Category Archives: Analysis

Panama Papers reveal a global web of corruption and tax avoidance

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Matthew Yglesias writes: Even as the world’s wealthiest and most powerful nations have engaged in increasingly complex and intensive efforts at international cooperation to smooth the wheels of global commerce, they have willfully chosen to allow the wealthiest members of Western society to shield their financial assets from taxation (and in many cases divorce or bankruptcy settlement) by taking advantage of shell companies and tax havens.

If Panama or the Cayman Islands were acting to undermine the integrity of the global pharmaceutical patent system, the United States would stop them. But the political elite of powerful Western nations have not acted to stop relatively puny Caribbean nations from undermining the integrity of the global tax system — largely because Western economic elites don’t want them to. [Continue reading…]

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The Panama Papers: Where are the Americans?

Politico reports: The Panama Papers sent ripples across the globe Monday after revealing that 140 politicians from more than 50 countries, including Russian President Vladimir Putin and Iceland President Sigmundur David Gunnlaugsson, were linked to offshore accounts set up by the Panamanian law firm Mossack Fonseca.

Despite its breadth, the scandal so far has barely touched American individuals and companies. There were no mass protests, as occurred in Iceland where protesters demanded the resignation of Gunnlaugsson; no U.S. leaders were forced to deny accusations of tax evasion as Putin did.

How have Americans so far escaped the biggest leak of financial data of all time? It’s not because wealthy Americans don’t use offshore bank accounts to avoid U.S. taxes: they do — to the tune of $1.2 trillion in 2014, according to one estimate. Some professors have suggested that Americans may have disguised their accounts at Mossack Fonseca behind another party. But there’s also a more structural answer, tax experts say — one that has to do with shifts in global financial policy — and, to an extent, taste.

Tax evasion overall is a far larger problem in developing countries, where norms around paying taxes are weak and rules designed to stop such evasion are ineffective. And when wealthy Americans do want to evade taxes, they turn to Bermuda, or the Cayman Islands, or Singapore. They don’t park their money in Panama. [Continue reading…]

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Why Vladimir Putin will hardly flinch at Panama paper cut

By Anastasia Nesvetailova, City University London

The world remains gripped by the revelations made in the papers leaked from Panamanian law firm Mossack Fonseca. But Moscow has greeted the coverage with what might be characterised as calm indifference.

Aware that president Vladimir Putin would be linked to offshore schemes, the people around him began their PR manoeuvres ahead of time. The week before the papers were released, the Kremlin was forewarning the public about an imminent “information attack aimed at destabilising Russia in light of its success in Syria”.

The reaction of the Russian individuals mentioned in the Panama Papers – at least those who have gone on record so far – has also been calm. Some have denied knowledge of ownership of any offshore accounts. Considering the way offshore structures operate and set up, is not an implausible proposition.

Others queried the authenticity of the documents (which is easy, as not all of the original documents have been presented). Some have admitted an earlier relationship with an offshore business but have said the company in question had been sold or shut down. Again, that’s not an odd claim considering that many offshore shells survive as empty, or fossil corporations after their corporate parents have no further use for them and don’t want to go to the expense of shutting them down.

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Hundreds of Israelis exposed in Panama Papers financial scandal

Haaretz reports: Some 600 Israeli companies and 850 Israeli shareholders are listed in the leaked documents of Panamanian law firm Mossack Fonseca, a leader in creating shell companies that often serve to conceal ownership of assets.

The leaked files, which were obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with Haaretz and other media organizations, provide a glimpse of the economy that until now had been hidden from the Israeli public.

There is a number of prominent names among the shareholders. It is important to note that as long as holdings in the companies and their revenues — if any — are reported as required to Israeli tax authorities, owning the company is not against the law.

Mossack Fonseca’s branch in Israel is headed by attorney Amir Maor. Callers to the branch are informed by a voicemail message that they have reached the offices of “The Company for Establishing Companies.”

Reached by telephone, Maor stated that Mossack Fonseca informed its Israeli branch last week that files had been stolen after its computer systems were breached. “Any information you use [from these files] is like using stolen data,” he said, refusing to give further comment.

