|Monday 13th of January 2020
13-JAN-2020 :: 2020 Opens with a Bang.
Its been an extraordinary opening to the new decade worthy of the best
cinematic sequences ever, something like the ‘Ride of the Valkyries’
helicopter scene in Francis Ford Coppola's 1978’s classic Apocalypse
Now. Nassim Nicholas Taleb referenced another Francis Ford Coppola
classic ''The Godfather''There was perhaps no Soleimani threat (at
least nothing new). And there was no need for it. Trump borrowed an
old Persian trick: put the head of a horse in the enemy's bed.
@nntaleb tweeted. There is this formidable scene in the Godfather when
a Hollywood executive wakes up with the bloody severed head of a horse
in his bed, his cherished race horse.He had refused to hire a Sicilian
American actor for reasons that appeared iniquitous, as while he knew
the latter was the best for the role, he was resentful of the “olive
oil voice” that charmed one of his past mistresses and fearful of its
powers to seduce future ones.
its been very cinematic and stream of consciousness in 2020. The
Shooting down of #PS752 out of the night Sky a couple of nights before
the luminous ''Wolf Moon'' coincided with this verbatim release about
"This airplane is designed by clowns, who in turn are supervised by
monkeys," said one Boeing company pilot
Meanwhile, Trump tweets that he is going to bomb Iran's cultural sites
one moment and the next tweets in Farsi ''To the brave, long-suffering
people of Iran: I've stood with you since the beginning of my
Presidency, and my Administration will continue to stand with you''
Federico Pieraccini writes in an article captioned ''The Deeper Story
Behind The Assassination Of Soleimani''
Iraqi prime minister, Adil Abdul-Mahdi, has revealed details of his
interactions with Trump. He tried to explain several times on live
television how Washington had been browbeating him and other Iraqi
members of parliament to toe the American line, even threatening to
engage in false-flag sniper shootings of both protesters and security
personnel in order to inflame the situation, recalling similar modi
operandi seen in Cairo in 2009, Libya in 2011, and Maidan in 2014.This
is why I visited China and signed an important agreement with them to
undertake the construction instead. Upon my return, Trump called me to
ask me to reject this agreement. When I refused, he threatened to
unleash huge demonstrations against me that would end my premiership.
Huge demonstrations against me duly materialized and Trump called
again to threaten that if I did not comply with his demands, then he
would have Marine snipers on tall buildings target protesters and
security personnel alike in order to pressure me.
The Wall Street Journal reported
The Trump administration warned Iraq that it risks losing access to a
critical government bank account if Baghdad kicks out American forces
following the U.S. airstrike that killed a top Iranian general,
according to Iraqi officials. The State Department warned that the
U.S. could shut down Iraq’s access to the country’s central bank
account held at the Federal Reserve Bank of New York, a move that
could jolt Iraq’s already shaky economy, the officials said.
Iraq, like other countries, maintains government accounts at the New
York Fed as an important part of managing the country’s finances,
including revenue from oil sales. Loss of access to the accounts could
restrict Iraq’s use of that revenue, creating a cash crunch in Iraq’s
financial system and constricting a critical lubricant for the
economy. The warning regarding the Iraqi central bank account was
conveyed to Iraq’s prime minister in a call on Wednesday, according to
an official in his office, that also touched on the overall military,
political and financial partnership between the two countries.“The
U.S. Fed basically has a stranglehold on the entire [Iraqi] economy,”
said Shwan Taha, chairman of Iraqi investment bank Rabee Securities.
The World is literally on fire
2019 was Europe’s warmest year, marginally higher than temperatures in
2014, 2015 and 2018 Global average temperatures in 2019 were 0.6
degrees Celsius warmer than the 1981 to 2010 average. A Billion
animals are dead in Australia.
Joshua Keating tweeted Sussex plunged into anarchy as ruling family's
departure leaves power vacuum.
its all very Vladimir Ilyich Lenin.
“There are decades where nothing happens; and there are weeks where
in India 250m Workers went on strike and India cut its growth forecast
to the slowest pace in 11 years.
The World Bank in its latest economic release spoke of The Fourth
Wave: Recent Debt Buildup in Emerging and Developing Economies: There
have been four waves of debt accumulation in the last 50 years. The
latest wave, which started in 2010, has seen the largest, fastest, and
most broad-based increase in debt among the four. Total EMDE debt
reached almost 170 percent of GDP in 2018 ($55 trillion), an increase
of 54 percentage points of GDP since 2010.
The World Bank tried to keep it bright eyed and busy tailed about
Africa Sub-Saharan Africa: Regional growth is expected to pick up to
2.9% in 2020 but in the same sentence admitted ''The feeble economic
recovery in Sub-Saharan Africa has lost momentum, with growth in 2019
estimated to have edged down to 2.4 percent, from 2.6 percent in
2018'' Africa Confidential headlined their Leader ''African spring,
economic winter'' The tension between the aspirations of Africa's
overwhelmingly young 1.2 billion people and the continent's sluggish
economic progress is palpable throughout the continent's 30 million
square kilometres. In several countries, especially in the bigger
economies such as Algeria, Nigeria and South Africa where hopes are
highest, the political temperature is close to boiling point. It will
take quantities of political will not seen so far to respond to such
pressures with a credible plan. I put it a different way in my article
of 09-DEC-2019 :: Time to Big Up the Dosage of Quaaludes
The Markets spiked Gold to $1,600.00 an ounce before closing out the
week at $1,561.00 and given the uncertainty I have outlined, Gold
looks well underpinned and might even have a Banner Year. Brent Crude
spiked above $72 a barrel in the middle of the night but then
retreated to close out last week at just above $65.00. There is enough
Oil around but there won't be if the strait of Hormuz gets shuttered.
US Stocks continue to float higher on a tidal wave of nearly free
money [just under 1/2 a trillion dollars since September] Nigeria's
stocks are the World's best performers this year. The Nigeria is
+9.51% in 2020 but in noted Mr. Dangote is using this bounce to
hightail it to New York.
Lets finish up in Kenya where we are currently under a Plague of
Locusts and Al Shabaab attack. Margot Kiser wrote in the Daily Beast
The Manda Bay attack is the first al-Shabab has carried out on a
U.S.military installation inside Kenya Among the aircraft destroyed at
the Manda Bay base were manned surveillance planes that collect data
across the border in Somalia, as well as over Kenya’s dense Boni
forest, Also reportedly destroyed were aircraft operated by U.S.
Special Operations Command and modified Havilland Canada Dash-8 spy
aircraft, which carries the U.S. civil registration code N8200L. This
is a mind bending Jedi Level intrusion and asymmetric coup de grace.
The U.S. Africa Command has sent its crack East Africa Response Force
to secure the airfield and augment security. This is in fact a big
The Ride of the Valkyries in Apocalypse Now (1979)
A lot of superlatives have been attached to Francis Ford Coppola’s
Vietnam War epic Apocalypse Now, it's every bit as mesmerizing, trippy
and poetic as it was when it stunned audiences back in 1979.
The helicopter attack scene with the Ride of the Valkyries soundtrack
was chosen as the most memorable film scene ever by Empire magazine
(this same piece of music was also used in 1915 to similar effect to
accompany The Birth of a Nation).
Wagner’s imposing score combine wonderfully with the visuals to
emphasize the military dominance of the American forces.
This is the intent; emphasizing the power and grandiosity of the
military force from the US in Vietnam on the surface, but underneath
we all know how that tale ends. In madness and embarrassment, that the
rest of the film ultimately explore.
There was perhaps no Soleimani threat (at least nothing new). And there was no need for it. Trump borrowed an old Persian trick: put the head of a horse in the enemy's bed. @nntaleb
There is this formidable scene in the Godfather when a Hollywood
executive wakes up with the bloody severed head of a horse in his bed,
his cherished race horse.
He had refused to hire a Sicilian American actor for reasons that
appeared iniquitous, as while he knew the latter was the best for the
role, he was resentful of the “olive oil voice” that charmed one of
his past mistresses and fearful of its powers to seduce future ones.
It turned out that the actor, who in real life was (possibly) Frank
Sinatra, had friends and friends of friends, that type of thing; he
was even the godson of a capo. A visit from the consigliere of the
“family” neither succeeded to sway the executive, nor softened his
Hollywood abrasiveness –the fellow failed to realize that by flying
across the country to make the request, the high ranking mobster was
not just providing the type of recommendation letter you mail to the
personnel department of a state university. He had made him an offer
that he could not refuse (the expression was popularized by that scene
in the movie).
Russians Think Soleimani Was Great, and Trump's a Big Loser @thedailybeast @JuliaDavisNews
Law & Politics
Russian government figures, lawmakers and analysts sometimes mock U.S.
President Donald J. Trump, and sometimes they heap praise on him as,
you know, their guy.
But it seems a man they really admired was Iranian Major General
Qassem Soleimani, head of the elite Quds Force, who was blown away
last week on Trump’s orders, precipitating a fraught international
Among other things, Russian state media are describing Soleimani as
the architect of Russia's involvement in Syria, an operation in which
Moscow takes pride despite a long and continuing history of
Moscow live-streamed Soleimani’s six-hour funeral and showcased the
procession of the mourners who brought flowers to the embassy of Iran
Discussing Soleimani’s liquidation on the state television news talk
show 60 Minutes on channel Rossiya-24, Russian State Duma lawmaker
Vladimir Zhirinovsky—a controversial nationalist politician known as a
showman of Russian politics—exclaimed: “Many don't understand it yet,
but World War III is already underway. It is being carried out through
different methods and technologies.”
Zhirinovsky proceeded to extol General Soleimani’s popularity with the
Iranian people by comparing his importance to Felix Dzerzhinsky, the
founder of Cheka—the secret police predecessor of the KGB and, now,
the FSB) and Soviet Marshal Georgy Zhukov, hero of the fight against
the Nazis, put together.
The Russian Defense Ministry praised Soleimani as “a competent
military leader,” who “commanded well-deserved authority and
significant influence in the entire Middle Eastern region.”
The Russian Ministry of Foreign Affairs warned that Soleimani’s
killing would be “fraught with grave consequences for regional peace
and stability,” leading “to a new round of escalating tensions in the
The chairman of the Russian State Duma’s Foreign Affairs Committee,
Leonid Slutsky, described the action as “a barbaric provocation by the
He opined that “the Americans have crossed the 'red line,' and this
time the consequences can be very serious.”
Russian Deputy Foreign Minister Sergei Ryabkov said that when Russia
urges restraint in the conflict between Iran and the United States, it
means America “first and foremost.”
Ryabkov said that Russia finds American politics “of controlled chaos
and destabilization” unacceptable.
