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Taking Stock of WikiLeaks

2010-12-26T16:07:00.000-06:00

By George Friedman

December 14, 2010

Julian Assange has declared that geopolitics will be separated into pre-“Cablegate” and post-“Cablegate” eras. That was a bold claim. However, given the intense interest that the leaks produced, it is a claim that ought to be carefully considered. Several weeks have passed since the first of the diplomatic cables were released, and it is time now to address the following questions: First, how significant were the leaks? Second, how could they have happened? Third, was their release a crime? Fourth, what were their consequences? Finally, and most important, is the WikiLeaks premise that releasing government secrets is a healthy and appropriate act a tenable position?

Let’s begin by recalling that the U.S. State Department documents constituted the third wave of leaks. The first two consisted of battlefield reports from Iraq and Afghanistan. Looking back on those as a benchmark, it is difficult to argue that they revealed information that ran counter to informed opinion. I use the term “informed opinion” deliberately. For someone who was watching Iraq and Afghanistan with some care over the previous years, the leaks might have provided interesting details but they would not have provided any startling distinction between the reality that was known and what was revealed. If, on the other hand, you weren’t paying close attention, and WikiLeaks provided your first and only view of the battlefields in any detail, you might have been surprised.

Let’s consider the most controversial revelation, one of the tens of thousands of reports released on Iraq and Afghanistan and one in which a video indicated that civilians were deliberately targeted by U.S. troops. The first point, of course, is that the insurgents, in violation of the 1949 Geneva Conventions, did not go into combat wearing armbands or other distinctive clothing to distinguish themselves from non-combatants. The Geneva Conventions have always been adamant on this requirement because they regarded combatants operating under the cover of civilians as being responsible for putting those civilians in harm’s way, not the uniformed troops who were forced to distinguish between combatants and non-combatants when the combatants deliberately chose to act in violation of the Geneva Conventions.

It follows from this that such actions against civilians are inevitable in the kind of war Iraqi insurgents chose to wage. Obviously, this particular event has to be carefully analyzed, but in a war in which combatants blend with non-combatants, civilian casualties will occur, and so will criminal actions by uniformed troops. Hundreds of thousands of troops have fought in Iraq, and the idea that criminal acts would be absent is absurd. What is most startling is not the presence of potentially criminal actions but their scarcity. Anyone who has been close to combat or who has read histories of World War II would be struck not by the presence of war crimes but by the fact that in all the WikiLeaks files so few potential cases are found. War is controlled violence, and when controls fail — as they inevitably do — uncontrolled and potentially criminal violence occurs. However, the case cited by WikiLeaks with much fanfare did not clearly show criminal actions on the part of American troops as much as it did the consequences of the insurgents violating the Geneva Conventions.

Only those who were not paying attention to the fact that there was a war going on, or who had no understanding of war, or who wanted to pretend to be shocked for political reasons, missed two crucial points: It was the insurgents who would be held responsible for criminal acts under the Geneva Conventions for posing as non-combatants, and there were extraordinarily few cases of potential war crimes that were contained in the leaks.

The diplomatic leaks are similar. There is precious little that was revealed that was unknown to the informed observer. For example, anyone reading STRATFOR knows we have argued that it was not only the Israelis but also the Saudis that were most concerned about Iranian power and most insistent that the United States do something about it. While the media treated this as a significant revelation, it required a profound lack of understanding of the geopolitics of the Persian Gulf to regard U.S. diplomatic cables on the subject as surprising.

U.S. Defense Secretary Robert Gates’ statement in the leaks that the Saudis were always prepared to fight to the last American was embarrassing, in the sense that Gates would have to meet with Saudi leaders in the future and would do so with them knowing what he thinks of them. Of course, the Saudis are canny politicians and diplomats and they already knew how the American leadership regarded their demands.

