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America is ignoring Iraq’s protests at its peril: security experts

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A demonstrator carries an Iraqi flag during ongoing anti-government protests in Baghdad, Iraq November 4, 2019.

Thaier Al-Sudani | Reuters

Iraq is descending into its most violent days since the battle against ISIS concluded in late 2017 — and the world is completely underestimating its significance, regional experts told CNBC at the Middle East’s premier oil and gas conference this week.

The second-largest OPEC producer has seen protests every summer for the last several years over economic grievances, met time and time again with empty government promises of reform that go unfulfilled. But this year’s demonstrations are different, spilling over into demands for a full-on political overhaul and attracting elements like Iranian-backed forces and other extremists that threaten to hijack the protest movement and potentially bring the U.S. into deeper involvement.

“From a security perspective, I would say that the Iraq story is the most under-covered story in the region right now,” Amos Hochstein, former special envoy for international energy affairs under the Obama administration, told CNBC on Wednesday.

“Because the forces that are outside, the external forces that have decades of interest (in Iraq) are not going to go away quietly. They will affect the economics of the region potentially, and they can affect the security beyond the region of Europe and eventually the United States.”

Some 300 people have been killed and more than 2,000 injured as protests rocking the country of 38 million draw a harsh response from state security forces and other unidentified entities. Authorities have taken extreme measures like shutting down the internet and using live ammunition against protesters in an attempt to crack down on the uprising.

Amnesty International has described the government response as “nothing short of a bloodbath.”

Protesters report plainclothes snipers shooting and killing civilian demonstrators, with many Iraqis pointing to Iranian-backed paramilitary fighters or “anonymous thugs” as some of the forces sowing further violence and confusion.

What we do know is that our adversaries, both groups like ISIS, al-Qaeda or Iran, thrive in chaos and a vacuum. What we’re seeing in Iraq today is vacuums being created and then occupied.

Amos Hochstein

fmr U.S. special envoy for international energy affairs

Iraqis across the country, particularly in Baghdad and cities of the country’s oil-rich south, are angry over grievances that lie at the heart of protests similarly taking place in Lebanon and Algeria: rampant state corruption, high unemployment, and a lack of basic services provision.

Iraqi cities regularly suffer power cuts, garbage is left uncollected and there is a broad consensus that the state serves the interests of the elites, not the people — and all this in a country that is a major crude oil producer, sitting on the world’s fifth-largest proven oil reserves and pumping nearly 5 million barrels per day. Its southern Basra province, afflicted with some of the worst poverty and lack of public services in the country, hosts international oil hegemons like Exxon, BP and Total.

Rocket attacks on US forces?

The comments come just days after 17 Katyusha rockets were fired at an Iraqi military base south of Mosul that houses U.S. troops. Some 5,000 American troops remain in the country, providing training and security assistance and supporting a U.S.-led coalition fighting what remains of ISIS.

Responsibility for the rocket attack has not been claimed and no casualties have been reported, but commodities expert and former CIA analyst Helima Croft sees this as a dangerous risk that could bring the U.S. into further confrontation with Iran. Hardline Iranian-backed Iraqi militias regularly threaten to attack Americans inside the country.

“If they hit that base and if you had dead U.S. servicemen, that would certainly be a red line where we could be hitting something in Iran, could we be bombing (Iranian port) Bandar Abbas? Potentially,” Croft said. “Iraq is where I think this whole thing comes to a head.”

The rocket attack, and protester anger at the corruption bred in a government system the Americans helped set up, is a sobering reminder that 16 years after its invasion, the U.S. remains tethered to the turbulent story of Iraq.

‘If you break it, you own it’

The protesters in Iraq are also fed up with foreign influence in their country’s affairs — many protest signs and chants say “No America, no Iran.” Observers say this presents a threat to Iran’s deeply held influence in the country, something that Tehran is not likely to take lightly.

“You have a battle for who is going to win the proxy war in the Middle East,” Croft said. “Think about Lebanon and Iraq, these two places where Iran has a strong foothold. The question is, are they going to want to surrender their foreign policy and strategic influence? I don’t think they will.”

For Hochstein, who opposed the 2003 U.S. invasion of Iraq, the U.S. has a serious responsibility — and the Donald Trump administration is ignoring it.

