Goodbye 2014 - you will not be missed

31 December 2014

So another year comes to an end and more than any other in recent times I will be glad to see the back of this one.

Of course that does not mean that 2015 will be any better - or that some things simply go away because it is the end of the year - but there will always be the sense that 1 January marks the start of a new year and the hope of change.

2014 will be remembered for the loss of Tai's father in the sort of accident that is just the waste of a life and for her sister's stroke. That her sister has made a partial recovery contrary to the surgeon's expectations is one of the reasons for hope.

Both events highlighted the importance of family and community in Thailand. It is such a tragedy that a country with so much potential is being held back in the dark ages by powerful vested interests and a compliant army. Andrew MacGregor Marshall's late 2014 book "A Kingdom in Crisis" should be required reading for anyone who loves Thailand but who believes in the future rather than a servile past and present. The May coup was just another setback on the road to building a proud future and an educated democratic nation.

Meanwhile an industry that I love had one of its worst years in recent history. The disappearance of MH370 remains one of the great aviation mysteries. I still believe that the wreckage will be found and her secrets revealed but the uncertainty and the wait for the families must be heart-breaking.

No one has yet been found responsible for shooting down MH17. Though most rational people are certain that it was Russian supported Ukraine separatists. Political pragmatism must ot be allowed to hide the truth and bring those responsible to justice.

And just three days ago Air Asia had its first fatal accident with the loss of flight 8501 from Surabaya to Singapore. Air Asia will survive. Its CEO has been strong. But the airline's innocence has gone.

The world seemed a less certain place in 2014. The rise of ISIS in the middle east should concern anyone who values peace in the region. Calm appears to have come to the Ukraine but there remains uncertainty over Russian intentions which have been somewhat short circuited by the dramatic fall in oil prices. Disputes over island ownership and passage through the South China Sea could be the next hot spot. Calm heads should prevail. But the rise of sabre-rattling patriotism could cause escalation. Maybe there is the issue - the rise of extremism is all its different hues. The rest of us - the big silent majority - may just get caught up in the crossfire.

The Gaza conflict in July shocked the world. Israel launched a devastating operation on Gaza after three teenagers were kidnapped by Palestinians. In seven weeks of bombardment, 2,200 people were killed - the vast majority of them Palestinians. There appears to be no acceptable (to all parties) resolution. And war and murder are hiddne behind ever more effective propaganda machines.

Myanmar's refugee problem and the oppression of the Rohinya people continues. The greatest disappointment - the silence of Aung San Suu Chi. After years of persecution she should be standing up for the oppressed not playing for political expediency.

Oscar Pistorius got away with it - which shows what can be done when you can afford the best legal representation. The trial should never have been televised. It simply led to media excess.

Ebola is a reminder that nature can still terrify us and that there are some remarkably brave doctors, nurses and relief agency staff working with little fuss and only with the well-being of their patients in mind.

In a troubled world the US looks impotent; Russia looks weakened; the rise of China is inexorable. How China uses that influence and its economic domination will be a great test for all.

It was a good year for travel - even if it was not always for the happiest of reasons: on the map this year were London, Newcastle, Vienna, Thailand (Bangkok, Phuket, Hua Hin and Chiang Mai), Tokyo, Rome, Vientiane, Switzerland, Devon, Ireland, Stockholm, Norway, Seattle, Portland, Sicily, Hong Kong, Athens, Sydney. Norway and Ireland were highlights; Norway for its scenery and just simple decent friendliness; Ireland for the landing place of Alcock and Brown and for that connection to one of the great feats of aviation.

Lunch in Stockholm was a wonderful way to reconnect. Long lunches and long conversations should happen more often.

Dubai meanders along. As it has rebounded from the 2008-2010 financial crisis the hubris has ratcheted up as well. Dubai was granted the 2020 World Expo. The truble is most people do not know what this is or indeed where the 2015 event will be held. But they have been told it is important so it is.

There are still too many vanity construction projects - hello Dubai canal - and not enough projects that make a difference to the lives of all the UAE's residents. The trouble is when Dubi booms there are people taking advantage - and when it crashes there have been too many people taking advantage. Meanwhile human rights and concerns over legal transparency remain a concern here as they do throughout much of the region.

So that's about it - a troubled year ends. And a new year begins. I wonder where I will be writing this from in 12 months time.

Take care, gentle reader. Thank you. Have a safe and happy new year and an optimistic 2015.

In praise of.....London

31 December 2014

It is time to give London its due - it is one of the world's great cities - maybe it eve tops the list.

I left London in 1988. Thatcher was Prime Minister. Eddie the Eagle was the best the British could offer at the Calgary WInter Olympics. London felt old, tired.

The new London is far from perfect - that is part of its appeal. But it is a vibrant, international city, that has benefited hugely from an influx of nationalities who have arrived to study, work or just to explore.

That to me is the biggest and most welcome difference. The new London is an international city. The old 1980s London was a British city.

House prices are prohibitive. The best properties are now foreign owned. Commutes have become longer and more expensive. The infrastructure creaks....but that at least gives the British something to complain about.

Over Christmas engineering work on the railways predictably did not finish in time. Finsbury Park - a remote NE London commuter station replaced Kings Cross as London's main terminal for two days. Perhaps the daftest piece of contingency planning since Canute tried t stop the incoming tide. Misery for those caught up in the mess. Mirth for the rest of us.

But what a fun place to visit. The investment in the city over the last thirty years has transformed derelict suburbs into new destinations; Canary Wharf; the city around Liverpool Street; Paddington Basin; the transformation of the South Bank, including Borough and Southwark.

On a sunny, cold December Sunday evening crowds on the south bank were enjoying a European style winter fair. The churros and hot chocolate stand was next to the duck confit burger stand and the chorizo roll and hot sangria stand. There was music. There was the buzz of a happy crowd.

The river is so much busier than it used to be. Tour boats continue through the winter months. The redevelopment of the South Bank, allows an uninterrupted walk along the river and takes in the Globe Theatre; the Tate Modern, the National Theatre - and some fine restaurants, bars, and markets. London is a city where you should explore as much as you can on foot. There is always something to see.

Over in Covent Garden, whose transformation in the 1980s arguably started the rebuilding of London as a destination, performers entertained a big crowd. The market was busy. The festive decorations were classy. The subway station as over-crowded as it always is.

Chinatown and Soho were busy. This is a very different Soho from 30 years ago. Restaurants of just about every nationality line the streets. Few of the staff are British - maybe that is why they are welcoming and enthusiastic. There is a warm energy. Explore and you will be rewarded.

