ISRAEL-TURKEY CONFRONTATION: Is Cyprus Ground Zero for War?

Since 1974 Turkey has occupied 40% of Cyprus, constituting in what the international community holds is an illegal occupation. In that time Turkey has driven out the Greek Cypriots from the Turkish enclave in the northern part of the island, where the ethnic Greeks had made up more than 80% of the populace.

As Turkey has swung further and further towards an Islamist style republic, with an increasingly autocratic president in Erdogan, Israel and Cyprus along with Greece have begun to form various economic alliances as a buffer to Turkey’s expansion. While Cypriot animosity to their Turkish occupiers cannot be overstated, Israel’s increasingly strong economic position and regional leadership capabilities in the technology and military arenas is both attractive and reassuring.

Greece, Cyprus, and Israel have jointly developed an East Med gas pipeline that will take their gas to Europe.  This has given them the need to also create a joint task force in dealing with threats from Iran, Hezbollah, and Turkey to both Cyprus’ and Israel’s gas and oil fields.

With Turkey trying to establish itself as the leader of the Islamic world, it has grown more and more antagonistic to Israel. Yet, behoind its stated infuriation over Israel’s self-defense from a potential Gaza stampede, the real thing bothering Erdogan is Israel’s alignment with Greece and Cyprus.

With positive relationships having been developed over the years in tourism between the three countries and now with a combination of economic, technological, and energy cooperation, Israel has become the stable anchor and friend both Cyprus and its big brother Greece have sought.



Turkey has grown very cool to the idea of energy collaboration between Greece, Cyprus, and Israel. In a recent visit to London Turkey’s Erdogan said that the “Eastern Mediterranean faces a security threat should Cyprus continue its unilateral operations of offshore oil and gas exploration in the region.”

Earlier this year, Turkish Navy vessels threatened to sink a drilling ship hired by Eni to explore for oil and gas off Cyprus’s shore.  Weeks before that, Turkey’s Navy had blocked the drilling vessel that Eni had hired.

Turkey claims that the drilling operations are ‘unilateral’ and claims that part of the exclusive economic zone of Cyprus is under Turkish jurisdiction.

These sorts of events and declarations have pushed Greece, Cyprus, and Israel closer together.  With the latest row between Turkey and Israel heightening tensions between the two, the frontlines of any potential conflict between the two may end up being Cyprus who has begun to rely on Israel for help with maritime security training.

With tensions mounting between Turkey and the three East Mediterranean allies,  Jonathan Cohen, US State Department Deputy Assistant Secretary for European and Eurasian Affairs said the following in hopes of calming the situation: “If confirmed, I will continue to support longstanding US policy recognizing the Republic of Cyprus’s right to develop its resources in its EEZ. The island’s oil and gas resources, like all of its resources, should be equitably shared between both communities on the island in the context of an overall settlement.”

Cohen backed by the US government appears to be placating both the internationally recognized Greek Cypriot government along with Turkey’s assertion that it deserves some of the access to Cyrus’ resources.  The problem with this approach is it rewards Turkey for it malevolent behavior at a time when it is actively engaged in wrecking havoc in several geographic areas in the region.

With the continued cooperation between Israel, Cyprus, and Greece in the offing, expect tensions to only increase with Turkey. Will there be war in the eastern Mediterranean? Perhaps not tomorrow, but with a falling Lira and an expansionist leader in Ankara, the threat is only increasing.

International Rankings Salute Israel’s Economy

When I came to Israel in 1984 the country was an economic disaster.  Annual inflation was running at 1200%, companies paid bills in the afternoon to save 1.5% and when you received your monthly salary you made sure to spend all of it that very same day, else it would be worth 3% less the following day.  The only way people survived was that items such as salaries, mortgages, insurance policies, etc. were linked to the inflation rate and in some rare cases to the dollar exchange rate so purchasing power remained more-or-less steady for those lucky enough to have their salaries linked.

I recall traveling to the US via Zurich on business during that time and, in error, took a fistful of old Shekels with me.  I went to the currency exchange at the airport to get dollars and they were only willing to give me 60% of the official exchange rate, that’s how valueless our currency was.  And in many cases, the shekel was not convertible at all overseas.

