Majorityrights News > Category: Economics & Finance

The coming US–China trade war will present opportunities for Australia in RCEP & FTAAP.

Posted by Kumiko Oumae on Sunday, 12 March 2017 09:29.

ASPI - The Strategist, ‘Would a US–China trade war pay dividends to Australia?’, 09 Mar 2017:

Among many other colourful characters, Donald Trump’s cabinet appointments include two protectionist and anti-China hardliners, Robert Lighthizer and Peter Navarro, who sit at the helm of US trade and industry policy. That decision confirms a belligerent change of tack in Sino­–American economic relations. But what are the implications for Australia?

A number of monetary economists, including Saul Eslake, have warned that a potential escalation to a full-blown China–US trade war poses the single biggest economic threat to Australia. That position argues that the already struggling global economy can’t face a superpower trade war, likely to be triggered by the Trump administration at the monetary level, when the RMB/USD exchange rate will reach the unprecedented level of 7 to 1 (it’s currently sitting at around 6.9). Furthermore, a falling Chinese currency combined with protectionist measures in the US will dampen the Chinese economy by way of reduced volumes of exports and higher interest rates that will spread across the Asia–Pacific. According to such reasoning, that could have negative impacts for Australia’s economy; prices for iron ore, coal and natural gas could possibly drop—we’ll know by the middle of the year.

However, it’s questionable that such crisis would be detrimental to Australia. In fact, focusing on monetary dynamics alone fails to capture the role of industrial production and regulatory arrangements in the global supply chain.

On the contrary, after triangulating the trade and industrial data of the US, China and Australia and considering the current trade regulatory framework, there are substantial reasons to argue that Australia is well placed to fill the gaps left by a wrecked US–China trade relationship at the best of its industrial capacity. Australia is indeed one of a handful of countries to have solid free trade agreements in place with both the US and China.

As it currently stands, the annual US–China trade balance is worth over US$600 billion—around the yearly value of Australia’s overall trade volumes.

Australia’s rocks and crops economy—in particular the growing productivity potential of its agricultural and mining sectors—is strong enough to rise above global monetary tensions and falling commodity prices, thanks to rising export volumes to both the US and China. It appears that the harder the two superpowers use their trade relations as leverage in their strategic competition, the harder they’ll need to look for other sources to sustain their industrial production levels and corporate supply chain.

In a trade war scenario, the possible initial hiccups in the global supply chain will likely be short-lived. In fact, let’s consider that about half of US imports are estimated to be made of intra-firm trade, and that protectionist measures from abroad tend to have insignificant effects on the production input of Chinese State-owned firms. Thus, multinational corporations are proven to be particularly adept at   quickly replacing the flows of their industrial production and distribution, as is shown by history.

In other words, in the event of a Sino–American crisis, the major trading actors in both countries will be able and willing to promptly move their business somewhere else.

Thanks to the existing spaghetti bowl of international economic partnerships, Australia is in prime position to be this “somewhere else” for both countries. In fact, Australia is the second largest economy and Sino–American trading partner of the only six countries that have in place free trade agreements with both the US and China, including South Korea, Singapore, Chile, Peru and Costa Rica.

The liquefied natural gas (LNG) trade is a significant case study for Australia in this instance. Australia is the world’s second largest LNG exporter, and is set to become the first by 2020. It exports more than $16 billion a year of LNG and by 2020 the LNG industry is expected to contribute $65 billion to the Australian economy, equating to 3.5% of its GDP. 2016 saw the start of LNG exports from the US and an unprecedented boost of Chinese imports. In a trade war scenario, the US would be locked out of China’s thriving market and thus LNG prices would rise even higher than they already have. With sharply rising production capacity, Australia needs to expand and diversify its customer base to keep the lion’s share of the global LNG market. China’s response to Trump’s trade policy is set to dampen the rise of a   strong emerging competitor of Australia’s highly lucrative LNG industry, and thus open up new commercial frontiers.

The LNG example clearly shows that Australia’s economy would benefit from a contained US–China trade crisis. Nevertheless, should that trade crisis escalate beyond the economy, Australia’s luck may run out.