The leaked files mention Sapir Holdings, a company registered in 2002 in the Virgin Islands. The owner and its only director was top-ranking lawyer Jacob Weinroth. He was indicted for money laundering in late 2009 and acquitted two years later of all charges against him. During the trial, it emerged that the company had received 30 million shekels ($7.95 million) for services rendered from Uzbek-Israeli entrepreneur Michael Cherney and Russian-Israeli businessman Arcady Gaydamak.

The fraudulent real estate deal of 2002 with the Greek Orthodox Patriarchate was also brought up in the trail. The failed deal, in which expensive lands in Jerusalem were offered to the State of Israel for a 999-year lease, was intended to be carried out by Christian Lands of Israel, a company created by Mossack Fonseca, which Weinroth represented. Company documents, like those requesting power of attorney for Weinroth, are among those found in the leaked files. [Continue reading…]

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Does ISIS even have a European strategy?

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Benjamin H. Friedman writes: With the bombers dead and investigations just a week old, the motives behind last week’s bombings in Brussels’ airport and metro will remain murky for some time. Of course, reporters and terrorism analysts have offered lots of speculation, much of it focused on how the attacks serve the agenda of ISIS’s leaders. That approach, I believe, overstates ISIS’s coherence and wisdom. If “ISIS” means the would-be state in Syria in Iraq, plus affiliated groups and clandestine networks of sympathizers, then it doesn’t have a strategy; it has strategies, often foolish ones.

Statements claiming responsibility for the attack, attributed to ISIS’s leadership in Syria, blame Belgium for joining in the war in Syria and Iraq and threaten coalition members with similar treatment. The attack, in other words, was meant to coerce foreign powers to quit making war on ISIS.

Those statements are indications that ISIS’s leaders didn’t know the particulars of the attack in advance, let alone direct it. Like some prior ISIS’s claims of reasonability for attacks, the statements seem to crib from media reports; they arrived hours after attacks without any detail unavailable in public. By claiming that the airport attackers “opened fire” with “automatic rifles,” the statements even repeat errors in initial reporting. [Continue reading…]

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In Nagorno-Karabakh, a bloody new war with Putin on both sides

The Daily Beast reports: Nagorno-Karabakh, an enclave in Azerbaijan that became breakaway republic backed by Armenia in all spheres of life, has been living in a not-quite-frozen state of war since 1994. Every schoolboy in the mountainous little republic has grown up knowing that after graduation he will put on a uniform and join the military to police the unstable cease-fire. The republic’s 150,000 people, mostly ethnic Armenians, remember rockets destroying apartment buildings in the fighting more than 20 years ago, and have long feared that their worst nightmare of full-scale war would return.

Now it looks like it has.

The war woke up on Saturday night with both sides of the front using armored vehicles, battle tanks, and aviation, launching multiple rockets, and shooting artillery at each other. Over 30 people were killed and dozens wounded in the worst combat in the last two decades.

The regional implications are hard to miss. Armenia is one of Russia’s closest allies and Turkey immediately backed up Azerbaijan at a time when relations between Moscow and Ankara are bitter and vindictive. Given the war in Syria, where Russia and Turkey back opposing sides, and Turkey shot down a Russian warplane in November, the current eruption between Armenia and Azerbaijan is even more geopolitically dangerous than two decades ago. [Continue reading…]

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Afghan spy agency arms villagers to hold off ISIS

The Wall Street Journal reports: n Afghan spy agency is recruiting villagers for militias to hold back Islamic State fighters seeking to expand their foothold in this opium heartland in eastern Afghanistan.

The program, which one top official says the government hopes to roll out across the country and may later use against the Taliban, is President Ashraf Ghani ’s riskiest attempt to defend rural villages—and also a part of his much larger counterinsurgency strategy.

The government has closely guarded the program, and news of it essentially hasn’t been reported since its establishment in August 2015. Details of the program came from Afghan government officials, local village leaders and Western officials who have been monitoring its progress.

The militia groups that are part of the pilot project, known as the People’s Uprising Program, are being called on to hold territory the army has recaptured from Islamic State in three districts.

