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Wednesday, January 28, 2015 2:16 AM

Clash Over Sanctions: Syriza Opposes Sanctions on Russia, Calls Them "Neocolonial Bulimia"; Negotiation Rules

The Blowout Victory of Syriza has taken on some new meaning outside of Grexit possibilities.

Please consider Greeks Rebuff EU Call for More Russia Sanctions.

A spokesman for the ruling coalition of Alexis Tsipras, prime minister, said Greece had not approved a statement from EU heads of government that asked their foreign ministers to review further sanctions in response to the latest flare-up of violence in eastern Ukraine, blamed by the US and most European nations on Russian-backed separatists.

The Greek statement raised questions over whether the new government, led by the radical leftist Syriza party, would support a continuation of existing EU sanctions, including visa bans and asset freezes on Russian officials and Moscow-supported separatists, when they come up for renewal in March.

German chancellor Angela Merkel warned last month that Moscow was trying to make some Balkan states “politically and economically dependent”.

[Mish comment: But hey - political and economic dependence on Germany and the Troika is of course perfectly acceptable]

Nikolai Fyodorov, Russia’s agriculture minister, suggested on January 16 that, if Greece’s debt woes forced it to leave the EU, the Kremlin would help Athens by lifting a ban on Greek food exports that forms part of the measures adopted by Moscow in retaliation for western sanctions.

Syriza has already given a taste of its foreign policy outlook in the European Parliament, where, since last May’s elections, its MEPs have adopted a number of pro-Russian positions, including voting against a EU-Ukrainian association agreement.

Costas Isychos, a Syriza foreign affairs spokesman, last year derided western sanctions on Russia as “neocolonial bulimia” and praised the military efforts of the Kremlin-backed separatists in Donetsk and Lugansk in eastern Ukraine.

Syriza’s 2013 party manifesto demanded Greece’s exit from Nato and the closure of a US navy base on the island of Crete.

Though a Nato member, Greece in modern times has often enjoyed warm relations with Russia, and the Soviet Union before it, no matter what the political complexion of the government in Athens. The two countries are culturally close, with a shared Orthodox religion, and leftwing Greeks in the cold war used to have an anti-US, anti-imperialist outlook very close to the views of Moscow.
"Neocolonial Bulimia"

That's a good term. It applies to the Troika as well. The IMF is not out to save Greece, it's out to loot Greece for the benefit of external bondholders.

Greece's Coming Clash in Europe Starts With Russia Sanctions

Bloomberg reports Greece's Coming Clash in Europe Starts With Russia Sanctions.
Prime Minister Alexis Tsipras’s Syriza-led coalition said it opposed a European Union statement issued in Brussels Tuesday paving the way to additional curbs on the Kremlin over the conflict in Ukraine, and complained it hadn’t been consulted.

“Greece doesn’t consent,” the government said in a statement. It added that the announcement violated “proper procedure” by not first securing Greece’s agreement.

Greece’s new foreign minister, Nikos Kotzias, has the opportunity to block further sanctions at an EU meeting in Brussels on Thursday. 

Sanctions require unanimity among the 28 governments. A Greek veto would shatter the fragile European consensus over dealing with Russia, potentially robbing Syriza of early goodwill as it lobbies for easier terms for Greece’s bailout.

“Anyone who thinks that in the name of the debt, Greece will resign its sovereignty and its active counsel in European politics is mistaken,” Kotzias said at the ceremony to take over the Foreign Ministry. “We want to be Greeks, patriots, Europeanists, internationalists.” 

The new government also includes Yanis Varoufakis, an economist who has called Greece’s bailout agreement a destructive “trap,” as finance minister. He advocates defaulting on the country’s debt while remaining in the euro.

“Tsipras’s initial decisions, especially his coalition with a nationalist-hooligan party, point toward an exit from the euro,” Luis Garicano, an economics professor at the London School of Economics, said on Twitter. “If he wanted to negotiate, he’d have teamed up with To Potami, he wouldn’t have opposed sanctions against Russia.”
Negotiation Rules

The position of Economics professor Luis Garicano is laughable.

In regards to EU sanctions, 1 vote out of 28 can kill the deal. That's a lot of leverage, especially when 27 on the other side want something from you. What are they willing to offer in return?

In contrast, when it comes to bailouts, Greece is outvoted by a huge margin, perhaps 18-1 within the Eurozone block. In this case, Greece desperately wants something from the other 18 instead of the other 27 wanting something from Greece.
The only way to negotiate when it's 18-1 against you and you need is to have some leverage. If Syriza teamed up with To Potami and agreed to sanctions, Tsipras may as well put all his cards on the table saying "here, take the ones you like".

