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The New Silk Road Will Go Through Syria

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Authored by Pepe Escobar via Asia Times,

China and Syria have already begun discussing post-war infrastructure investment; with a ‘Matchmaking Fair for Syria Reconstruction’ held in Beijing

Amid the proverbial doom and gloom pervading all things Syria, the slings and arrows of outrageous fortune sometimes yield, well, good fortune.

Take what happened this past Sunday in Beijing. The China-Arab Exchange Association and the Syrian Embassy organized a Syria Day Expo crammed with hundreds of Chinese specialists in infrastructure investment. It was a sort of mini-gathering of the Asia Infrastructure Investment Bank (AIIB), billed as “The First Project Matchmaking Fair for Syria Reconstruction”.

And there will be serious follow-ups: a Syria Reconstruction Expo; the 59th Damascus International Fair next month, where around 30 Arab and foreign nations will be represented; and the China-Arab States Expo in Yinchuan, Ningxia Hui province, in September.

Qin Yong, deputy chairman of the China-Arab Exchange Association, announced that Beijing plans to invest $2 billion in an industrial park in Syria for 150 Chinese companies.

Nothing would make more sense. Before the tragic Syrian proxy war, Syrian merchants were already incredibly active in the small-goods Silk Road between Yiwu and the Levant. The Chinese don’t forget that Syria controlled overland access to both Europe and Africa in ancient Silk Road times when, after the desert crossing via Palmyra, goods reached the Mediterranean on their way to Rome. After the demise of Palmyra, a secondary road followed the Euphrates upstream and then through Aleppo and Antioch.

Beijing always plans years ahead. And the government in Damascus is implicated at the highest levels. So, it’s not an accident that Syrian Ambassador to China Imad Moustapha had to come up with the clincher: China, Russia and Iran will have priority over anyone else for all infrastructure investment and reconstruction projects when the war is over.

The New Silk Roads, or One Belt, One Road Initiative (Obor), will inevitably feature a Syrian hub – complete with the requisite legal support for Chinese companies involved in investment, construction and banking via a special commission created by the Syrian embassy, the China-Arab Exchange Association and the Beijing-based Shijing law firm.

Get me on that Shanghai-Latakia cargo

Few remember that before the war China had already invested tens of billions of US dollars in Syria’s oil and gas industry. Naturally the priority for Damascus, once the war is over, will be massive reconstruction of widely destroyed infrastructure. China could be part of that via the AIIB. Then comes investment in agriculture, industry and connectivity – transportation corridors in the Levant and connecting Syria to Iraq and Iran (other two Obor hubs).

What matters most of all is that Beijing has already taken the crucial step of being directly involved in the final settlement of the Syrian war – geopolitically and geo-economically. Beijing has had a special representative for Syria since last year – and has already been providing humanitarian aid.

Needless to add, all those elaborate plans depend on no more war. And there’s the rub.

With the demise of Daesh (ISIS), or at least its imminent loss of any significant urban center, no one knows in what manner a fragmented, phony Caliphate “Sunnistan” might be manipulated into cutting Syria from its New Silk Road future.

Qatar has already provided a game-changer; Doha has gotten closer to Tehran (common interests in South Pars/North Dome gas-field oblige), as well as Damascus – much to the despair of the House of Saud. So, unlike the recent past, Qatar is not engaged in regime change anymore. But still there are the diverging interests of Saudi Arabia, Turkey, Israel and, of course, Washington, to accommodate.

A possible scenario out of what Putin and Trump negotiated in Hamburg – that was not relayed by either Lavrov or Tillerson – is that the ceasefire in southwestern Syria, assuming it holds, could mean US peacekeeping forces in effect sanctioning the creation of a demilitarized zone (DMZ) between the Syrian Golan and the rest of the country.

Translation: the Golan de facto annexed by Israel. And the “carrot” for Moscow would be Washington accepting Crimea de facto re-incorporated into the Russian Federation.

That may sound less far-fetched than it seems. The next few months will tell if this is indeed a plausible scenario.

The other big sticking point is Ankara against the YPG Kurds. Contrary to the ominous and quite possible Balkanization scenario, Washington and Moscow might well decide, in tandem, to let them sort things out by themselves. Then we will inevitably have the Turkish army occupying al-Bab for the foreseeable future.