Likewise, the Kremlin sided with Iran in discussing the Ukrainian
airliner, reportedly downed by Russian-made missiles. Ryabkov called
on senior world leaders to refrain from public statements accusing the
Iranians until an investigation has been completed.
Senator Konstantin Kosachev, Chairman of the Federation Council's
International Affairs Committee, predicted that the killing of the
general would lead to increased violence: “You won’t be forced to wait
for a response… wars are easy to start, but very hard to finish.”
Kosachev accused Trump of arranging the killing “to spectacularly
begin his election campaign.”
Russian state media have concluded that Trump's actions against Iran,
including the liquidation of Soleimani, were primarily motivated by
his re-election ambitions, as well as his urge to create a distraction
from the ongoing impeachment proceedings.
During the program 60 Minutes, the hosts played a 2011 video clip of
President Trump, divining that President Barack Obama would start a
war with Iran in order to secure his re-election. ‘Does it remind you
of anything?”host Olga Skabeeva asked sarcastically.
Trump’s ludicrous prediction revealed his own way of thinking. “Wag,
wag, wag,” as in Wag the Dog, read the cartoon shown on 60 Minutes.
Even as myriad pro-Kremlin voices condemned Soleimani’s killing, many
could hardly conceal their glee about the side effects of the
escalation. Military analysts and state media pundits rejoiced at the
perceived humiliation and weakening of the United States on the world
Russian state TV programs repeatedly broadcast the photograph of
American President Donald Trump with missile-shaped slap marks on his
face, originally posted on a Twitter page linked to the Iranian
Ayatollah Ali Khamenei.
فقط یک سیلی؛
انتقام بحث دیگری است... pic.twitter.com/sW1iIcE5G5
— KHAMENEI.IR | فارسی (@Khamenei_fa) January 9, 2020
Russian state television aired the clips from Iranian state television
referring to the American president as “a yellow-haired psycho” and
offering a bounty for his head.
Russian war correspondent Yevgeny Poddubny said that for the first
time since the Vietnam War someone dared to strike an American base.
He pontificated that Iran raised the red flag of revenge for a good
reason and managed to save face. The audience enthusiastically clapped
in support of Poddubny’s statements.
Russian and Iranian state media jointly emphasized that Iran’s
campaign of retaliation against the United States is far from over. An
unnamed U.S. government official told Ken Dilanian of NBC News that
American intelligence agencies expect Iran to continue retaliating for
the Soleimani killing, using clandestine measures.
The source said, “If I were a U.S. ambassador, I wouldn't be starting
my own car for the foreseeable future.”
Likewise, the Russians anticipate that the Iranian revenge for the
Soleimani killing won't end with the strikes of the American bases in
Iraq. As that tweet of Trump’s slapped face puts it, the missile
strike was, “Just a slap; revenge is another argument …”
Russian State television reporter Valentin Bogdanov described the
killing of Soleimani as “lawless” and opined: “Iranians know how to
serve their revenge cold. They could choose to exercise it—for
example—close to the November elections, not leaving Trump much time
Yevgeny Primakov, member of the Russian State Duma, a grandson of a
former Russian Foreign Minister and Prime Minister Yevgeny Primakov,
and host of the state TV program International Review, said that “Iran
demonstrated to the whole world that the hegemon could be kicked.”
“Iran showed its strength and America revealed its weakness,” argued
military expert Vladimir Evseev, adding: “Nothing like this has ever
“You can deal with Americans only from a position of strength. Note
how they got punched in the nose and that was the end of it,” remarked
Nikolay Platoshkin, a former Russian diplomat and a Professor at the
Moscow University of the Humanities.
Russian State TV host Olga Skabeeva mocked President Trump's
assessment that Iran decided to back down. In reality, Skabeeva
argued, “Trump got scared of Iran.” She marveled at the unprecedented
nature of the unfolding events:
“What other examples could you give when some country, some regional
power that doesn't possess nuclear weapons— as far as we
know—delivered a strike at the United States of America? Simply wow!
How is that even possible? Can it really be done?”
Skabeeva added: “Trump demonstrated that he can't strike back… Your
hegemony no longer works. What are your allies doing? Who supported
you, Americans, in this action?” Skabeeva smugly surmised: “You are
America’s deteriorating relationships with allies delight not only the
state media, but also the Russian lawmakers. On his Twitter page,
Senator Alexey Pushkov pointed out that the great majority of
America's traditional allies did not support President Trump's
decision to kill General Soleimani.
During the state TV show 60 Minutes, Russian military expert Igor
Korotchenko yelled at the American panelist, and in the process
sketched Moscow’s strategic calculations:
“You crapped all over yourselves, that's why the United States needs
to shut up! Your time is over!” said Korotchenko.
“America is no longer the same. It's come to nothing. America admitted
its own defeat, politically and militarily. Iran—an independent strong
country, which is significantly weaker militarily—whipped and slapped
you all over the face. Two waves of missile strikes—where are your
Patriot [anti-missile] systems? They detected nothing and couldn't
ward off the attacks. You utterly screwed up. America is not the same
and the world is different. The year 2020 is breaking all established
norms. Not one of your allies relies on you—not in Europe or the
Middle East. You're weak and helpless… You're losing the status of a
superpower. Your weapons are bad. Your allies found out that it's
senseless to rely on the United States or their weapons systems. Your
Patriot systems are ineffective, nothing more than a bluff.”
It should be noted that the Patriot systems reportedly were absent
from the targeted military facilities in Iraq.
Korotchenko predicted: “The year 2020 opens up new opportunities, it
will be the time of new alliances—and the place of the United States
won’t be in the lead, but somewhere off to the side... Iran's missile
strikes are not the final stage of the retaliation. You will no longer
be able to decide the fate of the world. This is the collapse of the
global U.S. domination. The multipolar world is coming into power in
2020. This represents new opportunities for our country.”
Korotchenko is a member of the Russian Defense Ministry's public
council, with high-level political and military connections, including
the likes of Defense Minister Sergey Shoigu and First Deputy Defense
Minister Valery Gerasimov.
Lest anyone mistake him for a random bystander, Korotchenko pointed
out: “As a participant of the Defense Ministry Board meeting [attended
by Russian President Vladimir Putin] in 2019, I can say that our
generals are at ease, because our army and navy function like
clockwork. We're in control of the situation… The world is changing
and it won’t be the American world. It will be a multipolar world in
which you will be asked to stand aside when the most important issues
of the global world order are being decided.”
Korotchenko concluded his tirade against the United States by
proclaiming: “Today, Turkey, Russia and Iran are jointly working in
Syria… from where you've been asked to get out. Tomorrow, you'll get
out of Iraq and then you'll get out of everywhere else, because no one
else places their hopes in you any longer. Other countries will be
seeking support and alliance with Russia and buying Russian weapons…
Russian political and military leadership is smarter and more
successful than the Americans. That is the problem of the United
States—the incompetence of their leaders. We are competent and that's
why we're winning… We're back in the Middle East, we're again in the
league of great nations. If the United States has a problem with that,
criticize your own leadership that keeps on losing to us.”
Expert Nikita Daniuk, deputy director of the Institute for Strategic
Studies and Forecasts, argued that “America can no longer dictate its
conditions to its direct enemies… Yet again we're noting the weakness
of the United States in the face of an indecisive president who can do
nothing but raise the stakes… Trump forced his way into a trap.”
There is a widespread consensus about the diminishing influence of the
United States and the increasing role of Russia amongst Russian
lawmakers and experts. “The geopolitical role of Russia and Putin keep
growing,” boasted Igor Morozov, a member of Russia’s Federation
Elena Suponina, advisor at the Russian Institute for Strategic
Studies, surmised that in light of Trump's actions in the Middle East,
Russia is now seen as a more reliable and predictable partner.
Political commentator Sergey Strokan wrote for the Russian newspaper
Kommersant that the new regional crisis will further weaken Washington
and increase Moscow’s geopolitical influence, widening the window of
Russia’s opportunities in the Middle East.
Russian experts see the Kremlin as the main beneficiary of the rising
tensions between the U.S. and Iran—both geopolitically and
financially. Oil and gold prices soared following the Soleimani
killing, and the Moscow Stock Exchange reached all-time record levels.
Financial analyst Andrey Kochetkov told the Russian news publication
Vedomosti that the geopolitical crisis in the Middle East directly
benefits Russia: “While others are fighting, we are out of the way and
have the opportunity to profit in this situation through the sales of
arms and the growing prices of oil and gold.” The Kremlin continues to
reap the dividends of President Trump’s foreign policy blunders and is
most certainly not “sick of winning.”
U.S. sent an encrypted fax via the Swiss Embassy in Tehran urging Iran not to escalate, followed by a flurry of back and forth messages @WSJ
Law & Politics
BERN, Switzerland—Hours after a U.S. strike killed Iranian Maj. Gen.
Qassem Soleimani, the Trump administration sent an urgent back channel
message to Tehran: Don’t escalate.
The encrypted fax was sent via the Swiss Embassy in Iran, one of the
few means of direct, confidential communication between the two sides,
U.S. officials said.
In the days that followed, the White House and Iranian leaders
exchanged further messages, which officials in both countries
described as far more measured than the fiery rhetoric traded publicly
A week later, and after a retaliatory Iranian missile attack on two
military bases hosting American troops that inflicted no casualties,
Washington and Tehran seemed to be stepping back from the brink of
open hostilities—for now.
“We don’t communicate with the Iranians that much, but when we do the
Swiss have played a critical role to convey messages and avoid
miscalculation,” a senior U.S. official said.
A spokesman at Iran’s mission to the United Nations declined to
comment on the exchanges but said “we appreciate [the Swiss] for any
efforts they make to provide an efficient channel to exchange letters
when and if necessary.”
One Iranian official said the back channel provided a welcome bridge,
when all others had been burned: “In the desert, even a drop of water
From the Swiss Embassy, a Shah-era mansion overlooking Tehran, the
country’s role as a diplomatic intermediary has stretched through four
turbulent decades and seven presidencies, from the hostage crisis
under Jimmy Carter to Barack Obama’s nuclear deal. It has seldom been
tested like this.
The Americans’ first note was sent immediately after Washington
confirmed the death of Gen. Soleimani, the most important figure in
Iran’s Islamic Revolutionary Guard Corps, the U.S. officials said.
It arrived on a special encrypted fax machine in a sealed room of the
Swiss mission—the most enduring method since the 1979 Islamic
Revolution—for the White House to exchange messages with Iran’s top
The equipment operates on a secure Swiss government network linking
its Tehran embassy to the Foreign Ministry in Bern and its embassy in
Washington, say Swiss diplomats. Only the most senior officials have
the key cards needed to use the equipment.
