All posts by natyliesb

Melvin Goodman: United States and Russia: Dangerous Export of Democracy and Dictatorship

By Melvin Goodman, Counterpunch, 10/4/22

Earlier this month, the Department of State circulated to our embassies around the world its report on Russian efforts to sway elections and exert political influence in more than two dozen countries over the past ten years. According to the study, Russia has covertly given at least $300 million to political parties and politicians in order to “shape foreign political environments in Moscow’s favor.”

The State Department wants our embassies to share this information widely as part of the Biden administration’s Summit for Democracy and to ensure that governments are not complacent about the Russian threat. In calling attention to this study, the Washington Post editorialized that “democracies must stand guard.”

The policy and intelligence communities have substantial expertise in this area because the United States has been the global leader in election interference and regime change since the end of the Second World War. The strategic failures of the Central Intelligence Agency in this field are legendary. The classic case of CIA interference took place in Guatemala from 1952 to 1954, an operation codenamed PBSUCCESS. The congressional investigations of illegal CIA activities in the 1970s omitted the Guatemalan operation because it was such an embarrassment to the image of the United States and the Eisenhower administration.

President Dwight D. Eisenhower was also responsible for the strategic nightmare in Iran in 1953, when we paved the way for the accession of the Shah of Iran, and in the Congo, which led to the emergence of Joseph Mobutu, the worse tyrant in Africa’s history. In Iran, the CIA harassed religious figures, even bombed their homes, in order to turn them against the Mossadegh government. In the Congo, Eisenhower endorsed an assassination attempt against Patrice Lumumba in 1959 because of the latter’s socialist leanings.

As a result, dozens of U.S. embassies should think twice before informing their host governments of Russian influence operations because these governmental officials presumably have vivid memories of far worse U.S. and CIA covert operations that supported various criminal, dictatorial, or militarist organizations in their own countries. The White House endorsed CIA operations that tried to assassinate foreign leaders; sponsor guerrilla wars or insurgencies; or bankroll key members of political parties, such as the Christian Democratic Party in Italy or the Liberal Democratic Party in Japan. The list of targeted countries is a long one that includes Afghanistan, Albania, Angola, Bolivia, China, Cuba, the Dominican Republic, Georgia, Greece, Haiti, Hungary, Indonesia, Iraq, Laos, Malaysia, Nicaragua, North Korea, North Vietnam, Oman, Poland, Thailand, Tibet, Turkey, and Venezuela to name a few. We know little about the efforts of the United States to invest several billion dollars on influence operations in Ukraine and Georgia, including the promotion of anti-government riots, in the wake of the collapse of the Soviet Union

Much of the covert activity stemmed from a putative belief in the domino theory that posited that, if one country in region came under the influence of communism, then the surrounding countries would follow suit. Again, it was President Eisenhower, referring to communism in Indochina, who described the “falling domino” theory as a “beginning of a disintegration that would have the most profound influences.” In 1954, Eisenhower warned that “if Vietnam were lost, or if Laos and Vietnam were lost, the dominoes would fall.”

The military-industrial complex had enormous success using the simplistic domino theory to exaggerate the threat to U.S. interests. The Pentagon was the initial source of the threat exaggeration, regularly overestimating the military capabilities of the Soviet Union and now China. The U.S. General Accounting Office concluded in 1992 that the exaggeration of the Soviet threat was used to justify the modernization of U.S. strategic nuclear systems in the administrations of Carter, Reagan, and Bush. More recently, the importance of “counterinsurgency” and the tactics of “terror and extortion” have been similarly ridiculous battle cries. The mainstream media have largely echoed U.S. propaganda in this regard.

Political theorists and politicians are citing the combined Sino-Russian threat to justify another wasteful round of spending on strategic weaponry. The lead editorial in the New York Times on September 28 argued that the Biden administration is “endangering” the United States by not funding a military that can “adequately carry out our defense commitments, a dangerous posture for a great power.” In fact, the United States allocates more spending to defense than the rest of the world combined. The editorial argued that Congress was forced to increase the defense budget because the Biden administration has not issued a National Security Strategy, a boilerplate document that actually carries little weight in national security decision making. Congress typically asks for greater spending on defense than the White House or even the Pentagon deems sufficient because of a bipartisan agreement that views the defense budget as a jobs bill to bolster the economies of each and every state.

