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Turkey’s Privatization of Sugar Factories

By Kubilay Cenk / Socialist Project.

On February 21, a notice was released in Turkey’s Official Gazette (Resmi Gazete) stating that bids will be collected for Turkey’s state-owned fourteen sugar plants. According to Directorate of Privatization Administration’s (OIB) announcement, sugar plants in the provinces of Afyon, Alpullu, Bor, Burdur, Çorum, Elbistan, Erzincan, Erzurum, Ilgın, Kastamonu, Kırşehir, Muş, Turhal and Yozgat will be privatized. The Adalet ve Kalkınma Partisi (AKP – Justice and Development Party) government, which has looted and made benefits of public-enterprises available to both national and international capital, seeks new privatization opportunities.

Britain’s Margaret Thatcher with Turkey’s Turgut Özal.

The introduction of neoliberal policies and privatization to Turkey began long before the AKP government.

Military Junta and Privatization

On 12 September 1980, the Turkish Military plotted a coup, which was supported by the U.S. administration. There were popular left-wing and working-class movements in Turkey before the coup. Although the military junta said that their main aim was suppression of a so-called “anarchic” situation, the government presented a free-market oriented economic construction package – known as January 1980 Package – in 24th of January 1980, just several months before the military takeover. The January 1980 Package was mainly focused on implementation of neoliberal economic reforms such as allowance and encouragement of foreign investment, the abolition of price controls and subsidies to state economic enterprises, and Turkey’s integration into international capital. The economic reform package was advised by the International Monetary Fund (IMF). The Military Junta saw left-wing movements, which had popular strength in Turkish society, as a threat to neoliberal transformation. At the time, the Confederation of Progressive Trade Unions of Turkey (DİSK) was a militant trade union and well-organized in the working-class movement.

The person behind the January 1980 Package, Turgut Özal, founded a right-wing political party called Motherland Party (ANAP). He had personally met with Britain’s Thatcher and is often compared with her because of his neoliberal policies. However, in a political environment where most of the trade-unions and left-wing movements were heavily suppressed, it became easier to implement the neoliberal reforms. As a result, Turkey entered into an era of integration into international capital and implementation of neoliberal policies including privatization of public enterprises.

Despite the fact that privatization in Turkey did not start with the AKP government, anti-labour and anti-popular policies have always been a key element for them. Most of the public enterprises and state-run firms were privatized in the last 16 years. According to information published by OİB in 2017, the AKP government privatized 10 ports, 81 power plants, 40 facilities, 3,483 premises, 3 ships, 36 mine sites and public shares of 94 companies.

Most of the privatized sectors were strategic parts of the Turkish economy. In 2005, the country’s main state-owned petroleum refinery TÜPRAŞ was sold to a joint venture of Turkey’s Koç group and Shell group of Netherlands. Privatization of the main firm in Turkey’s telecommunication sector, Türk Telekom, also took place in the same year. 55 per cent of Türk Telekom was sold to Lebanon’s Oger Telecom.

TEKEL workers during a strike. [Photo source: Evren Özesen]

One of Turkey’s most significant workers’ resistances also took place in 2009. Turkish tobacco and alcoholic beverages company, also known as TEKEL, was bought by British American Tobacco (BAT). Prior to the company’s privatization, approximately 10,000 workers received their notice of contract termination. Workers went on protests in the capital Ankara and faced police attacks. The 78 days-long resistance brought many achievements to Turkey’s working class and marked a historic phase.

First Reactions

The sugar beet industry played a crucial role in the country’s industrialization during the early republic years by building infrastructure in rural areas as well as providing employment opportunities to local people. If privatization takes place, many workers are expected to become internal migrants as their livelihood standards will fall dramatically.

Are we going to see another historical resistance? It is too early to say, but workers and opposition parties reacted with anger against the government’s decision to privatize Turkey’s sugar plants.

The Republican People’s Party (CHP) Deputy Chair Veli Ağbaba has said that the decision to privatize sugar plants came after President Recep Erdoğan’s meeting with U.S. Secretary of State Rex Tillerson on February 15 and that Turkey’s sugar factories are going to be sold in order to meet Cargill’s (a U.S.-based multinational company) demands. The company has been operating in agricultural product field in Turkey since 1986.

During the demonstration against the privatization of Apullu Sugar Factory, Lüleburgaz (a district of Kırklareli Province in the Marmara region) Mayor Emin Halebak said that if the government wants to sell Apullu Sugar Factory then he wants to buy the plant and give it back to people. Apullu is the oldest sugar factory in Turkey.

However, the state of emergency (OHAL) in Turkey, which was declared after the failed coup attempt in 2016, is an important tool in the hands of the AKP government against workers and possible resistance. Last year at a meeting with foreign investors, Erdoğan confessed the anti-labour nature of the state of emergency, saying that his government is taking advantage of OHAL and intervening in workplaces to ban possible strikes. Recently, a strike of 130,000 workers at 179 factories across the metal sector in Turkey was banned by the government on the grounds of being “prejudicial to national security.”

Fight Against Privatization

The fight against privatization of sugar factories is not just an economic demand but also a political issue. AKP and particularly Erdoğan called themselves “native and national” several times as if their opponents are not natives of Turkey and do not belong to the country. Yet, they are the ones that sell public property to foreign investors for the sake of a few moneybags and multinational companies.

Ironically, their so-called “native and national” values end when capitalists command them to do so.

At this stage, it is not clear if the AKP government is going to give up its goal of privatizing the country’s sugar factories but it seems like they are quite determined to do so. Turkey’s highly oppressed working-class movement is the only political force that can stop it.

History is calling the working-class to take the stage, once again. •

Kubilay Cenk is a member of Communist Movement of Turkey (TKH) and undergraduate student at University of Plymouth. His studies are focused on international relations and politics.

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The Curious World of Donald Trump’s Private Russian Connections

By James S. Henry / The American Interest.

Did the American people really know they were putting such a "well-connected" guy in the White House?

"Tell me who you walk with and I’ll tell you who you are."

- Cervantes

"I’ve always been blessed with a kind of intuition about people that allows me to sense who the sleazy guys are, and I stay far away."

- Donald Trump, Surviving at the Top

Even before the November 8 election, many leading Democrats were vociferously demanding that the FBI disclose the fruits of its investigations into Putin-backed Russian hackers. Instead FBI Director Comey decided to temporarily revive his zombie-like investigation of Hillary’s emails. That decision may well have had an important impact on the election, but it did nothing to resolve the allegations about Putin. Even now, after the CIA has disclosed an abstract of its own still-secret investigation, it is fair to say that we still lack the cyberspace equivalent of a smoking gun.

Fortunately, however, for those of us who are curious about Trump’s Russian connections, there is another readily accessible body of material that has so far received surprisingly little attention. This suggests that whatever the nature of President-elect Donald Trump’s relationship with President Putin, he has certainly managed to accumulate direct and indirect connections with a far-flung private Russian/FSU network of outright mobsters, oligarchs, fraudsters, and kleptocrats.

Any one of these connections might have occurred at random. But the overall pattern is a veritable Star Wars bar scene of unsavory characters, with Donald Trump seated right in the middle. The analytical challenge is to map this network—a task that most journalists and law enforcement agencies, focused on individual cases, have failed to do.

Of course, to label this network “private” may be a stretch, given that in Putin’s Russia, even the toughest mobsters learn the hard way to maintain a respectful relationship with the “New Tsar.” But here the central question pertains to our new Tsar. Did the American people really know they were putting such a “well-connected” guy in the White House?

The Big Picture: Kleptocracy and Capital Flight

A few of Donald Trump’s connections to oligarchs and assorted thugs have already received sporadic press attention—for example, former Trump campaign manager Paul Manafort’s reported relationship with exiled Ukrainian oligarch Dmytro Firtash. But no one has pulled the connections together, used them to identify still more relationships, and developed an image of the overall patterns.

Nor has anyone related these cases to one of the most central facts about modern Russia: its emergence since the 1990s as a world-class kleptocracy, second only to China as a source of illicit capital and criminal loot, with more than $1.3 trillion of net offshore “flight wealth” as of 2016.1

This tidal wave of illicit capital is hardly just Putin’s doing. It is in fact a symptom of one of the most epic failures in modern political economy—one for which the West bears a great deal of responsibility. This is the failure, in the wake of the Soviet Union’s collapse in the late 1980s, to ensure that Russia acquires the kind of strong, middle-class-centric economic and political base that is required for democratic capitalism, the rule of law, and stable, peaceful relationships with its neighbors.



Instead, from 1992 to the Russian debt crisis of August 1998, the West in general—and the U.S. Treasury, USAID, the State Department, the IMF/World Bank, the EBRD, and many leading economists in particular—actively promoted and, indeed, helped to finance one of the most massive transfers of public wealth into private hands that the world has ever seen.

