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Pompeo says US assuring Kim that it does not seek his overthrow

May 14, 2018 by  
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The United States is assuring North Korean leader Kim Jong Un that his ouster is not part of the agenda for the summit next month between Kim and President Trump, Secretary of State Mike Pompeo said Sunday.

“We will have to provide security assurances, to be sure,” Pompeo said in an interview on “Fox News Sunday.”

The promise not to invade North Korea or otherwise seek Kim’s overthrow would be incentive for him to give up his nuclear weapons.

“This has been a trade-off that has been pending for 25 years,” Pompeo said, referring to the long history of failed negotiations with Pyongyang as well as the North Korean narrative that the United States is a mortal threat.

Trump is scheduled to meet Kim in Singapore on June­ 12 for an unprecedented summit.

On CBS’s “Face The Nation,” Pompeo said he had already provided that assurance to Kim.


“I have told him that what President Trump wants is to see the North Korean regime get rid of its nuclear weapons program, completely and in totality, and in exchange for that we are prepared to ensure that the North Korean people get the opportunity that they so richly deserve.”

Pompeo added: “No president has ever put America in a position where the North Korean leadership thought that this was truly possible, that the Americans would actually do this, would lead to the place where America was no longer held at risk by the North Korean regime.”

The U.S. position is now new — Pompeo’s predecessor, Rex Tillerson, also had stressed that the United States would not seek Kim’s ouster, but it carries additional weight now that Trump and Kim are to meet face to face. It is also significant because of past statements by both Pompeo and new White House national security adviser John Bolton about potential regime change in North Korea.

Pompeo said last year that the most dangerous element of the North Korea nuclear weapons problem “is the character who holds the control” over the weapons.

“So, from the administration’s perspective, the most important thing we can do is separate those two, right?” Pompeo, who was CIA director at the time, had said at the Aspen Security Forum. “Separate capacity and someone who might well have intent and break those two apart.”

However, he told senators during his confirmation hearing last month that he does not support regime change in North Korea.

Bolton, speaking Sunday on CNN’s “State of the Union,” said his own past advocacy for regime change in North Korea and in Iran were the views of “a free agent” and are irrelevant to his current job.

“I’m the national security adviser to the president,” but Trump calls the shots, Bolton said.

As recently as December, Bolton had said that he favored “regime elimination” in North Korea.

“My proposal would be: Eliminate the regime by reunifying the peninsula under South Korean control,” Bolton had said on Fox News, where he was a frequent commentator. Asked whether he is calling for regime change, he replied, “Yes. Regime elimination with the Chinese. This is something we need to do with them.”

Bolton said that if Trump can negotiate an agreement with Kim, it might be submitted to the Senate as a treaty as the next step in the ratification process.

“It’s entirely possible we could,” Bolton said, adding that to do so would address “one of the criticisms of the Iran deal.”

The 2015 Iran nuclear deal was concluded as a compact among nations but was not submitted to the Senate for ratification by the Obama administration. Trump pulled the United States out of the agreement last week. Bolton said Sunday that it should not have come as a surprise to European powers.

European companies could be subject to U.S. sanctions if they continue doing some business with Iran, he said, adding that the threat of such sanctions will have a “dramatic” effect on Iran’s already struggling economy.

On ABC’s “This Week,” Bolton said Trump will raise the issue of Japanese citizens abducted by North Korea as well as the detention of South Koreans when he sees Kim. Both issues are of intense importance to U.S. allies. But Bolton hedged on how far Trump might take any human rights criticism of a regime the United States has previously accused of mass incarceration, torture and starvation of civilians.

“This first meeting is going to be primarily on denuclearization,” Bolton said, adding that other issues could follow.

Pompeo also said that if the summit leads to successful negotiations, the outcome will bring private investment in North Korea. He said it will include helping North Korea build out its energy grid and develop its agriculture program so it can grow enough food for its people.

“Those are the kinds of things that, if we get what it is the president has demanded — the complete, verifiable, irreversible denuclearization of North Korea — that the American people will offer in spades,” he said.

Pompeo said a lot of work remains to achieve that goal.

“Our eyes are wide open with respect to the risks, but it is our fervent hope that Chairman Kim wants to make a strategic change,” he said, “a strategic change in the direction for his country and his people, and if he’s prepared to do that, President Trump is prepared to assure that this can be a successful transition.”