Swiss Ambassador Markus Leitner, a 53-year-old career diplomat,
delivered the American message by hand to Iranian Foreign Minister
Javad Zarif early on Friday morning, according to U.S. and Swiss
Mr. Leitner, reached by email, declined to comment. The Swiss Foreign
Ministry confirmed there had been an exchange of messages, but
declined to comment further.
Mr. Zarif responded to the U.S. missive with anger, according to an
official familiar with the exchange. “[U.S. Secretary of State Mike]
Pompeo is a bully,” he said, according to one U.S. official briefed on
Mr. Zarif’s response.
“The U.S. is the cause of all the problems.”
The Swiss ambassador regularly visits Washington for closed-door
sessions with Pentagon, State Department and intelligence officials
eager to tap his knowledge about Iran’s opaque and fluid politics.
Mr. Leitner spent the days after Gen. Soleimani’s killing shuttling
back and forth in a low-key but high-wire diplomatic mission designed
to let each side speak candidly. It was a contrast to the jabs of
President Trump and Mr. Zarif on Twitter.
On Jan. 4, the day after the killing, Mr. Trump tweeted that he had
picked out 52 targets, including Iranian heritage sites for potential
retaliation if America suffered losses. “Those targets, and Iran
itself, WILL BE HIT VERY FAST AND VERY HARD,” the tweet said.
Mr. Zarif replied the next day: “A reminder to those hallucinating
about emulating ISIS war crimes by targeting our cultural heritage,”
“Through MILLENNIA of history, barbarians have come and ravaged our
cities, razed our monuments and burnt our libraries. Where are they
now? We’re still here, & standing tall.”
That same day, Mr. Zarif called the Swiss ambassador to take a message
to the U.S. It was more restrained, according to the U.S. officials.
Statements from both sides helped prevent miscalculations, the
“When tensions with Iran were high, the Swiss played a useful and
reliable role that both sides appreciated,” said a senior Trump
administration official. “Their system is like a light that never
The Swiss have served as messengers between Washington and Tehran
since 1980, in the wake of the seizure of the American Embassy—and 52
hostages —in Tehran by Iranian revolutionaries.
Swiss diplomats call the role the “brieftrager” or “the postman.”
In the years after the U.S.-led invasion of Iraq in 2003, the Swiss
shepherded messages to help avoid direct clashes. When President Obama
assumed office, Switzerland hosted the talks that led to a nuclear
deal. When Washington lifted sanctions, Swiss businesses had an early
jump on rivals.
When Mr. Trump reimposed sanctions, he gave the Swiss a phone number
to pass the Iranians, saying: “I’d like to see them call me.”
So far, Tehran has continued to speak through the Swiss.
Former Swiss ambassadors say the diplomatic channel is effective
because the U.S. and Iran can trust a message will remain
confidential, be delivered quickly, and will reach only its intended
recipients. Statements passed on the back channel are always precisely
phrased, diplomatic, and free of emotion, they said.
Landlocked Switzerland, a country of nine million with no standing
army, parlays its role as “postman” to lever access to the great
Currently, Swiss diplomats are working to get Washington’s green light
for Swiss banks to finance exports to Iran that aren’t subject to
sanctions—like food and medicine.
“We do things for the world community, and it’s good,” said a former
ambassador. “But it is also good for our interests.”
Iran isn’t the only geopolitical hot spot where the Swiss Embassy
represents U.S. or other countries’ interests after the breakdown of
The Swiss now holds six mandates including representing Iran in Saudi
Arabia, Georgia in Russia and Turkey in Libya. In April 2019, the
Trump administration asked Bern to represent it in Venezuela but
President Nicolás Maduro’s government has yet to approve.
As tensions between Washington and Tehran have escalated, the channel
has remained active. In December the two countries released prisoners
at the same time at a special hangar in the Zurich airport.
U.S. special envoy on Iran Brian Hook and Iran’s Mr. Zarif sat in
separate rooms as the Swiss directed the carefully choreographed
“The Swiss channel has become enormously important because of what
they can do in the short term to lessen tensions,” said former New
Mexico Gov. Bill Richardson, who worked with the Swiss on the prisoner
exchange. “It’s the only viable channel right now.”
U.S. Warns Iraq It Risks Losing Access to Key Bank Account if Troops Told to Leave @WSJ
Law & Politics
The Trump administration warned Iraq this week that it risks losing
access to a critical government bank account if Baghdad kicks out
American forces following the U.S. airstrike that killed a top Iranian
general, according to Iraqi officials.
The State Department warned that the U.S. could shut down Iraq’s
access to the country’s central bank account held at the Federal
Reserve Bank of New York, a move that could jolt Iraq’s already shaky
economy, the officials said.
Iraq, like other countries, maintains government accounts at the New
York Fed as an important part of managing the country’s finances,
including revenue from oil sales.
Loss of access to the accounts could restrict Iraq’s use of that
revenue, creating a cash crunch in Iraq’s financial system and
constricting a critical lubricant for the economy.
The warning regarding the Iraqi central bank account was conveyed to
Iraq’s prime minister in a call on Wednesday, according to an official
in his office, that also touched on the overall military, political
and financial partnership between the two countries.
During the parliamentary debate, the speaker, a Sunni, urged Shiite
lawmakers to be mindful of the potential backlash:
“One of the steps the international community could take is to stop
financial transactions with Iraq, and we would be unable to fulfill
our commitments to our citizens at any moment,” Mohammed al-Halboosi
said, based on a video of the proceedings viewed by The Wall Street
The financial threat isn’t theoretical: The country’s financial system
was squeezed in 2015 when the U.S. suspended access for several weeks
to the central bank’s account at the New York Fed over concerns the
cash was filtering through a loosely regulated market into Iranian
banks and to the Islamic State extremist group.
“The U.S. Fed basically has a stranglehold on the entire [Iraqi]
economy,” said Shwan Taha, chairman of Iraqi investment bank Rabee
Mohammed bin Zayed @MohamedBinZayed Dark Vision of the Middle East's Future @nytimes A
Law & Politics
Richard Clarke was in Abu Dhabi one morning in 2013 when his phone lit
up. “You busy?” a familiar voice said. It was a rhetorical question.
The caller was Mohammed bin Zayed al-Nahyan, the ruler of the United
Arab Emirates and one of the most powerful men on Earth. “I’ll send a
car,” he said, and hung up. Clarke, the former White House
counterterrorism czar, was working as a consultant for M.B.Z. (as he’s
mostly known outside his country) and had gotten used to impromptu
calls like this. M.B.Z. rarely explained what he had in mind. Once, he
took Clarke for an unexpected helicopter flight deep into the desert
of the Empty Quarter and then landed by an artificial pond, scattering
a herd of wild gazelles. Not far away, a group of German engineers was
standing around, working on an experimental solar-powered
This time, Clarke got in the back of the car with no idea where he was
heading. As they drove through a remote warehouse district, the
thought crossed his mind that he was being kidnapped. Then the driver
pulled up outside a building where Clarke heard popping sounds. He
went inside and saw a group of young women in military uniforms,
firing pistols at targets. Seated not far away was M.B.Z., in his
white tunic and ear-protection muffs, alongside his wife and an empty
third chair reserved for Clarke. During a lull in the shooting, M.B.Z.
introduced the women, who were all his daughters and nieces. “I’m
starting a draft,” M.B.Z. said. “I want everyone in the country to
feel like they’re responsible. A lot of them are fat and lazy.” To
stimulate the draft, he said, he would begin with all the young people
in his own family.
M.B.Z.’s draft was part of a grand nation-building effort at home and
abroad, one that would require more soldiers and have repercussions
for the entire Middle East. Since its founding in 1971, the United
Arab Emirates — a federation of oil-rich sheikhdoms on the north
Arabian coast — has mostly stayed out of the Arab world’s many
conflicts. It became the region’s economic marvel, a desert Xanadu of
gleaming skyscrapers, endless malls and marble-floored airports. But
by 2013, M.B.Z. was deeply worried about the future. The Arab Spring
uprisings had toppled several autocrats, and political Islamists were
rising to fill the vacuum. The Muslim Brotherhood — the region’s
foremost Islamic party, founded in 1928 — and its affiliates had won
elections in Egypt and Tunisia, and jihadist militias were running
rampant in Libya. In Syria, the rebellion against Bashar al-Assad was
also falling into the hands of Islamist militias. ISIS was on the
rise, and in less than a year would sweep across the Iraqi border and
seize a territory the size of Britain.
At the same time, M.B.Z. watched in dismay as armies mobilized on the
other side of the region’s great sectarian divide. Shiite militias
loyal to the Iranian spymaster Qassim Suleimani — who was killed
earlier this month in an American drone strike — exploited the
post-2011 vacuum to spread their theocratic influence over Syria, Iraq
and Yemen. It was a recipe for apocalyptic violence, and the regional
powers were doing little to stop it. Turkey was vehemently cheering
its own favored Islamists on and backing some of them with weapons. So
was Qatar, the U.A.E.’s oil-rich neighbor in the Persian Gulf. The
Saudis were ambivalent, hampered by an elderly and ailing monarch.
Even the United States — which M.B.Z. had always regarded as his chief
ally — seemed to regard the Muslim Brotherhood as an unsavory but
inevitable byproduct of democracy in action. M.B.Z. repeatedly warned
Barack Obama in phone conversations about the dangers he saw. The
American president was sympathetic, former White House officials told
me, but seemed intent on getting out of the Middle East, not wading
By the time he invited Clarke to his family’s firing range, M.B.Z. had
already hatched an immensely ambitious plan to reshape the region’s
future. He would soon enlist as an ally Mohammed bin Salman, the young
Saudi crown prince known as M.B.S., who in many ways is M.B.Z.’s
protégé. Together, they helped the Egyptian military depose that
country’s elected Islamist president in 2013. In Libya in 2015, M.B.Z.
stepped into the civil war, defying a United Nations embargo and
American diplomats. He fought the Shabab militia in Somalia,
leveraging his country’s commercial ports to become a power broker in
the Horn of Africa. He joined the Saudi war in Yemen to battle the
Iran-backed Houthi militia. In 2017, he broke an old tradition by
orchestrating an aggressive embargo against his Persian Gulf neighbor
Qatar. All of this was aimed at thwarting what he saw as a looming
M.B.Z. makes little distinction among Islamist groups, insisting that
they all share the same goal: some version of a caliphate with the
Quran in place of a constitution. He seems to believe that the Middle
East’s only choices are a more repressive order or a total
catastrophe. It is a Hobbesian forecast, and doubtless a self-serving
one. But the experience of the past few years has led some veteran
observers to respect M.B.Z.’s intuitions about the dangers of
political Islam writ large. “I was skeptical at first,” says Brett
McGurk, a former United States official who spent years working in the
Middle East for three administrations and knows M.B.Z. well. “It
seemed extreme. But I’ve come to the conclusion that he was often more
right than wrong.”
