30 April 2017

Could Le Pen Win and Could Either of Them Govern?

My longtime readers will remember that I am not very good at predicting electoral results.

For instance, given his effective fear campaign, I thought Sarkozy might overtake Hollande in the last week before runoff and it didn't happen. I still think he would have been victorious if he had another week but that is immaterial.

So, this time around instead of making predictions let me make a few observations about what might shape the outcome.

As you probably know, the candidates of the left and the conservative right lost in the first round. The Republican Francois Fillon never recovered from a self-inflicted wound. He might have survived the scandal about paying family members almost a million euros if he hadn't emphatically branded himself as Mr. Clean.

Every politician does that sort of thing and French people are rather jaded about such accusations. What did him in was not shoveling money to his wife and children but the hypocrisy of doing so while condemning such practices.

Socialist candidate Benoit Hamon stood no chance as his idea of universal wage (which actually makes a lot of economic sense) was universally derided. In an increasingly polarized society, this was perceived as my tax euros will be used to give "the others" you know, Africans, Arabs and a bunch of Muslims, money they don't deserve.

He got just 6 percent of the vote.

The other leftists candidate Jean-Luc Melenchon did much better than expected by getting 19 percent of the vote and tying Fillon for third place. Credit the holograms and a slick media campaign.

The two candidates left for the runoff in ten days (7 May) are the far right Marine Le Pen and centrist Emmanuel Macron. Currently Macron polls around 60 percent and looks to be the inevitable winner.

But there is more to it than that.

Polarization and Abstention

Michael Moore's prescient prediction about five states giving Trump the presidency notwithstanding, the real reason the Orange Man won was because a lot of Democratic voters stayed home, including many millenials.

The math is unassailable: 60 percent of millennials voted for Obama in 2012 and 37 percent backed Romney. This time around 55 percent came out for Clinton while the same 37 percent voted for Trump.

5 percent of that block of 60 stayed home. The same thing happened with Hispanics, women, blacks. People hated Clinton and instead of voting for her, they stayed home. She received fewer votes than Obama in 46 states.

A similar dynamic could affect French elections. Think about this: If only 65 percent of Macron voters go to the polls and 90 percent of Le Pen supporters do the same, she will win by 0.7 percent.

It is not as far-fetched as you think. The runoff election will take place on a long weekend. People vote on 7 May, which is a Sunday and Monday, 8 May is a holiday. French people live for those long weekends. They called them "ponds" or bridges. Everyone marks them on their calendar a year in advance daydreaming how they will leave the polluted city behind and rush to the campagne.

Macron voters (24 percent) are mostly urban-based and they much more likely to take off that weekend. Whereas Le Pen's base is in rural France.

More importantly, would Fillon supporters or Socialist voters or Melenchon folks who feel no allegiance to him, stay in to vote for a guy they more or less despise.

Here is a graffiti that sums up the situation.

There is trending hashtag #SansMoiLe7Mai and millennials marched to express their disgust with both candidates, chanting "neither Le Pen, nor Macron."

But there is a tie-breaker: an ISIS operation.

Another Bataclan

I have been telling to my French friends about the possibility of a terrorist attempt just before the election, first round or runoff. ISIS enjoys making grey areas disappear and a terrorist attack is one sure way of pushing people to the the opposite sides.

What happens if another Bataclan or Nice attack takes place? Predictably, ordinary French people would turn towards one candidate who unequivocally promised to deport anyone who seems to sympathize with Islamist terror groups.

Before the first round two men were arrested for planning a terror attack before or after the elections. On election day there were police officers and soldiers everywhere. I am sure it will be the same for the runoff.

But it is not impossible for some idiot to pull off a bloody stunt and if that happens, Le Pen stands a decent chance to win.

Russian Connection

If reports are correct, (and I always approach these things with a chunk of salt grains in my palm) the same hacker group that successfully breached the DNC servers and bolstered Trump's electoral chances, had attacked Macron campaign computers. And apparently, they failed.