Pompeo went to North Korea last week to discuss preparations for the summit and returned with three U.S. citizens who had been detained in North Korea. He met for almost 90 minutes with Kim, his second face-to-face encounter with the North Korean leader, and he described him as professional and knowledgeable.

“He, too is preparing for June 12, he and his team,” Pompeo said. “We’ll be working with them to put our two leaders in a position where it’s just possible we might pull off a historic undertaking.”

On CBS, Pompeo contrasted the Trump administration’s approach with those of previous presidents who tried to negotiate North Korea’s denuclearization.

“We’re hopeful that this will be different,” he said. “That we won’t do the traditional model, where they do something, and we give them a bunch of money, and then both sides walk away. We’re hoping this will be bigger, different, faster. Our ask is complete and total denuclearization of North Korea, and it is the president’s intention to achieve that. “

In exchange, he said, North Korea will get what Pompeo characterized as “our finest” — “our entrepreneurs, our risk takers. our capital providers.”

He said private equity, encouraged by sanctions relief, would help North Korea improve its electrical grid, infrastructure and agricultural production.

“We can create the conditions for real economic prosperity for the North Korean people that will rival that of the South,” he said.

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OPEC’s Output Deal Will Shrug Off Iran Sanctions

May 14, 2018 by  
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President Donald Trump’s decision to tear up the Iran nuclear deal and reimpose sanctions on buyers of its oil will have a big impact on Iran’s crude exports, but don’t expect it to imperil the output deal among OPEC and its friends.

There is no pressure from within the group to bring their cooperation to an end. Far from it. The deal will run until the end of 2018 and could be extended again if participants don’t believe that the market has been rebalanced.

Last month I suggested that OPEC+ was in the process of dropping the five-year average level of inventories as a target.  Last week Saudi oil minister Khalid Al-Falih did just that, denying that it had ever been the group’s goal. 

All the parties to the cuts are enjoying the benefits of higher prices and for many of them it is effectively cost-free – they are already producing as much as they can.

Cuts Deconstructed

Almost half the output cuts are involuntary – the result of capacity erosion through natural decline, insurgency, or political factors.

Source: Author’s assessment based on Bloomberg data

Note: Average output cut year-to-date

The only significant, immediately available spare production capacity within the group lies in Saudi Arabia, Russia and the United Arab Emirates.  These countries have chosen not to boost their production in response to Venezuela’s collapsing output, not because they lack a mandate to do so, but because they prefer the higher price that results from the loss to higher volumes for themselves. That calculation could quickly change in the event of a big drop in Iran’s exports as a result of sanctions.

If Saudi Arabia and Russia decide that that they want to supply the world with more oil, they can. There is plenty of historical precedent. Just look back at 2011 when Saudi Arabia boosted production in response to the loss of Libyan supply. Or look at 2015, when it refused to subsidize high-cost producers and embarked on the market-share strategy that was eventually brought to an end by the current output deal. It didn’t seek the approval of other OPEC members in either case.

Saudi Surges

Saudi Arabia boosted output to offset losses from Libya in 2011 and again in 2015 when it determined the world was short of oil.

Source: Bloomberg

Iran would certainly view this as a blatant attempt to “steal” the customers of a fellow OPEC member. But it shouldn’t be surprised. OPEC has a long history of operating when one or more of its members suffers international sanctions. When Iraq fell under United Nations sanctions for more than a decade after it invaded fellow OPEC-member Kuwait in 1990, that didn’t stop the rest of the group from functioning, or prevent Saudi Arabia, Iran and Venezuela from stepping in quickly to make up the loss.

The holders of spare capacity won’t need to actively chase Iran’s buyers. They will come calling as soon as their access to Iranian barrels is cut off. The exporters will simply respond to customer demand for their crude.

How much crude supply might the world lose as a result of Trump’s actions? Probably at least as much as was lost under President Barack Obama’s sanctions. The current president will undoubtedly want his curbs to be “the biggest” and he certainly won’t want them to be less punitive than his predecessor’s.

The U.S. Treasury department is allowing buyers of Iranian crude to apply for exceptions from sanctions if they “demonstrate a commitment to decrease substantially such purchases.” What constitutes a substantial decrease is not clear. It is likely to be a volume reduction of at least 20 percent, which appears to have been the Obama administration’s threshold, in addition to terminating contracts for future delivery of Iranian crude.