Carrot: We will pay you $xxx for each Kalashnikov you hand over. Stick: If we find you one after x you’ll go to jail for ten years!

Sir, in your “Broad front needed to address Venezuela crisis” you opine that the “Diplomatic effort requires reasonable balance of carrot and stick” February 5.

Indeed! In 2007 the degenerated Hugo Chávez decided to weaponize his supporters, the “colectivos”, by importing 100.000 Kalashnikovs from a willing salesman, Russia.

For Venezuela to come out reasonably well from its current predicaments, those rifles must be collected.

If all those who oppose the possession of guns in their own country dedicated just three percent of their efforts to help Venezuela to collect those rifles so as to have these destroyed, they might provide more human assistance than shipping many tons of foods and medicines.

If that’s not done all food or medicines sent might not reach those unarmed Venezuelans who most need it.

@PerKurowski

When restructuring Venezuela’s debt, start with identifying all odious credits.

Colby Smith writes “analysts reckon Venezuela has some $140bn debt outstanding with over $65bn owed to bondholders and another roughly $40bn due to China and Russia.” “Venezuela’s welter of debt will mean a messy restructuring” February 2.

The key word here is “reckon”… because the indebtedness of Venezuela has clearly not followed a transparent process. Frequently there are references to odious debts, but very rarely or never to the fact that these most often arise from odious credits that should never have been awarded. That “odiousness” extends from a shameful lack of due diligence to outright participation in corrupt acts.

All citizens in the world would greatly benefit from having a clear definition of what should be considered odious credits, and of its consequences. Without it, any Sovereign Debt Restructuring Mechanism (SDRM) similar to the one proposed 2002 at the IMF by Anne O. Kruger, would be found wanting.

PS. Because Robin Wigglesworth has touched on this theme I am copying him. 

https://ftalphaville.ft.com/2016/05/06/2161045/donald-trump-and-the-sovereign-debt-restructuring-mechanism-revisited/

https://www.ft.com/content/fa6850cc-96c3-11e7-b83c-9588e51488a0

What if Britain could use a Remain to make the EU a more worthy union?

Sir, Martin Wolf writes “EU is a peace project that works by embedding mutual relations in a framework of equally-applicable and legally-binding rules. The mutual trust necessary to make the EU work depends on this.” “Misunderstanding the European project” October 5.

How beautiful, but does the reality stand up to this? I don’t think so. As example EU authorities, for the risk weighted capital requirements for banks decreed a 0% risk weight for Greece and, as a direct consequence Greece was offered too much credit and, unable to resist, took on too much debt. But then EU blamed Greece for it all, and left it alone to pay for it all.

Also, the number one EU challenge is to help many of its members meet the challenges the euro poses, challenges that were known from the very start. Have they done this? No, in the euro’s soon twenty years, EU techno/bureaucrats have spend more time on a lot of other minor issues that sometimes makes one think more of a Banana Union. 

How can/should a Remainder Britain respond to EU? Definitely not with a “sorry, we made a mistake” but much more by requiring EU to do whatever is needed to make it what Martin Wolf wants it to be.

Britain might need a EU but EU might need Britain just as much. So what a great historic opportunity it would be if Britain used a Remain to leverage EU into something much better?

If nothing comes from it that might be because the European Union dream might have been taken over by European Union profiteers and, if so, Brexit shines much better.

PS: Wolf writes “the parallel Jeremy Hunt drew between the EU and Soviet Union was so stupid and offensive. The Soviets sent tanks into East Berlin in 1953, Budapest in 1956 and Prague in 1968.” I am not that sure, the Basel Committee, with the enthusiastic approval of EU sent in 0% risk weights for sovereigns and 100% for citizens. These will prove to be more dangerous to the Western World than all Russian tanks multiplied by thousands.

PS. What would Martin Wolf suggest Britain says to the European Union if it backs down from Brexit? “Sorry EU we did not really mean it?

@PerKurowski

What stops a Supreme Court of Justice of Venezuela in exile, to request the embargo of oil unduly received by Russia?

