SVB collapse exposes deep problems in US financial system

Nick Beams

In the wake of the collapse of the Silicon Valley Bank (SVB) on Friday, the second-largest bank failure in US history, followed by the takeover of the New York-based Signature Bank by the Federal Deposit Insurance Corporation (FDIC) on Sunday, the third largest, questions are being raised about the stability of the entire US financial and banking system.

Santa Clara Police officers exit Silicon Valley Bank in Santa Clara, California, Friday, March 10, 2023. The Federal Deposit Insurance Corporation is seizing the assets of Silicon Valley Bank, marking the largest bank failure since Washington Mutual during the height of the 2008 financial crisis. [AP Photo/Jeff Chiu]

There was a certain irony in the demise of Signature. One of its board members was Barney Frank, a former House of Representatives member and co-sponsor of the Dodd-Frank legislation, brought down in the wake of the 2008 financial crisis which was supposed to prevent a repetition of such events.

As a result of SVB’s demise, depositors withdrew $10 billion from Signature leading to its being taken over. “We had no indication of problems until we got a deposit run late Friday, which was purely contagion from SVB,” Frank told the business channel CNBC.

The Fed and the FDIC, with the full backing of the Biden administration, which has pledged to do “whatever is needed,” have justified their actions -- full coverage for wealthy uninsured depositors at SVB as well as increased liquidity provisions for banks—on the grounds of “systemic risk.”

If that is the case, then it means that all the regulations and measures introduced after the 2008 crash, embodied chiefly in the Dodd-Frank Act, are not worth the paper they are written on.

There are divergences in financial markets over what has been done.

Ken Griffin, the founder of the hedge fund Citadel and a strident advocate of “free markets,” told the Financial Times the rescue of uninsured depositors should not have taken place.

“The US is supposed to be a capitalist economy, and that’s breaking down before our eyes,” he said.

The losses to depositors would have been minimal and would have “driven home the point that risk management is essential.”

Others have a completely opposed position, including prominent hedge fund manager Bill Ackman who called for major intervention, tweeting that “our economy will not function effectively without our community and regional banking system.”

During the meetings between the Fed, the FDIC and the US treasury secretary, Janet Yellen, venture capitalists, who formed much of the client base of SVB, intervened heavily and played the military card.

One anonymous source involved in the lobbying campaign, cited by the Financial Times (FT), said the theme of their pitch was “this is not a bank.”

“This is the innovation economy. This is the US versus China. You can’t kill these innovative companies.”

The SVB crash was triggered by two interconnected processes set in motion by the Fed’s interest rates over the past year as it seeks to batter down the wages upsurge of the working class in response to the highest inflation rate in four decades.

The tech-sector, especially in the most speculative areas involving the financing of start-ups by venture capital firms, has been heavily affected with the flow of money into new projects drying up. This led to money which had previously poured into SVB, one of the main conduits for this process, being withdrawn.

SVB had invested the money it received in 2020 and 2021, when the Fed was providing money virtually for free, into Treasury bonds and mortgage-backed securities. However, the interest hikes have meant that the market value of these financial assets has fallen below their book value and SVB made losses when it came to sell them to meet the cash outflow.

When a move by SVB to strengthen its capital base with a new share issue failed, the FDIC intervened.

There is no doubt that SVB’s dependence on Treasury bonds and its failure to hedge its operations, apparently in the belief, held by other sections of the market as well, that the Fed would have to start to cut rates in the not-too-distant future was a significant factor in its collapse.

But the SVB case, notwithstanding its peculiarities, has thrown the spotlight on other banks whose position has worsened with the decline in the value of their holdings of Treasury bonds.

According to research undertaken by economists from five major universities and reported on by the FT under the headline “The US bank system is more fragile that you’d think,” the problems that hit SVB are present on a wide scale.

The study found that with the rise interest rates “the US banking system’s market value of assets is $2 trillion lower than suggested by their book value of assets.”

It said a case study of the SVB failure was illustrative because “10 percent of banks have larger unrecognised losses larger than those at SVB. Nor was SVB the worst capitalised bank, with 10 percent having a lower capitalisation than SVB.”

It noted that: “Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk. If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk.

“Overall, these calculations suggest that recent declines in bank asset values very significantly increased the fragility of the US banking system to uninsured depositor runs.”

SVB has been described as something of an outlier because of its heavy dependence on government bonds and mortgage-backed securities which it did not hedge for a loss of value.

But those issues notwithstanding, the study reported on a major change.

“Prior to the recent asset declines all US banks had positive bank capitalisation. However, after the recent decrease in value of bank assets, 2,315 banks accounting for $11 trillion of aggregate assets have negative capitalisation.”

This means that the final balance of what they owe is greater than the capital stock of the company meaning that the risk of insolvency increased.

Government bonds are not the only asset being hit by the interest rate rises. Real estate, particularly commercial real estate, where the effects are compounded by reduced demand for office space because of the COVID pandemic and the increase in working from home, is also a potential source of turbulence.

An article by Robert Burgess, the executive editor of Bloomberg Opinion, published yesterday, drew attention to real estate as a source of vulnerability for banks, with commercial real estate loans making up close to 24 percent of all their loans.

“If market participants are wringing their hands over the potential fallout from the collapse of Silicon Valley Bank, just wait until they look at the banking industry’s exposure to the rapidly weakening commercial real estate sector,” he wrote.

According to Burgess, it seemed as if every day brought news of some big property going into default, noting that in the past weeks “an office landlord controlled defaulted on about $1.7 billion mortgage notes on seven buildings in San Francisco, Boston and New York.”

The ongoing fallout from the SVB collapse has both political and financial policy consequences.

On the political front it has completely exposed the Biden administration as the bagman for the wealthy, the super-rich and financial speculators, prepared to dole out money, in whatever quantity necessary, to protect their interests.

