The Rwanda “Genocide Fax”. Who was Behind the 1994 Massacres?

The New York Times and The New Yorker are desperately trying to revive the story of the so-called “Genocide Fax” of January 11, 1994. It seems to indicate that they can’t find anything better to defend their official story of the Rwandan tragedy. With the author’s permission, Baraka Books is offering to the public the excerpt from Rwanda and the New Scramble for Africa concerning Philip Gourevitch’s story of that fax. The excerpt is from chapter 5 entitled “A Coup by Any Other Name …”

A Coup by Any Other Name…

… all on the basis of a single childish accusation, that idiotic bordereau…since almost all the so-called secrets  that had supposedly been turned over to the enemy were of no value.
Émile Zola, J’accuse

One fine spring day in 1998 the ring of a fax interrupted Philip Gourevitch, staff writer with The New Yorker. Some unknown source surprisingly sent him a copy of a document that reporters and investigators had been trying to track down for years. It was the answer from the New York office of the United Nations Peace Keeping Operations to the fax that General Romeo Dallaire sent on January 11, 1994, which supposedly warned UN authorities of an imminent genocide in Rwanda.

In his much-cited article in The New Yorker entitled “The Genocide Fax,” and then again in his book, [1] Gourevitch attempted to show that the UN leaders knew there would be a genocide because Dallaire had explicitly warned them after obtaining trustworthy information from a “big fish” by the name of Jean-Pierre. He also tried to prove that the same United Nations leaders chose to do nothing other than inform President Habyarimana and foreign embassies in Kigali. In a nutshell, a “very very important government politician,” to use Dallaire’s word, had put Dallaire in contact with a senior cadre of the President’s MRND party and its militia. Troubled by a guilty conscience, Jean-Pierre apparently decided to spill the beans.

According to Gourevitch’s story, Rwandan leaders were planning to provoke a civil war by assassinating selected political leaders and Belgian troops.  The informer, Jean-Pierre, apparently suspected that the same leaders were drawing up lists of Tutsis in order to exterminate them. He also said that with his small staff he could kill up to two thousand Tutsis in twenty minutes. Weapons were hidden throughout Kigali and could even be found at the MRND headquarters. In return for this information, the mysterious Jean-Pierre only wanted to obtain UN protection for him and his family.

This was the golden nugget, the first documentary evidence to be found from the period before April 1994. Finally a piece of paper proved the existence of a comprehensive plan to exterminate Rwandan Tutsis, just as the Nazi’s had left a paper trail of documentary evidence proving their intention to exterminate the Jews. What’s more, UN Secretary General Boutros Boutros-Ghali and his successor Kofi Annan, who then headed peacekeeping operations, were fully informed of the imminent genocide. Instead of taking immediate action, as the fax most obviously would have required, both Boutros-Ghali and Kofi Annan preferred typical UN bureaucratic inaction. They did not even inform the Security Council. As a result of their turpitude, the international community was caught unprepared for the apocalypse a few months later.

Thanks to investigations by the intrepid Philip Gourevitch the truth was now out and therefore we should all apologize profusely for our inaction during the genocide that was so clearly foretold. Fortunately, President Clinton and his Secretary of State Madeleine Albright apologized for us when they gracefully visited Central Africa in 1998.

That’s how “right and proper tale” goes, but what really happened?

“Neither General Dallaire nor I ever met that famous Jean-Pierre,” said the fax’s very very important government politician in an interview in Brussels. “I told Dallaire about this story I had heard and about the informer. Dallaire sent one of his assistants to meet him and two days later he came and told me that they had found a few guns. The UN was not about to provide protection for him.”  That doubly important government politician was Faustin Twagiramungu, leader of the opposition MDR party and prime minister designate.

For Mr. Twagiramungu the tale of Jean-Pierre reveals a terrible contempt for Africa and Africans. “I provided information to the UN Mission in Rwanda, but I never spoke about massacres or extermination of Tutsis. A fax is then sent to New York with reference to the extermination of Tutsis. Nobody talked to me about that. Except for a few words from Dallaire, I heard nothing more about this business for several years.” [2] On February 25, 1998 in Arusha General Dallaire confirmed under oath that he had never met Jean-Pierre.

Jean-Pierre’s real name was Abubakar Turatsinze.  He had been hired by the MRND as a chauffeur mainly because he was Muslim and would not likely drink and drive. Since Jean-Pierre was a good talker and had some success with the youth wing, the MRND gave him certain responsibilities in that area.  In November 1993, however, suspecting that “Jean-Pierre” was peddling information to others, the national secretary of the MRND, Joseph Nzirorera, fired him. He was reengaged by another leader to accomplish small tasks. Soon after Jean-Pierre indirectly informed Faustin Twagiramungu, chairman of the main party opposed to the MRND, that the leaders of the MRND were targeting him for assassination. His authority for such a statement was that he worked for the MRND, yet he had been fired two months earlier and was perceived to be unreliable.  Faustin Twagiramungu suspected a trap was being set to provoke confrontation between his own party and President Habyarimana’s MRND. He was also aware of the danger of circulating unfounded accusations. This prompted him to inform the UN Mission, which was responsible for investigating these types of reports.

Romeo Dallaire sent Colonel Luc Marchal, the Belgian commander of UNAMIR troops in the Kigali area, to meet Jean-Pierre/Abubakar Turatsinze on January 10 in the evening along with Captain Amadou Deme. They also visited the MRND offices and saw a number of light weapons, which was perfectly normal for security purposes. Luc Marchal believed Jean-Pierre’s story and relayed the information to Dallaire who sent the famous fax without counterchecking or investigating the story any further.

The promoters of the “right and proper tale” unfailingly forget to mention that the main reason Dallaire sent an urgent fax to New York was to get advice from his superiors. This was fully understandable.  Dallaire had no experience in this area, he had reservations about the informer’s credibility and he suspected a trap. Here are the sections of the fax that have been studiously omitted from the “right and proper tale.”

THIS HQ DOES NOT HAVE PREVIOUS UNITED NATIONS EXPERIENCE IN SUCH MATTERS AND URGENTLY REQUESTS GUIDANCE.

FORCE COMMANDER [Dallaire] DOES HAVE CERTAIN RESERVATIONS ON THE SUDDENNESS OF THE CHANGE OF HEART OF THE INFORMANT TO COME CLEAN WITH THE INFORMATION.

POSSIBILITY OF A TRAP NOT FULLY EXCLUDED, AS THIS MAY BE A SET-UP AGAINST THIS VERY VERY IMPORTANT POLITICAL PERSON.

It was normal for Dallaire and Marchal to request guidance from their superiors. Marchal had been in Rwanda since the end of November—one month. Dallaire had arrived at the end of October—two months. How could either determine the veracity of detailed information about the political parties in a country they knew little about and in which everything went on in a language they did not understand?

