Category: Veronika Kyrylenko

Trumponomics as a Response to a Failing Globalization


Ever since Donald Trump put his hand on the Bible to swear an Oath of Affirmation, he has been harshly criticized for every step he takes. While a rational criticism is a basis of every democracy, American left has gone unprecedentedly hysterical in its reaction to the Trump administration’s policies. Thus, Trump’s economic plan is usually labeled a “disaster,” a “chaos,” or even an “Armageddon.” At the best, positive results of the working policies are attributed to the Obama’s legacy. But all of them fail to objectively analyze and explain the global trends of the American and the world economy that dictate new and adequate approaches that would make America thrive in the given global context.

The pace of globalization is slowing down as it reaches its natural limits, and the central goal of the Trump administration now is to secure America’s global leadership. The core value of foreign and domestic policies has once again become American national interests. Globalization, once considered a vital part of American global leadership, is now damages its interests and, thus, strengthens the positions of its competitors. As the Trump administration tries to counteract this negative trend, it implements a new economic plan to which we will refer as Trumponomics. The fundamental points of the plan are protectionism, America-centric foreign policy, repatriation of the national capital and manufacturing to the U.S., and acceleration of GDP growth through a new budget policy and investments into infrastructure. Naturally, this policy has its side effects, such as trade wars and growing frustration among the American allies. The questions are, what would the benefits of Trumponomics be and would they outweigh its potential disadvantages? 

Ideological premises of globalization

With the collapse of the Soviet Union and bipolar world order in the early 1990s, the U.S. became the only superpower. With an absence of any serious political challenges to the U.S., geopolitics has eventually transformed into geoeconomics, or a competition over markets. Globalization, as a process of interaction and integration between people, companies, and governments worldwide based on Western values of freedom, democracy, and the market economy, has become a centerpiece of American foreign policy. Two main ideologies that constituted it were neoconservatism, which assumed utilization and growth of the economic and military supremacy of the U.S.; the other was a neoliberalism that transferred control over a global economy from national to supranational financial institutions. Domestically, the U.S. has developed a postindustrial economy that focused on finances, information technologies and services, and control over the newest technologies and intellectual property. Simultaneously, a major part of the industrial manufacturing had been moved to developing countries with cheap labor and resources.

A high concentration of  world production and labor in Southeast Asia, as well as the accumulation of technologies, goods, and finances, have strengthened the positions of regional players and has given them leverage to influence global economic processes. The U.S., in contrast, is facing a significant trade deficit ($43.1 billion) and a national debt ($21 trillion), and while it still dominates the world economy, the trends are discouraging, since the American part in a global GDP has declined by nearly a half since 1960s. All of these indicate a crisis of the current version of globalization as it undermines positions and potential for the U.S.  

An economist Dani Rodrick has introduced a phenomenon of Globalization Paradox, which lays in a conflict between democracy, economic globalization, and national sovereignty. Rodrik argues that it is impossible to balance all three, and sooner or later a country that is deemed to succeed would need to sacrifice one of these principles. As soon as democracy and sovereignty are sacred for America, it will give up globalization, while China will most likely sacrifice its democracy. Thus, on the current stage, it is natural for the U.S. to rely on a “hard power” with the elements of a military pressure and economic protectionism to regain a control over a geoeconomy.   

Trumponomics: strategic goals, national interests, mechanisms

The ideas of protectionism and a populist (in a good way) approach to international trade and immigration, that Donald Trump presented during his presidential campaign, seemed to be the most appropriate answer to the challenges of globalization. Now, despite the strong opposition of globalist part of political establishment, the Trump administration persistently implements its program that puts “America First.”

The National Security Strategy identifies four national interests of the U.S. as protection of the American People, the Homeland and the American Way of life; promotion of American prosperity; preservation of peace through strength; advancement of American influence.

To make an economy invincible from foreign threats, the Trump administration will try to make it as self-sufficient as possible to minimize a dependency on the swings of a global market. The highly diverse structure of the domestic economy, protectionist barriers, a high level of technological development, a strong military, energy independence, stimulation of a customer demand, and a coherent advancement into the new markets are all aimed to strengthen American global positions.

The core of the Trumponomics is a reflation — a comprehensive system of measures aimed to stimulate economy by increasing the money supply, reducing taxes, increasing domestic manufacturing, and reducing the trade deficit.