Democratic and Republican administrations have used false notions regarding a domino theory to justify various covert actions, including political assassination and regime change. The Truman administration used the domino theory to justify aid to Greece and Turkey. The chairman of the Senate Foreign Relations Committee, Arthur Vandenberg, told Truman that he would have to “scare the hell out of the American people” to get support for aiding Greece and Turkey.

Secretary of State Dean Acheson argued that “corruption of Greece would infect Iran and all [nations] to the east. Such corruption would also carry infection to Africa through Asia Minor and Egypt, and to Europe through Italy and France.” The domino theory was similarly used to justify U.S. involvement in Vietnam, although the North Vietnamese were conducting a nationalist revolution. American presidents regularly use Vandenberg’s scare tactics to bolster defense spending.

Most recently, the Pentagon used the domino theory to defend a continued military presence in Afghanistan, and to provide an obstacle to the efforts of the past three presidents to withdraw U.S. forces. Politicians and pundits are arguing that Russian success in Ukraine would enable the Kremlin to threaten Ukraine’s neighbors, even though it is obvious that Russian forces cannot even contend with the challenge of occupying Ukraine, let alone take on additional military challenges. Decades of political and military futility in Vietnam, Iraq, and Afghanistan have only worsened the atmosphere of fear and uncertainty in decision making circles that leads to the exaggeration of the threat and the misuse of military and clandestine capabilities.

The United States and Russia are powers with self-serving ambitions, but their covert actions have produced more failures than successes. Even so-called short-term “successes” such as the coup in Iran have become long-term failures or liabilities. Clandestine Soviet activities in East Europe in the Cold War have created an East European membership for the North Atlantic Treaty Organization that is passionately anti-Russian. U.S. covert action in Central America merely increased the violence in that region, bringing great embarrassment and substantial emigration to the United States.

“Whatsoever a man sowed, that shall he also reap.”

Melvin A. Goodman is a senior fellow at the Center for International Policy and a professor of government at Johns Hopkins University. A former CIA analyst, Goodman is the author of Failure of Intelligence: The Decline and Fall of the CIA and National Insecurity: The Cost of American Militarism. and A Whistleblower at the CIA.

Ben Aris: Kremlin preparing for a protracted conflict by putting Russian economy onto a war footing

dirty vintage luck table
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By Ben Aris, Intellinews, 9/30/22

The Kremlin is preparing for a protracted conflict and putting the Russian economy on a war footing. Details from the draft 2023-2025 budget show that spending on the Russian army this year will amount to almost RUB5 trillion ($86.2bn), up from the RUB3.5 trillion originally planned. In subsequent years spending will also exceed forecasts.

The extra spending is to cover the surge of troops being sent to Ukraine following Russian President Vladimir Putin’s partial mobilisation order on September 21.

According to some estimates, 300,000 draftees will cost the Russian federal budget RUB1.3 trillion per year. This is slightly less than the budget’s surplus in the first half of this year. The salary of a contract soldier sent to Ukraine is RUB250,000. One contractor will cost the Ministry of Defence RUB373,000 a month, if contractors and other expenses are taken into account, and 300,000 would be RUB112bn a month.

“Mobilisation spending will put a new burden on the federal budget, where this year, according to the Ministry of Finance, the deficit will be RUB1.7 trillion, and next year it will increase to RUB3 trillion (2% of GDP),” BCS GM said in a note.

Initially, RUB3.5 trillion was included in the 2022 budget, some details of which were released in the middle of September, under the “national defence” item, but that spending has now been dramatically increased.

At the same time, the Kremlin is increasing expenditures on the police, apparently fearing opposition protests, report independent journalists Farida Rustamova and Maxim Tovkaylo in a substack post on Putin’s escalation of the war.

According to expert calculations, Russia will spend at least RUB7.7 trillion on the war in Ukraine and the reconstruction of the annexed territories in 2022-2025.

​​War spending is likely to lift the breakeven oil price for the budget to $97 per barrel in 2022 vs $60 per barrel in 2021, says BCS GM.

