Saudi Government Wants $6 Billion For al-Waleed"s Freedom

In case you were wondering what the going-rate was for one of the world"s richest men"s freedom... it"s $6 billion... in unencumbered cash (not Bitcoin).

That is the price that Saudi authorities are demanding from Saudi Prince al-Waleed bin Talal to free him from detention.

The 62-year-old prince was one of the dozens of royals, government officials and businesspeople rounded up early last month in a wave of arrests the Saudi government billed as the first volley in Crown Prince Mohammed bin Salman’s campaign against widespread graft.

According to the Mail, al-Waleed, who is (or was, until recently) one of the richest men in the world, has also been hung upside down and beaten.

The Saudi government has disclosed few details of its allegations against the accused, but as The Wall Street Journal reports, people familiar with the matter said the $6 billion Saudi officials are demanding from Prince al-Waleed, a large stakeholder in Western businesses like Twitter, is among the highest figures they have sought from those arrested.

While the prince"s fortune is estimated at $18.7 billion by Forbes - which would make him the Middle East’s wealthiest individual - he has indicated that he believes raising and handing over that much cash as an admission of guilt and would require him to dismantle the financial empire he has built over 25 years.

Prince al-Waleed is talking with the government about instead accepting as payment for his release a large piece of his conglomerate, Kingdom Holding Co., people familiar with the matter said. The Riyadh-listed company’s market value is $8.7 billion, down about 14% since the prince’s arrest. Kingdom Holding said in November that it retained the support of the Saudi government and that its strategy “remains intact.”

According to a senior Saudi official, Prince al-Waleed faces accusations that include money laundering, bribery and extortion. The official didn’t elaborate, but said the Saudi government is merely "having an amicable exchange to reach a settlement."

The prince has indicated to people close to him that he is determined to prove his innocence and would fight the corruption allegations in court if he had to.

“He wants a proper investigation. It is expected that al-Waleed will give MBS a hard time,” said a person close to Prince al-Waleed, referring to the crown prince by his initials, as many do.

Some people close to Prince al-Waleed say they believe his high profile helped turn Prince Mohammed against the tycoon. Kingdom Holding has long acted like an arm of the Saudi state, striking deals that could have also been done by the crown prince or the kingdom’s own sovereign-wealth vehicle, the Public Investment Fund.

*  *  *

We suspect al-Waleed will not get his day in court, and will instead be forced to live on "diet food" since, as a reminder, the WSJ previously confirmed that fundamentally, the purge may be nothing more than a forced extortion scheme, as the Saudi government - already suffering from soaring budget deficits, sliding oil revenues and plunging reserves - was "aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite."

Russian Diplomat’s Warning: ‘Apocalyptic Scenario’ Likely On Korean Peninsula

The tense situation over North Korea’s nuclear program has one top Russian diplomat sounding the alarm. Russian Deputy Foreign Minister Igor Morgulov said that the world can no longer turn a “blind eye” to alarming speed with which North Korea is advancing their weapons of mass destruction.

North Korea’s nuclear program could evolve into an “apocalyptic” scenario, Morgulov said.  He was speaking at the opening of the eighth annual Asian Conference of the Valdai Discussion Club, which is being held in Seoul, South Korea, CNBC reports.  “I hope that a common sense, pragmatism, and an instinct of self-preservation would prevail among our partners,” Morgulov added.

The Russian diplomat’s remarks come amid global concerns over North Korean leader Kim Jong Un’s refusal to abandon his nuclear ambitions despite mounting international pressure. North Korea has conducted a record number of long-range missile tests this year, and in early September it carried out its sixth and most powerful nuclear test.

Tensions continue to heighten as Kim and President Donald Trump trade numerous threats and insults. Over the summer, Trump warned Pyongyang it would be met with “fire and fury” if it didn’t stop threatening the U.S. In late September while addressing the United Nations for the first time, he threatened to “totally destroy” North Korea if it forced the U.S. to defend itself or its allies. In a speech to South Korea’s National Assembly, president Trump denounced Kim’s regime but also offered the erratic leader a path to peace if he agreed to cease long-range missile tests and move toward denuclearization. North Korea rejected his offer and said the president had “begged” for nuclear war during his Asia trip.

Shortly after returning from his trip, Trump placed North Korea back on the list of state sponsors of terrorism on November 20. Kim has been far from quiet in the ongoing exchange of words as well. He has “sentenced Trump to death” and said that the U.S. president has “lit the wick of war.”

China, which is North Korea’s top trading partner and most important ally, has tried to pressure Pyongyang to change its stance on the development of nuclear weapons. But a recent visit from a senior Chinese envoy to the North Korean capital appears to have been unsuccessful. Correspondingly, China recently shut down the main road connecting it with North Korea, and the state-owned airline Air China suspended flights from Beijing to the reclusive nation.

Morgulov, whose nation, Russia, shares a border with North Korea, appears to be concerned about the rogue country’s handling of weapons of mass destruction.  “We have told North Korea many times that for us [its] nuclear status is unacceptable,” the diplomat said. “We continue this work with the North Korean counterparts presenting to them our position.”

Trump Reportedly Tells Erdogan US Will Cease Arming Syrian Kurds

Just after Putin hosted trilateral talks on Syria and the Middle East in Sochi involving Russia, Iran, and Turkey, President Trump spent part of his Friday after Thanksgiving on the phone with Turkey"s Erdogan. While the two discussed Syria and other regional issues, it appears they broached the delicate and contentious topic of US support to Syrian Kurdish fighters (namely, the Kurdish YPG, which forms the core of the Syrian Democratic Forces). The call came amidst a flurry of diplomatic activity over the Middle East driven by the Kremlin, and follows a lengthy Trump-Putin phone call on Tuesday.

Members of the Kurdish YPG, Mint Press

Though the details of the call are still unclear, Trump outlined what was to be generally discussed in a tweet, and said this morning, "Will be speaking to President Recep Tayyip Erdogan of Turkey this morning about bringing peace to the mess that I inherited in the Middle East. I will get it all done, but what a mistake, in lives and dollars (6 trillion), to be there in the first place!"

Will be speaking to President Recep Tayyip Erdogan of Turkey this morning about bringing peace to the mess that I inherited in the Middle East. I will get it all done, but what a mistake, in lives and dollars (6 trillion), to be there in the first place!

— Donald J. Trump (@realDonaldTrump) November 24, 2017

Though not verified by the US side, Turkish Foreign Minister Mevlut Cavusoglu said Trump told Erdogan during Friday"s call that the US will cease supplying weapons to the Syrian Kurdish fighters, according to the AP. Turkey has long considered Syrian Kurdish militant groups to be terrorists, and Erdogan reportedly insisted at the Sochi summit that Syrian Kurds be excluded from all negotiations over the future of Syria on the grounds that they have links to the PKK. However, it is unlikely that a lasting political settlement for Syria can be negotiated and successfully held without Syrian Kurdish input.

But should Turkey"s current claims that Trump vowed to end US military support to Syrian Kurds be confirmed, it would be a major development impacting the lasting arrangement of Syria and the war"s outcome. "Mr. Trump clearly stated that he had given clear instructions and that the YPG won"t be given arms and that this nonsense should have ended a long time ago,” Cavusoglu said at a news conference shortly after the call. And Erdogan presented an upbeat assessment of the call, tweeting shortly after: “I had a fruitful phone conversation with the U.S. President Donald Trump today."

Meanwhile Trump"s reference to $6 trillion appears to be related to a Nov. 8 Wall Street Journal story on a new study from the Watson Institute of International and Public Affairs, which calculates that the cost to US taxpayers for American troop deployment and wars in the broader Middle East - including Afghanistan, Iraq, Pakistan and Syria - is about $5.6 trillion. Could a major pull-out and disengagement from Syria and other parts of the region be on the table (consistent with Trump"s "America first" non-interventionist campaign promises)?

