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Keeping Power With the People: Puerto Rico’s Energy Future

By Sean Sweeney / Socialist Project.

Puerto Rico is now at the center of the global debate about climate resiliency, the potential of renewable energy technologies, and the best way to transition away from fossil fuels. To some extent, it has compressed the struggle for the world’s energy future both geographically and temporally. The whole system was shut down by an “extreme weather event” in the form of hurricane Maria that hit the island on September 16, 2017. This scale of disruption has never happened before – not in Puerto Rico, not in the United States, and not anywhere in the modern world. What was once a discussion about the future of energy has now been transplanted firmly into the precarious present.

“Electricity for Caguas” — protest in San Juan, Puerto Rico, January 15, 2018.

Hurricane Maria completely knocked out Puerto Rico’s electricity grid, leaving the island without any power. As of this writing, four months have passed and still 45 per cent of the island’s population is without electricity. This is the longest power outage in U.S. history. By mid-January 2018, only 20 per cent of the island’s traffic lights were functioning. Of nearly 31,000 new utility poles ordered from the U.S., almost 19,000 had still not arrived. Hundreds of schools, while holding classes, were operating without electricity.

Puerto Rico’s Public Electric Power Authority (known as PREPA), which since the mid-1970s has provided virtually all of the island’s electrical power quickly became the target of an avalanche of criticism regarding how it responded to the disaster. These criticisms inflicted fresh damage on PREPA’s already sullied reputation for poor management, neglect of infrastructure, and deep indebtedness. PREPA was also criticized for dragging its feet on the development of wind and solar power. Puerto Rico has significant wind and considerable solar potential, but only 3.3 per cent of its pre-Maria power was generated by renewables. 1 Oil generates 47.4 per cent of Puerto Rico’s power; about 33 per cent was generated by gas, and roughly 16 per cent from coal-all of it imported. In 2010, the island’s legislature introduced a renewable energy target that essentially instructed PREPA to source 12 per cent of energy from renewables by 2015-a target that it failed to meet.2


Assets for Sale

On January 22nd, Puerto Rico’s governor Ricardo Rosselló announced his intention to sell “PREPA assets.” The utility, he stated, “has become a heavy burden on our people, who are now hostage to its poor service and high cost.” Selling PREPA’s assets to private companies will, said the governor, “transform the generation system into a modern, efficient, and less expensive one for the people.” It would pave the way for one “based on renewable and environmentally friendly sources… We have the opportunity not only to make a new energy system, but to be a global model.” Business representatives applauded the announcement, with one of them stating, “For many years the private sector has requested the total transformation of the energy system in Puerto Rico, which, due to its inefficiency, prevents our economic development.”

The Sun Gods Speak

The decision to privatize PREPA was surely influenced by the actions of renewable energy interests outside of Puerto Rico, for whom Maria was a cloud with a solar lining. Indeed, a buzz of excitement swept across the green lists and blogs when, in late October, with most of the island in darkness, Tesla’s Elon Musk delivered hundreds of solar panels and energy storage batteries to Hospital del Nino in downtown San Juan near the Condado Beach area. Forever the entrepreneur, Musk chose to help a hospital in a wealthy commercial area-a politically strategic choice and a first-rate photo-op. According to one writer, “The island presented [Musk] with the perfect opportunity to test his theory that you could use solar panels and batteries to create microgrids to power people’s homes and even their cars, Teslas of course.”

Meanwhile, Virgin Group leader Richard Branson quickly enlisted the help of his friend Amory Lovins, arguably the founding father of the theory of “green capitalism.” In the 1970s, Lovins argued that the future scarcity of fossil fuels meant businesses should invest in renewable energy and energy efficiency in order to position themselves for the coming green bonanza. Unfortunately, the fossil fuels did not run out; instead more were found – under forests, in shale rock formations, and in deep ocean areas like the arctic. Those who invested in renewables only made money by convincing governments to directly subsidize them, to force utilities to pay above-market prices for solar and wind power-or preferably to do both.

In mid December 2017 Lovins’ Rocky Mountain Institute (RMI) released a report called The Role of Renewable and Distributed Energy in a Resilient and Cost-Effective Energy Future for Puerto Rico. After consulting “stakeholders” – the majority of those listed were corporations, including Tesla – the paper made a strong case for the introduction of new energy technologies such as microgrids and energy storage systems.3

The findings of the paper had an immediate impact on the politics of the island. This is because many of its proposals regarding microgrids and storage technologies (proposals that are hardly original) make perfect sense. But the Institute was not entertaining the idea that the island’s next system should remain publicly owned. Quite the contrary: “What is needed is a coordinated effort by the Puerto Rico government, regulatory commission, and utility to catalogue, prioritize, and competitively procure potential renewable and distributed energy projects…while supporting the least cost and highest value in the long run.” The terms “competitively procure” and “highest value” make it clear what RMI thought should happen: Hedge-fund financed private power producers, project developers, and technology companies should have more control over the island’s power generation, transmission, and distribution systems.

Green Colonialism?

But Governor Rosselló’s claim that the privatization of PREPA will mean that Puerto Rico will be “a global model” for a new cleaner and greener energy system will surely come back to haunt him. First of all, it is very likely there will be no full-on privatization of PREPA. No private interest is going to buy PREPA as it is – absent some backdoor deal to make the offer too good to refuse. The demand for electricity has been falling steadily as a result of recession, migration, and poverty. Furthermore, the island’s energy infrastructure is about 44 years old, compared with an average 18 years on the U.S. mainland. And the worrying prospect of more extreme weather events is not exactly an enticement for potential buyers.

So what will privatization look like? In a revealing but seemingly innocuous phrase, Rosselló’s announcement referred to “a model of privatization of power generation and a concession, term-defined, of energy distribution and transmission.” What does “concession, term-defined” mean? Concession agreements between governments and private corporations normally include rights to use (and profit from) certain pieces of an infrastructure or service for an agreed duration. From the dawn of the colonial period, concessionary companies were used by colonial administrations all over the global South to transfer wealth from the colonized “periphery” to the colonial “core.” Puerto Rico now faces the prospect of being a source of revenue and profit for wind and solar multinationals and technology companies. These companies are not interested in providing a universal service with equal access to all. They have their eyes on providing power to those who have the capacity to pay.

It seems very likely that, if Rosselló and private renewables’ companies get their way, PREPA will be broken up (or, in privatization speak, “unbundled”) and private transmission and distribution companies will be lured to the island or be established by PREPA’s top management who, as was the case in other parts of the world where power was privatized, would see themselves transformed from public servants to corporate CEOs.

In terms of generating electrical power, the global experience has shown that wind and solar projects can only make profits by way of favorable “out of market” arrangements, such as power purchase agreements (or PPAs) between developers and the utility or another public entity, normally over a 15- or 20-year period. PPAs offer “certainties” to investors and developers, but this invariably results in higher prices for users (to cover the additional costs of private financing, profit, etc.)4

Because Puerto Rico’s power system presently depends on imported fossil fuels, electricity costs have been higher than on the mainland. But this does not mean that private renewable energy will lead, as the governor claims, to a reduction in prices. The price will be determined by the terms of the PPAs, and if history is any guide prices will rise, not fall. And with the demand for electricity falling in Puerto Rico, this will mean every user will be required to pay more in order to cover investors’ costs and profits. This is not a reason to hold back on renewables; rather, it merely makes it imperative to reduce costs by eliminating profit and reducing the cost of borrowing capital based on commercial rates of return.

