The Line Dividing Russia and Turkey Runs Through Gyumri, Armenia

Russian Troops In Armenia Set For Greater Role

YEREVAN (RFE/RL)—Moscow and Yerevan are planning to sign a new military agreement that would assign Russia and its troops a greater role in ensuring Armenia’s security, official sources in both countries said on Friday.

The Interfax news agency reported that the two governments will soon amend a 1995 treaty regulating the presence of a Russian military base in Armenia. It said the Russian government has already submitted a relevant “protocol” to President Dmitry Medvedev, who is scheduled to visit Yerevan in mid-August.

It said one of the amendments proposed by the protocol makes clear that the Russian base will not only protect Russia’s interests but also contribute to Armenia’s national security.

Under another change cited by Interfax, Moscow will explicitly commit itself to providing its main South Caucasus ally with “modern and compatible weaponry and (special) military hardware.”

Speaking to RFE/RL’s Armenian service, a senior official at the Armenian Defense Ministry essentially confirmed the information. The official noted, though, that the Russian troops headquartered in the northern Armenian city of Gyumri are already tasked with defending Armenia. The planned changes in the Russian-Armenian treaty would simply underline that mission in more explicit terms, he explained.

The treaty went into effect in 1997 and is valid for 25 years. Interfax said its amended version would prolong the Russian military presence in Armenia by another 24 years and provide for its further automatic extension in the future.

The Russian base, which numbers some 4,000 personnel, and the broader military alliance with Russia has been a key element of Armenia’s national security ever since the Soviet collapse. Armenian leaders have repeatedly stated that despite forging closer security links with the West in recent years, they will not seek NATO membership in the foreseeable future.

Just last week, Yerevan and Moscow announced plans to significantly boost cooperation between their defense industries within the framework of the Collective Security Treaty Organization (CSTO), a Russian-led military alliance of seven ex-Soviet states. Top Russian and Armenian security officials said after talks in Yerevan that they have reached agreements envisaging the establishment of defense joint ventures.

Sahakian Rules Out Karabakh Under Azeri Control

Sahakian Rules Out Karabakh Under Azeri Control

Karabakh President Bako Sahakian

YEREVAN (RFE/RL)—Nagorno-Karabakh Republic President Bako Sahakian on Friday said the war with Azerbaijan is unlikely to resume soon and again ruled out any peaceful settlement that would place Karabakh back under Azerbaijani control.

“The likelihood of large-scale hostilities is small,” Sahakian told the Russian Interfax news agency in an interview. “First of all, there is a very effective balance of forces existing between the conflicting parties.”

“Secondly, war is fraught with unpredictable consequences. The international community and, in particular, the mediating countries are hardly interested in instability in a strategically important region like the South Caucasus,” he said.

Tensions along the main Armenian-Azerbaijani line of contact have risen since a June 18-19 firefight in northeastern Karabakh that left four Armenian soldiers dead. The incident was followed by fresh Azerbaijani threats to resolve the conflict by force.

“Such [ceasefire] violations can not change the existing balance of forces or undermine the spirit of our people and its army,” said Sahakian. Karabakh Armenian forces are capable of not only repelling an Azerbaijani offensive but also “taking hostilities deep into the enemy’s territory,” he added.

In a joint statement issued on Wednesday, the U.S., Russian and French mediators co-chairing the OSCE Minsk Group urged the conflicting parties to “reinforce the ceasefire and demonstrate a spirit of compromise.” They also confirmed that the parties failed to overcome their differences over the conflict’s resolution during recent negotiations.

Sahakian scoffed at Azerbaijani statements that Baku is only prepared to give Karabakh a high degree of autonomy. “We already had that autonomy during 70 years of Soviet rule and we all know how it ended,” he said. “A broad or any other autonomy within Azerbaijan is out of the question. The conflict with Azerbaijan can only be resolved through a formal international recognition of the independent Nagorno-Karabakh Republic.”

The Karabakh leader also insisted that the recent ruling by the International Court of Justice upholding the legality of Kosovo’s secession from Serbia is also applicable to the Armenian-Azerbaijani dispute.

Turkish-Azerbaijani association will work to eliminate Armenian lies – president

Turkish-Azerbaijani association will work to eliminate Armenian lies - president

Azerbaijan, Baku, July 31 /Trend, U.Sadikhova /

The Turkish-Azerbaijani associationcreated in Ankara will primarily work towards the elimination of false facts on Nagorno-Karabakh conflict and Khojaly tragedy being disseminated by theArmenians in the Western media, the president of the Association Sinan Ogantold Trend.

On Saturday with the participation of Turkish officials and representatives of the Azerbaijani State Committee for Work with the Diaspora the Turkish-Azerbaijani association was officially inaugurated in Ankara.

“The Association created today in Ankara will be lobbying to expand the dissemination of truthful information about the Nagorno-Karabakh conflict, the Khojaly tragedy and fraternal relations between Azerbaijan and Turkey, based on the “one nation – two states” principle”, Ogan, a member of the Expert Council of Trend and the head of the Turkish Center for International Relations and Strategic Analysis TURKSAM said by telephone from Ankara.

In addition to working in 81 Turkish provinces, the newly created association will also operate in European countries and the U.S., where the Armenian lobby is the most actively circulating false facts in the media,” said Ogan.

“The false information about the Nagorno-Karabakh, Khojali tragedy and the Turkish-Azerbaijani relations most often appear in European and American press, so that the Armenians have created the impression that they are innocent. This is one of the main problems of Azerbaijan and Turkey”, he said. “The Armenian lobby could even penetrate the Turkish media, leaving its mark there.

The association of friendship between the two countries will focus on the meetings and international conferences in European countries, to bring the true state of affairs,” Ogan said.

The conflict between the two South Caucasus countries began in 1988 when Armenia made territorial claims against Azerbaijan. Armenian armed forces have occupied 20 percent of Azerbaijan since 1992, including the Nagorno-Karabakh region and seven surrounding districts.

Armenian military forces committed genocide acts in the town of Khojali, Azerbaijan, with the population of 7,000 people on Feb. 26 1992. There were 3,000 people in the town at the time of attack.

As a result more than 600 people were killed, including 63 children, 106 women and 70 old men. 1,000 peaceful people of different age became physicly disabled during Khojali genocide. 8 families were completely annihilated, 130 children lost one parents, while 25 lost both of them. 1,275 peaceful residents were taken hostages, while the fate of 150 of them is still unknown.