There were other embarrassments also known by the informed observer. Almost anyone who worries about such things is aware that Italian Prime Minister Silvio Berlusconi is close to the Russians and likes to party with young women. The latest batch of leaks revealed that the American diplomatic service was also aware of this. And now Berlusconi is aware that they know of these things, which will make it hard for diplomats to pretend that they don’t know of these things. Of course, Berlusconi was aware that everyone knew of these things and clearly didn’t care, since the charges were all over Italian media.

I am not cherry-picking the Saudi or Italian memos. The consistent reality of the leaks is that they do not reveal anything new to the informed but do provide some amusement over certain comments, such as Russian Prime Minister Vladimir Putin and President Dmitri Medvedev being called “Batman and Robin.” That’s amusing, but it isn’t significant. Amusing and interesting but almost never significant is what I come away with having read through all three waves of leaks.

Obviously, the leaks are being used by foreign politicians to their own advantage. For example, the Russians feigned shock that NATO would be reassuring the Balts about defense against a potential Russian invasion or the Poles using the leaks to claim that solid U.S.-Polish relations are an illusion. The Russians know well of NATO plans for defending the Baltic states against a hypothetical Russian invasion, and the Poles know equally well that U.S.-Polish relations are complex but far from illusory. The leaks provide an opportunity for feigning shock and anger and extracting possible minor concessions or controlling atmospherics. They do not, however, change the structure of geopolitics.

Indeed, U.S. diplomats come away looking sharp, insightful and decent. While their public statements after a conference may be vacuous, it is encouraging to see that their read of the situation and of foreign leaders is unsentimental and astute. Everything from memos on senior leaders to anonymous snippets from apparently junior diplomats not only are on target (in the sense that STRATFOR agrees with them) but are also well-written and clear. I would argue that the leaks paint a flattering picture overall of the intellect of U.S. officials without revealing, for the most part, anything particularly embarrassing.

At the same time, there were snarky and foolish remarks in some of the leaks, particularly personal comments about leaders and sometimes their families that were unnecessarily offensive. Some of these will damage diplomatic careers, most generated a good deal of personal tension and none of their authors will likely return to the countries in which they served. Much was indeed unprofessional, but the task of a diplomat is to provide a sense of place in its smallest details, and none expect their observations ever to be seen by the wrong people. Nor do nations ever shift geopolitical course over such insults, not in the long run. These personal insults were by far the most significant embarrassments to be found in the latest release. Personal tension is not, however, international tension.

This raises the question of why diplomats can’t always simply state their minds rather than publicly mouth preposterous platitudes. It could be as simple as this: My son was a terrible pianist. He completely lacked talent. After his recitals at age 10, I would pretend to be enthralled. He knew he was awful and he knew I knew he was awful, but it was appropriate that I not admit what I knew. It is called politeness and sometimes affection. There is rarely affection among nations, but politeness calls for behaving differently when a person is in the company of certain other people than when that person is with colleagues talking about those people. This is the simplest of human rules. Not admitting what you know about others is the foundation of civilization. The same is true among diplomats and nations.

And in the end, this is all I found in the latest WikiLeaks release: a great deal of information about people who aren’t American that others certainly knew and were aware that the Americans knew, and now they have all seen it in writing. It would take someone who truly doesn’t understand how geopolitics really works to think that this would make a difference. Some diplomats may wind up in other postings, and perhaps some careers will be ended. But the idea that this would somehow change the geopolitics of our time is really hard to fathom. I have yet to see Assange point to something so significant that that it would justify his claim. It may well be that the United States is hiding secrets that would reveal it to be monstrous. If so, it is not to be found in what has been released so far.

There is, of course, the question of whether states should hold secrets, which is at the root of the WikiLeaks issue. Assange claims that by revealing these secrets WikiLeaks is doing a service. His ultimate maxim, as he has said on several occasions, is that if money and resources are being spent on keeping something secret, then the reasons must be insidious. Nations have secrets for many reasons, from protecting a military or intelligence advantage to seeking some advantage in negotiations to, at times, hiding nefarious plans. But it is difficult to imagine a state — or a business or a church — acting without confidentiality. Imagine that everything you wrote and said in an attempt to figure out a problem was made public? Every stupid idea that you discarded or clueless comment you expressed would now be pinned on you. But more than that, when you argue that nations should engage in diplomacy rather than war, taking away privacy makes diplomacy impossible. If what you really think of the guy on the other side of the table is made public, how can diplomacy work?