It has major consequences on the monetary policy front with the Fed due to meet next week. Before the SVB collapse, it was considered likely that in view of what the Fed continually refers to as the “very tight labour market” it would revert to an increase in its interest rate of 50 basis points, after dropping to a 25-basis point rise in February.

Now the betting in the markets is that a 25-basis point rise is the maximum, with some predictions that it will make no rise at all. And longer-term policy is completely up in the air. The central policy of the Fed has been to keep raising rates, in the name of “fighting inflation.” But this objective, as the SVB collapse has so graphically revealed, threatens to set off a major financial crisis.

Chinese-brokered deal between Iran and Saudi Arabia raises alarm bells in Washington

Peter Symonds

In what is something of a diplomatic coup for China, an agreement between Saudi Arabia and Iran to ease tensions and reestablish diplomatic relations was announced in Beijing last Friday. The two rival powers have been engaged in a fierce competition for influence throughout the Middle East that has been a significant factor in the region’s conflicts and worsening instability.

Secretary of Iran's Supreme National Security Council, Ali Shamkhani, right, shakes hands with China's most senior diplomat Wang Yi, as Saudi Arabia's National Security Adviser Musaad bin Mohammed al-Aiban looks on during an agreement signing ceremony between Iran and Saudi Arabia in Beijing. [AP Photo/Nournews]

Formal diplomatic relations ended after the Saudi regime, which is based on an extreme form of Sunni fundamentalism, executed prominent Shiite cleric and government critic Nimr Baqir al-Nimr in 2016. His beheading prompted protests inside Iran that led to the storming of the Saudi diplomatic mission. Since then, relations have only deteriorated as the countries backed opposing sides in the wars in Yemen and Syria.

Under last Friday’s agreement, Saudi Arabia and Iran will have two months to negotiate the re-establishing diplomatic relations and the reopening of embassies, as well as to activate security cooperation arrangements. Few details have been made public but the deal is reportedly said to include reducing mutual propaganda warfare as well as direct and indirect attacks on each other’s interests in the region.

According to the Wall Street Journal, Saudi Arabia agreed to rein in Iran International, a Saudi-funded, Farsi-language satellite news channel which Tehran has accused of fomenting the months of anti-government protests in Iran. The head of Iran’s intelligence agency has branded the channel as a terrorist organisation.

Iran has agreed to curb cross-border attacks on Saudi Arabia by Houthi rebels in Yemen who control large areas of the country and have been fighting a war against a Saudi-led military coalition since 2015. A truce negotiated last year remains in place as the Houthis and Saudis have held talks aimed at ending the conflict.

While efforts to ease tensions have been underway for several years with Iraq and Oman acting as mediators, China played the main role in securing the deal. Last Friday, top Beijing diplomat Wang Yi hailed the agreement as a “victory” adding that China would continue to address global issues. He declared that it “set an example for resolving conflicts and differences among countries through dialogue and consultation.”

In what was a thinly-veiled criticism of the US, Wang declared that the agreement demonstrated how the two nations were “getting rid of external interference, and truly taking the future and destiny of the Middle East into their own hands.” The Chinese diplomatic intervention in the Middle East comes as the US is escalating its war against Russia in Ukraine and accelerating preparations for conflict with Beijing in Asia.

The Biden administration has made a muted response to the Saudi-Iranian deal. National Security Council spokesperson John Kirby gave qualified support, saying: “To the degree that it could deescalate tensions, all that’s to the good side of the ledger.” He then pointedly added that the US was not stepping back from its role in the Middle East.

Commentaries in the American media, however, point to deep concerns in Washington that Beijing has stolen a march on the US and is playing a more prominent role in the strategic oil-rich region.

An article published in the Hill, entitled “China-brokered Iran-Saudi deal raises red flags for US,” cited the comments of Atlantic Council analyst Jonathan Panikoff, who declared: “It should be a warning to U.S. policymakers: Leave the Middle East and abandon ties with sometimes frustrating, even barbarous, but long-standing allies, and you’ll simply be leaving a vacuum for China to fill.”

While the US and its allies maintain crippling economic sanctions on Iran on the pretext of preventing it from building nuclear weapons, Washington relied on its longstanding ties with the Saudi monarchy in its interventions in the Middle East.

US-Saudi relations, however, have soured since Biden’s trip to Riyadh last July. Three months later OPEC slashed oil production by 2 million barrels a day in an arrangement reportedly put together by Saudi Arabia and Russia to keep oil prices high. Saudi Arabia has further galled Washington by not condemning the Russian invasion of Ukraine.

For its part, the Biden administration has riled Saudi Arabia by ending US military support for its Yemen war, limiting arms sales and not responding to Saudi appeals for assistance in starting a civilian nuclear program.

China has seized the opportunity to strengthen relations with Saudi Arabia and the Gulf States. The Wall Street Journal reported that Chinese President Xi Jinping met Arab leaders in Riyadh last December where he suggested a high-level gathering in Beijing of the Gulf Cooperation Council (GCC) with Iran this year—a plan that was embraced by all sides.

Clearly China’s position as a major energy purchaser and trading partner throughout the region played a significant role in engineering an agreement between Saudi Arabia and Iran as a prelude to the broader meeting in Beijing later this year.

Iran in particular is confronting a major economic and financial crisis as a result of the US-led sanctions regime with its currency plunging precipitously against the US dollar and inflation hitting more than 50 percent in January in urban areas. Amid the sanctions, China remains the largest buyer of Iranian oil and its biggest trading partner. Bilateral trade last year was $15.8 billion up 7 percent from the previous year.

As part of a state visit by Iranian President Ebrahim Raisi to Beijing in mid-February, Iran sent its top nuclear negotiator, Ali Bagheri Kani to lay the basis for a deal with Saudi Arabia. While Raisi met with Xi, Bagheri Kani raised Iran’s demands behind the scenes with Chinese officials. He reportedly called on China to intervene in international talks to revive the 2015 nuclear deal abruptly terminated by Trump as a step towards ending sanctions. He also appealed for Chinese investment and support for the Iranian currency. In return, Iran agreed not to set preconditions on talks with Saudi Arabia.