Azerbaijan and Armenia signed a ceasefire agreement in 1994.The co-chairs of the OSCE Minsk Group – Russia, France, and the United States – are currently holding the peace negotiations.

Armenia has not yet implemented the U.N. Security Council’s resolutions on the liberation of the Nagorno-Karabakh region and the occupied territories.

“The work on lobbying and functioning of the Diaspora is free, it must go beyond Turkey and take root in Europe and the USA” – he said, adding that the association will actively cooperate with the Azerbaijani Diaspora in Turkey and the Azerbaijani community, to which great attention is paid by the leadership of Azerbaijan.

“In the future we look forward to working closely with the Azerbaijani and Turkish governments for the elimination of any forgery and strengthening of Azerbaijani-Turkish brotherhood,” said Ogan.

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Oil Spill Dispersants Shifting Ecosystem Impacts in Gulf, Scientists Warn

Oil Spill Dispersants Shifting Ecosystem Impacts in Gulf, Scientists Warn

By ELANA SCHOR of Greenwire

But scientists warn the oil’s ecological impacts are shifting, not ebbing, thanks to massive volumes of dispersants that have kept the crude beneath the waves.

“This is a management decision, to use dispersants,” College of William and Mary marine science professor Robert Diaz said yesterday. “It doesn’t make the oil go away, it just puts it from one part of the ecosystem to another.”

That dispersed oil now hovers, diluted in the water column, posing a challenge for scientists to track and measure the subsea plumes. Mapping the long-term effects of the nearly 2 million gallons of dispersant used by BP PLC may well be equally difficult, given the array of unanswered questions that surround the products’ rapid breakdown of oil droplets and their chronic toxicity.

In other words, while dispersants may have helped spare the Gulf’s birds, the chemicals are likely shifting dangers to other species lower in the food chain. The National Research Council described dispersant use in 2005 as “a conscious decision” to direct hydrocarbons to one part of the marine ecosystem, “decreasing the risk to water surface and shoreline habitats while increasing the potential risk to organisms in the water column and on the seafloor.”

Diaz spoke at a Capitol Hill briefing aimed at guiding future research into dispersants, which remain a politically volatile topic even as their use in the Gulf tapers off thanks to the capped Macondo wellhead. A May meeting at the University of New Hampshire’s Coastal Response Research Center, planned by government scientists and oil industry representatives, yielded a consensus judgment that dispersant use “has generally been less environmentally harmful than allowing the oil to migrate on the surface into the sensitive wetlands.”

Another group of scientists, however, issued a public plea (pdf) last week that decried dispersants and warned that, mixed with oil, the products “pose grave health risks to marine life and human health.”

Coastal Response Research Center co-director Nancy Kinner sought to put the May statement in context. “Nobody’s saying dispersants are great,” she said after yesterday’s briefing, though they are an effective alternative when mechanical methods of collecting spilled oil prove impossible.

Kinner outlined a series of gaps in the current system of testing dispersants. U.S. EPA’s analysis of their toxicity focuses on acute effects of exposure in two representative species, but “we do very little chronic toxicity work,” she said. That work would evaluate whether dispersants could heighten the mortality of larvae and other sensitive species that may not die off immediately but studies show are absorbing tiny droplets of dispersed oil into their shells.

Dispersant studies have not examined the products’ long-term effects and their consequences when applied at high pressure, Kinner added, which BP did by spraying the chemicals subsea near the leaking wellhead. Diaz added another mystery to the list, noting that current studies focus on marine organisms that may not be feeling the brunt of this summer’s dispersant assault.

“All the risks we’ve evaluated have used surface, shallow-water species that are easily maintained” in a laboratory setting, Diaz said. “We haven’t been using oceanic species to assess risk, and this is a key issue.”

Measuring long-term effects

The Marine Environmental Research Institute’s director, Susan Shaw, the organizer of last week’s statement against dispersant use, agreed that the current extent of testing falls short. Oil mixed with the Corexit dispersant used by BP “is probably having a lethal effect on all these [small] animals — that’s the food for the small fish.”

“The idea that the oil has disappeared and this is all fine is completely not true,” Shaw added. “There are long-term impacts that we need to look at and measure.”

Shaw also pointed to language in the 2005 National Research Council report that discussed the higher potential toxicity of chemically dispersed crude droplets, thanks to an increased surface area that exposes more of the oil’s polycyclic aromatic hydrocarbons.

The Obama administration sought this week to temper premature celebration of the shrinking surface oil. “What we have yet to determine is the full impact that the oil will have on not just the shorelines, not just the wildlife, but beneath the surface,” National Oceanic and Atmospheric Administration chief Jane Lubchenco told reporters. “And we have a very aggressive research effort under way to determine exactly that.”

How much funding that effort will receive remains an open question. Kinner said the National Research Council’s report outlined a $40 million plan for dispersant research, but a quarter of the money materialized over the past five years. Future research and development should bring “industry and government and NGOs to the table,” she said.

The first player on that list, however, raised concerns for Shaw, who described herself as “worried about the impact of having polluting industries funding the research. There’s no way that will not impact [things] — it’s not independent research.”

Copyright 2010 E&E Publishing. All Rights Reserved.

For more news on energy and the environment,

Beijing’s Asia power play

Beijing’s Asia power play

China’s economic and military might has grown in recent years along with its overseas trade and investment. China is becoming an oceanic power with growing clout in the Asia-Pacific region.

It demonstrated naval, air and amphibious strength this year by holding exercises in the South and East China seas, where it has unresolved territorial and maritime boundary disputes with several Southeast Asian countries and with Japan.

Both areas appear to have become core national interests, meaning that sovereignty and other claims to control by China will be vigorously defended.

Recently the Yellow Sea between Korea and China was added to the areas where Beijing is warning the United States and its allies not to intrude. “We resolutely oppose any foreign military vessel and planes conducting activities in the Yellow Sea and China’s coastal waters that undermine China’s security interests,” a Chinese foreign ministry spokesperson declared in July.

But Beijing may have overplayed its hand, miscalculated the resolve of the Obama administration, and underestimated regional alarm at assertive Chinese actions. Nearly half of the 27 delegations taking part in a July 23 meeting in Hanoi of the ASEAN Regional Forum on security raised concerns about potential instability in the South China Sea. Japan was one of the countries voicing its concern.