Brick in the Face

The way to get things serious in a hurry is to figuratively hit the Brussels nannycrats smack in the face with a brick. Letting Brussels know you will kill sanctions if you do not get what you want would do just that.

Of course, sanctions are pure idiocy in the first place. So hitting the nannycrats with a brick in the face is precisely what needs to happen. That brick will set the tone for better negotiations on other matters as well.

This is likely to get very interesting in a hurry.

Mike "Mish" Shedlock

Tuesday, January 27, 2015 8:59 PM

Greek Payback Math at 0% Interest

Payback of Greek Debt

Greece has something like €315 billion of public debt.

Forget about that. Instead focus on liabilities as presented in Revised Greek Default Scenario: Liabilities Shifted to German and French Taxpayers; Bluff of the Day Revisited.

The above total is a "modest" €256 billion to be paid back over time.

  1. Assume 0% interest
  2. Assume a Current Account Surplus of 3% of GDP
  3. Assume Greek Debt-to-GDP is 176%
  4. Assume Greek Debt €312 billion
  5. Assume Greek GDP is €178 billion

Point 5 is derived from points 3 and 4. The numbers seem to vary a bit depending on the source, but they should be close enough for this exercise.

Payback Math at 0% Interest

Let's assume that Greece can run a 3% current account surplus for as long as it takes to pay back €256 billion.

3% of €178 billion is €5.35 billion. To pay back €256 billion it would take about 48 years. That assumes 0% interest and a 3% current account surplus every year for 48 years!

Those calculations ignore rising GDP. But they also ignore a huge burden on Greek citizens for 48 years.

Let's be honest: Greece is not going to run current account surpluses of 3% per year for perpetuity.

Unrealistic Debt

Syriza says Greece Debt Repayment in Full is 'Unrealistic'.

My math says Syriza is correct. But that math assumes debt is as stated above.

What is Greek Debt-to-GDP?

Financial Times writer Ferdinando Giugliano asks Is Greek government debt really 177% of GDP?
Economists tend to disagree over how sustainable this burden really is: some point to the sheer size of the liabilities, saying Athens will never be able to pay them back. Others emphasise the favourable conditions which the Greek government has secured on official sector loans in two rounds of restructuring: these include heavily subsidised interest rates and a lengthening of the average maturity of the debt, which now stands at 16.5 years, double Italy’s or Germany’s.

One figure on which everyone tends to agree, however, is that Greece’s public debt is 177 per cent of gross domestic product, the highest level in the eurozone. Well, everyone but a private equity group and a number of accountants, who think the relevant figure could be as low as 68 per cent.

The calculation is part of a large bet which private equity group Japonica Partners has made on Greek debt through the years. A year and a half ago, Japonica, led by former Goldman Sachs banker Paul Kazarian, offered to buy as much as €2.9bn of Greek government debt. The group has launched a campaign to prove that Greece’s liabilities are significantly more sustainable than the headline debt-to-GDP ratio suggest.

This could be easily dismissed as a private equity group talking its books. Except that it raises some interesting issues over how governments calculate their debts. The question is at the heart of a debate among the accounting community, with some thinking that the way states calculate their liabilities is out-dated and should be revamped to resemble more private sector practices.

Eurozone governments estimate their debt according to the so-called Maastricht definition”. The debt is taken at face value, meaning that a €100 liability is worth the same whether it needs to be repaid tomorrow or in 30 years time and regardless of the interest rate. Since the time-value-of-money and interest rates are ignored, Maastricht forces governments to book even a zero coupon bond at the principal amount due at maturity.

Why is this relevant to Greece? The reason is pretty simple. Eurozone governments have repeatedly agreed to lower the interest rate charged on their loans to Greece, as well as to extend their maturity. Conversely, they have insisted that the face value of the loans stayed the same. While these changes have undoubtedly made life easier for the Greek government, they do not show up in the Maastricht definition of Athens’ debt, which only considers face value.

Japonica’s estimates are based on a different system of accounting. This is the so-called International Public Sector Accounting Standards (IPSAS), the equivalent for governments of the International Finance Reporting Standards (IFRS) used by companies across the world. There are many ways in which IPSAS differs from the book-keeping rules used by governments across the EU: but for our purposes, it is worth noting that the calculation of debt moves beyond the simple face value of the liabilities, discounting it over time using market interest rates.
Wishful Thinking

I suggest it is pretty clear Greece cannot possibly pay back €256 billion even at 0% interest.

I admit I ignored potentially rising GDP. Yet, no matter how you slice it, Greece will not run current account surpluses for as long as it takes.

