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The Madman theory
Law & Politics
The madman theory was an important part of Richard Nixon's foreign policy
The madman theory was a primary characteristic of the foreign policy
conducted by U.S. President Richard Nixon. His administration, the
executive branch of the federal government of the United States from
1969 to 1974, attempted to make the leaders of other countries think
Nixon was mad, and that his behavior was irrational and volatile.
According to Nixon's theory, leaders of hostile Communist Bloc nations
would then avoid provoking the United States, fearing an unpredictable
Nixon explained the strategy to his White House Chief of Staff, H. R. Haldeman:
I call it the Madman Theory, Bob. I want the North Vietnamese to
believe I've reached the point where I might do anything to stop the
war. We'll just slip the word to them that, "for God's sake, you know
Nixon is obsessed about communism. We can't restrain him when he's
angry—and he has his hand on the nuclear button" and Ho Chi Minh
himself will be in Paris in two days begging for peace.
The madman strategy can be related to Niccolò Machiavelli, who, in his
Discourses on Livy (book 3, chapter 2) discusses how it is at times "a
very wise thing to simulate madness." Kimball, in Nixon's Vietnam War,
argues that Nixon arrived at the strategy independently, as a result
of practical experience and observation of Dwight D. Eisenhower's
handling of the Korean War.
Abe Says Summit With Putin Needed to Resolve Territorial Row
Law & Politics
Japanese Prime Minister Shinzo Abe said Monday that summit talks with
Russian President Vladimir Putin must take place in order for the
countries to forge a peace treaty.
Japan and Russia never signed a peace treaty after World War II
because of conflicting claims over islands north of the Japanese
island of Hokkaido, which Japan calls its "Northern Territories."
When asked about Putin in a news conference, Abe said, "We both
recognize that 70 years after the war's end, to not have concluded a
peace treaty is abnormal."
"But without a summit meeting this Northern Territories problem cannot
be resolved," Abe said.
@AbeShinzo is moving with despatch to square off a number of
previously intractable Foreign Policy challenges. South Korea refers.
Inside The Tiny Police State With Seven Armies Daily Beast
Law & Politics
There’s a smell of sewage out on the beaches outside, juxtaposed with
tangerine, sunset views glimmering atop the murky waves. Looking
southward across the warm waters of the Gulf of Aden, whale sharks
congregate en masse to feed in the fall and winter.
I’m watching through massive glass windows in the lobby of the
Sheraton hotel, an oasis for foreign soldiers and military contractors
of every stripe. That’s when I notice I’m being eyed by a couple of
It’s par for the course in this minuscule police state, where the most
prominent industry is catering to the world’s competing militaries—and
the biggest mistake is pointing out how the government treats its
So Djibouti has become a safari grounds for high-paying sovereign
clients. An American hub for its secret wars in East Africa and the
Arabian peninsula is here—complete with a fleet of drones and a
rotating gang of special operations forces.
The Japanese use their base here as an African logistical hub and to
protect regional shipping. The French, who colonized Djibouti in the
mid-19th century and controlled the country well into the 20th
century, also maintains a military force here. The German, Italian,
and Spanish militaries also have a presence in Djibouti, focusing on
countering piracy in the Gulf of Aden and off the coast of Ethiopia.
And soon, the Chinese will be operating there too, having negotiated
their first overseas military outpost, making it capable of projecting
power thousands of miles from their homeland. That makes seven
militaries crammed into this one tiny police state.
All shipping passing northward through the Suez Canal to Europe or
southward to the Indian Ocean would need to sail through the Bab
al-Mandab, or Gate of Tears in Arabic. On one side of the strait lies
the small but stable state of Djibouti. On the other side, the
treacherous and war-torn country of Yemen.
Djibouti’s primary strategic resource is its oil fields. The arid
desert state has hardly any agriculture to speak of, and locals
complain of a lack of skilled labor, but it does have a deepwater port
at a critical chokepoint for global commerce. In other words, it’s a
If you don’t ask too many questions.
Eurasia Group's Top risks 2016
Law & Politics
The hollow alliance
The China footprint
ISIS and “friends”
The rise of technologists
Not enough elections
The results are clear. The Middle East is the most vulnerable to a
geopolitical leadership vac- uum and is heading toward conflagration.