U.S. Secretary of State Hillary Clinton said that America had “a national interest in freedom of navigation, open access to Asia’s maritime commons, and respect for international law in the South China Sea.” She added that while the U.S. did not take sides on the competing territorial disputes (mainly involving China, Vietnam, Malaysia and the Philippines), Washington opposed the use or threat of force by any claimant.

Chinese Foreign Minister Yang Jiechi responded in a statement in English posted July 27 on the foreign ministry Web site. He said that Clinton’s “seemingly impartial remarks were in effect an attack on China and were designed to give the international community a wrong impression that the situation in the South China Sea is a cause for grave concern.” If navigation freedom and safety had been hindered, why had seaborne trade been growing so rapidly and why had China become the number one trading partner of many Southeast Asian countries, he asked rhetorically.

What may happen next? A key underlying problem is that China and the U.S. have sharply divergent views not about civilian shipping, but about the rights of foreign military ships and aircraft in waters and airspace around China.

China insists that any foreign naval vessels entering its territorial waters out to 12 nautical miles from the coast must first get permission. The U.S. says they have right to innocent passage under international law.

What has proven even more contentious in recent years are the divergent views of Beijing and Washington on military activities allowed in and over China’s Exclusive Economic Zone stretching out to as far as 200 nautical miles from the coast.

The U.S. says this zone is part of the high seas and international airspace where its military have rights of transit, maneuvering, exercise, flight operations, surveillance and intelligence collection, surveys, munitions testing and firing, communications and cable laying. China says such activities are prohibited without prior approval. However, Chinese naval ships or auxiliaries regularly conduct submarine operations, military surveys, and surveillance and intelligence gathering in the EEZs of Japan and other nations in the Asia-Pacific region without approval.

U.S. survey ships were harassed at least three times last year by Chinese vessels in China’s EEZ in the South China Sea.

The U.S. and South Korea recently started a series of sea exercises to deter North Korea. The first was held in waters to the east of Korea. But U.S. Defense Secretary Robert Gates said that some of the exercises later in the year would be held west of Korea in the Yellow Sea, despite China’s objections.

The U.S. has a long-standing Freedom of Navigation program. It is used to challenge what Washington regards as excessive coastal state claims over oceans and airspace anywhere in the world. The challenge can involve protests made through diplomatic channels, negotiations, and sending US warships and combat aircraft to assert rights of passage.

This is where the danger arises. China and the U.S. have no military crisis management system in place. China suspended military contacts in January after the U.S. said it would supply defensive arms to Taiwan, which Beijing regards as a rebel province. Among activities frozen were the bilateral Military Maritime Consultative Agreement set up to promote common understandings in conducting naval and air operations in line with international law.

Meanwhile, America is seen as hypocritical and the legitimacy of its position is being challenged because it is the only major power not to have signed the U.N. Law of the Sea Convention. Many countries do not agree with the way the U.S. interprets the law of the sea. Several dozen have sought to regulate military activities in their EEZs. These zones encompass nearly 30 percent of the world’s oceans.

But it’s China that’s trying to extend its jurisdiction as far as possible out to sea. The aim is to create a security buffer, limit the operating areas of U.S. naval and air forces, erode ties between America and its regional allies and friends, and put China in a stronger position to enforce claims to control islands, seas and resources far beyond its internationally recognized borders.

Michael Richardson is a visiting senior research fellow at the Institute of South East Asian Studies in Singapore.

Hamas Appeals To Arab Leaders In Lebanon, Using Dialogue of Rockets

Palestinian children play at a tunnel damaged in pre-dawn Israeli air strikes in Rafah town along the border with Egypt in the southern Gaza Strip

Israeli warplanes hit Gaza after new rocket attack

GAZA CITY, Palestinian Territories : Israeli warplanes launched two pre-dawn raids on tunnels in the southern Gaza Strip on Sunday after Palestinian militants fired rockets into Israel.

The Islamist Hamas movement ruling Gaza linked the flare-up of violence to Arab foreign ministers’ support for the principle of direct talks with Israel, saying Palestinians were “paying the price for (their) great error”.

A spokesman for the Israeli military confirmed the strikes targeted two tunnels used to smuggle arms into the Islamist Hamas-run enclave.

Palestinian medics said one person had been lightly injured in the overnight strike on the tunnels.

Late on Saturday, Gaza militants fired a second rocket on Israel in two days, with the makeshift projectile exploding near Sderot, causing damage at a university building but no casualties.

Israeli cabinet minister Benjamin Ben Eliezer told army radio that the army was “not going to sit there with its arms crossed in the face of these attacks”, but that its response would be measured.

“We do not want to set off an escalation because that is exactly what Hamas wants, which is why our response is hard but limited,” he said.

Hamas meanwhile condemned the “Israeli aggression” and reiterated its opposition to the relaunch of direct peace talks between the Palestinian leader Mahmud Abbas and Israel.

Arab foreign ministers meeting in Cairo last week had lent their support to the principle of talks while leaving their timing up to Abbas, as international pressure mounted on the Palestinians to return to face-to-face talks.

“Our people in Gaza are paying the price for the great error and political mistake committed by the Arab Peace Initiative follow-up committee against the Palestinian people,” Hamas spokesman Fawzi Barhum said.

Hamas, which is blacklisted as a terrorist group by Israel, the United States and the European Union, has adamantly opposed peace talks since they began in the early 1990s.

Israel routinely launches air strikes after rocket attacks from Gaza. The strikes rarely kill anyone, but on Friday a raid killed a senior Hamas military commander.

That strike came after a rare military-grade rocket fired from Gaza slammed into the southern Israeli port city of Ashkelon, damaging parked cars and shattering the windows of an apartment block but without wounding anyone.

Hamas vowed revenge for Friday’s raids that also wounded another eight people.

The Islamist movement has ruled Gaza since it drove out forces loyal to Abbas in June 2007, splitting the Palestinians into hostile rival camps. – AFP/ms

“Setting aside disputes and working for joint development.”

“Setting aside disputes and working for joint development.”

This quote is from the previous article on the US encroachment upon Chinese rights in the S. China Sea summarizes the Obama strategy which is used against both China and Russia to end-run around intransigent disputes which have blocked joint development ventures in the past.  Let’s ignore those big thorny issues while we make a few bucks.