We previously explained that that US strategy and support to the Kurds was predicated on the Pentagon forcing itself into a place of affecting the Syrian war"s outcome and final apportionment of power: the best case scenario for American power and planners in the region being permanent US bases under a Syrian Kurdish federated zone with favored access to Syrian oil doled out by Kurdish partners.

But it appears the Kurds may already be cutting separate deals and are in secret talks with Syria and Russia, which means a US exit from Syria could be forced sooner rather than later. According to University of Oklahoma Middle East expert Joshua Landis, the Kurds and the Syrian government are now sharing oil revenues from disputed oil fields controlled by Kurdish groups in some parts of Syria"s east.

Landis confirmed last week that "the Syrian gov, Syrian Kurds, and Arab tribes share oil revenues already. SAG gets 65% of revenues in Rmeilan field. PYD gets 20% (powerful Kurdish confederation in Syria"s north: the Democratic Union Party). Arab forces get 15%." Landis also posted the question, "is this the model for a future deal between Kurds, Arabs, and the Syrian Government in northern Syria?"

Should the White House confirm a commitment of US disengagement from the SDF with a concrete timeline, it would represent a monumental shift in policy, and would further ensure that Russia remains in the driver"s seat concerning the future of Syria and the Levant.

Isolation Escalates As Chinese Airline Ends Flights To North Korea

It"s barely been a day since President Donald Trump revealed that the US would once again label North Korea a state sponsor of terrorism and impose broad new sanctions against its government and senior officials, and already more bad news for the restive communist state has emerged. This time, the Associated Press is reporting that Air China, a state owned airline, is canceling flights to North Korea, leaving the North"s troubled Air Koryo as the only airline operating flights between North Korea and its primary economic benefactor.

Flights were “temporarily suspended due to unsatisfactory business operations,” said an employee of Air China’s press office who would give only his surname, Zhang, according to the AP. The suspension was blamed on falling demand for the routes. A foreign ministry spokesman, Lu Kang, said he hadn’t heard about Air China’s cancellation. He said such decisions would be made based on the “state of operation and the market.”

Beijing has supported UN sanctions on North Korean exports meant to pressure the government of leader Kim Jong Un to drop its pursuit of nuclear and missile technology, but China has argued against measures that would harm ordinary North Koreans.

Since mid-summer, the UN Security Council has passed two rounds of sanctions (with China"s approval) that impose strict limitations on exports of North Korean seafood, coal and other raw materials. And Trump said the Treasury will outline more restrictions to be imposed against the North and senior government officials in the coming weeks. Since Air China is state-owned, the cancellation of the routes received at least tacit government approval. But since the sanctions have choked off much of the North"s legitimate economy, it"s possible the routes were eliminated to prevent the airline from losing money, forcing the government to intervene with subsidies. Back in September, China kicked out North Korean businessmen and instructed its banks not to do business with North Koreans or North Korean-owned businesses.

To be sure, Airlines have been rolling back flights to North Korea for months.

Airlines have steadily reduced the frequency of flights to North Korea as mounting political tensions depressed the already small number of business travelers and tourists visiting the North.

 

Air China Ltd. announced in April it was cutting the frequency of flights to North Korea due to lack of demand. Some other Chinese carriers offered charter services to the North but those also have been canceled.

 

Zhang said the last Air China flight to Pyongyang was Monday and he didn’t know when service might resume.

 

The status of Air Koryo’s flights was unclear. Phone calls to the carrier’s Beijing office weren’t answered. The flight information website for the Beijing airport showed its Pyongyang flight on Tuesday took off as scheduled.

Lu, the foreign ministry spokesman, appealed for measures to ease the tense standoff.

 

“Given the highly complex and sensitive situation on the peninsula, we hope all relevant parties can do something conducive to alleviating the tension and pulling all sides concerned back to the track of negotiation and dialogue to settle the peninsular nuclear issue,” he said at a regular news briefing.

Whether it"s true or not, Trump has shown himself more than willing to take credit for any signs of a chill in relations between the North and China. For example, he boasted about having secured assurances from President Xi that China would continue to help isolated the North"s economy. Though many have speculated that Xi is just flattering his American rival, and that China has no intention of squeezing the North. 

Trump in Asia-Pacific Selling War and Weapons

US President Donald Trump (C), Japanese Prime Minister Shinzo Abe (R) and South Korean President Moon Jae-in pose for photos before attending the Northeast Asia Security Dinner at the US Consulate General Hamburg on the sidelines of the G20 Summit. [image: AFP]

On Monday in Tokyo with militant Japanese PM Shinzo Abe, Trump agreed with him on applying maximum pressure on Pyongyang at a joint press conference, Abe saying:

“As for North Korea, the positions of Japan and the United States on this issue coincide by 100%.”

“We confirmed that we will intensify pressure, which the international community is exerting on North Korea now, through bilateral cooperation and through the work with China and Russia on this issue.”

Separately, Trump said “we’re working to counter the dangerous aggressions of the regime in North Korea…a threat to the civilized world and international peace and stability.”

“We will not stand for that. The era of strategic patience is over…The United States of America stands in solidarity with the people of Japan against the North Korean menace.”

Fact: America and its rogue allies represent the only global threat.

Fact: The greatest “threat to the civilized world and international peace” is America’s rage for global dominance, smashing one sovereign independent nation after another, blaming victims for its high crimes.

Commenting on pending Japanese purchases of US weapons – Trump said “massive amounts,” hoped for sales of more by other regional countries, notably South Korea.

He’s eager to sell weapons to US allies, one reason for his trip, building support for war on North Korea his main objective, not likely to go down well except perhaps in Japan, Abe saying:

“We support President Trump’s position that all the options are on the table in dealings with North Korea” – including possible military action.

Ahead of Trump’s arrival in South Korea, thousands demonstrated in Seoul, protesting his visit, chanting “We oppose war!”

“Peace, not war” and “We want peace.” Signs and banners read “No Trump! No War” and “Trump get out!”

He’s “a misogynist, and he doesn’t care about life and peace of the South Korean people,” one demonstrator remarked, likely speaking for many others.

He’s unlikely to be warmly welcomed by ordinary South Koreans on arrival in Seoul. They’re in the line of fire if Washington attacks the DPRK, a grave risk given Trump’s rage for war.

“We have one problem,” he said. “That’s called North Korea. I must tell you North Korea’s a thing that I think we will solve and if we don’t solve it, it’s not going to be very pleasant for them. It’s not going to be very pleasant for anybody.”

Propaganda wars precede hot ones. Months of hostile Trump rhetoric against North Korea and Iran may be preparing the public for more war.

If launched, it’ll be against two nations able to hit back hard if attacked, Pyongyang with nuclear weapons.

The possibility of their use in the Asia-Pacific should terrify everyone – maybe against Iran, Russia and China next, a scenario dooming us all if plays out this way.

The post Trump in Asia-Pacific Selling War and Weapons appeared first on The Sleuth Journal.

Saudi Arabia Orders Its Citizens To Leave Lebanon Immediately

In a odd coincidence, just moments after we published an article laying out Hezbollah"s military power at a time when both Saudi Arabia and Lebanon appear to be targeting Lebanon, and just two days after we discussed a leaked Israeli cable that confirmed Saudi Arabia and Israel are deliberately coordinating to destabilize the region and push Lebanon to a state of war, Saudi Arabia has ordered its citizens residing in Lebanon to leave immediately in a travel warning issued on Thursday, November 9. As Al Arabiya adds, the travel warning also called for Saudi nationals not to travel to Lebanon from any point of origin.

Full advisory below:

Official Source at the Ministry of Foreign Affairs: Saudi nationals visiting or residing in Lebanon are asked to leave the country as soon as possible.