The bottom line: that Saudi Arabia gets nothing. And Israel and Turkey get political/military “wins”. It’s hard to imagine how Moscow could possibly sell this arrangement to Iran as a victory. Still, Tehran may not have a free flow Iran-Iraq-Syria-Hezbollah route totally back in action, but it will maintain close relations with Damascus and be engaged in the expansion of the New Silk Roads.

The key question from now on seems to be whether Washington will follow the deep state “Syraq” policy – as in “Assad must go” mixed with support or weaponizing of non-existent “moderate rebels”; or whether Trump’s priority – to eliminate Daesh/ISIS for good – will prevail.

Beijing, anyway, has made up its mind. It will work non-stop for the Iran-Iraq-Syria triumvirate to become a key hub in Obor. Any bets against a future, booming Shanghai-Latakia container route?

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Ex-Bosnian Serb commander Mladic faces verdict in genocide trial

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THE HAGUE (Reuters) – The U.N. tribunal on war crimes in former Yugoslavia hands down its final verdict on Wednesday in the genocide trial of Ratko Mladic, the ex-Bosnian Serb general accused of ordering the massacre of 8,000 Muslim men and boys at Srebrenica.

Fikret Alic, one of the survivors of concentration camps shows his photo on the cover of Time before the trial of former Bosnian Serb military commander Ratko Mladic before a court at the International Criminal Tribunal for the former Yugoslavia (ICTY) in the Hague, Netherlands, November 22, 2017. REUTERS/Michael Kooren

Prosecutors demanded a life sentence for Mladic, 74, who was the Serb army commander in Bosnia’s 1992-95 war and is also charged with crimes against humanity over the siege of Sarajevo in which 11,000 civilians died from shelling and sniper fire.

The Srebrenica slaughter was Europe’s worst atrocity since World War Two. Mladic faced 11 charges in total and pleaded not guilty to all of them. He is expected to appeal if convicted.

Srebrenica, near Bosnia’s eastern border with Serbia, had been designated a “safe area” by the United Nations and was defended by lightly armed U.N. peacekeepers. But they quickly surrendered when Mladic’s forces stormed it on July 11, 1995.

The Dutch peacekeepers looked on helplessly as Serb forces separated men and boys from women, then sent them out of sight on buses or marched them away to be shot.

A bronzed and burly Mladic was filmed visiting a refugee camp in Srebrenica on July 12. “He was giving away chocolate and sweets to the children while the cameras were rolling, telling us nothing will happen and that we have no reason to be afraid,” recalled Munira Subasic of the Mothers of Srebrenica group.

“After the cameras left he gave an order to kill whoever could be killed, rape whoever could be raped and finally he ordered us all to be banished and chased out of Srebrenica, so he could make an ‘ethnically clean’ city,” she told Reuters.

The remains of Subasic’s son Nermin and husband Hilmo were both found in mass graves by International Commission of Missing Persons (ICMP) workers. The ICMP have identified some 6,900 remains of Srebrenica victims through DNA analysis.

Mladic’s lawyers argued that his responsibility for murder and ethnic cleansing of civilians by Serb forces and allied paramilitaries was never established beyond reasonable doubt and he should get no more than 15 years if convicted.

The “Butcher of Bosnia” to his enemies, Mladic is still seen as a national hero by compatriots for presiding over the swift capture of 70 percent of Bosnia after its Serbs rose up against a Muslim-Croat declaration of independence from Yugoslavia.

“GREATER SERBIA”

Survivors of concentration camps pose with banners before the trial of former Bosnian Serb military commander Ratko Mladic before a court at the International Criminal Tribunal for the former Yugoslavia (ICTY) in the Hague, Netherlands, November 22, 2017. REUTERS/Michael Kooren

Prosecutors said the ultimate plan pursued by Mladic, Bosnian Serb political leader Radovan Karadzic and Serbian President Slobodan Milosevic was to purge Bosnia of non-Serbs – a strategy that became known as “ethnic cleansing” – and carve out a “Greater Serbia” in the ashes of old federal Yugoslavia.

In arguing for Mladic to be imprisoned for life, prosecutor Alan Tieger said anything else “would be an insult to victims and an affront to justice”.

