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October 2010

News Letter - 10th October 2010

Security Council debates legal options for pursuing pirates off Somali coast

Commending the efforts undertaken so far to combat piracy off the coast of Somalia, Secretary-General Ban Ki-moon has stressed recently that more can be done, as the Security Council debated legal options to help bring the perpetrators of such crimes to justice.
“Over the past three years, the international community has made concerted efforts to combat the problem, including by establishing a Contact Group and deploying significant naval assets to the region,” he told the Security Council as it met to discuss the issue. “Nonetheless, we can do more. In particular, we need to implement the existing legal regime, so the fight against piracy in international waters is effective”. In a report released last week, Mr. Ban identified seven options for furthering the aim of prosecuting and imprisoning persons responsible for acts of piracy and armed robbery at sea.

The above quotation was part of a much longer statement made recently by the Secretary General of the U.N. – that self same illustrious body which has often sent unarmed troops into dangerous hot spots around the world under the ludicrous expectation that a ‘blue beret’ is sufficient protection against well armed trouble makers.

As the S.W. monsoon season in the Indian Ocean draws to a close in 2010 and the weather moderates pirate activity has increased and continues to increase substantially resulting in more attacks on shipping and innocent seaman being put at risk of being killed or incarcerated for indeterminate periods of time under the constant threat of violence from these ‘thugs of the seas’ When will this situation change for the better?? Not I am afraid for some time unless the attitude of the ‘powers that be’ towards the problem changes considerably!

A recent statement out of Northwood, England, from where the coalition’s maritime forces for the Indian Ocean are monitored and controlled indicated that since 2008 the attacks and ransom demands have increased two fold and the hijacked seamen are being incarcerated for ever longer periods of time. The statement indicated the EU and other countries have 20 warships in the area “to protect merchant shipping”. What they did not say is that there are approximately 2,000,000 sq. miles of ocean to protect. To give that perspective that means each warship has to protect an area equivalent to the size of the entire U.K. Although the U.K. is a relatively small country that is a huge area of ocean for one warship to protect – in fact it’s an impossible situation. Unless they treat this problem in a serious manner the problem is not going to go away. They need ten times that number of ships in the area if they are serious in ridding the area of this scourge!

The above piece of the U.N. article laughably states “Security Council debated legal options to help bring the perpetrators of such crimes to justice”. Why are we even discussing legal options when in the past once a person turned to piracy he lost all legal rights (read human rights). It should be the same today as it was in the 18th and 19th centuries when it comes to pirates – there should be no “legal rights”. With such a “feely-feely, touchy-touchy” approach to the problem there is never going to be a sensible solution and these Somali pirates will continue to have everything to gain and nothing to lose by continuing to perpetrate their evil business. One nation whose attitude appears to have changed dramatically to the problem is that of Russia. An incident of a few months ago where a Russian tanker was hijacked resulted in a Russian commando unit retaking the vessel, disarming the pirates, putting them back on board their pirate boat, without food or water and then blowing up the vessel along with all the pirates. It would seem that the Russians are now meting out 18th and 19th century justice with 21st century military efficiency! Some people will say such actions will result in retaliatory action by the pirates, but this can only be minimal at worst since the pirates need their captives in order to broker a monetary reward. The language in the film is nearly all in Russian, although you do not need to understand the language to understand what is going on. The Russian commandos ask the pirates their nationalities and you hear some are Somali, some Iraqi, Iranian and Pakistani; these countries are major sources of recruitment for Al-Qaida. For the past five years or more the authorities of all Western countries have been assuring their people that the pirate activity off Somalia is carried out only by opportunistic criminals – are we really expected to believe this. If you are inclined to believe this then watch the short video on http://true-turtle.livejournal.com/85315.html - you may begin to disbelieve what Western governments appear to want their citizens to believe. Happy viewing!

The political ramifications of debt or – Debt & Politics Part II

In the last few weeks a little has begun to emerge about the details of the deal that saved the Dubai economy at the end of last year. This is partly due to forensic audits at state-linked firms, which are part of a wider corruption probe. As a result of its rescue by Abu Dhabi, Dubai has become more conservative, both politically and socially as the crisis prompted a shift of power to the rulers in Abu Dhabi.

