Monday, August 31, 2015

ANALYSIS: A flawed US approach to countering IS financing?

Middle East Eye

Military efforts to dislodge the Islamic State (IS) group from its strongholds in Syria and Iraq have not yet had the desired effect, in part due to the lack of a coordinated policy by regional and global actors.
The other major strategy to weaken IS, financial warfare, has been described as “pathetic” despite numerous international efforts, ncluding UN Security Council resolutions, an extensive report by the OECD's Financial Action Task Force (FATF), the Manama Declaration on combating the financing of extremism, the establishment of the Counter-ISIL Finance Group in Rome and pressure from the United States.
Financial crime experts attribute the failure to curb the rise of IS to policy initiatives and the “stalled war on terrorism financing”.

To read more:

Wednesday, August 19, 2015

Can growing pressure make Lebanon’s army reform its military courts?

  Middle East Eye 

BEIRUT - Lebanon is not a military state like Egypt, Jordan or Syria. There is no military-industrial complex like in Egypt, where it is estimated to account for about 30 percent of the gross domestic product (GDP). There is also no clear national leader capable of doing publicity stunts with parachute regiments like in Jordan, and there is no military service.
The last two Lebanese presidents aside - who switched their general's uniforms for suits once in office - Lebanese politics has been dominated more by former militia leaders and technocrats than by an elite officer corps with the potential to carry out a coup.
However, a storm is brewing over the extent of the army’s power, and in particular its use of military courts.
On the one hand, the Lebanese Armed Forces (LAF) exerts tremendous power within the country and has long been seen as one of the only neutral bodies in an otherwise heavily fractured state.
According to many activists it has also been able to further expand its influence in recent years thanks to the growing political vacuum that has left the country unable to select a president since May last year. Furthermore, it is having its hard power upgraded through a $3bn arms pledge from Saudi Arabia, which should see its stockpiles updated.
On the other hand, the body is keen to win public approval and has embarked on a soft power offensive, working to rally the populace around the cross-sectarian institution to keep stability amid regional unrest.
Billboards line the country's roads celebrating the army's 70th anniversary with the words Jamaa Moushtarak (Common Unity). In August, a smartphone app was launched, LAF Hero, with one game about territorial defence where the player has to strategically place army check points to nab terrorists.
This dual strategy has left the army open to criticism, touting itself as the defender of the people while at the same time trying citizens through the military court without full legal process, prompting a battle for reform that is currently underway.

To read more:

Tuesday, August 11, 2015

Britain had an Empire? -

An online video of Indian MP Shashi Tharoor arguing that Britain should pay India reparations for its colonial legacy has gone viral. It prompted much enthusiasm in the Indian press and parliament, as well as responses in the British press arguing both for and against Tharoor’s proposal. Interestingly, it also prompted a short article in the Guardian newspaper, ‘How much did you really learn about the British empire in school?
The article did not really answer the title’s question, even though the answer is ‘bugger all’.
It is quite extraordinary that British school children learn essentially nothing about an empire upon which ‘the sun never set’, which invaded every country on the planet bar 22 countries, spawned the world’s superpower, the United States, and that drew up the borders to so many countries with long-lasting negative results – Pakistan/India (Kashmir conflict), Sykes-Picot (divided up the Middle East), Nigeria, South Africa, and so on.
I had a British education in the 1980s and 1990s. In history lessons we touched on ancient Egypt, the Romans, the Vikings, then flash forwarded to Agincourt, Tudor England, the Industrial Revolution, the two World Wars, and some Cold War history. Colonialism was barely mentioned, or de-colonisation. Students had no idea about the true scale and the long history of the British empire. Then at university, where I studied international history and international politics, I encountered next to nothing about British colonialism; one course was on de-colonisation in Africa, but that was a class only history students took. In fact, I learned more about the British empire from the Flashman novels than I did at school or university – through George McDonald Fraser’s witty novels I read for the first time about the First Anglo-Afghan War (1839-42), the First Anglo-Sikh War (1845-6), the Indian War of Independence (or Mutiny as the Brits call it in 1857), the British and French invasion of China (the Second Opium War, 1856-1860), the invasion of Abyssinia (1868), and the White Rajah of Sarawak.
While Fraser had no real truck with imperialism, his extensive footnotes allowed you to read between the lines, and importantly learn something about what perfidious Albion was up to in the nineteenth century.
The Flashman novels aside, there are few other popular novels about the British empire (although J.G. Farrell’s excellent Empire Trilogy comes to mind), or films for that matter, certainly with a critical perspective produced over the past few decades. It is as if there is a collective amnesia about Britain’s imperial past. The one place you do encounter it is at the Imperial War Museum in London, but that is very much a hagiographic experience, not touching on the dark side of colonialism.
This amnesia extends to political studies too. Despite studying international relations at university, British foreign policy – old and contemporary – was not taught. An internet search showed that only one British university covers British foreign policy, as if Britain was not at all an actor on the world stage, not a part of the G8 or the UN Security Council, and was practising isolationism, when we know that is far from being the case. This is also extraordinary. There were – and still are – plenty of research papers and essays written about US foreign policy – invariably bashing it – but the same does not apply to British foreign policy; Europe yes, but not about what is coming out of Westminster and the Foreign and Commonwealth Office (FCO). Indeed, the FCO’s title says it all really, which should mean students, academics and journalists should be devoting as much, if not more, attention to its activities than Washington’s.
In conversation with Mark Curtis shortly after he published “Unpeople: Britain’s Secret Human Rights Abuses”, in which he states Britain bears “significant responsibility” since 1945 for the direct or indirect deaths of 8.6 million to 13.5 million people throughout the world, I asked him how many people were going through declassified British documents. He answered just one other research he knew of, Caroline Elkins, for her book “Britain’s Gulag: the Brutal End of Empire in Kenya”.
No academics or investigative journalists? He answered in the negative. That may, one hopes, have changed since 2005. But the title to George Monbiot’s article in 2012 discussing Elkins’ book still holds true, ‘Deny the British empire’s crimes? No, we ignore them’.
To have discovered about Britain’s past – varnished and unvarnished – has been a long term endeavour, from one’s own volition. Travel has also helped to discover the true extent of Britain’s empire and its legacy. The fact that all plug sockets in the Gulf Cooperation Council countries are British speaks volumes. Unless I had been there and read about the Gulf, I would never have known that the United Arab Emirates, Qatar and Bahrain all got their independence from Britain in 1971, and Kuwait in 1961. Or known that Cyprus got independence in 1960 – despite the ongoing presence of British Sovereign Base Areas – Uganda in 1962 and Tanzania in 1963. Hong Kong in 1997.
None of these ‘handbacks’ are very old, at all, yet few Brits below a certain age would know, and I would bet the vast majority of schoolchildren as well as university students today wouldn’t know either. Students wouldn’t be able to point on the map the countries that were British colonies. India perhaps. But would they know about the rest of Asia, Africa, South America, the Caribbean? Perhaps from the Commonwealth Games the public would have an idea, but the history of how Britain ‘acquired’ its colonies would be missing.
Tharoor’s suggestion that Britain should pay India reparations, even a token £1 ($1.54) a year as a form of apology for 200 years of occupation, should be strongly considered. Teaching children about the British empire should also be a major component of the curriculum. It is, quite simply, ridiculous that such a broad sway of history is not touched upon, especially a history that has had such a profound effect on the modern world.