The tools of the new policy include increasing government investments into infrastructure projects (up to $1 trillion), and a fiscal reform ($4.4 trillion). This reform, in turn, includes comprehensive tax cuts for individuals, households and businesses intended to increase an aggregate demand and stimulate investment activity.

Finally, Trumponomics implements various protectionist measures, including higher tariffs on imports of metals and consumer goods.  

Obviously, there is a downside to protectionism — trade wars that may backlash on American industry and the pace of its development. On March, 2, 2018 President Trump tweeted that “Trade wars are good, and easy to win.” In Trumponomics, even trade partners are viewed as rivals. For the world trade which constitutes 55% of global GDP, this approach may have serious consequences. In the first place, it would hurt exporter countries with a major export share of goods with high added value and that have a significant trade surplus with the U.S. (China, Japan, Germany, Mexico, Canada, Brazil, South Korea, and some EU countries). These countries, in turn, may try to retaliate and increase tariffs on American exports, too. But, in our opinion, the risk of an escalation of trade wars in 2018-2019 is low, as the American economy is tightly intertwined with the global one. It is more probable that the Trump administration will focus on non-tariff measures, such as a strict control on exports of high technologies and implementation of technical requirements for imports, as well as operations in stock markets, including dollar supply reduction.

Overall, we may conclude that protectionism and repatriation of manufacturing jobs will negatively affect world trade and hurt American trade partners but, most importantly, will benefit the U.S. in the long run as it is time to reestablish a healthy pragmatism in our policies. America will gradually expand its presence on the global market, but the expenses will rise, too, primarily on a national defense that is crucial for securing a military dominance. Naturally, part of these expenses will be transferred on NATO allies and satellite countries, which is exactly what is already happening.  

Ever since Donald Trump put his hand on the Bible to swear an Oath of Affirmation, he has been harshly criticized for every step he takes. While a rational criticism is a basis of every democracy, American left has gone unprecedentedly hysterical in its reaction to the Trump administration’s policies. Thus, Trump’s economic plan is usually labeled a “disaster,” a “chaos,” or even an “Armageddon.” At the best, positive results of the working policies are attributed to the Obama’s legacy. But all of them fail to objectively analyze and explain the global trends of the American and the world economy that dictate new and adequate approaches that would make America thrive in the given global context.

The pace of globalization is slowing down as it reaches its natural limits, and the central goal of the Trump administration now is to secure America’s global leadership. The core value of foreign and domestic policies has once again become American national interests. Globalization, once considered a vital part of American global leadership, is now damages its interests and, thus, strengthens the positions of its competitors. As the Trump administration tries to counteract this negative trend, it implements a new economic plan to which we will refer as Trumponomics. The fundamental points of the plan are protectionism, America-centric foreign policy, repatriation of the national capital and manufacturing to the U.S., and acceleration of GDP growth through a new budget policy and investments into infrastructure. Naturally, this policy has its side effects, such as trade wars and growing frustration among the American allies. The questions are, what would the benefits of Trumponomics be and would they outweigh its potential disadvantages? 

Ideological premises of globalization

With the collapse of the Soviet Union and bipolar world order in the early 1990s, the U.S. became the only superpower. With an absence of any serious political challenges to the U.S., geopolitics has eventually transformed into geoeconomics, or a competition over markets. Globalization, as a process of interaction and integration between people, companies, and governments worldwide based on Western values of freedom, democracy, and the market economy, has become a centerpiece of American foreign policy. Two main ideologies that constituted it were neoconservatism, which assumed utilization and growth of the economic and military supremacy of the U.S.; the other was a neoliberalism that transferred control over a global economy from national to supranational financial institutions. Domestically, the U.S. has developed a postindustrial economy that focused on finances, information technologies and services, and control over the newest technologies and intellectual property. Simultaneously, a major part of the industrial manufacturing had been moved to developing countries with cheap labor and resources.

A high concentration of  world production and labor in Southeast Asia, as well as the accumulation of technologies, goods, and finances, have strengthened the positions of regional players and has given them leverage to influence global economic processes. The U.S., in contrast, is facing a significant trade deficit ($43.1 billion) and a national debt ($21 trillion), and while it still dominates the world economy, the trends are discouraging, since the American part in a global GDP has declined by nearly a half since 1960s. All of these indicate a crisis of the current version of globalization as it undermines positions and potential for the U.S.  