The media remains vibrant - both traditional and new media. Fleet Street's media giants have long gone, to be replaced by solicitors and accountants and even a Premier Inn in one of the old Reuters buildings. But reading newspapers like the Independent and Guardian is a good reminder of what quality, questioning, informative and sometimes humourous journalism can do....and is such a refreshing change after too many years of the SCMP, Bangkok Post and Gulf News.

Maybe that is part of the charm - London does not take itself too seriously. None of the pompous overblown self promotion of Dubai. London has it all and does not need to make a loud noise about it. Take Paddington station where a statue of the great engineer, Isambard Kingdom Brunel sits next to a tribute to Paddington Bear. London has this ability to make people smile.

I am sure living in London has many frustrations. The cost of living is among the highest in the world. But for a visitor it is hard to beat.

Coup drives down Thai Air Asia profits

30 December 2014

Thai AirAsia CEO Tassapon Bijleveld said the carrier will, during 2014, post its greatest profit decline in its 10-year history, from THB1.9 billion (USD57.7 million) in 2013 to THB200 million (USD6.1 million) in 2014.

The carrier also lowered its FY2014 traffic forecast, from an earlier projection of 13.6 million to around 12.1 million passengers. Load factors are expected to average 80%, lower than a previously-forecast 83%.

Mr Tassapon said: "Despite increasing capacity by 20 per cent by adding five new aircraft, the number of passengers will be up by only about 16 per cent, lower than our average annual growth of 20 per cent... Political unrest in Thailand was the key factor for the decline".

The carrier, which handled 10.3 million passengers in 2013, also announced plans to focus on the domestic market in 2015 to substitute for losses from international markets.

Guzzling in the Gulf

23 December 2014

The Monarchies Face a Threat From Within

By Jim Krane for Foreign Affairs magazine

The story of the Persian Gulf monarchies is a Horatio Alger tale writ large. Over the past half-century, oil has transformed the six once-destitute sheikhdoms into some of the wealthiest places on earth.

Supergiant oil fields discovered between the 1930s and the 1970s, such as Kuwait’s Burgan and Saudi Arabia’s Ghawar, provided an ideal source of energy for the free world. It was easy oil, pooled in boundless reservoirs that could geyser into action with the prick of a drill bit. Even better, there was virtually no regional demand for that oil. Gulf populations were tiny and their economies undeveloped.

Over the years, the monarchies’ steady stewardship kept markets supplied with sufficient energy to fuel the world during a period of unprecedented economic and population growth. Back home, the ruling families harvested the proceeds to improve the lives of their people, who had, until then, lived in nearly primeval deprivation, with little access to electricity, clean water, medicine, or education. Ruling sheikhs made their subjects wealthy and complacent; oil production was a virtuous cycle.

That old story is beginning to change. The Gulf monarchies have developed a growing taste for their chief export, which, if left unaddressed, could undermine both of their long-held roles: as global suppliers and as stable polities in an otherwise fractious Middle East. For the rest of the world, meanwhile, the potential loss of a key Gulf asset—spare oil production—foreshadows a period of greater market volatility and uncertainty.

DRILLING FOR DISCOUNTS

It took an astonishing increase in demand to get to this point. Energy consumption in these six exporting countries, just a rounding error on global demand a few decades ago, has grown by eight percent annually since 1972, compared to two percent for the world. Together, four of the six monarchies (Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates) have less than one percent of the world’s population, but account for more than five percent of global oil consumption. Saudi Arabia, which consumes roughly a quarter of its own production, is now the world’s number-six oil consumer, guzzling nearly as much of the stuff as Russia and more than either Brazil or Germany, countries with far larger economies and populations.

What lies behind the transformation? For one thing, populations and incomes in the Gulf countries have mushroomed in recent decades, with predictable effects on demand. But another factor, one that lies entirely within government control, is also responsible: price.

Energy is so cheap in the Gulf states that, in some cases, it is essentially given away. Prices are among the world’s lowest: at 45 cents per gallon, gasoline in Saudi Arabia is a quarter the price of bottled water. In Kuwait, electricity has cost just 0.7 cents per kilowatt-hour since 1966. (Americans pay about 15 times as much.) In nearby Qatar, citizens receive unlimited electricity and water for free. Ultra-low energy prices are typical in autocratic or populist petro-states beyond the Arabian Peninsula, including Algeria, Brunei, Iran, Iraq, Libya, Turkmenistan, and Venezuela.

Cheap energy has exacerbated demand in two important ways. First, it has created path-dependence on energy-intensive infrastructure and technologies: skyscrapers, Hummers, and industrial plants producing aluminum, fertilizer, and petrochemicals. Second, low prices have also engendered wasteful behavior, making it easy for families to leave their air-conditioners blasting at home during a long vacation.

As a result, the Gulf’s per capita carbon emissions lead the world as well, ahead of or alongside other big emitters such as Australia, Canada, and the United States. The level of waste is substantial, even on a global scale. The IMF has calculated that eliminating energy subsidies, the largest of which are concentrated in oil-producing states, would reduce worldwide carbon emissions by 13 percent

Short-sighted energy policies could be defended in the 1970s, when citizens of these states were poor and few in number. But they have set the Gulf on a dangerous path.

WHEN ALL PETROLEUM IS LOCAL

The region’s problems extend beyond wasted energy. The Saudis and their neighbors also divert massive amounts of their chief export into domestic markets. That trend could prove ruinous. The Gulf countries derive, on average, 40 percent of their GDPs and 80 percent of their national budgets from oil exports. Yet if longstanding consumption trends continue, these countries will be unable to maintain their all-important supply to global markets. Most are already experiencing shortages of natural gas used in power generation, and some, including Kuwait and Saudi Arabia, are generating more than half their electricity from crude oil and other valuable liquid fuels.

Khalid al-Falih, the CEO of Saudi Aramco, has warned that without any significant changes, the kingdom’s consumption could rise from three million barrels per day to eight million by 2030. A projection by Riyadh’s Jadwa Investment Bank paints an even gloomier picture, showing that, at current rates of consumption growth, Saudi spare oil production capacity will dwindle until it disappears sometime before 2020. Barring major new investments, the Saudis would have to begin diverting oil destined for export into the domestic market. Following the trend further, Jadwa has estimated that Saudi Arabia will consume its entire production capacity—12.5 million barrels per day—at home by 2043. London’s Chatham House has predicted that the kingdom will become a net oil importer even earlier, by 2038.

