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Why Biden Will Not Get Soft with China

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by Martina Bernardini

President-Elect Joe Biden, then in his capacity of Vice President, walks with Chinese President Xi Jinping, shortly after his arrival at Andrews Air Force Base during a 2015 visit to the United States (Image credit: AP Photo/Carolyn Kaster)

The election of Joe Biden as President of the United States is meaningful for several reasons, but foreign policy stands out as one of the most important. While the wars in Iraq and Afghanistan and the subsequent crisis in Transatlantic relations challenged the resilience of U.S. hegemony, the widespread enthusiasm to Biden’s election demonstrates that the U.S. historic allies still want – and require – an engaged United States on their side. Taking the reins of U.S. foreign policy in this particular moment in the history of the international system, however, is not an easy task. The biggest challenge lies in re-affirming the U.S. position in world affairs, a grand strategy that will contribute to building a strict balance between Washington and Beijing, to show that the absolute decline of U.S. power has not occurred.

During his presidential campaign, outgoing U.S. President Donald J. Trump argued that Biden allowed China to become a threat to the United States by supporting China’s entrance into the World Trade Organization in 2001. Such assumption indicated that for Trump, if Biden became President of the United States, he would get soft with China. The recent history of U.S. foreign policy, however, dismisses this thesis. In 2000, in fact, together with eighty-two U.S. Senators and 237 members of the House of Representatives, Joe Biden did vote in favour of the China Trade Bill, which authorised ‘the extension of nondiscriminatory treatment (normal trade relations treatment) to the People’s Republic of China, and to establish a framework for relations between the United States and the People’s Republic of China.’

The approval of such a bill by the U.S. Congress accompanied U.S. support for China’s accession to the WTO. At the dawn of the 21st century, this move represented – at least to U.S. policymakers – China’s official embrace of a world order based on the American-led ideals of free trade and democracy, a trend that was set in motion by President Richard Nixon and George H.W. Bush. China’s entry into the WTO was indeed positively welcomed both by Democrats and Republicans – by Presidents Clinton as well as George W. Bush – because it was seen as the coronation of a grand strategy aimed at bringing China into a pan-American trade regime. Consequently, Biden’s vote in favour of the China Trade Bill does not mean that, as President of the United States, he will adopt a concessionary China policy. Incidentally, the exact reasons for his support of China’s integration into the global trade system increase the probability that Biden’s foreign policy towards China will not be accommodating.

Biden’s vision of the United States in the world reflects the American exceptionalism that drove the United States towards superpower status by spreading the American soft power and democratic ideals abroad from the Spanish-American war (1898) to Obama’s presidency (2008-2016). For Biden, this means that the U.S. has the duty to lead and inspire the other powers of the international system. In this framework, his administration’s foreign policy plan is to lead the United States to re-establish such a relationship with the international community after four years of isolationism under Trump.

This foreign policy approach will consequently bring Sino-American relations back to the Obama years, when Washington recognised that China represented a challenge for U.S. power that had to be addressed firmly, without undermining the bilateral relationship nor the stability of the international system, of which the United States intends to be the guarantor. In the last phase of his presidential campaign, Biden anticipated how he is likely to approach Beijing. For example, he criticized Trump for not having acted on the issue of human rights in the Xinjiang region, but at the same time, he talked about working with China on climate-related matters and the COVID-19 pandemic. That is to say, that open hostilities are unlikely to break out, but Biden will want the U.S. to take a firm stance against China in the key fields where the U.S. leadership among its allies and its great power status are at stake.

The most delicate grounds for Sino-American relations in the near future are two: trade and technology. Biden will inherit the trade war that Trump launched during his years in office as an attempt to reverse the course of the growing U.S. trade deficit with China. When he was Vice President from 2009 to 2017 under Obama, the United States pursued a multilateral economic strategy to reach the goal of re-balancing the U.S. balance of payments with China. Today, this approach is no longer an option, mainly because Biden will face a bipartisan consensus for toughening the U.S. China policy.

As David Shambaugh explained, the Democrats might not have fully agreed on the utility of tariffs for U.S. national security, but they were not against Trump’s tough China policy overall. A cross-party general indisposition and the willingness to take effective action towards China have risen in U.S. Congress because China challenges the U.S. power on many fronts, and exactly because Biden recognised the need of rebalancing the economic relations with China already during his Vice-Presidency, he is expected to be determined to reach such goal. For now, Phase One of the Economic and Trade Agreement between the U.S. and China that was signed this year remains in place, and Biden declared that he is not intentioned to cancel such agreement, at least not immediately. The first step for the Biden administration’s China policy will thus be to get a sense of where the historical U.S. foreign policy partners stand vis-à-vis their commercial relations with China.

