Category Archives: Industry Jobs Oil Economics

Trump and the Phony “Job-Creating” EB-5 Scam

Posted on by

Thank you Michelle, I hope those dedicated researchers that did all that grand work on Obama, too late in the game, don’t do it a second time….

Malkin: Ugh: Trump and the Phony “Job-Creating” EB-5 Green Card Racket

By: Michelle Malkin

CR: Whelp. It appears that one of Donald Trump’s projects helped make America great… by soliciting an estimated $50 million from Chinese investors using the fraud-riddled EB-5 green card program for politically connected cronies.

This is the same racket exploited by Virginia Gov. Terry McAuliffe, lobbied for by Nevada Sen. Harry Reid and DHS official Alejandro Mayorkas, and embraced by South Dakota Republican officials. It’s a scam I’ve reported on for years.

Bloomberg News has the new story on how EB-5 funded a Trump-branded tower in New Jersey. In a nutshell:

Trump Bay Street is a 50-story luxury rental apartment building being built by Kushner Companies, whose chief executive officer, Jared Kushner, is married to Trump’s daughter Ivanka. It will have an outdoor pool, indoor golf simulator and sweeping views of Lower Manhattan; it adjoins an existing high rise condo, Trump Plaza Residence. The firm that was hired to seek investors, US Immigration Fund, is run by Florida developer Nicholas Mastroianni, who announced a partnership last year with a Trump golf course in Jupiter, Florida.

The visa program is known as EB-5. In exchange for investing at least $500,000 in a project promising to create jobs, foreigners receive a two-year visa with a good chance of obtaining permanent residency for them and their families. In 2014, the most recent year for which records are available, the U.S. issued 10,692 of these visas — 85% to people from China.

The Jersey City project has raised $50 million, about a quarter of its funding, from loans obtained through EB-5, according to a slide presentation by US Immigration Fund. Mark Giresi, general counsel of US Immigration Fund, said he believed nearly all of the EB-5 investors in the Trump project were from China.

A Trump spokesperson said the presidential candidate was not a partner in the financing deal. A Kushner flack told Bloomberg News the project was “entirely legal and creating jobs.”

But in my longtime investigations and in Sold Out, my book with John Miano, the evidence is clear: EB-5’s job creation claims are as phony and manufactured as fuzzy porkulus math, H-1B lobbyists’ math, and corporate welfare/economic development subsidies math.

Since 2001, I’ve warned about the systemic and bipartisan corruption of America’s EB-5 immigrant investor visa program. The program puts America up for sale to the most politically connected bidders.

Created under an obscure section of the expansionist Immigration Act of 1990, EB-5 promised bountiful economic development for the U.S. in exchange for granting permanent residency (and eventual American citizenship) to foreign investors. The law allows 10,000 alien entrepreneurs a year to obtain green cards by investing between $500,000 and $1 million in new commercial enterprises or troubled businesses. After two years, foreign investors, their spouses, and their children can receive “conditional permanent resident” status for two years and a gateway to permanent U.S. citizenship.

Originally, the law required individual investments in commercial enterprises to directly generate at least 10 new full-time jobs. Investors were expected to manage the businesses themselves and dedicate some of the newly-created jobs to exports. Failure would mean loss of their money and their business. In 1992, Congress created the “Immigrant Investor Pilot Program” and established government-approved EB-5 “regional centers” — specially selected business groups and corporate entities designated to administer EB-5 investments and oversee a much more relaxed definition of job creation.

The idea was to pool investor funds in a defined industry and targeted region to promote economic growth. Under this loan model, the regional center would recruit and collect funding from a group of foreign investors, then turn around and lend the money to selected projects at a low interest rate. The project would then pay off the loan over an agreed period of time. In targeted areas of high unemployment, the threshold for investment was lowered.