Ali Shamkhani, secretary of Iran’s Supreme National Security Council, who was in Beijing last week for negotiations to finalise a deal told the Iranian media that the state visit had paved the way for “very serious negotiations between Iranian and Saudi delegations… Addressing misunderstandings and looking at the future can help develop stability and regional security.” Following the announcement of the agreement last Friday, the Iranian currency rose more than 10 percent against the US dollar.

In the volatile global conditions fueled by a deepening international economic crisis, the US-NATO war in Ukraine and a looming conflict with China, the deal between Iran and Saudi Arabia has more the character of a temporary truce than a lasting agreement. Like every other part of the world, the Middle East—the target of US imperialist wars—is caught up in the intensifying US confrontation with Russia and China. Saudi-Iranian rivalry, which is played out throughout the Middle East through the propaganda prism of competing Islamic fundamentalisms, can rapidly plunge back into conflict.

Whatever its immediate reaction to last Friday’s deal, Washington has no intention of allowing Beijing to extend its influence in the Middle East, or anywhere else in the world, and will not hesitate to use every dirty trick in the book to prevent it.

The United States and Human Rights: a History of Hypocrisy

Melvin A. Goodman

Photograph Source: Sistema Nacional de Bibliotecas – Public Domain

The United States is a human rights hypocrite.  No country has been more aggressive in lecturing others about human rights and no country has been less willing to take part in international efforts to halt crimes against the peace or even genocide.  The United States has been one of the major obstacles in the creation of an international military force under the auspices of the United Nations to prevent “crimes against the peace.”

Thanks to Charlie Savage’s excellent reporting in the New York Times, we currently find the Pentagon blocking the efforts of the United States to share intelligence with the International Criminal Court (ICC) regarding Russian war crimes in Ukraine.  The Departments of State and Justice as well as the intelligence community support providing the ICC with compelling evidence that has been collected by the Central Intelligence Agency and other intelligence organizations.  The Department of Defense, however, is resisting the sharing of such intelligence, citing the danger of a precedent that could be used by the ICC to prosecute American soldiers.  Unlike former presidents, President Joe Biden should stand up to the Pentagon and permit the sharing of our intelligence.

The Clinton administration’s handling of the Treaty of Rome, which was enacted in 1998 to create the ICC, is an excellent example of presidential cowardice.  President Clinton had a history of caving into the  right-wing opposition and the military establishment.  In this case, he signed the Rome Statute but refused to send it to the Senate for ratification.  In his first term, pressure from conservatives in the Congress led Clinton to abolish the Arms Control and Disarmament Agency as well as the United States Information Agency.  Pressure from the Pentagon also stopped Clinton from supporting various United Nations resolutions to prevent the use of cluster bombs and land mines as well as to prohibit the use of teenagers in combat.

In the first year of his administration, Clinton was faced with a decision to help stop the genocide in Rwanda, but he hid behind the advice of UN Ambassador Madeleine Albright and others to avoid getting involved in stopping this terrible tragedy.  The French government was willing to intervene to stop the massacre of the Tutsis, and merely wanted the United States to provide the heavy lift capability to transport French soldiers and their equipment.  At that time, only the United States had such a capability.

As for the Rome Statute, President George W. Bush withdrew Clinton’s signature from the agreement in 2002; meanwhile the Congress had passed laws to limit U.S. support of any kind to the ICC.  The administration of George H.W. Bush did nothing about the crimes of Serbs against Bosnian and Croatian Moslems in the Balkans in the early 1990s.  There was ample of evidence of these crimes collected by Senator Chris Van Hollen, who was serving as a staffer to the Senate Foreign Relations Committee at that time.

The Obama administration was unusual in providing rewards for the capture of fugitive warlords in Africa whom the court had indicted, including rebel leaders in Uganda and the Congo.  The ICC’s very first judgment took place in 2012 against Congo rebel leader Oyilo for forcing children into military service.

Ironically, when the Obama administration decided to pursue regime change in Libya against Muammar Gaddafi, it justified the use of force on the basis of Gaddafi’s “crimes against the peace.”  On this occasion, Secretary of State Hillary Clinton and UN Ambassador Susan Rice pressed for the use of force. The murder of Gaddafi in 2011 has left Libya as a failed state and a model of domestic horror.  The United States could have been accused of a “crime against the peace.”

On an earlier occasion, the Eisenhower administration opened the door to crimes against humanity in the Congo in the late 1950s, when it sanctioned the assassination of Patrice Lumumba.  This event opened the way to the emergence of Mobutu Sese Seko, the most brutal leader in Africa’s brutal history.

A series of administrations from Harry Truman’s to Ronald Reagan’s refused to even sign the UN Convention regarding the Punishment of Genocide because of the Pentagon’s opposition to the use of the term “genocide.”  It was not until the last year of Reagan’s second term in 1988, that Secretary of State George Shultz and others pressed for a U.S. signature. “Genocide” itself is a relatively new term, created by a Polish jurist, Raphael Lemkin in 1944.  Lemkin melded the Greek word “genus,” meaning tribe or race, with the Latin word “cide,” meaning killing.  Russian President Vladimir Putin’s own words denying the existence of Ukraine and Ukrainians could be used to make a case against Putin’s genocidal warfare.  Like the United States, however, Russia is not a member of the ICC, and the Court cannot pursue cases in absentia.

One of the serious obstacles to preventing future war crimes is the failure for the United States and others to seek accountability for crimes that have been committed.  Unfortunately, there is no better example of U.S. hypocrisy regarding human rights and war crimes than the failure to seek accountability for CIA crimes in the wake of 9/11.  CIA director George Tenet and deputy director John McLaughlin provided false intelligence to President Bush and Secretary of State Colin Powell to justify an illegal invasion of Iraq.  Tenet and McLaughlin are respectively a managing director at the Allen and Company investment bank and a Distinguished Practioner-in-Residence at the School of International Studies at Johns Hopkins University.  Tenet was also a Distinguished Professor in the Practice of Diplomacy at Georgetown University, and left government service with the Presidential Medal of Freedom, the highest award that can be given to a civilian.