More than a thousand men, mostly village farmers who turned against the extremist group’s harsh rule in areas it seized in the past year, are on the payroll of the spy agency, the National Directorate of Security, which receives funding from the U.S. Central Intelligence Agency. So far, the militias in Kot, with the backing of the army and police, have repelled six Islamic State attacks. [Continue reading…]

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How did we end up here?

Adam Shatz writes: In No Name in the Street, James Baldwin describes how, not long after he settled in France in 1948, he ‘had watched the police, one sunny afternoon, beat an old, one-armed Arab peanut vendor senseless in the streets, and I had watched the unconcerned faces of the French on the café terraces, and the congested faces of the Arabs.’ With a ‘generous smile’, Baldwin’s friends reassured him that he was different from the Arabs: ‘Le noir américain est très évolué, voyons!’ He found the response perplexing, given what he knew of French views about the United States, so he asked a ‘very cunning question’:

If so crude a nation as the United States could produce so gloriously civilised a creature as myself, how was it that the French, armed with centuries of civilised grace, had been unable to civilise the Arab?

The response was breathtakingly simple: ‘The Arabs did not wish to be civilised.’ They, the Arabs, had their own traditions, and ‘the Arab was always hiding something; you couldn’t guess what he was thinking and couldn’t trust what he was saying. And they had a different attitude toward women, they were very brutal with them, in a word they were rapists, and they stole, and they carried knives.’

Aside from ageing veterans of the French-Algerian war, no one in France talks about ‘the Arabs’ any longer. Instead they speak of ‘the Muslims’. But France’s Muslims are the descendants of that Arab peanut vendor – and, all too often, targets of the same racist intolerance. Like the racism Baldwin encountered among his Parisian friends, it often wears an ennobling mask: anti-terrorist, secular, feminist. [Continue reading…]

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New threats rose as U.S. apathy became policy

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Garry Kasparov writes: The 21st century has been marked by two complementary trends in global security: the rise of new and unexpected threats and the return of old ones. Terrorist organizations have adapted modern technology to deadly purpose and paired it with global ambition. Nineteen well-trained individuals killed more Americans on 9/11 than the entire Japanese fleet killed in Pearl Harbor. Our ubiquitous smartphones and social networks turned out to be agnostic tools, serving both good and evil. They are boons for economic empowerment and cultural exchange, but also allow terror movements to recruit internationally, creating a homegrown terror threat that no border wall or refugee ban will prevent.

The old menaces of the 20th century have reappeared in updated forms. Communism as a political ideology is as bankrupt as ever, but the aggressive despotism that enforced it for decades before the fall of the Iron Curtain and the Soviet Union has returned to the world stage, due largely to Russian President Vladimir Putin. The United States, a global hegemon alternately over-eager or reluctant, has reacted in dramatically inconsistent ways to the new threats while mostly ignoring the resurgence of the old ones.

The checks and balances that frustrate every president domestically do little to prevent the commander-in-chief from wielding the power of life and death all over the world. The overwhelming military might of the United States is inherently agnostic as well. It can be used to attack or to defend, to protect innocent lives or to take them, to remove dictatorships or to support them.

The use of this fearsome power is guided by the American constitution and the founding American values of democracy and freedom. But it is up to the occupant of the White House to follow the Constitution and to live up to those values. The executive has found countless ways to evade checks on his authority, from signing “agreements” instead of treaties, to escalating foreign “police actions” instead of declaring war. American values have been applied selectively as well, as decades of relative unity in containing the Communist threat has given way to a neo-isolationist trend in both major American political parties. Instead of debating how the U.S. should act on the world stage, today’s presidential candidates are arguing about whether or not the U.S. should act at all. The specter of the 2003 Iraq War looms over every potential American action.

