Crucial Threat to Israel from Western Border

by Amos Harel  •  Thu, 23 Aug 2012, 2:18 AM

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The developments on Israel's western border might be far more crucial to its strategic situation, even compared to the Iranian nuclear threat. The August 5 terror attack in northern Sinai, killing 16 Egyptian policemen, supplied the perfect excuse for the newly elected Mursi regime in Cairo. Under the pretext of finally dealing with extremist Islamic terrorism in the peninsula, the Egyptian President is aiming for something more: re-defining the terms of The Egyptian-Israeli peace agreement, especially regarding the security situation in Sinai.

Israel had previously ignored, or sometimes secretly approved, Egyptian violations of the treaty. These always concerned deploying more battalions than agreed, but only for a short period of time, in order to fight the terrorist groups. This time, Cairo is aiming for a more serious goal. Not only had it moved to Sinai more battalions and even tanks, with no prior consent from Jerusalem, but the Egyptian media is full of reports of fighter aircraft and heavy artillery batteries about to be deployed. These reports are not all necessarily accurate, but what's important is that they are part of a bigger plan – undermining the peace agreement, without actually deserting it altogether.

Why is the Islamic Brotherhood government doing this? The most logical explanation would be that it's done because of internal political reasons. Changing the security part of the treaty had been one of the party's promises during the election campaign. The Islamists claimed that the current treaty was a humiliation for Egypt's national honor. I assume they will be going for a de-facto change, believing Israel has no alternative but to agree, since the Mursi regime would find it hard to actually sit down formally and re-negotiate the contract with the Israelis.

For the time being, it's safe to assume that Mursi is not interested in escalating the military situation with Israel. He still needs the US and because of the economic situation in Egypt would not risk playing too many dangerous games in Sinai. But Israel should follow events very carefully. This is not only a matter of the situation in the peninsula. Perhaps more importantly - if Netanyahu finally decides to strike Iran's nuclear sites, shouldn't he consider a possible scenario, in which Mursi (soon to visit Teheran for a conference), orders two army divisions to cross the Suez Canal into Sinai?


The Muslim Brotherhood Builds a Totalitarian State in Egypt

by David P. Goldman  •  Tue, 21 Aug 2012, 12:15 PM

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Buried in a news item in the Egypt Independent on prospective foreign aid for Egypt is the following eye-opener:

The government decided to lower subsidies on oil products from LE95.5 billion in the 2011-2012 budget to LE25.5 billion in the 2012-2013 budget by applying a coupon system on butane, gas and diesel in addition to other procedures for rationalizing energy consumption.

Cutting subsidies on oil products by nearly three-quarters through a coupon system puts the daily operations of the Egyptian economy directly into the hands of the state. To put the magnitude of this move in perspective: Egypt's 2009 oil consumption (the last year for which data are available) was 683,000 bls/day, or about $25 billion a year in current prices. The 95.5 billion Egyptian pound subsidy, equal to about $15.7 billion at the currnet exchange rate, covered three-fifths of the bill. Given that almost half of Egyptians live on less than $2 a day, that is not surprising. The Wall Street Journal reported March 22, "Subsidies already absorb at least 28% of Egypt's budget outlay of 476 billion Egyptian pounds ($79 billion). About two-thirds of that goes toward fuel and energy, with the rest aimed at reducing food prices, particularly for wheat."

Egypt has suffered from chronic fuel shortages since the overthrow of Hosni Mubarak early in 2011, including repeated breakdowns in electricity provision. The National reported Aug. 19,

A severe electricity blackout hitting many parts of Cairo shut down the Egyptian stock exchange and delayed trading for two hours. When the market finally opened, stocks fell in value by about US$164 million (Dh602.3m) in the early hours before regaining lost ground later. The exchange quickly moved to assure the market it would not happen again...Egypt runs one of the most inefficient subsidy systems in the world, where two thirds of the total subsidy bill of 150 billion Egyptian pounds (Dh90.69bn) goes on fuel. Much of that is used to keep natural gas below market prices. About 90 per cent of the country's electricity generating capacity is from natural gas. It is no surprise gas shortages affect the electricity supply in the hottest months of the year during peak demand.

