Turkey

Despite the July 4th mid-week holiday, the coming week will be packed with major economic updates. Goldman Sachs summarizes what to look for in the next 5 days.

Last week's false flag story of baseless Middle Eastern provocation refuses to go away. Even after, in a shocking turn of events, US intelligence confirmed this weekend that Syria's version of events surrounding the downed Turkish F-4 jet story was the right one all along, pulling the media narrative rug right from under Hillary Clinton's provocative feet (and making others wonder just which country is the only one that stands to benefit of NATO does pull Article 4 or 5 and does invade Syria on now invalidated and false premises), today we read that Turkey continues to try to escalate. From the BBC: "Turkey has scrambled six F-16 fighters jets near its border with Syria after Syrian helicopters came close to the border, the country's army says. A total of six jets were sent to the area in response to three such incidents on Sunday, although there was no border violation, the Reuters news agency quoted the statement saying. On Friday, Turkey said it had begun deploying rocket launchers and anti-aircraft guns along the border in response to the downing of its F-4 Phantom jet." Of course, without an actual confirmed provocation, such as the one Turkey itself pulled against Syria, it is left with the same media rhetoric that continues to expose just one side of the Syrian story - the Western media spun one. "Turkey has strongly criticised Syria's response to the 16-month anti-government uprising, which has seen more than 30,000 Syrian refugees enter Turkey." Fair enough, we do however wonder what Syria would say about Turkey's treatment of Kurdish minorities. Finally, confirmation that just as we first suggested two weeks, this whole incident has been nothing but a provocation stage test to get NATO involved without any of the facts being on the table, comes from no other source than US military intelligence.

This week may very well go down as 'connect the dots' week. Things have been moving so quickly, so let's step back briefly and review the big picture from the week's events. When you connect the dots, the next steps lead to what may soon be regarded as an obvious conclusion: the system, as it exists right now, is crumbling. No amount of self-delusion can make this go away. Rational thinking and measured action, on the other hand, can make the consequences go away... turning people from victims into spectators of the greatest bubble burst in modern times.

There are now reports that the Reserve Bank of India (RBI) is likely to clamp down on gold bullion coin sales by banks as the rising bullion imports are adding pressure to the current account deficit and weakening the rupee.  

Western central banks and mints will not be clamping down on gold bullion coin sales in the near future as demand for gold and silver bullion coins fell in Q1 2012.

In the aftermath of the recent escalation in tensions between Turkey and Syria, whereby Syria was accused of hostile behavior for firing and taking down a Turkish fighter jet that supposedly spent at least 5 minutes in its airspace, today was a quiet day. At least until recently we saw the following footage in a clip uploaded to YouTube. Supposedly, Turkey has sent troop reinforcement to the Syrian border, after Erdogan's warning that soldiers approaching the border will be treated as targets, the clip explains, citing Turkish daily Zaman reported citing the Cihan news agency. This is unverified, nor is the statement that 15 military vehicles, including tanks and cannons, were dispatched to the border from Diyarbakir. We are skeptical of the validity of the above especially since earlier today Russia said that Tuesday's Syrian shooting down of a Turkish warplane should not be seen as a provocation and warned world powers against using the incident to push for stronger action against Damascus. It was Moscow's first official reaction which made it quite clear that Russia will not just stand idly by awaiting for NATO to unilaterally take a decision to punish the middle eastern nation for daring to defend itself. But then again, this may be merely misreading Russia's resolve, in collaboration with China, to defend its own national strategic interests.

Talks are already underway of suspending the Schengen agreement and implementing border and capital controls. The Schengen agreement and freedom across borders was at the very basis of the Eurozone. And now the political elite want to suspend this?

Turkey raised its reported gold holdings by another 2% in the month of May. Turkey’s gold holding rose by 5.7 tonnes in May to total 245 tonnes, International Monetary Fund data showed, making it the latest in a string of countries to increase gold bullion reserves this year. Turkey has allowed banks to hold more of their reserves in gold to provide extra liquidity. The central bank this month raised the proportion of reserve requirements that can be held in foreign exchange to 50 percent from 45 percent, while the limit for gold was increased to 25 percent from 20 percent. The changes will add as much as $2.2 billion to gold reserves. Gold accounts for about 9.1 percent of Russia’s total reserves, 5.1 percent of Ukraine’s and 15 percent of Kazakhstan’s, according to the World Gold Council. That compares with more than 70 percent for the U.S. and Germany, the biggest bullion holders, according to Bloomberg figures. Kazakhstan plans to raise the amount of gold it holds as part of its reserves to 20 percent, Bisengaly Tadzhiyakov, deputy chairman of the country’s central bank, said earlier this month.