Alliances are likely to be the starting point for a firm stance on the technology front as well. ‘The United States does need to get tough with China. If China has its way, it will keep robbing the United States and American companies of their technology and intellectual property,’ Biden wrote in Foreign Affairs last spring, adding that the best way to confront the Chinese technological challenge is to build a ‘united front’ with allies. Much has been said about the U.S. semiconductor sector as at risk of being exploited by China, which led the U.S. Department of Defense to finally add Semiconductor Manufacturing International Corporation (SMIC) – the largest chipmaker in China – to the U.S. Entity List on December 18, 2020.

The list in question, which is run by the U.S. Bureau of Industry and Security, contains the names of foreign persons, governmental organisations, and companies that are subject to specific license requirements for the import of items from American suppliers. Consequently, any operation held with one of the subjects present in the Entity List is considered at risk by the U.S. government, and will therefore be closely monitored. The move comes as the final act of the most vigorous measures that the outgoing Trump administration implemented towards Beijing before Biden takes office on January 20, 2021, fearful that the incoming administration would soften the line.

This, however, is not likely to happen, because Biden’s vision of the U.S. in the world will merge with the clear bipartisan support of a hard line with China coming from Congress. The incoming Biden administration will thus aim to bring the tensions on the commercial and technological fronts to a higher strategic level especially by working on reinvigorating Transatlantic relations. Biden’s overall approach to foreign policy will be guided by his vision of the U.S. in the world, which, on the one hand, is strictly related to the historical conception of American exceptionalism, but, on the other hand, must resiliently adapt to the shape of the 21st Century’s international system, which demands a cooperative approach on climate change, migration, and global health. This means that the world will not enter a ‘new Cold War’ – a misleading term that is very often overused to describe Sino-American relations – but that Biden’s foreign policy towards Beijing will contribute to a redefinition of the terms of great power competition in a globalised world, which is not necessarily an easier scenario.

Martina is a PhD Candidate at the Department of War Studies at King’s College London. She has been awarded the Leverhulme Scholarship ‘Interrogating Visions of a Post-Western World: Interdisciplinary and Interregional Perspectives on the Future in a Changing International Order.’ Her research focuses on the history of U.S. foreign policy towards China, particularly on the role of China in U.S. President George H.W. Bush’s Grand Strategy for a post-Cold War World Order. She is an alumna of the School of Politics founded by former Italian Prime Minister Enrico Letta, and she holds a first-class honors Master’s degree in International Studies from Roma Tre University, where she also completed her BA in Political Science and International Relations. 

After the US Elections: Chances for a European Strategy on China

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by Gesine Weber

EU: the referee in the great-power competition that is the US-China relationship? (Image credit: ImagineChina)

Over the past four years, the EU’s inability to balance its position between the US and China proved to be extremely challenging. Its member states can neither afford to loosen their ties with their long-standing ally across the Atlantic, nor risk a large-scale decoupling from the giant in the East. The alliance with the US is an essential security guarantee for Europe and perceived as vital, especially by countries in Eastern Europe. Putting this relationship at risk would leave Europe’s eastern flank exposed to the unpredictable aggression from Russia.

At the same time, China holds crucial political weight in international affairs: besides its status as a major trading partner for Europe, Beijing is now heading four out of fifteen UN organisations. Turning completely away from China could therefore be seen as a rejection of global cooperation with an increasingly global player. As such, the EU finds itself in a delicate balancing act. Decision-makers across Europe urgently need to prevent the EU from falling as the first victim of the Thucydides trap between the two powers.

Keeping China on the political agenda

The necessity for the EU to find a common strategy for China is not new. Since the election of American President Donald J. Trump in 2016, the challenge of mitigating US-China competition grew to become an important issue for policy-makers in Europe. Despite transatlantic relations at their lowest point during this time, Trump’s China policy spurred on a European awakening towards China. This shift happened in two ways. Firstly, it put active policy-making vis-à-vis China and the Indo-Pacific high on the political agenda, counter to the region’s relative neglect in the Common Foreign and Security Policy (CFSP) before.

