Russian Spies Nabbed

This story appears straight out of a Tom Clancy novel.

The FBI has arrested 10 people for allegedly serving for years as secret agents of Russia's intelligence organ, the SVR, with the goal of penetrating U.S. government policymaking circles.

According to court papers unsealed Monday, the FBI intercepted a message from SVR headquarters, Moscow Center, to two of the defendants describing their main mission as "to search and develop ties in policymaking circles in US." Intercepted messages showed they were asked to learn about a broad swath of topics including nuclear weapons, U.S. arms control positions, Iran, White House rumors, CIA leadership turnover, the last presidential election, the Congress and political parties.

After a secret multiyear investigation, the Justice Department announced the arrests Monday in a blockbuster spy case that could rival the capture of Soviet Col. Rudolf Abel in 1957 in New York.

More coverage here.

UPDATE: This story only gets juicier.

A ring of 11 Russian moles right out of a Cold War spy novel was smashed Monday — and among those busted was a flame-haired, 007-worthy beauty who flitted from high-profile parties to top-secret meetings around Manhattan.

Russian national Anna Chapman — a 28-year-old divorcee with a masters in economics

, an online real-estate business, a fancy Financial District apartment and a Victoria’s Secret body — had been passing information to a Russian government official every Wednesday since January, authorities charged.

In one particularly slick spy exchange on St. Patrick’s Day, Chapman pulled a laptop out of a tote bag in a bookstore at Warren and Greenwich streets in the West Village while her handler lurked outside, receiving her message on his own computer, the feds said. A similar exchange occurred at a Midtown coffee shop at 47th Street and 8th Ave.

The State Department and the Russians have given statements on the state of US/Russia relations in the aftermath of this development.

"to make a public statement in the spirit of the spy novel intrigues of the Cold War era" and noted that "these kinds of incidents have occurred in the past when our relations were on the rise."

"Such actions are ungrounded and pursue improper goals," the ministry said in a statement. "In any case, it is regrettable that all this is happening against the background of the 'reset' in Russian-American relations announced by the U.S. administration."

...

Watered Down Iran Sanctions

The sanctions against Iran have been watered down to satisfy Russia and China.

The U.S. has backed away from pursuing a number of tough measures against Iran in order to win support from Russia and China for a new United Nations Security Council resolution on sanctions, according to people familiar with the matter.

Among provisions removed from the original draft resolution the U.S. sent to key allies last month were sanctions aimed at choking off Tehran's access to international banking services and capital markets, and closing international airspace and waters to Iran's national air cargo and shipping lines, according to the people.

If we learned anything from the Bush administration it's that going to the UN and kow towing to Russia and China doesn't work. These sorts of sanctions were seeked and received throughout the Bush administration and we got nowhere.

Iran, Russia, and Garry Kasparov

Garry Kasparov has a theory about Vladimir Putin that I have repeated on numerous occasions. I will repeat it again. Putin does everything with an eye toward artificially making oil prices as high as possible. At the same time, he also makes sure that he creates a situation he can control.

That would explain Russia's insistence on protecting Iran from sanctions as they build up their nuclear capabilities. The threat of a nuclear Iran increases the price of oil. At the same time, if Iran were nuclear, that would also be a situation that Russia could no longer control. That might explain Russia's more aggressive tone.

Iran should improve its cooperation with the International Atomic Energy Agency, Russian President Dmitry Medvedev's spokeswoman says.

"On the subject of sanctions, Russia's position remains unchanged. Russia still believes that Iran should more actively and broadly cooperate with the IAEA and other countries," spokeswoman Natalia Timakova told reporters on Tuesday.

"If these obligations are not fulfilled, no one can exclude the application of sanctions," AFP quoted Timakova as saying.

Russia has made such threats before. They've never followed through when push came to shove. Still, no one understands Vladimir Putin better than Garry Kasparov. If Kasparov is right, a nuclear Iran is not in Russia's interest. As such, if you follow Kasparov's theory, they will stop Iran from getting a nuke before it is too late. Such a move would serve all their purposes and be very shrewd as it would also mean they'd have that much more geopolitical leverage as well.

Russia Warns Iran?

Russia's President Dmitry Medvedev recently said this.

On the subject of sanctions, Russia's position remains unchanged. Russia still believes that Iran should more actively and broadly cooperate with the IAEA and
other countries," spokeswoman Natalia Timakova told reporters on Tuesday.

"If these obligations are not fulfilled, no one can exclude the application of sanctions," AFP quoted Timakova as saying.

She stated that Medvedev also outlined Moscow's position on Iran's nuclear program to the Israeli prime minister, who was in Moscow on Tuesday to try to persuade Russia to support a new UN resolution imposing sanctions on Iran.

Russia has never taken any substantial action to limit Iran's nuclear program. In fact, every step of the way they have stood in the way when the U.S. and others tried to stop it. As such, these statements should be viewed skeptically until there is tangible action.

What if Roubini's Right: A Thought Experiment

Nouriel Roubini, known as Dr. Doom, is a renowned economist. He made a name for himself by predicting the mortgage, financial, and oil crisis currently going on.

"In 2005 Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he's a sage."[1] In September 2006, he warned to a skeptical IMF that: "The United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining
consumer confidence, and, ultimately, a deep recession."[2]

He also foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt". The New York Times labeled him "Dr. Doom", whereas, in hindsight, IMF economist Prakash Loungani has called him "a prophet".[2]

Now, the same Roubini is predicting a dollar carry trade bubble.

So what is behind this massive rally? Certainly it has been helped by a wave of liquidity from near-zero interest rates and quantitative easing. But a more important factor fuelling this asset bubble is the weakness of the US dollar, driven by the mother of all carry trades. The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates – as low as negative 10 or 20 per cent annualised – as the fall in the US dollar leads to massive capital gains on short dollar positions.

Let us sum up: traders are borrowing at negative 20 per cent rates to invest on a highly leveraged basis on a mass of risky global assets that are rising in price due to excess liquidity and a massive carry trade. Every investor who plays this risky game looks like a genius – even if they are just riding a huge bubble financed by a large negative cost of borrowing – as the total returns have been in the 50-70 per cent range since March.

