Friday, November 29, 2013

Middle East Stream:The French-Israeli-Saudi Front against Iran

55 minute show on Etejah TV with presenter Marwa Osman, myself, and Pepe Escobar of Asia Times discussing the P5+1 negotiations on Iran, and France, Israel and Saudi Arabia's moves to scuttle the deal.

At 47 minutes, I turn the discussion around from nuclear weapons in the Middle East to the need to discuss eliminating nuclear weapons globally, and the existential threat to the planet of the radioactive fallout of Fukushima.

Wednesday, November 13, 2013

Bolstering the beer business in Lebanon

The assembly line at the 961 Beer brewery in Mazraat Yachouh, northeast of Beirut. (The Daily Star/Carine Mechref)

The Daily Star

BEIRUT: The beer business is undergoing a renaissance as brewers increasingly take on the market leader Almaza, owned by Dutch conglomerate Heineken International. First came 961 in 2006, the brainchild of Marwan Hajjar of Gravity Brewing, which introduced a greater variety of beer to the market than commercially brewed lager. The success of 961, named after the country’s calling code, prompted Almaza to introduce a malt beer to its portfolio and, last year, Almaza Light.
Now there are upcoming contenders in the market, yet at opposite ends of the spectrum. One is a craft brewery producing on a microscale, while the other is entering the big leagues with a $12 million to $15 million investment in the Bekaa Valley. Both producers want to up the quality of brew on offer as well as the amount of beer being drunk.
“I consider Hajjar a pioneer of brewing in Lebanon; he likes brewing beer and has done so much for craft beer here,” said Emile Strunc, who produces his eponymous beer in Jounieh at what he calls his “nano brewery,” an 18-square-meter room with two 50-liter kettles. “We would both like to see 50 to 100 breweries here for people to discover real beer and move away from the commercial variety.”
Strunc, who produces around 600 liters of beer a month, does not sell his creations at any outlets, but to friends and “friends of friends,” and is more interested in promoting good beer than turning a profit.
“It is not about the business but about sharing the beer,” said Strunc, who works as a negotiating skills consultant and brews in his spare time.
But Strunc’s beer – which includes black ale, Indian Pale Ale (IPA), summer ale, Munchen, Vienna, Kolsch, organic and two wheat beers, Weiss and Dunkelweiss – is growing in popularity and his beer may be gracing the tables of certain restaurants very soon.

