposition groups are still deeply divided, with some 1200 different cells among them, and are in no shape to make agreements with the regime, especially when it has little legitimacy among rebel fighters...Inside Syria, these opposition forces have been fighting both regime troops and al Qaeda-affiliated groups on two fronts, splitting their concentration and hurting their military gains...Weakening the moderate branches of the opposition further, Western intelligence agencies recently indicated the regime may be conducting a complex double-game by providing funds and cooperating with al Qaeda...The goal here is threefold: maintain the impression in the West that the uprising is led by Islamist groups, help keep the opposition divided against itself, and convince undecided non-Alawite Syrians to side with the regime...The talks in Geneva will be largely brushed aside by Mr Assad, but rebel forces will probably use them to push for more international support. 

In Iran, nuclear enrichment suspended amid worry of agreement backtracking

Iran on January 20 stopped production of 20 percent-enriched uranium, bringing into effect an interim deal with world powers on Tehran's nuclear program, an official for Iran's Atomic Energy Organization told the official IRNA news agency, AFP reported...According to the IAEA, uranium enrichment has been suspended at the Natanz centrifuges...This first part of the nuclear deal agreed to in Geneva, was meant to begin in December but was delayed when an Iranian official announced January 14 Tehran’s intention to build more nuclear enrichment plants...Iran will also resume exporting oil and petrochemicals as existing sanctions are temporarily apprehended... Nothing in the November text compels Iran to dismantle their nuclear plants, and both Israel and some former IAEA inspectors warn that Iran remains capable of creating enough highly enriched nuclear material in as little as three weeks should it choose...Suspending the uranium enrichment is only one part of the interim agreement, Iran has already given some serious reasons to doubt their commitment to the nuclear deal...Negotiations may now begin on a longer-term agreement, which will be more difficult to reach...US President Barack Obama may experience so much controversy in Washington with the deal that there may be more sanctions against Iran in the future unless Tehran can show it remains committed to the Geneva talks...Therefore completing the deal is still an unknown outcome for both sides.

Tuesday, 21 January 2014

Signs China's economy could be on the right track

According to recently released trading data, the Chinese economy flew to the moon in 2013 in more ways than one. If the government data is to be believed in totality, China could have overtaken the United States economy as the world’s largest trading country in terms of goods in 2013.

Nearly US$4.2 trillion in total trade pushed China past the American’s much lower figure. Washington will release its trade figures in February, but right now the United States sits on a US$3.5 trillion total for the first 11 months of 2013.

Alongside this news, December saw China become the third country to place a mechanical, unmanned 140 kg rover on the lunar surface in a “soft landing”as part of an impressive 13-day journey. The last country to complete this impressive feat was Russia 37 years ago while the Cold War was at its zenith. The Americans, of course, make up the final piece of the triad. The Chinese rover is presently conducting a three-month mission collecting geological data and detecting for natural resources.

Japan, India, and the European Space Agency have each managed to crash probes into the moon in the past, but actually landing a rover on the surface appears to be a mission befitting only an exclusive club of nations.

The next stop for China’s highly politicised space program will probably be a manned mission to the moon. China has thrown down the gauntlet for other competing space-nations in the Asia Pacific region, which could herald the spark of a new race for supremacy over the final frontier.

China is firmly in the drivers seat when it comes to races of this sort. Their economy still retains much of its legendary vitality despite hints of a growing bubble as deep structural flaws within its banking system still threaten to push it over a premature fiscal edge. But for the meantime, China will enjoy the benefits of a truly globally-enviable 7 percent or greater growth rate, with the potential for it to continue well into 2014 if everything goes to plan.

A surge in imports proved to be a causal factor in China’s climb past the US$4 trillion mark last year. Strong and encouraging reform plans announced by the Communist Party of China (CCP) at the end of 2013 aim to steer the country away from a manufacturing-based economy towards a service-based economy.

But the Chinese economy still has a long way to go to overtake the United States in services, a key area of economic power. For instance, the Americans registered US$1.07 trillion in their 2012 services trade total, compared with China’s US$471 billion for the same period.

Nevertheless, China’s exports were slower in 2013 than at any point in the past 13 years, yet they still managed to grasp a healthy 7.9 percent rise, translating to roughly US$2.2 trillion. According to government data, imports also rose 7.3 percent to US$1.95 trillion while their trade surplus experienced a 12.8 percent increase to finish at close to US$260 billion.

It doesn't really matter which way this sort of news is cut, China has clearly reached an important milestone in its trade development. Of course,some economists are still sceptical of the officially released trade data showing them out in front of the US total.

Chinese companies have been known to inflate export figures to bring more money into the country. For instance, Global Financial Integrity, a nonprofit organisation based in Washington D.C., showed more than US$400 billion of misinvoicing flowed into China from Hong Kong between 2006 and 2013. The first quarter of 2013 alone saw over US$54 billion entering China disguised as export invoicing, according to the report.

All of this hasn’t escaped the notice of Beijing’s economic planners. The Chinese government has expressed concern that illicit fiscal inflows may be hurting their economy by fueling currency and housing speculation. To fix this, their new reform package unveiled at the country’s Third Plenum - a planning meeting conducted by the Chinese Communist Party to set the next 5 year's goals - will aim to liberalise their economy, reduce government intervention, and tighten financial laws.

While financial liberalisation reforms are already well advanced, there is still a lot of work left to do to reform state-owned enterprises (SOEs) and restructure local government finances and borrowings. Movement towards using greater amounts of the renminbi in international trade and developing local currency capital markets are two examples of early successes. Plans to deregulate interest rates and ramp up cross-border banking transactions and convertibility are apparently on their way as well.

Following the release of more detailed information about this meeting however, there appears to be good reason to believe China can tackle many of their most pressing obstacles. Evolving the Chinese economy will help close the gap between the top 20% richest urban Chinese and the poorest 20%, which could prove to be a brewing cauldron of problems for Beijing.

Also expected to help close the social gap is a restructuring of those bulky SOEs. In the final draft of the Third Plenum, policymakers explained how increasing the dividends paid to the central government from these important pillars of China’s economy would lead to increased social spending. A huge amount of freed funds could then be channeled towards additional household consumption, which may result in more equitable social welfare.

And there's more. Along with a planned property tax (set for introduction over the long term) and a relaxing of the one-child policy, a dismantling of the key hokou system is reportedly in the works.

The hukou household registration system is central to the country’s statecraft, but has recently become more of an obstacle than a useful tool. It divides all Chinese citizens into two main categories at birth: agricultural (rural) or non-agricultural (urban) and grants access to a wide range of social services, such as education and healthcare, mainly for urban citizens.

Relaxing the system will allow millions of migrant workers to bring their children with them - children who previously remained with relatives as their parents searched for work - so they can receive an education in more advanced cities. The idea would be to make the hukou system mobile so that benefits could be retained wherever someone chooses to travel and giving farmers the option to sell their shares in rural collectively owned land.

Ultimately, China has a promising blueprint for a more competitive and meritocratic economy. If the past 12 month’s trade figures are anything to go by, China is keeping up its impressive momentum, although that is still not guaranteed for the years ahead.

The scale of the challenges facing Beijing over the foreseeable future must be daunting for central planners, but the ideas floated at the Third Plenum might just be imaginative enough to foster serious changes in the way China does things. China’s poorest stand to gain significantly if the plans reach fruition, - and so do foreign commercial investors - as domestic consumption is encouraged and new financial laws make it tougher to break the rules.

Only time will tell if the reform packages will be enough to keep everyone happy and stave off popular revolt. And only time will tell if those people pulling the Communist Party strings are entirely willing to throw their weight behind the reforms, rather than dragging their heels.

Monday, 20 January 2014

Terror attacks raise Russia's security ahead of Sochi Olympic Games

Russian security officials in Sochi are searching for a woman suspected of plotting to carry out a suicide bombing, who was spotted in the city January 19, unnamed law enforcement sources said, BlogSochi reported...Russian authorities remain on alert following multiple successful and partially-successful terror attacks in the south of the country ahead of the 2014 Sochi Winter Olympics beginning February 7...More than 1,500 violent events have occurred in the Caucasus region since January 2010, the majority targeting law enforcement and occurring within 500 miles of the Olympic Games in areas such as Dagestan, Ingushetia, Kabardino-Balkaria and Chechnya...While responsibility has not been claimed for either the attacks in Volgograd in late December, or the recent failed attempts, similarities in tradecraft suggest the same group is responsible...The most likely suspect remains Doku Umarov’s North Caucasus militant group which is reigniting a decade’s-old insurgency in Russia’s south...There is some reason to believe the attacks may be the work of a splinter group or even semi-coordinated lone-wolf style attackers...The bombings have so far not caused any damage to the Olympic venue, however they have killed over 30 people and gathered a wide amount of press coverage, which for the perpetrators greatly increases the attack’s success...Historically, Mr Umarov’s group employs bombings which are followed up by armed, mobile attacks...The Sochi Olympic Games are only a few weeks away, so while Russian intelligence and law enforcement agencies will deploy more than 40,000 extra personnel to the area, they may only have a short window of opportunity to break the unknown militant cells before they strike again…Reports of other bombers at various places throughout Russia will likely continue to appear in media before the games, this will negatively affect ticket sales as some wary overseas travelers will decline to travel to the event...Given the high security at the Olympic venues, attacks on the games themselves will be very difficult...Soft targets such as buses, stations, crowded malls, etc will however remain extremely vulnerable and almost impossible to completely defend, even in Russia.