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BLACKWATER USA | DAILY BRIEF


Venezuela

  • U.S. officials say two of the tankers carrying Iranian crude for Venezuela have ditched their deliveries after the U.S. threatened sanctions on Liberia (the ships’ flag before it was revoked) and the Greek firms that own the vessels. The U.S. says the tankers changed course and are now off the coast of Senegal.

  • However, Venezuela offered a different account: it says its navy has received and escorted four of the five tankers through Venezuelan waters (and posted photos purporting to show it), and claims the fifth is still en route.

  • At some point after June 22nd, a UK court will hear Venezuela’s case asking for its gold to be released from the Bank of England. The court said it will first need to decide which Venezuelan government it recognizes, and there’s a good chance it’ll recognize Pres. Guaido—given that the UK does. That may mean Pres. Maduro’s case is automatically rendered invalid.

  • Venezuela’s opposition-led National Assembly ratified Juan Guaido as its speaker, defying a ruling by Pres. Maduro’s puppet Supreme Court to instead install Luis Parra—who Maduro handpicked and Guaido calls “an accomplice to dictatorship.”

Iran

  • Iran’s parliament selected as its next speaker a hard-line former mayor of Tehran with ties to the IRGC, suggesting the body is about to take a turn towards greater belligerence.

China

  • BBC had a nice explainer on what it would mean if the U.S. revokes Hong Kong’s special trading status (the logical next step to declaring that Hong Kong is no longer politically autonomous from China). It’s pasted below.

  • The U.S. House voted overwhelmingly for a measure that would sanction top Chinese officials involved in detaining Uighurs in Xinjiang and require the DNI to keep track of Chinese companies involved in the Xinjiang camps. The bill has already passed the U.S. Senate.

North Korea

  • The U.S. indicted 28 North Koreans involved in a $2.5 billion scheme to process illegal payments for North Korea’s nuclear programs via a state-owned bank.

Afghanistan

  • A Taliban attack in southeastern Paktia killed 14 ANSF and the Taliban says a government airstrike on Wednesday killed several civilians, but the National Security Council says the government will still uphold an extended ceasefire—and the Taliban also does not seem eager to return to full-scale fighting too quickly.

Islamic State

  • The U.S. reportedly targeted and killed Hajji Taysir—Islamic State’s head of chemical and biological weapons efforts—in an airstrike in Deir al Zour, Syria. Taysir was one of three IS leaders the U.S. offered rewards for in Aug. 2019.

Libya

  • The family of a murdered Libyan smuggler took revenge and killed 30 migrants in Mezdah (95 mi / 150 km south of Tripoli). It’s not clear what motivated the original murder.

  • A French Navy frigate patrolling off the coast of Libya stopped a tanker from unloading oil at Tobruk, where it was being sold to a UAE-registered company and probably would’ve supported the LNA.

Other News

  • South Korea is reverting to lockdown after a surge in coronavirus cases following its reopening. That’s a bad sign for other places emerging from lockdown.

  • The latest Economist issue had a great piece on mercenaries in Africa—see below.

What if the US removes Hong Kong's special status? (BBC)

Top members of the US administration have warned that Hong Kong no longer merits a special status when it comes trade, and the territory could be treated the same way as mainland China.

Until now, the US has given Hong Kong favourable trading terms, dating back to the territory's time as a British colony, but US Secretary of State Mike Pompeo told Congress that Hong Kong no longer enjoys a high degree of autonomy from China.

Meanwhile, President Donald Trump's top economic adviser Larry Kudlow said Beijing "will be held accountable" for a new security law set to be imposed on Hong Kong.

The National Economic Council Director told CNBC, "If need be, Hong Kong now may have to be treated the same way as China is treated, and that has implications for tariffs".

So what will it mean if that special status is revoked?

Hong Kong is well-known as one of the world's most important financial centres. With a free economy and a competitive tax regime, it's attracted many multinational companies to its shores.

It's also an important hub for trade. But all of that could be in jeopardy, if the US changes the way it deals with Hong Kong.

So what is the US threatening?

At the moment, Hong Kong enjoys special trade relations with the US. It operates as a separate customs territory to mainland China. It also has a free port, meaning no tariffs are charged on the import or export of goods.

Those arrangements have helped Hong Kong become a centre for global trade. But now the US is threatening to treat Hong Kong the same as mainland China. That would mean its goods would be subject to additional tariffs, including those extra charges that were introduced as part of the US-China trade war, although some of those have recently been rolled back.