Moreover, government spending (debt) adds to GDP. How much is GDP supposed to rise in the absence of more government spending and more debt? For how long?

Japonica’s calculations appear to be a combination of wishful thinking and talking one's book. Japonica also presumes patience by Greek citizens the last election proves does not exist.

Mike "Mish" Shedlock

2:58 PM

Email From US Special Forces Veteran; 500 US Blackwater Mercenaries in Ukraine? US Backs Ukrainian Neo-Nazis

US Special Forces in Ukraine?

In response to US Special Forces in Mariupol? I received an interesting email from "Dan" a 23-year Army veteran with four years in special services.

Dan writes ...

I was a soldier in the US Army for 23 years including four years in Special forces Stationed in Germany. I would agree that there is a strong likelihood that this is a US Special Forces soldier.

I can tell you that we were issued AK 74s and would use them on a mission such as this. That is about all I would really want to say at this point.

It is obvious to me that our strategy is the Balkanization of the various hot spots in the world, Syria, Ukraine, Iraq and so forth.

You can call me if you want I’d be happy to talk with you. All the Best
I did call Dan. We chatted a bit. He pointed out special fireproof gloves on the soldier.

I asked him about the rifles. Dan had high praise for them. "Exceptional" was the exact word. They  are widely distributed to special forces units in Europe.

Dan was "disgusted" with US operations stirring up trouble in numerous hotspots including Ukraine.

More English Speaking Soldiers in Mariupol

Over the weekend more videos of English speaking soldiers in Mariupol turned up. Around the 14:40 mark, talk is in English. This time it sounds British rather than US.

link if video does not play: Militants Fired On Mariupol

Translation of video title from Ukrainian

24.01 2015 бойовики обстріляли Маріуполь. Не дивитись людям зі слабкими нервами

24.01 2015 Militants fired on Mariupol. Not for the faint of heart.

Jacob Dreizin comments: "There is absolutely no way that any US or European company could send mercenaries to Mariupol without the knowledge and approval (tacitly or explicitly) of its host government.  So whether these are soldiers or "dogs of war" (mercenaries), it is a deliberate Western presence in Mariupol."

$100 Bill

Near the beginning of the video, there’s a $100 dollar bill (or replica) hanging from the rear view mirror. What’s that all about?

Brit Identified

I wrote the above yesterday. My accent detection appears to be correct.

The Daily Lede reports English Speaking Mercenary in Mariupol ID’d as Brit Leon Swampy From London, England.

I stopped the above video right at the 14:33 mark. Seems like a match.

AZOV Battalion Emblem

The preceding video was produced by AZOV. Their insignia is above. You can see it on soldier patches in the video.

Compare AZOV's emblem with the emblem of the Nazi 2nd SS Panzer Division Das Reich

AZOV Commander 

AZOV commander is Andriy Biletsy. Headquarters are in Mariupol.

Wikipedia has this to say about the AZOV Battalion.
Troops of the Azov Battalion use the Social-National Assembly (SNA) logo, an inverted Wolfsangel, a widely used symbol in Nazi Germany, on their banner, and some members are openly white supremacists or anti-Semites

In a 2010 essay, Biletsky set forth the ideology of the Social-National Assembly. "From the mass of individuals must arise the Nation; and from weak modern man, Superman... The historic mission of our Nation in this watershed century is to lead the White Races of the world in the final crusade for their survival: a crusade against semite-led subhumanity... The task of the present generation is to create a Third Empire -- Great Ukraine... If we are strong, we take what is ours by right and even more; we will build a Superpower-Empire..."

Foreign membership

In mid-July 2014, the BBC reported that the battalion had recruited the former Swedish Army and Swedish Home Guard sniper Mikael Skillt. Skillt, a Swedish white supremacist, joined the Azov Battalion for ideological reasons.

Ukrainian political scientist Anton Shekhotsov told the Swedes that four Swedish neo-Nazis were fighting with Azov, while the Swedish national police confirmed "several". Azov's leader, Biletsky, states that he has received recruits from Ireland, Italy, Greece and Scandinavia.

The Russian and Ukrainian security expert at New York University, Mark Galeotti, has described groups like the Azov Battalion as magnets attracting violent, fringe elements from around and outside Ukraine, warning that they will continue to play an outsized role in Ukrainian affairs after the war.
Azov with "SS" and Swastikas on Helmets

A news broadcast by German ZDF station on September 8 showed soldiers of the Ukraine Azov Battalion in Mariupol with Nazi symbols on their helmets.