 

Riyadh, Safar 20, 1439, November 09, 2017, SPA -- Due to the situations in the Republic of Lebanon, the official source at the Ministry of Foreign Affairs stated that the Saudi nationals visiting or residing in Lebanon are asked to leave the country as soon as possible.

 

The Kingdom advised all citizens not to travel to Lebanon from any other international destinations.

This follows a similar warning issued by the Kingdom of Bahrain on November 5 urghing its nationals residing in Lebanon to leave immediately and to "exercise caution.” The Bahraini call came a day after Lebanese Prime Minister Saad Hariri announced his resignation, while on location in Saudi Arabia, citing concerns he could be assassinated like his father, criticized the Lebanon-based Hezbollah paramilitary and political movement and accused Iran of alleged attempts to bring destruction to the region. The Bahraini foreign ministry said in a statement received by AFP that its call was "in the interest of its citizens’ safety and to avoid any risks they may be exposed due to the conditions and developments” that Lebanon is going through.

Earlier, Reuters reported that Lebanon believes former premier Saad al-Hariri, who as noted above resigned on Saturday while in Saudi Arabia, is being held by Riyadh, and Beirut plans to work with foreign states to secure his return, a top Lebanese government official said on Thursday. A second Reuters source, a senior politician close to Saudi-allied Hariri, said Saudi Arabia had ordered him to resign and put him under house arrest. A third source familiar with the situation said Saudi Arabia was controlling and limiting his movement.

Saudi Arabia and members of Hariri’s Future Movement have denied reports that he is under house arrest. But he has put out no statements himself denying his movements are being restricted. He made a one-day flying visit to the United Arab Emirates earlier this week before returning to Saudi Arabia.

Earlier on Thursday, Saudi Arabia"s foreign minister also urged the international community to slap fresh sanctions against Iran, accusing its regional rival of supporting terrorism.

"We would like to see sanctions on Iran for its support of terrorism and sanctions on Iran for violating the ballistic missile resolutions of the United Nations," Adel Al-Jubeir, Saudi minister of foreign affairs, told CNBC Thursday.

Al-Jubeir also said that the landmark nuclear deal between Iran and six world powers was "weak," especially given Tehran would be capable of assembling a bomb "within weeks." He added he would like to see international agencies carry out a "much more robust" job when conducting inspections in Iran.

Al-Jubeir also described the situation in Lebanon as "unfortunate" and went on to accuse Hezbollah of "hijacking the system" and putting "roadblocks" in front of Hariri at every opportunity. When asked whether Saudi Arabia was headed for a direct conflict with Iran, Al-Jubeir replied, "We hope not", and yet just hours later Riyadh made it clear that any Saudi citizens in Lebanon are now in danger.

Needless to say, traditionally such accelerate evacuation orders have preceded military intervention. Should that be the case again, keep a close eye on oil.

In Shocking Purge, Saudi King Arrests Billionaire Prince Bin Talal, Dozens Of Others In Cabinet Crackdown

In a shocking development, Saudi press Al Mayadeen reported late on Saturday that prominent billionaire, member of the royal Saudi family, and one of the biggest shareholders of Citi, News Corp. and Twitter - not to mention frequent CNBC guest - Al-Waleed bin Talal, along with ten senior princes, and some 38 ministers, has been arrested for corruption and money laundering charges on orders from the new anti-corruption committee headed by Crown Prince Mohammed bin Salman, while Royal princes’ private planes have been grounded.

Among those fired and/or arrested are the head of National Royal Guards, Miteb Bin Abdullah, the Minister of Economy and Planning, Adel Fakeih, and Admiral Abdullah bin Sultan bin Mohammed Al-Sultan, the Commander of the Saudi Naval Forces.

#BREAKING Several Princes & Saudi businessmen are arrested for #MoneyLaundering and #corruption charges in #KSA ????????https://t.co/EPh5tyilp9 pic.twitter.com/qZ4WSkKXyT

— ??? ?????? ???????? (@HSajwanization) November 4, 2017

As the local press further adds, the supreme committee chaired by Crown Prince and billionaire stops "on charges of money laundering."

al-Waleed bin Talal is perhaps best known not only for his periodic CNBC appearances, but for his recurring on and off spats with president Trump:

According to al Arabiya, among those sacked and/or arrested are Moteib Bin Abdullah, Minister of the National Guard, and Prince Khalid bin Ayyaf has been appointed as his replacement. A second Royal Order was issued to relieve Minister of Economy and Planning, Adel al-Faqieh, from his duties, and the appointment of Mohammed Al Tuwaijri as Minister of Economy and Planning.

According to a Royal Decree issued by King Salman on Saturday the anti-corruption committee is chaired by the Crown Prince with the membership of: Chairman of the Monitoring and Investigation Commission, Chairman of the National Anti-Corruption Authority, Chief of the General Audit Bureau, Attorney General and Head of State Security.

As Saudi analysts were quick to point out, the purge by the Saudi King means that King Abdallah’s last remnants (Riyad firmer gov. & head of Nat. Guard); media moguls; SAGIA & financial policy officials have been purged.

As Bloomberg notes, changing the head of the National Guard, an institution that’s been controlled by the clan of the late King Abdullah, “is not like changing the minister of oil,” said Kamran Bokhari, a senior analyst with Geopolitical Futures and a senior fellow with the Center for Global Policy. “I wouldn’t be surprised if this leads to greater fissures within the royal family.”

Arabiya adds that King Salman also issued sacking and replacement orders for Admiral Abdullah bin Sultan bin Mohammed Al-Sultan, the Commander of the Naval Forces, is to be terminated and be retired; his replacement is Vice Admiral Fahd bin Abdullah Al-Ghifaili, to be promoted to the rank of admiral and be appointed as Commander of the Naval Forces.

Additionally, Minister of Economy and Planning Adel al-Faqieh was replaced by Mohammed al-Tuwaijri, SPA said, quoting a royal decree. Commander of the Saudi Navy, Abdullah al-Sultan, was replaced with Fahad al-Ghafli. The king also replaced Minister of Economy and Planning Adel Fakeih withMohammad Al Tuwaijri, his deputy.

Al Tuwaijri, formerly vice minister for economy and planning, had already played a key role in shaping Saudi economic and fiscal policy over the past year. Before joining the government in May 2016 he was Middle East chief executive for HSBC. He’s served as a frequent spokesman for the government’s economic reform plan on TV and with Western journalists.

King Salman also issued an decree forming an anti-corruption committee headed by the crown prince. Its powers include the ability to trace funds and assets, and prevent their transfer or liquidation on behalf of individuals or entities, along with the right to take any precautionary actions until cases are referred to relevant investigatory or judiciary authorities, according to a government statement.

The committee’s formation was deemed necessary “due to the propensity of some people for abuse, putting their personal interest above public interest, and stealing public funds,” the Royal Order said.

Crown Prince: Every person, who has engaged in #corruption, regardless of their status, will be held accountable, provided there"s evidence. pic.twitter.com/sTxKfqvjo2

— CIC Saudi Arabia (@CICSaudi) November 4, 2017

Some more cynical observers noted how MBS is quickly learning from XIi Jinping "how to get rid of enemies under justification of "corruption commission" & place "friendlies" in high places."

Purge under the guise of combating corruption. Just like the earlier wave of arrests was a purge under the guise of combating extremism.

— ?yad el-Baghdadi (@iyad_elbaghdadi) November 4, 2017

Others arrested include Walid bin Talal; Khaled Tuweijri; AlWalid Ibrahim; Turki Bin Naser; and others.