Roubini believes that the weak dollar has been fueling a rush to risky assets as investors try and take advantage of a weak dollar. Roubini specifically identifies "risky global assets". Risky global assets are especially plentiful in the third world and the developing world.

In other words, domestic investors are borrowing at cheap domestic rates, moving out of dollars, and going into the third world with the potential of massive returns. One important characteristic of any bubble is the presence of a stimulant outside of fundamentals. In this case, the stimulant is the weak dollar itself. So, investors aren't making massive bets in the third world necessarily because of the fundamentals, but rather, because they're taking advantage of the weak dollar. So, once the dollar strengthens, they'll move out and back into dollar assets.

So, what we'll see is the rapid investment into the developing world and then that investment will move out, and the bubble will burst. Now, the U.S. has had its fair share of bubbles. They're difficult even at their mildest. Looking back, 2001-2003 was a relatively mild recession following the internet bubble. Yet, while it occurred, there was plenty of pain. In the third world, bubbles are much rarer since they don't experience as many booms.

Roubini isn't merely calling for a dollar carry back asset bubble but the MOTHER OF ALL dollar carry back asset bubbles. That means that third world economies will see economic pain on scales we've never seen before. After experiencing growth that will give their populations hope, they'll experience pain on scales they thought they'd never see again.

We often look at economics strictly economically. There is however a cultural, societal, and geopolitical aspect that is often overlooked. A massive bubble that hits the third and developing world all at once would lead to a sort of geopolitical instability that's frightening. In those nations, economic pain leads to coups, governments falling, and dictators rising.

Since this bubble's nexus will be tracked to a weak dollar, tracked to U.S. policy, you can bet that despots and opportunists will use the crisis to blame America. So, what we will have is a dictatorial takeover all over South America, some parts of Asia, and parts of Africa. Anti American depots and opportunists will look to use the crisis to support leftists to fill the vacuum for falling governments all over the world.

There will of course be plenty of civil wars. That's what happens in conjunction with falling government, often, in the third world. We'll see death, looting, and mass chaos all over the place. This will also give opportunities for terrorists and other American enemies like Hugo Chavez, Russia, and Iran to install governments sympathetic to their beliefs.

Chavez will almost certainly be the big winner in South America in such a scenario. He, more than anyone else, would ride the Anti American card as developing countries have their governments fall. Africa would see multiple civil wars all at once. Parts of Asia will have their governments fall. In the geopolitical climate that will likely be in place before all this, this sort of scenario is a recipe for disaster.

Iran Thumbs Its Nose at the World

A few days back the IAEA approved a strongly worded censure of Iran over its nuclear program. The Politico had a story that called this censure a "vindication", at least according to the White House.

The resolution was hailed by the White House and won praise from the Israeli government, which has previously expressed skepticism that much can be gained from trying to engage Iran.

"Today's overwhelming vote at the IAEA's Board of Governors demonstrates the resolve and unity of the international community with regard to Iran's nuclear program," White House spokesman Robert Gibbs said in a statement. "Indeed, the fact that 25 countries from all parts of the world cast their votes in favor shows the urgent need for Iran to address the growing international deficit of confidence in its intentions."

Not two days later, the same Politico, along with most media, is reporting that Iran is thumbing its nose at the censure by no longer working with the same IAEA.

Iran will no longer voluntarily cooperate with the International Atomic Energy Agency after its vote last week to rebuke the nation, the Tehran Times is reporting.

As Laura noted, the IAEA vote was a big win for Obama in that China and Russia, the two powers that have been most resistant to taking a harder line, both signed on to the resolution.

Thus, we continue this diplomatic dance that has played out in front of the world and it's a dance that Iran has manipulated perfectly to their benefit. So far the world community is patting itself on the back over a strongly worded letter that was rebuked publicly by Iran two days later. That's sum total of the diplomatic accomplishments of the Obama administration.



Listening to politicians from all parties and from all countries, none have a clue what to do. Everyone must understand that if nothing happens Israel will bomb Iran's nuclear sites. Even Israel itself wants to avoid this outcome. In fact, even Iran's chief defenders, China and Russia, have no clue.



No one wants Israel to bomb Iran, not even China and Russia. The price of oil would go to some unheard of level if that happened. That's not what China wants. That's what Russia wants but they also want a situation they can manage. A nuclear strike would very likely create a regional if not an all out war. Plenty of terrorist groups near Russia would take advantage of said situation.



Yet, both insist on stopping any significant sanctions giving Iran carte blanche to create a nuclear weapon. Meanwhile, the U.S. and our allies are acting like high school kids with a major research paper due. They'd all rather procrastinate with a series of meaningless diplomatic gestures and actions rather than making the difficult decisions necessary to actually stop Iran from getting a nuclear weapon diplomatically.



If you ever listen to any politician from either side of the aisle talk about what we should do to stop Iran from getting the bomb all you get is a series of platitudes designed to make a nice sounding sound bite not to have any meaningful practical plan. It will be things like working with our allies, getting Russia on board, and show strength. No politicians really have a clue.



There's only a limited number of options short of war. We can encourage all our allies to pull their ambassadors. All internal investment funds can make it clear to all companies that do business in Iran: they'll divest if the business continues. Most meaningful sanctions are unlikely because of Russia and Iran. Finally, we can engage in a Naval blockade, an act of war. That's it.

Yet, every politician from both sides offers nothing but platitudes. Platitudes won't get it done. Soon, we'll have to have real solutions and so far no one has shown they have any.

Russian Train Crash an Act of Terror

The crash of the train that was headed from Moscow to St. Petersburg has been ruled an act of terror.

A homemade chemical bomb planted on the tracks in an apparent act of terrorism derailed a high-speed train in Russia carrying hundreds of people Saturday, killing at least 26 and injuring scores more.

The head of the Russian Federal Security Service told the country's news agency Interfax that traces of explosives were found at the train crash site, including chemical residue from a homemade bomb.

Alexander Borotnikov was quoted by the Interfax and RIA Novosti news as saying that an improvised explosive device equivalent to 15 pounds of TNT had detonated when the express train traveling from Moscow to St. Petersburg passed over it Friday night about 9:30 p.m.

No group has been suggested as the perpetrator. Also, bodies continue to be found in the rubble and so we should expect the number of dead and injured to go up.

