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Trump vows to renew all-out economic war on Iran

Keith Jones

US President Donald Trump has publicly vowed to relaunch all-out economic warfare against Iran by no later than mid-May, unless the European powers join Washington in unilaterally rewriting the civil nuclear agreement between Tehran and the world’s great powers.
Trump’s incendiary pledge was the centerpiece of a bellicose anti-Iran statement issued on 12 January 2018.In it, the US president announced he was waiving, for a further four months, sanctions targeting Iran’s oil exports and freezing it out of the world banking system. Washington suspended these measures as part of the nuclear deal or Joint Comprehensive Plan of Action (JCPOA).
However, Trump insisted he will issue no further waivers unless the agreement is rewritten in accordance with his demands and coupled this with an ultimatum to America’s ostensible European allies—Germany, France, and Britain.
“Today,” said Trump, “I am waiving the application of certain nuclear sanctions, but only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal. This is a last chance. In the absence of such an agreement, the United States will not again waive sanctions in order to stay in the Iran nuclear deal.”
He went on to warn the Europeans that if they did not quickly fall into line, he could blow up the JCPOA even before the next waiver deadline of May 12. Trump declared, “If at any time I judge” that a US-European agreement “to fix” the Iran nuclear deal “is not within reach, I will withdraw from the deal immediately.”
US repudiation of the JCPOA would set Washington on a fast-track for war with Iran—a country the Trump administration’s recent National Security Strategy placed on par with North Korea as a threat to US “national interests” that needs to be countered and vanquished.

Iran will assert its full sovereign rights
Tehran has repeatedly said it will not be the first to break the terms of the deal it reached in 2015 with the five permanent members of the UN Security Council and Germany to dismantle much of its civil nuclear program in exchange for the lifting of punishing US and European Union economic sanctions. But it has warned that if the US abrogates the agreement and resumes its drive to destroy Iran economically, it will assert its full sovereign rights as it sees fit.
As it is, other more limited US sanctions and Washington’s repeated threats to scuttle the nuclear deal and roll back Iranian influence in the Middle East continue to roil the Iranian economy, with European businesses, in particular, wary of committing to substantial investments.
Iranian Foreign Minister Javad Zarif called Trump’s statement a “desperate” attempt “to undermine a solid multilateral agreement.”
European leaders avoided any immediate substantive comment, with Germany merely saying that it supports full implementation of the JCPOA and will consult Europe’s other major powers on a “common way forward.”
On Thursday, the German, French and British foreign ministers and EU foreign policy chief Federica Mogherini had all reiterated their support for the Iran deal at the conclusion of a meeting with Zarif.
In opposition to the Trump administration, the Europeans have insisted that differences with Tehran over non-nuclear issues, such as Iran’s role in Syria or its ballistic missile programme, should not be tied to the JCPOA. They have further warned that Washington’s repudiation of the Iran deal would not only dangerously destabilize the Middle East. It would also send an incontrovertible signal to North Korea that there is no point in negotiating with Washington since it refuses to abide by international agreements.
In his statement, Trump demanded that the Europeans sign on to changes to the nuclear agreement that Iran would and could never accept. These include: allowing International Atomic Energy Agency inspectors immediate and unlimited access to any site, including military installations, anywhere in the country; eliminating the “sunset clauses” in the JCPOA so as make the time-limited restraints on parts of Iran’s civil nuclear program permanent; and severely limiting, if not outlawing, Iran’s ballistic missile program.
According to Trump officials, Washington has no plans for talks with Iran or for that matter with the non-European signatories to the Iran nuclear accord, Russia and China. Rather Washington intends to “negotiate” with the Europeans about endorsing Trump’s demands, with a view to a subsequent joint US-EU ultimatum to Tehran to accept them or face the re-imposition of economic sanctions.