M.B.Z. has put many of his resources into what could be called a
counterjihad, and they are formidable. Despite his country’s small
size (there are fewer than a million Emirati citizens), he oversees
more than $1.3 trillion in sovereign wealth funds, and commands a
military that is better equipped and trained than any in the region
apart from Israel. On the domestic front, he has cracked down hard on
the Brotherhood and built a hypermodern surveillance state where
everyone is monitored for the slightest whiff of Islamist leanings.
M.B.Z.’s leading role in this ongoing counterrevolution, as a sort of
latter-day Metternich, has changed his country’s reputation. The
Pentagon still regards him as a loyal and capable ally; during one
visit to Abu Dhabi last May, I sat in the audience as Jim Mattis, the
former secretary of defense, addressed a crowd of Emirati and foreign
dignitaries and compared the Emirates to both Athens and Sparta. But
some Obama officials came to see him as a dangerous rogue actor. By
the time Donald Trump was elected — offering him a more pliant partner
— M.B.Z. was drawing criticism from human rights groups and diplomats
for his military’s role in Yemen and Libya. Even some of M.B.Z.’s
admirers in diplomatic circles say that he can be too absolutist and
that he has waded too deep into conflicts whose outcomes he cannot
Yet M.B.Z. remains a rare figure in the Middle East: a shrewd,
secular-leaning leader with a blueprint of sorts for the region’s
future and the resources to implement it. For all his flaws, the
alternatives look increasingly grim. The American drone strike that
killed Suleimani and his top Iraqi ally, coming on the heels of a
tense standoff at the United States Embassy in Baghdad, has pushed the
region closer to war, with Iran's supreme leader issuing dire-sounding
threats of retaliation. It is too soon to know how Tehran will react,
but M.B.Z. is likely to be a key player in whatever unfolds next.
Despite his reputation as an Iran hawk, he has made several quiet
diplomatic gestures in recent months and reportedly has a back channel
to communicate with Iran’s leadership.
These departures from Trump’s “maximum pressure” campaign have
underscored his new willingness to steer an independent course. The
same man who privately criticized Obama for appeasing Iran now appears
to be worried that Trump will stumble into war. M.B.Z. may be uniquely
well placed to avert a conflict in which his country — which sits just
across the Persian Gulf from Iran — could be one of the first targets.
M.B.Z., 58, has been the U.A.E.’s leading figure for over a decade
(his older brother Khalifa, who suffered a stroke in 2014, remains the
titular president) and has been shaping its policies — in education,
finance and culture as well as foreign policy — for even longer. Yet
he has made few state visits and has never attended a United Nations
assembly. He doesn’t do Davos. He rarely gives speeches and doesn’t
talk to journalists. He has a lower profile than the ruler of Dubai,
Mohammed bin Rashid al-Maktoum, his subordinate in the Emirati
federation. “He doesn’t want to be in the photo,” one of his oldest
friends told me.
It took me nearly a year to arrange an interview. During that time, I
went through a series of meetings with his surrogates in New York,
Washington, London and Abu Dhabi — a sort of vetting process, which I
seem to have survived mostly because I had spent years reporting on
the gulf region. He had never given an on-record interview to a
Western journalist, but the timing was lucky: My efforts coincided
with a push by his inner circle to be more open and transparent.
Still, even after our conversation, his advisers were extremely cagey
about what could be quoted, fearing his words would be twisted and
misused by his enemies.
The first time I saw M.B.Z., last May, he was at his evening majlis, a
central ritual of Emirati social and political life. It was in a vast
reception hall in Abu Dhabi, and I was surrounded by hundreds of
fasting Muslims. It was over 100 degrees outside, but this palatial
room, with its 50-foot ceilings and rows of immense chandeliers, was
air-conditioned to a clammy-palms chill, like almost every other
building in the U.A.E. It was strange to be surrounded by so many
Emiratis, who form a small minority of the country’s population. I’ve
been visiting the U.A.E. for many years, and have come to think of
rootlessness as one of the country’s defining features. Even when the
streets are packed, almost everyone you see in Dubai or Abu Dhabi — a
Benetton crowd of faces from everywhere on Earth — comes from
somewhere else. When you ask them about their lives, they almost
invariably mention how grateful they are to be in the U.A.E., sending
cash home to their families in Kerala or Nairobi or Kuala Lumpur.
The majlis I attended was the prelude to an iftar, the ritual evening
breaking of the fast during the holy month of Ramadan. M.B.Z. was deep
in conversation with a visiting African dignitary seated to his left.
On his right was Mohammed bin Rashid. Later, I watched M.B.Z. get up
and work the room like a Chicago pol — greeting new arrivals, making
introductions, laughing, hugging old friends. He hosts a separate
weekly majlis at which any Emirati citizen may apply to appear, often
to voice grievances or ask for help. These regular gatherings serve an
important purpose, allowing M.B.Z. and his peers to get feedback from
businessmen, tribal leaders and other constituencies. Emiratis often
tell you, with perfect sincerity, that this is their own indigenous
answer to democracy.
As we filed into a huge, high-ceilinged hall piled with food and
drink, I stationed myself back near the corner. Then I felt a tap on
my shoulder and heard a voice behind me: “Come on, guys, let’s eat.”
M.B.Z.’s advisers had been telling me for months about his love for
going off-script. He drives around Abu Dhabi at the wheel of his white
Nissan Patrol and shows up unannounced in local restaurants. A fitness
enthusiast, he often conducts meetings during long walks, occasionally
jotting notes on his hand. He is scrupulously punctual and always well
briefed, but he loves to surprise Western diplomats by flouting
princely decorum. One former diplomat told me he was waiting for his
car in Abu Dhabi on a foggy evening when a helicopter emerged out of
the mist and landed nearby. Out of the pilot’s seat stepped M.B.Z.,
who trained as a flyer in the 1970s. The official complained that it
was much too foggy for a safe flight. “Shut up and get in,” M.B.Z.
said with a grin. They then flew to Dubai, staying just above the
power lines. Another time, M.B.Z. was driving a former United States
ambassador through town when the ambassador noted the absence of any
security guards. “Don’t worry,” M.B.Z. said. “Look at the floor
beneath your seat.” The ambassador was startled to discover an
automatic weapon folded up under the carpet.
M.B.Z. led me to his table and seated me directly to his left, across
from several of his brothers and a visiting Asian head of state. At
M.B.Z.’s insistence, I dug into the hummus and lamb, and soon he was
interviewing me about my old life as a journalist in Lebanon. In
person, M.B.Z. speaks deliberately and quietly, lapsing now and then
into a crooked grin that conveys a surprising impression of shyness.
He has a prominent nose and slightly hooded eyes, partly concealed
when I met him by a pair of clunky black-plastic glasses. He speaks
fluent English with a faint British accent and an American vocabulary.
He doesn’t bother with small talk; when I met him in June for a formal
interview, he had barely said hello when he began telling me about his
government’s latest moves in Yemen. We were sitting in the atrium of
the Emirates Palace hotel, a marble-floored monument to Persian Gulf
excess. True to form, he showed up with only a couple of security men
and an adviser. He went on to talk for an hour about his views on
Islamism, his upbringing, his political priorities and his father’s
legacy. He seemed to enjoy telling stories, but all of them were
calculated to make a point. It is no accident that people often said
the same things about his father, Zayed bin Sultan al-Nahyan, who
founded the U.A.E. 49 years ago.
Here is a story M.B.Z. told me:
Sometime in the 1980s, when he was a young military officer, he went
on a holiday trip to the grasslands of Tanzania, and on his return to
Abu Dhabi, he went to see his father. The two men sat cross-legged on
the floor in the traditional style, with M.B.Z. serving his father
coffee. Zayed asked his son for details about everything he’d seen:
the wildlife, the Masai people and their customs, the extent of
poverty in the country. After hearing it all, he asked M.B.Z. what he
had done to help the people he’d encountered. In response, M.B.Z.
shrugged and said the people he met were not Muslims. His father’s
reaction was sudden and indelible.
“He clutched my arm, and looked into my eyes very harshly,” M.B.Z.
told me. “He said, ‘We are all God’s children.’ ”
M.B.Z. says his father’s pluralist instincts are at the root of his
own anti-Islamist campaign. Zayed, who died in 2004 at age 86, mixed
traditional Bedouin attitudes with a rare liberal-mindedness. Emiratis
are deeply religious, but the country’s position on an ancient
shipping lane has bred a style of Islam that is relatively
cosmopolitan and tolerant. In fact, Zayed’s unusual openness is what
elevated him to power and helped set the U.A.E. on a different course
from its neighbors. The British installed him as ruler in 1966 — at
the request of leading Abu Dhabi families — because they were fed up
with his brother Shakhbut, who had been xenophobic and averse to
development. The Emirates were desperately poor then, and even the
richest families lived in mud-brick huts. There was almost no Western
medicine available in the 1960s, and most of the population was
illiterate; as many as half of all babies and a third of mothers died
in childbirth. Even today, middle-aged people tell stories of how
their parents would cut a gash in a camel’s neck and force them to
drink the blood to avoid dying of thirst.
Zayed insisted on universal education for women at a time when female
illiteracy was almost 100 percent. He allowed Christians to build
churches in Abu Dhabi, flouting the common Muslim belief that no other
religion should establish a presence on the Arabian Peninsula. In the
late 1950s, a family of American missionaries built a hospital in the
city of Al Ain, and it was there that an American woman doctor
delivered Zayed’s third son, Mohammed.
As M.B.Z. grew up, his country was being catapulted from poverty into
unimaginable wealth by the discovery of oil. At the same time,
political Islam was becoming his generation’s great rallying cry. When
M.B.Z. was about 14, his father sent him to school in Morocco. Zayed
seems to have intended this to be a toughening experience; he gave his
son a passport showing a different last name, so that he wouldn’t be
treated like royalty. M.B.Z. lived simply in Morocco, and spent
several months working as a waiter in a local restaurant. He made his
own meals and did his own laundry, and was often lonely. “There’d be a
bowl of tabbouleh in the fridge, and I’d keep eating from it day after
day until a kind of fungus formed on the top,” M.B.Z. told me. He
later spent a summer at Gordonstoun, the Scottish boarding school
where generations of British royals and other titled elites have sent
their children to endure cold showers and hazing rituals. Prince
Charles famously hated the place, but M.B.Z. told me he enjoyed his
time there. He went on to spend a year at Sandhurst, the British
Unbeknown to his father, M.B.Z. was under the sway of Islamist
thinking throughout these years. Zayed seems to have inadvertently
facilitated his son’s indoctrination by putting an Egyptian Islamist
named Izzedine Ibrahim in charge of his education. Zayed knew about
Ibrahim’s Brotherhood affiliation, but didn’t yet consider the
organization a threat.
