The Standard

Week in Review

  **** The previous week's Russia-EU summit ended with unresolved disputes over Russian investment in the EU energy markets and the planned US missile shield in central Europe.

**** In a joint letter published in French and German newspapers, the French and German foreign ministers warned that a Russia's planned withdraw from the Conventional Forces in Europe Treaty (CFE) may provoke an arms race.

The ministers referred to the "specter of a new Cold War."

**** Russia placed restrictions on the number of international monitors it would allow into the country to observe the December parliamentary elections. The monitoring agencies called the move "unprecedented."

**** The Chinese company TEDA reached an agreement with Egypt to build an industrial zone near Suez that is expected to pull in $2.5 billion in Chinese investment.

The deal is another tie forged in a growing economic partnership between the two nations.

France and Germany: Danger of "New Cold War"

Foreign Ministers: Russian Treaty Withdraw May Provoke Arms Race

The French and German foreign ministers have urged Russia against withdrawing from the Conventional Forces in Europe Treaty (CFE).

Their appeal appeared on Tuesday as a joint article in the French le Monde and the German Frankfurter Allgemeine Zeitung.   

The foreign ministers warned that a Russian withdraw as planned could provoke an "arms race and new conflicts."

At one point they referred to the "specter of a new Cold War."

Russia is scheduled to withdraw from the treaty on Dec 12 after an announcement was made by President Putin this summer.

The CFE was signed in 1990 and is widely regarded as a linchpin of post-Cold War security.

It limits the deployment of conventional weaponry such as tanks and aircraft between the Atlantic Ocean and the Ural mountains.

The treaty also reduces the chances of surprise military attacks by limiting the number of forces a country can deploy in certain border areas.

The New Russian Foreign Policy

Russian foreign policy has grown increasingly assertive over the past several months.

Russian bombers have rehashed Cold War era flight patterns and drawn fighter escorts from Norway, the UK and the US on multiple occasions.

The Russian military last summer detonated the "Father of All Bombs," and promptly announced it was the most powerful non-nuclear device in history.

President Putin also recently announced his intention to re-vamp the Russian nuclear arsenal on Russian national television.

Until recently many European and American leaders had described Russia's actions as domestic political posturing in lead-up to the power transfer when Putin steps down from the presidency in March 2008.

A full Russian withdraw from the CFE would, however, prove a major geopolitical event.

The security provided by military information-sharing between Europe, Russia and the US would presumably evaporate.

Poland Elects Pro-EU Government

Pro-Market, Pro-EU Leader Pledges Policy Shifts

Polish voters have turned out in numbers not seen since the fall of Communism to elect the Civic Platform party into power. 

With 99% percent of the vote counted the pro-EU party led by Donald Tusk is set to claim 41% of the vote, setting the party up to form a coalition with the moderate Polish Peasants party.

The ousted Law and Justice party, led by Jaroslaw Kaczynski, took a combative political approach to EU affairs that has alienated Poland from the rest of Europe.

Mr. Kaczynksi often played on old nationalist sentiments and stirred up World War II resentments.

Mr. Tusk's Civic Platform party has vowed to repair relations with the EU and focus on Polish opportunities that derive from political cooperation with the rest of the European community.

Mr. Tusk is also seen as pro-business and a proponent of the free market.

EU politicians and European newspapers breathed a sigh of relief on Monday.

Jose Manuel Barrosso, EU commission president, reacted with the words: "I am confident that there can be fruitful cooperation with the next Polish government." He added: "I'm pleased by the Democratic process in Poland."

Battles With President Loom

Mr. Tusk will not have free hand in crafting Polish policy.

Lech Kazcynski, twin brother to Jaroslaw and fellow conservative nationalist, holds the Polish presidency until elections in 2010.

He has vowed to use his veto power to combat Civic Platform party proposals.

Mr. Tusk will need to hold together a broad coalition in parliament to meet his party's objectives.

