Wealthy Oahu Neighborhoods Benefit From Program Meant To Help Poor Communities

A oft-criticized federal immigrant investor program designed to create jobs in distressed areas is instead targeting thriving places like Kakaako and Ala Moana.

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By Stewart Yerton

No one was more surprised than Hiroki Shuto to hear that his new Sky Men’s Grooming Salon — where the barber chairs are plush, the stylists wear crisp shirts and vests, and a basic cut runs $45 — was located in an area that state and federal officials have tagged as distressed.

The burgeoning hipster hotspot of Kakaako, with 1,625 new condo units finished in 2016 and 1,840 more on the way, offered a prime location for the high-end barber shop.  Shuto said he had a “golden opportunity” to lease ground floor space in the Halekauwila Place development, which is half a block from a planned Honolulu rail stop and across from another retail and condo project underway.

It might seem like the last place to need incentives to attract investment.

But that’s not the case, according to some state and federal officials. The area around Shuto’s business is designated so economically distressed that it qualifies as a “targeted investment area” under the federal government’s EB-5 Immigrant Investor Program, which is designed to spur foreign investment to create jobs in the U.S.

A parcel across Halekauwila Street from Shuto’s shop has been certified as an EB-5 targeted employment area, and so has Stanford Carr’s Keauhou Place across Keawe Street.

Carr said he has not used EB-5 financing for the $170 million project, which he said was financed by a consortium of local banks including Finance Factors, First Hawaiian Bank, Bank of Hawaii, American Savings Bank, Central Pacific Bank, and Hawaiian National Bank. In fact, Carr said he had not even sought certification to designate his development as a targeted investment area.

But a letter obtained from the Hawaii Department of Business, Economic Development and Tourism shows that the state certified the site of the development, 500 Keawe Street, as a targeted employment area under the EB-5 program. The letter, signed by Mary Alice Evans for DBEDT Director Luis Salaveria and dated May 8, 2015, was addressed to Richard Marquard of the New York-based LCP Group, which runs a Hawaii EB-5 center.

Kakaako being distressed was news to Shuto, who is also president of the Waikiki Sand Villa Hotel. He said he knew about the EB-5 program but thought it was designed to bring investment to areas that “are not doing well.”

“I don’t think this is a place that’s not doing well,” he said.

Kakaako isn’t the only thriving hotspot tapped as a distressed targeted employment area. A project in bustling Ala Moana, where the unemployment rate is less than 1 percent, also has been targeted for a jobs boost from foreign investors. So has the Ko Olina resort, where the Four Seasons recently opened its first property on Oahu. Recent census data pegged Ko Olina’s unemployment rate at 2.5 percent.

Federal regulators seem to have had enough.

The Department of Homeland Security, which administers the EB-5 program, has proposed regulations to close the loophole that lets developers and state governments define vibrant places as distressed.

Business interests like the U.S. Chamber of Commerce are pushing back. Meanwhile, places like Kakaako, Ala Moana and Ko Olina remain targeted for investment.

The EB-5 program encourages foreign investment by providing a permanent resident document known as a green card to foreign nationals who invest in qualifying businesses. To get a green card, investors generally must put $1 million in a jobs-creating U.S. business. But the amount is lowered to $500,000 for investments in businesses in targeted employment areas, where the unemployment rate is at least 150 percent of the national rate.

The loophole involves how the program designates target employment areas. Developers can create oddly shaped, gerrymandered districts that link their project’s immediate, thriving vicinity to faraway distressed places with high unemployment.

As long as the gerrymandered area’s census tracts are contiguous and the combined area’s unemployment rate averages out to 150 percent of the national rate, the state government can certify the district as a targeted employment area. Some of the state-certified districts on Oahu stretch more than 30 miles from the edge of Waikiki to places that are genuinely distressed.

That’s why a project like the proposed Hawaii City Plaza qualifies. In the proposed luxury condo tower’s neighborhood, you can find everything from discount Hawaiian souvenirs at Wal-Mart, to shabu shabu and fancy pastries at the new 808 Center on Rycroft Street, to luxury electric cars from the Tesla showroom in Ala Moana Center.

You can also find a job. Wal-Mart is hiring. So is Domino’s Pizza on Keeaumoku Street. Fancy retailers also need help – and say it’s hard to find.

“The unemployment rate is really low in this area,” said Yayoi Akana, marketing and business development manager at Ala Moana Center’s Minamoto Kichoan, which sells gourmet Japanese treats like maccha tea mochi and jellied mango, delicately wrapped and boxed. “It’s hard to find people for us as a retail store.”

The shop has a “we are hiring” sign in the window and has been looking for one or two part-time workers for a month, she said. But competition for labor is stiff.

“You can see a lot of places around here are hiring,” she said.