Sounds pretty reasonable, doesn’t it.  That is the key to unreasonable suggestions like accepting US domination, ignore the magic show while we pursue the thrill of scamming the locals out of their valuable natural resources.  This time, you (China or Russia) can help us rob the natives.

Time to counter U.S. ploys

[The United States is using its military power, especially its navy, to control all the energy resources of the world that it can gain dominion over.  It does no good to deny this, or to challenge the assertion, hiding your head in the sand to what is going on in the world will not change anything, except perhaps to make it easier for this to be accomplished.  How can governments negotiate deals with a government that is working so hard to destroy them?  The shared hypocrisy of all world leaders, in this respect, makes all governments complicit in America's crimes, if all it takes to break the cycle and subvert the psyop is for one brave leader to take a stand and show the press whatever dirt he has access to.  It also means that because no people can depend upon their leaders to break this cycle of slow enslavement  it is the people's responsibility to change things.  Governments must be broken.]
By Li Bing

U.S. Secretary of State Hillary Clinton attends the U.S. - ASEAN Ministerial Meeting during the 43rd annual ASEAN Ministerial Meeting in Hanoi July 22, 2010. (Xinhua/Reuters Photo)
U.S. Secretary of State Hillary Clinton attends the U.S. – ASEAN Ministerial Meeting during the 43rd annual ASEAN Ministerial Meeting in Hanoi July 22, 2010. (Xinhua/Reuters Photo)

BEIJING, July 29 (Xinhuanet) — Instigating Southeast Asian nations over the South China Sea issue is a gambit aimed at containing China’s rise

The South China Sea is a body of water with rich natural resources and is of strategic significance to China in a geopolitical sense.

The current standstill in resolving territorial disputes in the South China Sea is being exploited as needed pretext for outside interference.

At the ASEAN (Association of Southeast Asian Nations) Regional Forum held in Vietnam on July 23, US Secretary of State Hillary Clinton said that resolving the South China Sea issue was “pivotal to regional stability” and suggested an international mechanism to settle the dispute.

The United States is the largest external power hampering a peaceful settlement of the South China Sea issue.

The Obama administration adjusted Washington’s Southeast Asian policy in an attempt to cozy up to ASEAN countries. The US is trying to strengthen its influence in the region so as to contain China by interfering with the ASEAN’s Treaty of Amity and Cooperation.

Washington has strengthened its military cooperation in the region, stealthily instigated and supported some local countries to scramble for the Nansha Islands, and has dispatched naval vessels to China’s exclusive economic zone to conduct illegal surveys.

Resolving the South China Sea issue is of great significance for China’s peaceful development. As far as national security is concerned, full control over the waters could enable the Chinese navy to better protect its seas. It is also helpful in maintaining security in the Asia-Pacific region.

By trying to internationalize the South China issue, the US wants to put off its resolution so as to contain China’s rise.

The US has multiple interests in Southeast Asia.

On a strategic level, Washington wants Southeast Asia to form the center of an “Asian strategic alliance” that includes Northeast Asia, Southeast Asia and India.

On a political level, the US continues to export “democracy” and Western values to Southeast Asian countries.

On the economic level, the US has close ties with Southeast Asia in terms of trade, finance and investment and considers the latter an important overseas market, resource supplier and investment destination.

At a military and security level, the US wants to set up more military bases and positively interfere in security affairs in the Asia-Pacific region.

All parties in the region covet the comparatively rich oil and gas reserves in the South China Sea, especially the US, which is keen to control energy resources all over the world, for which it never hesitates to launch a war.

Therefore, the US has made great efforts to complicate, extend and internationalize the South China Sea issue and it assiduously attempts to make the sea declared as international waters so that it can wantonly participate in oil exploitation in the region.

In addition, through cooperation with oil companies of Vietnam, Malaysia and the Philippines, American oil giants have participated in exploiting oil and gas in the South China Sea and the US military claims that it is responsible for providing security for these companies.

The US has a national interest in navigation in the South China Sea. In order to secure its control on important sea-lanes, the US doesn’t want to see China cooperating with other concerned countries to resolve the issue.

On the contrary, through high-intensity surveillance of China via warships and planes and holding of joint military drills with certain countries, the US is hindering a peaceful resolution of the issue.

The South China Sea issue not only concerns vying for jurisdiction of islands and reefs, delimitation of exclusive economic zones and division of marine resources, but also involves China’s strategic sea-lane safety and long-term development. Therefore, the issue should be accorded strategic importance as it concerns national security.

An important precondition for putting forward the doctrine of “setting aside disputes and working for joint development” is that China has indisputable sovereignty over the islands on the South China Sea. Setting aside disputes doesn’t mean indefinite abeyance, nor to abandon sovereignty.

China needs to strengthen fishery administration and maritime supervision so as to protect the rights and interests of Chinese fishermen, dispel illegal foreign survey ships, claim sovereignty in the South China Sea and contain the rampant plundering of its resources by others.

China has persisted in resolving the dispute through peaceful negotiations with neighboring countries. China never bullies the weak. At the same time, Beijing will never allow external forces, like the US, to interfere in the matter.

The author is a former research fellow at the Institute of International Studies, Central Party School.

(Source: China Daily)

De-Constructing Communism Into Crony Capitalism

[In converting from the Communist system to a capitalist one, the solution chosen has been to "privatize" the means of production.  The solution has benefited a few, while the majority had to endure increased prolonged levels of suffering and economic uncertainty   The conversion has been accomplished by rewarding the most powerful black marketeers who had stashed enough loot to form private corporations.  In every former Soviet country, just as government begins to look for corporations to handle service or production programs, mysteriously, investors (usually from the Jewish/Russian mafia) appear overnight.  Partners join with them and foreign funds begin to flow in to create the needed support structure.

The Communist restructuring ("perestroika") was an attempt to put oligarchs and their young, profit-oriented corporations in charge of social services.  In the end, the owners of the corporations amassed huge profits, while providing minimal levels of services.  The process generated insufficient government returns to run a modern state.  The result can be seen in the contrasts between pensioners begging on the streets and oligarchs sweltering in their jacuzzis, leaving governments reaches with unfunded budgets, forcing them with hat in hand to the IMF.

The merger of government with crony capitalism always produces the same end results wherever it takes root.  The hoarding of "profits" by a powerful few dries-up limited funds which should be flowing into social services.  Unfulfilled social needs inevitably produce  political tensions and widespread unrest, which sends the governments to the IMF once more.

