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- The US government, much to the chagrin of Senator Ted Cruz, is set to officially relinquish the Department of Commerce’s oversight of the Internet Corporation for Assigned Names and Numbers (ICANN) as of tomorrow night at midnight. ICANN is a California nonprofit that has supervised website domains since 1998, essentially under subcontract from the Commerce Department.
- Under the Obama transition plan oversight by the U.S. Commerce Department would end and be replaced by a multi-stakeholder community, which would include the technical community, businesses, civil society and governments.
- Cruz had attempted to block the internet transition by tying the recently passed funding bill to the reversal of the ICANN turnover. That said, apparently his harsh admonishments on the Senate floor failed to draw enough support from his fellow republicans to force a government shutdown over the topic.
“In 22 short days, if Congress fails to act, the Obama administration intends to give away control of the Internet to an international body akin to the United Nations,” Sen. Cruz said. “I rise today to discuss the significant, irreparable damage this proposed Internet giveaway could wreak not only on our nation, but on free speech across the world.”
“The Obama administration is instead pushing through a radical proposal to take control of Internet domain names and instead give it to an international organization, ICANN, that includes 162 foreign countries. And if that proposal goes through, it willempower countries like Russia, like China, like Iran to be able to censor speech on the Internet, your speech. Countries like China, Russia, and Iran are not our friends, and their interests are not our interests.
“Imagine searching the Internet and instead of seeing your standard search results, you see a disclaimer that the information you were searching for is censored. It is not consistent with the standards of this new international body, it does not meet their approval. Now, if you’re in China, that situation could well come with the threat of arrest for daring to merely search for such a thing that didn’t meet the approval of the censors. Thankfully, that doesn’t happen in America, but giving control of the Internet to an international body with Russia, and China, and Iran having power over it could lead to precisely that threat, and it’s going to take Congress acting affirmatively to stop it.
- Supporters of the plan counter that critics’ harsh rhetoric fails to recognize that ICANN will be turned over to management by an independent board with representation from all over the world with no single body holding undue influence over decisions. According to Yahoo, the transition has drawn support from Google and several democrat senators who commented to TechCrunch that “the internet belongs to the world, not to Ted Cruz.”
“The transition will further strengthen the internet as a stable, resilient and secure tool for empowering billions of people across the globe for decades to come.”
Google senior vice president Kent Walker also endorsed the shift, saying it would “fulfill a promise the United States made almost two decades ago: that theinternet could and should be governed by everyone with a stake in its continued growth.”
“The internet belongs to the world, not to Ted Cruz,” Senators Brian Schatz and Chris Coons, and Representatives Anna Eshoo, Doris Matsui, Frank Pallone and Mike Doyle said in an article for the TechCrunch news site.
“If the Republicans successfully delay the transition, America’s enemies are sure to pounce. Russia and its allies could push to shift control of the internet’s core functions to a government body like the UN where they have more influence.”
- But, in a last ditch effort to block the transition, 4 state attorneys general from Arizona, Oklahoma, Nevada and Texas, have filed a lawsuit in a Texas federal court alleging that the transition, in the absence of congressional approval, amounts to an illegal forfeiture of U.S. government property. According to Politico, the lawsuit also expresses concern that the reorganized ICANN would be so unchecked that it could “effectively enable or prohibit speech on the Internet.”
“Trusting authoritarian regimes to ensure the continued freedom of the internet is lunacy,” said Texas Attorney General Ken Paxton in a statement. “The president does not have the authority to simply give away America’s pioneering role in ensuring that the internet remains a place where free expression can flourish.”
“I think, as a matter of philosophy, turning this over ultimately is maybe a great idea in the long run,” the attorney general said, “but I do think there are a lot of stakeholders involved, and we want to make sure no one in the future can limit or suppress access to the internet or punish people for speaking their minds.”
- Given Obama’s recent humiliating loss on the 9/11 lawsuit bill, we’re sure that efforts to block his internet transition plan will draw some attention at the White House.
- If folks don’t like their healthcare then they can give us all their money so we can give it to other folks.
- New IRS disclosures from the 2014 tax year reveal the specifics of how the so-called “Affordable Care Act” helped to facilitate Obama’s desire to, as he famously told “Joe the Plumber”, “spread the wealth around.”