Friday, July 31, 2015

Support in a Time of Peril: Nurses and Syrian Refugees

Nurses helping people affected by the civil unrest in Syria do what they can with limited resources, writes Paul Cochrane for Nursing Standard Journal

Volunteer nurse Sylvie in Zaatari camp, Jordan

In the fifth year of the civil war in Syria, nurses working for more than 200 agencies and aid groups in the region are providing paid and unpaid assistance. In 2014, the United Nation’s Syria Humanitarian Assistance Response Plan dispensed 16.5 million medical treatments in Syria. In Turkey, 522,000 people received health assistance in September 2014 alone.
The plan has also provided 3.6 million primary healthcare consultations for Syrians, and trained 4,343 health workers. According to the International Labour Organisation, 75% of Syrian refugees are struggling to meet their food needs or pay for medical care. This is where aid agencies step in.
In neighbouring Lebanon, senior nurse Norma Kebbe works for the international Catholic charity Caritas’ Saint Michel Medical Centre in the Beirut suburb of Sid El Bauchrieh. The clinic sees more than 80 families every day.
‘It is busy because our services are free of charge,’ Ms Kebbe says. The clinic has two doctors, a nurse and an occasional volunteer Syrian nurse. Ms Kebbe, who has 17 years’ nursing experience, decided to leave her public hospital job and take a 20% salary cut to work for Caritas because the clinic’s daytime hours suit her. The clinic cares for Syrian refugees, Iraqi refugees and low-income Lebanese people. 

Ms. Kebbe at the Caritas Clinic

Marked improvement

Over the past two years Ms Kebbe has noticed a marked improvement in refugees’ health. ‘When we started the clinic, refugees were in a bad situation medically and psychologically. After a year, people with hypertension are improved, there are fewer skin infections and follow up is better,’ she says.
Patients are also referred to social workers and psychologists. ‘All the refugees are traumatised and stressed,’ says Ms Kebbe.
Lebanon has no refugee camps but Jordan does – although about 84% of refugees live outside camps. Minimal care is provided by the Jordanian government. The largest camp, Zaatari, with 83,796 refugees, is near Jordan’s capital Amman. Nurse Sylvie, who does not want to give her full name, is from New York and volunteered with the Syrian American Medical Society for a n week in March.
‘It was a shock,’ she says. Conditions at Zaatari’s healthcare facilities were basic and patients’ health issues were related to poor living conditions, trauma and prior medical conditions.
‘Burns from gas stoves were prevalent among women and children. I did a lot of dressings with almost nothing to work with and it was impossible to wash hands between patients.’
Despite the difficult conditions, Sylvie plans to volunteer again: ‘I should be in Jordan doing something useful.’

Syrian refugees: the figures

7.6 million
Internally displaced
3.8 million
1.2 million
Registered in Lebanon
1.6 million
In Turkey
In Jordan
Source: United Nations Office for the Coordination of Humanitarian Affairs (OCHA)