Mladic was indicted along with Karadzic in 1995, shortly after the Srebrenica killings, but evaded capture until 2011.

File picture: Former Bosnian Serb army commander Ratko Mladic attends his trial at the International Criminal Tribunal for the former Yugoslavia (ICTY) at The Hague May 16, 2012.. REUTERS/Toussaint Kluiters/Pool

His trial in The Hague took more than four years in part because of delays due to his poor health and will be the last case – barring appeals – to be heard by the International Criminal Tribunal for the former Yugoslavia (ICTY).

“From the legal point of view we expect the court to release the general,” Mladic’s son Darko told Reuters. “During the trial we have not seen any evidence against him. What we are worried about now is his health.”

Mladic has suffered several strokes, though U.N. judges rejected a flurry of last-minute attempts by defense lawyers to put off the verdict on medical grounds.

But his lawyers faced an uphill battle, given a mountain of evidence of Serb atrocities produced in previous trials. Four of Mladic’s subordinates have received life sentences, while Karadzic was convicted in 2016 and sentenced to 40 years.

Milosevic, who defended himself, died in prison in 2006 before a verdict was reached in his case.

Mladic’s lawyers argued that Sarajevo was a legitimate military target as it was the main bastion of Muslim-led Bosnian government forces. They also asserted that Mladic left Srebrenica shortly before Serb fighters began executing Muslim detainees and was later shocked to find out they had occurred.

However, prosecutors argued that under war crimes law, even if Mladic did not directly order the killings, he should have known what his subordinates were doing, and would be liable for failing to punish those who committed atrocities.

The ICTY indicted 161 people in all from Bosnia, Croatia, Serbia, Montenegro and Kosovo. It has convicted 83, more than 60 of them ethnic Serbs. Tradebuddy.onlineL8N1NL7ZT]

Reporting by Toby Sterling, Stephanie van den Berg and Ivana Sekularac; editing by Mark Heinrich

Our Standards:The Thomson Reuters Trust Principles.

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Budget Preview: Chancellor Philip Hammond’s Impossible Task To “Square The UK’s Circle”

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At lunchtime today, Philip Hammond will give the weakened Conservative government’s first budget in the new parliament.

Against a likely backdrop of downgrades for the economy from the OBR, the Chancellor will be under immense pressure to provide a sound plan going forward on many issues. As Statista’s Martin Armstrong notes, the NHS has already had its call for an emergency boost of £4 billion rejected, but there will need to be at least some answers to the problems surrounding health and public services funding.

As a new survey by ComRes shows, this topic is one of particular importance to the public, with 67 percent saying that there should be more investment in these services, with a slight majority even saying they would personally be prepared to pay more taxes to enable it.

Clearly, this is a highly significant budget and we would be greatly surprised if it’s considered a success. As we noted yesterday, Reuters columnist and former European economics editor of The Economist, Paul Wallace, believes:

Few British budgets have mattered as much as the one that Philip Hammond will deliver to the House of Commons on Nov. 22. The chancellor of the exchequer must shore up Theresa May’s perilously shaky government ahead of a vital Brexit summit of European leaders in mid-December. At the same time Hammond has to keep a grip on the public finances.

However, it’s worse than that, as the Chancellor is also under pressure from senior members of the Conservative party, never mind UK citizens, to increase spending amid widespread fatigue with austerity. Here is the Financial Times on the stiff challenge Hammond is facing.

UK Chancellor Philip Hammond is under pressure from all sides as he prepares to deliver his second Budget on Wednesday. The first Budget of a new parliament is traditionally the time for chancellors to take bold decisions about taxes and spending. But the economic forecasts are likely to be difficult, public services are under strain, and pro-Brexit MPs are increasingly turning on the chancellor over his support for a “soft Brexit”. If Mr Hammond produces a safety-first Budget, he squanders his opportunity to decisively shape Britain’s future. But boldness risks backfiring, and steering a middle course threatens to satisfy nobody.

The FT notes that the Chancellor’s statement will “serve a cold dish of downgrades for the UK economy” from the independent “Office for Budget Responsibility” (OBR). This year’s growth forecast is expected to be cut from 2.0% to 1.6% and for 2018 from 1.6% to 1.4%. The medium-term forecasts depend on the OBR’s assumptions on productivity growth, which it has already flagged will be cut “significantly”. The FT expects that.