O'Reilly Vs. Palin III

Bill O'Reilly had his final of three parts to his interview with Sarah Palin tonight. I was actually generally disappointed with the interview. O'Reilly said the interview would focus on "policy". There were two questions on Iran, one on Afghanistan, one on domestic policy, none on health care, and no questions on social issues.

That's not really focusing on policy but rather scratching the surface on policy. Tonight's interview was on the "hateful attacks" and whether or not Palin wants to lead the tea parties. All of this is interesting but what I want to know is what Palin would do to fix health care, about the economy, Russia, Iran, China, etc.

These cultural questions are interesting but they say very little about whether or not Palin has serious answers to serious policy questions. O'Reilly barely even mentioned China and Russia in the entire interview. All of Palin's critics say she knows little about foreign policy. O'Reilly neither confirmed nor denied that stance because he barely asked her about policy position toward Russia.

O'Reilly says that Palin wants to leave the new populist movement. Maybe, that's true, but that's ultimately of little consequence. I don't care if she wants to lead a populist movement. I want to know if she has the acumen to deal with geopolitical heavyweights like Vladimir Putin. I expected O'Reilly to ask her enough probing questions to get an idea of that. I was disappointed.

Russia is Not Our Friend

Two days ago, there were indications that Russia was leaning toward supporting the U.S. in dealing with Iran. Hillary Clinton proclaimed that Russia might be coming around to the U.S. position on sanctions. Clinton, meanwhile, also said that the U.S. didn't ask the Russians for any firm commitments. Then, yesterday the Russians poured cold water on any idea that they would support sanctions.

Russia pushed back Tuesday at U.S. efforts to threaten tough new sanctions if Iran fails to prove its nuclear program is peaceful, a setback to the Obama administration's desire to present a united front with Moscow.

After meeting with U.S. Secretary of State Hillary Rodham Clinton, Russian Foreign Minister Sergey Lavrov said Moscow believed that such threats would not persuade Iran to comply and that negotiations should continue to be pursued.

The Russians aren't merely against any new sanctions at this moment. Instead, the Russians wouldn't even favor the U.S. threatening Iran with sanctions. In other words, the Russians want the U.S. to meet with Iran and not even mention sanctions as a possible punishment for continued non compliance regarding their nuclear program.

The Russian Foreign Minister, Sergey Lavrov, would have the U.S. negotiate with Iran but not threaten the Iranians with any punishment. This of course is a recipe for disaster.

Let's face it, a recipe for disaster is exactly how the Russians want this. This has been their geopolitical dance for as long as I remember on this issue. They will make some statement that makes it appear as though they are coming around to confronting Iran. Then, when push comes to shove, or really long before that, they make another statement making it clear that they have no intention of confronting Iran. Since they have a veto vote on the Security Council, Russia can single handedly stop any action against Iran. That's what they've done and in fact they've been supported by China the entire time.

Russia wants artificially increased oil prices. Oil is one of their single biggest sources of wealth. Any confrontation between Iran and the West would only help oil prices. In fact, even the perception of a confrontation helps oil prices. Russia is looking for chaos on this front and a united front hurts that effort.

Of course, this is exactly what's been happening since the beginning of the Bush administration. Bush completely misread the intentions of Russia and its leader. Now, the Obama administration is continuing that mistake. They are not our friends. They don't have our best interest at heart. They don't have peace in the world as their intention. High oil prices are predicated on choas. We have set the so called "reset button" and the only ones resetting their relationship is our side. The Russians have continued to move forward with their own agenda.

What should be clear to all is that any action through the UN is not an option. The Russians will never allow it. Confronting Iran will take some creativity and work through channels outside of that body. Let's hope the administration will realize that before it's too late.

The Dollar Under Pressure

This may have been the big business news of the day.

The move would see oil priced not in dollars but in a unit based on a basket of currencies including the Chinese yuan, the Japanese yen, and a new currency intended for use by the Gulf emirates, according to a report in Tuesday's Independent newspaper. The paper added that the transistion from the dollar to a new currency will take almost a decade.

Finance ministers and central bankers have held meetings in Russia, China, Japan and Brazil to discuss the idea, which the Americans are aware of, the Independent said.

This news was first reported by the British newspaper the Independent. The Independent says that secret meetings have been occurring by several Gulf states to move to stop using the dollar to buy and sell oil on the open market.

Currently, oil, like most commodities, is bought and sold using U.S. Dollars. Under the plan reported, the Dollar would be replaced by a basket of currencies including the Chinese Yuan. The Dollar, as expected, plunged on the news. Domestic equities went through the roof. Each was up at least one and a half percent. Equities were up because of the belief that a weak Dollar would help multi nationals.

This isn't the first time that such an idea has been floated. Russian President Vladimir Putin floated a similar idea in January.

"The one reserve currency has become a danger to the world economy: that is now obvious to everybody," he said in a speech at the World Economic Forum.

It is the first time that a Russian leader has set foot in the sanctum sanctorum of global capitalism at Davos.

The consequences of this are pretty clear, directly at least. If oil is no longer bought and sold in Dollars, then demand for the Dollar weakens. That means the Dollar weakens, all else being equal of course. A weaker Dollar has all sorts of consequences of its own.

Sarkozy On Obama: Naive and Grossly Egotistical

This video is sure to get all sorts attention.




That's Jack Kelly of the Pittsburgh Post Gazette. If Kelly's sources are solid, then President Sarkozy views our president in much the same way as many of his opponents, naive and arrogant. That's of course the worst sort of a combination for any leader. I can't find video of the entire interview and that's too bad. That's because prior to this bombshell Kelly also said that Sarkozy pushed Obama to reveal Iran's secret nuclear site in his speech at the UN. He said that Obama didn't do it because he didn't want anything interfering with the resolution he wanted passed committing the UN to getting rid of nukes.

In other words, according to the sources that Kelly has near Sarkozy, Obama thought it was more important to pass this resolution than to maximize the diplomatic confrontation between the West and Iran. In fact, Kelly said that in his estimation Obama wouldn't have revealed it at all had it not been for the prodding of Sarkozy and Brown.