There are currently 614 such regional centers approved by the feds. Participation in the program has risen from 5,748 visa winners in 2008 to 22,444 in 2014. EB-5 participants in these joint ventures can fulfill job-creation requirements if they “create or preserve” either direct jobs or “indirect” jobs shown to be “created collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor.” The five-year “pilot program,” which has been reauthorized routinely since its inception, was extended last year until September 2016.

As John and I reported, early EB-5 boosters used various theoretical multipliers to hype the program’s benefits, predicting that “4 million millionaire investors along with family members, would sign up, bringing in $4 billion in new investments and creating 40,000 jobs [annually].” In 2011, President Obama’s Council on Job Competitiveness regurgitated the same, old figures in its call to “radically expand” the program:

If the EB-5 program reaches maximum capacity, it could result annually in the creation of approximately 4,000 new businesses, $2 billion to $4 billion of foreign investment capital, and create 40,000 jobs.

But in practice, like so many of the Beltway’s immigration programs, EB-5’s ever-evolving regulations are Byzantine and arbitrary. Fraud and abuse are rampant. Unsurprisingly, the purported economic benefits of EB-5 are woefully dubious. One sensible journalist, Charles Lane, put the EB-5 promoters’ claims in proper perspective:

“Sounds impressive,” he explained, “until you realize that foreign investment in the United States totals $2.5 trillion and that the program’s fuzzy job-creation count includes jobs ‘indirectly’ attributable to the investment. EB-5 would be dubious policy even if it could claim five times that impact. Simply put, it is corporate welfare — yet another attempt to subsidize the flow of capital into politically favored channels.”

Center for Immigration Studies analyst David North adds that “foreign investment comes to the United States routinely, in large volume, with minuscule help from EB-5.” In 2010, he observed, total foreign investment in the United States increased by $1.9 trillion, according to the U.S. Department of Commerce. Based on the investors’ green card applications filed two years after the first investment, North estimated that “EB-5 investment that year was about $191 million, and that was a well above-average year for the program. So, for every $100 of increased foreign investment that year, the EB-5 program contributed about one penny [emphasis added].”

Beltway cronyism was embedded in EB-5’s DNA from the get-go. The original Democratic House sponsor and his spokesman went on to establish for-profit companies that marketed the program and provided consulting services. Former federal immigration officials from the George H.W. Bush administration formed lucrative limited partnerships to cash in on their access and EB-5 expertise.

Key supporters of the original immigrant investor visa program included Democrat Sens. Ted Kennedy, D-Mass., and Paul Simon, D-Ill. Big Government Republicans embraced it, too. Prescott Bush, George W. Bush’s uncle, was on the board of American Immigration Services, one of the leading EB-5 visa vendors. So was former President Bush’s Immigration and Naturalization Service commissioner, Gene McNeary. GOP Sen. Mitch McConnell worked closely with the woman who was instrumental in drafting the EB-5 law: Maria Hsia.

That final name should ring a bell. Hsia was a Simon and McConnell donor identified by the House Governmental Affairs Committee as “an agent of the Chinese government.” In 2000, she was found guilty by a federal jury of laundering more than $100,000 in illegal donations to the Democratic National Committee through the infamous Hsi Lai Buddhist temple in California. At the time, Funny Money Honey Hsia was working for McConnell and others on the 1990 immigration bill, she also worked for a campaign fund-raising group called the Pacific Leadership Council. Hsia co-founded the PLC with Lippo Bank officials John Huang and James Riady, the chief figures in the Clinton-Gore Donorgate scandal convicted of campaign-finance crimes. At least six Lippo Bank officials reportedly benefited from the EB-5 law. Hsia partnered with former Democratic Rep. Bruce A. Morrison of Connecticut, an immigration lawyer, author of the 1990 Immigration Act in the House, and main sponsor of EB-5. After leaving Congress to run (unsuccessfully) for governor in Connecticut, Morrison formed a business to market the investor visa program.

