Posts Tagged privateering

Industry Talk: Offense Industry In Syria?


The deal is distinct from the common practice of oil majors and other corporations outsourcing security in hot spots in the Middle East and elsewhere. Under the contract, the wells are not just to be guarded, but to be captured first, the article said.

“The arrangement returns to the times of Francis Drake and Cecil Rhodes,” it noted, referring to two figures from British history whose careers mixed warfare and private profit.-NYT

A couple years back, I came up with a concept that more accurately described the type of contracts PMSC’s were conducting in the war. Current contracts are more or less classified as ‘Defense Industry’, where companies profit from the defense of a client and their property. This kind of contract is more favorable because it is not geared towards destroying the enemy. You actually want the enemy to stick around so you don’t work yourself out of a job. lol

The second type of scheme is ‘Offense Industry’. Basically we are talking about contracts where a company profits from the destruction of a client’s enemy and their property. If XYZ company destroys ISIS, then they are payed 50 billion dollars for example. In my post about it, I brought up past examples of offense industry–like privateering.

Fast forward to today’s news coming out of Syria. According to the news site Fontanka, there is an offense industry contract that has been arranged between Syria and several Russian PMSC’s. Here is the quote from the NYT’s article on it:

So far, two Russian companies are known to have received contracts under the new policy, according to the reports: Evro Polis, which is set to receive profits from oil and gas wells it seizes from the Islamic State using contract soldiers, and Stroytransgaz, which signed a phosphate-mining deal for a site that was under militant control at the time.
The agreements, made with the Syrian government, are seen as incentives for companies affiliated with Russian security contractors, who reportedly employ about 2,500 soldiers in the country, to push the Islamic State, also known as ISIS or ISIL, out of territory near Palmyra, in central Syria.
Most Middle Eastern wars are suspected of having some variant of this deal, but it is seldom made as explicit as in the Russian contracts.
“It’s all very simple,” Ivan P. Konovalov, director of the Center for Strategic Trends Studies, said by telephone of the deals, struck in December but just recently reported. “If a company provides security, then the country getting that service should pay. It doesn’t matter how the payment is made.”
In the petroleum deal, Evro Polis, a corporation formed last summer, will receive a 25 percent share of oil and natural gas produced on territory it captures from the Islamic State, the news site Fontanka.ru reported.

This contract is not just about defending a client’s asset. This first requires these companies to conduct offensive operations and seize this territory, and then defend it! That is a big difference and greatly adds to the risk of these types of contracts. But there is a big reward if they can take it.

It is that reward mechanism that creates an incentive for an investor to put so much into something like this. It is why investors put so much money into privateering vessels during the Revolutionary War and War of 1812 in the US–they were ‘incentivized’. But they also had a legal contract with the backing of the US Constitution and congress in the form of a Letter of Marque. I have not seen such legal protections talked about in this article by the NYT or Fontanka. Although I have to imagine the backroom dealings on this would be pretty comprehensive.

A final thought on this is that I held back on putting this story up at first. I do not have the resources to go to Syria and confirm all of this. So these forces might be legitimate Russian PMSC’s, or they might be just Russian special operations dressed up to be PMSC’s (little green men anyone?). I have written about PMC Wagner in the past, as well as the Slovanic Corps and the story always seems to be a little different that what was reported. There are a lot of groups out there pushing agendas and trying to trade up the chain as they say. So are we seeing the beginnings of new offense industry in Syria? We will see where this goes…. –Matt

 

