Internet chief allays fears over ICANN transition

WASHINGTON, April 10 (UPI) — Fears over control of the Internet came into sharp relief Thursday as lawmakers voted to stall a plan to relinquish U.S. government oversight of a key Internet regulation.  After the Obama administration announced last month its plan to hand off control of oversight responsibility when its contract with the Internet Corporation for Assigned Names and Numbers ends next year, Rep. Greg Walden, R-Ore., introduced the DOTCOM Act bill, which would delay the transition until the Government Accountability Office could examine the plan.

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Crack in the House of Saud

President Obama flew to Saudi Arabia to patch up relations with King Abdullah at the end of last week in his first visit in five years. The alliance had been strained by Saudi anger over US negotiations with Iran on its nuclear programme and Obama’s refusal to go to war in Syria to overthrow Bashar al-Assad last year. For its part, the US is upset by Saudi Arabia covertly supporting al-Qa’ida-type movements in Syria and elsewhere.  The US-Saudi relationship is a peculiar one in that it is between a reactionary theocratic monarchy – it is the only place in the world where women are not allowed to drive – and a republic that claims to be the chief exponent of secular democracy. The linkage is so solid that it was scarcely affected by 9/11, though al-Qa’ida and the hijackers had demonstrably close connections to Saudi Arabia.

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Mistrust overshadows Obama’s Saudi trip

Obama-Saudi

Riyadh (AFP) – US President Barack Obama meets Saudi King Abdullah Friday as mistrust fuelled by differences over Iran and Syria overshadows a decades-long alliance between their countries.  Obama, who is due to arrive in Saudi Arabia late in the afternoon on a flight from Italy, is expected to hold evening talks with the monarch on a royal estate outside Riyadh.Saudi Arabia has strong reservations about efforts by Washington and other major world powers to negotiate a deal with Iran on its nuclear programme.  It is also disappointed over Obama’s 11th-hour decision last year not to take military action against the Syrian regime over chemical weapons attacks.Saudi analyst Abdel Aziz al-Sagr, who heads the Gulf Research Centre, said Saudi-US relations are “tense due to Washington’s stances” on the Middle East, especially Iran.The recent rapprochement between Tehran and Washington “must not take place at the expense of relations with Riyadh,” Sagr told AFP.  Sunni Muslim Saudi Arabia, long wary of Shiite Iran’s regional ambitions, views a November deal between world powers and Iran over the latter’s nuclear programme as a risky venture that could embolden Tehran.

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By 2015, Russia Wants To Establish A Eurasian Union To Rival The EU

Is Moscow’s proposed Eurasian Union an initiative to revitalize stagnant economies, or an attempt to re-establish a Soviet Union “lite?”  After the fall of the Soviet Union in 1991, the world suddenly had 15 more nation states, some of whom had not been sovereign territories since the 19th century.  Nevertheless, calls for a re-integration of the Eurasian region were soon heard, often led by Russia, according to (pdf) a Chatham House paper.  In 2005, Russian President Vladimir Putin called the fall of the USSR “a major geopolitical disaster of the century.”  There’s been a smattering of different attempts at unification, including the Commonwealth of Independent States security union, but a lack of commitment to creating the institutions have stalled efforts, Chatham House writes.

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U.S. to relinquish government control over Internet

March. 14 (UPI) — The United States will hand over government control of administration of the Internet, bowing to pressures to globalize the management of the networks that connect billions of people around the world in a move meant to ease fears following last year’s revelations of NSA spying.

U.S. officials on Friday announced plans to relinquish its oversight role over the group that manages the Web’s critical infrastructure, said Lawrence Strickling, the head of the National Telecommunications & Information Administration at the Commerce Department.  The transition will come in 2015, when Commerce contract with the Internet Corporation for Assigned Names and Numbers expires next year. But the announcement comes with a major caveat: As part of the transition, an independent, international oversight authority must be established so as to earn the trust of the world, Strickling said.  “We will not accept a proposal that replaces the NTIA role with a government-led or an intergovernmental solution,” Strickling said.