The following day Dallaire’s superiors in New York advised him in a fax to inform President Habyarimana and to warn him of the risk that armed militias represented for the implementation of the Arusha Peace Accord. They also suggested that he communicate the same information to the main foreign embassies in Kigali. Nothing that Jean-Pierre predicted came about. If he had spoken about plans to assassinate President Habyarimana, perhaps his predictions would have warranted greater attention. But no mention is made of the upcoming assassination. The advice of Dallaire’s superiors therefore seems simple, reasonable, and wise.

The “very very important” Rwanda politician, Faustin Twagiramungu, thinks that the Jean-Pierre story is totally false and that there was absolutely no planning of a genocide. What’s more, he told Philip Gourevitch as much before The New Yorker article on “The Genocide Fax” appeared and before Gourevitch published his book on the Rwandan tragedy. The New Yorker staff writer did not bother quoting him even though he was at the heart of the whole story. Was Jean-Pierre just trying to obtain favours in return for information? Did he want a visa for the United States or Canada? Whatever the case may be, his story resembles so many others in every country in the world. It is the story of the clerk, driver or telephone operator who works for important and powerful people and glorifies his role and position to win influence, notoriety and, sometimes, financial gain. The possibility that he was an RPF “plant” cannot be eliminated.

***

The story of Jean-Pierre is at best dubious, but what can be said about the content of Dallaire’s fax and the questions it raises? What about the alleged preparations to exterminate Tutsis? What about the alleged armed militias and political assassinations? What about President Habyarimana’s loss of control of elements of his own party? And what about the lists? The whole picture would appear very sinister.

Faustin Twagiramungu never heard of any intentions to exterminate the Tutsis as Jean-Pierre described in detail to Colonel Luc Marchal. [3] He also testified to this effect under oath at the ICTR. In other testimony before the ICTR, Belgian Colonel Frank Claeyes, who also met Jean-Pierre, stated that he had never seen any lists and that after January 11 Abubakar Turatsinze/Jean-Pierre refused to produce the lists he had talked about even though Claeyes asked specifically for them or for samples every time they met. Other prosecution witnesses testified under oath that Turatsinze was active in the flourishing black market arms trade in Kigali.

Turatsinze undoubtedly knew that a Rwandan politician like Prime Minister designate Faustin Twagiramungu was familiar with the RPF and its tactics, just as he was with the other Rwandan political formations. He could not be easily fooled into believing such a story. On the other hand, Luc Marchal and Romeo Dallaire who had just arrived and new virtually nothing about Rwanda were much more gullible. The Belgian peacekeeper later wrote about how he had been “taken in by the RPF’s formidable propaganda” ever since the Arusha negotiations. [4]

Pro-RPF publications abounded with accusations similar to those made by Jean-Pierre. The Rwandan Patriotic Front’s goal was to prepare Western public opinion to accept and support the resumption of war since it knew very well that it could never win power in democratic elections. During the period prior to Jean-Pierre’s meeting with Luc Marchal, pro-RPF publications such as Isibo [5] ran articles closely resembling descriptions made by Jean-Pierre. Nearly twenty years after the events and despite long and detailed trials of alleged génocidaires in Arusha and elsewhere, absolutely no evidence of the planning or intention of exterminating Rwandan Tutsis has been found or presented. Philip Gourevitch, who has been one of the RPF’s main cheerleaders, explicitly recognized this when he insisted that his “genocide fax” from Dallaire was the most important documentary evidence of an extermination plan.

***

How and why did Gourevitch’s so-called genocide fax mutate into one of the elements of the official narrative? [6] The fax Dallaire sent to his superiors in New York remained more or less confidential until November 1995 when it was mentioned in The Observerin London. A copy of it then appeared in a Belgian publication and several questions about it were raised during the inquiry conducted by the Belgian Senate. Although nobody had a copy of the reply from UN headquarters in New York, the contents of the reply were known.

For former Secretary General Boutros-Ghali, “that story of the fax is greatly exaggerated. There was not only one fax. Every day the UN would receive faxes saying ‘We heard there’s a plot afoot…’” He added that if there was a plot afoot, Security Council member countries were much better informed than the UN Secretary General because, unlike the UN, they have intelligence gathering services. “What’s more, they refuse to share their information!” [7]

Late in 1997 and early in 1998, the United States was being severely criticized for its role in the Rwandan tragedy and in the Congo. Hearings in the French National Assembly and the Belgian Senate led to irritating headlines and pointed attacks on the Clinton Administration. In spring 1998, in Washington, the House Committee on International Relations wanted to question the Administration about Washington’s inaction during the Rwandan tragedy in 1994. Neither the State Department nor the Defense Department deigned to appear at the public hearings held by the House Committee. Their refusal angered members of Congress.

Astoundingly, Philip Gourevitch’s fax machine happened to ring at that very moment and out came the much sought-after UN reply to General Romeo Dallaire. Gourevitch published his “scoop” in The New Yorker coincidentally during the very week that hearings were being held in Washington about the United States’ role in the Great Lakes region of Africa. Here’s how Gourevitch explained it all. He first quoted UN spokesman Fred Eckhard to the effect that the UN was getting “a bum rap on this,” then he added, “Somebody with access to UN files disagreed with Eckhard, and one day my fax machine rang and a copy of the missing …” [8]

People have not asked Mr. Gourevitch how and why he happened to receive the missing reply, and he has not volunteered to tell us. The fax most likely came from Jamie Rubin, Madeleine Albright’s senior press attaché and right-hand man, who at that time was Gourevitch’s brother-in-law.

Jamie Rubin is the man who the Clinton Administration charged in March 1995 to devise a plan to prevent Boutros Boutros-Ghali from obtaining a second term as Secretary General of the United Nations. Rubin had contacts in all the major media in Washington and New York and never hesitated to use them to leak information to attack Boutros-Ghali within the UN. His overriding strategy however was to protect and promote Madeleine Albright. [9] Moreover, Jamie Rubin confirmed his tight relationship with Philip Gourevitch to New York Times reporter and author Howard French. In a 1997 press briefing while he was accompanying Madeleine Albright in Rwanda and the Democratic Republic of the Congo, Jamie Rubin said to French: “Actually a lot of my take comes from an even better source (than US intelligence), and it comes directly. Philip Gourevitch is my sister’s boyfriend.” [10]

The State Department and Secretary of State Madeleine Albright were in hot water over Rwanda. The best way to divert the attacks was to pass the buck on to the United Nations and to Boutros-Ghali. At the same time, they could also let Kofi Annan know that he too was on a short leash. Annan after all was responsible for UN peacekeeping operations at the time. The spin given to the fax story in The New Yorker could be summed up as follows: We in Washington are not guilty of having supported a murderous invading army that has spread death and destruction throughout central Africa. It’s those incompetent UN bureaucrats and especially that secretary general who did not take the obvious necessary measures to stop those horrible génocidaires from carrying out their evil plans. They did nothing even though they were sitting on unquestionable documentary evidence of a planned genocide. They did not even inform the international community.