The Chinese leadership doesn’t hide the fact that promoting international economic integration outside of the US control serves the purpose of carving greater geopolitical autonomy and flexibility in the global decision-making processes. Beside Trump’s trade policy, Xi Jinping’s diplomatic strategy may also speed up the end of the US­–China detente initiated by Nixon and Kissinger in the 1970s. It remains to be seen whether China will also pursue hard-line policies to push the US outside of the Asia–Pacific. In that instance, Australia would be caught between a rock and a hard place.

If the US­–China trade war were to escalate to the geopolitical level, the American order in the Asia–Pacific would enter uncharted waters. For one thing, such an unsavoury development may compel Australia to make a clear choice between trading with China and preserving America’s security patronage.

Giovanni Di Lieto lectures International Trade Law at Monash University.

One of the most interesting things about all this is that while Australia is going to be compelled to make that choice, the choice has essentially already been made through the pattern of trade relationships which Australian politicians have chosen to cultivate.

The only way that Australia would choose the United States in that scenario, would be if Australians decided that they would like to deliberately take a massive economic dive so that they can ‘Make America Great Again’ even though that is not their country, and so that they can avoid being called ‘anti-White’ by the legions of anonymous Alt-Right trolls roaming around on Twitter using Robert Whitacker’s ‘mantra’ on anyone who won’t support the geostrategic and geoeconomic intertests of the United States, the Russian Federation, and Exxonmobil specifically. 

Given that we know that Australians don’t care about America or Russia more than they care about the economic prosperity of their own country, the outcome is already baked into the cake. AFR carried an article last year which can be used to forecast what is likely to happen, and I’ll quote it in full here now:

AFR.com, ‘How our free trade deals are helping Australian companies right now’, 17 Nov 2016 (emphasis added):

Free trade should be embraced, not feared.

It has lifted living standards, grown Australia’s economy and created thousands of jobs.

While it is becoming more popular to denounce globalisation and flirt with protectionism, we cannot turn our back on free trade.

Australia’s economy has withstood global challenges and recorded 25 years of continuous growth because we’re open to the world.   Since Australia’s trade barriers came down, we’ve reaped the rewards.

Trade liberalisation has lifted the income of households by around $4500 a year and boosted the country’s gross domestic product by 2.5 per cent to 3.5 per cent, creating thousands of jobs.

One in five jobs now involve trade-related activities. This will grow as liberalised trade gives our producers, manufacturers and services providers better access to billions of consumers across the globe, not just the 24 million who call Australia home.

However, not everyone sees the value of free trade. Some see it, and the forces of globalisation, as a threat to their standard of living, rather than an opportunity to improve it.

When it comes to free trade, we often hear about the bad but not the good.

The nature of news means the factory closing gets more coverage than the one opening.

Chances are you heard about the Ford plant closing, but not the $800 million Boeing has invested in Australia and the 1200 people who work at their Port Melbourne facility.

You may have heard about Cubbie Station, but not heard that its purchase staved off bankruptcy, and has since seen millions of dollars invested in upgrades of water-saving infrastructure, a doubling of contractors, more workers, and of course, money put into the local economy supporting jobs and local businesses.

Key to attracting investment, jobs

The free trade agreements the Coalition concluded with the North Asian powerhouse economies of China, Japan and Korea are key to attracting investment and creating more local jobs.

The Weilong Grape Wine Company has said the China-Australia Free Trade Agreement is the reason it’s planning to build a new plant in Mildura.

This is a story being played out across the country.

Businesses large and small, rural and urban, are taking advantage of the preferential market access the FTAs offer Aussie businesses into the giant, growing markets of North Asia.

Australian Honey Products is building a new factory in Tasmania to meet the demand the trifecta of FTAs has created.

Owner Lindsay Bourke says the free trade agreements have been “wonderful” for  his business. “We know that we are going to grow and it’s enabled us to employ more people, more local people,”  he said.

