Terrorist Networks and the Panama Papers

 April 5, 2016

What is the connection between the terrorist attacks in Paris and Brussels and the huge size of the tax-avoidance industry, as illustrated by the recent publication of the “Panama Papers” ?

On a superficial level, none. In actual fact, the exponential proliferation of illegal activities – the drug and arms trade, the rapid multiplication of criminal networks, the smuggling of refugees and, ultimately, terrorism in the Western world – has everything to do with the financial and logistical incapacity of states to collect revenues in order to police their neighbourhoods or their internal and external borders.

For almost two decades now, conservatives have imposed on most Western economies a “small government” agenda followed by drastic budget cuts. This has had the effect of rendering formerly powerful Western states defenceless against all sorts of illegal trafficking, criminal networks and now against terrorists. Meanwhile, in order to get elected and stay in power, a good many centre-left parties have pushed a similar if not identical agenda. The consequences of such destructive policies are now clear for all to see.

The world-wide dissemination of the “Panama Papers” serves as comprehensive proof that the global business elites, political elites and nowadays even small-time investors have indulged in massive tax avoidance schemes that bleed their respective national treasuries dry. Governments in need have been forced to resort to borrowing and to reducing essential services – such as healthcare, education, police and even the military – in order to make up for the budget shortfall.

The extreme weakening of most Western states is ultimately responsible for fuelling the exponential growth of criminal and terrorist networks on a global scale. To give but a few examples, the German police is unable to defend its own population because its numbers have been reduced to a bare minimum in the past ten years; the Belgian secret services lack the manpower to keep tabs on jihadis in the country; the French legal system lacks sufficient personnel and in some cases courts have to do without photocopying paper; EU agencies such as Frontex have less than half the manpower needed to stem the flow of illegal refugees; and everywhere in Europe the number of competent tax collectors and auditors is far below the minimum required to verify compliance with existing taxation rules for corporations and individuals alike.

Little wonder, therefore, that major corporations – but also politicians, smaller firms and individuals with money – have used to their advantage the dire predicament in which Western states currently find themselves.

Not to be outdone, criminal and terrorist networks have flourished to levels unforeseen and are putting public authorities on the defensive. A global war against them, however, would be fought in vain unless the community of states takes resolute action against tax evasion and fiscal havens.

But as matters now stand, Western states are not financially able to employ the number of people needed to detect, prosecute and punish tax fraudsters. Consequently, they are not in a position to give their bureaucrats the means to hire and train more police, judges and secret service agents, or to proceed to a wholesale dismantling of existing criminal cartels and terrorist networks.

The implosion of southern EU states' political systems

 March 14, 2016

The EU’s macroeconomic indicators for 2015 – the growth rate standing at 0.3 percent, the inflation rate at 0.2 percent – paint the picture of a continent severely affected by what economists call “secular stagnation“.

Secular stagnation is afflicting not only the EU but also Japan, and in the years ahead it will most probably end up engulfing the United States as well. Until recently, the only growth engines for the global economy were the BRICS countries. The slowdown in China and the economic woes experienced by Brazil and Russia have, however, reignited fears that the world economy is about to go off the rails, as the latest IMF warning clearly states.
The dire consequences of secular stagnation for Western economies could have been mitigated, if not reversed, by higher levels of public spending on infrastructure and on health and education systems. Instead, most EU countries under German leadership opted for the implementation of harsh and totally counterproductive austerity policies, which made matters worse.

Nowhere is the destruction of social fabric and political systems more evident than in the southern half of the EU. Greece is yet to register any signs of economic recovery after five years of the harshest austerity policies ever, while Portugal, Spain and Italy show only minor signs of recovery and stubbornly high levels of unemployment and social misery. Even Ireland, until recently deemed to have benefitted from austerity, has seen its political system unravel after the latest elections.

The danger in the political implosion of the above group of countries is real, as elections in 2015 have demonstrated. Neither Greece, nor Ireland, Portugal or Spain have returned traditional parties to power – a situation that has created political deadlock and instability, risking to make these countries ungovernable. Extremist and nationalist forces thrive in such an environment, further complicating matters for Brussels and for more stable (until now) northern members of the EU.

Weighing in on the dire political situation of southern EU members like Greece, Portugal and Spain is these states’ recent political history. Until the 1980s, they had been ruled by dictatorships and subsequently made enormous efforts to democratize their political systems in order to join the EU. Nowadays, the same union that bankrolled their valiant efforts during the last decades of the 20th century is imposing austerity policies which are in fact destroying both their societies and recently democratized political systems. For a majority of southern European citizens, the EU has failed to live up to their expectations and has become the problem, instead of the solution, to their plight.