Such reflection is commendable, but in the seven years of the Obama administration we have seen that inaction can also have the gravest consequences. Inaction can fracture alliances. Inaction can empower dictators and provoke terrorists and enflame regional conflicts. Inaction can slaughter innocent people and create millions of refugees. We have the horrific proof in Syria, where Barack Obama’s infamous “red line” has been painted over in blood. [Continue reading…]

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China wants to power the world through a global grid

Earth

Adam Minter writes: China’s State Grid Corporation, the world’s biggest power company, is on an impressive buying binge. As Bloomberg News reports, the company is “actively in bidding” for power assets in Australia, hoping to add them to a portfolio of Italian, Brazilian, and Filipino companies. The goal isn’t simply to invest, however. State Grid’s Chairman Liu Zhenya has a plan that he believes will stall global warming, put millions of people to work and bring about world peace by 2050.

The idea is to connect these and other power grids to a global grid that will draw electricity from windmills at the North Pole and vast solar arrays in Africa’s deserts, and then distribute the power to all corners of the world. Among other benefits, according to Liu, the system will produce “a community of common destiny for all mankind with blue skies and green land.”

It’s a crazy idea, of course. And if this so-called Global Energy Interconnection had been proposed by anyone other than the chairman of the world’s wealthiest power company, it wouldn’t deserve much consideration. But the $50 billion in cash generated by State Grid last year gives the company the deep pockets and political standing to put its priorities on the international energy agenda.

Last September, no less than Chinese President Xi Jinping publicly called for talks on establishing a global grid, while leading research organizations — including the Argonne National Laboratory and the Edison Electrical Institute — have participated in conferences looking at what would be needed to establish one. And whether or not it’s ever built, the technologies that underlie Liu’s big idea are already changing how power will be generated and transmitted in coming decades. [Continue reading…]

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Climate change will blow a $2.5tn hole in global financial assets, study warns

The Guardian reports: Climate change could cut the value of the world’s financial assets by $2.5tn (£1.7tn), according to the first estimate from economic modelling.

In the worst case scenarios, often used by regulators to check the financial health of companies and economies, the losses could soar to $24tn, or 17% of the world’s entire assets, and wreck the global economy.

However, the research also showed the financial sense in taking action to keep climate change under the 2C danger limit agreed by the world’s nations. In this scenario, the value of financial assets would fall by $315bn less, even when the costs of cutting emissions are included.

“Our work suggests to long-term investors that we would be better off in a low-carbon world,” said Prof Simon Dietz, at the London School of Economics, the lead author of the study. “Pension funds should be getting on top of this issue, and many of them are.” But he said awareness in the financial sector was low.

Mark Campanale, at the thinktank Carbon Tracker Initiative, said the actual financial losses from unchecked global warming could be higher than estimated by the financial model behind the new study: “It could be a lot worse. The loss of financial capital can be a lot higher and faster than the GDP losses [used to model the costs of climate change in the study]. Just look at value of coal giant Peabody Energy: it was worth billions just a few years ago and now it is worth nothing.” [Continue reading…]

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Endgame for the IMF-EU feud over Greece’s debt

Yanis Varoufakis writes: The feud between the International Monetary Fund (IMF) and the European side of Greece’s troika of creditors is old news. However, Wikileaks’ publication of a dialogue between key IMF players suggests that we are approaching something of a hazardous endgame.

Ever since the first Greek ‘bailout’ program was signed, in May 2010, the IMF has been violating its own “primary directive”: the obligation not to fund insolvent governments. As a result, the IMF’s leadership has been facing a revolt from its staff members who demand an exit strategy arguing that, if the EU continues to obstruct the debt relief necessary to restore the solvency of the Greek government, the IMF should leave the Greek program.
Five years on, this IMF-EU impasse continues, causing a one-third collapse of Greek GDP and fuelling hopelessness to a degree that has made real reform harder than ever.

Back in February 2015, when I first met Poul Thomsen (the IMF’s European chief) in a Paris hotel, a fortnight after assuming Greece’s finance ministry, he appeared even keener than I was to press for a debt write off: “At a minimum”, he told me “€54 billion of Greece’s debt left over from the first ‘bailout’ should be written off immediately in exchange for serious reforms.”

This was music to my ears, and made me keen to discuss what he meant by “serious reforms”. It was a discussion that never got formally off the ground as Germany’s finance minister vetoed all discussion on debt relief, debt swaps (which were my compromise proposal), indeed any significant change to the failed program.