And it gets worse.  The two lawyers at the Department of Justice, John Yoo and Jay Bybee, who prepared the unconscionable “torture memoranda” used by the CIA, are respectively a faculty member at the law school at the University of California and a federal judge.  The CIA official, Gina Haspel, who sent the cable that ordered various CIA stations to destroy tapes of torture and abuse eventually received Senate confirmation as the director of CIA.

 Early warning did nothing to prevent or address genocidal crimes in Europe or Africa, and the lack of accountability has added to these tragedies.  The creation of an international network to share intelligence and coordinate actions could provide some framework for dealing with crimes against humanity.  It is high time that we return to Articles 42 and 43 of the United Nations, which allows for member states to create an international peace force to restore international peace and security.

Workers’ Party of Turkey backs Kılıçdaroğlu in presidential election

Hakan Özal

Erkan Baş, chairman and deputy of the Workers’ Party of Turkey (TİP) was one of the first politicians to congratulate Republican People’s Party (CHP) leader Kemal Kılıçdaroğlu after the Nation Alliance chose him as its presidential candidate for the May 14 elections.

Erkan Baş, 2019 [Photo by Yol TV / CC BY 3.0]

On Tuesday, when TV100 asked him, “Would you support Kemal Kılıçdaroğlu, the presidential candidate of the Nation Alliance,” Baş replied: “Let’s defeat him in the first round.” 

This means the TİP will support Kılıçdaroğlu in the presidential election against Recep Tayyip Erdoğan and advise its own alliance members, led by the Kurdish-nationalist Peoples’ Democratic Party (HDP), to do the same. The HDP’s over 6 million voters could well swing in the election results.

The TİP’s assembly, which convened in the earthquake-hit Hatay province over the weekend, decided that “the Central Executive Committee is authorized to make a decision on supporting Kemal Kılıçdaroğlu’s candidacy in consultation with the democratic public opinion, especially with the allied organizations in the Labour and Freedom Alliance.” 

This confirms the World Socialist Web Site’s (WSWS) analysis of the Labour and Freedom Alliance (EÖİ),” as “a so-called ‘left’ political extension of the Nation Alliance of bourgeois opposition parties led by the Kemalist Republican People’s Party (CHP).”

The WSWS explained that EÖİ’s function was “to drive the growing anger and opposition of workers and youth to both President Recep Tayyip Erdoğan and the ‘Nation Alliance’ into the channels of the capitalist establishment and thus suppress it. This means preventing the development of an independent revolutionary movement of the working class, the key to genuine change.”

In Turkey, as all over the world, the masses of workers and youth are looking for a way forward and are shifting to the left amid rising living costs largely due to the official response to the COVID-19 pandemic and NATO’s war against Russia. This has been accelerated by the colossal earthquake disaster that caused tens of thousands of preventable deaths. As an expression of this political shift, the TİP has seen rapid growth in recent months. 

However, it does not represent a way forward but functions as a dam in front of the growing search for a genuine socialist alternative among the masses. In fact, the TİP and the Labour and Freedom Alliance, let alone the Nation Alliance, have no viable solutions to the fundamental problems facing the working class and the oppressed masses.

The TİP, like the Erdoğan government and the bourgeois opposition, ignores the pandemic and the public health catastrophe it has caused, causing over 300,000 deaths in Turkey alone. The TİP, which claims to defend “peace program” everywhere, is silent about the pro-NATO character of the HDP or the Nation Alliance. While pointing to the growing social inequality under Erdoğan’s Justice and Development Party (AKP) since 2002, it also hides the fact that the CHP-led Nation Alliance also represents finance capital and seeks to massively enrich it.

“We will fulfill our responsibility to rid the country of the palace [i.e., Erdoğan] regime, but we also need to see our interlocutors,” Baş said in the same interview, adding: “First we need liberation, then we need re-establishment.”

The TİP, which advances the bankrupt “lesser evil” policy that dominates the pseudo-left internationally, argues that the task of getting rid of the right-wing Erdoğan government falls not to the working class, but to the Nation Alliance, which represents another right-wing faction of the same ruling class. This alliance, whatever its rhetoric, seeks to manipulate broad popular opposition to the Erdoğan government. It is favored by the Biden administration in Washington, as well as other NATO powers.

Asked for his opinion of the slogan “one vote for TİP [in the parliamentary elections] and one vote for Kılıçdaroğlu [in the presidential election],” Baş replied: “This shows that some of our line is understood.” He continued that after the Nation Alliance comes to power, the TİP will assume the main opposition role and for this, citizens should vote for the TİP.

Baş claimed that his party would support the new government’s “decisions for the benefit of the citizens,” but that it would uncompromisingly oppose the that government’s “neoliberal policies, privatization of education and health care.”

Thus the TİP is fully aware that if the Nation Alliance wins the elections, it would continue the essential policies of Erdoğan. Ali Babacan, the leader of DEVA party, one of the members of the alliance, served as foreign and economy minister in the AKP governments from 2002 to 2015. Babacan, who enjoys the trust of financial elites in Washington, London and Frankfurt, is rumored to be the economy minister of a potential new government.

Another member of the alliance, Ahmet Davutoğlu, leader of the Future Party, was Erdogan’s foreign minister from 2009 to 2014 and then his prime minister from 2014 to 2016. Davutoglu was a leading architect of Ankara’s dirty role in NATO’s regime change war in Syria, mobilizing Islamist jihadists as their proxies.

The fact that Baş is demanding votes for a right-wing bourgeois alliance, whose pro-imperialist and anti-working class character is evident to him and to others, means that his party is consciously complicit in the crimes that a potential new government will commit.