Last November 25th when Dubai's liabilities reached $59 billion, or nearly a quarter of the United Arab Emirates' federal GDP (with a $3.5 billion Islamic bond from Dubai World's real estate company Nakheel due on December 14th) the Dubai government announced they had sought a stay of payment on Dubai World's debts. Unfortunately this was on the eve of the Eid holiday so no official came forward to explain the situation until November 30th. Financial markets looked to December 14th as a major test: bondholders could smell blood in the water. The only thing Dubai could do was approach her neighbour to the North. On the evening of December 13th the final proposal was agreed and, crucially, it did not involve a full repayment of the bond. However Abu Dhabi, while rejecting the deal, offered to pay off the bond in its entirety. Clearly Abu Dhabi realised the magnitude of the situation.

Dubai’s transformation into a metropolis has relied on state-linked firms borrowed at an alarming rate and, with little oversight or coordination, the opportunity for corruption presented itself. Nakheel has recently been compared to a pyramid scheme in the international press. Its common practice in the Middle East for borrowing to consist of loans signed with a nod and a wink on a 'name lending' basis. With Dubai's government tightening the leash on borrowing for state-linked companies hopefully this will now cease.
Almost two-thirds of Dubai World's debt is held by six banks, four of them British: HSBC, Lloyds, Royal Bank of Scotland, Standard Chartered, and local lenders Emirates NBD and Abu Dhabi Commercial Bank. Ultimately Dubai's debts were accrued on the assumption that in the event of distress, the government – or big brother Abu Dhabi – would pick up the tab. When Dubai's government distanced itself from the problem, it gave the larger emirate responsibility – and power. The first sign of this came almost immediately when in January Dubai's ruler named the world's tallest structure Burj Khalifa, in honour of Abu Dhabi's ruler and the UAE president, Sheikh Khalifa bin Zayed al-Nahayan.

Restructuring of $14.4 billion worth of debt has been accepted by the main creditors with a five and eight year maturity. The rollover comes with up to 1 per cent of interest. The document for Dubai World's debt restructuring, which has recently been agreed to by most of its creditors, outlines the city's plans to sell assets over eight years to generate as much as $19.4 billion.The assets of Dubai World that the company is prepared to sell in order to raise this much, include stakes in luxury retailer Barney's, the Atlantis Hotel and casino operator MGM Resorts International, to which it assigns a value of up to $7.6 billion in five years. Dubai World has identified DP World, Jebel Ali Free Zone, the Dubai Maritime City development and Dry Docks World as its “strategic assets” that may generate as much as $11.8 billion if sold in eight years. Critics however argue that these figures are artificially high because Dubai World has assigned unrealistically high values to real estate based assets such as Maritime City, JAFZA and certain Istithmar’s holdings. The debt market tends to be more conservative and overvaluation would be almost certain given Dubai’s obsession with real estate over the last ten years.

An ally of the U.S, the UAE has taken a tougher posture toward Tehran over the past year, under increasing scrutiny from Washington but also out of concern of the risks of a nuclear Iran across the water and Dubai (with a substantial population of Iranian expatriates that last year generated $5.8 billion in re-exports to Iran) has followed that lead. Iranian ships visiting UAE ports are undergoing much more stringent cargo checks. It would seem that there has been a significant shift in what Abu Dhabi feels it can do with regard to Iran and how close it can position itself with the US. This has to be, at least in part, put down to the DW debt crisis in that without it Abu Dhabi would have far less leverage over Dubai. Abu Dhabi would appear to be in full control of UAE foreign policy. One wonders if perhaps Abu Dhabi doesn't have to throw its weight around because Dubai has realized what it needs to do without being told. Whatever, Dubai's ongoing debt problems mean the Emirate has little power to deviate from Abu Dhabi's line. There is also no doubt that the Gulf Arab region as a whole is seriously concerned about the possibility of a nuclear-armed Iran. A rising number of countries have announced big new purchases of weapons in the past year, including Saudi Arabia which plans a $60 billion arms deal with the United States. Analysts say the six Gulf Arab states could spend as much as $100 billion in coming years to overhaul their armed forces.

UAE BlackBerry Service

As of October 8th we were informed by the telephone companies in the UAE that the TRA has done a deal with RIM and BlackBerry services will continue to be offered here without interruption. Thank goodness they were able to work something out: removing the BB service from a country that touts itself as business friendly really would have been a gaffe of huge dimensions.

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