Tuesday, January 31, 2017

Nuclear Superpowers and the Impact of Nuclear War - Part One

The recent ramping up of diplomatic hostilities between the United States and Russia/China has created an atmosphere where there will be increasing distrust between the world's sole superpower and its main military competitors.  These developments have at least some of us who lived through the height of the Cold War during the 1960s concerned about the worst-case scenario, a limited or, God forbid, an unlimited nuclear exchange between America and Russia/China.  Despite the signing of various international treaties limiting the expansion of nuclear weaponry by nations that already have nuclear weapons and those who want them for their own purposes, the world still has enough nuclear weapons to destroy itself several times over.  In this posting, I'll take a brief look at the global nuclear stockpile and then go on to look at the impact of a nuclear attack on key cities in the United States, Canada, Russia and the United Kingdom.

Let's open this posting with a look at recent comments made by Mikhail Gorbachev about the building global geopolitical stresses:

"Politicians and military leaders sound increasingly belligerent and defense doctrines more dangerous. Commentators and TV personalities are joining the bellicose chorus. It all looks as if the world is preparing for war....Today, however, the nuclear threat once again seems real. Relations between the great powers have been going from bad to worse for several years now.  The advocates for arms build-up and the military-industrial complex are rubbing their hands." (my bold)

With Mr. Gorbachev's comments in mind, let's look at the global nuclear weapon stockpile from the Plowshares Fund:

According to the Bulletin of the Atomic Scientists, the nuclear weapons stockpile has declined substantially from its peak in 1986 when there were over 60,000 nuclear weapons compared to 15,375 in 2016.

Here is a graphic showing the estimated global nuclear warhead inventory:

Here is a table showing a further breakdown for each of the nuclear powers:

While the numbers don't completely match the table above, here is a 2016 inventory of Russia's nuclear weapons according to the Bulletin of Atomic Scientists:

Here is a 2016 inventory of America's nuclear weapons, again, according to the Bulletin of Atomic Scientists:

In looking through the data provided by the Bulletin of Atomic Scientists, we find that the yield on Russia's nuclear weapons have a yield of between 100 and 800 kilotons (most weapons have multiple warheads, ranging from 3 to 10 in total) and U.S. nuclear weapons have a yield of between 100 and 455 kilotons.  By way of comparison, Little Boy which destroyed most of Hiroshima had a yield of about 13 kilotons of TNT and Fat Man which destroyed most of Nagasaki had a yield of about 23 kilotons of TNT.  The largest nuclear weapon ever detonated by Russia (in 1961) was the RDS-220 or Tsar Bomba hydrogen bomb with a yield of 50 megatons (50,000 kilotons) and the largest thermonuclear weapon fielded by the United States was the B41 or Mk-41 which had a yield of 25 megatons (25,000 kilotons).

I think that's enough information to absorb in this posting.  With that background information on the still rather frightening global nuclear weapon stockpile that is capable of decimating the global population several times over and Mr. Gorbachev's insight into the growing diplomatic stresses between the United States and Russia, in part two of this posting, we'll take a look at the damage that could be done on major population centres should nuclear hostilities break out. 

Monday, January 30, 2017

Saudi Arabia and the Trump Administration Entanglement

Updated May 2017

The Trump Administration's early 2017 moves to suppress the flow of citizens from six nations because of security concerns and its backing of the failed raid in Yemen, is rather interesting, given that the majority of the perpetrators of the September 11, 2001 terrorist activities came from one nation; the Kingdom of Saudi Arabia (KSA).  This does come as a bit of a surprise in one sense but, given the current Secretary of State, Rex Tillerson, and his past position as Chairman of the Board and CEO of ExxonMobil, this posting will show you that this should not be a shock to anyone.

According to ExxonMobil, the corporation is one of the largest foreign investors in Saudi Arabia through its subsidiary, ExxonMobil Saudi Arabia Inc. (EMSA) and has a very long history of operating in the Kingdom as shown here:

ExxonMobil has an 85 year track record of being one of the largest investors in the KSA as a joint venture partner with the now 100 percent Saudi-owned Saudi Arabian Oil Company (Saudi Aramco) and Saudi Basic Industries Corporation (SABIC).  ExxonMobil is also one of the KSA's largest private sector purchases of Saudi Aramco crude oil 

Let's look at a bit of background.   Back in 1948, Standard Oil Company (now Exxon) and Soccony-Vacuum Oil Company (became Mobil) became part owners of the original Arabian American Oil Company (Aramco), providing market outlets and capital investments to develop the massive Saudi oil and natural gas reserves.  In 1950, then-Saudi King Abdulaziz threatened to nationalize the nation's oil facilities, a move that forced Aramco to share its profits 50/50 with the KSA.  This also resulted in a move of the company's headquarters from New York City to Dhahran.  In 1973, the Saudi government purchased a 25 percent interest in Aramco, increasing its participation interest to 60 percent in 1974.  In 1980, the Saudi government completed its purchase of Aramco, owning 100 percent of its crude oil concession rights, production and facilities.  Saudi Aramco now owns the largest oil reserves among all companies in the world and is the world's largest producer of oil.