If Kelly's sources are right, we have a serious problem. That would mean that Sarkozy will be weary of anything that Obama does and says. He won't be apt to join any sort of serious alliance on any important foreign policy matter. Sarkozy would then feel that Obama is incapable of properly handling and would proceed with that in mind. It would undermine most geopolitical moves made by Obama. Obama's already alienated most of our Eastern European allies by dumping the missile shield, and now a major Western European ally thinks he's arrogant and naive. Colombia has been alienated because we won't sign a free trade pact. Mexico was ticked off by protectionist language in the stimulus. That really doesn't leave too many allies.

Now, if Kelly is right about Sarkozy, and Sarkozy is right about Obama, then we have a disaster. If the president is naive and arrogant then not only will he proceed with policies with no hope of working but he'll be too arrogant to see they aren't working. With Afghanistan on the brink, Iran on the brink of a nuke, Russia lying in wait, and Venezuela trying socialize South America, we have a lot of potential problems. If we have a president both clueless and too arrogant to realize he's clueless, we have a lot of potential problems that will explode.

I was always stunned by how anyone could vote for someone that was four years removed from being a state senator. What exactly did his supporters think? Did his supporters really think he was up to being president? Obviously, the jury is still out, and it's unfair to make total judgments yet. That said, I think everyone should begin to admit that we may all be facing our worst nightmares with President Obama. So far at least, it appears all of our worst nightmares are coming true. We have a far left ideologue that's not all that bright and too arrogant to see it.

The Iran Dance Starts Again

There is an old and very famous saying that everyone likely knows, "the definition of insanity is doing the same thing over and over and expecting a different result". Let's see if anyone finds any of this familiar.

Iran declared its refusal Tuesday to discuss its nuclear program -- including the disclosure of a second nuclear enrichment plant -- when it sits down at the negotiating table Thursday with the five permanent members of the U.N. Security Council and Germany, Reuters reported. A top Iranian official told the news agency that his country will not abandon its nuclear activities, "even for a second."

Iran's nuclear chief also announced Tuesday that his country built its newly revealed uranium enrichment facility inside a mountain and next to a military site to ensure continuity of its nuclear activities in case of an attack. The revelation comes as the Obama administration works up plans to push for new sanctions against the country, targeting its energy, financial and telecommunications sectors if it does not comply with international demands to come clean about its nuclear program, U.S. officials said Monday.

Then, there's this.



Iran's missile test launches should not be used as an additional argument for imposing sanctions on Tehran over its nuclear program, Interfax news agency quoted a senior Russian diplomat as saying on Tuesday.



Finally, there's this.

President Obama has let Iran know that it faces an arsenal of sanctions if it fails to completely disclose the nature of its nuclear program and ambitions.

But with three rounds of U.N. sanctions already in place -- and Iran's defiant refusal Tuesday to put its nuclear program on the table when it meets Thursday with representatives of the five permanent Security Council members and Germany -- some officials question whether yet another round of sanctions, especially ones dependent on Russia and China, would have any teeth.

If Iran does not cooperate Thursday, the Obama administration has been working up plans to target Iran's energy, financial and telecommunications sectors, U.S. officials said Monday.

If all of this sounds familiar, that's because it is. President Bush went through several rounds of this dance, and now it appears President Obama is also going through the same dance. Through allies, we reach out to Iran diplomatically about their nuclear program. They give hints that they may be ready to capitulate. Then, it turns out they've only strung us along. Russia then pays lip service to how terrible it all is but makes sure to let it be known that tough sanctions won't happen. Instead, we got some sort of weak and limp sanctions and we start the process all over again. At some point, our president says something to the effect of "Iran must choose".



In the meantime, Iran has moved from being years away from the bomb to probably months. We've been here before. We've gone through this before, and it's always ended the same. Iran never capitulates. Russia always protects Iran, and whatever sanctions come about ultimately are too weak to work. We are here again. The president is going through the same dance again. Will he really try all the same things and hope for a different result?

The "Shocking" News on Iranian Nukes

This morning the president, along with the leaders of France and Britain, "stunned" the world with this news.

President Obama, along with the leaders of Britain and France, demanded Friday that Iran immediately allow international weapons monitors to inspect a nuclear facility the Islamic Republic acknowledges it has been secretly building for years.

Obama, joined by British Prime Minister Gordon Brown and French President Nicolas Sarkozy at the opening of the G-20 economic summit in Pittsburgh, warned Iran that it will be "held accountable" to an impatient world community if it does not fully disclose its nuclear ambitions.

So, it appears that Iran has had a secret nuclear plant and has been developing uranium there for years. I say the news was "shocking" because you'd have to have been really gullible to believe that Iran had disclosed its nuclear ambitions fully.

This is, according to President Obama, the third violation of UN resolutions related its nuclear ambitions. What's also not surprising was that all three leaders said that Iran "must be held accountable" and that this a moment of truth, yet again.

The language following this announcement was frankly no different from what we heard from President Bush over and over again regarding Iran. The former president proceeded to do little but talk tough toward Iran. He was able to orchestrate a few meaningless sanctions and did little beyond that.

Any sanctions that go through the UN would face a roadblock with both Russia and China. Earlier in the week some said that there was a breakthrough with Russia when its "leader" Dmitri Medvedev said that sanctions toward Iran were "inevitable". Some called this the first sign that the president's outreach was working. Now, that will have its first test. Most astute observers of Russia know that Vladimir Putin is the real leader of Russia, and it's unclear what Putin will do.

Garry Kasparov, the main opposition leader in Russia, believes that Putin makes every move with a desire to artificially raise oil prices. That's dropped precipitously since its highs about two years ago. A confrontation between Iran and the rest of the world would certainly push oil prices up in the short term, and so it's unclear that sanctions would benefit Putin.

I expect the world to talk tough for a few weeks. I expect some meaningless sanctions and then everyone will forget about it for the time being. Israel, however, has no such options. So, maybe, the threat of a regional war in the Middle East will force some to act. We'll all have to wait and see.

Obama Scraps Missile Shield

This news is breaking.

Barack Obama has abandoned the controversial Pentagon plan to build a missile defence system in Europe. The move has prompted angry accusations of betrayal from Washington's eastern European allies but delighted the Kremlin.