- To be precise, in 2014, Obamacare spread $11.2BN of wealth around, in the form of healthcare premium tax credits, with nearly 80% going to taxpayers reporting less that $35,000 of adjusted gross income. Moreover, the average tax filer received $3,600 of healthcare premium support with those in the lowest tax bracket receiving over $5,500 per person.
- Equally disturbing is the fact that 8.1mm tax filers, those who elected to forgo health insurance, were hit with $1.7BN in Obamacare penalties…call it the “young and healthy tax”. Ironically, 40% of the penalties fell upon people making less than $35,000 per year…the very same people that Obama apparently intended to “help”.
- Here’s how the subsidies and penalties broke down by tax bracket (the original IRS table can be found here):
- Of course, the real tragedy of Obamacare is that even if those 8.1mm young and healthy people wanted to buy health insurance, many of them have now likely been priced out of the market as premiums have soared and coverage “options” have vanished as insurers have pulled out of exchanges all over the country (something we discussed at length in a post entitled “Obamacare On “Verge Of Collapse” As Premiums Set To Soar Again In 2017″). In essence, while the bill has seemingly “helped” the 3.1mm people receiving subsidies in the chart above it has trapped the 8.1mm young and health people with a permanent tax increase as they are now even less likely to buy health insurance after Obamacare has driven up the rates astronomically.
- But, of course, the Obamacare penalties will only get even worse from here. According to The Washington Free Beacon, in 2014, uninsured individuals were required to pay the greater of either a flat penalty of $95 for each uninsured adult or 1% of their household’s adjusted gross income. That said, the penalties are set to increase in 2016 to the greater of a flat fee of $695 or 2.5% of AGI. According to the Congressional Budget Office, taxpayers are expected to pay penalties of $4BN in 2016 and $5BN annually from 2017 through 2024.
- Senator Tom Cotton (R-Arkansas), also pointed out the irony in the fact that Obamacare is now penalizing many taxpayers who can no longer afford healthcare simply because Obamacare itself has driven up premiums to such an extent they’ve been rendered completely unaffordable.
“It’s not surprising that the Obamacare mandate numbers are worse than the administration first claimed,” said Sen. Tom Cotton (R., Ark.). “Obamacare penalizes taxpayers who can no longer afford insurance that Obamacare made unaffordable.”
“As Obamacare continues to unravel, things will only get worse,” Cotton said. “The legacy of Obamacare is skyrocketing premiums, unaffordable deductibles, the destruction of the individual insurance market, and tax penalties on Obamacare’s victims.”
- The European banking crisis simply doesn’t let up. Currently, the big two German banks are grabbing the headlines away from the Italian banks, due to their size and the damage they could do to the global financial system. Other banks are in bigger trouble still, and some have already collapsed, with bailouts and bail-ins getting lined up.
- Deutsche Bank had to endure a horrendous Monday after it was leaked on Friday that Merkel had refused to entertain bailing out the bank before the general elections a year from now. Merkel’s popularity has gotten broadsided recently, and bailing out bank bondholders with taxpayer money is just not popular at the moment.
- Then Commerzbank, in which the government already owns a stake of 16% as a result of the bailout during the Financial Crisis, graced the headlines with leaks that it would lay off 9,000 employees, nearly one-fifth of its workforce. This will cost about €1 billion, according to the sources. To pay for it, the bank will scrap its dividend for 2016 to reduce the bleeding and preserve capital, in what is turning out to be the hellish environment of negative interest rates.
- We’ve been writing about the European banking crisis for a long time, it seems, as it drags on, and meanders from one country to another, and sometimes we write about it in an amused fashion because we’ve got to keep our sense of humor in all this gloom.
- But investors who believed in all the hype and in Draghi’s promises and in Merkel’s strength and in the willingness of all of them to do whatever it takes to protect bank bondholders and stockholders, and who believed in the miracle of Spain’s recovery, and in Italy’s new government and what not – well, they’re not amused.
- For them, it has been bloody. The global financial crisis got swept under the rug. Then the euro debt crisis took down some banks at the periphery, and taxpayers stepped in to bail out the bondholders, mostly, and a lot more things got swept under the rug. But the problems weren’t solved. And as the decomposing assets under the rug kept exuding their pungent odor, investors held their nose and played along for a while.
