Signs of a Political Armageddon

By Charles M. Blow


CreditDoug Mills/The New York Times


Donald Trump can feel the breath on the back of his neck. Aggresive federal investigators — in the Russia case and a separate inquiry of his lawyer’s behavior related to women who have alleged consensual sexual relationships with Trump — are taking ever more bold actions.

They are getting closer to knowing things that I am sure Trump thought no one but the parties involved would ever know.

This has frightened and enraged the president.

There are reports that Trump is thinking of ways to thwart or constrict the Robert Mueller investigation, including the possibility of firing and replacing Deputy Attorney General Rod Rosenstein, to whom Mueller reports.

As The New York Times has reported, Trump has at least twice sought to fire Mueller.

The first time was last June “amid the first wave of news media reports that Mr. Mueller was examining a possible obstruction case,” and the most recent was in December when Trump became “furious” over “reports that the subpoenas were for obtaining information about his business dealings with Deutsche Bank.” Those reports about the subpoenas were not correct and Trump backed down.

But there is a pattern here: When the investigation verges into Trump’s areas of vulnerability, he seeks to squash it.

This is not the behavior of an innocent man. This is not the behavior of a “normal” president.

There is no doubt in my mind that a strong case could be made that Trump has consistently sought to obstruct justice. That is as clear as creek water.

Furthermore, no president should be made nervous about his or her financial dealings being made public. Indeed, almost every major party nominee for president in the last 40 years has released his or her tax returns. Trump, however, has refused.

There is clearly something there that he doesn’t want America to know, something damning and catastrophic. He will do anything to keep it from view, including bringing the government to its knees.

And now investigators have raided the room and office of his longtime personal attorney Michael Cohen and will have access to the verboten.

Trump’s worlds may well be about to collide and he will move heaven and earth to prevent that.

There were always things that Trump bragged about, true, but even there he often did so with no proof. They were things that he thought grew his legend as a tycoon, cad and pop culture icon.

The truth always seemed far less glamorous and far dodgier.

That truth, the part that he has kept shoved into the shadows, is his vulnerability. Trump clearly views full knowledge of whatever that truth is as mortally injurious to his own sense of repute and renown.

If Trump has lied to the people who still support him about the most central parts of his character, not just months or years ago, but on a consistent basis, and if those lies can be proved by actual documentary evidence of some sort, the whole house of cards crumbles.

Trump seemed to have great confidence that he could keep the personal separate from the political, not fully considering that the whole life of a president — particularly if that person may somehow have skirted the law or flagrantly flouted it — must be part of the public record and any aberrant activity must eventually be held to account.

Trump’s options for keeping his secrets concealed are shrinking by the day. Therefore, Jeff Sessions is not safe. Rosenstein is not safe. Mueller is not safe. The rule of law is not safe. Our democracy is not safe.

What happens from here will truly test this country. It will test the Constitution, our protocols and our conventions.

Maybe the founders and the hundreds of years of politicians following them should have predicted that a person like Trump could ascend to the presidency, but they didn’t, so they didn’t build in sufficient constraints and strictures.

Trump has spent a lifetime probing the regulations for weaknesses, testing the theory that under sufficient weight any bureaucracy can be broken.

He will not hesitate to apply what he has learned to his present predicament. If America must be damaged for him to escape unscathed, he will take that bargain without batting an eye.

And it is by no means clear that his cowardly Republican accomplices in Congress would do anything to prevent or punish him.

The country is in a perilous position. It is in the hands and under the thumb of a man now motivated by a primal survival instinct, a consuming egotism and a petrifying fear of ignominy.

At this point, nothing is beyond the possible, no matter how ill advised and how ultimately destructive. In Trump’s mind, I can only imagine, he has settled on a strategy in the case of his own administration’s Armageddon: If he’s going down, the whole system is going down with him.