Now, I would not be very surprised if Putin backed Marine Le Pen. There is some interesting history of collusion there. On 24 March Le Pen went to see Putin in Moscow. It is very rare for him to grant an audience to someone who is not an elected politician.
"I know that the presidential campaign is developing actively in France," the Russian president said, adding: "Of course, we do not want to influence events in any way." 
The Russian president appeared to be suppressing a grin as he spoke those words. Marine Le Pen appeared unperturbed.
For her part, just like Michael T. Flynn, Trump's former National Security Adviser, she reaffirmed that, if she is elected President she will make sure that sanctions will be lifted.

But there is more.

In 2013, National Front was looking for a loan and no French bank would lend her money. So she arranged for "Jean-Luc Schaffhauser, an energy consultant turned MEP, who has called himself "Mr Mission Impossible"" to find another source.

They first tried Dubai, which fell through at the last moment. Iran was willing but Le Pen didn't want to risk it, given her public Islamophobia. So it was Russian banks that lend her a little over €11 million.
One of the loans, for €9m, came from a small bank, First Czech Russian Bank, with links to the Kremlin. 
 And there is this little wrinkle.
The negotiations over the loan coincided with Russia's annexation of Crimea. EU governments condemned the annexation. Marine Le Pen publicly took the opposite view, leading some to question whether the loans were a quid-pro-quo.
Were she to win, it would be two for two for Putin.

Can They Govern?

This is a valid question for either candidate as they have no parliamentary presence.

France has a funny presidential system which is referred to as quasi or semi presidential system in undergraduate political science textbooks.

There is both a President and a Prime Minister. Technically, the president is the President of the Republic and he represents everyone, whereas the PM is a politician representing his (there has been no woman holding that position) political party.

If they belong to the same party, there is no problem. The President is the alpha-dog and what he says goes. Plus the Assemblée nationale is a weak institution and the President can rule (mostly) by decree. But if the President and the PM belong to two different parties, we have what is known as "cohabitation" a term coined during Mitterrand's second term.

There are legislative elections coming up in June. Macron has no political party. Le Pen has one. She is unlikely to get a huge number of MPs, but whatever that is that will be more than what Macron will get.

Therein lies the rub.

If Le Pen passes, there is almost no incentive among established parties to help her govern. Both the Left and the Right fear that she could steal voters from them, the infamous "populist pull."

In that case France could quickly become ungovernable.

If Macron passes, he will need to form a legislative alliance with the party that gets the majority vote in June as they will have constitute the backbone of his government. If this is the Republican bloc, his presidency will shift to the right accordingly.

If this is the Socialist-Melenchon bloc, which I seriously doubt, he will kiss his labor reforms goodbye.

Either way France is facing a shaky future.

27 April 2017

Russia Collusion Investigation and Donald J Trump

In a recent post, I outlined how intelligence agencies were gunning for the Orange Man. Every week there is a new revelation and you get a sense that the noose around his neck is slowly being tightened.

The two latest leaks are about Carter Page and Michael Flynn. And they are bigly.

Carter Page was a second-tier Trump foreign policy adviser during the campaign. He is an energy consultant who lived in Moscow for several years and has always expressed pro-Kremlin views.

His Kremlin bias was so pronounced that FBI investigated him for a while to see if he was turned by S.V.R, Russia's foreign intelligence service.

It turns out he was targeted by them and in 2013, FBI recorded a conversation between two Russian diplomat-spies in which they refer to him as an ambitious idiot who might be turned.

Subsequently, the FBI cleared him of any wrongdoing.

Last March, Sam Clovis, a professor and Tea Party activist gave a list of foreign policy experts to the Trump campaign, including Carter's. He was with the campaign for six months.

According to the dossier prepared by ex-MI6 officer Christopher Steel, last July, Carter travelled to Moscow to meet with Igor Sechin, head of the Russian oil monopoly Rosneft. As I mentioned previously, the dossier alleged that Sechin offered him brokerage on the sale of 19 percent of Rosneft shares in exchange for lifting of the sanctions.