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• Biggest U.S. Banks Curb Loans as Regional Firms Fill Gap (Bloomberg)
• New York Fed Sells $4bn in Mortgage Debt (FT)
• Julian Assange’s fall from the heavens (Reuters)
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• Japan Lower House Passes Sales Tax Bill as Vote Divides DPJ (Bloomberg)

The NATO system — set up to oppose the Warsaw Pact system, which no longer exists — functions the same way — rather than dissipating risk, it allows for the magnification of international tensions into full-on regional and global wars. In the late 20th century the threat of nuclear war proved a highly-effective deterrent which limited the potential for all-out-war between the great powers, offsetting much of the risk of the hyper-fragile treaty system. Yet the potential for magnifying small regional problems into bigger wars will continue to exist for as long as NATO and similar organisations prevail. We do not know exactly what arrangements Syria has with Russia and China — there is no formal defensive pact in place (although there is one between Syria and Iran) though it is fair to assume that Russia will be keen to maintain its Syrian naval assets, a view which is supported by the fact Russia heavily subsidises the Syrian military, and has blocked all the UN-led efforts toward intervention in Syria. After the Cold War, the Warsaw Pact was allowed to disintegrate. Until NATO is similarly allowed to disintegrate, the threat of magnification will remain large. Could a border skirmish between Syria and Turkey trigger a regional or even global war? Under the status quo, anything is possible.

At this point even those who have never heard of the Gulf of Tonkin know where this is headed:

• SYRIAN ACT 'WON'T GO UNPUNISHED,' TURKEY'S ARINC SAYS
• SYRIAN ACT 'HOSTILE,' 'COLD-BLOODED,' ARINC SAYS
• SYRIA SHOT DOWN TURKISH JET WITHOUT WARNING, NULAND SAYS
• TURKEY INVOKED ARTICLES 4 & 5 FOR NATO MEETING, ARINC SAYS
• TURKEY TO PROCEED AGAINST SYRIA USING LEGAL RIGHTS, ARINC SAYS
• TURKISH JET SHOT DOWN IN INTERNATIONAL AIRSPACE, ARINC SAYS

And yet:

• TURKISH JET 'MISTAKENLY' ENTERED SYRIAN AIRSPACE, ARINC SAYS
• TURKISH JET WAS IN SYRIAN AIRSPACE ONLY 5 MINUTES, ARINC SAYS

Just the tip, eh?

Update 2: CLINTON: SYRIAN DOWNING OF TURKISH JET 'BRAZEN, UNACCEPTABLE. Just as we expected.

Update: All 28 NATO Allies will meet Tuesday following Turkey's request under article 4 of the Washington Treaty

And so the escalation-cum-provocation-cum false flag is complete. There was a time when shooting down a foreign jet over one's territory was considered self-defense. But not when the one doing the defending is perpetual media bogeyman Syria, which "unnamed sources say" kills hundreds, nay thousands of its own people daily, usually in round, soundbitey numbers. Of course, the other side to the story is irrelevant: the Western-led media is never known to fabricate stories that suit the status quo's power and military industrial complex interests. All that is relevant is for the west, aka NATO, aka Hillary Clinton to get an angle to push for provocation. She just got it. As we suspected on Friday, there was much more than met the eye with the Syrian take down of a Turkey F-4 jet. Remember what we said on Friday: "The only question remains whether Syria's act was offensive or defensive. Naturally, its version is one of self-defense. Turkey obviously will claim it was in its right to be wherever the plane may be, and will say this was an act of provocation. Then NATO, read Hillary Clinton, will promptly step in, and make this a case in which Turkey was in its right and that Syria committed an act of aggression. From there, things will just escalate, and can potentially deteriorate to a far more troubling scale, because as we reminded earlier, Syria has recently become a major symbol for NATO vs the Russia-China axis." And sure enough, just out from CNN: "Turkey declares jet shoot-down a 'hostile' act."