An economist Dani Rodrick has introduced a phenomenon of Globalization Paradox, which lays in a conflict between democracy, economic globalization, and national sovereignty. Rodrik argues that it is impossible to balance all three, and sooner or later a country that is deemed to succeed would need to sacrifice one of these principles. As soon as democracy and sovereignty are sacred for America, it will give up globalization, while China will most likely sacrifice its democracy. Thus, on the current stage, it is natural for the U.S. to rely on a “hard power” with the elements of a military pressure and economic protectionism to regain a control over a geoeconomy.   

Trumponomics: strategic goals, national interests, mechanisms

The ideas of protectionism and a populist (in a good way) approach to international trade and immigration, that Donald Trump presented during his presidential campaign, seemed to be the most appropriate answer to the challenges of globalization. Now, despite the strong opposition of globalist part of political establishment, the Trump administration persistently implements its program that puts “America First.”

The National Security Strategy identifies four national interests of the U.S. as protection of the American People, the Homeland and the American Way of life; promotion of American prosperity; preservation of peace through strength; advancement of American influence.

To make an economy invincible from foreign threats, the Trump administration will try to make it as self-sufficient as possible to minimize a dependency on the swings of a global market. The highly diverse structure of the domestic economy, protectionist barriers, a high level of technological development, a strong military, energy independence, stimulation of a customer demand, and a coherent advancement into the new markets are all aimed to strengthen American global positions.

The core of the Trumponomics is a reflation — a comprehensive system of measures aimed to stimulate economy by increasing the money supply, reducing taxes, increasing domestic manufacturing, and reducing the trade deficit.

The tools of the new policy include increasing government investments into infrastructure projects (up to $1 trillion), and a fiscal reform ($4.4 trillion). This reform, in turn, includes comprehensive tax cuts for individuals, households and businesses intended to increase an aggregate demand and stimulate investment activity.

Finally, Trumponomics implements various protectionist measures, including higher tariffs on imports of metals and consumer goods.  

Obviously, there is a downside to protectionism — trade wars that may backlash on American industry and the pace of its development. On March, 2, 2018 President Trump tweeted that “Trade wars are good, and easy to win.” In Trumponomics, even trade partners are viewed as rivals. For the world trade which constitutes 55% of global GDP, this approach may have serious consequences. In the first place, it would hurt exporter countries with a major export share of goods with high added value and that have a significant trade surplus with the U.S. (China, Japan, Germany, Mexico, Canada, Brazil, South Korea, and some EU countries). These countries, in turn, may try to retaliate and increase tariffs on American exports, too. But, in our opinion, the risk of an escalation of trade wars in 2018-2019 is low, as the American economy is tightly intertwined with the global one. It is more probable that the Trump administration will focus on non-tariff measures, such as a strict control on exports of high technologies and implementation of technical requirements for imports, as well as operations in stock markets, including dollar supply reduction.

Overall, we may conclude that protectionism and repatriation of manufacturing jobs will negatively affect world trade and hurt American trade partners but, most importantly, will benefit the U.S. in the long run as it is time to reestablish a healthy pragmatism in our policies. America will gradually expand its presence on the global market, but the expenses will rise, too, primarily on a national defense that is crucial for securing a military dominance. Naturally, part of these expenses will be transferred on NATO allies and satellite countries, which is exactly what is already happening.  



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Rethinking the NATO-Russia-Ukraine Relationship on the Eve of Brussels Summit


Ten years after the NATO Summit in Bucharest, when Ukraine and Georgia were promised entry into NATO “in the future,” NATO yet again incorporated Ukraine into its aspirant country list.  The definition regarding the list has been changed just recently, since in the past, Ukraine declared that it was not formally pursuing membership.

Indeed, in 2010, Ukraine, under Moscow’s pressure, passed a law on its non-aligned status but dropped it in 2014, after the infamous “Revolution of Dignity,” which brought to power pro-Western authorities.  In that same year, Russia annexed Crimea and invaded Eastern regions of Ukraine, waging a proxy war and supporting a pro-Russia separatist movement with eventual establishment of Moscow’s puppet regimes in rebellious regions.  Facing an escalating armed conflict in a geographical hub of Europe, NATO countries have supported Kiev with military and humanitarian aid, but there were no further talks on a possibility for Ukraine to join the Alliance.