This is the contradiction at the heart of the WikiLeaks project. Given what I have read Assange saying, he seems to me to be an opponent of war and a supporter of peace. Yet what he did in leaking these documents, if the leaking did anything at all, is make diplomacy more difficult. It is not that it will lead to war by any means; it is simply that one cannot advocate negotiations and then demand that negotiators be denied confidentiality in which to conduct their negotiations. No business could do that, nor could any other institution. Note how vigorously WikiLeaks hides the inner workings of its own organization, from how it is funded to the people it employs.

Assange’s claims are made even more interesting in terms of his “thermonuclear” threat. Apparently there are massive files that will be revealed if any harm comes to him. Implicit is the idea that they will not be revealed if he is unharmed — otherwise the threat makes no sense. So, Assange’s position is that he has secrets and will keep them secret if he is not harmed. I regard this as a perfectly reasonable and plausible position. One of the best uses for secrets is to control what the other side does to you. So Assange is absolutely committed to revealing the truth unless it serves his interests not to, in which case the public has no need to know.

It is difficult to see what harm the leaks have done, beyond embarrassment. It is also difficult to understand why WikiLeaks thinks it has changed history or why Assange lacks a sufficient sense of irony not to see the contradiction between his position on openness and his willingness to keep secrets when they benefit him. But there is also something important here, which is how this all was leaked in the first place.

To begin that explanation, we have to go back to 9/11 and the feeling in its aftermath that the failure of various government entities to share information contributed to the disaster. The answer was to share information so that intelligence analysts could draw intelligence from all sources in order to connect the dots. Intelligence organizations hate sharing information because it makes vast amounts of information vulnerable. Compartmentalization makes it hard to connect dots, but it also makes it harder to have a WikiLeaks release. The tension between intelligence and security is eternal, and there will never be a clear solution.

The real issue is who had access to this mass of files and what controls were put on them. Did the IT department track all external drives or e-mails? One of the reasons to be casual is that this was information that was classified secret and below, with the vast majority being at the confidential, no-foreign-distribution level. This information was not considered highly sensitive by the U.S. government. Based on the latest trove, it is hard to figure out how the U.S. government decides to classify material. But it has to be remembered that given their level of classification these files did not have the highest security around them because they were not seen as highly sensitive.

Still, a crime occurred. According to the case of Daniel Ellsberg, who gave a copy of the Pentagon Papers on Vietnam to a New York Times reporter, it is a crime for someone with a security clearance to provide classified material for publication but not a crime for a publisher to publish it, or so it has become practice since the Ellsberg case. Legal experts can debate the nuances, but this has been the practice for almost 40 years. The bright line is whether the publisher in any way encouraged or participated in either the theft of the information or in having it passed on to him. In the Ellsberg case, he handed it to reporters without them even knowing what it was. Assange has been insisting that he was the passive recipient of information that he had nothing to do with securing.

Now it is interesting whether the sheer existence of WikiLeaks constituted encouragement or conspiracy with anyone willing to pass on classified information to him. But more interesting by far is the sequence of events that led a U.S. Army private first class not only to secure the material but to know where to send it and how to get it there. If Pfc. Bradley Manning conceived and executed the theft by himself, and gave the information to WikiLeaks unprompted, Assange is clear. But anyone who assisted Manning or encouraged him is probably guilty of conspiracy, and if Assange knew what was being done, he is probably guilty, too. There was talk about some people at MIT helping Manning. Unscrambling the sequence is what the Justice Department is undoubtedly doing now. Assange cannot be guilty of treason, since he isn’t a U.S. citizen. But he could be guilty of espionage. His best defense will be that he can’t be guilty of espionage because the material that was stolen was so trivial.