Week In Review

****The US, France and Germany are separately taking steps to regulate investments by sovereign wealth funds. Sovereign wealth funds are huge investment funds controlled by foreign governments. Their current value is estimated to be between $1.5 and $2.5 trillion.

****Russian President Putin and Iranian President Ahmadinejad met in Tehran on Tuesday. Their call for diplomatic unity among Caspian nations was widely seen as a geopolitical rebuff to France and the US, who have publicly considered military action as a last ditch means of solving the Iranian nuclear dispute.

****The EU and Russia announced they would jointly appoint a panel of experts to discuss EU energy market reforms proposed by the European commission. The reforms would block out Russia's politically combative natural gas monopoly GazProm from investing deeper into the EU market.

****Russian President Putin announced on state-run television that Russia is planning to substantially upgrade its conventional and nuclear military arsenals. His remarks came on the same day Russia test fired and inter-continental ballistic missile.

Democratic Nations to Address Sovereign Wealth Funds

Sovereign Wealth Funds Spark Government Action

The US, France and Germany are reported to be acting separately to address the political threats of sovereign wealth funds both within their respective borders and across the globe.

Sovereign wealth funds are pools of foreign capital acquired and invested by governments.

They are a relatively new occurrence and there are few mechanisms in place for regulating how they invest.

China, Russia, Venezuela and Kazakhstan (among others) hold such funds.

The funds' assets are enormous.

They are currently estimated to control $1.5 to $2.5 trillion dollars.

Morgan Stanley has estimated that this number will balloon to $12 trillion by 2015.

Concern in the US and Europe

US, French and German lawmakers have all expressed concern that the funds will position themselves to take over companies in strategic sectors of western economies.

The fact that the funds are controlled by governments means that their goals will not merely be business-oriented, but motivated largely by geopolitical interest.

The US will call for tight IMF regulations on the funds at the G7 conference in Washington, DC later this week.

France is reported to be working on legislation that would give the French government power to protect French industrial giants from take over.

The German chancellery has two large groups working on legislation would require increased transparency and give the government power to block deals after a review.

Sources also say that Japan will come out as an ardent supporter of the US proposal at the G7.

Week In Review

Putin Shows His Hand, France Stays Tough on Iran

**** Citigroup and UBS announced large write-downs in assets tied to sub-prime securities.

They are two of many American and European banks who took multi-billion dollar hits on their balance sheets as the sub-prime crisis ripped through global credit markets during the third quarter.

**** Russian President Vladimir Putin accepted United Russia's invitation to head its list of candidates in the 2007 Russian parliamentary 'elections.'

Experts see this as Putin's first step on the road toward preserving his power through the office of prime minister.

**** Russian state-owned oil giant GazProm threatened to cut off Ukrainian gas supplies if the Ukrainian government did not pay a $1.3 billion debt by November.

The announcement was shrouded in confusion.

Analysts saw it as a Russian attempt to complicate the formation of a Tymoshenko-led government on the heels of close parliamentary elections in the Ukraine.

**** French Foreign Minister Bernard Kouchner strongly urged his European counterparts to consider EU-wide sanctions against Iran to halt its "nuclear defiance."

Italy, Austria, and Germany expressed reservations.

France Pushes For Iran Sanctions

Kouchner: Move Quickly

On Wednesday French Foreign Minister Bernard Kouchner called for EU-wide sanctions in the face of Iranian "nuclear defiance" in a letter to his EU counterparts.

Mr. Kouchner urged ministers to act quickly before Iran mastered nuclear enrichment and reached "de facto military nuclear capacity."

Iran has carried on its nuclear enrichment program in defiance of UN Resolution 1696 since the summer of 2006.

Mr. Kouchner's comments display a further hardening of France's line in the nuclear crisis.

Mr. Kouchner said on French radio two weeks ago that it was "necessary to prepare" for war in France if negotiations with Iran fell through.

