Because Stratfor says it's ok for me to post:
By Reva Bhalla, Lauren Goodrich and Peter Zeihan
Russian President Dmitri Medvedev reportedly will travel to Turkey in the near future to follow up a recent four-day visit by his Turkish counterpart, Abdullah Gul, to Moscow. The Turks and the Russians certainly have much to discuss.
Russia is moving aggressively to extend its influence throughout the former Soviet empire, while Turkey is rousing itself from 90 years of post-Ottoman isolation. Both are clearly ascendant powers, and it would seem logical that the more the two bump up against one other, the more likely they will gird for yet another round in their centuries-old conflict. But while that may be true down the line, the two Eurasian powers have sufficient strategic incentives to work together for now.
Russia’s World
Russia is among the world’s most strategically vulnerable states. Its core, the Moscow region, boasts no geographic barriers to invasion. Russia must thus expand its borders to create the largest possible buffer for its core, which requires forcibly incorporating legions of minorities who do not see themselves as Russian. The Russian government estimates that about 80 percent of Russia’s approximately 140 million people are actually ethnically Russian, but this number is somewhat suspect, as many minorities define themselves based on their use of the Russian language, just as many Hispanics in the United States define themselves by their use of English as their primary language. Thus, ironically, attaining security by creating a strategic buffer creates a new chronic security problem in the form of new populations hostile t o Moscow’s rule. The need to deal with the latter problem explains the development of Russia’s elite intelligence services, which are primarily designed for and tasked with monitoring the country’s multiethnic population.
(click image to enlarge)
[click on link for Statfor Map]
Russia’s primary challenge, however, is time. In the aftermath of the Soviet collapse, the bottom fell out of the Russian birthrate, with fewer than half the number of babies born in the 1990s than were born in the 1980s. These post-Cold War children are now coming of age; in a few years, their small numbers are going to have a catastrophic impact on the size of the Russian population. By contrast, most non-Russian minorities — in particular those such as Chechens and Dagestanis, who are of Muslim faith — did not suffer from the 1990s birthrate plunge, so their numbers are rapidly increasing even as the number of ethnic Russians is rapidly decreasing. Add in deep-rooted, demographic-impacting problems such as HIV, tuberculosis and heroin abuse — concentrated not just among ethnic Russians but also among those of childbearing age — and Russia faces a hard-wired demographic time bomb. Put simply, Russia is an ascending power in the short run, but it is a declining power in the long run.
The Russian leadership is well aware of this coming crisis, and knows it is going to need every scrap of strength it can muster just to continue the struggle to keep Russia in one piece. To this end, Moscow must do everything it can now to secure buffers against external intrusion in the not-so-distant future. For the most part, this means rolling back Western influence wherever and whenever possible, and impressing upon states that would prefer integration into the West that their fates lie with Russia instead. Moscow’s natural gas crisis with Ukraine, August 2008 war with Georgia, efforts to eject American forces from Central Asia and constant pressure on the Baltic states all represent efforts to buy Russia more space — and with that space, more time for survival.
Expanding its buffer against such a diverse and potentially hostile collection of states is no small order, but Russia does have one major advantage: The security guarantor for nearly all of these countries is the United States, and the United States is currently very busy elsewhere. So long as U.S. ground forces are occupied with the Iraqi and Afghan wars, the Americans will not be riding to the rescue of the states on Russia’s periphery. Given this window of opportunity, the Russians have a fair chance to regain the relative security they seek. In light of the impending demographic catastrophe and the present window of opportunity, the Russians are in quite a hurry to act.
Turkey’s World
Turkey is in many ways the polar opposite of Russia. After the dissolution of the Ottoman Empire following World War I, Turkey was pared down to its core, Asia Minor. Within this refuge, Turkey is nearly unassailable. It is surrounded by water on three sides, commands the only maritime connection between the Black and Mediterranean seas and sits astride a plateau surrounded by mountains. This is a very difficult chunk of territory to conquer. Indeed, beginning in the Seljuk Age in the 11th century, the ancestors of the modern Turks took the better part of three centuries to seize this territory from its previous occupant, the Byzantine Empire.
The Turks have used much of the time since then to consolidate their position such that, as an ethnicity, they reign supreme in their realm. The Persians and Arabs have long since lost their footholds in Anatolia, while the Armenians were finally expelled in the dying days of World War I. Only the Kurds remain, and they do not pose a demographic challenge to the Turks. While Turkey exhibits many of the same demographic tendencies as other advanced developing states — namely, slowing birthrates and a steadily aging population — there is no major discrepancy between Turk and Kurdish birthrates, so the Turks should continue to comprise more than 80 percent of the country’s population for some time to come. Thus, while the Kurds will continue to be a source of nationalistic friction, they do not constitute a fundamental challenge to the power or operations of the Turkish state, like minorities in Russia are destined to do in the years ahead.
Turkey’s security is not limited to its core lands. Once one moves beyond the borders of modern Turkey, the existential threats the state faced in years past have largely melted away. During the Cold War, Turkey was locked into the NATO structure to protect itself from Soviet power. But now the Soviet Union is gone, and the Balkans and Caucasus — both former Ottoman provinces — are again available for manipulation. The Arabs have not posed a threat to Anatolia in nearly a millennium, and any contest between Turkey and Iran is clearly a battle of unequals in which the Turks hold most of the cards. If anything, the Arabs — who view Iran as a hostile power with not only a heretical religion but also with a revolutionary foreign policy calling for the overthrow of most of the Arab regimes — are practically welcoming the Turks back. Despite both its imperial past and its close security association with the Americans, the Arabs see Turkey as a trusted mediator, and even an exemplar.
With the disappearance of the threats of yesteryear, many of the things that once held Turkey’s undivided attention have become less important to Ankara. With the Soviet threat gone, NATO is no longer critical. With new markets opening up in the former Soviet Union, Turkey’s obsession with seeking EU membership has faded to a mere passing interest. Turkey has become a free agent, bound by very few relationships or restrictions, but dabbling in events throughout its entire periphery. Unlike Russia, which feels it needs an empire to survive, Turkey is flirting with the idea of an empire simply because it can — and the costs of exploring the option are negligible.
Whereas Russia is a state facing a clear series of threats in a very short time frame, Turkey is a state facing a veritable smorgasbord of strategic options under no time pressure whatsoever. Within that disconnect lies the road forward for the two states — and it is a road with surprisingly few clashes ahead in the near term.
The Field of Competition
There are four zones of overlapping interest for the Turks and Russians.
First, the end of the Soviet empire opened up a wealth of economic opportunities, but very few states have proven adept at penetrating the consumer markets of Ukraine and Russia. Somewhat surprisingly, Turkey is one of those few states. Thanks to the legacy of Soviet central planning, Russian and Ukrainian industry have found it difficult to retool away from heavy industry to produce the consumer goods much in demand in their markets. Because most Ukrainians and Russians cannot afford Western goods, Turkey has carved out a robust and lasting niche with its lower-cost exports; it is now the largest supplier of imports to the Russian market. While this is no exercise in hard power, this Turkish penetration nevertheless is cause for much concern among Russian authorities.
So far, Turkey has been scrupulous about not politicizing these useful trade links beyond some intelligence-gathering efforts (particularly in Ukraine). Considering Russia’s current financial problems, having a stable source of consumer goods — especially one that is not China — is actually seen as a positive. At least for now, the Russian government would rather see its trade relationship with Turkey stay strong. There will certainly be a clash later — either as Russia weakens or as Turkey becomes more ambitious — but for now, the Russians are content with the trade relationship.
Second, the Russian retreat in the post-Cold War era has opened up the Balkans to Turkish influence. Romania, Bulgaria and the lands of the former Yugoslavia are all former Ottoman possessions, and in their day they formed the most advanced portion of the Ottoman economy. During the Cold War, they were all part of the Communist world, with Romania and Bulgaria formally incorporated into the Soviet bloc. While most of these lands are now absorbed into the European Union, Russia’s ties to its fellow Slavs — most notably the Serbs and Bulgarians — have allowed it a degree of influence that most Europeans choose to ignore. Additionally, Russia has long held a friendly relationship with Greece and Cyprus, both to complicate American policy in Europe and to provide a flank against Turkey. Still, thanks to proximity and trading links, Turkey clearly holds the upper hand in this theater of competition.
But this particular region is unlikely to generate much Turkish-Russian animosity, simply because both countries are in the process of giving up.
Most of the Balkan states are already members of an organization that is unlikely to ever admit Russia or Turkey: the European Union. Russia simply cannot meet the membership criteria, and Cyprus’ membership in essence strikes the possibility of Turkish inclusion. (Any EU member can veto the admission of would-be members.) The EU-led splitting of Kosovo from Serbia over Russian objections was a body blow to Russian power in the region, and the subsequent EU running of Kosovo as a protectorate greatly limited Turkish influence as well. Continuing EU expansion means that Turkish influence in the Balkans will shrivel just as Russian influence already has. Trouble this way lies, but not between Turkey and Russia. If anything, their joint exclusion might provide some room for the two to agree on something.
The third area for Russian-Turkish competition is in energy, and this is where things get particularly sticky. Russia is Turkey’s No. 1 trading partner, with energy accounting for the bulk of the trade volume between the two countries. Turkey depends on Russia for 65 percent of its natural gas and 40 percent of its oil imports. Though Turkey has steadily grown its trade relationship with Russia, it does not exactly approve of Moscow’s penchant for using its energy relations with Europe as a political weapon. Russia has never gone so far as to cut supplies to Turkey directly, but Turkey has been indirectly affected more than once when Russia decided to cut supplies to Ukraine because Moscow felt the need to reassert its writ in Kiev.
Sharing the Turks’ energy anxiety, the Europeans have been more than eager to use Turkey as an energy transit hub for routes that would bypass the Russians altogether in supplying the European market. The Baku-Tbilisi-Ceyhan (BTC) pipeline is one such route, and others, like Nabucco, are still stuck in the planning stages. The Russians have every reason to pressure the Turks into staying far away from any more energy diversification schemes that could cost Russia one of its biggest energy clients — and deny Moscow much of the political leverage it currently holds over the Europeans who are dependent on the Russian energy network.
There are only two options for the Turks in diversifying away from the Russians. The first lies to Turkey’s south in Iraq and Iran. Turkey has big plans for Iraq’s oil industry, but it will still take considerable time to upgrade and restore the oil fields and pipelines that have been persistently sabotaged and ransacked by insurgents during the fighting that followed the 2003 U.S. invasion. The Iranians offer another large source of energy for the Turks to tap into, but the political complications attached to dealing with Iran are still too prickly for the Turks to move ahead with concrete energy deals at this time.
Complications remain for now, but Turkey will be keeping an eye on its Middle Eastern neighbors for robust energy partnerships in the future.
The second potential source of energy for the Turks lies in Central Asia, a region that Russia must keep in its grip at all costs if it hopes to survive in the long run. In many ways this theater is the reverse of the Balkans, where the Russians hold the ethnic links and the Turks the economic advantage. Here, four of the five Central Asian countries — Kazakhstan, Uzbekistan, Kyrgyzstan and Turkmenistan — are Turkic. But as a consequence of the Soviet years, the infrastructure and economies of all four are so hardwired into the Russian sphere of influence that it would take some major surgery to liberate them. But the prize is a rich one: Central Asia possesses the world& #8217;s largest concentration of untapped energy reserves. And as the term “central” implies, whoever controls the region can project power into the former Soviet Union, China and South Asia. If the Russians and Turks are going to fight over something, this is it.
Here Turkey faces a problem, however — it does not directly abut the region. If the Turks are even going to attempt to shift the Central Asian balance of power, they will need a lever. This brings us to the final — and most dynamic — realm of competition: the Caucasus.
Turkey here faces the best and worst in terms of influence projection. The Azerbaijanis do not consider themselves simply Turkic, like the Central Asians, but actually Turkish. If there is a country in the former Soviet Union that would consider not only allying with but actually joining with another state to escape Russia’s orbit, it would be Azerbaijan with Turkey. Azerbaijan has its own significant energy supplies, but its real value is in serving as a willing springboard for Turkish influence into Central Asia.
However, the core of Azerbaijan does not border Turkey. Instead, it is on the other side of Armenia, a country that thrashed Azerbaijan in a war over the disputed Nagorno-Karabakh enclave and still has lingering animosities toward Ankara because of the 1915 Armenian “genocide.” Armenia has sold itself to the Russians to keep its Turkish foes at bay.
This means Turkish designs on Central Asia all boil down to the former Soviet state of Georgia. If Turkey can bring Georgia fully under its wing, Turkey can then set about to integrate with Azerbaijan and project influence into Central Asia. But without Georgia, Turkey is hamstrung before it can even begin to reach for the real prize in Central Asia.
In this, the Turks do not see the Georgians as much help. The Georgians do not have much in the way of a functional economy or military, and they have consistently overplayed their hand with the Russians in the hopes that the West would come to their aid. Such miscalculations contributed to the August 2008 Georgian-Russian war, in which Russia smashed what military capacity the Georgians did possess. So while Ankara sees the Georgians as reliably anti-Russian, it does not see them as reliably competent or capable.