I have no idea whether or when he got involved in the acquisition of the material. I do know — given the material leaked so far — that there is little beyond minor embarrassments contained within it. Therefore, Assange’s claim that geopolitics has changed is as false as it is bold. Whether he committed any crime, including rape, is something I have no idea about. What he is clearly guilty of is hyperbole. But contrary to what he intended, he did do a service to the United States. New controls will be placed on the kind of low-grade material he published. Secretary of Defense Gates made the following point on this:

“Now, I’ve heard the impact of these releases on our foreign policy described as a meltdown, as a game-changer, and so on. I think those descriptions are fairly significantly overwrought. The fact is, governments deal with the United States because it’s in their interest, not because they like us, not because they trust us, and not because they believe we can keep secrets. Many governments — some governments — deal with us because they fear us, some because they respect us, most because they need us. We are still essentially, as has been said before, the indispensable nation.”
“Is this embarrassing? Yes. Is it awkward? Yes. Consequences for U.S. foreign policy? I think fairly modest.”

I don’t like to give anyone else the final word, but in this case Robert Gates’ view is definitive. One can pretend that WikiLeaks has redefined geopolitics, but it hasn’t come close.

The Real Struggle in Iran and Implications for U.S. Dialogue

2009-06-30T15:33:00.000-05:00

June 29, 2009
By George Friedman

Speaking of the situation in Iran, U.S. President Barack Obama said June 26, “We don’t yet know how any potential dialogue will have been affected until we see what has happened inside of Iran.” On the surface that is a strange statement, since we know that with minor exceptions, the demonstrations in Tehran lost steam after Iranian Supreme Leader Ayatollah Ali Khamenei called for them to end and security forces asserted themselves. By the conventional wisdom, events in Iran represent an oppressive regime crushing a popular rising. If so, it is odd that the U.S. president would raise the question of what has happened in Iran.

In reality, Obama’s point is well taken. This is because the real struggle in Iran has not yet been settled, nor was it ever about the liberalization of the regime. Rather, it has been about the role of the clergy — particularly the old-guard clergy — in Iranian life, and the future of particular personalities among this clergy.

Ahmadinejad Against the Clerical Elite

Iranian President Mahmoud Ahmadinejad ran his re-election campaign against the old clerical elite, charging them with corruption, luxurious living and running the state for their own benefit rather than that of the people. He particularly targeted Ali Akbar Hashemi Rafsanjani, an extremely senior leader, and his family. Indeed, during the demonstrations, Rafsanjani’s daughter and four other relatives were arrested, held and then released a day later.

Rafsanjani represents the class of clergy that came to power in 1979. He served as president from 1989-1997, but Ahmadinejad defeated him in 2005. Rafsanjani carries enormous clout within the system as head of the regime’s two most powerful institutions — the Expediency Council, which arbitrates between the Guardian Council and parliament, and the Assembly of Experts, whose powers include oversight of the supreme leader. Forbes has called him one of the wealthiest men in the world. Rafsanjani, in other words, remains at the heart of the post-1979 Iranian establishment.

Ahmadinejad expressly ran his recent presidential campaign against Rafsanjani, using the latter’s family’s vast wealth to discredit Rafsanjani along with many of the senior clerics who dominate the Iranian political scene. It was not the regime as such that he opposed, but the individuals who currently dominate it. Ahmadinejad wants to retain the regime, but he wants to repopulate the leadership councils with clerics who share his populist values and want to revive the ascetic foundations of the regime. The Iranian president constantly contrasts his own modest lifestyle with the opulence of the current religious leadership.

Recognizing the threat Ahmadinejad represented to him personally and to the clerical class he belongs to, Rafsanjani fired back at Ahmadinejad, accusing him of having wrecked the economy. At his side were other powerful members of the regime, including Majlis Speaker Ali Larijani, who has made no secret of his antipathy toward Ahmadinejad and whose family links to the Shiite holy city of Qom give him substantial leverage. The underlying issue was about the kind of people who ought to be leading the clerical establishment. The battlefield was economic: Ahmadinejad’s charges of financial corruption versus charges of economic mismanagement leveled by Rafsanjani and others.

