The Greek Austerity Face Off + Globalized Afghanistan + Cracking Yemen -- This is World War IV

A quick rundown this Friday morning of some critical storylines heading into the weekend. 

First, the state of play between Greece, representing the forces of humanity, versus the eurozone, representing the forces of austerity in defense of an exhausted neoliberal paradigm which worships Mammon, or as Naked Capitalism's Yves Smith says, "Mr. Market."

After arriving at impasse on Wednesday, the parties are reported to resume technical negotiations today. Landon Thomas Jr. and Jack Ewing have a good DealBook piece, "Greek Debt Standoff Awaits a Decisive Move," that forecasts a Cyprus-like conclusion to the showdown: capital controls to keep Greek banks from collapsing, but creating a two-tiered euro, with the Syriza-led government eventually kneeling before Mammon and accepting the austerity diktats.

A growing number of analysts think that Mr. Schäuble, Mr. Dijsselbloem and Mr. Draghi are advancing a combined strategy that aims to wait Greece out.

The thinking goes like this. Say “no” politely, but repeatedly, to Greece’s request for a financial rescue package. As conditions deteriorate, cut off access to emergency loans for the bank’s troubled financial institutions.

If that happens, Greece would have to impose capital controls to help prop up the banks, leading to economic disarray and prompting a public outcry. The Greek government would then be forced to accommodate Europe.

“Game theory only works if the other side wants to keep playing with you,” said Adam Lerrick, a sovereign debt expert.

Under this theory, Greece does not leave the euro, Mr. Lerrick said. A majority of Greeks reject such an outcome.

Instead, the country becomes quarantined within Europe, with Greeks prohibited from removing large sums from banks and sending cash abroad. Such was the case with Cyprus in 2013.

Confidantes of Mr. Varoufakis say that, all along, he has been wary of such an approach — which is why he is pushing so hard for a €10 billion lifeline. With the money comes breathing room to put his government’s plan to work. “Time is our most precious commodity,” he has said repeatedly.

But why not capital controls and default? Why don't Thomas and Ewing game out this scenario? It seems to me that if Greece gets as far as Cyprus in placing limits on banking then why not go whole hog and default? The pressure will then be on Germany and other proponents of hardball within the eurozone as Mr. Market freaks out.

This morning Yves Smith is hedging her bets. In "Fog of Negotiations: Greece and Germany Make Friendlier Noises, Restart Talks, But Press Reports Diverge," she pulls back from her default forecast of yesterday. She has a colleague who is well versed in the German press, and this colleague, normally pessimistic, is telling her that the chances of a forthcoming deal are good -- 60/40 or even 65/35. So the normally cynical Smith is basically punting for the time being.

Next, let's go to Afghanistan where a big story ("U.S. Is Escalating a Secretive War in Afghanistan: Data From Seized Computer Fuels a Surge in U.S. Raids on Al Qaeda," by Matthew Rosenberg and Eric Schmitt) provides a look at what U.S. war-making is going to be in the next decade regardless of the outcome of the vote on Obama's Authorization for the Use of Military Force (AUMF) against Islamic State. Despite the announcement of the end of combat operations in Afghanistan at the end of last year, nighttime raids conducted by coalition Special Operations forces with their Afghan counterparts against Taliban and Al Qaeda targets are going gangbusters; drone strikes too:

The spike in raids is at odds with policy declarations in Washington, where the Obama administration has deemed the American role in the war essentially over. But the increase reflects the reality in Afghanistan, where fierce fighting in the past year killed record numbers of Afghan soldiers, police officers and civilians.

American and Afghan officials, who spoke on the condition of anonymity because they were discussing operations that are largely classified, said that American forces were playing direct combat roles in many of the raids and were not simply going along as advisers.

“We’ve been clear that counterterrorism operations remain a part of our mission in Afghanistan,” Rear Adm. John Kirby, the Pentagon press secretary, said on Thursday. “We’ve also been clear that we will conduct these operations in partnership with the Afghans to eliminate threats to our forces, our partners and our interests.”

The raids appear to have targeted a broad cross section of Islamist militants. They have hit both Qaeda and Taliban operatives, going beyond the narrow counterterrorism mission that Obama administration officials had said would continue after the formal end of American-led combat operations last December.

The tempo of operations is “unprecedented for this time of year” — that is, the traditional winter lull in fighting, an American military official said. No official would provide exact figures, because the data is classified. The Afghan and American governments have also sought to keep quiet the surge in night raids to avoid political fallout in both countries.

“It’s all in the shadows now,” said a former Afghan security official who informally advises his former colleagues. “The official war for the Americans — the part of the war that you could go see — that’s over. It’s only the secret war that’s still going. But it’s going hard.”

Criticisms of Obama's new AUMF center around its non-repeal of the super-broad "Al Qaeda and associates" 9/11 AUMF and its lack of any geographic boundaries. The ISIS AUMF does sunset in three years, but without the repeal of the 9/11 AUMF what it effectively does is globalize Afghanistan. A precedent is going to be established for super-stealthy Special Operations units -- "Afghan and American officials said the raids over the past few months had been carried out by the elite commandos of the National Directorate of Security, Afghanistan’s main spy agency, and members of a mix of American military Special Operations units, such as Navy SEALs and Army Rangers, and paramilitary officers from the C.I.A." -- a Schutzstaffel to terrorize the planet. This has been the fantasy of war planners all along.

Finally -- quickly -- Yemen is being cracked, like Libya, with the blessing of the United States, which led the rush of Western embassies out of the country the other day despite ongoing negotiations, brokered by the United Nations, between the Houthis and other parties to form a new government. Rod Nordland, who usually toes the State Department line but also finds a way to slip a paragraph or two into his stories that give the reader an idea what is really going on, writes, along with Shuaib Almosawa, in "In Yemen, Militants Are Increasingly Isolated" that

Many saw the move as intended to pressure Yemen’s power brokers to come to an agreement. Although the embassies cited security concerns as the reason behind the closings, they came amid relative calm in Sana, the capital, even on the anniversary of its Arab Spring revolution, with peaceful pro- and anti-Houthi demonstrations.

The British and American embassies in Sana were closed Wednesday, with the last diplomats from both embassies withdrawn. The German Embassy was also closed, a security official said, although its diplomats had not yet left. France urged all its citizens in Yemen to leave and said that the embassy would close Friday.

Nordland, working again with Shuaib Almosawa, reported yesterday that Al Qaeda in the Arabian Peninsula (AQAP) captured the "Yemeni National Army’s 19th Brigade after heavy fighting at its headquarters in the Baihan District of Shabwa Province, an important oil-producing area in southeastern Yemen."

This is all about the Saudis who are unwilling to have the Houthis formalize their control of Yemen. Now, instead, we will get yet another cracked state with a civil war raging. This is what the U.S./Saudi axis specializes in. We are going to have to start calling it what it is: World War IV.