In one of the sharpest breaks yet with the policies of the Bush administration, Obama phoned the leaders of Poland and the Czech Republic last night to tell them that he had dropped plans to site missile interceptors and a radar station in their respective countries. Russia had furiously opposed the project, claiming it targeted Moscow's nuclear arsenal.

Ironically enough, Defense Secretary Robert Gates just held a press conference. It's ironic because Gates was one of the biggest supporters of this missile defense shield when he was a part of the Bush administration. Secretary Gates cites two specific reasons for the change in policy 1)the intelligence on Iran has changed and 2)the administration believes that there's better technology to deal with the threat.

According to Gates, our intelligence now believes that Iran's intercontinental missile capabilities aren't as robust as we once thought. As such, the missile shield in Europe is unnecessary. I'm not privy to the intelligence however it goes without saying that our intelligence has had a recent history of being off.

There is a plethora of reaction so far. The strongest comes from Senator Jon Kyl of Arizona.

The decision announced today by the administration is dangerous and short-sighted,..Not only does this decision leave America vulnerable to the growing Iranian long-range missile threat, it also turns back the clock to the days of the Cold War, when Eastern Europe was considered the domain of Russia. This will be a bitter disappointment, indeed, even a warning to the people of Eastern Europe.

Joe Lieberman offered similar comments.

This deeply regrettable decision sends the wrong message to Tehran, Moscow, and our European allies at a critical time in our effort to stop Iran’s nuclear weapons program,” Senator Joe Lieberman says in a statement. “Moreover, it means that we will have a less capable missile defense system to protect the United States and our European allies against the Iranian threat. The administration must take immediate and tangible action to reassure our allies in Central and Eastern Europe that we are committed to their security and independence

Gates for his part says that the administration is switching strategy and looking at a more mobile missile defense shield.

The administration announced it is scrapping plans to base long-range missile defense sites in Poland and the Czech Republic in favor of a more flexible, shorter-range system that would counter a potential short- or mid-range Iranian missile threats to Europe. Under the new program, instead of focusing on a ground based system, the U.S. will increasingly deploy sea- and land-based missile interceptors.

I would caution everyone from rushing to judgments on this issue. These are very complicated issues and we, as the public, know an infinitesimal amount compared to those that have made the decisions. There will be plenty that will come out over the days, weeks, and months and we'll all be in a better position to judge the worthiness of this move. There's a lot to be troubled about this but for now we should give the president the benefit of the doubt.

The Russia Card?

In the hoopla over health care reform, this geopolitical story went largely unnoticed.

Israeli President Shimon Peres said Wednesday that the Kremlin has promised to reconsider the planned delivery of powerful air defense missiles to Iran.

Russian President Dmitry Medvedev made the pledge during their talks Tuesday in the Black Sea resort of Sochi, Peres said.

"President Medvedev gave a promise he will reconsider the sales of S-300s because it affects the delicate balance which exists in the Middle East," Peres told reporters via video link from Sochi.

The most important unreported business and geopolitical story of the year was this one.

On Jan. 18, just hours after a cease-fire began in the Gaza Strip, Israel announced the discovery of a major natural gas field off its northern Mediterranean coast.

The news sent the Tel Aviv stock market sharply higher on Sunday as the size of the find appeared to eclipse the negative impact of the recession the country is now facing. Shares of the Israeli partners in the Tamar-1 drilling site jumped between 42% and 124%, though profit-taking pulled some down on Jan. 19. Even the Israeli shekel joined in, climbing by up to 1.6% against the dollar on Monday before settling the day up a half-point.

The discovery of this natural gas pipeline immediately made Israel a player in the natural gas market. It's an open secret that Russian President Vladimir Putin wants to create a pseudo OPEC cartel in natural gas.

Last week, Russian President Vladimir Putin sent chills through Western Europe when he discussed the possibility of forming a gas-producers' association with countries like Libya and Iran. "A gas OPEC is an interesting idea. We will think about it," he said. "We are not going to set up a cartel. But it would be correct to co-ordinate our activities with an eye to the solution of the main goal of unconditionally and securely supplying the main consumers of energy resources."

Uh-oh!

Here is a government that already uses its control of vital energy supplies as a weapon against its neighbors proposing to join forces with a charter member of the Axis of Evil—the better to intimidate rival nations all over the world.

Everyone is well aware that Iran is moving quickly towards developin nuclear weapons and has threatened to destroy Israel. What hasn't been reported as much is a series of high level meetings between Israeli officials and Russian officials. The latest of which I just cited.

It continues to be more and more clear that Israel has no confidence that the U.S. will do anything to stop Iran from getting nuclear weapons. The Israelis can attack Iran before that happens but they would clearly like to find a better way to resolve this.

That's where Russia enters this geopolitical chess match. Iran's nuclear weapons development depends in very large part on Russia's support. That's because most of the equipment and weaponry comes from Russia. With the discovery of the natural gas pipeline in Israel, Israel becomes a major player in the natural gas market. They would be a very natural part, pardon the pun, of a natural gas cartel headed by Russia. Russia has no interest in Iran attaining nuclear weapons per se. They would gladly cut Iran off if it meant securing Israel's place in their cartel. This latest meeting appears to have been a step toward Russia cutting Iran off and thus cutting off their nuclear weapons program.

Israel cannot have Iran get a nuclear weapon. They have no confidence that the Obama administration will help them in this cause. As such, that country is now reaching out to other geo political players to ally themselves. Russia has much more influence on Iran than the U.S. anyway. So, it appears the geo political balance of power is changing with little scrutiny. Israel is moving away from their alliance with the U.S. and moving toward an alliance with Russia.

Russia increases its influence in the world, and with Israel in their back pocket, they are one step closer toward creating a natural gas cartel. Meanwhile, in its quest to reach out to Iran, the U.S. is pushing away its long term ally Israel. Israel also has plenty of business dealings with China, another country with influence over Iran. Of course, if Israel were to ally itself with China and Russia, that would end any hope that the U.S. could influence Israel into a peace agreement with the Palestinians. It would also create a formidable alliance that would challenge the U.S. both militarily and economically. It appears that it is unfolding with little notice.

Putin, the Dollar and Energy

Since taking over as leader nearly a decade ago, Vladimir Putin has rolled back democracy and freedom in Russia in ways that would only rival Joseph Stalin. He's cracked down on opponents, the media, and rolled back the Democratic process. All of this is a naked attempt to consolidate all legitimate power into his own hands. Yet, Putin isn't merely popular in Russia, but overwhelmingly popular.