There is a clear way, however, that the monarchies can reverse course: by raising domestic prices. In one sense, the Gulf monarchies and other big exporters are fortunate. They don’t need to tax energy; they just need to sell it at a reasonable price. If the Gulf states raised prices to global levels, calculations based on modest estimates of price elasticity show that demand would respond strongly. Over the long term, Kuwait might cut its electricity demand by as much as 60 percent, and Abu Dhabi by as much as 40 percent. An end to gasoline subsidies in Saudi Arabia could reduce its domestic demand by a third.

Just as in the United States, Gulf consumers would also take steps to reduce their exposure to higher prices, insulating their homes and trading in old appliances and SUVs. Governments would reap even more revenue, which could help finance a transition to a more energy-efficient economy. Polluted skies would give way to cleaner air. And since actual reserves in most of these countries remain huge, they could export more of the oil and gas they now consume.

Reforms, however, won’t be easy to implement. Subsidies are notoriously difficult to retract, even the unsustainable ones. And centralized governments, like those in the Gulf, are particularly vulnerable to angry public reaction. The Arab Spring, moreover, has taught the sheikhs that antagonizing subjects could endanger their very survival. As the political scientist Ted Gurr wrote in 1970—and as history has demonstrated since—declines in state benefits and social welfare are among the most common triggers for political violence. The examples are many. In OPEC members Venezuela and Indonesia, government-mandated price increases triggered violent public reactions that toppled sitting governments in 1993 and 1998, respectively. More recently, Arab Spring rioters counted benefit cuts as a major grievance, in countries ranging from Tunisia to Oman.

Citizens of the Gulf monarchies—like those in petro-states the world over—consider themselves entitled to cheap energy, alongside the other inducements that the regimes provide in return for political support. For many of them, raising prices on electricity or gasoline is politically illegitimate.

As the ability of Gulf monarchies to maintain exports comes under challenge, that sense of entitlement will be tested. Gulf rulers will need to look for ways to tinker with the prevailing social contract, reforming subsidies in ways that maintain exports without undermining public support for the regime. The recent plunge in oil prices has made these reforms simultaneously more urgent and easier to sell. But the stakes are high: If the monarchs fail, they may not get a second chance.

THE END OF SPARE CAPACITY

Surging Gulf oil consumption poses a strategic threat as much as it presents an economic one. In the past, OPEC has been able to flood the market with oil, mostly from Saudi Arabian reserves, to protect the global economy from damaging volatility. This capability has also functioned as a critical strategic asset for the United States. When Washington intervenes in the Middle East, it can usually count on its Saudi friends to ramp up production and replace lost exports from, say, Iran, to help avoid a crippling spike in prices. At one time or another, Saudi spare capacity has replaced exports from Iran, Iraq, Kuwait, and Libya. Such reserves allow the United States to have its cake and eat it too—to advance foreign policy goals without disrupting economies, antagonizing motorists, or complicating investment decisions.

At the moment, a supply overhang is sending oil prices lower, and so, few are thinking about Saudi spare capacity. When demand returns, however, the Saudis may be less able to rise to their old role. Future export outages could trigger more virulent price spikes, as Robert McNally, a former economic adviser to U.S. President George W. Bush, and Michael Levi, a senior fellow at the Council on Foreign Relations, predicted in these pages in 2011. Everyone from central bankers to U.S. consumers would suffer, and the ensuing damage to national economies and personal incomes would have no short-term antidote.

For the Gulf monarchs, the scenario gets even worse. If they lose their spare capacity, they start to lose their strategic importance to the United States and much of the oil-importing world. Pundits have crowed for some time that U.S. shale production could eliminate the country’s dependence on Middle Eastern oil. Meanwhile, Middle Eastern elites have feared that shale oil could reduce U.S. commitment to the region’s security.

Yet such scenarios are off-target. Since oil is a globally fungible commodity, the source of supply matters less than the level of supply. Even if the United States were entirely self-sufficient, an external supply shock would still impact U.S. prices. Shale oil doesn’t decouple the United States from the Middle East; it simply makes its dependence on the region’s oil less direct. Washington’s current calculus will change, however, if the Gulf countries find themselves unable to sustain their market-regulating role. In that case, the United States may not be as interested in spending, by one estimate, $50 billion annually to protect the monarchies.

THE REFORMER'S PLAYBOOK

Like all oil exporters, the Gulf monarchies’ prime business will eventually come to an end, either from depletion, the domestic displacement of exports, or reduced global demand for a product that is contributing to a warming climate. Some countries, such as the United Arab Emirates and Qatar, have already begun funneling profits into sovereign wealth funds and diversifying their economies, both of which are steps in the right direction. But they are still insufficient to replace the giant economic contributions of oil. The sheikhs need more time.

The simplest way for these oil monarchies to stay in business is to end extraordinarily generous energy subsidies. Once prices increase, efficiency will follow, driving behavioral change and technological improvement.

The good news is that an effective model for reform already exists. Across the Gulf, an old nemesis, Iran, has proven that an oil-exporting autocracy can launch a massive change in energy pricing without triggering unrest. Although Arab monarchs might recoil at the thought of emulating Iran, there are reasons to believe that the Iranian script for replacing in-kind energy benefits with cash might work better on the Arab side. In Iran, the government ultimately suspended its reforms in the face of inflation, currency devaluation, and embargo. But the Arab oil monarchies have a more reform-friendly macroeconomic environment, since they peg their currency to the U.S. dollar and face little danger of embargo.

External pressure would also help, providing political cover for governments, especially centralized regimes, to enact unpopular measures. Saudi Arabia’s accession to the World Trade Organization in 2005 gave the kingdom justification to enact difficult economic reforms. And when the IMF’s managing director, Christine Lagarde, warned of wasted resources in Kuwait, she provided the government with a rationale to scale back diesel and gasoline subsidies.

In the United States, the Environmental Protection Agency’s proposed carbon standards for power plants have provided President Barack Obama with new credibility on climate change. He should leverage that momentum by asking exporting countries to pare back their subsidies. In so doing, he would also provide political cover for Middle East allies that are ready to begin a task they desperately want to start. Oil revenues that have tumbled to their lowest levels in years provide a handy fiscal incentive to get busy.

Whatever the catalyst, subsidy reform will likely occur for a simple reason: because the alternatives are far worse. As Saudi King Faisal understood, rags-to-riches tales don’t always end on a high note. “In one generation we went from riding camels to riding Cadillacs,” he wrote. “The way we are wasting money, I fear the next generation will be riding camels again.”

Emirates to launch 3rd daily to Birmingham

22 December 2014

Emirates has announced a third daily service from Dubai to Birmingham Airport  and will also become the first airline to offer a direct First Class service to the region.