The unemployment rate in Hawaii City Plaza’s census tract was 0.8 percent in 2015. But the site qualified as a targeted employment area because it is part of a larger area that stretches to the high unemployment areas of Oahu’s west side.

Hawaii City Plaza has come under fire from Honolulu City Council members who say the developer has revealed he has sold 60 of his 163 residential units to buyers from China — a move council critics say runs counter to development policy in a city suffering a housing shortage.

Jay Fang, the developer, has said the 60 Chinese investors are EB-5 investors who have ponied up $30 million to build the project and are not necessarily condo unit buyers.

But the council critics have not questioned the bustling neighborhood’s designation as a distressed target area.

Eugene Tian, the Hawaii state economist, said his office approves sites as target areas if they meet the federal criteria: the census tracts have to be contiguous, and the area’s unemployment rate has to be 150 percent of the national average.

Tian said it’s common for target areas to stretch westward to Waianae and beyond because those places typically have the highest unemployment rate. “Without linking to Waianae, it is difficult to form a (targeted employment area),” he said. He once turned down a site in Manoa because it could not meet the criteria, Tian said.

The targeted employment area designation is “a pure statistical function,” Tian said. “It has nothing to do with economic development.”

Documents obtained from Tian’s office through a public records request show numerous sites the state has certified as targeted employment areas. The letters do not show whether foreign investors have invested in the projects.

Carr questioned why the state had certified his project as a targeted employment area when he did not request the designation; Marquard, an executive with New York-based LCP Group, an EB-5 investment firm which obtained the certification for 500 Keawe Street, did not return calls.

Calls placed to the number listed for Kenneth Kai Chang, developer of a proposed condo project at 615 Keawe and 690 Halekauwila streets, across from Sky barber shop, were not answered. Calls to Jianjie Ji and 900 Investments, which obtained a targeted employment area certification for a single-family housing development in Mililani, were not returned.

Sweetie Nelson, a spokeswoman for Ko Olina’s development and management company, The Resort Group, said Ko Olina has no plans to enroll in the program. Nelson said she did not know why The Resort Group’s chief executive, Jeffrey Stone, had asked the State of Hawaii in August 2016 to confirm that Ko Olina was certified as an EB-5 targeted employment area. She said Stone’s letter was “a general program inquiry.”

Cathelijne Sieber, the agent listed for Paradise Retirement Hawaii and PRW Hawaii, a Kalakaua home health care and retirement home company that has received EB-5 targeted employment area certification for sites on Kalakaua Avenue near the Hawaii Convention Center, was not available for comment and did not return emails.

The EB-5 program came under scrutiny nationally in April after revelations that the family of Jared Kushner, President Donald Trump’s son-in-law and policy adviser, had used the program for a luxury development in New Jersey. Kushner’s sister, Nicole Meyer, was criticized for mentioning her brother’s ties to the White House while trying to attract $150 million from Chinese investors.

Targeted employment areas are supposed to provide an exception to the general provision that requires investors to invest at least $1 million. But in practice, almost no one actually invests $1 million. The Department of Homeland Security, which administers the program, says 97 percent of all EB-5 petitions filed in 2015 involved investments at the lower level for target areas.

Proposed Regulations Would Prevent Gerrymandering

The department is trying to change that. In proposed regulations published in January, the Obama Administration was pointed in its criticism of the current system of creating targeted employment areas.

“The deference to state determinations provided by current regulations has resulted in the acceptance of some (targeted employment areas) that consist of areas of relative economic prosperity linked to areas with lower employment, and some (targeted employment areas) that have been criticized as ‘gerrymandered,’” the Department of Homeland Security wrote. The department added the result was target areas “resembling a chain-shape or other contorted shape.”

The proposed rules would let developers propose target areas including a project’s census tract and adjacent tracts surrounding it. Homeland Security, not state governments, would certify the areas. The standard investment would increase to $1.8 million, while the amount for target areas would be $1.35 million.

The U.S. Chamber of Commerce has submitted public comments opposed to changing the investment amounts and the method for defining target areas. The National Association of Home Builders also has opposed the changes.

U.S. Sen. Brian Schatz told Civil Beat he doesn’t think the program in general has met the spirit of the law. “It is not what the authors of the EB-5 (law) envisioned,” Schatz said.

At the same time, Schatz said, when it comes to targeted employment areas it might make sense to look at where workers are coming from.

Despite the family connection to the infamous EB-5 deal in New Jersey, the Trump administration has acknowledged the program is flawed.

“There are serious concerns held by the administration regarding the EB-5 visa program, in part because it is not being used as it was primarily intended,” Michael Short, a White House spokesman, told The Washington Post. “The administration is continuing to evaluate reforms to the program, which we believe is in need of substantial repair.”