Emile Strunc at his nano brewery

“It is reflective of where a certain Lebanese entrepreneurship is heading,” said Michael Karam, a wine writer and business journalist. “There is a big booze movement underway, first picked up by vineyards, then by Strunc, and now J2 vodka has been released in the market, which is distilled in Poland but owned by a Lebanese entrepreneur. So we are seeing a new entrepreneurial furrow being plowed.”
The big investment is by Kassatly Chtaura, a leading drinks manufacturer that is behind Buzz alcohol drinks and, since 2005, the wine Chateau Ka. Through a loan backed by the Central Bank, Kassatly is to invest up to $15 million to produce 20 million liters of beer a year, equivalent to the amount Almaza produces.
“Over the last 12 years we’ve been producing alcopops [Buzz] and non-alcoholic drinks [Freez] and doing well. Since we have the facilities to produce beer and want to expand, we are making this investment,” said Akram Kassatly, president of Kassatly Chtaura. “Half of the brewery is already there – the bottling, packaging and pasteurizing – so all we have to add is an annex for brewing and fermentation.”
A German firm has been contracted to develop the new 2,000-square-meter brewery, and brew masters are to come for six months to a year, with production slated to start in 2014. While the beer has no name yet, Kassatly is aiming at high quality production.
“It will be the same quality as in Germany or Holland. It will be 100 percent malt beer, so no headaches or bloating,” Kassatly said.
But the new brewery may face an uphill battle to get more people drinking beer instead of wine, cocktails and the popular spirits, whisky and vodka. Furthermore, an estimated 70 percent of Almaza is consumed in summer, with the drink considered a thirst quencher.
“I hope and wish this will change, and via advertising, encourage people to drink more in the winter,” Kassatly said.
This will require consumption to seriously balloon from the estimated 5 liters per capita a year currently consumed – low by comparison to Europe’s 75 liters per capita, Cyprus’ 58.1 liters, and the world’s largest consumer, the Czech Republic at 131.7 liters, according to Japan’s Kirin Institute of Food and Lifestyle Report.
Kassatly believes they can shake up the beer business here and bring consumption up to 10 liters per capita, adding that if the beer is not consumed locally, then it can be exported.
“We are not going to have to compete with Almaza, as our presence will make the market grow bigger, and there will be absolutely no risk of selling less. There’s always a place for a new brewery in Lebanon,” Kassatly said. “If capacity doesn’t sell in Lebanon, we will export it, and we will export to wherever Buzz does, with plans for Iraq, Syria eventually, and Africa.”
Strunc has noticed a change in attitude toward beer drinking in the country, and he is winning over converts to the taste of traditional beer.
“People are calling me up to taste the beer, and I’m happy about that as people are switching from industrial beer to something with more flavor,” said Strunc, who is half Lebanese and half Czech.
While getting people to drink more beer is one issue, a connected factor is the price. Almaza currently retails at a lower price than what Kassatly’s beer is expected to sell at, primarily due to the higher quality ingredients.
“Almaza has Heineken behind it, so it could start a price war,” Karam said.
Kassatly however is not concerned.
“Almaza doesn’t really have an interest to compete on price. We are going to do it with a premium product at a slightly higher price,” Kassatly said. “It will take two to three years to get known, so it is a long-term strategy. We are focusing on quality and will see how it develops.”