V. BIG Names of Arrests in #Saudi
•Meteib Bin Abdullah
•Walid bin Talal
•Khaled Tuweijri
•AlWalid Ibrahim
•Turki Bin Naser
•Adel Fakih https://t.co/I9yYZN21XS

— Joyce Karam (@Joyce_Karam) November 4, 2017

Putting the arrests in context, the heads of the main three Saudi owned TV networks were arrested, Alwalid Bin Talal (Rotana), Walid Al Brahim (MBC), Saleh Kamel (ART)

The heads of the main three Saudi owned TV networks were arrested, Alwalid Bin Talal (Rotana), Walid Al Brahim (MBC), Saleh Kamel (ART)

— Ali Hashem ??? ???? (@alihashem_tv) November 4, 2017

As Bloomberg adds, Saudi King Salman appointed a former HSBC banker to head the country’s economy ministry and removed one of the royal family’s most prominent princes from as head of the National Guard. Separately, a number of Saudi princes and former ministers were arrested by authorities hours after the announcement of a new anti-corruption committee, with sweeping powers and headed by Crown Prince Mohammed bin Salman, the Saudi-owned Al Arabiya news service reported.

Prince Miteb, son of the late King Abdullah, was replaced as minister of the National Guard by Prince Khaled Ayyaf, according to a royal decree carried by state-run media late Saturday. Before his ouster, Prince Miteb was one of the few remaining senior princes to have survived a series of cabinet reshuffles that promoted allies of the crown prince, who is the king’s son and heir to the throne.

 

King Salman has sidelined other senior members of the royal family to prevent any opposition to the crown prince. Prince Mohammed, 32, replaced his elder cousin, Muhammed bin Nayef, as crown prince in June, a maneuver that removed any doubt of how succession plans will unfold following the reign of King Salman, now 81.

While details remain scarce about this "Saturday of the long Saudi knives" - which some have suggested may be a countercoup attempt -  DPA confirms the Al Arabiya report that three senior state officials were sacked.

Salman relieved Prince Moteib bin Abdullah of his post as minister of the National Guard, replacing him with Khaled bin Ayaf, the official Saudi news agency SPA reported. Additionally, Minister of Economy and Planning Adel al-Faqieh was replaced by Mohammed al-Tuwaijri, SPA said, quoting a royal decree. Commander of the Saudi Navy, Abdullah al-Sultan, was replaced with Fahad al-Ghafli.

No official explanation was given for the sackings.

 

In recent months, the Saudi monarch has carried out a string of reshuffles appointing young people in senior state posts. In June, Salman ousted his nephew as the crown prince and appointed his son Mohammed to become the first in line to succeed him. The monarch on Saturday ordered the creation of an anti-corruption committee led by the crown prince amid a rumoured crackdown on suspected tainted officials and royals. Mohammed, 31, is seen as the driving force behind opening up the ultra-conservative country to the outside world and weaning its economy off oil.

Furthermore, there is speculation that all private flights and VIP departures out of Saudi Arabia have been suspended temporarily, similar to what happened following the last "gentle coup" in June when Prince Mohammed (MBS), 32, replaced his elder cousin, Muhammed bin Nayef, as crown prince in June, a maneuver that removed any doubt of how succession plans will unfold following the reign of King Salman, now 81.

#BREAKING : unconfirmed news:
all private flights and VIP departures in #KSA are suspended temporarily https://t.co/RHvqms0LrF

— ??? ?????? ???????? (@HSajwanization) November 4, 2017

According to the AngryArab blog, the removal of Prince Miteb bin Abdullah as head of the National Guard, means that "this is the first time that the National Guard is not in the hand of Abdullah or his son."

That put all apparatus of the military-intelligence network in the hands of Muhammad bin Salman.  News that Al-Walid bin Talal has been arrested and accused of money laundering.  This could be a service to Trump, who hates Al-Walid: the two fought it out on twitter during the campaign although Al-Walid tried to reconcile with Trump after his election but to no avail. 

Bin Talal"s arrest and the government reshuffle caps off a bizarre day for Saudi newsflow, which started with the resignation of Palestinian prime minister Saad al-Hariri, who announced he was quitting due to fears of an assassination plot, allegedly organized by Iran, followed shortly after by the Saudi defense forces intercepting a ballistic missile as it was about to strike the capital Riyadh.

To summarise today"s even more bizarre Saudi news day:

• Trump urges Aramco IPO


• Lebanon PM resigns


• Saudis intercept missile


• Major cabinet reshuffle; 3 Saudi princes - who run the anti-graft committee - arrested for money-laundering


• A total of 11 princes, >30 ministers arrested on corruption

This is a developing story.

The Intrigue At The Heart Of The Beijing-Riyadh-Washington Triangle

Authored by Valentin Katasonov via The Strategic Culture Foundation,

Saudi Aramco (the Saudi Arabian Oil Company) is the world’s largest petroleum business. It owns more than 100 oil and gas fields in Saudi Arabia with reserves of at least 264 billion barrels of oil, which is estimated to be approximately one-fourth of the world’s known reserves of this raw material. The company’s production figures do not give the full picture, as data exists only for a few years. But as an example, in 2013 Saudi Aramco produced 3.4 billion barrels of crude oil. Analysts calculate that every year the Saudi company extracts about twice as much oil and gas, in terms of barrels of oil equivalent, as the largest US company ExxonMobil. Interestingly, Saudi Aramco never appears in the rankings of the world’s largest oil producers, since it does not publish financial information such as profit, sales, assets, or market capitalization. Therefore America’s ExxonMobil and Chevron, China’s Sinopec and PetroChina, the Anglo-Dutch company Royal Dutch Shell, Great Britain’s BP, and France’s Total top the rankings. But everyone knows perfectly well that these leaders in the global oil industry are mere dwarfs compared to Saudi Aramco.

Saudi Aramco’s management set off a real bomb in early 2016 when they announced their plans to privatize part of the company through a stock market IPO. The proposal was to sell shares in Saudi Aramco equal to about 5% of the company. But an estimate of the company’s potential market price is needed in order to understand how much this would be in absolute terms. Almost the next day after the announcement of the potential sale of part of the company (in January 2016), the global media published a stunning evaluation by the independent oil analyst Mohammad Al Sabban, a former senior adviser to the Saudi Arabian oil ministry. He estimated the company’s worth at $10,000,000,000,000 (ten trillion USD). For comparison I should add that in 2016 the largest US oil company, ExxonMobil, barely exceeded $350 billion in share capital. And yes, It’s true that later on some of the hype in the assessments died down and more rational numbers were cited, most often $2 trillion. This meant that Saudi Arabia would be able to rake in approximately $100 billion from the sale of 5% of the company. But the company’s biggest trump card isn’t even the current record levels of oil production, but rather the reserves of hydrocarbon raw materials at Saudi Aramco’s disposal. And that’s a number that none of the companies named in the rankings of the global oil industry can even begin to approach.

At present, Riyadh adjusts and verifies the data on the hydrocarbon reserves in the fields owned by Saudi Aramco. Financial reports are painstakingly drafted in the needed formats for a public offering of shares. The company is being restructured to optimize the way it is organized and managed. And finally, a crucial step was taken to lower the taxes on the company’s profits. The traditional tax rate has been 90%, but this year it was set at 50%, which roughly corresponds to the level at which the leading Western oil companies are taxed. Lowering the tax rate raises dividends and makes the company a more attractive target for investment.

But beginning in early 2017, the estimates of Saudi Aramco’s market value have unexpectedly begun to decline. Appraisals began to surface that claimed the company’s share capital was only worth $1.5 trillion, then $1 trillion. The consulting firm Wood Mackenzie estimated Saudi Aramco’s worth at $400 billion overall, bringing it closer to US-based ExxonMobil. And suddenly Western consultants began talking about the need to “discount” the value of the Saudi company, since it is state-owned, and in the securities markets all government issues are by convention sold “at a discount.” They point out that although Saudi Aramco currently pays 50% of its profits in taxes, since the government owns the company anyway it could restore the 90% tax rate tomorrow with a simple stroke of the pen. There is also the fear that oil prices could be low for the next few years, and Saudi Aramco might not be able to generate big profits. But none of that can remotely explain why the valuations of the Saudi company have dropped so precipitously in the past year.