Furthermore, by the end of 1984 foreign currency reserves were down to $1 billion and buying everything from flour to oil required foreign currency.  Israel survived because the US provided an emergency loan of $1 billion at the time to bail the country out of its “situation.”  By comparison, foreign currency reserves now reach approximately $ 100 billion.

The high tech community was in “pre-infant” stage, venture capital did not exist, home mortgages could only be secured for a small portion of the total cost of the property and car loans, when granted, were at exorbitant interest rates..  Everything had to be purchased with cash.  And today, how things have changed.

This week two major US publications have listed Israel within their top ten rankings, citing the country’s military prowess and innovation capabilities, respectively.

Web-based publication US News and World Report, best known for its influential ranking lists, named Israel as the 8th most powerful nation in the world. Meanwhile, Bloomberg News listed us as the 10th most innovative country worldwide, hailing our high-tech industry and technological advances.

Partnering with global marketing communications company BAV Group and the Wharton School of the University of Pennsylvania, US News surveyed more than 21,000 people from four regions of the world and asked them to associate 80 countries with specific attributes.

The power aspect of the survey measured how “economically” and “politically influential” a country was and took into account both its “strong international alliances and strong military alliances.”

“Israel has a technologically advanced market economy with cut diamonds, high-technology equipment and pharmaceuticals among its major exports,” US News also noted in its report, adding, however, that the country still “has one of the most unequal economies in the Western world, with significant gaps between the rich and poor.”

Rounding out the top 10 after Israel were two Arab rivals: Saudi Arabia and the United Arab Emirates.

The online news organization ranked Israel 30th overall in terms of “Best Countries” out of a list of 80. The United States, like last year, was placed at number 1 while Slovenia ranked dead last at number 80.

Bloomberg News ranked Israel number 10 on its list of most innovative countries, using an index that annually ranks economies by analyzing seven contributing factors such as research and development, spending and the concentration of public hi-tech companies.

South Korea topped the Bloomberg list for the third year in a row, followed by Sweden, Singapore, Germany, Switzerland, Japan, Finland, Denmark and France.

The US fell to 11th place from ninth mainly because of an eight-spot slump in the post-secondary, or tertiary, education-efficiency category, which includes the share of new science and engineering graduates in the labor force, Bloomberg said.

Like last year, Israel achieved first place in the “researcher concentration category,” or the number of professionals – including postgraduate PhD students – engaged in R&D per million people in the country. The country was ranked second and trailed only South Korea in the “R&D intensity” category, or R&D expenditure as a percentage of gross domestic product (GDP).

Israel also did well in “hi-tech density” – the number of domestically domiciled hi-tech public companies – placing fifth, just after South Korea and Germany.

On the venture capital side, Israeli tech firms raised $5.24 billion in 2017, a 9% increase from 2016.  This from 620 deals, according to the IVC Research Center.  The 2017 jump was aided by four large deals of over $100 million each, representing 12% of the total amount raised.   The four companies were Cybereason, ridesharing firm VIA, artificial intelligence firm Lemonade and Skybox Security.

Recently, a German-based firm that analyzes world currencies, even ranked the Israel Shekel as the second most stable currency in the world.

Had anyone projected any of this in the early 80s they would have been laughed out of the room.  But no one could have predicted what the intellectual prowess of the population could do, especially in the face of constant threats from Israel’s neighbors and a few wars thrown in as well.

A miracle on the Mediterranean?  For sure, but also testimony to what can be achieved even under the most challenging situations.

Bitcoin price crosses $10,000, Central Banker Warns that Banks Could Be ‘Eviscerated’

The price of Bitcoin continues its ascent (as of this writing, the price is $10,800) as the ongoing global currency reset comes into greater focus. Japan has led the way in recent weeks, as approximately 60% of Bitcoin transactions have been conducted in Japanese yen. Other cryptocurrencies such as Ethereum and Litecoin have also increased in value, led by US dollar and South Korean won trades.