When it comes to pricing, malt beer costs more to produce, as do craft beers.
“Even with economies of scale, how can you sell a beer at $1 a bottle?” Strunc said. “A craft beer has a minimum cost of $4 a bottle, taking into consideration volume and production. If you brew craft beer at a bigger volume, you can cut the cost a bit but not much if the ingredients are top quality. For instance, I use 200 grams of hops for 50 liters, but industrial beer will use 50 grams for the same amount, and most probably extracts not natural hops, so a big impact on the price. It is the same for yeast, it is expensive.”

Handcrafted Schtrunz beer

Kassatly is certainly not daunted by going head to head with Almaza, having done the same in the country’s burgeoning wine sector.
“When we started the wine business, we were told, you are facing a giant, Ksara, but we are now colleagues, and hope to see the same attitude from Almaza,” Kassatly said.
Kassatly certainly has the right business model and setup to make the beer a success.
“Kassatly has the distribution in place, so hooking up a whole product line to existing production channels, which is very smart. In a few years they will be a serious drinks conglomerate,” Karam said. “They will probably eclipse 961 as they’re big spenders on advertising. It will be interesting to see how the market reacts.”
What may be more of a challenge is to export beer in the current regional environment. For one, a significant export market, Syria, is currently off limits. Second, the rest of the Middle East does not have much of a big beer drinking culture. Third, going by what is happening in other markets, beer drinking has slumped in North America and parts of Europe due to the recession and changing consumer habits in favor of wine and other beverages.
That said, beer consumption in developing markets has increased, as it has in the Middle East, rising 9.9 percent between 2010 and 2011 (the most recent statistics), according to Kirin figures, and as a share of global consumption rising from 0.7 percent in 2010 to 0.8 percent in 2011.
Karam is optimistic about Kassatly’s entrance into the market, given the producer’s success with its wine:
“They got Chateau Ka into [high-end British supermarkets] Waitrose and Marks & Spencers, which considering they started in 2005, is one hell of an achievement.”
A lot of the success of Kassatly, 961 and craft beer in general will of course depend on the economic situation in the country and regionally, which is making any forecasts hard to formulate.
“Will the Syria crisis impact further on Lebanon and affect the private sector’s ability to function more than it is now? And you have to ask whether any Islamic fundamentalism – especially in the Bekaa – is going to affect alcohol production. I think the only thing stopping Lebanon’s entrepreneurial spirit in alcohol or anything else is the threat of conflict,” Karam said.
– with

Wednesday, November 06, 2013

The so-called “Sushi war”

International Link magazine - Hong Kong

Barely a week goes by without news of Sunni-Shia sectarian violence. Shia are beheaded by Sunni extremists in Syria and the videos aired online. Thousands continue to die in Iraq due to sectarian warfare in the aftermath of the US occupation. Terms like the “Shia crescent” are bandied about, while Sunni religious leaders call for a Jihad in Syria. But is this Sunni-Shia sectarianism an ancient rivalry that flares up now and again, as the mainstream narrative makes out? Or are vested interests utilizing this apparent divide for geo-political ends? Paul Cochrane reports from Beirut.