Secondly, however, European reluctance to endorse the US’s maximum pressure strategy towards China underlined the diverging opinions and thereby unveiled the lack of a comprehensive EU strategy on China. Despite the release of documents such as the strategic outlook on China or the 2020 Agenda for Strategic Cooperation, there has, so far, not been a comprehensive guideline or strategy on the EU’s current and future action towards China in the different realms of foreign affairs, ranging from trade to security, to technology, so on and so forth.

Presently, should President-Elect Joe Biden wants to credibly translate his value-based foreign policy discourse into practice, there is a need to cooperate with the Europeans. In this context, finding a common approach towards China might be possible at least in some policy areas. Although President Biden will most likely seek closer cooperation with the US’ European partners, there will be little patience in Washington for intra-EU or EU-NATO power struggles or debates on the wording. This is especially the case for France and Germany: the two most influential EU member states are currently getting lost in semantic quarrels on European strategic autonomy – a term that is highly contested in Germany and a concept strong advocated for by Macron -, although both actually want the same things, to advance European security and defence.

US elections as a potential driving force for EU strategy-making

Over the history of European integration, the functionalist approach of ‘form follows function’ often demonstrated the EU’s ability to overcome challenges. New policies and approaches were first and foremost designed to serve a certain objective, and institutional adaptation could follow at a later stage of this process once the output matched the expectations. In this sense, the US elections could catalyse European strategy-making.

As EU leaders have already declared their willingness to cooperate with Biden on China, it is now important for the latter to define their priorities and identify areas of cooperation. Such a development ought to happen first among the member states and then between the EU and the US. Despite the EU member states’ diverging opinions on some issues, especially on the 17+1 format, there is a growing consensus that the EU requires a common approach to China.

Accordingly, a window of opportunity is opening here for European strategy-making. Such a China strategy, however, is not to be solely focused on the identification of threats. No, this exercise should also concentrate on drafting a positive agenda on China. The potential of global cooperation, with a broad regional and multilateral approach, is to be pursued. If the EU and its member states achieve this objective and manage to present a comprehensive approach on China – ranging from foreign investment to security in the Indo-Pacific to regulation of new technologies and environmental challenges – strategy-making will succeed thanks to geopolitical drivers — and without getting lost in technical debates. Instead of wedged in between China and the US, the EU could emerge as the balancer of both.

Gesine Weber is a first-year PhD Candidate at the Defence Studies Department, King’s College London, and works as a Program Assistant for the Paris Office of the German Marshall Fund of the United States. She holds a master’s degree in European Affairs (cum laude) from SciencesPo Paris and a master’s in Political Science from Freie Universität Berlin. Her research interests include European defence cooperation, which she focuses on in her PhD thesis, the CSDP, geopolitics and questions of global order.

 

The Rise of China Inc.: Can it Prevail in the US-China Trade War?

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by Guanie Lim & Yat Ming Ooi

Founder and chairman of Geely Automobile Li Shufu (second from the left) pictured during a visit to Volvo Car Gent. Geely bought the Volvo brand in 2010 (Image credit: Belga)

‘The Fortune Global 500 is now more Chinese than American’. The headline piece of Fortune Magazine’s edition of August 2020 revealed much about the nature of global business. With more companies based in Mainland China and Hong Kong (124) than in the US (121), the list sparked intense debate China’s perceived ascendancy in the international economy. Following four decades of rapid growth, this is a clear image of what is conventionally known as China Inc. Searching for market share domestically as well as abroad, these Chinese firms (occasionally termed ‘national champions’) are known for their acquisition of large and well-established firms such as IBM, Club Med, and Volvo. Against the backdrop of an increasingly strained relationship between the US and China and instances of some countries pushing back against Chinese infrastructure deals in the Global South, a dual question can be asked: where is this rivalry headed to? And, what are the implications for the rest of the world?

Chinese Corporate Power

The Global 500 is a prestigious list and offers arguably the best snapshot of the state of global business. In its methodology, firms are ranked based on revenue. This approach is somewhat biased as it tends to favour companies operating highly regulated monopolies/oligopolies in large economies. Many Chinese companies fall into this category. Indeed, an analysis of those 124 Chinese companies in the Global 500 reveals that many are operating de facto monopolies/oligopolies in the domestic market, where non-tariff barriers remain high. Examples include Sinopec Group, State Grid, and China National Petroleum (all located within the top 4). Operating in chemicals, power, and petroleum respectively, these three firms are not only state-owned but also generate much of their revenue in highly-regulated, capital-intensive industries. Further down the pecking order, a similar trend emerges: of the twenty-four Chinese companies in the top 100, almost all operate in industries such as banking, insurance, construction, and mining.

