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BLACKWATER USA | DAILY BRIEF


U.S.

  • Pres. Trump’s use of the military—and perhaps even special forces—to protect the White House from protesters is raising eyebrows. It could also damage public perceptions of the military: a War On The Rocks survey found that respondents who were told that U.S. troops support Trump’s policies reported lower trust in the military. (This survey asked specifically about patrolling the southern border rather than policing protests, but still: the point is that politicizing the military is unpopular).

  • Google reports that Chinese and Iranian hackers unsuccessfully targeted the Biden and Trump campaigns.

Russia

  • Senators Ted Cruz and Jeanne Shaheen introduced a bill that would expand sanctions related to Russia’s Nord Stream 2 pipeline, which the U.S. thinks will make European energy markets too beholden to Russia.

  • Separately, Pres. Putin declared a state of emergency in the Siberian city of Norilsk after a massive oil leak (over 20,000 tons of diesel) polluted an Arctic river. The parent company of the metals plant that leaked the fuel said thawing permafrost caused the supporting posts under a fuel tank to sink.

Mexico

  • Americas Quarterly had a great article about Pres. AMLO’s continued efforts to push his controversial infrastructure plans—which have now been recast as post-COVID recovery projects. See below.

Libya

  • Khalifa Haftar’s forces retreated from Tarhuna—Haftar’s last stronghold near Tripoli—yesterday, ending a 15-month assault on the city. Forces loyal to the Tripoli government quickly swept into Tarhuna. Haftar’s backers, the UAE and Russia, appear to have withdrawn from the front lines but not from Libya altogether, which suggests Haftar isn’t completely giving up.

  • According to the WSJ, U.S. and UN officials are investigating whether Haftar sought to raise money for his Tripoli campaign by brokering oil deals—including perhaps with Venezuela (and that one may have even been in person: Haftar’s plane appears to have been in Caracas on April 24th). The WSJ article pasted below has more.

Iran

  • The U.S. released an Iranian scientist who violated sanctions against Iran after sentencing him to time served, and Iran responded by freeing U.S. Navy veteran Michael White, who had been in Iranian prison for 683 days on charges of privacy violations and insulting Ayatollah Khamenei.

North Korea

  • Kim Jong Un’s sister, Kim Yo Jung, threatened to abandon a series of security and economic agreements with South Korea because of anti-(Northern) government leaflets a human rights group dropped over the border. Ms. Kim is the Deputy Director of the North’s “Propaganda and Agitation Department,” so it’s not unusual for her to speak for the regime, but the fact that she’s the one making such a critical threat shows she’s gaining clout.

Afghanistan

  • The U.S. conducted two airstrikes against the Taliban in Farah yesterday—the first U.S. airstrikes against the Taliban since the Eid ceasefire.

Other News

  • Pres. Duterte is about to sign a new law that broadens the category of terrorism-related crimes and creates a council that can designate people or entities as terrorists. Duterte’s critics worry the law will be used against the opposition.

Libyan Warlord’s Oil Foray Draws U.S., U.N. Scrutiny (WSJ)

Probes come after Khalifa Haftar pursues international oil deals to help fund his siege of Tripoli

The U.S. and other powers are investigating suspected efforts by Libyan militia leader Khalifa Haftar to raise funds through oil deals, including with Emirati brokers and Venezuela, according to U.S., European and Libyan officials.

The United Nations and the official Libyan government are probing a Dubai-based ship charterer for possibly helping Mr. Haftar to market fuel in the Mediterranean, the officials said. The U.S. has also begun scrutinizing a trip Mr. Haftar may have made to Caracas in what some officials say was an effort to broker oil and fuel deals. Venezuela, which is subject to broad U.S. sanctions, is struggling to sell its crude oil and import the gasoline and other oil products it needs to fuel the country.

The probes are part of a wider international campaign aimed at halting Mr. Haftar’s oil sales, which he is hoping to turn into a key source of funding for his 14-month insurgent assault on Libya’s capital city of Tripoli. Mr. Haftar’s faction, the Libyan National Army, didn’t return a request for comment.

The renegade general controls much of eastern Libya including key oil export terminals, after launching a campaign to take over the country six years ago. He has suffered a series of military defeats in recent weeks after Turkey deepened its support for the Tripoli government, sending fighters and weapons including air-defense equipment.