EPA May Reverse Ban Of Deadly Paint-Removing Chemical

There Have Been More than 50 Deaths Since 1980 from a Common Ingredient in Household Paint Strippers

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By Sarah Okeson

The sweet-smelling solvent methylene chloride, commonly used in paint strippers, can kill in minutes, but our government has left the chemical largely unregulated for decades.

Trump’s Environmental Protection Agency may be trying to kill or water down a proposed regulation published on the last full day of the administration of former President Barack Obama that would ban most uses of the chemical in paint strippers.

“In our view, a ban on methylene chloride in paint stripping products is long overdue, said Lindsay McCormick of the Environmental Defense Fund. “It is literally a matter of life and death.”

Deaths from the chemical have been documented since 1947 when four men were overcome, and one died. The solvent, which can be inhaled or absorbed through the skin, can cause heart attacks and turns into carbon monoxide in the body.

The solvent can only be used safely with a respirator and special gloves and is especially dangerous in confined spaces such as bathrooms or basements.

Since 1980, more than 50 accidental deaths in the United States have been linked to methylene chloride, including possibly the death in April of Kevin Hartley, 21, of Ashland City, Tenn., who was using chemicals to help strip old finish from bathtubs.

ACTION BOX / What you can do about it

Tell EPA Administrator Scott Pruitt your thoughts via his Facebook and Twitter sites. His email is Pruitt.scott@Epa.gov

His phone number is 202-564-4700.

Write him at:

EPA Headquarters
William Jefferson Clinton Building
1200 Pennsylvania Avenue, N. W.
Mail Code: 1101A
Washington, DC 20460

Contact your representative and senators.

The Environmental Defense Fund, which supports stronger regulations on methylene chloride, can be reached at 800-684-3322 or at 1875 Connecticut Ave., NW, Suite 600, Washington, DC 20009.

The European Union prohibited methylene chloride paint strippers from general use in 2011.

The Consumer Product Safety Commission denied a 1985 petition to ban the chemical in household products and rejected requests by California and Washington state officials in 2012 to consider stiffer regulation. The commission voted June 2 to include stronger language on household products containing the solvent.

The Halogenated Solvents Industry Alliance has pushed back against tougher regulation, calling it overreach. The organization spent $60,00 on federal lobbying in 2016 and $10,000 so far this year.

Attorney W. Caffey Norman called the proposed EPA ban a “blatant and raw power grab.”

EPA Administrator Scott Pruitt has previously sided with industry over the safety of people in our country. He overruled the agency’s own scientists to keep the pesticide chlorpyrifos on the market despite evidence that it lowers children’s IQs

Methylene chloride is in paint removers on home improvement store shelves of companies such as Ace Hardware, Home Depot and Lowe’s.  An estimated 1.3 million consumers use products with methylene chloride every year, and more than 30,000 people use them at work.

The fatality numbers linked to the solvent are likely an undercount because federal investigations frequently miss people who are self-employed.

“Everybody knows it’s a bad chemical, and yet nobody does anything,” said Katy Wolf, director of Institute for Research and Technical Assistance in California.

Open letter to party leaders on climate change and the UK economy

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By Dr Stuart Parkinson & Dr Philip Webber, Scientists for Global Responsibility

In an open letter to the UK's political party leaders, Scientists for Global Responsibility urge those politicians to take the global threat of climate change seriously and to exploit science and technology to create jobs, tackle fuel poverty, and reduce local air pollution

We urge you to unite around a common cause - tackling climate change - as a way of helping to provide major economic, social and environmental benefits at this time of uncertainty

In the wake of the inconclusive general election result and bearing in mindthe forthcoming Brexit negotiations, we are writing to leaders of UKparliamentary parties to urge you to unite around a common cause - tackling climate change - as a way of helping to provide major economic, social and environmental benefits at this time of uncertainty.

Not only does there continue to be there very strong scientific evidence on the urgency of this global threat, but measures to tackle it offer major opportunities to exploit science and technology to create jobs, tackle fuel poverty, reduce local air pollution and provide many other co-benefits for British society.

The UK could now capitalise on the renewed international commitment to tackling climate change in the wake of the ill-informed decision of President Trump to withdraw the USA from the Paris Agreement.