Keeping it Public, and the Role of Unions

The fight against the privatization of PREPA will be difficult. The utility does not have a reputation for providing efficient, reliable, cost-effective service. But Rosselló’s plan will take up to three years to implement, so there is time to build a broad-based campaign. The power system is not the only service threatened with privatization in Puerto Rico. The island’s political and social elite – to say nothing of the U.S. hedge funds operating on the island and members of the Fiscal Control Board – had already been looking to privatize potentially profitable public services, including health care and education along with parts of the power system. And fighting the privatization of public services is already a priority for the island’s progressive forces.

Progressive labor has an important role to play. In late October 2017, before the announced privatization, Trade Unions for Energy Democracy (TUED) organized a global labor conference call on the future of Puerto Rico’s power sector. On the call was Ángel Figueroa Jaramillo, the president of Puerto Rico’s principal power sector union, the Electrical Industry and Irrigation Workers Union (Unión de Trabajadores de la Industria Eléctrica y Riego – UTIER). UTIER represents workers at PREPA. Jaramillo called for a “just transition” for the sector, which must move from being based almost entirely on fossil fuels to a distributed renewables-based system. Jaramillo added, “PREPA is a public good that belongs to the people and not to the politicians.”

The recent attacks on PREPA were, says UTIER, part of a broad-based campaign against anything public. The predatory interventions of hedge-fund interests caused a large portion of PREPA’s already declining revenues from power generation to be used to repay debts, meaning less funds were available to maintain and improve the utility’s aging infrastructure. UTIER maintains that the island’s government, the Board of Fiscal Control, and PREPA’s upper management collectively impeded the post-Maria recovery effort in order to make privatization seem like a positive step.

Following the announcement that PREPA would be privatized, UTIER denounced the plan, stating “For decades we have warned how various administrations have undermined workers and intentionally damaged the infrastructure of PREPA. This was intended to provoke the people’s discontent with the service in order to privatize, to strip us-the people-of what is ours.” For UTIER, PREPA’s actions before and after Maria reflect the corruption of the public service ethic that has corroded PREPA from within. Top management often looks to privatization as a means of escaping publicly regulated salary structures. For example, the privatization of Con Edison in New York in 1998 saw the pay levels of its top management climb astronomically. Just prior to the lock-out of the Utility Workers Local 1-2 in July 2012, CEO Kevin Burke was pulling down an $11-million annual salary.

PREPA, said Jaramillo, needs to be reclaimed politically to serve the public good. It’s estimated $9-billion debt should be cancelled or renegotiated. A reformed, transparent, and democratically controlled PREPA can then work with communities to develop distributed solar power under public and local-level control. These sources would need to be connected to a reliable grid – one that can serve all the people equally. Such a restructuring will take a number of years. Microgrid systems under community control have real potential, but they should not become a means for wealthier communities to generate power for themselves and then expect to come back on to the grid when the sun stops shining or the batteries run out, and storage technologies are expensive and still relatively untested.

Simple Economics

With the old public systems, the cost of electricity was tied to the costs of installing, maintaining, and upgrading the system. Such systems worked fine – and they would work for large-scale renewables too. Everyone was connected. Most of the territorial U.S. was electrified as a result of the New Deal and the development of publicly owned and operated rural cooperatives, almost 900 of which still exist today. Since World War II, most of the global South has been electrified by way of public electrification programs that were set up as national and human development projects, and not as a way of making money for energy companies and hedge funds.

But what about the costs? Here several factors need to be considered. First, a report prepared for Rosselló and FEMA from Navigant Consulting estimated that rebuilding and upgrading Puerto Rico’s grid will cost as much as $18-billon.5 If funds are committed to this effort, they will surely come from public sources and therefore should not be used to simply clear the path to privatization and profiteering. Rosselló’s plan to privatize key parts of PREPA will be a three-year process, thus presenting a scenario where private companies will have a rebuilt and upgraded grid handed to them on a platter.

Second, the cost of public renewable power is lower than would be the case under a system of PPAs, where borrowing and transaction costs are much higher, and profits are then added on top. As much as they make the headlines, figures like Musk and Branson are not the pioneers of renewable energy (Branson has made his money from airlines and buying up once-public railway systems). Globally, publicly owned development banks have been driving renewables. Ironically, private companies have made their money significantly due to low-interest loans – because the lenders are not motivated by profit, but are pursuing policy commitments such as emissions reductions and clean-energy targets.

Third, in many parts of the world the public is already paying for renewable power, but the benefits typically go to private companies. In the U.S., wind and solar power received 54 per cent of federal energy subsidies in 2013, but produced only 4.5 per cent of total U.S. electricity. The subsidies come in the form of tax credits, which means that incentives to encourage renewables are paid for by the public when states impose taxes in order to make up for the tax revenue lost through subsidies. If renewables were deployed as a public service there would be no need for incentives – solar and wind would simply be public infrastructure, and job numbers would actually grow as a result of scaled-up deployment.

Public renewable power may or may not be cheaper than power generated from coal or gas, but it will certainly be cheaper than renewable power generated for private gain. The public utility, PREPA, can be reclaimed and restructured in order to ensure, first, that the energy transition can be planned and implemented over a period of years and that renewable sources of energy serve everyone – and not just those who can afford solar panels, microgrids, and battery systems. Space can be created so that communities have a real voice in the installation, operation, maintenance, and management of local energy systems with a strong emphasis on conservation and efficiency. But public-worker control of the overall service is also important, because this is where decisions about the direction of the island’s energy future will need to be made. The goal here is not to sell electrical power to the grid for profit, but to make sure systems are operating well and are responsive to public needs and concerns.

The people of Puerto Rico may come up with another way of doing the energy transition. But they must be given a choice-and that includes the choice to keep the power system fully in public hands. •

New Labor Forum, Spring 2018, forthcoming.


  1. Prior to Maria Puerto Rico has installed just 120MW of solar and only 22MW of wind.
  2. The targets mandated were 15% renewables by 2020 and 20% by 2035.
  3. Microgrids are small-scale power grids that can function independently of the larger transmission system. So if there is a problem with the centralized generation and main transmission lines, users can still-under certain circumstances-continue to access electricity.
  4. See TUED Bulletin #68.
  5. Puerto Rico Energy Resiliency Working Group (Navigant Consulting) Build Back Better: Reimagining and Strengthening the Power Grid of Puerto Rico.

Sean Sweeney is Director of the Murphy Institute's International Program on Labor, Climate, and the Environment. And he writes for New Labor Forum and Trade Unions for Energy Democracy.

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The Curious World of Donald Trump’s Private Russian Connections (Cont)

Indeed, partly because it has no prying co-op board, Trump Tower in New York has received press attention for including among its many honest residents tax-dodgers, bribers, arms dealers, convicted cocaine traffickers, and corrupt former FIFA officials.65

One typical example involves the alleged Russian mobster Anatoly Golubchik, who went to prison in 2014 for running an illegal gambling ring out of Trump Tower—not only the headquarters of the Trump Organization but also the former headquarters of Bayrock Group LLC. This operation reportedly took up the entire 51st floor. Also reportedly involved in it was the alleged mobster Alimzhan Tokhtakhounov,66 who has the distinction of making the Forbes 2008 list of the World’s Ten Most Wanted Criminals, and whose organization the FBI believes to be tied to Mogilevich’s. Even as this gambling ring was still operating in Trump Tower, Tokhtakhounov reportedly travelled to Moscow to attend Donald Trump’s 2013 Miss Universe contest as a special VIP.

In the Panama Papers database we do find the name “Anatoly Golubchik.” Interestingly, his particular offshore company, “Lytton Ventures Inc.,”67 shares a corporate director, Stanley Williams, with a company that may well be connected to our old friend Semion Mogilevich, the Russian mafia’s alleged “Boss of Bosses” who appeared so frequently in the story above. Thus Lytton Ventures Inc. shares this particular director with another company that is held under the name of “Galina Telesh.”68 According to the Organized Crime and Corruption Reporting Project, multiple offshore companies belonging to Semion Mogilevich have been registered under this same name—which just happens to be that of Mogilevich’s first wife.