Link if video does not play: AZOV Helmet Swastikas

"Ukraine’s Neo-Nazis Demand Respect"

Robert Parry, the investigative reporter who broke many of the Iran-Contra stories for the Associated Press and Newsweek in the 1980s writes "Ukraine’s Neo-Nazis Demand Respect".
Historians blame the UIA and other Ukrainian fascist forces for the extermination of thousands of Poles and Jews during World War II as these right-wing Ukrainian paramilitaries sided with the German Nazis in their fight against the Soviet Union’s Red Army. Svoboda and the Right Sektor have elevated UIA leader Stepan Bandera to the level of a Ukrainian national hero.

But Svoboda and Right Sektor activists are not just neo-Nazi street protesters. They were key figures in last February’s violent uprising that overthrew elected President Viktor Yanukovych and established a coup regime that the U.S. State Department quickly recognized as “legitimate.” Many far-right militants have since been incorporated into the Ukrainian military in its fight to crush resistance to the coup regime from ethnic Russians in Ukraine’s east.

Though played down by the Western press, the neo-Nazi affiliations of these militants have occasionally popped up in news stories, including references to displays of Nazi insignias, but usually these citations are mentioned only in passing or are confined to the last few paragraphs of lengthy stories or are dismissed as “Russian propaganda.”

But this neo-Nazi reality continues to be an inconvenient truth about the U.S.-backed coup regime that seized power in Kiev with the overthrow of Yanukovych on Feb. 22. Several government ministries, including national security, were given to these far-right elements in recognition of their key role in the putsch that forced members of Yanukovych’s government to flee for their lives.
German Consultant Says 500 Blackwater US Mercenaries in Ukraine

Please consider this German news story from January 23, 2015: 500 US Blackwater Mercenaries in Ukraine
German political and business consultant Michael Lüders in an interview with the TV channel Phoenix made this allegation: There are 500 mercenaries in Ukraine, all trained experts, requisitioned in cooperation between the United States and Ukraine.

So we not only have Russians who are fighting on the side of the separatists, but also US mercenaries on the part of the government. This is a dangerous trend, and an unhealthy development. For it is quite clear that an escalation is possible. This conflict can spiral out of control when the Russian side or when the Ukrainian side believes there is a certain winner.

The security firm Blackwater, also called Academi, is known for its top-secret orders in war zones. The units are perfectly trained and mostly ex-US military with high-level combat experience. At the same time they are themselves and their corporate boardroom closely intertwined with US military circles and even the presidential administration.
If you can understand German, here is a link to the Michael Lüders Interview on the German Phoenix TV station.

Ukrainian Foreign Legion

Yesterday, the Financial Time reported Nato Accuses Russia Over Worsening Ukrainian Crisis

Russian president Vladimir Putin responded "We often talk about the Ukrainian army . . . In fact this is not an army, it is a foreign legion, in this case a Nato foreign legion which, of course, does not follow the national interests of Ukraine."

Ukrainian Military Transport Loading Tanks

I am told this is a recent (within past few days) image of the Ukrainian "Antonov Airlines" An-225 cargo plane picking up surplus Soviet-era tanks at the Prague airport for transfer to Ukrainian forces.

I cannot verify the date, location, or source of the above image, but certainly the plane is correct. It's the only one ever built. Anyone in Prague care to confirm?

From Wikipedia ...
The An-225's name, Mriya (Мрiя) means "Dream" (Inspiration) in Ukrainian. It is powered by six turbofan engines and is the longest and heaviest airplane ever built, with a maximum takeoff weight of 640 tonnes. It also has the largest wingspan of any aircraft in operational service. The first and only built has the Ukrainian civil registration UR-82060. The airlifter holds the absolute world records for an airlifted single item payload of 189,980 kilograms (418,834 pounds).
Disinformation and Outright Lies

Without a doubt, some Russian-made military equipment is in Ukraine in rebel hands. Ukraine also has Russian-made equipment. Some of the rebel equipment was captured from Ukraine, and some came in from Russia.

How much military equipment is directly from Russia since the start of the war? I do not know.

I do know that Ukraine's claim the rebels have 500 Russian tanks is ridiculous. You cannot hide 500 tanks. Claims of 15,000 Russian regular soldiers in Ukraine are also ridiculous.

How many are there? I don't know. Could there be 500 Russian "trainers"? Sure, why not?

The US has "trainers" in Ukraine as well. How many? I don't know that either. Could it be as many as 500? Sure? Why not?

If you wish to change the word "trainers" to sponsored "mercenaries", fine, as long as you do it for both sides.

There are many Russians living in Ukraine. That does not make them "Russian regulars", no matter how many times it is presented that way by Western media.


I wrote about blowback recently in Russia Under Attack: Letter from CEO of Genoil to CEO of JPMorgan Chase on US Foreign Policy Blowback.