Sir, you suggest that one of the few ways the Maduro regime could manage the restructuring of PDVSA’S bonds, is that “Moscow might… extend the cash Caracas needs to service PDVSA debt in return for cut-price stakes in local oil ventures”, “The geopolitics of Venezuela’s debt” November 5.

You really think Moscow would throw its relative scarce good money at this?

The Venezuelan Constitution in its Article 12 establishes: “Mining and hydrocarbon deposits, whatever their nature, existing in the national territory, under the territorial sea bed, in the exclusive economic zone and on the continental shelf, belong to the Republic, are the property of the Public domain and, therefore, inalienable and imprescriptible.”

And so, though I am not a lawyer, it would seem that any negotiation that assumes that local or foreign oil ventures receive an ironclad guaranteed access to Venezuela’s oil might be very naive.

I ask, if Russians end up taking oil from Venezuela under a shady deal not approved by its real General Assembly, that which is recognized by so many countries, what stops its Supreme Court of Justice in exile to request international courts to embargo it?

As I see it the best thing to happen would be a constitutional reform in Venezuela that decrees all net oil revenues belonging equally to all its citizens. What judge will then order the embargo of oil that belongs to citizens who at this moment need it to avoid death from starvation?

And the biggest benefit of doing so would be freeing the Venezuelans from having to live under the powerful thumb of a government that centralizes all that oil revenue, 97% of all the nation’s exports, in very few hands… sometimes even the hands of outright bandits.

Sir, those who awarded odious credits, should not be able to negotiate behind the back of Venezuela’s people, with those who contracted odious debts.

https://perkurowski.blogspot.ca/2017/06/a-simple-but-complex-question-from.html

http://theoilcurse.blogspot.com

@PerKurowski

If a credit from one sovereign to another were classified as a crime against humanity how would the IMF proceed?

Sir, in Venezuela going to the IMF for assistance, is such a hot potato that some might even be hauled in front of a court accused for antipatriotic behavior for even mentioning that possibility. But if at the end it has to go to the IMF, it is clear that Martin Wolf raises an extremely important issue, namely how the influence of some sovereign creditors could block constructive actions by the IMF to reach acceptable solutions. “Resist Russian blackmail over Ukraine’s debt” October 21.

And the same problem, of how to treat sovereign credits, would be present in any Sovereign Debt Restructuring Mechanism. It has no easy solution… and the perfect might well prove to be the enemy of the good.

That said, a sovereign should have the right to go in front of some international court, in order to at least have the chance of getting the debts it owes, including to other sovereigns, classified as derived from odious credit, if for instance there is sufficient proof that substantial corruption was involved when the debt was contracted… and that the creditor had or should have had sufficient knowledge about it.

In the case of the most egregious malfeasance, where it can be sufficiently evidenced that many humans are suffering as a direct consequence of a debt having been contracted, one should be able to have that debt qualified as an economic crime against humanity.

And if a debt owed by a sovereign to a sovereign were to be qualified as resulting from an economic crime against humanity, by for instance the International Criminal Court in Hague, how would then IMF proceed? I really do not know… I am just an economist.

@PerKurowski ©

Unbelievable that with so much history, Europe, instead of with a “Bang!”, could be going down with a whimper.

Sir, Robert D Kaplan, in “America is growing impatient with Europe’s appeasement”, April 7, states as a matter of fact “Gutsy is not a word one would use to describe Europe’s political class”. Sadly, very sadly, it is very hard to debate that.

And right below, giving credence to such an affirmation, we find Martin Wolf writing in “China will struggle to keep its momentum”, that “The world must pray the Chinese authorities manage this transition successfully. The alternative is not to be contemplated”; which basically reads like an anxious European convinced that his future is all-dependent on China’s.

Really, if Europe thinks it will be better off accommodating to Putin’s Russia; or if it thinks that its economy will be better off depending on China’s; (or if it feels that its bankers should earn their returns on equity solely with what is perceived as safe), then sadly it would seem that Europe is lost before the fight has even begun.