A 2003 indictment of Mogilevich also mentions two offshore companies that he is said to have owned, with names that include the terms “Arbat” and “Arigon.” The same corporate director shared by Golubchik and Telesh also happens to be a director of a company called Westix Ltd.,69 which shares its Moscow address with “Arigon Overseas” and “Arbat Capital.”70 And another company with that same director appears to belong to Dariga Nazarbayeva, the eldest daughter of Nursultan Nazarbayev, the long-lived President of Kazakhstan. Dariga is expected to take his place if he ever decides to leave office or proves to be mortal.

Lastly, Dmytro Firtash—the Mogilevich pal and Manafort client that we met earlier—also turns up in the Panama Papers database as part of Galina Telesh’s network neighborhood. A director of Telesh’s “Barlow Investing,” Vasliki Andreou, was also a nominee director of a Cyprus company called “Toromont Ltd.,” while another Toromont Ltd. nominee director, Annex Holdings Ltd., a St. Kitts company, is also listed as a shareholder in Firtash’s Group DF Ltd., along with Firtash himself.71 And Group DF’s CEO, who allegedly worked with Manafort to channel Firtash’s funding into the Drake Hotel venture, is also listed in the Panama Papers database as a Group DF shareholder. Moreover, a 2006 Financial Times investigation identified three other offshore companies that are linked to both Firtash and Telesh.72

Anatoly Golubchik’s Panama Papers Network Neighborhood

Anatoly Golubchik’s Panama Papers Network Neighborhood

Of course, all of these curious relationships may just be meaningless coincidences. After all, the director shared by Telesh and Golubchik is also listed in the same role for more than 200 other companies, and more than a thousand companies besides Arbat Capital and Arigon Overseas share Westix’s corporate address. In the burgeoning land of offshore havens and shell-game corporate citizenship, there is no such thing as overcrowding. The appropriate way to view all this evidence is to regard it as “Socratic:” raising important unanswered questions, not providing definite answers.

In any case, returning to Trump’s relationships through Trump Tower, another odd one involves the 1990s-vintage fraudulent company YBM Magnex International. YBM, ostensibly a world-class manufacturer of industrial magnets, was founded indirectly in Newtown, Bucks County, Pennsylvania in 1995 by the “boss of bosses,” Semion Mogilevich, Moscow’s “brainy Don.”

This is a fellow with an incredible history, even if only half of what has been written about him is true.73 Unfortunately, we have to focus here only on the bits that are most relevant. Born in Kiev, and now a citizen of Israel as well as Ukraine and Russia, Semion, now seventy, is a lifelong criminal. But he boasts an undergraduate economics degree from Lviv University, and is reported to take special pride in designing sophisticated, virtually undetectable financial frauds that take years to put in place. To pull them off, he often relies on the human frailties of top bankers, stock brokers, accountants, business magnates, and key politicians.74

In YBM’s case, for a mere $2.4 million in bribes, Semion and his henchmen spent years in the 1990s launching a product-free, fictitious company on the still-badly under-regulated Toronto Stock Exchange. Along the way they succeeded in securing the support of several leading Toronto business people and a former Ontario Province Premier to win a seat on YBM’s board. They also paid the “Big Four” accounting firm Deloitte Touche very handsomely in exchange for glowing audits. By mid-1998, YBM’s stock price had gone from less than $0.10 to $20, and Semion cashed out at least $18 million—a relatively big fraud for its day—before the FBI raid its YBM’s corporate headquarters. When it did so, it found piles of bogus invoices for magnets, but no magnets.75

In 2003, Mogilevich was indicted in Philadelphia on 45 felony counts for this $150 million stock fraud. But there is no extradition treaty between the United States and Russia, and no chance that Russia will ever extradite Semion voluntarily; he is arguably a national treasure, especially now. Acknowledging these realities, or perhaps for other reasons, the FBI quietly removed Mogilevich from its Top Ten Most Wanted list in 2015, where he had resided for the previous six years.76

For our purposes, one of the most interesting things to note about this YBM Magnex case is that its CEO was a Russian-American named Jacob Bogatin, who was also indicted in the Philadelphia case. His brother David had served in the Soviet Army in a North Vietnamese anti-aircraft unit, helping to shoot down American pilots like Senator John McCain. Since the early 1990s, David Bogatin was considered by the FBI to be one of the key members of Semion Mogilevich’s Russian organized crime family in the United States, with a long string of convictions for big-ticket Mogilevich-type offenses like financial fraud and tax dodging.

At one point, David Bogatin owned five separate condos in Trump Tower that Donald Trump had reportedly sold to him personally.77 And Vyacheslav Ivankov, another key Mogilevich lieutenant in the United States during the 1990s, also resided for a time at Trump Tower, and reportedly had in his personal phone book the private telephone and fax numbers for the Trump Organization’s office in that building.78

So what have we learned from this deep dive into the network of Donald Trump’s Russian/FSU connections?

First, the President-elect really is very “well-connected,” with an extensive network of unsavory global underground connections that may well be unprecedented in White House history. In choosing his associates, evidently Donald Trump only pays cursory attention to questions of background, character, and integrity.

Second, Donald Trump has also literally spent decades cultivating senior relationships of all kinds with Russia and the FSU. And public and private senior Russian figures of all kinds have likewise spent decades cultivating him, not only as a business partner, but as a “useful idiot.”

After all, on September 1, 1987 (!), Trump was already willing to spend a $94,801 on full-page ads in the Boston Globe, the Washington Post, and the New York Times calling for the United States to stop spending money to defend Japan, Europe, and the Persian Gulf, “an area of only marginal significance to the U.S. for its oil supplies, but one upon which Japan and others are almost totally dependent.”79

This is one key reason why just this week, Robert Gates—a registered Republican who served as Secretary of Defense under Presidents Bush and Obama, as well as former Director and Deputy Director of the CIA—criticized the response of Congress and the White House to the alleged Putin-backed hacking as far too “laid back.”80

Third, even beyond questions of illegality, the public clearly has a right to know much more than it already does about the nature of such global connections. As the opening quote from Cervantes suggests, these relationships are probably a pretty good leading indicator of how Presidents will behave once in office.

Unfortunately, for many reasons, this year American voters never really got the chance to decide whether such low connections and entanglements belong at the world’s high peak of official power. In the waning days of the Obama Administration, with the Electoral College about to ratify Trump’s election and Congress in recess, it is too late to establish the kind of bipartisan, 9/11-type commission that would be needed to explore these connections in detail.

Finally, the long-run consequence of careless interventions in other countries is that they often come back to haunt us. In Russia’s case, it just has.

1Author’s estimates; see for more details.

2For an overview and critical discussion, see here.

3See Lawrence Klein and Marshall Pomer, Russia’s Economic Transition Gone Awry (Stanford University Press, 2002); see also James S. Henry and Marshall Pomer, “A Pile of Ruble,” New Republic, September 7, 1998.

4See this Washington Post report, which counts just six bankruptcies to the Trump Organization’s credit, but excludes failed projects like the Trump SoHo, the Toronto condo-hotel, the Fort Lauderdale condo-hotel, and many others Trump was a minority investor or had simply licensed his brand.

5For example, the Swiss federal and cantonal corporate registries, available here.

6For ICIJ’s April 2016 “Panama Papers” database of offshore companies, see here.

7Trump’s minority equity deal with Bayrock was unlike many others, where he simply licensed his name. See this March 2008 New York Magazine piece.