In December, when Putin announced the sale of 19.5 percent of Rosneft Carter happened to be in Moscow. A couple of weeks later, the man who leaked the Sechin-Page meeting to Steele, Rosneft's Chief of Staff, Oleg Erovinkin was found dead in his car.

All of this picked FBI's curiosity and according to Washington Post they obtained at least two FISA warrants to monitor Carter's communications. Since FBI chief James Comey acknowledged the existence of an investigation of collusion between Trump camp and the Kremlin, their warrants place Carter to the epicenter of Russian interference allegations.

Then there is the curious case of Michael Flynn, the retired three star general and the former National Security Adviser of Donald Trump. As I mentioned in a recent post, his conversations with Russian Ambassador Sergey Kislyak were taped by the NSA. in which he maintained that once Trump was sworn in, sanctions would be lifted.

He also received over $500,000 from Turkish government to find a way to extradite aging cleric Fethullah Gulen. He even discussed with Turkish representatives other scenarios that included kidnapping and extra-legal rendering.

In both instances, Michael "Lock Her Up" Flynn did not disclose his actions and arrangements. He denied talking to Ambassador Kislyak until he was shown the recording and he did not file the forms declare his services for Turkey. He filed them after he was caught in the lie.

But last week something interesting happened. Representative Jason Chaffetz (R-Utah) the Chair of House Oversight Committee announced that General Flynn may have violated federal law by not disclosing his business dealings with Russia in his security clearance forms. Lying in your security clearance is a yuge deal in the US and certainly for the National Security Adviser.

It turns out that Flynn was paid $45,000 for a speech in Moscow and he simply left it out.
In addition to making the speech on that trip — for which he received the $45,000 fee from RT, formerly known as Russia Today, a Kremlin-backed news network — Mr. Flynn attended the network’s lavish anniversary dinner and was photographed sitting at the elbow of President Vladimir V. Putin of Russia.
I actually posted that photo. You can see that they are seated next to one another.

What is interesting about these latest revelations is the fact that they were made by a Republican (and ultra conservative) Representative.  Actually, this is how Chaffetz put it:
“As a former military officer, you simply cannot take money from Russia, Turkey or anybody else,” Mr. Chaffetz said. “And it appears as if he did take that money. It was inappropriate, and there are repercussions for a violation of law.
Republicans never throw one of their own under the bus and certainly not someone like Flynn, a former general who is admired by both the alt-right movement and Chaffetz' conservative constituency.

The only exception to this rule is when National Security State apparatus pressures them. Then everyone is fair game.

Flynn's lawyer had earlier offered his testimony in exchange for immunity. At the time, unlike other observers, I did not think that this deal could lead to major revelations because Flynn was not accused of anything substantial. He corrected his failure to file and his dealings with Russian Ambassador took place before Trump's inauguration.

But with this new allegations refer to an incident that is two years old so a late filing is not possible. And according to Chaffetz, it constitute a violation of federal law.

To me, it means that some powerful agencies are signalling to him that they have the goods on him and more revelations will come.

The message is that if he wanted to avoid an indictment he might have to come clean on Trump's Russia connection.

Where do I get this idea?

Well Chaffetz' Committee asked to see the paperwork for the security clearance and the White House simply refused. That tells me that they are doing their best to protect the General and the only reason to do so now is to prevent him from spilling the beans.

I expect more revelations in the coming weeks and months.

Drip, drip, drip.

Now Pentagon says that they are actively investigating Flynn and his Russia connections.
Acting Pentagon inspector general Glenn Fine disclosed the inquiry in an 11 April letter to the House oversight committee, which is also investigating Flynn. The committee released Fine’s letter on Thursday. 
Additionally, newly disclosed DIA documents show that Flynn was warned of “criminal sanctions” in 2014 should he fail to obtain express official approval for accepting money for services rendered to a foreign government.

22 April 2017

Is This the Beginning of the End for Erdogan?

The results of last week's referendum in Turkey were rather unexpected.

While some polls predicted the 51-49 split, most of them and almost all of the pundits thought that the gap would be much larger, something like 60-40.