M.B.Z. turned 18 in 1979, the year the Soviet Union invaded
Afghanistan. As the Afghan mujahedeen began a heroic resistance, young
Muslims from around the world streamed to Peshawar to join them. At
the same time, popular demonstrations toppled the shah of Iran, and
Ayatollah Khomeini returned to his homeland to lead the revolution.
For many people, a thrilling idea bound these events: The region’s
Western-backed puppets had failed, and now Islam would provide the
guidebook for a better, more authentic society.
But M.B.Z. was born with another, opposing legacy: clan loyalty. His
famous father was the embodiment of the traditional “feudal” dynasties
that Brotherhood ideologues used to rail against. His mother, Fatima,
was Zayed’s third and favorite wife, and her shrewdness and
determination helped elevate her six sons over Zayed’s other male
children. They are intensely loyal to one another and to her. In the
late 1960s, when they were children, Fatima told her boys about the
al-Nahyan family’s long history of internecine violence, which rose to
a crescendo in the 1920s with a series of brother-on-brother murders
that saw power change hands three times within seven years. She made
them all swear a vow never to overthrow or act against one another, a
former British intelligence officer told me. M.B.Z. still talks to his
mother almost every day.
Only after M.B.Z. returned to Abu Dhabi in the early 1980s did he
recognize that the ideas promoted by the Brotherhood were incompatible
with his own emerging role as an heir to power. M.B.Z. did not say
whether he thought about the corollary of his choice: that for
ordinary Emiratis, the Brotherhood’s appeal must have been even
In 1991, as George H.W. Bush assembled a coalition to push Saddam
Hussein out of Kuwait, the Pentagon was impressed by Zayed’s eagerness
to take part. Afterward, American military leaders began cultivating
M.B.Z., who became a military officer and had begun to emerge as the
most ambitious and competent of Zayed’s children. “He was a natural,
up-and-coming,” I was told by Bruce Riedel, a former C.I.A. officer
who is now an analyst at the Brookings Institution. “He was going to
run the country. The U.S. set on a path of wooing and grooming him.”
In 1995, Riedel told me, Secretary of Defense William Perry invited
M.B.Z. to the Pentagon. To make the experience more memorable, he also
flew him down to Camp Lejeune and arranged for him to attend a
military exercise in which Marines landed on the North Carolina shore
— a simulation of an amphibious attack in Iran or Iraq. “We used to
say in the Pentagon, the objective was to get M.B.Z. addicted to
aerospace magazines so he’d buy everything we produced,” Riedel said.
The seduction appears to have worked. The U.A.E. has spent billions on
American jets and weapons systems, and visitors to M.B.Z.’s office say
they still see stacks of military magazines there. In the early 1990s,
M.B.Z. told Richard Clarke, then an assistant secretary of state, that
he wanted to buy the F-16 fighter jet. Clarke replied that he must
mean the F-16A, the model the Pentagon sold to American allies. M.B.Z.
said no, he wanted a newer model he’d read about in Aviation Week,
with an advanced radar-and-weapons system. Clarke told him that that
model didn’t exist yet; the military hadn’t done the necessary
research and development. M.B.Z. said he would pay for the R. & D.
himself. The subsequent negotiations went on for years, and though
M.B.Z.’s hardball tactics angered some Pentagon brass, “he ended up
with a better F-16 than the U.S. Air Force had,” Clarke says. In the
decades to come, M.B.Z. would make clear that if the United States
military refused to accommodate him, he would be perfectly happy to
shop elsewhere — even in China, which has sold inexpensive drones to
the Emirati military in recent years. Still, the United States
remained his most important relationship by far.
On Sept. 11, 2001, M.B.Z. was in northern Scotland, enjoying the last
morning of a weeklong rabbit-hunting excursion with his friend King
Abdullah II of Jordan. He said his goodbyes and boarded a private
plane to London, arriving just after lunch. He hadn’t even left the
plane when an Egyptian member of his entourage came running out from
the terminal and climbed onboard, according to an official who was
present. “New York is burning!” the man shouted.
M.B.Z. had heard nothing of the day’s events, and when he did he was
furious. “What are you saying?” he asked the man. “New York is the
center of the world — look how vulnerable we are.” M.B.Z. tried to
reach his father, but was unable to get through. He did manage to get
Clarke, who was then working on counterterrorism in the White House.
It was the only call Clarke took that morning from outside the
government. “Carte blanche — just tell me what to do,” he recalled
M.B.Z. telling him.
By the time M.B.Z. arrived back in Abu Dhabi, later that day, he knew
that two Emiratis were among the 19 hijackers.
The Sept. 11 attacks were a life-changing moment for M.B.Z., unmasking
both the depth of the Islamist menace and the Arab world’s state of
denial about it. That October, M.B.Z. told me, he listened in
amazement as an Arab head of state, meeting with his father on a visit
to Abu Dhabi, dismissed the attacks as an inside job involving the
C.I.A. or the Mossad. After the head of state left, Zayed turned to
M.B.Z., who had been there for the meeting, and asked what he thought.
“Dad,” M.B.Z. recalled telling his father, “we have evidence.” That
fall, the Emirati security services arrested about 200 Emiratis and
about 1,600 foreigners who were planning to go to Afghanistan and join
Al Qaeda, including three or four who were committed to becoming
That same autumn, M.B.Z. had another conversation with his father that
would affect the way he thought about political Islam. The encounter
began, M.B.Z. told me, when he entered his father’s office with a
momentous piece of news: The Americans were sending troops to
Afghanistan. Zayed said he wanted Emirati troops to join them. M.B.Z.,
who was commanding the armed forces by this time, was not prepared for
this. Taking an active role in the American campaign would raise
sensitive issues, given that some were calling it a war against Islam.
Sensing his son’s unease at the prospect of committing troops, Zayed
said: “Tell me, do you think I’m doing this for Bush?” M.B.Z. said
yes. “That’s 5 percent of it,” Zayed said. “Do you think I’m doing
this to keep bin Laden away?” M.B.Z. nodded. “That’s another 5
M.B.Z., a little baffled, asked his father to explain. “You’ve read
the Quran and the Hadith, the sayings of the Prophet,” Zayed said.
“And you like them?” Of course, his son replied. Zayed then said:
“Mohammed, do you think this guy bin Laden running around Afghanistan
is doing what the Prophet wanted us to do?” Not at all, M.B.Z. said.
His father then told him emphatically: “You’re right. Our religion is
being hijacked.” M.B.Z. didn't have to add that there was another
reason to fight Al Qaeda — it was a threat to their own family’s
Soon after the Sept. 11 attacks, M.B.Z. undertook a bottom-up review
of all his country’s vulnerabilities to terrorist attacks. “I believe
9/11 made him look internally to re-evaluate key sectors from
education to finance,” says Marcelle Wahba, who arrived as the new
United States ambassador in October of that year. “They went through
it all very systematically.” He formed a team, including his brothers
and top advisers, and they worked relentlessly to patch the holes,
according to Wahba. They set out to register all the hawala shops, the
informal money-transfer system that has often been used by terrorists.
They put transponders on dhows that plied the gulf. They began looking
for ways to better monitor the U.A.E.’s sprawling trade and finance
networks. Much of this was aimed at deterring terrorists transiting
the Emirates, but the risk of attacks inside the country was also
real. In the following years, U.A.E. authorities foiled a string of
terrorist plots by jihadi groups, including a 2005 plan for a triple
car-bombing attack against a five-star hotel.
At the same time, M.B.Z. mounted a broader assault on Islamist
ideology. Many of the U.A.E.’s Islamists belonged to Islah, a group
founded in the 1970s that was the local equivalent of the Muslim
Brotherhood. They included thousands of foreigners, mostly from Egypt,
who had been welcomed decades earlier to fill the U.A.E.’s need for
educated professionals and bureaucrats. The country’s ruling families
had initially given their blessing to Islah, which they saw as a
benignly pious group. By the 1990s, Islamists had made the education
and judicial ministries into a “state within a state,” according to
the Emirati journalist Sultan al Qassemi, deciding how scholarships
were handed out and pushing the courts in a more religious direction.
M.B.Z. authorized the firing of Islamist teachers and a sweeping
rewrite of the country’s textbooks. Most of the Emiratis I know can
tell shocking stories about elementary schoolteachers who casually
told them about the glories of violent jihad and the depravity of
kuffar, or infidels. The textbooks, written by Brotherhood members,
sprinkled zealotry even into subjects like history and math: “If you
kill three Jewish settlers and spare two, what is the sum?”
Emirati high schools now offer ethics courses that are independent of
religious study — something that would have been unthinkable not long
ago. M.B.Z. has made other quiet efforts to push religion into the
private realm. He has given a platform to respected religious scholars
who took a quietist approach, including a number of prominent Sufis
like Ali al-Jifri, Aref Ali Nayed, Hamza Yusuf and Abdallah bin
Bayyah, the renowned Mauritanian Sufi scholar who now chairs an
Emirati council that oversees religious rulings. The U.A.E. also began
exporting its own brand of Islam via training programs for imams
abroad, including thousands of Afghans.
Most Islah members were concentrated in the northern emirates,
especially Ras al Khaimah, just over an hour’s drive north from Dubai.
It is less dense than the wealthier cities to the south, with fewer
skyscrapers and malls, and it is a little shabbier. In a sense, Islah
was expressing its disapproval of the hypercapitalist culture being
spawned in the U.A.E.’s biggest cities. Many of its public statements
were protests against the bars and prostitution that served the
U.A.E.’s growing foreign population. Its spokesmen eventually began
promoting democracy and human rights, though those may have been at
least partly a convenient way to draw Western sympathy to their cause.
Arabists and diplomats in the West have mostly taken the view that
Islamists of this kind should be tolerated, and that their views are
likely to be softened over time by their integration into electoral
politics. The Tunisian Ennahda movement is often held up as an example
of what may happen when Islamists are given a chance to evolve in a
more progressive direction. Ennahda, which emerged from the Muslim
Brotherhood, has shared power with a secular party, and its leader has
suggested that it is less an Islamist party than an Arab variant on
European parties like the Christian Democrats.