In a move not too surprising to those who have followed the Egyptian presidential election, the candidate who is now president of the country one year after its "liberation" is the Muslim Brotherhood-backed Mohammed Mursi (for an extended interview with Mursi delineating his views read this ), who has won with over 13 million, or 51.73% of the votes. This means that at least superficially the Egyptian military is being pulled back from power, and instead the Islamist forces will be in control. How this ultimately impacts the region, and especially Egyptian neighbor Israel, remains to be seen, although a major Islamist power ascending in control of a formerly secular nation will hardly be very beneficial to Israel, especially in the long-run even if the just elected president has pro-western beliefs.

It seems pretty clear that the Syrians know the consequences of their actions. NATO (including deluded US hawks who are happy to ignore the disastrous consequences of the drug war on the US border while talking up more intervention in the middle east) and the NATO-backed Syrian opposition has been looking for any excuse to get stuck into a new interventionist mission. We know that the NATO-backed opposition were prepared to try and get a British journalist killed in a false flag operation in order to trigger a Western intervention. So why did Russia-armed Syria do it? And why (given the age of F-4 aircraft, it could easily have crashed of its own accord giving the Syrians a lot of plausible deniability) are they not at least denying that they shot it down? Is it possible that the wider Eurasian anti-American coalition led by the Russians and the Chinese are confident that NATO will not intervene out of fear of triggering a wider war? After all the Russian naval base has been a great obstacle to NATO intervention. Libya didn’t have any Russian bases, and it took far less internal violence for NATO to intervene there.

The "Syrianna" story from this afternoon, which many were quick to label as merely a lot of diplomatic hot air and rhetoric, just turned uglier, after Syria not only did not officially apologize as Turkey PM Erdogan implied had happened previously for the shot down Turkish F-4 fighter jet, but instead turned the tables on Turkey, and gave itself an out for what is now a definitive military action. From Reuters:

The Syrian military said it shot down a Turkish military aircraft "over Syrian territorial waters" on Friday.

 

"Our air defences confronted a target that penetrated our air space over our territorial waters pre-afternoon on Friday and shot it down. It turned out to be a Turkish military plane," a statement by the military circulated on state media said.

The only question remains whether Syria's act was offensive or defensive. Naturally, its version is one of self-defense. Turkey obviously will claim it was in its right to be wherever the plane may be, and will say this was an act of provocation. Then NATO, read Hillary Clinton, will promptly step in, and make this a case in which Turkey was in its right and that Syria committed an act of aggression. From there, things will just escalate, and can potentially deteriorate to a far more troubling scale, because as we reminded earlier, Syria has recently become a major symbol for NATO vs the Russia-China axis.

Update: they are making it up as they go along:

TURKISH PM SAYS HAS NO FIRM INFORMATION ON ANY APOLOGY FROM SYRIA, WILL MAKE FURTHER STATEMENT AFTER SECURITY MEETING
TURKISH PM SAYS CANNOT SAY WHETHER TURKISH WARPLANE SHOT DOWN OR CRASHED, NO NEWS ON PILOTS - TURKISH TV

Looks like everyone is trying to position appropriately.

Update from Al Jazeera: Turkish PM says cannot say whether Turkish warplane shot down or crashed, no news on pilots.

Just when the geopolitical tensions in the middle east appeared to be abating, and Brent was on a gentle glideslope to whatever price will greenlight the NEW QE now that fears of an Iran war have been very much silenced, things change. Reuters reports that Syria shot down a Turkish warplane on Friday, according to Lebanon's al-Manar television reported, "risking a new crisis between Middle Eastern neighbours already at bitter odds over a 16-month-old revolt against Syrian President Bashar al-Assad." "Syrian security sources confirmed to a Manar correspondent in Damascus that Syrian defence forces shot down the Turkish fighter jet," the Hezbollah-owned channel said." Here is the rub: Turkey is a NATO member, and by definition the alliance will have to come to Turkey's aid if requested. Syria, however is not just any country as has been made quite clear over the past several months of UN impotence: it is a critical staging ground for both Russia (which has a very critical regional naval base in the city of Tartus) and China, and according to the Jerusalem Post, the three countries are in preparation to conduct the "largest ever" war game. As such Syria, already gripped by fierce local fighting, where just like in Egypt and Libya the presence of US-based flipflop on the ground can be smelt from across the Atlantic, is merely a symbol. The real implication is how far can little escalations push until finally the showdown begins, with NATO on one side and Russia and China on the other?