This means that Turkish-Russian competition may have been short-circuited before it even began. Meanwhile, the Americans and Russians are beginning to outline the rudiments of a deal. Various items on the table include Russia allowing the Americans to ship military supplies to Afghanistan via Russia’s sphere of influence, changes to the U.S. ballistic missile defense (BMD) program, and a halt to NATO expansion. The last prong is a critical piece of Russian-Turkish competition. Should the Americans and Europeans put their weight behind NATO expansion, Georgia would be a logical candidate — meaning most of the heavy lifting in terms of Turkey projecting power eastward would already be done. But if the Americans and Europeans do not put their weight behind NATO expansion, Georgia would fall by the wayside and Turkey would have to do all the work of projecting power eastward — and facing the Russians — alone.
A Temporary Meeting of Minds?
There is clearly no shortage of friction points between the Turks and the Russians. With the two powers on a resurgent path, it was only a matter of time before they started bumping into one another. The most notable clash occurred when the Russians decided to invade Georgia last August, knowing full well that neither the Americans nor the Europeans would have the will or capability to intervene on behalf of the small Caucasian state. NATO’s strongest response was a symbolic show of force that relied on Turkey, as the gatekeeper to the Black Sea, to allow a buildup of NATO vessels near the Georgian coast and threaten the underbelly of Russia’s former Soviet periphery.
Turkey disapproved of the idea of Russian troops bearing down in the Caucasus near the Turkish border, and Ankara was also angered by having its energy revenues cut off during the war when the BTC pipeline was taken offline.
The Russians promptly responded to Turkey’s NATO maneuvers in the Black Sea by holding up a large amount of Turkish goods at various Russian border checkpoints to put the squeeze on Turkish exports. But the standoff was short-lived; soon enough, the Turks and Russians came to the negotiating table to end the trade spat and sort out their respective spheres of influence. The Russian-Turkish negotiations have progressed over the past several months, with Russian and Turkish leaders now meeting fairly regularly to sort out the issues where both can find some mutual benefit.
The first area of cooperation is Europe, where both Russia and Turkey have an interest in applying political pressure. Despite Europe’s objections and rejections, the Turks are persistent in their ambitions to become a member of the European Union. At the same time, the Russians need to keep Europe linked into the Russian energy network and divided over any plans for BMD, NATO expansion or any other Western plan that threatens Russian national security. As long as Turkey stalls on any European energy diversification projects, the more it can demand Europe’s attention on the issue of EU membership. In fact, the Turks already threatened as much at the start of the year, when they said outright that if Europe doesn’t need Turkey as an EU member, then Turkey doesn’t need to sign off on any more energy diversification projects that transit Turkish territory. Ankara’s threats against Europe dovetailed nicely with Russia’s natural gas cutoff to Ukraine in January, when the Europeans once again were reminded of Moscow’s energy wrath.
The Turks and the Russians also can find common ground in the Middle East. Turkey is again expanding its influence deep into its Middle Eastern backyard, and Ankara expects to take the lead in handling the thorny issues of Iran, Iraq and Syria as the United States draws down its presence in the region and shifts its focus to Afghanistan. What the Turks want right now is stability on their southern flank. That means keeping Russia out of mischief in places like Iran, where Moscow has threatened to sell strategic S-300 air defense systems and to boost the Iranian nuclear program in order to grab Washington’s attention on other issues deemed vital to Moscow’s national security interests. The United States is already leaning on Russia to pressure Iran in return for other strategic concessions, and the Turks are just as interested as the Americans in taming Russia’s actions in the Middle East.
Armenia is another issue where Russia and Turkey may be having a temporary meeting of minds. Russia unofficially occupies Armenia and has been building up a substantial military presence in the small Caucasian state. Turkey can either sit back, continue to isolate Armenia and leave it for the Russians to dominate through and through, or it can move toward normalizing relations with Yerevan and dealing with Russia on more equal footing in the Caucasus. With rumors flying of a deal on the horizon between Yerevan and Ankara (likely with Russia’s blessing), it appears more and more that the Turks and the Russians are making progress in sorting out their respective spheres of influence.
Ultimately, both Russia and Turkey know that this relationship is likely temporary at best. The two Eurasian powers still distrust each other and have divergent long-term goals, even if in the short term there is a small window of opportunity for Turkish and Russian interests to overlap. The law of geopolitics dictates that the two ascendant powers are doomed to clash — just not today.
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Wednesday, March 18, 2009
AIG political contributions
Drudge has a headline today about Obama receiving political contributions from AIG and that story links to this list at OpenSecrets.com. It's worth pointing out that G.W. Bush has received nearly double what Obama has received. In 2008, AIG gave Obama almost double what it gave to McCain; for lifetime, they've given Obama about $8,000 more than McCain. In 2004, AIG gave Bush almost three times as much as Kerry. In 2000, AIG contributed almost four times as much to Bush as to Gore.
Tuesday, March 17, 2009
The Happy Wanderer
I love to go a-wandering,
Along the mountain track,
And as I go, I love to sing,
My knapsack on my back.
And apparently little else. From the NYT:
In recent years, it has become fashionable for a growing number of Swiss and some foreigners to wander in the Alps clad in little more than hiking shoes and sunscreen. Last summer, the number of nude hikers increased to such an extent that the hills often seemed alive with the sound of everything but the swish of trousers.
H/t: Hot Air
Along the mountain track,
And as I go, I love to sing,
My knapsack on my back.
And apparently little else. From the NYT:
In recent years, it has become fashionable for a growing number of Swiss and some foreigners to wander in the Alps clad in little more than hiking shoes and sunscreen. Last summer, the number of nude hikers increased to such an extent that the hills often seemed alive with the sound of everything but the swish of trousers.
H/t: Hot Air
RE: Crips
Stephanie's post got me wondering about the name of the gang. Per Wiki:
The original name for the alliance was "Cribs", a name narrowed down from a list of many options, and chosen unanimously from three final choices, which included the Black Overlords, and the Assassins. Cribs was chosen to reflect the young age of the majority of the gang members. The name "Cribs" generated into the name "Crips" when gang members began carrying around canes to display their "pimp" status. People in the neighborhood then began calling them cripples, or "Crips" for short.
The original name for the alliance was "Cribs", a name narrowed down from a list of many options, and chosen unanimously from three final choices, which included the Black Overlords, and the Assassins. Cribs was chosen to reflect the young age of the majority of the gang members. The name "Cribs" generated into the name "Crips" when gang members began carrying around canes to display their "pimp" status. People in the neighborhood then began calling them cripples, or "Crips" for short.
Short-selling, credit default swaps and zero-sum gambling
Samantha Bee last night on the Daily Show shines a light on short selling:
Anyone want to tell me how/why short-selling is allowed? I've heard a defense of it as a mechanism for properly pricing stock, but it didn't make sense to me. Why can't potential buyers just look at the P/E ratios and other company fundamentals to decide what price they're willing to pay for a stock?
The short-selling is just another version of gambling, like the credit default swaps. This kind of gambling is zero-sum, isn't it? For someone to make money, someone else has to lose money, as far as I can tell. If I have that right, then that's what makes these vehicles different in kind from regular old ownership of a share of stock in a company. Sure, it's a gamble to own stock, in the sense that it could lose some or all of its value, but no one need lose any money for your stock to go up in value.
Anyone want to tell me how/why short-selling is allowed? I've heard a defense of it as a mechanism for properly pricing stock, but it didn't make sense to me. Why can't potential buyers just look at the P/E ratios and other company fundamentals to decide what price they're willing to pay for a stock?
The short-selling is just another version of gambling, like the credit default swaps. This kind of gambling is zero-sum, isn't it? For someone to make money, someone else has to lose money, as far as I can tell. If I have that right, then that's what makes these vehicles different in kind from regular old ownership of a share of stock in a company. Sure, it's a gamble to own stock, in the sense that it could lose some or all of its value, but no one need lose any money for your stock to go up in value.
Subhead: Crips
The subtitle nearly quotes Gen. Richard B. Meyers, from his appearance on The Daily Show on Monday, March 16. He was talking about the partisan political climate since 2004.
Thanks to reader RS for correcting my spelling of Crips.
When I posted it, I thought about rephrasing it as: "Like the Crips and the Bloods, except with better grammar" but I couldn't remember if we ever took liberties with quotes for the subtitle. Now it looks like I might have considered "Like the Crips and the Bloods, except with better spelling." Or would that be worse spelling, since I got it wrong?
Thanks to reader RS for correcting my spelling of Crips.
When I posted it, I thought about rephrasing it as: "Like the Crips and the Bloods, except with better grammar" but I couldn't remember if we ever took liberties with quotes for the subtitle. Now it looks like I might have considered "Like the Crips and the Bloods, except with better spelling." Or would that be worse spelling, since I got it wrong?
Re: Dionne on Leuchtenburg
VDH had a similar thought yesterday (or over the weekend):
2) The Meltdown Commission. We had a 9/11 Commission; we formed the Baker-Hamilton Commission on Iraq (never mind the utility of the conclusions). So let us try a bipartisan investigatory commission on the autumn financial meltdown. Thus far the mainstream media narrative is a reductive “Bush did it.” But let us examine past bundling of subprime mortgages, and derivatives, and who introduced more regulation of banks, who opposed it; who tried to restrain Freddie and Fannie, who fought that tooth and nail, what the SEC did and did not do—and why. Let us collate all the campaign contributions from the failed banks, Madoff, the entire open sewer of politics and high finance, and then let those of the commission, both Democrat and Republican, issue a white paper on when, why, and how it all went down.
2) The Meltdown Commission. We had a 9/11 Commission; we formed the Baker-Hamilton Commission on Iraq (never mind the utility of the conclusions). So let us try a bipartisan investigatory commission on the autumn financial meltdown. Thus far the mainstream media narrative is a reductive “Bush did it.” But let us examine past bundling of subprime mortgages, and derivatives, and who introduced more regulation of banks, who opposed it; who tried to restrain Freddie and Fannie, who fought that tooth and nail, what the SEC did and did not do—and why. Let us collate all the campaign contributions from the failed banks, Madoff, the entire open sewer of politics and high finance, and then let those of the commission, both Democrat and Republican, issue a white paper on when, why, and how it all went down.
Monday, March 16, 2009
Dionne on Leuchtenburg
E.J. Dionne writes for The American Prospect about how he came to be a liberal. He cites the book Franklin D. Roosevelt and The New Deal: 1932-1940 by Leuchtenburg as influential in his thinking. In the piece, he notes similarities between the Depression and the current economic situation, and quotes Leuchtenburg:
You wonder if our Congress will launch a probe along the lines of the 1930s Senate investigation of Wall Street led by Ferdinand Pecora. "Pecora revealed that the most respected men on Wall Street had rigged pools, had profited by pegging bond prices artificially high, and had lined their pockets with fantastic bonuses," Leuchtenburg writes. "The bankers seemed bereft of a sense of obligation even to their own institutions."
Neibuhr
I like this so much, I'm preserving it:
If we should perish, the ruthlessness of the foe would only be the secondary cause of the disaster. The primary cause would be that the strength of a giant nation was directed by eyes too blind to see all the hazards of the struggle; and the blindness would be induced not by some accident of nature or history but by hatred and vainglory.
Starbucks part of the Great Jewish Conspiracy
First they went after Rushdie, Ayaan Hirsi Ali, the cartoonists, Van Gogh and Geert Wilders; now radical Islam may have crossed the Rubicon. They've taken on Starbucks per Melanie Phillips at the Spectator:
In January, Egyptian Cleric Safwat Higazi brought viewers of al Nas TV urgent news (subscriber only) about the Starbucks logo:
Has any of you ever wondered who this woman with a crown on her head is? Why do we boycott Starbucks? ... The girl on the Starbucks logo is Queen Esther. Do you know who Queen Esther was and what the crown on her head means? This is the crown of the Persian Kingdom. This queen is the queen of the Jews. She is mentioned in the Torah, in the Book of Esther. The girl you see is Esther, the queen of the Jews in Persia...
Can you believe that in Mecca, Al-Madina, Cairo, Damascus, Kuwait, and all over the Islamic world, hangs the picture of beautiful Queen Esther, with a crown on her head, and we buy her products.[...]We want Starbucks to be shut down throughout the Arab and Islamic world. We want it to be shut down in Mecca and in Al-Madina. I implore King Abdallah bin Abd Al-‘Aziz, the Custodian of the Two Holy Mosques: It is inconceivable that in Mecca and Al-Madina, there will be a picture of Queen Esther, the queen of the Jews.
As anyone can see, however, the female figure in the Starbucks logo (pictured above) has two fish tails. This is a clue that she is not Esther, queen of the Jews in Persia. She is instead a twin-tailed siren of Greek mythology. This is because the company is apparently named in part after Starbuck, Captain Ahab’s first mate in the book Moby Dick.
In January, Egyptian Cleric Safwat Higazi brought viewers of al Nas TV urgent news (subscriber only) about the Starbucks logo:
Has any of you ever wondered who this woman with a crown on her head is? Why do we boycott Starbucks? ... The girl on the Starbucks logo is Queen Esther. Do you know who Queen Esther was and what the crown on her head means? This is the crown of the Persian Kingdom. This queen is the queen of the Jews. She is mentioned in the Torah, in the Book of Esther. The girl you see is Esther, the queen of the Jews in Persia...
Can you believe that in Mecca, Al-Madina, Cairo, Damascus, Kuwait, and all over the Islamic world, hangs the picture of beautiful Queen Esther, with a crown on her head, and we buy her products.[...]We want Starbucks to be shut down throughout the Arab and Islamic world. We want it to be shut down in Mecca and in Al-Madina. I implore King Abdallah bin Abd Al-‘Aziz, the Custodian of the Two Holy Mosques: It is inconceivable that in Mecca and Al-Madina, there will be a picture of Queen Esther, the queen of the Jews.