An entire side industry of economic book-cookers has arisen to supply analyses of the “job creation” benefits of EB-5 projects and to gerrymander Census employment data to fit the program’s definition of “targeted employment areas” in order to qualify for lower investment thresholds (as was done in New York City’s Atlantic Yards/Pacific Park EB-5 deal).

Think Solyndra and federal stimulus math on steroids.

How does Trump respond to the debunking of the bogus job-creation math upon which the entire cash-for-citizenship swindle rests? Have any other Trump projects been subsidized by EB-5 China money? Where are the other GOP candidates on the issue and will they join Capitol Hill calls to kill the program?

If the RNC-organized, corporate media-controlled GOP debates weren’t such clown shows, maybe American voters could get some answers.

 

 

 

The 7th Fleet Deployment v. China

Posted on by

 

SOUTH CHINA SEA – USS Stockdale (DDG 106) is conducting a routine patrol in international waters of the South China Sea as part of the John C. Stennis Strike Group and Great Green Fleet on a regularly scheduled 7th Fleet deployment.

“The strike group is exercising our right to operate in international waters,” said Rear Adm. Ron Boxall, commander, John C. Stennis Strike Group. “Our presence here promotes peace and stability in the region. We’ve got vibrant economies in the Western Pacific, and it’s really important for us to be there for our national interests and to ensure that we can keep the sea lanes free.”

In recent months, other U.S. Navy ships have conducted similar operations in the 7th Fleet area of operations including the Arleigh Burke-class guided-missile destroyers USS Curtis Wilbur (DDG 54), USS Lassen (DDG 82), USS McCampbell (DDG 85) and USS Preble (DDG 88), the multi-purpose amphibious assault ship USS Essex (LHD 2), the Ticonderoga-class guided missile cruiser USS Chancellorsville (CG 62) and the Freedom-class littoral combat ship USS Fort Worth (LCS 3). The amphibious dock landing ship USS Ashland (LSD 48) completed a similar patrol, Feb. 26.

Stockdale is currently on patrol in 7th Fleet as part of the John C. Stennis Strike Group (JCSSG). The strike group is comprised of USS John C. Stennis (CVN 74) with Carrier Airwing (CVW) 9 and Destroyer Squadron (DESRON) 21 embarked, Arleigh Burke-class guided-missile destroyers USS Chung-Hoon (DDG 93), USS Stockdale (DDG 106), USS William P. Lawrence (DDG 110) and Ticonderoga-class guided-missile cruiser USS Mobile Bay (CG 53).

CVW-9 consists of Helicopter Maritime Strike Squadron (HSM) 71, Helicopter Sea Combat Squadron (HSC) 14, Airborne Early Warning Squadron (VAW) 112, Electronic Attack Squadron (VAQ) 133 and Strike Fighter Squadrons (VFA) 151, 97, 41, 14.

JCSSG is providing a ready force supporting security and stability in the Indo-Asia- Pacific.

****

For a full photo essay, go here.

What China Has Been Building in the South China Sea

NYT: China has placed runways and radar facilities on new islets in the South China Sea, built by piling huge amounts of sand onto reefs. The construction is straining already taut geopolitical tensions.

The speed and scale of China’s island-building spree in the South China Sea last year alarmed other countries with interests in the region. After announcing in June that the process of building seven new islands by moving sediment from the seafloor to reefs was almost done, China has focused its efforts on building ports, three airstrips, radar facilities and other military buildings on the islands. The installations bolster China’s foothold in the Spratly Islands, a disputed scattering of reefs and islands in the South China Sea more than 500 miles from the Chinese mainland. China’s activity in the Spratlys is a major point of contention between China and the United States, and has prompted the White House to send Navy destroyers to patrol near the islands twice in recent months.