In certain circles in the Washington beltway, policy makers and 'think tankers' regular use the term “the Sushi war.” This does not refer to disputes over tuna fish quotas in the Pacific Ocean or the eponymous Japanese cuisine, but to the sectarian conflict within Islam, between the Sunnis and the Shiites (or Shia). Such terminology makes light of what is underway in countries with Sunni and Shia populaces, of the mounting death toll, violence and animosity between the two sects, especially in Iraq, Pakistan, Lebanon, Egypt and, more recently, Syria.
But this tongue-in-cheek reference belies a seriousness by trying to make light of what is underway, as if the US does not have a hand in stoking the fires of the so-called “sushi war.” Furthermore, global powers and the establishment like mnemonics and abbreviations, even if not appropriate, like “Af-Pak” for the Afghanistan-Pakistan region - to call a Pakistani a “Paki” is considered a racist slur, as former US President George W. Bush found out when he made a related verbal faux pas in 2002 that soured bilateral tensions.
The US as the world's hegemonic power is involved in sectarianism at the macro level, the regional level and the local level for its own geopolitical ends. Yet it is not acting alone. In the Middle East, there are regional players and intermediaries, such as the pro-West Gulf states like Saudi Arabia and Qatar that are pushing a Sunni agenda, and on the opposite side, the nemesis of the US and the Gulf monarchies, Shia Iran. Then there are the local actors: the sheikhs in the pay of regional powers, media outlets that stoke tensions between sects, and militant groups that carry out attacks.
“Someone is playing with this religion left, right and centre. Sheikhs are on the payroll, like back in the 1960s when they wrote anti-communist speeches until they came out of their turbans,” said Mohammad, an Arab veteran of the Mujahideen against the Soviets in Afghanistan in the 1980s that wanted to remain anonymous. “This sectarianism crosses all the boundaries of logic. It doesn't have any roots for a valid conflict, except for being a divide to provoke people against each other. Most Muslims are standing by and watching what is happening, and wondering what to do with each other.”
But before getting into the situation today, a bit of background history first. 

A bit of history

Factionalism in Islam started in the wake of the death of the Prophet Muhammed in 632 AD, over who was to succeed as the caliph, the leader of this new and ascendant monotheistic religion. The first four caliphs were all companions of the prophet: Abu Bakr, Umar ibn Al Kattab, Uthman ibn Affan and Ali ibn Abi Talib. The majority of Muslims – Sunnis at around 90 percent of the 1.6 billion Muslims worldwide today – consider that the prophet did not designate a successor, but partisans (Shia) of Ali, believe that he was denied his rightful succession as a member of the prophet's family, being the cousin of Muhammed and his son-in-law, having married Fatima. Factionalism came to a head in 680 AD when the son of Ali, Hussain, lead a rebellion in what is now Iraq against the Ummayad caliph Yazid, which was crushed with Hussain's “martyrdom” in Karbala. This event is commemorated every year – Ashoura – and is a central historical narrative in Shia Islam, that of the suffering and martyrdom of Hussain in pursuing the rightful rule of the Prophet's family. Indeed, you rarely find any Shiites named after the first three caliphs.
The rift led to theological differences, the primary one that for the Shia religious leadership is vested in an Imam (leader) that is a descendant of Ali and Hussain. To the Sunnis, religious authority for interpreting Islam is based on the collective judgment of the community – the ulama, traditional religious scholars - and not through the divinely inspired Imam.
While there is clear historical continuity over the past 1,400 years in theological differences, it is hard to find any parallels to the sectarianism of today. “The Sunnism or Shi'ism of one age is quite different from that of another. So we must avoid essentialism,” said Professor Tarif Khalidi, Sheikh Zayed Chair in Islamic and Arabic Studies at the American University of Beirut, and the translator of the Penguin edition of the Qur'an into English. “In origin my theory is that Sunnism was associated with groups who felt that the unity of the community was the highest ethical-political value while Shi`ism believed that the integrity of the ruler was the best guarantee of good government. There are echoes of these two foundational beliefs in today's Sunnism and Shi`ism but they're only echoes.”
While this is a brief summary – as there are many offshoots of Shia Islam as well as theological schools within Sunni Islam – differences within Islam cannot be simplistically compared to that of Christianity, and the rivalry between the Catholic and Protestant churches during the Reformation (which happened in Europe some 1,500 years after the death of Jesus Christ) and ensuing conflicts, such as the 30 Years War. As Khalidi noted: “When approaching this subject we need to rid ourselves of parallels with Protestant/Catholic conflicts in Europe.”
Mainstream accounts that the Sunni-Shia divide has raged since the time of the Prophet Muhammad are also spurious, and labels attached to points in history that were distinctly Shia or Sunni were imposed on the region by Western scholars.
“Though tensions between them were frequent, historically there was more bark than bite, more polemic than pitched battle in their actual relations. There were basically three periods when tensions were high: the 10th century, often called the "Shi`ite interregnum" by Western though not by Muslims historians. This was a century where you had three major Shi`ite centers of power: Fatimid Egypt, Hamdanid Syria and Buyid Iraq and Western Iran. You then have the 11-12 centuries, again called by Western historians the "Sunnite revival" when Turkic Sunnite dynasties (Seljuqs, Zengids, Ayyubids, Mamluks) spread their power over Egypt and Greater Syria. Finally you have the great wars between Shia Safavid Iran versus Sunnite Ottoman power in the 16-17th centuries,” said Khalidi. “In none of these conflicts was the Sunni-Shia divide the decisive factor. Rather it was a geo-political struggle over resources but none of these conflicts involved massive ethnic cleansing or genocide of one party by the other. In the present context of Shia-Sunni tensions, we need to go beyond surface rhetoric and ask what are the real strategic issues involved.”