Ultimatum would be illegal
Such an ultimatum would be illegal under the JCPOA and tantamount to an act of war. Trump is also insisting that the US Congress pass legislation that would enshrine his key demands for unilaterally rewriting the JCPOA into American law. It would outline “triggers,” including in respect to the development of Iran’s ballistic missile program, that would cause the US economic sanctions suspended under the JCPOA to immediately “snap back” into force.
Trump’s statement was provocative and belligerent from beginning to end. It denounced Iran as the “world’s leading state sponsor of terror” and, in a revealing admission boasted that the US is “countering Iranian proxy wars in Yemen and Syria.”
Predictably, the billionaire, despot and Islamophobe repeated his obscene claims to be a champion of the Iranian people and their rights, even as he set the US on course for a military confrontation with Iran.
His statement was accompanied by the announcement of sanctions against 14 individuals and entities, including the Islamic Revolutionary Guard Corp’s cyber division. Sanctions were also imposed on the administrative head of Iran’s judiciary, Sadeq Larijani, supposedly in retaliation for the Iranian regime’s repression of the recent protests by impoverished workers and youth against rising prices, mass joblessness, government austerity, and rampant social inequality.
Trump also vowed yesterday that he will continue to refuse to certify that Iran is in compliance with the JCPOA, although the IAEA has repeatedly reported that Teheran is in full compliance and even top Trump officials have conceded Iran is implementing it to the letter.
According to press reports, National Security Adviser H.R. McMaster, Defense Secretary James Mattis, and Secretary of State Rex Tillerson had to bring considerable pressure to bear on Trump to persuade him not to blow up the Iran accord this week by refusing to sign the four-month sanction waiver.
There is strong support in both the Republican and Democratic Party leaderships for a more aggressive stance against Iran, beginning in Syria, where Tehran’s support for Assad played a major role in the failure of US efforts to use al-Qaeda aligned Islamist forces to install a pro-US regime. But there are grave concerns within the US military-security and political establishments about Trump’s haste to tear up the Iran nuclear accord and provoke an all-out confrontation with Iran.
These concerns are entirely of a tactical character, revolving around how best to achieve US global hegemony. Leading strategists for US imperialism argue Iran needs to be “contained,” through a combination of military, economic and diplomatic pressure, while the US concentrates on countering more formidable rivals, Russia and China. And there are deep concerns Trump’s push for a confrontation with Iran will intensify the growing strategic rift with Europe.

Unilateral US withdrawal from tIran nuclear accord
The  ultimatum to Europe over Iran, which Trump’s advisors prevailed on him to issue in preference to a unilateral US withdrawal from the Iran nuclear accord, only underlines the divergence between NATO’s principal member states.
Apparently Trump, or at least those egging him on to scuttle the Iran deal, are calculating that the Europeans will ultimately ally with the US against Iran for fear that they could themselves become targets if the US again seeks to use its domination of the world financial system to block trade with Iran.
The Europeans, for their part, have their own imperialist designs in the Middle East and beyond. With Germany in the lead, they are pursuing rearmament and seeking to develop EU military forces that can act independently of, and if need be, in opposition to America.
Since sanctions were lifted on Iran, European companies have announced billions in new investments, even if, as of yet, many of these haven’t been fulfilled due to fears of a renewal of US sanctions.
More broadly, the EU fears the incendiary consequences of a US-Iran war, which would quickly embroil the entire Mideast. Europe is both far more dependent on Mideast oil than the US and far more susceptible to the political and demographic shocks such a war would engender.
While hostile to the growth of Iranian influence in parts of the Middle East such as Syria and Iraq, the European imperialist powers are alarmed by Washington’s readiness to inflame sectarian tensions whether by promoting a Saudi-led anti-Iran Sunni alliance or recognizing Jerusalem as Israel’s capital.
Stefan Kornelius, foreign editor of German daily Süddeutsche Zeitung, pointed to the strategic divergence between the US and the major EU powers when he wrote Friday, “Iran is pursuing an expansive foreign policy course. Europe must find a different answer to that than the United States, which is causing damage with its clear siding with the Gulf monarchies.”
— WSWS

Comment

Keith Jones

US President Donald Trump has publicly vowed to relaunch all-out economic warfare against Iran by no later than mid-May, unless the European powers join Washington in unilaterally rewriting the civil nuclear agreement between Tehran and the world’s great powers.
Trump’s incendiary pledge was the centerpiece of a bellicose anti-Iran statement issued on 12 January 2018.In it, the US president announced he was waiving, for a further four months, sanctions targeting Iran’s oil exports and freezing it out of the world banking system. Washington suspended these measures as part of the nuclear deal or Joint Comprehensive Plan of Action (JCPOA).
However, Trump insisted he will issue no further waivers unless the agreement is rewritten in accordance with his demands and coupled this with an ultimatum to America’s ostensible European allies—Germany, France, and Britain.
“Today,” said Trump, “I am waiving the application of certain nuclear sanctions, but only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal. This is a last chance. In the absence of such an agreement, the United States will not again waive sanctions in order to stay in the Iran nuclear deal.”
He went on to warn the Europeans that if they did not quickly fall into line, he could blow up the JCPOA even before the next waiver deadline of May 12. Trump declared, “If at any time I judge” that a US-European agreement “to fix” the Iran nuclear deal “is not within reach, I will withdraw from the deal immediately.”
US repudiation of the JCPOA would set Washington on a fast-track for war with Iran—a country the Trump administration’s recent National Security Strategy placed on par with North Korea as a threat to US “national interests” that needs to be countered and vanquished.

Iran will assert its full sovereign rights
Tehran has repeatedly said it will not be the first to break the terms of the deal it reached in 2015 with the five permanent members of the UN Security Council and Germany to dismantle much of its civil nuclear program in exchange for the lifting of punishing US and European Union economic sanctions. But it has warned that if the US abrogates the agreement and resumes its drive to destroy Iran economically, it will assert its full sovereign rights as it sees fit.
As it is, other more limited US sanctions and Washington’s repeated threats to scuttle the nuclear deal and roll back Iranian influence in the Middle East continue to roil the Iranian economy, with European businesses, in particular, wary of committing to substantial investments.
Iranian Foreign Minister Javad Zarif called Trump’s statement a “desperate” attempt “to undermine a solid multilateral agreement.”
European leaders avoided any immediate substantive comment, with Germany merely saying that it supports full implementation of the JCPOA and will consult Europe’s other major powers on a “common way forward.”
On Thursday, the German, French and British foreign ministers and EU foreign policy chief Federica Mogherini had all reiterated their support for the Iran deal at the conclusion of a meeting with Zarif.
In opposition to the Trump administration, the Europeans have insisted that differences with Tehran over non-nuclear issues, such as Iran’s role in Syria or its ballistic missile programme, should not be tied to the JCPOA. They have further warned that Washington’s repudiation of the Iran deal would not only dangerously destabilize the Middle East. It would also send an incontrovertible signal to North Korea that there is no point in negotiating with Washington since it refuses to abide by international agreements.
In his statement, Trump demanded that the Europeans sign on to changes to the nuclear agreement that Iran would and could never accept. These include: allowing International Atomic Energy Agency inspectors immediate and unlimited access to any site, including military installations, anywhere in the country; eliminating the “sunset clauses” in the JCPOA so as make the time-limited restraints on parts of Iran’s civil nuclear program permanent; and severely limiting, if not outlawing, Iran’s ballistic missile program.
According to Trump officials, Washington has no plans for talks with Iran or for that matter with the non-European signatories to the Iran nuclear accord, Russia and China. Rather Washington intends to “negotiate” with the Europeans about endorsing Trump’s demands, with a view to a subsequent joint US-EU ultimatum to Tehran to accept them or face the re-imposition of economic sanctions.

Ultimatum would be illegal
Such an ultimatum would be illegal under the JCPOA and tantamount to an act of war. Trump is also insisting that the US Congress pass legislation that would enshrine his key demands for unilaterally rewriting the JCPOA into American law. It would outline “triggers,” including in respect to the development of Iran’s ballistic missile program, that would cause the US economic sanctions suspended under the JCPOA to immediately “snap back” into force.
Trump’s statement was provocative and belligerent from beginning to end. It denounced Iran as the “world’s leading state sponsor of terror” and, in a revealing admission boasted that the US is “countering Iranian proxy wars in Yemen and Syria.”
Predictably, the billionaire, despot and Islamophobe repeated his obscene claims to be a champion of the Iranian people and their rights, even as he set the US on course for a military confrontation with Iran.
His statement was accompanied by the announcement of sanctions against 14 individuals and entities, including the Islamic Revolutionary Guard Corp’s cyber division. Sanctions were also imposed on the administrative head of Iran’s judiciary, Sadeq Larijani, supposedly in retaliation for the Iranian regime’s repression of the recent protests by impoverished workers and youth against rising prices, mass joblessness, government austerity, and rampant social inequality.
Trump also vowed yesterday that he will continue to refuse to certify that Iran is in compliance with the JCPOA, although the IAEA has repeatedly reported that Teheran is in full compliance and even top Trump officials have conceded Iran is implementing it to the letter.
According to press reports, National Security Adviser H.R. McMaster, Defense Secretary James Mattis, and Secretary of State Rex Tillerson had to bring considerable pressure to bear on Trump to persuade him not to blow up the Iran accord this week by refusing to sign the four-month sanction waiver.
There is strong support in both the Republican and Democratic Party leaderships for a more aggressive stance against Iran, beginning in Syria, where Tehran’s support for Assad played a major role in the failure of US efforts to use al-Qaeda aligned Islamist forces to install a pro-US regime. But there are grave concerns within the US military-security and political establishments about Trump’s haste to tear up the Iran nuclear accord and provoke an all-out confrontation with Iran.
These concerns are entirely of a tactical character, revolving around how best to achieve US global hegemony. Leading strategists for US imperialism argue Iran needs to be “contained,” through a combination of military, economic and diplomatic pressure, while the US concentrates on countering more formidable rivals, Russia and China. And there are deep concerns Trump’s push for a confrontation with Iran will intensify the growing strategic rift with Europe.

Unilateral US withdrawal from tIran nuclear accord
The  ultimatum to Europe over Iran, which Trump’s advisors prevailed on him to issue in preference to a unilateral US withdrawal from the Iran nuclear accord, only underlines the divergence between NATO’s principal member states.
Apparently Trump, or at least those egging him on to scuttle the Iran deal, are calculating that the Europeans will ultimately ally with the US against Iran for fear that they could themselves become targets if the US again seeks to use its domination of the world financial system to block trade with Iran.
The Europeans, for their part, have their own imperialist designs in the Middle East and beyond. With Germany in the lead, they are pursuing rearmament and seeking to develop EU military forces that can act independently of, and if need be, in opposition to America.
Since sanctions were lifted on Iran, European companies have announced billions in new investments, even if, as of yet, many of these haven’t been fulfilled due to fears of a renewal of US sanctions.
More broadly, the EU fears the incendiary consequences of a US-Iran war, which would quickly embroil the entire Mideast. Europe is both far more dependent on Mideast oil than the US and far more susceptible to the political and demographic shocks such a war would engender.
While hostile to the growth of Iranian influence in parts of the Middle East such as Syria and Iraq, the European imperialist powers are alarmed by Washington’s readiness to inflame sectarian tensions whether by promoting a Saudi-led anti-Iran Sunni alliance or recognizing Jerusalem as Israel’s capital.
Stefan Kornelius, foreign editor of German daily Süddeutsche Zeitung, pointed to the strategic divergence between the US and the major EU powers when he wrote Friday, “Iran is pursuing an expansive foreign policy course. Europe must find a different answer to that than the United States, which is causing damage with its clear siding with the Gulf monarchies.”
— WSWS


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Sri Lanka: Reconciliation process suspended for now

Jehan Perera in Colombo

THE outcome of the forthcoming local government elections will be significant as they come at the mid-point of the national election cycle. There will be 30 political parties contesting the forthcoming local government elections. But it is the contest between three of them that is riveting. The question is who will do the best and who will do the worst out of the UNP, SLFP and SLPP. The last presidential and general elections were held in 2015 and the next are scheduled for 2020. The SLPP, which has become the vehicle for the Joint Opposition led by the former President, has been stating that voters should simply consider whether they are pro-government or anti-government when casting their votes. A poor performance by the two parties forming the government alliance would therefore be construed by the Joint Opposition as a rejection of the government and its policies on all major issues, not simply ones pertaining to local government.
Among the key issues at stake at the local government elections will be the government’s reconciliation process which has two primary components—constitutional reform which will ensure improved sharing of power between the ethnic majority and minorities, and transitional justice which will ensure accountability for past rights violations in the context of the country’s three decade long war for separation. Although the reconciliation process is broader than these two components, and includes improvements in the day to day life of people, including economic wellbeing and return of land, constitutional reform and transitional justice are reconciliation components that have evoked considerable political controversy. A poor performance by the parties of the government alliance would be construed as a rejection of the measures in this regard taken so far by the government, in addition to a whole slew of other matters.

Cautious approach
In recognition of the politically sensitive nature of the constitutional reform and transitional justice processes, and to their vulnerability to being exploited by nationalists, the government has put both of these issues on the backburner from the time that local government elections were declared. The last that was heard of constitutional reform was during the parliamentary debate on the report of the constitutional steering committee in October last year. The Office of Missing Persons which is at the centre of the current transitional justice initiatives has been in a state of limbo since its gazetting by the president in September of last year. Its commissioners have still to be appointed.
The halt to the reconciliation initiatives in the run up to elections is not surprising. The parties that comprise the government alliance are acutely sensitive to the fact that controversy on the subject of ethnicity and religion could spark of a polarizing debate to their detriment. As a result of not taking these reconciliation issues up, the election campaign does not have them as a main feature.
However, the fact that the official reconciliation process is on the backburner does not mean it is not being considered as important by the government. Speaking to a Youth Parliament last week, Prime Minister Ranil Wickremesinghe said that the government would decide on its course of action with regard to constitutional reform after the local government elections. He said they would be making an effort to reduce the gaps between various proposals put forward by different groups and said “We will be looking towards devolving more powers to the provincial councils while bringing laws to prevent the division of the country.” This was an implicit acknowledgement that the divisive potential of the draft constitutional proposals which generated massive opposition from powerful sections of the polity, especially religious clergy, made it injudicious to bring it to the fore at this time.

Ongoing reconciliation
Secretary General of the Secretariat for Coordinating Reconciliation Mechanisms, Mano Tittawella, who functions under the Prime Minister’s Office, addressing the meeting of District Reconciliation Committees consisting of religious clergy, government officials, police and civil society members, gave a hopeful view of the post-election scenario. He said that apart from the Office of Missing Persons which has been established in law, two more of the reconciliation mechanisms promised by the government, the Office of Reparations and Truth Seeking Commission, would be presented to parliament and to the general public in the aftermath of the elections. He added that the draft laws on outlawing Enforced Disappearances and a replacement to the Prevention of Terrorism Act would be enacted in the coming months.
The optimistic scenarios presented above will be possible if the parties of the government alliance do well at the forthcoming elections. If the SLPP, which has been hostile to the reconciliation process as dividing the country and sacrificing it to foreign forces, outperforms the ruling parties and is able to capture a majority of local government authorities, the government’s ability to move forward on controversial issues will be crippled. This will make it especially difficult for the government to move forward on the reconciliation process which the Joint Opposition has described as paving the way to the division of the country while punishing the gallant soldiers who won the war. The government’s cautious strategy of putting off issues of constitutional reform and transitional justice until after the local government elections will hopefully only be a temporary phenomenon.

Comment

Jehan Perera in Colombo

THE outcome of the forthcoming local government elections will be significant as they come at the mid-point of the national election cycle. There will be 30 political parties contesting the forthcoming local government elections. But it is the contest between three of them that is riveting. The question is who will do the best and who will do the worst out of the UNP, SLFP and SLPP. The last presidential and general elections were held in 2015 and the next are scheduled for 2020. The SLPP, which has become the vehicle for the Joint Opposition led by the former President, has been stating that voters should simply consider whether they are pro-government or anti-government when casting their votes. A poor performance by the two parties forming the government alliance would therefore be construed by the Joint Opposition as a rejection of the government and its policies on all major issues, not simply ones pertaining to local government.
Among the key issues at stake at the local government elections will be the government’s reconciliation process which has two primary components—constitutional reform which will ensure improved sharing of power between the ethnic majority and minorities, and transitional justice which will ensure accountability for past rights violations in the context of the country’s three decade long war for separation. Although the reconciliation process is broader than these two components, and includes improvements in the day to day life of people, including economic wellbeing and return of land, constitutional reform and transitional justice are reconciliation components that have evoked considerable political controversy. A poor performance by the parties of the government alliance would be construed as a rejection of the measures in this regard taken so far by the government, in addition to a whole slew of other matters.

Cautious approach
In recognition of the politically sensitive nature of the constitutional reform and transitional justice processes, and to their vulnerability to being exploited by nationalists, the government has put both of these issues on the backburner from the time that local government elections were declared. The last that was heard of constitutional reform was during the parliamentary debate on the report of the constitutional steering committee in October last year. The Office of Missing Persons which is at the centre of the current transitional justice initiatives has been in a state of limbo since its gazetting by the president in September of last year. Its commissioners have still to be appointed.
The halt to the reconciliation initiatives in the run up to elections is not surprising. The parties that comprise the government alliance are acutely sensitive to the fact that controversy on the subject of ethnicity and religion could spark of a polarizing debate to their detriment. As a result of not taking these reconciliation issues up, the election campaign does not have them as a main feature.
However, the fact that the official reconciliation process is on the backburner does not mean it is not being considered as important by the government. Speaking to a Youth Parliament last week, Prime Minister Ranil Wickremesinghe said that the government would decide on its course of action with regard to constitutional reform after the local government elections. He said they would be making an effort to reduce the gaps between various proposals put forward by different groups and said “We will be looking towards devolving more powers to the provincial councils while bringing laws to prevent the division of the country.” This was an implicit acknowledgement that the divisive potential of the draft constitutional proposals which generated massive opposition from powerful sections of the polity, especially religious clergy, made it injudicious to bring it to the fore at this time.

Ongoing reconciliation
Secretary General of the Secretariat for Coordinating Reconciliation Mechanisms, Mano Tittawella, who functions under the Prime Minister’s Office, addressing the meeting of District Reconciliation Committees consisting of religious clergy, government officials, police and civil society members, gave a hopeful view of the post-election scenario. He said that apart from the Office of Missing Persons which has been established in law, two more of the reconciliation mechanisms promised by the government, the Office of Reparations and Truth Seeking Commission, would be presented to parliament and to the general public in the aftermath of the elections. He added that the draft laws on outlawing Enforced Disappearances and a replacement to the Prevention of Terrorism Act would be enacted in the coming months.
The optimistic scenarios presented above will be possible if the parties of the government alliance do well at the forthcoming elections. If the SLPP, which has been hostile to the reconciliation process as dividing the country and sacrificing it to foreign forces, outperforms the ruling parties and is able to capture a majority of local government authorities, the government’s ability to move forward on controversial issues will be crippled. This will make it especially difficult for the government to move forward on the reconciliation process which the Joint Opposition has described as paving the way to the division of the country while punishing the gallant soldiers who won the war. The government’s cautious strategy of putting off issues of constitutional reform and transitional justice until after the local government elections will hopefully only be a temporary phenomenon.


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Why businessman Trump is upset with Pakistan

M.K. Bhadrakumar

THE Indian media have ignored the momentous announcement by Pakistan’s central bank on January 2 notifying that it has taken “comprehensive policy related measures to ensure that imports, exports and financing transactions can be denominated in CNY (Chinese Yuan).” Probably they got bogged down with Kulbhushan Jadhav’s video and President Trump’s invectives against Pakistan – or, simply failed to grasp the profound implications of the announcement in Islamabad for regional and global politics. This needs some explaining.
First, the details of the Pakistani central bank notification of January 2 titled “Use of Chinese Yuan for denominating foreign currency transactions in Pakistan.” The following excerpts of the notification are relevant:

Promoting use of CNY in Pakistan
“Both public and private sector enterprises (i.e. both Pakistanis and Chinese) are free to choose CNY for bilateral Trade and Investment activities… SBP (central bank) has already put in place the required regulatory framework, which facilitates use of CNY in trade and investment transactions such as opening of L/Cs and availing financing facilities in CNY… SBP had taken a series of steps to promote use of CNY in Pakistan for bilateral trade and investment with China. SBP allowed banks to accept CNY deposits and give CNY Trade loans… SBP has put in place the loan mechanism for banks to get the CNY financing from SBP for onward lending to importers and exporters having underlying trade transactions denominated in CNY… Industrial and Commercial Bank of China Limited Pakistan has been allowed to establish a local CNY settlement and clearing setup in Pakistan… With the opening of Bank of China in Pakistan, the access to onshore Chinese markets will strengthen further. Apart from the above, several banks in Pakistan maintain onshore CNY nostro accounts.”
“Considering the recent local and global economic developments, particularly with the growing size of trade and investment with China under CPEC, SBP foresees that CNY denominated trade with China will increase significantly, going forward; and will yield long term benefits for both the countries.”
The big question is how far this joint Pakistani-Chinese move to dump dollar – alongside their announcement on December 26 in Beijing to extend the CPEC to Afghanistan and Central Asia – explains Trump’s New Year Day outburst on tweeter and the incipient signs of an aggressive policy by the Trump administration towards Pakistan (as is borne out by an exclusive interview by NSA HR McMaster to the Voice of America on January 3).

Threat to dollar’s status
To my mind, it explains a great deal, as much if not more than the so-called counterterrorist operations in Afghanistan. It is useful to remember that Trump is quintessentially a businessman. He understands perfectly well the gathering storms on the horizon that threaten the dollar’s status as the world currency. What seemed “a cloud, a small one, about the size of a man’s hand… coming up out of the sea” – as Elijah said in the Old Testament – cannot be taken lightly any longer.
And the threat is spearheaded by countries such as China, Russia and Iran principally – “revisionist powers”. Put differently, the preservation of the dollar’s global reserve currency status is vital to the US economy as otherwise there will be and explosion of further debt and this is turning into an existential struggle for the superpower.
No doubt, the key here is China. Are the policymakers in Beijing aware of what is at stake? You bet, they are. And they are planning accordingly — there’s no gunboat diplomacy, but instead through financial tools. Do not think that the move to extend CPEC is an impetuous, vainglorious decision. An entire swathe of Middle Asia may cut loose and drift away from the use of dollar in their transactions. Convince yourself about the high stakes by reading a stunning speech, here, by the PLA’s key strategic thinker Major-General Qiao Liang at a forum of the Chinese Communist Party’s Central Committee and government office two years ago.
Succinctly put, Washington is highly sensitive to the ‘harmonious ascent’ of the Chinese Yuan. China dominates world trade and is putting itself in a position to revert to the old system of tying oil and commodities to gold (as it existed before 1971 when the US thrust the dollar to replace gold.) China is increasingly shedding its shyness to promote Yuan as its own preferred settlement medium, as highlighted by the Pakistani notification. Interestingly, only last week the Chinese central bank governor met the Saudi finance minister and amongst other things discussed the date by which Saudi Arabia will dump dollar and switch to yuan as payment for oil sales to China. (No surprises here — read a CNBC report titled China will ‘compel’ Saudi Arabia to trade oil in yuan — and that’s going to affect the dollar.

Breakdown in US’ purchasing power
The countdown has begun. If dollar begins losing ground as indispensable to global trade, it will lead to a complete breakdown in the US’ purchasing power and the consequent surge of the underlying monetary inflation in the US economy for decades (that has been lying suppressed) will make the budget deficit no longer manageable and such heavy military spending no longer sustainable – leave alone Trump’s ‘America First’.
Pakistan is a big country – and potentially a big economy, especially as CPEC gives buoyancy to it.  It is a very bad sign for the US that Pakistan is heading toward the exit door leading out of dollar as a fiat currency for its transactions. Trump feels really annoyed.
M.K. Bhadrakumar has served as a career diplomat in the Indian Foreign Service for over 29 years.
Courtesy: South Asia Monitor

Comment

M.K. Bhadrakumar

THE Indian media have ignored the momentous announcement by Pakistan’s central bank on January 2 notifying that it has taken “comprehensive policy related measures to ensure that imports, exports and financing transactions can be denominated in CNY (Chinese Yuan).” Probably they got bogged down with Kulbhushan Jadhav’s video and President Trump’s invectives against Pakistan – or, simply failed to grasp the profound implications of the announcement in Islamabad for regional and global politics. This needs some explaining.
First, the details of the Pakistani central bank notification of January 2 titled “Use of Chinese Yuan for denominating foreign currency transactions in Pakistan.” The following excerpts of the notification are relevant:

Promoting use of CNY in Pakistan
“Both public and private sector enterprises (i.e. both Pakistanis and Chinese) are free to choose CNY for bilateral Trade and Investment activities… SBP (central bank) has already put in place the required regulatory framework, which facilitates use of CNY in trade and investment transactions such as opening of L/Cs and availing financing facilities in CNY… SBP had taken a series of steps to promote use of CNY in Pakistan for bilateral trade and investment with China. SBP allowed banks to accept CNY deposits and give CNY Trade loans… SBP has put in place the loan mechanism for banks to get the CNY financing from SBP for onward lending to importers and exporters having underlying trade transactions denominated in CNY… Industrial and Commercial Bank of China Limited Pakistan has been allowed to establish a local CNY settlement and clearing setup in Pakistan… With the opening of Bank of China in Pakistan, the access to onshore Chinese markets will strengthen further. Apart from the above, several banks in Pakistan maintain onshore CNY nostro accounts.”
“Considering the recent local and global economic developments, particularly with the growing size of trade and investment with China under CPEC, SBP foresees that CNY denominated trade with China will increase significantly, going forward; and will yield long term benefits for both the countries.”
The big question is how far this joint Pakistani-Chinese move to dump dollar – alongside their announcement on December 26 in Beijing to extend the CPEC to Afghanistan and Central Asia – explains Trump’s New Year Day outburst on tweeter and the incipient signs of an aggressive policy by the Trump administration towards Pakistan (as is borne out by an exclusive interview by NSA HR McMaster to the Voice of America on January 3).

Threat to dollar’s status
To my mind, it explains a great deal, as much if not more than the so-called counterterrorist operations in Afghanistan. It is useful to remember that Trump is quintessentially a businessman. He understands perfectly well the gathering storms on the horizon that threaten the dollar’s status as the world currency. What seemed “a cloud, a small one, about the size of a man’s hand… coming up out of the sea” – as Elijah said in the Old Testament – cannot be taken lightly any longer.
And the threat is spearheaded by countries such as China, Russia and Iran principally – “revisionist powers”. Put differently, the preservation of the dollar’s global reserve currency status is vital to the US economy as otherwise there will be and explosion of further debt and this is turning into an existential struggle for the superpower.
No doubt, the key here is China. Are the policymakers in Beijing aware of what is at stake? You bet, they are. And they are planning accordingly — there’s no gunboat diplomacy, but instead through financial tools. Do not think that the move to extend CPEC is an impetuous, vainglorious decision. An entire swathe of Middle Asia may cut loose and drift away from the use of dollar in their transactions. Convince yourself about the high stakes by reading a stunning speech, here, by the PLA’s key strategic thinker Major-General Qiao Liang at a forum of the Chinese Communist Party’s Central Committee and government office two years ago.
Succinctly put, Washington is highly sensitive to the ‘harmonious ascent’ of the Chinese Yuan. China dominates world trade and is putting itself in a position to revert to the old system of tying oil and commodities to gold (as it existed before 1971 when the US thrust the dollar to replace gold.) China is increasingly shedding its shyness to promote Yuan as its own preferred settlement medium, as highlighted by the Pakistani notification. Interestingly, only last week the Chinese central bank governor met the Saudi finance minister and amongst other things discussed the date by which Saudi Arabia will dump dollar and switch to yuan as payment for oil sales to China. (No surprises here — read a CNBC report titled China will ‘compel’ Saudi Arabia to trade oil in yuan — and that’s going to affect the dollar.

Breakdown in US’ purchasing power
The countdown has begun. If dollar begins losing ground as indispensable to global trade, it will lead to a complete breakdown in the US’ purchasing power and the consequent surge of the underlying monetary inflation in the US economy for decades (that has been lying suppressed) will make the budget deficit no longer manageable and such heavy military spending no longer sustainable – leave alone Trump’s ‘America First’.
Pakistan is a big country – and potentially a big economy, especially as CPEC gives buoyancy to it.  It is a very bad sign for the US that Pakistan is heading toward the exit door leading out of dollar as a fiat currency for its transactions. Trump feels really annoyed.
M.K. Bhadrakumar has served as a career diplomat in the Indian Foreign Service for over 29 years.
Courtesy: South Asia Monitor


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