“There is a basic rule of if you break it, you own it,” Hochstein said. “It was us who broke it. And the consequences of that, we are living through today.”

Demonstrators run as Iraqi security forces use tear gas during a protest after lifting of the curfew, following four days of nationwide anti-government protests turned violent, in Baghdad, Iraq October 5, 2019.

Thaier Al-Sudani | Reuters

The solution, the former diplomat believes, is engagement — but that doesn’t need to be boots on the ground.

“We have come to this dichotomy now, we’ve come to this extreme where it’s either we have to be involved, meaning troops, or the alternative is nothing. And that is not the case here. What we’re seeing now is that during the Trump administration, we’re seeing no troops and no diplomacy.”

Hochstein stressed the need for American engagement to “at least put the path of dialogue on the table so that you can see a horizon for solutions, versus a total absence from the scene that allows the protests and the violence to take on a life of its own.”

“And then you don’t know where it ends. And what we do know is that our adversaries, both groups like ISIS, al-Qaeda or Iran, thrive in chaos and a vacuum. What we’re seeing in Iraq today is vacuums being created and then occupied. And the more we retreat, both militarily and diplomatically, the more vacuums we’re creating to be occupied by our opponents.”

‘All of them out’

Former Secretary of State Condoleezza Rice, speaking at the Abu Dhabi International Petroleum Exhibition & Conference (ADIPEC) this week, told CNBC, “We certainly have a responsibility in Iraq.”

“The Iraqi situation is one I have great sadness for because I think the Iraqis have a chance to govern wisely. Unfortunately they’ve not really delivered the services the people expect, the jobs people expect,” she said.

Rice was a leading proponent of the 2003 Iraq invasion, and remains a controversial figure from the Bush administration. Critics of the Iraq War say the former diplomat remains responsible for the chaos and violence that engulfed the country as a result.

Iraqi Prime Minister Adel Abdul Mahdi, who came to power only a year ago, has promised more public sector jobs and limited economic reforms, but the pledges have failed to satisfy popular anger. The U.S. embassy in Baghdad on Sunday called for new elections, but Iraqis protesting say that will only result in the same faces reappearing in power. The leaderless movement has seen demands ranging from a new generation of leaders to a return to military dictatorship.

“It reminds me of what we saw in Lebanon — protester demands have morphed into ‘all of them out’,” Croft said, referring to the mass protests sweeping neighboring Lebanon where citizens are calling for the removal of the entire political class. She noted the same happening in Algeria, where popular protests have endured since last spring.

“‘All of them out’ seems to be a movement sweeping across the region. And I think this is an under-reported story,” Croft said. “A movement sweeping across the Middle East.”

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Market reactions to major virus scares show stocks have more to lose

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A trader works on the floor of the New York Stock Exchange.

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Investor anxiety over the coronavirus led to the Dow Jones Industrial Average’s longest losing streak since August, and the market may have more to lose, going by past epidemics.

Looking back 20 years, previous epidemics from SARS in 2003 to the Ebola scare six years ago shaved 6% to 13% off the S&P 500 over different lengths of time, according to Citi’s head of U.S. equity strategy Tobias Levkovich. The equity benchmark was down about 2.6% through Monday’s close since Jan. 21.

The coronavirus outbreak has killed 106 people and infected 4,515 in China, and the disease has spread to countries around the globe. Medical experts have compared the coronavirus to the severe acute respiratory syndrome, or SARS, which lasted 38 trading days and resulted in a 12.8% sell-off in the S&P 500.

The most recent outbreak was Zika, which started in Nov. 2015 and spread mostly by bites from infected mosquitoes. The market suffered a near 13% pullback in the span of 66 sessions.

“The SARS scare in Hong Kong in 2003 changed the mindset of fund managers who had not dealt with such a health risk emergence and therefore MERS, Ebola, Zika, avian flu, and now coronavirus has created deep concern with still limited information on the extent of contagion and what remedies can be put in place and over what timeframe,” Levkovich said in a note.

Tech biggest loser

All 11 S&P 500 sectors declined during the SARS outbreak 17 years ago, and information technology and communication services were among the biggest losers during the period, falling 14% and 26%, respectively, according to Citi’s analysis.