"Hong Kong has had a special trading relationship with different types of tariffs and regulations that have allowed it to trade in a freer way, particularly in relation to capital markets," said Dr Rebecca Harding, independent trade expert and CEO of Coriolis Technologies.

"The US has treated it as an ally, if you like. But it's now saying we are going to treat you in a similar way to how we treat China," she said.

Where does that leave Hong Kong?

Hong Kong is one of the world's top trading territories. In 2018 it was ranked with the 7th highest volume of trade with a total value of nearly $1.2tn.

But much of that trade is made up of goods that pass into, or come out of, mainland China.

In 2018, 8% of mainland China's exports to the US and 6% of mainland China's imports from the US, passed through Hong Kong.

This role as a gateway between the Chinese market and the rest of the world has put Hong Kong in a unique position, but different trade arrangements could change that.

"If there's a new trade regime in place, that changes the calculation for companies," said Dr Tim Summers, a Senior Fellow at Chatham House, based in Hong Kong.

Companies could choose to move their goods directly through ports in mainland China instead, and higher tariffs there will mean higher price tags.

"The people who are going to get hurt are businesses and consumers," Dr Summers said.

Will China be worried?

Not so much as it might have been at the time of the Hong Kong handover. Back in 1997, Hong Kong played a much more significant role in China's economy, accounting for around 18% of China's GDP.

"But over the last 25 years China has grown massively," said Dr Summers. Hong Kong now contributes just 2-3% of China's GDP.

"Put that in context of the ocean of trade coming out of China, it's not so significant any more. So if President Trump were to act on trade, Hong Kong would suffer, but it's not a gamechanger for China," he said.

Beijing will however want to maintain Hong Kong's status as a global financial centre. Mainland Chinese companies are among those which choose to list on Hong Kong's Stock Exchange because of its access to global capital. Mainland Chinese companies also benefit from Hong Kong's large financial services sector.

"Shanghai and Shenzhen already have a vibrant financial services sector serving mainlanders," said David Webb, a former investment banker who's lived in Hong Kong since 1991. But so long as Beijing has capital controls on the movement of money in and out of China for investment, "then it can't compete with Hong Kong on international capital," he said.

How could this affect the US?

Each year, billions of dollars worth of goods and services are traded between Hong Kong and the US. In 2018, the total value of that trade was almost $67bn according to the US Trade Representative, including $17bn worth of imports that Americans bought from Hong Kong.

If Hong Kong faces the same trading terms as mainland China, US consumers will pay more for those goods.

"American businesses both in the US itself and in Hong Kong are lobbying hard to try and get any action diluted," said Rachel Cartland, director of Cartland Consulting and a former Hong Kong civil servant.

The US Chamber of Commerce has warned that far-reaching changes to Hong Kong's status would have "serious implications" for Hong Kong and US businesses.

That puts Washington in a tricky position, according Dr Summers.

He says ostensibly, Secretary Pompeo's threat appears to be about recent developments in Hong Kong, and Beijing's new security law for the territory. But he said, what it's really about is US-China relations.

"If I were going to be really cynical, I would say this has provided an opportunity for some people in Washington to take measures they wanted to take anyway against China, in the context of a wider US-China rivalry," he said.

"That may well drive the thinking of what Trump does next more than any particular concern about the political autonomy of Hong Kong," he said.

Soldiers of misfortune (Economist)

Why African governments still hire mercenaries

Professional gunmen are cheap, efficient and deniable

When president filipe nyusi wanted help last year to tackle a jihadist insurgency in northern Mozambique, various private military firms were keen to oblige. Mr Nyusi chose Russia’s Wagner Group, which vowed to make short work of the rebels. But after a bunch of its men were killed, it pulled out, humiliated.

In its place, the government has hired a firm with a very different pedigree: the Dyck Advisory Group (dag), led by a South Africa-based colonel, Lionel Dyck. Mr Dyck served in the army of Rhodesia, the white-run state that became Zimbabwe at independence in 1980. In the 1970s, when Mr Dyck wore its uniform, the Rhodesian army used to attack Mozambique and the Zimbabwean guerrilla bases that Mr Nyusi’s Frelimo party was hosting. Times change, as do alliances.

Despite a un treaty banning mercenaries, their day is far from over. Some analysts think there are now more of them in Africa than ever. But can they ever be a force for good? Some of them served in special forces known for their ruthlessness during the dying days of white rule in southern Africa. Since then many have worked in Iraq and Afghanistan before returning closer to their old haunts.