At the same time, there is also a paucity of Chinese manufacturing firms on the list. This odd development has occurred despite Beijing’s push for ‘national champions’ in industries such as automobile production, steelmaking, shipbuilding, and aerospace. However, only two manufacturing firms – Huawei (private; 49th) and SAIC (state-owned; 52nd) – made it into the top 100.

Huawei can be described as a non-traditional firm in the manufacturing industry since a relatively large portion of its revenue is derived from what are essentially service activities (telecommunication installation, consulting, and repair). Even in the manufacturing of its renowned smartphones, core components are still sourced primarily from Western and Japanese business groups. For example, the Huawei P and Mate Series – which come with high-definition cameras – rely on German company Leica for the supply of camera-related components. Despite Huawei’s attempts at expanding into global markets, the firm continues to face difficulties in some markets, due to allegations of undue state support, and cybersecurity concerns. Most recently, its Chief Financial Officer has been under house arrest in Canada. In addition, the US has stepped up pressure on its allies to remove Huawei equipment from their telecoms infrastructures over concerns that the Chinese government could possibly lean on the company to allow it to conduct espionage, closely followed by the UK. Although it is premature to write off Huawei at this stage, it seems to be one of the highest-profile targets ensnared in the trade war between the USA and China.

For SAIC, an automobile player based in Shanghai, the outlook is somewhat better. Since its joint-venture with Volkswagen after the 1978 economic reforms, SAIC has been able to continuously strengthen its position in the domestic economy, emerging as a de facto lead firm. In the Global 500 list for 2020, it is ranked as the seventh-largest automobile company, surpassing brand name rivals such as BMW Group and Nissan Motor. However, like Huawei, there does not seem to be enough incorporation of critical manufacturing technologies, which forces SAIC to rely on more mature foreign companies. SAIC still sells vehicles from a variety of brands licensed from mainly Western automobile companies, in exchange for entry to the Chinese market. As of 2020, only two of its brands, MG and Roewe, have had (limited) success outside China. These two brands were acquired during the mid-2000s from now-defunct British carmaker MG Rover.

For the MG brand, in particular, SAIC’s internationalisation efforts have been bumpy. In 2012, SAIC entered into a joint venture with Thailand’s largest conglomerate, Charoen Pokphand (CP) Group, to produce MG cars in Thailand. With an annual production capacity of fifty thousand vehicles at the outset (which could increase to two-hundred thousand units), the company aspired to capture the Thai as well as the adjacent Southeast Asian markets. However, here again, progress has been slow. SAIC only managed to sell 23,740 MG vehicles in 2018, well below its total production capacity of 200,000 units. By capturing only a 2.3% market share in the Thai market, SAIC has failed to make a dent in the Japanese-dominated automobile market of Thailand (and by extension Southeast Asia).

Chinese Catching-Up in Retrospect

The experiences of Huawei and SAIC are sobering. Although undoubtedly ‘national champions’ in their own right within the large domestic market of China, there is not enough evidence to suggest they have become the sort of ‘global champions’ that successive Chinese politicians and bureaucrats frequently exhort them to be, nor are they necessarily setting the example for other national firms. Perhaps this suggests some underlying problems with China’s technological catching-up that goes unmentioned in both the euphoria surrounding the ‘rise of China Inc.’ and the pessimism engulfing the increasingly tense international economic environment? What we are advocating here is to step back and scrutinise both sets of development. While not denying China’s economic strengths, there is an equal need to unpack the nature of the Chinese economy.

As illustrated in the previous paragraphs, Chinese growth is mainly driven by a large domestic market, which obviates the need to create competitive firms with world-beating indigenous technologies. Chinese technological shortfall can instead be plugged by purchasing production and process expertise from foreign firms (through royalty payments for copyrighted products and mergers and acquisitions, for example), resulting in a dearth of genuine manufacturing ‘national champions’, for which long-term investment in R&D is required. If the fate of Huawei and SAIC is of any relevance, then we must more seriously take manufacturing as a key cog of development. More broadly, while one may like to envision a post-industrial society, no economy – barring small, wealthy offshore financial centres (e.g. Macau and the Cayman Islands) – transitioned straight into the high-income category without a competitive manufacturing sector. Without a strong manufacturing sector (and by extension command of technology), talks about a US-China trade war is overblown as China Inc. might not have the strategic depth to mount a sustained challenge.