China’s navy to conduct live-fire drills in Taiwan Strait

Naval exercise billed as largest ever underscores rising tension in western Pacific

Charles Clover in Beijing and Edward White in Hong Kong


Xi Jinping, China's president, makes a speech on board the destroyer Changsha on April 12 © AP


China’s navy announced it would hold live-fire military drills in the Taiwan Strait next Wednesday amid a worsening of tension in the western Pacific region.

On Thursday night the defence ministry carried a statement from the Maritime Safety Administration of Fujian province, bordering Taiwan, warning shipping from entering the area of the exercises on April 18.

They will be the first naval manoeuvres by China in the sensitive waters since 2015, and are sure to infuriate Taiwan. They also come as Washington and Beijing engage in a tit-for-tat military build-up in the disputed South China Sea, with China installing communications jamming gear on one of its artificial island bases and the US sailing two aircraft carriers through the sea in the past two months.

The defence ministry announcement followed a large exercise by the People’s Liberation Army Navy on Thursday and a speech by Xi Jinping, China’s president, from the deck of a destroyer announcing the need for China would build the world’s leading naval force.

This "has never been more pressing than today" Mr Xi told officers on the deck of the Changsha, in a nationally televised speech. He then watched through binoculars as four J-15 fighter jets took off from the Liaoning, China's first and only operational aircraft carrier.

The exercise was billed by state media as the largest Chinese naval drill ever, involving 10,000 personnel, 48 ships and submarines and 76 fighter jets.

“There is a good possibility that these military drills were planned many months ago, but they serve as a useful warning to Taiwan and the US not to cross Chinese red lines,” said Bonnie Glaser, director of the China power project at the Center for Strategic and International Studies, a US think-tank. “Taipei should remain calm, and not look for ways to retaliate that would ratchet up tension.”

Ian Easton, a research fellow at the Project 2049 Institute, a US security think-tank, and the author of a book on the threat of a Chinese invasion of Taiwan, said the drills did not amount to a major escalation.




“It is a PLA attempt to use the media to inflame a sense of insecurity in Taiwan, classic political warfare,” he said. “Nonetheless, you can bet US and Taiwanese military intelligence will be monitoring this exercise closely, just in case there is more than meets the eye.”

Taiwan’s president, Tsai Ing-wen, was on Friday scheduled to inspect a naval base at Su’ao on the island’s north-east coast. While the visit was not directly linked to China’s drills on Thursday, a senior official told the Financial Times that Ms Tsai “has instructed government agencies to enhance the efficiency and effectiveness of crisis management” due to the “growth of China's military activities” and other regional security threats.

“The Tsai administration is resolutely determined to accelerate the modernisation of the armed forces,” the official said.

The US Navy has been steadily building its presence in the western Pacific this year. On April 10 the US aircraft carrier Theodore Roosevelt sailed through the South China Sea, which China claims as its territorial waters. Another aircraft carrier, the Carl Vinson, made a similar passage in February, angering Beijing.

In response, China late last month held the then largest-ever military exercises in the South China Sea with 40 ships, including the Liaoning. On April 10, US officials said China had installed communications-jamming equipment on Mischief Reef, one of the artificial islands it has built in the sea, despite repeated promises not to militarise the islands.

In another step which angered Beijing, Taiwan on April 9 announced the US had agreed to grant it a licence to buy sensitive technology so it could build its own submarines. That came just weeks after US president Donald Trump signed new legislation promoting higher level visits between Taiwan and the US.

Some commentators have also connected the timing of the Taiwan Strait exercises next week to increasing tension over Syria, and Chinese support for Russia, which has troops fighting alongside Syrian government forces there. The US has threatened to bomb Syria in response to the recent chemical weapons attack on civilians.

China’s defence ministry has been particularly vocal about its support for Russia. On April 3, defence minister Wei Fenghe visited Moscow for a security conference and was quoted by Russian state news agency Itar-Tass as saying “the Chinese side has come to show Americans the close ties between the armed forces of China and Russia, especially in this situation.”