- But now it’s just getting worse. And investors are wondering what exactly is under these rugs – or maybe they’d rather not know for it’s too ugly to behold. And every time someone does look, for example at the Italian banks, they find even bigger problems that have started to metastasize.
- This banking crisis has the potential to transmogrify into a financial crisis. All it takes is for one of the big ones to suddenly topple. The flow of credit would freeze up instantly. In an economic system that depends on credit, and whose lifeblood is credit, such an event is a financial crisis.
- The problem isn’t restricted to a couple of Italian or German banks. It’s deep and wide.
- Here are the 29 banks in the ESTX Banks Index of Eurozone banks (so Swiss and UK banks, for example are not included). It shows the percentage drop from their 52-week high. But for some of these banks, particularly for Italian and Portuguese banks, that 52-week high was just about last year’s 52-week low, so relentless has their decline been over the years. Some of them had already been reduced to penny stocks years ago, and for them, in euro terms, the biggest losses occurred back then. So these mayhem banks, color coded by country:
- If a bank stock plunges from €0.04 to €0.01 over the 52-week period, such as Banco Comercial Português in Portugal, it has been toast for longer than 52 weeks, and the percentage plunge is essentially meaningless because shares were worthless to begin with.
- The shares of five of these banks trade under €1. Another 8 banks trade under €3. These 29 banks form a big part of the European financial system. It includes some of the world’s largest banks, such as Deutsche Bank, Societe Generale, and BNP Paribas. It includes a slew of other “systemically important financial institutions,” such as Unicredit, ING, and Santander.
- They’re troubled at the same time. The can has been kicked down the road for years. Now negative interest rates appear to have inadvertently crushed the can.
09.27.16 – Dangerous Bubbles In Plain Sight
- Jesse Felder published an incisive bubble finance chart over the weekend. It is yet another reminder that Janet Yellen and her merry band of money printers are oblivious to the dangerous speculation and valuation excesses that their policies have implanted throughout the financial system.
- Relative to disposable income, the value of household financial assets now far exceeds the last two bubble peaks. And that has happened in an economic environment which suggests just the opposite. To wit, valuation multiples and cap rates should be falling owing the fact that the productivity and growth capacity of the US economy has been heading south ever since the turn of the century.
- What is even more striking about this chart is what’s hidden behind the denominator. Since the eve of the financial crisis in 2007, a rapidly increasing share of DPI (disposable personal income) has been accounted for by the explosive growth of transfer payments.
- Needless to say, transfer payments do not represent newly produced income that can be capitalized into the value of aggregate societal wealth. By definition, transfer payments are extracted via taxation from the incomes of current producers—–or via taxation of future incomes if they are funded with increased government debt.
- Either way, the true extent of the bubble excess in Felder’s chart is even more extreme than pictured above. Between 2007 and 2016, in fact, the value of household financial assets soared from $53 trillion to $72 trillion at a time when real personal income excluding transfer payments rose by only1.2% annually.
- And that’s crediting the BLS’ deeply understated inflation indices. In the real world of Flyover America, inflation-adjusted earned income hardly grew at all.
- So here’s a newsflash for the clueless school marm who presides over the Wall Street casino. There is no such thing as a timeless “historical norm”when its comes to the valuation of financial assets. The appropriate capitalization rate for a current stream of income or cash flows depends upon the expected growth path into the distant future.
“I would not say that asset valuations are out of line with historical norms.” — Federal Reserve Chairwoman Janet Yellen 9/21/2016
- Yet by the Fed’s own reckoning, the expected growth rate of the US economy has been marked down time and again in its economic forecasts. The long-run median real GDP growth rate is now pegged at just 1.9%.
- So you might think someone on the fed would connect the dots. For the last six years running, they have drastically over-estimated the growth of real GDP even as the stock indices have soared based largely on multiple expansion.
- Thus, after estimating 3.7% growth in 2011 and nearly 4.0% growth in 2012, actual expansion came in at 1.7% and 1.8%, respectively. Yet that wasn’t some kind of temporary aberration. During 2013 and 2014, the shortfall between initial estimates and actual was also nearly 50%; and then, even as the Fed lowered its estimates for 2015 and 2016, the actual rate of growth slowed still more.