Russian EOD personnel in Palmyra, Syria. -NBC

Russia Deploys a Potent Weapon in Syria: The Profit Motive
By ANDREW E. KRAMER
JULY 5, 2017
The Kremlin is bringing a new weapon to the fight against the Islamic State militant group in Syria, using market-based incentives tied to oil and mining rights to reward private security contractors who secure territory from the extremists, Russian news outlets have reported.
So far, two Russian companies are known to have received contracts under the new policy, according to the reports: Evro Polis, which is set to receive profits from oil and gas wells it seizes from the Islamic State using contract soldiers, and Stroytransgaz, which signed a phosphate-mining deal for a site that was under militant control at the time.
The agreements, made with the Syrian government, are seen as incentives for companies affiliated with Russian security contractors, who reportedly employ about 2,500 soldiers in the country, to push the Islamic State, also known as ISIS or ISIL, out of territory near Palmyra, in central Syria.
Most Middle Eastern wars are suspected of having some variant of this deal, but it is seldom made as explicit as in the Russian contracts.
“It’s all very simple,” Ivan P. Konovalov, director of the Center for Strategic Trends Studies, said by telephone of the deals, struck in December but just recently reported. “If a company provides security, then the country getting that service should pay. It doesn’t matter how the payment is made.”
In the petroleum deal, Evro Polis, a corporation formed last summer, will receive a 25 percent share of oil and natural gas produced on territory it captures from the Islamic State, the news site Fontanka.ru reported.
The website has a record of accurately reporting about private security companies in Russia, and just last month Washington appeared to corroborate one of its earlier reports by imposing sanctions on a Russian whose activities first came to light in the publication.
Fontanka’s latest article on the topic, published last week, detailed how Evro Polis was cooperating with a shadowy Russian private security group called Wagner, which American sanctions suggest has also provided contract soldiers to the war in Ukraine.
The deal is distinct from the common practice of oil majors and other corporations outsourcing security in hot spots in the Middle East and elsewhere. Under the contract, the wells are not just to be guarded, but to be captured first, the article said.

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Books: The Privateering Stroke, By Capt. Michael Rustein

Henry Adams stated flatly that “the privateers contributed more than the regular navy to bring about a disposition for peace in the British classes most responsible for the war.”

For those of you that have been following along with the blog’s focus on privateering, letter of marque and reprisal, and offense industry, then you will know why this book would interest me. I have not had a chance to check it out yet, but from the sounds of it, it was written by a privateering ‘maven‘.

The author has actually built a schooner called the Fame, based on the first privateering vessel to capture a prize during the War of 1812. He has written several books on the subject and even has a business that teaches the public the history and the workings of a privateer vessel. I would say that would be defined as pretty passionate about the subject. lol

Probably the most interesting aspect of this book from the description below, is the author’s focus on how important privateers really were during the war. This was the ultimate in old school privatized warfare and offense industry in overdrive.

An entire industry focused on attacking the weakness of an enemy, and Britain’s weakness was their commerce/trade. There is no way our navy and privateers could have taken on the Royal Navy directly, so instead we did like most small disadvantaged forces would do in that situation, and attacked their poorly defended commerce/trade. Check this quote out.

Deprived of customs duties, the United States government was in dire straits by the end of 1814. Had the conflict continued, the nation would have been incapable of defending itself without a central bank, new taxes, and conscription. Meanwhile, America’s privateers were waging a highly effective war against British trade. They captured an estimated 2,000 prizes worth $40 million, sent insurance rates to unprecedented levels, and drove up prices at a time when Britain’s economy was groaning under the strain of two decades of warfare. The British public was outraged; merchants bombarded the government with protests and appeals. With the United States incapable of maintaining the initiative in Canada, privateering became the nation’s last, best, and only offensive weapon. 

Pretty neat and this book would be another good one to check out. Especially if you are a student of ‘offense industry’ or are interested in the letter of marque concept. This would also be a good read for those of you interested in naval history and guerrilla warfare. –Matt

The Privateering Stroke

By Capt. Michael Rustein
Book Description
Publication Date: March 25, 2012
High school and even college textbooks oversimplify the War of 1812 — when they don’t ignore it completely. Popular histories emphasize the military as opposed to the economic and political aspects of the war. The U.S. Navy’s role has been written about ad nauseum. Meanwhile, we are still waiting for a definitive work on the equally important contributions of American privateers. While the Navy’s outstanding performance in single-ship engagements remains a source of national pride, those victories did not change the course of the war one iota. Had Constitution defeated a dozen British frigates, the thousand-ship Royal Navy would still have blockaded our coasts, strangled our commerce, bottled up our warships, and hunted down those that escaped. Even her former commander, Tyrone Martin, conceded that Constitution’s victories were “no more than pin pricks” that “had no direct effect on the course of the war.”

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Quotes: Secretary William L Marcy On The Paris Declaration And Privateering, 1856

Lately I have been delving into privateering history, and Secretary of State William L Marcy comes up now and again. Even John Arquilla was quoting stuff about Marcy in some of his work, so I thought it would be cool to do some digging.