When Ahmadinejad defeated Mir Hossein Mousavi on the night of the election, the clerical elite saw themselves in serious danger. The margin of victory Ahmadinejad claimed might have given him the political clout to challenge their position. Mousavi immediately claimed fraud, and Rafsanjani backed him up. Whatever the motives of those in the streets, the real action was a knife fight between Ahmadinejad and Rafsanjani. By the end of the week, Khamenei decided to end the situation. In essence, he tried to hold things together by ordering the demonstrations to halt while throwing a bone to Rafsanjani and Mousavi by extending a probe into the election irregularities and postponing a partial recount by five days.

The Struggle Within the Regime

The key to understanding the situation in Iran is realizing that the past weeks have seen not an uprising against the regime, but a struggle within the regime. Ahmadinejad is not part of the establishment, but rather has been struggling against it, accusing it of having betrayed the principles of the Islamic Revolution. The post-election unrest in Iran therefore was not a matter of a repressive regime suppressing liberals (as in Prague in 1989), but a struggle between two Islamist factions that are each committed to the regime, but opposed to each other.

The demonstrators certainly included Western-style liberalizing elements, but they also included adherents of senior clerics who wanted to block Ahmadinejad’s re-election. And while Ahmadinejad undoubtedly committed electoral fraud to bulk up his numbers, his ability to commit unlimited fraud was blocked, because very powerful people looking for a chance to bring him down were arrayed against him.

The situation is even more complex because it is not simply a fight between Ahmadinejad and the clerics, but also a fight among the clerical elite regarding perks and privileges — and Ahmadinejad is himself being used within this infighting. The Iranian president’s populism suits the interests of clerics who oppose Rafsanjani; Ahmadinejad is their battering ram. But as Ahmadinejad increases his power, he could turn on his patrons very quickly. In short, the political situation in Iran is extremely volatile, just not for the reason that the media portrayed.

Rafsanjani is an extraordinarily powerful figure in the establishment who clearly sees Ahmadinejad and his faction as a mortal threat. Ahmadinejad’s ability to survive the unified opposition of the clergy, election or not, is not at all certain. But the problem is that there is no unified clergy. The supreme leader is clearly trying to find a new political balance while making it clear that public unrest will not be tolerated. Removing “public unrest” (i.e., demonstrations) from the tool kits of both sides may take away one of Rafsanjani’s more effective tools. But ultimately, it actually could benefit him. Should the internal politics move against the Iranian president, it would be Ahmadinejad — who has a substantial public following — who would not be able to have his supporters take to the streets.

The View From the West

The question for the rest of the world is simple: Does it matter who wins this fight? We would argue that the policy differences between Ahmadinejad and Rafsanjani are minimal and probably would not affect Iran’s foreign relations. This fight simply isn’t about foreign policy.

Rafsanjani has frequently been held up in the West as a pragmatist who opposes Ahmadinejad’s radicalism. Rafsanjani certainly opposes Ahmadinejad and is happy to portray the Iranian president as harmful to Iran, but it is hard to imagine significant shifts in foreign policy if Rafsanjani’s faction came out on top. Khamenei has approved Iran’s foreign policy under Ahmadinejad, and Khamenei works to maintain broad consensus on policies. Ahmadinejad’s policies were vetted by Khamenei and the system that Rafsanjani is part of. It is possible that Rafsanjani secretly harbors different views, but if he does, anyone predicting what these might be is guessing.

Rafsanjani is a pragmatist in the sense that he systematically has accumulated power and wealth. He seems concerned about the Iranian economy, which is reasonable because he owns a lot of it. Ahmadinejad’s entire charge against him is that Rafsanjani is only interested in his own economic well-being. These political charges notwithstanding, Rafsanjani was part of the 1979 revolution, as were Ahmadinejad and the rest of the political and clerical elite. It would be a massive mistake to think that any leadership elements have abandoned those principles.

