Monthly Archives: August 2013

Economic Choking: US in Somalia

For Mohamed Abdulle, sending money to his family in Somalia means a trip to a high street in Stratford, East London, home to a large expatriate community. Once there he hands over cash, a telephone number and a name, usually that of his grandmother who lives in Somalia’s capital, Mogadishu, to an agent. A few minutes later Mr Abdulle, who works as a shop assistant, gets a text message letting him know the cash has arrived on the other side. This fast and reliable system, developed during decades of war in Somalia, is used by hundreds of thousands in the global diaspora, as well as by some UN offices and aid agencies to pay staff.

Perhaps not for much longer. Barclays, a big retail bank, has served notice that it will close the accounts of some 250 money-transfer businesses. The bank said the decision followed a routine legal review. Some money remitters “don’t have the proper checks in place to spot criminal activity,” the bank says, or could “unwittingly” be financing terrorists.

Barclays was among the last British banks willing to deal with agents who cheaply transfer money to poor countries. Many European banks have become nervous about such cash transfers after the American government last year forced HSBC, another big British bank, into a $1.9 billion settlement over allegedly shoddy money-laundering controls…..

Meanwhile, a group of 100 academics and other notables [petition] written to the British government asking it to avert a humanitarian crisis in the Horn of Africa. An estimated 40% of Somalia’s population depends on money sent from abroad. A recent study showed that three-quarters of recipients need the money to buy essentials, such as food and medicine.

“This will mean children being pulled out of school, people going hungry or not getting medicines they need,” said Laura Hammond, a lecturer at the University of London. The Somali Money Services Association, another British trade body, warned that the consequences of the closure of the accounts would be “worse than the drought” that ravaged Somalia two years ago and killed tens of thousands.

So far attention has focused on Somalia, where years of conflict have destroyed the banks and left no real alternatives to cheap money transfers. But the 250 firms put on notice by Barclays also include some serving Ghana and Nigeria, as well as India and Bangladesh. More sophisticated and expensive competitors such as Western Union may now benefit. A reduction in competition in the African remittance market will drive up prices.  Africans already pay more than any other migrant group to send money home. The cost of remitting to sub-Saharan Africa, typically around 12%, is three percentage points higher than the global average…

Some observers are calling for the creation of new institutions that could replace private banks. One suggestion is a “remittance bank” hosted by the UN or a multilateral agency. Another is a code of conduct worked out by remitters, banks and regulators. “This needs to be driven by government,” says Leon Isaacs of the International Association of Money Transfer Networks. “Or the banks won’t get the comfort they want.”

African money transfers: Let them remit, Economist, July 20, 2013, at 43

See also Family Ties: Remittances and Livelihoods Support in Puntland and Somaliland Study Report (pdf)

The Rape of Europe by Internet Giants: tax avoiding, data mining

The raid by the European Commission’s antitrust gumshoes this month on Orange (formerly France Telecom), Deutsche Telekom and Telefónica of Spain seemed to come out of the blue. The companies professed a surprise verging on stupefaction. Even some Brussels insiders were caught on the hop.  Naming no names, the commission said the inquiry involved internet connectivity. The question is whether entrenched telecoms firms are abusing their strength in the market for internet traffic to deny video-streaming websites and other content providers full access to their networks to reach consumers. Besides the content providers themselves, the other potential plaintiffs are the “wholesalers” that the content providers use to ship their data across borders (and usually the Atlantic). These rely on incumbent internet-service providers (ISPs) such as Orange to take the data the last bit of the way to subscribers’ screens and mobiles.

All eyes turned to Cogent Communications, an American wholesaler which handles data for the likes of YouTube. Cogent has complained, fruitlessly, to French and German regulators that their former monopolies were asking too much to handle data, and throttling the flow to consumers when bigger fees were not forthcoming. It is appealing against the French decision.  In theory Orange and the other network providers might simply pass on to their customers the cost of all their streaming and downloading… But Europe’s market is fiercely competitive; and regulators place all sorts of constraints on how networks can charge for their services, while haranguing them to invest in new technology and new capacity to keep up with rising traffic. Though there are similar spats in America (for instance between Cogent and Verizon, a big network operator), it looks to some Europeans like another example of the rape of the old continent by America’s data-mining, tax-avoiding internet giants.