Putin has maintained his enormous popularity because Russia's GDP (ironically the acronym in Russian is the same as his name, VVP) has grown every year since he took over in significant ways. Much of this GDP growth is tied to the explosion of oil prices over largely the same period. Russia produces nearly 10 million barrels of oil daily. Along with natural gas, oil accounts for the overwhelming reason for Russias extraordinary growth over the last nine years. Russia currently supplies about 75% of Europe's energy needs.

Of course, with the world wide recession, Russia's extraordinary growth in wealth was threatened with it. With that, so was Putin's enormous popularity and by exension, power. To understand how Vladimir Putin thinks, the best person to ask, in my opinion, is former chess champion, Garry Kasparov, currently a political activist that opposes Putin. Kasparov has often said that Putin's every geo political move is done with the motivation of keeping oil prices as artificially high as possible. He wants, in Kasparov's view, to create enough chaos in the world to increase the price of oil, but not so much that a situation spins out of control. This would explain why Putin has gotten into bed with Iran for instance.

Putin set the average price of oil in the world at $41 per barrel earlier in the year. Such a price would absolutely devastate the Russian economy. So, if you believe, as I do, that Kasparov's thesis is right, then you also believe that Vladimir Putin will do all he can to manipulate the price of oil up. In fact, if you trace the Russian invasion of Georgia and the price of oil at the time, it is startling how well the theory held.

Starting with his appearance at the World Economic Forum in Davos, Switzerland in January of this year, Putin, along with other Russian officials, have from time to time suggested that the Dollar should no longer be the world's currency.

The one reserve currency has become a danger to the world economy: that is now obvious to everybody," he said in a speech at the World Economic Forum.

It is the first time that a Russian leader has set foot in the sanctum sanctorum of global capitalism at Davos.

Mr Putin said the leading powers should ensure an "irreversible" move towards a system of multiple reserve currencies, questioning the "reliability" of the US dollar as a safe store of value. "The pride of Wall Street investment banks don't exist any
more," he said.

For all his bluster, Mr Putin's bargaining power is weakening by the day. Russia's foreign reserves have fallen by 34pc since August to $396bn (£277bn) after months of capital flight and the collapse in the price of Urals crude oil to $45 a barrel. The rouble also fell to a record low yesterday after sliding for weeks in a controlled devaluation.

The idea is hokey, I don't believe that Putin either wants it to be implemented nor expects it to be. Putin has significantly more modest intentions in mind. Back in March, Secretary Geithner, speaking at the Council on Foreign Relations, suggested he was also open to the suggestion that the Dollar would no longer be used as the world's currency. Over the next couple hours, the value of the dollar dropped against the rest of the world's currencies.

Oil, like most commodities, is priced in dollars. If the dollar is weakened, the price of oil is artificially increased. Thus, it makes sense that Putin puppet, Dmitri Medvedev, said this earlier this morning.

Russia and India said in the past week the world economy is too dependent on the dollar and called for revisions to how $6.5 trillion in currency reserves are managed. “The dollar system or the system based on the dollar and euro have shown that they are flawed,” Russian President Dmitry Medvedev said in an interview with the Italian newspaper Corriere della Sera, repeating his proposal for a new reserve currency.

Oil has fallen more than ten percent, from $72 a barrel to $62 a barrel, in about two weeks. If you are to take Kasparov's theory, you would have to believe that Putin will need to do all he can to stop the free fall of oil and see it go back up. Suggesting that the Dollar should no longer be the world's currency is an effective way of weakening it. Weakening the dollar is an effective way of artificially raising oil prices, at least in the short term. It would also explain why Russian officials are again suggesting that the dollar should no longer be the world's currency.

The Left's Delusions on Obama and Israel

The timing is uncanny. In the last week, two liberals strongly defended Obama's policies toward Israel. Yet, their defenses are diametrically apart from each other. As such, at best, one is terribly wrong. At worst, both are wrong. In my opinion, both are delusional.

The first comes from Israeli defender, Alan Dershowitz. Dershowitz acknowledges what most of us that follow events surrounding Israel already know...Obama's policies are troublesome to most that are concerned with safety and prosperity of that nation. Dershowitz defends them in two ways. First, he acknowledges that Obama has been much tougher than his predecessors on the issue of settlements. Dershowitz points out that while Obama's rhetoric has been sharper on settlements, the policy is not necessarily any different. Furthermore, just because you are against settlement expansion doesn't mean you don't have the safety of Israel as a top priority. Now, I agree with Dershowitz on the second point. Settlement expansion is not some sort of litmus test on Israel. On the other hand, he makes a quantum leap on the first point.

There is a massive difference between Obama's policies and prior policies on settlements. Prior presidents allowed for "natural growth" whereas Obama doesn't even allow for that. Dershowitz makes this seem as though it is a minor point. It isn't. Without natural growth, this means that the population in settlements couldn't grow. That means for every child born someone would have to leave. If there is no natural growth, there are no settlements period. Furthermore, past presidents have demanded a lot more of both the Palestinians and the Arab world in general. This president saves most of his criticism for Obama himself.

On the issue of Iran, Dershowitze is even more murky. First, he acknowledges that so far Obama's policies have been problematic.

The Obama administration consistently says that Iran should not be allowed to develop nuclear weapons. But prior to the current unrest in the Islamic Republic, White House Chief of Staff Rahm Emanuel frightened many supporters of Israel in May by appearing to link American efforts to stop Iran from developing nuclear weapons to Israeli actions with regard to the settlements.

This is a disturbing linkage that should be disavowed by the Obama administration. Opposition to a nuclear Iran -- which would endanger the entire world -- should not be dependent in any way on the issue of settlement expansion.

The current turmoil in Iran may strengthen the Obama administration as it seeks to use diplomacy, sanctions and other nonmilitary means to prevent the development of nuclear weapons. But if these tactics fail, the military option, undesirable and dangerous as it is, must not be taken off the table. If the Obama administration were to shift toward learning to live with a nuclear Iran and attempt to deny Israel the painful option of attacking its nuclear targets as a last resort, that would be troubling indeed. Thankfully, the Obama administration's point man on this issue, Dennis Ross, shows no signs of weakening American opposition to a nuclear-armed Iran.