It is the same story for NSW skincare manufacturer Cherub Rubs, who will have to double the size of their factory. “The free trade agreements with China and Korea really mean an expansion, which means new Australian jobs manufacturing high-quality products,” said Cherub CEO John Lamont.

It is easy to see why the three North Asian FTAs are forecast to create 7,900 jobs this year, according to modelling conducted by the Centre for International Economics.

Australia has a good story when it comes to free trade. In the past three years, net exports accounted for more than half of Australia’s GDP growth.

Exports remain central to sustaining growth and economic prosperity. Last year exports delivered $316 billion to our economy, representing around 19 per cent of GDP.

This underscores the importance of free trade and why it is a key element of the Turnbull Government’s national economic plan.

The Coalition is pursuing an ambitious trade agenda, and more free trade agreements, to ensure our economy keeps growing and creating new jobs.

On Friday I arrive in Peru for the Asia-Pacific Economic Cooperation (APEC) Ministerial Meeting.

Free trade will be at front of everyone’s mind.

With the future of the Trans-Pacific Partnership (TPP) looking grim, my ministerial counterparts and I will work to conclude a study on the Free Trade Area of the Asia-Pacific (FTAAP), which sets out agreed actions towards a future free trade zone.

We will also work to finalise a services road map, which will help grow Australian services exports in key markets including education, finance and logistics.

More to be done

The Coalition has achieved a lot when it comes to free trade, but there is more to do.

Momentum is building for concluding a free trade agreement with Indonesia, work towards launching free trade agreement negotiations with the European Union continues, we’ve established a working group with the United Kingdom that will scope out the parameters of a future ambitious and comprehensive Australia-UK FTA and we’re continuing to negotiate the Regional Comprehensive Economic Partnership (RCEP), which brings together 16 countries that account for almost half of the world’s population.

The Turnbull government will continue to pursue an ambitious free trade agenda to keep our economy growing and creating more jobs.

Meanwhile Opposition Leader Bill Shorten continues to build the case for Labor’s embrace of more protectionist policies, claiming he will learn the lessons of the US election where it featured heavily.

What Labor doesn’t say though is that by adopting a closed economy mindset, they will close off the investment and jobs flowing from free trade. They’re saying no to Boeing’s $800 million investment in Australia and the Cubbie Station improvements; they’re saying no to businesses like Cherub Rubs and Australian Honey Products building new factories and the many local jobs they will create.

Steven Ciobo is the Minister for Trade, Tourism and Investment

Obligatory Taylor Swift
What’s not to love about all this?

I really think I love Anglo-Saxons. This is going to be fun, isn’t it? 

When Mr. Ciobo spoke of ‘a working group with the United Kingdom that will scope out the parameters of a future ambitious and comprehensive Australia-UK FTA’, he was not joking. That is happening and it is likely going to be another window that the UK will have into the formation of both RCEP and FTAAP, even though technically the UK is not physically in the Indo-Asian region.

I wrote an article several days ago called ‘A view of Brexit from Asia: Britain as a Pacific trading power in the 21st century.’ I chose at that time not to mention the Australian or New Zealand interface at all, but that article’s main point should be viewed as being reinforced by the point I’ve presented in here now.

I have also written an article today called, ‘US Government to build American competitiveness atop socio-economic retrogression and misery.’ It’s crucial to understand that time is of the essence, since the Americans are at the present moment in relative disarray compared to the rest of us. The Americans have not yet tamed and pacified the various economic actors in their own country, they are still working on that, and they also have yet to form a coherent internationalist counter-narrative to the one that is being enunciated by the governments of Britain, Australia, New Zealand, Japan, South Korea, Taiwan, China, and so on.

Some of you may be mystified by that statement. What do I mean that the Americans don’t have a coherent ‘internationalist counter-narrative’? I mean that while they are capable of explaining and rationalising their own position as a narrowly ‘America first’ position in a way that is pleasing to Americans, they are not able to export that view to regular people anywhere else in a way that would induce any other European-demography country to comply with America’s geoeconomic interests.