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China’s Economic Cold War on the United States

Read the recent report by Congress on China’s Huawei Technologies and ZTE Corp. and you could be excused for a sense of déjà vu. It sounds like it came from the U.S.-Soviet era. One passage: “The opportunity exists for … espionage by a foreign nation-state already known to be a major perpetrator of cyber espionage.”  Many are worried that Congress has gone too far. But the truth is it hasn’t gone far enough.  Once the world admitted China to the World Trade Organization in 2001, we welcomed the country into our free-markets. We trusted the global economy would evolve toward free and fair trade. We then set our policies on cruise control, assuming the world would follow the U.S. model.

Instead, China got a hand on the steering wheel: It turned the rules of global business in its favor. We woke up to find a hijacking of our free-market system. China was manipulating its currency, subsidizing its firms, undermining nascent U.S. firms, erecting trade barriers, and stealing intellectual property. China was using its firms as instruments of state capitalism—it even coordinated them to monopolize critical resources such as steel and rare earths.

We are now at odds with China. We are essentially in an economic cold war. The Huawei report—a notable bipartisan effort—documents as much. After hollowing out many manufacturing industries—tires, consumer electronics, auto parts, steel—China has gone after tech-heavy industries like telecommunications.

The report focuses on national-security risks posed by Huawei and ZTE: spying via backdoor software implants, cyber attacks on key networks, and inserting malicious software in security systems. These are serious allegations: Imagine if China used Huawei equipment to shut down American water and electrical systems.

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Global military spending is now an integral part of capitalism

  China’s surge in military spending gains headlines, partly because of the ominous implications regarding its regional contest with Japan, but it’s the deeper structures of military spending in general that are far more compelling.

There are few surprises about the distribution of military spending: for all the current focus on China’s growing military outlays and it is significant that they have embarked on a sequence of double-digit increases as a percentage of GDP the United States still accounts for 40 per cent of such expenditures. However, the distribution is not the only thing that matters; it’s the sheer scale of such investment $1.756tn in 2012. The “peace dividend” from the end of the cold war has long since bitten the dust. Global military spending has returned to pre-1989 levels, undoubtedly a legacy of the war on terror and the returning salience of military competition in its context. In fact, by 2011 global military spending was higher than at any year since the end of the second world war.

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Facebook buying 11,000 drones to connect Africa

Solara_50_drone

Facebook is in negotiations to buy a drone manufacturer with the aim of using its high-altitude autonomous aircraft to beam internet connections to isolated communities in Africa, according to reports.  The social networking company is one of the main backers of the internet.org project, which aims to connect the large parts of the world which remain offline.  Today, only 2.7 billion people – just over one-third of the world’s population – have access to the internet, according to Facebook. Other founding members include Ericsson, MediaTek, Nokia, Opera, Qualcomm and Samsung.

 

Now TechCrunch reports that Facebook intends to buy the maker of advanced solar-powered drones which can remain in the air for up to five years at a time, in the hope that they can be modified to provide internet connectivity for those on the ground.  Titan Aerospace’s drones fly so high – up to 65,000 feet – that they can effectively operate as satellites with far lower operating costs, which the company calls “atmospheric parking”. The Solara 50 and 60 models can carry up to 100kg of equipment.

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G-20 Plus Five: The Economic Forum’s Mixed Record

G20Plus5

It is time to take stock of the G-20. Just over five years ago, during the free fall of the global financial crisis, representatives from 20 of the world’s leading economies agreed to gather twice a year in order to develop a more sustainable regulatory framework for financial institutions.

 

There have been many signs of promise. The group has agreed on a new framework for regulatory standards for each country’s most important financial institutions and tasked a Financial Stability Board (FSB) with monitoring adherence to them. But the G-20 has also fallen short of some expectations. Although there have been improvements in global financial regulation over the past five years, serious flaws remain.

 

The G-20 has already addressed the main pillars of financial regulatory reform. The most important decision concerned international bank capital regulations. Prior to the G-20, there were serious problems. The Basel II agreement, initially published in June 2004, gave banks enormous discretion in determining whether they met minimum capital standards. That agreement was also undermined by the fact that the United States decided not to live up to it.

 

The Basel III regulations, which were agreed upon in 2011, were a great improvement. The first important step was that all the G-20 countries agreed to recognize the regulations and task a new body, called the Regulatory Consistency Assessment Programme (RCAP), with monitoring, assessing, and evaluating the implementation of new, more stringent capital standards. The RCAP audits the regulatory frameworks of participating countries and issues formal publications evaluating their progress. It has the authority to request improvements as necessary, and has done so. In each of the four countries it has reviewed, it has requested improvements — 90 of them, in the case of China. In a preliminary assessment, the European Union was declared materially noncompliant on two items, and the United States was declared materially noncompliant on one item.