First photo courtesy of Sylvie, second by Paul Cochrane

Wednesday, July 29, 2015

The New Great Game: The West, Uyghers and China

The Unz Review

The control of Central Asia has been a core part of international relations since the “Great Game” between Tsarist Russia and the British Empire. At the turn of the 20th century, John Halford Mackinder developed the “Heartland Theory,” which revolves around the concept of a pivot area/Heartland, that covers Eastern Europe, Central Asia, Western China and most of Eastern Russia. The theory determines that whichever regional power controls Eurasia will determine that country’s supremacy over world politics.
Mackinder’s theory had widespread traction. It was influential to Nazi military planners, and the “Heartland” concept has been apparent in United States foreign policy since President Jimmy Carter’s term in the White House, when the US backed the mujahideen in Afghanistan against the Soviet Union. Mackinder’s theory was pushed by then National Security Advisor Zbigniew Brezinski, a voice still listened to in Washington D.C. circles, and took on renewed relevance following the end of the Cold War.
As a leaked 1992 Pentagon document states: “Our first objective is to prevent the reemergence of a rival that poses a threat on the territory of the former Soviet Union. This is a dominant consideration… and requires that we endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power…Our strategy must now refocus on precluding the emergence of any potential future global competitor.”
A decade after this policy objective, US forces were in Afghanistan, and in 2010, the Obama administration launched its “pivot to Asia” foreign policy initiative, its very name drawn from Mackinder’s Heartland theory.
A clear aim is that the US and its allies – embodied in NATO – are trying to contain China’s ascendancy to retain political and financial power. There is the realization that power is shifting from the West to the East. The US strategy has been proactive, trying to shore up its allies in China’s immediate geographical vicinity, and been aggressive in its military build up, particularly in Asia Pacific. But in Central Asia, the US is on the back-step, unable to undermine Russia and China’s strong positioning, evident in the Shanghai Cooperation Council (SCC). Outside of the SCC, in the immediate area, the US is reducing troops in Afghanistan – albeit to retain a presence until 2024 – and is not as strategic a partner with Pakistan as in the past. The US is struggling to have “full spectrum dominance” in Central Asia, and economically has been losing out to China, in goods and services, to accessing hydrocarbons. Furthermore, China is cementing its position in the area through its Silk Road Economic Belt, which is to run from China to Eastern Europe, and ramping up ties and investment with neighboring Pakistan, evidenced in President Xi’s visit to Islamabad with pledges of some US$46 billion. Additionally, China is challenging the financial status quo regionally and further afield through the launch of the Asian Infrastructure Investment Bank (AAIB).

Back to the Future

American policymakers were aware that exerting US influence in Central Asia was going to be an uphill struggle, if not mission impossible. Washington would not be able to have a military presence with the same capabilities as in the Asia-Pacific, in Taiwan, South Korea and Japan. Moscow would not stand for it, and neither would Beijing. Afghanistan and Pakistan – known as AfPak – therefore become focuses during and after the Cold War.
The NATO presence in Afghanistan has been devastating for the country, and the US’ acquiescence in its relationship with Pakistan and its infamous intelligence service the ISI – which has co-opted and used Islamic terrorist organizations for its own ends to fight India in Kashmir, and retain influence in Afghanistan – has created fertile ground for extremists in the region.
As leaked documents have shown, this has been both intentional and unintentional, with the US on one hand waging its “Global War on Terrorism” and on the other creating the conditions for the rise of Islamic terrorism – for instance ISIS spawned from the battlefields of Iraq – and directly working with and through its allies with Islamic terrorist groups.
In the wake of the Cold War, Britain and the US – along with Arab Gulf allies – utilized Islamist groups, including fighters affiliated with Al-Qaeda, for its own foreign policy objectives in Bosnia, Kosovo and Chechnya, documented in Mark Curtis’ book, which draws on declassified documents, Secret Affairs: Britain’s Collusion with Radical Islam.
As cited in written evidence by Nafeez Ahmed to a UK Parliamentary inquiry in 2010: “According to Graham Fuller, former Deputy Director of the CIA’s National Council on Intelligence, the selective sponsorship of al-Qaeda terrorist groups after the Cold War continued in the Balkans and Central Asia to intensify the rollback of Russian and Chinese power (2000): ‘The policy of guiding the evolution of Islam and of helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia.’”
Covert operations programs have also been carried out by British and American intelligence that supports certain Islamist opposition groups in the Middle East to curtail Iranian and Syrian influence in the region. This came to a head during the uprisings in the Arab world from 2011 onwards, with Western intelligence agencies working with funders Saudi Arabia and Qatar to develop the militant opposition against the regime of Bashar Assad in Syria, as has been documented here, here and here. Turkey, a NATO member, has also been instrumental in supplying Islamic rebels in Syria, including ISIS (the Islamic State).

The move on Xinjiang

At the other end of the “Heartland”, Eastern Europe, the US and Europe have been involved in regime change in Ukraine, utilizing non-governmental organizations (NGOs) to undermine the Kiev government away from the Russian orbit, and through backing pro-Western politicians, despite in cases their openly neo-Nazi and fascist sympathies. A propaganda war has been waged in the West that has ignored the West’s subversive policies in Ukraine to primarily demonize Russia, framing the conflict as one of “freedom” and “democracy” and leading to renewed discourse of a “New Cold War”. Such a policy has had mixed success, still being played out, but is a clear geo-political attempt to undermine Moscow in the public eye as well as economically through sanctions. What is notable in the Ukraine arena is that the US has not been directly involved militarily, relying on proxies and covert operations, to not risk an all-out war with Russia.
Given the West’s track record with co-opting and using Islamist groups for its own ends, as well as undermining democratically elected governments that do not see eye-to-eye with the US since World War II through coups and assassinations, it is far from conspiratorial to suggest that such tactics will be employed in the future against Chinese interests.
As such, Xinjiang is China’s Achilles heel, bordering on Kyrgyzstan, Kazakhstan, Tajikistan, Afghanistan and Pakistan, as well as having abundant hydrocarbons and being a key transit hub for the Silk Road Economic Belt. As mentioned, the US is attempting to contain China in the Asia-Pacific, and while it is strengthening its relationship with India, does not have the same capabilities in Central Asia, which will force the US to act clandestinely through NGOs, pro-democracy organizations, and Islamist groups. For instance, the National Endowment for Democracy (NED), which is funded by the US government and has been linked to subversive measures in numerous countries, including most recently in Hong Kong, is a sponsor of the World Uygher Conference and the Uygher American Association.
This is given further credence by the Uyghers not having the same ‘appeal’ as the Tibetans when it comes to “information politics” and winning “hearts and minds” in the West. The Uygher diaspora has attempted to portray their political grievances as self-determination causes, ‘minority rights’ and ‘human rights’ to capitalize on media coverage in the West. It is a classic method to highlight a cause in the eyes of the Western public, concerned about human rights, women’s rights and so on, the “softer” foreign policy issues. This was evidenced in the media’s use of humanitarian intervention to justify the US-led invasion of Afghanistan in 2001, such as by focusing on women’s rights and bringing “freedom,” thereby simplifying the complex reasons for US military engagement.
But while the Uygher cause will not gain the same traction in the West as Tibet arguably has – for one it is an under-covered area in the media, and secondly the Uyghers’ Islamic identity can be considered a “turn off” for liberal mainstream media – it is becoming a more important issue in Islamic extremist circles.