Alexander Gabuev, an expert on Russia-China relations at the Carnegie Moscow Centre, tweeted in response: “This is the 1st time in many years that a senior Chinese military leader says [something] like that publicly.”


Additional reporting by Ben Bland in Hong Kong


What Happened to the Oil Glut?

Stored oil is at its lowest level in more than three years, partly due to OPEC and Russia’s output cuts

By Benoit Faucon, Summer Said and Anant Vijay Kala


Oil storage tanks stand as snow falls at the Novokuibyshevsk oil plant, operated by Rosneft, in Samara, Russia. Photo: Andrey Rudakov/Bloomberg News 


A glut of stored oil that helped keep prices low for years is almost gone, thanks to production cuts by OPEC and Russia, a humming global economy and a series of small but meaningful supply disruptions.

Excess inventories of stored oil by the world’s industrialized economies are now at their lowest level in more than three years, based on a five-year running average, according to data released Thursday by the Organization of the Petroleum Exporting Countries. After months of steepening declines, the cartel said commercial inventory levels shrunk a further 17.4 million barrels in February, to about 2.85 billion barrels. 
That represents a surplus of just 43 million barrels, based on the five-year average. Two years ago, the storage surplus hit 400 million barrels.


The drain on storage is partly a consequence of a concerted effort by Saudi Arabia, its OPEC colleagues, and Russia, to throttle back output to bolster prices.


GOING, GOING, GONE
The world's glut of stored oil has quickly disappeared.

Total oil inventories in OECD countries compared with their five-year averages


*Source: Organization of the Petroleum Exporting Countries


“The rebalancing process is well under way,” OPEC Secretary General Mohammed Barkindo told an energy summit in New Delhi on Wednesday.

The quickening depletion of excess stored oil has analysts throwing around a word they haven’t had to use that often in the past few years: shortages. Without much cushion in storage, the threat of supply outages can more quickly drain inventories—and boost prices.

Venezuelan crude output has been hobbled by political and economic instability there, and rising tensions between the U.S. and Russia over Syria have also contributed to worry over supply. President Donald Trump has threatened a missile attack against Syria, in retaliation for an alleged chemical attack by Syria’s government, which Moscow has backed during the country’s long civil war.

Syria doesn’t pump much oil itself, but the new tensions have raised the specter of bigger production outages across the oil-rich Middle East, should military action escalate. Many similar supply-shock worries have had only muted impact on oil prices in the recent past, thanks to the glut of oil in storage. With that cushion gone, analysts say geopolitics may again start playing an outsize role in oil markets.

“Global oil supply and demand are quickly approaching a balanced position after spending several years in an excessively high inventory mode,” said Dominick Chirichella, co-president of New York-based Energy Management Institute, in a report Wednesday. “Geopolitical risk is bubbling up in the oil pits.”

Saudi Arabia has indicated little appetite for opening up the spigots. In its report Thursday, OPEC said its collective production fell by an average 201,000 barrels a day. Part of the decline came from fresh, voluntary cuts by Saudi Arabia. Earlier this week, the kingdom said it would keep its overall crude-oil exports below 7 million barrels a day next month.

Saudi Oil Minister Khalid al-Falih told the New Delhi conference this week that “we will not sit by and let another glut resurface in the coming years and bring the market through the roller coaster that we have seen.”

Thinning inventories isn’t just down to OPEC-led cuts. Oil demand has been growing amid a rare, synchronized economic expansion by the world’s biggest economies. OPEC said it now sees demand for this year growing by about 30,000 barrels a day more than it had previously forecast. That growth is now expected to come to an average 1.63 million barrels a day for the year.

Amid that new appetite, a series of production outages are already sapping supply. Last month, OPEC says it lost about 100,000 barrels a day because of the crisis in Venezuela and disputes by rival political groups in Libya and Iraq.

All that has translated into higher oil prices. Brent, the international oil benchmark, has been hovering above $70 a barrel—levels not seen in three years.