After Dershowitz lays out what he himself considers a disturbing trend, Dershowitz defends that Obama administration by pointing out that Dennis Ross is their point man on Iran. As such, none of us have anythin to fear because Ross is both a veteran of the region and pro Israel.

That's just looney. The Obama's policy toward Iran has just been plain inexplicable. They have maintained a position of outreach. They have been even handed in their response to the protests. The administration to do this day maintains that talks with the current regime are still possible. Their linkage of Iran's pursuit of nuclear weapons to the Palestinian/Israeli crisis is so disturbing that Dershowitz himself characterizes it as "disturbing". Yet, after listing out all the reasons to be troubled, all Dershowitz has to say in defense is that Dennis Ross is the point man and thus we need not worry. Is Dershowitz kidding?

The reality is that Obama's policies have so far been decidedly anti Israel. While it's far too early to make a final judgment on Obama's Israeli policy, it's not too early to say that so far it has been nothing short of anti Israel. It's no surprise that a recent Israeli poll gave Obama single digit support in that nation.

The other analyst is Matt Yglesias. He supports Obama's Israeli policy because he sees it as sufficiently anti Israel.

There was no sign of this change in the post-election transition process. Hillary Clinton, who as senator from New York had staked out extremely pro-Israel positions, was made secretary of state. Robert Gates, George W Bush’s secretary of defence, was kept in place. As these secretaries began staffing their offices, many foreign policy hands who had supported Obama began to fear that they were being frozen out. People who’d spent more than a year working to put him in the White House began complaining to me that there seemed to be room on the president’s national security team for all kinds of people except his own supporters.

It now seems that while Obama was alarming some of his fans, he was also lulling his opponents into a false sense of complacency. In the past couple of months, he has adopted a tough stance against Binyamin Netanyahu’s government and his approach has flummoxed the pro-Israel lobby.The first major sign of change came at a meeting of the lobby’s flagship organisation, the American Israel Public Affairs Committee (Aipac), on 5 May. The annual gathering attracts big-name politicians from across the political spectrum and this year’s session was no exception. But the message from some of the most influential Democrats did more than attempt even-handedness.

“Israel must work toward a two-state solution,” said Vice-President Joe Biden, “not build settlements, dismantle outposts, and allow Palestinians freedom of movement, access to economic opportunity and increased security responsibilities.” Senator John Kerry went further, hailing the Arab Peace Initiative of 2002 as an important step and arguing that “nothing will do more to show Israel’s commitment to making peace than freezing new settlement activity”.

Yglesias goes on to, in detail, describe how Obama's tough stance toward Israel caught the Israelis off guard, put Netanyahu on the defensive, forced him to soften his tone, and how all of this will soon lead to peace (which presumably Yglesias blames Israel for a lack of) Most of Yglesias' analysis is impossible to confirm. How do you confirm if Israelis were caught off guard? How do you confirm if this put the Israelis on the defensive? All of it is nonsense regardless. That's because after this analysis, Yglesias is forced to acknowledge this.

The new approach has yet to have much of an impact on the ground in the occupied territories, but it has pushed Netanyahu to seek to soften his image in the US with a conciliatory-sounding speech. And Obama’s administration understands that words rather than deeds are what is needed from Israel. Republicans, led by Representative Eric Cantor of Virginia, the only Jewish Republican in Congress, are trying to use the issue against Obama, helped by leaders such as Malcolm Hoenlein of the Conference of Presidents of Major Jewish Organisations, an umbrella group that purports to speak for Jewish Americans. And yet, on 16 June, the Union of Reform Judaism, the largest organisation of synagogues in America, adopted a resolution backing Obama, condemning the “destructive impact of the settlements” in the occupied territories and calling on Israel to freeze settlement activity unconditionally.

In other words, nothing has changed but Netanyahu sounds more conciliatory. Yglesias is delusional because he believes that Israel has no options. He thinks that if the U.S. is tougher with Israel, the tiny nation will be forced to capitulate.

That's just not accurate. All nations have options. If the Israelis are convinced that they are dealing with a president that doesn't have their best interest at heart, the Israelis will look to ally themselves with another nation of relatively equal strength (obviously no one is as strong as America but there are options). One such option is Russia. Israel discovered a major source of natural gas in January. Russia is looking to create an OPEC style cartel in natural gas. Russia would be more than happy to ally itself with Israel if it means a partner in this OPEC style cartel. Israel would have no choice but to ally itself with Russia if they are convinced the U.S. doesn't have its best interest at heart. The problem with treating your ally like an enemy is then your ally will seek new allies. The left should not be under the impression that Israel would ever capitulate and threaten its own safetly simply because we have a president that suddenly talks tough to them.

The President in Russia: A Preview

Later today, the president will travel to Russia as part of a week trip through Europe and Africa. He'll stop at the Vatican, meet with the other leaders of the G8, and travel to Ghana.

President Obama is scheduled to leave Washington tonight on a week-long trip that will help determine whether his personal popularity and fresh policy approaches can yield concrete results on difficult issues including arms control, missile defense and nuclear nonproliferation.

After seeking support for U.S. policies from allies in Europe and appealing for a new relationship with the Muslim world in Cairo on previous trips, Obama arrives in Moscow tomorrow for his first foray into high-profile, nuts-and-bolts negotiations with the leader of a nation that might be deemed an unfriendly rival.

On Wednesday, Obama will travel to L'Aquila, Italy, where he will meet with leaders of the world's major industrial powers. Climate change and the continued shaky global economy are expected to dominate the agenda. He is also to meet with Pope Benedict XVI.

The president is wise to understand Russia's motive in the region and in the world. Russia is looking to increase its reach both in the region and the world. Russia currently supplies Europe with about 75% of it energy needs. Russia is also a major player in the natural gas market. In fact, Russia may even be angling to lead a group of nations to create an OPEC like cartel in natural gas. In all these ways, Russia will once again become a major player in the world's geopolitics.