 

Another achievement of the G-20 was the creation of a regulatory framework for over-the-counter-derivatives, risky financial instruments that were at the center of the last financial crisis. Before the crisis, there were essentially no regulations on the riskiest derivatives trading and there was no transparency in the derivatives marketplace. Now the majority of these transactions are bound to multilateral standards of transparency and regulation. Although these ideas were discussed by the G-20, ultimately the United States and Europe — where 85 to 90 percent of derivatives trading is conducted — are primarily responsible for implementing them. Although most countries have passed laws implementing these regulations, it is too early to tell whether they are working.

 

A third accomplishment of the G-20 was its reforms to international regulations on rating agencies. Before the crisis, ratings agencies, which are responsible for assessing the ability of debtors to pay back what they borrow, were unregulated in most G-20 countries. After the crisis, it was clear that this was a grave mistake. The industry was highly concentrated, with two U.S. firms controlling more than 80 percent of the market. But the ratings issued by these agencies were often sloppily fabricated.

 

The assumption behind the new regulations was that greater transparency and scrutiny of ratings agencies would encourage competition and improve overall performance. Preliminary data suggest that the plan has worked. In the United States and the EU, new entrants have joined the market and a greater number of firms are now rating financial institutions and asset-backed securities.

 

The G-20 has also succeeded at regulating hedge funds. Before the crisis, hedge funds were dealt with in different ways in different countries. (Even the EU lacked a single regulatory framework.) All G-20 economies, with the exception of Brazil, have now passed hedge fund regulations as part of broader efforts to regulate and supervise the shadow banking sector, which involves entities and activities (including hedge funds) that exist fully or partially outside the regular banking system.

 

Finally, the G-20 has made major progress on standards for winding down troubled banks. During the crisis, the lack of such standards proved to be a major problem, as the lack of a common playbook worsened market jitters. The need for a clear resolution scheme is especially relevant for large cross-border banks, which are especially difficult to unravel and are concentrated in the United States and the EU.

 

Resolution regimes require a clear operational authority to stabilize the bank, as well as a clear legislative framework that allows authorities to force creditors to take losses. It is already evident that such a system is easier to build in the United States than the EU. The United States already has a clear authority, the FDIC, which is responsible for taking control of the parent company of the distressed financial group. It has always been capable of keeping distressed operations open by injecting extra liquidity. The FDIC can also access an Orderly Liquidation Fund (OLF), administered by the U.S. Treasury, to finance a “bridge” bank, which is authorized to hold the assets and liabilities of an insolvent bank. A bridge bank is charged with continuing the operations of the insolvent bank until the bank becomes solvent through acquisition by another entity or through liquidation.

 

The EU is only halfway there. Although Europe has agreed on the procedure to resolve a bank, the proposed common fund for that kind of activity is, at 55 billion euro, still too small given the size of the EU banking market, and will only come in place too late. In practice, national governments will still likely be responsible for providing most of the money to assist their ailing banks, which would only worsen the distortions in European financial markets.

 

LONG ROAD AHEAD

 

The G-20 still has plenty of work in coming years. New financial regulatory items have emerged on the agenda, including regulation of the non-bank financial sector. International standards for the non-bank financial sector are far less developed than those for banking. In July 2013, the FSB published a list of nine insurance companies (five are European, three are American, and one is Chinese) that it deemed systemically important. It will soon publish a similar list for other finance and asset management companies. Although the size of total assets of insurers and asset management companies is far below that of the banking sector, and systemic risks are much lower, their business models and risk diversification still require proper supervision.

 

The G-20 regulations have also not yet solved the problem posed by central counterparties (CCPs), the entities that increasingly serve as an exchange for derivatives transactions. They play a critical role, but are still under-regulated: at periods of financial stress, they may not be able to meet the liquidity needs of their members. If inadequately managed, CCPs could become the Fukushimas of global finance. CCP board members need to take a much more hands-on approach to insulating risks coming from CCPs.

 

The G-20 also needs to place greater emphasis on macroeconomics, especially when it comes to coordinating exit policies from the unconventional monetary policy that developed countries have pursued since the start of the crisis. The prospect of the end of such policies — namely, the U.S. Federal Reserve’s decision to draw down its bond-buying program — has already led capital to flee emerging markets. Similar policies are sure to follow in the other developed countries. Whether central banks will take the global dimension into account remains an open question.

 

Overall, the G-20 has taken a big step toward instituting better global governance and a more consistent regulatory framework for financial markets. Five years on, the G-20 countries — and especially the United States and Europe, where the seeds of the last financial crisis were sown — have largely delivered on their commitments. Better rules are in place on bank capital, derivatives, ratings agents, hedge funds, and bank liquidation. How these rules are enforced will matter, of course, but at least the rules exist. Initial reports on the implementation of the new Basel III rules, which are key to the entire framework, are already promising.

 

That raises the question of how the G-20 has managed to enforce its agenda without possessing coercive authority. One important factor has been the quality and dedication of its leadership. The past and current chairs of the FSB, Mario Draghi and Mark Carney, were instrumental in driving the process forward. But another factor has been the subtle effectiveness of peer pressure. Although the G-20 cannot force any single country to pass regulations, each country is very aware of being observed by the others. No member of the group has wanted to be accused of shirking its responsibilities. For now, that should be enough for the G-20 to move forward on its remaining agenda.

 

Swiss Immigration Vote Raises Alarm Across Europe

BERLIN — Swiss and European leaders reacted warily on Monday to Swiss voters’ narrow approval of a proposal to limit the number of foreigners allowed to live and work in Switzerland.  A bare majority voted in a referendum on Sunday to cut immigration quotas and require that Swiss nationals be given priority in hiring. The result could have far-reaching implications for relations between Switzerland and the 28-member European Union, of which it is not a member.  Laurent Fabius, France’s foreign minister, said Monday that the European Union would have to reconsider its relationship with Switzerland.  “It is a vote that causes concern because it means that Switzerland wants to withdraw into itself,” Mr. Fabius told RTL radio.

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Saudi Women Find a Way

“I changed my baby brother’s Pampers, and now? I’m a 42-year-old mother, and I need him to sign off when I travel abroad?” My divorced Saudi friend and I were sharing tea in Riyadh’s Al Faisaliah Hotel, and she could not hide her disgust. A striking beauty of regal bearing, she has a high-powered international job and limited patience for her culture’s suffocating “protections” for women.  Yet even this worldly skeptic could see signs of progress for the kingdom’s women. “It’s changing,” she insisted. “We are in a correctional phase.” On a recent trip to Riyadh and Jeddah, that is an opinion I encountered time and again from Saudis and westerners alike. “The country is on a trajectory of modernization, if not too fast,” recently departed U.S. Ambassador James Smith told me. Together with his wife, Janet, a former professor at the National War College, Smith has spent nearly five years steeped in kingdom culture. “There is an imbalance politically that ever so slightly favors the modernizers” and, he continued, “an emerging critical mass of daughters — on campuses and in jobs — who will make a difference.”

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DOD Looks 25 Years Ahead in Unmanned Vehicle Roadmap

WASHINGTON, Dec. 23, 2013 – Strategy and budget realities are two aspects of the Defense Department’s new Unmanned Systems Integrated Roadmap, released today.  The report to Congress is an attempt to chart how unmanned systems fit into the defense of the nation.  “The 2013 Unmanned Systems Integrated Roadmap articulates a vision and strategy for the continued development, production, test, training, operation and sustainment of unmanned systems technology across DOD,” said Dyke Weatherington, the director of the unmanned warfare and intelligence, surveillance and reconnaissance office at the Pentagon.  “This road map establishes a technological vision for the next 25 years and outlines the actions and technologies for DOD and industry to pursue to intelligently and affordably align with this vision,” he continued.  Unmanned aerial vehicles have received the most press, but unmanned underwater vehicles and ground vehicles are also providing warfighters with incredible capabilities.

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Europe repeating all the errors of Japan as deflation draws closer

Europe is one shock away from a deflation trap.  A surprise anywhere in the world is all that it needs: an upset in China as the credit bubble pops, or a global bond shock as the US Federal Reserve winds down monetary stimulus.  Producer price inflation (PPI) fell to -1.4pc in the eurozone in October.  This is how deflation becomes lodged in the price chain.  “Prices are sticky for a while as you approach zero inflation, but once you break through the ice into deflation things can move fast, as we’ve seen in Greece,” said Julian Callow, global strategist at Barclays.”  The European Central Bank needs to act before the horse has already bolted.”  Mr Callow said excess industrial plant in China is exporting deflation across the world.  China’s fixed capital investment over the past year has been $4 trillion, compared with $3 trillion for the entire EU and $3 trillion for the US.  This has grown eightfold in a decade.  It is a vast new source of supply for a saturated global economy.  China itself is now in PPI deflation.

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Ukraine riot police break up pro-Europe protests

(Reuters) – Ukrainian riot police used batons and stun grenades to disperse hundreds of pro-Europe protesters early on Saturday after President Viktor Yanukovich opted not to sign a pact with the European Union.  Helmeted police bearing white shields, stormed an encampment of protesters in Kiev’s Independence Square, as they sang songs and warmed themselves by campfires, the opposition said.  Tension had been building since Friday, when Yanukovich declined to sign the pact with EU leaders at a summit in Lithuania, going back on a pledge to work toward integrating his ex-Soviet republic into the European mainstream.

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Russia claims $5 billion in helicopter orders at Dubai Air Show

DUBAI, United Arab Emirates, Nov. 23 (UPI) — Russia’s state-owned arms exporter said Saturday it has new orders worth $5 billion from Arabian Gulf nations for helicopters.  A Rosoboronexport representative made the announcement at the Dubai Air Show in the United Arab Emirates.  The representative said outstanding orders as of Nov. 1 exceeded $38 billion for Russia’s state arms exporter for military-related equipment.  During the five-day biannual air show, the Russian delegation held talks with the UAE, Saudi Arabia, India, Jordan and Algeria, RIA Novosti reported.

How Somebody Forced the World’s Internet Traffic Through Belarus and Iceland

This is a deeply technical but potentially very troubling story. Imagine one day you’re using the Internet the same way you do every day. Reading the news, shopping, sending email, checking your bank and credit card balances. Maybe even doing some work for your employer.  Typically, but not always, the bits being sent from your computer, tablet or phone will flow from where you are to where they need to be via the most direct route available.  But what if they didn’t? What if someone slipped in between you and the various servers you’re connecting with and diverted your traffic elsewhere, funneling it through a choke point of their choosing, so they could capture, copy and analyze it? Your data takes some extra — and imperceptible — milliseconds to get where it’s going and ultimately everything you’re doing online works just fine. But your traffic has been hijacked by parties unknown and you’re none the wiser that it has happened.

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Feds Stop North Korean Meth ‘Floodgate’ Into New York

Is Walter White working out of North Korea?  According to federal authorities, five men were arrested in New York this week for attempting to bring over 200 pounds of methamphetamine from the dictatorial regime into the Empire State. (Mirroring the quality of “Blue Magic” meth produced in Breaking Bad, the illegal drugs seized “had a purity of over 99%,” according to the indictment.)  The five men–whose nationalities include the United Kingdom, China and the Philippines–were arrested in Thailand in September and were extradited to the United States yesterday evening, where they were arrested by U.S. authorities.  “Methamphetamine is a dangerous, potentially deadly drug, whatever its origin. If it ends up in our neighborhoods, the threat it poses to public health is grave whether it is produced in New York, elsewhere in the U.S., or in North Korea,” Manhattan U.S. Attorney Preet Bharara declared in a statement today announcing the arrests.

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China to Foreign Media: Get in Line or Get Out

It’s no secret that China bans foreign news portals that offend its oh-so delicate sensibilities, swiftly and without mercy or explanation. This week has seen The Wall Street Journal and Reuters‘ Chinese websites blocked. There is, so far, no explanation for China’s blocking of these sites — could be anything from the Tiananmen attack reporting to Paul Mooney’s rejected visa — but signs point to a bleak future for foreign media in the Middle Kingdom.  This news comes as Bloomberg is under scrutiny for allegedly censoring sensitive stories to be able to report in China; their site has been blocked since July 2012 for running a story on Xi Jinping’s family wealth. This is not totally dissimilar to the censor’s axe that is still chopping on The New York Times‘ neck (Chinese and English language websites) for a story about Wen Jiabao’s family wealth. The message from China’s censorship czars is clear: get in line, or get out.

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