The USA: Still No. 1?

Moreover, in the US, the situation is nowhere near as dire as what the popular media seems to suggest. Despite numerical superiority, Chinese companies account for only twenty-five per cent of the total Global 500 revenue against the US’ thirty per cent. Furthermore, two US companies made it into the top 10 – Walmart (first) and Amazon.com (ninth). Walmart, in particular, claimed the top spot for the seventh consecutive year.

In addition, thirty-four US companies made it into the top 100, outweighing the twenty-four hailing from China. Although US companies in the Global 500 participate heavily in service activities, it must be noted that some of the manufacturing behemoths have maintained or even enhanced their positions. In the top 100 roster, USA Inc. is represented by Ford Motor (31st), General Motors (40th), Microsoft (47th), and Dell (81st). Ford Motor and General Motors represent the mature automotive industry, while the latter two represent the more forward-looking information technology industries.

Amid the seemingly meteoric rise of Chinese companies, the US retains three salient points that will determine the outcome of the much-hyped trade wars. The first point that often goes unnoticed is the early mover status of US companies, which allow them to go abroad far more easily than companies originating from latecomer economies such as China and India. The US (and by extension, its cohort of companies) remains popular in many parts of the globe, in turn giving US companies quite simply the benefit of the doubt, a privilege that Chinese firms do not enjoy (at least for now). Take, for example, the ban that prohibited Huawei and ZTE from participating in Australia’s 5G network development. A cue the Australians took from the US.

The second point concerns the innovative capabilities of US companies. Historically, the US and other Western countries are famed for their ability to innovate. By innovating, we mean to create something new, and implementing it in the production process or bringing it to market as a new product. While US companies are moving some production out of China, this is unlikely to affect their ability to innovate as communication technologies have improved companies’ ability to innovate throughout their value chain. It is through the ability of US companies, often with support from the state, to continually renew and reinvent themselves that we see US companies extending their early mover advantage in the long run.

The final point brings our analysis into the behavioural realm. US companies have market-shaping capabilities. In other words, these companies can dictate what customers and consumers need and want in the US and global markets. No one knew we needed an MP3 player until the late Steve Jobs told us it is ‘cool’ to own an iPod. We had no idea we needed boutique takeaway coffee too. That is until Howard Schultz told us we should all be sipping on a barista-made, grande, vanilla latte with low-fat milk from Starbucks. Of course, there was more to the iPod story. Apple was excellent in crafting an ecosystem strategy, which created network and lock-in effects. The ability of US companies to create new demand, tap previously untapped markets, and influence consumer choices, reinforces US Inc.’s position in the global market.

Is China Inc. taking over from US Inc. any time soon? The short answer is no. Chinese companies are performing well in the globalised and connected world we live in today. But (most) open and transparent economies are ‘suspicious’ of Chinese companies’ intentions. Will China Inc. prevail if we have a full-blown trade war between the two largest economies? Maybe. Chinese companies are still learning and expanding. Moreover, they have the Chinese and surrounding Asian markets to fall back on if indeed a full-scale trade war materializes. Regardless, we can conclude that the US can prevail if it continues to do what it does best – extend its early mover advantage through innovation, market-shaping capabilities, and lock-in effects.

Guanie Lim is Research Fellow at the Nanyang Centre for Public Administration, Nanyang Technological University, Singapore. His main research interests are comparative political economy, value chain analysis, and the Belt and Road Initiative in Southeast Asia. Guanie is also interested in broader development issues within Asia, especially those of China, Vietnam, and Malaysia. In the coming years, he will be conducting comparative research on how and why China’s capital exports are reshaping development in key developing regions – Southeast Asia, the Middle East, and North Africa. He can be reached at guanie.lim [at] gmail.com

Yat Ming Ooi is Research Fellow in the Department of Management and International Business, The University of Auckland, New Zealand. He is also Adjunct Lecturer at Swinburne University of Technology, Australia. His main research interests are innovation management, technology and science commercialisation, and business models. Yat Ming is also interested in the role of new research funding policy plays in addressing grand challenges. He can be reached at y.ooi [at] auckland.ac.nz