For example, Russia’s 1992 “voucher privatization” program permitted a tiny elite of former state-owned company managers and party apparatchiks to acquire control over a vast number of public enterprises, often with the help of outright mobsters. A majority of Gazprom, the state energy company that controlled a third of the world’s gas reserves, was sold for $230 million; Russia’s entire national electric grid was privatized for $630 million; ZIL, Russia’s largest auto company, went for about $4 million; ports, ships, oil, iron and steel, aluminum, much of the high-tech arms and airlines industries, the world’s largest diamond mines, and most of Russia’s banking system also went for a song.

In 1994–96, under the infamous “loans-for-shares” program, Russia privatized 150 state-owned companies for just $12 billion, most of which was loaned to a handful of well-connected buyers by the state—and indirectly by the World Bank and the IMF. The principal beneficiaries of this “privatization”—actually, cartelization—were initially just 25 or so budding oligarchs with the insider connections to buy these properties and the muscle to hold them.2 The happy few who made personal fortunes from this feeding frenzy—in a sense, the very first of the new kleptocrats—not only included numerous Russian officials, but also leading gringo investors/advisers, Harvard professors, USAID advisers, and bankers at Credit Suisse First Boston and other Wall Street investment banks. As the renowned development economist Alex Gerschenkron, an authority on Russian development, once said, “If we were in Vienna, we would have said, ‘We wish we could play it on the piano!'”

For the vast majority of ordinary Russian citizens, this extreme re-concentration of wealth coincided with nothing less than a full-scale 1930s-type depression, a “shock therapy”-induced rise in domestic price levels that wiped out the private savings of millions, rampant lawlessness, a public health crisis, and a sharp decline in life expectancy and birth rates.

Sadly, this neoliberal “market reform” policy package that was introduced at a Stalin-like pace from 1992 to late 1998 was not only condoned but partly designed and financed by senior Clinton Administration officials, neoliberal economists, and innumerable USAID, World Bank, and IMF officials. The few dissenting voices included some of the West’s best economic brains—Nobel laureates like James Tobin, Kenneth Arrow, Lawrence Klein, and Joseph Stiglitz. They also included Moscow University’s Sergei Glaziev, who now serves as President Putin’s chief economic advisor.3 Unfortunately, they were no match for the folks with the cash.

There was also an important intervention in Russian politics. In January 1996 a secret team of professional U.S. political consultants arrived in Moscow to discover that, as CNN put it back then, “The only thing voters like less than Boris Yeltsin is the prospect of upheaval.” The experts’ solution was one of earliest “Our brand is crisis” campaign strategies, in which Yeltsin was “spun” as the only alternative to “chaos.” To support him, in March 1996 the IMF also pitched in with $10.1 billion of new loans, on top of $17.3 billion of IMF/World Bank loans that had already been made.

With all this outside help, plus ample contributions from Russia’s new elite, Yeltsin went from just 8 percent approval in the January 1996 polls to a 54-41 percent victory over the Communist Party candidate, Gennady Zyuganov, in the second round of the July 1996 election. At the time, mainstream media like Time and the New York Times were delighted. Very few outside Russia questioned the wisdom of this blatant intervention in post-Soviet Russia’s first democratic election, or the West’s right to do it in order to protect itself.

By the late 1990s the actual chaos that resulted from Yeltsin’s warped policies had laid the foundations for a strong counterrevolution, including the rise of ex-KGB officer Putin and a massive outpouring of oligarchic flight capital that has continued virtually up to the present. For ordinary Russians, as noted, this was disastrous. But for many banks, private bankers, hedge funds, law firms, and accounting firms, for leading oil companies like ExxonMobil and BP, as well as for needy borrowers like the Trump Organization, the opportunity to feed on post-Soviet spoils was a godsend. This was vulture capitalism at its worst.

The nine-lived Trump, in particular, had just suffered a string of six successive bankruptcies. So the massive illicit outflows from Russia and oil-rich FSU members like Kazahkstan and Azerbaijan from the mid-1990s provided precisely the kind of undiscriminating investors that he needed. These outflows arrived at just the right time to fund several of Trump’s post-2000 high-risk real estate and casino ventures—most of which failed. As Donald Trump, Jr., executive vice president of development and acquisitions for the Trump Organization, told the “Bridging U.S. and Emerging Markets Real Estate” conference in Manhattan in September 2008 (on the basis, he said, of his own “half dozen trips to Russia in 18 months”):

[I]n terms of high-end product influx into the United States, Russians make up a pretty disproportionate cross-section of a lot of our assets; say in Dubai, and certainly with our project in SoHo and anywhere in New York. We see a lot of money pouring in from Russia.

All this helps to explain one of the most intriguing puzzles about Donald Trump’s long, turbulent business career: how he managed to keep financing it, despite a dismal track record of failed projects.4

According to the “official story,” this was simply due to a combination of brilliant deal-making, Trump’s gold-plated brand, and raw animal spirits—with $916 million of creative tax dodging as a kicker. But this official story is hokum. The truth is that, since the late 1990s, Trump was also greatly assisted by these abundant new sources of global finance, especially from “submerging markets” like Russia

This suggests that neither Trump nor Putin is an “uncaused cause.” They are not evil twins, exactly, but they are both byproducts of the same neoliberal policy scams that were peddled to Russia’s struggling new democracy.

A Guided Tour of Trump’s Russian/FSU Connections

The following roundup of Trump’s Russo-Soviet business connections is based on published sources, interviews with former law enforcement staff and other experts in the United States, the United Kingdom, and Iceland, searches of online corporate registries,5 and a detailed analysis of offshore company data from the Panama Papers.6 Given the sheer scope of Trump’s activities, there are undoubtedly other worthy cases, but our interest is in overall patterns.

Note that none of the activities and business connections related here necessarily involved criminal conduct. While several key players do have criminal records, few of their prolific business dealings have been thoroughly investigated, and of course they all deserve the presumption of innocence. Furthermore, several of these players reside in countries where activities like bribery, tax dodging, and other financial chicanery are either not illegal or are rarely prosecuted. As former British Chancellor of the Exchequer Denis Healey once said, the difference between “legal” and “illegal” is often just “the width of a prison wall.”

So why spend time collecting and reviewing material that either doesn’t point to anything illegal or in some cases may even be impossible to verify? Because, we submit, the mere fact that such assertions are widely made is of legitimate public interest in its own right. In other words, when it comes to evaluating the probity of senior public officials, the public has the right to know about any material allegations—true, false, or, most commonly, unprovable—about their business partners and associates, so long as this information is clearly labeled as unverified.

Furthermore, the individual case-based approach to investigations employed by most investigative journalists and law enforcement often misses the big picture: the global networks of influence and finance, licit and illicit, that exist among business people, investors, kleptocrats, organized criminals, and politicians, as well as the “enablers”—banks, accounting firms, law firms, and havens. Any particular component of these networks might easily disappear without making any difference. But the networks live on. It is these shadowy transnational networks that really deserve scrutiny.

Bayrock Group LLC—Kazakhstan and Tevfik Arif

We’ll begin our tour of Trump’s Russian/FSU connections with several business relationships that evolved out of the curious case of Bayrock Group LLC, a spectacularly unsuccessful New York real estate development company that surfaced in the early 2000s and, by 2014, had all but disappeared except for a few lawsuits. As of 2007, Bayrock and its partners reportedly had more than $2 billion of Trump-branded deals in the works. But most of these either never materialized or were miserable failures, for reasons that will soon become obvious.

Bayrock’s “white elephants” included the 46-story Trump SoHo condo-hotel on Spring Street in New York City, for which the principle developer was a partnership formed by Bayrock and FL Group, an Icelandic investment company. Completed in 2010, the SoHo soon became the subject of prolonged civil litigation by disgruntled condo buyers. The building was foreclosed by creditors and resold in 2014 after more than $3 million of customer down payments had to be refunded. Similarly, Bayrock’s Trump International Hotel & Tower in Fort Lauderdale was foreclosed and resold in 2012, while at least three other Trump-branded properties in the United States, plus many other “project concepts” that Bayrock had contemplated, from Istanbul and Kiev to Moscow and Warsaw, also never happened.