But hidden, somewhere in its gutters, there must be a reserve of European elites who can understand that it is time to stand firm… since it seems unbelievable that with so much history Europe, more than going out with a Bang! could be going down with a whimper.

Aren’t there any Bravehearts or Churchills in Europe anymore?

And, having observed the growing nanny mentality in America, its elite should be careful too. When drones are viewed as more convenient than boots on the ground, many strange things can happen.

@PerKurowski

“Capitalism for hyenas” might be a more accurate description than “capitalism for friends”

Sir, I refer to Chrystia Freeland’s “Puttin’s populist bluster belies the loneliness of the cynic” December 29.

If for instance Andres Schipani would like to write an up to date report on Venezuela and Maduro, he would have to change almost nothing except for some names and regional references… especially now when even Cuba, as was to be expected, has also turned out to be a fair-weather ally.

But, when referring to the crony capitalists that flock around the leaders, I would perhaps disagree with the term “capitalism for friends”. In Venezuela at least, it is really not friends who are sharing those oil revenues which now represent 97 percent of all this nation's exports… it is much more something like “capitalism for hyenas”

Tweeting "Oil: The Big Drop"

Sir, I refer to your FT series “Oil: The Big Drop” December 16, in order to suggests some tweets.

Oil is 97% of Venezuela’s exports, and 75% of Russia’s. If oil prices go down 40%... bye-bye Maduro, bye-bye Putin?

Venezuela suffers shortages of basic goods & inflation of more than 63%, and yet its economy is to shrink only 3%?

Hunger or Freedom? High oil prices make Venezuela a medieval feudalism; with citizens serfs to an elected Lord of Manor

The State gets 97% of Venezuela’s exports. How much does its citizens’ relevance increase, each $1 drop in oil price?

If Europe wants high oil prices, to get high inflation, so to repay its sovereign debts, it should be institutionalized

The European taxman is scared European motorists will ask: Why does not gasoline prices go down much?

It seems like those who should have the largest vested interest in joining Opec are shale-oil extractors in the USA

Will there be new rounds of quantitative easing to bail out failed expensive oil lenders and investors?

Have green energy investors or subsidy dependents, adequately hedged against so much lower oil prices?

Ps. More tweets might follow

http://theoilcurse.blogspot.com

http://petropolitan.blogspot.com

Martin Wolf, a neighbor, Russia, can become dangerous by Europe’s and US’ own weakening.

Sir, Martin Wolf is absolutely right when he writes “For Europe and, I believe, the US, there is no greater foreign policy question than how to deal with today’s Russia”, “Russia is our most dangerous neighbor” September 17.

But that said let us not never ignore the dangers with a neighbor becoming more dangerous, only because ones’ own country is becoming weaker. And in this respect something is happening both in Europe and in the US. 

Only as an example I cannot shake off the impression it made on me seeing the image of Britain’s David Cameron, Germany’s Angela Merkel, Holland’s Mark Rutte and Sweden’s Fredrik Reinfeldt, in a row boat, in a little lake, probably surrounded by thousands of life guards… wearing life vests… exactly where, perhaps in the same boat, 50 years earlier, we had seen Tage Erlander of Sweden and Nikita Khrushchev, rowing… without life vests.

What I said to those around me was “Never ever would Winston Churchill (or Putin) have allowed to be photographed in a little row boat, on a small lake, close to the shore, wearing a life vest!”

And with respect to the US, I just heard on the radio of a soccer team being sued because one of the players hurt his head while playing… come on... in the "home of the brave"?

And of course I do not refer here to any silly bare-chested testosterone showing-off, like Putin often does… but, of course, I do refer here to that de-testosteroning of our banks, which risk adverse regulators are causing with their credit-risk-weighted capital requirements.

PS. By the way, in order not to become dangerously cocky, we should never forget that one of the reasons for the fall of Russia was the low oil price at that time.

As a sanction why not increase the risk-weight of Russia when calculating the capital requirements for banks?

Sir, Wolfgang Münchau writes that “Europe must impose financial sanctions on Russia” July 21, and among the possibilities for that he discusses the European Bank for Reconstruction and Development to stop lending to Russia.