Commencing Saturday 1st August 2015, Emirates flight EK41 will depart Dubai International Airport at 0235hrs and arrive in Birmingham at 0705hrs. The outbound flight EK42 will depart Birmingham Airport at 0910hrs and arrive in Dubai at 1910hrs, well-timed for a good night’s sleep and a fresh start in the city the following day.

Or - which is far more likely - well timed for an onward connection on flight into South Asia, the GCC and the Far East.

Emirates started flying from Birmingham to Dubai in December 2000 when it launched the route with a daily non-stop service, operated by a 278-seat Airbus A330. Over its 14 year history at Birmingham, Emirates has carried 4.9 million passengers.

The seven new flights a week will be operated with a Boeing 777-300ER aircraft in a three class configuration.

Oil prices in a changing world

16 December 2014

Oil prices dropped below US$59/barrel today for the first time since 2009. In six months the price of oil has fallen 50%.

No one seems to have seen this coming - the fall is substantial and dramatic.

So good news or bad? Exporters, oil-company shareholders and industry suppliers are all contemplating a future of oil at $60 a barrel—or below. So too are all the people who lent money to them. Markets are pricing in the pain and pessimism immediately, while seeming to discount the future gains to energy users.

Russia’s currency is at a record low, falling below 60 roubles to the dollar on December 15th. Indonesia’s rupiah is at its weakest for six years. The FTSE 100, a London-based stock market index dominated by extractive-industry shares, had its worst week since August 2011, with a 6.3% fall. European equities across the continent suffered their biggest weekly loss in more than three years. Emerging market stocks are also down to a nine-month low. Middle East stock markets saw falls of up to 7% today. Thailand yesterday saw its biggest one day market fall since 2008.

Yet the secretary general of the Organisation of Oil Exporting Countries, (OPEC), a cartel which produces 40% of the world’s oil, said he saw no grounds for production cuts. So excessive supply meets falling demand.

OPEC is gambling that the fall in price will be short-lived. That is a big gamble. Increased efficiency, weak economic growth and the use of alternative energy sources are all dampening demand.

Weak demand is only a minor factor, though. The biggest cause of the falling price is rising supply from non-OPEC countries, particularly from America. Since 2008 oil companies in the US, for example, have increased production by 70%, or 3.5m barrels of oil per day. In theory, lower oil prices will curb that. Spending on new projects is falling, chilling the prospects for jobs and profits.

Efforts to trim supply have little immediate effect. Once a well has been drilled it makes sense to pump them.

So what has happened:

i) demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to other fuels.
ii) turmoil in Iraq and Libya — two big oil producers with nearly 4m barrels a day combined — has not affected their output. The market is more sanguine about geopolitical risk.
iii) America has become the world’s largest oil producer. Though it does not export crude oil, it now imports much less, creating a lot of spare supply.
iv) the Saudis and their Gulf allies have decided not to sacrifice their own market share to restore the price. They could curb production sharply, but the main benefits would go to countries they detest such as Iran and Russia. Saudi Arabia can tolerate lower oil prices quite easily. It has $900 billion in reserves. Its own oil costs very little (around $5-6 per barrel) to get out of the ground.

The question that no one seems able to answer is whether this is a good or bad thing. The answer probably depends on where you live and what you do.

Global demand is still expected to grow next year, but by far less than many thought earlier this year. The economies of China, Japan and western Europe – the top oil consumers after the United States – all appear to be weakening. Oil demand falls when economic growth stalls.

The US is still the world’s largest consumer, but more fuel-efficient cars and changing demographics mean demand for oil and gasoline is not increasing. The Energy Department predicts a slight decrease in gasoline demand next year even though the price is expected to be sharply lower and the economy is expected to grow.

Lower oil prices present a major economic risk to oil-producing nations like Russia, Venezuela and Nigeria. And the lower prices are spooking the Middle East despite massive cash reserves.

It is not all gloom - for drivers, shippers, airlines and other consumers of fuel, there’s nothing not to like about the drop in oil prices. In the USA the national average gasoline price has fallen for 81 straight days to $2.55 a gallon, its lowest level since October of 2009, according to AAA. It’s $1.15 a gallon cheaper than its high for the year, saving US households $100 a month as they shop for holiday presents.

Diesel and jet fuel prices have also plunged, helping boost the profits and share prices of airlines and shippers. Heating oil is the cheapest it has been in four years, reducing home heating prices.

Falling fuel prices act like a tax cut and help boost consumer spending, which for example accounts for 70% of the US economy. But economists are growing concerned that there are other, more troublesome forces at play.

The depth of oil’s plunge could be a signal that the global economy is struggling even more than economists think. A weak global economy could hurt the US economy by reducing exports, employment and spending, which together could outweigh the economic benefits of cheaper fuel.

The knock on effect for another house price and construction slump is worrying.

For oil companies, oil-producing states and oil-exporting countries, the oil price collapse is painful.

Major oil exporters such as Iran, Iraq, Russia and Venezuela rely heavily on revenues from state-owned oil companies to run their governments and are struggling under major budget shortfalls.

For example, Bank of America estimates that every $1 drop in the global price of oil costs Venezuela $770m in annual revenue. Current prices are now $47 below last year’s average, putting the country on pace for a $36bn reduction in revenue.

A fresh wave of panic selling wiped out $49 billion of stock market value across the Gulf Arab economies today.

The stock market losses came on top of over $200 billion of value already destroyed since the end of October. Most of the frenzied selling has been by retail investors who fear governments will cut spending in line with falling oil revenues.

Dubai's index tumbled 7.3 percent to 3,084 points, a one-year low. The market has now retraced more than 50 percent of its massive rally from a multi-year low in January 2012 to this year's peak in May, a rise of 318 percent.

Abu Dhabi's benchmark ended 6.9 percent lower, posting its biggest daily loss in five years and also hitting a one-year low.

Investors ignored statements by officials and economists who said fears of sharply lower spending and growth were not justified.

Speaking at a conference in Dubai on Tuesday, an International Monetary Fund official said that although the oil price plunge would cut revenues of Gulf Arab governments, they had big reserves so in general they would not need to reduce state spending significantly.

United Arab Emirates economy minister Sultan bin Saeed al-Mansouri said development projects would not be cut significantly in coming years and urged investors to remain calm.

But investors were dismayed by the speed of oil's decline and the fact that their governments do not appear to have tried to support oil prices. Heavily traded UAE blue chips such as Emaar Properties, Arabtec and First Gulf Bank sank their 10 percent daily limits.

One of the few UAE stocks to gain was Air Arabia, which can be expected to benefit from cheaper aviation fuel. The stock edged up 0.7 percent and was Dubai's third most heavily traded.