Let's look at ExxonMobil's current activities in the KSA which include petrochemicals manufacturing and petroleum refining operations starting with this screen capture of the first two pages of the company's ExxonMobil Saudi Arabia brochure:

Here is a list of the company's facilities in Saudi Arabia:

1.) Saudi Aramco Mobil Refinery (SAMREF):  This 400,000 BOPD refinery is owned 50/50 by Saudi Aramco and a subsidiary of ExxonMobil and is one of the world's largest single-train crude oil refineries.  It employs 727 Saudi nationals, a 90 percent Saudization level.  Most of its production is domestically consumed.  Here is a photo of the facility:

2.) Saudi Yanbu Petrochemical Company (YANPET):  This facility has two world-class 800,000 metric ton per year crackers, producing mainly ethylene and is one of the largest and lowest-cost producers in the world.  It is equally owned by the Saudi Basic Industries Corporation (SABIC) and a subsidiary of ExxonMobil.  It employs 1300 workers of which 87 percent are Saudi nationals.

3.) Al-Julbail Petrochemical Company (KEMYA):  This facility has the capacity to produce 900,000 tonnes of ethylene and 1.3 million tonnes of polyethylene annually.  It is equally owned by SABI and an ExxonMobil affiliate.  It employed nearly 1200 people, over 98 percent of which are Saudi nationals.  The two shareholders have also developed the $3.4 billion Al-Jubail Elastomer/Saudi  Elastomers Project (SEP) as part of the KEMYA facility which will produce about 400,000 tonnes per year of synthetic rubber. 

Let's put some of these numbers into perspective.  In 2015, the Al-Jubail and Yanbu facilities produced 1.6 million tonnes of ethylene, 17.8 percent of ExxonMobil's total global production of 9.0 million tonnes.  These facilities also produced 1.4 million tonnes of polyethylene, 16.3 percent of ExxonMobil's total global production of 8.6 million tonnes.  The SAMREF refinery produced 200,000 BOPD (ExxonMobil share), 4 percent of ExxonMobil's 5.035 million BOPD global total.  As you can see, the ExxonMobil-owned facilities in the Kingdom of Saudi Arabia provide a significant portion of the company's cash flow.   

Not only is ExxonMobil helping to develop Saudi infrastructure, it supports educational programs including one rather interesting prorgram, the Global Women in Management project which trains 30 Saudi women annually since its inception in 2011.  The project seeks to strengthen their management leadership and technical skills to "build the next generation of women".  What I find fascinating about this is that Saudi women still have no voting rights, no right to drive their own vehicle and must be covered completely when in public, in fact, the KSA is one of the most female-repressive societies in the world.  I cannot imagine that training 30 women annually is going to make one bit of difference to Saudi Arabia's misogynistic society.  In the health realm, ExxonMobil founded the Prince Salmoan Center for Disability Research to support the Kingdom's disabled citizens.  They also support the Zahra Breast Cancer Association, the Saudi Alzheimer's Disease Association and the Disabled Children's Association.

With this background, I think that we can get some sense of why Saudi Arabia was treated differently than its Middle East neighbours when it came to moves by the Trump Administration and its ExxonMobil-sourced Secretary of State.  It certainly appears that it's more business as usual in the hallowed halls of the nation's capital.  

Sunday, January 29, 2017

Donald Trump and His Complex Relationship With the United Kingdom

Donald Trump has been through this before, but the citizens of the United Kingdom are at it again.  Back in December  2016 when candidate Trump vowed to ban Muslims from entering the United States as shown here:

...a total of 586,930 signatories believed that Donald Trump should be banned from entering the United Kingdom as shown here:

Since the early 2016 petition breached the 100,000 signature threshold, a debate was held in Parliament which responded with this comment:

"For good reasons the Government does not routinely comment on individual immigration and exclusion decisions.

The Home Secretary may exclude a non-European Economic Area national from the UK if she considers their presence in the UK to be non-conducive to the public good.

The Home Secretary has said that coming to the UK is a privilege and not a right and she will continue to use the powers available to prevent from entering the UK those who seek to harm our society and who do not share our basic values.