There are six failed states across the broader region (Afghanistan,
Iraq, Libya, Mali, Syria, and Yemen) and more refugees than ever
recorded. ISIS has become the most powerful terrorist organization in
history. Oil economies are under strain. All of this will get worse in
This all means a dramatically more fragmented world in 2016 with more
intra-, inter-, and extra-state conflict than at any point since World
And so, in 2016, conflict intensifies. Last year, investors recognized
growing uncertainty but remained more focused on the economic
improvements: a US economy in recovery and Europe coming out of
recession. That’s unlikely to last, as geopolitical risk shakes the
Eurasia Group's Top risks 2016
South China Sea tensions surge as China lands plane on artificial island Reuters
Law & Politics
China's first landing of a plane on one of its new island runways in
the South China Sea shows Beijing's facilities in the disputed region
are being completed on schedule and military flights will inevitably
follow, foreign officials and analysts said.
"The next step will be, once they've tested it with several flights,
they will bring down some of their fighter air power - SU-27s and
SU-33's - and they will station them there permanently. That's what
they're likely to do."
"These events are a precursor to an ADIZ, or an undeclared but de
facto ADIZ, and one has to expect tensions to rise."
China changing the Facts on the ground.
Currency Markets at a Glance WSJ
Euro 1.0820 The euro traded at $1.0820 EUR=, pushing away from a
one-month trough of $1.0781 touched on Monday as flight-to-quality
pushed down Treasury yields and weighed on the dollar.
Dollar Index 98.87
Japan Yen 119.462 The dollar inched up 0.1 percent to 119.59 yen JPY=.
The greenback plumbed an 11-week low of 118.705 on Monday
Swiss Franc 1.0017
Aussie 0.7200 Aussie was up 0.2 percent at $0.7205 AUD=D4 after
tanking 1.3 percent on Monday.
India Rupee 66.425
South Korea Won 1187.72
Brazil Real 4.0413
Egypt Pound 7.8298
South Africa Rand 15.5239
Dollar Index 3 Month Chart INO 98.869
Looking out for Africa in 2016 By J. Peter Pham
While each of Africa's 54 independent states presents a different
political and economic risk profile rooted in each country's unique
history and driven by diverse internal and regional dynamics, there
are nonetheless several common trends which will broadly impact many
of them in 2016.
Increasing terrorist violence. While the attacks in Paris at the
beginning and end of 2015, which were linked to al Qaeda in the
Arabian Peninsula (AQAP) and the Islamic State in Iraq and Syria
(ISIS), respectively received a great deal more attention in global
media, it is in Africa where terrorism has been surging. In fact, the
publication in mid-November of the annual "Global Terrorism Index" by
the Institute for Economics and Peace provided statistical evidence
that, in fact, it is the Nigerian group Boko Haram, which in March
pledged its allegiance to ISIS and been branding itself as "Islamic
State West Africa Province" (ISWAP) — an evolution I predicted this
time last year — is "the most deadly terrorist group in the world."
The report counted 6,644 deaths caused by Boko Haram in 2014, an
increase of more than three times the tally of just a year earlier.
The toll meant that the Nigerian terrorists outdid their
self-proclaimed caliph, the ISIS's Abu Bakr al-Baghdadi, whose forces
in Iraq and Syria killed 6,073 people in the same period. With
continuing assaults like the rocket-propelled grenades and suicide
bombers it unleased on Maiduguri and Madagali in northeastern Nigeria
last week, killing more than 80 people in just one day, Boko Haram is
likely to have retained its title as the globe's deadliest terrorist
group going into the new year.
In fact, of the five most deadly terrorist groups on the "Global
Terrorism Index," three are in Africa: Boko Haram, Fulani militants in
Nigeria's Middle Belt and al-Shabaab in Somalia. Together, just these
three groups accounted for nearly half of the terrorism-related
casualties in the world in 2014. It is not just the threat that
terrorism poses to the individuals and countries immediately impacted
that is preoccupying, but the broader harm that this surge in violence
poses to Africa as a whole — in terms of its prospects for economic
growth and development — by having a dampening effect on the
confidence of investors for the entire continent at precisely the
moment when many are just beginning to discover its extraordinary
For the sake of international security in general as well as their own
interests in preventing massive population displacements as a result
of the violence, the United States and its European allies need to
step up their assistance to African states on the front line of the
battle against Islamist terrorists and other violent extremists.
Continued, but uneven, economic growth. According to the most recent
edition of the World Bank's "Global Economic Prospects" report, of the
13 countries with the highest projected compounded annual growth rate
from 2014 through 2017, six are in Africa. Sub-Saharan Africa is
expected to be the fastest growing economic region in the world for
2015, with its gross domestic product (GDP) growing at 4.5 percent,
slightly higher than China's anticipated GDP increase of 4.3 percent.