The speed and scale of China’s island-building spree in the South China Sea last year alarmed other countries with interests in the region. After announcing in June that the process of building seven new islands by moving sediment from the seafloor to reefs was almost done, China has focused its efforts on building ports, three airstrips, radar facilities and other military buildings on the islands. The installations bolster China’s foothold in the Spratly Islands, a disputed scattering of reefs and islands in the South China Sea more than 500 miles from the Chinese mainland. China’s activity in the Spratlys is a major point of contention between China and the United States, and has prompted the White House to send Navy destroyers to patrol near the islands twice in recent months.

Sources: C.I.A., NASA, China Maritime Safety Administration

The new islands allow China to harness a portion of the sea for its own use that had been relatively out of reach. Although there are significant fisheries and possible large oil and gas reserves in the South China Sea, China’s efforts serve more to fortify its territorial claims than to help it extract natural resources, said Mira Rapp-Hooper, formerly the director of the Asia Maritime Transparency Initiative at the Center for Strategic and International Studies, a Washington research group. Though they are too small to support large military units, the islands will also enable sustained air and sea patrols, strengthening China’s influence in the area.

***

Several reefs have been destroyed outright to serve as a foundation for the new islands, and the process also causes extensive damage to the surrounding marine ecosystem. Frank Muller-Karger, professor of biological oceanography at the University of South Florida, said sediment “can wash back into the sea, forming plumes that can smother marine life and could be laced with heavy metals, oil and other chemicals from the ships and shore facilities being built.” Such plumes threaten the biologically diverse reefs throughout the Spratlys, which Dr. Muller-Karger said may have trouble surviving in sediment-laden water. 

Although China was a relative latecomer to construction in the Spratly archipelago, its island building is much more extensive than similar efforts by other countries in the area. The recent activity has unsettled the United States, which has about $1.2 trillion in bilateral trade go through the South China Sea every year.

Washington does not recognize China’s ownership of the islands, and in February President Obama reiterated the government’s position that “the United States will continue to fly, sail and operate wherever international law allows.” To reinforce the message, the United States Navy sent missile destroyers in October and January within 12 nautical miles of the islands, the conventional limit for territorial waters. According to statements from David Shear, the top Pentagon official in charge of Asia and the Pacific, the last time before October that the United States had sent ships or aircraft that close to the islands was in 2012.

***

What Is on the Islands

China has built airstrips, ports, radar facilities, solar arrays, lighthouses and support buildings on the islands. The airstrips and ports lengthen the reach of Chinese ships and planes, while the radar facilities allow the country to keep a closer eye on what is happening nearby. Imagery from January compiled for a recent report by the C.S.I.S. suggests that China may be constructing a longer-range high-frequency radar installation on Cuarteron Reef that would help the country monitor air and ship traffic in the south, farther from the Chinese mainland.

***

Fiery Cross Reef is one of China’s most strategically important new islands, with an airstrip that is long enough to allow the country to land any plane, from fighter jets to large transport aircraft.

***

Two additional airstrips on Mischief Reef and Subi Reef that China has been building since mid-2015 are nearing completion, bringing China’s total to three airstrips in the region.

***

Though China’s airstrips expand the country’s ability to operate in the South China Sea, they are not the first in the region — every other country that occupies the Spratlys already operates an airstrip as well.

***

Vietnam, Malaysia, the Philippines and Taiwan have also expanded islands in the Spratlys, but at a much smaller scale than China’s efforts.

***

China’s reefs hosted smaller structures for years before the current surge in construction. By preserving these initially isolated buildings, China can claim that it is merely expanding existing facilities, similar to what other countries have done elsewhere in the region.

***

Construction on Johnson South Reef from January 2014 to February 2016.

Image by DigitalGlobe, via CSIS Asia Maritime Transparency Initiative

 

The Plan: Five for Freedom

Posted on by

Bringing government spending under control.

NRO: At the last Republican presidential debate, I presented the Simple Flat Tax — which, for a family of four, exempts the first $36,000 from all income tax, and above that amount collects one low rate of 10 percent for all Americans. It eliminates the death tax, the payroll tax, the corporate income tax, and the Obamacare taxes; ends the corporate carve-outs and loopholes; and requires every business to pay the same simple business flat tax of 16 percent.