When the West looks at Iran, two concerns are expressed. The first relates to the Iranian nuclear program, and the second relates to Iran’s support for terrorists, particularly Hezbollah. Neither Iranian faction is liable to abandon either, because both make geopolitical sense for Iran and give it regional leverage.

Tehran’s primary concern is regime survival, and this has two elements. The first is deterring an attack on Iran, while the second is extending Iran’s reach so that such an attack could be countered. There are U.S. troops on both sides of the Islamic Republic, and the United States has expressed hostility to the regime. The Iranians are envisioning a worst-case scenario, assuming the worst possible U.S. intentions, and this will remain true no matter who runs the government.

We do not believe that Iran is close to obtaining a nuclear weapon, a point we have made frequently. Iran understands that the actual acquisition of a nuclear weapon would lead to immediate U.S. or Israeli attacks. Accordingly, Iran’s ideal position is to be seen as developing nuclear weapons, but not close to having them. This gives Tehran a platform for bargaining without triggering Iran’s destruction, a task at which it has proved sure-footed.

In addition, Iran has maintained capabilities in Iraq and Lebanon. Should the United States or Israel attack, Iran would thus be able to counter by doing everything possible destabilize Iraq — bogging down U.S. forces there — while simultaneously using Hezbollah’s global reach to carry out terror attacks. After all, Hezbollah is today’s al Qaeda on steroids. The radical Shiite group’s ability, coupled with that of Iranian intelligence, is substantial.

We see no likelihood that any Iranian government would abandon this two-pronged strategy without substantial guarantees and concessions from the West. Those would have to include guarantees of noninterference in Iranian affairs. Obama, of course, has been aware of this bedrock condition, which is why he went out of his way before the election to assure Khamenei in a letter that the United States had no intention of interfering.

Though Iran did not hesitate to lash out at CNN’s coverage of the protests, the Iranians know that the U.S. government doesn’t control CNN’s coverage. But Tehran takes a slightly different view of the BBC. The Iranians saw the depiction of the demonstrations as a democratic uprising against a repressive regime as a deliberate attempt by British state-run media to inflame the situation. This allowed the Iranians to vigorously blame some foreigner for the unrest without making the United States the primary villain.

But these minor atmospherics aside, we would make three points. First, there was no democratic uprising of any significance in Iran. Second, there is a major political crisis within the Iranian political elite, the outcome of which probably tilts toward Ahmadinejad but remains uncertain. Third, there will be no change in the substance of Iran’s foreign policy, regardless of the outcome of this fight. The fantasy of a democratic revolution overthrowing the Islamic Republic — and thus solving everyone’s foreign policy problems a la the 1991 Soviet collapse — has passed.

That means that Obama, as the primary player in Iranian foreign affairs, must now define an Iran policy — particularly given Israeli Defense Minister Ehud Barak’s meeting in Washington with U.S. Middle East envoy George Mitchell this Monday. Obama has said that nothing that has happened in Iran makes dialogue impossible, but opening dialogue is easier said than done. The Republicans consistently have opposed an opening to Iran; now they are joined by Democrats, who oppose dialogue with nations they regard as human rights violators. Obama still has room for maneuver, but it is not clear where he thinks he is maneuvering. The Iranians have consistently rejected dialogue if it involves any preconditions. But given the events of the past weeks, and the perceptions about them that have now been locked into the public mind, Obama isn’t going to be able to make many concessions.

It would appear to us that in this, as in many other things, Obama will be following the Bush strategy — namely, criticizing Iran without actually doing anything about it. And so he goes to Moscow more aware than ever that Russia could cause the United States a great deal of pain if it proceeded with weapons transfers to Iran, a country locked in a political crisis and unlikely to emerge from it in a pleasant state of mind.

Obama's Strategy and the Summits

2009-04-07T00:45:00.001-05:00

April 6, 2009
By George Friedman

The weeklong extravaganza of G-20, NATO, EU, U.S. and Turkey meetings has almost ended. The spin emerging from the meetings, echoed in most of the media, sought to portray the meetings as a success and as reflecting a re-emergence of trans-Atlantic unity.

The reality, however, is that the meetings ended in apparent unity because the United States accepted European unwillingness to compromise on key issues. U.S. President Barack Obama wanted the week to appear successful, and therefore backed off on key issues; the Europeans did the same. Moreover, Obama appears to have set a process in motion that bypasses Europe to focus on his last stop: Turkey.

Berlin, Washington and the G-20

Let’s begin with the G-20 meeting, which focused on the global financial crisis. As we said last year, there were many European positions, but the United States was reacting to Germany’s. Not only is Germany the largest economy in Europe, it is the largest exporter in the world. Any agreement that did not include Germany would be useless, whereas an agreement excluding the rest of Europe but including Germany would still be useful.

Two fundamental issues divided the United States and Germany. The first was whether Germany would match or come close to the U.S. stimulus package. The United States wanted Germany to stimulate its own domestic demand. Obama feared that if the United States put a stimulus plan into place, Germany would use increased demand in the U.S. market to expand its exports. The United States would wind up with massive deficits while the Germans took advantage of U.S. spending, thus letting Berlin enjoy the best of both worlds. Washington felt it had to stimulate its economy, and that this would inevitably benefit the rest of the world. But Washington wanted burden sharing. Berlin, quite rationally, did not. Even before the meetings, the United States dropped the demand — Germany was not going to cooperate.

The second issue was the financing of the bailout of the Central European banking system, heavily controlled by eurozone banks and part of the EU financial system. The Germans did not want an EU effort to bail out the banks. They wanted the International Monetary Fund (IMF) to bail out a substantial part of the EU financial system instead. The reason was simple: The IMF receives loans from the United States, as well as China and Japan, meaning the Europeans would be joined by others in underwriting the bailout. The United States has signaled it would be willing to contribute $100 billion to the IMF, of which a substantial portion would go to Central Europe. (Of the current loans given by the IMF, roughly 80 percent have gone to the struggling economies in Central Europe.) The United States therefore essentially has agreed to the German position.

Later at the NATO meeting, the Europeans — including Germany — declined to send substantial forces to Afghanistan. Instead, they designated a token force of 5,000, most of whom are scheduled to be in Afghanistan only until the August elections there, and few of whom actually would be engaged in combat operations. This is far below what Obama had been hoping for when he began his presidency.

Agreement was reached on collaboration in detecting international tax fraud and on further collaboration in managing the international crisis, however. But what that means remains extremely vague — as it was meant to be, since there was no consensus on what was to be done. In fact, the actual guidelines will still have to be hashed out at the G-20 finance ministers’ meeting in Scotland in November. Intriguingly, after insisting on the creation of a global regulatory regime — and with the vague U.S. assent — the European Union failed to agree on European regulations. In a meeting in Prague on April 4, the United Kingdom rejected the regulatory regime being proposed by Germany and France, saying it would leave the British banking system at a disadvantage.

Overall, the G-20 and the NATO meetings did not produce significant breakthroughs. Rather than pushing hard on issues or trading concessions — such as accepting Germany’s unwillingness to increase its stimulus package in return for more troops in Afghanistan — the United States failed to press or bargain. It preferred to appear as part of a consensus rather than appear isolated. The United States systematically avoided any appearance of disagreement.

The reason there was no bargaining was fairly simple: The Germans were not prepared to bargain. They came to the meetings with prepared positions, and the United States had no levers with which to move them. The only option was to withhold funding for the IMF, and that would have been a political disaster (not to mention economically rather unwise). The United States would have been seen as unwilling to participate in multilateral solutions rather than Germany being seen as trying to foist its economic problems on others. Obama has positioned himself as a multilateralist and can’t afford the political consequences of deviating from this perception. Contributing to the IMF, in these days of trillion-dollar bailouts, was the lower-cost alternative. Thus, the Germans have the U.S. boxed in.