The privatization of industry and services continues throughout the process, converting the state itself into the property of a few powerful individuals.  The end result will either be one giant corporation, or a massive pyramid of corporations, with a handful of individuals, or one committee, sitting at the top.  After that, the formula becomes fixed--government feeds the greed, which increases the need, which lights the fuse of the next colored revolution.

When is it America's turn?  When will the Second American Revolution begin?]

High Price Of Havens

KIEV, Ukraine — The use and abuse of offshore tax havens are reasons why Ukraine’s budget coffers are far from full. To compensate and keep state finances afloat, Ukraine‘s government has landed another multi-billion-dollar bailout loan from the International Monetary Fund.

For many elderly in richer nations, their last years are “golden” ones – free from the stress of having to worry about work or where their next meal will come from. But many Ukrainian pensioners can only make ends meet by begging, such as the woman above, in downtown Kyiv. This would not be the case if Ukraine’s rich elite stopped pilfering state assets and concealing profits from the government in offshore havens.

The nation‘s oligarchs and loyal political elite continue to profit from these sweet tax deals at the nation’s expense. When will the weight of their conscience become heavy enough to make them end this practice, which has cost the nation so dearly?

Back to 1982: It’s the height of the cold war, and the Soviet Union is desperately cultivating allies. The communist heartland signs a generous double taxation avoidance treaty with Cyprus– regulating which of the two countries has the right to levy taxes on subjects operating on both territories.

The landmark treaty gives left-leaning Cyprus most taxation rights upon companies operating in both countries.

The Soviet aim? To provide economic support to a rare European ally, similar to that enjoyed by Finland, and also to develop the Mediterranean island as a conduit for importing goods to the U.S.S.R.

Fast forward to 1992: The Soviet Union is gone, but the treaty lives on for each of the successor states, including Ukraine. Meanwhile, Cyprus has become an offshore tax haven with a corporate tax rate of 4.25 percent – a sweet deal.

With the Soviet republics embarked on a no-holds-barred path towards crony capitalism, the double tax avoidance treaty and low taxes are matches made in heaven for the asset-stripping post-Soviet nouveau riche. Capital flight from Ukraine takes off on a huge scale.

Fast forward further to July 2008: With a major economic crisis hiding just round the corner, Ukraine’s parliament votes on abrogating a treaty that critics claim has seen billions of dollars leave the country for the pockets of the rich over the previous seventeen years. The motion is backed by the government of Yulia Tymoshenko, but fails by only three votes.

Ironically, it was Ukraine’s Communist Party that failed to deliver the three votes needed. Petro Symonenko, leader of a Ukrainian Communist Party which like most domestic political groupings is, reputably, backed by big business tycoons, struggled to explain his party’s behavior.

Defensive, he said the party did not want to damage relations with a country that, as of February 2008, had a Communist Party President, Dimitris Christofias. Skeptics suspect motives closer to party coffers.

If the treaty had indeed been abrogated in July 2008, and the $5.5 billion in Ukrainian financial flows to Cyprus in 2009 subject to Ukraine’s standard 15 percent withholding tax, Ukraine’s state coffers would be around $1 billion richer today: roughly equivalent to the budget sequester recently imposed on Ukraine by the International Monetary Fund in order for the government to borrow more money.

Only since 2007 have information exchange agreements with Cyprus allowed an accurate assessment of Ukrainian funds leaked to Cyprus year after year – $5.5 billion to $6 billion. But one thing is certain: Few countries have a bigger tax haven problem than Ukraine – and few countries have a bigger fiscal problem.

Ukraine has a wealth structure redolent of untaxed income. Huge wealth is concentrated in the hands of a thin layer of super-rich, while most of the population scrapes by on salaries and pensions measured in hundreds of dollars per month. The country goes hat in hand to both Russia and the West.

According to Ukraine’s state statistics committee, direct Ukrainian investment in Cyprus over the last three years accounted for an incredible 92 percent of all outward-going foreign investment by Ukrainian companies. Experts assess the tax revenues lost each year due to the Cyprus double tax treaty at 1-2 percent of gross domestic product (GDP).

Suspension of a far less generous Russia-Cyprus treaty in 2007 immediately boosted Russian tax revenue by 0.6 percent, according to World Bank figures.

Now the international financial institutions Ukraine relies on for funding are demanding that the country ends the Cyprus exemption. “Ukraine should close tax loopholes connected with the U.S.S.R.-Cyprus double taxation treaty,” said Martin Raiser, head of the World Bank mission to Ukraine, who drew up a 100-day plan to rescue Ukraine’s state finances.

But with Ukraine’s parliament stuffed with businessmen – most of whom actively benefit from the treaty, including the current government’s main financial backers – implementing changes will not be easy.

A unique treaty

“The Cyprus-U.S.S.R. tax treaty, as it still applies in the case of Ukraine, is the most favorable double tax avoidance treaty concluded and in force,” said Sophie Stylianou, senior tax manager at Cyprus-based corporate law firm Eurofast Taxand.

“This is a magnificent treaty,” says Volodymyr Kotenko, head of tax and legal services in Ukraine for Ernst & Young. “It is unique. It exempts from tax virtually all income earned by Cyprus residents. And because there is no concept of beneficial owner, it may be equally used if the company registered in Cyprus is only an intermediary for a Ukrainian company or person.”

“The double tax treaty with Cyprus means that dividends, interest and royalties from Ukrainian companies to Cyprus residents are not taxed at all in Ukraine. These payments are only subject to tax in Cyprus. The Cyprus tax rate is zero on all of these items,” explains Hennadiy Voytsitskyi, head of law firm Baker McKenzie’s tax practice group in Kyiv.

“Moreover, while corporate profit tax in Cyprus is very low at only 10 percent, Cyprus itself has no withholding tax on financial flows to other countries, meaning Cypriot-registered companies can transfer money on to tax havens with even lower tax rates.”

“This all makes Cyprus a nice jurisdiction to siphon profits out of Ukraine,” says Voytsitskyi.

According to Volodymyr Didenko, partner for tax questions at leading Ukrainian law firm Magisters, the treaty allows Ukrainian business to achieve 20-30 percent tax savings. “This is not tax evasion, this is completely legal tax avoidance,” Didenko emphasized.

