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NightWatch 20111227


For the night of 27 December 2011

North Korea: The official funeral for Kim Chong-il will be held on 28 December. Images of the leadership lineup should add to the developing insights about the direction of the state in the new era.

Party cadre and government agencies have been directed to submit letters of allegiance to Kim Jong-un by 30 December.

Anecdote. According to an inside North Korean source who spoke with Daily NK on the 20th, one day after the news of Kim Jong Il's death was released, the North Korean authorities used the 3rd broadcast to brag, "Winning against 70 American soldiers single-handed was comrade General Kim Jong-un's greatest victory."

"Positioning themselves with an eye on our waters, the South Chosun (Chosun = Korea) puppets with 70 of their American strategists behind entered the seas near Yeonpyeong Island to threaten our territorial waters, but our revolutionary military power led by comrade Kim Jong-un crushed them in an instant…If they ever invade us again, comrade General Kim Jong-un will pay them back many hundreds of times over."

Comment: North Korea has 2 public broadcast channels. The 3rd channel is a cable channel for private communications.

The propagandists under Kim Ki-nam are going overboard to extol the talents of the unproven and sheltered Kim Jong-un. The hyperbole is embarrassing, including an outright fabrication that the young general was responsible for the death of 70 American military personnel.

Anything reported on the 3rd channel, however, is supposed to be accepted as fact. The facts, according to the defector news outlet Daily NK, are that even North Koreans are afraid of the new leadership.

Daily NK sources also reported that North Korean authorities suspended all new economic deals with China until after mid-January, when the official mourning period will have ended. The unofficial markets have reopened so that people can by basic necessities that the government no longer is capable of supplying, but the country remains under lockdown, at least in the cities.

Iran: The official news agency (IRNA) reported on 27 December that first vice-president Mohammad Reza Rahimi warned, "If sanctions are imposed on Iran's oil, not one drop of oil will pass through the Strait of Hormuz."

According to IRNA's political affairs reporter, on the evening of Tuesday, 27 December, at the third international conference on development of domestic capacities, Mohammad Reza Rahimi said, "We do not have an inclination to hostility and our slogan is friendship and brotherhood. However, Westerners do not wish to abandon their plots….The enemies will only drop their plots when we put them back in their place."

The foreign ministry said such drastic action was "not on the agenda", but it reiterated Iran's threat of "reactions" if the current tensions with the West spilled over into open confrontation.

Comment: The Shiites who dominate Iranian decision making such as President Ahmadi-Nejad, have a religious basis for performing acts of national suicide for the sake of principle. But there is cleverness in their religious fervor because the Iranians know that the immediate victims of a Strait closure would be India, South Korea and other states friendly to the US. The boomerang effect is what Iran is relying on to deter sanctions on oil exports.

Iraq: This week, the coalition government in Baghdad has disintegrated slowly with the withdrawal of the al-Iraqiyah list and Kurdish resistance to the orders of the al Maliki administration. On 27 December the Sadrist Trend, the political organization of Muqtada al Sadr, called for new elections, apparently in opposition to al Maliki's crackdown on Sunni Arab Iraqis. In response to a stylized question from his followers about the wisdom of a crackdown on Sunnis at this time, al Sadr responded,

"In the name of God

In my opinion, raising such matters in this current phase might lead to a situation that harms the country, its unity, and security. It might have ramifications, such as:

1. Aborting the current political process, as some might freeze their participation or withdraw from it.

2. Aborting the current fragile security situation.

3. Distorting the image of the prime minister concerning the formation of alliances with him because of arrests, as a result of which he will not find any partner in the future.

4. Distorting the entire image of the political process.

5. Turning the government into a one-party government that imposes its hegemony over everybody else.

6. Diverting attention from the people and their concerns at the expense of the repulsive political settlement of accounts.

7. Increasing the isolation of Iraq and its people by its neighbors, particularly Arab neighbors.

8. Imposing hegemony over the Iraqi judiciary and not giving it the chance to achieve justice, if it could be put this way.

9. Forcing some sides to abandon particular demands, such as assuming ministries and regional posts under judicial pressure.

10. Ensuring that the trial (of Al-Hashimi) takes place under the supervision of parliament and the people. Dismissing people from their posts should be legal and should not be carried out by others.

(signed) Muqtada al-Sadr (seal)"

Comment: Sadr apparently judges that al Maliki's mistakes have given him an opening to emerge as the champion of a new Arab government. The key unknown is whether Sadr of al Maliki has the backing of Iran. The best assessment is that the faction that can stabilize Iraq the quickest will have Iranian support. Sadr appears to be mounting a credible challenge.

Europe:  Updates. In an interview with a French daily on 25 December, International Monetary Fund (IMF) Managing Director Christine Lagarde stressed that Europe's financial crisis is turning into "a crisis of confidence in public debt and the solidity of the financial system."

Greece: According to an IMF source involved in discussions with Greece, the situation in Athens is "deteriorating" and "a further 10-15 billion euros ($13.1-19.6 billion) still needs to be found." Banks may be asked to agree to write off 65 % instead of 50% of Greece's debt.

France: The French National Institute for Statistics and Economic Studies (INSEE) said on 26 December that there were 29,000 new job seekers "without any occupation" in November, up 1.1% over October. The year-on-year increase reached 5.2%. In total, 2,844,800 people did not have any occupation, the highest such figure since November 1999.

An economist at the French Observatory of Economic Conditions speculated that France's unemployment rate -- which currently stands at 9.3% -- will reach 10.7% by the end of 2012, and predicted that Paris will not succeed in bringing the deficit down to 3% of GDP by 2013.

Spain: At a news conference on 26 December, Spanish Economy Minister Luis De Guindos said that the Spanish economy had suffered a "relapse" and would record negative growth in the fourth quarter of 2011. De Guindos warned that "the next two months are not going to be easy, neither from a growth nor a jobs point of view."

Comment: According to the Financial Times and multiple economists the fate of the euro depends on what happens in Italy. This week Italy intends to auction bonds worth Euros 20 billion. The market reaction to the auction will be an important indicator of whether the central bankers have found a way to stabilize the financial crisis, or have just made it worse.

All analysts of European economics predict a recession in 2012. They differ only about how severe it will be. In an integrated global economy, the ripple effects from Europe will drag the US and the Chinese economies, among all others.

End of NightWatch for 27 December.

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