He softened his comments the following day, emphasizing war was a worst-case scenario in the event France exhausted all efforts to "negotiate, negotiate, negotiate, and work with our European friends on credible sanctions."

A Strong European Hand?

Mr. Kouchner's calls for action come as the EU foreign policy chief, Javiar Solana, urged the European parliament to move quickly on the issue.

"We can't wait forever, and we have to see those negotiations are moving ahead. … There is a risk of more sanctions and it is a real risk, we have to get that across," Mr. Solana said on Wednesday.

French and EU initiative to deal directly with Iran has come after the US, China, Russia, the UK, France and Germany delayed the decision on UN sanctions until November.

The US, France, and the UK have tended toward a tougher line while China and Russia are generally considered to have weakened proposals and delayed decisive action.

Many who favor a tough diplomatic stance against Iran have seen this delay as a sign that meaningful UN sanctions are next to hopeless.

The EU is Iran's largest trading partner.

EU-wide sanctions would bypass the watering down of sanctions that would most likely be required to avoid a Chinese or Russian veto.

Most analysts see the UK in line with France.

Germany and Italy have expressed reservations.

China Hacked Pentagon Computers

The Financial Times has reported that the Chinese military successfully attacked the computers of the US Department of Defense.

Reports say that the US was forced to shut down a part of the Pentagon computer system.

Some good speak here:

"Another person familiar with the event said there was a 'very high level of confidence...tending toward total certainty' that the People's Liberation Army was responsible."

Translation:

China did it.

Bad Habits

Hacking into the computer systems of Western governments is becoming a regular past time for the Chinese military.

Last week, you may or may not remember, Spiegel reported that the China had hacked into the computer systems of various German government ministries.

Hmm...

I've been thinking...

You know... Germany is getting cyber-attacked by China... the US Department Defense is getting cyber-attacked by China...

The US and Germany have this history of cooperation thing. Both democracies. Cold War allies. Then there's that whole free market and efficiency thing we have in common.

Maybe somebody wants to say the word 'NATO'. Or 'free world'. Loudly.

Oh, don't worry Beijing. Google or Yahoo! can block that search, too.

Nobody outside of the communist party will have to know.

Der Spiegel: Chinese PLA Hacked German Government Computers

German Der Spiegel reports that Chinese spyware was detected in mulitple German government computer networks.

These included the chancellery, the foreign ministry, and the ministries of economy and research.

German intelligence services discovered the operation in May.

Information networks were infected with "Trojan" spyware when Microsoft Word and PowerPoint files containing the virus were opened.

Hackers based in the northwest Chinese province, Lanzhou, used this software to steal German governmental information on a daily basis until German intelligence services took countermeasures.

German officials told Spiegel they believed the People's Liberation Army of China was directing the operations.

China's rapid economic development over the last decade has also seen it rise as a more potent player in the international game of power.

In mid-August, the Chinese and Russian militaries staged war games in Russia to mark the end of the SCO (Shanghai Cooperation Organization) summit. The war games brought together 6,000 military personnel from Russia, China, and four other Central Asian nations.

Germany Presses China On Climate Change

German Chancellor Angela Merkel has pressed China to address climate change in her first day of a three day visit to the country.

Chinese industry has been fueling its rapid economic growth largely with dirty coal and oil.

Chinese air quality has suffered as a result.

Only 1% of Chinese citizens breathe air considered safe by EU standards.

Chinese pollution also clouds the air of Tokyo, Seoul, and Los Angeles.

The International Energy Commission has reported that China will overtake the US as world leader in greenhouse gas emissions by the end of this year.

According to the Netherlands Environment Assessment Agency, China has already passed that level.

Much like the United States government, the Chinese government has refused to take responsibility for its enormous hand in worldwide environmental damage.

It has provided excuses and appears to value short-term economic expansion at the expense of long-term economic stablity.

As in the US, the thrill and comfort of profit in the short-term is preferred to preserving a prosperous and habitable world for future generations of humankind.

Add political inefficiency to the rap sheet, too.