Even though the newly obtained status of “aspirant country” only confirms Kiev’s political willingness, or aspiration, to join NATO and is only a transitional step on this long journey, the change of definition on NATO’s official website has expectedly caused the Kremlin to nervously overreact, calling it the “West’s final betrayal of Russia.”  Indeed, NATO’s pointless flirtation with Ukraine on the eve of the Brussels Summit on 11-12 June is antagonizing Russia, which has proven to be bold enough to take military action when it feels challenged or perceives a geopolitical loss (Ukrainian territory is obviously a pivotal geostrategic space for Russian security).  Tension between the NATO countries and Russia has recently been fueled by Russian interference in American elections, differences over the Syrian war, and use of chemical weapons in Salisbury (Great Britain) followed by the mutual expulsion of diplomats.  This tension gravely undermines the stability and security of the whole Euro-Atlantic region, including Russia itself.  Improving relationships requires counterparts to change their vision and strategy toward each other, which is in everyone’s best interest.

Russia: Dropping Victimhood Narratives

When rationalizing its anti-Western views and policies, the Russian political establishment utilizes a narrative of the West’s broken promise” not to expand NATO eastward, since former Soviet republics and satellite countries of the Warsaw Pact were viewed by Russia as its traditional sphere of influence.  True, there were many verbal commitments given to Soviet officials by their Western counterparts, but none of them was concluded as a political or legal pact that would prohibit NATO’s expansion beyond the borders of a reunited Germany.  Nevertheless, Russia sees itself as a victim of Western betrayal and thus “justifies” its rogue international actions.

Moreover, for Vladimir Putin’s regime, this narrative constitutes an image of Russia as a besieged castle.  Having deep roots in the Russian mass consciousness, the image of an endangered Motherland allows the regime to achieve such goals as to legitimize of personalized and hyper-centralized power of a president, to distract the public’s attention from domestic issues to external threats (whether real or imagined), to transfer responsibility for the regime’s failures in economic, social, and other domestic policies onto the “enemy’s” plan, to mobilize the electorate, and to fight political opposition by simply labeling their leaders “foreign agents.”

But instead of engaging the Russians in a witch hunt and a muscle-flexing contest, there is just one and, perhaps, the most important question that Vladimir Putin needs to answer honestly: why do former Soviet republics and countries of Central and Eastern Europe that once were either part of USSR or its closes allies now seek to orient themselves toward the West and not Russia?  Maybe it is because Putin’s Russia cannot offer them a positive integrational idea that would inspire international cooperation.  And maybe it is because the Kremlin failed to create an attractive image of a prosperous country that cherishes and respects human dignity and human rights, freedom, democracy, and the rule of law.  The Kremlin needs to stop blaming the West for its failures and crimes and to concentrate on rebuilding its positive image through domestic reforms – primarily in the economic and social sectors.

NATO: Understanding the Kremlin

Although NATO claims that its ongoing enlargement process poses no threat to any country, we must view it realistically.  Just a quick glance at the map of NATO military bases in Eastern Europe, the Balkans, and the Baltic States and anti-missile defense systems deployed in Turkey, Romania, Poland, and Germany, as well as Aegis-equipped U.S. warships in the Mediterranean Sea combined with regular military training of NATO troops in Ukraine and the Black Sea region, allows us to understand rightful Russian concerns.  On top of that, Washington has just recognized Russia as a threat in the recently published National Security Strategy and National Defense Strategy, calling it a “revisionist power.”  Naturally, it makes Russia feel threatened, just as the U.S. would be if Russians had their military bases deployed in Mexico and Canada and warships cruising along American coasts. As we noted before, given Putin’s readiness to violently react against NATO’s advances in Eastern Europe, NATO leaders should concentrate on securing a natural strategic boundary of the Alliance in Europe by completing a logical process of integration of all the states of former Yugoslavia (Bosnia, Macedonia, Kosovo, and Serbia), strategically securing the Balkan peninsula.  And then the alliance’s enlargement must be at least temporarily put on hold.