That’s because China has been an important manufacturer and supplier for many American tech companies. Apple, for example, could see its iPhone production slowing down due to the coronavirus outbreak, the Nikkei Asian Review reported Tuesday.

“Pure China exposure stocks tend to be more IT oriented due to supply chain dynamics and it is likely that shipments from places other than Hubei province probably continue with moderate disruption, but time will tell,” Levkovich said.

Financials were the second-worst performer during SARS, declining 16% as falling bond yields posed a profit threat to banks.

To be sure, while history may suggest the sell-off could continue, the economy is in a better place today with a resilient consumer base and strong business spending, which could prevent a bigger market pullback and a negative economic impact.

“The U.S. economy and market is much more domestically-focused,” Levkovich said. “We do not envision a major domestic slowdown as a result of the China news, but this does not mean that share prices cannot continue to falter in the nearer term.”

— CNBC’s Nate Rattner contributed to this report.

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Powerful magnitude 7.7 earthquake strikes between Cuba and Jamaica

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The U.S. Geological Survey says a powerful magnitude 7.7 earthquake has struck south of Cuba and northwest of Jamaica.

It was centered 125 kilometers north-northwest of Lucea, Jamaica, and hit at 2:10 p.m. (1910 GMT) Tuesday. The epicenter was a relatively shallow 10 kilometers (6 miles) beneath the surface.

It’s not immediately clear if there are damage or injuries.

The quake could be felt strongly in Santiago, the largest far-eastern Cuban city, said Belkis Guerrero, who works in a Catholic cultural center in the center of Santiago. 

“We were all sitting and we felt the chairs move,” she said. “We heard the noise of everything moving around.”

She said there was no apparent damage in the heart of the colonial city.

“It felt very strong but it doesn’t look like anything happened,″ she told The Associated Press.

The USGS initially reported the magnitude at 7.3.

“Hazardous tsunami waves from this earthquake are possible within 300 km (186 miles) of the epicenter along the coasts of Jamaica… Cayman Islands and Cuba,” the International Tsunami Information Center said.

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World Health Organization to send delegation to China to help combat coronavirus outbreak

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World Health Organization Director-General Tedros Adhanom Ghebreyesus speaks during a press conference following an emergency talks over the new SARS-like virus spreading in China and other nations in Geneva on January 22, 2020.

Pierre Albouy | AFP | Getty Images

The World Health Organization is sending a delegation of researchers and other health experts to China to help combat the coronavirus outbreak.

WHO Director-General Tedros Adhanom Ghebreyesus met with Chinese President Xi Jinping in Beijing earlier Tuesday. The two were joined by top officials from the WHO and the Chinese government to discuss how best to contain a fast-spreading and deadly virus in Wuhan and other cities and provinces.

“Stopping the spread of this virus both in China and globally is WHO’s highest priority,” Tedros said in a statement. “We appreciate the seriousness with which China is taking this outbreak, especially the commitment from top leadership, and the transparency they have demonstrated, including sharing data and genetic sequence of the virus.”

The WHO said its delegation will collaborate with Chinese counterparts “on increasing understanding of the outbreak to guide global response efforts.” A spokesperson declined to further comment on the delegation, including who will be included in the group.

The virus has now killed 106 people in China and infected roughly 4,700 across the world as of Tuesday, according to Chinese and U.S. health authorities.

The Centers for Disease Control and Prevention told Americans Tuesday to avoid all nonessential travel to China, expanding its travel warning from the city of Wuhan to the entire country. At a press conference the same day, U.S. health officials announced that it would expand entry screenings for the virus from five airports to 20.

The WHO said the source of the outbreak and the extent to which it has spread remains unknown.

Scott Gottlieb, a former Food and Drug Administration Commissioner and a CNBC contributor, said he’s worried that coronavirus cases in China are actually much higher than the official numbers show.

“I think we are dramatically underestimating” cases in China by “tens of thousands,” Gottlieb told CNBC’s “Squawk Box.”

According to the WHO, more data needs to be collected before the virus is declared a global health emergency. The organization declined at two emergency meetings last week to say it was a worldwide emergency.

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