“Oil and gas revenues have been the main support for the Russian economy in 1H22; however, since 2H22, the situation changed as sanctions pressure on Russian energy exports increased. Concurrently, the ruble strengthening also reduced the domestic currency value of oil and gas revenues. A combination of these forces together with higher budget spending increased the breakeven oil price for 2022 to $100 per barrel (last seen in 2014),” BCS GM said in a note.

In addition, the Ministry of Finance has ordered a 10% cut in expenditure across the board of non-protected items, excluding key payments like pensions.

The government surprised with an unexpected announcement in September that it was raising tariffs for households on energy, water and heat up to 9% early from December 1, instead of the scheduled mid-2023 increase within 4%. The move is especially sensitive for poorer Russians including pensioners.

And the business lobby protested loudly after the finance ministry increased the obligatory social payments as a way to raise taxes and revenues. Russia’s largest business lobby, RSPP, issued an unusually stark statement complaining about “surprising amendments to the system of social insurance payments which contradict earlier agreement [between large businesses and the state]”.

From 2023, the government plans to increase the base for calculating social insurance premiums. The single cap on fully contributory salaries will rise to RUB1.92mn. against the RUB1.57mn contribution planned before tough sanctions were imposed.

The maximum value of the base for calculating insurance premiums, which employers will begin to pay in a single payment from 2023, will be RUB1.917mn from January 1, 2023. This follows from the draft budget of the Social Fund, which RBC got acquainted with.

From 2023, Russia will merge the Pension Fund (PFR) and the Social Insurance Fund (FSS) into a single Social Fund. In addition to administrative changes, the merger involves a new model for paying insurance premiums: from 2023, all employers will pay both pension contributions and payments for social and medical insurance in the same amount (30% of the wage fund), but in the form of a single payment and based on the availability of a single base.

As long as the employee’s cumulative total salary within a year does not exceed the base, companies pay the full tariff (30%) from it, and if the amount of earnings is higher, the tariff is reduced to a preferential rate of 15.1%. Thus the higher the marginal value of the base, the longer the full insurance premiums for the employee are transferred.

Russia’s budget deficit will stand at 0.9% of the gross domestic product (GDP), or RUB1.313 trillion, in 2022, according to the draft budget for 2023-2025 seen by PRIME on September 23.

Russia’s budget deficit will amount to 2% of GDP or around RUB3 trillion in 2023, Prime Minister Mikhail Mishustin said on September 20 at a meeting of the government’s budget commission.

In a speech in early September, Putin said there would be no deficit this year.

Budget revenue will amount to RUB27.693 trillion, including RUB11.666 trillion of oil and gas and RUB16 trillion of non-oil and gas income, while spending will be RUB29 trillion, according to the new draft budget that will be sent to the Duma for approval before the end of this year.

In 2023, budget revenue is expected to be more than RUB26.1 trillion and spending to hit RUB29.056 trillion.

The finance ministry plans to borrow RUB1.747 trillion through OFZ government bonds in 2023, RUB1.938 trillion in 2024 and RUB2 trillion in 2025 – less than half of the annual borrowing plans of preceding years.

The finance ministry’s moves are designed to head off problems further down the road. Although Russia’s economy has been doing better than expected and its balance sheet looks strong, the structure of the government’s revenues contains some large weaknesses.

“While on the surface Russia’s fiscal accounts appear strong, with debt-to-GDP at about 17% and a fiscal deficit of 2% in 2022, they hide important vulnerabilities due to Russia’s reliance on oil and gas revenues. Energy extraction and export taxes account for more than 40% of total federal budget revenues. Without them, Russia’s federal budget would have been in persistently large deficits over the last decade,” Institute of International Finance (IIF) said in a note.

Russia has been enjoying very large inflows from oil and gas exports after the war pushed the prices of both commodities up to record levels.

Russia’s current account was still well in surplus in August. According to the preliminary estimate of the Russian central bank, the surplus was $16.5bn in August. The surplus was clearly smaller compared to the peak readings of recent months, but still at a historically high level. In January-August, a surplus of around $180bn was accumulated – more than double the previous record. This year, the surplus has also varied exceptionally widely from month to month.

“However, fiscal dynamics are even more critical for Russia’s ability to wage the war on Ukraine. Due to the high commodity prices and the seasonally low government spending, Russia ran a fiscal surplus of RUB1.3 trillion during 1H2022. However, a combination of the ruble strengthening, sharply lower gas exports, as well as somewhat higher expenditure pushed the federal budget into substantial deficits in July – August. While expenditures picked up markedly in July, the trend did not continue into August, so we will be closely watching the developments into the end of the year,” IIF said.