 

The Funding of Terrorism (Part II) – Terrorist Financing Hidden among Commercial Ties: Venezuela, Iran and Hezbollah

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by Vanessa Neumann

6 August 2019

Comrades in arms? (Image credit: The Commentator)

 

Venezuela, my country, is dying. Money has become worthless and we now face the biggest humanitarian disaster ever seen in the Western Hemisphere as the exodus will surpass Syria’s in 2020. The country is projected to lose a third of its population. One in three, and that number is without a hot, shooting war. The main cause of the catastrophe is illicit finance of every stripe: kleptocracy, corruption, money laundering, and terrorist finance. Together, these illicit financial activities have enslaved the country to foreign interests and turned the government against the people, who want freedom and democracy. However, the regime leaders serve only their own enrichment and the interests of foreigners who help prop them up. Amongst these is the Lebanese Hezbollah.

Financial support for terrorism is a policy of the Maduro regime. In short, Venezuela’s dictator Nicolás Maduro is in a strategic partnership with the Iranian Ayatollah to provide Hezbollah terrorists with financiers and an assortment of facilitators for the covert movement of people, money, and material. The network reaches right to the top: it is managed by the former Vice President and current Minister of Industries and National Production, Tareck el-Aissami, and members of his immediate family. Hezbollah’s External Security Organisation is active throughout Latin America: its Business Affairs Component oversees enormous money laundering schemes using a minimum of 11 US-sanctioned operatives. However, Venezuela has become their heartland.

Maduro’s network of illicit financial interests was established when he was Hugo Chávez’s Foreign Minister, though it grew out of shared interests and diaspora flows. Today, this global network of illicit finance is what helps keep him in power: too many people are making too much dirty money to see him go, including Iran, which has long used Venezuela to bust sanctions and used by Hezbollah to make drug money. In 1960, Venezuela co-founded OPEC with Iran, Saudi Arabia, Iraq, and Kuwait. After its 1979 Revolution, Iran turned towards Latin America to increase trade in the region, and Venezuela was among the first approached because of this relationship through OPEC. The deeper relationship connection with Iran, that opened up the financial channels, was a policy pursued by Hugo Chávez. During 2001 and 2003 visits to Tehran, the former President signed joint venture accords with President Mahmoud Ahmadinejad for the manufacturing of tractor parts and cars, as well as banking through Banco Toseyeh Saderat and others.

The relationship with Hezbollah developed separately. Latin America received many Lebanese immigrants in the 1980s, amid the country’s civil war of 1975-1990. In the following decade, Lebanese Hezbollah sought to deepen its financial associations with its Latin American diaspora, as its funding had been slashed by nearly seventy percent by the administrations of both presidents Akbar Hashemi Rafsanjani (1989-1997) and Mohammad Khatami (1997-2005), further adding to the significant impact of sanctions on the Iranian economy.

The two-track relationship with Iran and Hezbollah merged in 2007, when Nicolás Maduro (then Foreign Minister) and Rafael Issa (then Vice Minister for Finance), joined by one translator, met with Hassan Nasrallah, the Secretary General of Hezbollah, in Damascus. Afterwards, Nicolás Maduro flew to Tehran to join Chávez in his meeting with President Ahmadinejad. Here, a multitude of commercial ties were established, but dirty money was hidden among these broader commercial interests. The Islamic Revolutionary Guard Corps (IRGC) opened subsidiaries in Venezuela that moved money through PDVSA (the Venezuelan state-run oil company), using it to enter the international financial system and evade sanctions. Chávez and Ahmadinejad became so close as to call each other ‘brothers’ and Chávez presented him with a replica of the Sword of Bolívar, a national symbol.

Some Chavistas are tied to Hezbollah by family. A prime example is Tareck el-Aissami Maddah who is Venezuelan of Syrian descent. His father was the head of the Ba’ath party in Venezuela and called Osama bin Laden “the great Mujahideen leader” after 9/11 and himself “a Taliban.” His great-uncle Shibli el-Aissami was Assistant to the Secretary General of the Ba’ath party in Iraq under Saddam Hussein. el-Aissami was a radical student leader at the University of the Andes in the city of Mérida, on the border with Colombia. There have been many Hezbollah sympathisers at the top of the Chávez regime: Fadi Kabboul was the Executive Director of planning for PDVSA; Aref Richany Jimenez was the President of Venezuela’s military-industrial complex, CAVIM; and Radwan Sabbagh was the president of the state-owned mining concern, Ferrominera.

Yet it is el-Aissami that continues to be the lynchpin, and the US Treasury’s Office of Foreign Asset Control (OFAC) designated him under the Kingpin Act in February 2017, for playing a significant role in international narcotics trafficking, while he was the Executive Vice President of Venezuela. el-Aissami is also linked to the coordination of drug shipments to Los Zetas, a violent Mexican drug cartel, as well as providing protection to Colombian drug lord Daniel Barrera and Venezuelan drug trafficker Hermagoras Gonzalez Polanco. Los Zetas, Barrera and Polanco were previously named as Specially Designated Narcotics Traffickers under the Kingpin Act in April 2009, March 2010, and May 2008, respectively. El-Aissami’s primary frontman, Venezuelan national Samark Jose Lopez Bello, was also designated for providing material assistance to el-Aissami’s drug trafficking activities through an international network spanning the British Virgin Islands, Panama, the United Kingdom, the United States, and Venezuela. El-Aissami and Lopez Bello had an international network of businesses and asset holding companies to launder the drug proceeds. Many had government contracts with PDVSA.

Maduro’s diplomatic corps has shown to be the circulatory system of the transnational crime syndicate. Tareck el-Aissami’s sister is posted to the Netherlands, where she oversees the traffic in narcotics and diamonds, shielded by her diplomatic immunity. Chávez’s daughter, Maria Gabriela, is Venezuela’s wealthiest woman (with a net worth of over US$ 4 billion) and was (until recently) the Deputy Chief of Mission to the United Nations. Rocío Maneiro, Maduro’s Ambassador to the Court of St. James, still occupies all three of our buildings in London, and uses them freely to house staff and rent rooms, despite the fact that she is indicted for grand larceny from a money laundering account in Andorra (two separate crimes). She retains her immunity and the properties, despite the fact that the UK recognises Juan Guaidó, and not Nicolás Maduro, as the legitimate head of state and government. Hence the frequently used hashtag #MaduroCrimeFamily. I am personally pressuring for the US and UK to appropriately apply counter-organised crime statutes against the Maduro regime.

The vast and multi-layered money laundering network set up by el-Aissami works through a structure designed by the former Deputy Chief of Mission in Syria, Ghazi Nasr al Din, who was sanctioned in 2008 by OFAC and designated a ‘person of interest’ by the FBI in 2015 for his support of Hezbollah. While el-Aissami was Interior Minister (2008-2012), 173 Middle Easterners with suspected ties to Hezbollah were provided with authentic, fully-legal Venezuelan passports, birth certificates, and national identification cards. In short, they were provided with completely new Venezuelan identities, to conceal these Hezbollah operatives from detection by international intelligence agencies. This case was covered in a CNN documentary, Passports to Terror. The main source of information on this is Misael López Soto, a legal attaché at the Venezuelan embassy in Baghdad, who turned whistleblower in 24 November 2015 and revealed the identities of several of these suspected Hezbollah militants. These are highly skilled and effective well beyond their numbers.

Amongst them is Hakim Diab Fattah, a Palestinian-Venezuelan dual national with suspected ties to the 9/11 hijackers. In 2015 he resurfaced in Amman, where he was arrested for potentially plotting a terrorist attack on the Allenby Bridge, connecting Jordan to the West Bank. The Venezuelan consulate in Jordan funded his legal defence. On 28 October 2014, Lebanese national and accused Hezbollah operative Muhammad Ghaleb Hamdar, was arrested in Lima, Peru for allegedly planning a terrorist attack. During questioning, he admitted he travelled to Venezuela to obtain new identification, which was eventually secured in Liberia. As recently as February 2018, OFAC sanctioned Jihad Muhammad Qansu (who has a Venezuelan passport) and five other individuals tied to an important Hezbollah financier, Adam Tabaja. The sanctions announcement describes him as “a Hezbollah member that maintains direct ties to the senior leadership.”

In October 2018 the US Department of Justice named Hezbollah one of the top five transnational criminal organisations in Latin America. The Drug Enforcement Administration led an effort to undercut Hezbollah financing from illicit drug sources, known as Operation Cassandra. Within Cassandra was Operation Perseus, targeting the Venezuelan syndicate. The effort uncovered links between two important Hezbollah financiers, directly related to Nasrallah, and cutouts connected to Maduro. Venezuela under Maduro is a hub for the convergence of criminal and terrorist networks that fund Hezbollah, loot Venezuela, and destabilize both the Western Hemisphere and the Middle East. Getting Maduro and his cartel out of power and restoring Venezuela to democracy, will not only end the horrible suffering of 32 million people, a newly free Venezuela will deal a significant blow to Hezbollah operational capabilities. That is a diplomatic win-win if ever there was one.

Dr. Vanessa Neumann is President Juan Guaidó’s appointed Ambassador and Chief of Diplomatic Mission to the United Kingdom. She is also the President of the British-Venezuelan Society and Chamber of Commerce, which is partnered with UK Trade & Investment’s Oil & Gas Team for the Americas, as well as the Caracas-based British-Venezuelan Chamber of Commerce. Prior to her diplomatic appointment, Dr. Neumann was a long-standing expert on crime-terror pipelines, the founder & CEO of Asymmetrica, and the author of “Blood Profits: How American Consumers Unwittingly Fund Terrorists.”

Can digital currencies challenge the status quo?

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By Michael Jefferson:

Bitcoin_'challenge_coin'

Increasing international trade, multi-currency holding, public distrust in the banking system and a regulatory barriers that are seen to hinder the free-flow of capital. All of these suggest that a global digital currency, one that is not linked to a particular sovereign state or the fortunes of a company, is a natural development as we move towards a more inter-connected and easier to access global economy. Currencies such as the dollar, euro, pound or yen are internationally traded floating currencies that are a token of the underlying assets and economic power of it’s a sovereign nation (or in the case of the euro group of sovereign nations). This allows people to have an understanding of what that token means. Given this what place is there in the financial system for digital currency?

If you look at the most successful digital currency so far, Bitcoin, we have seen vast swings in valuation which has seen it go from under $20 in February 2013 to over $1,100 in November 2013 to around $620 at the time of writing in March 2014. There have also major infrastructure issues around security with the bankruptcy following breaches at one of the main exchanges MtGox. This is on top of high profile coverage of Bitcoin’s possible use for illegal activities on websites such as the Silk Road. These trust and infrastructure issues do not help deliver the confidence in the system that could enable it to build overtime and become a real competitor to the current financial system.

In the case of Bitcoin these issues are perhaps understandable given its origins as an open source currency developed by the anonymous Satoshi Nakamoto which anyone can mine. We are still in the ‘Wild West’ years of digital currencies. Bitcoin only came on the scene in 2009. Everyone is rushing to be involved and the potential gains for speculators seemingly engulf those that see the potential for building something useful and stable. These problems are fixable and as experience grows in the use and security for digital currencies I have no doubt that these concerns will fade away for the users.

Perhaps the bigger question for digital currencies to address is the underlying problems which causes the volatility – what it represents. We know what a dollar is and although we may not think about it in this way it is a token that is backed up by the US government and by extension the biggest economy in the world. Nowhere is the representation of the backstop for a currency more evident than during the 2008/9 financial crisis in the UK. The government stepped into to bail a number of banks including one of the world’s biggest banks at the time, RBS, because of the impact it would have on the pound and UK economy its possible default would have. In the year (March 2008 to March 2009) around the bank bail outs of October 2008 the pound lost almost 30% of its value against the dollar.

Here is your problem in digital currencies – what does is represent and where is the backstop? Digital currencies are an agreement between parties which then is only crystallised in value when exchanged into a currency, there are no economic indicators we can look to for an understating of where this floating currency will head. With digital currencies it is not yet the case and so its success will be valued on its efficiency and integrity in carrying out transactions. The lack of an underlying assets leaves it open to huge swings in value, which make most players nervous. It would be an understandable for a digital currency to grow into the international currency of choice allowing easy transactions and hassle free conversion not dependent on locality, but nations and regulators have vested interests in the status quo which will be a big obstacle in the next stage of development.

 

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Michael Jefferson works in public affairs for an international bank. He has extensive experience in public policy and international relations from his current role as well as from his time working for the UK Government on international trade. He has an MA in Japanese from St Catherine’s College, Oxford specialising in Japanese politics and international relations.