As the West seeks to deter Russia, the most effective tool to do so is found in economic sanctions that have already proven their efficiency.  After all, military and political strength are rooted in a strong economy.  Unfortunately for Russia, President Putin has not contributed much to its economic development during the past 17 years.  On the contrary – he has built crony capitalism with a mono-economy of natural gas and oil, exports of which keeps the weakening Russian economy afloat.

As for strategy toward Ukraine, NATO should continue its support through consultations, training, and limited military aid aimed to secure Ukraine’s eastern border.

Ukraine: Lowering Expectations

As much as Ukraine is important for building of common Euro-Atlantic security, Kiev must accept that the country will not be accepted as a member of the alliance in the near future due to major obstacles.  For instance, NATO rarely accepts countries with unresolved territorial issues.  To be fair, some countries’ strategic importance made NATO turn a blind eye to that kind of dispute, as happened in 1951, when Turkey and Greece were invited to join.  But it is not going to happen to a Ukraine that is unfortunate enough to have a nuclear-armed Russia as its adversary.  Bringing Ukraine into the alliance with its simmering conflict in the Eastern regions and an annexed Crimea would factually mean NATO declaring war against Russia, under its obligations according to an Article 5 of the North Atlantic Treaty.  Clearly, no one is ready for this scenario.

Thus, Kiev must manage its expectations and not fan them among Ukrainians.  Instead, it must concentrate on the strengthening of its democratic institutions and fighting a decisive war on corruption that slows down the country’s development and damages its credibility. 

All in all, there is no doubt that the mutual strategy in the triangle NATO-Russia-Ukraine must change to prevent any further escalation of tension in Europe.  It is not an easy task, and even if NATO slows down its pace of enlargement, as is highly probable that it will, there is no guarantee that this would pacify Russia.  Luckily, NATO countries possess an arsenal of economic and diplomatic measures to deter Russia’s unpredictable reactions. 

Ten years after the NATO Summit in Bucharest, when Ukraine and Georgia were promised entry into NATO “in the future,” NATO yet again incorporated Ukraine into its aspirant country list.  The definition regarding the list has been changed just recently, since in the past, Ukraine declared that it was not formally pursuing membership.

Indeed, in 2010, Ukraine, under Moscow’s pressure, passed a law on its non-aligned status but dropped it in 2014, after the infamous “Revolution of Dignity,” which brought to power pro-Western authorities.  In that same year, Russia annexed Crimea and invaded Eastern regions of Ukraine, waging a proxy war and supporting a pro-Russia separatist movement with eventual establishment of Moscow’s puppet regimes in rebellious regions.  Facing an escalating armed conflict in a geographical hub of Europe, NATO countries have supported Kiev with military and humanitarian aid, but there were no further talks on a possibility for Ukraine to join the Alliance.

Even though the newly obtained status of “aspirant country” only confirms Kiev’s political willingness, or aspiration, to join NATO and is only a transitional step on this long journey, the change of definition on NATO’s official website has expectedly caused the Kremlin to nervously overreact, calling it the “West’s final betrayal of Russia.”  Indeed, NATO’s pointless flirtation with Ukraine on the eve of the Brussels Summit on 11-12 June is antagonizing Russia, which has proven to be bold enough to take military action when it feels challenged or perceives a geopolitical loss (Ukrainian territory is obviously a pivotal geostrategic space for Russian security).  Tension between the NATO countries and Russia has recently been fueled by Russian interference in American elections, differences over the Syrian war, and use of chemical weapons in Salisbury (Great Britain) followed by the mutual expulsion of diplomats.  This tension gravely undermines the stability and security of the whole Euro-Atlantic region, including Russia itself.  Improving relationships requires counterparts to change their vision and strategy toward each other, which is in everyone’s best interest.

Russia: Dropping Victimhood Narratives

When rationalizing its anti-Western views and policies, the Russian political establishment utilizes a narrative of the West’s broken promise” not to expand NATO eastward, since former Soviet republics and satellite countries of the Warsaw Pact were viewed by Russia as its traditional sphere of influence.  True, there were many verbal commitments given to Soviet officials by their Western counterparts, but none of them was concluded as a political or legal pact that would prohibit NATO’s expansion beyond the borders of a reunited Germany.  Nevertheless, Russia sees itself as a victim of Western betrayal and thus “justifies” its rogue international actions.

