Mario Draghi's efforts to save EMU have hit the Berlin Wall

If the ECB tries to press ahead with QE, Germany's central bank chief will resign. If it does not do so, the eurozone will remain stuck in a lowflation trap and Mario Draghi will resign

By Ambrose Evans-Pritchard

9:22PM GMT 05 Nov 2014

President of European Central Bank Mario Draghi speaks during a press conference following the meeting of the governing council in Frankfurt, Germany, Thursday, Feb. 6, 2014
 Mario Draghi seems to have hit the limits of European power politics  Photo: AP

Mario Draghi has finally overplayed his hand. He tried to bounce the European Central Bank into €1 trillion of stimulus without the acquiescence of Europe's creditor bloc or the political assent of Germany.
The counter-attack is in full swing. The Frankfurter Allgemeine talks of a "palace coup", the German boulevard press of a "Putsch". I write before knowing the outcome of the ECB's pre-meeting dinner on Wednesday night, but a blizzard of leaks points to an ugly showdown between Mr Draghi and Bundesbank chief Jens Weidmann.
They are at daggers drawn. Mr Draghi is accused of withholding key documents from the ECB's two German members, lest they use them in their guerrilla campaign to head off quantitative easing. This includes Sabine Lautenschlager, Germany's enforcer on the six-man executive board, and an open foe of QE.
The chemistry is unrecognisable from July 2012, when Mr Draghi was working hand-in-glove with Ms Lautenschlager's predecessor, Jorg Asmussen, an Italian speaker and Left-leaning Social Democrat. Together they cooked up the "do-whatever-it-takes" rescue plan for Italy and Spain (OMT). That is why it worked.
We now learn from a Reuters report that Mr Draghi defied an explicit order from the governing council when he seemingly promised to boost the ECB's balance sheet by €1 trillion.

He also jumped the gun with a speech in Jackson Hole, giving the very strong impression that the ECB was alarmed by the collapse of the so-called five-year/five-year swap rate and would therefore respond with overpowering force. He had no clearance for this.           

The governors of all northern and central EMU states - except Finland and Belgium - lean towards the Bundesbank view, foolishly in my view but that is irrelevant. The North-South split is out in the open, and it reflects the raw conflict of interest between the two halves.
The North is competitive. The South is 20pc overvalued, caught in a debt-deflation vice. Data from the IMF show that Germany’s net foreign credit position (NIIP) has risen from 34pc to 48pc of GDP since 2009, Holland's from 17pc to 46pc. The net debtors are sinking into deeper trouble, France from -9pc to -17pc, Italy from -27pc to -30pc and Spain from -94pc to -98pc. Claims that Spain is safely out of the woods ignore this festering problem.

David Marsh, author of a book on the Bundesbank and now chairman of the Official Monetary and Financial Institutions Forum, says the Bundesbank has been quietly seeking legal advice on whether it can block full-scale QE. It is looking at Articles 10.3 and 32 of the ECB statutes, arguably relevant given the scale of liabilities.

The let-out clauses would make QE the sole decision of the 18 national governors - shutting out Mr Draghi - based on the shareholder weightings. Germany would have 26pc of the votes, easily enough to mount a one-third blocking minority. Mr Draghi would not even have a say.

Mr Marsh said this has echoes of the "Emminger Letter" invoked in September 1992 to justify the Bundesbank's refusal to uphold its obligation to defend the Italian lira in the Exchange Rate Mechanism. The lira crashed. The Italians were stunned. One of them was the director of the Italian Treasury, a young Mario Draghi.

Lena Komileva, from G+ Economics, says the ECB is heading for a crisis of legitimacy whatever happens. If the bank tries to press ahead with a QE-blitz, Mr Weidmann will resign. If it does not do so, the eurozone will remain stuck in a lowflation trap and the ECB will go the way of the Bank of Japan in the late 1990s, in which case Mr Draghi will resign.

Mr Draghi's balance sheet pledge was muddled and oversold from the start. Much of it was predicated on banks taking out super-cheap loans (TLTROs) from the ECB, but they have so far spurned it. You cannot make a horse drink. These loans are not the same as QE money creation in any case. They are an exchange for collateral.

The asset purchases are what matter and the package announced so far is modest, bordering on trivial. It is unlikely to exceed €10bn a month as currently designed. The "buyable" market for covered bonds and asset-backed securities is too small to move the macro-economic dial. If the ECB wanted to match the Bank of Japan in its latest effort to drive down the yen and export deflation, it would have to launch €130bn of asset purchases every month (1.4pc of GDP).

Hawks claim that QE would make no difference because interest rates are already near zero, and the German 10-year Bund is already the lowest in history. This is eyewash. Central banks can print money to buy gold, land, oil for strategic reserves (why not?) or Charollais cattle. Or they can print to build roads or windmills. They can hand the money out as cash envelopes. If they did this, even the dimmest wits would see that QE is a monetary device and can always defeat deflation as a mathematical principle. It does not have to work through interest rates, nor should it.
The ECB's North-South clash mirrors the political breakdown of monetary union after six years of depression and mass unemployment. France's Front National now has twice as many Euro-MPs as the ruling Socialists. Euro defenders invariably insist that the triumph of Marine Le Pen - currently leading presidential polls at 30pc - has nothing to do with her pledge to restore the franc and take back French economic sovereignty.
Whether or not this is true - and that smacks of presumption - she is snatching enough votes from the Socialists to threaten their survival as a political movement. If they let perma-slump drift on until 2017, they will meet the fate of Greece's PASOK, and deserve it.
Italy is also edging closer to an inflexion point. The Five Star movement of Beppe Grillo - which won a quarter of the vote in 2013 - has grasped the elemental point that zero inflation and falling nominal GDP is pushing Italy into a debt-compound trap. For a long time Mr Grillo wrestled with the EMU issue. There is no longer any doubt. "We must leave the euro as soon as possible,” he says.

Spain's insurgent Podemos party has come from nowhere to top the polls at 28pc. It is not anti-euro. Its wrath is directed against a corrupt "Casta". Yet the party's reflation drive and furious critique of Spain's "internal devaluation" is entirely at odds with EMU imperatives, as is its €145bn plan for a universal basic income, which would lift Spain's fiscal deficit to 20pc of GDP.

Podemos reminds one of France's Front Populaire in 1936. Leon Blum did not perhaps intend to leave the Gold Standard, but he knew his policies would bring it about in short order.
Mr Draghi is of course right to force the issue. The ECB is missing its 2pc inflation target by a mile, with crippling effects on the crisis states. This itself is a violation of the ECB's legal mandate. The refusal of the German-led hawks to do anything serious about this is indefensible, and remarkably stupid unless their intention is to break up EMU, a possibility one can no longer exclude.
The European Commission's Autumn forecast this week is a cri de coeur. It warns of a "snowball effect" as deflationary forces causes debt trajectories to accelerate upwards by mechanical effect.

Brussels admits that something has gone horribly wrong, obliquely blaming stagnation on the "policy response to the crisis". It halved the growth estimate for France to 0.7pc next year, and for Italy to 0.6pc, a ritual with each report.

It says the eurozone faces a "home-grown" malaise, left behind as the US and Britain pull away. "It is becoming harder to see the dent in recovery as the result of temporary factors only. Trend growth has fallen even lower due to low investment and higher structural unemployment," it said. Now they tell us.