A Year of Seismic Change

Fast forward to the 20th century, and the geopolitical issues at play were securing access to the hydrocarbons and economic markets of the oil-rich Middle East, the Gulf in particular, which were under British tutelage before the US took over the mantle as the global superpower. To understand what is happening in the 21st century, we need to go back some 30 years to 1979.
It was a year of seismic change in the Middle East. The Shah of Iran was overthrown in major demonstrations, leading to the formation of the Islamic Republic of Iran and the start of tensions between the US and Tehran that rage to this day. Yet the US did not label Iran an enemy because it was Shia, but because it was revolutionary and Muslim. The worry was that in losing a pliable ally like the Shah and access to Iran's hydrocarbon wealth, other Muslim majority countries in the Middle East could do the same, and reject US power by going it alone. This sent shivers down the spines of elites in Washington, but also the ruling families in the monarchical Gulf states, which are all Sunni and use religion to legitimise their power base, particularly Saudi Arabia. Notably, Kuwait and Saudi Arabia have Shia minorities, while Bahrain is majority Shia.
“The real issue is ideological warfare and has three different angles. One, Iranian-Arab divisions, and the second is conservative Arab states, mostly monarchies, versus secular nationalists like Iraq and Syria. Thirdly, it is about Islamists and monarchies, who are arguing and fighting for two different forms of sovereignty: one from God, and one from the monarchy, and they try and link (their legitimacy) to God,” said Rami Khouri, Director of the Issam Fares Institute for Public Policy and International Affairs in Beirut.
In late November 1979, some of the Gulf monarchies' fears started to be realized when the Great Mosque of Mecca in Saudi Arabia was seized by hard-line Islamist gunmen bent on overthrowing the Saudi monarchy and introducing a new redeemer – the mahdi – on the day marking 1,400 years of Islam. The siege shook Saudi Arabia's foundations for two weeks, challenged the kingdom's position as the guardian of the two holy cities of Islam, triggered a Shiite uprising in the east of the country, and unleashed forces that led to the rise of Al Qaeda. Then, less than a month after the Saudis' disastrous handling of the siege, the Soviet Union invaded Afghanistan on December 24. This created the spark for a Machiavellian strategy hit upon by the US and Saudi Arabia for the kingdom to export its “bad boys” – the hard-line Sunni Islamists – to take on the Soviets with the Afghan Mujahideen. And we all know where that led – the rise of Sunni Islamic extremism in central Asia and the Middle East, with those returning from Jihad in Afghanistan challenging the regional order and, more recently, reflected in the so-called “Arab Spring,” which some regard as having played into the hands of Islamists, and can be called an “Islamic spring.” But on the other side of the apparent Sunni-Shia divide, Iran in the wake of the Arab uprisings called for an “Islamic awakening” but, note, not a Shia Islamic awakening.
“It was a crucial year, 1979, for Muslims. On the Shia front was Iran's Ayatollah Khomeini, and on the Sunni side Abdullah Azzam, a Jersulamite that went to Lebanon and then to Afghanistan, where he decided the fight against the Soviets was a true Jihad, and that the liberation of Jerusalem (from the Israelis went) through Afghanistan,” said Mohammad. “Then the Sunni world embarked on a project to recruit people in mosques to fight in Afghanistan, on the periphery of the Muslim world. The Shia were also awoken, and given the centre in the Iran-Iraq war and the Lebanese civil war. Later, the two were brought together to meet in the Iraqi arena after the US invasion. But for some reason the world's intelligentsia has not given this any value.”
One reason the mainstream narrative does not focus on these issues is that they present uncomfortable truths. That to ensure oil and capital flowed from the Gulf countries to the West, Britain and the US were willing to work with authoritarian Islamic states like Saudi Arabia, which has spent over $50 billion over the past half century promoting its version of conservative Islam around the world, according to Mark Curtis, author of “Secret Affairs: Britain's Collusion with Radical Islam.”
Equally, Britain and the US worked with radical Islamist groups when it suited them, such as during the Cold War to counter communism, pan-Arabism and nationalist sentiments in the Middle East, as Curtis shows in his book. Furthermore, the West's political-economic alignment with Sunni monarchies, and that collusion with radical Islamists were primarily Sunni, gives rise to the idea that the West is more pro-Sunni than pro-Shia despite the prevalence of Islamophobia in the West today.
This is the thing about political Islam, especially Sunni political Islam, that they are more than happy to take weapons, financial support and logistical support from the US when it serves their ends, and when they want to go to the next step, they have no ethical ties to that alliance and dump the US,” said Stephen Sheehi, Associate Professor of Arabic and Arab Culture at the University of South Carolina, and author of “Islamophobia: The Ideological Campaign Against Muslims.”
As for the Iran-Iraq war, the first Gulf War, that raged between 1980-88, claimed over 1 million lives and caused economic losses of over $500 billion, it was actively pushed by the US, Israel and the Gulf states – the latter and the US being major financiers of Saddam Hussein's regime – to counter the fledgling Islamic Republic and thwart Iran from spreading its revolutionary Islamic message, while at the same time weakening two of the most potentially powerful states in the Middle East.
The war, like the West and the Gulf backing the Mujahideen in Afghanistan, was to have long-term ramifications. One in positioning Iran as a major threat, reflected in ongoing concerns about Tehran's alleged nuclear weapons programme, which has been warned about as far back as 1984, and its support for “terrorist organizations” such as the Shiite militia Hizbullah in Lebanon, which was established in the early 1980s with Iranian assistance in response to the Israeli invasion of Lebanon in 1982. Secondly, the First Gulf War laid the groundwork for the eventual overthrow of Saddam Hussein when the US invaded Iraq in 2003. And it was the invasion of Iraq that in many ways sparked the violent sectarianism afoot today.
“People never talked of such sectarianism before. In the 1960s, never did I use the word Shiite,” said Khouri. “The reason why there is not a real region wide Sunni-Shia war is because such sectarianism never surfaced until seven to eight years ago, until after the Iraq invasion.”

