Love, and Hate

"Show me that better plan for improving yields and doubling production to meet demand for food, and we'll probably be doing research on it."

So said Robert Fraley, the Monsanto Corporation's Chief Technology Officer, no doubt thinking of the company's legion of critics. These are groups who hate the company to the extent that, in cities worldwide, they now stage a "March Against Monsanto" once a year (the second annual of which was in late May). With slogans like "Monsanto is the seed of our destruction", and "Monsanto Kills", and against the backdrop of widespread public suspicion of genetically modified organisms (GMOs), the protestors latest complaints are that Monsanto researchers have developed a "terminator" gene that makes crops sterile, that it is aggressively resisting efforts in many states to require the labeling of GM foods, that organic crops are being polluted by airborne GM pollen, and that it continues to bully and even sue farmers - on the grounds of intellectual-property theft - who violate technology agreements by using seeds for which they haven't paid. Given these and other alleged practices, the company is regarded strongly negatively - in a recent Harris poll ranking companies' "reputation quotient", Monsanto was third from the bottom (just above BP and Bank of America).

There is, however, a significant portion of society that has nothing short of love and respect for the company - its investors. The stock market value of the company is up massively since 2000 (when it was spun off from Pharmacia Upjohn) - nearly 1000%, from some $7 billion to more than $66 billion, with much of that increase coming  from the biotechnology unit that develops GM seeds. Such seeds (not all of which are from Monsanto) have been broadly accepted, and paid for by farmers at a premium to others: according to USDA data, GM cotton accounted for 94 percent of all cotton planted, GM soybeans accounted for 93 percent of soybeans planted, and GM corn accounted for 88 percent of corn planted; nearly 95 percent of the U.S. sugar beets are GMO, and more than 50% of the US domestic sugar production comes from sugar beets; GM corn, soybean and cotton plants are used extensively to produce food ingredients such as corn starch and syrup, and cottonseed and soybean oil; over 90% of canola oil production in the US is GMO. Investors are not unaware of the demand shift to non-GMO foods, but feel the impact will be small. They are aware that the considerable research literature (from, among others, the American Medical Association, the World Health Organization, and the American Association for the Advancement of Science) concludes that GMO foods are safe. And, in any case, they point to Monsanto's current laser focus on traditional plant breeding, on the targeted use of bacteria, fungi, and other living organisms to strengthen seed properties, and on the company's move into computing, supplying software and hardware to farmers to collect and analyze crop data, as clear evidence that the company continues to evolve.

So, from the early days in the mid-1980's when Monsanto's researchers spliced a bacterium that makes a protein lethal to insect larvae into corn, potato, and cotton seeds, to the current state of development, which includes a $400 million expansion to the 1.5 million-square-foot research facility in Chesterfield, Missouri, Monsanto will proceed relentlessly with one overall objective - to steepen crop yield curves through scientific research - in order to feed an ever-expanding world population. Hating the company may be popular, but hardly rational.

The Vicious Circle of Violence and Economic Destruction

Professor Soji Adelaja, a distinguished American economist, has recently moved, from Lansing, Michigan, to Abuja, the capital of his home country Nigeria.

In Lansing, as long-time Director of the Land Institute at Michigan State University, Mr. Adelaja, inter alia, acted as an economic development adviser to Michigan's ex-governor Jennifer Granholm, forming policy aimed at reviving the state's depressed economy after the auto industry crisis. Now in Abuja, as an adviser to Nigerian President Goodluck Jonathan in the new Presidential Initiative for the North East (PINE), and also attached to the office of Nigeria's National Security Advisor, he is once again assessing root causes, in this case, of the rise of the Islamist extremists, Boko Haram in, and the concomitant economic collapse of, north-east Nigeria since 2009.

Mr. Adelaja sees his mission as nothing short of devising and implementing a Marshall Plan for the impoverished north of his home country. His strategy is simple: in order to weaken and ultimately defeat Boko Haram, job creation is crucial. Here's why: the region is among the poorest in the world - even as Nigeria as a whole has become Africa's largest economy over the past decade. At least 10% of the region's 12 million people are in urgent need of food aid; most young men don't work, and have no prospects of finding work; more than 1,000 classrooms have been destroyed by Boko Haram over the past few years; skilled workers and entrepreneurs have migrated south; infrastructure is dilapidated. As a result, Mr. Adelaja estimates that a stunning half of the north-east economy has been destroyed, and perhaps as much as two-thirds.

The task of sparking economic development under such circumstances is daunting, as Mr. Adelaja is well aware. Critics believe that his emphasis is all wrong, that achieving peace is the first priority, without which development cannot be nurtured. And there is the question of budget: Jibrin Ibrahim, a political scientist in Abuja, thinks the $12 million that PINE has this year is far too small.