The strategy used by Washington to hide its own evildoing is tried and proven. In 2002, when it was preparing war on Iraq, Washington launched a similar message: “We don’t want to destroy Iraq, take over the country, and put in an American puppet. It’s the United Nations resolutions that demanded we do so.”

Washington’s strategy has unfortunately been quite successful even though it does not stand up to analysis. The power of the United Nations is very limited. The CIA alone spends more in ten days than the UN spends in a year: 1.2 billion US dollars. [11]Ramsey Clark points out that, “since the end of the Cold War the US is so dominant in the UN that it is almost a tool, a small tool, and it has a lot bigger ones like its bombs and its aircraft to get its way around the world.”

***

In that January 11 fax Romeo Dallaire reported that according to Jean-Pierre President Habyarimana did “not have full control over all elements of his old party/faction.” He could, and perhaps should, have written that the president no longer had any control over the country.

Decision-making power for Rwanda was now everywhere but in the hands of Rwandans in Kigali. Between October 1, 1990 and April 6, 1994 foreign powers led by the United States had effectively disempowered Rwandans who had worked for thirty-five years to build a state apparatus and a society that worked relatively well and met the needs and aspirations of the people of Rwanda. Yet the so-called donor institutions had decided that the economic model had to be changed. A strong state with an interventionist bent was to become a tiny administrative unit, even if it meant social upheaval and loss of power for the Hutu majority. Next came the political model imposed by Western powers even though the country had been invaded under their noses and with their support and was still occupied by a hostile foreign army. The same powers then forced the Rwandan government to sit down and negotiate the transfer of power to an invading army that, at best, represented a small minority of the Rwandan population.

Time passed and the occupying army continued to take new land. The civilian population was chased out of their homes. The country, its president and government, and all Rwandans who refused to accept being ruled by the invading army were vilified throughout the world.  While the occupying army killed, deported, and terrorized the population, right-thinking Europeans and North Americans became international mouthpieces for the attacks while regularly adding their own slander. Their words became daggers aimed at the jugular of Rwandan society. Friendly countries turned their backs after thirty years of co-operation and became cozy with the occupying army, soon to be characterized as a beacon of hope for Africa in the new millennium.

By April 1994, on the eve of President Habyarimana’s assassination, Rwanda was in total disarray. The country’s leaders had no power to decide on their future. The new political parties were in crisis, jockeying for position and influence. The economy was shattered. The war raged on and more than a million people were displaced. Armed groups were everywhere, each establishing its own laws, while the United Nations peacekeeping mission responsible for disarming them could not, or would not, carry out its mandate.

The amplification of the importance of the dubious story of Jean-Pierre and Dallaire’s fax must be contrasted with the trivialization of the crime that triggered the massacres in Rwanda in April 1994. [12] Whereas none of the details or causal links in the former story have been established despite years of court hearings, we know that a sophisticated and well-armed organization planned, organized, and executed on April 6, 1994 the assassination of two African heads of State which had terrible direct consequences. Yet the powers that be would rather see that crime remain a footnote in history.

Buy Robin Philpot’s Rwanda and the New Scramble for Africa From Tragedy to Useful Imperial Fiction. The book is also available on the Global Research online store.

Notes

[1] Gourevitch, Philip, We Wish to Inform you that Tomorrow we Will Be Killed with our Families. Stories from Rwanda, New York, Farrar, Straus and Giroux, 1998.

[2] Interview with Faustin Twagiramungu, November 22, 2002.

[3] Colonel Luc Marchal, Rwanda : la descente aux enfers, Témoignage d’un peacekeeper, décembre 1993 – avril 1994, Paris Éditions Labor, 2001, pages 165 à 176.

[4] Letter from Luc Marchal to Alain de Brouwer written in July 1998 quoted by de Brouwer in a document about the organization of International Christian Democrats and the war in Rwanda, October 2002.

[5] James K. Gasana, op. cit. p. 238.

[6] To appreciate the power of a false story, in 2000 a group of “experts” published a book entitled The Path of a Genocide, still used in schools and universities, in which the January 11, 1994 cable is printed in its entirety right after the editors’ preface as though it were incontestable proof of the case about to be made.

[7] Interview with Boutros Boutros-Ghali, November 9, 2004.

[8] The Genocide Fax, The New Yorker, May 11, 1998, p. ??.

[9] Michael Dobbs, Madeleine Albright. A Twentieth Century Odyssey, Henry Holt & Company, 1999, pages 364 à 365.

[10] Howard French, A Continent for the Taking, Knopf, 2004 p. 243.

[11] Ibid. p 365. Former UN Secretary General Boutros Boutros-Ghali complained that the CIA spent as much every day as the UN in a whole year. Madeleine Albright’s biographer corrected him by pointing out that it was every ten days and not every day.

[12] In a sad attempt to mimic the paper trail left by the Nazis regarding their genocidal project some have conferred upon the dubious “genocide fax” and “Jean-Pierre” a sacred role in their narrative. Kofi Annan, in his ingratiating effort to maintain credibility among Western powers, quotes the in full in his memoirs Interventions: A Life in War and Peace (Penguin 2012), as if his feigned candour could make the story true

UK Government Accused of Indirectly Arming Somali Pirates

By Russia Today

A report on the UK’s weapons exports has triggered accusations that Britain may be arming Somali pirates and dictatorial regimes. MPs allege this is due to the sheer volume of guns being exported and poor oversight.

An urgent review has been launched over why some 44,000 guns were exported to East Africa in just 15 months. Government data shows that among the weapons were 30,000 assault rifles, 2,536 pistols and 11,000 rifles which ended up in countries with poor human rights records like Somalia, Egypt and Sri Lanka. Some of the weapons were also exported to Russia and South Africa.

The report, which was part of a wide-ranging inquiry into arms exports, noted the MPs want to know why UK firms would need such a large stash of new weapons, given that they already had thousands of weapons in their armory before April 2012.

MPs alleged that the sheer volume of weapons being exported meant that it was difficult to keep tabs on where they end up, prompting speculation the UK could be arming pirates in Somalia.

House of Commons Arms Export Controls Committee said that the Business Department, which approved the weapons export, did not thoroughly assess where the weapons were going. MPs also raised doubts as to whether Britain’s export policy has got the “balance right between the arms trade, surveillance equipment and our economic interests.”

“The evidence provided to us by Mr Bell seems to suggest that the department did not have a process of looking at the cumulative number of weapons and whether those exports fitted the scenario on the ground needed for protection.”

The head of the Export Control Organisation at the Business Department, Edward Bell said he understood the worries of MPs given the large quantity of arms, although he denied the weapons had fallen into the wrong hands.

“I understand the concern about the volumes … having now heard about the volumes, I would like to do a bit more digging around that. I have no concerns that anything untoward has happened, but I certainly will have a closer look at the volumes involved,” Bell told MPs. The Business Department has now launched an internal inquiry into weapons exports.

Piracy remains a big problem in Somali despite international efforts to curtail attacks. In November of last year a US court sentenced two Somali pirates to life in prison for the killing of four American citizens onboard a yacht off the Horn of Africa in 2011.