That plan will unleash unprecedented growth, create millions of new jobs, raise after-tax incomes for all income levels by double-digit percentages — and abolish the IRS as we know it. But eliminating the IRS is only the first step in my plan to break apart the federal leviathan that has ruled Washington and crept into our lives. We can’t stop there. In addition to eliminating the IRS, a Cruz administration will abolish four cabinet agencies. And we will sharply reduce the alphabet soup of government entities, beginning with the ABCs that should not exist in the first place: The Agencies, Bureaus, Commissions, and other programs that are constitutionally illegitimate and harmful to American households and businesses. It’s time to return to a federal government that abides by our constitutional framework and strips power from unelected bureaucrats.

The need is urgent.

The total federal debt currently stands at $18.6 trillion, larger than our entire economy. That is up 75 percent since the current president took office, and by the end of his tenure, he is expected to have added almost as much to the national debt as all past presidents combined. And what does the Obama administration have to show for its uncontrolled spending? A stagnant economy, lagging job creation, and the lowest labor-force participation since the Carter administration. The Obama economy has burdened each American household with the equivalent of $57,000 of federal debt. Under such stifling circumstances, it’s no wonder that 84 percent of college graduates do not have a job lined up after graduation, and 13.2 percent of young adults are out of work. The current level of spending is not only irresponsible, but immoral and unjust to future generations.

It is time for bold change. Change that stops Washington from squandering Americans’ money; that creates jobs and restores growth with a single, fair, low rate for everyone; that reins in Washington’s costly regulations; that honors the people’s work with the dignity it deserves; and that finally gets the government out of our pockets and off our backs. Of course, because entitlements constitute roughly two-thirds of federal spending, no government spending plan is complete without addressing entitlement reform. And in the coming months, I will be laying out a detailed plan to do just that, to strengthen and preserve Social Security and Medicare and to ensure their fiscal strength for decades to come. But we should start with federal discretionary spending.
First, to begin the process of reducing the scope and cost of government, I have identified the Five for Freedom: During my first year as president, I will fight to abolish the IRS, the Department of Education, the Department of Energy, the Department of Commerce, and the Department of Housing and Urban Development. To do that, I will press Congress relentlessly. And I will appoint heads of each of those agencies whose central charge will be to lead the effort to wind them down and determine whether any of their programs need to be preserved elsewhere because they fall within the proper purview of the federal government. I do not anticipate the lists to be long. The IRS and these cabinet agencies are unnecessary and will be shuttered for the following reasons:
Internal Revenue Service – to dramatically simplify the tax code and enable everyone to fill out their taxes on a postcard or smartphone app. Department of Education – to return education to those who know our students best: parents, teachers, local communities, and states. And to block-grant education funding to the states.
Department of Energy – to cut off the Washington cartel, stop picking winners and losers, and unleash the energy renaissance.
Department of Commerce – to close the “congressional cookie jar” and promote free enterprise and free trade for every business.
Department of Housing and Urban Development – to offer real solutions that lift people out of hardship, rather than trapping families in a cycle of poverty, and to empower hurting Americans by reforming most of the remaining programs, such as Section 8 housing. Second, besides these unnecessary cabinet agencies and the IRS, we will sharply reduce the agencies, bureaus, commissions, and other programs that are harming American households and businesses — including the Consumer Financial Protection Bureau.
Together with the four departments and the IRS, our conservative estimate of the effects of these eliminations and reductions is a savings of over $500 billion over ten years. And that’s just a start. The true savings — of scaling down the scope of the federal government, of restoring to the states their rightful authority, and of unleashing the people’s ingenuity — cannot be measured by a number. We are uprooting the centralized power that we have lived under for far too long. Third, we will bring back a proven approach from the prosperous days of the Reagan administration: a private-sector panel to assess federal spending levels and evaluate areas of waste and fraud for removal. At President Reagan’s behest, the Grace Commission recommended 2,478 “cost-cutting, revenue-enhancing” suggestions, without raising taxes, weakening defense, or harming social welfare. It was a major success among other policies that created a great economic boom, and it deserves a reprise. Fourth, we will hold Congress accountable; it too often delegates its authority to unelected bureaucrats. We will enact a strong Balanced Budget Amendment. And, by enacting the REINS Act, we will require that a majority of members approve any major, cost-inducing regulations. Fifth, we will put in place a hiring freeze of federal civilian employees across the executive branch. For those agencies in which it is determined that a vacant position needs to be filled, I will authorize the hiring of a maximum ratio of one person for every three who leave. And rather than automatically increasing federal workers’ pay annually, workers will have more opportunities for merit-based pay increases.
The full details of this plan can be found at www.tedcruz.org. It’s past time to dramatically reduce the size of government and restore congressional accountability to the people. Doing so, along with instituting fundamental tax reform and regulatory reform, will reignite the promise that has made this the freest and most prosperous nation in the world.