But given that the Boko Haram insurgency is now into its sixth year, it is evident that the Nigerian military alone is incapable, or unwilling, of bringing peace to the region. And as Mr. Adelaja points out, "Boko Haram recruits young men who feel left behind", who don't "have any connection to any opportunities". The key, then, to breaking the seemingly endless cycle of hopelessness and extremism may well just be Mr. Adelaja's focus on job creation. The Nigerian government, apparently receptive to the strategy, needs to re-think PINE's tiny annual budget - Mr. Adelaja's Marshall Plan for north-east Nigeria will require considerably more than the $12 million allocated for this year.

Enforcement

Earlier this week, French Foreign and Trade Minister Laurent Fabius, a former prime minister not known for drama or emotion, spoke up, emotively. Referring to possible sanctions exceeding $10 billion being considered by the U.S. Justice and Treasury Departments and New York State authorities against the French bank BNP Paribas for allegedly violating U.S. sanctions relating to Sudan, Iran and Syria in the period 2002-2009, he said such a move could threaten transatlantic free-trade negotiations. (Minister Fabius is well aware that President Obama has been pressing to conclude this trade pact.) "If there is an error or a violation then it's normal that there is a fine, but the fine has to be proportionate and reasonable," the Minister said, adding, "it's an extremely serious question that the Americans must handle in a spirit of partnership and not unilaterally".

That BNP Paribas (ranked in 2013 as the world's 4th largest bank by assets) violated sanctions, repeatedly, is apparently not in question. CEO Laurent Bonnafe told shareholders last month that the bank is doing what it can to ensure such "mistakes" do not occur in the future: "We have improved our control processes," he said. And the $10 billion fine would not threaten the bank's existence: its assets were $2.5 trillion at the end of 2013. But the fine would exceed the bank's entire net profit in 2013 (some $6 billion), would far exceed the amount the bank set aside for an expected fine (some $1.1 billion), and would set a record for this sort of violation of U.S. sanctions regulations (the prior being $1.5 billion). Apart from the immediate financial impact, such a large fine could dampen BNP's targeted expansion in North America, seen by the bank Board as a key strategy to increase revenue and profit outside its traditional, slow-growing European markets. And there could be worse: U.S. authorities may insist BNP plead guilty to criminal charges, and might also temporarily suspend the bank's authority to clear U.S. dollar transactions, something that would effectively stop the bank from being a bank.

It is little wonder, then, that BNP alerted the French government of the impending fine, or that the Foreign Minister spoke out forcefully against its potential amount. But it is equally unsurprising that the U.S. administration is signalling, with the record $10 billion fine, its clear intent to enforce its policy of sanctions through the imposition of significant penalties for violators. Sanctions - and drones - seem to be President Obama's new, favored tools of foreign policy, replacing traditional means of intervention via troops-on-the-ground supported by air power. The President is deadly serious about this. His responses to the crises in Syria, Iran, and most recently Ukraine and Russia, are clear examples of what some are calling a new "Obama Doctrine".

So, when the President meets with French President Hollande tomorrow evening at a Paris dinner, he is unlikely to suggest any backing away from pursuing the $10 billion BNP fine, however much this is adding to tensions between the two countries arising in part from France's insistence on completing an existing contract to supply Mistral-class helicopter carriers to Russia (the latest target of U.S. sanctions). For its part, France is still smarting from the Obama administration's last-minute cancellation in September 2013 of a planned joint military action in Syria - just as France readied its jets for take-off. And France is resisting General Electric's thrust to buy Alstom's energy business.

It will be a service to all involved if the Paris State dinner, and the next day's joint visit to Normandy to mark the 70th anniversary of the D-Day landings, are brief.

More, or Less?

European Central Bank (ECB) President Mario Draghi, making a rare foray into the political arena when speaking after this month's ECB's rate-setting meeting, called for greater European integration as a means of preventing a repeat of the financial crisis that almost wrecked the European union. He said, "our future lies with more integration, not with the re-nationalization of our economies".

Mr. Draghi clearly had in mind elections to the European Parliament that run through this weekend. They come at a time when at least some European economies are finally showing signs, albeit weak, of improving, or at least not contracting further, and when the area's common currency, the euro, far from collapsing, has remained relatively strong. Moreover, and unexpectedly by many commentators including this writer, sovereign bond yields have dropped dramatically in the periphery countries of Italy, Spain, Portugal, Ireland and even in Greece, greatly reducing these countries' costs of borrowing, as investors have apparently decided that the risk of economic implosion has all but disappeared.

But if imminent collapse appears to have been avoided, it's nothing less that wishful thinking that economic health has returned. Even where growth has resumed, it's anemic, and growth in Europe's engine, Germany, is slowing; unemployment is massive, chronic, and stratified across the region, with some 26 million Europeans, especially young workers, out of work; government debt is high, dangerously so in Greece (175% of GDP), Italy (133%), Portugal (129%), Ireland (124%), Spain (94%), and even in Europe's principal economies, such as France (94%) and the UK (91%). Banks' balance sheets are fragile, and, thus, banks' lending is restrained. Perhaps most worryingly, Europe could be near or on the threshold of deflation, eliminating indebted countries' chance of inflating their debts away, and raising the specter of an experience similar to Japan's lost decade in the 1990's.

Into this mix, some 380 million European voters are going to the polls over four days ending Sunday to elect their representatives to the European Parliament, which operates in Brussels and Strasbourg. This is the largest multinational exercise in democracy in the world. But, weary of austerity, and wary of decision-making by centralized eurocrats, many eligible voters may simply not bother voting (participation has fallen each time since the first direct elections to the Parliament were held in 1979). Turnout this time is not likely to exceed 40%, and euro-skeptic parties, on both the left and the right, are expected to receive well over a quarter of the 751 seats. In Greece (where it is a legal requirement to vote), the radical left Syriza party, which favors continued use of the euro but wants to ditch fiscal austerity in that country, may even glean the majority of Greek votes. And Italy's Beppe Grillo's Five Star Movement, Europe's largest skeptic, advocates not only  abandoning austerity, but holding a referendum on the use of the euro in Italy. France's far-right Front National, and Britain's UK Independence Party, want their respective countries to exit the EU all together.

So, while the ECB's Mario Draghi and other federalists call for more European integration as a means of rejuvenating the EU, many citizens, who resent their loss of sovereignty, are who are likely to make such very clear at the polls this weekend, want much less. Rather than "ever closer union", as European leaders have been urging, voters may force return of some power to national parliaments, including greater fiscal flexibility and control over social and employment policies. Handing power back to the people may be a requisite if the EU is to survive.

Escalating Violence, Collapsing Economy

"Urgent action was necessary, decisive measures were taken by Ukraine, and decisive measures have just been taken by the IMF."

So spoke IMF Managing Director Christine Lagarde on Wednesday, announcing her Executive Board's approval of $17.01 billion to support Ukraine's economic reform program. The loan is a two-year Stand-By Arrangement, by which is meant it will be disbursed over two years - with $3.2 billion available immediately - and the remainder subject to, as the IMF noted in its press release, "frequent reviews". It aims at "restoring macroeconomic stability, promoting sustainable growth, and strengthening economic governance and transparency". In non-IMF-speak, it's a bail-out for an economy on the brink of collapse, with unsustainable indebtedness, depleted international reserves, and a political and business legacy of endemic corruption.

That the loan is being advanced at all represents something of a leap of faith for the IMF, and a tribute to the new government in Kiev. In place only since February, Interim Prime Minister Arseniy Yatsenyuk's administration, in consultation with visiting IMF experts, has devised, in record time, and in the face of, first, Russia's annexation of Crimea, and then mounting violence in Eastern Ukraine's cities, a broad and deep reform program that includes commitments to maintain a flexible exchange rate, restrain wage increases to productivity growth, ramp up financial regulation, gradually reduce both the massive government deficit and that of state-owned energy provider Naftogaz (which together account for an unsustainable 12% of GDP), and strengthen governance, transparency and the overall business climate. The program also aims to radically alter energy policy, in a country that depends on Russia for almost all its imported natural gas, most of its crude oil, and all of the enriched uranium required to run its nuclear power plants.

Just one of these elements taken alone would constitute an ambitious plan for any new government, especially one facing Ukraine's daunting economic and dangerous political circumstances. The reforms, if implemented, would be a dramatic break with the past. And the government appears to have taken strong ownership of the program, believing they have a narrow window of opportunity. But already there are threatening signs: Ms. Lagarde spoke out just one day after announcing approval of the stand-by facility, warning that "further escalation of tensions with Russia and unrest in the east of the country pose a substantial risk to the economic outlook". And in a staff report issued Thursday, the Fund was very clear in noting that "should the central government lose effective control over the east, the program will need to be re-designed".

The ongoing violence this weekend in Eastern Ukraine, and in the Black Sea port city of Odessa, suggest that the Kiev government may have already lost control. It seems virtually certain that, until/if conditions stabilize, the government's reforms, the IMF's money, and the $15 billion of additional funds that the Fund's loan would unlock from other donors including the World Bank, EU, Canada and Japan, will be held in abeyance. It also appears virtually certain that national elections scheduled for the end of this month will be cancelled. Full-scale civil war, fomented by continuing Russian support of activists, is not unimaginable, and Western sanctions against Russia, even if expanded, may be impotent in preventing it.