8“I dealt mostly with Tevfik,” he said in 2007.

9Case 1:09-cv-21406-KMW Document 408-1. Entered on FLSD Docket 11/26/2013. p. 15.


11Bayrock reported its co-ownership of six Rixos hotels in a 2007 press release.

12See also Salihovic, Elnur, Major Players in the Muslim Business World, p.107, and this Telegraph piece.

13See also Zambia, Mining, and Neo-Liberalism; Brussels Times; and Le Soir.

14According to the Panama Papers database, “International Financial Limited” was registered on April 3, 1998, but is no longer active today, although no precise deregistration date is available. Source.

15According to the Panama Papers, “Group Rixos Hotel” is still active company, while three of the four companies it serves were struck off in 2007 and the fourth, Hazara Asset Management, in 2013.


17See also TurizmGü and Le Grand Soir.

18Case 1:09-cv-21406-KMW Document 408-1. Entered on FLSD Docket 11/26/2013. p. 16.

19The exact date that Sater joined Bayrock is unclear. A New York Times article says 2003, but this appears to be too late. Sater says 1999, but this is much too early. A certified petition filed with the U.S. Supreme Court places the time around 2002, which is more consistent with Sater’s other activities during this period, including his cooperation with the Department of Justice on the Coppa case in 1998–2001, and his foreign travel.

20See Financial Times, New York Times, and Washington Post. Note that previous accounts of Sater’s activities have overlooked the role that this very permissive relationship with federal law enforcement, especially the FBI, may have played in encouraging Sater’s subsequent risk-taking and financial crimes. See here.

21See here, p. 13.

22Sater’s 1998 case, never formally sealed, was U.S. v. Sater, 98-CR-1101 (E.D.N.Y.) The case in which Sater secretly informed was U.S. v. Coppa, 00-CR-196 (E.D.N.Y.). See also this piece in the Daily Beast.

23Source. Sater also may have taken other steps to conceal his criminal past. According to the 2015 lawsuit filed by x Bayrocker Jody Kriss, Arif agreed to pay Sater his $1 million salary under the table, allowing Sater to pretend that he lacked resources to compensate any victims of his prior financial frauds. See Kriss v. Bayrock, pp. 2, 18. The lawsuit also alleges that Sater may have held a majority of Bayrock’s ownership, but that Arif, Sater and other Bayrock officers may have conspired to hide this by listing Arif as the sole owner on offering documents.

24See here, p. 155.

25Author’s interview with Sigrun Davidsdottir, Iceland journalist, London, August 2016.

26See “Report of the Special Investigation Commission on the 2008 Financial Crisis” (April 12, 2010).

27These loans are disclosed in the Kaupthing Bank’s “Corporate Credit – Disclosure of Large Exposures > €40 mm.” loan book, September 15, 2008. This document was disclosed by Wikileaks in 2009. See this Telegraph piece., p.145 (€79.5mm construction yacht loan to Russian vodka magnate Yuri Shefler’s Serena Equity Ltd.); p. 208 (€45.8 mm yacht construction loan to Canadian-Russian billionaire Alex Shnaider’s Filbert Pacific Ltd.).

28Kriss lawsuit, op. cit.; author’s analysis of Kaupthing/ FL G employees published career histories.

29Author’s interview with an “Iceland economist,” Reykjavik, July 2016.

30Source. The passage in Russian, with the father’s name underlined, is as follows: “Родители Алекса Шнайдера владели одним из первых успешных русских магазинов в русском квартале Торонто. Алекс помогал в бизнесе отцу—Евсею Шнайдеру, расставляя на полках товар и протирая полы. С юных лет в Алексе зрела предпринимательская жилка. Живя с родителями, он стал занимать деньги у их друзей и торговать тканями и электроникой с разваливающимися в конце 80-х годов советскими предприятиями.” “Евсею Шнайдеру” is the dative case of “Евсей Шнайдер,” or “Evsei Shnaider,” the father’s name in Russian.

31The Zurich company registry reports that “Seabeco SA” (CHE-104.863.207) was initially registered on December 16, 1982, with “Boris Joseph Birshtein, Canadian citizen, resident in Toronto” as its President. It entered liquidation on May 5, 1999, in Arth, handled by the Swiss trustee Paul Barth. The Zurich company registry listed “Boris Joseph Birshtein, Canadian citizen, resident in Toronto,” as the President of Seabeco Kirgizstan AG in 1992, while “Boris Joseph Birshtein, Canadian citizen, resident in Zurich,” was listed as the company’s President in 1993. “Boris Birshtein” is also listed as the President and director of a 1991 Panama company, The Seabeco Group, Inc. as of December 6 1991. See below.


33The Zurich company registry reports that “Seabeco SA” (CHE-104.863.207) was initially registered on December 16, 1982, with “Boris Joseph Birshtein, Canadian citizen, resident in Toronto” as its President. According to the registry, it entered liquidation on May 5, 1999. See also this. The liquidation was handled by the Swiss trustee Paul Barth, in Arth.

34For Seabeco’s Antwerp subsidiary, see here.

35“Royal HTM Group, Inc.” of Toronto, (Canadian Federal Corporation # 624476-9), owned 50-50 by Birshtein and his nephew. Source.

36Birshtein was a director of Seabeco Capital Inc. (Canadian Federal Incorporatio # 248194-4,) a Winnipeg company created June 2, 1989, and dissolved December 22, 1992.

37Since 1998, Boris Birshtein (Toronto) has also served as Chairman, CEO, and a principle shareholder of “Trimol Group Inc.,” a publicly-traded Delaware company that trades over the counter. (Symbol: TMOL). Its product line is supposedly “computerized photo identification and database management system utilized in the production of variety of secure essential government identification documents.” See Bloomberg. However, according to Trimol’s July 2015 10-K, the company has only had one customer, the former FSU member Moldova, with which Trimol’s wholly owned subsidiary Intercomsoft concluded a contract in 1996 for the producton of a National Passport and Population Registration system. That contract was not renewed in 2006, and the subsidiary and Trimol have had no revenues since then. Accordingly, as of 2016 Trimol has only two part time employees, its two principal shareholders, Birshtein and his nephew, who, directly and indirectly account for 79 percent of Trimol’s shares outstanding. According to the July 2015 10-K, Birshtein, in particular, owned 54 percent of TMOL’s outstanding 78.3 million shares, including 3.9 million by way of “Magnum Associates, Inc.,” which the 10-K says only has Birshtein as a shareholder, and 34.7 million by way of yet another Canadian company, “Royal HTM Group, Inc.” of Ontario (Canadian Federal Corporation # 624476-9), which is owned 50-50 by Birshtein and a nephew. It is interesting to note according to the Panama Papers database, a Panama company called “Magnum Associates Inc. was incorporated on December 10, 1987, and struck off on March 10, 1989. Source. As of December 2016, TMOL’s stock price was zero.

38See the case of Trimol Group Inc above. The Seabeco Group, Inc., a Panama company that was formed in December 1991, apparently still exists. Boris J. Birshtein is listed as this company’s Director and President. See “The Seabeco Group Inc.” registered in Panama by Morgan Y Morgan, 1991-12.06, with “Numero de Ficha” 254192; source here and here.