Russia is also looking to exert as much control over its former republics as possible. That was put on display last summer when Russia invaded Georgia. Finally, much of Russia's economic wealth is dependent on artificially high oil prices, and in fact, Putin opponent, Garry Kasparov, believes that Putin's entire geopolitical agenda is based on maintaining this artificially high oil prices.

There will be several issues on the agenda between Russian leaders and President Obama: nuclear non proliferation, missile defense, and NATO membership for many former Georgian satellites.

President Obama would be wise to keep all of this in mind as ne negotiates with the Russians. Nuclear non proliferation is his pet issue but from the view of Vladimir Putin, he would gladly give up his nuclear stock pile if it meant the U.S. backing away from a missile defense system in Eastern Europe. Missile defense in Eastern Europe make most of the former Russian satellites a lot more secure from the influence of Russia. The same goes for NATO membership of many of these satellites. Putin frankly sees the potential of a natural gas cartel as a significantly more promising way of exerting force than his nuclear stock pile. As such, Russia would gladly sign onto any nuclear non proliferation agreement if it means that the U.S. backs off missile defense and NATO membership for the Ukraine, Georgia and other former Russian satellites. Any such agreement would NOT be in our best interest, nor our friends.

There's more. Israel recently discovered a major natural gas discovery. Israel is now instantaneously a player in the natural gas market. With relations between the U.S. and Israel frosting, Russia could use this as an opportunity to try and include them in any such OPEC style cartel. In fact, the recent visit by Israeli Foreign Minister Avigdor Lieberman, of Russian descent, could be a sign of warming relations between the two nations. Russia can and will use the growing rift between the U.S. and Israel to their advantage.

Vladimir Putin knows that President Obama is desperate to achieve nuclear non proliferation. Putin is desperate to increase the scope of influence by Russia in the world. Putin could easily puppeteer Obama into an agreement that gives Putin exactly what he wants. Russia has several agendas in the world. They are not America's allies. They must be viewed as threats and rivals and all potential agreements must carefully be viewed with all of this in mind.

What's Popularity Worth

The president continues to enjoy outstanding popularity, or at least, that's what nearly every pundit says when they write a story about him. He's apparently just not popular enough to win his time slot.

The one-hour ABC News special "Primetime: Questions for the President: Prescription for America" (4.7 million viewers, 1.1 preliminary adults 18-49 rating) had the fewest viewers in the 10 p.m. hour (against NBC's "The Philanthropist" debut and a repeat of "CSI: NY" on CBS). The special tied some 8 p.m. comedy repeats as the lowest-rated program on a major broadcast network.

Given we're in the summer time re run season, it's all the more stunning just how poorly the president's health care townhall debate did. Maybe, the pollsters can poll the popularity of The Philanthropist. If the president polls at 60%, I can only imagine how well the Philanthropist would poll.

Apparently, the president is overwhelmingly popular, just not so popular that anyone could stand watching him talk about health care for an hour. Tomorrow, the House has scheduled a vote on cap and trade. Reports say that if it passes it will be by a razor thin margin. Health care is stalled. His financial reform overhaul is already met with skepticism, and the Senate voted overwhelmingly not to fund Let's think about that for a second. The president is supposed to be overwhelmingly popular. He has a massive majority in both chambers. Yet, he can't seem to get any of his agenda passed.

Overseas, the president is even more popular. Yet, that doesn't seem to have had any effect on policy. He got nothing more than token support in Afghanistan. He had to go to the previously unknown island of Palau to be able to rid himself of the Uighers housed at GITMO. Germany and France are concerned by our out of control deficits. Meanwhile, Russia and China have all but stopped buying our bonds.

At some point, popularity has to turn into real political capital. Either that or popularity goes away. Tomorrow's vote on cap and trade will be a crucial step. If the president loses that vote, it won't be long before he loses his popularity as well.

When Will Angela Merkel Apologize for Hitler

Whenever there is a debate over whether or not Obama's apology tour all over the world, those that defend the president are quick to point out that it shows maturity and humility for a president to recognize and acknowledge not only triumphs of their country's past but errors and faults. Here is one example.

A mature nations acknowledges its shortcomings.Quite simple really. Butyou seems to have difficulty grasping it.

A "show" of strength differs from real strength. Again, elementary.

A strong nation can admit mistakes because it knows it is still the strongest. You don't make yourself weaker by acknowledging flaws, you set an
example. Human knowledge 101.

In particular, he is showing how he is different to one of the most hated Presidents in modern history.

The days of talking self-righteously about America while refusing to consider other viewpoints are over.

To those folks I ask a few simple questions. Why isn't German Chancellor Angela Merkel apologizing for Hitler? When will Nicholas Sarkozy apologize for Napolean? When will the world receive and apology from Gordon Brown for King George? How about Putin? When will he apologize for Stalin? If you want something more recent, how about this? Both Merkel and Sarkozy ran on against the policies of their predecessors, foreign policy and domestic. When will they apologize on a world stage for the years under Chirac and Shroeder?

If it is a sign of a "mature nation" to recognize both faults and accomplishments on the world stage, why do supporters of Obama only demand that our president show such "maturity"?

The answer to this question lies at the heart of the fallacy of their argument. I believe in their view if Obama demanded of his counter parts that which he deems necessary from himself, he would be portrayed as exactly the arrogant bully that he is trying to avoid. The only way for Obama to bring the world together is for him and him alone to show humility while giving everyone else a free pass on their own country's past misdeeds.

Think about that for a minute. The president is going on a tour of the world and pointing out each and every wrong that his country has ever done. Yet, the rest of the world gets a pass from doing the same, even though they all have just as much to apologize for, if not more. He's doing this because he believes only such humility will allow for an environment of mutual understanding so that we can work in a productive manner on the world stage.

In other words, Obama holds himself to standards he wouldn't hold others to because that's the only way he thinks the rest of the world can rally around him. In other words, the only way that President Obama thinks he can rally the world around his geopolitical goals is to inherently make the United States look weaker than the rest of the world. Keep in mind he has been flying around the world pointing each of our mistakes while nearly totally disregarding the mistakes the rest of the world has made.

That's a peculiar and rather ironic point of view. We are the world's only super power. Our leader thinks that the only way for the world to come together is for that super power to inherently be weakened first on the world stage. Maybe it will work, but I've never heard of a plan in which you weaken yourself first in order to get others to work with you.