The Migrant Crisis: Why Germany Can't Cope

 February 1, 2016

The biggest refugee crisis in Europe since WWII looks set to get worse in 2016. The country most responsible for the huge inflow of migrants from the Middle East is, as we all know, Germany.

What is less well-documented is the fact that its state apparatus simply cannot cope anymore. Chancellor Angela Merkel is quick to reassure her national and European audiences that her country can handle the challenges of integrating a million refugees, but events have proved her wrong time and again.

The New Year’s Eve disorders in Cologne are, according to German police, just the tip of the iceberg. The sheer numbers of refugees Germany has agreed to accept have led to administrative and security chaos in a country known until recently as one of the best-run and most orderly in the world.

To be sure, last year’s huge refugee influx is only partly to blame. At least as important a cause has been Germany’s adoption of tough austerity policies in recent years, which had seriously affected the budget and capabilities of the police and civil service, both on a local and federal level. After years of hugely misguided austerity, Germany nowadays has 10,000 less police than in the year 2000. Since 2014, repeated requests by the Interior Ministry for the hiring of an additional 3,000 personnel have been denied funding by Mr. Schaeuble’s ministry, the latter being bent on balancing the German budget at the expense of its citizens’ most basic security needs.

What’s worse, nobody can expect this situation to improve anytime soon. Although the creation of 3,000 new posts has recently been approved, the new police recruits will have to be trained first, becoming effective only in 2019. Meanwhile, the safety of ordinary German citizens will continue to be affected by the chaos engulfing the entire country and the lack of manpower and resources needed to deal effectively with the migrants’ influx.

The EU in the Age of Geoolitics

 January 4, 2016

At the beginning of the year, it has become customary for ‘pundits’ to make predictions about forthcoming developments which might affect the global economy, elections in leading countries or international relations. From my part, I would like to take my readers back in time, in an attempt to make today’s armed conflicts around the world easier to understand.

This approach is all the more necessary as virtually all of today’s armed conflicts – in Ukraine, Libya, Syria, Iraq or Yemen – have geopolitics as a common denominator. Even ISIS has a clearcut geopolitical agenda of sorts, namely that of establishing an “Islamic caliphate” in territories snatched from war-torn Syria and Iraq. Taken together, these tensions and conflicts among ethnic, religious or military blocs have brought to an untimely end the era of globalization and ushered in the Age of Geopolitics. But where did it all start ?

Over the past sixty years, specialists and the European general public were led to believe that geopolitics died together with Nazi Germany and was replaced with the ideological confrontation between the capitalist and communist worlds commonly referred to as the Cold War. Yet by the 1970s, as the confrontation apparently led to a stalemate, geopolitical-type conflicts again started to prove their usefulness for policymakers intent on destabilizing their opponents’ camp.

In Europe, conflicts of a geopolitical nature were rekindled by stealth courtesy of the United States. Thus, during the seventies the Ceausescu regime, fearful of being axed by the Soviets following the Prague Spring, was encouraged to denounce the Ribbentrop-Molotov Pact and pushed some of the country’s historians into demanding the return of Bessarabia within Romanian borders. That geopolitical conflict is still very much alive today, with Romania, the EU and the Russian Federation involved in a tug-of-war confrontation over the future of the Republic of Moldova.

As it turned out, in the end the Soviets lost their post-WW II domination of Central and Eastern Europe following a decade of cooperation between the CIA and the Vatican – which led to the formation of the Solidarnosc trade union movement and the organization of free elections in Poland – and not as a result of the geopolitical, USA-backed proxy confrontation between the Ceausescu regime and Moscow.

Following the fall of the Berlin wall and the implosion of the Soviet Union, geopolitical conflicts have made a spectacular return to Europe, in Yugoslavia. The separation of Slovenia and Croatia, the two Catholic regions of the Yugoslav federation, is likely to have been requested to the Western alliance by the Vatican as a reward for its successful assistance in undermining the Soviet Union during the eighties. It is also very likely that US strategists did not in fact plan for the total destruction of the Yugoslav federation, but for a diminished one, after which Serbia could be allowed to control the remainder of the territory. As events unfolded, however, the Macedonians and Albanians also decided to secede, spelling the end of the Yugoslav state.

Since 2001, the US has openly embarked on a drive to stoke geopolitical conflicts in places around the world where it wanted to expand or consolidate its hegemony. In Europe this drive led to the 2004 colour revolutions in Ukraine, Moldova or Georgia, as well as the 2008 Georgian war, and culminated in 2014 with the toppling of the elected government of Ukraine by the CIA-backed Maidan movement.