It seems likely that the Morsi government will shift food subsidies to a ration card system as well, according to the Egypt Independent. Bread shortages appeared at the end of Ramadan in some Egyptian provinces, al-Ahram reports, and the Morsi government blames corruption by bakers:

Residents of the city of Desouk in the northwestern Nile Delta governorate of Kafr El-Sheikh have been suffering from a shortage of subsidised bread since the beginning of Eid on Sunday, according to the Al-Ahram Arabic news website.">Bakeries, which serve close to three million residents in the governorate, have not received their share of subsidised wheat and have therefore been unable to produce enough bread.

As a result, several bakeries in the city will be closed for the three-day Eid festival.

Burullus, Kafr El-Sheikh city and Riad in the same governorate are also experiencing bread shortages, with many residents complaining that what little bread they are able to buy is of poor quality. Fawzy Abdel-Aziz, undersecretary at the supply ministry, has said the problem is not due to a shortage of subsidised wheat, and has instead accused bakeries of illegally selling subsidised wheat on the black market.

The Morsi government will exploit the crisis to put access to basic necessities of life into the hands of a one-party state. I warned of this in an April 11, 2012 essay in Asia Times:

The Brotherhood believes that widespread hunger will strengthen its political position, and is probably correct to believe this. As the central government's corrupt and rickety system of subsidies collapses, local Islamist organizations will take control of food distribution and establish a virtual dictatorship on the streets. American analysts mistook the protestors of Tahrir Square for revolutionaries. The Muslim Brotherhood now reveals itself to be a revolutionary organization on the Leninist or Nazi model.

The Brotherhood's revolutionary program has been gestating for some time. As food and fuel shortages emerged in the first months of after the downfall of president Hosni Mubarak last year, Islamist organizations already began to fill the vacuum left by the breakdown of the old civil regime. The Ministry of Solidarity and Social Justice began forming "revolutionary committees" to mete out street justice to bakeries, propane dealers and street vendors who "charge more than the price prescribed by law", the Federation of Egyptian Radio and Television reported on May 3, 2011. According to the ministry, "Thugs are in control of bread and butane prices" and "people's committees" are required to stop them.

With nearly half its population dependent on subsidies for necessities, an effective unemployment rate of 40%, and a 45% effective illiteracy rate, Egypt is one of the least-prepared nations of the world for parliamentary democracy. The state rationing system now in preparation will make the local Muslim Brotherhood office the arbiter of whether families eat or starve. There is no more powerful form of social control. It is not necessarily the case that the Morsi government will follow the guidelines of the Brotherhood's sage Sayyid Qutb, whose tract Social Justice in Islam argues for an Islamist-tinged sort of socialism, but the logic of circumstances are pushing them towards this kind of model.

The irony here is that the Muslim Brotherhood may construct a totalitarian state with the help of the International Monetary Fund, including American money. Al-Ahram reports,

International Monetary Fund (IMF) chief Christine Lagarde will visit Egypt on 22 August, according to an IMF statement on Wednesday. Lagarde's visit will focus on the $3.2 billion loan that Egypt has been asking for since March 2011. No deal has been reached and Egypt's funding problems have steadily worsened during subsequent 18 months of political turmoil. Reuters reported on Wednesday that Egypt would discuss the possibility of a bigger-than-expected $4.8 billion loan from the Washington-based body.

How much financial aid Egypt will receive remains unclear. What is crystal clear is that the Muslim Brotherhood is using economic misery to entrench its power.


Bread Shortages Appear in Egypt: From Al-Ahram

by David P. Goldman  •  Mon, 20 Aug 2012, 10:41 AM

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Poor people in Egypt's Kafr El-Sheikh governorate unable to buy subsidised bread; bakers blame lack of wheat, government blames corruption

Alaa Abdallah , Monday 20 Aug 2012



File photo: A child balancing a tray of bread On his shoulder, which he has just bought from a bakery in Cairo , Feb. 6, 2008. that sells government-subsidized bread. (Photo:Reuters)


Resident of the city of Desouk in the northwestern Nile Delta governorate of Kafr El-Sheikh have been suffering from a shortage of subsidised bread since the beginning of Eid on Sunday, according to the Al-Ahram Arabic news website.

Bakeries, which serve close to three million residents in the governorate, have not received their share of subsidised wheat and have therefore been unable to produce enough bread.

As a result, several bakeries in the city will be closed for the three-day Eid festival.

Burullus, Kafr El-Sheikh city and Riad in the same governorate are also experiencing bread shortages, with many residents complaining that what little bread they are able to buy is of poor quality.

Fawzy Abdel-Aziz, undersecretary at the supply ministry, has said the problem is not due to a shortage of subsidised wheat, and has instead accused bakeries of illegally selling subsidised wheat on the black market.

Monitors will be sent to the bakeries suffering from shortages, Abdel-Aziz said.

Egypt has been suffering from subsidised bread shortages for a number of years. The crisis reached its peak during the final years of the Mubarak era, when fatal brawls at bakeries were not uncommon.


Weekly Call at "The Gate" blog: Israel's Options After the Debacle of US Foreign Policy

by David P. Goldman  •  Mon, 20 Aug 2012, 9:55 AM

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Israeli gas, Iranian Missles, and the Russian Price Tag

by Rotem Sella  •  Fri, 17 Aug 2012, 7:08 AM

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In the on-going debate over an Israeli attack on Iran, attention has largely focused over the last few weeks on Israel and America, for good reason. But what about Russia?

A very senior person in the Israeli gas industry tells me: "The Russians have been poking around here for a while. Everyone knows about the Russian interest in controlling the European energy market. Do they want to buy from us, or delay our efforts? I don't know. But they are here."

In early July, the Israeli energy and infrastructure news website "Thastiot" claimed that during Vladimir Putin's much publicized visit to Israel, Putin and Israeli Prime Minister Netanyahu agreed to form a junior company to Gazprom – the Russian oil and gas giant—which would help develop Israel's biggest gas field, the recently discovered reserves in the eastern Mediterranean, the so-called "Levyatan" (Leviathan) reserves.

"Eventually Israeli gas will be exported to the far east," Ohad Marani, CEO of IDLC energy which is already drilling the Myra, said to me. For him, the question is purely economic. "In the Far East we will see three times what we see in Europe. While we won't be able to keep the whole margin, it's surely better than any European option, which would involve an expensive pipe."

The senior industry veteran with whom I spoke is not quite sure. Yes, the Far East has unlimited demand ("The Japanese are lessening their reliance on nuclear, and the Chinese can never have enough") but the European market remains relevant and we have this massive amount of gas already discovered or to be discovered. The US geological survey (USGC) estimates that gas reserves in the eastern Mediterranean amount to 345 trillion cubic feet while Russian gas reserves in Siberia are estimated at 643 tcf.

Big business! With lots of Russians having come and gone to Israel on this question, one wonders about the relationship between the gas deal and Russian involvement on the Iran question.

The same week Putin visited Netanyahu in Jerusalem, Eurasia monitor published that:

"the government agency that oversees Russia's arms exports and imports… confirmed that Iran is suing Russia for damages to the tune of some $4 billion in the Court of Arbitration in Geneva for cancelling in 2010 a contract to sell five divisions of the S-300 long-range antiaircraft missile system worth an estimated $800 million to $1 billion."

By some estimates the worth of the Levayatan gas-field might be 15 billion dollars say Gilad Alper, the gas industry analyst at the Excellence Investment house. It trades today at a price of 3 billion dollars.

Another way to look at it: Levayatan contains 473 billion cubic meters of gas. Gazprom exported 150 billion cubic meters of Gas to Europe in 2011, at a price of 384$ per thousand cubic meters – revenue of 57.6 billion dollar—this year Gazprom raised the price to 415$, an 8% increase that will generate another 4.6 billion dollar of revenue to Gazprom. What would be the cost of keeping Israeli competition neutralized? Would it be worth the cancellation of an 800 million dollar deal? Could Russian action over the missile sale and Israeli gas reserves indicate that they have come to terms with the Israeli point of view?

Prominent Americans like David Petraeus have been saying non-stop that Israel does not have the capability to destroy Iranian Nuclear capacities, and surely not Iran's ambition to go nuclear. But if Israel can indeed delay the project while in the meantime having taken out of the picture one of Iran's most important allies, then things might look very different from the office of Prime Minister Netanyahu. Everyone knows that Russia intends to play the 'spoiler' in the International arena. But this spoiler frequently has a price tag.


Obama Administration "Caused Serious Damage to Israel's Deterrence toward Iran"

by David P. Goldman  •  Thu, 16 Aug 2012, 6:10 PM

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Ha'aretz Senior Defense Analyst Amos Harel, a regular on our "Gate" blog, just published his evaluation of Washington-Jerusalem relations. The key thought:

The Israeli leadership is taking a dangerous gamble here, that has to do with more than the repeated winding of the spring, exhausting security officials and, lately, pulling at the already fraying nerves of the Israeli public. This last series of publications has managed to unhinge the Obama administration as well – to which the Americans repaid us with a sharp statement made by the U.S. army chief Martin Dempsey this week, saying that the IDF can't destroy Iran's nuclear program, only, at most, delay it.

On the face of it, there isn't much news in Dempsey's comments. But the timing, wording, context (in a press conference, alongside Panetta) are what count here. Washington has stuck a proverbial pin in the Israeli balloon. Its message was clear: You better sit tight, the Iranian issue is out of your league. Dempsey's statement, thus caused serious damage to Israel's deterrence toward Iran, since leaders in Tehran now understand that Israel lacks the real possibility to disrupt their plans.

Whether Israel has the capacity or not remains the question. IDF Gen.(res.) Yitzhak Ben Yisrael rebutted Gen. Dempsey Aug. 16, contending that "The Americans know we can clobber Iran's nuclear sites like they can but I think Gen, Dempsey was referring to what happens after an Israeli strike on Iran." On paper, Israel has enough bunker-buster bombs and enough platforms to deliver them to destroy a great deal of Iran's dug-in enrichment capacity, even without the deployment of sabotage teams on the grounds. But it is not an easy exercise to fly 1,600 kilometers through hostile airspace, drop a series of bunker-busters directly into the crater left by the previous one, and get home.

A parallel question is: Why would Israel bluff? A year ago, Israeli threats helped push the U.S. and other Western nations to tighten sanctions on Iran. One could argue a year ago that there was some probability that sanctions might work. The probability now is vanishingly small. Dennis Ross, Obama's former chief Iran planner, warned in an interview today that the Israelis are not simply bluffing:

"Part of the motivation for being as public as they have been is to motivate the rest of world," Ross, who served as the top Obama White House Iran strategist from 2009 to the end of 2011, told Al-Monitor in an interview Tuesday.

"The second reason is to condition the rest of the world not to be surprised if or when they are going to act militarily," Ross said. "And to get the Israeli public ready as well."

That doesn't mean that they have made a decision. It's not about to happen tomorrow." Ross continued. "If it happens tomorrow, it's rather late in terms of getting the Israeli public ready. But I do think it means one cannot just dismiss it. Those who say it is just a bluff are misreading."

A careful reading of the transcript of Israeli Ambassador Michael Oren's talk before a Bloomberg conference yesterday shows that Israel is concerned not simply about Iranian bomb acquisition but the entire array of forces around it. Dempsey warned that Israel could only delay, but not destroy, Iran's nuclear weapons program. That, said Oren, was good enough for Israel. The situation was changing so quickly that a few years could mean a radically different environment:

One, two, three, four years are a long time in the Middle East -- look what's happened in the Middle East in the last year alone" in terms of political change, Oren said yesterday at a Bloomberg Government breakfast in Washington. "In our neighborhood, those are the rules of the game."

From the Israeli standpoint, a great deal that is happening on its borders may reflect Iranian maneuvering for a response to an Israeli strike. The Muslim Brotherhood move against the Egyptian military this week opens a threat in Gaza and Sinai, and it is noteworthy that Ambassador Oren referred to the terrorist organization Islamic Jihad as "owned and operated by Tehran." Lebanon has a new outbreak of sectarian violence, with the kidnapping of forty individuals (including Saudi and Turkish nationals) by Shi'ite militia. Iran, the US alleges, is organizing a militia in Syria, and the disposition of Syria's chemical weapons stockpiles represents an opportunity for Iran to acquire a WMD second strike capability out of Syria. This is a troublesome issue, as Oren observed, given that the chemical weapons are dispersed throughout the country and often close to civilian areas.

I stick by our basic conclusions of last Sunday's call: not just the timing of Iranian nuclear weapons development but the sudden instability around its borders make a compelling case for Israel to strike.


That Mecca Photo-Op

by Pepe Escobar  •  Wed, 15 Aug 2012, 1:46 PM

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Talk about all roads lead to Mecca. This is BIG. Everyone and his neighbor is there. The Emir of Qatar, Morsi from Egypt, Gul from Turkey, Mahmoud Abbas, Hamid Karzai, Zardari from Pakistan, Marzouki from Tunisia, King Abdullah from Jordan, Ahmadinejad himself. All of the 57 member-states of the Organization of Islamic Cooperation (OIC) – representing no less than 1.5 billion Muslims worldwide.

Arab News couldn't resist waxing poetically. What about…

"In Makkah, last night the Holy Kaaba and the Grand Mosque was bathed in bright lights. The giant Clock Tower glowed in green lights on a clear, moonless night. As the muezzin's heart-warming voice reverberated in the mountainous city at Isha, the world's leaders, sitting in the Al-Safa Palace next to the Grand Mosque, repeated Allah-o-Akbar after him."

Right. And then they got to what they do best; squabble among themselves, and suspend Syria from the OIC. Is this the idea of "the Islamic world's respected leader, Custodian of the Two Holy Mosques King Abdullah" of how to "unify and strengthen the crisis-riven Muslim world"?

What the "Custodian of the Two Holy Mosques" seems to have perpetrated is a savvy, DC-style PR coup. He seated Ahmadinejad to his left and the Emir of Qatar to his right. The graphic message; this triumvirate – two Sunni powers, one Shi'ite - is deciding the future of the Middle East.

Not really. My colleague Kaveh Afrasiabi argues that Tehran may have fallen into a trap; they were expecting a real effort of mediation and political dialogue instead of the meeting's priority – to suspend and even expel Syria.

Behind all the syrupy shenanigans, the fact is the House of Saud and Tehran didn't – and couldn't – possibly agree on anything; this is more like a "let's keep talking" – the Mecca version of the US-USSR red telephone. King Abdullah called for "solidarity, tolerance and moderation"; hard to see any of this in the House of Saud – and Qatar - arming runaway gangs and an array of Salafi-jihadis in Syria.

Then the OIC as a whole defends Syria's "unity, sovereignty, independence and territorial integrity" – exactly as the House of Saud and Qatar are doing all they can to undermine all of the above. Here's the OIC as an extension of the GCC. I'm getting echoes that quite a few countries – certainly Indonesia and Malaysia, plus a few Africans – are very unhappy with the whole thing.

The Custodian also wants to set up a "center for dialogue" in Riyadh. The verdict is open whether this center will examine who's really responsible for what is now practically all-out war between Sunnis and Shi'ites. Imagine the center coming to the conclusion that the protests in Bahrain were legitimate; as legitimate as the protests in the eastern province of Saudi Arabia. And as legitimate as what happened in Tahrir Square (remember Saudi horror at the time?)

OK; so at least Iran and the GCC are talking – even if practically at each other's throats. But the House of Saud agenda remains extremely tricky; it may not dream of a smashed Iran, but certainly a weakened Iran, either by years of sanctions or by a potential Israeli attack.

This show is far from over. Up next; Tehran invited King Abdullah for the Non-Aligned Movement (NAM) summit later this month. Let's see whether The House of Saud, the GCC and Iran are really interested in serious talk way beyond a photo-op. There's still no evidence the "leaders" of 1.5 billion Muslims will EVER get their act together


Pharaoh Morsi? Not so fast

by Pepe Escobar  •  Mon, 13 Aug 2012, 2:37 PM

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Saudi newspaper warns Muslim Brotherhood

by David P. Goldman  •  Mon, 13 Aug 2012, 11:52 AM

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Writing in the Saudi English-language news site Asharq Alawsat, senior editor Osman Mirghani issued a sharp warning to Egypt's Muslim Brotherhood. Under the headline "Who is trying to set Egypt ablaze?" Mighani wrote:

Egypt has been experiencing a state of complete shock since the attack on its border crossing in northern Sinai during which 16 Egyptian officers and soldiers were killed and many others injured, whilst breaking their Ramadan fast. This treacherous operation, not to mention the fact that it occurred whilst the Egyptian soldiers were breaking their fast, has inflicted a deep wound on all of Egypt, which further intensified the sense that Egypt is now completely exposed, whether to armed militias moving freely across the Sinai Peninsula or external forces seeking to carry out their own plots. This is all happening at a time when Egypt's political elite are preoccupied with the manoeuvring that has dominated the scene since the eruption of the revolution, the success and joy of which has turned into frustration as a result of the deteriorating living conditions and services in the country. This is not to mention the continuous accusations that the Muslim Brotherhood is attempting to dominate the political scene and implement a secret agenda.


Politically, Egypt seems to be in a state of disorder and instability, with all parties experiencing a tug-of-war over power, not to mention the general concerns regarding the Muslim Brotherhood and the unclear nature of the military's role in the political sphere. Some people are championing the military as a balancing power that can frustrate the Brotherhood's hegemony, whilst others are calling for its withdrawal from the political scene. Such political disorder reflects negatively on Egypt and demonstrates that the country is vulnerable to infiltration from all directions.


The Egyptian forces reaction to the killing of the soldiers, attacking the tunnels at the Egyptian-Palestinian border and closing the Rafah Border Crossing, reflects the country's shock and anger. This also reflects the Egyptian people's suspicions that Hamas provided the attackers with support; or at the very least turned a blind eye to them and allowed them freedom of movement. However the results and impact of this reaction will remain limited unless Egypt takes serious action to eradicate extremist armed groups that are being allowed to move freely across the Sinai Peninsula, and who are gradually transforming the region into a centre for struggle, outside the control of the central government. This is also conditional upon ending the internal political struggle that is making Egypt vulnerable to infiltration and unrest. Perhaps, the Muslim Brotherhood will also get the message that what Egypt requires today is consensus and stability, rather than attempts to gain political hegemony or talk about moving towards the establishment of an Islamic Caliphate! [emphasis added]


Caroline Glick comes to the same conclusion as our August 12 Call

by David P. Goldman  •  Mon, 13 Aug 2012, 11:31 AM

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Our weekly call with our regular journalists (transcript posted here) concluded that Egyptian President Morsi's purge of military leaders made an Israeli strike on Iran more probable. Writing today, Jerusalem Post columnist Caroline Glick offers the same conclusion.

According the the Israel media, the IDF was surprised by Morsy's move. Clearly our esteemed generals believed reassurances they received from their Egyptian military counterparts that Israel had no reason to be concerned with the election of Hamas's big brother to Egypt's presidency.

[The Israeli general staff's] failure to understand Egypt speaks all the more strongly for the full justification and necessity of Barak and Netanyahu's current media campaign to force the IDF to fall in line on attacking Iran.


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