Contrary to the claims of the TİP and other pseudo-left parties, masses of workers and youth do not have to choose between the factions of the bourgeoisie. This bankrupt middle-class nationalist perspective only serves to politically disarm and disorient workers everywhere.

From Syriza in Greece to Podemos in Spain and the Left Party in Germany, the WSWS has comprehensively analyzed the destructive political role and the theoretical and historical roots of the pseudo-left internationally. In 2015, in his Foreword to The Frankfurt School, Postmodernism and the Politics of the Pseudo-Left: A Marxist Critique, David North, Chairman of the WSWS International Editorial Board, described this political tendency internationally as follows:

The pseudo-left denotes political parties, organizations and theoretical/ideological tendencies, which utilize populist slogans and democratic phrases to promote the socioeconomic interests of privileged and affluent strata of the middle class. Examples of such parties and tendencies include Syriza in Greece, Podemos in Spain, Die Linke in Germany, and numerous offshoots of ex-Trotskyist (i.e., Pabloite) and state capitalist organizations such as the Nouveau Parti Anticapitaliste (NPA) in France, the NSSP in Sri Lanka and the International Socialist Organization in the United States.

Founded in 2017 following a split in the Stalinist Communist Party of Turkey (TKP) in 2014, the TİP sought to orient and adapt more openly to the bourgeoisie and imperialism under the guise of being “with the masses.” Its party leaders were elected as deputies from the HDP, which is represented in the NATO Parliamentary Assembly. However, the TİP’s main goal has been to serve as a bridge between the Turkish bourgeois-nationalist parties led by the CHP and the Kurdish bourgeois-nationalist HDP.

The TİP uses left-populist rhetoric to keep the social and democratic aspirations of the masses and their growing opposition to the capitalist order within parliamentary boundaries. The dirty record of its pseudo-left allies internationally, indicates that a similar political trap is being set in Turkey.

After the refugee tragedy off Crotone, Italy: Brussels and Berlin further restrict sea rescues

Martin Kreickenbaum

Some two weeks after the refugee tragedy off Italy’s Calabrian coast near the town of Crotone, the death toll has risen to 74. On Saturday, the body of a young girl was recovered from the water. Among the victims are 29 minors, 20 of them children under 12. While 79 refugees were rescued from the Mediterranean, around 30 people are still missing.

Relatives cry on the coffin of one of the victims of last Sunday’s shipwreck at the local sports hall in Crotone, southern Italy, Wednesday, March 1, 2023. [AP Photo/Giuseppe Pipita]

The cruel deaths of the refugees could have been avoided if a rescue operation had been launched in time. The tragedy throws a harsh spotlight on the murderous policies of the European Union, which deliberately accepts such victims in order to prevent other refugees from reaching Europe. For example, the German government is planning to drastically reduce civilian sea rescue operations in the Mediterranean.

The breakup of the wooden boat with presumably about 200 refugees on board, just a few dozen metres from the beach, caused worldwide horror. The coffins of the those who died were laid out in a sports hall in Crotone, where many came to pay their respects. At least 57 of the victims were refugees from Afghanistan. Many had relatives in Germany and other European countries who travelled to Crotone to identify their relatives and say goodbye.

Italy’s government, led by fascist Prime Minister Giorgia Meloni, denies any responsibility for the horrific disaster. Matteo Piantedosi, the nonpartisan interior minister, even blamed the victims themselves. “They shouldn’t have set off in this weather in the first place,” he declared cynically. Desperation did not justify “putting your own children in danger.”

In the meantime, however, it is known that a surveillance plane from the European border protection agency Frontex had spotted the boat in the late evening of February 25. Based on footage from the thermal imaging cameras on the aircraft and the detected draft of the vessel, the crew concluded that there must be around 200 people on board. Frontex did not launch a rescue mission, however, but informed the Italian financial police, the Guardia die Finanza, which prosecutes “illegal border crossings.” However, military vessels dispatched by the financial police struggled in a force eight wind and four-meter waves before they could reach the refugee boat.

“A small, overloaded boat, and in a sea state that forces two military ships to return, cannot but be in danger,” concluded the daily il manifesto. Nevertheless, the Coast Guard in the port of Crotone, with its practically unsinkable ships, was not sent to the rescue. It was not activated until about 4:30 a.m. on February 26 and did not reach the wrecked ship until an hour later. By that time, dozens of refugees who could not swim had drowned.

During a state visit to the United Arab Emirates, Meloni nevertheless said “the situation is as simple as it is tragic: we did not receive any distress signals from Frontex.” Rather, she said, everything was done “to save lives after we were alerted to the problem.” She added, “I wonder if anyone in this country seriously believes that the government deliberately let more than 60 people die, including many children.”

In fact, not only do many believe this, but it is the terrible truth. What happened Sunday night off the Calabrian coast was “not a tragedy, but the result of this nefarious policy,” as Orlando Amodeo, a doctor and long-time aid worker in shipping accidents who was also on the scene during the February 26 operation, told La7 television. It was “what was wanted,” he said.

“Fortress Europe”

This applies not only to the Italian government, but to the entire European Union. The dead of Crotone are victims of the deadly “Fortress Europe” policy, organized from Brussels and supported by all EU member states.

In 2013, when two refugee boats sank off the Italian island of Lampedusa, dragging 500 people to a horrific death, the European Commission was still promising that such a tragedy should never be repeated. But these were nothing more than empty promises. The “Mare Nostrum” mission launched by the Italian government at the time, which was supposed to pick up refugee boats and escort them back to Libya, was discontinued at the insistence of the European Union just one year later, after nearly 100,000 refugees had been rescued from distress at sea and brought to Europe.

Instead, the EU trained militias in Libya, equipped them with fast boats and appointed them as coast guards. This has since served as a European mercenary force, intercepting refugees before they reach international waters in order to bring them back to Libya. There, they are interned in facilities that German diplomats attested were “concentration camp-like conditions” in 2017.