Saudi Arabia's bourse, which has the biggest share of petrochemicals among markets in the region, tumbled 7.3 percent in its biggest daily loss in six years and reached 7,330 points, its lowest level since June 2013.

Dozens of Saudi stocks fell by their daily 10 percent limits, indicating further potential weakness. The index has dropped 34 percent from its September peak.

While analysts think earnings in many sectors such as banking and retailing will not necessarily be dampened much by cheap oil, petrochemical firms are exposed as they will lose the competitive advantage they enjoy against foreign rivals from cheap feedstock. Also, the global economic weakness indicated by the commodities rout is a bad omen for petrochemical exporters.

Saudi Arabia is expected to announce its 2015 budget by the end of this month, and possibly as soon as on Monday.

TUESDAY'S HIGHLIGHTS
DUBAI
* The index tumbled 7.3 percent to 3,084 points.
ABU DHABI
* The index fell 6.9 percent to 3,892 points.
SAUDI ARABIA
* The index fell 7.3 percent to 7,330 points.

In other words for the oil-based economies of the Middle East this is something of an unwanted and unexpected setback. But a radical rethink of middle east budgets and sources of income is long overdue.

Sorry, Putin. Russia’s economy is doomed

16 December 2014 The Washington Post

A funny thing happened on the way to Vladimir Putin running strategic laps around the West. Russia's economy imploded.

The latest news is that Russia's central bank raised interest rates from 10.5 to 17 percent at an emergency 1 a.m. meeting in an attempt to stop the ruble, which is down 50 percent on the year against the dollar, from falling any further. It's a desperate move to save Russia's currency that comes at the cost of sacrificing Russia's economy. So even if it "works," things are about to get a lot worse.

It's a classic kind of emerging markets crisis. It's only a small simplification, you see, to say that Russia doesn't so much have an economy as it has an oil exporting business that subsidizes everything else. That's why the combination of more supply from the United States, and less demand from Europe, China, and Japan has hit them particularly hard. Cheaper oil means Russian companies have fewer dollars to turn into rubles, which is just another way of saying that there's less demand for rubles—so its price is falling. It hasn't helped, of course, that sanctions over Russia's incursion into Ukraine have already left Russia short on dollars.

Add it all up, and the ruble has fallen something like 22 percent against the dollar the past month, with 11 percent of that coming on Monday alone. The Russian ruble has fallen even further than the Ukrainian hryvnia or Brent oil has this year. The only asset, and I use that word lightly, that's done worse than the ruble's 50 percent fall is Bitcoin, which is a fake currency that techno-utopians insist is the future we don't know we want.

And this is only going to get worse. Russia, you see, is stuck in an economic catch-22. Its economy needs lower interest rates to push up growth, but its companies need higher interest rates to push up the ruble and make all the dollars they borrowed not worth so much. So, to use a technical term, they're screwed no matter what they do. If they had kept interest rates low, then the ruble would have continued to disintegrate, inflation would have spiked, and big corporations would have defaulted—but at least growth wouldn't have fallen quite so much.

Instead, Russia has opted for the financial shock-and-awe of raising rates from 10.5 to 17 percent in one fell swoop. Rates that high will send Russia's moribund economy into a deep recession—its central bank already estimates its economy will contract 4.5 to 4.7 percent if oil stays at $60-a-barrel—but they might, just might, be enough to stop the ruble's free fall. We'll see. If they're not, Russia will have to resort to capital controls to prop up the value of the ruble, and might even have to ask the IMF for a bailout.

Putin's Russia, like the USSR before it, is only as strong as the price of oil. In the 1970s, we made the mistake of thinking that the USSR's invasion of Afghanistan meant we were losing the Cold War, when the reality was that they had stumbled into their own Vietnam and could only afford to feed their people as long as oil stayed sky-high. The USSR's economic mirage, though, became apparent to everybody—none less than their own people, who had to scrounge in empty supermarkets—after oil prices bottomed out in the 1980s. That history is repeating itself now, just without the Marxism-Leninism. Putin could afford to invade Georgia and Ukraine when oil prices were comfortably in the triple digits, but not when they're half that. Russia can't afford anything then.

Putin might be playing chess while we play checkers, but only if we lend him the money for the set.

The Sydney siege - some sensible perspective

16 December 2014 The Guardian

It was the act of terror that Australia feared would come but could do little to anticipate and even less to prevent.

It arrived, characteristically, when least expected – just as the country was winding down with office Christmas parties ahead of the customary hazy summer languor of cricket, family gatherings and beach.

And then it came to an ordinarily welcoming morning coffee shop, the Lindt Chocolat cafe in Sydney’s Martin Place, in the form of Man Haron Monis.

It makes tragic little difference to the two dead hostages and the survivors, who must live forever with the terrifying legacy of their experiences, that Monis was apparently an auto-radicalised terrorist, acting partly under the banner of contorted, extreme Islam.

It already seems probable that Monis was not a remote drone acting directly for the Islamic State (Isis), as others who have come to the attention of Australian counter-terrorism authorities have allegedly been. Rather, as Tony Abbott pointed out early on Tuesday morning, he was a mentally unstable man who “cloaked his actions with the symbolism of the Isis death cult”.

Abbott’s statement is a temperate departure from comments he made a few months ago after the shooting of a Muslim man near a Sydney mosque and an earlier unrelated incident in Melbourne in which police shot dead an Islamic radical.

Commenting in September on those incidents, Abbott said:

Well obviously we saw the attack on two policemen in Victoria a month or so back. It seems there is an [Isis] death cult influence on this shooting in Sydney in the last 24 hours or so. The important thing is for all of us to absolutely reject this death cult.

But in measured statements during and after the siege yesterday and today, Abbott offered Australians much-needed assurance and empathy, rather than linking the dead terrorist firmly to Islamic State.

Notwithstanding the number of Australian men who have been drawn to the Isis fight in Syria and Iraq, and suspected terrorists already arrested and charged locally, it seems a sensible way to proceed. Abbott’s security mandarins have been on the record for some time about the danger of auto-radicalisation.

In August the then director of the Australian Security Intelligence Organisation (Asio), David Irvine, said “a recurring nightmare has been the so-called lone wolf, radicalised over the internet, who had managed to avoid coming across our radar”.

And with Monis – a “damaged goods individual” according to his own lawyer – it has come to pass. This is an incident to which all Australians (and citizens anywhere who assume it is safe to buy a morning coffee without becoming a hostage) can relate and, therefore, be fearful of. That is the universal potency of terrorism.

Moments such as these test political leaders. Abbott told his traumatised country:

I can think of almost nothing more distressing, more terrifying than to be caught up in such a situation and our hearts go out to these people.