A Jihadi Front Against China?

Beijing is aware of the international dimension of Islamic terrorism, pressurizing Central Asian states to ban Jihadist groups such as the Turkistan Islamic Party (TIP) in Pakistan, the Islamic Movement of Uzbekistan (IMU), the Islamic Jihad Union, and the East Turkestan Islamic Movement (ETIM).
The TIP is linked to the IMU, which is pushing for the jihad to go beyond Pakistan and Afghanistan into China. Its mufti, Abu Zar al-Burmi, has become a prominent Jihadi leader in Pakistan with an anti-China message that is reportedly gaining in popularity. In 2013, in a speech called “A Lost Nation”, al-Burmi said the “mujahideen should know that the coming enemy of the Ummah (the Islamic community) is China, which is developing its weapons day after day to fight the Muslims.” In the speech, al-Burmi stated Muslims should kidnap and kill Chinese citizens and target Chinese companies, while blasting the Pakistani-Chinese relationship.
In May, 2014, Reuters briefly interviewed TIP’s leader Abdullah Mansour, who echoed al-Burmi’s statements. “The fight against China is our Islamic responsibility and we have to fulfill it. China is not only our enemy, but it is the enemy of all Muslims … We have plans for many attacks in China,” he told Reuters. “We have a message to China that East Turkestan people and other Muslims have woken up. They cannot suppress us and Islam any more. Muslims will take revenge.”
It is highly probable, lacking other options and not able to go head to head with Beijing, that the US will capitalize on such sentiments, urging directly and indirectly attacks against Chinese interests in Central Asia and China itself, as well as further afield, utilizing networks in Pakistan and the Middle East.
A scenario, going by past example, would be to force Beijing’s hand into harsh crackdowns against the Uyghers in Xinjiang, thereby providing ample propaganda opportunities for Jihadi groups to label China as an enemy of Islam, for Western media to highlight the Uygher’s aspirations for self-determination, and draw China into a costly war that will destabilize the Silk Road Economic Belt initiative.
The US appears to have already utilized such a strategy. “Between 1996 and 2002, we, the United States, planned, financed and helped execute every single uprising and terrorism related scheme in Xinjiang (aka East Turkistan and Uyghurstan)”, said Sibel Deniz Edmonds, a former Federal Bureau of Investigation (FBI) translator and founder of the National Security Whistleblowers Coalition (NSWBC), under oath in the US.
Militant Uyghers in the AfPak arena pose the closest geopolitical threat in this regard. Elements of Pakistan’s ISI in conjunction with financiers in the Arabian Gulf, as well as through establish networks with Western intelligence agencies, would pose the greatest concern. Indeed, as in the past when Islamabad played off British and American interests to maximum advantage, so could it play off its main financial backers, China, Saudi Arabia and the US.
Turkey is also a player to be watched in this regard, trying on the one hand to not sour growing ties with China, and on the other keep its affinities and further strengthen relations with Turkic groups. Istanbul has played a major role in the rebel movement against Assad, while the country is home to a large Uygher diaspora. Furthermore, with Turkey a transit hub for rebel groups to enter Syria and Iraq, it has played a role in enabling Chinese Muslims and Uyghers to join ISIS and become radicalized.
Another “Great Game” is unfolding, and the Heartland of Eurasia will be a key arena in the battle for the US to retain a unipolar world, or make room for a multilateral one, which Washington will fight on all fronts to ensure does not happen.
As Brzezinski wrote in The Grand Chessboard, echoing Mackinder: “The US, a non-Eurasian power, now enjoys international primacy, with its power directly deployed on three peripheries of the Eurasian continent [...]. But it is on the globe’s most important playing field – Eurasia – that a potential rival to America might at some point arise”.

Thursday, July 16, 2015

Egypt struggles to meet burgeoning domestic energy demand

Energy World magazine
Renewables are only now beginning to feature in the northern African country of Egypt, which has yet to adopt nuclear energy. Rather, the government is dealing with relentlessly rising demand, writes Paul Cochrane in Cairo

The Egyptian energy sector is facing numerous challenges in the immediate and long term, mirroring how the country is struggling to secure political stability. Insufficient power supply is resulting in sporadic power cuts in the major cities, driving up sales of private generators. Billions of dollars are owed to international oil companies in arrears. As big a concern is Egypt remaining a net importer of energy to meet demand needs, with natural gas imports likely to continue until 2020 (despite the country’s healthy reserves), while ambitious targets for renewable energy may not be met.
The Egyptian government has been scrambling to get a handle on the energy situation, complicated by the political unrest in the country since the 2011 uprising that overthrew former President Hosni Mubarak. Even prior to the unrest, Egypt was struggling to meet its projected energy demand.
The instability made things worse, causing a drain on the state’s finances, economic growth spluttered, and energy and food subsidies rose to account for 20% to 25% of government spending, according to Middle East Economic Survey (MEES) figures. Foreign reserves also plunged, by nearly two-thirds as of 2015, according to International Monetary Fund figures, and the currency was devalued. 