Incredibly, in a recent interview, St. Louis Fed President James Bullard said:

“(We could) wake up one day and most of the big banks have been eviscerated and most of that activity has moved elsewhere,”

This marks a realization that banks will inevitably become irrelevant as our world transitions to a decentralized system of currencies that central banks are powerless to stop. At this time, the FED has no practical options to manage the massive influx of capital into cryptocurrencies. Any attempt to rapidly raise interest rates to strengthen the US dollar would devastate equity and bond markets and thereby plunge the global economy into depression. While US politicians may increase threats of regulations and taxation, there is no feasible way to confiscate cryptocurrencies.




As painful as it will be for bankers to lose their livelihood (may need to sell their second homes in the Hamptons), the greater US population stands to benefit. China is planning to destroy the petrodollar system and remove the US dollar as the world’s reserve currency. The sooner the US (along with Japan and South Korea) can transition to an alternative system, the better prepared its citizens will be for future economic turmoil.

Originally Published on News from Chai.

WARNING SIGNS: Dollar Continues to Weaken as the Skekel Keeps its Momentum

The shekel/dollar has fell below the key NIS 3.50/$ rate reaching 3.497.

In a further example of a strengthening Israeli economy due to its diversification of trading partners, the exchange rate between the shekel and dollar has continued to fall and now has broken below the key NIS 3.50/$ rate. While this may not hold, the trend seems to be a weakening dollar across the board.

The dollar has sunk to a new two month low against the euro. This is following positive data about the German economy. In contrast to this the US Federal reserve meeting earlier this month expressed concern about recent weak US economic data.

The Israeli economy has continued to surprise, showing great 4th quarter results and a higher than predicted GDP.  Israel has continued to expand its trading partners and diversify its economy.

Partnerships with India, and many countries in East Asia have contributed to Israel’s growth.

In years past, Israel’s Central Bank has bought dollars to help lift the rate back up, but in recent dips they have refrained from doing this do to adverse effects to other currency rates.  It remains to be seen if the central bank will step in if the rate continues to fall.

India cancels $500 million Missile Deal With Israel…Now What?

As the Indian-Israeli relationship continues to grow and mature to something akin to long-lost cousins rediscovering each other, something strange appears to have happened. The Indian MoD has decided to cancel a $500 million deal for anti-tank missiles signed with Rafael in 2014.

The Indian Express reported the following on Monday:

“Ministry sources told The Indian Express that the decision to cancel the deal was based on the consideration that importing a foreign ATGM at this stage would adversely impact the programme for indigenous development of the weapon system by DRDO. Earlier, India had also rejected an offer from US-based Raytheon-Lockheed Martin for Javelin ATGM in favour of the Israeli weapon system.”

While this may seem like a serious dent in future relations between Israel and India, it isn’t and nor should it be.  The misnomer outsiders have involving the relationship between Israel and India revolves around the misunderstanding that the special relationship between the two countries is one tactical and two based on defense sales from Israel to India.

These two notions should be disposed of immediately.  The relationship between India and Israel has been growing from the ground up for over two decades.  While India recognized Israel in 1950, the two did not begin formal relations until 1990.  It was initially Israelis post the army that began to travel to India in a way which created a real grassroots relationship.

These Israelis brought back stories and connections.  These inspired more Israelis to travel to India.  When the tech boom happened Israeli companies sought out inexpensive yet quality programming in India. The economic relationship continued to be built in a decentralized manner.

Both Indians and Israelis recognize that their cultures are ancient and with that recognition a special bond has been built over the years.  Afterall, while Jews lived in exile, they appeared to have found the best treatment in India.

The reasons for the cancellation of the Rafael deal may not seem business like by Western standards, but Israelis should be supportive of India’s strategic goal of self-reliance even if it hits us in the pocket in the short-term.  It is important that alliances and strategic partnerships are based on mutual benefits where neither side holds an upper hand.  An India, which is truly independent is an India that is far better for Israel in the long term.

With all of this being said, the Indian Express reported in the same article that “the Indian military, which currently uses an inferior anti-tank missile that does not work well at night, reportedly expressed concerns that the decision to scrap the Spike deal would negatively affect its preparedness, and that there was ‘operational urgency’ for the Israeli missile.”

India, like Israel appears in need of balancing its short-term military necessities while constantly building home-grown defense equipment.  With the geopolitical circumstances around India entering a far more manic and uncertain stage, both Israel and India would do well to help each other build short-term and long-term approaches to defense partnerships.