Prosecutors said the pirates intended to kidnap the Americans and hold them for ransom in Somalia.

However, following four days of negotiations with the US Navy, the pirates shot their captives dead and opened fire on the US vessels.

There has been a significant naval operation by many countries around the Horn of Africa and the Indian Ocean, which has helped stop attacks. There haven’t been any successful pirate raids on ships since May 2012.

War and Water: Hydropolitics Propel Balkanization in Africa

By Wayne Madsen

Wherever there are reports of melting glaciers and a future of diminished water resources, there is an increasing Balkanization of nation-states. Those who manipulate world events for maximum profit understand that it is much easier to control water resources if one is dealing with a multitude of warring and jealous mini-states than it is to deal with a regional power…

The Nile Basin is seeing record fragmentation of nation-states by secessionist and other rebel movements, some backed by the United States and its Western allies and others backed by Egypt and Saudi Arabia. Yet other secessionist groups are backed by regional rivals such as Ethiopia, Eritrea, Uganda, and Sudan.

Ethiopia has announced that its Grand Ethiopian Renaissance Dam project on the Blue Nile will begin diverting the Blue Nile at the end of 2014. Ethiopia’s decision has set off alarm bells down river in Sudan and Egypt, which are both critically dependent on the Nile for drinking water, irrigation, and in the case of Egypt’s Aswan High Dam, electric power. A 1959 agreement between Egypt and Sudan guarantees Egypt 70 percent and Sudan 30 percent of the Nile’s water flow.

Egypt’s government has warned Ethiopia, a historical rival, not to restrict the Nile water flow to the extent that it would adversely affect the Aswan Dam or Egypt’s water supply. Sudan has voiced similar warnings. Cairo and Khartoum are also aware that their mutual enemy, Israel, has close relations with Ethiopia and the Republic of South Sudan, the world’s newest nation. The independence of South Sudan would not have been possible without the backing of Israel’s leading neo-conservative allies in Washington and London.

The White Nile flows from the Tanzania, Rwanda, Burundi, through Uganda and South Sudan, to Sudan. Egypt and Sudan have also been concerned about Israel’s heavy presence in South Sudan. The South Sudanese secession put tremendous pressure on the future territorial integrity of Sudan, which faces additional Western- and Israeli-backed breakaway movements in Darfur and northeastern Sudan.

Independence for South Sudan was long a goal of former Secretary of State Madeleine Albright and her god-daughter, current U.S. ambassador to the UN Susan Rice. The splitting of Sudan into an Arab Muslim north and a black Christian and animist south was also long a goal of Israel, which yearned for a client state in South Sudan that would be able to squeeze the supply of the Nile’s headwaters to Egypt and north Sudan.

South Sudan’s independence was cobbled together so rapidly, its Western sponsors were not even sure, at first, what to call the country. Although South Sudan was finally agreed upon, other proposals were to call the nation the «Nile Republic» or «Nilotia,» which were rejected because of the obvious threatening meaning that such names would send to Cairo and Khartoum.

The names «Cush» or «Kush» were also rejected because of their reference to the land of Cush that appears in the Jewish Bible and the obvious meaning that such a name would have for those who accuse Israel of wanting to expand its borders beyond the borders of the Palestinian mandate. «New Sudan» was also rejected because of implied irredentist claims by South Sudan on the contested oil-rich Abyei region between Sudan and South Sudan.

Egypt has been lending quiet support to Ethiopian and Somali secessionists, which Cairo sees as a counterweight to Ethiopian neo-imperialist designs in the Horn of Africa. Although Ethiopia maintains good relations with the breakaway Republic of Somaliland, Addis Ababa does not want to see Somalia fragmented any further. But that is exactly what is desired by Cairo to keep Ethiopia’s military and revenues preoccupied with an unstable and collapsing neighbor to the east.

Two other parts of Somalia, Puntland and Jubaland, also spelled Jubbaland, have declared separatist states. Jubaland should not be confused with the capital of South Sudan, Juba, which is being relocated to Ramciel, close to the border with Sudan. However, all this confusion and map redrawing is a result of increasing hydropolitics in the region, as well as the ever-present turmoil caused by the presence of oil and natural gas reserves. The Rahanweyn Resistance Army is fighting for an independent state of Southwestern Somalia.

Somaliland has its own secessionist movement in the western part of the country, an entity called Awdalland, which is believed to get some support from neighboring Djibouti, the site of the U.S. military base at Camp Lemonier.

Ethiopian troops, supported by the African Union and the United States, are trying to prop up Somalia’s weak Federal government but Somalia’s fracturing continues unabated with Kenya supporting a semi-independent entity called «Azania» in a part of Jubaland in Somalia.

There are also a number of nascent separatist movements in Ethiopia, many being brutally suppressed by the Ethiopian government with military assistance from the United States, Britain, and Israel. Some of these movements are backed by Eritrea, which, itself, broke away from Ethiopia two decades ago. Chief among the groups are the Ogadenis, who want a Somali state declared in eastern Ethiopia and the Oromo, who dream of an independent Oromia.

Ethiopia’s ruling dictatorship has tried to placate the Oromos and Ogadenis with peace talks but these moves are seen as window dressing to placate Ethiopia’s benefactors in Washington and London.

However, separatist movements throughout the Horn of Africa took pleasure in the advent of South Sudan because they saw the «inviolability» of colonial-drawn borders, long insisted upon by the Organization of African Unity and the African Union, finally beginning to wither. In fact, that process began with Eritrea’s independence in 1993. Eritrea also faces its own secessionist movement, the Red Sea Afars. The Afars also maintain separatist movements in Ethiopia and Djibouti, the latter having once been known as the French Territory of the Afars and Issas.

In another U.S. ally, Kenya, the homeland of President Barack Obama’s father, Muslims along the coast have dusted off the Sultan of Zanzibar’s 1887 lease to the British East Africa Company of the 10-mile strip of land along the present Indian Ocean coast of Kenya. Legally, when the lease expired the strip was to revert back to control of the sultan. Since the Sultan was ousted in a 1964 coup, the coastal Kenyans argue that the coastal strip was annexed illegally by Kenya and that, therefore, the coastal strip should be the independent Republic of Pwani. The discovery of major oil and natural gas reserves in Uganda and South Sudan has resulted in plans for pipelines to be built to the port of Mombasa, the would-be capital of Pwani on the Indian Ocean. In Kenya, hydropolitics and petropolitics in the Horn of Africa has resulted in Balkanization spilling into Kenya.