Carelessness about due diligence with respect to potential partners and associates is one of Donald Trump’s more predictable qualities. Acting on the seat of the pants, he had hooked up with Bayrock rather quickly in 2005, becoming an 18 percent minority equity partner in the Trump SoHo, and agreeing to license his brand and manage the building.7

Exhibit A in the panoply of former Trump business partners is Bayrock’s former Chairman, Tevfik Arif (aka Arifov), an émigré from Kazakhstan who reportedly took up residence in Brooklyn in the 1990s. Trump also had extensive contacts with another key Bayrock Russian-American from Brooklyn, Felix Sater (aka Satter), discussed below.8 Trump has lately had some difficulty recalling very much about either Arif or Sater. But this is hardly surprising, given what we now know about them. Trump described his introduction to Bayrock in a 2013 deposition for a lawsuit that was brought by investors in the Fort Lauderdale project, one of Trump’s first with Bayrock: “Well, we had a tenant in … Trump Tower called Bayrock, and Bayrock was interested in getting us into deals.”9

According to several reports, Tevfik Arif was originally from Kazakhstan, a Soviet republic until 1992. Born in 1950, Arif worked for 17 years in the Soviet Ministry of Commerce and Trade, serving as Deputy Director of Hotel Management by the time of the Soviet Union’s collapse.10 In the early 1990s he relocated to Turkey, where he reportedly helped to develop properties for the Rixos Hotel chain. Not long thereafter he relocated to Brooklyn, founded Bayrock, opened an office in the Trump Tower, and started to pursue projects with Trump and other investors.11

Tevfik Arif was not Bayrock’s only connection to Kazakhstan. A 2007 Bayrock investor presentation refers to Alexander Mashevich’s “Eurasia Group” as a strategic partner for Bayrock’s equity finance. Together with two other prominent Kazakh billionaires, Patokh Chodiev (aka “Shodiyev”) and Alijan Ibragimov, Mashkevich reportedly ran the “Eurasian Natural Resources Cooperation.” In Kazakhstan these three are sometimes referred to as “the Trio.”12

The Trio has apparently worked together ever since Gorbachev’s late 1980s perestroika in metals and other natural resources. It was during this period that they first acquired a significant degree of control over Kazakhstan’s vast mineral and gas reserves. Naturally they found it useful to become friends with Nursultan Nazarbayev, Kazakhstan’s long-time ruler. Indeed, State Department cables leaked by Wikileaks in November 2010 describe a close relationship between “the Trio” and the seemingly-perpetual Nazarbayev kleptocracy.

In any case, the Trio has recently attracted the attention of many other investigators and news outlets, including the September 11 Commission Report, the Guardian, Forbes, and the Wall Street Journal. In addition to resource grabbing, the litany of the Trio’s alleged activities include money laundering, bribery, and racketeering.13 In 2005, according to U.S. State Department cables released by Wikileaks, Chodiev (referred to in a State Department cable as “Fatokh Shodiyev”) was recorded on video attending the birthday of reputed Uzbek mob boss Salim Abduvaliyeva and presenting him with a $10,000 “gift” or “tribute.”

According to the Belgian newspaper Le Soir, Chodiev and Mashkevich also became close associates of a curious Russian-Canadian businessman, Boris J. Birshtein. who happens to have been the father-in-law of another key Russian-Canadian business associate of Donald Trump in Toronto. We will return to Birshtein below.

The Trio also turn up in the April 2016 Panama Papers database as the apparent beneficial owners of a Cook Islands company, “International Financial Limited.”14 The Belgian newspapers Het Laatste Nieuws, Le Soir, and La Libre Belgique have reported that Chodiev paid €23 million to obtain a “Class B” banking license for this same company, permitting it to make international currency trades. In the words of a leading Belgian financial regulator, that would “make all money laundering undetectable.”

The Panama Papers also indicate that some of Arif’s connections at the Rixos Hotel Group may have ties to Kazakhstan. For example, one offshore company listed in the Panama Papers database, “Group Rixos Hotel,” reportedly acts as an intermediary for four BVI offshore companies.15 Rixos Hotel’s CEO, Fettah Tamince, is listed as having been a shareholder for two of these companies, while a shareholder in another—“Hazara Asset Management”—had the same name as the son of a recent Kazakhstan Minister for Sports and Tourism. As of 2012, this Kazakh official was described as the third-most influential deputy in the country’s Mazhilis (the lower house of Parliament), in a Forbes-Kazakhstan article.

According to a 2015 lawsuit against Bayrock by Jody Kriss, one of its former employees, Bayrock started to receive millions of dollars in equity contributions in 2004, supposedly by way of Arif’s brother in Russia, who allegedly “had access to cash accounts at a chromium refinery in Kazakhstan.”

This as-yet unproven allegation might well just be an attempt by the plaintiff to extract a more attractive settlement from Bayrock and its original principals. But it is also consistent with fact that chromium is indeed one of the Kazakh natural resources that is reportedly controlled by the Trio.

As for Arif, his most recent visible brush with the law came in 2010, when he and other members of Bayrock’s Eurasian Trio were arrested together in Turkey during a police raid on a suspected prostitution ring, according to the Israeli daily Yediot Ahronot.

At the time, Turkish investigators reportedly asserted that Arif might be the head of a criminal organization that was trafficking in Russian and Ukrainian escorts, allegedly including some as young as 13.16 According to these assertions, big-ticket clients were making their selections by way of a modeling agency website, with Arif allegedly handling the logistics. Especially galling to Turkish authorities, the preferred venue was reportedly a yacht that had once belonged to the widely-revered Turkish leader Atatürk. It was also alleged that Arif may have also provided lodging for young women at Rixos Group hotels.17

According to Russian media, two senior Kazakh officials were also arrested during this incident, although the Turkish Foreign Ministry quickly dismissed this allegation as “groundless.” In the end, all the charges against Arif resulting from this incident were dismissed in 2012 by Turkish courts, and his spokespeople have subsequently denied all involvement.

Finally, despite Bayrock’s demise and these other legal entanglements, Arif has apparently remained active. For example, Bloomberg reports that, as of 2013, he, his son, and Rixos Hotels’ CEO Fettah Tamince had partnered to pursue the rather controversial business of advancing funds to cash-strapped high-profile soccer players in exchange for a share of their future marketing revenues and team transfer fees. In the case of Arif and his partners, this new-wave form of indentured servitude was reportedly implemented by way of a UK- and Malta-based hedge fund, Doyen Capital LLP. Because this practice is subject to innumerable potential abuses, including the possibility of subjecting athletes or clubs to undue pressure to sign over valuable rights and fees, UEFA, Europe’s governing soccer body, wants to ban it. But FIFA, the notorious global football regulator, has been customarily slow to act. To date, Doyen Capital LLP has reportedly taken financial gambles on several well-known players, including the Brazilian star Neymar.

The Case of Bayrock LLC—Felix Sater

Our second exhibit is Felix Sater, the senior Bayrock executive introduced earlier. This is the fellow who worked at Bayrock from 2002 to 2008 and negotiated several important deals with the Trump Organization and other investors. When Trump was asked who at Bayrock had brought him the Fort Lauderdale project in the 2013 deposition cited above, he replied: “It could have been Felix Sater, it could have been—I really don’t know who it might have been, but somebody from Bayrock.”18


Although Sater left Bayrock in 2008, by 2010 he was reportedly back in Trump Tower as a “senior advisor” to the Trump Organization—at least on his business card—with his own office in the building.

Sater has also testified under oath that he had escorted Donald Trump, Jr. and Ivanka Trump around Moscow in 2006, had met frequently with Donald over several years, and had once flown with him to Colorado. And although this might easily have been staged, he is also reported to have visited Trump Tower in July 2016 and made a personal $5,400 contribution to Trump’s campaign.

Whatever Felix Sater has been up to recently, the key point is that by 2002, at the latest,19 Tevfik Arif decided to hire him as Bayrock’s COO and managing director. This was despite the fact that by then Felix had already compiled an astonishing track record as a professional criminal, with multiple felony pleas and convictions, extensive connections to organized crime, and—the ultimate prize—a virtual “get out of jail free card,” based on an informant relationship with the FBI and the CIA that is vaguely reminiscent of Whitey Bulger.20

Sater, a Brooklyn resident like Arif, was born in Russia in 1966. He reportedly emigrated with his family to the United States in the mid-1970s and settled in “Little Odessa.” It seems that his father, Mikhael Sheferovsky (aka Michael Sater), may have been engaged in Russian mob activity before he arrived in the United States. According to a certified U.S. Supreme Court petition, Felix Sater’s FBI handler stated that he “was well familiar with the crimes of Sater and his (Sater’s) father, a (Semion) Mogilevich crime syndicate boss.”21 A 1998 FBI report reportedly said Mogilevich’s organization had “approximately 250 members,” and was involved in trafficking nuclear materials, weapons, and more, as well as money laundering. (See below.)

But Michael Sater may have been less ambitious than his son. His only reported U.S. criminal conviction came in 2000, when he pled guilty to two felony counts for extorting Brooklyn restaurants, grocery stores, and clinics. He was released with three years’ probation. Interestingly, the U.S. Attorney for the Eastern District of New York who handled that case at the time was Loretta Lynch, who succeeded Eric Holder as U.S. Attorney General in 2014. Back in 2000, she was also overseeing a budding informant relationship and a plea bargain with Michael’s son Felix, which may help to explain the father’s sentence.

By then young Felix Sater was already well on his way to a career as a prototypical Russian-American mobster. In 1991 he stabbed a commodity trader in the face with a margarita glass stem in a Manhattan bar, severing a nerve. He was convicted of a felony and sent to prison. As Trump tells it, Sater simply “got into a barroom fight, which a lot of people do.” The sentence for this felony conviction could not have been very long, because, by 1993, 27-year-old Felix was already a trader in a brand new Brooklyn-based commodity firm called “White Rock Partners,” an innovative joint venture among four New York crime families and the Russian mob aimed at bringing state-of-the art financial fraud to Wall Street.