If you missed it, please take a look.

The Guardian proposes (and I agree) Wrecking Russia’s Economy Could be a Disaster for the West.

"It’s sheer folly to hope that the country is destabilised and Vladimir Putin overthrown. We’ve no idea what the outcome would be" says Guardian author Angus Roxburgh.

An Incomplete History of US Foreign Policy Disasters

  • War reparations imposed by the allies gave way to German hyperinflation and the rise of Hitler.
  • In 1953 the US and UK orchestrated the Iranian coup d'état in an operation called "Operation Boot" in the UK and the "TPAJAX Project" in the US. This in turn led to the US backed Shah of Iran overthrown in 1979. In August 2013, 60 years after, the American Central Intelligence Agency (CIA) admitted that it was involved in both the planning and the execution of the coup, including the bribing of Iranian politicians, security and army high-ranking officials, as well as pro-coup propaganda. The CIA is quoted acknowledging the coup was carried out "under CIA direction" and "as an act of U.S. foreign policy, conceived and approved at the highest levels of government."
  • The War in Vietnam started with an outright lie from president Lyndon B. Johnson regarding the Gulf of Tonkin Incident. A document declassified in 2005 shows the US fired first, on North Vietnam. In a second episode, the US fired on "Tonkin ghosts" (false radar images) and not actual torpedo boats as claimed.
  • It's pretty clear the US helped foment the overthrow of Ukraine's president Viktor Yanukovych, but the US will probably will not admit that for another 30 years.
  • Bush's lies led us to invade Iraq with disastrous consequences including the evolution of ISIS.
  • Finally, Bin Laden's number one reason for the attack on the US was because the US had troops on sacred Arab soil.

Avoiding the Mess

Why are we in Ukraine at all? The answer is we backed a corrupt pack of neo-Nazis that helped overthrow a government the US decided was too friendly to Russia.

When we did not like the blowback, we put sanctions on Russia. And those sanctions harm Europe as much as Russia.

None of this means one has to like Putin. I don't, but I get accused of it, simply because I look at both sides of the story while most believe lies spoon-fed to them by Western media.

All we had to do to avoid this mess was not get involved in the overthrow, then had it happened anyway, encouraged a solution at the ballot box rather than siding with the new corrupt regime.

No Cost to Great

I have a very close friend who thinks this "Russian invasion cannot be allowed to stand at any cost".

Such ideology sounds like the discredited Vietnam War "domino" theory all over again. My friend was against that war, but fails to see this is more of the same "last stand" nonsense.

Note that "any cost" might mean outright war with nuclear-armed Russia over a meaningless patch of land. How asinine is that?

Ironies Abound

The first irony is that Ukraine is not really a single country in the first place. Its boundaries were arbitrarily created with no regard to religion, culture, and language.

A natural split that could have and should have been decided by vote (if only the US went along), is now being decided by war. Supposedly, we need to put "humpty dumpty" back together again at any cost, presumably even nuclear war.

For what?

Putin is not Hitler attempting to conquer the world with a "final solution". Rather Russia has genuine fears and concerns about NATO on its doorstep. Russia has been invaded multiple times by other European countries.

And the second major irony of it all is the US openly supports a bunch of white supremacist neo-Nazis whose leader stated in 2010 "The historic mission of our Nation in this watershed century is to lead the White Races of the world in the final crusade for their survival: a crusade against semite-led subhumanity."

Ukraine Freedom Act

In December, President Obama signed the Ukraine Freedom Support Act giving Ukraine $350 million.

Meet Your US-Backed Neo-Nazis

Here is the source of the above AZOV image.

The site Ukraine at War claims the flag was edited in. I blew the image up 400% looking for artifacts around the flag and the hand holding it. If it was edited in, then it was a professional job.

The image appears on the website of Oleg Pyenya (a person in the picture). Oleg has many pictures giving the Nazi salute (and he is not even the one giving the Nazi salute in the picture!)

Oleg is the guy holding the Nazi flag with his fingers. I believe there is roughly a zero percent likelihood that Oleg or anyone in his group was capable of perfect Photoshop editing. Somehow we are supposed to believe Russia did, gave it to Oleg, then he placed it on his site.

US Hypocrisy

Fake or not, it is 100% clear what AZOV commander, Andriy Biletsy, and his group of thugs stands for. Also it's important to note that Biletsy has been commended and awarded by Ukrainian president Petro Poroshenko.

Thus, it's equally clear that your tax dollars support neo-Nazis and white-supremists in yet another example of US hypocrisy and the idiocy of the policy "the enemy of my enemy is my friend".

Mike "Mish" Shedlock

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