I was able to find an old article written about Marcy’s mission to the Congress of Paris, and the debates he was having with the other members of that congress about the terms of the Paris Declaration Respecting Maritime Law. This of course is the treaty that banned privateering.

With that said, Secretary Marcy is the reason why the US is ‘not’ a signatory of this treaty.  His reasons were pretty simple as the quote below says.  Privateering is a tool of warfare that smaller sovereigns can use, that lack the resources for creating navies that can compete with the larger countries with more powerful navies. It was the great equalizer of the time, and the US was not about to give up that tool of warfare.

Privateering is also an ‘offense industry’ that creates an industry that attacks weakness with strength (Sun Tzu). That ‘weakness’ is a poorly defended and dispersed commerce (and logistics/source of wealth) of an enemy, and the ‘strength’ is an industry that only grows with each prize that it captures. (today’s piracy is a prime example)

The strength does not come from one vessel, but of thousands of vessels, all hunting and canvassing the seas, looking for their prey. And all of these vessels are competing with each other over enemy prizes. The successful privateers grow their fleets and expand upon their winning strategies, while the competitors of these successful privateers watch and learn and try to mimic what they are doing to be equally successful.

This system of free market warfare also works well with The New Rules of War that John Arquilla and David Ronfeldt put together.(watch this video about the concept) That privateers are the ‘small and many’, that go up against the enemy’s ‘large and few’.  Privateers also fit well within the concept of ‘swarming’, because privateers do not set out in large battle groups or flotillas–they attack from all and any directions in small groups, and at the time and choosing of each individual privateer. There is no large navy, for a large navy to attack….

Although under the swarming concept, this industry kind of shuns large companies to do this.  A swarm has to be cost effective, if it is to be done by a single privateer company. Most would prefer to go after low hanging fruit or easy prizes. But if the money was there, swarming could easily be cost effective. Today’s pirates are experimenting with swarming and the market will determine if this is a profitable venture.

On the other hand, an industry of thousands of privateers versus the commerce of an enemy totally presents itself as a swarm. No one controls it’s actions, it attacks when and where it wants. There is no admiral directing the attacks of all of these vessels, and that is what makes it a unique attack group. The only controls in this type of industry, are a simple Letter of Marque.

Most of all, the concept of ‘finding’ works really well with privateers, because each private vessel is purely focused on ‘finding’ prizes. Their livelihood depends upon it, and those captains that are best at finding prizes, wins. Investors hire them specifically because of their success rates, and they depend upon these captains for profit. An example would be commercial fishermen, and how important a good captain is for finding fish and to covering the costs of investment–both internal and external.

All of these attributes combined, is what makes privateering an asset for nations. Secretary Marcy knew this as well, and our leaders knew this when they decided not to be a signatory to the Paris Declaration.

Finally, I mentioned before that private industry was important during times of war, because this nation uses an All Volunteer Military system. The problem with this system is that during the post war era, a citizenry demands a peace dividend, and their politicians give it to them. The military is then reduced in size and cost, and everyone is happy–until another ‘9/11’ happens.  And then we must go to war with the military we have, and not the one we wished we had.

Or during that war, it becomes unpopular for whatever reason–like it drags on and on, or there is an uptick in deaths, or the economy is doing well.  Finding volunteers during those times is tough. Or when a nation’s war plans becomes a victim of politics, with changing leadership or alliances crumbling because of issues in their home countries, and manpower issues arise during those time periods.

Man power requirements are always changing during a war, and war planners and politicians need tools to meet the needs of those changing man power requirements. Using privateers and private industry during times of war is a tool that gives our leaders the means to deal with the ups and downs, beginnings and ends of war or multiple wars. Private industry is what makes an All Volunteer Military work in this kind of environment, pure and simple. I think Secretary Marcy and others realized this back then about privateering, and today’s leaders realize how important private industry is for our current and future wars. –Matt

*For an excellent history about the Paris Declaration and why the US did not sign it, check out this downloadable book.  It is called “The Abolition of Privateering and the Declaration of Paris”, written in 1887 by Francis Raymond Stark.