After all, if the Alt-Right people are going to careen all over the internet essentially screaming, “put America first ahead of your own country’s interests or be accused of White genocide”, and alternately equally absurdly, “you’re an evil Russophobe who supports White genocide if you invested in BP instead of Exxon”, then they should not expect that they are going to win the sympathy of anyone who is neither American nor Russian.

I want to say to British people, to Australians, to New Zealanders, to Canadians, Commonwealth citizens in general, that you know, it’s been a long time since you’ve taken your own side. This coming phase is going to be a time when it will become possible to do precisely that.

The time is fast approaching when it will be possible to choose neither America nor Russia. You’ll be able to finally choose yourselves and your own geoeconomic interests, and you’ll be able to choose to trade and associate with whoever else in the world you want to trade and associate with.

Kumiko Oumae works in the defence and security sector in the UK. Her opinions here are entirely her own.


Corporate community, ruined after Icahn episode, votes Trump oblivious that Icahn is his gatekeeper

Posted by DanielS on Thursday, 09 February 2017 16:17.

Together back in the 80s, when Carl Icahn was showing Donald Trump the ropes of “corporate-take-over”, such as his plunder of TWA.

The Carl Icahn episode that pilfered the corporate culture of the once bustling American town—Lancaster, Ohio—is highly instructive of itself. It provides a lesson in its farther implications, however, as it set in motion transformations of that corporate culture which effected a perverse irony of its residents becoming Trump voters, seeking a return to their corporate culture as it had been - implicitly White - oblivious to the fact that they are hoping to do this through Trump, whose appointed gate-keeper is Carl Icahn - the very man who plundered Lancaster’s corporate culture and set in motion its transformative demise, with devastating impact upon the now rust-belt town and its people (nearly all White).
 
(((NPR))) doesn’t provide a transcript of portions which refer to Carl Icahn, e.g.

NPR, Glass House’ Chronicles The Sharp Decline Of An All-American Factory Town, 6 Feb 2017:

13:10: Dave Davies: “When did outside financial interests first pose a challenge to the management of Anchor Hocking, this giant of a company?

Brian Alexander: The first time was Carl Icahn.

It is meaningful that the relatively brief episode of Carl Icahn’s corporate raid on Anchor-Hocking did not merely lead to a limited financial downturn following the large (what amounts to) bribe that he levied against the company in order to get rid of him, but it had implicative force which transformed even the subsequent non-Jewish corporate culture, creating a new corporate culture - a new context, if you will. That is the kind of thing that the serious ethno-nationalist will want to examine further.

Ibid:

Brian Alexander: It’s the 1980’s, Carl Icahn has just begun his career of what became known at the time as “green mailing.”

Dave Davies: “Corporate raiding”, “corporate take-overs.”

Alexander: “Corporate raiding”, saying now I’ve just bought 5% of your stock. I want a seat on the board. You’re running your company in a lousy way; and so I’m going to come and make all sorts of trouble for you, but you know, if you want to buy me out, at a profit, at a premium, well maybe I’ll go away; and so that’s exactly what happened with Carl Icahn.

Carl Icahn bought over 5% of the stock of Anchor Hocking, agitated the board, saying you need to make some different decisions, you could be returning more share-holder value and was eventually bought off at what I calculate to be about a three million dollar profit to Carl Icahn.

That episode did not last long, but I argue that it changed Anchor Hocking forever, from then on.

Dave Davies: In what way?

Brian Alexander: It scared people…

........................................................................


NPR, Glass House’ Chronicles The Sharp Decline Of An All-American Factory Town, 6 Feb 2017:

NPR host Dave Davies: We heard a lot in the presidential campaign about anger and frustration among working class voters in America’s heartland. Today we’re going to focus on one factory town in central Ohio that was once a bustling center of industry and employment, but is now beset by low wages, unemployment and social decay.

Lancaster, Ohio isn’t just a research subject for our guest Brian Alexander, it’s his hometown.