The losses have prompted Mr. Haftar, a former U.S. ally now backed by Russia, to step up efforts to sell Libyan oil as a means of funding his operations.

Oil sales by Mr. Haftar would grease the path for Russia to establish a new Mediterranean outpost after establishing a durable presence in Syria, said Fathi Bashagha, the interior minister of the internationally recognized Libyan government in Tripoli. The general “wants to sell oil. He needs the money to pay for Wagner [Russian mercenaries],” Mr. Bashagha said.

Mr. Haftar has a complicated relationship with the U.S. extending back decades. The Trump administration previously saw him as central to any future peace deal, but that view has soured in light of the militia leader’s newfound relationships with Moscow and Caracas.

The international community only recognizes the right of the state-run National Oil Corp., or NOC, to sell Libyan oil and has blocked Mr. Haftar’s attempts to sell crude. Failing to capitalize on the oil production of Libya—home to Africa’s largest crude reserves—Mr. Haftar in January blocked ports and pipelines.

The U.S. is now also probing whether Mr. Haftar also made overtures to the Maduro regime in Venezuela this year, possibly seeking to play a role in a fuel-for-oil deal between the South American country and Iran, according to a senior Western diplomat. The suspected outreach drew attention from U.S. officials who were concerned that Mr. Haftar’s efforts could enable sanctions evasion by two of Washington’s top foes.

“Our intelligence is looking into it,” a U.S. official said.

In November, the Military Investment Authority, a Haftar creation, signed 10-year fuel-distribution deals with Emo Investment Trading and Marketing of Oil and Derivatives LLC, a shipping charter firm in Dubai, the United Arab Emirates, according to copies of the contracts viewed by The Wall Street Journal. Under the deal, Emo was to arrange for the loading of Libyan diesel and heavy oil onto vessels in east Libyan ports on behalf of the Military Investment Authority.

Kheralla Saleh Abdelsalam, who headed the Eastern branch of Brega Petroleum Marketing, a company under Mr. Haftar’s control at the time that was to supply the fuels, confirmed the content of the agreement.

Last month, Emo sent an Emirati-owned tanker, the Jal Laxmi, to pick up the fuel, according to a shipping document. Proceeds from the sale are still earmarked for Mr. Haftar’s Military Investment Authority as agreed in the original contracts, according to European and Libyan officials.

The vessel arrived in late May but stayed off Libya’s eastern coastline after the U.N., the European Union’s naval mission, Operation IRINI, Tripoli’s NOC and the U.S. threatened the ship’s captain and its charterer with sanctions if they loaded Libyan fuel, those officials said.

The Jal Laxmi’s captain, Abul Bashar Muhammad Fakhrul Islam, said his vessel had been chartered by Emo Investment and was due to load in Tobruk. The shipmaster confirmed the vessel had been warned by the European naval force and NOC not to dock in Tobruk and was waiting offshore for orders.

Rami Al-Breiki, the operations manager at Emo Investment and a former official at the state-run Abu Dhabi National Oil Co., didn’t return a request for comment.

Capt. Santhakumar Pai, a manager at the vessel’s owner, CPC Corp. in Dubai, said the vessel had been rented to a third party, which he declined to name.

A spokesman for the EU’s naval force declined to comment.

Mr. Haftar has also been in contact with the Venezuelan regime of Nicolás Maduro, offering to act as a broker that would handle payments for the Latin American nation’s sanctioned oil, according to Western and Libyan security officials.

The general’s private jet was in Caracas, Venezuela’s capital, as recently as April 24, according to tracker Flight Radar24.

Full Steam Ahead: AMLO’s Infrastructure Plan (Americas Quarterly)

Mexico’s president is betting on pet projects to spark a post-COVID recovery. Critics see a waste of resources.

Andrés Manuel López Obrador doesn’t intend to let the coronavirus upend his “fourth transformation” of Mexico. On a whistle-stop tour of southern states this week, the president is touting progress on a development agenda that has changed strikingly little since the pandemic began: a tourist rail network on the Yucatan peninsula broke ground on June 1, with a separate cross-isthmus train line and investment corridor also in the works. Construction on an $8-billion oil refinery and a new airport outside Mexico City never stopped.