The broader issue—and the reason, perhaps, why the antitrust watchdogs chose to weigh in—is that Europe is on the brink of big regulatory change. A draft law to be published in September will subtly alter the principle of “net neutrality”, the idea that companies which own the infrastructure cannot give priority to some traffic (eg, from their own websites) over that of others.;”

Internet access: Congestion on the line, Economist, July 20, 2013

Predictive Policing

PredPol Places, a US company, has developed] one of a range of tools using better data, more finely crunched, to predict crime. They seem to promise better law-enforcement. But they also bring worries about privacy, and of justice systems run by machines not people.  Criminal offences, like infectious disease, form patterns in time and space….

Cops working with predictive systems respond to call-outs as usual, but when they are free they return to the spots which the computer suggests. Officers may talk to locals or report problems, like broken lights or unsecured properties, that could encourage crime. Within six months of introducing predictive techniques in the Foothill area of Los Angeles, in late 2011, property crimes had fallen 12% compared with the previous year; in neighbouring districts they rose 0.5%…

For now, the predictive approach works best against burglary and thefts of vehicles or their contents. These common crimes provide plenty of historical data to chew on. But adding extra types of information, such as details of road networks, can fine-tune forecasts further. Offenders like places where vulnerable targets are simple to spot, access is easy and getaways speedy, says Shane Johnson, a criminologist at University College London. Systems devised by IBM, a technology firm, watch how big local events, proximity to payday and the weather affect the frequency and location of lawbreaking. “Muggers don’t like getting wet,” says Ron Fellows, IBM’s expert.

Predicting and forestalling crime does not solve its root causes. Positioning police in hotspots discourages opportunistic wrongdoing, but may encourage other criminals to move to less likely areas. And while data-crunching may make it easier to identify high-risk offenders—about half of American states use some form of statistical analysis to decide when to parole prisoners—there is little that it can do to change their motivation.

Misuse and overuse of data can amplify biases….But mathematical models might make policing more equitable by curbing prejudice…

This sort of transparency about what goes on in predictive systems, and what their assumptions are, may also be a partial solution to worries voiced by Andrew Ferguson, a law professor in Washington, DC. Mr Ferguson fears that judges and juries could come to place too much credence in the accuracy of crime prediction tools, jeopardising justice.

The legal limits on using social media to fish out likely wrongdoers, or create files on them, are contested. Most laws governing police investigations pre-date social networking, and some forces assert that all information posted to public forums is fair game. But Jamie Bartlett of Demos, a British think-tank, says citizens and police forces need clearer guidance about how to map physical-world privacy rights onto online spaces. He thinks gathering information about how someone behaves on social sites ought to require the same clearance needed to monitor them doggedly in public places. Officers who register anonymously or pseudonymously to read content, or send web crawlers to trawl sites against their owner’s wishes, would require yet more supervision.

Identifying true villains among the oddballs and loudmouths found by social-media searches is tricky. Most police efforts are embryonic. Evgeny Morozov, an academic and technology writer, thinks the privacy-conscious have more to fear from crime detection algorithms cooked up by social networks themselves. Some of those firms already alert investigators when they suspect users of soliciting minors. Unlike the cops they employ clever coders who can process private messages and other data that police may access only with a court order.

These projects make life difficult for many criminals. But smart ones use the internet to make predictions of their own. Nearly 80% of previously arrested burglars surveyed in 2011 by Friedland, a security firm, said information drawn from social media helps thieves plan coups. Status updates and photographs generate handy lists of tempting properties with absent owners. It does not take a crystal ball to work out what comes next.

Predictive policing: Don’t even think about it, Economist,July 20, 2013, at 24

Shadow Oil Deals and Safe-Sex Transactions: Nigeria

Deals for oilfields can be as opaque as the stuff that is pumped from them. But when partners fall out and go to court, light is sometimes shed on the bargaining process—and what it exposes is not always pretty. That is certainly true in the tangled case of OPL245, a massive Nigerian offshore block with as much as 9 billion barrels of oil—enough to keep all of Africa supplied for seven years.