We have noted the widespread commitment to tackling climate change in the party manifestos. While there is some diversity in the approaches, there are many common factors. Hence, as a priority, we urge strong support for:

• Home energy conservation programmes. These will both reduce carbon emissions and help to tackle fuel poverty, which is estimated to be responsible for nearly 8,000 UK deaths a year. [1]

• Renewable energy projects - especially wind, solar, marine and biogas technologies and community-led projects. With costs for many of these falling rapidly, the potential economic and employment benefits are very large [2] - and government opinion polling shows these technologies are especially popular. [3]

• Energy storage technologies, including batteries, power-to-gas systems, and pumped hydro storage. Many of these technologies are already rapidly falling in cost, and they have enormous potential to complement the variable renewable energy sources. [4] Electric vehicles will play a key role here and their widespread adoption will help to reduce the number of UK deaths attributable to outdoor air pollution, currently estimated at 40,000 per year. [5]
  
  Additional Recommendations:

We further recommend the following additional actions, which we strongly

believe will complement those above:

• End subsidies for fossil fuels, especially for unconventional sources like shale gas. The growth of a large-scale shale gas industry in this country is likely to seriously undermine Britain's climate targets, as the Committee on Climate Change has warned. [6] Furthermore, the technique of hydraulic fracturing (or ‘fracking') is not popular with the British public, [7] partly as it creates significant risks for the local environment.

• End new commitments to nuclear power stations. These create unique and unresolved economic, security, environmental and safety risks.

Finally, we urge you to use any political influence you have in the USA to try to convince President Trump that climate change is a serious threat to his country as well as the world, and that his government needs to change course. Indeed, his failure to support cleaner industries in his own country is very likely to have a negative impact on the economy there.

We would be interested to hear your thoughts on our recommendations.

Yours sincerely

These Authors

Dr Stuart Parkinson is Executive Director and Dr Philip Webber

is Chair of Scientists for Global Responsibility

This open letter has been sent to the following politicians:

Theresa May MP, Conservative Party

Jeremy Corbyn MP, Labour Party

Tim Farron MP, Liberal Democrats

Nicola Sturgeon MSP, Scottish National Party

Arlene Forster MLA, Democratic Unionist Party

Michelle O'Brien MLA, Sinn Fein

Leanne Wood AM, Plaid Cymru

Caroline Lucas MP, Green Party

Koch Convention to Rewrite Constitution Runs Into Roadblocks

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By Arn Pearson

This year's legislative season saw a strong push in the states from right-wing groups, bankrolled by the Koch brothers and other ultra-conservative billionaires, hoping to convene a national constitutional convention in order to inject rigid fiscal constraints into our country's founding document. Advocates of a federal "balanced budget amendment" (BBA) picked up two more states, Wyoming and Arizona, in their drive to win the 34 resolutions needed to bypass Congress and convene a convention to propose changes to the US Constitution.

That momentum, however, was blunted by surprisingly successful campaigns to rescind convention calls in three states, New Mexico, Maryland, and Nevada. As a result, BBA proponents now claim 27 states in their column, down from 28 at the beginning of the year.

Two steps forward and three steps back... from the brink of a political experiment untried since 1787.

Under Article V of the Constitution, amendments can be proposed either by two-thirds of both the House and Senate, or through a convention called for by two-thirds of state legislatures (currently 34 states). After adoption at a convention, any amendment must be ratified by three-fourths of the states (currently 38 states) before it can become part of the Constitution.

While amendments proposed by Congress have been adopted 17 times since the Constitution's ratification, a constitutional convention has never been called. Critics of this approach, from the Left and the Right, are concerned about how such a convention would play out in this era of massive political spending by billionaires and corporations, especially since there is nothing in Article V limiting the scope of a convention once called.

BBA Momentum Stalls

Backers of a balanced budget amendment convention set their sights on at least seven red states this year, but of those, Wisconsin is the only one still in play, with an Assembly vote scheduled for June 14. Growing opposition resulted in the hard-fought defeat of a BBA resolution in Idaho and the tabling of a similar measure in Kentucky.

More than 200 organizations, including the Center for Media and Democracy, signed onto a letter in April 2017 denouncing an Article V convention at this time as "a dangerous threat to the US Constitution, our democracy, and our civil rights and liberties."

In addition, three legislatures rescinded prior convention calls, following Delaware's lead last year. As a result, the number of states with BBA convention calls has dropped by one; passage in Wisconsin would make the year a wash.

The groups behind the convention drive are disappointed but undeterred, and have targeted at least seven states for 2018, (Kentucky, Maine, Minnesota, Montana, South Carolina, Virginia, and Washington).

"With tremendous momentum led by ALEC and other arch-conservative organizations, we started 2017 expecting to see Article V resolutions pass in many states," said Common Cause campaign strategist Jay Riestenberg. "Instead, in this dangerous period of divisive politics, we saw bi-partisan cooperation in several states to protect the Constitution."

"While three states took action to protect our Constitution by rescinding Article V convention resolutions, wealthy special interest groups are still dangerously close to calling a convention that would put everyone's constitutional rights and protections up for grabs," Riestenberg said.