When private aid organizations, which are financed solely by donations, tried to close the gap left by the withdrawal of the EU and the Mediterranean states from sea rescue, they were repeatedly thwarted. Under the false accusation that the presence of these sea rescue boats was fueling the movement of refugees across the Mediterranean, the ships belonging to private aid organizations were chained up and prevented from leaving port.

In 2019, then-interior minister and now Transport and Infrastructure Minister Matteo Salvini of the far-right Lega ordered Italian ports closed to private sea rescue boats and threatened draconian fines and confiscation of the vessels. The regulations were largely rolled back in October 2020, but were reintroduced in a modified form by the new fascist-led government just days before the new refugee tragedy.

Under these rules, private rescue boats must immediately head to their assigned port after a rescue mission, even if it is not the closest port. There must also be no other rescues along the way. Moreover, since the assigned ports are far away, a quick return to the search and rescue area is not possible—with the consequence that considerably fewer refugees can be rescued.

The ink on the government’s decree had not yet dried when the “GeoBarents,” operated by the organization Doctors Without Borders, received a penalty notice for rescuing 48 refugees, allegedly in violation of the new regulations. The “GeoBarents” was detained for 20 days and fined €10,000.

German government cracks down on sea rescuers

The German government also wants to take massive action against civilian sea rescuers. According to information from broadcaster ARD’s magazine programme Monitor, the federal Ministry of Transport under Volker Wissing (Liberal Democrat, FDP) is planning to tighten the Ship Safety Ordinance. According to the draft bill, ships undertaking “political ... and humanitarian activities or comparable idealistic purposes” should no longer be classed as part of the leisure sector.

Consequently, aid organizations that operate these ships will face enormous costs due to requisite conversions, additional technology, different insurance conditions and further requirements. The smaller ships that can be on the scene quickly and rescue drowning people from the sea will be particularly affected.

“For the majority of civilian sea rescue ships under a German flag, this regulation will mean they will have to limit or stop their life-saving work,” a statement from the NGOs Mare*GO, Mission Lifeline, r42-sailtraining, Resqship, Sarah Seenotrettung, Sea-Eye and Sea-Watch said of the planned measures.

With the new regulations, the coalition government was “deliberately widening the drastic rescue gap in the Mediterranean,” the statement by the civilian rescuers continues. “In the absence of a government rescue operation and safe and legal escape routes, people on the run will pay the price for the planned legal changes with their lives.”

The Transport Ministry rejected these accusations to taz, claiming that the plan “is not aimed at hindering private sea rescue in the Mediterranean, but on the contrary, it is about safeguarding their work.” The supposed safety deficiencies of the ships deployed should be prevented and thus the “protection of life and limb guaranteed.”

Since the beginning of rescue missions by civilian ships, there has not been a single accident in hundreds of missions, with many thousands of rescued persons, in which a crew member on board the ships has been injured. In reality, the tightening of the rules of engagement for civilian sea rescuers is aimed at restricting the rescue of refugees from distress at sea.

In doing so, the Transport Ministry is following guidelines developed by the EU Commission together with Frontex in the “Contact Group for Search and Rescue.” According to information from Neues Deutschland, on January 31 this contact group called on the EU member states to “jointly consider” how private sea rescuers could be regulated. It suggested tightening security requirements under the guise of “public order and security.”

The German government is acting as a driving force here, like the way it pushed through the EU’s dirty deal with Turkey back in 2015 to prevent refugees from reaching Europe via Turkey. This cynical arrangement, under which the EU pays the Turkish government billions of euros for its stooge services in fending off refugees, proved to be the undoing of the refugees on the boat that has now capsized off the Italian coast.

Alauddin Mohibzada, who lost his aunt and three cousins, aged 5, 8 and 12, in the accident, told refugee charity ProAsyl the reasons why they had embarked on the crossing despite knowing of the risk:

They had no other choice. They had to flee Afghanistan several years ago because my uncle was being persecuted there and was not safe anywhere. For the last few years, they lived in Turkey. But they didn’t have a residence permit, they were there illegally, they were threatened with deportation to Afghanistan.

Even now, when the Taliban are in power in Afghanistan, Turkey is deporting people en masse back to Afghanistan. They had therefore worked illegally in a textile factory for a pittance to somehow make ends meet. On the side, they saved money to continue their flight to Europe.

Legal channels were not open to them and “they didn’t get a visa. And of course, fleeing from Turkey to Greece sounds easier at first. But everywhere, the borders have been closed. And they heard from Greece that refugees don’t get any protection there but are stuck for years under miserable conditions. No one wants to put their children through that.”

Even Syrian refugees, who have once again become homeless because of the catastrophic earthquake in Turkey and are left with nothing, are not granted entry permits in Germany.

EU Commission President Ursula von der Leyen, who in 2020 described Greece as Europe’s protective shield and thus justified the use of live ammunition in shootings against refugees, is now also explicitly praising the Italian government for its ruthless actions against refugees. In a letter to Giorgia Meloni, she states that Italy’s actions to “offer safe and legal routes to people in need of protection with humanitarian corridors” was a crucial contribution to the further development of European migration policy.

In fact, the EU is waging an outright war against refugees. As early as February 9, after consultations among EU heads of government, Ursula von der Leyen announced: “We will better protect our external borders and prevent illegal migration.” In this context, the strengthening of the closure policy includes not only the erection of kilometres-long border fences but also shameless cooperation with North African despots.

In her letter to Meloni, von der Leyen reiterated this plan and promised to support Libya and Tunisia, in particular, in securing their borders against refugees. “We will continue to support Libyan maritime border security and search and rescue capabilities and build similar land border control capabilities with Egypt,” she said.

Meanwhile, the Italian government has announced it will provide Tunisia with 100 pick-up trucks worth €3.6 million to strengthen its border controls against refugees. In the process, the Tunisian security authorities have acted even more brutally against refugees since they were incited to do so by President Kais Saied in a violent and racist speech.