What new light does the leaked dialogue between Thomsen and Delia Velculescu (the IMF’s Greek mission chief) throw on this saga? [Continue reading…]

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Fund run by David Cameron’s father avoided paying tax in Britain

The Guardian reports: David Cameron’s father ran an offshore fund that avoided ever having to pay tax in Britain by hiring a small army of Bahamas residents – including a part-time bishop – to sign its paperwork.

Ian Cameron was a director of Blairmore Holdings Inc, an investment fund run from the Bahamas but named after the family’s ancestral home in Aberdeenshire, which managed tens of millions of pounds on behalf of wealthy families.

Clients included Isidore Kerman, an adviser to Robert Maxwell who once owned the West End restaurants Scott’s and J Sheekey, and Leopold Joseph, a private bank used by the Rolling Stones.

The fund was founded in the early 1980s with help from the prime minister’s late father and still exists today. The Guardian has confirmed that in 30 years Blairmore has never paid a penny of tax in the UK on its profits. [Continue reading…]

BBC News reports: China appears to be censoring social media posts on the Panama Papers document leak which has named several members of China’s elite, including President Xi Jinping’s brother-in-law.

Hundreds of posts on networks such as Sina Weibo and Wechat on the topic have been deleted since Monday morning. [Continue reading…]

Find out more about the Panama Papers.

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Travelling inside ISIS-controlled Syria and Iraq

Jürgen Todenhöfer writes: Abu Qatadah, a German-born Muslim convert, who has brokered our visit to the Islamic State, is almost as wide as he is tall, with a thick, reddish-brown beard. My photographer son Frederic and I load our bags into the bed of the white pickup Qatadah and his driver arrived in. The driver’s head and face are so thoroughly wrapped with a large grey shawl that only his eyes and the contours of his nose are visible. He murmurs a greeting in English in a strikingly rhythmic accent. For security reasons, we can’t use the main roads. The drive to Raqqa takes more than three hours.

Qatadah claims business is booming in Isis. Almost all the shops are open and lots of goods are being sold, above all at the markets. We notice the new construction. “In places that are not being bombed, life goes on as normal,” Qatadah tells us. Then he gives us a short lecture on Isis’s version of sharia.

Christians have to pay jizya, a protection tax. It comes to about $300 (£210) a year for poor people and $600 (£420) for the rich. But then that is the only tax. Christians are among the more prosperous inhabitants of the country. All they have to do is sell a couple of sheep to raise the money to cover the tax. [Continue reading…]

The Daily Beast reports: Two senior intelligence analysts at U.S. Central Command say the military has forced them out of their jobs because of their skeptical reporting on U.S.-backed rebel groups in Syria, three sources with knowledge of their claim told The Daily Beast. It’s the first known instance of possible reprisals against CENTCOM personnel after analysts accused their bosses of manipulating intelligence reports about the U.S.-led campaign against ISIS in order to paint a rosier picture of progress in the war.

One of the analysts alleging reprisals is the top analyst in charge of Syria issues at CENTCOM. He and a colleague doubted rebels’ capabilities and their commitment to U.S. objectives in the region. The analysts have been effectively sidelined from their positions and will no longer be working at CENTCOM, according to two individuals familiar with the dispute, and who spoke on condition of anonymity. [Continue reading…]

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Investigators believe at least 22 suspects are still at large following Brussels and Paris attacks

The Wall Street Journal reports: At least 22 radical Islamists from Europe linked to the terror network behind the Brussels and Paris attacks are suspected to be still at large, putting security services on high alert as they rush to prevent Islamic State from striking again in the region.

Many of the fugitives have been involved in previous Islamic State plots, officials say, and almost all of them have spent months or years fighting in Syria.

Interviews and confidential court documents seen by The Wall Street Journal portray the fugitives as part of an extensive web of young men who developed a deep hatred of the West after embracing radical Islam at underground mosques and clandestine meetings in Molenbeek, a heavily Muslim district in the heart of Brussels. They have since become central to Islamic State’s plans to strike the West, according to investigators, who suspect the Brussels network is behind the movement of battle-hardened operatives from Syria to Europe.