Exclusion powers are very serious and are not used lightly. The Home Secretary will use these powers when justified and based on all available evidence.

The Prime Minister has made clear that he completely disagrees with Donald Trump’s remarks. The Home Secretary has said that Donald Trump’s remarks in relation to Muslims are divisive, unhelpful and wrong. 

The Government recognises the strength of feeling against the remarks and will continue to speak out against comments which have the potential to divide our communities, regardless of who makes them. We reject any attempts to create division and marginalisation amongst those we endeavour to protect."

Now that Donald Trump is in the Oval Office and has made the Administration's first move toward controlling the movement of citizens of six nations into the United States, this petition has been presented:

As I noted above, once the number of signatories has passed the 100,000 mark, the U.K. Parliament must consider the issue for a debate.  Thus far, the petition has received in excess of 1.833 million signatures, most of which have taken place after Jeremy Corby, Leader of the Opposition and head of the Labour Party tweeted this on January 29th:

The number of signatories is rising so quickly that it's hard to keep up; in roughly five minutes today, over five thousand new signatures were added and in two hours, over 135,000 new signatures were added.

Given that Donald Trump just met with U.K. Prime Minister Theresa May and that he had received and accepted an invitation from Queen Elizabeth to visit the United Kingdom later this year, this issue could prove to be somewhat complicated for U.K. parliamentarians.  So much for that close United States - United Kingdom relationship. 

Friday, January 27, 2017

Ending Corruption and Cash

At the recent World Economic Forum annual meeting held in Davos, Switzerland, an interesting Issue Briefing entitled "Ending Corruption" took place with renowned Nobel Prize-winning economist, Joseph Stiglitz, a professor of economics at Columbia University and Mark Pieth, a professor of criminal law at the University of Basel.  Stiglitz and Pieth recently published a paper "Overcoming the Shadow Economy" that looked at secrecy-havens and how they facilitate both money laundering and tax avoidance and evasion which they believe contribute to both crime and the high degree of global wealth inequality.

The issue dealt with during this briefing was corruption, particularly the shadow economy, the subject matter of their aforementioned joint publication.  To put the discussion into context, it is also important to remember that the November 2016 moves by India's Modi government/the Reserve Bank of India to demonetize the Indian economy by banning bank notes with Rs 500 and Rs 1000 denomination, a move that has led to a shortage of cash as 86 percent off the nation's currency has disappeared from circulation.  This move was made under the guise of reducing corruption thereby increasing tax revenue in India but has had significant negative impacts on Indian consumers.  It has also led to an increase in digital transactions and an increase in the size of balances allowed in mobile wallets on smartphones used for online payments.  Mobile wallet companies have noted massive increases in the use of mobile wallets with approximately 1 million wallet users joining every day since demonetization.

Interestingly, the Reserve Bank of India also expresses another concern about the old Rs500 and R100 notes, stating the following:

"The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw legal tender character of the old Bank Notes in the denominations of Rs 500 and Rs 1000 was introduced." (my bold)

Here's how India's government is selling the concept of a cashless society, using Prime Minister Modi's likeness as a huckster:

Now, let's get back to the WEF Issue Briefing.  Here is Joseph Stiglitz answer to the following question:

Q - "I'm very interested by the view of the panel on the radical move that the Prime Minister of India took to fight corruption which was to suppress the banknotes and change them.  What do you think about that?"

A - "So, let me say on the first question, I actually, I believe very strongly that  for countries like the United States, we could and should move to a digital currency and get rid of currency and I have an NPR paper coming out on using, digitalizing electronic money so that you would have the ability to trace this corruption.  There are important issues of privacy and issues of cyber security but it would have, certainly, very big advantages on knowing....and I think you could attack some of the cyber issues because of the transparency."

When asked by the moderator whether such a move to a cashless society would have a short-term impact on the economy, he responded:

"I think over the long term, the benefits will exceed the cost and yes, there are transitional issues and they may not have carried out those transitional issues in the best possible way but I think over the long term, its a move in the right direction because I think the corruption is very enervating in many of these societies."

If you wish to hear the exchange for yourself, please go to the 25 minute mark.

Basically, India is the global test case for demonetization, a process that was sold to Indians as a means to both reduce corruption and reduce the incidence of counterfeit currency.  When we start hearing both politicians and central bankers touting the disadvantages of a cash society, we'll know that cash is about to disappear as a medium of exchange.  From the comments made by Joseph Stiglitz, we can see that he is firmly in the camp of banning cash all in the name of reducing corruption and increasing transparency, moves that will be appealing to governments if they are tied to increasing tax revenues in this time of ultra-high public debt.