Israel Can Not be Deprived of Jerusalem

Israel can be deprived of Jerusalem. The world’s leading countries are trying to solve the crisis in the Middle East against the background of yet another conflict between Palestine and Israel. Arab countries are about to convince Israel ’s major ally – the USA – to approve the Saudi initiative, in accordance with which Israel will no longer have Jerusalem.

Russia’s Foreign Minister Sergey Lavrov arrived in New York today to discuss the Palestinian problem at the UN Security Council. No one expects any miracle to happen, of course. It is absolutely impossible to solve all problems, which Arabs and Jews have.

Saudi Arabia suggests Israel should give the holy city of Jerusalem under external control and set its state borders in accordance with the map of 1967. The Arab districts of Jerusalem – the eastern part of the city – will have to become the capital of the Palestinian State, Arabian officials suggest.

Official spokesmen for Arab countries, including the leader of the Palestinian Authority Mahmoud Abbas, try to convince President Obama of the need to implement the Saudi initiative. The landmark decision can be made during a special conference for the Middle East, which is taking place in June.

The Israelis traditionally believe that their capital is the city of Jerusalem, not Tel Aviv. Making the holy city become the capital of Palestine would be a disaster for the national mindset of Israel. In other words, it would mean a capitulation.

In the meantime, Israel and Palestine continue to attack each other. It goes without saying that Israel is not going to sit on its hands and watch Palestinian Qassam rockets hitting target one after another. Israel’s Cast Lead Operation did not reach its goals, and terrorists continued to attack Israel.

The sitting Israeli administration does not even think of giving Jerusalem away to Arabs. Israel would rather repeat the military operation against Palestine to minimize the terrorist threat.

Whose backyard?

CAN Europe pull off America’s trick? The European Union wants to bolster stability and prosperity in ex-Soviet countries on its borders, while improving ties with Russia on other matters. That is pretty much what Barack Obama’s new administration has managed. It has separated the issues where agreement is reachable, such as arms control, from those where it isn’t, such as the future of countries such as Georgia. The EU’s efforts, however, look quite puny. At a two-day summit in Prague ending on Friday May 8th it launched an “Eastern Partnership” which is supposed to create closer political and economic ties with six countries: Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.

The EU faces obstacles to closer relations with its eastern neighbours. One element is a spy spat. After NATO expelled two Russian officials accredited to the alliance’s headquarters in Brussels, the Kremlin in turn on Wednesday threw out two Canadian diplomats who represent NATO in Moscow. Western spooks have been grumbling that Russia’s mission to NATO, set up in the hope of defusing the Kremlin’s feelings of exclusion, had turned into a blatant intelligence-gathering operation. But neither side seems interested in escalating it further.

Russia is also now downplaying its hostility to NATO-led exercises in Georgia. Russian state-run media earlier characterised these as “war games” and Russian forces in the region presented a show of strength in response. Some wondered if another war was brewing.

America sees the Russian reaction as neurotic and unjustified. Its diplomats point out that the NATO exercises are small (with barely 1,000 soldiers in all), long-planned and deal with disaster relief. They include non-NATO countries such as the United Arab Emirates and Russian allies. Russia itself was invited (at German insistence) but then declined to attend. The real story is not NATO muscle-flexing in Russia’s back yard, but the Kremlin’s lingering feeling of entitlement over its former empire, they argue.

Still, if Russia matches its verbal climbdown with an end to its military sabre-rattling against Georgia, it will set the stage for a sunny visit by Mr Obama to Russia in July. After talks in Washington, DC, with Russia’s foreign minister, Sergei Lavrov, America’s president said the two countries had an “excellent opportunity” to improve relations. Talks start on May 18th on a much-needed treaty to cut both sides’ arsenals of strategic nuclear weapons. America also hopes for more Russian help over issues such as Iran.

The sunlight over Washington has not yet dispelled the dank fog of suspicion over the Caucasus. Georgia is still twitchy about Russian intentions. The authorities there defused what appeared to be an attempted military coup on Tuesday. They blamed Russia. The opposition said it was a stunt aimed at bolstering support for Georgia’s president, Mikheil Saakashvili. Then the month-long opposition protests in the capital, Tbilisi, persistent but dwindling in number, briefly turned violent. Mr Saakashvili has to tread a fine line between showing his long-suffering western friends that he has become calmer and more responsible, while at the same time making sure that Russia does not succeed in its stated intention of toppling him.