- In the case of anyone paying attention, of course, the tepid and weakening recovery conveyed in the table below helps explain why S&P 500 profits peaked six quarters ago in the September 2014 LTM period at $106 per share. Since they came in 19% lower at $87 per share in the June 2016 LTM, the actual market multiple at 24.7X is anything but normal, and that’s hardly a temporary condition, either.
- As was indicated in a nearby post, the Wall Street hockey stick is bending toward the flat-line yet again. The most recent earnings outlook for Q3 has turned negative on a Y/Y basis—just in time for the next earnings season, and also precisely as needed for another round of Wall Street’s phony earnings “beat” game.
- In short, in the context of declining earnings, PE multiples are not even in line with historic norms. Contrary to Yellen’s press conference blather, they are at the very top of the charts.
- Worse still, the Fed continues to project that interest rates will “normalize” back to 3% on the federal funds rate and 4.2% on the 10-year treasury note. And in point of fact, sooner or later that must happen or the entire monetary system will be destroyed.
- So with a future outlook characterized by slowing growth, weakened earnings and rising interest rates, how in the world can it be said that current valuations are nothing to worry about?
- At the same time, even the Fed’s new dissenter, the formerly dovish, Eric Rosengren, remains lost in the Fed’s Keynesian puzzle palace. Rosengren voted to raise interest rates because he apparently thinks the US is nearing full employment, and that it may overshoot by 2019, thereby creating inflationary risks:
By 2019, I expect the unemployment rate to have declined below 4.5 percent. While I have a long track record of advocating for policy that supports robust labor market conditions, that is below the rate that I believe is sustainable in the long run.
- Well, that’s some kind of “full-employment”. There are 5 million more prime working age persons in the US today than there were in January 2000, but the number with “jobs”, including part-time gigs a few hours per weak and self-employed e-Bay traders, is nearly 1.0 million lower!
- As for inflation, here is another newsflash. It’s already here.
- So here’s the danger. The denizens of the Eccles Building see no bubbles in a financial system that is rampant with asset inflation. It sees full-employment when the US economy has more labor slack than any time in modern history. And it keeps the Wall Street gamblers in free carry trade funding because it wants even more inflation than what is already ravaging the real incomes of Flyover America.
- It has already been an abysmal day for Germany’s biggest lender: overnight Deutsche Bank plunged to fresh all time lows on speculation whether the German government would or wouldn’t provide state aid to the bank (if needed), forcing the bank to state it does not need the funds at the same time as the government urged markets that “you can’t compare” Deutsche Bank and that “other” bank, Lehman Brothers, although looking at the chart, one may beg to differ.
- However, while DB stock closed at session lows, over 7% lower on the day, with its market cap of $16 billion now rapidly approaching the $14 billion litigation settlement demanded by the DOJ, the bad news did not stop there.
- In a report issued an hour ago by Citigroup titled “Capital, Litigation & AT1 Coupon Risks”, bank analyst Andrew Coombs says that Deutsche reported an end-June CET1 ratio of 11.2% pro-forma for the HXB stake sale, but still only targets c11% by end-2016 as further litigation charges are assumed, with management expecting to resolve four of the five major outstanding litigation cases this year. To this Citi says that it “struggles” to see how Deutsche Bank can reach the fully-loaded SREP requirement of 12.25% in the medium-term.
- Furthermore Coombs notes that “the leverage ratio, at 3.4%, looks even worse relative to the 4.5% company target by 2018 and an IPO of Postbank looks increasingly challenging to execute upon.”
- Worse, he calculates that while he only models €2.9bn in litigation charges over 2H16-2017 – far less than the $14 billion settlement figure proposed by the DOJ – and includes a successful disposal of a 70% stake in Postbank at end-2017 for 0.4x book he still only reaches a CET 1 ratio of 11.6% by end-2018, meaning the bank would have a Tier 1 capital €3bn shortfall to the company target of 12.5%, and a leverage ratio of 3.9%, resulting in an €8bn shortfall to the target of 4.5%.
- He then observes that while “management should be reluctant to raise capital with the bank trading on only 0.3x P/TB”, the only viable alternative is to further cut balance sheet, which would be even more detrimental to earnings. As a result, he says that “a rights issue looks inevitable, in our view.”