As anyone can see, however, the female figure in the Starbucks logo (pictured above) has two fish tails. This is a clue that she is not Esther, queen of the Jews in Persia. She is instead a twin-tailed siren of Greek mythology. This is because the company is apparently named in part after Starbuck, Captain Ahab’s first mate in the book Moby Dick.
I have no idea if she's right about Moby Dick but sheesh.
Update: finally remembered what this reminds me of: Colonel Bat Guano’s, “You're gonna have to answer to the Coca-Cola company."Somewhat misplaced anger: AIG Bonuses
We're all outraged, rightly, that AIG is dispensing $450 million in bonuses (the latest installment of which is $165,000,000) when we taxpayers have handed them $170+ billion in bailout money so far. Here's how those amounts compare (Bonuses on the left; Bailout on the right):
Of course, it's the principle that offends.
Of course, it's the principle that offends.
Thank you so very much, Mr. Paul M. Architzel
Paul M. Architzel's bio currently lays claim to being the architect of the Commodity Futures Modernization Act of 2000 that paved the way for credit default swaps to be exempted from state gambling prohibitions.
Prior to joining the firm, Mr. Architzel was chief counsel of the Division of Market Oversight at the Commodity Futures Trading Commission for more than 20 years. He was the main architect of the new framework for futures market regulation, codified by the Commodity Futures Modernization Act of 2000 (CFMA), and wrote the CFTC’s rules for regulated and exempt markets. In recognition of this work, he was granted the Presidential Rank Award of “Distinguished Executive” in 2000.
"Spin your head...spin your head"
Back in the 90's, I used to enter the Final 4 ticket lottery. It's really sad that the general public gets so few tickets for events like this (the Final 4, the Super Bowl, etc.). But, in 1997, I actually got tickets. The Final 4 that year was in Indianapolis and I made the trek. The teams that made it that year were Kentucky, North Carolina, Arizona (the eventual champion) and Minnesota. Kentucky and NC had the most fans, but Minnesota had by far the most wild and fun fans. That is where I learned that (at least at that time) bars in Minneapolis closed at midnight. That is where I learned that (by sitting by many) Kentucky fans will turn on their team in a nano-second if they lose and I learned about the special talent of Goldie, the mascot of Minnesota.
During the semi-final game that Minnesota played in, right before the first TV time-out, the Minnesota fans started chanting...."spin your head...spin your head...spin your head". I had no idea what that meant or who they were directing the chant at. At the time-out, the Minnesota band started playing some song and Goldie, the mascot, started running around the court with the cheerleaders. He gets near the basket by the band, stops, and starts twirling his mascot head around in circles while still wearing it. I'd never seen a human mascot do this before and it was wild. The Minnesota fans were going crazy and this Kentucky fan sitting next to me, in his slow, Eastern Kentucky, coal-mining, Appalachia accent, turns to his son and says..."daaaaaamn, I ain't never seen anything like dat in the S-E-C. How is dat boy doin, that?"
Sadly, the Gophers lost and didn't make it to the finals. And, even more sadly, they got busted a couple of years later for numerous NCAA violations and were stripped of their Final 4 appearance and Big Ten Championship.
On a side note, I also got selected for Final 4 tickets the following year (it was in San Antonio) and that is where I had my close, personal encounter and conversation with Ashley Judd. Even without make-up and wearing "just" jeans and a Kentucky Wildcat t-shirt, she was stunningly beautiful. She was also extremely nice and polite and as committed a fan of Kentucky basketball as can be.
During the semi-final game that Minnesota played in, right before the first TV time-out, the Minnesota fans started chanting...."spin your head...spin your head...spin your head". I had no idea what that meant or who they were directing the chant at. At the time-out, the Minnesota band started playing some song and Goldie, the mascot, started running around the court with the cheerleaders. He gets near the basket by the band, stops, and starts twirling his mascot head around in circles while still wearing it. I'd never seen a human mascot do this before and it was wild. The Minnesota fans were going crazy and this Kentucky fan sitting next to me, in his slow, Eastern Kentucky, coal-mining, Appalachia accent, turns to his son and says..."daaaaaamn, I ain't never seen anything like dat in the S-E-C. How is dat boy doin, that?"
Sadly, the Gophers lost and didn't make it to the finals. And, even more sadly, they got busted a couple of years later for numerous NCAA violations and were stripped of their Final 4 appearance and Big Ten Championship.
On a side note, I also got selected for Final 4 tickets the following year (it was in San Antonio) and that is where I had my close, personal encounter and conversation with Ashley Judd. Even without make-up and wearing "just" jeans and a Kentucky Wildcat t-shirt, she was stunningly beautiful. She was also extremely nice and polite and as committed a fan of Kentucky basketball as can be.
Cramer v. Stewart (and O'Reilly and Hannity)
I've got no problem with the way Stewart loaded up the questions and then crushed the puny Cramer and his Mad Money. Stewart's show is what it is, primarily a comedy show with bits of news and current events tossed in to make it relevant. It's the SNL weekend update for thirty minutes every weeknight.
In fact, from what little bits of Cramer's show I've caught in the kitchen at the office, his show is rather like Stewart's: primarily schtick with a bit of finance and economics tossed into the mix. The big difference is that Cramer's is on a "real" network while Stewart's is on the Comedy Channel.
I can't listen to O'Reilly and Hannity for the exact reasons LJ listed. Well, I guess I should say I've almost never listened to their radio shows. I can't watch the televsion programs for the exact reasons LJ listed. I don't even mind them being incredibly one-sided...that is what they do. I loathe the technique LJ described and the shouting.
In fact, from what little bits of Cramer's show I've caught in the kitchen at the office, his show is rather like Stewart's: primarily schtick with a bit of finance and economics tossed into the mix. The big difference is that Cramer's is on a "real" network while Stewart's is on the Comedy Channel.
I can't listen to O'Reilly and Hannity for the exact reasons LJ listed. Well, I guess I should say I've almost never listened to their radio shows. I can't watch the televsion programs for the exact reasons LJ listed. I don't even mind them being incredibly one-sided...that is what they do. I loathe the technique LJ described and the shouting.
Sunday, March 15, 2009
Minnesota versus Texas
The University of Minnesota (10th seed) meets the University of Texas (7th seed) in the first round of the NCAA basketball tournament on Thursday, March 19th.
AIG, credit default swaps, making gambling legal and making gamblers whole
Here is a lucid commentary on what happened to AIG and why bailing it out is not sensible. He explains that AIG has been essentially two companies: one an insurance company that is well-regulated and well-run and profitable, and one that has been a player in the highly risky, unregulated world of derivatives. It's the losses of the second, risky company that we're bailing out which is all wrong because everyone playing in that game should have been aware of their risks and should bear their own losses.
The NYT today, in its editorial, echos this assessment (and goes on to demand answers to some good questions).
The NYT today, in its editorial, echos this assessment (and goes on to demand answers to some good questions).
Still, [AIG's] trading partners knew, or should have known, how dangerous the swaps were. And that is not necessarily the whole story. In the manic years of this decade, credit default swaps took off as a way to bet on the likelihood of default by a firm or an investment portfolio, without having to own any financial interest in the firm or portfolio. That is definitely not insurance, it is gambling. The reason it is not illegal gambling is that, in 2000, Congress specifically exempted credit default swaps from state gaming laws.The Commodity Futures Modernization Act of 2000 (that exempted credit default swaps from prosecution under state gaming laws) passed on the last day and last vote of the 106th Congress. Republicans controlled both the House and the Senate and was introduced by Republicans (Rep. Thomas Ewing and Senator Dick Lugar), but the bill had bipartisan sponsorship, passed with bipartisan support and passed unanimously in the Senate and was signed by Pres. Bill Clinton. (Steve Kroft did a piece on 60 Minutes about credit default swaps that aired in October 2008.)
Friday, March 13, 2009
Cramer on The Daily Show
I've never watched CNBC, so I don't really have a sense of how fair Stewart's criticism is, though his central premise makes sense to me: that if CNBC shows were going to have interviews with CEOs, giving them a platform to spew lies, then they had a duty to either a) investigate and do some in-depth reporting or b) clearly present themselves as nothing but entertainment.
Stewart makes a couple other points worth making that don't have much of anything to do with CNBC (except to the extent they ought to have been a watchdog on behalf of average investors): 1) that publicly-traded corporations have lately been managed for short term gain, while average joe investors have been investing for the long term (based on the misunderstanding that corporations were managed for the long term) and that mismatch has robbed investors of their savings; and 2) there are two markets, one of hard-earned dollars by ordinary people on an ordinary scale being invested to own a piece of companies and a second that is a big game in which market players use the money of average investors in their betting games. (I could swear I posted my own made-up theory that was similar to #2, but I can't find it.)
The Daily Show has made the whole interview (much longer than what appeared on the show) available on its website, and available for embedding, so here you go:
Stewart makes a couple other points worth making that don't have much of anything to do with CNBC (except to the extent they ought to have been a watchdog on behalf of average investors): 1) that publicly-traded corporations have lately been managed for short term gain, while average joe investors have been investing for the long term (based on the misunderstanding that corporations were managed for the long term) and that mismatch has robbed investors of their savings; and 2) there are two markets, one of hard-earned dollars by ordinary people on an ordinary scale being invested to own a piece of companies and a second that is a big game in which market players use the money of average investors in their betting games. (I could swear I posted my own made-up theory that was similar to #2, but I can't find it.)
The Daily Show has made the whole interview (much longer than what appeared on the show) available on its website, and available for embedding, so here you go:
Thursday, March 12, 2009
Childhood Bible Stories
I have no idea why this came to me today.
Remember this story you learned as a kid? Jacob, the third of the Old Testament Patriarchs, gets flimflammed by Laban when Jacob asks to marry Laban’s daughter Rachel.
“Work for me for 7 years,” says Laban, “then you can marry Rachel.”
Jacob does so, but is somehow hoodwinked by Laban and marries Rachel’s sister Leah instead. Jacob then had to work another 7 years for Laban to get Rachel.
Laban: inventor of the Bait-n-Switch.
Remember this story you learned as a kid? Jacob, the third of the Old Testament Patriarchs, gets flimflammed by Laban when Jacob asks to marry Laban’s daughter Rachel.
“Work for me for 7 years,” says Laban, “then you can marry Rachel.”
Jacob does so, but is somehow hoodwinked by Laban and marries Rachel’s sister Leah instead. Jacob then had to work another 7 years for Laban to get Rachel.
Laban: inventor of the Bait-n-Switch.
Tuesday, March 10, 2009
Oil down but...
This morning, early, I saw something on one of the blogs/sites that had that as a headline. Did anybody catch it? I've been thinking that the collapse of oil would act as something of a "stimulus" and my quick impression was that the article was going to dispel that idea somewhat.
When I went back to try to find the article, I couldn't.
When I went back to try to find the article, I couldn't.
Update: Stewart excoriates CNBC
Jim Cramer complained that Stewart's take on CNBC last week, in which Stewart said Cramer encouraged people to buy Bear Stearns five days before it collapsed, was in error. Cramer pointed out that in the clip Steward showed, Cramer wasn't encouraging people to buy Bear Stearns stock; he was simply assuring them it was safe to use Bear Stearns for handling one's investments. Steward acknowledges the error, but then goes on to show that Cramer did indeed encourage people to buy Bear's stock not long before the collapse.
Monday, March 09, 2009
Hey
Where did all the blog entries go?
[Update 3/9/09: Nevermind. They're back now. But they were completely missing moments ago.]
[Update 3/9/09: Nevermind. They're back now. But they were completely missing moments ago.]
Saturday, March 07, 2009
Unintended consequences: death by hyperthermia
Each year 15-25 kids die of hyperthermia when a child is forgotten and is left in a hot car. WaPo:
Two decades ago, this was relatively rare. But in the early 1990s, car-safety experts declared that passenger-side front airbags could kill children, and they recommended that child seats be moved to the back of the car; then, for even more safety for the very young, that the baby seats be pivoted to face the rear. If few foresaw the tragic consequence of the lessened visibility of the child . . . well, who can blame them?
Friday, March 06, 2009
Kicking the GM Bankruptcy down the road
GM now more open to bankruptcy after audit?
From the Australian News this several month delay has been a bit pricey:
The auditor's finding could also complicate GM's effort to get additional bailout loans from the US Government and other governments around the world. GM has so far borrowed $US13.4 billion from the US Treasury and has asked for as much as $US16.6 billion more. It is also seeking €3.3 billion ($6.5 billion) in loans from the German Government.
From the Australian News this several month delay has been a bit pricey:
The auditor's finding could also complicate GM's effort to get additional bailout loans from the US Government and other governments around the world. GM has so far borrowed $US13.4 billion from the US Treasury and has asked for as much as $US16.6 billion more. It is also seeking €3.3 billion ($6.5 billion) in loans from the German Government.
The collapse of the US by 2010
The AP reports:
Per Russian dean at the Foreign Ministry's school for future diplomats:
"I can see Russia from my house."
will become
"My house is in Russia."
Panarin argued that Americans are in moral decline, saying their great psychological stress is evident from school shootings, the size of the prison population and the number of gay men.
Per Russian dean at the Foreign Ministry's school for future diplomats:
"I can see Russia from my house."
will become
"My house is in Russia."