That means growth figures for 2020 and beyond will be closer to 1.5 per cent a year, compared with the 2 per cent that the fiscal watchdog had previously forecast.

Paul Wallace highlighted productivity as Hammond’s biggest problem.

But the gravest challenge he faces is economic: Britain’s persistent productivity blight…

 

Other advanced economies have also experienced setbacks to productivity growth following the financial crisis. Where Britain stands out is in the severity of its reverse. The shortfall in productivity is the main reason real wages are now 4 percent lower than 10 years ago, a potent reason why the leave campaign prevailed in the Brexit referendum.

While public finances look slightly more robust in the near-term, the outlook is deteriorating 3-4 years out, as the  FT explains”

Tax revenues have been stronger than expected this year, alongside lower-than-expected public spending. As a result, this year’s expected public borrowing will fall by about £8bn. The debt burden will begin to fall next year, giving Mr Hammond the opportunity to boast that he has turned the corner on public finances. But good news in the short term disappears towards the end of the forecast horizon, as weaker economic forecasts bear down on projected tax revenues. Before any accounting or tax changes, the deficit forecast in 2020-21 is likely to rise by more than £10bn compared with the March forecast. The government has already said it wants to reduce borrowing to under 2 per cent of national income by 2020-21, but Mr Hammond’s headroom is likely to roughly halve, from £26bn to about £13bn, in that year.

However, he does have one thing up his sleeve…an off-balance sheet accounting gimmick.

The chancellor wants to signal that after a difficult year, things are looking up, with debt falling and Brexit-related uncertainties lifting. To offset bad news in the medium-term public finances, he will use a £5bn-a-year accounting change — by taking housing associations’ borrowing off the government’s books — to free up more money for housing, wages and healthcare.

Affordable housing is a major problem for Hammond and Prime Minister Theresa May. According to the FT:

Fixing the “broken housing market” is the government’s biggest domestic priority. The chancellor wants to make rents more affordable and ease the path to home ownership for younger adults who have deserted the Conservative party in recent elections. Mr Hammond has already set a target of 300,000 new homes per year, but has also insisted there is no “single magic bullet” to solving housing problems.

He will announce a housing package on Wednesday that is likely to include commissioning of new building on public land and funding for local authorities to construct homes. He will also reaffirm the Tories’ promise from last month’s party conference to commit £10bn more of Help to Buy equity loans, and set out plans to lower stamp duty for some first-time buyers. There will be no big reform of planning laws for the “greenbelt” of protected area outside of London, but local authorities could be given more powers for compulsory purchase of land.

In its budget preview, the left-leaning Guardian newspaper highlights the deteriorating outlook for public finances due to the productivity problem.

Lower expectations for the output per worker will have an impact on the gross domestic product, cutting the amount of economic output available for taxation. The Institute for Fiscal Studies reckons the downgrade will contribute to a £20bn black hole in the public finances, limiting Hammond’s spending power if he wants to stick to his pledge to remove the deficit by the mid-2020s. John McDonnell, the Labour shadow chancellor, seized on the October data to argue that seven years of spending cuts had “caused pain and misery for millions with little to show for it”.

As if “Fiscal Phil” Hammond didn’t have enough on his plate, he’s also been lambasted for his gaffe that “there are no unemployed people” in Britain, in a television interview at the weekend. Disliked by the pro-Brexit side of his party, Hammond’s budget speech is being viewed by some as the “make or break” moment of his career. We concur.

Meanwhile, Bloomberg has been doing some sleuthing on budget preparations by government departments and think tanks. It identifies six things to look out for when Philip Hammond stand up in parliament to deliver his speech.

The U.K. budget is usually a mixture of measures that have been heavily trailed in the run-up by various government ministers, with a liberal sprinkling of surprises. In the past six months there have been myriad consultations and papers on everything from the offshore oil to air pollution that hint at possible measures in the works. Bloomberg trawled through that documentation, as well as recent announcements, to identify six areas that are likely to get a mention when Chancellor of the Exchequer Philip Hammond lays out his economic blueprint.