Moreover, for Vladimir Putin’s regime, this narrative constitutes an image of Russia as a besieged castle.  Having deep roots in the Russian mass consciousness, the image of an endangered Motherland allows the regime to achieve such goals as to legitimize of personalized and hyper-centralized power of a president, to distract the public’s attention from domestic issues to external threats (whether real or imagined), to transfer responsibility for the regime’s failures in economic, social, and other domestic policies onto the “enemy’s” plan, to mobilize the electorate, and to fight political opposition by simply labeling their leaders “foreign agents.”

But instead of engaging the Russians in a witch hunt and a muscle-flexing contest, there is just one and, perhaps, the most important question that Vladimir Putin needs to answer honestly: why do former Soviet republics and countries of Central and Eastern Europe that once were either part of USSR or its closes allies now seek to orient themselves toward the West and not Russia?  Maybe it is because Putin’s Russia cannot offer them a positive integrational idea that would inspire international cooperation.  And maybe it is because the Kremlin failed to create an attractive image of a prosperous country that cherishes and respects human dignity and human rights, freedom, democracy, and the rule of law.  The Kremlin needs to stop blaming the West for its failures and crimes and to concentrate on rebuilding its positive image through domestic reforms – primarily in the economic and social sectors.

NATO: Understanding the Kremlin

Although NATO claims that its ongoing enlargement process poses no threat to any country, we must view it realistically.  Just a quick glance at the map of NATO military bases in Eastern Europe, the Balkans, and the Baltic States and anti-missile defense systems deployed in Turkey, Romania, Poland, and Germany, as well as Aegis-equipped U.S. warships in the Mediterranean Sea combined with regular military training of NATO troops in Ukraine and the Black Sea region, allows us to understand rightful Russian concerns.  On top of that, Washington has just recognized Russia as a threat in the recently published National Security Strategy and National Defense Strategy, calling it a “revisionist power.”  Naturally, it makes Russia feel threatened, just as the U.S. would be if Russians had their military bases deployed in Mexico and Canada and warships cruising along American coasts. As we noted before, given Putin’s readiness to violently react against NATO’s advances in Eastern Europe, NATO leaders should concentrate on securing a natural strategic boundary of the Alliance in Europe by completing a logical process of integration of all the states of former Yugoslavia (Bosnia, Macedonia, Kosovo, and Serbia), strategically securing the Balkan peninsula.  And then the alliance’s enlargement must be at least temporarily put on hold.

As the West seeks to deter Russia, the most effective tool to do so is found in economic sanctions that have already proven their efficiency.  After all, military and political strength are rooted in a strong economy.  Unfortunately for Russia, President Putin has not contributed much to its economic development during the past 17 years.  On the contrary – he has built crony capitalism with a mono-economy of natural gas and oil, exports of which keeps the weakening Russian economy afloat.

As for strategy toward Ukraine, NATO should continue its support through consultations, training, and limited military aid aimed to secure Ukraine’s eastern border.

Ukraine: Lowering Expectations

As much as Ukraine is important for building of common Euro-Atlantic security, Kiev must accept that the country will not be accepted as a member of the alliance in the near future due to major obstacles.  For instance, NATO rarely accepts countries with unresolved territorial issues.  To be fair, some countries’ strategic importance made NATO turn a blind eye to that kind of dispute, as happened in 1951, when Turkey and Greece were invited to join.  But it is not going to happen to a Ukraine that is unfortunate enough to have a nuclear-armed Russia as its adversary.  Bringing Ukraine into the alliance with its simmering conflict in the Eastern regions and an annexed Crimea would factually mean NATO declaring war against Russia, under its obligations according to an Article 5 of the North Atlantic Treaty.  Clearly, no one is ready for this scenario.

Thus, Kiev must manage its expectations and not fan them among Ukrainians.  Instead, it must concentrate on the strengthening of its democratic institutions and fighting a decisive war on corruption that slows down the country’s development and damages its credibility. 

All in all, there is no doubt that the mutual strategy in the triangle NATO-Russia-Ukraine must change to prevent any further escalation of tension in Europe.  It is not an easy task, and even if NATO slows down its pace of enlargement, as is highly probable that it will, there is no guarantee that this would pacify Russia.  Luckily, NATO countries possess an arsenal of economic and diplomatic measures to deter Russia’s unpredictable reactions. 



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