After years of legal tussles, in 2011 Shell, in partnership with ENI of Italy, paid a total of $1.3 billion for the block. The Nigerian government acted as a conduit for directing most of that money to the block’s original owner, a shadowy local company called Malabu Oil and Gas. Two middlemen hired by Malabu, one Nigerian, one Azerbaijani, then sued the firm separately in London—in the High Court and in an arbitration tribunal, respectively—claiming unpaid fees for brokering the deal.

The resulting testimony and filings make fascinating reading for anyone interested in the uses and abuses of anonymous shell companies, the dilemmas that oil firms face when operating in ill-governed countries and the tactics they feel compelled to employ to obfuscate their dealings with corrupt bigwigs. They also demonstrate the importance of the efforts the G8 countries will pledge to make, at their summit next week, to put a stop to hidden company ownership and to make energy and mining companies disclose more about the payments they make to win concessions. On June 12th the European Parliament voted to make EU-based resources companies disclose all payments of at least €100,000 ($130,000) on any project.

The saga of block OPL245 began in 1998 when Nigeria’s then petroleum minister, Dan Etete, awarded it to Malabu, which had been established just days before and had no employees or assets. The price was a “signature bonus” of $20m (of which Malabu only ever paid $2m).

The firm intended to bring in Shell as a 40% partner, but in 1999 a new government took power and two years later it cried foul and cancelled the deal. The block was put out to bid and Shell won the right to operate it, in a production-sharing contract with the national petroleum company, subject to payment of an enlarged signature bonus of $210m. Shell did not immediately pay this, for reasons it declines to explain, but began spending heavily on exploration in the block.

Malabu then sued the government. After much legal wrangling, they reached a deal in 2006 that reinstated the firm as the block’s owner. This caught Shell unawares, even though it had conducted extensive due diligence and had a keen understanding of the Nigerian operating climate thanks to its long and often bumpy history in the country. It responded by launching various legal actions, including taking the government to the World Bank’s International Centre for the Settlement of Investment Disputes.

Malabu ploughed on, hiring Ednan Agaev, a former Soviet diplomat, to find other investors. Rosneft of Russia and Total of France, among others, showed interest but were put off by Malabu’s disputes with Shell and the government. Things moved forward again when Emeka Obi, a Nigerian subcontracted by Mr Agaev, brought in ENI (which already owned a nearby oil block). After further toing and froing—and no end of meetings in swanky European hotels—ENI and Shell agreed in 2011 to pay $1.3 billion for the block. Malabu gave up its rights to OPL245 and Shell dropped its legal actions (see timeline).

The deal was apparently split into two transactions. Shell and ENI paid $1.3 billion to the Nigerian government. Then, once Malabu had signed away its rights to the block, the government clipped off its $210m unpaid signature bonus and transferred just under $1.1 billion to Malabu.  Tom Mayne of Global Witness, an NGO, has followed the case closely; he believes things were structured this way so that Shell and ENI could obscure their deal with Malabu by inserting a layer between them. Mr Agaev, Malabu’s former fixer, lends weight to this interpretation. It was, he says, structured to be a “safe-sex transaction”, with the government acting as a “condom” between the buyers and seller.

Oil companies in emerging markets: Safe sex in Nigeria, Economist, June 15, 2013, at 63

Indian Nuclear Submarines firing from land, air and sea

The miniature reactor on board India’s first indigenous nuclear submarine INS Arihant has gone “critical”, which marks a big stride towards making the country’s long-awaited “nuclear weapons triad,” an operational reality.  Sources, in the early hours of Saturday, said the 83 MW pressurized light-water reactor attained “criticality” after several months of “checking and re-checking” of all the systems and sub-systems of the 6000-tonne submarine at the secretive ship-building centre at Visakhapatnam.

INS Arihant, till now, was being tested in the harbor on shore-based, high-pressure steam. With the reactor going critical now, the submarine will eventually head for open waters for extensive “sea- acceptance trials”, which will include firing of its 750-km range K-15 ballistic missiles. The sea trials will take at least another 18 months before INS Arihant can become fully operational.