The double tax treaty is, in fact, only half the story, explained Svitlana Musienko, head of DLA Piper’s tax practice in Kyiv. The other half are the tax avoidance schemes companies employ to maximize their benefit from the treaty, which are reflected in corporate structure.

Ukrainian holdings maximize revenue channeled through Cyprus and minimize profits taxable in Ukraine. To do so they employ two mechanisms that enjoy worldwide notoriety for tax avoidance effects: transfer pricing and thin capitalization.

Transfer pricing means that subsidiaries belonging to one international holding skew the prices they charge each other so that company profit is realized where tax is least – invariably a tax haven.

Offshore shareholders use thin capitalization schemes to provide funding to their onshore companies in the form of loans instead of equity. The onshore company’s debt can thus exceed its actual capitalization many times over, hence the term.

The point is that the company then pays interest to shareholders on these outsize loans, instead of declaring profits. Interest is tax deductible for the company in Ukraine and exempt from tax for the offshore shareholder under the terms of the Cyprus double taxation treaty.

The Organization for Economic Cooperation and Development (OECD) states have now declared war on both thin capitalization and transfer pricing, although there are huge difficulties in enforcing such clampdowns, especially regarding transfer pricing.

But in Ukraine, things are a whole lot easier. Both practices are completely legal.

Ukraine has no legislation against transfer pricing, and the Cyprus double tax treaty allows for thin capitalization, according to Pablo Saavedra, tax expert at the World Bank.

According to Musienko, head of DLA Piper’s tax practice in Kyiv, Ukrainian companies use Cypriot intermediaries in three main ways: firstly as a holding vehicle, to conduct upstream distribution on profits from Ukraine to Cyprus, and then further on to a final shareholder in a tax haven such as British Virgin Islands.

Secondly, as a finance company used to shift taxable profits from Ukraine to Cyprus through thin capitalization schemes. Thirdly, as an intellectual property company, shifting taxable profits from Ukraine to Cyprus by way of paying royalty for instance for use of some trademark owned by a Cypriot company.

In addition, “most of the ownership vehicles for Ukrainian companies that tapped foreign capital markets for equity are registered off-shore,” said Volodymyr Nesterenko of BG Capital.

Thus, with the exception of state-owned companies, use of Cyprus-based intermediaries is more or less obligatory for Ukrainian big business. But pressure is mounting on Ukraine’s cash-strapped government to broaden its tax base and end tax loopholes. The shadow economy is currently estimated at around 50 percent, most of which is down to underreporting of earnings and of income.

Closing down the scheme

Something has to give, and the most likely candidate is the double tax treaty.

Ukraine and Cyprus already hammered out a replacement treaty in 2008. The new draft treaty incorporates far tougher terms, including a 10 percent withholding tax on interest and royalties, and 5 percent on dividends, according to Magisters’ Didenko.

However, the Cyprus parliament refused to accept the treaty, due to its anticipated impact on the country’s economy, dependent on the tax avoidance industry.

Ukrainian big business is also far from happy. “The 10 percent tax rate is unacceptable for business,” said Didenko. “Companies will not pay it.”

Cypriot finance minister Charilaos Stavrakis visited Kyiv at the end of June to continue negotiations on the issue, and indicated the Ukrainian side may have softened its position. “Ukrainians are very tough negotiators, but I’m still smiling,” he said at a meeting with tax experts, according to Ernst & Young’s Kotenko.

The Cypriot finance ministry refused comment on the provisions of the new treaty.

With Ukraine unlikely to abrogate the treaty unilaterally, “a horrible thing to do”, according to Kotenko, it still needs Cyprus to agree to a new version. The shadow cast on Cyprus by the mounting uncertainty is itself a stimulus for Cyprus to negotiate. “Our standard practice is to warn clients about the possibility of change,” said Kotenko.

There is also a new competitor to Cyprus in the eyes of Ukrainian business.

“Investors are now increasingly looking at alternative jurisdictions to structure their Ukrainian operations, such as the Netherlands, which now appears to be preferable in the long-term perspective,” said Serhiy Melnik of Salans law firm in Kyiv.

While Netherlands has a good double tax treaty with Ukraine, its domestic tax rates are substantially higher than Cyprus and it also collects withholding tax on funds moved out of the country.

The first signs of a shift in Ukrainian loyalties from Cyprus to Holland are already apparent. Experts point to recent changes in corporate structure of System Capital Management (SCM), the multi-sector industrial group owned by Ukraine’s richest man and high-profile government backer, Rinat Akhmetov.

Until 2009, SCM’s Ukraine subsidiaries were owned by Cyprus holding company, SCM Ltd, and the company’s website still displays them as such. However, in December 2009, as part of a corporate structure overhaul, SCM eliminated its Cyprus intermediary from the power sector holding DTEK, in favor of a Netherlands-registered holding company DTEK B.V.

SCM’s massive Metinvest holding, one of Europe’s largest steelmakers, is also owned by Dutch-registered Metinvest B.V. SCM investor relations manager Jock Mendoza-Wilson said the reason for the moves was “enhanced transparency.”

With the thirtieth anniversary of the Soviet-Cyprus double tax treaty approaching, its anomalous role in the flawed development of post-Soviet capitalism may be finally drawing to an end.

Source: Kyiv Post

Don’t Blame Pakistan For The Failure Of The War

Don’t Blame Pakistan For The Failure Of The War

Don’t Blame Pakistan For The Failure Of The WarImran Khan (Pakistan)

It is unfortunate that the US was unable to use the window of opportunity that it had in the immediate aftermath of the removal of the Taliban Government in late 2001. It could have brought in a truly broad-based Afghan government and invested in the development of the country. Instead, it continued its military actions and brought corrupt and criminal elements into power in Kabul.

Before the West invaded Afghanistan my country had no suicide bombers, no jihad and no Talibanisation.

There is now a general recognition that the war in Afghanistan cannot be won militarily. All the Taliban have to do to win is not to lose. The Americans won’t stay and everybody knows that.

The focus has come to rest on the inevitable need to talk with all the militant groups in Afghanistan. While most important players are ready to talk peace, the US remains confused and has still to straighten out its policy. This confusion is once again taking its toll, especially on Pakistan.