39As of December 2016, the Zurich company registry listed a Zurich company called “Conim Investment AG” (CH- was originally formed in May 1992, and in January 1995 was transferred to Arth, in the Canton of Schwyz, where it is still in existence. (CHE-102.029.498). This is confirmed by the Schwyz Canton registry. According to these registries, Conim Investment AG is the successor company to two other Zurich campanies, “Seabeco Kirgizstan AG,” formed in 1992, and “KD Kirgizstan Development AG,” its direct successor. Source. The Swiss federal company registry also reports the following Swiss companies in which Boris J.Birshtein has been an officer and or director, all of which are now in liquidation: (1) Seabeco Trade and Finance AG (CH-, 4/3/92-11/30/98 ), ; (2) Seabeco SA (CHE-104.863.207,12/16/82-5/9/99) ; (3) Seabeco Metals AG (4/3/92-6/11/96); (4) BNB Trading AG (CH-, 1/10/92-11/19/98 ); and (5) ME Moldova Enterprises AG (CH-, 11/10/92-9/16/94). All of these liquidations were handled by the same trustee, Paul Barth in Arth.

40As of December 2016, active Birshtein companies include “Conim Investment AG” (CH- in the Swiss Canton of Schwyz and he Seabeco Group, Inc. in Panama.

41For example, the Zurich and Schwyz company registries indicates that the following have been board members of Birshtein companies: (1) Seabeco Trade and Finance AG: Iouri Orlov (citizen of Russia, resident of Moscow), Alexander Griaznov (citizen of Russia, resident of Basserdorf Switzerland), and Igor Filippov (citizen of Russia, resident of Basel). (2) ME Moldova Enterprises: Andrei Keptein (citizen of FSU/ Moldova; Evsei Shnaider (Russian émigré to Canada); (3) Seabeco Kirigizstan/ Conim Investment AG: Sanjarbek Almatov (citizen of Bishkek, FSU/ Kirgizstan), Toursounbek Tchynguychev (citizen of Bishkek, FSU/Kirgizstan), Evsei Shnaider (Russian émigré to Canada); (4) BNB Trading AG: Yuri Spivak (Russian émigré to Canada; (5) Seabeco Metals AG: Alex Shnaider (Russian émigré to Canada).

42Charles Clover, “Ukraine: Questions over Kuchma’s adviser cast shadows,” Financial Times, October 30, 1999, available here. See also Misha Glenny, 2009. McMafia: A Journey Through the Global Criminal Underworld (Vintage Books), pp. 63–5.

43Clover, “Ukraine: Questions over Kuchma’s adviser cast shadows.”

44See FBI, Organizational Intelligence Unit (August 1998), “Semion Mogilevich Organization: Eurasian Organized Crime,” available here.

45Clover, “Ukraine: Questions over Kuchma’s adviser cast shadows.”

46Clover, “Ukraine: Questions over Kuchma’s adviser cast shadows.”

47Boris knows everyone,” Toronto Star, August 28, 1993.

48See Zurich corporate registry for “Seabeco Metals AG” (CH-, formed 4/3/92 and liquidated 6/11/96.




52See Kaupthing Bank, “Loan Book, September 2008,” Wikileaks.

53The Panama Papers database provides an address for “Midland Resources Holding Limited” that exactly matches the company’s corporate address in Guernsey, as noted by Bloomberg’s corporate data base. Here are the 28 companies that are associated with Midland in database: Aligory Business Ltd.; Anglesey Business Ltd.; Blue Industrial Skies Inc.; Cl 850 Aviation Holdings Ltd.; Cl 850 Aircraft Investments Ltd.; Caray Business Inc.; Challenger Aircraft Company Limited; Colley International Marketing S.A.; East International Realty Ltd.; Filbert Pacific Limited; Gorlane Business Inc.; Jabar Incorporated; Jervois Holdings Inc.; Kerryhill Investments Corp.; Leaterby International Investments Corp.; Maddocks Equities Ltd.; Maverfin Holding Inc.; Midland Maritime Holding Ltd.; Midland River-Sea Holding Ltd.; Midland Drybulk Holding Ltd.; Midland Fundco Ltd.; Norson Investments Corp.; Olave Equities Limited; Orlion Business Incorporated; Perseus Global Inc.; Sellana Investments Global Corp.; Stogan Assets Incorporated; Toomish Asset Ltd.

54With the address “11 First Tverskaya-Yamskaya Street; apt. 42; Moscow; Russia.”: here, here, and here.

55As for the Midland-related offshore vehicles still listed as active, one shareholder in two of them—Stogan Assets Incorporated and Blue Sky Industries Inc.—happens to have the same name as Russia’s Deputy Culture Minister Gregory Pirumov, reportedly arrested in March 2016 on embezzlement charges. The “Gregory Pirumov” in the Panama Papers has a registered address in Moscow (4 Beregkovskaia Quay; 121059), as do the reported agent of these two companies: “Global Secretary Services Ltd. Mal. Tolmachevskiy pereulok 10 Office No.3 Moscow, Russia 119017 Attention: Katya Skupova).” See here. A “Georgy Pirumov” is also listed separately in the Panama Papers as having been a shareholder in the same two companies. For what it is worth, in September 2016, one “Georgy Pirumov” was convicted in Moscow of “illegally taking over a building in Gogolevsky Boulevard,” and sentenced to 20 months in a minimum-security correctional facility. See The Investigative Committee of the Russian Federation, Sept 15, 2016. At this point, however, we need to emphasize that there is still plenty that needs to be investigated—we cannot yet confirm whether “Georgy” and “Gregory” are the same person, whether they are related, how they might be related to Shnaider’s Mineral Resources, or whether they are the same people named in the articles just noted above about criminal prosecutions.


57See Schwyz canton corporate registry, “ME Moldova Enterprises AG,” CH-

58See Zurich corporate registry, “ME Moldova Enterprises AG,” CH- (11/10/92-9/16/94).

59See “Seabeco Group Inc.,” Panama Corporate Registry # 254192, formed 12-6-1991.

60See “Seabeco Security Intl Inc.” Panama Corporate Registry #254206, formed 12-10-1991.”

61See footnotes 58 and 59.


63See Unian Information Agency.


65See Transparency International Russia.

66A.K.A. “Tochtachunov.” See FBI, Organizational Intelligence Unit (August 1998), “Semion Mogilevich Organization: Eurasian Organized Crime.”

67According to the Panama Papers, as of December 2016, Lytton Ventures Inc., incorporated in 2006, was still an active company but its registration jurisdiction was listed as “unknown.”

68For Telesh’s company the director’s name is given as “Stanley Williams,” as compared with “Stanley Edward Williams” in Golubchik’s, but they have the same address. See here. Telesh’s company, Barlow Investing, was incorporated in 2004. In the PP database, as of December 2016 its status was “Transferred Out,” although its de-registration date and registration jurisdiction are unknown.

69Westix Ltd., registered in 2005, is still active, according to the Panama Papers.

70In the Panama Papers, Telesh’s company and Golubchik’s reportedly have the same director, one Stanley Williams. Williams is also reportedly a director of Westix, which shares its address with two other offshore companies that use corporate names that Mogilevich has reportedly used at least twice each in the past. Arbat Capital, registered in 2003, was still active as of December 2016, as was Arigon Overseas, registered in 2007.

71See the diagram below.

72These three offshore companies are not in the Panama Papers database. Firtash acknowledged these connections to Telesh but still told FT reporters that he didn’t know her. The three companies identified in the report are (1) Highrock Holdings, which Firtash and Telesh each reportedly owned 1/3rd of, and where Firtash served as director beginning in 2001; (2) Agatheas Holdings, where Firtash apparently replaced Telesh as director in 2003; and (3) Elmstad Trading, a Cyprus company owned by Firtash which in 2002 transferred the shares of a Russian company named Rinvey to Telesh and two other people: one of them Firtash’s lawyer and the other the wife of a reputed Mogilevich business partner. See also here.

73On Mogilevich, see, for example, this.

74See also FBI, Organizational Intelligence Unit (August 1998), “Semion Mogilevich Organization; Eurasian Organized Crime,” available here.