It required neither more nor less. But as the siege developed, imprudent hyperbole captivated some headline writers, not least at the The Daily Telegraph, whose special edition screamed “DEATH CULT CBD ATTACK – IS takes 13 hostages in city cafe siege”.

It was, we were advised, “the instant we changed forever”.

But it wasn’t really. Australia and Australians, here and abroad, have had sufficient deadly brushes with the terrorism of contorted Islam to understand their own susceptibility. Our distance, always considered such a tyranny, offers us little safety from the darker uses of the internet, where hatred is easily spawned and the deranged easily captivated by deformed religion.

The frequently naïve chatter of social media and the white noise of rolling, 24-hour news coverage – of journalists who know nothing live crossing to those who know little more, in an endless barrage of speculation – brought new dimensions to inanity, irresponsibility and perhaps insensitivity.

A traumatised employee of the Lindt cafe, who narrowly escaped becoming a hostage with her work colleagues, was asked on air, “How do you feel ... knowing that could be you?” Who is genuinely served by such an interview?

Thankfully acts of kindness reverberate in times of evil. That’s why Tessa Kum’s hashtag #Illridewithyou – an evocation of support for Muslims, who are rightly fearful of an anti-Islam backlash after the Martin Place siege – has been mentioned more than 120,000 times on Twitter.

It’s a beautifully conceived reminder that such attacks, whether carried out by Isis or a lone wolf, are antithetical to nearly all Australians.

Abbott on Tuesday morning declared there were “lessons to be learned” from what happened yesterday and overnight. As Australia winds down for the beach and the cricket and extended family time, there is plenty else besides to think about this year. There are lessons for everyone, all right.

Hostage crisis in Sydney

15 December 2014

It was 9.30am on a Monday morning - the start of a new work week.

Martin Place is in the heart of the CBD - the Lindt cafe one of many cafes where people stop on their way into the office.

People pick up a takeaway coffee or office workers sit around tables chatting.

But this was not a normal Monday morning as the Australian newspaper reports below:

"Three motorcycle police arrived and a woman still clasping her mobile phone to her ear was telling them about a gunman inside.

She had tried to enter the cafe just after I had walked out but the automatic sliding glass doors were shut.

Initially she thought the cafe was closed but saw a man with a blue bag and what she thought was a shotgun.

As police quickly swarmed and cleared the area, I turned to see a man against the window, facing out with his hands raised.

At first I was relieved, thinking this was the gunman responding to police — but soon came the awful realisation that customers were being forced against the windows.

From the outset the suggestion of a hold-up seemed remote — a cafe at 9.30am in the middle of the city seemed an unlikely target.

Police said little but pushed shoppers and commuters back as onlookers strained to seen what was going on.

Within 10 minutes car-loads of police were on the scene, wearing bullet-proof vests and some with handguns drawn. They were telling their colleagues that specialist officers were on the way.

Soon traffic along Elizabeth and Phillip streets was blocked, rail traffic through Martin Place station was halted and a massive emergency operation was under way.

My fellow customers — fellow Australians — are now in a horrific situation, the sliding doors of the cafe playing a brutal game of chance and fate in Sydney today.

It is a central, busy location, above a crucial train station and across the road from a television network newsroom — whoever has unleashed this was not after cash but impact.

Terror is in the heart of Sydney right now."

8 hours on the siege continues - five people have been seen running out of a cafe in Sydney’s CBD where at least one armed gunman took ‘fewer than 30’ customers and staff hostage but it remains unclear whether they escaped or were freed.

The cafe remains surrounded by heavily armed New South Wales police. Some inside the cafe were apparently forced to stand at the cafe’s windows holding up a flag bearing what appears to be the Islamic creed

Bizarrely since it is now the end of the work day the crowds are swelling in Martin Place where the siege is taking place. There are hundreds of people now trying to catch a glimpse of the siege, which is likely making the police operation more difficult.

In addition there are people in the crowd drinking (it is the Xmas party season) and taking selfies. Not very appropriate.

Police eventually made contact with the gunman, who appears to be acting alone, in mid afternoon. Hostages have been made to hold a flag with Arabic writing and this has raised concern that this is an Islamic State terrorist attack.

The gunman, calling himself "The Brother" claims there are two bombs in the cafe and 2 in the CBD.

The police presence is massive. Largely shutting down the CBD. Many offices have closed - even those away from the city centre.

So far none of the hostages appear to have been hurt. Five hostages appear to have escaped suggesting that the gunman does not have complete control in the cafe. The police are asking people to be patient and this will be a waiting game.

The CIA torture report and the shaming of the USA

11 December 2014

Last Tuesday a long-awaited US Senate report was released after a five-year investigation into the CIA’s enhanced interrogation techniques.

The report, which looked into CIA interrogation techniques under the George W. Bush administration, comes after an investigation by the Senate Intelligence Committee and wrangling between the committee, the CIA and the Obama administration over how to release the report.

Only the Executive Summary was released and even parts of that are redacted, mainly to avoid disclosing names or locations. It is grim reading.

While parts of the programme had been known – and much more will never be revealed – the catalogue of abuse is nightmarish.

Detainees were forced to stand on broken limbs for hours, kept in complete darkness, deprived of sleep for up to 180 hours, sometimes standing, sometimes with their arms shackled above their heads.

Prisoners were subjected to “rectal feeding” without medical necessity. Rectal exams were conducted with “excessive force”. The report highlights one prisoner later diagnosed with anal fissures, chronic hemorrhoids and “symptomatic rectal prolapse”.

The report mentions mock executions, Russian roulette. US agents threatened to slit the throat of a detainee’s mother, sexually abuse another and threatened prisoners’ children. One prisoner died of hypothermia brought on in part by being forced to sit on a bare concrete floor without pants.

The Senate committee’s investigation, born of what its chairwoman, Senator Dianne Feinstein of California, said was a need to reckon with the excesses of this war, found that CIA officials routinely misled the White House and Congress about the information it obtained, and failed to provide basic oversight of the secret prisons it established around the world.

In a speech in the Senate, moments after the report was released Tuesday morning, Ms. Feinstein described the tumultuous history of her investigation and called the C.I.A. interrogation program “a stain on our values and our history.”

She said, “History will judge us by our commitment to a just society governed by law and the willingness to face an ugly truth and say ‘never again.’

The report is more than 6,000 pages long, but the committee voted in April to declassify only its 524-page executive summary and a rebuttal by Republican members of the committee. The investigation was conducted by the committee’s Democratic majority and their staffs.

Inevitably the responses to the report has largely followed partisan political lines.