As the US and Nato realise the failure of their military policy in Afghanistan, they are seeking to shift the centre of gravity of the war into the north west of Pakistan, the region known as the Federally Administered Tribal Areas (FATA). One of the fears raised in the West at the prospect of withdrawing troops from Afghanistan is that it will lead to a Taliban- controlled nuclear Pakistan. That fear betrays a total ignorance about the evolution of the Taliban movement as well as the impact of the War on Terror on Pakistan.

Remember, there was no Pakistani involvement in 9/11. Nor throughout the period of the Taliban regime in Kabul was there Talibanisation in Pakistan .

When the Americans were drawing up their military response to the 9/11 attacks, they drew up a list of seven conditions for Pakistan to meet to attract US support. The assumption was that General Pervez Musharraf, the former President of Pakistan, might agree to three or four. Instead he unilaterally signed up for the lot. These conditions were a total violation of the human rights of the people of Pakistan and the sovereignty of the country.

This was a leader with whom President Clinton had refused to shake hands when he came to Pakistan before 9/11, for fear of being seen to support a dictator. It was quite shameless how the Pakistani leadership capitulated and how the US gave Musharraf the embrace of legitimacy. This was reminiscent of the Cold War era when tinpot dictators were routinely supported by the US.

In 2004 Pakistan’s Government sent troops into Waziristan, where al-Qaeda was allegedly present. I was one of the only politicians from outside the tribal areas who had been to Waziristan and I opposed the move in Pakistan’s Parliament. Anyone who knows the region and its history could see it would be a disaster.

Until that point we had no militant Taliban in Pakistan. We had militant groups, but our own military establishment was able to control them. We had madrassas, but none of them produced militants intent on jihad until we became a frontline state in the War on Terror.

The country is fighting someone else’s war. We never had suicide bombings in our history until 2004. Now we have 30 to 40 deaths a day from shells or bombings and the suicide attacks continue to increase. While we have received about $15 billion in aid from the US, our own economy has lost about $50 billion.

We have borrowed a record amount of money from the International Monetary Fund, which was only given to us because of our role in the war, not because we could afford to pay it back. Our social and economic fabric is being destroyed because of the conditions that the IMF has imposed.

Millions of our people have been displaced and a massive radicalization of our youth has taken place as they see the Pakistani state becoming a puppet doing US bidding. The military operations by Pakistan in FATA have led to 40,000 casualties in indiscriminate aerial bombardment and ground fire.

The attacks by US drones, in which the Government of Pakistan is complicit, have also killed thousands of civilians, leading to a growing hatred becoming embedded among the local population. There is deep resentment of the war in the frontier regions, where high unemployment feeds the discontent.

The war in Afghanistan is justified as a stabilizing force for Pakistan, whereas in truth the country is collapsing under the pressure. We are like Cambodia in the Vietnam War. After the Wikileaks revelations yesterday reports are being floated that the ISI, Pakistan’s intelligence service, is aiding the Afghan militancy. The fact is that the ISI is not that powerful, but certainly in an environment of chaos and uncertainty Pakistan will need to protect its interests through all means necessary.

It is unfortunate that the US was unable to use the window of opportunity that it had in the immediate aftermath of the removal of the Taliban Government in late 2001. It could have brought in a truly broad-based Afghan government and invested in the development of the country. Instead, it continued its military actions and brought corrupt and criminal elements into power in Kabul.

Pakistan, supposedly an ally of the US, is bearing the brunt of American failure in Afghanistan. A recent poll showed that 80 per cent of Pakistanis consider the US a bigger threat to their country than India. Nor is this view about the US solely because of the “War on Terror”. Pakistanis also blame the US for brokering the “National Reconciliation Order”, which was intended to sustain Musharraf in power while also bringing rogue Pakistani politicians back into the political landscape.

The result is a total collapse of governance in Pakistan today. There is no danger of Talibanisation in Pakistan but there is a very real threat of chaos and radicalization, especially of the youth.

There is only one solution to this chaos. This is to implement an immediate ceasefire and commence talks with all militant groups in Afghanistan. Either America leaves or Pakistan withdraws from this war.

The US should not worry about Pakistan. Once the bombing stops, it will no longer be jihad and the suicide attacks will immediately subside. About 18 months ago the former head of the CIA’s Kabul station, Graham Fuller, wrote in the International Herald Tribune that once the US leaves the region Pakistan will be stable.

Political leaders in the US and UK should realize that people in the streets of New York and London are not threatened by the people in the mountains of Afghanistan and Pakistan but by the growing radicalization of their own marginalised Muslim youth.

Imran Khan is the founder and chairman of Pakistan Tehreek-e-Insaf (the Movement for Justice Party) and a world cup winning national cricket team captain.