76See FBI archives and Slate.

77David Cay Johnston, interview with the author, November 2016. Wayne Barrett, Trump: The Greatest Show on Earth: The Deals, the Downfall, the Reinvention (Regan Arts, 2016).

78Johnston, interview; see also here. In another interesting coincidence, the President of YBM Magnex was also reportedly a financial director of Highrock in the late 1990s, before Manafort-client Dmytro Firtash joined the company as a director in 2001. See note 151. Source.



Appeared in: Volume 12, Number 4 | Published on: December 19, 2016
James S. Henry, Esq. is an investigative economist and lawyer who has written widely about offshore and onshore tax havens, kleptocracy, and pirate banking. He is the author of The Blood Bankers (Basic Books, 2003,2005), a classic investigation of where the money went that was loaned to key debtor countries in the 1970s-1990s. He is a senior fellow at the Columbia University’s Center on Sustainable Investment, a Global Justice Fellow at Yale, a senior advisor at the Tax Justice Network, and a member of the New York Bar. He has pursued frontline investigations of odious debt, flight capital, and corruption in more than fifty developing countries, including Russia, China, South Africa, Brazil, the Philippines, Argentina, Venezuela, and Panama.
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By Vijay Prashad.

Dear Friends,

I’m writing to you from Beirut, Lebanon, where the sun is shining brightly and the air is crisp. Not far from here, in the east of Damascus, the war in Syria continues. It is not a war that has disappeared from the consciousness of people who live in this land, where war has marked its landscape and its sensibility. A few years ago, a police chief of Beirut had told me that its civil war (1975-1990) had merely entered into a long half-time break. There is always the sense that the country will be attacked by Israel or that its fragile sectarian arrangements will collapse. But for now, as a former government minister told me last night, Lebanon has the safest borders in West Asia and North Africa. I’m entitled to agree with him.

In Syria, meanwhile, the worst part of the war continues in two locations - around Damascus, where the Syrian Arab Army is in a fierce fight to clear its suburbs of rebel fighters; and in Northern Syria, where the Turkish forces are in pitched battle with the US-backed Syrian Kurdish forces and where the Turkish army has almost entirely encircled the city of Afrin. In Astana (Kazakhstan), the Russians, Iranians and Turks have opened a dialogue that will result - as I hear - in a deal which will allow the Turkish army free rein in the northern part of Syria to break the momentum of the Syrian Kurdish fighters, while the Turkish government eventually will allow the Syrian forces to attack the rebels in the city of Idlib without interference. In Alternet today, I have a report on this deal making around Afrin and Idlib. But my report is also about the expectation in Damascus that the US might bomb government establishments in the city to insinuate itself into the political process. You can read my report here.


Not far from the centre of Damascus, in eastern Ghouta, the government forces have been pounding the rebels - who are, in this area, mainly affiliated to various extremist outfits. This is a tough campaign, which has likely resulted in the death of a large number of civilians. Brief lulls in the fighting have allowed some of the injured to leave the area. But many others are trapped. Much the same happened in Mosul and Raqqa, where US air power devastated the civilians areas in the fight to defeat ISIS. Air campaigns, as the research institute AirWars shows, are hideous and inhumane. Whether they are US bombers or Russian bombers or Syrian bombers, the net result is that ordinary people suffer their wrath. At Frontline, I have a report on the situation of the war in Syria - seven years later - and of the battle in eastern Ghouta for emphasis. You can read my report here.

At Tricontinental, we are preparing a dossier on Syria, which should be released in early April. Keep an eye out for it. This will be a difficult dossier to produce because of the great divergence of opinions about what is happening in Syria.


A week ago, the Turkish army cut off the water supply to the city of Afrin (Syria). Once the Turks seized Mydanki Lake, they shut off the delivery of water. Residents in Afrin are using boreholes for water. The risk of disease has increased. This is the use of water as a weapon of war.

But another crisis of water is on the horizon. Beirut, for instance, is set to run out of water by 2035 (according to a new study by Fransabank). The bank sees the solution for Beirut and Lebanon in privatisation. This is a curious position to take, for it is widely understood that even the public sector water delivery set-up is deeply entrenched in private hands. Failure to deliver potable water has enhanced the industry for private filtered water, while lack of investment in water delivery is part and parcel of the misuse of public funds. It would obviously be a bank that suggests further privatisation. That is their habit.

I’m happy to let you know that we - at Tricontinental - have produced our second dossier Cities Without Water, which you can read here (free to download). The dossier is released a few days before the start of the Alternative World Water Forum (Brasilia, March 17-22). The Forum comes just before the major city of Cape Town (South Africa) is said to run out of water. Our dossier goes through the reasons why there is a crisis in Cape Town, why there was a crisis in Sao Paulo (Brazil) and what was done by the Communist government in Shimla (India) to avert such crises. It is a dossier that explains a problem and then provides a practical and tested set of principles to tackle this crisis. The dossier is illustrated with wonderful pictures (such as the one above) from a group of photographers associated with the Drik Gallery and Picture Library in Dhaka, Bangladesh. I hope you will visit their work here.

We wish our friends in the Alternative World Water Forum success in their deliberations and hope they will be able to push back against privatisation as the solution to the crisis of water and cities without water.


Last week, I mentioned the Kisan Long March in Maharashtra. A hundred thousand farmers entered Mumbai, where they were greeted by residents with open arms. They came at night and made their camp. When they heard that the Class X students were going to have their exams the next day, they broke camp and marched all night to their final destination so as not to disturb the students the next day. It is a sign of the great humanity of these workers and peasants. They were not prepared to disrupt the city. They had come to deliver a message to the Chief Minister.

Not long after they began their encirclement of the government buildings, the Chief Minister and his cabinet pledged to accept all their demands. It is a tremendous victory not only for the farmers in Maharashtra but for the All-India Kisan Sabha (the mass front of the Communist Party of India-Marxist) and - of course - for the farmers across the country and for the Left movement. Such victories, of this scale, do not occur easily. Nor does inspiration come without great cost. It took effort and determination for the organisers of the farmers in the Kisan Sabha to build this campaign and it took a great deal of fortitude and courage for the farmers to march 190 kms to the capital city. Violence from the government was expected. But the dignity of the farmers and the support for their cause stayed the hand of violence. Our Tricontinental Senior Fellow P. Sainath, the founder of PARI, spoke at the final rally. He told Bloomberg that this was a very significant win for the farmers, a short clip that you can see over here (well worth watching this seven minute clip).

It is with some pride that I can say that the best reporting on the long march came from our friends at Newsclick and at the People’s Archive of Rural India (PARI). There are too many stories to point to, so I welcome you to go to their websites to have a look at the range of stories. There are, however, a few stories that I hope you will read:

  1. Parth M. N, ‘Blistered Feet, Unbroken Spirit’ (PARI, March 13).
  2. ‘I am a farmer, I walk this long journey’ (PARI, March 14).
  3. Parth M. N., ‘The run the farm, they made the March’ (PARI, March 15).
  4. ‘Farmers Paint the Streets Red’ (Newsclick, March 12).
  5. ‘Four Leaders You Need to Know About’ (Newsclick, March 12).

The struggle is not over. Yesterday, farmers rallied in Lucknow, Uttar Pradesh. They are prepared to follow their comrades from Maharashtra. Other states will follow. This is an unfolding story.

On Wednesday, at 930pm, in Rio de Janeiro, a leftist councilwoman Marielle Franco (1979-2018) was assassinated. Her driver - Anderson Pedro Gomes - was also killed. She was a vocal critic of state violence and had just made a comment on twitter about violence in her society. One more decent person killed.



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The Threats, Real and Imagined, of Mexico’s Election

By Mark Weisbrot / CEPR

In less than five months, Mexico will have a presidential election that is mostly being described by US and international media commentators as a perilous undertaking. For some, it is part of a “perfect storm” that could wreak havoc on the Mexican economy (together with Trump’s tax reform and threats to NAFTA); for the business press, there is a threat to foreign investment, especially in the state-owned oil industry, which has had an unprecedented opening to such investment since 2013; and for other observers, it is a threat to the “security” — that is, foreign policy — of the United States.

The problem, according to the pundits and the Trump administration, is that the leftist candidate Andrés Manuel López Obrador (often known by his initials, AMLO) holds a sizable lead in the polls, and could well be Mexico’s next president. But is his possible election as president really the threat it’s made out to be?

Although López Obrador has moved toward the center during the campaign, his Morena party has a left-wing base that resembles some of the movements and governments that Washington has opposed since they began to spread through Latin America in the early years of the twenty-first century. López Obrador was a popular mayor of Mexico City from 2000 to 2005; he ran for president in 2006 and 2012 as the candidate of the left-of-center Party of the Democratic Revolution (PRD). When López Obrador formed Morena in 2014, he took a large part of the PRD’s support with him.

The stated purpose of Morena was to form an alternative to existing political parties in order to reform not only Mexico’s governance, but also its economic policy. The objective was to move Mexico’s economy toward a more developmentalist model — of more robust internal markets through industrial policy and public investment and planning — and to provide more of a welfare state and take Mexico in a more social-democratic direction.

Like Bernie Sanders in the 2016 US presidential election, López Obrador is running as an outsider, in this case against what he claims is a corrupt elite represented by all the mainstream parties that cannot provide either economic or physical security for the country’s citizens. He promises to “clean out corruption in government from top to bottom, like you clean the stairs.” And he proposes the reallocation of about 4 percent of Mexico’s GDP to infrastructure and social programs, including a universal pension — since a similar policy for Mexico City residents was one of his most popular and influential achievements when he was the city’s mayor.

The other parties seem to be reinforcing his characterization of them, as they increasingly meld together despite their disparate ideologies. The remnant of the previously left-leaning PRD is allying with the National Action Party (PAN), a right-wing party with ties to the Catholic Church. The PAN broke the grip of more than seventy years of one-party rule by the Institutional Revolutionary Party (PRI) in 2000 with the election of President Vicente Fox. But Fox’s PAN administration failed to deliver much in the way of improvement to the standard of living for most Mexicans, and its US-sponsored “war on drugs” failed to stem the rising tide of violence. In 2012, the PRI won back the presidency with the election of Enrique Peña Nieto.

But Peña Nieto proved to be the least popular president in decades, thanks to continued economic failure and a series of corruption scandals, as well as his government’s failure to quell epidemic levels of violence. In January, preliminary government data showed that in 2017 Mexico suffered the highest number of murders on record. Peña Nieto’s meeting with then-candidate Donald Trump in 2016 also turned into a disaster, adding insult to the Mexican president’s multiple injuries when Trump claimed there was no discussion of who would pay for Trump’s proposed border wall, while Peña Nieto maintained he had stated in the meeting that Mexico would not pay for it.

The PRI’s candidate for this election, José Antonio Meade, is therefore languishing as a distant third in the polls (he is also widely seen as a lackluster contender). There is talk that the PRI will throw its weight behind the PAN candidate, Ricardo Anaya, thereby completing the description of an undifferentiated mass of politicians, as López Obrador and his supporters have labeled them.

Many people believed that Mexico began a transition to democracy in 2000, when the PRI lost the presidency. But this has turned out to be something of a myth. The promise of that transition never materialized, and Mexico became an increasingly violent and still deeply corrupt narco-state. The failed neoliberal economic reforms that the PRI initiated, beginning in the 1980s, were consolidated with the NAFTA agreement, which helped to draw Mexico closer to the US, economically and politically.

First, the economics. From 1960 to 1980, under the old PRI regime, the average income of Mexicans nearly doubled. If the economy had continued growing at that pace, Mexicans would, by today, have a standard of living comparable to Europe’s. We can only speculate as to whether Mexico would have become more democratic as it developed; most countries have done so, though at varying paces.

Instead, the 1980s were a “lost decade,” with negative per capita income growth, as Mexico ― under pressure from foreign creditors, including the IMF ― transformed its economy with neoliberal reforms, liberalizing international trade and capital flows, privatizing state enterprises, and abandoning development and industrial policies. NAFTA institutionalized most of the harmful changes in the form of an international treaty, partly, at Washington’s behest, to make them permanent.

The twenty-three years since NAFTA have been an economic failure, by any historical or international comparison. The national poverty rate is higher today than it was in 1994, and real (inflation-adjusted) wages have barely risen. Over the period, Mexico ranked fifteenth of twenty Latin American countries in GDP growth per person. Nearly five million farmers lost their livelihoods, unable to compete with subsidized corn from the US. Although some found employment in the new agro-export industries, the displacement contributed to a surge of emigration to the US from 1994 to 2000.

What kind of democracy has developed out of this continuing failed economic experiment? We might expect that governments would have to find other ways to remain in power since they have not been delivering the goods. And they have. The New York Times reports that the Mexican government has spent, astoundingly, nearly $2 billion over the past five years to buy off the media — in part, by paying for advertising on the condition that it will receive favorable coverage.

According to the Times, at least 104 journalists have been murdered since 2000, and about another twenty-five have disappeared. In 2017, Mexico was the second-most dangerous country in the world, after Syria, to practice journalism. Although many people have the impression that the drug cartels are primarily responsible for the violence and climate of fear, the Times reports that “according to government data, public servants like mayors and police officers have threatened journalists more often than drug cartels, petty criminals or anyone else.”

Not only journalists, but citizens and activists can be killed for their constitutionally protected activities. The disappearance and massacre in 2014 of forty-three students in Iguala, in the state of Guerrero, brought Mexico’s violent repression to the world’s attention, because of the scale of the crime and the documented involvement of government security forces and agents.

The lack of an independent media, the near-monopoly of two partisan networks over broadcast television, widespread vote-buying, and the use of state resources by the government in election campaigns makes electoral democracy in Mexico especially weak. And then there is the voting process itself. In a close presidential election in 2006, López Obrador lost by less than 0.6 percent of the popular vote. But there was an “adding-up” problem: at each polling station, the number of ballots cast, plus the number of blank ballots remaining, are supposed to match the number of blank ballots at the start. For nearly half the polling stations, they didn’t.

Despite reports of vote-rigging and fraud — and hundreds of thousands of people in the streets demanding a recount — the Bush administration immediately threw its weight behind a campaign to declare the election of PAN’s Felipe Calderón legitimate. (A partial recount, the results of which were not released while the election was still disputed, raised further serious questions about the tally.) The Bush administration operated from the playbook it had used for Bush’s own disputed election in 2000, and they did a fine job. But as with Mexico’s economic transformation from a developmentalist to a neoliberal state, the influence of the United States on Mexico’s politics has gone largely unnoticed.

Many Mexicans are again worried about the prospect of fraud in the July election. But Trump administration officials, including White House Chief of Staff John Kelly, a former head of the US Southern Command, have expressed other concerns. They are worried that López Obrador might win. Predictably, US officials have alleged that there will be Russian interference in the election. A spate of silly, fact-free articles in the US media followed, and in Mexico the allegations went viral, as intended. López Obrador has responded with ridicule, calling himself “Andrés Manuelovich,” and saying that he’s looking forward to a Russian submarine surfacing with his gold. (In the 2006 election, the broadcast media was flooded with false allegations that López Obrador had ties to Venezuela’s Chavista government; this smear campaign has also resurfaced.)

Interestingly, despite all of Trump’s bluster about building a wall and renegotiating NAFTA, combined with his trademark insults and threats and the resulting animosity, Mexico’s cooperation with Washington’s malign foreign policy in the region remains strong. Hardly anyone believed the results of the November 26 election in Honduras; even the extremely Washington-friendly Organization of American States leadership has called for a new election there. But Mexico was one of the first to issue a strong statement in support of the “winner,” the incumbent president — and US ally — Juan Orlando Hernández, whose party came to power with help from the US following a 2009 military coup.

Reuters reported in December that Mexico’s official statement “was brokered in coordination with the United States.” In a smooth move the next day, a senior US State Department official cited Mexico’s statement as a reason to reject calls for a new election in Honduras. This is exactly the kind of coordination Washington likes — and that the Trump administration must fear would disappear with a less compliant Mexican president.

It is difficult to say how much López Obrador could, or would, do if elected, given the forces arrayed against him, both at home and from the north. But if there is a reform candidate and party in the race, it is López Obrador and his Morena party.

In July, Mexicans will get to decide whether they might do better as a more independent nation ― if they can defend their right to a free and fair election.

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research in Washington, D.C., and the president of Just Foreign Policy. He is also the author of “Failed: What the ‘Experts’ Got Wrong About the Global Economy” (2015, Oxford University Press).

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Shooting an Own Goal: China’s Belt and Road funding terms spark criticism

By James M. Dorsey / Mid-East Soccer.

Steep commercial terms for China’s investment in infrastructure projects across Eurasia related to its Belt and Road initiative may give it control of key ports and other assets as recipients of Beijing’s largess find themselves trapped in debt. Yet, that comes with a risky price tag: potentially rising anti-Chinese sentiment, questioning of Chinese intentions, and a tarnishing of the image China is seeking to cultivate.

Cynically dubbed debt-trap diplomacy, multiple countries along China’s Belt and Road risk financial crisis. The Washington-based Center for Global Development recently warned that 23 of the 68 countries involved were “significantly or highly vulnerable to debt distress.”
The centre said in a report that eight of the 23 countries -- Djibouti, Kyrgyzstan, Laos. the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan – were particularly at risk.

Djibouti already owes 82 percent of its foreign debt to China while China is expected to account for 71% of Kyrgyz debt as Belt and Road-related projects are implemented.

“There is…concern that debt problems will create an unfavourable degree of dependency on China as a creditor. Increasing debt, and China’s role in managing bilateral debt problems, has already exacerbated internal and bilateral tensions in some BRI (Belt and Road initiative) countries,” the report said.

International relations scholars Robert Daly and Matthew Rojanski noted in a separate report on a recent trip to the Russia, Kazakhstan and China intended to gauge responses to the Belt and Road initiative that Eurasian nations were eager to benefit from Chinese investment but wary of Beijing’s intentions.

“We found an eagerness to participate in projects that support national development, but deep resistance to any westward or northern expansion of China’s practices, ideas, or population… Neither (Russia or Kazakhstan) hopes that China’s power will increase with its investments.,” the scholars said.

Outgoing US Secretary of State Rex Tillerson echoed the centre’s concerns on a visit to Africa this month. China “encourages dependency using opaque contracts, predatory loan practices, and corrupt deals that mire nations in debt and undercut their sovereignty, denying them their long-term, self-sustaining growth, Chinese investment does have the potential to address Africa’s infrastructure gap, but its approach has led to mounting debt and few, if any, jobs in most countries,” Mr. Tillerson said.

China has sought in some cases to counter resistance by offering more concessional or, in the case of Pakistan. interest-free instead of commercial loans for some projects.

Nonetheless, China has used debt relief as a vehicle to gain control of assets. Tajikistan saw an undisclosed amount of debt written off in exchange for ceding control of some 1,158 square kilometres of disputed territory. Sri Lanka, despite public protests, was forced to give China a major stake in its port of Hambantota.

Djibouti, one of the eight countries most at risk and a rent-a-military-base East African nation that hosts a major US facility, is about to follow in Sri Lanka’s footsteps. Djibouti last month seized control of the Doraleh Container Terminal from Dubai-based DP World and reportedly intends to hand over its management to a state-owned Chinese company.

Marine General Thomas Waldhauser, the top US commander in Africa, warned that the consequences of a Chinese takeover “could be significant.” He said moves by China, described by the Pentagon as one of several “revisionist powers” that “seek to create a world consistent with their authoritarian models,” had prompted him to revise US military strategy in Africa.

For their part, Pakistan and Nepal withdrew last November from two dam-building deals. The withdrawal coincided with mounting questions in Pakistan, a crown jewel in Chinese geo-strategic ambition, about what some see as a neo-colonial effort to extract the country’s resources.

China's seeming obliviousness to the potential impact on recipients and its own standing of its funding approach appears to be rooted in President Xi Jinping's rewriting of history and spin on reality that threatens to become a self-fulfilling prophecy.

Launching Belt and Road in a speech in Kazakhstan in September 2013, Mr. Xi suggested that the initiative constituted a revival of China’s centuries-old relationship with Eurasia. “More than 2,100 years ago … (Chinese) imperial envoy Zhang Qian was sent to Central Asia twice to open the door to friendly contacts between China and Central Asian countries as well as the transcontinental Silk Road linking East and West,” Mr. Xi told his audience.

In Indonesia a month later, Mr. Xi reminded the country’s parliament that “Southeast Asia has since ancient times been an important hub along the ancient Maritime Silk Road.”

Messrs. Daly and Rojanski noted that the historic Silk Road was never centred on China and that it served both commercial and military purposes. “The term ‘Silk Road’ was coined in 1877 by a German geographer to connote the historic phenomenon of Eurasian trade rather than a particular route,” the scholars said.

They suggested that Eurasian nations had not forgotten that historically Chinese expansion westwards had often been violent,” a fact Mr. Xi chose to overlook in his projection of the Belt and Road initiative.

It was, moreover, not immediately clear “that China’s branding, cash, and ambition can overcome the uneven development, political and cultural diversity, age-old hatreds, and daunting geography” of the Belt and Road, Messrs. Daly and Rojansky said.

Mr. Xi’s projection of a China-centric world is reflected in the country’s media that positions the Belt and Road as a vehicle to cement the People’s Republic’s place in the world as well as Communist Party rule despite paying lip service to the principle of a win-win proposition.
Chinese ambitions are evident in its efforts to internationalize its currency, the renminbi, as well as the inclusion of elements of the Chinese surveillance state and the propagation of Chinese culture through local media in investment target countries, for example Pakistan. They are also apparent in the creation of special Chinese courts to adjudicate Belt and Road.

China this month announced the establishment of a new agency to coordinate its foreign aid program. The agency is part of an effort to project China’s global influence more effectively and increase Communist Party control.

Taking issue with the Chinese effort, the Washington-based centre suggested that China as well as recipients of Beijing’s largess would be better served if the People’s Republic adopted a multilateral approach to Belt and Road-related funding rather than insisting on going it alone.

Said Scott Morris, a former US Treasury official and co-author of the centre’s report: “The way forward demands a clear policy framework aligned with global standards, something that has been absent from China’s lending practices to date. Whether Chinese officials have the will to pursue this approach will be critical in determining the ultimate success or failure” of the Belt and Road initiative.

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and co-host of the New Books in Middle Eastern Studies podcast. James is the author of The Turbulent World of Middle East Soccer blog, a book with the same title as well as Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africa, and the forthcoming China and the Middle East: Venturing into the Maelstrom

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