Five years later, in 1998, Felix Sater pled guilty to stock racketeering, as one of 19 U.S.-and Russian mob-connected traders who participated in a $40 million “pump and dump” securities fraud scheme. Facing twenty years in Federal prison, Sater and Gennady Klotsman, a fellow Russian-American who’d been with him on the night of the Manhattan bar fight, turned “snitch” and helped the Department of Justice prosecute their co-conspirators.22 Reportedly, so did Salvatore Lauria, another “trader” involved in the scheme. According to the Jody Kriss lawsuit, Lauria later joined Bayrock as an off-the-books paid “consultant.” Initially their cooperation, which lasted from 1998 until at least late 2001, was kept secret, until it was inadvertently revealed in a March 2000 press release by U.S. Attorney Lynch.

Unfortunately for Sater, about the same time the NYPD also reportedly discovered that he had been running a money-laundering scheme and illicit gun sales out of a Manhattan storage locker. He and Klotsman fled to Russia. However, according to the New York Times, which cited Klotsman and Lauria, soon after the events of September 11, 2001, the ever-creative Sater succeeded in brokering information about the black market for Stinger anti-aircraft missiles to the CIA and the FBI. According to Klotsman, this strategy “bought Felix his freedom,” allowing him to return to Brooklyn. It is still not clear precisely what information Sater actually provided, but in 2015 U.S. Attorney General Loretta Lynch publicly commended him for sharing information that she described as “crucial to national security.”

Meanwhile, Sater’s sentence for his financial crimes continued to be deferred even after his official cooperation in that case ceased in late 2001. His files remained sealed, and he managed to avoid any sentencing for those crimes at all until October 23, 2009. When he finally appeared before the Eastern District’s Judge I. Leo Glasser, Felix received a $25,000 fine, no jail time, and no probation in a quiet proceeding that attracted no press attention. Some compared this sentence to Judge Glasser’s earlier sentence of Mafia hit man “Sammy the Bull” Gravano to 4.5 years for 19 murders, in exchange for “cooperating against John Gotti.”

In any case, between 2002 and 2008, when Felix Sater finally left Bayrock LLC, and well beyond, his ability to avoid jail and conceal his criminal roots enabled him to enjoy a lucrative new career as Bayrock’s chief operating officer. In that position, he was in charge of negotiating aggressive property deals all over the planet, even while—according to lawsuits by former Bayrock investors—engaging in still more financial fraud. The only apparent difference was that he changed his name from “Sater” to “Satter.”23

In the 2013 deposition cited earlier, Trump went on to say “I don’t see Felix as being a member of the Mafia.” Asked if he had any evidence for this claim, Trump conceded “I have none.”24

As for Sater’s pal Klotsman, the past few years have not been kind. As of December 2016 he is in a Russian penal colony, working off a ten-year sentence for a failed $2.8 million Moscow diamond heist in August 2010. In 2016 Klotsman was reportedly placed on a “top-ten list” of Americans that the Russians were willing to exchange for high-value Russian prisoners in U.S. custody, like the infamous arms dealer Viktor Bout. So far there have been no takers. But with Donald Trump as President, who knows?

The Case of Iceland’s FL Group

One of the most serious frauds alleged in the recent Bayrock lawsuit involves FL Group, an Icelandic private investment fund that is really a saga all its own.

Iceland is not usually thought of as a major offshore financial center. It is a small snowy island in the North Atlantic, closer to Greenland than to the UK or Europe, with only 330,000 citizens and a total GDP of just $17 billion. Twenty years ago, its main exports were cod and aluminum—with the imported bauxite smelted there to take advantage of the island’s low electricity costs.

But in the 1990s Iceland’s tiny neoliberal political elite had what they all told themselves was a brilliant idea: “Let’s privatize our state-owned banks, deregulate capital markets, and turn them loose on the world!” By the time all three of the resulting privatized banks, as well as FL Group, failed in 2008, the combined bank loan portfolio amounted to more than 12.5 times Iceland’s GDP—the highest country debt ratio in the entire world.

For purposes of our story, the most interesting thing about Iceland is that, long before this crisis hit and utterly bankrupted FL Group, our two key Russian/FSU/Brooklyn mobster-mavens, Arif and Sater, had somehow stumbled on this obscure Iceland fund. Indeed, in early 2007 they persuaded FL Group to invest $50 million in a project to build the Trump SoHo in mid-town Manhattan.

According to the Kriss lawsuit, at the same time, FL Group and Bayrock’s Felix Sater also agreed in principle to pursue up to an additional $2 billion in other Trump-related deals. The Kriss lawsuit further alleges that FL Group (FLG) also agreed to work with Bayrock to facilitate outright tax fraud on more than $250 million of potential earnings. In particular, it alleges that FLG agreed to provide the $50 million in exchange for a 62 percent stake in the four Bayrock Trump projects, but Bayrock would structure the contract as a “loan.” This meant that Bayrock would not have to pay taxes on the initial proceeds, while FLG’s anticipated $250 million of dividends would be channeled through a Delaware company and characterized as “interest payments,” allowing Bayrock to avoid up to $100 million in taxes. For tax purposes, Bayrock would pretend that their actual partner was a Delaware partnership that it had formed with FLG, “FLG Property I LLC,” rather than FLG itself.

The Trump Organization has denied any involvement with FLG. However, as an equity partner in the Trump SoHo, with a significant 18 percent equity stake in this one deal alone, Donald Trump himself had to sign off on the Bayrock-FLG deal.

This raises many questions. Most of these will have to await the outcome of the Kriss litigation, which might well take years, especially now that Trump is President. But several of these questions just leap off the page.

First, how much did President-elect Trump know about the partners and the inner workings of this deal? After all, he had a significant equity stake in it, unlike many of his “brand-name only” deals, and it was also supposed to finance several of his most important East Coast properties.

Second, how did the FL Group and Bayrock come together to do this dodgy deal in the first place? One former FL Group manager alleges that the deal arrived by accident, a “relatively small deal” was nothing special on either side.25 The Kriss lawsuit, on the other hand, alleges that FLG was a well-known source of easy money from dodgy sources like Kazakhstan and Russia, and that other Bayrock players with criminal histories—like Salvatore Lauria, for example—were involved in making the introductions.

At this stage the evidence with respect to this second question is incomplete. But there are already some interesting indications that FL Group’s willingness to generously finance Bayrock’s peculiar Russian/FSU/Brooklyn team, its rather poorly-conceived Trump projects, and its purported tax dodging were not simply due to Icelandic backwardness. There is much more for us to know about Iceland’s “special” relationship with Russian finance. In this regard, there are several puzzles to be resolved.

First, it turns out that FL Group, Iceland’s largest private investment fund until it crashed in 2008, had several owners/investors with deep Russian business connections, including several key investors in all three top Iceland banks.

Second, it turns out that FL Group had constructed an incredible maze of cross-shareholding, lending, and cross-derivatives relationships with all these major banks, as illustrated by the following snapshot of cross-shareholding among Iceland’s financial institutions and companies as of 2008.26

Cross-shareholding Relationships, FLG and Other Leading Icelandic Financial Institutions, 2008

Cross-shareholding Relationships, FLG and Other Leading Icelandic Financial Institutions, 2008

This thicket of cross-dealing made it almost impossible to regulate “control fraud,” where insiders at leading financial institutions went on a self-serving binge, borrowing and lending to finance risky investments of all kinds. It became difficult to determine which institutions were net borrowers or investors, as the concentration of ownership and self-dealing in the financial system just soared.

Third, FL Group make a variety of peculiar loans to Russian-connected oligarchs as well as to Bayrock. For example, as discussed below, Alex Shnaider, the Russian-Canadian billionaire who later became Donald Trump’s Toronto business partner, secured a €45.8 million loan to buy a yacht from Kaupthing Bank during the same period, while a company belonging to another Russian billionaire who reportedly owns an important vodka franchise got an even larger loan.27

Fourth, Iceland’s largest banks also made a series of extraordinary loans to Russian interests during the run-up to the 2008 crisis. For example, one of Russia’s wealthiest oligarchs, a close friend of President Putin, nearly managed to secure at least €400 million (or, some say, up to four times that much) from Kaupthing, Iceland’s largest bank, in late September 2008, just as the financial crisis was breaking wide open. This bank also had important direct and indirect investments in FL Group. Indeed, until December 2006, it is reported to have employed the FL Group private equity manager who allegedly negotiated Felix Sater’s $50 million deal in early 2007.28

Fifth, there are unconfirmed accounts of a secret U.S. Federal Reserve report that unnamed Iceland banks were being used for Russian money laundering.29 Furthermore, Kaupthing Bank’s repeated requests to open a New York branch in 2007-08 were rejected by the Fed. Similar unconfirmed rumors repeatedly appeared in Danish and German publications, as did allegations about the supposed Kazakh origins of FLG’s cash to be “laundered” in the Kriss lawsuit.

Sixth, there is the peculiar fact that, when Iceland’s banks went belly-up in October 2008, their private banking subsidiaries in Luxembourg, which were managing at least €8 billion of private assets, were suddenly seized by Luxembourg banking authorities and transferred to a new bank, Banque Havilland. This happened so fast that Iceland’s Central Bank was prevented from learning anything about the identities or portfolio sizes of the Iceland banks’ private offshore clients. But again, there were rumors of some important Russian names.