 

Emerging Putin’s Geo Aggressions

Posted on by

Putin has an inside circle and it is bid-rigging and creating wealth though fraud and collusion. Cunning, calculated, measured and well planned, Putin has a global objective. Is he stoppable beyond Syria?

Few have spoken about the national blackout, the cyber-attack on Ukraine’s power grid. If it can happen in Ukraine, it can happen in America. It must be noted who owns and controls companies with ties to infrastructure….Putin’s friends. For a chilling read, go here.

In part: In a statement announcing the sanctions, the U.S. Treasury Department alleged that Putin “has investments” with Gunvor, the oil-trading firm that Timchenko founded but exited a day before he was hit with U.S. sanctions, and “may have access to Gunvor funds.”

Washington has not released any evidence to substantiate these claims, which the Kremlin and Gunvor deny. (The firm also says CEO Torbjorn Tornqvist was in charge of daily operations.)*

Meanwhile, Navalny filed a lawsuit earlier this month accusing Putin of a conflict of interest in awarding $1.75 billion in state financing to a company part-owned by Shamalov, his alleged son-in-law. A Moscow court rejected the lawsuit, saying it did not qualify for consideration under “administrative proceedings.” Full article here.

When it comes to Crimea and most recently Ukraine, does anyone care? For a data cache on Russian aggressions on Ukraine, go here.

According to Ukrainian officials on March 1 Russia sent three trains with ammunition to the occupied city of Ilovaisk and two tanks and four armoured personnel vehicles to Novoazovsk.

NATO’s top commander says Russian military activity in eastern Ukraine is increasing. Earlier, General Philip Breedlove also warned of ‘disturbing trends’ – including more sniper fire and shelling on the frontline. The NATO leader claims Russia has placed “well above” 1,000 pieces of military hardware in Ukraine over the past 12 months. More here.

Then comes Kazakhstan, where it appears covert pro-Russian adjustments are next up for Putin and Kazakhstan is taking notice.

Reuters in part: Demographically, the region therefore has much in common with Ukraine’s Crimea peninsula and the eastern Donbass region, whose majority Russian-speaking populations pulled out of Kiev’s orbit with help from Moscow.

There is no separatist rebellion in northern Kazakhstan, but the ethnic Russians, who make up more than a fifth of the country’s 18 million population, are feeling increasingly insecure and some sympathize with the separatists in Ukraine.

The Ukraine experience has made the Kazakh authorities highly sensitive to any signs of disloyalty by ethnic Russians. Ethnically based political parties are banned.

Last year, a court in eastern Kazakhstan sentenced a user of Vkontakte, a Russian-based social network, to five years in prison for posting a poll which asked people whether they would support the idea of that region, which also has a big ethnic Russian population, becoming part of Russia.