The collapse of investment is not some form of witchcraft. It is entirely due to the folly of deep cuts in public investment - pushed by the Commission itself - at a time of private sector deleveraging, all made much worse by monetary paralysis. Italy's rate of investment fell by 7.4pc in 2012 and 5.4pc in 2013. Even Germany's fell 0.7pc in each year.

Tucked away in the report is a nugget that Britain alone accounted for almost all the EU's growth in 2013, half in 2014, and will still be the biggest contributor by far in 2015. This implies that the UK's net payments to the EU budget - already up fourfold since 2008 - will become ever more skewed. Or put another way, the more EMU makes a mess of its affairs, the more Britain must pay to prop it up.

Europe's leaders and officials have run monetary union into the ground. Mr Draghi has bravely tried to bring them to their senses and contain the damage. He seems to have hit the limits of European power politics.

There is another job waiting for him in Rome as Italian president, should he wish to take it.

The offer must be tempting, if only for sweet revenge.

His departure would shatter market confidence in the euro overnight. He could then lead his country to recovery, with a correctly-valued lira, and inflict a massive trade shock on his tormentors in the North for good measure.

China’s Questionable Economic Power

Joseph S. Nye

NOV 6, 2014

China and US

TOKYO – The World Bank recently announced that China’s economy will surpass that of the United States this year, measured according to purchasing power parity (PPP). But this is far from a holistic depiction of China’s global economic standing.
Though PPP can serve some purpose in comparing welfare across countries, it is affected significantly by population size. India, the world’s tenth largest economy measured according to the market exchange rate of the US dollar and the Indian rupee, is the third largest in PPP terms. Moreover, power resources, such as the cost of imported oil or an advanced fighter aircraft engine, are better judged according to the exchange rates of the currencies that must be used to pay for them.
To be sure, total size is an important aspect of economic power. China has an attractive market and is many countries’ largest trading partner – important sources of leverage that China’s leaders are not afraid to wield.
But, even if China’s overall GDP surpasses that of the US (by whatever measure), the two economies will maintain very different structures and levels of sophistication. And China’s per capita income – a more accurate measure of economic sophistication – amounts to only 20% of America’s, and will take decades, at least, to catch up (if it ever does).
Moreover, as Chinese officials and researchers have acknowledged, though China surpassed Germany in 2009 as the world’s largest exporter by volume, it has yet to develop into a truly “strong” trading country, owing to lackluster trade in services and low value-added production. And China lacks the kind of strong international brands that trade powerhouses like the US and Germany boast; indeed, 17 of the top 25 global brands are American.
China’s lagging economic sophistication is also reflected in its financial markets, which are only one-eighth the size of America’s, with foreigners permitted to own only a tiny portion of Chinese debt. Though China has tried to increase its financial clout by encouraging the international use of its currency, renminbi-denominated trade still represents just 9% of the global total, compared to the dollar’s 81% share.
Not even China’s massive foreign-currency reserves – the world’s largest, at nearly $4 trillion – will be adequate to boost its financial leverage, unless the authorities create a deep and open bond market with liberalized interest rates and an easily convertible currency. These reserves do not give China much direct bargaining power over the US, either, given that interdependent relationships depend on asymmetries.
China holds dollars that it receives from its exports to America, while the US, by keeping its market open to Chinese products, helps to generate growth, employment, and stability in China. Yes, China could bring the US economy to its knees by dumping its dollars, but not without taking a serious hit itself.
The differences between China and the US in terms of economic sophistication extend to technology as well. Despite some important achievements, China relies on copying foreign inventions more than domestic innovation for its technological progress. Though China is issuing more patents than ever, few represent groundbreaking inventions. Chinese often complain that they produce iPhone jobs, but not Steve Jobs.
In the coming decades, China’s GDP growth will slow, as occurs in all economies once they reach a certain level of development – usually the per capita income level, in PPP terms, that China is approaching. After all, China cannot rely on imported technologies and cheap labor to support growth forever. The Harvard economists Lant Pritchett and Lawrence Summers have concluded that regression to the mean would place Chinese growth at 3.9% for the next two decades.
But this straightforward statistical estimate does not account for the serious problems that China must address in the coming years, such as rising inequality between rural and urban areas and between coastal and inland regions. Other major challenges include a bloated and inefficient state sector, environmental degradation, massive internal migration, an inadequate social safety net, corruption, and weak rule of law.


lunes, noviembre 10, 2014



Foreign policy

Showing off to the world

The capital is about to host President Xi Jinping’s diplomatic coming-out party

Nov 8th 2014

THE factories have closed down for a few days, and millions of cars have been ordered off the roads. Clear blue skies appearing over a usually smog-choked Beijing always mean one thing: a big event is about to get under way.

From November 10th President Xi Jinping will welcome world leaders to this year’s Asia-Pacific Economic Co-operation (APEC) summit. Not since the Olympics in 2008 have so many leaders gathered in the capital, and they will include the heads of the United States, Russia and Japan. It is a defining moment for Mr Xi’s foreign policy. Having established himself at home as China’s most powerful leader since Deng Xiaoping, he now seems to want to demand a bigger, more dominant and more respected role for China than his predecessors, Deng included, ever dared ask for.

Respect begins by putting on a good face to guests. Chinese bullying over disputed maritime claims has done much to raise tensions in the region. But now Mr Xi appears to be lowering them. In particular, China’s relations with Japan have been abysmal. The government has treated Japan’s prime minister, Shinzo Abe, with both venom and pettiness, implying he is a closet militarist. The relationship had sunk to such a low that it will count as notable progress if Mr Xi shakes Mr Abe’s hand—even if he does little more—at the summit.

On November 11th and 12th, Mr Xi will host a state visit in Beijing for Barack Obama. It is the second summit with the American president, following one at Sunnylands in California in 2013. It will be a good show, with a scenic walk and all that. But the substance appears less clear. At the time of Sunnylands, there was much Chinese talk of a “new type of great-power relationship” with America. Yet since it implies a diminished role for America, at least in Asia, Mr Obama does not seem inclined to go along. The two men appear likely to co-operate in a few areas, including climate change, trade and investment. They will agree to a bit more communication over respective military movements in and over the seas near China. But hopes that cordiality at Sunnylands might lead the relationship to blossom may come to little.

In truth, Mr Xi does not have much respect left for Mr Obama; the Chinese dismiss him as weak-willed in foreign policy. And so much of Mr Xi’s ambition lies elsewhere. Above all, the dream is to return China to its rightful place in a world in which, according to Bonnie Glaser of the Centre for Strategic and International Studies, a Washington think-tank, “China will be at the centre, and every other nation will have to consider China’s interests.”

This attitude is most familiar to China’s neighbours in the South China Sea and East China Sea. China has upset the Philippines by grabbing a disputed reef; Vietnam, by moving an oil rig into contested waters; Japan, by challenging its control over uninhabited islets; and even South Korea which, though on good terms, was concerned along with others when China declared an “Air Defence Identification Zone” over the East China Sea, demanding that planes inform it when entering it.

Yet Mr Xi has also courted friends under the catchphrase of “peaceful development”. He has pushed multilateral initiatives, including a new Asian Infrastructure Investment Bank, which many of China’s neighbours, including India, have signed up to. A New Development Bank has also been set up with fellow “BRICs”—Brazil, Russia, India and South Africa.

One of Mr Xi’s playmates is President Vladimir Putin. China and Russia have a history of mutual distrust, but Mr Xi’s first trip abroad as president, in March 2013, was to Moscow. Since then the two countries have struck a long-stalled gas deal and, according to Kommersant, a Russian newspaper, a pact on cyber-security. China backs Russia’s pro-Syrian stand in the UN Security Council and has refused to condemn Russia’s territorial incursions in Crimea and eastern Ukraine—though it loves to preach non-interference.

A strong thread that binds the two countries is American dominance in international affairs. “No country”, said Mr Xi at a security summit earlier this year to which Mr Putin was invited, “should attempt to dominate regional security affairs or infringe upon the legitimate rights…of other countries.” Mr Xi did not name America, but a month earlier Mr Obama had in Tokyo emphasised that America’s security pact with Japan extended to the Japan-controlled Senkaku islands, which China claims and calls the Diaoyu.

Is Mr Xi’s foreign policy succeeding? Only in parts. China’s maritime assertiveness has pushed some neighbours closer to Japan and America. But for long China will remain Asian nations’ biggest trading partner. It is busy pursuing regional and bilateral trade agreements while an American-led trade initiative, the Trans-Pacific Partnership, is bogged down. At APEC Mr Xi will seek to build on those economic relationships. And, given China’s heft, by and large he will succeed.

And what of global ambitions? If Mr Xi wants a bigger role in the world, then China will have to engage better with the big issues, including the environment, terrorism and health. Here the picture is mixed. This week China and Russia together blocked an international plan for an ocean sanctuary in Antarctica. On counter-terrorism, China puts more effort into getting everyone to acknowledge it faces an al-Qaeda-type threat in Xinjiang than it helps in much worse terrorist hotspots.

Yet global health is an example of how Chinese policy can change. Only a few weeks ago, during preparations for Mr Xi’s summit with Mr Obama, officials appeared to see their American counterparts’ obsession with Ebola as proof of Americans always coming to them only with the latest irritating pebble in their shoe, as Douglas Paal of the Carnegie Endowment for International Peace, a think-tank, puts it. But since then China has announced a trebling of its commitment to fighting Ebola, to $120m, making it the second-most generous of any country. One way or another, China’s rise continues.

The US Shale Oil Bubble Is Ready to Burst

The financial Ponzi scheme behind the increase of US domestic oil output the past several years is about to evaporate in a cloud of fictitious smoke. The illusion of the US surpassing Saudi Arabia and Russia in oil producton is now in jeopardy
F. William Engdahl
Thu, Nov 6
The Obama administration has launched oil wars based on myths and lies about the rosy prospects of shale oil
By now even the New York Times is openly talking about the secret Obama Administration strategy of trying to bankrupt Russia by using its oil-bloated Bedouin bosom buddy, Saudi Arabia, to collapse the world price of oil. However, it’s beginning to look like the neo-conservative Russia-haters and Cold war wanna-be hawks around Barack Obama may have just shot themselves in their oily foot. As I referred to it in an earlier article, their oil price strategy is basically stupid. Stupid, as all consequences have not been taken into account. Take now the impact on US oil production as prices plummet.

The collapse in US oil prices since September may very soon collapse the US shale oil bubble and tear away the illusion that the United States will surpass Saudi Arabia and Russia as the world’s largest oil producer. That illusion, fostered by faked resource estimates issued by the US Department of Energy, has been a lynchpin of Obama geopolitical strategy.

Now the financial Ponzi scheme behind the increase of US domestic oil output the past several years is about to evaporate in a cloud of fictitious smoke. The basic economics of shale oil production are being ravaged by the 23% oil price drop since John Kerry and Saudi King Abdullah had their secret meeting near the Red Sea in early September to agree on the Saudi oil price war against Russia.

Wall Street bank analysts at Goldman Sachs just issued a 2015 forecast that US oil prices, measured by a benchmark called WTI (West Texas Intermediate) will fall to $70 a barrel. In September 2013, WTI was more than $106 a barrel. That translates into a sharp 34% price collapse in just a few months. Why is that critical to the US shale production? Because, unlike conventional crude oil deposits, shale oil or tight oil as industry calls it, depleted dramatically faster.

A comprehensive new analysis just issued by David Hughes, a Canadian oil geo-scientist with thirty years’ experience with the Geological Survey of Canada, using data from existing US shale oil production that has now become public for the first time (the shale oil story is very recent), shows dramatic rates of oil volume decline from US shale oil wells:
The three year average well decline rates for the seven shale oil basins measured for the report range from an astounding 60-percent to 91-percent. That means over those three years, the amount of oil coming out of the wells decreases by that percentage. This translates to 43-percent to 64-percent of their estimated ultimate recovery dug out during the first three years of the well’s existence. Four of the seven shale gas basins are already in terminal decline in terms of their well productivity: the Haynesville Shale, Fayetteville Shale, Woodford Shale and Barnett Shale.
A decrease in oil daily of between 60% and 91% for these best possible shale oil regions means the oil companies must drill deeper to even stay still with oil production, let alone increase total oil volume. That means the drillers must spend more money to drill deeper, a lot more. According to Hughes, the Obama administration Department of Energy has uncritically taken rosy forecast numbers given them by the companies that boost the US shale oil myth. His calculations show future US shale oil output only 10% that estimated for 2040 by the Energy Department.

Hughes describes the current deadly dilemma of the shale oil companies as a “drilling treadmill.” They must drill more and more wells just to keep production levels flat. The oil companies have already gone after the most promising shale oil areas, so-called “sweet spots,” to maximize their production. Now as production begins to decline terminally, they must start drilling in spaces with less rich oil and gas returns. He adds, “if the future of U.S. oil and natural gas production depends on resources in the country’s deep shale deposits…we are in for a big disappointment.”

Oil price collapse

What Hughes describes was the state of shale oil before the start of the Kerry-Abdullah Saudi oil price war. Now US WTI oil prices have dropped a catastrophic 25% in six weeks, and still falling. Other large oil producers like Russia and Iran are in turn flooding the world market with their oil to increase revenue for their state budgets, adding to a global oil supply glut. That in turn pressures prices more.

The shale oil and gas bonanza of the past five years in the USA has been built on a foundation of zero Federal Reserve interest rates and huge speculative investment by hungry Wall Street firms and funds. Because of the ultra-rapid oil well depletion, when market oil prices collapse, the entire economics of lending to the shale oil drillers collapses as well. Money suddenly vanishes and debt-strapped oil companies begin real problems.

According to Philip Verleger, former head of President Carter’s Office of Energy Policy and now an energy consultant, in North Dakota’s Bakken shale, one of the most important new shale oil regions, oil at $70 a barrel could cut production 28 percent to 800,000 barrels a day by February from 1.1 million barrels a day in July. “The cash flow will go down as the prices go down, the amount of money advanced to these people to continue the drilling will dry up entirely, so you’ll see a marked slowdown in drilling,” said Verleger.

Myths, Lies and Oil Wars

The end of the shale oil bubble would deal a devastating blow to the US oil geopolitics. Today an estimated 55% of US oil production and all the production increase of the past several years comes from fracking for shale oil. With financing cut off because of economic risk amid falling oil prices, shale oil drillers will be forced to halt new drilling that is needed merely to maintain a steady oil output.

The aggressive US foreign policy in the Middle East—its war against Syria’s al-Assad regime, its hardball oil sanctions against Iran, its sanctions against Russian oil projects, its cynical toleration of ISIS in Iraqi oil regions, its refusal to intervene to stabilize the Libyan oil economy but instead to tolerate dis-order are all premised on a cocky view in Washington that the USA is once again the King of Oil in the world and can afford to play high-risk oil geopolitics. The official government agency responsible for advising the CIA, Department of Defense, State Department and White House on energy, the US Department of Energy, has issued projections of US shale oil growth based on myths and lies. That has led the Obama White House to launch oil wars based on those same myths and lies about the rosy prospects of shale oil.

This oily arrogance was epitomized in a speech by then Obama National Security Adviser Tom Donilon. In an April 2013 speech at Columbia University, Donilon, then Obama’s national security adviser, publicly expressed this: “America’s new energy posture allows us to engage from a position of greater strength. Increasing US energy supplies acts as a cushion that helps reduce our vulnerability to global supply disruptions and price shocks. It also affords us a stronger hand in pursuing and implementing our international security goals.”

The next three or so months in the US shale oil domain will be strategic.

F. William Engdahl is a strategic risk consultant and lecturer. He holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics. This article originally appeared at New Eastern Outlook

11/06/2014 04:56 PM

The Lost Children

France Takes Stock of Growing Jihadist Problem

By Julia Amalia Heyer

Photo Gallery: France's Jihadist Youth
More than 1,000 young people from France have joined extremist groups in Syria and Iraq, more than from any other European country. The recruits are no longer just coming from the margins of society.

Sometimes Séverine Mehault climbs the stairs to the second floor for no reason at all. She walks along the hallway, past her son's room and into her daughter's bedroom. Then the 40-year-old lies down on the bed, next to a white stuffed bunny, and closes her eyes for a moment, trying to understand why only one of her two daughters, 15-year-old Kenza, is still there -- and why Sahra has abandoned her.

Not much of Sahra is left in the room: her stuffed rabbit, a Koran in translation, a prayer book and a guide to the correct methods of bathing for Islamic women. The guide is a worn, pink brochure with small illustrations. Chapter 3 is titled: Instructions for Cleaning Your Ears.

There's a dish containing red nail polish, mascara and lip gloss, but Sahra hasn't worn makeup in almost two years. After turning 15 at the time, she converted to Islam.

She left France on March 11, 2014 to joint the jihadists in Syria. The family doesn't know where she is exactly, or which terrorist group she has joined.

Her father drove her to the train station in Narbonne on that March day, as he did every day, when she would take the train to school in the nearby city of Carcassonne in southwestern France. A surveillance camera image shows Sahra, 17, standing on the platform in Narbonne, at 7:44 a.m. She is wearing white jeans, white sneakers and a black headscarf, and she is carrying two shoulder bags.

The last image of Sahra on French soil, also taken with a surveillance camera, shows her at the airport in Marseille. She took an afternoon flight to Istanbul, and the next day she continued to Antakya on the Turkish-Syrian border.

Séverine Mehault has spread out photocopies of the surveillance camera images on the dining room table, next to the last photo she took of Sahra. It depicts her daughter dressed entirely in black, in a jilbab, a floor-length robe with baggy sleeves, and a hijab, or headscarf. She is smiling, with a soft, roundish face.

A Faraway Country

"Before she left, I didn't even know what was happening in Syria. It was a faraway country for me," says Mehault, running her fingers across the photo. Her fingernails gnawed to the quick.

These days, she anxiously follows the news, trying to discern where exactly the group known as the Islamic State is fighting and where the West is bombing the terrorists. The TV set in the living room is constantly switched on. Sometimes she even leaves the radio on at night.

On that Tuesday in March, Sahra didn't come home in the evening. The family called the police.

When officers came to the house the next day, they brought along the surveillance photos and retraced the route Sahra had taken. They asked a few questions, and when they left they took along the family's computer and tablet device.

Séverine Mehault received a call on her mobile phone two days later, with an unknown number appearing on the screen. She was so excited that she passed the phone to her eldest son, Jonathan. It was Sahra. She was calling to tell her parents not to worry, and that she was doing well. "I married Farid, a fighter," she told them. "He's 25 and comes from Tunisia."

"Where are you?" Jonathan asked.

"In Syria," his sister replied.

She also said that she would protect her family, even though they were all infidels. Then she hung up.

Her mother describes herself as an atheist, while her father, Kamal Mehenni, is a Muslim. He was born in France, the son of a French woman and an Algerian man.

But Mehenni never goes to the mosque, and he doesn't strictly abide by Ramadan fasting rules.

Sitting next to his wife at the table, he says: "We raised our children without any religion. Togetherness was important to us, not faith."

'We Should Have Noticed Something'

Sahra's father is a tall, gentle man with powerful hands. In a region with high unemployment, he has been supporting his family with odd jobs for the last few years. "We should have noticed something," says Mehenni. His wife repeatedly says the same thing.

Mehault and Mehenni live with their children in a yellow, two-story house, in a town of 8,000 inhabitants near Narbonne, which we will not name, surrounded by the vineyards of the Languedoc region. Wild grapevines are entwined around the front door, and there is a plastic pool in the yard. There are many framed family photos on the walls.

There is nothing to suggest a reason for a 17-year-old girl to run away from this life.

Nevertheless, Sahra spent a long time preparing her escape, as she gradually became radicalized, in full view of her family.

Extremism is infecting young French people like a slow but steadily progressing disease. And like a disease, its course varies slightly among individuals, and yet in each case it passes through similar stages.

Targeting French Youth

There are believed to be about 1,000 French citizens in Iraq and Syria, or en route to those countries, more than from any other European nation. Entire families have joined jihadist movements, including about 100 young French women. Many have already been married off to fighters in the Turkish-Syrian border region. Once a girl is married and pregnant, it becomes more difficult for her to flee.

The terrorist groups that are targeting France in their recruitment efforts include Islamic State and Syria's Al-Nusra Front.

"Young people are being deliberately targeted, boys and girls, each for different purposes," says Dounia Bouzar, who has been studying the radicalization of French youth for 15 years.

Bouzar, 50, an anthropologist specializing in religion, had already analyzed the phenomenon of self-proclaimed holy warriors when officials at the French Interior Ministry were still dealing with isolated cases. She wrote a book on the subject in 2006, a sort of guide for parents. Bouzar says that she saw this wave of radicalization of French youth coming, but that she would have preferred to be wrong.

On a sunny fall day, Bouzar is sitting in a Paris brasserie, ignoring a constant stream of calls on her mobile phone. Today she is part of a small team of advisers to the interior minister. In the spring, when cases of minors who had secretly left the country were mounting, Bouzar set up a hotline for family members seeking advice. About five new families call the hotline every week.

But Bouzar also receives calls from young girls wanting to know what to do about female friends who have stopped wearing makeup and no longer want to go to the movies. Instead, they say, the girls are now covering their entire bodies with loose-fitting robes.


Sahra's radicalization began the same way. Then she converted to Islam. When she told her parents about it, Mehault thought that her daughter was simply becoming interested in her father's religion. Then Sahra began praying regularly, first twice and eventually five times a day. She traded her jeans for long dresses, wouldn't leave the house without a headscarf, and stopped plucking her eyebrows.

One day, when Mehault caught her daughter trying on a face veil, she said: "Sahra, religion is something you carry in your heart. You don't have to show it to everyone."

Sahra told her mother that she was an "infidel," that she was "impure," and that she had no right to judge what her daughter was doing.

Arguments became more frequent, and there were long discussions over meals. The parents, afraid that Islamophobes might attack their daughter, forbade her from leaving the house in a full veil. Instead, she stayed at home and spent hours in front of the computer.

"We should have stopped it," her mother says.

"We didn't notice how bad things were with her," says her father.

Kenza, who is two years younger than her sister, once eavesdropped on Sahra when she was Skyping with one of her "sisters" while looking at a series of images of dead children. "You shouldn't see this," said Sahra, quickly closing the window on the screen.
'Almost All Are Middle Class'

The number of young people who have become radicalized and have disappeared is rising rapidly. More than 140 families have contacted Bouzar since January 2014.

Radicalization used to be limited to the poor and the uneducated, says Bouzar. Immigrants from Muslim backgrounds were usually the ones who joined jihadist groups. But the situation has changed today, she explains. "Now three-quarters of them come from atheist families."

They include Christians and Jews, and almost all are from the middle class, with some coming from upper-class families, the children of teachers, civil servants and doctors. Bouzar is even familiar with a case involving an elite female university student. It also appears that more and more girls and young women are fantasizing about jihad.


The Internet and social networks make it easy to indoctrinate young people. In her research, Bouzar discovered that the French-speaking unit of the Al-Nusra Front actually employs headhunters to recruit young women and men.

The process of brainwashing usually follows the same principles, not unlike the approach taken by sects. First the victim, be it a boy or a girl, is isolated from his or her surroundings. The young people are pressured to sever all ties to family and friends. Then the indoctrination begins, through videos about genetically engineered food or alleged conspiracies. The goal is to make the victims believe that the world is evil and that only they have been chosen to make it a better place.

As a result of this brainwashing, the young women and men gradually lose their connection to everyday life and their old identities. Once a new identity has been created, they often see themselves as members of a chosen group of fighters for a better world.

Bouzar has found that the radicalized young women have a common trait: They are all interested in careers in social work or humanitarian aid. Sahra, for example, wanted to become a kindergarten teacher. As soon as these aspirations become apparent, through such channels as a Facebook profile, the Islamists begin casting their nets. They masquerade as "sisters in spirit" and become friends with the young women. During this initial phase, the conversations do not revolve around religious issues, but around an emotional world that is being created.

The recruiters foster feelings of dismay, using images of children gassed by the Syrian regime, for example. Only when the victims have become sufficiently unsettled, and when they begin to question their current world and way of life, does Islam come into play.

Devious Methods

"Of course, it isn't Islam that is being communicated to them," says Bouzar, herself a Muslim. The extremists use the religion to lead their victims to believe in a higher, "godly" objective, she explains. And girls like Sahra, confused and disgusted by the supposed decadence of the West, believe what they hear. Bouzar and her associates have set up Facebook profiles, which they use to reconstruct the terrorists' devious methods.

In the end Sahra, an insecure and naïve girl, and an introverted and helpful person, became so indoctrinated that she left home.

Sometimes she sends a text message or a Facebook message to her parents or her brother. She writes that she is doing well. Although her mother calls the number every day, Sahra never answers.

Sahra's parents have written letters to the French president and the interior minister. They want the French government, which they accuse of allowing their underage daughter to simply leave the country, to get her back -- or at least to tell them where she is. They have only received one response, a letter from the Elysée Palace, from the office of President François Hollande, dated May 2. "You should know that the President of the Republic emphasizes with you in your distress," the letter reads.

They have heard nothing else since then.

Dividing Families

Dominique Bons, 60, is sitting in a brightly lit café in a suburb of Toulouse, a two-and-a-half-hour drive from the family's home. She, more than anyone, can emphasize with the anguish Sahra's parents are feeling. Bons, a retired civil servant, is a gaunt, petite woman with a striking face. She too is an atheist.

Bons lost her son Nicolas, 30, to the Islamic State extremists. All she has left of him is a text message, sent to her mobile phone on Jan. 2, 2014. It reads: "Your son committed a suicide bombing in a village near Homs that was occupied by the enemy. May he be accepted by God as a martyr."

That was on Dec. 22, 2013. Nicolas had left France nine months earlier, in March 2013, together with his half-brother Jean-Daniel, 22, his father's son from a second marriage. Jean-Daniel also died in the fighting in Syria.

Nicolas told his mother that he was going to spend two weeks in Thailand with friends. When she didn't hear from him, she called one of her son's friends.

"Thailand? We were never in Thailand," he said.

After that, Bons spoke with her son on the phone regularly.

"Why are you doing this?" she would ask.

"My place is here, fighting against (Syrian President) Bashar Assad," Nicolas replied.

A Son Becomes an Extremist

Bons describes Nicolas as an affectionate, insecure person who was often ridiculed for his gullibility, even by his friends. His parents divorced when he was three. He converted to Islam at 27, even though no one in his family was a Muslim. At first, Bons thought it was one of his quirks. She was pleased when he stopped smoking hashish and drinking. She thought that if religion gave her son a sense of security, it must be a good thing. The only thing she didn't like was the beard he grew.

"You shouldn't walk around like that," she told him. When he started wearing a loose-fitting floor-length coat and a prayer cap, she forbade him from visiting her dressed like that. "I'm a Frenchwoman, and I'm a committed secularist. It was too much," says Bons.

When Nicolas's views became more and more extreme, they began arguing frequently. He criticized his sister for wearing a short-sleeved T-shirt on a summer day. His mother was outraged. "That's enough now, Nicolas," she told him. He replied that they would probably never meet in paradise. By now, Nicolas often said how disgusted he was by life in France. "There are no true Muslims here," he would say.

His mother suggested he find a job. "At least a regular income makes people a little happier," she said. Her son's attempts to convert people annoyed her. Nicolas was now spending a lot of time reading the Koran.

He appeared in an IS propaganda video in July 2013, with the black IS flag waving in the background. He was wearing a Keffiyeh and called himself Abu Abd al-Rahman. His speech sounded stilted, as if he had been programmed. "I am a Frenchman. My mother is a Frenchwoman, and my father is a Frenchman. My parents are atheists. They have no faith. Al-hamdu lillah, All Praise and Thanks be to Allah that I converted to Islam almost three years ago."

In the video, he called upon his "French brothers" and his "European brothers" to emulate him, and to come to the blessed land of Sham -- Syria -- to fight. "Jihad is obligatory," he said, and repeated the same phrase again, like a broken record. In the end, he called upon François Hollande to withdraw France's troops from Mali and convert to Islam, because that would be the only way to save himself "from the flames of hell."

'I Will Never Get My Child Back'

Extremism expert Bouzar has found that boys and men who join the jihadists do it for different reasons than girls and women. They too often fit the profile of the humanitarian and starry-eyed idealist, but it is less pronounced than the belief that they are "knights" with a mission. Many men become fighters to satisfy their fantasies of omnipotence.

"It's a question of playing God, of being in control of life and death," says Bouzar. Mohamed Merah, the man who killed several people at a Jewish school in Toulouse, fit the same profile.

Others are simply motivated by a desire to belong, to be part of a group, a clique. This could also apply to Nicolas Bons.

His mother unlocks the door of her Renault Clio car. She has just finished smoking a hand-rolled cigarette. It was Nicolas who taught her how to roll them.

Her son died 10 months ago, in a foreign country and as a person who had become a stranger to her. He was a man who appeared on camera dressed in a combat uniform and carrying a Kalashnikov, someone who treated the mujahedeen in Afghanistan as his role models.

"I will never get my child back, but I can help other parents," she says. She established an organization to help others in similar positions, and within a week three couples that had lost their sons in Syria contacted her. Together, they now try to arrange counseling for returnees in prison.

The government sees everything in black and white and treats anyone who travels to Syria as a terrorist, says Bons. For her, as a mother, things aren't quite as clear. "Mostly they're just confused children, victims," she says.

Kenza Mehenni recently had a tantrum and sent her older sister Sahra a Facebook message filled with invective. "Sahra, you are incredibly mean," she wrote. "How can you abandon us like this, how can you do such a thing to Mama and Papa, all for this shit, for this war, someplace far away."

Translated from the German by Christopher Sultan

The Pressure to Escalate

The Phantasmagoric World of Washington

By Tom Engelhardt

Sometimes it seemed that only two issues mattered in the midterm election campaigns just ended.  No, I’m not talking about Obamacare, or the inequality gap, or the country’s sagging infrastructure, or education, or energy policy.  I mean two issues that truly threaten the wellbeing of citizens from Kansas, Colorado, and Iowa to New Hampshire and North Carolina.  In those states and others, both were debated heatedly by candidates for the Senate and House, sometimes almost to the exclusion of anything else. 

You know what I’m talking about -- two issues on the lips of politicians nationwide, at the top of the news 24/7, and constantly trending on social media: ISIS and Ebola.  Think of them as the two horsemen of the present American apocalypse.

And think of this otherwise drab midterm campaign as the escalation election.  Republican candidates will arrive in Washington having beaten the war and disease drums particularly energetically, and they’re not likely to stop.

In 2015, you’re going to hear far more about protecting Americans from everything that endangers them least, and especially about the need for a pusillanimous president (or so he was labeled by a range of Republicans this campaign season) to buckle down, up the ante, and crush the Islamic State, that extreme Islamist mini-oil regime in the middle of an increasingly fragmented, chaotic Middle East.

You already know the tune: more planes, more drones, more bombs, more special ops forces, more advisers, and more boots on the ground.  After 13 years of testing, the recipe is tried and true, and its predictably disastrous results will only ensure far more hysteria in our future.  And count on this: oppositional pressure to escalate, heading into the presidential campaign season, will be a significant factor in Washington “debates” in the last years of the Obama administration.

The Coming of a Terror Disease

Speaking of escalation, don’t think Congress will be the only place where escalation fever is likely to mount.  Consider the pressures that will come directly from the Islamic State and Ebola.  Let’s start with Ebola.  Admittedly, as a disease it has no will, no mind.  It can’t, in any normal sense, beat the drum for itself and its dangers.  Nonetheless, though no one knows for sure, it may be on an escalatory path in at least two of the three desperately poor West African countries where it has embedded itself.  If predictions prove correct and the international response to the pandemic there is too limited to halt the disease, if tens of thousands of new cases occur in the coming months, then Ebola will undoubtedly be heading elsewhere in Africa, and as we’ve already seen, some cases will continue to make it to this country, too.

Not only that, but sooner or later someone with Ebola might not be caught in time and the disease could spread to Americans here.  The likelihood of a genuine pandemic in this country seems vanishingly small.  But Ebola will clearly be in the news in the months to come, and in the post-9/11 American world, this means further full-scale panic and hysteria, more draconian decisions by random governors grandstanding for the media and their electoral futures.  It means feeling like a targeted population for a long time to come.

In this way, Ebola should remain a force for escalation in this country.  In its effects here so far, it might as well be an African version of the Islamic State.  From Washington’s heavily militarized response to the pandemic in Liberia to the quarantining of an American nurse as if she were a terror suspect, it’s already clear that, as Karen Greenberg has predicted, the American response is falling into a “war-on-terror” template.

Keep this in mind as well: we’re talking about a country that has lived in a phantasmagoric landscape of danger for years now.  It has built the most extensive system of national security and global surveillance ever created to protect Americans from a single danger -- terrorism -- that, despite 9/11, is near the bottom of the list of actual dangers in American life.  As a country, we are now so invested in terrorism protection that every little blip on the terror screen causes further panic (and so sends yet more money into the coffers of the national security state and the military-industrial-homeland-security-intelligence complex). 

Now, a terror disease has been added into the mix, one that -- like a number of terror organizations in the Greater Middle East and Africa -- is a grave danger in its “homeland,” just not in ours.

IS’s Escalatory Bag of Tricks

The preeminent terror outfit of the moment, the Islamic State (IS), which has declared itself a “caliphate” in parts of Iraq and Syria, seems to grasp the nature of the mental landscape in the U.S. far more clearly than we do. Whatever pain we cause it (and our bombing campaign is undoubtedly causing it some pain), we’re its ticket to the big time.  Our war against it confirms its singular sense of importance in the world of jihadism.  We have helped not just to bring it into existence (thanks to the invasion of Iraq and subsequent events there), but also to give it just the credentials it needs to thrive.  Washington and the Islamic State are now attached at the hip and so the pressures for escalation will only grow.  Or put more accurately, they will be quite consciously stoked by the IS itself.

Bloody and barbaric as it may be, it’s also a remarkably resourceful movement with a powerful sense of how to utilize its propaganda skills, especially on the Internet, to attract recruits, gain support in worlds that matter to it, and drive the U.S. national security state and Washington over the edge.  It can act or react in ways that will only lead the Obama administration to up the ante in its war.

As it has already done, it can continue to produce beheading videos and other inflammatory online creations, which have had a powerful escalatory effect here.  It has also learned that it may, after a fashion, be able to call out the “lone wolves,” the loose nuts and bolts of our world, to act in its name.  In recent weeks, there have been three such possible acts, one in New York City and two in Canada by stray individuals who might have been responding, at least in part, to IS calls for action (though we can’t, of course, be certain why such disturbed people commit acts of mayhem).  Such acts, in turn, trigger the usual sort of over-reporting and hysteria here as well as further steps to lock down our world.

What we do know is that the damage such individuals can do is modest at best, no more, say, than what a high school freshman with a pistol can do in a crowded cafeteria.  Strangely, however, while mass shootings, which are on the rise in this country, get major headlines, they lead to few changes in our world.  When it comes to the far less common phenomenon of the “lone wolf terrorist,” however, congressional figures are already raising a hue and cry and the national security state is mobilizing.

And then, of course, there’s what the militants of the Islamic State can do in Syria and Iraq to put further escalatory pressure on Washington.  Despite the Obama administration’s bombing campaign, from the town of Kobane on the Turkish border to the outskirts of Baghdad the Islamic State has generally either held its ground or continued to expand incrementally in the last two months.  Its militants are now within range of Baghdad International Airport, a key supply and transit point for the U.S., and recently dropped several mortar shells into the fortified Green Zone in the heart of the capital, which houses the gargantuan U.S. Embassy.

Already incidents of car bombings and suicide bombers are on the rise in Shiite neighborhoods of Baghdad.  Imagine, though, what the next possible steps might be: an assault on the airport, Washington’s lifeline in the country, or the infiltration of even small numbers of fighters into neighborhoods in the capital and the beginning of actual fighting in the city.  There are, in other words, a series of easily imaginable moves like these that could quickly raise temperatures and fear levels in Washington and lead to the kinds of escalatory steps that officially remain off the table at the moment.

Similarly, to imagine another kind of scenario, a State Department official recently suggested that U.S. air power be ordered to take out the pipelines that transport Islamic State-controlled oil to market.  That was, she suggested, a "viable option" and was under consideration by the U.S. military.  

As energy expert Michael Klare has pointed out, however, attacking such pipelines “would provide anti-American groups anywhere in the world with a rationale for bombing pipelines on which we and our allies depend. The result could be global economic havoc.”  In such a situation, the Islamic State could potentially call on “lone wolves” and jihadi groups across the Greater Middle East to respond in kind.

And these are simply examples of moves the Islamic state could have in its own escalatory bag of tricks.

The Military Trumps the Commander-in-Chief

At least one more source of potential pressure must be added to Congress, Ebola, and the Islamic State: the Pentagon.  Thanks to the reporting of Mark Perry at Politico, we know that the most telling bit of domestic escalatory pressure on the president came directly from someone he reputedly respects greatly, General Martin Dempsey, the chairman of the Joint Chiefs of Staff.  On August 6th, Perry writes, Dempsey joined Obama in his limousine and, according to an unnamed “senior Pentagon official,” “really leaned into him” on the crisis in the Middle East, saying that it demanded “immediate attention.”  A series of White House meetings followed and the next evening the president went on national television to announce the first limited air strikes against the militants of the Islamic State. By early the following month, he had essentially declared war against that outfit and announced "a systematic campaign of airstrikes," as well as other measures.

Another manifestation of military pressure on the White House soon followed, however.  From the beginning, the president had repeatedly and insistently taken one thing off that famed “table” in Washington on which all “options” reputedly sit: the possibility that there would ever be American “boots on the ground” in Iraq -- that is, military personnel sent directly into combat.  This, in effect, represented what was left of Obama’s previous proud claim that he had gotten us out of Iraq never to return.  Assumedly, it also represented a bedrock formulation in a situation that otherwise seemed to be in a constant state of flux.

In a way that has been rare in the history of American civilian-military relations, Dempsey and others in the Pentagon simply refused to accept this.  No matter what the commander-in-chief’s bottom line may have been, they evidently saw the future quite differently and didn’t hesitate to say so.  On September 16th, Dempsey himself stepped gingerly across the red line the president had drawn in the shifting sands of Iraq and Syria, telling the Senate Armed Services Committee in public testimony, "If we reach the point where I believe our advisers should accompany Iraqi troops on attacks against specific [Islamic State] targets, I will recommend that to the president."

In response, the president addressed troops at MacDill Air Force Base in Florida the next day and reiterated his stance: “I want to be clear: the American forces that have been deployed to Iraq do not and will not have a combat mission." Meanwhile, officials at the White House and in the Pentagon “scrambled” to claim that the difference was merely a semantic one and in no way an attempt by the chairman of the Joint Chiefs to contradict presidential policy.

That was, however, clearly not the case.  Soon after, Secretary of Defense Hagel offered a similar, if blurry, mantra on the subject of boots on the ground: “Anybody in a war zone, who's ever been in a war zone, and some of you have, know that if you're in a war zone, you're in combat.”  Almost a month later, Dempsey himself returned to the subject.  Speaking about a future campaign by the Iraqi army against that country's second largest city, Mosul, in the hands of the Islamic State since that army collapsed, he elliptically indicated his belief that American advisers would sooner or later be heading into battle with Iraqi troops.  "Mosul will likely be the decisive battle in the ground campaign at some point in the future," Dempsey told ABC's "This Week." "My instinct at this point is that will require a different kind of advising and assisting because of the complexity of that fight."  More recently, he urged that American advisors be sent to the battle zone of Anbar Province.

Meanwhile, retired officials like former Secretary of Defense Robert Gates (“There will be boots on the ground if there's to be any hope of success in the strategy.  And I think that by continuing to repeat that [the U.S. won't put boots on the ground], the president, in effect, traps himself.”), as well as the usual anonymous sources, drove the point home.  If the not-so-subtle public defiance of presidential policy was striking, the urge itself was perhaps less so.

After all, a group of frustrated military men would have had no trouble grasping the obvious: that U.S. air power, a coalition of unenthusiastic regional allies (some of whom had aided IS and other extreme al-Qaeda-style groups in their rise), Syrian “moderate” fighters who essentially couldn’t be found, and a sectarian Iraqi government with an army that wouldn’t fight did not add up to the perfect formula for winning a war in the Middle East.  With their feet already on the lower rungs of the escalatory ladder, their response was to begin promoting the need for more American involvement, the commander-in-chief be damned.

And note that the impulse to contradict the president in an escalatory fashion wasn’t confined to the fight against the Islamic State.  When it came to Ebola, Dempsey, Hagel, and Army Chief of Staff General Ray Odierno set out on a similar path in an even blunter fashion.

As October was ending, the president firmly called on state governors and others not to impose blanket quarantines on American caregivers returning from West Africa, but to stick to the guidelines suggested by the Centers for Disease Control and Prevention (CDC).  Almost immediately thereafter, Odierno issued a directive for the “21-day controlled monitoring” of all troops returning from the region (even though those there were not supposed to treat Ebola patients themselves).  Soon after, Dempsey recommended to the secretary of defense that “all members of the armed services working in Ebola-stricken West African countries undergo mandatory 21-day quarantines upon their return to the United States.”  Hagel no less promptly ordered just such a quarantine for troops returning from the Ebola hot zone.

The president was left to explain lamely and less than coherently the divergence between his policy and the Pentagon’s.  As the New York Times reported, “In his remarks, Mr. Obama defended the CDC guidelines for civilians, saying they protect Americans at home while not unduly burdening health workers in Africa. He called the situation with members of the military different, in part because they are not going to Africa voluntarily.  ‘We don’t expect them to have similar rules, and by definition, they’re working under more circumscribed circumstances.’”

A President Adrift in Bad Weather

In the eye of this storm of pressures is, of course, the White House and a president who seems aware that, in the last 13 years, American military power in the Greater Middle East has not exactly achieved its goals.  And yet, that clearly matters little.

We’ve been through a version of this before in the Vietnam era.  We know that, once on the ladder of escalation, those in power, including presidents, often can’t imagine any possible direction but up, no matter how they assess where that might lead.  A mentality of fatefulness verging on helplessness seems to set in, which only results in an ever-greater commitment of American resources (and lives).

Under the pressure of a powerful national security state (and the various complexes that have grown to gigantic proportions around it), in a Washington in which beating the drums for war has become a reflexive act and Republican hawks may well rule the roost, in a society in which journalistically stripped-down major media outlets are focused on anything that can glue eyeballs for more than a few seconds (and the Internet and social media follow suit), it turns out to be remarkably easy to create an atmosphere of hysteria, and escalation naturally follows.  Never before have Americans experienced the intensity of this combination of forces in this way.