Finally, there is the rather odd phone call that Russia’s Ambassador to Iceland made to Iceland’s Prime Minister at 6:45 a.m. on October 7, 2008, the day after the financial crisis hit Iceland. According to the PM’s own account, the Russian Ambassador informed him that then-Prime Minister Putin was willing to consider offering Iceland a €4 billion Russian bailout.

Of course this alleged Putin offer was modified not long thereafter into a willingness to entertain an Icelandic negotiating team in Moscow. By the time the Iceland team got to Moscow later that year, Russia’s desire to lend had cooled, and Iceland ended up accepting a $2.1 billion IMF “stabilization package” instead. But according to a member of the negotiating team, the reasons for the reversal are still a mystery. Perhaps Putin had reconsidered because he simply decided that Russia had to worry about its own considerable financial problems. Or perhaps he had discovered that Iceland’s banks had indeed been very generous to Russian interests on the lending side, while—given Luxembourg’s actions—any Russian private wealth invested in Icelandic banks was already safe.

On the other hand, there may be a simpler explanation for Iceland’s peculiar generosity to sketchy partners like Bayrock. After all, right up to the last minute before the October 2008 meltdown, the whole world had awarded Iceland AAA ratings: Depositors queued up in London to open high-yield Iceland bank accounts, its bank stocks were booming, and the compensation paid to its financiers was off the charts. So why would anyone worry about making a few more dubious deals?

Overall, therefore, with respect to these odd “Russia-Iceland” connections, the proverbial jury is still out. But all these Icelandic puzzles are intriguing and bear further investigation.

The Case of the Trump Toronto Tower and Hotel—Alex Shnaider

Our fourth case study of Trump’s business associates concerns the 48-year-old Russian-Canadian billionaire Alex Shnaider, who co-financed the seventy-story Trump Tower and Hotel, Canada’s tallest building. It opened in Toronto in 2012. Unfortunately, like so many of Trump’s other Russia/FSU-financed projects, this massive Toronto condo-hotel project went belly-up this November and has now entered foreclosure.

According to an online profile of Shnaider by a Ukrainian news agency, Alex Shnaider was born in Leningrad in 1968, the son of “Евсей Шнайдер,” or “Evsei Shnaider” in Russian.30 A recent Forbes article says that he and his family emigrated to Israel from Russia when he was four and then relocated to Toronto when he was 13-14. The Ukrainian news agency says that Alex’s familly soon established “one of the most successful stories in Toronto’s Russian quarter, “ and that young Alex, with “an entrepreneurial streak,” “helped his father Evsei Shnaider in the business, placing goods on the shelves and wiping floors.”

Eventually that proved to be a great decision—Shnaider prospered in the New World. Much of this was no doubt due to raw talent. But it also appears that for a time he got significant helping hand from his (now reportedly ex-) father-in-law, another colorful Russian-Canadian, Boris J. Birshtein.

Originally from Lithuania, Birshtein, now about 69, has been a Canadian citizen since at least 1982.31 He resided in Zurich for a time in the early 1990s, but then returned to Toronto and New York.32 One of his key companies was called Seabeco SA, a “trading” company that was registered in Zurich in December 1982.33 By the early 1990s Birshtein and his partners had started many other Seabeco-related companies in a wide variety of locations, inclding Antwerp,34 Toronto,35 Winnipeg,36 Moscow, Delaware,37 Panama,38 and Zurich.39 Several of these are still active.40 He often staffed them with directors and officers from a far-flung network of Russians, emissaries from other FSU countries like Kyrgyzstan and Moldova, and recent Russia/FSU emigres to Canada.41

According to the Financial Times and the FBI, in addition to running Seabeco, Birshtein was a close business associate of Sergei Mikhaylov, the reputed head of Solntsevskaya Bratva, the Russian mob’s largest branch, and the world’s highest-grossing organized crime group as of 2014, according to Fortune.42 A 1996 FBI intelligence report cited by the FT claims that Birshtein hosted a meeting in his Tel Aviv office for Mikhaylov, the Ukrainian-born Semion Mogilevich, and several other leaders of the Russo/FSU mafia, in order to discuss “sharing interests in Ukraine.”43 A subsequent 1998 FBI Intelligence report on the “Semion Mogilevich Organization” repeated the same charge,44 and described Mogilevich’s successful attempts at gaining control over Ukraine privatization assets. The FT article also described how Birshtein and his associates had acquired extraordinary influence with key Ukraine officials, including President Leonid Kuchma, with the help of up to $5 million of payoffs.45 Citing Swiss and Belgian investigators, the FT also claimed that Birshtein and Mikhaylov jointly controlled a Belgian company called MAB International in the early 1990s.46 During that period, those same investigators reportedly observed transfers worth millions of dollars between accounts held by Mikhaylov, Birshtein, and Alexander Volkov, Seabeco’s representative in Ukraine.

In 1993, the Yeltsin government reportedly accused Birshtein of illegally exporting seven million tons of Russian oil and laundering the proceeds.47 Dmytro Iakoubovski, a former associate of Birshtein’s who had also moved to Toronto, was said to be cooperating with the Russian investigation. One night a gunman fired three shots into Iakoubovski’s home, leaving a note warning him to cease his cooperation, according to a New York Times article published that year. As noted above, according to the Belgian newspaper Le Soir, two members of Bayrock’s Eurasian Trio were also involved in Seabeco during this period as well—Patokh Chodiev and Alexander Mashkevich. Chodiev reportedly first met Birshtein through the Soviet Foreign Ministry, and then went on to run Seabeco’s Moscow office before joining its Belgium office in 1991. Le Soir further claims that Mashkevich worked for Seabeco too, and that this was actually how he and Chodiev had first met.

All this is fascinating, but what about the connections between Birshtein and Trump’s Toronto business associate, Alex Shnaider? Again, the leads we have are tantalizing.The Toronto Globe and Mail reported that in 1991, while enrolled in law school, young Alex Shnaider started working for Birshtein at Seabeco’s Zurich headquarters, where he was reportedly introduced to steel trading. Evidently this was much more than just a job; the Zurich company registry lists “Alex Shnaider” as a director of “Seabeco Metals AG” from March 1993 to January 1994.48

In 1994, according to this account, he reportedly left Seabeco in January 1994 to start his own trading company in Antwerp, in partnership with a Belgian trader-partner. Curiously, Le Soir also says that Mikhaylov and Birshtein co-founded MAB International in Antwerp in January 1994. Is it far-fetched to suspect that Alex Shnaider and mob boss Mikhaylov might have crossed paths, since they were both in the same city and they were both close to Shnaider’s father-in-law?

According to Forbes, soon after Shnaider moved to Antwerp, he started visiting the factories of his steel trading partners in Ukraine.49 His favorite client was the Zaporizhstal steel mill, Ukraine’s fourth largest. At the Zaporizhstal mill he reportedly met Eduard Shifrin (aka Shyfrin), a metals trader with a doctorate in metallurgical engineering. Together they founded Midland Resource Holdings Ltd. in 1994.50

As the Forbes piece argues, with privatization sweeping Eastern Europe, private investors were jockeying to buy up the government’s shares in Zaprozhstal. But most traders lacked the financial backing and political connectons to accumulate large risky positions. Shnaider and Shifrin, in contrast, started buying up shares without limit, as if their pockets and connections were very deep. By 2001 they had purchased 93 percent of the plant for about $70 million, a stake that would be worth much more just five years later, when Shnaider reportedly turned down a $1.2 billion offer.

Today, Midland Resources Holdings Ltd. reportedly generates more than $4 billion a year of revenue and has numerous subsidiaries all across Eastern Europe.51 Shnaider also reportedly owns Talon International Development, the firm that oversaw construction of the Trump hotel-tower in Toronto. All this wealth apparently helped Iceland’s FL Group decide that it could afford to extend a €45.8 million loan to Alex Shnaider in 2008 to buy a yacht.52

As of December 2016, a search of the Panama Papers database found no fewer than 28 offshore companies that have been associated with “Midland Resources Holding Limited.”53 According to the database, “Midland Resources Holding Limited” was a shareholder in at least two of these companies, alongside an individual named “Oleg Sheykhametov.”54 The two companies, Olave Equities Limited and Colley International Marketing SA, were both registered and active in the British Virgin Islands from 2007–10.55 A Russian restaurateur by that same name reportedly runs a business owned by two other alleged Solntsevskaya mob associates, Lev Kvetnoy and Andrei Skoch, both of whom appear with Sergei Mikhaylov. Of course mere inclusion in such a group photo is not evidence of wrongdoing. (See the photo here.) According to Forbes, Kvetnoy is the 55th richest person in Russia and Skoch, now a deputy in the Russian Duma, is the 18th.56

Finally, it is also intriguing to note that Boris Birshtein is also listed as the President of “ME Moldova Enterprises AG,” a Zurich-based company” that was founded in November 1992, transferred to the canton of Schwyz in September 1994, and liquidated and cancelled in January 1999.57 Birshstein was a member of the company’s board of directors from November 1992 to January 1994, when he became its President. At that point he was succeeded as President in June 1994 by one “Evsei Shnaider, Canadian citizen, resident in Zurich,” who was also listed as director of the company in September 1994.58 “Evsei Schnaider” is also listed in the Panama registry as a Treasurer and Director of “The Seabeco Group Inc.,” formed on December 6, 1991,59 and as treasurer and director of Seabeco Security International Inc.,” formed on December 10, 1991. As of December 2016, both companies are still in existence.60 Boris Birshtein is listed as president and director of both companies.61

The Case of Paul Manafort’s Ukrainian Oligarchs

Our fifth Trump associate profile concerns the Russo/Ukrainian connections of Paul Manafort, the former Washington lobbyist who served as Donald Trump’s national campaign director from April 2016 to August 2016. Manafort’s partner, Rick Davis, also served as national campaign manager for Senator John McCain in 2008, so this may not just be a Trump association.

One of Manafort’s biggest clients was the dubious pro-Russian Ukrainian billionaire Dmytro Firtash. By his own admission, Firtash maintains strong ties with a recurrent figure on this scene, the reputed Ukrainian/Russian mob boss Semion Mogilevich. His most important other links are almost certainly to Putin. Otherwise it is difficult to explain how this former used-car salesman could gain a lock on trading goods for gas in Turkmenistan and also become a lynchpin investor in the Swiss company RosUrEnergo, which controls Gazprom’s gas sales to Europe.62

In 2008, Manafort teamed up with a former manager of the Trump Organization to purchase the Drake Hotel in New York for up to $850 million, with Firtash agreeing to invest $112 million. According to a lawsuit brought against Manafort and Firtash, the key point of the deal was not to make a carefully-planned investment in real estate, but to simply launder part of the huge profits that Firtash had skimmed while brokering dodgy natural gas deals between Russia and Ukraine, with Mogilevich acting as a “silent partner.”

Ultimately Firtash pulled out of this Drake Hotel deal. The reasons are unclear—it has been suggested that he needed to focus on the 2015 collapse and nationalization of his Group DF’s Bank Nadra back home in Ukraine.63 But it certainly doesn’t appear to have changed his behavior. Since 2014 there has been a spate of other Firtash-related prosecutions, with the United States trying to extradict from Austria in order to stand trial on allegations that his vast spidernet “Group DF” had bribed Indian officials to secure mining licenses. The Austrian court has required him to put up a record-busting €125 million bail while he awaits a decision.64 And just last month, Spain has also tried to extradite Firtash on a separate money laundering case, involving the laundering of €10 million through Spanish property investments.

After Firtash pulled out of the deal, Manafort reportedly turned to Trump, but he declined to engage. Manafort stepped down as Trump’s campaign manager in August of 2016 in response to press investigations into his ties not only to Firtash, but to Ukraine’s previous pro-Russian Yanukovych government, which had been deposed by a uprising in 2014. However, following the November 8 election, Manafort reportedly returned to advise Trump on staffing his new administration. He got an assist from Putin—on November 30 a spokeswoman for the Russian Foreign Ministry accused Ukraine of leaking stories about Manafort in an effort to hurt Trump.

The Case of “Well-Connected” Russia/FSU Mobsters

Finally, several other interesting Russian/FSU connections have a more residential flavor, but they are a source of very important leads about the Trump network.

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Shooting an Own Goal: China’s Belt and Road funding terms spark criticism

By James M. Dorsey / Mid-East Soccer.

Steep commercial terms for China’s investment in infrastructure projects across Eurasia related to its Belt and Road initiative may give it control of key ports and other assets as recipients of Beijing’s largess find themselves trapped in debt. Yet, that comes with a risky price tag: potentially rising anti-Chinese sentiment, questioning of Chinese intentions, and a tarnishing of the image China is seeking to cultivate.

Cynically dubbed debt-trap diplomacy, multiple countries along China’s Belt and Road risk financial crisis. The Washington-based Center for Global Development recently warned that 23 of the 68 countries involved were “significantly or highly vulnerable to debt distress.”
The centre said in a report that eight of the 23 countries -- Djibouti, Kyrgyzstan, Laos. the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan – were particularly at risk.

Djibouti already owes 82 percent of its foreign debt to China while China is expected to account for 71% of Kyrgyz debt as Belt and Road-related projects are implemented.

“There is…concern that debt problems will create an unfavourable degree of dependency on China as a creditor. Increasing debt, and China’s role in managing bilateral debt problems, has already exacerbated internal and bilateral tensions in some BRI (Belt and Road initiative) countries,” the report said.

International relations scholars Robert Daly and Matthew Rojanski noted in a separate report on a recent trip to the Russia, Kazakhstan and China intended to gauge responses to the Belt and Road initiative that Eurasian nations were eager to benefit from Chinese investment but wary of Beijing’s intentions.

“We found an eagerness to participate in projects that support national development, but deep resistance to any westward or northern expansion of China’s practices, ideas, or population… Neither (Russia or Kazakhstan) hopes that China’s power will increase with its investments.,” the scholars said.

Outgoing US Secretary of State Rex Tillerson echoed the centre’s concerns on a visit to Africa this month. China “encourages dependency using opaque contracts, predatory loan practices, and corrupt deals that mire nations in debt and undercut their sovereignty, denying them their long-term, self-sustaining growth, Chinese investment does have the potential to address Africa’s infrastructure gap, but its approach has led to mounting debt and few, if any, jobs in most countries,” Mr. Tillerson said.

China has sought in some cases to counter resistance by offering more concessional or, in the case of Pakistan. interest-free instead of commercial loans for some projects.

Nonetheless, China has used debt relief as a vehicle to gain control of assets. Tajikistan saw an undisclosed amount of debt written off in exchange for ceding control of some 1,158 square kilometres of disputed territory. Sri Lanka, despite public protests, was forced to give China a major stake in its port of Hambantota.

Djibouti, one of the eight countries most at risk and a rent-a-military-base East African nation that hosts a major US facility, is about to follow in Sri Lanka’s footsteps. Djibouti last month seized control of the Doraleh Container Terminal from Dubai-based DP World and reportedly intends to hand over its management to a state-owned Chinese company.

Marine General Thomas Waldhauser, the top US commander in Africa, warned that the consequences of a Chinese takeover “could be significant.” He said moves by China, described by the Pentagon as one of several “revisionist powers” that “seek to create a world consistent with their authoritarian models,” had prompted him to revise US military strategy in Africa.

For their part, Pakistan and Nepal withdrew last November from two dam-building deals. The withdrawal coincided with mounting questions in Pakistan, a crown jewel in Chinese geo-strategic ambition, about what some see as a neo-colonial effort to extract the country’s resources.

China's seeming obliviousness to the potential impact on recipients and its own standing of its funding approach appears to be rooted in President Xi Jinping's rewriting of history and spin on reality that threatens to become a self-fulfilling prophecy.

Launching Belt and Road in a speech in Kazakhstan in September 2013, Mr. Xi suggested that the initiative constituted a revival of China’s centuries-old relationship with Eurasia. “More than 2,100 years ago … (Chinese) imperial envoy Zhang Qian was sent to Central Asia twice to open the door to friendly contacts between China and Central Asian countries as well as the transcontinental Silk Road linking East and West,” Mr. Xi told his audience.

In Indonesia a month later, Mr. Xi reminded the country’s parliament that “Southeast Asia has since ancient times been an important hub along the ancient Maritime Silk Road.”

Messrs. Daly and Rojanski noted that the historic Silk Road was never centred on China and that it served both commercial and military purposes. “The term ‘Silk Road’ was coined in 1877 by a German geographer to connote the historic phenomenon of Eurasian trade rather than a particular route,” the scholars said.

They suggested that Eurasian nations had not forgotten that historically Chinese expansion westwards had often been violent,” a fact Mr. Xi chose to overlook in his projection of the Belt and Road initiative.

It was, moreover, not immediately clear “that China’s branding, cash, and ambition can overcome the uneven development, political and cultural diversity, age-old hatreds, and daunting geography” of the Belt and Road, Messrs. Daly and Rojansky said.

Mr. Xi’s projection of a China-centric world is reflected in the country’s media that positions the Belt and Road as a vehicle to cement the People’s Republic’s place in the world as well as Communist Party rule despite paying lip service to the principle of a win-win proposition.
Chinese ambitions are evident in its efforts to internationalize its currency, the renminbi, as well as the inclusion of elements of the Chinese surveillance state and the propagation of Chinese culture through local media in investment target countries, for example Pakistan. They are also apparent in the creation of special Chinese courts to adjudicate Belt and Road.

China this month announced the establishment of a new agency to coordinate its foreign aid program. The agency is part of an effort to project China’s global influence more effectively and increase Communist Party control.

Taking issue with the Chinese effort, the Washington-based centre suggested that China as well as recipients of Beijing’s largess would be better served if the People’s Republic adopted a multilateral approach to Belt and Road-related funding rather than insisting on going it alone.

Said Scott Morris, a former US Treasury official and co-author of the centre’s report: “The way forward demands a clear policy framework aligned with global standards, something that has been absent from China’s lending practices to date. Whether Chinese officials have the will to pursue this approach will be critical in determining the ultimate success or failure” of the Belt and Road initiative.

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and co-host of the New Books in Middle Eastern Studies podcast. James is the author of The Turbulent World of Middle East Soccer blog, a book with the same title as well as Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africa, and the forthcoming China and the Middle East: Venturing into the Maelstrom

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End Times Coming?

By Andrew Levine / Counterpunch.

Photo by olavXO | CC BY 2.0

Donald Trump has been losing it a lot lately, mentally decomposing.  The more he does, the more likely it becomes that the world will end with a bang.  We cannot rule out a whimper, however – not with the Commander-in-Chief’s mind, what there is of it, fluttering hither and yon.

Or maybe Providence has something more Biblical in store.

In the Book of Revelation, six hundred sixty-six is “the mark of the beast.”  For some two thousand years, that number has been associated with the Anti-Christ and with what evangelicals nowadays call “the end times.”  The number 666 figures in esoteric mystical and satanic practices, and in the folk traditions of peoples throughout Christendom.  It is a point of reference in the popular culture of our time.

How ironic therefore that the address of the skyscraper office building that is playing such a prominent role in Jared Kushner’s fall from grace is 666 Fifth Avenue!

The demonic connotations of that building’s address have been part of the folklore surrounding it from the time that Tishman Realty and Construction, a far bigger deal than the Trump Organization, had the office tower built in the late fifties.  Tishman had no problem renting out office and retail space on that account; in those saner times, Christian eschatology was less commercially and politically consequential than it has since become.

The Kushner Real Estate Group, which under Jared’s leadership acquired 666 in 2007, has had trouble making ends meet.  Not all the blame lies with the resurgence of archaic modes of thought in recent decades.  A bigger problem is that the Kushners who, as “modern Orthodox” Jews, know a thing or two themselves about archaic, beliefs and practices, borrowed heavily to purchase the building, and more still to maintain it.  The income 666 brings in does not justify their level of indebtedness.

Even so, the building remains one of New York City’s prime addresses.  Thank the First Law of Real Estate for that – location, location, location.

However, Jared paid too much for it, just before the market for Manhattan office space went south as the Great Recession unfolded.  By now, that market has recovered somewhat, but not enough to get the Kushners out from under water.

Thus the man whom Trump put in charge of nearly every thorny issue facing his administration put his own family’s business seriously in debt.

Debt is something Trump knows well.  If only for that reason, if he has any capacity for empathy at all, Trump must be feeling Jared’s pain.

In demeanor and personality Jared and the Donald are as different as can be.  However, as real estate tycoons, the two of them are cut from the same cloth.

Plainly, Ivanka and her psychoanalyst, if she has one, have a lot to talk about: father (even in public she calls him “daddy”) and husband – same syndrome.

The two loves of her life both had sleazy landlord fathers, though only Jared’s actually did time.  Both had fathers who provided them with money and political influence to spare.  And they both set out from the metropolis’s hinterlands (Queens in Trump’s case, New Jersey in Kushner’s) to take Manhattan by storm.  In the process, both indebted themselves up to the gills.

Trump Tower is an over the top monument to Trump’s vanity, greed, and insecurity; it is an architectural mediocrity, a gilded flat screen TV, bulked up on steroids and turned on its side.

Kushner has more refined ambitions for 666.  He wants to replace the existing structure with something more luxurious, more profitable, and more distinguished than the building there now.

To that end, he has enlisted the architectural firm of Zaha Hadid.   Hadid, who died in 2016, was an Iraqi architect living in Britain.  She had an outstanding reputation, and many fine buildings to her credit.  In 2004, she became the first woman to win the Pritzker Prize, the equivalent of a Nobel Prize for architects.

Hooray for Jared!  He may be as unfit for the tasks his father-in-law assigned him as Trump himself is for his own responsibilities, but at least he still believes in the “American dream” – or at least the part of it that has children being more couth than their parents and parents-in-law.

Kushner also wants to change the building’s street number – to 660.   Another smart move.

But getting all this done is going to cost money; in this case, at least $12 billion.

Each day’s news brings fresh reports of meetings in the White House or at foreign venues between Crown Prince Jared and the world’s leading moneylenders.  Some of them are American; two names that have come to light recently are Joshua Harris, founder of the hedge fund Apollo Global Management, and Michael Corbat, chief executive of Citigroup.

But many, maybe most, of Jared’s efforts to raise money for 666 and his family’s other holdings have involved foreign oligarchs and potentates.  It could hardly be otherwise.  On the merits, no sane capitalist banker would want anything to do with his plans for 666, and America’s homegrown high flyers have not quite yet descended to the level of their counterparts in modern day equivalents of banana republics and Third World dictatorships.

Harris and Corbat and others of their ilk may be willing to talk about helping the Kushners out, but they are loath to do it.  From their point of view, it doesn’t matter, or doesn’t matter enough, that Jared is the president’s son-in-law and one of his senior advisers.  Despite all that has happened since Trump’s election, they continue to believe that, in the banking business, there is still more percentage in sticking with First World norms than in caving in to the manifold corruptions emanating out of the Oval Office.

Jared’s plight must feel like dejà vu all over again to his father-in-law.

Even up to the moment Trump surprised everybody (including himself) by winning the 2016 election, major American banks would have sooner flushed their money down the toilet than lend any of it to him.  Deutsche Bank and other foreign-based financial titans would work with the Trump Organization from time to time, but American bankers, having been burned too many times in the past, wanted nothing to do with him.

When the dust finally settles from the several on-going “Russiagate” investigations, it should become clear how Trump was able to bounce back from seemingly irreversible financial ruin as often as he has; the kindness of German bankers only explains so much.

No doubt, political influence has had a lot to do with it. Trump inherited a tidy sum from his father and then, by fair means or foul, added to it many times over.  It is also looking more likely than not that Russian oligarchs and similarly unsavory characters from distant lands with lax financial regulations figure in the explanation, and that person connected to criminal organizations or to Russian intelligence services played a role as well.

The way to find out is clear: follow the money.  In this instance, there is a via regia, a royal road, a (comparatively) easy way to do that: look where the son-in-law has gone begging.  What are Kushner’s problems, after all, but Russiagate writ small?

Talking with shady characters, Russian or otherwise, about business ventures is not the same thing as “colluding” with them to get elected.  To the extent that any of that went on, “the Russians” should be ashamed – not so much for sullying an already profoundly corrupt democracy, but for the pointlessness and amateurishness of their endeavors.

Our plutocrats are perfectly able to corrupt democracy on their own.  They have been doing a fine job of it too – seemingly from time immemorial, but at no time more than now.  Democracy’s foes don’t need Russians for that

It is telling that even such ardent Cold War revivalists as Joy Reid and Rachel Maddow and the other MSNBC and CNN bloviaters don’t claim that the (unspecified) Russian meddling they go on about endlessly actually accomplished anything.

Because the United States is and long has been the world’s foremost serial meddler in the affairs of other countries, their hypocrisy is mind-boggling.  That aside, the peril they warn of is almost certainly a red herring.

On the other hand, financial shenanigans involving Russia and the Trump organization almost certainly did take place.  If Russiagate investigators do their job properly, it is extremely likely that they will find that this, not his campaign’s “collusion” with “the Russians,” is what Trump is trying so hard to cover up.

When Trump’s remaining supporters realize this will they finally wise up?  Probably not.  But, if anything can get them to abandon their illusions, this will.

Trump’s agenda is detrimental to the material interests of the people in his base, but, as has been demonstrated time and again, most of them could care less about that.  Neither does it matter to them that Trump is an embarrassment, or that he and his people are incompetent, or that he poses a clear and present danger to every living thing on the planet.   Old-fashioned corruption is another story; when that is exposed, everybody gets upset.

Thus even the most bamboozled Trump diehards will have a hard time maintaining their belief that the Donald is on their side when they are presented with evidence too compelling for them to deny that the only side he is on is his own.

But we must be careful not to give them or their opponents too much credit.  As long as Trump supporters remain willfully blind, and as long as the self-declared Democratic “resistance” remains milquetoast and feckless, Trump could survive revelations of his financial shenanigans, just as surely as he has been able so far to get away with everything else.

Whether of not Trump’s Teflon armor keeps on protecting him, the fact remains: the gods are closing in.  “Whom the gods would destroy, they first make mad,” wrote Longfellow.  We can see it happening before our very eyes.

Reasonable people will, of course, see it all as a consequence of the mounting pressure on Trump and everyone associated with him as the law closes in, and as the wages of incompetence fall due.

In this instance, however, there is a certain satisfaction in taking Longfellow at his word, by casting prosaic reasonableness aside and looking upon the goings on in the Trump White House as the handiwork of pagan gods amusing themselves at our expense.  Or, better yet, and in a more sullen and less imaginative Christian vein, as a sign of demons portending the End Time.