This anticipation is understandable since the referendum took place under extraordinary and extraordinarily unfair circumstances. To begin with, emergency rules were (and still are) in effect.

Secondly, co-leaders and many of the MPs of the pro-Kurdish HDP were in jail, therefore unable to campaign.

Ironically, one of the opposition parties (MHP) campaigned for a Yes vote even though the party's base was overwhelmingly against the changes. The sole voice for No (CHP) was blocked from appearing on TV or other media outlets.

Moreover, clerics declared Yes a religious duty.

Erdogan, the supposedly neutral head of state, campaigned relentlessly and equated a No vote with terrorism and moral deficiency.

And most importantly, he maintained throughout that, unless he was given these new powers, the country would be lost as there were too many looming crises.

Make me the leader of all three branches of government and you will be saved, he intoned.

Well, now he has got those powers and he will have to face these crises.

Let me make a bold prediction, no one, especially not Erdogan can fix what is broken in Turkey. And with him at the helm, the task is nothing less than Herculean.

This is not because the problems in question are insurmountable. It is because Erdogan damaged all the state institution that can tackle them. The only thing left standing is him and his sycophantic advisers. And they are not up to the challenged. Not by a country mile.

This does not mean that he will leave anytime soon. Quite the contrary he will cling to power like never before. And he will double down on his victim-bully strategy. But sooner or later, serious economic crises and the institutions he destroyed will make crisis management impossible and will lead to his demise.

And maybe that of the country.

Dysfunctional Economy

Turkey's sovereign debt is cut to junk status by Moody's last Autumn, making borrowing prohibitively expensive and foreign direct investment a thing of the past.

Last year Turkish Lira lost over 20 percent of its value.  Indicating deeper structural issues, the Lira's loss of value was not accompanied with a rise of exports:
Turkey's trade deficit increased to USD 3.69 billion in February of 2017, compared to a USD 3.21 billion gap a year earlier. Exports fell 1.9 percent, dragged down by manufacturing while imports rose 1.6 percent, boosted by mining and quarrying.
Unemployment has reached 13 percent and if you add people who have given up looking for a job in the last four weeks that figure goes up to 19.6 percent. Youth unemployment hovers around 25 percent.

Inflation has risen to double-digit levels (11.29% in March 2017), the highest since 2008.

New investments have stalled since the comical coup attempt last July.

Tourism sector, which accounts for 13 percent of GDP, imploded after the Russian jet downing debacle and with Erdogan's recent name calling of Europeans, the number of incoming tourists is expected to decrease further.

Current account deficit is likely to reach a historic high this year:
In the first two months of 2017, the current account deficit widened to USD 5.29 billion from USD 4.17 billion in the same period of 2016. 
Against this dismal picture, you have Erdogan calling Turkey's biggest trading partner, the European Union, Nazis and fascists and threatening to re-introduce the death penalty to ensure the cancellation of Turkey's membership bid.

This is nothing short of economic suicide since the new constitutional system (along with the death penalty) might also lead to the expulsion of Turkey from the Customs Union (CU).

CU is not just about EU regulations governing production and trade, it also requires general compliance with EU rules and principles. Indeed, this one was one of the prerequisites of the 1995 Agreement: it was signed only after Turkey passed a series of reforms of the criminal justice system and scrapped undemocratic laws.

No one knows how a country can be ejected from CU or you might dispute whether the EU has the political will to do so; but with Erdogan upping the ante, European politicians might turn Turkey's expulsion into a winning electoral platform.

If that happens, I expect a colossal economic collapse.

What is perhaps worse than the looming economic catastrophe, after years of frontal assault by Erdogan, there are no properly functioning state institutions.

Crumbling Institutions

From the get go, Erdogan was so worried that the secular bureaucracy and army might block his Islamist Sultan aspirations that he appointed his ally Fethullah Gulen's highly educated Islamist cadres to the top echelons of state apparatus.

This was largely because Erdogan's followers, like himself, are mostly graduates of vocational religious schools (Imam Hatip schools) with little or no managerial skills. Or skills of any kind other than delivering Friday prayer sermons.