As for the Obama White House, increasingly imperial in theory, it has visibly stumbled in practice.  Worse yet for a president clearly adrift, what it has to work with in the world looks ever less promising.  Take, as an example, its ally in the war against the Islamic State, the Iraqi government of Prime Minister Haider al-Abadi.  He has been touted as a Shiite “unifier” unlike his notoriously sectarian predecessor Nouri al-Maliki.

Facts on the ground, however, tell quite a different story.  It turns out that, in the wake of the collapse of the Iraqi army in the northern part of the country, the only significant forces capable of defending the capital and Shiite regions to the south have proven to be highly sectarian Shiite militias. 

According to recent reports, in places where they have taken territory, they have acted in a fashion hardly less brutal than their IS enemies.  They have burned homes in villages they have captured, kidnapping and killing Sunnis in a grim repeat of the worst years of sectarian slaughter during the American occupation.  In the meantime, al-Abadi appointed as his crucial interior minister Mohammed Ghabban, a man connected to the Badr Organization, whose Shiite militia was once known for its death squads.

Everyone seems to agree that the prerequisite for any struggle to defeat the Islamic State is a genuine “unity” government that could begin to woo back the alienated, oppressed Sunni population of northern Iraq.  That, however, is simply not in the cards.  In response to this fact on the ground, Washington has only one conceivable option: further escalation.  It’s the nature of the world that presses in on the White House, even if the phrase the ladder to hell makes no metaphorical sense.

Escalation is now a structural fact embedded in the war in the Middle East and the Ebola crisis here at home.  It has its constituencies and they are powerful.  It is fed by a blend of hysteria and panic that now passes for “the news,” heightened by the ministrations of the social media.  Escalation, it turns out, is in the interest of everyone who matters -- except us.

Tom Engelhardt is a co-founder of the American Empire Project and the author of The United States of Fear as well as a history of the Cold War, The End of Victory Culture. He runs the Nation Institute's His new book, Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World (Haymarket Books), has just been published.

Putin Signs Secret Pact to Crush NATO

Marin Katusa, Chief Energy Investment Strategist

November 6, 2014

Putin is staging an assault on the dollar to bring the US down to the level of just one ordinary nation among many.

Back on September 11 and 12, there was a summit meeting in a city that involved an organization that most Americans have never heard of. Mainstream media coverage was all but nonexistent.
The place was Dushanbe, the capital of Tajikistan, a country few Westerners could correctly place on a map.

But you can bet your last ruble that Vladimir Putin knows exactly where Tajikistan is. Because the group that met there is the Russian president’s baby. It’s the Shanghai Cooperation Organization (SCO), consisting of six member states: Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan.

The SCO was founded in 2001, ostensibly to collectively oppose extremism and enhance border security. But its real reason for being is larger. Putin sees it in a broad context, as a counterweight to NATO (a position that the SCO doesn’t deny, by the way). Its official stance may be to pledge nonalignment, nonconfrontation, and noninterference in other countries’ affairs, but—pointedly—the members do conduct joint military exercises.

Why should we care about this meeting in the middle of nowhere? Well, obviously, anything that Russia and China propose to do together warrants our attention. But there’s a whole lot more to the story.

Since the SCO’s inception, Russia has been treading somewhat softly, not wanting the group to become a possible stalking horse for Chinese expansion into what it considers its own strategic backyard, Central Asia. But at the same time, Putin has been making new friends around the world as fast as he can. If he is to challenge US global hegemony—a proposition that I examine in detail in my new book, The Colder War—he will need as many alliances as he can forge.

Many observers had been predicting that the Dushanbe meeting would be historic. The expectation was that the organization would open up to new members. However, expansion was tabled in order to concentrate on the situation in Ukraine. Members predictably backed the Russian position and voiced support for continuing talks in the country. They hailed the Minsk cease-fire agreement and lauded the Russian president’s achievement of a peace initiative.

However, the idea of adding new members was hardly forgotten. There are other countries which have been actively seeking to join for years. Now, with the rotating chairmanship of the organization passing to Moscow—and with the next summit scheduled for July 2015 in Ufa, Russia—conditions could favor the organization’s expansion process truly taking shape by next summer, says Putin.

To that end, the participants in Dushanbe signed documents that addressed the relevant issues: a “Model Memorandum on the Obligations of Applicant States for Obtaining SCO Member State Status,” and “On the Procedure for Granting the Status of the SCO Member States.”

This is extremely important, both to Russia and the West, because two of the nations clamoring for inclusion loom large in geopolitics: India and Pakistan. And waiting in the wings is yet another major player—Iran.

In explaining the putting off of a vote on admittance for those countries, Putin’s presidential aide Yuri Ushakov was candid. He told Russian media that expansion at this moment is still premature, due to potential difficulties stemming from the well-known acrimony between India and China, and India and Pakistan, as well as the Western sanctions against Iran. These conflicts could serve to weaken the alliance, and that’s something Russia wants to avoid.

Bringing longtime antagonists to the same table is going to require some delicate diplomatic maneuvering, but that’s not something Putin has ever shied away from. (Who else has managed to maintain cordial relationships with both Iran and Israel?)

As always, Putin is not thinking small or short term here. Among the priorities he’s laid out for the Russian chairmanship are: beefing up the role of the SCO in providing regional security; launching major multilateral economic projects; enhancing cultural and humanitarian ties between member nations; and designing comprehensive approaches to current global problems. He is also preparing an SCO development strategy for the 2015-2025 period and believes it will be ready by the time of the next summit.

We should care what’s going on inside the SCO. Once India and Pakistan get in (and they will) and Iran follows shortly thereafter, it’ll be a geopolitical game changer.

Putin is taking a leadership role in the creation of an international alliance among four of the ten most populous countries on the planet—its combined population constitutes over 40% of the world’s total, just short of 3 billion people. It encompasses the two fastest-growing global economies. Adding Iran means its members would control over half of all natural gas reserves.

Development of Asian pipeline networks would boost the nations of the region economically and tie them more closely together.

If Putin has his way, the SCO could not only rival NATO, it could fashion a new financial structure that directly competes with the IMF and World Bank. The New Development Bank (FKA the BRICS Bank), created this past summer in Brazil, was a first step in that direction.

And that could lead to the dethroning of the US dollar as the world’s reserve currency, with dire consequences for the American economy.

As I argue in The Colder War, I believe that this is Putin’s ultimate aim: to stage an assault on the dollar that brings the US down to the level of just one ordinary nation among many… and in the process, to elevate his motherland to the most exalted status possible.

What happened in Tajikistan this year and what will happen in Ufa next summer—these things matter. A lot.

Perhaps no one knows how dangerous Vladimir Putin is and how much he controls the flow of capital in the global energy trade than author of The Colder War, Marin Katusa.

Marin stakes millions on his deep knowledge of energy and politics. And as a result, his hedge funds have outperformed the TSXV index by 6-fold over the past 5 years. To discover everything Putin is planning and how it will directly affect you, click here to get a copy of Marin's brand new book, The Colder War.

The article Putin Signs Secret Pact to Crush NATO was originally published at