In the Himalayas, glacier retreat and rapidly diminishing snow cover are also adding to hydropolitical angst and fueling separatist movements backed by the bigger powers in the region: India, China, Pakistan, and Bangladesh. Snow melt is now being seen in some parts of the Himalayas in December and January. Four dams on the Teesta River, which flows from Sikkim through north Bengal to the Brahmaputra basin, have not only affected the geo-political situation in Sikkim, which has nascent independence and Nepali irredentist movements, but also helps to fuel demands for increased autonomy for Gorkhaland, Bodoland, and Assam, an independent Madhesistan in southern Nepal, an ethnic Nepali revolt in southern Bhutan, and consternation in Bangladesh, where the Brahmaputra and Ganges converge to largely support a country with a population of 161 million people. Bangladesh has also seen its share of secessionist movements, including the Bangabhumi Hindu and the Chittagong Hill Tracts movements.

Hydropolitics, petropolitics, and the status quo, like water and oil, do not mix, especially when it comes to the preservation of current borders. Northeastern Africa and South Asia are not unique in this respect.

The Secret War in Libya: In-depth Report: NATO'S WAR ON LIBYA

By Eric Draitser

The battles currently raging in the South of Libya are no mere tribal clashes.  Instead, they represent a possible burgeoning alliance between black Libyan ethnic groups and pro-Gaddafi forces intent upon liberating their country of a neocolonial NATO-installed government.

On Saturday January 18th, a group of heavily armed fighters stormed an air force base outside the city ofSabha in southernLibya, expelling forces loyal to the “government” of Prime Minister Ali Zeidan, and occupying the base.  At the same time, reports from inside the country began to trickle in that the green flag of the Great Socialist People’s Libyan Arab Jamahiriya was flying over a number of cities throughout the country.  Despite the dearth of verifiable information – the government inTripoli has provided only vague details and corroboration – one thing is certain: the war forLibya continues.

On the Ground

Libya’s Prime Minister Ali Zeidan called an emergency session of the General National Congress to declare a state of alert for the country after news of the storming of the air base broke.  The Prime Minister announced that he had ordered troops south to quell the rebellion, telling reporters that, “This confrontation is continuing but in a few hours it will be solved.”  A spokesman for the Defense Ministry later claimed that the central government had reclaimed control of the air base, stating that “A force was readied, then aircraft moved and took off and dealt with the targets…The situation in the south opened a chance for some criminals…loyal to the Gaddafi regime to exploit this and to attack the Tamahind air force base…We will protect the revolution and the Libyan people.”

In addition to the assault on the airbase, there have been other attacks on individual members of the government in Tripoli.  The highest profile incident was the recent assassination of the Deputy Industry Minister Hassan al-Droui in the city of Sirte.  Although it is still unclear whether he was killed by Islamist forces or Green resistance fighters, the unmistakable fact is that the central government is under assault and is unable to exercise true authority or provide security in the country.  Many have begun speculating that his killing, rather than being an isolated, targeted assassination, is part of a growing trend of resistance in which pro-Gaddafi Green fighters figure prominently.

The rise of the Green resistance forces in Sabha and elsewhere is merely one part of larger and more complex political and military calculus in the South where a number of tribes and various ethnic groups have risen against what they correctly perceive to be their political, economic, and social marginalization.  Groups such as the Tawergha and Tobou ethnic minorities, both of which are black African groups, have endured vicious attacks at the hands of Arab militias with no support from the central government.  Not only have these and other groups been the victims of ethnic cleansing, but they have been systematically shut out of participation in Libyan political and economic life.

The tensions came to a head earlier this month when a rebel chief from the Arab Awled Sleiman tribe was killed.  Rather than an official investigation or legal process, the Awled tribesmen attacked their black Toubou neighbors, accusing them of involvement in the murder.  The resulting clashes have since killed dozens, once again demonstrating that the dominant Arab groups still view their dark skinned neighbors as something other than countrymen.  Undoubtedly, this has led to a reorganization of the alliances in the region, with the Toubou, Tuareg and other black minority groups that inhabit southern Libya, northern Chad and Niger moving closer to the pro-Gaddafi forces.  Whether or not these alliances are formal or not still remains unclear, however it is apparent that many groups in Libya have come to the realization that the government installed by NATO has not lived up to its promises, and that something must be done.

The Politics of Race in Libya

Despite the high-minded rhetoric from Western interventionists regarding “democracy” and “freedom” in Libya, the reality is far from it, especially for dark skinned Libyans who have seen their socioeconomic and political status diminished with the end of the Jamahiriya government of Muammar Gaddafi.  While these peoples enjoyed a large measure of political equality and protection under the law in Gaddafi’s Libya, the post-Gaddafi era has seen their rights all but stripped from them.  Rather than being integrated into a new democratic state, the black Libyan groups have been systematically excluded.

In fact, even Human Rights Watch – an organization which in no small measure helped to justify the NATO war by falsely claiming that Gaddafi forces used rape as a weapon and were preparing “imminent genocide” – has reported that, “A crime against humanity of mass forced displacement continues unabated, as militias mainly from Misrata prevented 40,000 people from the town of Tawergha from returning to their homes from where they had been expelled in 2011.”  This fact, coupled with the horrific stories and images of lynchings, rapes, and other crimes against humanity, paints a very bleak picture of life in Libya for these groups.

In its 2011 report, Amnesty International documented a number of flagrant war crimes carried out by the so called “freedom fighters” of Libya who, despite being hailed in the Western media as “liberators”, used the opportunity of the war to carry out mass executions of black Libyans as well as rival clans and ethnic groups.  This is of course in stark contrast to the treatment of black Libyans under the Jamahiriya government of Gaddafi which was praised up and down by the Human Rights Council of the United Nations in their 2011 report which noted that Gaddafi had gone to great lengths to ensure economic and social development, as well as specifically providing economic opportunities and political protections to black Libyans and migrant workers from neighboring African countries.  With this in mind, is it any wonder that Al Jazeera quoted a pro-Gaddafi Tuareg fighter inSeptember 2011 as saying, “fighting for Gaddafi is like a son fighting for his father…[We will be] ready to fight for him until the last drop of blood.”

As the Toubou and other black ethnic groups clash with Arab militias, their struggle should be understood in the context of a continued struggle for peace and equality.  Moreover, the fact that they must engage in this form of armed struggle again illustrates the point that many international observers made from the very beginning of the war: NATO’s aggression was never about protecting civilians or human rights, but rather regime change for economic and geopolitical interests.  That the majority of the population, including black ethnic minorities, is worse off today than they ever were under Gaddafi is a fact that is actively suppressed.

Black, Green, and the Struggle for Libya

It would be presumptuous to assume that the military victories made by the pro-Gaddafi Green resistance in recent days will be long-lasting, or that they represent an irreversible shift in the political and military landscape of the country.  Though decidedly unstable, the neocolonial puppet government in Tripoli is supported economically and militarily by some of the most powerful interests in the world, making it difficult to simply overthrow it with minor victories.  However, these developments do signal an interesting shift in the calculus on the ground.  Undoubtedly there is a confluence between the black ethnic minorities and the Green fighters as both recognize their enemy as being the tribal militias who participated in the overthrow of Gaddafi as well as the central government in Tripoli.  Whether a formal alliance emerges from this remains to be seen.