- The most direct implication from this is that the bank’s AT1 coupon is now once again at risk: “Deutsche has confirmed the HXB stake sale and HGB 340 e/g reserves would lift Available Distributable Item (ADI) reserve capacity to €4.3bn versus c€0.4bn of annual AT1 coupon payments. Deutsche can potentially create another €1-2bn from releasing some of its Dividend Blocked Amounts.”
- This would explain the ongoing deterioration in the bank’s “loss buffer” contingent convertible bonds.
- Ironically, the longer DB waits to address the market’s concerns, not to mention its untenable balance sheet, the worse it will get. Citi’s conclusion is that the bank now faces two “negative feedback loops.”
We highlight two feedback loops: one short-term and one long-term. Widening credit spreads can exacerbate market fears, result in negative press coverage and damage counterparty confidence. The February tender offer for senior debt, coupled with a solid funding and liquidity position, has helped to address this loop.However a longer-term feedback loop still exists. Deutsche needs to raise capital in our view. It may choose to wait until litigation issues have been resolved, but the further the share price falls, the more dilutive a capital raise becomes (and vice versa).
- Naturally, all of the above assumes a slow-burn scenario for DB stock. What happens if what happens next is a more aggressive liquidation of exposure? Well, in that case we would have something that the Telegraph’s Matthew Lynn would dub a “German banking crisis.”
Our image of German banks, and the German economy, as completely rock solid is so strong that it takes a lot to persuade us they might be in trouble.
- Maybe so, but a “German banking crisis” would certainly delight the Italians, who have been on the receiving end of Germany’s stern lecturing about “sticking to the rules,” not to mention Schauble’s insistence not to engage in state-funded bailouts in this day and age of mandatory bail-ins, and explains why Merkel’s party has been so careful not to admit that a bailout may ultimately be the endgame.
- Then again, Merkel’s stated position opens up a can of worms. As Lynn correctly notes, “if the German government does not stand behind the bank, then inevitably all its counter-parties – the other banks and institutions it deals with – are going to start feeling very nervous about trading with it. As we know from 2008, once confidence starts to evaporate, a bank is in big, big trouble. In fact, if Deutsche does go down, it is looking increasingly likely that it will take Merkel with it – and quite possibly the euro as well.”
- Even without counterparty risk rearing its ugly head, the market appears to already be pricing it in.
The damage can be seen in its share price. Last October, the shares were at 27 euros. Back in 2007, they were over 100 euros, and even in the spring of 2009, when banks were crashing all across the world, they were still trading at close on 17 euros. For most of this year they have been sliding fast. On Monday, they crashed again, down another 6pc. Its bonds have slumped as well, while the cost of credit default swaps – essentially a way of hedging against a collapse – have jumped. It all has a very 2008 feel to it.
- Indeed, but what is Merkel to do: admit that all the posturing about a stable banking system was just a lie, and the demands for Italy to get its house in order were sheer hypocrisy… or do what Allianz admitted that ultimately Deutsche Bank will have to be bailed out?
- As Lynn points out, “there is something to be said for a hard-line position. It is hard to be sure the massive bank bail-outs of 2008 were such a great idea. Perhaps we would be better off now if a few had been allowed to fail. That said, Merkel is surely playing with fire. In the markets, investors, along with other financial institutions, have rightly or wrongly come to assume that major banks are, as the saying has it, ‘too big to fail’. You didn’t really have to worry about how solid they were, because if the crunch came the state would always ride to the rescue.”
In Germany, that appears not to be the case – certainly for Deutsche, and possibly for its next biggest player, Commerzbank, which is hardly looking much healthier. Would you want to trade a few billion with Deutsche right now, and would you feel sure you’d get paid next month? Nope, thought not. The risk is that confidence evaporates – and as we know, once that is gone a bank is not long for this world.
- To be sure, the politics of a Deutsche rescue would be terrible. Germany, with is Chancellor taking the lead, has set itself up as the guardian of financial responsibility within the euro-zone. Two years ago, it casually let the Greek bank system go to the wall, allowing the cash machines to be closed down as a way of whipping the rebellious Syriza government back into line. This year, there has been an unfolding Italian crisis, as bad debts mount, and yet Germany has insisted on enforcing euro-zone rules that say depositors have to shoulder some of the losses when a bank is in trouble.