The big question for markets now is whether, amid the tightening market, North American shale producers swing back into action. These smaller, nimbler producers have in previous periods of oil-price strength, ramped up output to take advantage of the higher prices.

That new production typically boosts supply, and eases prices back down again. In its report, OPEC upgraded its non-OPEC oil supply forecast for the year, saying Canada and the U.S. will pump about 90,000 barrels a day more than expected.


Measures of US Power

By Xander Snyder


The Russian ruble, Turkish lira and Iranian rial are all falling in value. What do they have in common? The United States is in some way involved in their decline. It’s a sign of U.S. power: Even as its military becomes more limited and it threatens to pull back from the Middle East and other parts of the world, the U.S. can still put pressure on the economies of countries that are working against U.S. interests and impact global conflicts without resorting to military force.
 
Sanctions Pressure in Russia
For Russia, recently imposed sanctions and the threat of new sanctions are proving to be a drain on its economy and the ruble. Last week, the U.S. announced a new round of sanctions that target Russian oligarchs and their businesses. Rusal, a metals conglomerate and one of the world’s largest aluminum producers, was hit particularly hard, with its shares declining by nearly 35 percent in two days. But Rusal wasn’t the only company with ties to the Russian government to experience a rapid sell-off: Sberbank and VTB, two major Russian banks, saw their share prices decline by nearly 20 percent and 10 percent, respectively, after the sanctions were announced. Some financial analysts have estimated that up to $16 billion in wealth owned by Russian oligarchs was wiped out in just a couple of hours.
Through the use of so-called secondary sanctions, which target both U.S. and non-U.S. companies that do business with sanctioned Russian companies and individuals, the U.S. is restricting Russia’s access to dollars. This limits Russian companies’ ability to conduct transactions globally in dollars and their access to foreign investment. For example, Rusal has been forced to ask its customers to fulfill contracts in euros rather than dollars. The declining ruble also makes foreign machinery and equipment – which are among Russia’s top imports and which Russia needs to modernize its economy – costlier.
Attracting investment is crucial for Moscow as it tries to reform its economy to decrease its dependence on oil and other natural resources. Yet, capital outflow from Russia increased by 60 percent in 2017 compared to 2016 and totaled $13.4 billion in the first quarter of 2018. Cutting off this outflow is no small feat.
By imposing sanctions, the U.S. wants to make Russia’s domestic problems strong enough to force Moscow to turn its focus inward and limit its foreign adventures. And more sanctions might be on the way. A bill introduced in Congress last week would restrict investment in Russia’s sovereign debt, putting further pressure on the ruble. Washington is thus signaling that it is by no means out of ammunition.
Treasury Secretary Steven Mnuchin said the sanctions introduced this month are a response to Russia’s occupation of Crimea and its ongoing support of the Assad regime in Syria. The recent poisoning of a former Russian spy in the United Kingdom also undoubtedly played a role. But the sanctions shouldn’t be seen solely as a reaction to these events. The U.S. is trying to send Russia a broader message: If Moscow keeps asserting itself in places like Ukraine, Syria and Georgia, it will face consequences. In a way, it’s a proactive move intended to keep the Russians in check and prevent further Russian incursions elsewhere.
 