With prices for commodities being depressed globally — the price for
oil ended the year at its lowest point in more than a decade — and
demand for natural resources by China slumping as a result of that
country's economic slowdown, the growth spurts in places like Côte
d'Ivoire, Ethiopia, Rwanda and Tanzania are less a matter of a
resource windfall than other factors, including the wise choices made
by their leaders and peoples regarding economic reform, governance and
the use of new technologies that have encouraged significant
investment in and diversification of their economies, enabling them to
ride out the slackening demand for primary commodities. Likewise, some
regional blocs like the East African Community have made great strides
toward integration and in lowering barriers to trade between members,
boosting their collective economic potential.
On the other hand, the sustained slump in prices commanded by natural
resources will cause significant political and economic headaches for
both existing producers like Angola and Nigeria — the latter relies on
oil for roughly 80 percent of the federal government's revenue — as
well as countries like Mozambique and Uganda, where recent major finds
may go underdeveloped or even undeveloped as current price levels
discourage the level of investment required. Given the expectations
raised by the discoveries, the disappointment may lead to unrest and
even instability in some places. (It goes without saying that the
socioeconomic prospects are even bleaker for countries like South
Sudan, Somalia and the Central African Republic, which remain deeply
mired in conflicts that are not even close to being resolved.)
Electoral uncertainty. Presidential and/or parliamentary elections are
supposed to take place in at least 16 African countries this year:
Benin, the Central African Republic, Chad, the Republic of the Congo
(Brazzaville), the Democratic Republic of the Congo (DRC), Equatorial
Guinea, Gabon, The Gambia, Ghana, Mauritania, Niger, Rwanda, São Tomé
and Príncipe, Somalia, Uganda, and Zambia. While Africa's incumbents
have long enjoyed huge advantages over their opponents across most of
the continent, there were some surprises in 2015, notably in Nigeria,
where challenger Muhammadu Buhari beat incumbent President Goodluck
Jonathan — the first time a challenger has ever beaten an incumbent in
the country's history — and the latter conceded and peacefully handed
over the reins of Africa's most populous country and its biggest
Such grace and respect for constitutional order is unlikely to be the
case with 2016's most significant African poll, the presidential
election in the DRC, whose current ruler, Joseph Kabila, has been in
power since he extralegally inherited power from his assassinated
warlord father. Not only barred by the constitution from running for
another term, but explicitly precluded by the charter from amending
the provision on presidential term limits, Kabila fils has pulled out
all stops to avoid having to stand down at the end of this year,
including widespread repression as well as a cynical call for
"national dialogue" about the vote. A report in December by the United
Nations mission in the Congo documents the detention of at least 649
political opponents and civil society activists in the first nine
months of 2015 alone and notes rather diplomatically that "the
shrinking of democratic space is likely to impact the electoral
process." Absent timely elections which will enable the Congolese
people to transition past the Kabila era, it is hard to see how the
country can avoid a slide back into conflict that will impact the
In this regard, dwindling resources for democracy efforts in general
across the whole of the United States government could not have come
at a worse time, especially when one considers that that U.S. Agency
for International Development (USAID) funding for democracy assistance
in Africa has declined 43 percent under the Obama administration,
according an estimate by the Carnegie Endowment's Thomas Carothers.
Geopolitical competition. Notwithstanding some of the challenges, the
extraordinary lure of Africa's human and material resources as well as
its ongoing security challenges will continue to attract global
interest and, inevitably, competition. The last few months have seen
both an India-Africa Summit in New Delhi and a China-Africa Summit in
Johannesburg. China has also announced plans to build of its
first-ever overseas military base in the East African country of
Djibouti, which already hosts American, French and Japanese outposts.
The heightened outside interest and, indeed, competition, need not
necessarily constitute a negative, if African governments can avail
themselves of their newfound leverage to strike more advantageous
deals for their peoples and economies. For their part, Africa's
partners, including the United States, will need to step up their own
diplomatic and commercial engagement in 2016 if they want to be taken
seriously by their African counterparts, many of whom now enjoy
For African countries and those other governments and businesses that
have chosen to invest in the continent's incredibly promising future,
the year ahead will bring these and host of other challenges and
opportunities. The key to success will be having a strategic approach
that manages the former while seizing the latter.
Pham is director of the Atlantic Council's Africa Center.