Since then, thousands of refugees have been trying to leave the country as quickly as possible. In the process, at least 14 people drowned off the coastal town of Sfax last week, when two boats capsized. This brought the number of refugees who have drowned in the Mediterranean this year to at least 346. More than 25,500 refugees have died in the Mediterranean since 2014.

Xi Jinping reappointed to head Chinese regime under siege

Peter Symonds

China’s National People’s Congress (NPC) officially installed Xi Jinping for a third term as president on Friday and Li Qiang, a close associate of Xi, as premier on Saturday. The body, which nominally acts as the country’s legislature, is finalising other top governmental appointments—with Xi’s supporters being appointed to key positions.

Chinese President Xi Jinping, left, and Chinese Premier Li Qiang, right arrive for a session of China's National People's Congress (NPC) at the Great Hall of the People in Beijing, Sunday, March 12, 2023. (AP Photo/Andy Wong)

Xi’s re-appointment as president was a foregone conclusion following his appointment to a third term as Chinese Communist Party (CCP) general secretary at the party congress last October. It is the culmination of the process that Xi set in motion in 2018 when the country’s constitution was amended to end the two-term limit on the presidency.

The CCP congress also stacked the top party body, the Politburo Standing Committee, with Xi’s followers and incorporated “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” into the party’s constitution. Party officials and the state-owned media ritually declare Xi to be the “core” of the party leadership and government.

The flipside of the official lauding of Xi in China is the coverage in the US and Western media. As part of the propaganda for the accelerating US-led preparations for war with China, the American media paints Xi as a political strongman and autocrat—the most powerful leader in China since Mao Zedong. In reality, Xi has been thrust to the fore by a fragile CCP regime under siege both at home and abroad. He is a Bonapartist figure balancing between rival factions in the party and capitalist class amid sharpening social and geo-strategic tensions.

Beijing confronts escalating US military and diplomatic provocations over Taiwan and the South China and East China Seas, and a dramatic US military build-up and strengthening of alliances throughout the Indo-Pacific region. In addition, the Biden administration has not only maintained the trade war measures put in place by Trump but imposed one ban after another on the transfer of advanced semiconductors and the machinery needed for their manufacture to China.

Last week, in an unusual step, Xi explicitly accused the US of seeking to undermine China, declaring: “Western countries led by the United States have implemented all-around containment, encirclement and suppression of China.” A major restructuring endorsed by the NPC on Friday of the State Council points to several significant aspects of the mounting crisis facing the regime.

The State Council, which functions as China’s cabinet, will strengthen its control over the key Ministry of Science and Technology (MOST), which will be called on to boost efforts to create an advanced computer chip-making industry in China. A new Central Science and Technology Committee will be created, directly under the State Council, to oversee all the ministry’s operations.

China is heavily dependent on imported semiconductors and has been hit hard by the US bans. According to the latest Chinese customs figures, the number of semiconductors imported by China in the first two months of the year plunged by 26.5 percent to 67.6 billion units, compared to the same period last year. Their total value dropped by 30.5 percent from $68.8 billion to $47.8 billion compared to the first two months last year.

While higher numbers of relatively low-end chips may have been manufactured within China, the most damaging impact will have been in the lack of access to advanced semiconductors, critical for both commercial and military applications.

The reform plan endorsed by the NPC declared it was necessary to “rationalise the scientific and technological leadership and management system… to overcome difficulties in key core technologies, and accelerate the realisation of high-level technological self-reliance and strength.” 

However, China, despite its economic size, confronts huge problems in replicating and competing with what is a globally-organised industry. The US has not only banned the sale of American equipment and semiconductors to China but pressured Japan, Taiwan, the Netherlands and South Korea to do the same. The Taiwan Semiconductor Manufacturing Company has a virtual global monopoly in the production of the most advanced chips.

The Financial Times reported last week that the Netherlands is preparing to impose bans on the export of semiconductor manufacturing equipment to China on the pretext of national security. The Dutch company ASML is the world’s largest supplier of advanced chip equipment. The article suggested that a ban on the servicing and repair of existing ASML equipment in China may be under consideration.

The State Council reform also strengthened the oversight of Chinese financial sector, which is threatened by a meltdown in the real estate sector following years of frenzied speculation as well as high levels of government debt. Estimates put public debt as high as $US18 trillion, of which $10 trillion is “hidden debt” owed by shaky local government financing platforms.

A new National Financial Regulatory Administration (NFRA) is to be established to take over from the existing China Banking and Insurance Regulatory Commission (CBIRC). It will wield significant new supervisory powers over the financial industry, excluding the share markets, including over small local banks that represent nearly half of the country’s banking sector. Significantly, its national officials will take over from local regulators. The NFRA will be directly administered by the State Council.

The economy as a whole has slumped sharply. Economic growth in 2022 was just 3 percent, well under the target of 5.5 percent and one of the lowest figures for decades. Projected growth for 2023 of “around 5 percent” was announced by outgoing Premier Li Keqiang on the opening day of the NPC. The CCP regime had long regarded 8 percent growth as the minimum figure necessary to minimise unemployment and maintain social stability.

Under intense pressure from the major powers and the corporate elite, the Chinese government in December abruptly ended its zero-COVID policy that had minimised infections and deaths in China and removed virtually all health restrictions. As a result, infections have ravaged the population and estimates for the death toll are over one million. While the CCP regime is hoping that ending zero-COVID will give it an economic boost, the adoption of the same murderous let-it-rip policy as governments around the world will only further undermine its claims to be looking after public welfare.

Over the past decade, Xi had effectively sidelined Li Keqiang and taken control of economic policy, which traditionally had been the province of the premier. Li Keqiang had been an advocate of further opening up the Chinese economy to foreign investment as part of a China 2030 plan drawn up with the World Bank. In response to Washington’s increasingly confrontational stance and the global economic turmoil, Xi has sought to boost Chinese corporations and China’s ability to compete technologically.