Even though Russia initially budgeted a fiscal surplus of 1.1% of GDP this year, IIF expects it to reach a deficit of about 2-3% in 2022. With Russia already cutting off the gas supply to Europe and oil prices stabilising, pressure on Russia’s fiscal accounts will continue to mount.

“For now, Russia can finance higher spending from the National Wealth Fund (NWF), currently at about 8% of GDP or $200bn, and domestic MinFin bond (OFZ) issuance,” says IIF. “However, up to 40% of the NWF appears to be already committed to anti-crisis measures, and close to $35bn allegedly frozen alongside the Bank of Russia reserves.” The finance ministry restarted OFZ issuance in September, which had been temporarily cancelled due to market volatility. The first auctions were heavily oversubscribed, given the limited investment opportunities for domestic banks flush with liquidity. Russia’s financial sector is dominated by public banks (accounting for more than two-thirds of total assets) with room to increase their holdings.

“The financial system has largely recovered from the March liquidity shock, and the structural liquidity surplus of the banking system vis-à-vis the Bank of Russia is back at RUB2.8 trillion ($47bn), which should allow banks to absorb significant additional issuance,” says IIF.

But the government is well aware that things will get tough soon. The medium-term budget for 2023 and beyond assumes a 25% reduction in oil and gas revenues by 2025 and a fall in oil prices to about $60 per barrel.

As a result of the sharp decrease in oil and gas revenues, the government is considering bringing back the fiscal rule that requires saving all oil and gas revenues above a certain Urals price cut-off point, reports IIF.

“We believe the authorities are overly optimistic expecting other revenues to fully compensate for the loss of oil and gas inflows, thus allowing government spending to stay flat in nominal terms. The government will need to find spending cuts of at least 10-15% during this period to keep the deficits in the 2-3% range,” says IIF. The finance ministry has already ordered 10% spending cuts, but it remains to be seen if they can be implemented.

In response to the combined oil price drop and sanctions shock in 2014, Russia implemented expenditure cuts on a par with most of the IMF crisis programmes.

Alexander Mercouris: Ukraine Sabotage Crimea Bridge, Russia Threatens Retaliation, Problems with Starlink, Biden Criticised for Armageddon Comment

Link here.

Moon of Alabama gives his analysis of the Crimea bridge attack here and also discusses the possible implications of the faltering Starlink system in Ukraine.

The most recent reporting from RT states that auto traffic is currently moving on the side of the Kerch bridge that is undamaged and rail service is expected to be back online this evening. Putin has ordered enhanced security in and around the bridge:

Russian President Vladimir Putin issued a new order on Saturday demanding the Russian Federal Security Service (FSB) enhance security of “the Kerch Strait transport corridor.” This comes after the Crimean Bridge was damaged in a truck explosion early on Saturday.

At least three people are believed to have died as a result of the truck explosion on the bridge. Additional ferry service is to be started to make up for the one side of the bridge that is closed to auto traffic due to damage. It is uncertain at this time how long it will take to repair.

Michael Hudson on The Euro Without Germany

blue and yellow round star print textile
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By Michael Hudson, Naked Capitalism, 9/30/22

Michael Hudson is a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is The Destiny of Civilization.

The reaction to the sabotage of three of the four Nord Stream 1 and 2 pipelines in four places on Monday, September 26, has focused on speculations about who did it and whether NATO will make a serious attempt to discover the answer. Yet instead of panic, there has been a great sigh of diplomatic relief, even calm. Disabling these pipelines ends the uncertainty and worries on the part of US/NATO diplomats that nearly reached a crisis proportion the previous week, when large demonstrations took place in Germany calling for the sanctions to end and to commission Nord Stream 2 to resolve energy shortage.

The German public was coming to understand what it meant that their steel companies, fertilizer companies, glass companies and toilet-paper companies were shutting down. These companies were forecasting that they would have to go out of business entirely – or shift operations to the United States – if Germany did not withdraw from the trade and currency sanctions against Russia and permit gas and oil imports to resume, and presumably to fall back from their astronomical eight to tenfold increase.