Ex-Bozize PM takes early lead in C.Africa presidential race
Bangui (Central African Republic) (AFP) - Former prime minister
Faustin Archange Touadera took a commanding lead in the Central
African Republic's presidential race on Sunday, garnering more than 23
percent of the vote with a quarter of the ballots counted, electoral
Running as an independent, he has scored more than 120,000 votes,
while his closest rival for the top job, Anicet Georges Dologuele,
also a former prime minister, has scored just over 68,500 votes, the
elections authority's rapporteur Julius Ngouade Baba said.
The results confirm early indications of Touadera's lead in the
closely watched vote, which took place last Wednesday after repeated
delays. A likely second round is set for January 31.
Desire Kolingba, son of a former president, was in third place with
under 40,000 votes.
Fourth-placed Jean-Serge Bokassa, the 43-year-old son of the
self-proclaimed emperor Jean-Bedel Bokassa, who ruled CAR from 1966 to
1979, had nearly 34,000.
Tide is turning on African debt financing: S&P
The agency noted also that several SSA currencies had depreciated
dramatically. Of the 18 countries S&P rate in the region, only four
had experienced currency depreciation of less than 10 percent against
the US dollar in 2015.
A depreciating currency increases the foreign currency debt burden (in
local currency terms) relative to gross domestic product.
The statement noted that Mozambique, Zambia, Ghana, Angola and Senegal
were most affected by such debt inflation.
10-AUG-2015 “The end is nigh’’ for crude oil and oil producers from Caracas to Luanda, from Riyadh to Abuja
Oil is now in free fall. The end is nigh for the oil based, rentier
economies. President Obama, first Kenyan-American president of the
United States and oil warfare specialist, has scored the equivalent of
a hat-trick at the World Cup in how he has advanced the US national
interest by using the price of oil as a geopolitical spear. Oil based
economies are going to contract, currencies which have already
collapsed are going to be routed and Greek- style austerity will be
the order of the day. The melt-down is coming.
Africa Flash Note 04 January 2016 Angola: 15% devaluation in AOA [No
link Via Email]
The average USD/AOA exchange rate quoted on the BNA website was 156.38
(mid-rate) late on 31 Dec from 135.3 the previous day: a 15.0%
devaluation. The BNA has indeed been deliberating the extent of the
USD/AOA move higher needed in order to counter the marked
deterioration in both the fiscal and external balances for some time.
While assessing where the new normal for oil prices might be the
authorities devalued the currency back in Jun 15 and Sep 15 and
allowed USD/AOA to gradually grind higher in between those moves. The
step change on 31 Dec 15 appears to reflect a recognition that the
move needed to be swifter and possibly harder. It may well be that the
authorities took a breather to ascertain the influence of the
depreciation on the market before the move higher in USD/AOA .While we
don’t rule out further step devaluations, we still won’t be surprised
to see a resumption of a gradual grind higher USD/AOA. Besides, the
parallel exchange rate is around 240-260.
USD backlog remains significant: The BNA continues to ration its USD
supply via its auctions, which has resulted in an FX shortage and a
queueing system. The BNA claims that the backlog of USD was reduced to
about USD2.0bn by the end of Aug from about USD6.0bn before they put
in place certain regulations. However, we are not convinced that this
has diminished demand and still estimate the demand to be a little
more than double of that estimated by the BNA. Some of the regulations
sought to eradicate multiple client orders among different banks which
have probably brought the backlog down, but it’s still likely to be in
the region of about USD4.5bn. The BNA introduced regulations earlier
in H2:15 that require that the kwanza equivalent of FX orders from
banks are kept in a separate margin account and then placed with the
BNA with the objective of reducing the duplication of orders. The
government also started taxing 10% of service payments, with only a
few exceptions. Banks are prohibited from transacting for firms that
do not meet these tax obligations and may face fines and exclusions
from the FX auctions. This hardly reduced the large amount of USD
demand. Data from the BNA indicates that total USD sales for 2015
stood at USD17.5bn, merely USD1.7bn lower than in 2014. Nevertheless,
helped by the sale of the USD1.25bn Eurobond in Nov, gross FX reserves
have increased to USD25.0bn by Nov from USD23.7bn in Oct. Crucially
though, FX reserves were USD27.3bn at the start of the year.
Inflation and rates outlook: The budget for 2016 suggests that
domestic financing will be AOA1.4tr, AOA1.28tr of which will refinance
maturities. Hence, we still believe rates will increase further. In
any event the issuance of government T-bills and bonds has been barely
sufficient to cover maturing paper, let alone meet financing needs.