Were such an alliance to develop however, it would be a watershed moment in the continued war for Libya.  As Green resistance fighters have shown in Sabha, they are able to organize themselves in the south of the country where they enjoy a large degree of popular support.  One could imagine an alliance in the south that would be able to hold territory and possibly consolidate power throughout the southern part of Libya, creating a de facto independent state.  Naturally, the cry from NATO and its apologists would be that this is anti-democratic and counter-revolution.   This would be understandable as their goal of a unified Libya subservient to international finance capital and oil interests would become unattainable.

One should be careful not to make too many assumptions about the situation in Libya today, as reliable details are hard to come by.  More to the point, Western media has attempted to completely suppress the fact that the Green resistance even exists, let alone is active and winning victories.  All this simply further illustrates that the war for Libya rages on, whether the world wants to admit it or not.

Eric Draitser is the founder of StopImperialism.com.  He is an independent geopolitical analyst based in New York City.  You can reach him at ericdraitser@gmail.com.

Naked Gold Shorts: The Inside Story of Gold Price Manipulation

By Dr. Paul Craig Roberts and David Kranzler

The deregulation of the financial system during the Clinton and George W. Bush regimes had the predictable result: financial concentration and reckless behavior. A handful of banks grew so large that financial authorities declared them “too big to fail.”  Removed from market discipline, the banks became wards of the government requiring massive creation of new money by the Federal Reserve in order to support through the policy of Quantitative Easing the prices of financial instruments on the banks’ balance sheets and in order to finance at low interest rates trillion dollar federal budget deficits associated with the long recession caused by the financial crisis.

The Fed’s policy of monetizing one trillion dollars of bonds annually put pressure on the US dollar, the value of which declined in terms of gold. When gold hit $1,900 per ounce in 2011, the Federal Reserve realized that $2,000 per ounce could have a psychological impact that would spread into the dollar’s exchange rate with other currencies, resulting in a run on the dollar as both foreign and domestic holders sold dollars to avoid the fall in value. Once this realization hit, the manipulation of the gold price moved beyond central bank leasing of gold to bullion dealers in order to create an artificial market supply to absorb demand that otherwise would have pushed gold prices higher.

The manipulation consists of the Fed using bullion banks as its agents to sell naked gold shorts in the New York Comex futures market.  Short selling drives down the gold price, triggers stop-loss orders and margin calls, and scares participants out of the gold trusts. The bullion banks purchase the deserted shares and present them to the trusts for redemption in bullion.  The bullion can then be sold in the London physical gold market, where the sales both ratify the lower price that short-selling achieved on the Comex floor and provide a supply of bullion to meet Asian demands for physical gold as opposed to paper claims on gold.

The evidence of gold price manipulation is clear. In this article we present evidence and describe the process.  We conclude that ability to manipulate the gold price is disappearing as physical gold moves from New York and London to Asia, leaving the West with paper claims to gold that greatly exceed the available supply.

The primary venue of the Fed’s manipulation activity is the New York Comex exchange, where the world trades gold futures.  Each gold futures contract represents one gold 100 ounce bar.  The Comex is referred to as a paper gold exchange because of the use of these futures contracts.  Although several large global banks are trading members of the Comex, JP Morgan, HSBC and Bank Nova Scotia conduct the majority of the trading volume.  Trading of gold (and silver) futures occurs in an auction-style market on the floor of the Comex daily from 8:20 a.m. to 1:30 p.m. New York time.  Comex futures trading also occurs on what is known as Globex.  Globex is a computerized trading system used for derivatives, currency and futures contracts.  It  operates continuously except on weekends.  Anyone anywhere in the world with access to a computer-based futures trading platform has access to the Globex system.

In addition to the Comex, the Fed also engages in manipulating the price of gold on the far bigger–in terms of total dollar value of trading–London gold market.  This market is called the LBMA (London Bullion Marketing Association) market.  It is comprised of several large banks who are LMBA market makers known as “bullion banks”  (Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorganChase, Merrill Lynch/Bank of America, Mitsui, Societe Generale, Bank of Nova Scotia and UBS).  Whereas the Comex is a “paper gold” exchange, the LBMA is the nexus of global physical gold trading and has been for centuries.   When large buyers like Central Banks, big investment funds or wealthy private investors want to buy or sell a large amount of physical gold, they do this on the LBMA market.

The Fed’s gold manipulation operation involves exerting forceful downward pressure on the price of gold by selling a massive amount of Comex gold futures, which are dropped like bombs either on the Comex floor during NY trading hours or via the Globex system.  A recent example of this occurred on Monday, January  6, 2014.  After rallying over $15 in the Asian and European markets, the price of gold suddenly plunged $35 at 10:14 a.m.   In a space of less than 60 seconds, more than 12,000 contracts traded – equal to more than 10% of the day’s entire volume during the 23 hour trading period in which which gold futures trade. There was no apparent news or market event that would have triggered the sudden massive increase in Comex futures selling which caused the sudden steep drop in the price of gold. At the same time, no other securities market (other than silver) experienced any unusual price or volume movement.  12,000 contracts represents 1.2 million ounces of gold, an amount that exceeds by a factor of three the total amount of gold in Comex vaults that could be delivered to the buyers of these contracts. 

This manipulation by the Fed involves the short-selling of uncovered Comex gold futures.   “Uncovered” means that these are contracts that are sold without any underlying physical gold to deliver if the buyer on the other side decides to ask for delivery. This is also known as “naked short selling.”  The execution of the manipulative trading is conducted through one of the major gold futures trading banks, such as JPMorganChase, HSBC, and Bank of Nova Scotia.

These banks do the actual selling on behalf of the Fed.  The manner in which the Fed dumps a large quantity of futures contracts into the market differs from the way in which a bona fide trader looking to sell a big position would operate.  The latter would try to work off his position carefully over an extended period of time with the goal of trying to disguise his selling and to disturb the price as little as possible in order to maximize profits or minimize losses. In contrast, the Fed‘s sales telegraph the intent to drive the price lower with no regard for preserving profits or fear or incurring losses, because the goal is to inflict as much damage as possible on the price and intimidate potential buyers.

The Fed also actively manipulates gold via the Globex system. The Globex market is punctuated with periods of “quiet” time in which the trade volume is very low.  It is during these periods that the Fed has its agent banks bombard the market with massive quantities of gold futures over a very brief period of time for the purpose of driving the price lower.  The banks know that there are very few buyers around during these time periods to absorb the selling.  This drives the price lower than if the selling operation occurred when the market is more active.