“Their bodies are in Kazakhstan but their minds are in Russia,” said political analyst Dosym Satpayev, talking about what he described as the significant portion of the Kazakh population influenced by Russian media.

“There are signs that (the authorities) in Kazakhstan are beginning to realize it also faces a separatist threat,” said Satpayev, who runs the Risk Assessment Group, a think tank.

There are no signs of Moscow promoting separatism in Kazakhstan, although it wants to keep the country in its orbit. More here.

So beyond the matter of Putin taking over Syria, then gaining power and control in Afghanistan again, there is the matter of the Arctic. Enter ICEX.

Military: The U.S. Navy’s submarine force is setting up a temporary command center on a sheet of Arctic ice, where U.S. underwater capabilities will be put to the test in the increasingly strategic High North.


The five-week submarine drill coincides with separate war games in Norway called Cold Response involving 16,000 U.S. and NATO forces. Marines have been launching stinger missiles and maneuvering tanks, and the Air Force has dispatched three B-52 Stratofortress bombers.
Together, the exercises underscore the emergence of the Arctic as an area of concern as melting ice caps raise the prospects for competition over vital undersea natural resources. The area could become a flash point between the U.S. and Russia.


“The Arctic environment plays a key role in national defense,” said U.S. Submarine Forces commander Vice Adm. Joseph E. Tofalo in a statement announcing the launch of Ice Exercise 2016. “With over a thousand miles of Arctic coastline, the U.S. has strong national security and homeland defense interests in the region.”


Then ICEX drill, which is being conducted in the Arctic Ocean, aims to evaluate the terrain and assess the readiness of U.S. submarines operating under ice. It does not explicitly address concerns of a growing Russian military presence.
Still, Russian activity in the High North has grabbed the attention of top U.S. military commanders.
“We are facing a very challenging situation in the Arctic,” European Command’s Gen. Philip Breedlove told lawmakers last week. “Many of our NATO allies, Canada and the U.S. are concerned about what we see as the militarization of the Arctic now by Russia.”
Since 2008, Russia has been steadily upgrading its forces in the Arctic: reopening air bases, restoring air-defense radar stations and building new submarines. The moves are all in response to new security challenges brought on by melting ice and the prospect of new shipping lanes.
Moscow’s actions reflect a focus on “goals beyond the Arctic region,” the Stockholm International Peace Research Institute said in a recent report examining Russian military capabilities and intentions in the region. More here.

Is there some negotiating or new deal that can stop Putin? Anyone?

 

 

 

Boeing Secret Deals with Iran, Skirting Sanctions

Posted on by

Why Boeing kept Iran dealings under the radar

Author: Saam Borhani

alMonitor: Barely a week after the Jan. 16 lifting of nuclear-related sanctions on Iran, Tehran hosted its first international business summit in years. The event, sponsored by the Centre for Aviation (CAPA), brought together 400 executives of the global aviation industry to re-establish links with their Iranian counterparts after a decades-long estrangement. What raised eyebrows in Tehran and Washington, however, was the conspicuous absence of Boeing, the world’s largest aircraft manufacturer. Boeing’s curious decision to skip the CAPA event raised questions about the United States’ commitment to the sanctions relief mandated under the July 14, 2015, Joint Comprehensive Plan of Action (JCPOA). The decision Boeing made to stay home, likely prompted by unease as to the confusing web of remaining US sanctions, is a harbinger of things to come for the delicate dance between Iran and American business.

It turns out that Boeing, while skipping the high-profile CAPA event in Tehran, has actually been unofficially negotiating behind the scenes with Iranian civil aviation officials for a considerable time. Indeed, weeks after European rival Airbus signed a multibillion dollar deal for 118 passenger jets with Iran, Washington finally gave the go-ahead for Boeing to begin official negotiations and to apply for special licenses to sell aircraft to the Iranians.