SourceCounter Currents

On psychopaths

On psychopaths

Saturday, July 31, 2010
Charles Ferndale
On July 14, The News ran an article about two anonymous people (supposedly psychiatrists working in Pakistan) who claimed that all those in government found to have fake educational qualifications are dangerous psychopaths. It must be said that these two people are reckless psychiatrists. No good psychiatrist would ever diagnose someone as being a psychopath just because that person had a fake degree. It may be that all Pakistanis in government with fake qualifications are indeed psychopaths; it may also be that none are. Further, it may be that all members of the Pakistani political establishment are psychopaths, or that some are, or that none are. But none of these claims could be shown to be true only on the basis of their possessing, or not possessing, fake qualifications.
Having fake educational qualifications is neither a necessary nor sufficient condition for a reliable diagnosis of psychopathy. Diagnosing psychopaths is an exceedingly difficult thing to do accurately and should never be done without long, careful observation by dispassionate professionals experienced in the field, accompanied by detailed knowledge of the person’s cultural background and personal history.
It is true that all psychopaths do persistent harm to themselves and to those around them. It is also true that they invariably seek and abuse power. But not all people who meet these criteria are psychopaths and psychopaths are not necessarily the most destructive of those who seek and abuse power. Nevertheless, psychopaths with power are dangerous in proportion to the power they hold, so it is vital they be kept from power.
How, then, can one decide whether or not a person is a psychopath? A detailed knowledge of the person’s background is essential. Psychopaths show themselves to be such at a very early age, often as young as six, but usually at around the age of fourteen. They have a tendency to be cruel to other children and to animals. They are persistently selfish and always take more than they give, by force if necessary, or by subterfuge if that is easier. They are persistent liars and manipulators of others. They have no shame when caught in misdemeanours.
Though they are sometimes skilled at the use of moral language, their use of it is shallow and insincere. Morality is not something they really understand. Their use of the language of feeling is no more sincere than that of a talking computer. They use the language of feeling only to manipulate others.
They are morally blind (or what early German psychiatrists called "value blind"). They are oblivious of the rights and interests of others. They appear to have imperfect concepts of other minds. They cannot imagine others having interests and feelings separate from their own; for them, others only think what the psychopaths think they think, which is why psychopaths are so irritated when others act independently. They are unable to share the suffering of other sentient creatures. They have no feeling for others. They have poor foresight and an imperfect grasp of the motives of others. Their understanding of anything is patchy and inconsistent.
They despise kindness, and see it only as an opportunity to take advantage of the kind person. They are predators, swindlers, thieves, cheats, fabricators of tall tales, heartless opportunists, greedy, insatiable. But even the possession of many of these characteristics does not, in itself, settle the issue of whether or not they are psychopaths.
Psychopathy is a syndrome. It is a set of characteristics, possessed to a greater or lesser degree. To some degree, possession of all, or certain, of these characteristics defines a person as a psychopath. The pattern and degree to which these characteristics are possessed define the type of psychopath a person may be. Psychopaths differ in the severity and pattern of their personality disorder. Only a small minority commit appalling crimes like serial murders. Many are found in governments, banks, the legal professions, in armies, universities, schools, hospitals–indeed they can be found anywhere.
Estimates of the number of psychopaths among us range from 10 per cent (Hervey Cleckley: The Mask of Sanity) to 2 per cent (Robert D Hare: Without Conscience: The Disturbing World of the Psychopaths Among Us). A distinction must be made between people who are psychopaths and those who only behave psychopathically under certain circumstances. Soldiers are trained to be psychopathic in battle. Some terrorists, including those working for mercenary organisations and national secret services, often behave psychopathically, but may, or may not, be psychopaths.
Some terrorists may be altruists. The selection process for the British SAS is supposed to screen out real psychopaths, who tend to make bad soldiers, because they are unreliable. Occasionally, history favours psychopaths and such people rise to great power and do terrible damage (Hitler was almost certainly a psychopath, but the picture is confused, because he developed during the First World War an addiction to various drugs (e.g., amphetamines), the effects of which mimic psychopathy).
Psychopaths are never like the fictional character Hannibal Lecter in the film Silence of the Lambs. Hannibal Lecter is an entirely fictional character, the likes of which has probably never existed. Psychopaths seldom exude evil. They are usually not frightening to behold (except for a tendency amongst some of them to have an intense, though blank, stare). What makes psychopaths usually so dangerous is not that they look obviously evil; it is their abundant charm, which can be so great that even when their true natures have been unmasked, the community in which they have lived, and to members of which they have done great damage, flock to their support and refuse to believe that they are bad people.
Psychopaths smile a lot. Two experienced, streetwise war journalist friends of mine were left for dead in a room at Flashman’s Hotel in Rawalpindi by the infamous Charles Sobhraj and his girlfriend. They were entirely taken in by him at Jan’s Hotel in Peshawar. When I asked them whether they had not sensed anything ominous about Sobhraj, they said, "He appeared no more evil than you do. We, who are not naïve people, trusted him completely. We were grateful to him for his help." The "medicines" he was administering to them, to treat the poison he had put in their drinks, knocked them unconscious, so they could be robbed. Why did he not kill them, as was his custom? They think it was because he liked their dog. Sobhraj was an admirer of the religion of Thugee (Thugs were always charming, before they strangled their innocent victims. Were all thugs psychopaths? An interesting question, which there is no space here to explore).
Psychopathic murderers are frequently released from jail on parole, having fooled the parole board into thinking they are reformed. They promptly commit more murders. Since about 25 per cent of all people in jail are psychopaths, parole officers, who are experienced with such people, should not be easy to fool. But even the world’s greatest expert in psychopathy, Robert D Hare, admits to having been taken in, from time to time, by people in jail whom he had every reason to believe were psychopaths. So, some of the nicest people you know may be psychopaths. Most do persistent, but relatively minor, damage to themselves and others.
Psychopathy is almost certainly an untreatable condition–psychopaths can probably never be reformed, so a psychopath is usually a psychopath for life. The severity of psychopaths’ destructiveness tends, statistically, to decline after the age of forty. This does not mean that every psychopath over the age of forty is safe; far from it.
The two psychiatrists who diagnosed the possessors of fake degrees as being dangerous psychopaths, though reckless, did however raise an important issue. Psychopaths seek and abuse power. And when circumstances put them into a position of power they wreak havoc. It should therefore be a constitutional requirement that all those who seek power in any political system be screened for psychopathy. Had this been common practice in the past the world would certainly have been spared some terrible catastrophes.
Fortunately, there is a reasonably accurate diagnostic tool which, used by experts, can usually sort the psychopaths from other types of opportunists. It was designed by Robert Hare and is called the Psychopathy Checklist. It has been repeatedly validated by years of use.
Here are the main features possessed by psychopaths. First, their emotional and interpersonal traits: they are glib and superficial, egocentric and grandiose, they lack guilt and remorse, they lack empathy, they are deceitful and manipulative, and they are emotionally shallow, they are dedicatedly selfish. Second, they are impulsive, have poor control over what they do, have a marked need for excitement; they are irresponsible, show behavioural problems early in life, are bad at getting on with others for any extended period; they break promises and abuse friendships in many other ways; they take advantage of others whenever they can with scant foresight.
Each of these traits can be possessed to a greater or lesser degree, but all psychopaths show all these traits to some degree. Each of these characteristics is more complex than the above descriptions suggest. All are described in more detail, along with examples from case histories, in Robert Hare’s books, including Without Conscience.
Readers may be forgiven for thinking that all the politicians of the major parties in Pakistan fit this profile. (I exclude Imran Khan until there is reason to include him.) Nevertheless, though politics is a profession that is likely to attract psychopaths, most Pakistani politicians are almost certainly not psychopaths. Nevertheless, if all Pakistani politicians were screened by a well trained professional (unconnected with Pakistani politics), I think that at least one prominent member of Pakistan’s political establishment might fail the test. But he is a psychopath not because his educational qualifications are bogus, but on the basis of quite extensive background evidence.
The writer was trained in experimental psychology and neurophysiology at Oxford and in abnormal human psychology at the Institute of Psychiatry, London. Email: