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November 18, 2016

News You’re Not Getting Elsewhere 18 Nov 16

Filed under: Political Commentary — justplainbill @ 4:18 pm

Storm-tossed: Haiti
Elections in the poorest country in the Americas are invariably fraught. And in the aftermath of last month’s Hurricane Matthew, the presidential vote on Sunday promises to be as tricky as any. It is a repeat of an election held in October 2015 that was aborted after widespread protests. But with homes destroyed and food scarce, many people have priorities other than voting. This could compromise the legitimacy of the first-round poll (a run-off is scheduled for January) and provide an excuse for losing candidates to protest once again. Whoever prevails, the new president’s priority will be to lead the response to the hurricane, which has affected nearly a fifth of the population. Storm-related losses have been put at $2bn; most of the farms and fisheries in the south-west, the main sources of regional economic activity, have been destroyed; and suspected cholera cases have surged. These are not problems for a caretaker president: Haiti desperately needs stable leadership.

Yellow v red: Malaysia
Thousands of people in yellow shirts will gather in Kuala Lumpur tomorrow to protest against corruption and impunity. The government of Najib Razak, the prime minister, has yet to prosecute anyone in connection with allegations of wrongdoing at 1MDB, a state investment firm from which billions of dollars are thought to have gone missing. A court this week instead handed an 18-month jail term to an opposition lawmaker accused of leaking classified information about the affair. The rally in the capital is the fifth to be organised by Bersih, a coalition calling for electoral reform. A similar event last year passed off peacefully—despite dire warnings from authorities—but without much immediate impact on the country’s stultified politics. This year gangs of red-shirted government supporters have sought to impede a roadshow put on to promote the march, and may try to make trouble at the weekend. Either way, the protesters are already seeing red.

Final countdown: Congolese politics
Residents of Kinshasa, the capital, will be preparing for a weekend hiding indoors. Tomorrow marks one month before the end of Joseph Kabila’s second—and supposedly final—term as president, under the constitution he helped to write. Yet he seems determined to stay in power. Protesters led by Etienne Tshisekedi, an ageing populist, have promised to try to stop him. Yesterday, Mr Kabila’s prime minister was replaced by a minor opposition figure as part of a power-sharing deal that would allow the president to stay in office until 2018. The main opposition called it “a useless provocation”, refusing to accept the deal. Mr Tshisekedi’s alliance, “Le Rassemblement”, remains strong. The question is whether its supporters will be put off by a government ban on protests, and memories of September, when 50-plus protesters at an authorised rally were gunned down by police. If people don’t take to the streets, Mr Kabila will be emboldened.

A perfect excuse to cry: APEC
The Asia-Pacific Economic Co-operation meeting this weekend in Peru, with corporate and national leaders from 21 Pacific Rim countries, will be gloomy. The Trans-Pacific Partnership would have drawn 12 Pacific countries into the biggest regional free-trade pact ever. It would have prompted Japan to open some coddled industries to foreign competition and Vietnam to reform its inefficient state-owned firms, allowed America to set the economic rules for much of developing Asia and given sluggish global trade a fillip. But faced with an incoming president who dislikes free trade, the White House has given it up for dead. Bilateral agreements may partly fill the void, and the other 11 countries may crack on without America; RCEP, a smaller agreement among China, India, Japan and some South-East Asian countries, is near completion. Attendees will be wondering what the world will look like as America, having soured on globalisation, turns inward. They aren’t the only ones.

Will we always have Paris? Climate talks
The Paris Agreement, adopted at the last UN climate meeting a year ago, entered into force before delegations even arrived for this year’s get-together in early November. That ensured a cheery start to proceedings in Marrakech, which conclude this weekend. But that joy gave way to despair when Donald Trump was elected. He wants to stall American efforts to keep global warming to “well below” 2°C, as the Paris deal requires. Mitigation and adaptation efforts, an important topic at the talks, will prove even trickier to fund as a result. Greens insist Mr Trump will galvanise greater action. The latest estimates from the International Energy Agency suggest that’s needed anyway: coal use by 2040 will be more than double the level that would give humanity an odds-on shot at limiting warming to just 2°C. Demand for the stuff, not just growth in demand for the stuff, must fall. Mr Trump disagrees; markets may not.

The world in brief

Shinzo Abe, Japan’s prime minister, called Donald Trump a “leader we can trust” after their meeting in New York, Mr Trump’s first with a foreign counterpart. If that was reassuring, Mr Trump’s reported choice of national security adviser was less so: General Michael Flynn was a decorated intelligence officer but has recently stirred controversy with strident rhetoric about waging war against radical Islam.

The International Atomic Energy Agency publicly warned Iran that it had endangered international support for its nuclear deal by twice producing more than the permissible amount of heavy water, a nuclear-reactor material. The UN nuclear watchdog’s head, Yukiya Amano, denied the warning was related to the election of Donald Trump, a vocal opponent of the deal.

As part of an ever-widening corruption probe in Brazil, police arrested a former governor of Rio de Janeiro state. Sergio Cabral is alleged to have led an operation that netted more than 224m reais ($66m) in construction-related bribes. Unrest over corruption and budget cuts has spread; on Wednesday right-wing protesters stormed the lower legislative house, demanding a military coup.

After the opprobrium, the overhaul. As Volkswagen grapples with a diesel-emissions scandal, the German carmaker announced a major restructuring, including shedding up to 30,000 jobs over five years. The aim is to buff up the core VW brand, doubling its return on sales to 4%—helping to offset the €18bn ($19bn) in scandal-related costs it has incurred so far.

American federal prosecutors filed criminal charges against and arrested a former executive of Valeant, a beleaguered Canadian drug company, and the ex-boss of Philidor, a mail-order pharmacy, over suspected fraud and payment of kickbacks. Investigators have been looking into whether the two companies bilked investors by concealing an arrangement in which Philidor was used to boost Valeant’s sales.

JPMorgan Chase agreed to pay $264m to American authorities to settle criminal and civil probes into whether its hiring practices in China broke foreign-bribery laws. Investigators spent more than three years looking into suspicions that the bank had offered jobs to “princelings”—young relatives of senior Chinese officials—in return for business from state-run companies. Several other banks are also under investigation.

Amid signs of growing economic strength, Federal Reserve chair Janet Yellen said an interest-rate rise could come “relatively soon”; most pundits expect it in December. Earlier, the Bank of Japan, concerned about rising bond yields, surprised markets by offering to buy an unlimited amount of Japanese government bonds. The BoJ wants to keep ten-year yields at around 0%.

C4iSR: Air
USAF to study future command-and-control requirements
Gareth Jennings, London – IHS Jane’s Defence Weekly
17 November 2016
The US Air Force (USAF) is to shortly begin work on a study to asses its command-and-control (C2) capability requirements out to 2030 and beyond, an official said on 16 November.
Speaking under the Chatham House rule, the official said that the study would be similar in scope to the service’s air superiority study that was concluded earlier this year.
“We looked out to 2030 and beyond for our future air superiority needs, and came up with a lot of good ideas and thoughts. Command-and-control will be the next study in which we will look at what are the next capabilities that we need to expand upon. We will be looking to glean as much information [as the USAF’s future C2 requirements] as is humanly possible,” he said.
According to the official, C2 is becoming increasingly important given the need to reduce and even eliminate collateral damage in the age of social media. “Near-precision is a thing of the past,” he said, adding, “[Eliminating] collateral damage is extremely important, and it is something that we need to do even in a denied [defended] environment.”
The USAF fields a number of aircraft types that are traditionally associated with C2, including the Boeing E-3 Airborne Warning And Control System (AWACS) and E-4B, but as the official noted, the service’s latest-generation combat platforms will greatly add to the C2 mix in the coming years.
“The F-22, F-35, and B-21 are going to be hoovers of information, and will bring information dominance,” he said.

EU defence ministers call for pragmatic capability initiatives in 2017
Brooks Tigner, Brussels – IHS Jane’s Defence Weekly
16 November 2016
Aligning national defence planning among European Union countries and extending multinational command arrangements beyond air transport to medical, land, and naval logistics will be explored in early 2017, EU foreign and defence ministers announced after a joint meeting on 14 November.
Calling on the European Defence Agency (EDA) to develop proposals in these areas, they said business cases should be created to ‘replicate the success’ of the multinational European Air Transport Command (EATC) ‘in other domains’. Based in the Dutch city of Eindhoven, the command plans and tasks some 200 transport and air-to-air refuelling aircraft – 75% of Europe’s air transport capacity – on behalf of seven air forces (Belgium, France, Germany, Italy, Luxembourg, the Netherlands, and Spain).

Country Risk
Argentine, Chilean navies patrol Antarctic waters
Alejandro Sanchez, Washington, DC – IHS Jane’s Defence Weekly
17 November 2016
Argentine and Chilean sea platforms are to monitor the Antarctic from 15 November 2016 to 31 March 2017 under the Joint Antarctic Naval Patrol (Patrulla Antártica Naval Combinada: PANC) framework.
The operation includes search-and-rescue missions, monitoring maritime traffic, potential cleanup activities, and support for Antarctic bases.
Argentina will deploy Islas Malvinas (A 24), one of four Neftegaz-class ships acquired from Russia in 2014. Neftegaz-class ships are classified as Anchor Handling Vessels Tug Supply, weigh 2.7 tonnes, and can travel at 12 kt. Chile is sending Lautaro (ATF 67), a tug/supply vessel constructed in Norway in 1973 and incorporated into the Chilean Navy in 1990, which weighs 1.6 tonnes with a speed of 12 kt.

Air-Launched Weapons
USN plans extended range JSOW test
Richard Scott, London – IHS Jane’s Navy International
17 November 2016
Key Points
• NAVAIR plans a contract award to Raytheon in early 2017 for JSOW ER all-up-round test support
• Scope of work includes adding a production-representative engine/fuel/inlet system, and software modifications to optimise mid-course/endgame performance
The US Navy (USN) is finalising plans to move forward with testing of a powered, extended-range variant of Raytheon’s air-launched AGM-154C-1 Joint Standoff Weapon (JSOW).
In a pre-solicitation notice posted on 8 November, the Naval Air Systems Command (NAVAIR) said that the Precision Strike Weapons Program Office (PMA 201) intended to enter into sole-source negotiations with Raytheon Missile Systems for a JSOW Extended Range (JSOW ER) all-up-round (AUR) flight test programme.

Syria now operating ‘restored’ S-200 SAMs
Jeremy Binnie, London – IHS Jane’s Defence Weekly
17 November 2016
Syria’s longest range surface-to-air (SAM) systems have been refurbished and are now contributing to the anti-access/area-denial (A2/AD) network in the Eastern Mediterranean region, Russian defence minister Sergei Shoigu said on 15 November.
“We have repaired the Syrian S-200 [air defence] systems over the past four months. They are now effectively protecting Syrian territory, as well as providing air protection for the eastern flank of our Tartus and Humaymim bases,” he said in a joint press conference with President Vladimir Putin.
The Syrian military operates the S-200VE version of the system that has a range of 240 km. Open source satellite imagery shows it had four S-200 operational bases with a total of 10 batteries in 2014.

Air Platforms
India’s indigenous Rustom-II UAV completes maiden flight
Rahul Bedi, New Delhi – IHS Jane’s Defence Weekly
17 November 2016

India’s locally developed Rustom-II MALE UAV completed its maiden test flight near Bangalore on 16 November. Source: DRDO
India’s locally developed Rustom-II medium-altitude long-endurance unmanned aerial vehicle (MALE UAV) completed its maiden test flight at the aeronautical test range in Chitradurga, near Bangalore, on 16 November.
Official sources told IHS Jane’s that the test flight was limited to a 100 km range even though the UAV’s operational range to conduct intelligence, surveillance and reconnaissance (ISR) missions for all three of India’s services is expected to reach to 250 km.
India’s Ministry of Defence (MoD) said in a statement that the test flight achieved the main objectives of testing the platform’s capabilities such as take-off, banking, level flying, and landing.
Developed by the Aeronautical Development Establishment of India’s Defence Research and Development Organisation (DRDO) and Bharat Electronics Limited, the first prototype of the 1.8-tonne multimission UAV – known as TAPAS 201 – has a 21 m wingspan, a capacity payload of 350 kg, an endurance of over 24 hours, and an operational ceiling of 10,660 m (34,776 feet), according to the MoD.
The public sector Hindustan Aeronautics Limited is also a production partner in the programme.
The MoD said that the Rustom-II/TAPAS 201 is capable of carrying medium- and long-range optic sensors, synthetic aperture radar, electronic intelligence, communication intelligence, and situational awareness payloads for round-the-clock operations.
The UAV is powered by two Russian NPO Saturn 36T turboprop engines rated at 100 hp each. The UAV’s airframe, landing gear, digital flight control, avionic, and navigational systems have all been sourced locally from public and private sector companies.
DRDO officials said the Rustom-II/TAPAS 201 would undertake further trials to validate its design parameters before conducting user trials with the respective services.
The UAV is a derivative of the Rustom-I, which conducted its first test flight in October 2010 and was designed primarily as a test bed for more advanced variants. However, DRDO sources said that the Rustom-I is also expected to enter limited service, possibly with the Indian Navy.

Iron waffler
Germany and its chancellor are still too hesitant to be able to lead the free world
Nov 19th 2016 | From the print edition

TO VISIT Berlin is to be confronted at every turn by reminders of the evils that Germans do. Memorials to the Holocaust and other wartime atrocities dot the city. In Kreuzberg, a scruffy-but-hip neighbourhood, posters and leaflets denounce milder German iniquities, from urban gentrification to the Transatlantic Trade and Investment Partnership (TTIP), a hated trade deal between the European Union and America that the election of Donald Trump may have killed for good.
Outside Germany, though, Mr Trump’s victory has left disaffected liberals gasping for German benevolence. Brexit, the refugee crisis and the rise of drawbridge-up populists across Europe had already punctured the West’s self-confidence. Now, after an election campaign in which Mr Trump trashed immigrants, vowed to rewrite trade deals and threatened to withdraw America’s security guarantee, the West’s indispensable nation appears to have dispensed with itself. Desperate for a candidate to accept the mantle of leader of the free world, some alighted on Angela Merkel, Germany’s chancellor.
It is easy to see why. Unflappable and patient, dedicated to the freedom she had thrust upon her as a young East German physicist in 1989, Mrs Merkel is a beacon to those who fear the flickering of the liberal flame. She likes markets, trade and good governance. Her commitment to helping refugees fleeing strife in Syria contrasts with the anti-migrant turn elsewhere in Europe. Mr Trump’s victory should extinguish any speculation that Mrs Merkel will not seek a fourth term as chancellor next year in Germany’s federal election; expect an announcement soon.
Yet anyone expecting Germany to fill America’s shoes will be disappointed. Consider Mrs Merkel’s approach to crisis management, from the euro to Ukraine to refugees. Each played out differently, but Mrs Merkel’s prevarication was consistent: humming and hawing over bail-outs for indebted governments; taking Vladimir Putin at his word before realising he was a liar; reacting to the refugee surge rather than trying to prevent it. For those seeking stability, Mrs Merkel’s taste for hesitation may be a feature, not a bug, but it hardly makes for bold leadership.
Nor does German assertiveness inside Europe run smoothly. Seventy years after the second world war, protestors in Greece and Spain who resent Germany’s strict approach to fiscal stewardship still resort to Nazi tropes. The occasional attempt to form “anti-austerity” (read: anti-German) axes inside the EU elicits terror in Berlin. The world’s progressives may have loved it, but some in Berlin were uneasy at the chiding tone of Mrs Merkel’s letter of congratulation to Mr Trump, which pledged co-operation on the basis of a commitment to liberal values. “We are protected by our terrible history,” says Joschka Fischer, a former foreign minister. “You cannot say, ‘Make Germany Great Again’.”
More importantly, Pax Americana has always required American bite. Germany, with a defence budget one-fifteenth that of the United States, no nuclear deterrent and an instinct for pacifism, has neither the ability nor the aspiration to act as the world’s liberal hegemon. This is a country that went through agonies over whether to arm Iraqi Kurds battling Islamic State. Inside Europe, let alone elsewhere, only France and Britain have the ability to project power, and that suits Germans fine. Put bluntly, if Mr Putin’s tanks roll into the Baltics it will not be the Bundeswehr that takes the lead in rolling them back.
Mrs Merkel’s ambitions are altogether smaller. First among them is to hold together the fracturing EU, via a blend of prayer and policy. Germany is pinning its hopes on France, its eternal partner inside the EU, electing a sane president next year—ideally Alain Juppé, the centre-right front-runner. Franco-German comity should help EU governments find common ground on defence co-operation, the focus of their efforts over the next few months. (Mr Trump’s questionable commitment to NATO should provide another spur.) Should the politics prove propitious, Germany may one day be open to more ambitious schemes, such as greater integration of the euro zone. But grand visions of EU institutional change, let alone a German-led reshaping of the world order, are off the menu in Berlin. The priority is stopping the rot.
Meanwhile Mrs Merkel, her political capital depleted by the refugee crisis, must hold the line at home. Owing in part to the rise of the anti-immigration Alternative for Germany (AfD) party, the coalition that emerges from next year’s election will probably command a Bundestag majority far smaller than the one Mrs Merkel’s centrist grand coalition enjoys today. That will limit the chancellor’s room for manoeuvre, at home and in Europe. The political fragmentation is also disinterring old questions about Germany’s geopolitical allegiance. The Westbindung (Western integration), a staple of German foreign policy since Adenauer, is fraying as extremist parties on the left and right cosy up to Russia.
Leading from the mittel
And what about Mr Trump? For now, Germany retains a touching faith in America’s institutions to rein in the president-elect’s worst impulses. But from his vicious campaign to the chaotic management of his transition, there is every sign that Mr Trump will prove to be another of the erratic politicians, like Silvio Berlusconi and Nicolas Sarkozy, who have tested Mrs Merkel’s patience. Russia is a particular worry. If Mr Trump abandons Ukraine and allows America’s sanctions to wither, Mrs Merkel’s task of maintaining European unity will become almost impossible.
Germany’s stake in the global liberal order is immense. Its export-led economic model relies on robust international trade; its political identity is inexorably linked to a strong EU; its westward orientation assumes a friendly and engaged America. All of these things may now be in jeopardy, and Germany would suffer more than most from their demise. But do not look to Mrs Merkel to save them, for she cannot do so alone.

Consumer goods
Pot of gold
America’s cannabis industry prepares for new highs
Nov 19th 2016 | From the print edition

Flat white joint to go
IN THE 1990s Snoop Dogg, a rapper, called cannabis “chronic”. The drug was illicit and cool. In 2016 Mr Dogg is a cannabis investor, and the drug is poised to earn another title: consumer staple. On November 8th four states, including California, voted to approve recreational cannabis use. Four other states eased rules for medical marijuana. About three-fifths of America’s population lives in states that now allow cannabis use in some form.
So pot entrepreneurs face the thrilling prospect of normality. This week industry leaders were meeting in Las Vegas to discuss how the sector might expand. They have in prospect a vast, partially established market. More than 32m Americans already use cannabis. As the business becomes more normalised, it is sure to attract new customers. “It’s not often that you see an industry and you know the inevitability of it,” says Brendan Kennedy of Privateer Holdings, a private-equity firm that specialises in cannabis. Last year legal sales reached $6bn, according to the Arcview Group, an investment and market-research firm. By 2020 Arcview expects legal sales to be more than three times higher.
There remains the dispiriting fact that, on a national level, marijuana is still illegal. Federal agencies have generally respected states’ cannabis rules, but Donald Trump’s enforcers may be more aggressive. Even if they demur, the federal ban makes business difficult. Few banks are willing to lend to cannabis companies that handle the plant directly. Firms cannot operate across state lines, nor may they deduct common expenses from tax filings, which squeezes their profits.
Nevertheless, startups are spreading like weeds. Many of them serve the cannabis industry without touching the plant itself—these firms benefit from the sector’s growth while avoiding its strictest rules. For example Kush Bottles, based in California, sells product packaging that complies with idiosyncratic state requirements. Older firms are eyeing the industry as well. Scotts Miracle-Gro, a publicly traded gardening company, reckons it can serve not just ageing green thumbs but young cannabis growers, too.
Other companies deal with the plant directly, whether growing, processing or distributing it. Many early entrepreneurs have exited, unable to survive tight rules and falling cannabis prices brought about by legalisation. Bigger firms with strong management have, unsurprisingly, fared better. A company called LivWell now has 14 dispensaries across Colorado, which legalised recreational cannabis use in 2014. Its founder used to lead a firm that sold baby products to Walmart.
Cannabis firms have much in common with traditional consumer businesses. To cope with bans on interstate commerce, for example, those backed by Privateer license their brands and production methods to third parties in particular states, in much the same way that Coca-Cola depends on licensees in markets around the world. And just as big food companies grew in the 20th century by processing basic ingredients into tasty, more profitable snacks, for example, lots are processing plants into biscuits, gummy candies, tinctures and oils. “There’s not a lot of money to be made in tomatoes,” points out Arcview’s Troy Dayton, “but there’s a lot of money to be made in sauce.” In Colorado, the market share of cannabis flower, such as that typically rolled into a joint, fell from 68% in 2014 to 57% in the first nine months of this year, according to BDS Analytics, a data firm, but the processed versions of cannabis are on the rise.
Looming over the industry is the question of when tobacco companies might join the fray. Cigarette-makers certainly have the expertise to navigate complex rules for cannabis, points out Vivien Azer of Cowen, a financial-services firm. Their research on e-cigarettes could enhance vapour products for pot. If the federal government ever legalises the drug, tobacco firms would probably swoop in and snap up small, fast-growing firms. In the meantime, Colorado offers a tantalising glimpse of the future: there are now more cannabis dispensaries in the state than there are Starbucks coffee outlets.


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