Strapped for cash

Strapped for cash, the government in Cairo began to default on payments to foreign energy companies, owing $7.5bn as of June 2014, according to figures from Egypt’s ministry of electricity and renewable energy.
Natural gas exports plunged from 535bn cubic feet (bcf) in 2010 to 259 bcf in 2012, according to US Energy Information Administration (EIA) data, while domestic consumption of natural gas, which accounts of 53% of power generation, rose from 45 bcf in 2010 to 51 bcf in 2014; production is 5.4 bcf per day.
In 2013, the state started diverting its liquefied natural gas (LNG) away from its two exporting plants, with the one run by Spain’s UniĆ³n Renosa Gas, in Damietta, north-east Egypt, stopping that year, and the BG Group citing force majeure to shut its plant in January 2014.
President Abdel Fattah Sisi, elected in May 2014, has put energy at the top of his agenda, aware that the power cuts during the Muslim Brotherhood’s rule were a contributing factor in fuelling discontent with President Mohamed Morsi. Radical reductions to subsidies were imposed in July 2014, with prices of petrol, diesel and natural gas rising by 40% to 175% – an average of 76% – with fuel and electricity subsidies to be gradually eliminated over five years. 

Justin Dargin said "it is an impossibility for Egypt to be able to lower aggregate demand due to demographics."

Plans to reform power generation

At the World Future Energy Summit (WFES) in Abu Dhabi in January this year, Sisi announced a range of plans and reforms for the sector. Key measures included increasing oil and gas production, diversifying power production through the use of clean coal technology, nuclear energy and renewables. Sisi set a target of 20% of the country’s power supply to come from renewable energy by 2020, aiming to install 4,300 MW of solar and wind power within three years.
This would contribute to the 12 GW that needs to be added to the grid over the next five years, estimated to cost $12bn.
Energy consumption has surged over the past decade, rising from 57mn tonnes of oil equivalent (MTOE) in 2003 to 87 MTOE in 2013, according to the BP Statistical Review of World Energy 2014. In power production, Egypt has added 10.2 GW over the past 15 years, bringing installed generating capacity to 30 GW, but operational capacity is only between 22 GW and 23 GW due to a lack of fuel, according to ministry of electricity and energy 2014 figures.
While per capita electricity consumption is low by global and regional standards at 1,740 kWh (neighbouring Libya is 3,930 kWh and Saudi Arabia 8,150 kWh), according to World Bank data for 2011, it is burgeoning population growth that is driving up demand at an average of 7% a year. The population reached 85.5mn in 2014, up by 13mn on 2006 figures, according to the government’s Central Agency for Public Mobilisation and Statistics.
Reducing demand is not considered a possibility as a result. ‘It is an impossibility for Egypt to be able to lower aggregate demand due to demographics, with 1.3 children born every minute, so demand is going to continue to rise unless the state does a family planning programme like Tunisia did in the 1970s and 80s,’ said Justin Dargin, a UK-based Middle East energy expert at the University of Oxford. ‘But the subsidy reformation programme shows that the government is serious about mitigating the stark growth in energy demand.’ 

 Dr Elagamawy thinks the government forecast of 20% of energy to come from renewables by 2020 is optimistic. Around 15% could be achieved. 

Feed-in tariffs for renewables 

Subsidies aside, where the government is working to reduce conventional energy consumption
is at the household, company and industrial level by introducing last September a feed-in tariff scheme for renewable energy installations.
But while tariffs were released for photovoltaic installations, making use of Egypt’s abundant sunshine and ranging from less than 50 kWh for residential systems to over 20 MW, the scheme will not be available to all households.
‘Not all inhabitants are allowed to install a PV system, as there are certain requirements, like roof space, and the ability to make such investments,’ said Dr Hisham El Agamawy, energy advisor at the Egyptian Association for Energy and Environment (EAEE) and b former advisor to the country’s environment minister.
He believes the potential for smaller-scale solar power installations to be in the new residential and industrial cities springing up on the outskirts of the major metropolises, such as those being developed around Cairo.
Feed-in tariffs were also extended to wind power at the end of 2014. The country has three primary regions to generate wind power, at Hurghada on the Red Sea coast, in the Nile Valley, and in Gebel El-Zeit on the Gulf of Suez. ‘A lot of companies have been certified by the New and Renewable Energy Authority (NREA) to start installation and supply, ranging from 5 kW to 500 kW,’ said El Agamawy.
Indicative of interest in solar and wind power, in January, 177 international consortiums bid for 67 tenders to develop 4.3 GW of projects. According to the NREA, 40 are solar power projects, the rest wind energy projects. In February, the Bahrain-based Terra Sola Group proposed investing $3.5bn in a project aiming to develop solar photovoltaic technology in Egypt.
As for hydroelectricity, it already provides 3% of energy, according to the EIA, and room for further expansion is limited to meet agricultural needs. Expansion of renewables is therefore focused on major expansion of solar and wind, which currently together account for just 1% of current energy consumption. El Agamawy thinks that while the government forecast of 20% of energy to come from
renewables by 2020 is optimistic, around 15% could be achieved.
Mohamed Kassem, General Manager of Nanotech International for Industry and Trade, which develops solar systems, thinks the recent tenders will push production immensely.
‘Once these projects happen over the next couple of years, this should increase the percentage of solar power. With higher electricity prices due to the dismantling of fossil fuel subsidies, Egypt can try to close the price gap with the more expensive renewables, and the feed-in tariff makes it more attractive. We expect more investments,’ he said.
Dargin on the other hand is less optimistic. ‘It is still chaotic in renewables as they can’t get
primary production under control, so Egypt will be hard-pressed to increase to 20%. They are focused on doing anything necessary for energy demand, if that means importing coal, so be it. Environmental concerns are quite secondary,’ he added.


Coal imports, new nuclear? 