Uncertainty in Iran
Another adversary that the U.S. faces in Syria is Iran. While the U.S. was busy cobbling together a weak coalition of moderate rebels to fight Bashar Assad and the Islamic State, Iran was solidifying its position there. The U.S. now needs a way to limit Iran’s expansion, and encouraging the devaluation of the rial – by, say, threatening to scrap the Iran nuclear deal – is one way to do it. The uncertainty surrounding the deal makes it more difficult for foreign companies to conduct business in Iran, limiting its foreign investment potential. The U.S. doesn’t need to actually abandon the deal to make an impact – it just needs to threaten to do so.
That the rial has so sharply declined as a result of this uncertainty is a sign that Iran’s economy remains vulnerable and its security tenuous, regardless of its rising clout in Syria and Iraq. Like Russia, Iran is now forced to turn its attention to domestic issues rather than its efforts at external expansion. For example, the government this week introduced its own exchange rate of 42,000 rials to the dollar – far better than the market rate, which currently hoovers around 60,000 rials to the dollar – to try to stem the currency’s decline. The large-scale protests in January and the more localized ones in Khuzestan and Isfahan provinces this week indicate that there is consistent and widespread dissatisfaction with the regime. This dissatisfaction isn’t restricted to students or those living in cities. In Isfahan, farmers are again protesting the government’s poor handling of water shortages during a severe, nationwide drought, which has made it difficult if not impossible for farmers to make a living. As a result, fewer crops are being grown domestically, increasing Iran’s need to import food. But with a weaker rial, food imports become more expensive.
One of the catalysts of the January protests was a spike in the price of food staples. Following those protests, Iran – under growing budgetary pressure as it allocates ever more funds to fighting wars – was forced to walk back planned subsidy cuts to appease the public. This forced Iran’s supreme leader, Ayatollah Ali Khamenei, to dip into Iran’s reserve fund to ensure funding for the military wouldn’t be slashed. But a weaker rial will certainly make the Iranians think twice about their military funding and could impact Iran’s ability to continue waging war at the scale that it has in the past couple of years. If high food prices were to again spark large-scale uprisings, Iran would need to divert funds to domestic needs to ensure social stability.

Debt-Fueled Growth in Turkey
In contrast to Russia and Iran, Turkey isn’t a direct target of the United States.

Nevertheless, Turkey faces serious risks due to U.S. monetary policy. In response to a tight U.S. labor market and consistent economic growth, the Federal Reserve has been raising interest rates since 2015 and will almost certainly continue to do so throughout 2018. This encourages capital inflow to the U.S. as investors seek higher returns. It also creates higher demand for the dollar, increasing the dollar’s value relative to other currencies, including the lira.
A weaker lira is a problem because, although Turkey’s economy has seen high levels of growth, it has been supported with external debt (that is, debt denominated in foreign currencies). Accompanying this debt-fueled growth has been rising rates of inflation, which devalues the lira. A weaker lira makes it harder for Turkish businesses to pay back foreign debt. In March, ratings agency Moody’s downgraded Turkey’s sovereign debt, citing a combination of factors including inflation, a weak lira and the risk of external financing being tabled.
Higher U.S. interest rates, therefore, are a threat to Turkey’s growing economy and thus its ability to expand its reach to places where it might challenge U.S. interests. A weak economy that must dedicate more and more funds to servicing debt will find it progressively more difficult to support the costs of war. And these costs are only going to increase as Turkey faces the challenges of governing the parts of Syria it has conquered and looks to move farther east.
To be clear, the U.S. isn’t intentionally weakening the Turkish economy through its own monetary policy. Rather, the U.S. economy is so large and pervasive that it has far-reaching consequences for countries around the world. That said, the U.S. and Turkey have been at odds over the situation in northern Syria, and Washington wouldn’t mind indirectly curtailing Turkey’s ability to expand its operations against Kurdish forces there.
The decline of U.S. power has become a trope in discussions of global affairs. But its ability to contribute to the domestic problems of its adversaries – and an ally with which it is increasingly at odds – is a sign that the U.S. can still exercise substantial soft power, even as its military is overcommitted and limited in its ability to deploy force to new theaters.


US-China rivalry will shape the 21st century

Beijing’s rising economic and political power poses great challenges to the west

Martin Wolf



China is an emerging superpower. The US is the incumbent. The potential for destructive clashes between the two giants seems potentially unbounded. Yet the two are also intimately intertwined. If they fail to maintain reasonably co-operative relationships they have the capacity to wreak havoc not only upon each other, but upon the entire world.

China is a rival of the US on two dimensions: power and ideology. This combination of attributes might remind one of the clash with the Axis powers during the second world war or the cold war against the Soviet Union. China is of course very different. But it is also potentially far more potent.

China’s rising power, economic and political, is evident. According to the IMF, its gross domestic product per head in 2017 was 14 per cent of US levels at market prices and 28 per cent at purchasing power parity, up from 3 per cent and 8 per cent, respectively, in 2000.

Yet, since China’s population is more than four times as big as that of the US, its GDP in 2017 was 62 per cent of US levels at market prices and 119 per cent at PPP.

Assume that by 2040, China achieves a relative GDP per head of 34 per cent at market prices and 50 per cent at PPP. This would imply a dramatic slowdown of the rate it is catching up (a fall of around 70 per cent from the rate since 2000, starting in 2023). China’s economy would then be almost twice as big as that of the US at PPP and almost 30 per cent larger at market prices. (See charts.)





The 34 per cent benchmark I have chosen is that of today’s Portugal. It is hard to imagine that China, with its vast savings, motivated population, huge markets and sheer determination could not achieve the relative prosperity of Portugal. This would still leave it far poorer, relative to the US, than Japan or South Korea — the fast-growing east Asian economies of the past.

Size matters. It is quite unlikely that China’s overall economy will not end up far bigger than that of the US, even if, on average, individual Americans remain far more prosperous than individual Chinese. China is also already a more important export market than the US for many significant countries, particularly in east Asia.

Moreover, China is spending almost as big a share of GDP on research and development as leading high-income countries. This is a driver of Chinese innovation, which I recently saw at a visit to Alibaba’s headquarters in Hangzhou. Moreover, the combination of economic size with improving technology is making China an increasingly formidable military power. The US may complain about this. But it has no moral right to do so. Self-defence is a universally accepted right of nations.




So is the right to develop. The US can huff and puff about Chinese theft of intellectual property. But every catch-up nation, very much including the US in the 19th century, seized the ideas of others and built upon them.

The idea that intellectual property is sacrosanct is also wrong. It is innovation that is sacrosanct. Intellectual property rights both help and hurt that effort. A balance has to be struck between rights that are too tight and too loose. The US can try to protect its intellectual property. But any idea that it is entitled (or indeed able) to prevent China from innovating its way to prosperity is mad.



China is also an ideological challenger of the US, on two dimensions. It has what might be called a planned market economy. It also has an undemocratic political system. Unfortunately, recent failures of free market high-income economies have increased the lustre of the former.

The election of Donald Trump, an admirer of despotism, has strengthened the appeal of the latter.

The US, one would once have said, also has the benefit of powerful and committed allies.

Unfortunately, Mr Trump is waging economic war upon them. If a decision to attack North Korea led to the devastation of Seoul and Tokyo, US military alliances would be over. An alliance cannot also be a suicide pact.




Managing the competition between these two superpowers is going to be difficult. Graham Allison of Harvard is fatalistic in his Destined For War: conflict between the incumbent and rising power is almost inevitable. A hot war among nuclear powers might seem relatively unlikely.

But large-scale friction and so an end to necessary co-operation over economic relations seems probable. It is unclear how to resolve today’s conflicts over trade. Co-operation over managing the global commons has already collapsed, given the Trump administration’s rejection of the very idea of climate change.

China’s future is up to China. But the west’s relations with China are up to it. The US is right to insist that China abide by its commitments. But then so must the US and the rest of the west. China is not going to feel compelled to abide by agreed rules when pressed by any country that treats these rules with contempt. China is, in any case, not the real threat. That relationship can surely be managed.





The threat is the decadence of the west, very much including the US — the prevalence of rent extraction as a way of economic life, the indifference to the fate of much of its citizenry, the corrupting role of money in politics, the indifference to the truth, and the sacrifice of long-term investment to private and public consumption.

It is indeed a tragedy that the best way we could find to escape from a financial crisis was via monetary policies that risked promoting new bubbles. We could be better than this.

The west can and must live with a rising China. But it should do so by being true to the better angels of its own nature. If it is to manage this turn of the wheel of history, it has to look within.