Putin Stokes Paranoia About the Web BY ERIK C NISBET AND SARAH MIKATI 2/18/15 AT 11:41 AM Newsweek

President Vladimir Putin of Russia may fear that the Internet is a CIA project, but unfortunately he is not alone.

According to a recently released study about how the Russian public views the Internet, his views are widely shared by large portions the Russian population.

In fact, our research concludes that the Russian public’s distrust of Western sources and dissident information on the Internet creates a “perceptual filter” that bolsters Putin’s foreign and domestic policies.

A deep distrust of the Internet—domestic and foreign

Based on a survey of 1,600 individuals (see details below), almost half of all Russians believe that information on the Internet should be be censored. Likewise, two out of five Russians distrust foreign media and nearly half of Russians believe foreign news websites need to be censored.

These attitudes are partly driven by the fact that 42 percent of Russians believe the Internet is being used by foreign countries against Russia.

In contrast, Central Russian TV news, heavily dominated and controlled by the Russian government, is a primary source of information for 84 percent of Russians and trusted by 90 percent of all Russians.

Put together these attitudes about a malicious foreign influence over the Internet and perceived threats to political stability from domestic anti-government blogs and websites and you have a toxic mix.

Large majorities of Russians have negative feelings toward anti-government online content. These feelings translate into significant portions of the public supporting censorship—of social network groups that organize anti-government protests (46 percent); of on-line videos by the dissident rock band Pussy Riot (45 percent) and of bloggers that call for regime change (43 percent).

Based on these perceived external and internal threats, it should not be a surprise that the Federal Russian Security Service is the organization most trusted as the regulator of the Internet.

A deliberate government campaign

The prevalence of these perceptions amongst the Russian public is no accident.

For some time, the Russian government has been weaving two complementary narratives. The first is that foreign countries use their technological dominance over the Internet to pursue economic, political and military objectives in Russia. The second is that home-grown online activists and “extremists” use the Internet to destabilize Russia’s political system.

These narratives have provided the justification for a range of regulatory initiatives by the Russian government over the last two years.

Popular (which is officially defined as 3,000 daily readers or more) blogs and websites have to be officially registered. All websites and social media platforms have to physically store six months of user data inside Russia. Since November 2012, a blacklist law allows the Russian government to filter and block any websites or social media deemed to contain offensive material. A foreign media ownership law that took effect in October 2014 led CNN International, for example, to cease broadcasting inside Russia.

All this can be seen as a larger project by the Russian government to further tighten control over the flow of news and information.

Previously, the Internet had been less censored and more pluralistic than the government-dominated mass media. This meant Russians had access to a wider range of views and information than was available in Russian TV news and newspapers.

The new focus on Internet regulation and foreign broadcasting will allow the Putin regime greater control over the Russian public’s access to information, regardless of whether it stems from within or outside Russia.

What’s more, the Russian public’s support for government regulation provides an extra “psychological firewall” against alternative sources of information. And this firewall—being based on belief—is particularly difficult to circumvent.

Russia is not alone

Russia is not the only illiberal democracy increasing control over domestic and foreign online content while attempting to convince its citizens of the threat posed by a free and open Internet.

The Turkish government, for example, has followed a similar path in recent years with its attempts to block anti-government online and social media content. The recently elected Turkish president went so far as to call social media “the worst menace to society.”

In both the Russian and Turkish cases, Internet censorship and information control help the regimes’ efforts to build and maintain public support, or at least passive acceptance, for their foreign policy objectives.

The Turkish government has attempted to block information about its possible support of Islamic extremists fighting the Assad regime inside Syria.

In Russia, government domination of the news cycle has been instrumental in driving the sky-high approval ratings of President Putin (in the mid to high eighties) since the annexation of Crimea and conflict in eastern Ukraine, even as the Russian economy has gone into free fall.

The Russian public has very different views about the situation in Ukraine from the Western public. Even though the Russian government has denied the formal involvement of Russian troops in eastern Ukraine, the Russian media’s depictions of the Ukrainian government as ultra-nationalist, fascist, Western puppets has led [55 percent of Russians to feel positively about the Russian volunteers fighting with Ukrainian separatists. In fact, 45 percent of Russians support the idea of Russian military troops joining the fight.

The Internet and U.S. foreign policy

Promoting media and Internet freedom—and with it public understanding and demand for these freedoms—should be considered among key American foreign policy priorities as suggested by former Secretary State Hillary Clinton back in 2010.

As we see with Russia, autocratic-leaning governments may use increased Internet regulation and propaganda against dissident voices as a means to close the remaining cracks in the information bubbles surrounding their citizens.

Once hardened, these information bubbles allow governments to build further support for their illiberal regimes and to pursue their foreign policy objectives without the democratic accountability that can prevent unprovoked international conflict—as Russia has been doing in Ukraine over the past year.

The ConversationThis article was originally published on The Conversation. Read the original article.

A Global Boom Is Facing the End of Easy Lending

New York Times

August 20, 2013

A Global Boom Is Facing the End of Easy Lending


In a city where skyscrapers sprout like weeds, none grew as high as the Sapphire tower in Istanbul.

Today, it stands as a symbol of how far the mighty may fall.

Like a vast majority of new buildings that have blanketed the Istanbul hills in recent years, the Sapphire — at 856 feet it is the tallest in Turkey and among the loftiest in Europe — was built on the back of cheap loans, in dollars, that have flooded Turkey and other fast-growing markets like Brazil, India and South Korea. The money began to flow when the Federal Reserve and other major central banks cut interest rates to the bone in 2009 and cranked up the printing presses in a bid to spur recovery in the United States and other advanced industrial nations.