As the world cashes in on an Iran ready to do business, the United States risks being late to the game because of a mixture of political sensitivities, confusion about the remaining American sanctions and structural impediments that make trading with Iran prohibitively risky for all but the most adept American companies.

American trade with Iran is known to attract seething headlines in both countries. A simple form on McDonald’s website about franchise opportunities in Iran last year prompted warnings of an impending cultural invasion of the country in the Iranian right-wing media. Similarly, US companies risk the wrath of special interest groups devoted to inflicting reputational damage because of trade with Iran. Halliburton and Hewlett-Packard are prominent examples of companies that have been attacked in the American media for previous legal business relations with Iran.

Groups such as United Against a Nuclear Iran have also been successful in convincing around half of the state legislatures to pass measures punishing companies operating in Iran. These local laws have directed state pension funds with billions of dollars in assets to divest from targeted companies and sometimes have barred these companies from public contracts. The impact of these state “sanctions” on the JCPOA is not clear and may yet prompt a political and legal battle between the federal government and state officials. Indeed, the harm to the reputations of US companies by such local punitive measures is a strong deterrent to engaging with the Iranian consumer. It is also an issue that is likely to continue, as long as Iran remains listed as a state sponsor of terrorism by the State Department.

For American companies large enough to weather bad publicity, the remaining and now largely unilateral US sanctions on Iran represent a potentially costly minefield. The JCPOA allows for licensed sales of American airliners to Iran and the legal importation of Iranian foodstuffs and rugs. Besides these specific carve-outs, US companies may trade with Iran under the general licenses that were available before the JCPOA and under specific licenses granted by the Office of Foreign Assets Control (OFAC), the Treasury Department’s sanctions administrator. In addition, foreign subsidiaries of US companies that are not under the control and direction of US persons may trade directly with Iran. Maintaining a robust compliance system and routinely checking company interactions with Iran to make sure that they do not run afoul of OFAC regulations is a costly and time-consuming endeavor. Indeed, any American company that trades with Iran under the terms of the JCPOA, and especially under the complicated foreign subsidiary clause, must be large enough to support sufficiently adept legal compliance teams. Small and medium-size US businesses are thus effectively shut out of a presence in Iran for this very reason.

For the large multinational American companies that may be able to gain a foothold in Iran, there remain structural constraints that residual US sanctions place on legal trade with Iran. The United States has made it clear that no payments linked to Iran may be processed through its financial system. This means that profits made by American businesses in Iran will likely not be able to be directly repatriated and probably will remain offshore in segregated foreign accounts. American companies must also contend with strict bars on doing business with any Iranian entities that remain on OFAC’s “specially designated nationals” list, the Iranian government and the Islamic Revolutionary Guard Corps. Each of these barred entities took over vast parts of the Iranian economy as a result of the international sanctions that have now been lifted.

The JCPOA has opened small opportunities for trade between American and Iranian firms. However, the remaining labyrinth of hard-to-understand restrictions will likely spook most Americans.

Both the Iranian and US governments have a vital interest in seeing that the JCPOA is an enduring agreement — and this partly depends on sanctions relief benefiting Iranian and American private sectors in a way that would effectuate the “buy-in” of JCPOA skeptics. A mutually beneficial trading arrangement that connects the private sectors of the United States and Iran — despite political differences — would strengthen the nuclear deal by attaching a direct economic cost to nonadherence. The limited avenues for legal trade, if quickly institutionalized, can be insulated from the historically volatile political relationship between Iran and the United States.

In this vein, a quiet Iranian commitment to protect American investors in Iran and to tone down the harshest anti-US rhetoric, at least with respect to American business, would give space for Wall Street to influence a change in Washington’s largely monolithic view of a hostile Iran. More importantly, a quiet US commitment to actively support legal trade with Iran — with the same zeal that it uses to enforce sanctions — would give the Iranians space to consider future negotiated compromises.