A primary example of this type of intervention occurred on December 18, 2013, immediately after the FOMC announced its decision to reduce bond purchases by $10 billion monthly beginning in January 2014.  With the rest of the trading world closed, including the actual Comex floor trading, a massive amount of Comex gold futures were sold on the Globex computer trading system during one of its least active periods.  This  selling pushed the price of gold down $23 dollars in the space of two hours.  The next wave of futures selling occurred in the overnight period starting at 2:30 a.m. NY time on December 19th. This time of day is one of the least active trading periods during any 23 hour trading day (there’s one hour when gold futures stop trading altogether).  Over 4900 gold contracts representing 14.5 tonnes of gold were dumped into the Globex system in a 2-minute period from 2:40-2:41 a.m, resulting in a $24 decline in the price of gold. This wasn’t the end of the selling. Shortly after the Comex floor opened later that morning, another 1,654 contracts were sold followed shortly after by another 2,295 contracts. This represented another 12.2 tonnes of gold. Then at 10:00 a.m. EST, another 2,530 contracts were unloaded on the market followed by an additional 3,482 contracts just six minutes later. These sales represented another 18.7 tonnes of gold.

All together, in 6 minutes during an eight hour period, a total amount of 37.6 tonnes (a “tonne” is a metric ton–about 10% more weight than a US ”ton”) of gold future contracts were sold. The contracts sold during these 6 minutes accounted for 10% of the total volume during that 23 hours period of time. Four-tenths of one percent of the trading day accounted for 10% of the total volume. The gold represented by the futures contracts that were sold during these 6 minutes was a multiple of the amount of physical gold available to Comex for delivery.

The purpose of driving the price of gold down was to prevent the announced reduction in bond purchases (the so-called tapering)  from sending the dollar, stock and bond markets down. The markets understand that the liquidity that Quantitative Easing provides is the reason for the high bond and stock prices and understand also that the gains from the rising stock market discourage gold purchases. Previously when the Fed had mentioned that it might reduce bond purchases, the stock market fell and bonds sold off. To neutralize the market scare, the Fed manipulated both gold and stock markets.

(See Pam Martens for explanation of the manipulation of the stock market:http://wallstreetonparade.com/2013/12/why-didn’t-the-stock-market-sell-off-on-the-fed’s-taper-announcement/ )

While the manipulation of the gold market has been occurring since the start of the bull market in gold in late 2000, this pattern of rampant manipulative short-selling of futures contracts has been occurring on a more intense basis over the last 2 years, during gold’s price decline from a high of $1900 in September 2011. The attack on gold’s price typically will occur during one of several key points in time during the 23 hour Globex trading period. The most common is right at the open of Comex gold futures trading, which is 8:20 a.m. New York time.  To set the tone of trading, the price of gold is usually knocked down when the Comex opens. Here are the other most common times when gold futures are sold during illiquid Globex system time periods:

- 6:00 p.m NY time weekdays, when the Globex system re-opens after closing for an hour;

- 6:00 p.m. Sunday evening NY time when Globex opens for the week;

- 2:30 a.m. NY time, when Shanghai Gold Exchange closes

- 4:00 a.m. NY time, just after the morning gold “fix” on the London gold market (LBMA);

• 2:00 p.m. NY time any day but especially on Friday, after the Comex floor trading has closed – it’s an illiquid Globex-only session and the rest of the world is still closed.

In addition to selling futures contracts on the Comex exchange in order to drive the price of gold lower, the Fed and its agent bullion banks also intermittently sell large quantities of physical gold in London’s LBMA gold market.  The process of buying and selling actual physical gold is more cumbersome and complicated than trading futures contracts. When a large supply of physical gold hits the London market all at once, it forces the market a lot lower than an equivalent amount of futures contracts would.  As the availability of large amounts of physical gold is limited, these “physical gold drops” are used carefully and selectively and at times when the intended effect on the market will be most effective.

The primary purpose for short-selling futures contracts on Comex is to protect the dollar’s value from the growing supply of dollars created by the Fed’s policy of Quantitative Easing. The Fed’s use of gold leasing to supply gold to the market in order to reduce the rate of rise in the gold price has drained the Fed’s gold holdings and is creating a shortage in physical gold.  Historically most big buyers would leave their gold for safe-keeping in the vaults of the Fed, Bank of England or private bullion banks rather than incur the cost of moving gold to local depositories.  However, large purchasers of gold, such as China, now require actual delivery of the gold they buy.

Demands for gold delivery have forced the use of extraordinary and apparently illegal tactics in order to obtain physical gold to settle futures contracts that demand delivery and to be able to deliver bullion purchased on the London market (LBMA).  Gold for delivery is obtained from opaque Central Bank gold leasing transactions, from “borrowing” client gold held by the bullion banks like JP Morgan in their LBMA custodial vaults, and by looting the gold trusts, such as GLD, of their gold holdings by purchasing large blocks of shares and redeeming the shares for gold.

Central Bank gold leasing occurs when Central Banks take physical gold they hold in custody and lease it to bullion banks. The banks sell the gold on the London physical gold market.  The gold leasing transaction makes available physical gold that can be delivered to buyers in quantities that would not be available at existing prices.  The use of gold leasing to manipulate the price of gold became a prevalent practice in the 1990′s.  While Central Banks admit to engaging in gold lease transactions, they do not admit to its purpose, which is to moderate rises in the price of gold, although Fed Chairman Alan Greenspan did admit during Congressional testimony on derivatives in 1998 that “Central banks stand ready to lease gold in increasing quantities should the price rise.”

Another method of obtaining bullion for sale or delivery is known as “rehypothecation.”  Rehypothecation occurs when a bank or brokerage firm “borrows” client assets being held in custody by banks.  Technically, bank/brokerage firm clients sign an agreement when they open an account in which the assets in the account might be pledged for loans, like margin loans.  But the banks then take pledged assets and use them for their own purpose rather than the client’s. This is rehypothecation.  Although Central Banks fully disclose the practice of leasing gold, banks/brokers do not publicly disclose the details of their rehypothecation activities.

Over the course of the 13-year gold bull market, gold leasing and rehypothecation operations have largely depleted most of the gold in the vaults of the Federal Reserve, Bank of England, European Central Bank and private bullion banks such as JPMorganChase. The depletion of vault gold became a problem when Venezuela was the first country to repatriate all of its gold being held by foreign Central Banks, primarily the Fed and the BOE.  Venezuela’s request was provoked by rumors circulating the market that gold was being leased and hypothecated in increasing quantities.   About a year later, Germany made a similar request.  The Fed refused to honor Germany’s request and, instead, negotiated a seven year timeline in which it would ship back 300 of Germany’s 1500 tonnes.  This made it apparent that the Fed did not have the gold it was supposed to be holding for Germany.

Why does the Fed need seven years in which to return 20 percent of Germany’s gold?  The answer is that the Fed does not have the gold in its vault to deliver.  In 2011 it took four months to return Venezuela’s 160 tonnes of gold. Obviously, the gold was not readily at hand and had to be borrowed, perhaps from unsuspecting private owners who mistakenly believe that their gold is held in trust.