Coal has not been a part of Egypt’s energy mix – it relies on coal imports - but is considered more logistically viable than more gas and oil-powered plants. Clean coal technology is being pushed
by the government, in line with European Union (EU) regulations, and Cairo plans to offer tenders this year for coal plants to produce 4 GW. However, the government is facing opposition to coal power for environmental reasons. If the plans go ahead, El Agamawy said power plants will be located in the northern desert to ‘have minimal impact on Cairo or other governorates.’
Another possible avenue is nuclear. Cairo has considered nuclear power for decades but lacked the funds to move beyond research and development at its Dabaa nuclear site near Alexandria on the Mediterranean coast. There was renewed interest in 2011, with announcements to develop four nuclear power plants by 2025, and on a state visit to Moscow in 2013, former President Morsi invited Russian participation.
In February this year, Russian President Vladimir Putin visited Cairo, leading to an agreement with the Egyptian Nuclear Power Plants Authority for state-owned Rosatom to construct a nuclear power plant with a desalination facility. Two nuclear reactors of 1,200 MW each are to be built, with the prospect for a further two.
El Agamawy said there is not expected to be major opposition to the nuclear power plant due to the energy shortages, but had hoped the bid would have been competitive, as with the tender for the United Arab Emirates’ Braka plant, in Abu Dhabi. ‘We were surprised by this agreement, expecting an international tender to compare all nuclear technologies, especially after what happened in the Emirates when there was competition between French and Korean firms, but maybe the circumstances are imposed on us to cooperate directly with the Russians,’ he said.
Another pledge from Sisi at the WFES was to pay off its outstanding debts to international oil companies to get exploration and production back on track. As of December last year, Cairo had paid off a further $2.1bn. ‘There is still $3.1bn left to pay, but it has come to an agreement the international oil companies have more or less signed off on, so it is not just words and shows they’re [Egypt] putting their money where their mouths are,’ said Dargin. 

Gas, oil and LNG 

In the immediate term, Egypt is considering buying gas from Israel, and in March will receive its first shipment of imported LNG. Egypt’s petroleum ministry said in February that Egypt expects to stop importing gas and resume exports by 2020 as exploration and development projects gets underway. The official added that Cairo had inked 56 oil and gas exploration contracts worth $12bn since November 2013.
However, domestic demand for gas is set to continue outstripping production for years to come, while around 75% of gas reserves are in deep offshore waters, requiring greater investor investment and risk to extract.
‘These investments will take some time and massive investments to bear fruit. Considering the significant domestic investments and some reforms and caps on domestic demand, it is a possibility to export LNG in the future. But I think the strategic focus of Egypt in the short to medium term is to satisfy domestic and downstream demand. It is not like in the early 2000s with exports of LNG for revenues,’ said Dargin.

Photos by Paul Cochrane, except image of Justin Dargin, courtesy of Mr Dargin.

Accounting and Business in Egypt - After the revolution

Accounting and Business magazine

As political stability returns to Egypt, greater adoption of international accounting standards is seen as a key factor in galvanising the economy and foreign investment. By Paul Cochrane in Cairo

With the dust settling in post-revolutionary Egypt, economic reforms are on the agenda as the country seeks more foreign investment to get back on its feet. Improving auditing and accounting standards is on the to-do list to bolster capital inflows and the domestic economy.
Egypt has been on a rollercoaster ride since the uprising that ousted long-term president Hosni Mubarak in January 2011. The Muslim Brotherhood came to power in the elections a year later, ushering in a period of uncertainty. In July 2013, Mohamed Morsi, who had been elected president just 12 months before, was put under house arrest following major demonstrations. The leader of the coup, army chief Abdel Fattah Sisi, was elected president in May 2014.
The political turbulence has discouraged foreign direct investment (FDI), which dwindled from US$6.8bn in 2010 to around US$3bn in 2012 and 2013 (according to Central Bank of Egypt figures), and only gradually returned to something like its pre-revolution levels in 2014, when the World Bank valued FDI at US$5.53bn. However, economic growth is still sluggish, way below what is needed to absorb the 700,000 new entrants entering the workforce annually as a result of Egypt’s population growth, according to the government’s Central Agency for Public Mobilisation and Statistics.
Meanwhile, the International Monetary Fund (IMF) says that Egyptian foreign exchange reserves plunged by 50% between January 2011 and late 2014, and the US dollar exchange rate for the Egyptian pound has fallen from 5.70 in 2010 to 7.60 at the time of writing.
Numerous laws and reforms have been delayed because of the political instability. The new government is now planning to reintroduce legislation and some laws previously proposed under the Mubarak regime, such as a new investment law and an amended companies law. Over the past year, the Egyptian Institute of Directors, part of the Egyptian Financial Supervisory Authority, has drafted an updated code of corporate governance, based on Organisation for Economic Cooperation and Development (OECD) guidelines, that should be enacted this year.
There are also hopes that an Egyptian accounting standard for small and medium enterprises (SMEs), based on International Financial Reporting Standards (IFRS) for SMEs, proposed by the Egyptian Society of Accountants and Auditors prior to the revolution, will be implemented.
The supervisory authority has been active since its creation in 1997. In 2008, it established an audit oversight board. But while the financial sector is implementing international best practice, just 213 companies are listed on the Egyptian Exchange, compared with hundreds of thousands of companies not audited to the same standards.