In the years after most African countries gained independence, mercenaries were notorious for supporting secessionist movements and mounting coups. They fought for Moïse Tshombe in Katanga as it tried to break away from Congo in the early 1960s, and in Biafra when it sought to secede from Nigeria in the late 1960s. More recently Simon Mann, a former officer in Britain’s special forces, tried to overthrow the dictator of oil-rich Equatorial Guinea in 2004, but ended up in jail.

Western governments have in the past winked at mercenary activity that served their commercial interests. But nowadays Russia is seen as the leading country egging on mercenaries to help it wield influence. It does so mainly through Wagner, whose founder, Yevgeny Prigozhin, is close to President Vladimir Putin. Shortly after Mr Nyusi met Mr Putin in Moscow last year, Wagner was awarded the contract for Mozambique, which has rich gasfields and is developing Africa’s largest energy project.

Wagner has been hired to prop up a number of shaky African regimes. In Sudan it tried to sustain the blood-drenched dictatorship of Omar al-Bashir. He was ousted last year after big protests. In 2018 hundreds of Wagner men arrived in the Central African Republic to guard diamond mines, train the army and provide bodyguards for an embattled president, Faustin-Archange Touadéra. In Guinea, where Rusal, a Russian aluminium giant, has a big stake, Wagner has cosied up to President Alpha Condé, who has bloodily faced down protests against a new constitution that lets him have a third term in office.

In Libya, despite a un arms embargo, Wagner is reported to have deployed 800-1,200 operatives in support of a rebel general, Khalifar Haftar, who has been trying to defeat the un-recognised government. On May 26th America’s military command for Africa said Russia had flown modern fighter jets to Libya to give air support to Wagner. It released satellite photos purporting to show the jets at al-Jufra airbase. It seems, however, that Wagner has been failing in Libya too, with hundreds of its men being forced to retreat.

Private military firms typically say they fill gaps in security that would otherwise lead to chaos. In the Central African Republic, for example, France withdrew almost all of its peacekeeping troops in late 2016, leaving a un force and a small European training mission that struggled to keep order. Wagner has hardly fared better. In north-eastern Nigeria in 2015 a South African firm called sttep (Specialised Tasks, Training, Equipment and Protection), had some success in bolstering the Nigerian army in its fight against the jihadists of Boko Haram. However, its contract was cancelled by a new president, Muhammadu Buhari, who reckoned his own forces should finish the job alone. They have signally failed to do so.

Mercenaries have three main advantages over regular armies. First, they give plausible deniability. Using them, a government such as Russia’s can sponsor military action abroad while pretending not to. Second, they tend to be efficient, experienced, nimble and flexible. Third, they are cheaper than regular armies. Whereas soldiers receive lifelong contracts and pensions, mercenaries are often paid by the job. They are also better value for money than the heavy, expensive weaponry that African governments often import, which is not much use against terrorists. dag’s hardware in Mozambique is reported to include several helicopters (one of which recently crashed after being shot at by jihadists) and some small aircraft, but nothing hugely expensive.

Colonel Tim Collins, a veteran of Britain’s Iraq campaign who has been running a private military firm in Afghanistan, says that “for the money Britain spends on booze at Christmas” such firms could provide African governments with a continental force (not that they would ask for one). He points out that in Sierra Leone in 1995, mercenaries from Executive Outcomes played a key part in routing the murderous rebels of the Revolutionary United Front. That bare-bones force was co-founded by a South African, Eeben Barlow, who now chairs sttep. Manned mainly by former apartheid-era commandos, Executive Outcomes had previously helped the Angolan government to defeat the rebels of unita, which South Africa had once fostered.

dag’s website claims it has undertaken “security-based operations” in at least eight countries, including the Central African Republic, Malawi and South Africa. Zimbabwe’s president, Emmerson Mnangagwa, is said to be close to Mr Dyck, who caught his eye back in 1981. That was when he led a battalion of the mainly black Rhodesian African Rifles in suppressing a mutiny of disgruntled ex-guerrillas loyal to Prime Minister Robert Mugabe’s bitter rival, Joshua Nkomo, leaving many dead.

oam Middle East, another security firm run by a former Rhodesian, John Gartner, lists no fewer than 18 African countries where it has operated. Many such companies stress their credentials as wildlife conservationists, using helicopter gunships to deter poachers.

Although opposed to mercenaries on paper, the un may have softened its stance of late. It now has a code of conduct for how they may work and has itself used them to help with things such as logistics, neutralising landmines and training security teams. Chris Kwaja, a Nigerian who chairs a “working group on the use of mercenaries” for the un’s High Commissioner for Human Rights, thinks they can be useful as long as they are subject to “binding international instruments”. Some private military firms now accept ethics clauses written into their contracts.

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