M.B.Z. did engage in a dialogue of sorts with the U.A.E.’s Islamists,
and he claims the experience proved they could not be trusted. After
the Sept. 11 attacks, he began meeting with members of Islah and
urging them to return to the fold. Initially, he offered them a deal:
Stay away from politics and they could maintain their charitable work.
They responded with lists of demands. The attempts at outreach came to
an end after a tense meeting in 2003, and M.B.Z.’s attitude appears to
have hardened. He told a visiting United States delegation in 2004
that “we are having a culture war with the Muslim Brotherhood in this
country,” according to a cable made public by WikiLeaks. One of
M.B.Z.’s own sons started to fall under the spell of Islamist
thinking, he told a group of visiting diplomats in 2009. He responded
by employing a tactic his own father had used: sending his son to
Ethiopia with the Red Cross to appreciate the moral worthiness of
Even as he cracked down on the Brotherhood, M.B.Z. was working on a
far more ambitious project: building a state that would show up the
entire Islamist movement by succeeding where it had failed. Instead of
an illiberal democracy — like Turkey’s — he would build its opposite,
a socially liberal autocracy, much as Lee Kuan Yew did in Singapore in
the 1960s and ’70s. He began with Abu Dhabi’s Civil Service, which was
afflicted with many of the same ills as those of other Arab countries:
bloat and inefficiency, with connections and family reputation playing
a bigger role in hiring than merit. These features were partly a
legacy of the Egyptian strongman Gamal Abdel Nasser, who built a
dysfunctional prototype in the 1950s that was copied everywhere.
M.B.Z. deployed a group of young, talented people and authorized them
to smash up the bureaucracy. Over the next few years, they fired tens
of thousands of employees and reassigned many others, streamlining the
state. Between 2005 and 2008, the Abu Dhabi government went from
64,000 people to just 7,000. At the same time, he began harnessing Abu
Dhabi’s vast capital reserves to build up a non-oil economy. Using a
new sovereign wealth fund called Mubadala, he attracted new
industries, creating job opportunities that would help train the local
population. He honed his progressive image by including women in his
cabinet. Mubadala created an aerospace-and-aviation hub in Al Ain
where 86 percent of the workers are women.
At times, he seems to want to change Emiratis themselves, to make his
people more disciplined, more rational, more self-reliant. “Ever shake
hands with an Emirati?” one former diplomat heard him say. “It’s a
weak hand — they look away. I’m trying to teach people to look you in
the eye and give you a firm hand.” He made jujitsu compulsory in
schools. In 2014 he established the military draft, forcing young
Emiratis — who are granted free housing, education and health care —
to endure a year of boot camp and hard work. M.B.Z. made sure they
took it seriously. Soon after the draft started, a few hundred
eligible young men failed to register. M.B.Z. had them brought to him
and “spent an hour excoriating them about what his father did,
building the country and so on,” I was told by one former diplomat.
“They all went to jail for 30 days.” (An Emirati spokesman disputed
When I first started visiting the U.A.E., in 2007, I heard a lot of
fretting about the social consequences of the country’s sudden vault
from poverty to vast wealth: listlessness, depression, isolation and
dislocation. On my most recent visit, I heard at least a dozen stories
about young couch potatoes who returned from boot camp sober and lean,
suddenly willing to do their own laundry and dishes. The draft has
also brought together people from different emirates and social
classes in a way that rarely happened in the past. The Yemen war has
wreaked horrors on that country, but it appears to have had an
annealing effect on Emirati society. More than 100 Emiratis have been
killed in the fighting, and while that is tiny compared with the
appalling toll of Yemeni dead, it is in human terms by far the
costliest war the U.A.E. has ever fought. It probably helps that
M.B.Z. and most of the rulers of the other six emirates had sons or
nephews on the front lines, some of whom were seriously injured. I
briefly met Zayed bin Hamdan, M.B.Z.’s nephew and son-in-law, who uses
a wheelchair after his spine was damaged in a helicopter crash in
Yemen in 2017.
In 2009, M.B.Z. made a decision that would vastly augment his ability
to project power beyond his borders. He invited Maj. Gen. Michael
Hindmarsh, the retired former head of Australia’s Special Operations
Command, to help reorganize the Emirati military. Early on, M.B.Z.
asked Hindmarsh to help him find an Emirati officer to lead the reboot
of the country’s elite units. But M.B.Z. seems to have taken a liking
to Hindmarsh, a lanky man with a deeply lined face and a relaxed,
frank manner, and ended up choosing him for the job.
Putting a non-Arab in charge of the military’s crown jewel would be
unimaginable in any other Middle Eastern country. But by 2009, M.B.Z.
had a firm grip on the state. The global financial crisis had hurt the
other six emirates — especially Dubai — and they had lost some of
their autonomy to Abu Dhabi, by far the largest and richest member of
the federation. M.B.Z. gave Hindmarsh (who calls him “the Boss”) his
full backing and all the money he needed. Hindmarsh, who had gotten
used to bureaucratic obstacles during his decades in the Australian
Army, was delighted. The U.A.E. has kept Hindmarsh’s role quiet, in
deference to Arab sensitivities, but he remains in the job, and his
work has been essential in making the Emirati special forces among the
best in the world.
M.B.Z. was deeply unnerved by the Bush administration’s talk of
democracy-promotion and by its consequences, including the creation of
sectarian political parties in Iraq and the electoral triumph of Hamas
in Gaza. In 2009, M.B.Z. detected a freedom agenda in Obama’s landmark
Cairo speech, with its call for a “new beginning between the United
States and Muslims around the world.” He told a United States diplomat
afterward that he feared the speech “raises the bar of expectations in
the Arab world.”
Then came the Arab Spring. The United States had supported the
Egyptian president, Hosni Mubarak, and autocrats like him for decades,
and had treated the Brotherhood as dangerous fanatics. Yet when the
Brotherhood’s Mohammed Morsi was elected president of Egypt in 2012,
the Obama administration accepted the result. M.B.Z. did not. By early
2013, the U.A.E. was backing Tamarod, the swelling popular movement
against Morsi. Vast demonstrations against Morsi took place on June
30, followed by his ouster by the military on July 3, which brought
Abdel Fattah el-Sisi, the military chief, to power.
The U.A.E. and its gulf allies instantly pledged billions of dollars
in support to the new government. Emirati officials have maintained a
discreet silence about their role, but all the diplomats I spoke with
believe the U.A.E. approached Sisi and outlined the terms of their
financial support before Morsi’s overthrow. “I think there’s every
reason to believe he staged a coup,” I was told by one former
diplomat. “For a tiny country in the Persian Gulf to overthrow the
ruler of Egypt and put their guy in, that’s a big achievement.”
M.B.Z. may have prevented Egypt from becoming an Islamic theocracy —
that, at any rate, is how he sees it. But Sisi’s own ruthlessness
became apparent almost instantly. (It is safe to assume that this
doesn’t bother M.B.Z. much, if at all.) In mid-August of 2013, the
Egyptian military gunned down about a thousand people in two
pro-Brotherhood protest encampments in Cairo, according to Human
Rights Watch. Around the same time, the government began cracking down
on secular dissidents too, and in many ways Sisi has been more
autocratic than Mubarak was. The takeover in Egypt raised tensions
between the U.A.E. and the United States, which danced clumsily
between censuring Sisi as an undemocratic strongman and quietly
continuing some cooperation. (Trump would later offer a much more
unqualified embrace, joking that Sisi was “my favorite dictator.”)
Soon after Sisi took power, in October 2013, M.B.Z. was watching CNN
when he learned for the first time that the United States had been
secretly negotiating a nuclear deal with Iran. His American friends
had told him nothing. “It was a big blow,” one of M.B.Z.’s senior
advisers told me. It wasn’t so much that he opposed the idea of
negotiating with Iran (the U.A.E. eventually endorsed the preliminary
nuclear deal, which was formalized that November). Instead, M.B.Z. was
staggered that Obama had not bothered to consult or even inform a
longtime ally about such an important deal — and one that was being
negotiated right next door, in Oman. The U.A.E. had a lot at stake,
having forced Dubai traders to give up their lucrative business with
Iran to comply with the sanctions. “His Highness felt that the U.A.E.
had made sacrifices and then been excluded,” the senior adviser said.
Together, the Egyptian tumult and the Iran talks formed a kind of
watershed in M.B.Z.’s relations with the United States. The shift was
not immediately apparent; he continued talking to Obama regularly and
offered him advice. He warned him that the proposed remedy in Syria —
Islamist rebels — could be worse than the disease (Assad’s tyranny).
He also urged Obama to talk to the Russians about working together on
Syria, a coldly realistic suggestion that might have ended the war
faster, albeit by foreclosing the opposition’s hope of victory.
But beneath the veneer of routine consultations, M.B.Z.’s feelings
about Obama had changed. The relationship eventually turned toxic,
with M.B.Z. trash-talking the administration to visitors, former
administration officials told me. Obama also made dismissive comments
in a 2016 interview in The Atlantic, describing the gulf’s rulers as
“free riders” who “do not have the ability to put out the flames on
their own” and expect the United States to rescue them. The final
straw came a month after the election of Donald Trump, when M.B.Z.
flew to New York to meet the president-elect’s team, canceling a
parting lunch with Obama. Soon afterward, M.B.Z. hosted a Russian
middleman at an Emirati-owned resort in the Seychelles with Erik
Prince, the Blackwater founder — an encounter that put them in the
sights of Robert Mueller’s investigation of the Trump administration’s
ties to Russia. The meetings, mentioned briefly in the Mueller report,
do not seem to have involved any Trump-related collusion. But even if
he wasn’t colluding with Russians, M.B.Z.’s attitude toward his
American patrons seems to have changed. He had plans of his own, and
would no longer wait for their approval.
The overthrow of Morsi was the first great success of M.B.Z.’s
counterrevolutionary campaign, and it seems to have supercharged his
confidence about what could be done without American constraints. His
attention soon turned to Libya, where jihadists were running rampant.
He began providing military support to the renegade former general
Khalifa Haftar, an autocrat who shared M.B.Z.’s feelings about
Islamists. At a Camp David summit in May, 2015, Obama tacitly scolded
M.B.Z. and the emir of Qatar for waging proxy war in support of their
rival militias. But by the end of 2016, the U.A.E. had set up a secret
air base in eastern Libya, from which drones and aircraft bombed
Haftar’s rivals in Benghazi.
All of this was in violation of a U.N. weapons embargo, and it
irritated Washington. Thousands have been killed in the Libyan
fighting, and Haftar’s effort to capture Tripoli has not succeeded.