Khaled Dahawy, professor of accounting at the American University in Cairo, says: ‘Unfortunately many SMEs are more interested in tax returns than income statements, so there’s a big mismatch with what we are asking to do. Accountants have become tax consultants.’
Microbusinesses, with fewer than four employees, make up an estimated 91% of Egyptian enterprises, employing 58% of the total workforce, while SMEs account for 8% of enterprises and 25% of the workforce, according to a Carnegie Middle East Center 2014 report, The private sector in postrevolution Egypt.
Mohanad Khaled FCCA, managing partner of BDO Khaled and ACCA voluntary representative for Egypt, says: ‘SMEs are an area we need to work on, as they contribute 80% to 85% of the GDP. That is huge. Imagine how much we need (as accountants) to cater for, as well as the parallel economy we’re not aware of.’
Mohamed Farid, chairman and CEO of Dcode, an economic and financial consulting firm in Cairo, conservatively estimates that if the informal sector were brought into the general economy, there would be a 40% to 50% increase in GDP. But to do that, simplified accounting standards should be applied to ease the cost and resources burden on SMEs, and there would need to be awareness campaigns about accounting processes.
‘The ultimate point is how to expand the role of auditors rather than be only for listed companies and corporations,’ says Farid.
As for the formal business sector, IFRS-based accounting standards were adopted in 2007. ‘They are to a great extent compliant with IFRS – say 95% – but there are four standards we couldn’t have translated due to legal and legislative reasons,’ says Khaled.


The missing four


The four omissions are current cost accounting (except investments), certain employee deductions of profit sharing (by law, not through income statement), general reserves for banks, and financial leasing. Egyptian account leasing legislation contrasts sharply with IFRS. ‘We are still lobbying for legislative change on that as accountants,’ says Khaled.
Implementation of the new standards is patchy outside blue-chip and profitable boutique businesses, however, despite Egypt having a developed accounting sector. Local firms have been expanding internationally and the top 12 global firms all have a presence in the country.
The Egyptian Society of Accountants and Auditors (ESAA), part of the International Federation of Accountants (IFAC), offers courses on the new standards to its 5,000 members, but there has been minimal IFRS outreach to the overall accounting community.
‘That is just 5,000 out of 100,000 accountants [in the country],’ Dahawy points out. ‘Many of our older gentlemen or ladies in accounting have no idea what the standards are. There needs to be mass education courses at low costs and with no exams, just pass or fail, as you can’t implement standards if people don’t know them.’ He would also like to see an accounting law defining the profession and qualifications.
Farid agrees it is not the rules and standards that need improving, but training. ‘There is room for improvement due to the vast number of personnel in this area and the diversity of their backgrounds [with a need for continuous training],’ he says.
As well as the usual tension between academic and technical training, Egypt faces particular issues. Different accounting standards are taught at universities, including IFRS, Certified Public Accountant (CPA) standards and US GAAP, along with the Egyptian standards themselves, published in Arabic.
The primary route to enter the profession is to train for three years at a firm and automatically become a certified accountant after eight years. The second track is through the ESAA, which requires examinations over a three-year period.




Differences in courses, standards and language ability can bring complications. ‘Now, even with CPA, the society asks you to sit two exams, law and tax, which is a disaster, as you may be fluent enough in English for the CPA, but not fluent enough in Arabic for the accounting and auditors exam. It’s a catch-22,’ says Dahawy.
Work was under way before 2011 to establish an Egyptian accounting body to govern the sector but, as with the SME standards, it was put on hold by the revolution. Khaled is hopeful that with more political stability and economic growth such a body will be created and other laws passed to drive development, including legislation on taxation, which is increasingly coming under global regulatory scrutiny.
Khaled says: ‘Accountants have their own ways to deal with tax matters, and that needs to change. It is on its way. It comes down to a number of things, the legal and administrative system. We have a reasonable legal framework; it is the administrative loopholes that, if I may say so, need to be mitigated.
‘One way to enforce taxation is if we make efforts towards introducing the parallel economy into the tax system.’
Dahawy sees an updated code of ethics as key to such change: ‘The previous code dates back to 1933, which is a disgrace. There is, in general, great confusion between what is legal and what is ethically correct, and there needs to be work to understand the difference.’
Such improvements would include greater oversight and enforcement of auditing laws. ‘I don’t recall anyone going to jail recently for an accounting problem, just one in 20 years,’ he says.
In the immediate term, Egypt has been pinning investment hopes on the results of the government-organised Egypt Economic Development Conference, held in March in the Red Sea resort of Sharm El-Sheikh. The aim of the conference was to attract US$10bn to US$20bn in investment, with some US$12bn earmarked for infrastructure projects, showing that Egypt is once again open for business.
While there is optimism, low oil prices may mean less than expected investment from the oil-rich Gulf countries. Ongoing attacks within Egypt on the security forces, conflict in neighbouring Libya, and instability in much of the Middle East may also influence investment commitments. In the medium term, greater adoption of international accounting standards could be critical in attracting FDI beyond infrastructure and high-profile projects.
Dahawy says: ‘To get the FDI that Egypt needs, there should be the stamp of something the investor understands. It’s in everybody’s interest that we move to internationally accepted standards, and more than that, implement them, which we are fighting to do right now.’

Monday, June 08, 2015

Qatar's World Cup blues: What happens if the tournament is revoked?

Middle East Eye

'Expect Amazing' is the slogan for the Qatar World Cup but if Doha loses the event, it could become 'Expect Embarrassment'

When Qatar won the bid in 2010 to host the FIFA World Cup 2022, petrodollars were widely considered to have influenced the vote. Allegations of bribery repeatedly surfaced, most damningly in France Football magazine's “Le QATARGATE” 20 page expose in 2013.

While not able to shake-off the accusations, Doha had a firm supporter in FIFA President Sepp Blatter, who enabled the controversial change of the event from summer to winter to better suit Qatar's sweltering climate.

Then in May, the Swiss authorities arrested members of FIFA for corruption. Would Blatter be next, and Qatar's champion pushed to the exit? The speculation was rife but the answer was - not yet. Blatter was re-elected 29 May and The Qatar Exchange (QE) - the country's stock market - reacted on the news once trading started on the Sunday, rallying by 1.23 percent.

Then Blatter resigned 2 June. The following day it was confirmed that the FBI as well as the Swiss attorney general were probing the 2018 and 2022 FIFA World Cup bidding process. The QE immediately dropped on the news (see below).