Against all that, substance is rather lacking with the EU’s “eastern partnership”. Only 17 of 27 EU heads of government turned up for the summit. Gordon Brown and Nicolas Sarkozy were among the missing heavyweights. Alyaksandr Lukashenka, the Belarussian leader, stayed away (few of his European counterparts think he has done enough to relax his authoritarian regime). The six countries are a mixed bag, ranging from those that ardently want to join western clubs (Georgia), to Russian satrapies (Belarus). The €600m ($805m) budget for the partnership is chickenfeed. Genuinely easing rules on visas would make a difference. But Germany doesn’t want that. It also does not want any measures that would offend Russia.

Still, by the cautious standards of the EU, officials sounded quite cross about Russia’s chilly attitude. The EU’s leading foreign-policy official, Javier Solana, complained that: “Some comments from Russian leaders have not been very constructive…They understand very well this is not against Russia.” Maybe not but it is still unclear how Russia regards its neighbours’ foreign relations.

Do they believe that anything that stokes security and prosperity is a benefit all round? Or do they see it as a zero-sum game, in which integration westwards in the former empire automatically threatens what Dmitry Medvedev, Russia’s president, calls his country’s “privileged interests”. What is certain is that trade allows Russia to play divide-and-rule with the EU in a way that it cannot with America.

An alternative view of the European Union

The EU launches programme to forge closer ties with six countries in Eastern Europe and the Southern Caucasus.

The ‘Eastern Partnership’ holds out the prospect of free-trade pacts, financial aid, help with energy security and visa-free travel to the EU for Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. For Europe, it could mean more stability and security on its eastern rim.

The region has gone through multiple crises since the collapse of the Soviet Union and remains troubled by unresolved conflicts. At a summit in Prague to launch the programme, President Barroso said the EU had a “vital interest” in stronger relations.

The partnership adds a specific eastern dimension to the EU’s umbrella policy for neighbouring countries. The urgent need for this was brought home by the Russia-Georgia conflict last summer and the Russia-Ukraine gas dispute in January. The recent unrest in Moldova has renewed concerns about stability in the region.

The six countries will receive increased financial assistance from the EU to help with political and economic reforms. Successful reforms may lead on to comprehensive Association Agreements with the EU, which would include free-trade pacts and commitments on energy security – important for EU countries whose oil and gas supplies transit the region from Russia.

The countries, former Soviet republics, face major challenges to democracy and the rule of law. Badly hit by the recession, they continue to struggle with the transition to market economies.

Alongside regional-development expertise, the EU is offering programmes to address economic and social disparities, and would consider opening up its labour market to workers from the partner countries. And visiting the EU could be made easier for travellers if the countries bring border controls up to EU standards.

Border management is one of the five key areas the EU wants to help with. The others are support for small businesses, connections between regional electricity grids, gas and oil pipelines from the Caspian Sea to Europe, and cooperation on disaster response.

The commission will add €350m in fresh money on top of the planned resources for 2010-13. Another €250m already earmarked for the region will be refocused to support the new programme.

Diamonds on the Cheap(er) - Bloomberg

More than 20 years ago journalist Edward Jay Epstein wrote the definitive expose of the diamond business, initially published in the Atlantic Monthly in 1982 and subsequently as a book, The Rise and Fall of Diamonds. Epstein, it must be said, is a conspiracy buff, but his research on diamonds is pretty credible. His central contention is that diamonds have little inherent value; their perennially high price is solely a function of clever promotion and ruthless manipulation of the market. You ask: Isn't that true of any high-value product? Nope. Take gold, a true commodity in the sense that it's fungible, as the economists say--like quantities of gold are freely interchangeable. Gold's purity can be readily assayed and it's indestructible for practical purposes, making it a reliable store of value. Even now that the world has abandoned the gold standard, gold's price has held up well on the open market.

