Ziad Abdelnour on China, Iran, and Hezbollah

Salah Uddin Shoaib Choudhury

In today’s financial world, Ziad Abdelnour is one of the most respected and well-known names. He is a specialist in finance and economy. At the same time, he possesses great knowledge in politics and global affairs. Many governments and investors in the world see Mr. Abdelnour as one of the most valuable advisors and ally. He is being regularly consulted by many of the heads of states and top investors in the world on various issues. Abdelnour is also known as an extremely influential and effective lobbyist in the US.

Ziad Abdelnour is the Editor (Economy & Finance) of Blitz. He is CEO of the New York-based private equity firm Blackhawk Partners, chairman of the Financial Policy Council, and author of Economic Warfare: Secrets of Wealth Creation in the Age of Welfare Politics (2011).

Recently Ziad Abdelnour has accorded an exclusive interview to Blitz. Here are the excerpts:

Blitz: Asia has experienced decades of economic growth, while African countries are still impoverished. In your opinion, as an internationally known finance expert, what is stopping Africans from achieving economic prosperity? 

Answer: Not all of Africa is quite so bleak, but 19 of the world’s 23 poorest nations are in Africa, and it’s no mystery why they’re poor. All of them lack one or both of the two essential conditions for poor countries to achieve sustainable economic growth – low taxes and stable money. That’s all it takes to get the ball rolling, particularly if there are no barriers to the entry of foreign investment.

The U.S. alone provided nearly $8.7 billion dollars in development, food, and security aid to African countries last year. But most of the aid hasn’t done very much to create conditions conducive to investment. Opening a school doesn’t make anyone less poor if there is no economic demand for the skills it teaches.

The Trump administration is determined to fix what National Security Advisor John Bolton last month rightly called a “longstanding pattern of aid without effect, assistance without accountability, and relief without reform,” in part because many impoverished African nations have fallen victim to predatory “investments” by state-backed Chinese firms. Very often, Chinese economic penetration of African countries increases their foreign debt, promotes

corruption, weakens whatever labor protections exist, and in many other respects is damaging to their long-term future.

The Trump administration’s Prosper Africa initiative, unveiled last month, is specifically designed to improve conditions for investment.

Blitz: China openly describes its political system as a “people’s autocracy,” meaning it doesn’t even pretend to be democratic. You have excellent relations with several leading Chinese entrepreneurs and investors. What is their priority – democracy or economic prosperity? 

Answer: Most Chinese businessmen I know don’t talk about politics, but like entrepreneurs everywhere prosperity is their goal. It’s tempting to assume they will be a major force for democratic change, as this is what happened in our history. It made sense for those seeking prosperity in 18 th -century Boston or 19 th -century London to push for more representative government.

Those seeking prosperity in early 21st-century China, however, are obliged to depend on and collude with government. The Chinese economy is free in the sense of being market-driven, but the hand of the state is everywhere.

Blitz: It is said that Chinese global economic supremacy is inevitable. Do you agree? 

Answer: No. The double-digit growth China experienced in the three decades after it began free market reforms in 1978 is a thing of the past. It’s easy to achieve 15% growth when you’re starting from a poor, agrarian baseline – just move peasants into cities and let foreign investors build factories to employ them. After that, boosting labor force productivity is much slower-going.

Since the 2008 global financial crisis, China’s economic growth has been in the 6-8% range most years, and even that has been maintained artificially through massive deficit spending, mostly on infrastructure and other fixed-asset investments that don’t directly contribute to future growth.

As a result, its banking sector is plagued by nonperforming loans. In 2017, Moody’s and S&;P downgraded China’s credit rating for the first time in decades. This credit expansion will eventually have to be dialed back, reducing Chinese economic growth further.

In addition, demography will cut into future growth. The ratio of working-age to overall population in China is projected to decline precipitously, the result of the country’s three-decade-long one-child policy (abandoned three years ago in favor of a two-child policy). As the population ages, labor costs increase, savings go down, and healthcare costs go up, to name just a few of the growth-slowing implications.

Finally, China’s future growth will be inhibited by the fact that the rest of the world has lost patience with its unfair trade practices, copyright infringements, and other transgressions that were long tolerated. The Trump administration’s success in standing up to China is sure to lead others to do likewise.

China may experience political instability as its growth slows. A predominantly urban, literate population willing to sacrifice its political rights in exchange for 15% annual growth may not be so willing when the state can only deliver 5% growth. If China’s “people’s autocracy” can’t adapt to changing expectations, it may respond by whipping up nationalist sentiments and pursuing military adventures abroad. That prospect has a lot of people in Washington worried.

In recent years, China has focused on increasing its influence amongst the Asian nations.

Blitz: Do you think an economically prosperous China can be effectively challenged by India, which is just beginning to emerge as an economic power? 

Answer: Well, India won’t be able to rival China in terms of economic strength for decades. Although India has a similar population size ($1.36 billion against China’s $1.42 billion) and its economic growth has exceeded that of China’s in recent years, its annual GDP is still only one-fifth that of its northern neighbor. This is because China got a 13-year head start opening its economy.

In any event, India doesn’t really need to challenge China economically. The two countries’ exports compete in different spheres. China’s strength lies primarily in manufacturing, while India’s big growth sectors are pharmaceuticals, information technology, and services. This will change as both economies develop further, of course, but for now they are very far from any kind of zero-sum competition.

That said, India has much the same complaint as the U.S. has against China – unfair trade practices. Unlike the U.S., it does not yet have the economic strength to do much about it.

Blitz: To what extent does money control politics and media in today’s world? 

Answer: Big money has always had a major influence in American media, especially since the rise of William Randolph Hearst – the quintessential “media mogul” – early this century. Today, billionaire Michael R. Bloomberg has built Bloomberg News into a formidable organization, while Rupert Murdoch’s Fox News dominates conservative airways.

In 2010, a Supreme Court ruling (Citizens United v. FEC) lifted restrictions on the ability of corporations and other associations to spend money advocating for political candidates, which opened the floodgates for big money to directly enter politics.

One silver lining of Citizens United is that it has helped debunk the myth that wealthy and corporate donors favor Republicans. Since the door opened up to big money, Democrats have been consistently out-raising Republicans.

Most Americans don’t like the idea of money influencing politics. So much so that Donald Trump, the ultimate capitalist, and Sen. Bernie Sanders, a self-described socialist who finished narrowly behind Hillary Clinton in the 2016 Democratic presidential primaries, both denounced the corrupting influence of wealthy donors.

Blitz: You have been calling Iran the most dangerous regime in the world. But the European Union, Turkey, Russia and even some non-Arab Muslim nations are resisting sanctions. What can be done to finally liberate Iran from its radical Islamist regime? 

Answer: Sanctions are proving to be a lot more effective than the naysayers predicted. Iran’s economy is plagued by high unemployment, skyrocketing inflation, and a plummeting currency.

Expectations that Europe would ride to Iran’s rescue have diminished, mainly because Iran has continued to carry out assassinations and plot terror attacks on European soil, test nuclear-capable ballistic missiles, and engage in other nefarious activities that Europeans find threatening. Earlier this month, in fact, the EU imposed its first new sanctions on Iran since it the 2015 Iran nuclear deal.

Many governments say they are resisting sanctions, but the more important question is whether companies in those countries are willing to incur the costs of violating U.S. sanctions, and by and large they’re not. There have been continued delays in setting up the so-called Special Purpose Vehicle (SPV) promised by European leaders to help companies avoid these costs, and the mechanism actually being set up isn’t going to be as expansive as the Iranians were hoping.

According to the latest news, EU foreign ministers are preparing to issue a joint statement condemning Iranian missile tests. Little by little, I’m confident they will see the wisdom of the Trump administration’s sanctions campaign and gravitate toward it.

Blitz: Operating out of Lebanon, Hezbollah poses a grave threat to regional and global security. Given that it seems to enjoy mass support amongst the Lebanese people, what can be done to dismantle Hezbollah?

Answer: Hezbollah is supported by the majority of Shi’a, but only small minorities of other sectarian groups support it. The bigger problem is that the political class kowtows to Hezbollah. Why?

Because they don’t want to suffer the same fate as the late Rafiq Hariri and others killed by Hezbollah. This, in turn, enables Hezbollah to effectively control the Lebanese Army and other vital state institutions.

Today, Hezbollah is a bigger threat than ever. Once marketing itself exclusively as armed “resistance” to Israel, Hezbollah has gone regional. Its intervention in the Syrian civil war has helped turn the tide back in favor of President Bashar Assad, and it has played a big role organizing and training Shiite militias in Iraq.

Far from combating this state of affairs, the Obama administration turned a blind eye to Hezbollah, prevented its own DEA from taking down Hezbollah drug traffickers (for fear of jeopardizing its precious nuclear deal with Iran), and stepped up its supply of arms and intelligence to the Lebanese Army, which operates as an auxiliary of Hezbollah.

The Trump administration is intent on changing course. Last October, the administration announced the formation of a Transnational Organized Crime Task Force to confront Hezbollah and four other major networks. A few weeks later it signed the Hezbollah International Financing Prevention Amendments Act, which targets foreign individuals and government agencies that knowingly assist the terrorist group.

If Trump wants to take down Hezbollah, however, he must go further and start treating the Lebanese government as the terror-sponsoring state it has become. U.S. aid should be cut entirely until Lebanon meets its obligations under UN Security Council Resolutions 1559 (2004), 1680 (2006), and 1701 (2006), which bar the continued maintenance of arms outside of state control by Hezbollah.

If necessary, the U.S. should impose sanctions on Lebanon similar in scope to those imposed on Iran. Lebanon, heavily dependent on trade and banking, is probably more vulnerable to sanctions than any other country in the world. Israeli Prime Minister Benjamin Netanyahu and Saudi Crown Prince Mohammed bin Salman (aka MBS) have both urged the Trump administration to take this step because they understand it’s the only way to break Hezbollah’s stranglehold over the country.

Follow Ziad Abdelnour on Twitter at @blackhawkinc.

Leave a Comment