His new book tells the story of the company that was once Lancaster’s largest employer - Anchor-Hocking Glass Company was a Fortune 500 company with its headquarters in the town. The company provided jobs, civic leadership and community pride. It’s decline Alexander argues isn’t just a product of increased competition and changing markets, he says the firm was undone by Wall Street investors who had little knowledge of the company and little interest in anything besides short-term profit.

READ MORE...


New Horizons Pluto Mission Foreshadows the Capability of an Unburdened European/Asian Alliance

Posted by DanielS on Saturday, 04 February 2017 08:29.

This is the kind of reach a European-Asian Alliance is capable of, even while heavily burdened: imagine what we could accomplish if we were not saddled by the YKW, their Abrahamism (Judaism, Islam and Christianity), complicit right-wing arrogation and liberal irresponsibly - pinning us down with the irresponsible among us, their consequences; as well as in obsequiousness toward, and over-burdened necessity to defend against, African aggression and bio-power, Muslim colonization (“Hijra”) and terror.

 
Nasa, New Horizons image gallery.

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All Indians look same to BBC. But Pakistani-American, Sajid Tarar, is behind ‘Muslims for Trump’

Posted by DanielS on Wednesday, 25 January 2017 03:44.


“Don’t be surprised if the money he used to buy-up American real estate came from U.S. foreign aid” - TT.  Pictured, Trump signalng 181 dimensional chess with Pakistani-American real estate tycoon, Sajid Tarahas, founder of ‘Muslims for Trump.’

BBC, “Trump’s Hindu, Sikh and Muslim power brokers”, 24 Jan 2017:

When Indian-American industrialist Shalabh “Shalli” Kumar donated close to a million dollars to the Trump campaign, many in the community dismissed it as a poor investment.

But today, Mr Kumar is the go-to guy not just for Indian-Americans chasing opportunities in the new administration but apparently for the Indian officials seeking contacts with Trump aides.

A leading Indian TV channel NDTV introduced him as “the man with a direct line to Trump” on their show. Another top-ranking Diaspora website, The American Bazar, has called him “the most influential Indian-American power broker” in DC.

And Kumar isn’t complaining about this new celebrity status. “I would like to be the bridge between the two sides,” he told the BBC. “I have arranged two big meetings between Indian officials and leading figures in the Trump team.”

A majority in the Indian immigrant community have traditionally supported Democrats and Trump’s anti-immigrant campaign rhetoric seemed to have further alienated many.

Kumar says he and his Republican Hindu Coalition mobilised Hindu Indian-Americans votes in swing states like Florida.

Their message? Trump was the anti-terrorism candidate, and would help India and US see greater collaboration in defence, energy and manufacturing.


Trump’s anti-Muslim rhetoric did appeal to some Hindus, but whether that actually swayed the community at large is unclear.

       
Kumar is not the only one whose stock has soared with a Trump victory.

Pakistani-American Sajid Tarar, who is a Muslim, and Sikh-American Jesse Singh, sided with Mr Trump at the peak of his anti-Muslim barbs. They were pilloried by their own communities for doing so. One exit poll suggested more than three-quarters of Muslims voted for Clinton.

Mr Tarar’s Facebook inbox used to be swamped with negative messages, calling him a “disgrace to Pakistan and Islam”.

But on the morning of 9 November, his phone wouldn’t stop ringing. Mr Tarar had more than 80 messages congratulating him on Mr Trump’s victory and how he had made Pakistan proud.

He says the Pakistan embassy reached out to him to facilitate a call between Pakistani Prime Minister Nawaz Sharif and the President-elect.

“I sent out a few emails and the call happened,” says Mr Tarar, a real estate businessman.

READ MORE...


African Violence Chases Away Paris Tourists

Posted by DanielS on Friday, 20 January 2017 05:02.

TNO, “African Violence Chases Away Paris Tourists”, 19 Jan 2017:

Criminal violence perpetrated by massed gangs of African invaders in Paris and Marseilles is driving foreign tourists away from France, with the number of Chinese tourists dropping by over half a million in one year, it has emerged.

       

According to a report in the French newspaper Le Parisien, the President of the Chinese Association of Travel Agencies in France, Jean-François Zhou, said that 2016 had been a “very bad year” for tourists from his country in France.