1. Stamp Duty and the Housing Crisis
Prime Minister Theresa May last week pledged that it’s her personal mission to “build more homes, more quickly.” To that end, the budget is likely to include a number of measures to encourage construction and enable younger people to get on the housing ladder. Asked on the BBC on Sunday about whether the home-buying tax known as stamp duty would be cut for younger buyers, Hammond declined to discuss tax matters, but didn’t deny he was looking at the measure.

“We recognize the challenge for young first-time buyers, that in many parts of the country deposits are now very large,” Hammond said. “Nobody is saying we’ve done enough. We must do more. We recognize there’s a challenge there and on Wednesday I shall set out how we intend to address it.”

2. North Sea Oil and Gas
Whilst remaining committed to its climate-change goals, the U.K. is also trying to extract as much value from its waning oil and gas fields in the North Sea. The industry is crucial to the economy in Scotland, which would be grateful for any assistance to a financial lifeline even as it remains angry at the Conservatives for taking it out of the European Union.

At the last budget in March, the government published a “discussion paper” that examined allowing transfers of tax history between buyers and sellers of oil and gas assets — a measure designed to make it easier to buy and sell the fields, and keep them producing for longer. It would allow buyers to get a tax refund as a result of any costs incurred decommissioning the field at the end of its life.

Hammond told the Sunday Times he’s “looking at” a possible change in the tax rules, which is “the No. 1 ask of my Scottish colleagues.” Even so, he did issue a note of caution, adding that the Treasury needs to ensure the reform “is robust and that we don’t inadvertently create scope for gaming on a grand scale in the tax system.”

3. Boosting Research & Development
May on Monday said the government aims to increase public and private research and development spending to 2.4 percent of economic output by 2027, and beyond that to 3 percent. “This could mean about 80 billion pounds ($106 billion) of additional investment in the next decade,” she said.

As part of an announcement the same day linked to her government’s Industrial Strategy — due to be published next week — she said that would begin with a commitment for an extra 2.3 billion pounds of investment in the 2021-2022 tax year, taking total public investment to 12.5 billion pounds that year. The government also signaled plans for a 1.7 billion-pound fund focused on improving regional transport links.

4. Shale Wealth Fund
In another measure aimed at boosting the fossil-fuel industry — in this case by making it more palatable to local communities — the government promised at the last election to overhaul a pledged fund worth as much as 1 billion pounds to distribute some of the profits from hydraulic fracturing.

The aim is to ensure “a greater percentage of the tax revenues from shale gas directly benefit the communities that host extraction sites.” The government last week responded to a consultation on the issue pledging the fund will initially consist of as much as 10 percent of tax revenues from shale-gas extraction, with proceeds to be spent on projects ranging from play parks for children to improved transport links and restoring historical sites.

5. Air Pollution Tax
Diesel vehicles have become a political football of late. For years, governments ignored evidence that diesel is worse for air quality and encouraged its use because the fuel is less damaging to the climate than gasoline. With air pollution now under the microscope in London in particular, the government published an air-quality plan over the summer and is likely to include measures in the budget designed to help clean up the air in Britain’s cities by encouraging cleaner vehicles.

Possible measures include raising the sales tax on diesel cars, known as vehicle excise duty, or raising taxation on diesel fuel itself, which is currently taxed at the same level as gasoline, at about 58 pence per liter. The government has also said it will consider programs to encourage motorists to trade in their older, more polluting cars, for newer, cleaner ones. Ministers also stepping up efforts to encourage the use of more electric vehicles by supporting the development of batteries and the deployment of charging points.

6. Fund for Start-Ups
In August, the government proposed a new National Investment Fund that would help start-ups access the “patient capital” funding they need to develop into so-called “unicorns” — innovative companies valued at over $1 billion. A consultation on the proposal closed in September, and Hammond is likely to propose a confirmed plan of action in the budget.

The consultation suggested funding should come from the British Business Bank, replacing the backing currently received from the European Investment Fund. One of the reasons this could get a mention is that the the government is keen to demonstrate that London can attract Big Tech even when it’s no longer in the European Union.

Although the view is hardly unique to this government, a mere 22 percent said that they feel taxpayers’ money is currently being spent wisely.

Whether this percentage will go up or down after the Chancellor’s statement today, remains to be seen.

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