Panarin argued that Americans are in moral decline, saying their great psychological stress is evident from school shootings, the size of the prison population and the number of gay men.
Saving Social Security
Rough Calculations. Rough in more ways than one. Looks like I’m down about 36% from my highs. Not quite accurate since it doesn’t allow for my contributions since the peak. I’m guessing that puts me down about 38-39% in real dollars. Good thing these windows don’t open.
Thursday, March 05, 2009
Public Service
Sheesh. Time to get a gummint job.
From the Austin American Statesman:
About 450 city workers earn $100,000 or more in base pay. City Manager Marc Ott said Wednesday night that he is not yet prepared to begin cutting those salaries. That number would include 111 Austin Energy employees, 92 police officers, 43 firefighters and 30 in the water utility department.
But I really don’t have much problem with these guys:
Workers whose overtime and extra pay put them over six figures last year included a code enforcement inspector whose earnings soared to $157,192 from a base pay of $51,002, an Austin police officer whose $61,443 base salary increased to $114,943 and a paramedic whose pay went from $52,191 to $114,398, documents show.
From the Austin American Statesman:
About 450 city workers earn $100,000 or more in base pay. City Manager Marc Ott said Wednesday night that he is not yet prepared to begin cutting those salaries. That number would include 111 Austin Energy employees, 92 police officers, 43 firefighters and 30 in the water utility department.
But I really don’t have much problem with these guys:
Workers whose overtime and extra pay put them over six figures last year included a code enforcement inspector whose earnings soared to $157,192 from a base pay of $51,002, an Austin police officer whose $61,443 base salary increased to $114,943 and a paramedic whose pay went from $52,191 to $114,398, documents show.
Financial Crisis and Security Risks
Stratfor’s Report this week is a little self-serving but:
By Fred Burton and Scott Stewart
As anyone with a stock portfolio knows, it is a rough time for the markets. With many portfolios down 50 percent or more, this large loss of equity and wealth has been very difficult on individuals and corporations. The problems, of course, have not been confined to the stock markets. With property values plunging and variable-rate mortgages ballooning, many homeowners are also caught in a bad situation — the number of homeowners behind in their mortgage payments has been increasing and the number of foreclosures has grown. Unemployment is also an issue. According to the Bureau of Labor Statistics, in January 2009 there were 2,227 mass layoff actions in the United States involving 237,902 workers.
Significantly, the financial crisis is not just restricted to the United States — it is a global event that is also having a severe impact on economies in Europe, Asia and the developing world. Things are tough all over, and this financial strain will create some large security problems for corporations and governments.
Threats to the Bottom Line
During times of financial hardship, companies often have to make cuts like the aforementioned layoffs. When companies plan cuts, they often focus on eliminating those corporate functions that do not appear to be contributing to the company’s profitability. And one of the first functions cut during tough times often is corporate security. A security department typically has a pretty substantial budget (it costs a lot for all those guards, access-control devices, cameras and alarms), and security is usually viewed as detracting from, rather than contributing to, the company’s bottom line. The “fat” security budget is seen as an easy place to quickly reduce costs in an effort to balance the profit-and-loss statement.
This view of security is due to a number of factors. First, it must be recognized that there are certainly some security programs that are indeed bloated and ill-conceived that have consumed far too many corporate resources for the results they produce. Furthermore, there is a long tradition of corporate security directors who are not good communicators and who do not take the effort to educate upper management about ways their programs contribute to corporate goals. However, even when a security director has an effective program and is a good communicator, it can be very difficult to quantify the losses that the corporation did not suffer due to the presence of effective security measures. The lack of losses and incidents due to a robust security program can be interpreted by some to mean that there is no threat to guard against. Indeed, effective security can make it appear that there is no need for security, a paradox we have also seen in the historical pattern of U.S. government security funding — a pattern that has resulted in a number of disastrous attacks against U.S. embassies.
In times of economic hardship, the relentless focus on operating expenses and even corporate cutbacks can lead to definite security challenges. As we discussed last November, one of these problems is workplace violence, but during times when people are hurting financially, issues such as employee theft, fraud and product theft by non-employees must also be carefully monitored.
However, while the theft of a tractor-trailer full of computers or flat screen televisions can quickly get someone’s attention, there is a far more subtle, and no less dangerous, threat lurking just under the surface. That threat is espionage — both corporate and state-sponsored.
The Human-Intelligence Process
Espionage is always a problem corporations must face. Competitors, criminals and even foreign governments often seek ways to gather proprietary information from companies, sometimes to boost their own operational capacities (e.g., to apply critical or emerging technologies to their weapons programs) and sometimes to sell on the open market.
Once a company has been identified as having the information sought, the first thing the human-intelligence practitioner will do is look for weak links in the targeted company’s operations. If the required information is readily available, there is no need to undertake a time-intensive and costly operation to retrieve it. Indeed, it is shocking to see the amount of sensitive and critical information that is openly available on the Internet and in research libraries, or that is freely given out at technical conferences.
When open source collection efforts fail, more invasive measures must be employed. Sometimes the required information can be obtained via technical surveillance. A faulty information technology system, for example, can expose the company’s secrets via remote electronic intrusion conducted from a continent away. Other times, information can be obtained by eavesdropping on telephone calls made by corporate leaders or by using other technical surveillance measures.
However, technical surveillance has its limitations, and sometimes critical information must be obtained through human intelligence, which means obtaining the required data from an employee working within the targeted company. Due to human nature, human-intelligence practitioners use the same time-tested principles in the recruitment of corporate sources that they use when recruiting sources in the government sector. (The risks associated with obtaining unclassified proprietary information from private companies are often far less than those associated with obtaining classified information from government agencies or national research laboratories.)
The first step in the human-intelligence process is called spotting. This is when the human-intelligence practitioner attempts to identify those workers who have access to the required information. Then the practitioner conducts a thorough examination of the backgrounds and situations of the employees who have that access in an effort to determine which employee is most vulnerable to exploitation. Employees who are in dire need of extra cash to maintain extravagant lifestyles or to support drinking, drug or gambling habits, or those who are hiding extramarital affairs or other secrets that can be used for blackmail, make prime candidates. A background check might also reveal that a certain worker is angry with his or her employer over issues of salary or placement in the company. There also are employees who disagree ideologically with the product their company makes or the process the company uses to produce it. Finally, there are the employees whose egos are so big that they might be willing to risk committing industrial espionage just to prove they can get away with it. Robert Hanssen, an ex-FBI special agent accused of selling secrets to Russia, was motivated by the belief that he was above the system and could commit espionage without being caught.
Of the four major motivations for committing espionage — money, ideology, compromise and ego (known to security officials as MICE) — money has proven to be the No. 1 motivation, though two or more motivations can be used to turn an employee. More often than not, simple bribery is sufficient to obtain the desired information, especially if the employee is living beyond his or her means for one reason or another. Outside agents looking to turn an employee can also use blackmail (“compromise” in the MICE acronym). Demanding proprietary information in exchange for not exposing a personal secret, for instance, is a cost-effective approach that also allows the agent to return again and again to the same source. This method is a bit riskier, however, since it can cause more resentment than other means and make the source more likely to rebel. However, sexual entrapment and blackmail is still widely used as a recruitment tactic, one that has been used with great success in recent years by the Chinese government against targets such as Japanese and Taiwanese government officials, FBI special agents — and foreign businessmen.
Emphasizing the ‘M’
Once the practitioner has identified the weakest link, decided on the approach to take and made a specific plan on how to proceed, the next step in the human-intelligence process is to actually approach the employee and “pitch” him or her. This step is often a gradual effort to establish a relationship of trust between the practitioner and the employee, and contact can begin gradually with requests for small, seemingly harmless bits of information such as internal phone numbers. In this approach, known as the “little hook,” the employee is offered “gifts” in exchange for these favors. The requests gradually become greater in scope until the targeted information is obtained. Other times, the pitch is far more blatant and the human-intelligence practitioner does not take the time to establish a relationship or gradually recruit the target. Instead the practitioner makes a flat-out cash offer for the required goods or shows the target the evidence that will be used for blackmail.
In the current economic environment, with many 401(k) plans now more like 201(k)s, stock options severely underwater and homeowners facing foreclosure, cold hard cash — the M in MICE — is an even more attractive approach. In fact, with employees seeing their investment accounts decline dramatically, and perhaps even facing the possibility of home foreclosure, it is not at all unreasonable to anticipate that companies and foreigners will face a windfall of walk-in sources who will volunteer to sell critical information — and in such a buyer’s market, information can often be bought at fire-sale prices. Employees attempting to sell proprietary information are somewhat common; one of the most publicized examples of this in recent years was the disgruntled Coca-Cola Co. employee who was arrested in July 2006 after attempting to sell Coke’s recipe to rival soft drink company Pepsi.
Mass layoffs also complicate the equation, especially when some of the employees being laid off have access to critical information. If measures are not taken to ensure that the information is protected, the information could easily find itself in the hands of competing companies or even foreign intelligence services.
Not Just a Corporate Concern
The current financial crisis — and vulnerability to espionage — is not just confined to the private sector. There are many federal government employees in the United States who have watched their investments in the stock-based funds of the government’s Thrift Savings Plan wither on the vine over the past two years, and judging from the performance of foreign stock exchanges, the investments of employees in other governments have followed suit. Additionally, government employees tend to live in places with very expensive real estate, like Washington, London, Paris and Tokyo. This means that a foreign intelligence officer armed only with a briefcase full of dollars, euros or yen can make a substantial amount of money. With many corporate security departments being cut to the bone, many internal security services focused on the counterterrorism mission and many law enforcement agencies chasing white-collar criminals, it is a good time to be in the intelligence business.
One day we will look back on this time through a counterintelligence lens and see that, although it was a time of bear stock markets, it was a tremendous bull market for practitioners of human intelligence.
This report may be forwarded or republished on your website with attribution to www.stratfor.com
By Fred Burton and Scott Stewart
As anyone with a stock portfolio knows, it is a rough time for the markets. With many portfolios down 50 percent or more, this large loss of equity and wealth has been very difficult on individuals and corporations. The problems, of course, have not been confined to the stock markets. With property values plunging and variable-rate mortgages ballooning, many homeowners are also caught in a bad situation — the number of homeowners behind in their mortgage payments has been increasing and the number of foreclosures has grown. Unemployment is also an issue. According to the Bureau of Labor Statistics, in January 2009 there were 2,227 mass layoff actions in the United States involving 237,902 workers.
Significantly, the financial crisis is not just restricted to the United States — it is a global event that is also having a severe impact on economies in Europe, Asia and the developing world. Things are tough all over, and this financial strain will create some large security problems for corporations and governments.
Threats to the Bottom Line
During times of financial hardship, companies often have to make cuts like the aforementioned layoffs. When companies plan cuts, they often focus on eliminating those corporate functions that do not appear to be contributing to the company’s profitability. And one of the first functions cut during tough times often is corporate security. A security department typically has a pretty substantial budget (it costs a lot for all those guards, access-control devices, cameras and alarms), and security is usually viewed as detracting from, rather than contributing to, the company’s bottom line. The “fat” security budget is seen as an easy place to quickly reduce costs in an effort to balance the profit-and-loss statement.
This view of security is due to a number of factors. First, it must be recognized that there are certainly some security programs that are indeed bloated and ill-conceived that have consumed far too many corporate resources for the results they produce. Furthermore, there is a long tradition of corporate security directors who are not good communicators and who do not take the effort to educate upper management about ways their programs contribute to corporate goals. However, even when a security director has an effective program and is a good communicator, it can be very difficult to quantify the losses that the corporation did not suffer due to the presence of effective security measures. The lack of losses and incidents due to a robust security program can be interpreted by some to mean that there is no threat to guard against. Indeed, effective security can make it appear that there is no need for security, a paradox we have also seen in the historical pattern of U.S. government security funding — a pattern that has resulted in a number of disastrous attacks against U.S. embassies.
In times of economic hardship, the relentless focus on operating expenses and even corporate cutbacks can lead to definite security challenges. As we discussed last November, one of these problems is workplace violence, but during times when people are hurting financially, issues such as employee theft, fraud and product theft by non-employees must also be carefully monitored.
However, while the theft of a tractor-trailer full of computers or flat screen televisions can quickly get someone’s attention, there is a far more subtle, and no less dangerous, threat lurking just under the surface. That threat is espionage — both corporate and state-sponsored.
The Human-Intelligence Process
Espionage is always a problem corporations must face. Competitors, criminals and even foreign governments often seek ways to gather proprietary information from companies, sometimes to boost their own operational capacities (e.g., to apply critical or emerging technologies to their weapons programs) and sometimes to sell on the open market.
Once a company has been identified as having the information sought, the first thing the human-intelligence practitioner will do is look for weak links in the targeted company’s operations. If the required information is readily available, there is no need to undertake a time-intensive and costly operation to retrieve it. Indeed, it is shocking to see the amount of sensitive and critical information that is openly available on the Internet and in research libraries, or that is freely given out at technical conferences.
When open source collection efforts fail, more invasive measures must be employed. Sometimes the required information can be obtained via technical surveillance. A faulty information technology system, for example, can expose the company’s secrets via remote electronic intrusion conducted from a continent away. Other times, information can be obtained by eavesdropping on telephone calls made by corporate leaders or by using other technical surveillance measures.