Li Qiang, the new premier has been closely associated with Xi. He worked for Xi as secretary when Xi was governor of the wealthier coastal province of Zhejiang in the mid-2000s. When Xi became president in 2012, Li took over as Zhejiang governor himself, then party boss of nearby Jiangsu province. In 2017, Li was installed in the powerful position of CCP secretary in Shanghai where he is credited with convincing Tesla founder Elon Musk to build the company’s first overseas factory in the city. He is due to speak today about the direction of economic policy and will undoubtedly cleave closely to the line of his mentor.

Israeli protest leaders ignore escalating attacks on Palestinians, direct opposition along nationalist lines

Jean Shaoul

Opposition to the power grab by Prime Minister Benjamin Netanyahu has grown to unprecedented levels, but the protests’ leaders have said nothing about the ongoing attacks on Palestinians by Israel’s security forces and settlers in the West Bank.

On Saturday evening, for the tenth successive week, a record number of people—estimated at 500,000—took to the streets of towns and cities all over Israel, calling for democracy and a halt to Netanyahu’s plans to neuter the judiciary. As well as 100,000 demonstrating in Tel Aviv, 50,000 people rallied in Haifa and in Jerusalem and 10,000 in Beersheva.

Israeli demonstrators hold torches during protest against plans by Prime Minister Benjamin Netanyahu's government to overhaul the judicial system, in Tel Aviv, Israel, March 9, 2023. [AP Photo/Oded Balilty]

This was despite the police’s use of horses, stun grenades and water cannon to break up previous rallies, and the government’s efforts to use the shooting and wounding of three Israelis Thursday evening by a Palestinian, who was killed by security forces, to scare off protesters.

The rallies were again addressed by former government ministers, many of whom have served under Netanyahu in the past, as well as retired generals and intelligence chiefs, who are determined to channel the heterogeneous sentiments of the protesters along nationalist lines in defence of the Zionist project, amid the greatest political crisis and social and economic divisions in Israel’s history.

The organisers have called for mass walkouts and rallies next Thursday in another “day of disruption,” again without challenging the refusal of the trade unions to endorse the walkouts. The Zionist Histadrut union federation fears a massive explosion of anger over the rising cost of living, with inflation now running at 5.4 percent, interest rate hikes and spiraling housing costs. The Histadrut has just agreed a paltry 11 percent pay rise over a seven-year period for 350,000 public service employees, having fended off strikes during the pandemic and four elections in five years “to help with the economic recovery.”

Neither have the organisers made any appeal to Israel’s Palestinian citizens, sharing the concern of a government made up of a far-right coalition of fascists, racists and ultra-Orthodox parties to assert their pro-Zionist credentials. They have gone to great lengths to insist that these protests are in defence of Israel, issuing hundreds of thousands of Israeli flags to the demonstrators.

All factions of the Israeli bourgeoisie are united in their policy of occupying Palestinian land, expanding Israeli settlements—deemed illegal under international law and in violation of United Nations resolutions—and continuing the system of apartheid oppression against the Palestinian population.

The protest leaders are also no less determined to suppress any dissent within Israel itself that would challenge the rule of Israel’s oligarchs. Former Prime Minister Yair Lapid and the other leaders of the opposition seek to convince the ruling elite that they are a safer set of hands to be entrusted with protecting the Israeli state.

The Israeli military has meanwhile stepped up its ever more lethal mass search and arrest operations in the West Bank, which include extra-judicial, targeted killings. They are being carried out during the daytime when towns and cities are packed with people, in an effort to intimidate and terrorise the Palestinian population.

From Monday to Wednesday last week, during the Jewish festival of Purim, the security forces closed the border crossings from the West Bank and Gaza into Israel, confining the Palestinians in a ghetto.

On Sunday, Israeli forces shot and killed three Palestinian gunmen after they opened fire on troops in the West Bank, while a fourth man turned himself in. This follows a raid by Israeli troops last week on the West Bank village of Jaba, where they shot and killed three Palestinians they claimed were “militants.”

On Tuesday afternoon, soldiers raided the West Bank city of Jenin, firing rounds of machine gun fire and explosives, with at least seven drones circling overhead, killing at least six Palestinians and wounding another 10. Video footage showed a damaged ambulance and witnesses said that medical staff were prevented from reaching the injured. A simultaneous arrest operation was mounted in Nablus.

On Monday night, settlers returned to Huwara, scene of a horrific pogrom-like attack a week earlier, where they threw stones at a supermarket and cars and injured five members of the same family, including an elderly man and a toddler. Israeli soldiers were seen dancing on the town’s main road to celebrate Purim. The Israeli military did nothing to stop the attack, instead firing tear gas on the Palestinians, of whom 25 needed medical treatment.

President Mahmoud Abbas’s Fatah-dominated Palestinian Authority (PA), which is widely reviled for its dictatorial and corrupt rule in the service of Israel, has done nothing to protect its citizens, despite being responsible for “security” in the West Bank’s towns and cities. It has enriched a handful of plutocrats while policing the deepening poverty of the majority.

Teachers have been on strike since February 5 over the PA’s failure to pay them their full salaries. With more than a million Palestinian students unable to attend school, families have started a movement to support the strike.

Israel’s orgy of criminal violence brings to 80 the number of Palestinians killed since the start of the year, while Palestinian attacks have killed 14 Israelis. It threatens the eruption of a violent conflagration that would engulf not just the occupied Palestinian territories, but Israel and its neighbours, even as Israel is involved in a covert war against Iran and its allies in Syria.

All this has the backing of Israel’s paymasters in Washington, with the Biden administration granting Finance Minister Bezalel Smotrich—the Religious Zionist leader whose remit now includes the settlements in the West Bank—a diplomatic visa to visit the US where he will address the Israel Bonds conference. Civil rights groups and Palestinian and Jewish organisations have called for the self-confessed fascist and homophobe to be denied entry. Smotrich has called for Israel to “wipe out” Huwara, home to 7,000 Palestinians.