Analysts blame this on the pressure Washington is putting on Riyadh, for reasons that have as much to do with the currency market as the oil market. And the pressure coming from Washington is, in turn, a response to the pressure also being exerted on Riyadh by China, which wants to buy oil from Saudi Aramco in renminbi instead of dollars. China is currently the world’s biggest oil importer, knocking the US out of its former first-place position. China is also the Saudi oil industry’s biggest customer, and Beijing does not want to pay extra for that black gold using American currency. A number of oil exporters that sell to China have already partially or entirely transitioned to settling their accounts in renminbi. Topping that list are Nigeria and Iran. Russia has also recently begun to sell some oil to China for renminbi (although only small percentage as yet).

Saudi Arabia, however, is heavily dependent on the US and has thus far refused to settle its accounts in renminbi. And that rebuff is costing the country dearly: Beijing is gradually finding other suppliers to take Riyadh’s place. The Saudis used to be China’s biggest foreign supplier of oil, but recently Russia has squeezed them out for that number-one spot. If this continues, Saudi Aramco might lose its Chinese market altogether.

Riyadh now finds itself caught between a rock and a hard place. It’s hard to imagine what Saudi Arabia could be hit with from across the Atlantic, should it sell even one barrel of oil for Chinese currency. After all, that would be a direct challenge to the petrodollar, which was born right there in Saudi Arabia in the 1970s, midwifed by the negotiations between Henry Kissinger and King Faisal.

Washington has sternly warned Riyadh to refrain from any ill-considered move to replace the dollar with the renminbi in its transactions with China, lest other players in the oil market follow suit (oil might then be traded for rubles, rupees, rials, etc.) And tomorrow that epidemic of transitioning to national currencies could infect other commodity markets. Incidentally, this year Beijing will begin to trade oil futures priced in renminbi on its commodity exchanges and claims that this is only the first step.

Voices have already been heard within the US president’s entourage that suggest blocking the listing of Saudi Aramco shares on the New York Stock Exchange. Signs have emerged of an organized campaign to short-sell the Saudi oil company. In light of that development, Riyadh has announced that it will put off its share listing until a later date. But its problem isn’t going to go away - Saudi Arabia will still have to make a choice between the dollar and the renminbi.

Although Beijing is upping its pressure on Riyadh, it is also simultaneously offering to directly buy out 5% of Saudi Aramco, while allowing the Saudis to forgo the usual ritual of listing shares on Western stock markets. And China is prepared to shell out a “fair” price (about $100 billion). The Chinese government has already announced that it is forming a consortium of energy and finance companies, plus China’s sovereign wealth fund, in order to purchase a “chunk” of the Saudi company. The Chinese media reports that that consortium is ready to become a cornerstone investor in Saudi Aramco.

Beijing’s winning move in its chess game against Washington has neutralized the US threat to disrupt the sale of Saudi Aramco, while simultaneously pushing Riyadh toward a decision to transition Saudi oil sales to the renminbi.

And so the plot thickens inside the Beijing-Riyadh-Washington triangle of intrigue.

Another Gulf Crisis: Dinar Devaluation Looms As Bahrain Begs Neighbors For Bailout

Despite the recent rise in oil prices, all is not well among the allies in the Gulf. The "pegged-to-the-dollar" Bharaini Dinar has tumbled in the last few days as Bloomberg reports the nation has asked Gulf Arab allies for financial assistance as it seeks to replenish its foreign-exchange reserves and avert a currency devaluation - which could spread contagiously through MidEast markets.

Bloomber notes that the slump in oil prices has battered the six-member Gulf Cooperation Council, at times raising questions over whether a dollar peg seen as a bedrock for economic stability for more than three decades was sustainable. And while bets against the region’s currencies have subsided this year, a devaluation of a GCC member would risk shifting the attention to others. Gulf central banks, including Bahrain’s, have repeatedly brushed aside talk of abandoning their exchange-rate regimes.

But Bahrain has seen its central bank"s foreign reserves collapse over 75% from 2014 highs as they have defended the currency peg.

And so, as Bloomberg reports, according to people with knowledge of the talks, Bahrain has asked for a bailout.

The request was made to Saudi Arabia and the United Arab Emirates, two of the people said.

 

A third person said Kuwait was also asked.

 

The countries responded by requesting the island kingdom do more to bring its finances under control in return for the money, the people said on condition of anonymity because the discussions were private.

 

The talks are at an early stage, one person said.

It appears the FX markets are not convinced as the Dinar tumbled...

The IMF estimates that Bahrain needs oil prices at $99 a barrel to balance its budget this year, compared with $73.1 a barrel for Saudi Arabia, which is overhauling its economy.

While Brent crude is trading at the highest level in more than two years, it’s still almost $40 below Bahrain’s breakeven price.

But, Bloomberg points out that economists say that a Saudi-led bailout of Bahrain will be less costly than cleaning up the mess of a devaluation.

“Most people are fully expecting the other Gulf countries to come to Bahrain’s aid,” said Jason Tuvey, a London-based economist at Capital Economics.

 

“If Bahrain was forced to devalue its currency it would probably start to raise questions about other currency pegs.”

Will this be the next ripple to spook markets? Or just another dip to buy?

China Has Practiced Bombing Runs On Guam

Just as President Donald Trump is preparing to embark on a nearly two-week tour of Asia – his first since taking office – where he is expected to discuss, among other topics, the regional threat posed by North Korea, Defense News is reporting that China has reportedly been conducting bombing drills targeting the US territory of Guam.

Reports of China’s aggressive expansion of its air force – an attempt to exert its dominance over contested territories in the South China and East China seas – were relayed by Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford during a briefing with reporters.

China “is very much the long-term challenge in the region,” Dunford said. “When we look at the capabilities China is developing, we’ve got to make sure we maintain the ability to meet our alliance commitments in the Pacific.”

The notion that both North Korea and China have threatened Guam, either explicitly or tacitly, speaks to the fact that China is the biggest threat to US security in the Pacific, nuclear standoff with North Korea notwithstanding, Dunford said.

To wit, a conflict with North Korea is still viewed as “a fight we can win,” military officials said during the briefing. With China, they said they “worry about the way things are going.”

Followers of US activities in the Pacific may have noticed the increase in confrontations between US and Chinese forces, both in the water and in the sky. While it hasn’t been nearly as widely publicized as the Chinese military’s buildup in the South China Sea, China has also been building its fleet of fighter jets, operating daily, aggressive campaigns to contest airspace over the East China Sea, South China Sea and further out into the Pacific, Defense News reported.

The officials described the escalatory behaviors by China in a briefing they provided to reporters traveling with Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford.

China’s willingness to test boundaries has caused the number of confrontations between Japanese and Chinese fighter jets to escalate dramatically…

Over the last year Japan has scrambled 900 sorties to intercept Chinese fighters challenging Japan’s air defense identification zone, or ADIZ. In 2013 China announced borders for its own ADIZ, borders which overlapped Japan’s zone and included the disputed Senkaku Islands in the East China Sea. Since then, increased interactions between Japanese and Chinese aircraft ultimately resulted in Japan relocating two fighter squadrons to Naha Air Base on Okinawa to more easily meet the incursions, the officials said.

 

“We now have, on a daily basis, armed Chinese Flankers and Japanese aircraft” coming in close proximity of each other, the officials said, adding that intercepts between the U.S. and China are also increasing.

…While US military officials have accused the Chinese air force of provoking the US by staging intercepts of US aircraft.

“It’s very common for PRC aircraft to intercept U.S. aircraft” these days, the officials said, referring to the People’s Republic of China.

 

Chinese aircraft are also testing U.S. air defense identification zones, the officials said. Chinese H-6K “Badger” bombers upgraded with 1,000 mile range air launched cruise missiles are testing U.S. defense zones around Guam.

 

The Badgers run “not infrequent” flights to get within range of the U.S. territory, they said.

 

“The PRC is practicing attacks on Guam,” the officials said.

 

The vast majority of the flights occur without an incident, such as a report of unsafe flying, for example. The officials said they follow U.S. Pacific Command guidance on how to respond in those events, so they do not further escalate.

DefenseNews noted that the military relationship between the US and China remains open, if guarded. US officials meet twice a year at the Military Maritime Consultative Agreement conference, where the incursions are discussed along with other security topics.

However, officials described China’s repeated confrontations as part of a strategy of normalization, whereby Chinese officials repeatedly test boundaries until regional gradually come to accept their expanded presence. Ultimately, the strategy is aimed at forcing the international community to accept “the nine-dash line” – the contest maritime border surrounding islands in the South China Sea that China has claimed and developed, but have been the subject of an international dispute with several of China’s regional neighbors. Last year, an international court ruled in favor of the Philippines’ claim of ownership, but the ruling was promptly ignored by the Chinese.

The expanded Chinese fighter and bomber runs are just one part of the country’s effort to “win without fighting” to gradually normalize the gains China has made in the South China Sea, the officials said.

 

There are other pressures. For example, the officials said they estimate the People’s Liberation Army Navy has placed as many as 150,000 Chinese commercial fishing vessels under its direction, even though they are not official Chinese navy. The Chinese fishing vessels make coordinated attacks on Vietnamese fishermen, the officials said, ramming and sometimes sinking boats near the Paracel Islands. China took the territory from Vietnam in the 1970s and has militarized some of the islands. The area remains a traditional fishing area for the Vietnamese.

 

Taken together, China’s activities suggest it is preparing to defend expanded boundaries, the U.S. officials worry.

 

“I think they will be ready to enforce it when they decide to declare the Nine-Dash line as theirs,” one of the officials said, referring to the territorial line China has identified that would notionally put the entire South China Sea under Chinese control if enforced.

Ultimately, the US fears that Chinese systemic provocations will erode the so-called “rules-based order” – the system of international codes and treaties that governs military relationships between sovereign states.

If unchallenged, the U.S. officials worry that China could slowly force countries away from what they describe as the “rules based order” — essentially the standing international treaties and norms — in the region and make them shift their security alliances to Beijing for their own economic survival.

 

Dunford said the U.S. would not allow that to happen.

 

“We view ourselves as a Pacific power,” Dunford said.

 

“There are some who try to create a narrative that we are not in the Pacific to stay,” he said. “Our message is that we are a Pacific power. We intend to stay in the Pacific. Our future economic prosperity is inextricably linked to our security and political relationships in the region.”

 

While all of the officials stressed that there is no imminent danger of a conflict with China, U.S. forces in the region are rethinking what a Pacific fight would look like.

 

“If we find ourselves in conflict out there we will be under air attack,” the official said.

While North Korea will likely be the main topic of discussion during Trump’s Asia tour, Dunford said he expects Trump will convey the US’s displeasure with China’s increasingly aggressive posture in the Pacific.

Of course, while China has cooperated with the US in passing sanctions against North Korea, while partly acquiescing to US demands that Beijing curtail economic support for the Kim regime, Dunford seems to suggest that China’s cooperation on these issues is nothing more than a ploy to create a buffer of goodwill as it gradually expands its reach in the Pacific. The question now is: Will the US seek to more boldly counter China’s advance? Or, like the famous analogy of the frog in the pot of boiling water, will US reticence allow China to keep pushing until it is the dominant military power in the Pacific?

What do you think?
 

US Air Force Admits To Harvesting Russian Tissue

A day after Russian President Vladimir Putin surprised members of Russia’s human rights council by informing them that some shadowy entity - possibly with ties to the United States - had been collecting biological tissues from Russians from different ethnic groups, the group responsible for harvesting the tissue has revealed itself.

While some initially discounted Putin"s remars as another loony conspiracy theory, as it turns out, he was right: The group responsible for the tissue collection was none other than the US Air Force, proving that yet another conspiracy theory has become a conspiracy fact.

A representative for the US Air Force Education and Training Command explained to Russia Today that the choice of the Russian population was not intentional, and is related to research the Air Force is conducting on the human musculoskeletal system.

Eyebrows were first raised in July when the AETC issued a tender seeking to acquire samples of ribonucleic acid and synovial fluid from Russians, adding that all samples (12 RNA and 27 synovial fluid) “shall be collected from Russia and must be Caucasian.” The Air Force said it wouldn’t collect samples from Ukrainians, but didn’t specify why.

According to AETC spokesman Capt. Beau Downey, the 59th medical group’s molecular research center is currently conducting “locomotor studies to identify various biomarkers associated with trauma.”

Downey told Russian media that the study required two sets of samples: disease and control samples of RNA and synovial membrane. The first set was provided by a “US-based company.”

Since the first set of tissue, provided by a US company, was sourced from Russia, the Air Force opted to collect the second set of data from Russians, too, to eliminate any confounding variables that could skew the results of the study. He did not say which set - the control or the diseased set - was collected first, and neglected to provide any further details about the study.

However, some suspect that this explanation is merely a ruse, and that the Pentagon is collecting the tissue for a much more sinister purpose, according to RT.

Russian President Vladimir Putin said on Monday that Russian genetic material is being harvested all over the country. “Do you know that biological material is being collected all over the country, from different ethnic groups and people living in different geographical regions of the Russian Federation? The question is – why is it being done? It’s being done purposefully and professionally. We are a kind of object of great interest,” Putin told Russia’s Human Rights Council, without specifying who might be behind the activities involving Russians’ biological samples. “Let them do what they want, and we must do what we must,” he said.

 

The fact that Russian tissue samples specifically are on the wanted list made some wonder whether the Pentagon is working on a biological weapon to target Russians. “I’m not saying that it is about preparing a biological war against Russia. But its scenarios, are, no doubt, being worked on. That is to say, in case the need suddenly arises,” Franz Klintsevich, the first deputy chairman of the Federation Council’s Committee for Defense and Security, wrote on Facebook. “It is also no secret that different ethnic groups react differently to biological weapons. Hence the collection of the biological material from Russians living in different geographical locations. In the west, everything is done extremely scrupulously and is verified up to the tiniest detail.”

Kremlin spokesman Dmitry Peskov confirmed on Tuesday that Russian special services are in possession of intelligence suggesting that NGOs are collecting the genetic material - intelligence that presumably prompted Putin’s initial speculation about who might be behind the collections.

“Some emissaries are really carrying out such activities, representatives of Non-Governmental Organizations (NGOs) and other bodies. Such cases were registered, and security services, the president naturally have this information,” he said.

This is not the first attempt to collect samples of Russian genetic material by foreign agencies in Russia, Igor Nikulin, a former member of the UN biological weapons commission, told RT.

“Such attempts were made back in the 90s, when there was a Human Genome program, then there were various programs in the 2000s too… under different pretexts, including the most noble, but for some reason all this happens in the interests of the US military department, and this raises suspicion,” Nikulin said.

He noted that, as a rule, “samples of Europeans of the Slavic group, mostly Russians” are sought-after. “Blood samples are taken for analysis, and if an organization is foreign, what they are doing with the results is always unknown,” he said.
 

NYC Terror Suspect Was "Very Friendly" Uber Driver, Friend Claims

It"s been less than two hours since police identified the suspect in today"s Halloween terror attack in NYC as 29-year-old Uzbek national Sayfullo Habibullaevic Saipov, and already the New York Post has published an interview with a friend of the suspected terrorist who reportedly expressed complete shock when told his friend had killed 8 people and injured more than a dozen others in what some sources described as the deadliest terror attack in NYC since 9/11.

Kobiljon Matkarov, 37, and a fellow Uzbek native, described Saipov as a "very friendly" man who worked for Uber. Matkarov met Saipov in Florida about five years ago shortly after he came over from Uzbekistan. The two connected over their mutual heritage, with Matkarov adding that Saipov had no terrorist connections.

“He is very good guy, he is very friendly… he is like little brother… he look at me like big brother,” Matkarov said by phone Tuesday from his home in Miamisburg, Ohio.

Saipov was identified as a resident of Tampa, Florida, by police but according to Matkarov had been living in New Jersey where he drove for Uber as recently as this summer. Matkarov said he last saw Saipov in June when he asked him to a ride to JFK, where the family was catching a flight to Uzbekistan.

“He dropped me to the airport with my family… I called him and said I needed a ride."

Matkarov said Saipov got along well with Matkarov"s five kids, who enjoyed playing with Saipov.

“My kids like him too, he is always playing with them. He is playing all the time,” Matkarov remembered.

But when Matkarov’s son asked for a picture with Saipov, he refused.

“He no like that. He said no,” Matkarov said.

New York Gov. Andrew Cuomo said Saipov acted alone when he carried out today"s attack and that there were no signs of a wider plot. However, the New York Times has reported that allegiance notes to ISIS written in Arabic were found at the scene.

Chinese Police Foil Plot To Assassinate Kim Jong Un"s Nephew

As the two women who fatally poisoned Kim Jong Nam with a toxic nerve agent face the gallows in a Malaysian murder trial, Bloomberg is reporting that Chinese police have broken up a plot purportedly masterminded in North Korea whereby a group of men were dispatched to Beijing to murder Jong Nam’s son, 22-year-old Kim Han Sol, who is also the nephew of North Korean leader Kim Jong Un.

Since taking the reins of the North Korean state following the death of his father in 2011, Jong Un has readily murdered members of his family to eliminate any potential challenges to his rule. Chinese police arrested two of seven North Korean agents suspected of involvement with the plot.

Jong Un executed his uncle Jang Song Thaek in 2013 on charges of graft and factionalism. Earlier this month, the leader promoted his 28-year-old sister to the ruling party’s political wing, bringing her closer to the center of power, Bloomberg reported.

Kim Han Sol

Some agents are being interrogated in special facilities on the outskirts of Beijing, a South Korean newspaper reported without elaborating on whether the other five were arrested. China’s foreign ministry didn’t immediately respond to a faxed request for comment.

Kim Han Sol identified himself as the son of Kim Jong Nam – who was poisoned in February during a brazen attack at Kuala Lumpur airport – in a YouTube video released earlier this year. Kim Jong Nam was the eldest son of late North Korean leader Kim Jong Un.

South Korean government officials have speculated that Kim Jong Un was behind the murder of his half-brother, a critic of his leadership who had lived outside the country for years. The Associated Press reported that attorneys in the trial of Jong Nam’s suspected assassins have sought to pin the blame for the assassination on four shadowy North Korean figures believed to have masterminded the murder plot.

Authorities in Malaysia said the two women charged with Kim Jong Nam’s murder used the chemical weapon VX in the attack, claiming they were trained to swipe the poison on the victim’s face and knew the substance was toxic. The pair have pleaded not guilty.

The "Iron Coffin Lid": Why The Euphoric Surge In Japanese Stocks Is Coming To An End

Last week, Japan"s Nikkei 225 index enjoyed its longest winning streak in history which eventually ending after 16 consecutive days of gains, only to resume rising after a brief one day hiatus. And, as foreign investors once again flood the Japanese stock market, chasing the momentum which has pushed local stocks to levels not seen since 1996, the question on everyone"s lips is how much longer can this continue?

Offering a decidedly downbeat outlook on Japan"s market exuberance, Shannon McConaghy - portfolio manager at what we have in the past dubbed the world"s most bearish hedge fund, Horseman Capital Management - believes that the euphoria is about to end. The reason: the ominously sounding "Iron Coffin Lid."

In a note released late last week, McConaghy writes that there has been a lot of excitement over Japanese equities of late, with hyperbole from the sell-side, and others interested in promoting Japanese equities, becoming extreme. However, he cautions that "there is not a lot of discussion around the risks to Japanese equities from current elevated levels" and adds that "one observation I would make is that Japan has risen to these levels on a number of occasions over the last 25 years, only to fail spectacularly each time against what is referred to, by some in the Japan markets, as the “Iron Coffin Lid”. History suggests it is far better to be short Japanese equities from these levels than to be long."

So what is this Iron Coffin, why does it have a lid, and what happens next?

Below is a visualization of this "Iron Coffin Lid" effect: it shows the key resistance level in the Topix beyond which the index has failed to progress every time in the past quarter century.

There"s more than just a chart however: here is Horseman"s take on why this latest rally in Japanese stocks is also set for disappointment.

For those unwilling to outright short, I would point out that historically Japan has had meaningful underperformance following past bursts of outperformance. In these periods it is particularly appealing to short against longs in higher growth areas. Japan also provides amplified short returns during global down turns. As such it can be a low cost but high return hedge to risk-off impacting long positions elsewhere. One way to identify when Japan is about to provide its greatest periods of underperformance is when its market capitalisation exceeds its Gross Domestic Product (GDP). Again, on this measure history suggests it is far better to get short Japanese equities at current levels than to get long.

 

 

One way to think about Japan’s persistent underperformance is that past market rallies have been quickly frustrated by structurally weaker GDP growth, as opposed to other markets with more sustainable growth. Japan’s GDP only grew +1.7% over the last 10 years, a CAGR of +0.169%. It grew even less in the 10 years prior. It is no mere coincidence that the market has failed to break out during decades of weak economic activity. Once again the market is pricing in significant economic expansion to come in Japan but its demographics, the key reason for past structural weakness, are only getting worse. I expect the euphoric hope held by many in the market, that “this time is different” in Japan, will once again be crushed by the “Iron Coffin Lid” that is Japan’s structurally weak economy. Long positions in Japan will likely be buried alive again while short opportunities thrive. Yes, Japan’s GDP growth rate has been higher since 2012, during what I would consider a recovery phase. But the drivers of growth in the three largest components of GDP growth are unsustainable, exhausted and now showing clear signs of reversing. Our market views to be released over coming days will look into these three major components of recent GDP growth in more detail.

Originating from Horseman Capital, hardly known for its optimistic outlook, here is the fund"s take on why Japan is set for more pain once the current euphoria fades, and how to capitalize on this imminent decline:

As a short preview, Japan faces immense risks to its economic system from;

 

1. Declining private consumption as the number of households in Japan starts to decline. Nowcast data also shows a marked decline in household consumption in recent months.


2. A precipitous decline within the financial sector, an often forgotten component of GDP. With the Japan Financial Services Agency now reporting that most regional banks have become loss making in core businesses.


3. A roll-over in the real estate sector as residential oversupply hits, vacancy rates rise, rents fall, prices decline in some areas and contract ratios indicate more price cuts are coming.


4. Net export growth, which has been driven by a weak Yen and weak oil prices, faces a risk of the Yen strengthening 22% back to the long run real effective exchange rate, as well as continued oil price rises.

 

Short opportunities in regional banks, real estate developers, Real Estate Investment Trusts (REITs) and mid-size retailers are particularly appealing. The first three of these sectors, about which we have written over the last two years, have been noticeably weak but still offer significant downside. The retail sector, about which we have only recently began to write, has yet to turn down but was a notably weak performer in the last years of the last global  credit cycle. Importantly we believe that shorting these sectors does not require an end to the global credit cycle, but they would likely generate amplified short returns in that environment and hence afford excellent hedges to other longs elsewhere.