In the Arab world, the US and some of its European allies like France and the UK gave full backing to armed groups involved in the fall of the Gaddafi regime in Libya, or in the civil war in Syria, sometimes in alliance with Saudi Arabia and/or Turkey. The Russians and the Chinese have either been largely neutral in these conflicts or have sided with the embattled Syrian regime, which for more than four years is fighting some of the most dangerous terrorist groups on the planet.

For the EU, the price to pay for the US’ post-cold war geopolitical forays in Eastern Europe and the Arab world is staggering.

Already affected by years of stagnation after the 2008 financial crisis, EU countries have lost tens of billions of euros in trade with Russia, following the Washington-dictated sanctions against this country which prompted the Russians to reply in kind. At least ten billion euros more is the likely cost for resettling the 1 million Syrian refugees within the EU, an amount that does not include the 3 billion euros promised by the European Commission to Turkey so far, in a futile effort to convince this country to stem the flow of Europe-bound refugees.

Geopolitics as a field of study can not only provide us with a better understanding of what is at stake in today’s conflicts, but also with some insights into what the future could bring.

In the Middle East, the Sunni-Shia confrontation between the region’s main powers, Saudi Arabia and Iran, is likely to continue for years to come. We are in all likelihood entitled to expect that the Alawite minority in Syria will establish its own separate state, as are the Kurds from northern Iraq and parts of today’s Syria, much to the chagrin of Turkey. The rest of the Syrian territory and possibly parts of Iraq will probably emerge as a new Sunni state entity, as sectarian conflicts will prevent the continued existence of Syria and Iraq in their current form.

For the European Union, Ukraine is poised to play the same role as Afghanistan in the demise of the Soviet Union. The unwise decision to back American neocon planners will thus backfire and hasten the EU’s own demise in the process. The main catalyst for its undoing are the nationalistic movements gaining in strength, from the UK and France in the West, to Hungary and Poland in Central and Eastern Europe. The continent is already back to barbed-wire fences not only in Ukraine, but also in Hungary, Austria and Germany – a trend that will mean the final collapse of the Schengen area in the following years, if not as early as 2016.

All these developments combined suggest one thing. Namely that, when compared to Russia, China or the United States, the European Union is the worst-equipped entity to survive in the age of geopolitics and deal with its consequences.

How NATO is Failing the EU

 December 3, 2015

The untrained observer could be forgiven for believing that NATO is still acting as a military and political organization dedicated to protecting the security of its members. Enlarging the organization with a less-than-significant member (militarily speaking) like Montenegro cannot, however, obscure NATO’s huge failure to adapt to today’s radically changed geopolitical and strategic landscape.
Headed in the past few years by Russia-obsessed officials hailing from European northern kingdoms (Rasmussen from Denmark or Stoltenberg from Norway), the alliance has failed to recognize that these days the biggest threat to the security of all NATO countries is represented by existing or emerging Islamic countries from the Middle East instead.
Nor did NATO reckon with the fact that, since 2002, the secular regime in Turkey was replaced by an Islamic one. This mega transformation of Turkish society – which is still ongoing – has ended up creating a serious security threat for the European Union as a whole, as illustrated by this year’s refugee crisis. Indeed, not only has Turkey failed to live up to its obligations as a NATO member, such as sealing its border with Syria, but over the past four years it has allowed tens of thousands of jihadi fighters from all over the world to cross the country and join ISIS. This year it has decided to allow hundreds of thousands of refugees on its territory to practically invade EU countries unhindered. One of Erdogan’s advisers, Burhan Kuzu, has even hailed Turkey’s latest exercise in extortion as a success for the AKP regime:

“The EU finally got Turkey’s message and opened its purse strings. What did we say? ‘We’ll open our borders and unleash all the Syrian refugees on you.”

For a number of years after 2002, I too believed that a moderate Islamic government in power in Turkey could make the country more politically stable and economically prosperous. Not anymore. The assistance – overt or covert – extended by the AKP regime to Islamists in Syria and elsewhere, the scandal of appointing Erdogan’s son-in-law as energy minister and his son as the head of another energy company ( as if Turkey was an oil-producing powerhouse), the savage repression of journalists, of the free press and of Turkish officials who are trying to uphold the rule of law within the country, have all finally contributed to convincing me that the AKP regime has outlived its usefulness for Turkey and for the NATO alliance, as well.
Undaunted, the current NATO leadership, with some behind the scenes assistance from American neo-cons, is trying to recycle expired Cold War policies and continue to depict Russia as the main enemy of the West. In so doing, the organization conclusively proves that it has become obsolete and useless when it comes to addressing major security threats affecting its members.
It is my belief that Turkey wouldn’t have dared shoot down a Russian aircraft – a jamais vu event in the Alliance’s history – if the country’s leaders had not been certain that anti-Russian bias at the top levels of NATO would prevail.