Yet State Department hawk Victoria Nuland already had stated in January that “one way or another Nord Stream 2 will not move forward” if Russia responded to NATO/Ukrainian accelerated military attacks on the Russian-speaking eastern oblasts. President Biden backed up U.S. insistence on February 7, promising that “there will be no longer a Nord Stream 2. We will bring an end to it. … I promise you, we will be able to do it.”

Most observers simply assumed that these statements reflected the obvious fact that German politicians were fully in the US/NATO pocket. They held fast in refusing to authorize Nord Stream 2, and Canada soon seized the Siemens dynamos needed to send gas through Nord Stream 1. That seemed to settle matters until German industry – and a rising number of voters – finally began to calculate just what blocking Russian gas would mean for Germany’s industrial firm. 

Germany’s willingness to self-impose an economic depression was wavering – although not its politicians or the EU bureaucracy. If German policymakers were to put German business interests and living standards first, NATO’s common sanctions and New Cold War front would be broken. Italy and France might follow suit. That nightmare of European diplomatic independence made it urgent to take the anti-Russian sanctions out of the hands of democratic politics and settle matters by sabotaging the two pipelines. Despite being an act of violence, it has restored calm to international diplomatic relations between U.S. and German politicians. 

There is no more uncertainty about whether or not Europe will break away from U.S. New Cold War aims by restoring mutual trade and investment with Russia. That option is now out. The threat of Europe beaking away from the US/NATO trade and financial sanctions against Russia has been solved, seemingly for the foreseeable future, as Russia has announced that as the gas pressure falls in three of the four pipelines, the infusion of salt water will irreversibly corrode the pipes. (Tagesspiegel, September 28.) 

Where do the euro and dollar go from here?

Looking at how this trade “solution” will reshape the relationship between the U.S. dollar and the euro, one can understand why the seemingly obvious consequences of Germany, Italy and other European economies severing trade ties with Russia have not been discussed openly. The “sanctions debate” has been solved by a German and indeed Europe-wide economic crash. To Europe, the next decade will be a disaster. There may be recriminations against the price paid for letting its trade diplomacy be dictated by NATO, but there is nothing that it can do about it. Nobody (yet) expects it to join the Shanghai Cooperation Organization. What is expected is for its living standards to plunge.

Germany’s industrial exports were the major factor supporting the euro’s exchange rate. The great attraction to Germany in moving from the deutsche mark to the euro would avoid its export surplus from pushing up the D-mark’s exchange rate to a point where German products would be priced out of world markets. Expanding the currency to include Greece, Italy, Portugal, Spain and other countries running balance-of-payments deficit would prevent the currency from soaring. And that would protect the competitiveness of German industry.

After its introduction in 1999 at $1.12, the euro did indeed sink to $0.85 by July 2001, but recovered and indeed rose to $1.58 in April 2008. It has been drifting down steadily since then, and since February of this year the sanctions have driven the euro’s exchange rate below parity with the dollar to $0.97 this week. The major factor has been rising prices for imported gas and oil, and products such as aluminum and fertilizer requiring heavy energy inputs for their production. And as the euro’s exchange rate declines against the dollar, the cost of carrying its US-dollar debt – the normal condition for affiliates of U.S. multinationals – will rise, squeezing their profits.

This is not the kind of depression that “automatic stabilizers” can work “the magic of the marketplace” to restore economic balance. Energy dependency is structural. And the eurozone’s own economic rules limit its budget deficits to just 3% of GDP. This prevents its national governments supporting the economic by deficit spending. Higher energy and food prices – and dollar-debt service – will leave much less income to be spent on goods and services. 

It seems curious that the U.S. stock market soared – 500 points for the Dow Jones Industrial Average on Wednesday. Maybe it was simply the Plunge Protection Team intervening to try and reassure the world that everything was going to be all right. But economic reality raised its ugly head on Thursday, and the stock market gave back its phantom gains.

It is true that the end of German industrial competition with United States is ended on trade account. But on capital account, depreciation of the euro will reduce the value of U.S. investments in Europe and the dollar-value of any profits that these investments may still earn as the European economy shrinks. So reported earnings by U.S. multinationals will fall.