Damningly the senate report found that the detention and interrogation of Mr. Zubaydah and dozens of other prisoners were ineffective in giving the government “unique” intelligence information that the C.I.A. or other intelligence agencies could not get from other means.

Basically, torturing prisoners produced unreliable or useless intelligence. There are plenty of examples even in the executive summary - just a few follow:

One CIA cable released in the report reveals that detainee Majid Khan was administered by enema his “‘lunch tray’ consisting of hummus, pasta with sauce, nuts and raisins was ‘pureed and rectally infused’”. One CIA officer’s email was in the report quoted as saying “we used the largest Ewal [sic] tube we had”.

Rectal feeding is not intended as a form or sustenance - it is simply painful abuse of limited application in actually keeping a person alive or administering nutrients, since the colon and rectum cannot absorb much besides salt, glucose and a few minerals and vitamins. The CIA administered rectal rehydration to Khalid Sheikh Mohammed “without a determination of medical need” and justified “rectal fluid resuscitation” of Abu Zubaydah because he “partially refus[ed] liquids”. Al-Nashiri was given an enema after a brief hunger strike.

The CIA’s chief of interrogations characterized rectal rehydration as a method of “total control” over detainees, and an unnamed person said the procedure helped to “clear a person’s head”.

One CIA interrogator at COBALT reported that “‘literally, a detainee could go for days or weeks without anyone looking at him’, and that his team found one detainee who ‘as far as we could determine’, had been chained to a wall in a standing position for 17 days’.’ Some prisoners were said to be like dogs in kennels: “When the doors to their cells were pened, ‘they cowered.’”

In April 2006, during a CIA briefing, President George W Bush, expressed discomfort at the “image of a detainee, chained to the ceiling, clothed in a diaper, and forced to go to the bathroom on himself”. This man is thought to be Ridha al-Najjar, who was forced to spend 22 hours each day with one or both wrists chained to an overhead bar, for two consecutive days, while wearing a diaper. His incarceration was concealed from the International Committee of the Red Cross.

Sleep deprivation involved keeping detainees awake for up to 180 hours, usually standing or in stress positions, at times with their hands shackled above their heads. At least five detainees experienced disturbing hallucinations during prolonged sleep deprivation and, in at least two of those cases, the CIA nonetheless continued the sleep deprivation.” One of the prisoners forced to say awake for seven-and-a-half days was Khalid Sheikh Mohammed. Most of this time he was forced to stand. The report says that former CIS director Michael Hayden was aware that Mohammed had been deprived of sleep for this period.

Many Republicans have said that the report is an attempt to smear both the CIA and the Bush White House. Former C.I.A. officials have already begun a vigorous public campaign to dispute the report’s findings.

But taken in its entirety, the report is a portrait of a spy agency that was wholly unprepared for its new mission as jailers and interrogators, but that embraced its assignment with vigor. The report chronicles millions of dollars in secret payments between 2002 and 2004 from the CIA to foreign officials and to third part contractors aimed at getting other governments to agree to host secret prisons, including Thailand.

The report reveals that two doctors, identified by the pseudonyms Dr Grayson Swigert and Dr Hammond Dunbar, were paid $81 million by the CIA to help develop and implement a seven-year programme that included "enhanced interrogation techniques" such as waterboarding, placing detainees in stress positions and sleep deprivation.

Until now, little was known about the pair, who the New York Times has named as James Mitchell and Bruce Jessen.

According to the declassifed documents, they created the programme in 2002 when the CIA took custody of Abu Zubaydah, a Saudi arrested in Pakistan and suspected of being an al-Qaeda lieutenant.

He was taken to an unnamed country, reportedly Thailand, where a prison – “detention site green” - became an experimental laboratory for Swigert and Dunbar to perfect the techniques they had learned at the US Air Force Survival, Evasion, Resistance and Escape (Sere) school where they were based before.

During Swigert’s pitch for the programme he described 12 SERE techniques that could prove useful to the CIA. They were: “The attention grasp, walling, facial hold, facial slap, cramped confinement, standing, stress positions, sleep deprivation, water-board, use of diapers, use of insects, and mock burial.”

A year after Swigert and Dunbar began the torture (or “enhanced interrogation techniques”), a senior CIA interrogator would tell colleagues that their model at SERE was “based on resisting North Vietnamese physical torture” and “designed to extract confessions”.

Indeed, the interrogation was prioritised over the health of the detainee. One declassified cable says the interrogation team understood that “interrogation process takes precedence over preventative medical procedures”.

The CIA also provided a “indemnification agreement” to “protect the company and its employees from legal liability arising out of the programme”.

But while condemning the actions of the CIA the report is weak on its commentary on every top official whose job it was to prevent this torture from happening.

The report recasts the country’s political leadership as useful idiots for an intelligence agency gone rogue, concluding that Bush was only fully briefed on the interrogation program in 2006, as the details were coming out in the press. But it’s hard to believe that the Bush administration couldn’t have had any clue about what was really going on at the CIA.

Less than a week after the 9/11 attacks, Bush signed an order allowing the CIA to detain and interrogate terror suspects, and in February 2002, he signed “a memorandum stating that the Third Geneva Convention did not apply to the conflict with al Qaeda and concluding that Taliban detainees were not entitled to prisoner of war status or the legal protections afforded by the Third Geneva Convention,” according to a 2008 Senate Armed Services’ Committee investigation.

So: Mere months after the 9/11 attacks, the Bush administration was already rewriting the law to make it easy to torture detainees in U.S. custody.

So a major US government agency acted with utter disregard for human decency, implementing a program that was as incompetently managed as it was brutal. And not one person will be prosecuted.

Despite the fact that agency officials involved in the program reportedly misled Congress, the White House, and the Justice Department, the agency has so far faced no meaningful accountability for its actions. That’s because the CIA’s wrongful detentions and interrogations affected an unpopular group against whom violence can be easily justified. Americans are, at best, ambivalent about, if not supportive of, the use of torture when it comes to suspected terrorists — particularly those who can be perceived as foreign.

Indeed, when tv shows such as Homeland appear to embrace interrogation we have started to become immune to it.

The CIA didn’t go rogue. It did more or less what the Bush administration, and perhaps even the public, wanted it to do. Faced with the hawkish political climate of the post-9/11 years, Congress was too paralyzed by fear or indifference to stop them. With the gruesome details now made public, the Obama administration would like to move on like nothing happened, even though the next Republican president could overturn his 2009 order banning Bush-era torture with nothing more than a pen.

The CIA’s interrogation program was a spectacular, grisly failure. But it wasn’t theirs alone.