But now, with expectations mounting that the Federal Reserve, led by its departing chairman Ben S. Bernanke, may soon begin to tighten its monetary spigot, Istanbul’s skyline could well be a harbinger of an emerging-market bust brought on by unpaid loans, weakening currencies, and, eventually, the possible failure of developers and banks.

This week, stocks and currencies in several developing Asian markets, including India, Indonesia and Thailand, have been hit hard. Global investors continued to withdraw funds from emerging markets, as interest rates edge up in anticipation of the Fed’s move to reduce its stimulus efforts in the United States. Indonesia’s benchmark index, which fell 5 percent on Monday, dropped 3.2 percent more on Tuesday. India’s stock market fell 0.3 percent after sliding 5.6 percent in the previous two trading sessions.

Some analysts see it as the markets reacting to an end — real or perceived — of the Bernanke boom. “What we are witnessing is a huge bubble, a Bernanke bubble if you will,” said Tim Lee of Pi Economics, an independent consultancy based in Greenwich, Conn.

Not everybody is as alarmed as Mr. Lee. Still, 16 years after emerging markets in Asia imploded after local currencies collapsed, even optimists are starting to grow nervous over the rapid accumulation of dollar-denominated debt not just in Turkey but in other now-struggling economies like Brazil, India and South Korea.

As it turned out, some of the biggest beneficiaries of the Fed’s largess were not so much in the developed world, but among the politically connected elite in emerging nations like Turkey, where vanity towers, glitzy shopping malls and even grander projects to come — a third bridge across the Bosporus and a vast new airport — have become representative of the nation’s new dynamism, economic as well as geopolitical.

What these elites have so far ignored, Mr. Lee warns, is that their obligations carry with them a significant and pressing danger: currency risk.

Unlike the risky loans made to subprime borrowers in the United States or Irish real estate developers in the euro zone, dollar debts taken on by companies erecting skyscrapers in Istanbul, manufacturing steel in India and prospecting for oil in Brazil, need to be largely paid back in dollars by entities that earn most of their revenues in their home currency.

When the Turkish lira or the rupee in India was strong — as these currencies were until recently — local companies had every incentive to borrow in dollars at comparatively lower interest rates.

But when local currencies start to weaken, in line with diminished economic prospects, then the effect is twofold: paying off dollar loans becomes more costly for the borrower, and the lender becomes increasingly skittish about his exposure to a fragile currency and may move to reduce or even slash credit lines.

While Brazil has the largest amount of dollar loans outstanding at $287 billion, few countries have relied on this source of money as much as Turkey, where dollar loans of around $172 billion represent 22 percent of the overall economy.

In recent months, the Turkish lira has lost 4.5 percent of its value against the dollar. Adding to this, protests have hit Istanbul’s main public square over an unpopular building sponsored by a developer with close political and cultural ties to the prime minister, Recep Tayyip Erdogan.

Goldman Sachs is forecasting a dollar-lira rate of 2.2, representing a 15 percent mini-devaluation from the current level of 1.95. “The Turkish economic miracle was built on liquidity and a massive appreciation of the Turkish lira,” said Atilla Yesilada, an economist at Global Source partners in Istanbul, who has lived through Turkey’s previous financial crashes in 1994 and 2001.

These loans — many of them relatively short term — also highlight a recurring characteristic of the emerging-market growth boom: the powerful nexus between ambitious governments eager to promote high-profile investments and politically connected business groups ready to take on such projects.

The Sapphire tower in Turkey is a perfect example in this regard.

The 54-floor tower, which received a ceremonial baptism from Prime Minister Erdogan when it opened in early 2011, is the signature property of the Kiler Group, one of the many construction-themed conglomerates that have achieved extraordinary success since Mr. Erdogan came to power in 2003. Like Mr. Erdogan, whose family comes from the northern Black Sea region, these businessmen hail from Turkey’s conservative Islamist provinces.

According to regulatory filings, 154 million liras of the group’s total 164 million liras in debt is denominated in dollars — about $79 million using current exchange rates. Of that figure, $25 million is related to the Sapphire tower, company officials say. Most of the group’s debt is short term, and in a reflection of the project’s risk, regulatory documents show that the cash generated by the property goes directly to the project’s primary creditor, Akbank, the fourth-largest bank in Turkey.

Given the differential between dollar loans at 6.5 percent and lira credit costing 11.5 percent, it was no surprise that the Kiler Group and others chose to borrow in dollars. The company, in its most recent filings, acknowledged this risk: if the American dollar gains 10 percent against the Turkish currency, the loss to the company would be 11.8 million Turkish liras.

According to Rasim Kaan Aytogu, chief financial officer for the Kiler Group, the Sapphire tower’s share of that total is $25 million. He contends that because the project books its revenue in dollars it is not exposed to currency fluctuations. He also says that demand for apartment units is strong, with 66 percent of them sold.

“This is a unique property in all of Europe,” he said. “And it is becoming a travel destination.”

But Turkish real estate experts say that sales of the apartments, which cost from $1 million to $10 million, have lagged and that the tower does not have the prestige of rival properties, including towers built by Trump and Zorlu. And according to company filings, revenue from visitors ogling the view from the tower’s observation deck have undershot targets from the outset.

The Kilers are not alone in their ability to make a big splash in Istanbul by deploying dollar debt and political muscle.

Even more influential has been the Kalyon Group, another real estate conglomerate with close ties to Mr. Erdogan. Kalyon is the main developer behind Mr. Erdogan’s controversial effort to build a replica of Ottoman-era army barracks as a shopping mall near Taksim Square.

As troubles were beginning to brew in Turkey, the leader of the Kalyon Group, Cemal Kalyoncu, remained confident that nothing would change. Asked in an interview with a local paper how the consortium of companies that won the tender for the airport would obtain the money, Mr. Kalyoncu said the group would look for loans outside Turkey.

“Financing this should be no problem at all,” he said.