The process started out with the judiciary and the police as the first targets. At some point, many of the prominent prosecutors and judges belonged to Gulen's Islamist Calvinist movement, Hizmet (Service).

As part of the mission given to them by Erdogan, they launched the first purge of the military, the infamous Ergenekon and Sledgehammer prosecutions, indicating in the process that they would cynically manipulate the law whenever they could.

AKP base was happy and supportive, since they were on the winning side. The opposition was bewildered and in disarray as they have never seen the Turkish military so vulnerable. But most importantly, the erosion of trust in the judiciary was near universal.

Gulenists also took over key economic management posts and strategic positions in the bureaucracy. For instance, the main architect of AKP's economic miracle, Ali Babacan, was almost certainly a Gulen sympathizer.

Through Abdullah Gul's efforts, another likely Gulenist, one of the strongest state institutions, the Ministry of Foreign Affairs saw most of its senior diplomats gradually removed from key positions and its corporate memory disappear.

After Abdullah Gul, successive ministers continued to purge secular diplomats and to promote Gulenists. Since it takes time to move someone up in foreign service, for a while, important capitals remained in the hands of experienced diplomats but they were now getting their instructions from Gulenists in Ankara.

As a movement that emphasizes education, Gulen supporters also established a strong presence in many academic institutions.

In the second part of 2013 Erdogan and Gulenists became rivals and eventually enemies. Since Gulen supporters controlled the police and the judiciary, they assumed that they could easily topple Erdogan.

On 17 December they leaked several audio tapes in which Erdogan was giving orders to his son Bilal to get rid of tens of millions of euros stashed in his residences. They were also pre-dawn raids to the houses of AKP ministers which uncovered millions of dollars in shoeboxes and many very expensive luxury items.

Erdogan did the unexpected: he launched a massive attack on Gulenists and ordered their dismissal from state institutions. Instead of denying or acknowledging the massive corruption hinted at in those tapes, he declared himself the victim of a huge conspiracy. His followers ate it up and Gulen lost his bid to overthrow Erdogan.

From that point onwards, it was open field for all state institutions, In successive waves, the last of which began after the botched coup attempt, Erdogan removed many qualified personnel from state bureaucracies and academic institutions.

When you look at the whole process a clearer picture of the devastation emerges. The first purge replaced secular bureaucrats with Gulenists destroying institutional traditions and corporate memory. The second replaced Gulenists with highly unqualified and unskilled Erdogan supporters hampering the proper functioning of these institutions.

The Central Bank provides the best illustration.

When Erdogan came to power, there was already a Governor in place, so he appointed a Gulenist, Erdem Basci, as Deputy Governor (2003). In 2011, Basci became Governor. As he was a reasonably competent economist, he became a target for Erdogan after 2013 and in 2016, he was replaced with Murat Cetinkaya.

Cetinkaya holds a B.A in International Relations, has no macro-economic qualifications but he is the perfect candidate as he has some background in Islamic finance and he is a disciple of Erdoganomics which maintains that high interest rates are responsible for high inflation.

By all accounts, he is useless. And he has a critical role in steering the economy.

In any event, the worst affected institution by this systematic cleansing was the military. As I recently pointed out, the once formidable Turkish army is now incapable of accomplishing basic tasks after it lost half of its senior officers and a good chunk of its pilots and non-commissioned officers (NCO).

In short, thanks to Erdogan and his personal survival struggle, Turkey is facing a whole host of serious problems without being able to count on its highly damaged state institutions.

Besides its economic woes, Turkey has to deal with a long standing Kurdish insurgency, an increasingly risky Syrian involvement, a volatile region in which Sunni-Shia rivalry might engulf the country and countless geopolitical issues involving Russia, the US and EU.

The problem solver and crisis manager in all of this, is a graduate of Imam Hatip high school with a fake university diploma and an army of advisers who are mostly temperament fluffers, to use Graydon Carter's apt expression.

How likely is that they will prevail?

And how likely is that they will take the country down with them?

Time will tell. But I am not optimistic.