However, technical surveillance has its limitations, and sometimes critical information must be obtained through human intelligence, which means obtaining the required data from an employee working within the targeted company. Due to human nature, human-intelligence practitioners use the same time-tested principles in the recruitment of corporate sources that they use when recruiting sources in the government sector. (The risks associated with obtaining unclassified proprietary information from private companies are often far less than those associated with obtaining classified information from government agencies or national research laboratories.)
The first step in the human-intelligence process is called spotting. This is when the human-intelligence practitioner attempts to identify those workers who have access to the required information. Then the practitioner conducts a thorough examination of the backgrounds and situations of the employees who have that access in an effort to determine which employee is most vulnerable to exploitation. Employees who are in dire need of extra cash to maintain extravagant lifestyles or to support drinking, drug or gambling habits, or those who are hiding extramarital affairs or other secrets that can be used for blackmail, make prime candidates. A background check might also reveal that a certain worker is angry with his or her employer over issues of salary or placement in the company. There also are employees who disagree ideologically with the product their company makes or the process the company uses to produce it. Finally, there are the employees whose egos are so big that they might be willing to risk committing industrial espionage just to prove they can get away with it. Robert Hanssen, an ex-FBI special agent accused of selling secrets to Russia, was motivated by the belief that he was above the system and could commit espionage without being caught.
Of the four major motivations for committing espionage — money, ideology, compromise and ego (known to security officials as MICE) — money has proven to be the No. 1 motivation, though two or more motivations can be used to turn an employee. More often than not, simple bribery is sufficient to obtain the desired information, especially if the employee is living beyond his or her means for one reason or another. Outside agents looking to turn an employee can also use blackmail (“compromise” in the MICE acronym). Demanding proprietary information in exchange for not exposing a personal secret, for instance, is a cost-effective approach that also allows the agent to return again and again to the same source. This method is a bit riskier, however, since it can cause more resentment than other means and make the source more likely to rebel. However, sexual entrapment and blackmail is still widely used as a recruitment tactic, one that has been used with great success in recent years by the Chinese government against targets such as Japanese and Taiwanese government officials, FBI special agents — and foreign businessmen.
Emphasizing the ‘M’
Once the practitioner has identified the weakest link, decided on the approach to take and made a specific plan on how to proceed, the next step in the human-intelligence process is to actually approach the employee and “pitch” him or her. This step is often a gradual effort to establish a relationship of trust between the practitioner and the employee, and contact can begin gradually with requests for small, seemingly harmless bits of information such as internal phone numbers. In this approach, known as the “little hook,” the employee is offered “gifts” in exchange for these favors. The requests gradually become greater in scope until the targeted information is obtained. Other times, the pitch is far more blatant and the human-intelligence practitioner does not take the time to establish a relationship or gradually recruit the target. Instead the practitioner makes a flat-out cash offer for the required goods or shows the target the evidence that will be used for blackmail.
In the current economic environment, with many 401(k) plans now more like 201(k)s, stock options severely underwater and homeowners facing foreclosure, cold hard cash — the M in MICE — is an even more attractive approach. In fact, with employees seeing their investment accounts decline dramatically, and perhaps even facing the possibility of home foreclosure, it is not at all unreasonable to anticipate that companies and foreigners will face a windfall of walk-in sources who will volunteer to sell critical information — and in such a buyer’s market, information can often be bought at fire-sale prices. Employees attempting to sell proprietary information are somewhat common; one of the most publicized examples of this in recent years was the disgruntled Coca-Cola Co. employee who was arrested in July 2006 after attempting to sell Coke’s recipe to rival soft drink company Pepsi.
Mass layoffs also complicate the equation, especially when some of the employees being laid off have access to critical information. If measures are not taken to ensure that the information is protected, the information could easily find itself in the hands of competing companies or even foreign intelligence services.
Not Just a Corporate Concern
The current financial crisis — and vulnerability to espionage — is not just confined to the private sector. There are many federal government employees in the United States who have watched their investments in the stock-based funds of the government’s Thrift Savings Plan wither on the vine over the past two years, and judging from the performance of foreign stock exchanges, the investments of employees in other governments have followed suit. Additionally, government employees tend to live in places with very expensive real estate, like Washington, London, Paris and Tokyo. This means that a foreign intelligence officer armed only with a briefcase full of dollars, euros or yen can make a substantial amount of money. With many corporate security departments being cut to the bone, many internal security services focused on the counterterrorism mission and many law enforcement agencies chasing white-collar criminals, it is a good time to be in the intelligence business.
One day we will look back on this time through a counterintelligence lens and see that, although it was a time of bear stock markets, it was a tremendous bull market for practitioners of human intelligence.
This report may be forwarded or republished on your website with attribution to www.stratfor.com
Wednesday, March 04, 2009
Alexander Hamilton and The Big Apple
Very interesting article (13 pp but worth it) on the symbiosis between His Excellency’s "my boy" and his adopted hometown of New York from City Journal:
The other Founders were Americans of a century’s standing, who fought the Revolution to defend liberties their families had claimed for generations. Washington and Jefferson, landed grandees, descended from seventeenth-century Virginians; Harvard-educated John Adams’s forebears settled in Massachusetts Bay in 1638. Such men were rooted Americans, living on land inherited from their fathers. Hamilton, by contrast, was a penniless immigrant from the West Indies; like so many New Yorkers, he had come here from elsewhere, seeking his fortune.
And he wasn’t just penniless. "My birth," as he delicately put it, "is the subject of the most humiliating criticism"—for he was, in John Adams’s acidulous taunt, "the bastard brat of a Scotch pedlar." Nevertheless, as a prime exemplar of that American opportunity and enterprise he so fervently promoted, he rose to be the country’s second most powerful man. As Ron Chernow puts it in his indispensable biography, he served in effect as George Washington’s prime minister and head of government, directing his administration’s policy and molding the enduring institutions it created.
The other Founders were Americans of a century’s standing, who fought the Revolution to defend liberties their families had claimed for generations. Washington and Jefferson, landed grandees, descended from seventeenth-century Virginians; Harvard-educated John Adams’s forebears settled in Massachusetts Bay in 1638. Such men were rooted Americans, living on land inherited from their fathers. Hamilton, by contrast, was a penniless immigrant from the West Indies; like so many New Yorkers, he had come here from elsewhere, seeking his fortune.
And he wasn’t just penniless. "My birth," as he delicately put it, "is the subject of the most humiliating criticism"—for he was, in John Adams’s acidulous taunt, "the bastard brat of a Scotch pedlar." Nevertheless, as a prime exemplar of that American opportunity and enterprise he so fervently promoted, he rose to be the country’s second most powerful man. As Ron Chernow puts it in his indispensable biography, he served in effect as George Washington’s prime minister and head of government, directing his administration’s policy and molding the enduring institutions it created.
Islam in Russia
Mark Steyn at the Corner quoting/interpreting a Finnish newspaper article on Russian demographics (not a Finnish speaker, I have to trust him):
The last 20 years have seen major demographic changes in Russia. At the beginning of the 1990s, there were 149 million people in Russia. By 2007 the figure was seven million less. The population is falling by around 400,000 per year.
But the situation is very different in parts of the country with a Muslim majority. There the population is growing, and, for example, male life expectancy is significantly higher than in ethnic Russian areas. If demographic trends continue in the same way, by 2015 the majority of Russian army conscripts will be Muslims. By 2020 20 per cent of all Russians will be Muslims. And three decades later they will be the largest part of the Russian population.
The last 20 years have seen major demographic changes in Russia. At the beginning of the 1990s, there were 149 million people in Russia. By 2007 the figure was seven million less. The population is falling by around 400,000 per year.
But the situation is very different in parts of the country with a Muslim majority. There the population is growing, and, for example, male life expectancy is significantly higher than in ethnic Russian areas. If demographic trends continue in the same way, by 2015 the majority of Russian army conscripts will be Muslims. By 2020 20 per cent of all Russians will be Muslims. And three decades later they will be the largest part of the Russian population.
Tuesday, March 03, 2009
Slate Editor David Plotz on reading the OT
I post this link and the quoted paragraphs not for the religious aspects dicussed later in the article (Plotz is an agnostic Jew) but for the aspects of the OT as literature.
When I was reading Judges one day, I came to a complicated digression about a civil war between two groups of Israelites, the Gileadites and the Ephraimites. According to the story, the Gileadites hold the Jordan River, and whenever anyone comes to cross, the guards ask them to say the password, shibboleth. The Ephraimites, for some unexplained reason, can't pronounce the sh in shibboleth and say "sibboleth" instead. When an Ephraimite fails the speech exam, the Gileadites "would seize him and slay him." I've read the word shibboleth a hundred times, written it a few, and probably even said it myself, but I had never understood it until then. It was a tiny but thrilling moment when my world came alive, when a word that had just been a word suddenly meant something to me.
And something like that happened to me five, 10, 50 times a day when I was Bible-reading. You can't get through a chapter of the Bible, even in the most obscure book, without encountering a phrase, a name, a character, or an idea that has come down to us 3,000 years later. The Bible is the first source of everything from the smallest plot twists (the dummy David's wife places in the bed to fool assassins) to the most fundamental ideas about morality (the Levitical prohibition of homosexuality that still shapes our politics, for example) to our grandest notions of law and justice. It was a joyful shock to me when I opened the Book of Amos and read the words that crowned Martin Luther King's "I Have a Dream" speech.
I probably shouldn't even post because of all the links to Slate's Blogging the Bible but loved the article and couldn't help myself. Tragically sad comments like this sum up his view:
You notice that I haven't said anything about belief. I began the Bible as a hopeful, but indifferent, agnostic. I wished for a God, but I didn't really care. I leave the Bible as a hopeless and angry agnostic. I'm brokenhearted about God.
Again, I don't want to get into theology, but I thought I needed to be fair to Plotz's position.
When I was reading Judges one day, I came to a complicated digression about a civil war between two groups of Israelites, the Gileadites and the Ephraimites. According to the story, the Gileadites hold the Jordan River, and whenever anyone comes to cross, the guards ask them to say the password, shibboleth. The Ephraimites, for some unexplained reason, can't pronounce the sh in shibboleth and say "sibboleth" instead. When an Ephraimite fails the speech exam, the Gileadites "would seize him and slay him." I've read the word shibboleth a hundred times, written it a few, and probably even said it myself, but I had never understood it until then. It was a tiny but thrilling moment when my world came alive, when a word that had just been a word suddenly meant something to me.
And something like that happened to me five, 10, 50 times a day when I was Bible-reading. You can't get through a chapter of the Bible, even in the most obscure book, without encountering a phrase, a name, a character, or an idea that has come down to us 3,000 years later. The Bible is the first source of everything from the smallest plot twists (the dummy David's wife places in the bed to fool assassins) to the most fundamental ideas about morality (the Levitical prohibition of homosexuality that still shapes our politics, for example) to our grandest notions of law and justice. It was a joyful shock to me when I opened the Book of Amos and read the words that crowned Martin Luther King's "I Have a Dream" speech.
I probably shouldn't even post because of all the links to Slate's Blogging the Bible but loved the article and couldn't help myself. Tragically sad comments like this sum up his view:
You notice that I haven't said anything about belief. I began the Bible as a hopeful, but indifferent, agnostic. I wished for a God, but I didn't really care. I leave the Bible as a hopeless and angry agnostic. I'm brokenhearted about God.
Again, I don't want to get into theology, but I thought I needed to be fair to Plotz's position.
Russia’s Six Pillars
From Stratfor:
By Lauren Goodrich and Peter Zeihan
Under the leadership of Vladimir Putin, Russia has been re-establishing much of its lost Soviet-era strength. This has given rise to the possibility — and even the probability — that Russia again will become a potent adversary of the Western world. But now, Russia is yet again on the cusp of a set of massive currency devaluations that could destroy much of the country’s financial system. With a crashing currency, the disappearance of foreign capital, greatly decreased energy revenues and currency reserves flying out of the bank, the Western perception is that Russia is on the verge of collapsing once again.
Consequently, many Western countries have started to grow complacent about Russia’s ability to further project power abroad.
But this is Russia. And Russia rarely follows anyone else’s rulebook.
The State of the Russian State
Russia has faced a slew of economic problems in the past six months. Incoming foreign direct investment, which reached a record high of $28 billion in 2007, has reportedly dried up to just a few billion. Russia’s two stock markets, the Russian Trading System (RTS) and the Moscow Interbank Currency Exchange (MICEX), have fallen 78 and 67 percent respectively since their highs in May 2008. And Russians have withdrawn $290 billion from the country’s banks in fear of a financial collapse .
One of Moscow’s sharpest financial pains came in the form of a slumping Russian ruble, which has dropped by about one-third against the dollar since August 2008. Thus far, the Kremlin has spent $200 billion defending its currency, a startling number given that the currency still dropped by 35 percent. The Russian government has allowed dozens of mini-devaluations to occur since August; the ruble’s fall has pushed the currency past its lowest point in the 1998 ruble crash.
The Kremlin now faces three options. First, it can continue defending the ruble by pouring more money into what looks like a black hole. Realistically, this can last only another six months or so, as Russia’s combined reserves of $750 billion in August 2008 have dropped to just less than $400 billion due to various recession-battling measures (of which currency defense is only one). This option would also limit Russia’s future anti-recession measures to currency defense alone. In essence, this option relies on merely hoping the global recession ends before the till runs dry.