All of the bills are closely tailored to model measures being promoted by the Koch-backed American Legislative Exchange Council (ALEC) and Balanced Budget Amendment Task Force. Funded and controlled by large corporations, including Koch Industries, ExxonMobil, telecom, and tobacco companies, ALEC has supported a BBA since 1995 and renewed its push for a constitutional convention in recent years, publishing an Article V convention handbook for legislators and hosting numerous strategy sessions.

BBA advocates cite "common sense" concerns about "fiscal responsibility," but the rhetoric masks the outright hostility that the Kochs and other billionaire backers have for key federal programs like Social Security, Medicare and Medicaid, and for the regulatory infrastructure that protects consumers and the environment. Prominent economists warn that such an austerity amendment -- which would constrain discretionary spending but not tax giveaways for corporations and the wealthy -- would have catastrophic results during economic downturns and cripple the federal government's ability to aid states as they deal with the severe impacts of climate change.

More Radical Measures Gain Momentum

Meanwhile, a faction of the Article V convention crowd seeking a much more radical rewrite of the Constitution made significant gains in 2017. The "Convention of States" (COS) project, run by the Texas-based Citizens for Self Governance, introduced wide-ranging resolutions calling for a broad convention to limit the powers of the federal government in 24 states and won passage in four, Arizona, Missouri, North Dakota, and Texas.

COS, whose budget more than tripled between 2011 and 2015 to $5.7 million, now has a total of 12 states behind its more unlikely, but more dangerous, approach. The group, founded by Tea Party Patriots founder Mark Meckler and Koch-tied dark money man Eric O'Keefe, has received major support from the Koch-linked Donors Trust and backing from ALEC, which has adopted COS's proposal as a "model" bill. It seeks a constitutional convention to pass any number of amendments designed to limit the powers of the federal government, adopt term limits, and allow states to opt-out of regulations and even Supreme Court decisions they do not like.

The COS strategy, if successful, would radically revise the Constitution's structure of state and federal power sharing in a way that goes to the heart of what it means to be "united states." Most of the states that have passed Convention of State resolutions are in the deep south, prompting some critics to call it the "New Confederacy."

US and Qatar seal $12bn deal for F-15 fighter jets

Contract is the latest in a series of mixed messages from the US as it attempts to navigate the Gulf diplomatic crisis.

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Washington and Doha have signed an agreement for the purchase of F-15 fighter jets with an initial cost of $12bn, as US President Donald Trump's administration attempts to navigate an ongoing diplomatic crisis in the Gulf.

The aircraft purchase was completed by Qatari Minister of Defence Khalid Al Attiyah and his US counterpart Jim Mattis in Washington DC on Wednesday, according to Qatar News Agency (QNA).

Attiyah said the agreement underscores the "longstanding commitment of the state of Qatar in jointly working with our friends and allies in the United States in advancing our military cooperation for closer strategic collaboration in our fight to counter violent extremism and promote peace and stability in our region and beyond". 

The deal is "yet another step in advancing our strategic and cooperative defence relationship with the United States, and we look forward to continuing our joint military efforts with our partners here in the US", said Attiyah. 

The sale "will give Qatar a state-of-the-art capability and increase security cooperation and interoperability between the United States and Qatar", the Defence Department said in a statement.

The weapon transfer comes just weeks after Trump signed a deal with Saudi Arabia for almost $110bn in US arms. 

It also comes amid a diplomatic row between a Saudi-led bloc of nations and Qatar. 

Saudi Arabia, United Arab Emirates (UAE), and Bahrain and a number of other countries severed relations with Qatar earlier this month, accusing it of supporting armed groups and Iran - allegations Qatar has repeatedly rejected.

Riyadh also closed its border with Qatar, the only land border the emirate has. In addition, the closure of Saudi, Bahraini, and Emirati airspace to Qatar-owned flights has caused major import and travel disruptions.

As the Saudi-led bloc moved against Qatar, the US Secretary of State Rex Tillerson's attempts to remain neutral were overshadowed by a series of heavy-handed tweets from Trump, in which he accused Qatar of supporting "terror".

The US stance amid the Gulf's diplomatic rift was thrown into further confusion last week when Tillerson called on Saudi Arabia toease the blockade on Qatar.

The US' top diplomat has since attempted to mediate between the two sides, and on Tuesday the State Department said efforts to resolve the crisis were "trending in a positive direction".

On Wednesday, Rex Tillerson - in testimony before the House Committee on Foreign Relations - said it was problematic to list the entirety of the Muslim Brotherhood - one of the "extremist" groups the Saudi-led block has accused Qatar of supporting - as "terrorists".

US Navy vessels arrive in Qatar

In another development, two US Navy vessels arrived in Doha on Wednesday for a joint exercise with Qatar's fleet.

The American boats arrived at Hamad Port south of Doha "to participate in a joint exercise with the Qatari Emiri Navy," according to a Ministry of Defence statement posted on QNA.

The crews of the two vessels were received by Qatari navy officers.

It was unclear if the arrival of the two warships was planned before the Gulf rift or if was a sign of support from the Pentagon.

Qatar hosts the biggest US military base in the Middle East with 11,000 troops deployed to or assigned to Al-Udeid Air Base. More than 100 aircraft operate from there.

Yellen Doubles Down on Bet Hot Job Market Stokes Inflation

• Fed chief counsels against overreacting to recent price data
• Economists caution her gamble hinges on a 60-year-old theory

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By Rich Miller

Federal Reserve Chair Janet Yellen is pressing ahead with plans to normalize monetary policy, betting that the ongoing strength of the labor market will ultimately prevail over the recent weakness in inflation.

In a press conference on Wednesday after the Fed raised interest rates for the second time in 2017, Yellen played down a softening of price pressures in the last few months and voiced confidence the central bank was on course to hit its 2 percent inflation goal.

"It’s important not to overreact to a few readings, and data on inflation can be noisy," she told reporters.

The decision to push forward on normalization -- the Fed also provided further detailsof its plan to begin reducing its balance sheet this year -- is not without its perils. If Yellen is wrong and inflation stays low, the Fed is in danger of having companies and consumers conclude that the central bank is not serious about hitting its price goal.

“The risk is that the Fed is too complacent on inflation and more than just transitory factors are keeping it from rising, and that the Fed is too confident about labor market improvement transitioning to wages and inflation," said Michael Gapen, chief U.S. economist at Barclays Plc in New York.

Labor Specialist

A noted labor economist, Yellen is pinning her hopes on an ever-tightening job market eventually lifting wages and inflation -- a relationship quantified in the so-called Phillips Curve that was first developed almost 60 years ago. At 4.3 percent in May, the unemployment rate is below the level that policy makers reckon is sustainable in the long-run.

“We continue to feel that with a strong labor market and with a labor market that’s continuing to strengthen, the conditions are in place for inflation to move up," Yellen said.

Inflation in recent months, though, has been slowing, not quickening. The Fed’s favorite price gauge was 1.7 percent higher in April than a year ago, down from 1.9 percent in March and 2.1 percent in February. And it probably took another leg down last month, based on separate consumer price data released on Wednesday.

‘One-Off’ Factors

Yellen attributed much of the recent weakness to“one-off” factors such as a steep decline in mobile-phone costs and a drop in prescription drug prices.

Investors don’t seem to be buying that explanation. They’ve trimmed odds for a third rate hike this year to less than 50 percent -- in spite of policy makers’ reiteration of those plans on Wednesday.

“There’s a lot of skepticism on Wall Street,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “You look at market inflation expectations, and they’re moving in the opposite direction that the Fed wants them to move.”

For their part, economists began to pull forward their calls for a balance-sheet decision after Wednesday’s meeting. Economists at Citigroup Inc. joined those at Goldman Sachs Group Inc. and Morgan Stanley in looking for an announcement in September on when the wind-down begins. NatWest economists also moved up to September.

In a separate statement on Wednesday, the Fed spelled out the details of its plan to allow the balance sheet to shrink by gradually rolling off a fixed amount of assets on a monthly basis. The initial cap will be set at $10 billion a month: $6 billion from Treasuries and $4 billion from mortgage-backed securities.

The caps will increase every three months by $6 billion for Treasuries until they reach $30 billion and $4 billion for MBS until they reach $20 billion.

Officials didn’t reveal how large the portfolio might be when finished, nor the exact timing of when the process will begin this year, though Yellen told reporters it could get underway “relatively soon” if the economy performs as expected.

Dakota Access pipeline: judge rules environmental survey was inadequate

In what’s being hailed a ‘significant victory’ for pipeline’s opponents, a judge said he would consider whether operations must halt until assessment is redone

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A federal judge has handed a lifeline to efforts to block the Dakota Access pipeline, ruling Wednesday that the US Army Corps of Engineers did not adequately consider the possible impacts of an oil spill where the pipeline passes under the Missouri River. 

US district judge James Boasberg said in a 91-page decision that the corps failed to take into account how a spill might affect “fishing rights, hunting rights, or environmental justice, or the degree to which the pipeline’s effects are likely to be highly controversial”.

The judge said the army must redo its environmental analysis in certain sections and he would consider later whether the pipeline must halt operations in the meantime. A status conference is scheduled for next week.

Dave Archambault II, chairman of the Standing Rock Sioux tribe, which has led opposition to the pipeline, called it “a significant victory”.

The pipeline developer Energy Transfer Partners (ETP) announced earlier this month that it started shipping oil to customers. ETP maintains that the 1,200-mile pipeline is safe, but the Standing Rock Cheyenne River, Yankton and Oglala Sioux tribes in the Dakotas fear environmental harm.

ETP spokeswoman Vicki Granado did not immediately return email and phone messages seeking comment on Boasberg’s ruling. A spokeswoman for the US Department of Justice, Nicole Navas Oxman, said the department was reviewing the ruling.

The decision marks “an important turning point”, said Jan Hasselman, attorney for the nonprofit Earthjustice, which is representing the tribes in the lawsuit.

“Until now, the rights of the Standing Rock Sioux tribe have been disregarded by builders of the Dakota Access pipeline and the Trump administration ... prompting a well-deserved global outcry,” Hasselman said.

The project led to months of demonstrations near the Standing Rock reservation and hundreds of protesters were arrested. The protests died off with the clearing of the main encampment in February and the completion of the pipeline.

Boasberg rejected two earlier complaints by the tribes. One was that the construction threatened sites of cultural and historical significance and the other was that the presence of oil in the pipeline under Lake Oahe would desecrate sacred waters and make it impossible for the tribes to freely exercise their religious beliefs.

“Now that the court has rejected these two lines of attack, Standing Rock and Cheyenne River here take their third shot, this time zeroing in DAPL’s environmental impact,” Boasberg wrote. He added later, “This volley meets with some degree of success.”

The corps originally declined to issue an easement for drilling and earlier this year launched a full environmental study of the Lake Oahe crossing, which it said would take up to two years to complete. Boasberg, the federal judge, had rejected an ETP request to stop the study.

“As we all know, elections have consequences, and the government’s position on the easement shifted significantly once President Trump assumed office on January 20, 2017,” Boasberg wrote in Wednesday’s ruling.

Blood on the tracks of the New Silk Roads

Qatar chaos sends ripples of economic anxiety across the region

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By PEPE ESCOBAR

China’s cardinal foreign policy imperative is to refrain from interfering abroad while advancing the proverbial good relations with key political actors – even when they may be at each other’s throats.

Still, it’s nothing but gut-wrenching for Beijing to watch the current, unpredictable, Saudi-Qatari standoff. There’s no endgame in sight, as plausible scenarios include even regime change and a seismic geopolitical shift in Southwest Asia – what a Western-centric view calls the Middle East.

And blood on the tracks in Southwest Asia cannot but translate into major trouble ahead for the New Silk Roads, now rebranded Belt and Road Initiative (BRI).

When he said, on the record, “I decided … the time had come to call on Qatar to end its funding [of terrorism]”, President Trump essentially took credit for the Saudi/UAE-orchestrated excommunication of Doha, the aftermath of his now notorious sword dance in Riyadh.

Trump’s senior staff though maintains that Qatar never came up in discussions with the Saudis. Secretary of State Rex Tillerson, former Exxon-Mobil CEO and a certified old Middle East hand, has done his best to defuse the drama – conscious there would be no reason for Qatar to continue hosting Al Udeid Air Base and Centcom to a hostile superpower.

Meanwhile, Russia – the Beltway’s favorite evil entity – is getting closer and closer to Qatar, ever since the game-changing acquisition in early December by the Qatar Investment Authority (QIA) of 19.5% of the crown energy giant Rosneft.

That translates into an economic/political alliance of the world’s top two gas exporters; and that explains why Doha – still holding a permanent office at NATO’s HQ – has abruptly thrown its “moderate rebels” in Syria under the (economic) bus.

Russia and China are bound by a complex, multi-vector strategic partnership. Beijing, privileging economic interests, takes a pragmatic view and is never inclined to play a political role. As the world’s biggest manufacturer and exporter, Beijing’s motto is crystal clear: Make Trade, Not War.

But what if Southwest Asia is mired in the foreseeable future in a permanent pre-war footing?

China and BRI’s best pal Iran

China is Qatar’s top trading partner. Beijing was actively negotiating a free trade agreement with the Gulf Cooperation Council (GCC) before the current standoff. Moving forward, a possible scenario is Qatar even pulling out of the GCC.

Qatar is also China’s second-largest source of liquefied natural gas (LNG), while Saudi Arabia is China’s third-largest source of oil. Since 2010 China is ahead of the US as the biggest exporter to Southwest Asia while solidifying its position as the top importer of Southwest Asia energy.

When King Salman recently visited Beijing, the House of Saud ecstatically spun a “Sino-Saudi strategic partnership” based on the signing of deals worth $65 billion. The partnership, in fact, hinges on a five-year Saudi Arabia-China security cooperation agreement that includes counter-terrorism and joint military drills. Much will have to do with keeping the profitable Red Sea-Gulf of Aden corridor free of political turmoil.

Of course, eyebrows may be raised over the fact that Saudi Arabia’s Wahhabism is the ideological matrix of Salafi-jihadism threatening not only Southwest Asia and the West but also China itself.

The New Silk Roads/BRI imply a key role for the GCC – in a mutual investment, trademark Chinese “win-win” way. In an ideal world, the Saudi “Vision 2030” modernizing plan breathlessly being sold by Warrior Prince Mohammed Bin Salman (MBS) could, in theory, even reign in the appeal of Salafi-jihadism of the Daesh variety all across Southwest Asia.

What the Iranophobic MBS seems not to understand is that Beijing actually privileges its BRI-based economic relationship with Tehran.

Early last year, when President Xi Jinping visited Tehran, he and President Rouhani pledged to raise Chinese-Iranian bilateral trade to a whopping $600 billion in 10 years, most of it related to BRI expansion.

China and Iran have been doing serious business. For over a year now, direct China-Iran cargo trains have been crossing Central Asia in only 12 days. That’s just the appetizer for high-speed rail connectivity spanning the arc from China to Turkey via Iran in the early 2020s.

And in a (distant?) future, a pacified Syria will also be configured as a BRI node; before the war, Syrian merchants were a top fixture in the trading-in-small-goods Silk Road running from the Levant to Yiwu in eastern China.

BRI does Turkey, Egypt and Israel

China’s Maritime Silk Road is not about a threatening “string of pearls” – but mostly about port infrastructure, built by Chinese companies, configuring key BRI stops from the Indian Ocean via the Red Sea and Suez all the way to Piraeus port in the Greek Mediterranean. Piraeus is owned and operated by China’s COSCO since August 2016; this upgraded, modern container hub for trade between East Asia and the West is already the fastest-growing port in Europe.

For his part, Turkey’s President Recep Tayyip Erdogan has already made it clear that Turkey’s national interests involve “the Suez Canal, the adjacent seas, and from there extending to the Indian Ocean.” As much as Ankara has set up a base in Qatar – with soldiers now flowing in – it has also established a Turkish-Saudi Strategic Cooperation Council.

Ankara may have been slowly and surely engaged in a strategic pivoting to Russia – as in the go-ahead for Turkish Stream. Yet that also qualifies as a pivot to China – expected to develop, bumps included, in all key areas, from membership of the Asia Infrastructure Investment Bank (AIIB) to membership of the Shanghai Cooperation Organization (SCO).

Both Turkey and Iran – a possible full member of the SCO as early as next year – are actively supporting Qatar in the current standoff, including via regular food shipments. That shows once again how Beijing simply cannot allow itself to be dragged politically into what is essentially the vicious, intractable Iran-Saudi regional power war. Once again; BRI trumps everything.

Egypt poses an extra problem. It aligns with Riyadh in the current standoff; after all Field Marshall President Al-Sisi depends on the House of Saud “largesse”.

In Egypt, the new Singapore-sized capital east of Cairo is essentially being financed by Chinese investment; $35 billion by the end of last year, and counting. Extra bonuses include Beijing facilitating currency swap deals – providing a much-needed boost to the Egyptian economy. Ahmed Darwish, chairman of the Suez Canal Economic Zone, has nothing but praise to the top investor in the Suez Canal Corridor, which happens to be Beijing.

And then there’s the budding Israeli-Chinese connection. Israel backs the Saudi-UAE anti-Qatar blitzkrieg essentially as yet another proxy war front against Iran.

China is bidding to build the Red-Med high-speed rail connecting the Red Sea to the Mediterranean. If the proverbial sea of containers can be accommodated near Eilat, the Chinese will be able to transship cargo via the Red-Med railway directly to Piraeus – an alternative route adding to the already Chinese-involved Suez Canal Corridor.

Connectivity is frantic on all fronts. Shanghai International Port Group is running Haifa port. China Harbor Engineering will build a new $876 million port in Ashdod. Israel is already China’s top supplier of advanced agricultural technology – as in water desalination, aquaculture and cattle farming, for instance. Beijing wants more biomedical, clean energy and telecom technology Israeli imports. And the clincher is Israel’s imminent membership of the AIIB.

It’s fair to argue that from now on everything that happens across Southwest Asia will be conditioned by, and interlocked with, BRI’s land-sea superhighway emporium from East Asia and Southeast Asia to southeastern Europe.

Focused on BRI’s comprehensive drive for multipolarization, “inclusive” globalization 2.0, and the rapid spread of information technology, the last thing Beijing needs is a throwback to the past; a foolish, manufactured standoff as the new front in an existential proxy war between the House of Saud and Iran, and with Saudi Arabia, the UAE, Egypt and Israel pitted against Qatar, Turkey, Iran – and Russia.

Talk about sleepless nights in the Zhongnanhai these days.