Finally, it"s worth recalling that as of one month ago, the BOJ already owned three quarters of all Japanese ETFs: a number which is now certainly higher, and is a non-trivial reason why Japan"s stocks have enjoyed the recent surge. Of course, with ETF supply declining rapidly and the BOJ soon to be locked out of further purchases, the question is what will stoke further "flow" into risk assets (and frontrunning of central bank purchases), and will the BOJ expand its mandate further to buy single name stocks next in the name of "price stability?"

 

In Shocking, Viral Interview, Qatar Confesses Secrets Behind Syrian War

A television interview of a top Qatari official confessing the truth behind the origins of the war in Syria is going viral across Arabic social media during the same week a leaked top secret NSA document was published which confirms that the armed opposition in Syria was under the direct command of foreign governments from the early years of the conflict.

And according to a well-known Syria analyst and economic adviser with close contacts in the Syrian government, the explosive interview constitutes a high level "public admission to collusion and coordination between four countries to destabilize an independent state, [including] possible support for Nusra/al-Qaeda." Importantly, "this admission will help build case for what Damascus sees as an attack on its security & sovereignty. It will form basis for compensation claims."

A 2013 London press conference: Qatari Prime Minister Sheikh Hamad bin Jassim bin Jabr Al Thani with U.S. Secretary of State John Kerry. A 2014 Hillary Clinton email confirmed Qatar as a state-sponsor of ISIS during that same time period. 

As the war in Syria continues slowly winding down, it seems new source material comes out on an almost a weekly basis in the form of testimonials of top officials involved in destabilizing Syria, and even occasional leaked emails and documents which further detail covert regime change operations against the Assad government. Though much of this content serves to confirm what has already long been known by those who have never accepted the simplistic propaganda which has dominated mainstream media, details continue to fall in place, providing future historians with a clearer picture of the true nature of the war.

This process of clarity has been aided - as predicted - by the continued infighting among Gulf Cooperation Council (GCC) former allies Saudi Arabia and Qatar, with each side accusing the other of funding Islamic State and al-Qaeda terrorists (ironically, both true). Increasingly, the world watches as more dirty laundry is aired and the GCC implodes after years of nearly all the gulf monarchies funding jihadist movements in places like Syria, Iraq, and Libya.

Since 2013 The Intercept (+WaPo?) hid NSA docs showing Saudi ordering "rebel" attacks on Damascus. Now released. https://t.co/0PZrBKpJCw

— Julian Assange ???? (@JulianAssange) October 24, 2017

The top Qatari official is no less than former Prime Minister Hamad bin Jassim bin Jaber al-Thani, who oversaw Syria operations on behalf of Qatar until 2013 (also as foreign minister), and is seen below with then-Secretary of State Hillary Clinton in this Jan. 2010 photo (as a reminder, Qatar"s 2022 World Cup Committee donated $500,000 to the Clinton Foundation in 2014).

In an interview with Qatari TV Wednesday, bin Jaber al-Thani revealed that his country, alongside Saudi Arabia, Turkey, and the United States, began shipping weapons to jihadists from the very moment events "first started" (in 2011).

Al-Thani even likened the covert operation to "hunting prey" - the prey being President Assad and his supporters - "prey" which he admits got away (as Assad is still in power; he used a Gulf Arabic dialect word, "al-sayda", which implies hunting animals or prey for sport). Though Thani denied credible allegations of support for ISIS, the former prime minister"s words implied direct Gulf and US support for al-Qaeda in Syria (al-Nusra Front) from the earliest years of the war, and even said Qatar has "full documents" and records proving that the war was planned to effect regime change.

"We argued over the prey and that prey run away".Ladies and Gentleman: To these people #Syria #Assad was nothing but a f....ing hunting game https://t.co/w4oKO5TTK6

— EHSANI2 (@EHSANI22) October 27, 2017

According to Zero Hedge"s translation, al-Thani said while acknowledging Gulf nations were arming jihadists in Syria with the approval and support of US and Turkey: "I don"t want to go into details but we have full documents about us taking charge [in Syria]." He claimed that both Saudi Arabia"s King Abdullah (who reigned until his death in 2015) and the United States placed Qatar in a lead role concerning covert operations to execute the proxy war.

The former prime minister"s comments, while very revealing, were intended as a defense and excuse of Qatar"s support for terrorism, and as a critique of the US and Saudi Arabia for essentially leaving Qatar "holding the bag" in terms of the war against Assad. Al-Thani explained that Qatar continued its financing of armed insurgents in Syria while other countries eventually wound down large-scale support, which is why he lashed out at the US and the Saudis, who initially "were with us in the same trench."

In a previous US television interview which was vastly underreported, al-Thani told Charlie Rose when asked about allegations of Qatar"s support for terrorism that, "in Syria, everybody did mistakes, including your country." And said that when the war began in Syria, "all of use worked through two operation rooms: one in Jordan and one in Turkey."

Below is the key section of Wednesday"s interview, translated and subtitled by @Walid970721. Zero Hedge has reviewed and confirmed the translation, however, as the original rush translator has acknowledged, al-Thani doesn"t say "lady" but "prey" ["al-sayda"]- as in both Assad and Syrians were being hunted by the outside countries.

#Qatar"s ex PM says that Qatari support for jihadists including Nusra in #Syria was in coordination w/ KSA, Turkey & the US via @BBassem7 pic.twitter.com/tu8IMRI7IP

— Walid (@walid970721) October 27, 2017

The partial English transcript is as follows:

"When the events first started in Syria I went to Saudi Arabia and met with King Abdullah. I did that on the instructions of his highness the prince, my father. He [Abdullah] said we are behind you. You go ahead with this plan and we will coordinate but you should be in charge. I won’t get into details but we have full documents and anything that was sent [to Syria] would go to Turkey and was in coordination with the US forces and everything was distributed via the Turks and the US forces. And us and everyone else was involved, the military people. There may have been mistakes and support was given to the wrong faction... Maybe there was a relationship with Nusra, its possible but I myself don’t know about this… we were fighting over the prey ["al-sayda"] and now the prey is gone and we are still fighting... and now Bashar is still there. You [US and Saudi Arabia] were with us in the same trench... I have no objection to one changing if he finds that he was wrong, but at least inform your partner… for example leave Bashar [al-Assad] or do this or that, but the situation that has been created now will never allow any progress in the GCC [Gulf Cooperation Council], or any progress on anything if we continue to openly fight."

As is now well-known, the CIA was directly involved in leading regime change efforts in Syria with allied gulf partners, as leaked and declassified US intelligence memos confirm. The US government understood in real time that Gulf and West-supplied advanced weaponry was going to al-Qaeda and ISIS, despite official claims of arming so-called "moderate" rebels. For example, a leaked 2014 intelligence memo sent to Hillary Clinton acknowledged Qatari and Saudi support for ISIS.

The email stated in direct and unambiguous language that: 

"the governments of Qatar and Saudi Arabia, which are providing clandestine financial and logistic support to ISIL and other radical Sunni groups in the region."

Furthermore, one day before Prime Minister Thani"s interview, The Intercept released a new top-secret NSA document unearthed from leaked intelligence files provided by Edward Snowden which show in stunning clarity that the armed opposition in Syria was under the direct command of foreign governments from the early years of the war which has now claimed half a million lives.

The newly released NSA document confirms that a 2013 insurgent attack with advanced surface-to-surface rockets upon civilian areas of Damascus, including Damascus International Airport, was directly supplied and commanded by Saudi Arabia with full prior awareness of US intelligence. As the former Qatari prime minister now also confirms, both the Saudis and US government staffed "operations rooms" overseeing such heinous attacks during the time period of the 2013 Damascus airport attack. 

No doubt there remains a massive trove of damning documentary evidence which will continue to trickle out in the coming months and years. At the very least, the continuing Qatari-Saudi diplomatic war will bear more fruit as each side builds a case against the other with charges of supporting terrorism. And as we can see from this latest Qatari TV interview, the United States itself will not be spared in this new open season of airing dirty laundry as old allies turn on each other.