Not so with diamonds. Despite the hype, diamonds aren't forever; they can be damaged or destroyed. The value of diamonds varies widely depending on grade and, despite efforts at standardization, is basically arbitrary--experts often disagree sharply on the worth of a particular gem. Sure, the same can be said of paintings or other collectibles. The difference is that the world diamond market is largely controlled by a single private enterprise, the South Africa-based De Beers cartel. The geniuses behind De Beers recognized early on that a stable, profitable diamond industry depended on controlling both supply and demand. De Beers rarely discovers new sources of diamonds; rather, it focuses on controlling existing ones, limiting production, and if necessary buying up surplus gems and stockpiling them to prop up the market. It sets prices arbitrarily and cuts off supplies to dealers who buy through unauthorized channels. On the marketing side, De Beers hired advertising firms, starting with N.W. Ayer in the late 1930s, to render axiomatic the idea that diamonds = true love. De Beers and Ayer didn't invent diamond engagement rings but did rescue a fading concept--in 1932 worldwide diamond sales had been only $100,000. Ayer's ploys ranged from planting news stories about newly betrothed celebrities flaunting big rocks to positioning diamonds as heirlooms, preventing the market from being flooded with secondhand goods. (The market for used diamonds is dismal, by the way.) The campaign worked--U.S. wholesale diamond sales increased from $23 million in 1939 to $2.1 billion in 1979. The J. Walter Thompson agency performed a similar miracle in Japan in the 1960s, essentially creating a tradition of diamond engagement rings out of thin air.

Throughout all this De Beers has successfully fended off threats due to political upheaval, competing producers, and even the U.S. justice department (the firm recently paid a $10 million fine to settle an antitrust case). The big challenge today is synthetic diamonds. In a widely noted article last fall, Wired magazine reported on two start-up firms, one in Florida and the other in Boston, that had begun manufacturing gem-quality artificial diamonds. Synthetic diamonds have been available since the 1950s and are commonly used in industrial abrasives, but till now have made little headway in the gem market due to prohibitive manufacturing expense. Supposedly the new artificial diamonds, particularly those made by chemical vapor deposition (CVD), are both cheap to produce and, unlike knockoffs such as cubic zirconium, virtually indistinguishable from natural diamonds even in the lab.

So, the jig's up for De Beers, right? Maybe, maybe not. The last chapter of The Rise and Fall of Diamonds, entitled "The Coming Crash of 1983," described a scenario in which a concatenation of factors, including a flood of diamonds from new mines in Australia, would trigger "the final collapse of world diamond prices." It didn't happen (although De Beers did lose market share), and Epstein has omitted the chapter from the online version of his book. De Beers has dodged plenty of disasters in its history, and I'd hesitate to write the final pages yet.

Empire - Israel and the US - 25 Feb 09 - Part 1

Arctic winds are blowing into Jerusalem from Washington these days. As Prime Minister Binyamin Netanyahu's May 18 visit to Washington fast approaches, the Obama administration is ratcheting up its anti-Israel rhetoric and working feverishly to force Israel into a corner.

Using the annual AIPAC conference as a backdrop, this week the Obama administration launched its harshest onslaught against Israel to date. It began with media reports that National Security Adviser James Jones told a European foreign minister that the US is planning to build an anti-Israel coalition with the Arabs and Europe to compel Israel to surrender Judea, Samaria and Jerusalem to the Palestinians.

According to Haaretz, Jones was quoted in a classified foreign ministry cable as having told his European interlocutor, "The new administration will convince Israel to compromise on the Palestinian question. We will not push Israel under the wheels of a bus, but we will be more forceful toward Israel than we have been under Bush."

He then explained that the US, the EU and the moderate Arab states must determine together what "a satisfactory endgame solution," will be.

As far as Jones is concerned, Israel should be left out of those discussions and simply presented with a fait accompli that it will be compelled to accept.

Events this week showed that Jones's statement was an accurate depiction of the administration's policy. First, quartet mediator Tony Blair announced that within six weeks the US, EU, UN and Russia will unveil a new framework for establishing a Palestinian state. Speaking with Palestinian reporters on Wednesday, Blair said that this new framework will be a serious initiative because it "is being worked on at the highest level in the American administration."