The second option would be to abandon any defense of the ruble and just let the currency crash. This option will not hurt Moscow or its prized industries (like those in the energy and metals sectors) too much, as the Kremlin, its institutions and most large Russian companies hold their reserves in dollars and euros. Smaller businesses and the Russian people would lose everything, however, just as in the August 1998 ruble crash. This may sound harsh, but the Kremlin has proved repeatedly — during the Imperial, Soviet and present eras — that it is willing to put the survival of the Russian state before the welfare and survival of the people.
The third option is much like the second. It involves sealing the currency system off completely from international trade, relegating it only to use in purely domestic exchanges. But turning to a closed system would make the ruble absolutely worthless abroad, and probably within Russia as well — the black market and small businesses would be forced to follow the government’s example and switch to the euro, or more likely, the U.S. dollar. (Russians tend to trust the dollar more than the euro.)
According to the predominant rumor in Moscow, the Kremlin will opt for combining the first and second options, allowing a series of small devaluations, but continuing a partial defense of the currency to avoid a single 1998-style collapse. Such a hybrid approach would reflect internal politicking.
The lack of angst within the government over the disappearance of the ruble as a symbol of Russian strength is most intriguing. Instead of discussing how to preserve Russian financial power, the debate is now over how to let the currency crash. The destruction of this particular symbol of Russian strength over the past ten years has now become a given in the Kremlin’s thinking, as has the end of the growth and economic strength seen in recent years.
Washington is interpreting the Russian acceptance of economic failure as a sort of surrender. It is not difficult to see why. For most states — powerful or not — a deep recession coupled with a currency collapse would indicate an evisceration of the ability to project power, or even the end of the road. After all, similar economic collapses in 1992 and 1998 heralded periods in which Russian power simply evaporated, allowing the Americans free rein across the Russian sphere of influence. Russia has been using its economic strength to revive its influence as of late, so — as the American thinking goes — the destruction of that strength should lead to a new period of Russian weakness.
Geography and Development
But before one can truly understand the roots of Russian power, the reality and role of the Russian economy must be examined. From this perspective, the past several years are most certainly an aberration — and we are not simply speaking of the post-Soviet collapse.
All states economies’ to a great degree reflect their geographies. In the United States, the presence of large, interconnected river systems in the central third of the country, the intracoastal waterway along the Gulf and Atlantic coasts, the vastness of San Francisco Bay, the numerous rivers flowing to the sea from the eastern slopes of the Appalachian Mountains and the abundance of ideal port locations made the country easy to develop. The cost of transporting goods was nil, and scarce capital could be dedicated to other pursuits. The result was a massive economy with an equally massive leg up on any competition.
Russia’s geography is the polar opposite. Hardly any of Russia’s rivers are interconnected. The country has several massive ones — the Pechora, the Ob, the Yenisei, the Lena and the Kolyma — but they drain the nearly unpopulated Siberia to the Arctic Ocean, making them useless for commerce. The only river that cuts through Russia’s core, the Volga, drains not to the ocean but to the landlocked and sparsely populated Caspian Sea, the center of a sparsely populated region. Also unlike the United States, Russia has few useful ports. Kaliningrad is not connected to the main body of Russia. The Gulf of Finland freezes in winter, isolating St. Petersburg. The only true deepwater and warm-water ocean ports, Vladivostok and Murmansk, are simply too far from Russia’s core to be useful. So while geography handed the United States the perfect transport network free of charge, Russia has had to use every available kopek to link its country together with an expensive road, rail and canal network.
One of the many side effects of this geography situation is that the United States had extra capital that it could dedicate to finance in a relatively democratic manner, while Russia’s chronic capital deficit prompted it to concentrate what little capital resources it had into a single set of hands — Moscow’s hands. So while the United States became the poster child for the free market, Russia (whether the Russian Empire, Soviet Union or Russian Federation) has always tended toward central planning.
Russian industrialization and militarization began in earnest under Josef Stalin in the 1930s. Under centralized planning, all industry and services were nationalized, while industrial leaders were given predetermined output quotas.
Perhaps the most noteworthy difference between the Western and Russian development paths was the different use of finance. At the start of Stalin’s massive economic undertaking, international loans to build the economy were unavailable, both because the new government had repudiated the czarist regime’s international debts and because industrialized countries — the potential lenders — were coping with the onset of their own economic crisis (e.g., the Great Depression).
With loans and bonds unavailable, Stalin turned to another centrally controlled resource to “fund” Russian development: labor. Trade unions were converted into mechanisms for capturing all available labor as well as for increasing worker productivity. Russia essentially substitutes labor for capital, so it is no surprise that Stalin — like all Russian leaders before him — ran his population into the ground. Stalin called this his “revolution from above.”
Over the long term, the centralized system is highly inefficient, as it does not take the basic economic drivers of supply and demand into account — to say nothing of how it crushes the common worker. But for a country as geographically massive as Russia, it was (and remains) questionable whether Western finance-driven development is even feasible, due to the lack of cheap transit options and the massive distances involved. Development driven by the crushing of the labor pool was probably the best Russia could hope for, and the same holds true today.
In stark contrast to ages past, for the past five years foreign money has underwritten Russian development. Russian banks did not depend upon government funding — which was accumulated into vast reserves — but instead tapped foreign lenders and bondholders. Russian banks took this money and used it to lend to Russian firms. Meanwhile, as the Russian government asserted control over the country’s energy industries during the last several years, it created a completely separate economy that only rarely intersected with other aspects of Russian economic life. So when the current global recession helped lead to the evaporation of foreign credit, the core of the government/energy economy was broadly unaffected, even as the rest of the Russian economy ingloriously crashed to earth.
Since Putin’s rise, the Kremlin has sought to project an image of a strong, stable and financially powerful Russia. This vision of strength has been the cornerstone of Russian confidence for years. Note that STRATFOR is saying “vision,” not “reality.” For in reality, Russian financial confidence is solely the result of cash brought in from strong oil and natural gas prices — something largely beyond the Russians’ ability to manipulate — not the result of any restructuring of the Russian system. As such, the revelation that the emperor has no clothes — that Russia is still a complete financial mess — is more a blow to Moscow’s ego than a signal of a fundamental change in the reality of Russian power.
The Reality of Russian Power
So while Russia might be losing its financial security and capabilities, which in the West tend to boil down to economic wealth, the global recession has not affected the reality of Russian power much at all. Russia has not, currently or historically, worked off of anyone else’s cash or used economic stability as a foundation for political might or social stability. Instead, Russia relies on many other tools in its kit. Some of the following six pillars of Russian power are more powerful and appropriate than ever:
(1) Geography: Unlike its main geopolitical rival, the United States, Russia borders most of the regions it wishes to project power into, and few geographic barriers separate it from its targets. Ukraine, Belarus and the Baltic states have zero geographic insulation from Russia. Central Asia is sheltered by distance, but not by mountains or rivers. The Caucasus provide a bit of a speed bump to Russia, but pro-Russian enclaves in Georgia give the Kremlin a secure foothold south of the mountain range (putting the August Russian-Georgian war in perspective). Even if U.S. forces were not tied down in Iraq and Afghanistan, the United States would face potentially insurmountable difficulties in countering Russian actions in Moscow’s so-called “Near Abroad.” Russia can project all manner of influence and intimidation there on the cheap, while even symbolic counters are quite costly for the United States. In contrast, places such as Latin America, Southeast Asia or Africa do not capture much more than the Russian imagination; the Kremlin realizes it can do little more there than stir the occasional pot, and resources are allotted (centrally, of course) accordingly.
(2) Politics: It is no secret that the Kremlin uses an iron fist to maintain domestic control. There are few domestic forces the government cannot control or balance. The Kremlin understands the revolutions (1917 in particular) and collapses (1991 in particular) of the past, and it has control mechanisms in place to prevent a repeat. This control is seen in every aspect of Russian life, from one main political party ruling the country to the lack of diversified media, limits on public demonstrations and the infiltration of the security services into nearly every aspect of the Russian system. This domination was fortified under Stalin and has been re-established under the reign of former President and now-Prime Minister Vladimir Putin. This political strength is based on neither financial nor economic foundations. Instead, it is based within the political institutions and parties, on the lack of a meaningful opposition, and with the backing of the military and security services. Russia’s neighbors, especially in Europe, cannot count on the same political strength because their systems are simply not set up the same way. The stability of the Russian government and lack of stability in the former Soviet states and much of Central Europe have also allowed the Kremlin to reach beyond Russia and influence its neighbors to the east. Now as before, when some of its former Soviet subjects — such as Ukraine — become destabilized, Russia sweeps in as a source of stability and authority, regardless of whether this benefits the recipient of Moscow’s attention.
(3) Social System: As a consequence of Moscow’s political control and the economic situation, the Russian system is socially crushing, and has had long-term effects on the Russian psyche. As mentioned above, during the Soviet-era process of industrialization and militarization, workers operated under the direst of conditions for the good of the state. The Russian state has made it very clear that the productivity and survival of the state is far more important than the welfare of the people. This made Russia politically and economically strong, not in the sense that the people have had a voice, but in that they have not challenged the state since the beginning of the Soviet period. The Russian people, regardless of whether they admit it, continue to work to keep the state intact even when it does not benefit them. When the Soviet Union collapsed in 1991, Russia kept operating — though a bit haphazardly. Russians still went to work, even if they were not being paid. The same was seen in 1998, when the country collapsed financially. This is a very different mentality than that found in the West. Most Russians would not even consider the mass protests seen in Europe in response to the economic crisis. The Russian government, by contrast, can count on its people to continue to support the state and keep the country going with little protest over the conditions. Though there have been a few sporadic and meager protests in Russia, these protests mainly have been in opposition to the financial situation, not to the government’s hand in it. In some of these demonstrations, protesters have carried signs reading, “In government we trust, in the economic system we don’t.” This means Moscow can count on a stable population.
(4) Natural Resources: Modern Russia enjoys a wealth of natural resources in everything from food and metals to gold and timber. The markets may take a roller-coaster ride and the currency may collapse, but the Russian economy has access to the core necessities of life. Many of these resources serve a double purpose, for in addition to making Russia independent of the outside world, they also give Moscow the ability to project power effectively. Russian energy — especially natural gas — is particularly key: Europe is dependent on Russian natural gas for a quarter of its demand. This relationship guarantees Russia a steady supply of now-scarce capital even as it forces the Europeans to take any Russian concerns seriously. The energy tie is something Russia has very publicly used as a political weapon, either by raising prices or by cutting off supplies. In a recession, this lever’s effectiveness has only grown.
(5) Military: The Russian military is in the midst of a broad modernization and restructuring, and is reconstituting its basic warfighting capability. While many challenges remain, Moscow already has imposed a new reality through military force in Georgia. While Tbilisi was certainly an easy target, the Russian military looks very different to Kiev--or even Warsaw and Prague — than it does to the Pentagon. And even in this case, Russia has come to rely increasingly heavily on its nuclear arsenal to rebalance the military equation and ensure its territorial integrity, and is looking to establish long-term nuclear parity with the Americans. Like the energy tool, Russia’s military has become more useful in times of economic duress, as potential targets have suffered far more than the Russians.
(6) Intelligence: Russia has one of the world’s most sophisticated and powerful intelligence services. Historically, its only rival has been the United States (though today the Chinese arguably could be seen as rivaling the Americans and Russians). The KGB (now the FSB) instills fear into hearts around the world, let alone inside Russia. Infiltration and intimidation kept the Soviet Union and its sphere under control. No matter the condition of the Russian state, Moscow’s intelligence foundation has been its strongest pillar. The FSB and other Russian intelligence agencies have infiltrated most former Soviet republics and satellite states, and they also have infiltrated as far as Latin America and the United States. Russian intelligence has infiltrated political, security, military and business realms worldwide, and has boasted of infiltrating many former Soviet satellite governments, militaries and companies up to the highest level. All facets of the Russian government have backed this infiltration since Putin (a former KGB man) came to power and filled the Kremlin with his cohorts. This domestic and international infiltration has been built up for half a century. It is not something that requires much cash to maintain, but rather know-how — and the Russians wrote the book on the subject. One of the reasons Moscow can run this system inexpensively relative to what it gets in return is because Russia’s intelligence services have long been human-based, though they do have some highly advanced technology to wield. Russia also has incorporated other social networks in its intelligence services, such as organized crime or the Russian Orthodox Church, creating an intricate system at a low price. Russia’s intelligence services are much larger than most other countries’ services and cover most of the world. But the intelligence apparatus’ most intense focus is on the Russian periphery, rather than on the more expensive “far abroad.”
Thus, while Russia’s financial sector may be getting torn apart, the state does not really count on that sector for domestic cohesion or stability, or for projecting power abroad. Russia knows it lacks a good track record financially, so it depends on — and has shored up where it can — six other pillars to maintain its (self-proclaimed) place as a major international player. The current financial crisis would crush the last five pillars for any other state, but in Russia, it has only served to strengthen these bases. Over the past few years, there was a certain window of opportunity for Russia to resurge while Washington was preoccupied with wars in Iraq and Afghanistan. This window has been kept open longer by the West’s lack of worry over the Russian resurgence given the financial crisis. But others closer to the Russian border understand that Moscow has many tools more potent than finance with which to continue reasserting itself.
This report may be forwarded or republished on your website with attribution to www.stratfor.com
By Lauren Goodrich and Peter Zeihan
Under the leadership of Vladimir Putin, Russia has been re-establishing much of its lost Soviet-era strength. This has given rise to the possibility — and even the probability — that Russia again will become a potent adversary of the Western world. But now, Russia is yet again on the cusp of a set of massive currency devaluations that could destroy much of the country’s financial system. With a crashing currency, the disappearance of foreign capital, greatly decreased energy revenues and currency reserves flying out of the bank, the Western perception is that Russia is on the verge of collapsing once again.
Consequently, many Western countries have started to grow complacent about Russia’s ability to further project power abroad.
But this is Russia. And Russia rarely follows anyone else’s rulebook.
The State of the Russian State
Russia has faced a slew of economic problems in the past six months. Incoming foreign direct investment, which reached a record high of $28 billion in 2007, has reportedly dried up to just a few billion. Russia’s two stock markets, the Russian Trading System (RTS) and the Moscow Interbank Currency Exchange (MICEX), have fallen 78 and 67 percent respectively since their highs in May 2008. And Russians have withdrawn $290 billion from the country’s banks in fear of a financial collapse .
One of Moscow’s sharpest financial pains came in the form of a slumping Russian ruble, which has dropped by about one-third against the dollar since August 2008. Thus far, the Kremlin has spent $200 billion defending its currency, a startling number given that the currency still dropped by 35 percent. The Russian government has allowed dozens of mini-devaluations to occur since August; the ruble’s fall has pushed the currency past its lowest point in the 1998 ruble crash.
The Kremlin now faces three options. First, it can continue defending the ruble by pouring more money into what looks like a black hole. Realistically, this can last only another six months or so, as Russia’s combined reserves of $750 billion in August 2008 have dropped to just less than $400 billion due to various recession-battling measures (of which currency defense is only one). This option would also limit Russia’s future anti-recession measures to currency defense alone. In essence, this option relies on merely hoping the global recession ends before the till runs dry.
The second option would be to abandon any defense of the ruble and just let the currency crash. This option will not hurt Moscow or its prized industries (like those in the energy and metals sectors) too much, as the Kremlin, its institutions and most large Russian companies hold their reserves in dollars and euros. Smaller businesses and the Russian people would lose everything, however, just as in the August 1998 ruble crash. This may sound harsh, but the Kremlin has proved repeatedly — during the Imperial, Soviet and present eras — that it is willing to put the survival of the Russian state before the welfare and survival of the people.
The third option is much like the second. It involves sealing the currency system off completely from international trade, relegating it only to use in purely domestic exchanges. But turning to a closed system would make the ruble absolutely worthless abroad, and probably within Russia as well — the black market and small businesses would be forced to follow the government’s example and switch to the euro, or more likely, the U.S. dollar. (Russians tend to trust the dollar more than the euro.)
According to the predominant rumor in Moscow, the Kremlin will opt for combining the first and second options, allowing a series of small devaluations, but continuing a partial defense of the currency to avoid a single 1998-style collapse. Such a hybrid approach would reflect internal politicking.
The lack of angst within the government over the disappearance of the ruble as a symbol of Russian strength is most intriguing. Instead of discussing how to preserve Russian financial power, the debate is now over how to let the currency crash. The destruction of this particular symbol of Russian strength over the past ten years has now become a given in the Kremlin’s thinking, as has the end of the growth and economic strength seen in recent years.
Washington is interpreting the Russian acceptance of economic failure as a sort of surrender. It is not difficult to see why. For most states — powerful or not — a deep recession coupled with a currency collapse would indicate an evisceration of the ability to project power, or even the end of the road. After all, similar economic collapses in 1992 and 1998 heralded periods in which Russian power simply evaporated, allowing the Americans free rein across the Russian sphere of influence. Russia has been using its economic strength to revive its influence as of late, so — as the American thinking goes — the destruction of that strength should lead to a new period of Russian weakness.
Geography and Development
But before one can truly understand the roots of Russian power, the reality and role of the Russian economy must be examined. From this perspective, the past several years are most certainly an aberration — and we are not simply speaking of the post-Soviet collapse.
All states economies’ to a great degree reflect their geographies. In the United States, the presence of large, interconnected river systems in the central third of the country, the intracoastal waterway along the Gulf and Atlantic coasts, the vastness of San Francisco Bay, the numerous rivers flowing to the sea from the eastern slopes of the Appalachian Mountains and the abundance of ideal port locations made the country easy to develop. The cost of transporting goods was nil, and scarce capital could be dedicated to other pursuits. The result was a massive economy with an equally massive leg up on any competition.
Russia’s geography is the polar opposite. Hardly any of Russia’s rivers are interconnected. The country has several massive ones — the Pechora, the Ob, the Yenisei, the Lena and the Kolyma — but they drain the nearly unpopulated Siberia to the Arctic Ocean, making them useless for commerce. The only river that cuts through Russia’s core, the Volga, drains not to the ocean but to the landlocked and sparsely populated Caspian Sea, the center of a sparsely populated region. Also unlike the United States, Russia has few useful ports. Kaliningrad is not connected to the main body of Russia. The Gulf of Finland freezes in winter, isolating St. Petersburg. The only true deepwater and warm-water ocean ports, Vladivostok and Murmansk, are simply too far from Russia’s core to be useful. So while geography handed the United States the perfect transport network free of charge, Russia has had to use every available kopek to link its country together with an expensive road, rail and canal network.
One of the many side effects of this geography situation is that the United States had extra capital that it could dedicate to finance in a relatively democratic manner, while Russia’s chronic capital deficit prompted it to concentrate what little capital resources it had into a single set of hands — Moscow’s hands. So while the United States became the poster child for the free market, Russia (whether the Russian Empire, Soviet Union or Russian Federation) has always tended toward central planning.
Russian industrialization and militarization began in earnest under Josef Stalin in the 1930s. Under centralized planning, all industry and services were nationalized, while industrial leaders were given predetermined output quotas.
Perhaps the most noteworthy difference between the Western and Russian development paths was the different use of finance. At the start of Stalin’s massive economic undertaking, international loans to build the economy were unavailable, both because the new government had repudiated the czarist regime’s international debts and because industrialized countries — the potential lenders — were coping with the onset of their own economic crisis (e.g., the Great Depression).
With loans and bonds unavailable, Stalin turned to another centrally controlled resource to “fund” Russian development: labor. Trade unions were converted into mechanisms for capturing all available labor as well as for increasing worker productivity. Russia essentially substitutes labor for capital, so it is no surprise that Stalin — like all Russian leaders before him — ran his population into the ground. Stalin called this his “revolution from above.”
Over the long term, the centralized system is highly inefficient, as it does not take the basic economic drivers of supply and demand into account — to say nothing of how it crushes the common worker. But for a country as geographically massive as Russia, it was (and remains) questionable whether Western finance-driven development is even feasible, due to the lack of cheap transit options and the massive distances involved. Development driven by the crushing of the labor pool was probably the best Russia could hope for, and the same holds true today.
In stark contrast to ages past, for the past five years foreign money has underwritten Russian development. Russian banks did not depend upon government funding — which was accumulated into vast reserves — but instead tapped foreign lenders and bondholders. Russian banks took this money and used it to lend to Russian firms. Meanwhile, as the Russian government asserted control over the country’s energy industries during the last several years, it created a completely separate economy that only rarely intersected with other aspects of Russian economic life. So when the current global recession helped lead to the evaporation of foreign credit, the core of the government/energy economy was broadly unaffected, even as the rest of the Russian economy ingloriously crashed to earth.
Since Putin’s rise, the Kremlin has sought to project an image of a strong, stable and financially powerful Russia. This vision of strength has been the cornerstone of Russian confidence for years. Note that STRATFOR is saying “vision,” not “reality.” For in reality, Russian financial confidence is solely the result of cash brought in from strong oil and natural gas prices — something largely beyond the Russians’ ability to manipulate — not the result of any restructuring of the Russian system. As such, the revelation that the emperor has no clothes — that Russia is still a complete financial mess — is more a blow to Moscow’s ego than a signal of a fundamental change in the reality of Russian power.
The Reality of Russian Power
So while Russia might be losing its financial security and capabilities, which in the West tend to boil down to economic wealth, the global recession has not affected the reality of Russian power much at all. Russia has not, currently or historically, worked off of anyone else’s cash or used economic stability as a foundation for political might or social stability. Instead, Russia relies on many other tools in its kit. Some of the following six pillars of Russian power are more powerful and appropriate than ever:
(1) Geography: Unlike its main geopolitical rival, the United States, Russia borders most of the regions it wishes to project power into, and few geographic barriers separate it from its targets. Ukraine, Belarus and the Baltic states have zero geographic insulation from Russia. Central Asia is sheltered by distance, but not by mountains or rivers. The Caucasus provide a bit of a speed bump to Russia, but pro-Russian enclaves in Georgia give the Kremlin a secure foothold south of the mountain range (putting the August Russian-Georgian war in perspective). Even if U.S. forces were not tied down in Iraq and Afghanistan, the United States would face potentially insurmountable difficulties in countering Russian actions in Moscow’s so-called “Near Abroad.” Russia can project all manner of influence and intimidation there on the cheap, while even symbolic counters are quite costly for the United States. In contrast, places such as Latin America, Southeast Asia or Africa do not capture much more than the Russian imagination; the Kremlin realizes it can do little more there than stir the occasional pot, and resources are allotted (centrally, of course) accordingly.
(2) Politics: It is no secret that the Kremlin uses an iron fist to maintain domestic control. There are few domestic forces the government cannot control or balance. The Kremlin understands the revolutions (1917 in particular) and collapses (1991 in particular) of the past, and it has control mechanisms in place to prevent a repeat. This control is seen in every aspect of Russian life, from one main political party ruling the country to the lack of diversified media, limits on public demonstrations and the infiltration of the security services into nearly every aspect of the Russian system. This domination was fortified under Stalin and has been re-established under the reign of former President and now-Prime Minister Vladimir Putin. This political strength is based on neither financial nor economic foundations. Instead, it is based within the political institutions and parties, on the lack of a meaningful opposition, and with the backing of the military and security services. Russia’s neighbors, especially in Europe, cannot count on the same political strength because their systems are simply not set up the same way. The stability of the Russian government and lack of stability in the former Soviet states and much of Central Europe have also allowed the Kremlin to reach beyond Russia and influence its neighbors to the east. Now as before, when some of its former Soviet subjects — such as Ukraine — become destabilized, Russia sweeps in as a source of stability and authority, regardless of whether this benefits the recipient of Moscow’s attention.
(3) Social System: As a consequence of Moscow’s political control and the economic situation, the Russian system is socially crushing, and has had long-term effects on the Russian psyche. As mentioned above, during the Soviet-era process of industrialization and militarization, workers operated under the direst of conditions for the good of the state. The Russian state has made it very clear that the productivity and survival of the state is far more important than the welfare of the people. This made Russia politically and economically strong, not in the sense that the people have had a voice, but in that they have not challenged the state since the beginning of the Soviet period. The Russian people, regardless of whether they admit it, continue to work to keep the state intact even when it does not benefit them. When the Soviet Union collapsed in 1991, Russia kept operating — though a bit haphazardly. Russians still went to work, even if they were not being paid. The same was seen in 1998, when the country collapsed financially. This is a very different mentality than that found in the West. Most Russians would not even consider the mass protests seen in Europe in response to the economic crisis. The Russian government, by contrast, can count on its people to continue to support the state and keep the country going with little protest over the conditions. Though there have been a few sporadic and meager protests in Russia, these protests mainly have been in opposition to the financial situation, not to the government’s hand in it. In some of these demonstrations, protesters have carried signs reading, “In government we trust, in the economic system we don’t.” This means Moscow can count on a stable population.
(4) Natural Resources: Modern Russia enjoys a wealth of natural resources in everything from food and metals to gold and timber. The markets may take a roller-coaster ride and the currency may collapse, but the Russian economy has access to the core necessities of life. Many of these resources serve a double purpose, for in addition to making Russia independent of the outside world, they also give Moscow the ability to project power effectively. Russian energy — especially natural gas — is particularly key: Europe is dependent on Russian natural gas for a quarter of its demand. This relationship guarantees Russia a steady supply of now-scarce capital even as it forces the Europeans to take any Russian concerns seriously. The energy tie is something Russia has very publicly used as a political weapon, either by raising prices or by cutting off supplies. In a recession, this lever’s effectiveness has only grown.
(5) Military: The Russian military is in the midst of a broad modernization and restructuring, and is reconstituting its basic warfighting capability. While many challenges remain, Moscow already has imposed a new reality through military force in Georgia. While Tbilisi was certainly an easy target, the Russian military looks very different to Kiev--or even Warsaw and Prague — than it does to the Pentagon. And even in this case, Russia has come to rely increasingly heavily on its nuclear arsenal to rebalance the military equation and ensure its territorial integrity, and is looking to establish long-term nuclear parity with the Americans. Like the energy tool, Russia’s military has become more useful in times of economic duress, as potential targets have suffered far more than the Russians.
(6) Intelligence: Russia has one of the world’s most sophisticated and powerful intelligence services. Historically, its only rival has been the United States (though today the Chinese arguably could be seen as rivaling the Americans and Russians). The KGB (now the FSB) instills fear into hearts around the world, let alone inside Russia. Infiltration and intimidation kept the Soviet Union and its sphere under control. No matter the condition of the Russian state, Moscow’s intelligence foundation has been its strongest pillar. The FSB and other Russian intelligence agencies have infiltrated most former Soviet republics and satellite states, and they also have infiltrated as far as Latin America and the United States. Russian intelligence has infiltrated political, security, military and business realms worldwide, and has boasted of infiltrating many former Soviet satellite governments, militaries and companies up to the highest level. All facets of the Russian government have backed this infiltration since Putin (a former KGB man) came to power and filled the Kremlin with his cohorts. This domestic and international infiltration has been built up for half a century. It is not something that requires much cash to maintain, but rather know-how — and the Russians wrote the book on the subject. One of the reasons Moscow can run this system inexpensively relative to what it gets in return is because Russia’s intelligence services have long been human-based, though they do have some highly advanced technology to wield. Russia also has incorporated other social networks in its intelligence services, such as organized crime or the Russian Orthodox Church, creating an intricate system at a low price. Russia’s intelligence services are much larger than most other countries’ services and cover most of the world. But the intelligence apparatus’ most intense focus is on the Russian periphery, rather than on the more expensive “far abroad.”
Thus, while Russia’s financial sector may be getting torn apart, the state does not really count on that sector for domestic cohesion or stability, or for projecting power abroad. Russia knows it lacks a good track record financially, so it depends on — and has shored up where it can — six other pillars to maintain its (self-proclaimed) place as a major international player. The current financial crisis would crush the last five pillars for any other state, but in Russia, it has only served to strengthen these bases. Over the past few years, there was a certain window of opportunity for Russia to resurge while Washington was preoccupied with wars in Iraq and Afghanistan. This window has been kept open longer by the West’s lack of worry over the Russian resurgence given the financial crisis. But others closer to the Russian border understand that Moscow has many tools more potent than finance with which to continue reasserting itself.
This report may be forwarded or republished on your website with attribution to www.stratfor.com
Monday, March 02, 2009
New-fangled casinos
Have you been to a casino lately? I visited one several weeks ago for the first time in fifteen or twenty years. They've made some substantial changes over the years. I wasn't ever very fond of casinos, so I'm not the best judge, but these changes didn't seem like an improvement to me:
- the slot machines no longer have handles to pull; instead, you push a button and the results are a digital display (i.e. there's nothing mechanical that spins around before stopping);
- the slot machines don't take coins or coin-like tokens; you swipe a paper card (mag stripe); I don't know what happens if you win, but obviously, no outpouring of coins;
- the roulette "wheel" doesn't turn; instead, lights just move around the wheel and come to a stop.
How is a gambler (excuse me, "gamer") supposed to have any confidence that the games are legit? Outcomes are obviously digitally determined and odds can be affected with a couple key strokes.
There is still plenty of SMOKING. So we didn't stay long enough to check out blackjack and craps tables. I wonder if they still have humans dealing paper cards/rolling dice.
Sunday, March 01, 2009
Paul Harvey
I have mixed feelings because he reported too often and too fast upon things he wasn't up on. But, Dad loved him so I post this RIP.
From USA Today:
Paul Harvey, the news commentator and talk-radio pioneer whose staccato style made him one of the nation's most familiar voices, died Saturday in Arizona, according to ABC Radio Networks. He was 90.
He was the uncle of the wife of probably the most influential spiritual advisers of my life so I'm even more conflicted.
I already miss the voice. I remember listening to it while travelling to or from vacations while trying to sleep under the rear window of my dad's Impala forty years ago.
From USA Today:
Paul Harvey, the news commentator and talk-radio pioneer whose staccato style made him one of the nation's most familiar voices, died Saturday in Arizona, according to ABC Radio Networks. He was 90.
He was the uncle of the wife of probably the most influential spiritual advisers of my life so I'm even more conflicted.
I already miss the voice. I remember listening to it while travelling to or from vacations while trying to sleep under the rear window of my dad's Impala forty years ago.
Re: Blog Integrity and "If that is true"
I'm wondering if "If that is true, and I'm skeptical, then..." would be enough of a caveat. If I posted something probably wrong but too funny or otherwise outrageous not to post with that caveat, I could sleep.
I would post the retraction/correction later if it were confirmed to be untrue, of course.
Well, I say that...maybe I would. If a totally frivolous subject matter, I might not. Also, there probably has to be some kind of time frame to be considered. If I made an errant post about Katrina, I'm not going to correct.
I'd love to have Miguel back, too.
I would post the retraction/correction later if it were confirmed to be untrue, of course.
Well, I say that...maybe I would. If a totally frivolous subject matter, I might not. Also, there probably has to be some kind of time frame to be considered. If I made an errant post about Katrina, I'm not going to correct.
I'd love to have Miguel back, too.
Blog integrity
Blog integrity matters to me. I don’t want to post anything untrue. When I get a fact wrong, I want to be corrected, so I can post an update and offer an apology. (I’m speaking for myself, but I believe that everyone who posts here has the same ethic and in fact have demonstrated that commitment to truth here.)
In November, I posted an entry about a Sarah Palin story that had been reported in the mainstream media. I’ve learned that it was this post that led to our blog brother Michael opting to end his participation here. Specifically, it's my understanding that he felt he couldn't participate in a blog that perpetrated a falsehood and perpetuated it in the face of the truth. I, for one, miss Michael here and would like to coax him back. I don't think I committed the ethical violation he thinks I did.
Let’s start with the underlying facts about that Sarah Palin story. (I know, I know... it feels like such ancient history.)
Actually, there were two mainstream media stories on the topic. First, there was Story A. On Nov. 5, 2008, Fox News and others reported that according to unnamed sources within the McCain campaign, Sarah Palin did not know that South Africa was a country and that she didn’t know which countries were part of NAFTA.
Story B came out a few days later stating that Martin Eisenstadt was the source for Story A.
Then, on Nov. 10, the news came that Martin Eisenstadt was a prankster; he had no connection to the McCain campaign. This meant that Story B was a hoax. In some news accounts, the distinction between stories A and B was blurred, giving the impression that Story A had also been proved a hoax, whereas really only Story B was disproved by the revelation of Eisenstadt’s true identity. Fox still stands by Story A: they have sources, still unnamed who are not Martin Eisenstadt, who claim Sarah Palin didn’t know the countries in NAFTA.
Now, turning to my blog entry about the story...
On Nov. 5, I posted this
entry:
This is phrased in an “if this is true” construction. Set that aside for the moment (I’ll come back to it) and take the post as a pronouncement of the truth of the story. On post date, Nov. 5, I had no reason to believe it wasn’t accurate; there had been no reporting counter to it. And I don’t think anyone thinks it wasn’t OK to post it the day I posted it.
In the following days, when the Eisenstadt hoax was perpetrated and uncovered, the news stories were fuzzy. It wasn’t clear to me then whether the hoax was limited to Story B (the identity of the sources) or if Story A was also a hoax. Michael’s interpretation was that Story A was a hoax.
On Nov. 11, Michael posted on it, citing Hot Air.
Michael also commented on my post, wondering if we could agree that my post should be retracted and quoted this text:
Michael provided no link to this. The quoted source, “Biegun”, wasn’t familiar to me and the text included no explanation of who he was. Given the absence of background info, I admit I didn’t pay any attention to it. That was an error on my part and I apologize. In preparing this post, I Googled the text from Michael’s comment to see if I could determine where it came from and I learned that it came from a National Review story and that Steve Biegun was involved with briefing Palin during the campaign.
So there was and there remains a discrepancy between professional media reports: a) Fox has two unnamed sources that say Story A is true; and b) National Review has a named, credible (as far as I know) source that says that Story A is not true. What’s an amateur blogger to do with such a situation?
Sure, one should be skeptical of unnamed sources. Someone may be lying or they may have misinterpreted something Palin said during debate prep. (Of course, the Watergate story was revealed by unnamed sources while others who were on the record lied to cover the story up.) It’s also possible that all the sources are telling the truth and both Fox and National Review are correct; maybe Biegun didn’t converse with Palin on these topics until after the unnamed sources had had a first discussion with her about them during which she learned some things.
Given the muddiness of the situation, I don’t think I had an ethical obligation to update or retract my post about the Palin Story A (and I did not post on Story B, so had nothing to correct in that regard). I’m open to input from my blog brothers on this, though. If we have a rule that we need to post on every competing version of stories we post about, I think we may have a lot of remedial blogging to do.
Yet another issue raised by my post is one of construction. I framed my post with an if-this-is-true format. It was a hedge, because I had some skepticism about whether it could be true. Michael made the case, using a hyperbolic example, that couching a post in an “if it’s true that...” construction doesn’t cure the post of being unethical if the “that” is untrue. I think he's generally right about that; and I agree that correction is warranted when it turns out to not be true. I do think, though, that hypothetical questions (that are by definition in an “if true” format and typically conjure something not true or not proven) are useful in finding the limits of others’ positions.
In November, I posted an entry about a Sarah Palin story that had been reported in the mainstream media. I’ve learned that it was this post that led to our blog brother Michael opting to end his participation here. Specifically, it's my understanding that he felt he couldn't participate in a blog that perpetrated a falsehood and perpetuated it in the face of the truth. I, for one, miss Michael here and would like to coax him back. I don't think I committed the ethical violation he thinks I did.
Let’s start with the underlying facts about that Sarah Palin story. (I know, I know... it feels like such ancient history.)
Actually, there were two mainstream media stories on the topic. First, there was Story A. On Nov. 5, 2008, Fox News and others reported that according to unnamed sources within the McCain campaign, Sarah Palin did not know that South Africa was a country and that she didn’t know which countries were part of NAFTA.
Story B came out a few days later stating that Martin Eisenstadt was the source for Story A.
Then, on Nov. 10, the news came that Martin Eisenstadt was a prankster; he had no connection to the McCain campaign. This meant that Story B was a hoax. In some news accounts, the distinction between stories A and B was blurred, giving the impression that Story A had also been proved a hoax, whereas really only Story B was disproved by the revelation of Eisenstadt’s true identity. Fox still stands by Story A: they have sources, still unnamed who are not Martin Eisenstadt, who claim Sarah Palin didn’t know the countries in NAFTA.
Now, turning to my blog entry about the story...
On Nov. 5, I posted this
entry:
This is phrased in an “if this is true” construction. Set that aside for the moment (I’ll come back to it) and take the post as a pronouncement of the truth of the story. On post date, Nov. 5, I had no reason to believe it wasn’t accurate; there had been no reporting counter to it. And I don’t think anyone thinks it wasn’t OK to post it the day I posted it.
In the following days, when the Eisenstadt hoax was perpetrated and uncovered, the news stories were fuzzy. It wasn’t clear to me then whether the hoax was limited to Story B (the identity of the sources) or if Story A was also a hoax. Michael’s interpretation was that Story A was a hoax.
On Nov. 11, Michael posted on it, citing Hot Air.
Michael also commented on my post, wondering if we could agree that my post should be retracted and quoted this text:
He says there’s no way she didn’t know Africa was a continent, and whoever is saying she didn’t must be distorting “a fumble of words.” He talked to her about all manner of issues relating to Africa, from failed states to the Sudan. She was aware from the beginning of the conflict in Darfur, which is followed closely in evangelical churches, and was aware of Clinton’s AIDS initiative. That basically makes it impossible that she thought all of Africa was a country._On not knowing what countries are in NAFTA, Biegun was part of the conversation that led to that accusation and it convinces him “somebody is acting with a high degree of maliciousness.” He was briefing Palin before a Univision interview, and talking to her about trade issues. He rolled through NAFTA, CAFTA, and the Colombia FTA. As he talked, people were coming in and out of the room, handing Palin things, etc. She was distracted from what Biegun was saying, and said, roughly, “Ok, who’s in NAFTA, what the deal with CAFTA, what’s up the FTA?”—her way, Biegun says, of saying “rack them and stack them,” begin again from the start. “Somebody is taking a conversation and twisting it maliciously,” he says.
Michael provided no link to this. The quoted source, “Biegun”, wasn’t familiar to me and the text included no explanation of who he was. Given the absence of background info, I admit I didn’t pay any attention to it. That was an error on my part and I apologize. In preparing this post, I Googled the text from Michael’s comment to see if I could determine where it came from and I learned that it came from a National Review story and that Steve Biegun was involved with briefing Palin during the campaign.
So there was and there remains a discrepancy between professional media reports: a) Fox has two unnamed sources that say Story A is true; and b) National Review has a named, credible (as far as I know) source that says that Story A is not true. What’s an amateur blogger to do with such a situation?
Sure, one should be skeptical of unnamed sources. Someone may be lying or they may have misinterpreted something Palin said during debate prep. (Of course, the Watergate story was revealed by unnamed sources while others who were on the record lied to cover the story up.) It’s also possible that all the sources are telling the truth and both Fox and National Review are correct; maybe Biegun didn’t converse with Palin on these topics until after the unnamed sources had had a first discussion with her about them during which she learned some things.
Given the muddiness of the situation, I don’t think I had an ethical obligation to update or retract my post about the Palin Story A (and I did not post on Story B, so had nothing to correct in that regard). I’m open to input from my blog brothers on this, though. If we have a rule that we need to post on every competing version of stories we post about, I think we may have a lot of remedial blogging to do.
Yet another issue raised by my post is one of construction. I framed my post with an if-this-is-true format. It was a hedge, because I had some skepticism about whether it could be true. Michael made the case, using a hyperbolic example, that couching a post in an “if it’s true that...” construction doesn’t cure the post of being unethical if the “that” is untrue. I think he's generally right about that; and I agree that correction is warranted when it turns out to not be true. I do think, though, that hypothetical questions (that are by definition in an “if true” format and typically conjure something not true or not proven) are useful in finding the limits of others’ positions.
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