“We see many plots and several cells that we now know are part of the same network,” said Jean-Charles Brisard, president of the Center for the Analysis of Terrorism, a Paris think tank. “They’re already here. The problem is how to find them.”

The 22 men investigators are scrutinizing include those prosecuted in absentia during a major terror trial in Belgium last year, as well as several with links to a foiled plot to kill Belgian police last year. But people familiar with investigations say they believe the reach of the Brussels network extends beyond the group to others from the city who went to Syria and their sympathizers who stayed behind. [Continue reading…]

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Obama’s nuclear security summit neglected 98 percent of the world’s bomb-ready uranium

The Intercept reports: At President Obama’s fourth and final nuclear security summit which took place last week, world leaders confronted the danger posed by nuclear terrorism — specifically, by reducing the ways that terrorists could get their hands on the uranium they would need to build a nuclear bomb.

But critics have pointed out that the summits have only focused on highly enriched uranium in civilian possession, which, according to the Department of Energy, only accounts for 2 to 3 percent of the world’s supply. That small percentage is used mostly by academics for research and medical isotope production.

The remaining 97 to 98 percent is held in military stockpiles, which the security summits have largely ignored. Countries keep the safeguards on these stockpiles secret, and military material falls outside the scope of international security agreements. [Continue reading…]

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Intelligence community olive branch on data sharing greeted with skepticism

The Intercept reports: Top intelligence community lawyer Robert Litt has offered a rare olive branch to privacy advocates, in the form of information.

In a post on one of the intelligence community’s favorite blogs on Wednesday, Litt, general counsel for the Office of the Director of National Intelligence, outlined new intelligence data-sharing guidelines that he said will be released soon.

The post, on Just Security, was essentially a response to reporting last month from the New York Times’s Charlie Savage that the NSA would soon be sharing with other government agencies the raw, unfiltered intelligence from the depths of its massive overseas spying programs.

“There has been a lot of speculation about the content of proposed procedures that are being drafted to authorize the sharing of unevaluated signals intelligence,” Litt wrote.

The New York Times story raised concerns that the data, which inevitably includes information about Americans, would become too easily accessible by intelligence agencies including the FBI, potentially leading to fishing expeditions. [Continue reading…]

BuzzFeed reports: Just days after breaking into a terrorist’s iPhone using a mysterious third-party technique, FBI officials on Friday told local law enforcement agencies it will assist them with unlocking phones and other electronic devices.

The advisory, obtained by BuzzFeed News, was sent in response to law enforcement inquiries about its new method of unlocking devices — a technique the FBI said was successful at gaining access to the iPhone 5C belonging to one of the shooters in the deadly San Bernardino, California, attack.

“In mid-March, an outside party demonstrated to the FBI a possible method for unlocking the iPhone,” the message said. “That method for unlocking that specific iPhone proved successful.” [Continue reading…]

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Is Mohammed Dahlan likely to replace Mahmoud Abbas as Palestinian leader?

Adnan Abu Amer writes: The most important world capitals that provided Dahlan with this regional and international network are Cairo and Abu Dhabi, where Dahlan enjoys undeniable influence since he is considered the security adviser of UAE’s Crown Prince Sheikh Mohammed bin Zayed Al Nahyan. This position has provided Dahlan with influence that many UAE officials may not enjoy within the state.

Dahlan also enjoys considerable influence in Egypt through his direct ties with Sisi, which allows him to influence Egyptian media. In addition, he has been deploying efforts to buy some news websites in Jordan.

Ahmed Youssef, former political adviser to former Prime Minister Ismail Haniyeh, told Al-Monitor, “Dahlan is welcomed on the regional and international levels. As long as elections are not the only criterion on the Palestinian scene — in light of regional and international pressure to export this leader and sideline others — Dahlan may have better chances at accessing high Palestinian positions than others. This is considering Israel’s [relative] satisfaction with him and his special ties with the UAE, Egypt, Saudi Arabia, Jordan and the Syrian opposition. The international relations that a Palestinian official has may allow him to climb to rungs of the leadership ladder.” [Continue reading…]

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