- And this is why Merkel is cornered: “for Germany to then turn around and say, actually we are bailing out our own bank, while letting everyone else’s fail, looks, to put it mildly, just a little inconsistent. Heck, a few people might even start to wonder if there was one rule for Germany, and another one for the rest. In truth, it would become impossible to maintain a hard-line in Italy, and probably in Greece as well.”
- “And yet” Lynn adds, “if Deutsche Bank went down, and the German Government didn’t step in with a rescue, that would be a huge blow to Europe’s largest economy – and the global financial system. No one really knows where the losses would end up, or what the knock-on impact would be. It would almost certainly land a fatal blow to the Italian banking system, and the French and Spanish banks would be next. Even worse, the euro-zone economy, with France and Italy already back at zero growth, and still struggling with the impact of Brexit, is hardly in any shape to withstand a shock of that magnitude.”
- What we do know is that if some €42 trillion in derivatives – some three times more than the GDP of the European Union – were to suddenly lose their counterparty, the systemic damage would be unprecedented.
- And just like that, Germany finds itself in the same position the Fed and US Government were in September 2008: let the bank fail and deal with the devastating consequences, or inject a few more billion and keep the bank alive for a few more quarters. Indeed, “the politics of a rescue are terrible, but the economics of a collapse are even worse. By ruling out a rescue, she may well have solved the immediate political problem. Yet when the crisis gets worse, as it may do at any moment, it is impossible to believe she will stick to that line. A bailout of some sort will be cobbled together – even if the damage to Merkel’s already fraying reputation for competence will be catastrophic.”
- Lynn’s conclusion is spot on:
Merkel is playing a very dangerous game with Deutsche – and one that could easily go badly wrong. If her refusal to sanction a bail-out is responsible for a Deutsche collapse that could easily end her Chancellorship. But if she rescues it, the euro might start to unravel. It is hardly surprising that the markets are watching the relentless decline in its share price with mounting horror.
- In retrospect, the irony is delightful: for so many years the markets erroneously focusing only on the periphery as the source of potential banking contagion, when the biggest ticking time bomb in Europe’s banking sector was smack in the middle of what was considered the safest and most stable country, until now…. or as we put it in 2014: “The Elephant In The Room: Deutsche Bank’s $75 Trillion In Derivatives Is 20 Times Greater Than German GDP“
- Just three weeks after yet another “landmark” Syria peace deal was signed, the agreement is not only in tatters but the war drums are beating louder than ever before after the US slammed Russia’s action in Syria as “barbarism,” not counter-terrorism, while Moscow’s U.N. envoy said ending the war “is almost an impossible task now” as Syrian government forces, backed by Moscow, bombed the city of Aleppo.
- As Reuters reported overnight, the UN Security Council met on Sunday at the request of the United States, Britain and France to discuss the escalation of fighting in Aleppo following the announcement on Thursday of an offensive by the Syrian army to retake the city. “What Russia is sponsoring and doing is not counter-terrorism, it is barbarism,” U.S. Ambassador to the United Nations, Samantha Power, told the 15-member council.
- “Instead of pursuing peace, Russia and Assad make war. Instead of helping get life-saving aid to civilians, Russia and Assad are bombing the humanitarian convoys, hospitals and first responders who are trying desperately to keep people alive,” Power said.
- As reported previously, the September 9 ceasefire deal between U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov aimed at putting Syria’s peace process back on track effectively collapsed in what may be a record short period of time last Monday when an aid convoy was bombed. Russsia and the US have both accused each other of being the party responsible behind the bombinb.
- “In Syria hundreds of armed groups are being armed, the territory of the country is being bombed indiscriminately and bringing a peace is almost an impossible task now because of this,” Russian U.N. Ambassador Vitaly Churkin told the council. Britain’s U.N. ambassador, Matthew Rycroft, said on Sunday the U.S. and Russian bid to bring peace to Syria “is very, very near the end of its life and yes the Security Council needs to be ready to fulfill our responsibilities.”
- “The regime and Russia have instead plunged to new depths and unleashed a new hell on Aleppo,” Rycroft told the council. “Russia is partnering with the Syrian regime to carry out war crimes.”