 

 

They tell us, “reserving the right to make what havoc our overgrown navies may choose to inflict upon your tempting commerce, we demand that you exempt our commerce from the only means of retaliation you possess, the system of privateering.”
We reply, “The terms are unfair. Equalize them by declaring your public and our private armed vessels under the same prohibitory rule, and we are with you. Otherwise, we are constrained to deny that privateering is or ought to be abolished.”

 

quote of Secretary William L. Marcy, about the Congress of Paris and terms of treaty, August 12, 1856.

 

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Publications: Structuring A Sustainable Letters Of Marque Regime, By Lieutenant Todd Hutchins

A big hat tip to David Isenberg for finding this paper and writing an excellent article about it. Also bravo to the California Law Review for publishing this paper and hopefully between this site and David’s, we can really promote this thing. I am always on the lookout for modern legal interpretations of, and the possible uses for the LoM.

It is also cool that the author of this paper is an officer in the US Navy and a current JAG student. Maybe he can come up and talk a little about any feedback he has received for this paper, and the reason why he chose this particular topic.

Now for a couple of points of interest. Lt. Hutchins is more focused on an international LoM system, as opposed to countries issuing LoM’s. You know, I don’t think this approach would work, just because personally speaking, I would rather answer to the laws and customs of my own country versus answering to an international court. What is to prohibit any biases towards me and my nationality in such a international court?  So personally, I would much rather have a LoM issued by a country whose legal system I trust and would give me the best odds in a trial of my peers–from my country.

I still think companies would seek an internationally issued LoM. Especially if the profit margin was there. If it is not, then the risk will definitely not equal the reward and this industry will not thrive. You really need to make the enemy into the ‘Blufin Tuna’ or ‘Buffalo’ of prizes.

Which brings me to my next point. Offense Industry requires a strong profit motive for the destruction or capture of a declared enemy. The reward must equal or be greater than the risk in this case. I tend to lean towards greater than the risk, just because we want extreme competition for this highly valuable enemy.

So the question with this is if the enemy has enough assets that can be seized and decided upon in a prize court. The guys with the money are on land or hiding out in Dubai or wherever. How will a company be able to seize their assets on the international stage?

Now privateers like Captain Morgan did do land raids to capture enemies and their assets. He was quite successful at it, and if we were to target Somali pirates, then allowing companies to raid wealthy Somali investors in Somalia or elsewhere would be key. But then that would require special agreements with those countries that these investors are hiding in. The LoM would have to be very specific and comprehensive in this regard.

Or, the issuing party could throw in bounties and create a false market out of the whole thing. To artificially attach value to these targets, as well as allow companies to seize assets. That to me would be optimum, just because you really have to sweeten the pot for companies to get involved with this thing. Perhaps the 10 percent that governments would receive via prize courts, would go back into the pot for bounties and costs of running prize courts?  Raising money for bounties is a factor when creating artificial values of targets.

I also applaud the author for identifying how expensive the current Defense Industry is for maritime security. I have mentioned in the past that DI’s are costly, and they do nothing to eliminate the problem. If anything, DI’s profit from the continuation of war or piracy, and it is against the best interest of these participants to remove the very thing that gives them their reason for existence. But DI’s have their place, and I believe that in order to reduce the costs of DI, you need to also implement an offensive capability. You will always need guards to protect that in which you love, but you must also have a force tasked with hunting the bad guys–to keep them off balance and put them on the defense. And ultimately, you would like to make piracy into a very unprofitable game for all parties thinking about getting into that business.

Finally, I would like to add one more deal to this review, just to emphasize the significance of profit and reward in warfare. This quote comes from Sun Tzu.

Now in order to kill the enemy, our men must be roused to anger; that there may be advantage from defeating the enemy, they must have their rewards…Therefore in chariot fighting, when ten or more chariots have been taken, those should be rewarded who took the first. Our own flags should be substituted for those of the enemy, and the chariots mingled and used in conjunction with ours. The captured soldiers should be kindly treated and kept….This is called, using the conquered foe to augment one’s own strength.- Paragraphs 16, 17, 18, Chapter 2, ‘Waging War’.