Why not also, for the purpose of capital requirements of European banks, assign to Russia at least the same risk-weight currently assigned to Europeans small businesses and entrepreneurs, namely 100%. At its current credit rating BBB- Russia earns a 50% risk-weight, which means that banks are allowed to leverage twice as much when lending to Russia, than when lending to those who have done absolutely nothing wrong except being perceived as “risky”... something for which they already pay for dearly.

Besides, for a starter, why on earth would you want European banks lend more to Russia than to European job generators?

Believing too much in “the power of peace” can be hazardous to the health of your nation.

Sir, I refer to Simon Kuper’s “The surprising power of peace”, March 29.

It is always better to be skeptical and pleasantly surprised by “the power of peace” than naïve and unpleasantly surprised by its weakness. Most Venezuelans, including most of those who strongly protested the previous ways of Venezuela, and thereby perhaps unwittingly helped to open the way for Hugo Chavez, stand today in utter disbelief watching how everything has degenerated. I cannot but reflect on how much better off we could have been if we had believed much much less in “the power of peace”.

And I say this also in reference to George Osborne and Wolfgang Schäuble now recommending a “balanced and proportionate” response to Russia. That sounds a bit like believing too much in “the power of peace”.

On responding to Russia and on Europe’s decline, Churchill and von Bismarck might have differed from Osborne and Schäuble.

Sir George Osborne and Wolfgang Schäuble write about responding to Russia in a “balanced and proportionate way”, “The eurozone cannot dictate Europe´s rules alone” March 28. Is that really enough? Might it not be so that history shows that Europe must respond to Russia in an unbalanced and disproportionate way?

And these two European gentlemen also write that “No one should assume that European decline is inevitable”. No… but it can happen! As long as regulators, with their risk weighted capital requirements allow banks to earn higher risk-adjusted returns on equity when lending to what is perceived as “safe” than when lending to what is perceived as “risky”, its decline is inevitable. In order to have a future Europe must risk continuing opening those risky doors behind which its luck might be hiding.

Sir, do you believe Winston Churchill and Otto von Bismarck would have cosigned George Osborne´ and Wolfgang Schäuble´s article?

“Inalienable sovereign rights” is most often just a wonderful exploitable excuse to screw your own citizens

Sir, François Heisbourg writes “It is clear… that the new great powers, including a reinvigorated Russia are deeply averse to interference in what they see as inalienable sovereign rights – an attitude explained in many instances by their former colonial or dependent status”, “The west is accelerating its own strategic decline”, September 5.

I think there is a need for a clarification. 99 percent, at least, of the demand for the respect of inalienable sovereign rights, comes from those wanting to use that as a shelter in order to violate what should be the even much more inalienable human and economic and democratic rights of their citizens.

To oversell the importance of “inalienable sovereign rights” is only to play into the hands of dictatorships, even those who dressed up as popular democracies, are quite often, de facto, nothing but dictatorships.

You have to root out the monsters in their homeland first

Sir Stefan Wagstyl should perhaps have expanded the title “Stalin still looms large over eastern Europe” with the “because he still looms large over Russia” August 31. Wagstyl rightly points us to see that the way countries victimized by foreign monsters can overcome such events starts with how the monsters´ homelands overcome being just that. Since Germany has done so much more in accepting the horrendous realities of a Hitler, than Russia those of Stalin, Germany has been more able to overcome its own demons and shames, and, consequentially the world has been much more able not to hold it against it. Besides, these monster´s, if not pulled out completely, with all their roots, can rot and infect and propagate.

How will the fines from Siemens be distributed?

Sir Daniel Schäfer reports on December 16 that Siemens has to pay $1.4bn in fines to US and German authorities in order to settle bribery inquiries in the United States and Germany related to Venezuela, Argentina, Iraq, Israel, Russia and Bangladesh. How much of these fines will the real victims, the citizens of those countries that were the object of the bribery receive and how will these be distributed?

A corruption of a third kind?