The overnight interbank rate was around 11.32% for the past month from
6.25% in May, but down slightly from nearly 12.0% in Sep 15. To some
extent the stability is because the government started issuing T-bills
at higher yields, reducing the divergence between T-bill yields and
the interbank rate. At the last T-bill auction on 30 Dec, yields on
the 91-d, 182-d and 364-d T-bills were 13.23%, 14.43% and 15.3%,
respectively. The yields have moved up on average by 350 bps across
maturities since the start of Nov. Moreover, if the BNA is going to
push USD/AOA higher still then debt issuance will be lower. On the
other hand, sharper USD/AOA moves higher will place more upward
pressure on inflation that reached 13.3% y/y in Nov 15 from an average
of 7.3% y/y in 2014.
Lower oil prices set to ease Kenya’s import bill in 2016 @BD_Africa
“Forecasts show oil prices have not found the bottom and could plunge
some more or take several years to recover to mid-last year’s level of
$115 (Sh11,730) per barrel,” said Aly-Khan Satchu, chief executive of
data management firm Rich Management.
“This is certainly a plus for Kenya’s economy in terms of cushioning
the shilling against extreme volatility from import pressures and a
stronger US dollar,” he added.
Kenya imported Sh197.7 billion worth of fuel and lubricants in the
year to October, a huge drop from Sh297.5 billion in the same period
last year, according to data from the Kenya National Bureau of
This saved the economy Sh99.8 billion, which is a seventh of the
foreign exchange reserves held by the Central Bank of Kenya at Sh724
billion ($7.1 billion).
21-DEC-2015What’s going on you might well ask?
Oil accounts for about a quarter of Kenya’s annual import bill.
According to latest data, Kenya imported Sh177.2 billion worth of fuel
and lubricants between January and September, a 34.66 per cent drop
from the Sh271.2 billion it took in during the same period last year.
That’s a Sh94 billion swing and nearly a $1 billion. That’s $1 billion
of dollar demand that has evaporated. Since September, the price of
fuel has tanked more than 20 per cent further accelerating this trend.
Earlier in the year, I spoke of how this $1 billion boost would
underpin our economy by providing a powerful grassroots stimulus.
However, what has happened is that the government has creamed off a
great deal of this by raising taxes on the price of fuel and thereby
improving its fiscal position and this has blunted the price move at
International Markets continue to exhibit sharpened Volatility with
China moving to support its stock market as state-controlled funds
bought equities [Bloomberg]
Government funds purchased local stocks on Tuesday after a 7 percent
tumble in the CSI 300 Index on Monday triggered a market-wide trading
halt, said the people, who asked not to be identified because the
buying wasn’t publicly disclosed.
Chinese policy makers are combatting ''a rout that erased $590 billion
of value in the worst-ever start to a year for the nation’s equity
China’s CSI 300 index rose 0.3 percent at the close, after earlier
falling more than 2 percent. The plunge on Monday triggered the
nation’s circuit breakers on their first day in effect.
Currency Markets have also been turbulent with the Yen very firm and
Commodity Currencies and The Euro under pressure.
The Teflon Shilling, however,is unperturbed at was last at 102.25 a 16
The Nairobi All Share eased by the smallest allowable margin to close
0.01 points lower 145.49.
The Nairobi NSE20 fell a further 32.75 points to close at 3974.58.
Equity Turnover clocked 497.172m
N.S.E Equities - Commercial & Services
Kapchorua Tea rallied +2.5% to close at 205.00 and was trading at the
Daily Limit of 220.00 +10.00% at the Finish.
N.S.E Equities - Finance & Investment
Kenya Commercial Bank firmed +1.162% to close at 43.50 and traded
2.292m shares worth 99.879m. Kenya Commercial Bank is +7.5% since 30th
December closing and since the announcement of the New Hold Co.
CFC Stanbic ticked 0.61% easier to close at 81.00 and on good volume
action of 903,200 shares worth 73.584m.
Equity Group eased -1.22% to close at 40.25 and was trading at session
Lows of 39.25 -3.68% at the closing bell. Equity traded 1.040m shares.
N.S.E Equities - Industrial & Allied
EABL rebounded +2.22% to close at 276.00 and traded 237,000 shares.
Buyers outpaced Sellers by a Factor of 2 to 1, underpinning the move.
Home Afrika closed limit down -10.00% at 2.25 and traded 408,900
shares. There was a further 2m available for sale which was not
cleared at the Closing Bell.Home Afrika issued a Full Year Profits
Warning on the last day of the last year.
KenGen closed unchanged at 6.95 and was trading at 7.05 +1.44% at the
Close. KenGen is very oversold is expected to snap higher.
Trans-Century rebounded +6.875% to close at 8.55 on thin volume, however.