When that happens, India will finally get the long-elusive third leg of its nuclear triad — the capability to fire nuclear weapons from the land, air and sea. The first two legs — the rail and road-mobile Agni series of ballistic missiles and fighters like Sukhoi 30MKIs and Mirage-2000s capable of delivering nuclear warheads — are already in place with the armed forces.

The capability to deploy submarine-launched ballistic missiles (SLBMs) is crucial since India has a declared “no first-use policy” for nuclear weapons, and hence needs a robust and viable second-strike capability

Rajat Pandit, Reactor of India’s first indigenous nuclear submarine INS Arihant goes ‘critical’, The Times of India, Aug. 10, 2013

 

Cold World Nuclear Experiments in California

Several environmental groups on Aug. 6, 2013 sued state regulators over the cleanup of a former nuclear research lab, saying low-level radioactive waste was improperly shipped to landfills.  Consumer Watchdog, along with other groups, filed a lawsuit Tuesday in Sacramento County Superior Court against the Department of Public Health and Department of Toxic Substances Control, which oversees the cleanup at the Santa Susana Field Laboratory.  Located about 30 miles northwest of Los Angeles, Santa Susana was once home to nuclear research and rocket engine tests. In 1959, one of the reactors suffered a partial nuclear meltdown. Responsible parties including Boeing Co., NASA and the U.S Energy Department have been working with state officials to meet a 2017 deadline to rid the nearly 2,900-acre site of contaminated soil.

In their complaint, the groups contend that materials from several buildings that were demolished were sent to landfills and metal recycling shops that are not licensed to accept radioactive waste. They also sought a temporary restraining order to stop Boeing from tearing down a plutonium fuel fabrication building on the hilltop complex….Officials at the toxic control agency rejected the allegations, saying that debris sent offsite posed no threat to human health or the environment.

Stewart Black, a deputy director at DTSC, said the state followed the rules in the demolishing and disposal of old buildings.   During the Cold War, workers at the site tested thousands of rockets and experimented with nuclear reactors, which were operational until 1980. And by the time the rest of the lab closed in 2006, a toxic legacy of radioactive and chemical contamination had been left.  Former workers and residents in nearby neighborhoods have blamed the lab for a variety of health problems.

Groups sue to block demolition at ex-nuclear site, Associated Press, Aug. 6, 2013

The Drone War that’s in Full Force

There were more drone strikes in Pakistan last month (July 2013) than any month since January 2013. Three missile strikes were carried out in Yemen in the last week alone. And after Secretary of State John Kerry told Pakistanis on Thursday that the United States was winding down the drone wars there, officials back in Washington quickly contradicted him.  More than two months after President Obama signaled a sharp shift in America’s targeted-killing operations, there is little public evidence of change in a strategy that has come to define the administration’s approach to combating terrorism.  Most elements of the drone program remain in place, including a base in the southern desert of Saudi Arabia that the Central Intelligence Agency continues to use to carry out drone strikes in Yemen. In late May, administration officials said that the bulk of drone operations would shift to the Pentagon from the C.I.A.

But the C.I.A. continues to run America’s secret air war in Pakistan, where Mr. Kerry’s comments underscored the administration’s haphazard approach to discussing these issues publicly. During a television interview in Pakistan on Thursday, Mr. Kerry said the United States had a “timeline” to end drone strikes in that country’s western mountains, adding, “We hope it’s going to be very, very soon.”

But the Obama administration is expected to carry out drone strikes in Pakistan well into the future. Hours after Mr. Kerry’s interview, the State Department issued a statement saying there was no definite timetable to end the targeted killing program in Pakistan, and a department spokeswoman, Marie Harf, said, “In no way would we ever deprive ourselves of a tool to fight a threat if it arises.”

Some of those operations originate from a C.I.A. drone base in the southern desert of Saudi Arabia — the continued existence of which encapsulates the hurdles to changing how the United States carries out targeted-killing operations.  The Saudi government allowed the C.I.A. to build the base on the condition that the Obama administration not acknowledge that it was in Saudi Arabia. The base was completed in 2011, and it was first used for the operation that killed Anwar al-Awlaki, a radical preacher based in Yemen who was an American citizen.

By MARK MAZZETTI and MARK LANDLER,Despite Administration Promises, Few Signs of Change in Drone War, New York Times, Aug. 2, 2013