Western central banks have pushed fractional gold reserve banking to the point that they haven’t enough reserves to cover withdrawals.  Fractional reserve banking originated when medieval goldsmiths learned that owners of gold stored in their vault seldom withdrew the gold.  Instead, those who had gold on deposit circulated paper claims to gold. This allowed goldsmiths to lend gold that they did not have by issuing paper receipts. This is what the Fed has done. The Fed has created paper claims to gold that does not exist in physical form and sold these claims in mass quantities in order to drive down the gold price. The paper claims to gold are a large multiple of the amount of actual gold available for delivery.   The Royal Bank of India reports that the ratio of paper claims to gold exceed the amount of gold available for delivery by 93:1.

Fractional reserve systems break down when too many depositors or holders of paper claims present them for delivery. Breakdown is occurring in the Fed’s fractional bullion operation. In the last few years the Asian markets–specifically and especially the Chinese–are demanding actual physical delivery of the bullion they buy.  This has created a sense of urgency among the Fed, Treasury and the bullion banks to utilize any means possible to flush out as many weak holders of gold as possible with orchestrated price declines in order to acquire physical gold that can be delivered to Asian buyers.

The $650 decline in the price of gold since it hit $1900 in September 2011 is the result of a manipulative effort designed both to protect the dollar from Quantitative Easing and to free up enough gold to satisfy Asian demands for delivery of gold purchases.

Around the time of the substantial drop in gold’s price in April, 2013, the Bank of England’s public records showed a 1300 tonne decline in the amount of gold being held in the BOE bullion vaults. This is a fact that has not been denied or reasonably explained by BOE officials despite several published inquiries. This is gold that was being held in custody but not owned by the Bank of England.  The truth is that the 1300 tonnes is gold that was required to satisfy delivery demands from the large Asian buyers.  It is one thing for the Fed or BOE to sell, lease or rehypothecate gold out of their vault that is being safe-kept knowing the entitled owner likely won’t ask for it anytime soon, but it is another thing altogether to default on a gold delivery to Asians demanding delivery.

Default on delivery of purchased gold would terminate the Federal Reserve’s ability to manipulate the gold price. The entire world would realize that the demand for gold greatly exceeds the supply, and the price of gold would explode upwards. The Federal Reserve would lose control and would have to abandon Quantitative Easing. Otherwise, the exchange value of the US dollar would collapse, bringing to an end US financial hegemony over the world.

Last April, the major takedown in the gold price began with Goldman Sachs issuing a “technical analysis” report with an $850 price target (gold was around $1650 at that time).  Goldman Sachs  also broadcast to every major brokerage firm and hedge fund in New York that gold was going to drop hard in price and urged brokers to get their clients out of all physical gold holdings and/or shares in physical gold trusts like GLD or CEF.  GLD and CEF are trusts that purchase physical gold/silver bullion and issue shares that represent claims on the bullion holdings.  The shares are marketed as investments in gold, but represent claims that can only be redeemed in very large blocks of shares, such as 100,000, and perhaps only by bullion banks. GLD is the largest gold ETF (exchange traded firm), but not the only one. The purpose of this announcement was to spur gold sales that would magnify the price effect of the short-selling of futures contracts. Heavy selling of futures contracts drove down the gold price and forced sales of GLD and other ETF shares, which were bought up by the bullion banks and redeemed for gold.

At the beginning of 2013, GLD held 1350 tonnes of gold.  By April 12th, when the heavy intervention operation began, GLD held 1,154 tonnes.  After the series of successive raids in April, the removal of gold from GLD accelerated and currently there are 793 tonnes left in the trust.  In a little more than one year, more than 41% of the gold bars held by GLD were removed – most of that after the mid-April intervention operation.

In addition, the Bank of England made its gold available for purchase by the bullion banks in order to add to the ability to deliver gold to  Asian purchasers.

The financial media, which is used to discredit gold as a safe haven from the printing of fiat currencies, claims that the decline in GLD’s physical gold is an indication that the public is rejecting gold as an investment. In fact, the manipulation of the gold price downward is being done systematically in order to coerce holders of GLD to unload their shares.  This enables the bullion banks to accumulate the amount of shares required to redeem gold from the GLD Trust and ship that gold to Asia in order to meet the enormous delivery demands.  For example, in the event described above on January 6th, 14% of GLD’s total volume for the day traded in a 1-minute period starting at 10:14 a.m. The total volume on the day for GLD was almost 35% higher than the average trading volume in GLD over the previous ten trading days.

Before 2013, the amount of gold in the GLD vault was one of the largest stockpiles of gold in the world.  The swift decline in GLD’s gold inventory is the most glaring indicator of the growing shortage of physical gold supply that can be delivered to the Asian market and other large physical gold buyers.  The more the price of gold is driven down in the Western paper gold market, the higher the demand for physical bullion in Asian markets. In addition, several smaller physical gold ETFs have experienced substantial gold withdrawals.  Including the more than 100 tonnes of gold that has disappeared from the Comex vaults in the last year, well over 1,000 tonnes of gold has been removed from the various ETFs and bank custodial vaults in the last year.  Furthermore, there is no telling how much gold that is kept in bullion bank private vaults on behalf of wealthy investors has been rehypothecated.  All of this gold was removed in order to avoid defaulting on delivery demands being imposed by Asian commercial, investment and sovereign gold buyers.

The Federal Reserve seems to be trapped. The Fed is creating approximately 1,000 billion new US dollars annually in order to support the prices of debt related derivatives on the books of the few banks that have been declared to be “to big to fail” and in order to finance the large federal budget deficit that is now too large to be financed by the recycling of Chinese and OPEC trade surpluses into US Treasury debt. The problem with Quantitative Easing is that the annual creation of an enormous supply of new dollars is raising questions among American and foreign holders of vast amounts of US dollar-denominated financial instruments. They see their dollar holdings being diluted by the creation of new dollars that are not the result of an increase in wealth or GDP and for which there is no demand.

Quantitative Easing is a threat to the dollar’s exchange value. The Federal Reserve, fearful that the falling value of the dollar in terms of gold would spread into the currency markets and depreciate the dollar, decided to employ more extreme methods of gold price manipulation.

When gold hit $1,900, the Federal Reserve panicked.  The manipulation of the gold price became more intense.  It became more imperative to drive down the price, but the lower price resulted in higher Asian demand  for which scant supplies of gold were available to meet.

Having created more paper gold claims than there is gold to satisfy, the Fed has used its dependent bullion banks to loot the gold exchange traded funds (ETFs) of gold in order to avoid default on Asian deliveries. Default would collapse the fractional bullion system that allows the Fed to drive down the gold price and protect the dollar from QE.

What we are witnessing is our central bank pulling out all stops on integrity and lawfulness in order to serve a small handful of banks that financial deregulation allowed to become “too big to fail” at the expense of our economy and our currency. When the Fed runs out of gold to borrow, to rehypothecate, and to loot from ETFs, the Fed will have to abandon QE or the US dollar will collapse and with it Washington’s power to exercise hegemony over the world. 

Dave Kranzler traded high yield bonds for Bankers Trust for a decade.  As a co-founder and principal of Golden Returns Capital LLC, he manages the Precious Metals Opportunity Fund.