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Monthly Archives: February 2018

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Streamlining Towards Brexit

by John Brian Shannon

Time is running down on the Brexit clock (399 days and counting!) and the default path seems the only way that will allow a smooth and orderly Brexit in any sort of timeframe that could be construed as reasonable to British voters.

If the UK government chooses to simply photocopy existing EU trade regulations and then change those laws incrementally over a period of years, the UK should rightly expect to be invited by the European Union to continue their mutually beneficial trade relationship.

After all, how could the EU possibly be upset that the UK will voluntarily continue to follow European Union trade regulations in the pre-Brexit period?

However, this implies that until Brexit actually occurs, the UK will be obligated to consult with the EU on every incremental change made on those photocopied laws and regulations from now until the UK officially leaves the European Union on March 29, 2019. It’s not about polite diplomatic behavior, it’s about pragmatic self-interest.

The UK must begin today to re-prove that it intends — in all cases — to be a fair and reliable trading partner with the EU, and other countries are sure to be watching as this process unfolds. No amount of effort can be spared in this regard, because as so goes the UK trading relationship with the EU, so it will go between Britain and every other country in the world, after Brexit.


Trade After Brexit

Once March 29, 2019 has passed and the UK has officially left the European Union there will be no longer be any requirement for lengthy consultations with the EU on changes to British trade laws or regulations far in advance of them coming into effect.

That doesn’t mean that the UK shouldn’t continue to consult with the EU, it means that it doesn’t need to consult with the EU during the entire policy formation period. But once UK policy has been decided, the EU should continue to be the first to know about pending changes due to the bloc’s importance to the British economy.

As above, no effort should be spared in showing the EU every possible courtesy on even the most incremental of trade policy adjustments under consideration in the pre-Brexit timeframe.

And in the post-Brexit timeframe, a high level of communication and consultation must continue to define the relationship between the two sides.


Customs Law After Brexit

Unlike trade, the present customs union will end the day after Brexit which will be a very positive thing for the UK. After Brexit, the UK alone will be fully in charge of who can and can’t enter the country, and it should mount a Herculean effort now to identify and locate every single foreigner in the country, matching them to their home and workplace (or school) address.

Every non-British born resident in the country should be required to pay 100 pounds sterling per year, and also be required to provide their updated home and work/school address as often as it changes, no matter which country they originally hailed from. It’s the 21st century(!) all of this can be done on a UK.gov webform in less than 10 minutes per year.

Especially for those foreigners living in the United Kingdom anytime prior to Brexit day, the UK government should make the entire process as streamlined as possible.


Commonwealth Nations in the post-Brexit Timeframe

As the UK returns to its Commonwealth roots, immigration to the UK should thenceforth be sourced from Commonwealth nations.

Of course, there will always be a number of immigrants from the EU, America, and other countries. But as much as possible, the focus should be on the ‘all for one and one for all’ approach of Commonwealth nations — and one great way to keep that viable is by sourcing 2/3rds of the UK’s immigration requirements from the Commonwealth.


In addition, the UK should continue to spend .7 per cent of GDP on foreign aid — but spend it in Commonwealth nations exclusively.

This means that the British government must find other nations to take over its existing foreign aid commitments in non-Commonwealth nations so that Britain can concentrate on building a better Commonwealth.

Done right, every pound sterling spent in Commonwealth foreign aid should return a minimum of two pounds sterling to the UK, as a rising tide in a finite environment like the Commonwealth will lift all boats, which is quite unlike spending that same amount of foreign aid in the wider world.

One example of how Britain could benefit in the post-Brexit timeframe with a policy that favours Commonwealth nations is that UK universities, colleges and trade schools should see a vast increase in enrollment from the 2 billion citizens of Commonwealth nations.


Time is Tight

Although Brexit once seemed far-off, time is getting a little tight. Much needs to be accomplished in the remaining 399 days until Brexit.

The best way to do that is to harmonize UK trade law with EU trade law and then make incremental changes over time. That’s how not to lose.

How to win is to engage with Commonwealth nations as never before in ways that work to benefit both the United Kingdom and every Commonwealth member nation.

Keeping our EU friendships healthy on the one hand while updating our Commonwealth friendships for the 21st century on the other hand, is irrevocably in Britain’s best interests, thereby creating a new paradigm that will allow the UK to work to its strengths over the next 100 years.

How a Pipeline From Iran to Syria Could Bring Peace

by John Brian Shannon

It’s no surprise the wheels are coming off in Syria, and in the absence of an agreement between the various parties regarding Syria at the upcoming Munich Security Conference, things are certain to deteriorate further and at an increased pace.

Therefore, the pressure is on all sides to arrive at a solution to prevent further bloodshed among the civilian population in Syria and to prevent an escalation between the various military groups operating in the region.


Good Intentions Gone Awry

There was at one time, a completely plausible plan for the region that has gone off the rails — not because any side opposed it — but because there was no oversight to bring the plan to fruition.

In between President Obama’s ‘Pivot to Asia’, the Arab Spring, and the U.S. elections that brought Donald Trump to the White House, the Syrian situation was left unguided and (no surprise!) it therefore deteriorated.

Major powers are now bombing each other’s troops and shooting down each other’s aircraft (and who knows what else is going on that isn’t reported) which makes escalation a foregone conclusion in the absence of leadership and implementation of the original plan.


The Forgotten Plan

Prior to the Syrian conflict the plan for the region was to bring Iranian #2 (sweet) crude oil and Iraqi #3 (semi-sweet) crude oil via a proposed pipeline across the northern part of those countries and across very northern Syria to the Mediterranean for export to Europe, Turkey, and Israel.

Not only would Iranian and Iraqi crude oil be transported by the proposed pipeline, pumping stations along the route would allow Syrian #3 (semi-sweet) crude to be carried by the new pipeline.

Iran’s #2 sweet is highly prized by refineries around the world because it requires much less refining than sour crude oil and it allows a relaxed maintenance schedule for refineries so they can operate continuously for many years before requiring a mandatory and hugely expensive maintenance protocol.

For example, Iran’s #2 sweet oil can be used to blend very sour oil (such as Canadian tar sands oil which is rated at #4.75 sour) to bring it up to a standard where it is acceptable to an oil refinery.

Further on the Canadian example which is very roughly comparable to the problem facing other refineries around the world, Canadian refineries presently purchase huge volumes of Saudi #3 semi-sweet in order to blend with Canada’s toxic #4.75 oil — but access to Iranian sweet would allow Canadian companies to meet refinery standards with much less foreign oil.

In rough terms, a certain refinery in eastern Canada receives one Saudi supertanker per week to blend with Canadian tar sands oil — otherwise the refinery would never agree to process that sour Canadian oil — but if they switched up from Saudi #3 semi-sweet to Iranian #2 sweet it would allow that same refinery to purchase only one supertanker per month to blend with the sour Canadian oil.

It would be a win for Canadian oil producers, a win for the refinery, and a win for consumers as purchasing fewer (expensive) foreign tanker loads leads to lower prices at the gas pump.

The situation is only slightly different in the United States.

Texas still has a small production of #3 sweet crude, while Pennsylvania (where the modern oil business began) has none left whatsoever. Refineries in Texas have for decades gladly accepted #3 Saudi semi-sweet to blend with their #4 sour so they can blend it to meet their target of #3.25 semi-sweet before it hits the refinery — thereby saving the refinery millions of maintenance dollars per year and saving American consumers money at the gas pump.

Even refineries in Europe and Russia benefit from blending sweet or semi-sweet with their oil allowing them to bring their most sour crude to a standard that is acceptable to refineries. Otherwise, all that sour crude would be left in the ground forever.


Enter ISIS and the Kurds

Prior to the Arab Spring, few had heard of the Kurds other than seeing 30-second video clips of their troops helping coalition forces during the Iraq War, and even fewer knew about ISIS.

Buoyed by their participation with the Americans during the Iraq War, the Kurds were also recipients of generous non-American foreign aid. The Kurds (who have some negative ‘history’ with Turkey) decided the proposed pipeline route should be ‘protected’ by their troops as the security situation in northern Iraq was then at an all-time low.

It’s completely logical from their perspective to want to secure those areas and make them part of their traditional Kurdish territory, and this was seen as a ‘minor good’ by Washington and its allies. No doubt the Kurds would have been recipients of even more foreign aid, many pipeline jobs, and they would have been in charge of security along the part of the proposed pipeline corridor that would run through their territory.

ISIS saw the opportunity to steal the default option from the Kurds and fired the first shot.

Hence we now have Americans fighting ISIS and sometimes using the Kurds to do it. We have Turkey and the Kurds fighting each other. We have the Russians helping Syria. And we have various other countries supporting those or other groups operating in the region. Finally, we have the long-term and largely stalemated situation that exists between Israel and Syria.

A recipe for disaster, if ever there were one.


Vision, Leadership and Management – the Only Solution to This Problem

Instead of a Munich Security Conference that degenerates into shouting match, all sides should return to the forgotten plan and concentrate on making that plan the new reality.

Bringing Iranian sweet crude oil, Iraqi semi-sweet crude oil and Syrian semi-sweet to the Mediterranean via a new pipeline system through traditional and newly created Kurdish territories across northern Iraq and very northern Syria while continuing to finish off ISIS and working to mitigate Turkish concerns about the Kurds is the only real way forward.

Iran, Iraq, Syria, Turkey map.

Internationally recognized Kurdish territories span northern Iraq and northern Syria which could allow a direct Iran, Iraq, Syrian oil pipeline to the Mediterranean to bring high quality Iranian #2 sweet crude oil to Europe, Turkey, Israel and even to North America. Image courtesy of Iran Review.

Whether the parties agree to redirect their energies now, or at a later date, it’s the only option that solves everyone’s problems in the region.

The plan depends on the extinction of ISIS and that seems as worthy a goal as ever while accommodating the Kurds is simply an extension of what’s already been happening.

Solving the security concerns of Turkey is paramount to bring the plan forward.

The world needs that high quality oil and it’s in the interest of the parties to get that pipeline system built and operational as soon as possible.

The UK government can play as honorable a part as any country to bring this ongoing political disaster to a successful conclusion by promoting the Iran / northern Iraq / northern Syria pipeline that would span old and newly created Kurdish territory to bring exceptionally high quality oil to Europe, Turkey, Israel and even North America.

It’s time to stop looking at the problem and begin working on the solution.

‘No-Deal’ Brexit scenario would cost both UK and EU billions

by John Brian Shannon

A new report by a prestigious polling firm says that a so-called ‘No-Deal’ WTO-style Brexit will cost one EU country €5.5 billion over the next two years, as opposed to a Brexit with a trade agreement where losses for that country would likely total €1.5 billion over the next two years.

That country is the Republic of Ireland.

“A hard Brexit could cost the Irish economy more than €5.5 billion over the next two years, a government-commissioned report has said.

A “soft” Brexit including a transition arrangement would cost less than €1.5 billion over the period, highlighting the importance to Ireland of the UK’s withdrawal talks with the EU.

The study by Copenhagen Economics, which examined four possible scenarios, also warns that the UK will probably take at least five years to implement new trade agreements, complicating Irish efforts at contingency planning.

[Ireland’s ‘Taoiseach’ which is the official title of the Irish Prime Minister] Leo Varadkar said last night that a comprehensive free-trade deal with the UK would be the best way to avoid a hard border. After a meeting with Theresa May, the UK prime minister, he said: “We both prefer [the option] by which we can avoid a hard border in Ireland, and that is through a comprehensive free trade and customs arrangement.

“That is the best way we can avoid any new barriers — north and south, and also east and west.”” — The Times 


Other EU Nations Would Take a Hit in the ‘No-Deal’ Scenario

We can extrapolate that other EU countries would also take an economic hit in a ‘No-Deal’ scenario, but due to their much larger economies when compared to Ireland, such losses would amount to tens or even hundreds of billions over the same two-year period. Just think of all those German cars that wouldn’t be sold in the UK due to the higher tariffs that would automatically be imposed on EU countries in a ‘No-Deal’ Brexit!

Almost every country in the world uses WTO rules as the foundation of their trading relationship with other countries (but important to note) those same countries also diligently pursue bilateral trade deals with their important trading partners that allow both sides to legally sidestep the more costly WTO tariff ruleset in favour of something that works better for both partners. (And that trading relationship/tariff structure can be anything the two sides want in regards to any trade that happens between them)

So if country A and country B decide they want to trade, they’re completely free to build a better tariff structure than the comparatively expensive WTO ruleset, and that agreement will thenceforth supercede the WTO tariff structure. However, it only applies on trade between those two countries — the rest of their trade with the world would still be conducted under the auspices of the WTO.


It’s a pretty basic thing. Countries that do anything more than a smattering of trade between them negotiate bilateral free trade agreements to bypass the more onerous WTO trade rules and tariff regime.


There’s Still Time to Negotiate a Trade Deal with the EU

How many days until Brexit?

How many days until Brexit? Image courtesy of HowManyDaysStill.com

As of this writing there are 409 days remaining until Brexit and either we will have a trade agreement with the EU, or we won’t. If not, it will be costly for both sides, but more costly for the EU by one order of magnitude!

However, saying that there are 409 days remaining ’til Brexit — isn’t the same as saying there are 409 days left to negotiate a free trade agreement. Far from it!

The two sides have 258 days to arrange a free trade agreement. Let’s hope our politicians (and theirs) are up to the job (and if not, why are we paying them?) otherwise almost everything that citizens and businesses purchase will become much more expensive on both sides of the English Channel in the post-Brexit timeframe.

UK Prime Minister Theresa May has stressed that October 29, 2018 is the last date that both sides can agree a trade and customs deal before the UK must begin readying for the implementation of WTO trade rules. And on that point both sides agree. Even six months (during the period from October 29, 2018 to March 29, 2019) would barely suffice to put in place the necessary measures and standards to allow industry to prepare for life after Brexit.

UK and EU voters should remember who did, and who didn’t, get a free trade agreement signed when they head to the polling booth at the next election.


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