Still, instead of discussing Russia, NATO ministers would be well-advised to hold a special session dedicated to assessing Turkey’s continuing usefulness for the Alliance in the current strategic circumstances. In the light of this year’s developments, Turkey – NATO’s only Muslim member – has emerged as a dangerous ally and a questionable friend. In other words, instead of trying to evict Greece – Turkey’s main victim in the refugee crisis – from the Schengen area, it would definitely prove more useful to consider the suspension of Turkey from NATO command structures until such time as the AKP leadership could come clean on the issues of unchecked refugee migration to Europe, jihadi movements to and from Syria, shady oil dealings and the supply of weaponry to Islamic insurgents.

Turkey's Confused Geopolitics

 November 27, 2015

The downing of a Russian jet over Syria by the Turkish military brings to a sad conclusion a hitherto promising international relations agenda, whose author was none other than Ahmet Davutoglu, the current Turkish prime minister.

Only a few years ago, Davutoglu as Turkey’s foreign minister advanced a “zero problems with the neighbours” diplomatic agenda. Turkey’s economic and diplomatic relations with Moscow, meanwhile, had evolved from fair to excellent, as one would expect from two major Eurasian powers with similar development objectives and interests in the region spanning from Central Asia to the Middle East.

The two countries – Russia and Turkey – are neither European nor entirely Asian. They are neither rich nor poor and both have experienced problems with Islamic radicalism or outright terrorism. For a while, even in military terms, Turkey has tried a few years back to leave the Cold War-era NATO structures and seek admission within the SCO, the new up-and-coming security organization designed specifically for dealing with the challenges of the Eurasian region.

Not anymore. Since the war in Syria, the Turkish leadership’s geopolitical agenda got confused. Ankara’s ambition of exporting its Islamic brand of democracy to the Arab world, from Tunisia to Egypt or Syria, is now in shambles.

Internally, Turkey is nowadays a divided country as a result of the November 1st parliamentary elections that gave, nevertheless, the AK Party another mandate to stay in power a few years longer.

The 2002 victory of political Islam was a direct consequence of the failure of the Turkish brand of secularism to build a truly democratic and inclusive society. Subsequent efforts by the AKP to give Kurds more autonomy and recognize the rights of the Alevi religious minority have similarly failed, transforming Turkey into a reluctant and erratic NATO ally, a menacing neighbour for Greece and the European Union as a whole and, as of a few days ago, an enemy of Russia.

Undaunted, Recep Tayyip Erdogan has failed to see the error of his ways and is blindly pushing for a re-write of the Turkish constitution that would change the country from a parliamentary to a presidential republic which nobody seems to want, not even some leading figures within the AKP.

Since the war in Kosovo and the invasion of Iraq, the world has slowly abandoned globalization as a universal objective of economic and political development. What we are currently witnessing is the onset of the age of geopolitics, characterized by a plethora of civil wars, like in Syria, Iraq or Libya, and of proxy wars between military blocs, such as the one in Georgia (in 2008) or the present-day war in Ukraine, not to mention the conflict in Yemen and beyond in the Middle East.

In such troubled times, it is imperative for large countries like Turkey to articulate a revamped geopolitical agenda for its leadership. The further Islamization of Turkish society is definitely not the answer to its current predicament, while economic and military conflict with its much larger and much more powerful Eurasian neighbour Russia should have been avoided at all costs.

Moreover, being soft on ISIS, selling weapons and buying oil from them – a fact uncovered by both the American and the Russian intelligence establishments – will not bring about a quick demise of the Assad regime, as Ankara expected. As Vladimir Putin correctly observed, the military situation in Syria cannot change by bombing campaigns alone. Since all interested countries in the Syrian developments are reluctant to provide boots on the ground, Assad’s army, with its Hezbollah associates, is the only force involved in large-scale ground operations against ISIS and other terrorist groups.

Last but not least, Turkey would be well-advised to reverse its current practice of allowing waves of Syrian migrants to cross to Europe in their hundreds of thousands. The recent approach adopted by the AKP in their negotiations with the EU has an important blackmail component and could turn decisively the entire European Union, Germans included, against Turkey. Already it stands to lose tens of billions of dollars in lost tourism revenue from Russia, as well as from exports and projects in that country. If German tourists were likewise of a mind to punish Ankara for allowing the migrant exodus towards Europe, then the entire Turkish economy would nosedive and growth would evaporate altogether.

One can only hope that sanity will prevail in the end, that Turkey will apologize to Russia and start to live up to its responsibilities when it comes to stopping the current wave of Syrians en route for Europe. After all, Turkey – and not the EU – was the most enthusiastic and vocal supporter of the anti-Assad rebellion in Syria…

The EU and China: Geo-economic Agendas Compared

 November 22, 2015

The wave of blowback terrorism currently sweeping Western European capitals is likely to obscure a major event due to take place on November 24th and 25th in China: I am referring to the annual meeting of the leaders of 16 Central and Eastern European countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia) with the Chinese leadership in Suzhou. Following immediately after this weekend’s ASEAN summit in Malaysia, the meeting provides an extremely useful glimpse of China’s geo-economic agenda from the Balkans to Poland and Hungary.

An even more useful exercise, however, would be to compare the EU’s geo-economic agenda, with that of China and Russia in our parts of Europe.

The leading exponent of the West’s geo-economic agenda has to be considered Pascal Lorot, the founder of geo-economics. In the 1990s he published a booklet, suggestively titled “La conquête de l’Est”. The book contains the main tenets of the West’s economic expansion in the ex-Soviet bloc states from Central and Eastern Europe. Although NATO expansion has preceded that of the European Union, the main actors of the West’s geo-economic agenda in the region are the global corporations headquartered in France, the US or other participating Western countries.

While financial transfers from the EU to new member states from Central and Eastern Europe have diminished significantly over the years, having contributed only marginally to upgrading their infrastructure to EU standards, Western global corporations have taken over even the water supply or gas distribution in countries like Romania.

The results of the economic penetration in the area are, in some cases, nothing short of disastrous. Thus, companies like Vivendi or Gaz de France have succeeded in imposing to consumers at least ten tariff increases for water and gas in the last four years alone, contributing heavily to further impoverishing Romania’s population whose income levels, however, were already well below the EU average. To top it all off, Brussels is about to stunt Romania’s economic growth by imposing an EC-backed premier, unelected and undesired by the locals.

Moreover, throughout the region, Western global corporations have systematically deprived all the governments of much needed taxation income via transfer pricing and other accounting gimmicks.

Sure enough, there are a few success stories of Western economic expansion in the region, like that of German, American and French auto-makers in countries like Hungary, Slovakia, the Czech Republic and Romania, but these are the exception rather than the rule.

At the time of their EU accession in 2007, citizens of predominantly Orthodox countries like Romania and Bulgaria were hoping that this would put an end to their countries’ economic plight. The ensuing cultural shock suffered during the latest drive of Western expansionism has instead reopened old wounds. The 1204 ransacking of Constantinople by the crusaders is still alive in the collective memory of the Balkans. On that occasion, Western military “assistance” morphed into full-blown pillage and plunder, followed by the occupation of the Byzantine capital.

By contrast, since 2012 when the first China-CEE meeting took place in Warsaw, China has proven more willing than the EU to invest heavily in these countries’ infrastructure and manufacturing sector. In 2013, the first direct rail link between southwest China and the Polish city of Lodz was inaugurated, greatly facilitating two-way trade between the two countries. Nowadays, it takes only 15 days by rail for Chinese goods to reach Poland, or for Polish agricultural products to reach China. The upgrade of Baltic countries’ ports with Chinese investment is also underway, not to mention the upgrade of the port facilities in Piraeus, Greece by Cosco.

To date, the most ambitious Chinese infrastructure project in the region is the building of a very fast rail link between Piraeus and Hungary, connecting Athens and Skopje with Budapest via Belgrade. Not very far behind are the Russians, who are planning to build a gas pipeline from the Balkans to Central Europe along the same route. The Russians have also agreed to finance, to the tune of a few billion euros, the upgrade and construction of nuclear reactors in Hungary in spite of vehement EU protests.

The leaders of Central and Eastern European countries are now in a position to choose from the two geo-economic agendas the one that best suits the needs of their economies. As matters now stand, it seems that the West has largely exhausted its economic growth potential and is instead trying to exploit – colonial-style – the resources or populations of the new member states accepted after 2004. With its large cash reserves and “win-win” economic philosophy, China looks set to capitalize on local disenchantment with the EU by expanding steadily into this region.