Opening Pandora's Box

Iraq was nominally secular under the ruling Baath party, but after the invasion the US drew up a new constitution based along sectarian lines, dividing the country up between the Shia in the south, the Sunnis in the centre, and the Kurds in the autonomous north, while at the same time the US funded a Shia police commando force that fuelled a sectarian war in the country that at its height was causing 3,000 deaths a month. On the other side, Sunni fighters flowed into Iraq to fight the Americans, with Saudi Arabia adopting a similar tactic as during the 1980s in Afghanistan: allowing Islamist fighters to go to Iraq instead of causing problems at home.
“It was a situation that was partly instigated by the deliberate spread of activities by Al Qaeda and the like in Iraq by targeting Shiites. The other part of it was revenge by the Shia after the overthrow of Saddam Hussein, as he was so brutal against his people, and this created fears among Sunnis and exacerbated the divide,” said Khouri.
Further fuel was poured on the fire a year after the invasion when Jordan's pro-Western King Abdullah made a controversial speech warning of a "Shia crescent" that went from Damascus to Tehran via Baghdad. Yet ironically, the government in Baghdad is close to the US but also to Tehran, and in many ways, the invasion of Iraq played into the Iranian's hands. As Khouri noted, “the talk of a Shiite crescent is not about being worried about Shiites but about Iran. They (the Gulf states) can't talk of a Shiite crescent when they have Shia populaces of their own.”
This fear of Iran has led Middle East states, primarily in the Gulf, to buy $92 billion of arms from the US between 2008-2011. But it is not just arms-for-oil at the crux of US-Gulf relations. The Gulf countries are major players on the ground in “the Sushi war,” such as backing Islamic rebels during the Libyan conflict and currently in Syria – Qatar has provided an estimated $3 billion to the rebels according to the Financial Times.
“The Gulf countries have their own internal rivalries, but are smart enough to put rivalries aside and channel common interests in managing the “Arab Spring” and the “Arab Street.” The Gulf countries are critical in negotiating between the top global layer, the US, and the local layer. They are the intermediary,” said Sheehi.
As for the conflict in Syria, it is now being increasingly portrayed as a sectarian war, with Sunni Islamic rebels fighting the regime of President Bashar Assad, who is an Alawite, an offshoot sect of Shiism. In June, the now ousted Egyptian President Mohamed Morsi said the Assad regime was a “Shia oppressor of Sunnis,” while Egyptian preachers Mohamed Hassan and Mohamed Abd al-Maqsud called for a Jihad in Syria and Shiites to be banned from Egypt.
However, Syria is a nominally secular state, and pro-government support within the country derives not only from Alawites, but also Christians and Sunnis. Furthermore, there is little basis for the argument that the Alawites are Shiite and therefore siding with Iran for religious reasons. As is the case with the US stance on Iran, it is not about Iran being Shiite, or Syria Alawite, that the two countries – and their support for Hizbullah – is being portrayed as part of the “Sushi war.” Instead it is that Iran, Syria and Hizbullah form an “axis of resistance” against the US-led world order. Indeed, Russia and China's support for Syria and Iran is not because Syria's government is headed by an Alawite and Iran is Shia, but about geopolitics.
“Power is an important rubric we often ignore, for “great powers” to maintain their influence. So if you can break this Iran-Hizbullah-Syria axis, it enhances your power, although it might not necessarily on the ground,” said Sheehi.
Utilizing sectarianism to achieve that old adage of “divide and rule” is therefore one of the US' and it allies tools to achieve geopolitical ends, turning what was not a major issue – certainly in terms of violence – between Sunnis and Shia into a deadly issue in many mixed Muslim counties.
“Deep down it is not a war to death, but there is now mass fear and hysteria, so (a sectarian conflict) is not completely fantasized,” said Khouri.

Monday, November 04, 2013

The delay to FATCA’s roll out

Thomson Reuters

On 12 July 2013, the Internal Revenue Service (IRS) and the Treasury Department delayed certain provisions. While the announcement of a further delay was met with relief, it has also sent mixed signals to the financial services industry about how ready they should be with their FATCA compliance program by July 2014.
On 22 October 2013, they released a notice giving Foreign Financial institutions (FFIs) further guidance to implement their FATCA compliance program. 

The notice highlights details of the negotiated bilateral agreements, adds new rules and it includes a draft agreement for institutions to sign if they want to avoid penalties. While this notice serves as a next step in implementing a FATCA compliance program, it is only relevant to those institutions operating in model 2 Intergovernmental Agreements (IGA's) jurisdictions. Institutions not operating in Model 1 or Model 2 jurisdictions will need to comply with the final regulations released in January 2013. 

Our white paper 'The delay to FATCA's roll out' is a global examination of how the financial services industry is preparing for FATCA compliance, how well they understand the FATCA legislation and the impact it will have on the organization’s operations.

To download the paper: