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Changes make JASTA a tool the U.S. State Department can use against Arab, Muslim and oil-exporting countries
May 19, 2016
The U.$. Senate passed the Justice Against Sponsors of Terrorism Act this week.(1) The bill was passed by unanimous consent. The House of Representatives will consider the legislation next.
Some in the media had opposed the bill on the grounds that JASTA’s passage would result in politically motivated lawsuits against the U.S. in other countries. If was as if the March default judgment against Iran for 9/11 was not-political and only the rule of law. The Amerikan media has largely ignored the poor quality of the so-called evidence on which the Iran judgment was based.
Amerikans are saying or implying the Senate passed an impotent version of JASTA that would only provoke other countries.(2) Supposedly, the bill otherwise won’t matter even if King Obama – with the big-picture, long-term interests of the empire close to heart – doesn’t veto it or a veto is overridden. That is wrong.
Some of the changes supposedly weakening JASTA actually make JASTA a tool Amerikans could use to coerce various petroleum-exporting countries and others that might be held responsible for terrorism in the U.S. Even if the JASTA text passed by the Senate doesn’t make it easier to actually take another country’s property after a judgment, an unfavorable judgment would be damaging in other ways. The impression left by incomplete media reports is itself damaging.
JASTA broadens exceptions to foreign sovereign immunity to include alleged terrorism tortfeasors not on the U.S. State Department’s “State Sponsors of Terrorism” (SST) list. Saudi Arabia is being implicitly singled out with JASTA because it isn’t on the SST list and has been the target of a large sustained effort to get compensation for 9/11. Other countries could be impacted by JASTA at some point, though. For example, if Iran is ever removed from the SST list and becomes more dependent on the united $tates, JASTA might expose Iran to another lawsuit with an unfavorable outcome.
JASTA is relevant to more than one country. What section 5(c) of JASTA means is Amerikans can use JASTA to enable lawsuits against foreign governments inconsistently. JASTA is basically a law that can be selectively enforced according to Attorney General and State Department discretion. Such a law can be used to make threats and bully countries. The State Department could use JASTA to compel countries to accept agreements with less-favorable terms. 5(c) contains,
“A court of the United States may stay a proceeding against a foreign state if the Secretary of State certifies that the United States is engaged in good faith discussions with the foreign state defendant concerning the resolution of the claims against the foreign state, or any other parties as to whom a stay of claims is sought.”
Notice this empowers John Kerry during discussions with Saudi Arabia. With JASTA, the already-debatable so-called rule of law in the U.S. would explicitly incorporate the determination of somebody who isn’t working in the capacity of a lawyer or a judicial or law enforcement officer. Negotiations or discussions with other countries could also be affected if a way can be found to blame the countries for terrorism inside U.S. borders.
Venezuela, which is currently experiencing a U.$. propaganda onslaught, has already been accused by the State Department itself of having officials who are “Foreign Narcotics Kingpins.” The State Department has also accused Venezuela of enabling WMD proliferation in connection with Iran, and maintaining (according to “credible” reports) “a permissive environment that allowed for support of activities that benefited known terrorist groups.”(3) JASTA could impact Venezuela though it probably won’t be blamed for 9/11 via Iran and sued for that. The possibility of a lawsuit resulting in a finding of responsibility could be used as a threat. A future mafia-style offer to buy part of Venezuelan state-owned oil company PDVSA so Venezuelans can benefit from the sale – or from a bribe – would include threats. Such an offer would be typical as discussed in the book Confessions of an Economic Hit Man.(4)
Forbes last week published an article proposing “the radical option,” privatizing the Venezuelan oil industry.(5) “Venezuela has the largest known crude oil reserves in the world. No single company will be able to pay enough to match what these assets are truly worth. Instead, the government should break up the map and auction off plots individually. Venezuela could even keep some assets to exploit later with a revamped national oil company or to sell at a later date. This is the easiest way to bring massive revenue to the country quickly. Even an immediate announcement of an upcoming auction might allow Venezuela to take some substantial loans to tide them over.” Of course, any overly proud Saudis need not recognize any similarity to their own situation, and the fact that the impact of low oil prices on both countries is partly related to opening the flow of Iranian oil after stifling Iran with sanctions. No doubt Aramco privatization would have complex causes and effects, but there may be a pan-Islamist reason to get out of the oil business. With both Saudi Arabia and Venezuela, though, various threats in the State Department’s and U.S. Treasury’s toolkits may be used to achieve compliance with U.$. objectives.
The idea of enforcing a trillion-dollar or more judgment against Saudi Arabia was never realistic without going to war. But what sacrosanct “9/11 families” are doing with their lawsuit efforts is contributing to warmongering and international bullying even if such a large amount is never awarded. They may never get hundreds of billions of dollars, but they ended up conspiring with the U.S. government to produce a legal tool diplomats will wield to benefit the united $nakes as a whole. The State Department could easily use JASTA to let through smaller lawsuits.
JASTA probably will become law. This is true whether Obama is really against JASTA or only pretends to be for a diplomatic reason. Before the House passes JASTA, more countries may consider selling U.S. assets. It looks like a Saudi threat to sell U.$. assets (after a stronger version of JASTA was reported out of committee) was just a rumor hurting Treasury prices.(6) However, there could be an economic purpose in selling U.$. assets for other reasons. That is particularly the case with dollar-denominated assets, which are sensitive to central bank and government policy in the united $tates.
The Federal Reserve – the central bank of government budget deficit country #1 and trade deficit country #1 – carried out quantitative easing in 2008-2014 that bid up the price of Treasury bonds and other assets. It did so while substituting an extremely liquid asset – the money created by hitting buttons on a keyboard – for high- or higher-risk assets, which the 30-year bond is considered to be. In contrast, Saudi sales of large quantities of U.S. Treasuries, and Aramco shares starting 2018 – in exchange for money it didn’t create, but which the Fed may have created – may require bidding down prices. That in itself is something for readers to think about. However, in the last two weeks the investment world has been discussing U.S. Treasuries as an attractive alternative to other countries’ low- or negative-yield bonds.(7) So, there may be a moment for Saudi Arabia to sell Treasuries without losing too much in the process.
That discussion of more demand for U.S. Treasuries has, on the other hand, coincided with discussion of possible future negative yields of short-term Treasuries.(8) Two days later, Janet Yellen was talking about not ruling out negative interest rates, for certain situations.(9) As Saudi Arabia has pointed out, legislation such as JASTA has the potential to decrease investor confidence. Discouraging investment in low-liquidity, low-return, or higher-risk assets, may contribute to a decision to lower interest rates.
In other words, investors seeking positive yields are looking more at the united $tates, but the longer-term, higher-risk assets that have larger positive yields have lower yields than before. Investors may end up receiving less than they invested in real terms. There may be a wealth transfer to the united $tates as the dollar becomes less valuable or prices increase. Ending attachment to the U.S. dollar makes lawsuits less useful as a weapon against a targeted country with dollar holdings, but it is also the case that for more countries to use the dollar less, and invest in dollar-denominated assets less, makes economic sense in the long term for more than one country.
One Amerikan investment advisor has said of the disclosure of Saudi holdings of U.S. Treasury debt, “Ultimately, releasing the Saudi Treasury data was done most likely because we just don’t care to hide it anymore. There is no longer a benefit to be had or a promise to keep. . . . There might even be a benefit to releasing the data, as the mystery around it potentially made it harder for us to manipulate our currency – I’m not sure which direction, maybe both.”(10) It’s an interesting idea. Whether there is currency devaluation or depreciation, or revaluation or appreciation, Amerikans stand to gain as debtors or consumers. The extent of the borrowing and spending is made possible by the world’s use of the dollar in trade and investment in dollar-denominated assets.
When the united $tates can’t use dollar hegemony to control other countries such as by withholding dollar access – either because it needs to trade with a country or preserve an agreement, or because it has exhausted sanctions against an uncooperative country’s use of the dollar – it uses other measures. Some of these measures may derive strength from dollar hegemony. It may be that the Amerikans used the rumored Saudi divestiture threat as an excuse reveal the Saudi Treasury holdings information, to increase their ability to improve Amerikans’ economic conditions at the expense of other countries, or to better-wield the dollar as a political tool. The lower-than-expected size of Saudi Arabia’s ownership of Treasury debt will help JASTA become law if Saudi Arabia’s holdings of other kinds of assets, such as stocks, receive less attention. JASTA will then be used as a diplomatic tool if not an economic weapon. ◊
Notes:
1. “S.2040 - Justice Against Sponsors of Terrorism Act.” https://www.congress.gov/bill/114th-congress/senate-bill/2040/text
“S. 2040: Justice Against Sponsors of Terrorism Act.” https://www.govtrack.us/congress/bills/114/s2040
2. “The Senate killed JASTA, then passed it…,” 2016 May 18. https://www.justsecurity.org/31156/senate-killed-jasta-passed-it/
“Senate says 9/11 families can sue Saudi Arabia. Why such suits could backfire,” 2016 May 18. http://www.csmonitor.com/USA/2016/0518/Senate-says-9-11-families-can-sue-Saudi-Arabia.-Why-such-suits-could-backfire-video
3. “Chapter 2. Country Reports: Western Hemisphere Overview,” 2013. http://www.state.gov/j/ct/rls/crt/2013/224825.htm
4. “Confessions of an Economic Hit Man” (book review), 2004 December. http://www.prisoncensorship.info/archive/etext/bookstore/books/capital/perkins.html
5. “The radical option to save Venezuela,” 2016 May 16. http://www.forbes.com/sites/ellenrwald/2016/05/16/the-radical-option-to-save-venezuela/#2fad08a0113a
6. “Saudi FM: We don’t use economic policy for political purposes,” 2016 May 3. https://www.saudiembassy.net/press-releases/press05031601.aspx
7. “Investors fleeing $9 trillion of negative yields fuel bond binge,” 2016 May 11. http://www.bloomberg.com/news/articles/2016-05-11/investors-fleeing-9-trillion-of-negative-yields-fuel-bond-binge
“Investors’ flight from negative rates flattens yield curve,” 2016 May 17. http://www.nasdaq.com/article/investors-flight-from-negative-rates-flattens-yield-curve-20160517-01204
8. “Bond traders are worried about negative U.S. Treasury yields,” 2016 May 11. http://www.bloomberg.com/news/articles/2016-05-11/investors-fleeing-9-trillion-of-negative-yields-fuel-bond-binge
9. “Yellen doesn’t rule out negative rates in letter to Congressman,” 2016 May 12. http://www.bloomberg.com/news/articles/2016-05-12/yellen-doesn-t-rule-out-negative-rates-in-letter-to-congressman
10. “The curious case of revealing Saudi Arabia’s treasury holdings,” 2016 May 18. http://seekingalpha.com/article/3976156-curious-case-revealing-saudi-arabias-treasury-holdings
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