Even Sun Tzu understood the value of reward in war.  Might I add that the interpretation of ‘rewards’ refers to spoils, and not some ideological reward of just ‘winning’. Although that has it’s place for incentive, but feeling good about a win does not pay the bills as they say. lol

I should also note that Sun Tzu also delved into the concept of the cost of protracted war. It is expensive, and if there is no element of a strategy focused on eliminating an enemy, and industry is only used for defense, then the costs will continue to drain the treasures of those nations and companies with interest in the matter.

There is no instance of a country having benefited from prolonged warfare…It is only one who is thoroughly acquainted with the evils of war that can thoroughly understand the profitable way of carrying it on. –Paragraphs 6,7, Chapter 2, ‘Waging War’.

That pretty much sums up why wars should be fought as quickly as possible, and why there should be thought about creating an industry that profits from ending it, and not ‘carrying it on’. Something to give balance or even counter strong DI’s that come about from prolonged warfare. –Matt

 

 

Structuring A Sustainable Letters Of Marque Regime: How Commissioning Privateers Can Defeat the Somali Pira…

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Letter Of Marque: Understanding Offense Industry– Law Enforcement And Asset Forfeiture

This is cool. I found this older article about how asset forfeiture is benefiting the law enforcement offices of the southern states of the US.  These are the states that border Mexico and have the highest probability of drug money smuggling.  But I also look at this practice from an Offense Industry point of view, and also from a privateering/Letter of Marque and Reprisal point of view.

Actually, if you look at what these officers are really involved with, this is just another form of legalized piracy. lol  They are arresting a criminal, and taking a prize in the form of confiscated drug money or hard assets like planes and automobiles.

And get this, the states are giving these law enforcement agencies the license or legal authority to do so. Most importantly, the federal government is supporting the act nationally. In the article below this, I posted an excerpt from the US Marshal’s page about their Asset Forfeiture Program. It is a program where local police departments can help the Department of Justice and their various ‘crack downs’ on criminals, and if there are any asset seizures during those operations, that those departments get a cut of the loot or prize.

Matter of fact, the DoJ acts like an admiralty court here, and determines the amount that the departments get and if the seizure was ‘legal’.  And then when that amount is settled upon, they use an electronic funds transfer program called ‘e-share’ to give the various departments their cut.  Pretty slick, and this is an excellent model on how modern day privateering could work.  E-share is a technological solution to getting the ‘sailors (police) their cut of the loot’, as opposed to them selling their ‘prize tickets’ on the dock.

Now I also wanted to point out that the very thing that gives concern to NPR with their study of law enforcement asset forfeiture. Here is a quote:

What are some of the rules of asset forfeiture? Federal and state laws, in general, say that a law enforcement agency that seizes assets may not “supplant” its own budget with confiscated funds, nor should “the prospect of receiving forfeited funds … influence relative priorities of law enforcement agencies.
NPR has found examples, mainly in the South, in which both of these things have happened.

Or basically, the fear is that law enforcement agencies will care more about going after drug money, and less about the ‘other’ duties of law enforcement. Perhaps this is why asset seizure should be a private industry game, just so police departments are not entirely focused on asset forfeiture?

The other fear with police asset forfeiture is budgetary funding for those departments. If a police department gets less tax payer funding because they are extremely successful at asset forfeiture, then now that department becomes dependent on asset forfeiture as a funding mechanism.  State and city budget offices will become less inclined to fund a wealthy department, and a police department’s success in asset forfeiture could easily be their downfall. It could potentially turn a police department into more of a privateer company, and the other less profitable crime fighting activities become a secondary priority next to asset seizure.

So that is why I think asset seizure or privateering should be left in the hands of licensed companies who do not have the extra duties of basic law enforcement. And if local police departments were somehow brought into the venture of privateering as either monitors or issuing licenses, or even allowed to moonlight in privateer companies, then that is how a local department could benefit. Or some kind of tax must be paid for every asset taken in order to make this a mutually beneficial industry. You want the local cops cheering on privateer companies, not bashing them–so give them a cut, or allow them to work in those companies.

So with modern day privateering for taking drug cartel assets, the local cop shop should benefit, the state should benefit, and the federal government should benefit–all by getting a percentage of the prize.  But the privateer company should benefit the most, just because they are the ones that put in the hard work for finding and seizing those assets. I think the city/state/feds should split ten percent and enjoy the reduction in crime, and the companies should get ninety percent of whatever amount.  Ninety percent fits in with the percentages of yesteryear. Anything less, and the risk of taking on these criminal elements becomes too great.