- However, any attempts to “rein in” Russia are doomed to fail as the country is one of five veto-powers on the council, along with the United States, France, Britain and China. Russia and China have protected Syrian President Bashar al-Assad’s government by blocking several attempts at council action.
- Unfazed by the logistical impossibility of the UN to actually do anything, Power said that “It is time to say who is carrying out those air strikes and who is killing civilians. Russia holds a permanent seat on the U.N. Security Council. This is a privilege and it is a responsibility. Yet in Syria and in Aleppo, Russia is abusing this historic privilege.”
- As Syria’s U.N. Ambassador Bashar Ja’afari began addressing the council, Power, Rycroft and French U.N. Ambassador Francois Delattre walked out of the chamber, diplomats said. “Any political solution can only be successful by providing the requisite conditions through intensified efforts to fight terrorism,” Ja’afari told the council. “The real war on terrorism has never started yet. The advent of Syrian victory is imminent.”
- * * *
- Earlier today, Russian foreign minister Sergey Lavrov said the US and its Western partners are trying to steer the world’s attention away from their airstrikes on the Syrian Army by accusing Russia of attacking a UN humanitarian convoy outside the Aleppo. “I would like to emphasize that the Americans and their Western allies, for one thing, want to distract public attention from what had happened in Deir-az-Zor,” Lavrov told NTV on Monday following the urgent meeting of the UN Security Council.
- “When the humanitarian convoy was hit [outside Aleppo], we demanded that an investigation be conducted. [US Secretary of State] John Kerry, a good partner of mine, behaved the way he never has done previously. He claimed that the investigation might take place, but they know who did it, namely the Syrian Army or Russia, and that it was Russia’s fault in any case,” he said quoted by RT.
- Kerry appeared to be “pinned down by stark criticism from the American military apparatus,” Lavrov noted, which may indicate that the US military does not comply with its commander-in-chief’s orders.
- “[President] Barack Obama always supported, as I was told, cooperation with Russia, and he confirmed it himself during the meeting with [President] Vladimir Putin in China. It seems to me that the military may not be obeying their supreme commander too much.”
- Lavrov went on by saying that Washington is trying to continue finger-pointing at Russia and hold it accountable for what is happening in Syria. Such approach is counterproductive and leaves Moscow wary of the US-led coalition’s actions, the FM said, adding that there is no room for “100 percent trust.”
- In turn, Moscow will push for a detailed investigation into the attack on the humanitarian convoy, the minister said. The US and the West are not coping with their obligations on combating the Islamic State (IS, formerly ISIS/ISIL), Lavrov said. “It is clear that the West, led by the US which runs the anti-IS coalition and, as they put it, Al-Nusra Front in Syria, do not cope with their obligation.”
- * * *
- Meanwhile, as the peace process has completely fallen apart, the bombing campaign of Aleppo has resumed. According to the WSJ, Syria and its Russian allies pressed an assault on Aleppo amid what the United Nations called the most intense bombing in years of warfare there, and residents said hundreds of civilians have been killed since a cease-fire fell apart last week. The surge in deaths came as a spokesman for U.N. Secretary-General Ban Ki-moon over the weekend cited reports of “bunker buster bombs.” The bombs have left large craters in the rebel-held part of the divided city, Aleppo residents said, and caused shock waves felt blocks away from the point of impact.
- Rebels and opposition leaders blamed Russia, Syria’s key ally, for the bunker-buster bombs. The Russian Defense Ministry didn’t immediately respond to a request for comment. “The first time one struck, everyone thought there was an earthquake,” said Muhammad al-Zein, who helps oversee hospitals in the rebel-held part of Aleppo. “But the next day another one hit and we realized it was not an earthquake.”
- President Bashar al-Assad has vowed to retake all of Aleppo and the offensive was the latest indication that he aims to win the war militarily despite repeated efforts by the U.S. and Russia to reach a lasting cease-fire and a diplomatic solution. Syrian state media reported that the army on Saturday seized control of an area north of Aleppo city called Handarat Camp. Within hours, rebels said they had retaken the territory.
- With the Syrian war once again front and center, and this time the possibility of a Chinese intervention – on the side of the Assad regime all too real – the recent warning by a Syrian politican that World War III has started in Syria suddenly does not appear too far fetched
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