In that spirit, let us therefore relish the profound, possibly terminal, disorder portended by the Mark of the Beast.

Kushner seems like a harmless enough airhead but as Trump’s early backer and erstwhile crony, Chris Christie, can attest, that boy can be one vengeful son of a bitch.  Christie was the prosecutor who put Jared’s father behind bars.

Not long after the government of Qatar turned down Kushner’s pleas for help, Qatar became the victim of a United Arab Emirates led, Saudi supported, and Trump endorsed blockade.  It is hard not to see Jared’s hand at work here.

The consequences for the region have been grave – for Syria, Iraq, Lebanon, and, above all, for Yemen, one of the most war devastated places on earth.

As always, the peoples most directly affected have been the most harmed.  But no good will come of this for the United States either.  To the extent that the Kushner family’s financial woes are a cause, Jared has much to answer for.

Even in an administration where the outrageous has become normal, letting the pecuniary interests of the president, his children, and, in the case of the Donald’s favorite daughter, his children’s spouses dictate the course of world events marks a new low.

How bad will it get, and what role, if any, have the Russian government and its intelligence services been playing?  Will it lead to Kushner’s undoing?  To Trump’s?  As with the reality TV shows from which Trump learned most of what he knows, stay tuned and relish the spectacle.

Evangelicals surely will.  They must be thinking that with 666 so prominently involved, the End Times – not just for Kushners and Trumps but for everybody, saved and reprobate alike – is near.

Or perhaps they are not quite as crazy as that, and are instead just looking forward to a time when Mike Pence will be the one calling the shots.  He is one of their own, after all; and, if only by being less unhinged, he can do more for them than Trump can.

Mark of the beast, indeed!  With or without Trump himself in the leading role, the Trump Show has at least two and a half more years to run.  That is Hell enough already.

ANDREW LEVINE is the author most recently of THE AMERICAN IDEOLOGY (Routledge) and POLITICAL KEY WORDS (Blackwell) as well as of many other books and articles in political philosophy. His most recent book is In Bad Faith: What’s Wrong With the Opium of the People. He was a Professor (philosophy) at the University of Wisconsin-Madison and a Research Professor (philosophy) at the University of Maryland-College Park.  He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

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Smoking and drinking: Churchill sets an example today’s Western leaders can learn from

By James M. Dorsey / Mid-East Soccer.

To understand that Western emphasis on human rights is at best a fig leaf to do business with autocrats whose rule is based on repression, contrast Winston Churchill’s encounter with Mohammed bin Salman’s grandfather, King Abdulaziz, with British prime minister Theresa May’s recent talks with the crown prince.

Meeting the king for lunch in Cairo in 1945, Mr. Churchill suggested that it was the “religion of his majesty to deprive himself of smoking and alcohol,” a reference to the king’s adherence to a puritanical strand of Islam that has dominated the kingdom since its founding in 1932.

Mr. Churchill, however, made clear that the king’s beliefs would not deter him from enjoying his smokes and drinks in the monarch’s presence. The prime minister’s rule of life “prescribes as an absolutely sacred rite smoking cigars and also the drinking of alcohol before, after, and if need be during all meals and in the intervals between them,” Mr. Churchill said.

Enjoying tobacco and alcohol is certain not to have featured in Ms. May’s talks this week with Prince Mohammed. Human rights and the humanitarian cost of Saudi Arabia’s ill-fated military intervention in Yemen did.

In contrast to Mr. Churchill, who, perhaps insensitively and arrogantly, refused to compromise on his principles and pleasures, Ms. May’s statements were no more than words in what has become a ritual in interactions between democratic and autocratic leaders. The autocrats understand democrats’ need to maintain a fig leaf. The public admonishment of their tarnished human rights records is a small price to pay for the ability to conduct political and economic business.

The contrast between the two encounters is particularly significant in an environment in which abuse of human rights is on the rise and authoritarian and autocratic rule is spreading its wings across the globe from China to once liberal democracies. Democracy is on the defense.

It raises the question whether the refusal of democracies to stand up for their principles and pay a price will contribute to their demise and brutalization in a world in which the lessons of World War Two genocide and principles of good governance in warfare can be ignored with impunity. Russia and Iran-backed Syrian president Bashar al-Assad’s gassing and starvation of non-combatant Syrian civilians is a case in point.

Ms. May’s fig leaf approach to standing by basic democratic principles is but the latest incident in a long-standing Western willingness to pay a heavy price for sleeping with the devil in a bid to gain short-term geo-political and economic advantage.
Guilt is widespread. Its not just governments. The same is true for non-governmental organizations such as international sport associations who for decades tolerated pre-modernity curtailing of women’s sporting rights in countries like Saudi Arabia and Iran by restricting their criticism to words rather than deeds.

Saudi journalist Jamal Khashoggi and author and long-time Saudi-watcher Robert Lacey noted in The Guardian that “the crown prince doesn’t listen to Saudis – why would he listen to Theresa May?”

Mr. Khashoggi, long closely associated with Prince Turki al-Faisal, a former head of Saudi intelligence and ambassador to Britain and the US, who often voices opinions Prince Mohammed does not want to do so publicly, went into voluntary exile last year on the eve of the crown prince’s power and asset grab under the mum of an anti-corrup0tion campaign.

One irony of Ms. May’s approach in her talks with Prince Mohammed is the fact that the kingdom is an exemplary case study of the price that democracies have paid for their toothless objections to a long-standing Saudi worldview that was intolerant, supremacist, and anti-pluralistic.

To be sure, Prince Mohammed has begun to shave off the rough edges of that worldview with his social and economic reforms but has yet to convey his willingness to achieve a clean break.

Holders of tickets for a concert in Jeddah by Egyptian pop sensation Tamer Hosny were recently surprised to receive vouchers that warned that “no dancing or swaying” would be allowed at the event. "No dancing or swaying in a concert! It's like putting ice under the sun and asking it not to melt,” quipped a critic on Twitter.

If anything, Prince Mohammed’s reforms have been underwritten by repression of any form of dissent.

Anti-death penalty group Reprieve reported that Saudi Arabia's execution rate had doubled since Prince Mohammed was appointed crown prince eight months ago. It said 133 people had been executed since June 2017 compared to 67 in the preceding eight months.

Equally fundamentally, the world is still reeling from at times short-sighted, opportunistic Western support for the export of Saudi-inspired Sunni Muslim ultra-conservatism and at others a willingness to ignore its impact on Muslim communities across the globe.
The same can be said for support of secular autocracies like the regime of Egyptian general-turned-president Abdel Fattah Al Sisi, whose repression, brutality and failure to deliver public goods and services offer extremism a fertile breeding ground.

It is also true for states like Baathist Syria and Iraq that fell into the Soviet orbit during the Cold War, with Iraq. after the demise of the Soviet Union, enjoying US support during its war against Iran in the 1980s.

Geo-strategist Robert D. Kaplan, writing in Foreign Policy, argued that Syria and Iraq had descended into the Middle East and North Africa’s worst mayhems that have caused enormous human suffering and cost the international community significantly in political, diplomatic, and security terms because they were artificial, colonial-era geographic constructs. They lacked the civilizational history, centuries of some kind of statehood, and deep-seated identities that have helped keep Egypt or Tunisia territorially intact.

In South Asia, the United States went during the era of conservative Pakistani president Zia ul-Haq and the US and Saudi-backed war against the Soviets in the 1980s waged by Afghan mujahedeen as far as to distribute schoolbooks that propagated Saudi-inspired jihad and precepts of ultra-conservatism. In doing so it played havoc with Pakistan, a country that since its birth has struggled with its identity.

Western democracies ignored the fact that Saudi Arabia invested heavily over decades to push its austere worldview as an anti-dote to post-1979 Iranian revolutionary zeal. While not the only factor, the Saudi campaign created an environment in Pakistan and elsewhere in which militant Islam flourished, societies became ever more conservative and intolerant, and political violence increased.

Western democracies as well as others, including the kingdom, are paying a high price in terms of people’s lives and vastly expanded security to counter extremism and political violence.

Its an open debate whether policies that had been built on democratic values rather than support for autocracy and intolerant worldviews could have achieved similar geopolitical victories such as the defeat of the Soviets in Afghanistan at a lower cost and a reduced threat to those values.

What is certain, however, is the fact that the fallout of the failure to stand up for democratic values comes at an ever-steeper cost and uncertainty of how the pendulum will swing.

The unanswered question is whether in terms of cost-benefit analysis short-term hits resulting from adopting a principled stand may ultimately be a more reasonable cost and produce greater long-term benefit than the price of dealing with the fallout of policies that effectively ignore democratic principles and ultimately are likely to produce ever greater threats.

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and co-host of the New Books in Middle Eastern Studies podcast. James is the author of The Turbulent World of Middle East Soccer blog, a book with the same title as well as Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africa, and the forthcoming China and the Middle East: Venturing into the Maelstrom

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