“The worry for Qatar has always been Blatter going, and that's now transpired,” said David Roberts, a lecturer in the Defence Studies Department of King’s College London and author of Qatar: Securing the Global Ambitions of a City State.

Media reports quickly emerged that property owners in Qatar would get burnt from the FIFA scandal, and that Doha was standing to lose $200 bn in infrastructure investment related to the tournament.

But would being stripped as the World Cup host be a serious economic loss for one of the world’s wealthiest countries?

Edd Brookes, Senior Director of DTZ Middle East, a real estate services company in Doha, said it was business as usual, dismissing the articles.

“The only people buying in Qatar at the moment are Qataris and GCC citizens, so [its] basically a local market. Frankly, land prices are where they were back in 2010,” he said. Brookes also dismissed Bloomberg's claim that the $18 bn Lusail City development - which is expected to house 200,000 people - was for World Cup tourists.

According to Brookes, that project had been planned in 2003, years before the bid was secured in 2010.

As for the new infrastructure - the railway, the Doha metro, the port, and a network of roads - it is all part of the Qatar National Vision 2030 strategy announced in 2008.

“They are lumping the whole construction industry [together] in comparison to [focusing] on a global event,” said Steven Humphrey, director and head of the cost consultancy programme at AECOM, an engineering design and services firm, in Doha.

“The government departments we have contact with are still pushing on strategy, which is not to do with one event but [with] the National Vision, a bigger philosophy. Perhaps the only impact of the [bribery] rumours, if true, is [slower] time frames and relaxed deadlines, which would actually be a benefit.”
An estimated $4 bn, however, is specifically required for the championship and the construction or renovation of eight stadiums.

“A couple of stadium replacements will still go ahead, so I'd say if something happens in the next two months, [Qatar may] lose perhaps a few stadiums, but the rest will stay as required for existing football clubs,” said Humphrey.

But economic losses are not the only things in play. Losing the championship is expected to have an overly negative effect on Qatar's football culture. Some 65 percent of Qataris surveyed did not attend any matches during the 2013 football season, with 72.8 percent saying heat, humidity, wind and dust were factors for non-attendance. Half of all respondents also said that “annoying behaviour” by crowds was an obstacle to match attendance.

Expect Embarrassment?

Where Qatar Inc. stands to lose the most if stripped of the event is its brand image, which the Gulf state has aggressively worked on, kick-started with Al Jazeera's broadcasting emergence in 1996, and Doha's foray into foreign policy and overseas investment.

“Doha made a lot of bets, and the bets seem to have come off over the last two decades, but [the country] lately seem to be losing time and again, in Libya, Egypt, and going into extra time with the world cup,” said Roberts, in relation to Qatar’s support for now ousted Egyptian President Mohamed Morsi and the Tripoli-based government in Libya.

While the country has wealth that is backed by huge hydrocarbon reserves, to weather any economic losses, if the FIFA corruption allegations are proven true, there would be a reduction in the confidence of international players and clubs to enter the game. Doha's ambitions to diversify its economy through becoming a financial hub to rival neighbouring Dubai would also likely be dented.

“The loss of the event would not be positive, as Doha has been struggling to create itself as an economic hub to match the Dubai International Finance Centre," said Elias Moubarak, head of finance at the law firm Trowers & Hamlins in the UAE.

“Bad publicity will not encourage people to move to the Qatar Financial Centre for example, and I think generally [have] a negative impact on Qatar's objectives.”

The biggest impact of losing the world's most watched sports event would be the knock to Qatar's reputation.

“First and foremost Qatar would see it as an embarrassing loss, and care about that far more than financial implications,” said Roberts. “They would be livid if [they] lost it, and I'm sure Qatar would try to sue FIFA - and anyone they can - back to the Stone Age, as probably hundreds of millions has been spent on public relations, consultancy, designs for stadiums.”

If proven, the bribes, alleged at several million, would be a minimal loss by comparison.

One potential consequence of Qatar losing the World Cup would be shifting away from its favoured investment destination, Britain, which accounts for around $57bn of the Qatar Investment Authority's estimated $170bn global asset spread.
“Domestically it will be a rally around the flag thing as anger will be 100 percent directed externally, especially towards Britain. Qataris are already a vast minority in their homeland and are increasingly resenting the number of foreigners in Qatar as well as the rough time that their state is getting in the Western press,” said Roberts.

“Additionally, there's an overt recognition Qatar is overly invested in London. I imagine this need to diversify would become more pronounced [if the games were scrapped] and [Qatar would] augment the relationship with East Asia countries.”

“Pouring further fuel on the fire to such Qatari sentiment has been England saying they are ‘ready to host’ the 2022 World Cup if asked,” he added.

A flip-side?

A potential flip-side for Qatar losing the tournament would be the spotlight being turn off on labour rights issues and other muck-raking stories that Doha has exposed itself to in the lead up to the World Cup. Media coverage has focused on human rights abuses, while anti-logos, depicting slavery as part of a campaign to urge corporate sponsors to withdraw from the 2022 event, has been doing the rounds online.

“Qatar's brand image might be more dented if they actually host the cup through exposure of the exploitation of the labour force,” said Hannes Baumann, Leverhulme Research Fellow at King's College London.

“By comparison, the Bahrain Formula One has been an opportunity for progressive activism, and a risk for the regime.”

Such coverage and related Qatar-bashing would only heat up as the event approaches and the world's media descends on the peninsula.

“European taxi drivers now know where Qatar is on the map - due to the successful bid - but on the other hand [they also] know about labour deaths,” said Baumann. “If anything, that risk is even greater. People in the know might not have a high opinion of the Qatari regime necessarily, but at the popular level the branding really [could] backfire.”