López Obrador’s big-ticket infrastructure projects were controversial before the pandemic, amid unresolved questions about financial viability and environmental impact. Now, with Mexico’s daily coronavirus count yet to plateau and a death toll over 10,000, some see the president’s commitment to his campaign agenda as a stubborn misuse of limited resources.

“It’s investment that could be directed to areas of much more urgent need,” Macario Schettino, a Mexican political and economic analyst, told AQ.

López Obrador says the projects, which together the administration expects to cost around $18 billion, will help “accelerate” the post-pandemic recovery; the administration claims they will account for 10% of the 2 million jobs it has pledged to create this year. The Maya Train, which will shuttle passengers to and from Cancún, Bacalar and other tourist hot spots, is projected to provide 80,000 jobs on its own.

Observers are skeptical. Mexico’s economy has never seen even 1 million new jobs created in the nine months that López Obrador has given himself to double that. The government’s expected employment bump comes mostly from projects that were already on the books or expansions of unproven social programs. A youth apprenticeship scheme that enrolled close to a million young people in 2019 – and which the government says will be the biggest driver of new employment – led directly to only 20,000 permanent jobs in that time.

“The goal is far from what they’ll be able to achieve,” Edmundo Gamas, director of the Mexican Institute of Infrastructure Development (IMEXDI), told AQ. “On top of that, the quality of the jobs they’re talking about creating doesn’t compare with the jobs being lost. Most of these would be temporary, with very low salaries and without benefits.”

Meanwhile, half a million Mexicans lost their jobs in April. Rather than a boon for the country’s economy, observers fear the infrastructure projects will become a herd of white elephants. A report from Mexican think tank IMCO, written before the impact of the pandemic became clear, suggested that the refinery had a less than 2% chance of being worth its cost. Many analysts also expect the $8-billion price tag to increase, after the initial concession yielded no private sector bids that fit the president’s time and cost requirements. Government agencies and state oil firm Pemex were eventually tasked to oversee construction.

Similar questions hover over the Maya Train project. Mexico’s national human rights commission has called for a temporary halt to the project over coronavirus concerns in nearby indigenous communities. Environmental groups say they have yet to see a satisfactory projection of the train’s impact on protected lands.

López Obrador is nonetheless charging ahead. Speaking at a groundbreaking ceremony this week, he said that the new line would follow the same path as a now-defunct stretch of track built in the middle of the last century, minimizing environmental costs. He also said that his personal relationships with the heads of the companies involved in the train’s construction would help ensure that the project comes in on time and budget.

According to Mariana Campos, who directs the public spending program at México Evalúa, Mexico lacks the institutional strength and planning mechanisms to meaningfully control costs on major infrastructure projects. In contrast to the Mexico City airport, budget execution for the train and refinery projects so far has been below expectations – a possible indicator of complexities that could delay construction progress and increase costs.

“Even well-planned megaprojects are hard to control,” Campos told AQ. “If it’s hard for Germany, it’s basically impossible for Mexico.”

These concerns have led some to suggest that López Obrador should divert funds intended for his infrastructure plan to deal with the economic effects of the virus. López Obrador’s COVID-19 stimulus plans total less than 1% of GDP in new spending by some estimates, far below most of the rest of the region. Reticent to take on new debt, the president is instead relying on a rainy day fund and spending cuts to weather the storm.

There is a lot riding on López Obrador’s more optimistic view of recovery, especially in Mexico’s southeast, which trails the rest of the country in GDP and most social indicators, and where much of the president’s development plans are concentrated.

While the south needs more attention and investment from the government, the concentration of resources could limit the effects of public spending on a post-COVID recovery. As it is, around 70% of planned federal investment is divided between Mexico City and two southern states, Campos said.

“Instead of a few big projects focused in just a few states, reassigning investment to smaller projects in each state in the country would allow for more effective and wider spread recovery,” Campos said.

López Obrador’s emphasis on the southeast is driven in part by his own experience growing up in the region at a time when oil was viewed as synonymous with prosperity. The president also cited the significance of passenger trains in connecting the region to the rest of the country during the Mexican Revolution, on railways that were canceled “in the blink of an eye at the beginning of the neoliberal period.”

Some critics, however, believe the president is drawing the wrong lessons from Mexico’s past. “It’s a textbook view of a history that never really existed,” said Schettino. “The southern states haven’t developed because they’ve never been brought into the modern economy. These plans aren’t going to change that.”

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