One former United States diplomat who admires M.B.Z. told me that his
handling of the Libya mess underscored the danger of overreach. “They
are looking to stage-manage and cleave out the parties they don’t
like,” she said of the U.A.E. “They will learn they can’t do that.”
She added: “You may stir a pot that boils over because of your
As he pulled away from the Obama administration, M.B.Z. was acquiring
a powerful ally: Mohammed bin Salman, the Saudi crown prince. The
alliance may seem natural to outsiders — two gulf autocrats with
similar initials — but the bond papered over a historic rift. The
Saudis, as the slain Saudi journalist Jamal Khashoggi liked to say,
are “the mother and the father of political Islam.” M.B.Z. would
agree. The Saudi state is rooted in an 18th-century pact between its
rulers and a hard-line strain of Islam known as Wahhabism. It is a
formula for state-sponsored extremism that makes the Muslim
Brotherhood look mild.
M.B.Z. grew up in a time when most Emiratis felt threatened by their
big desert neighbor; there were armed clashes on the border as
recently as the 1950s. In 2005, M.B.Z. told a United States
ambassador, James Jeffrey, that his biggest concern was Wahhabism,
according to a cable made public by WikiLeaks. He saw the Saudi royal
family as feckless, but feared that the alternative in such a deeply
conservative society could be an ISIS-style Wahhabi theocracy.
“Anybody who replaced the Al Saud would be a nightmare,” Jeffrey
remembered him saying. “We have to help them help themselves.”
M.B.Z. soon latched onto his Saudi counterpart — who was eager for big
reforms — as the key to loosening Saudi Arabia’s ties to radical
Islam. He appears to have been something of a mentor to the younger
man, and he encouraged the Obama administration to support him. But he
doesn’t seem to have any sort of brake on M.B.S.’s worst impulses.
When the Saudis led a military campaign against the Iran-allied Houthi
fighters in Yemen in March 2015 — with the U.A.E. as their lead
partner — many expected it to last a few months at most. Instead, it
has lasted nearly five years, becoming a catastrophe that shocked the
conscience of the world. Ancient buildings have been smashed to
rubble, thousands of civilians have been killed and Yemen — already
the Arab world’s poorest country — has suffered terrible outbreaks of
famine and disease. The war’s ostensible goal of uprooting the
Iran-backed Houthi government is more distant than ever. The U.A.E.
has a share of responsibility for this immense tragedy, though it did
not carry out the bombings that wreaked so much destruction on
northern Yemen. M.B.Z. confined his country’s role to the south, where
he tried unsuccessfully to broker political deals to end the war, and
relied on Hindmarsh’s commando units to train local forces. One former
high-ranking American military official told me that 95 to 100 percent
of the military success in the war was due to the Emiratis.
When M.B.Z. announced a withdrawal from Yemen in June, he made clear
that his new partnership with Saudi Arabia had limits. He also began
charting a more diplomatic course with Iran. After a series of attacks
on shipping in the Persian Gulf and the downing of an American drone,
Trump threatened fire and fury that same month and then abruptly
backed down. M.B.Z. appears to have sensed that Tehran was starting to
see Trump as a paper tiger — leaving the U.A.E. dangerously exposed to
further Iranian aggression. Soon afterward, the U.A.E. issued
Mohammed bin Zayed @MohamedBinZayed Dark Vision of the Middle East's Future @nytimes B
Law & Politics
Foreign diplomats have occasionally confronted M.B.Z. about his
country’s lack of democracy, and he has responded by saying something
along the lines of “This isn’t California”: Lack of education and the
prevalence of backward religious attitudes make autocracy necessary,
he insists. But if he succeeds in his mission to educate the populace
and eradicate political Islam, the al-Nahyan family may eventually
have more trouble justifying its role as a virtual monarchy.
“You cannot import a ready-made process from abroad,” I was told by
Zaki Nusseibeh, who served as a translator and adviser to M.B.Z.’s
father for decades. “But yes, we need to start involving young people
more in decision-making.” On the two-hour drive from Abu Dhabi to
Nusseibeh’s home in Al Ain, in the country’s conservative heartland, I
passed immense, upscale housing blocks built by the state for
Emiratis, who tend to seclude themselves from the gleaming towers of
the city. It was a vivid reminder of the al-Nahyans’ tacit deal with
their people: safety and prosperity in exchange for quiescence.
Nusseibeh, a slim, bald man of 73 with alert eyes and a professorial
air, is a kind of cultural ambassador for the U.A.E., where he has
lived since he arrived five decades ago from the West Bank. His house
is a museum of sorts, with books in Arabic, English and French stacked
ceiling-high and a whole tower of CDs devoted to the work of Richard
Wagner (a framed photograph at the bottom shows Nusseibeh with the
composer’s descendant, Cosima Wagner). Paintings and sculptures fill
almost every available space, most of them by Arab or Iranian artists.
The important work, Nusseibeh said, is still about building
institutions and protecting against external threats, and that
requires stable leadership. We were back to the Islamist menace.
“The last 50 years were foundational,” he said. “The next 50 — how do
we move this to a new, global level? The challenge becomes more
existential. We have to inoculate people against what is happening.”
One morning in June, I got a taxi from my hotel to the Louvre Abu
Dhabi, M.B.Z.’s madly ambitious, billion-dollar monument to “art and
civilization.” It was unbearably hot and humid out, and as we drove
past the corniche — a beautifully landscaped mile-long stretch of
waterfront — I didn’t see a single human being. As we crossed the
bridge onto Saadiyat Island, I could see the museum looming in the
distance like a vast metallic tortoise. Its steel dome, which is as
heavy as the Eiffel Tower, is a weave of strands designed to act like
a palm grove, allowing tiny shards of sunlight onto the grounds below.
When we arrived, I got out and suffered my unavoidable minute-long
exposure to nature, and then returned indoors to the controlled world
of M.B.Z.’s visions. It was easy to imagine him striding confidently
around the building site a decade earlier, pointing his index finger
like a magician: I want walkways here. Let’s keep the natural
coastline there. Let’s put hotels there, with a view of the museum.
That, in fact, is more or less what happened, as I learned from the
man who ran the project for him.
Inside, I goggled alongside the tourists at classic works of Western
art sitting alongside Chinese and Indian and Arab masterpieces. The
museum’s guiding concept reflects the U.A.E.’s own multicultural
ethos, a mash-up of global high culture. It has been derided by some
critics, including many in France, as a lavish purchase of a European
brand for the benefit of a global leisure class. But M.B.Z.’s main
goal for the museum, one of his advisers told me, was to educate the
local population, not attract tourists.
As I strolled past a Roman sculpture, a group of Emirati
schoolchildren in green shirts trickled in and sat on the floor around
me. After a few minutes of sketching, their teachers led them toward
the Universal Religions gallery, the museum’s centerpiece. I followed
behind and listened as one of the teachers led a Q. and A.
“You all know about the Quran,” he said. “But who can tell me what the
Christian holy book is?” Several children shouted the answer. “Very
good! What about the Jewish holy book? And for Hindus?” More
high-pitched answers. At last came the clincher. “Sheikh Zayed wanted
this to be a universal museum, and he had the idea to put all the holy
books in one place, so people could see what their religions had in
common, and perhaps that way they’d be a bit nicer to each other.”
As the children got up and filed into the next room, it struck me that
the teacher’s lecture contained a revealing false note. Sheikh Zayed
wasn’t the one who conjured up this museum, with its grand ambition to
smash Islamic certainties and turn Bedouins into citizens of the
world. M.B.Z. was hiding in his father’s shadow, absent and omnipotent
at the same time.
Robert F. Worth is a contributing writer for the magazine. His book on
the 2011 Arab uprisings, “A Rage for Order,” won the 2017 Lionel
Gelber Prize. He last wrote for the magazine about the war in Yemen.
A desert locust outbreak that's the worst in 25 years is threatening pastures and crops on both sides of the Red Sea and could spread to Uganda and South Sudan @UN @FAO said @business
A desert locust outbreak that’s the worst in 25 years is threatening
pastures and crops on both sides of the Red Sea and could spread to
Uganda and South Sudan, the United Nations’ Food and Agriculture
A potentially threatening situation is developing along both sides of
the Red Sea with locust numbers increasing on the coasts of Egypt,
Sudan, Eritrea, Saudi Arabia and Yemen, the FAO said on its website.
“There is a risk that some swarms could appear in northeast Uganda,
southeast South Sudan and southwest Ethiopia,” it said.
While control operations are going on in all affected countries,
insecurity and a lack of national capacity have limited efforts in
Somalia, FAO said.
While large swarms appeared near Kenya’s border with Somalia at the
end of December, there’s low risk of breeding there, the FAO said.
The East African nation is already spraying swathes of land in its
northeast region, the Star newspaper reported on Tuesday.
Locusts can cover as much as 150 kilometers (93 miles) a day and an
average swarm will destroy crops sufficient to feed 2,500 people for a
year, according to the UN.
Of Tigers, Debt Merchants and 2020 Vision @theelephantinfo @DavidNdii
The former president of the African Development Bank, Donald Kaberuka,
has dismissed as “nonsensical” any suggestion that Africa may have
over-borrowed, saying instead that with better debt management and
higher domestic revenue mobilisation, the continent can take on more
But Kaberuka fails to make the link between the increased borrowing
and the revenue problem.
The public debt burden has dominated economic debate in 2019. Public
debt is likely to be even more topical in 2020, both domestically and
globally. As at end November 2019, 31 out of 70 countries in the IMF’s
roster of low-income countries are listed as either in or at high risk
of debt distress.
Another 26 are listed as being at moderate risk, leaving only 13 that
are still at low risk.
Last week, the IMF approved a $2.9b bailout for Ethiopia, one of the
high distress risk countries.
I first called out the Jubilee administration’s borrowing binge six
years ago. Up until two years ago, the IMF and the World Bank were
still giving it the thumbs up. (Very often we forget that these
institutions are lenders and therefore conflicted on matters debt.)
A few weeks ago Donald Kaberuka, the immediate former president of the
African Development Bank (AfDB) and erstwhile Finance Minister of
Rwanda, dismissed as “nonsensical” any suggestion that Africa may have
“The idea that Africa is drowning in debt is nonsensical . . . If we
can improve on our own domestic revenue mobilization, if we can
improve on our public debt management and if we can improve on our
debt management capabilities, the continent is able to take a bit more
debt, especially at this time when the markets are looking for yield.”
This is an interesting argument. You may also have heard it from the
Jubilee administration—the problem is not too much debt; it is the
Kenya Revenue Authority (KRA) that is failing to meet revenue targets.