Zhou, who is also general manager of a travel agency and official representative of the Chinese tourist association Utour in France, said that “the scourge of criminality is especially aimed at Chinese tourists.”

“They are robbed at the palace of Versailles, at the foot of the Eiffel Tower, in front of their hotels, on the steps of buses . . . during high season, there is not a day that goes by without tourists being assaulted,” Zhou continued.

“I saw an 80-year-old man seriously injured because he was trying to resist the thieves. Women are pushed over, and as they fall, their bags are stolen.”

Zhou said the level of crime had created a “panic on Chinese social networks,” and that these reports had started to deter Chinese tourists since last year.

He explained that in 2016, about 1.6 million Chinese tourists came to Paris. This was a huge drop compared to 2015, when 2.2 million visited.

It is not only the Chinese who have stopped coming, but also the Japanese and Koreans, he added, pointing out that tourism from Japan had dropped 39 percent, and from Korea by 27 percent.


European Commissioner for Economic Affairs, (((Pierre Moscovici))): Brexit would be bad for UK

Posted by DanielS on Thursday, 19 January 2017 10:35.

BBC, “Theresa May: UK will be a global leader on trade”, 19 Jan 2017:

Theresa May has told leaders at the World Economic Forum in Davos that the UK will be a “world leader” on trade. But the prime minister also warned that inequality blamed on globalisation was aiding the “politics of division”. Her speech to business leaders and politicians in Switzerland comes after EU leaders said a post-Brexit trade deal with the UK would be “difficult”. The European Commissioner for Economic Affairs, Pierre Moscovici, said Brexit would be bad for the UK and the EU.
       
EU Commissioner for Economic & Financial Affairs, France’s Mr Moscovici, told BBC that Brexit was not a positive move.

Pierre Moscovici (French pronunciation: ​[piɛʁ.mɔs.kɔ.vi.si]; born September 16, 1957) is a French politician currently serving as the European Commissioner for Economic and Financial Affairs, Taxation and Customs. Previously he served as a senior French politician, as Minister of Finance from 2012 to 2014 and as Minister for European Affairs between 1997 and 2002.

Previously a member of the Trotskyist group the Revolutionary Communist League, Moscovici joined the French Socialist Party (PS) in 1984 and has since been a member of the Departmental Council of Doubs and the French and European Parliaments.

Early life and education

Born in Paris, he is the son of the influential Romanian-Jewish social psychologist Serge Moscovici and of the Polish-Jewish psychoanalyst Marie Bromberg-Moscovici.[1]


In the meantime, former UKIP treasurer, Andrew Reid, seems to have secured something out of the deal:

Oxford Mail, “Villagers in Dorchester-on-Thames, South Oxfordshire, are battling former UKIP treasurer and city lawyer Andrew Reid”, 19 Jan 2017:

VILLAGERS are fighting for freedom after a former UKIP treasurer a bought up vast swathes of beloved countryside and started fencing it off. Residents in Dorchester-on-Thames were shocked when city lawyer Andrew Reid bought the 845-acre Bishop’s Court Farm for £11m last year and started putting up barbed wire fences around fields where families have played and picnicked for generations.

The rolling patchwork of pastures, in the shadow of Wittenham Clumps hill on the banks of the Thames, includes the famous meadow by Day’s Lock where the World Pooh Sticks Championships were held for more than 30 years.

The previous owner of Bishop’s Court Farm, Anne Bowditch, had always been happy for villagers and visitors to tramp across her meadows, but she passed away in September 2015.

Mr Reid, senior partner at RMPI solicitors, bought the property last year through a company called Vision Residences (2) LLP.

The first many villagers knew about it was when spiked fences started shooting up across the fields in October.

       
A commentor on the article noted: “There was a famous photo taken in these fields years ago that was used in a genius plot by the British in WW2 to deceive the Germans (remember the floating “airman” who had invasion plans in his jacket). A photo of him with his “sweetheart” was planted on him - that photo was taken on Day’s Meadow.”


12 million more migrants expected despite Brexit unless U.K. exits Single Market as well.

Posted by DanielS on Friday, 30 December 2016 09:07.

Tory MP Philip Hollobone said: “Migration Watch’s forecasts have always been thoroughly reliable.”

Express, “BREXIT WARNING: 12 MILLION more migrants to arrive in UK in 25 years without hard Brexit”, 29 Dec 2016:

MASS immigration will continue at “unacceptable” levels for at least two decades unless Britain makes a full break with Brussels, a report predicted last night.

               

Figures showed that annual net migration to the UK from EU countries would be unlikely to fall below 155,000 in the “medium term” if the country stays in the EU’s Single Market.

And the Government’s ability to reduce the influx will be “extremely limited” as long as the EU’s free movement rules remain in force.

The disturbing forecast of near-record levels of migration for years ahead was set out in a report from the population think tank Migration Watch. It was being seen last night as a devastating blow to campaigners for a so-called “soft Brexit” that retain the UK’s full Single Market membership.

[...]

“An increase of anything like 12 million in just 25 years is, quite simply, unacceptable to the British public and certainly not what they voted for in the referendum.”

Tory MP Philip Hollobone said: “Migration Watch’s forecasts have always been thoroughly reliable and are the best we are going to get from anyone.

[...]

“The picture they paint is completely unacceptable.

“We simply can’t stay in the Single Market if it means we are going to get that sort of level of immigration.

“Above all, people voted in the referendum for a change in our approach to immigration.”

[...]

“Total net immigration will add 12 million people to the population in just 25 years, more than the equivalent of the entire current populations of Bulgaria and New Zealand.”

He added: “Theresa May needs to set out in no uncertain terms that when the UK leaves the EU it will also cease to be a member of the Single Market.


Leak reveals Rex Tillerson is director of Bahamas-based US-Russian oil company

Posted by Kumiko Oumae on Sunday, 18 December 2016 19:39.

Guardian, ‘Leak reveals Rex Tillerson is director of Bahamas-based US-Russian oil company’, 18 Nov 2016:

Rex Tillerson, the businessman picked by Donald Trump to be the next US secretary of state, is the long-time director of a US-Russian oil firm based in the tax haven of the Bahamas, leaked documents show.

Tillerson – the chief executive of ExxonMobil – has been a director of the oil company’s Russian subsidiary, Exxon Neftegas, since 1998. His name – RW Tillerson – appears next to other officers who are based at Houston in Texas; Moscow; and Sakhalin, in Russia’s remote Far East.

The leaked 2001 document comes from the corporate registry in the Bahamas. It was one of 1.3m files given to Germany’s Süddeutsche Zeitung by an anonymous source. The registry is public but details of individual directors are typically incomplete or missing entirely.

Though there is nothing untoward about this directorship, it has not been reported before and is likely to raise fresh questions over Tillerson’s relationship with Russia ahead of a potentially stormy confirmation hearing by the US senate foreign relations committee.

ExxonMobil’s use of offshore regimes – while legal – may also jar with Trump’s avowal to put “America first”.

Tillerson’s critics say he is too close to president Vladimir Putin – and that his appointment could raise potential conflicts of interest.

ExxonMobil is the world’s largest oil company and has for a long time been eyeing Russia’s vast oil and gas deposits. Tillerson currently has Exxon stock worth more than $200m.

leaked document

Since his nomination, Tillerson’s Russia ties have become a source of bipartisan concern. In 2013 Vladimir Putin awarded him the Russian Order of Friendship. Tillerson is close to Igor Sechin, the head of Russian state oil giant Rosneft and the de facto second most powerful figure inside the Kremlin. A hardliner, Sechin is ex-KGB.

Tillerson’s award followed a 2011 deal between ExxonMobil and Rosneft to explore the Kara Sea, in Russia’s Arctic.

It was put on hold in 2014 after the Obama administration imposed wide-ranging sanctions against Russia. The sanctions were punishment for Putin’s Crimea annexation that spring and Russia’s undercover invasion of eastern Ukraine.

The ban covers the US sharing of sophisticated offshore and shale oil technology. Exxon was supposed to halt its drilling with Rosneft. The firm successfully pleaded with the US Treasury department to delay the ban by a few weeks, with the Kremlin threatening to seize its rig. In this brief window Exxon discovered a major Arctic field with some 750m barrels of new oil.

Tillerson has criticised the US government’s policy on Russia. In 2014 he told Exxon’s annual meeting that “we do not support sanctions”. He added: “We always encourage the people who are making those decisions to consider the very broad collateral damage of who they are really harming.”

It is widely assumed by investors that the new Trump administration will drop sanctions. This would allow the Kara joint venture to resume, boosting Exxon’s share price and yielding potential profits in the tens of billions of dollars. According to company records, Tillerson currently owns $218m of stock. His Exxon pension is worth about $70m.

The senate foreign relations committee is currently split 10 to 9 between Republicans and Democrats. But several heavyweight Republicans, including John McCain, have raised doubts about Tillerson’s nomination and his lack of experience to be America’s top diplomat after four decades spent exclusively in the oil industry.

Republican senator Marco Rubio – who sits on the committee – said on Tuesday that he had “serious concerns” about giving Tillerson the job. Rubio praised him as a “respected businessman” but said that the next secretary of state “must be someone who views the world with moral clarity [and who] has a clear sense of America’s interests”.

Tillerson is likely to get rid of his Exxon stock if the narrowly Republican-majority Senate confirms his appointment.

Controversy over his Russian links comes at a time when the topic is politically red hot, after the CIA said earlier this month that Kremlin hackers had stolen emails from the Democratic National Committee and top Democrats in order to help Trump. The president-elect has dismissed the CIA’s assessment, dubbing it “ridiculous”. Democrat presidential candidate Hillary Clinton says Putin targeted her for reasons of personal revenge.

As well as on oil and gas, the Obama administration has imposed personal sanctions on Putin’s friends including Sechin. Sechin has said that one of his ambitions is to “ride the roads in the United States on motorcycles with Tillerson”. Currently, Sechin is forbidden from entering the country.

Today’s revelation sheds light on the use by multinational companies of contrived offshore structures, now under scrutiny following April’s massive Panama Papers leak.

Exxon Neftegas’s most important oil and gas project is Sakhalin-1. It is located in the sub-Arctic, off the frozen and difficult-to-access north-east coast of Russia’s Sakhalin island. This is 10,700km (6,650m) away from the subsidiary’s official business home in Nassau, the warm semi-tropical capital of the Bahamas. The Bahamas is notorious for secrecy. It has a corporate tax rate of zero.

The documents from the Bahamas corporate registry were shared by Süddeutsche Zeitung with the Guardian and the International Consortium of Investigative Journalists in Washington DC. They show that Exxon registered at least 67 companies in the secretive tax haven, covering operations in countries from Russia to Venezuela to Azerbaijan.

Exxon Neftegas features in about 25 leaked offshore documents. The oil firm was incorporated in 1998 by a law firm in Nassau, Higgs & Johnson. Another veteran law firm, Lobosky Management Ltd, subsequently took over as registered agent. Company secretary Sophia Kishinevsky signed the paperwork and made annual filings.

Exxon said it had no comment on whether Tillerson should now divest his Exxon holdings and resign from his positions with all Exxon entities. It said the oil firm had incorporated some of its affiliates in the Bahamas because of “simplicity and predictability”.

“It is not done to reduce tax in the country where the company operates,” Exxon said. It added: “Incorporation of a company in the Bahamas does not decrease ExxonMobil’s tax liability in the country where the entity generates its income.”

The firm was one of the largest taxpayers in the world, with an effective global tax rate in 2015 of 34%, it said. Its effective tax rate over the past three years – 2013, 2014, 2015 – was 43%, it added. This compared favourably with other Fortune 100 companies which “have substantially lower effective tax rates than ExxonMobil”.

And if you think that’s interesting, there will be more later.


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