As a final kicker, Pepe Escobar pointed out on September 28 that “Germany is contractually obligated to purchase at least 40 billion cubic meters of Russian gas a year until 2030. … Gazprom is legally entitled to get paid even without shipping gas. That’s the spirit of a long-term contract. … Berlin does not get all the gas it needs but still needs to pay.” It looks like a long court battle before money will change hands – but Germany’s ability to pay will be steadily weakening.

For that matter, the ability of many countries’ ability to pay already is reaching the breaking point.

The effect of U.S. sanctions and New Cold War outside of Europe

International raw materials are still priced mainly in dollars, so the dollar’s rising exchange rate will raise import prices proportionally for most countries. This exchange-rate problem is intensified by the US/NATO sanctions forcing up world prices for gas, oil and grain. Many European and Global South countries already have reached the limit of their ability to service their dollar-denominated debts, and are still coping with the Covid pandemic. They cannot afford to import the energy and food that they need to live if they have to pay their foreign debts. The world economy is now exceeding its debt limits, so something has to give.

On Tuesday, September 27 when news of the Nord Stream gas attacks became known, U.S. Secretary of State Antony Blinken shed crocodile tears and said that attacking Russian pipelines was “in no one’s interest.” But if that really were the case, no one would have attacked the gas lines.

I have no doubt that U.S. strategists have a game plan for how to proceed from here, and to do so that indeed is in what the neocons claim to be in the U.S. interest – that of maintaining a unipolar neoliberalized and financialized global economy for as long as they can. 

They have long had a plan for countries that are unable to their foreign debts. The IMF will lend them the money, conditional upon the debtor country raising the foreign exchange to repay the (increasingly expensive) dollar loans by privatizing what remains of their public domain, natural-resource patrimony and other assets, mainly to U.S. financial investors and their allies.

Will it work? Or will debtor countries band together and work out ways to restore the seemingly lost world of affordable oil and gas prices, fertilizer prices, grain and other food prices, and metals or raw materials supplied by Russia, China and their allied Eurasian neighbors? 

That is the next great worry for U.S. global strategists. It seems less easy to solve than was done by the sabotage of Nord Stream 1 and 2. But the solution seems to be the usual U.S. approach: something military in nature, new color revolutions. The aim is to gain the same power over Global South and Eurasian countries that American diplomacy wielded over Germany and other European countries via NATO.

Unless an institutional alternative is created to the IMF, World Bank, International Court, World Trade Organization and the numerous UN agencies now biased by U.S. diplomats and their proxies, the coming decades will see the U.S. economic strategy of financial and military dominance unfold as Washington has planned.

The problem is that its plans for how the Ukraine war and anti-Russian sanctions have worked out so far have been just the reverse of what was announced. That may give some hope for the world’s future. The opposition and even contempt by U.S. diplomats to other countries acting in their own economic interest and social values is so strong that they are unwilling to think through just how these countries might develop their own alternative to the U.S. world plan.

The question is thus how successfully these other countries may develop their alternative new economic order, and how they can protect themselves from the fate that Europe has just imposed upon itself for the next decade.

RT: Crimean Bridge damage caused by truck explosion – Russia’s Anti-Terrorism Committee

Billboard in Crimea that reads: “Crimea.. Russia. Forever.” Photo by Natylie Baldwin, Oct. 2015

RT.com, 10/8/22

The bridge was closed earlier after a fuel tank caught fire

The bridge that connects the Crimean Peninsula with mainland Russia has been damaged by a truck bombing, the National Anti-Terrorism Committee said on Saturday.

Officials said that the blast, which occurred shortly after 6am local time, caused a partial collapse of the road on the vehicle section. It also triggered a blaze on a freight train on the parallel rail section, with seven fuel tanks catching fire. 

“The arch above the shipping section of the bridge has not been damaged,” the committee added.

An unverified video appears to show the moment of the blast.

https://t.me/kommersant/40806?embed=1

A video from the scene that was posted on social media appears to show the fuel tank fire and the damage to the road.

https://t.me/bbbreaking/137596?embed=1

Nikolay Lukashenko, the acting regional transport minister, told reporters that the authorities are considering launching a ferry service.

The 19-kilometer (11.8 mile) bridge, which runs across the Kerch Strait and connects Crimea with mainland Russia, consists of a railway section and a vehicle section. It became fully operational in 2020.