The Dear Leader's core values embrace Hitler as a role model

11 December 2014

The Thai junta’s efforts to stifle the media and control the national narrative since it took power on May 22 have been well documented. Aside from plain old-fashioned censorship, it has put serious efforts into creating a wave of patriotic fervour among Thais and instilling the desired values with films and songs.

In June the National Council for Peace and Order (NCPO) gave out thousands of free tickets for the patriotic Thai war biopic ‘King Naresuan 5‘ and has regularly hosted free music concerts featuring music suitable for a collective “return to happiness”.

Even junta leader General Prayuth Chan-ocha pitched in, writing a catchy sentimentalist ballad justifying the coup – entitled ‘Return Happiness to Thailand’ – before making it a hit by flooding radio and television stations with his song. It is still played at the end of every hour on government controlled radio stations.

As Thailand’s prime minister, he also hosts a one-man TV program ‘Returning Happiness to the People’ every Friday evening when he updates the nation on the junta’s progress and reminds Thai people of their duties. With a goal to impose its own moralism on the nation, the junta’s relentless attempt to dominate the media space are unlikely to come to an end anytime soon.

Last Saturday, December 6, a new production called Thai Pride (Thai Niyom) premiered with a free screening at Major Cineplex cinemas nationwide. This latest production, commissioned by the Office of the Prime Minister, is also scheduled to be broadcast on free TV later this month. Aimed at bolstering patriotism among the Thai people, the production comprises 12 short films by 12 directors. Each of them presents one of the 12 core values which are being endlessly promoted by the junta.

These have not only been adapted into film, they have already been adopted by the Education Ministry and are being integrated into the standard curricula. Many schools have responded quickly to the idea, and the result is a number of YouTube videos of students singing, reciting and dancing to the patriotic song in an awkward melody.

Bizarrely, one of the short films features an animated section depicting young Thai students painting a picture of Adolf Hitler with a Swastika in the background. The short, entitled ’30’, was quickly removed from official YouTube channels Tuesday.

The director of a film commissioned by the junta has defended the Hitler scene. saying he "didn't think it would be an issue."

In the video, which reportedly is intended to promote the value of "democracy," wholesome looking children smile as they put the final touches on a glorious painting of Hitler with his arm raised into a fist beneath a large swastika wreathed with laurels.

If Hitler is an acceptable role model for the Thai junta then there are even worse times ahead.

If it was simply a naive mistake by the director then it raises again the whole issue of education and the lack of critical reasoning and discussion.

Air Canada to fly to Dubai in 2015

11 December 2014

 Air Canada will launch non-stop service between Toronto and Dubai beginning in November 2015. The new route will extend the airline's international network farther into the Middle East at a time of increased travel between North America and the region.

It should be noted that Air Canada has spent years lobbying the Canadian government to stop Emirates and Etihad from establishing any additional flights to Toronto beyond the six a week to Toronto that the airlines share equally.

Air Canada say that te introduction of the Boeing 787 Dreamliner has been a catalyst for international expansion plans. Air Canada's 787s are in a high density configuration with 9 across in economy and only a 30 or 31 inch seat pitch. It terms of cabin product it will fall far behind the product of both UAE airlines.

The new route will increase Air Canada's presence in the Middle East by providing its customers with direct, non-stop access to Dubai, complementing its other services in the region. Air Canada currently serves the region primarily through an extensive joint venture with its JV and Star Alliance partner Lufthansa over Frankfurt and Munich. In addition, the new route will build on Air Canada's existing codeshare relationship with Etihad Airways, with whom it codeshares on three flights a week between Toronto and Abu Dhabi, in the UAE.

Since last December, Air Canada has announced new international service to Delhi, Amsterdam, Rio de Janeiro, Osaka, Tokyo-Haneda and Panama City. Including Dubai, Air Canada now serves or has announced service to a total of 66 international destinations on five continents from its Toronto global hub.

Tickets for Dubai go on sale Dec. 16, 2014 and the three-times-weekly service starts on Nov. 3, 2015.

The Guardian view on the continuing protests in Hong Kong

2 December 2014 - Editorial: Rule that is simultaneously timid, fearful, and harsh: China’s problem is that it cannot free itself of a mind set that values control above all else

China’s obsession with control is the enemy of sensible policy. If nothing that comes from outside the ranks of the governing elite can ever be permitted, and indeed must on principle be opposed simply because it does come from outside, the result will be rule that is simultaneously timid, fearful, and harsh. That is the lesson of Hong Kong, where both the local authorities and Beijing have made misstep after misstep. The result is that the police are still beating and arresting student demonstrators more than a month after the first, peaceful, protests against the Chinese government’s insistence that it must control who can and who cannot stand for the position of chief executive.

True, the number of demonstrators has fallen, as has popular support for their cause. True, the use of force has been, so far, relatively restrained. The situation is manageable, but that does not mean that China has won, if by winning is meant winning over that large proportion of the population of Hong Kong who want their city to have the autonomy and gradually evolving democracy they believe they were promised, and in return for which they were ready to offer a qualified loyalty to Beijing. What China has done in Hong Kong will preserve control but deepen alienation.

It will have a price, too, outside China, where it is seen as yet another indication that compromise and the Chinese communist party are strangers to each other, whether in dealing with non-Han minorities, in territorial issues with neighbours or in relations with other major states.

Taiwan is a case in point. The disastrous results for the ruling Kuomintang in the weekend’s elections there mainly reflect the unpopularity of President Ma Ying-jeou, a good man who lost his political touch, rather than than any deliberate repudiation by voters of his and his party’s relative closeness to Beijing. Yet the fact that the “one country, two systems” formula has been almost completely discredited by events in Hong Kong is part of the context. Mr Ma’s criticism of Beijing in a speech last month in which he supported the Hong Kong demonstrators and called for China to move toward constitutional democracy did him no good electorally. This may have been because voters felt that he acted less than wisely in dealing earlier this year with the Sunflower student movement, which demanded that increased trade with the mainland be monitored to prevent it being used by China to gain political influence in Taiwan.

But it is also true that the narrative of convergence to which Mr Ma tried to appeal has lost its power. The Chinese are prisoners of another narrative, in which China’s rise is a phenomenon benefiting its neighbours as much as itself, in which opponents are seen as a tiny minority manipulated by hostile powers, and in which democracy is a flawed western concept that has no relevance for China. The refusal to allow the British parliament’s foreign affairs select committee to visit Hong Kong is typical of this deeply counterproductive attitude. If there are Chinese officials who understand this, they have yet to show their hand.

Etihad's new colour scheme

1 December 2014

My opinion may not count for much but I like this very much - bold, distinctive, original, global.

And on an A380

Etihad A6-APA by XFW-Spotter, on Flickr