The rule with offense industry is the reward must outweigh the risks for it to work and flourish. With law enforcement, they are totally enjoying the rewards of their work, and that is great. But the risk of them being too focused on this kind of activity, and not enough on the other aspects of law enforcement in their communities is equally as great. Likewise, a department is not able in some cases to totally focus all of their efforts on asset seizure, because they do have other duties. Perhaps private industry is the better choice for this kind of activity? The overall point is this kind of offense industry is an excellent study for modern day privateering, and it is all food for thought. –Matt

 

Courtesy of the Kingsville Police Department Investigator Mike Tamez of the Kingsville Police Department shows off the $1 million he discovered in a hidden compartment of a Land Rover in January 2008.

Seized Drug Assets Pad Police Budgets
by John Burnett
June 16, 2008
Every year, about $12 billion in drug profits returns to Mexico from the world’s largest narcotics market — the United States. As a tactic in the war on drugs, law enforcement pursues that drug money and is then allowed to keep a portion as an incentive to fight crime.
As a result, the amount of drug dollars flowing into local police budgets is staggering. Justice Department figures show that in the past four years alone, the amount of assets seized by local law enforcement agencies across the nation enrolled in the federal program—the vast majority of it cash—has tripled, from $567 million to $1.6 billion. And that doesn’t include tens of millions more the agencies got from state asset forfeiture programs.
In Texas, with its smuggling corridors to Mexico, public safety agencies seized more than $125 million last year.
While drug-related asset forfeitures have expanded police budgets, critics say the flow of money distorts law enforcement — that some cops have become more interested in seizing money than drugs, more interested in working southbound than northbound lanes.

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Letter Of Marque: Thomas Jefferson On Privateering, July 4, 1812

Today is the birthday of Thomas Jefferson, and I thought it would be cool to post his original paper on the concept of privateering, and why it should be used during the War of 1812.  I plan to link to this page often in the future, when ever I talk about the history of the concept and how important it was to the US strategy back then.

The other thing I wanted to point out is the article written in 1882 about the paper that Thomas Jefferson wrote, and the statistics the author presented. I have not seen these statistics before, and they are pretty interesting.  Of course the author of the article was certainly impressed with the concept of privateering and it’s effects on an enemy. The author made this point in the article, that really stuck out for me. That the British were certainly concerned about American privateers:

One at least of the London journals, the Statesman, foresaw the danger from privateers in 1812. When war was threatened, it said: “America cannot certainly pretend to wage a maritime war with us.  She has no navy to do it with.  But America has nearly a hundred thousand as good seamen as any in the world, all of whom would be actively employed against our trade on every part of the ocean, in their fast-sailing ships of war, many of which will be able to cope with our small cruisers; and they will be found to be sweeping the West India seas, and even carrying desolation into the chops of the Channel.”
All this, and more, the two hundred and fifty privateers accomplished.  They cruised in every sea, and wrought such havoc with British commerce as had never been known before.  Coggeshall’s history of the service enumerates about fifteen hundred prizes taken by them in the two and a half years of war, and these were not all of the captures by privateers alone; while the government war-vessels, in their cruises, added considerably to the number.  The fortunes of the privateers were of the most varied kind.  Some of them made long cruises without falling in with a single British merchantman of which they could make a prize.  Others took enough to enrich every man of the crew.

Very cool stuff and there is way more in this old, but extremely informative article. Check it out. –Matt


Thomas Jefferson On Privateering
July 4, 1812
“What is war?  It is simply a contest between nations of trying which can do the other the most harm.  Who carries on the war?  Armies are formed and navies manned by individuals.  How is a battle gained?  By the death of individuals.  What produces peace?  The distress of individuals.  What difference to the sufferer is it that his property is taken by a national or private armed vessel?  Did our merchants, who have lost nine hundred and seventeen vessels by British captures, feel any gratification that the most of them were taken by his Majesty’s men-of-war?  Were the spoils less rigidly exacted by a seventy-four-gun ship than by a privateer of four guns?  And were not all equally condemned? Read the rest of this entry »

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