Kaberuka, who I gather is an economist, wittingly or otherwise, fails
to make the connection between the borrowing binge and the revenue
Only a most incurious economist would look at revenue and debt trends
such as ours (see chart) and conclude that they are completely
Although I have written about the connection on more than one
occasion, it is worth recapping. There are two dimensions to the
connection: an accounting one and an economic one.
Let’s start with the accounting. Let’s say we start with a GDP of Sh10
trillion which is 80 per cent private economy and 20 per cent
Let’s then say the government is raising Sh2 trillion, which is 20 per
cent of GDP, in tax revenue.
Suppose the government goes to China and buys a railway worth Sh500
billion on credit. The GDP will now be Sh10.5 trillion. We will be
told that the economy has grown by 5 per cent.
But the railway has not added anything to the economy, and nor is it
paying tax, so the government still collects Sh2 trillion, but which
is now 19 per cent of the Sh10.5 trillion GDP.
If this is repeated every year, by year five, the GDP will have
expanded to Sh12.8 trillion and the tax revenue-to-GDP ratio will be
down to 15.7 per cent.
This is a purely accounting view, which assumes that government
investment is neutral, neither helping nor harming the economy. This
is not as far-fetched as it might at first appear.
For example, it could simply reflect government investments with long
gestation periods. Indeed, we have been told that the new Standard
Gauge Railway (SGR) is one such long-term visionary project whose
benefits will be realised by our grandchildren.
But for no harm to occur, two conditions need to obtain. First, all
the borrowing needs to be foreign. Use of domestic resources means
diverting these from the private economy, and that is harmful. We call
this crowding out.
Second, there are no repayments, because repayment of foreign debt
amounts to sucking money out of the economy, also harmful. Neither
obtains. Let us start with repayments. This year, we have budgeted to
pay Sh139 billion ($1.39 billion) in foreign interest, a tenfold-plus
increase from Sh11b ($130m) in the 2012-2013 financial year, the last
year of the Grand National Coalition government. And this does not
include the hefty payments of the principal on the SGR loans that
kicked in this year. The use of domestic resources is also a very
significant factor. Half the debt that the Jubilee administration has
accumulated is domestic. The crowding out extends beyond credit.
With so much money to spend liberally, trading with the government
becomes the most profitable business, diverting other economic
services away from, and inflating the costs for the private sector.
This could not be better demonstrated than by the case of Kenya’s
Last year, the industry made a consolidated profit of Sh140b, and
Sh119b in interest from government securities. Considering that
lending to government is virtually costless and risk-free, this
implies that banks made all their profits from the government, and
lost Sh9b on the business they did with the rest of the economy.
The contribution of interest on government securities has increased
steadily from 37 per cent in 2013 to 108 per cent in 2018 (see chart).
But we also see that the banks’ profitability has declined. Profits
declined by 40 per cent in 2017, following the capping of interest
rates in late 2016. In 2018 profits were 14 per cent lower than in
If banks are not making money from the private economy, it stands to
reason that government revenue will also take a hit. How much public
debt is too much?
Debt experts have sophisticated models that are supposed to tell us.
These models are built around “present value.” Present value is the
sum of a forecast, such as a cash flow, and in this case annual debt
repayments, discounted by a rate of interest or other relevant
discount factor, used to give an estimate of current worth.
If two similar countries borrow the same amount of money on similar
terms, one invests wisely, and the other plunders it all, the net
present value of the debt will be the same.
It should not surprise then that the IMF’s models were giving the
Jubilee borrowing binge the thumbs-up even as the Eurobond went
walkabout and one Josephine Kabura was mocking us with tall tales of
cash stuffed in gunny bags.
For the financial health of a country, a simple rule of thumb is to
ensure that debt service does not grow faster than government revenue
for too long.
If the debt is invested productively, the investments expand the
economy, the government generates more tax revenue from the expanding
economy, which it then uses to service the debt.
How long is too long? That is a matter of exercising sound judgement.
As John Maynard Keynes famously quipped, in the long run, we are all
But the question becomes moot when the trend looks like what we see in
the chart—debt service heading north, revenue heading south. You do
not need present value calculations to see that this trend cannot go
on for much longer.
Sooner or later, something will have to give. Expect to hear a lot
about fiscal consolidation in 2020. Fiscal consolidation is defined as
policy measures that aim to reduce the deficit and stop the
accumulation of debt.
The substance of it is what we used to call structural adjustment but,
following the 2007 financial crisis, it became necessary to invent a
new name—it just wouldn’t do to speak of Spain, or the UK for that
matter, as implementing structural adjustment.
A fiscal consolidation strategy is predicated on the expectation that
governments can find ways of bringing down deficits without hurting
Budget deficits are, in essence, the pumping of money into the
economy, which ought to stimulate growth. Conversely, fiscal
consolidation amounts to withdrawing money from the economy, which
would dampen growth.
The problem is that economic slowdown hurts revenue, meaning that the
government has to constrain expenditure even further to meet its
deficit reduction targets.
The first strategy entails counteracting the contractionary effect of
fiscal consolidation with expansionary monetary policy. Simply put,
what the government takes away, the Central Bank puts back in
The Central Bank has a couple of tools to do this, principally by
buying bonds and lowering the cash ratio and liquidity requirements
for the banks (the percentages of assets that banks are required to
have in cash and near-cash assets such as Treasury bills and bonds).
Shovelling money out of the door is also expected to reduce interest
rates, which besides making borrowing attractive for businesses and
consumers, can substantially lower the interest cost of domestic debt.
But unlike fiscal stimulus where the government is the spender,
monetary stimulus depends on market response.
The policy makers hope the money will stimulate production, but it
could just as well suck in imports, or leave the country to seek
higher returns elsewhere, thereby depleting foreign exchange reserves
and putting pressure on the currency.
The second strategy is to find “off-balance sheet” financing of public
investment. The default alternative these days is the so-called
public-private partnerships (PPPs).
Simply put, PPPs are the public equivalent of equity financing.
Instead of the government borrowing to build a hospital for instance,
a private investor builds, and the government leases it.
But PPPs have their drawbacks. First, to make them attractive to
private investors, PPP projects are usually structured in such a way
as to ensure that the investors cannot lose money—“de-risked” in
Second, PPPs are seldom commercially viable so, more often than not,
the Government usually has to part-finance the project in order to
achieve an attractive rate of return for investors.
Third, PPP financing cherry picks projects with commercialisation
potential, which typically will be projects that benefit more
developed areas or better-off people in society.
In economics, we call such policies “regressive”, meaning they
transfer resources from the poor to the rich.
Fourth, PPPs have a very high corruption risk—we need look no further
than the stink that is the medical equipment leasing scheme known as
the Managed Equipment Services (MES) project.
Another scheme is to shift debt and deficit financing from the
national government’s books to quasi-government agencies, such as has
recently been done by amending the law to allow the Kenya Roads Board
(KRB) to issue bonds leveraged on the fuel levy revenues that are
earmarked for road construction.
Assuming an interest rate of, say, 12 per cent, each shilling of fuel
levy revenue can be leveraged to borrow 8 shillings.
Already, the KRB has published an expression of interest for
transaction advisors to raise Sh150 billion.
Suffice it to say that Greece used financial gymnastics of this nature
to first be admitted into the Eurozone and to subsequently fake
PPPs have a very high corruption risk—we need look no further than the
stink that is the medical equipment leasing scheme known as the
Managed Equipment Services (MES) project
How much public finance does development require? There is perhaps no
better place to benchmark than with the Asian Tigers.
In the 70s, Thailand and South Korea were raising 13 and 15 per cent
of GDP in tax revenue, well below Kenya’s 18 per cent, while Malaysia
and Singapore were doing better at just over 20 per cent (see chart).
But where the East Asians stand apart is that each of them was able to
put at least a third of their revenue into investment.
The real miracle here is how they managed to keep their recurrent
budget to a maximum of 10 per cent of GDP, out of which they were also
heavily investing in education.
As economists Mahbub ul Haq and Khadija Haq observed, beneath the East
Asian economic miracle lay an education miracle.
It is also a miracle of public finance, specifically, public thrift.
We hear a lot about the high saving and investment rate part of the
story. What we do not hear about is the role of government in that
In the early seventies, East Asian and African countries had similar
national savings rates, but even then East Asian governments were
contributing more to national saving and investment, although African
governments’ contribution was also significant (see chart).
A decade later, East Asian governments were still contributing over a
third of national investment, while for African and other LDC
governments this contribution fell to 11 and 6 per cent respectively.
Consequently, we turned to foreign resources.
By the early 80s, Africa was investing 20 per cent of GDP more than
half of which was foreign-financed, while the East Asians were
investing 30 per cent, 90 per cent of which was domestically financed.
In the 70s, Thailand and South Korea were raising 13 and 15 per cent
of GDP in tax revenue, well below Kenya’s 18 per cent, while Malaysia
and Singapore were doing better at just over 20 per cent
The East Asian experience is telling us that when people were too poor
to save much, it is the government, and not foreign resources, that
closed the gap between private savings and investment requirements.
In economics, we postulate that saving is determined primarily by
income, and investment by rate of return. As these public investments
paid off, they boosted private income and consequently private saving.
When countries save more, they need less, not more foreign resources
to finance investment.
Donald Kaberuka is telling us that we need to raise more revenue to
enable us to borrow more. Is he ignorant or dishonest? During his
tenure, the AfDB became the lightning rod for infrastructure-led
growth, a fallacy that this column has discussed before.
In fact, the nonsensical comments echo sentiments in the AfDB’s 2018
Africa Economic Review, to wit: “For much of the past two decades, the
global economy has been characterised by excess savings in many
advanced countries. Those savings could be channeled into financing
profitable infrastructure projects in developing regions, especially
Africa, to achieve the G20’s industrialisation goal. That this
mutually profitable global transaction is not taking place is one of
the biggest paradoxes of current times.” You may want to note that the
objective is to “meet the G20’s industrialisation goal.”
The irrepressibly prescient Franz Fanon read in the tea leaves: “The
national bourgeoisie will be quite content with the role of the
Western bourgeoisie’s business agent, and it will play its part
without any complexes in a most dignified manner.” And therein lies
Kenya's tourism earnings rise 3.9% in 2019 @ReutersAfrica
Kenya’s earnings from tourism rose 3.9% last year to 163.56 billion
shillings ($1.61 billion), thanks to a slight increase in the number
of visitors, its tourism minister said on Friday.
The East African nation, which relies on tourism as a major source of
foreign exchange and jobs, had 2.05 million tourists last year, an
increase of 1%