The political aspect of this should not be underestimated. George W. Bush had extremely bad relations with the Europeans (in large part because he was prepared to confront them). This was Obama’s first major international foray, and he could not let it end in acrimony or wind up being seen as unable to move the Europeans after running a campaign based on his ability to manage the Western coalition. It was important that he come home having reached consensus with the Europeans. Backing off on key economic and military demands gave him that “consensus.”

Turkey and Obama’s Deeper Game

But it was not simply a matter of domestic politics. It is becoming clear that Obama is playing a deeper game. A couple of weeks before the meetings, when it had become obvious that the Europeans were not going to bend on the issues that concerned the United States, Obama scheduled a trip to Turkey. During the EU meetings in Prague, Obama vigorously supported the Turkish application for EU membership, which several members are blocking on grounds of concerns over human rights and the role of the military in Turkey. But the real reason is that full membership would open European borders to Turkish migration, and the Europeans do not want free Turkish migration. The United States directly confronted the Europeans on this matter.

During the NATO meeting, a key item on the agenda was the selection of a new alliance secretary-general. The favorite was former Danish Prime Minister Anders Fogh Rasmussen. Turkey opposed his candidacy because of his defense on grounds of free speech of cartoons depicting the Prophet Mohammed published in a Danish magazine. NATO operates on consensus, so any one member can block just about anything. The Turks backed off the veto, but won two key positions in NATO, including that of deputy secretary-general.

So while the Germans won their way at the meetings, it was the Turks who came back with the most. Not only did they boost their standing in NATO, they got Obama to come to a vigorous defense of the Turkish application for membership in the European Union, which of course the United States does not belong to. Obama then flew to Turkey for meetings and to attend a key international meeting that will allow him to further position the United States in relation to Islam.

The Russian Dimension

Let’s diverge to another dimension of these talks, which still concerns Turkey, but also concerns the Russians. While atmospherics after the last week’s meetings might have improved, there was certainly no fundamental shift in U.S.-Russian relations. The Russians have rejected the idea of pressuring Iran over its nuclear program in return for the United States abandoning its planned ballistic missile defense system in Poland and the Czech Republic. The United States simultaneously downplayed the importance of a Russian route to Afghanistan. Washington said there were sufficient supplies in Afghanistan and enough security on the Pakistani route such that the Russians weren’t essential for supplying Western operations in Afghanistan. At the same time, the United States reached an agreement with Ukraine for the transshipment of supplies — a mostly symbolic gesture, but one guaranteed to infuriate the Russians at both the United States and Ukraine. Moreover, the NATO communique did not abandon the idea of Ukraine and Georgia being admitted to NATO, although the German position on unspecified delays to such membership was there as well. When Obama looks at the chessboard, the key emerging challenge remains Russia.

The Germans are not going to be joining the United States in blocking Russia. Between dependence on Russia for energy supplies and little appetite for confronting a Russia that Berlin sees as no real immediate threat to Germany, the Germans are not going to address the Russian question. At the same time, the United States does not want to push the Germans toward Russia, particularly in confrontations ultimately of secondary importance and on which Germany has no give anyway. Obama is aware that the German left is viscerally anti-American, while Merkel is only pragmatically anti-American — a small distinction, but significant enough for Washington not to press Berlin.

At the same time, an extremely important event between Turkey and Armenia looks to be on the horizon. Armenians had long held Turkey responsible for the mass murder of Armenians during and after World War I, a charge the Turks have denied. The U.S. Congress for several years has threatened to pass a resolution condemning Turkish genocide against Armenians. The Turks are extraordinarily sensitive to this charge, and passage would have meant a break with the United States. Last week, they publicly began to discuss an agreement with the Armenians, including diplomatic recognition, which essentially disarms the danger from any U.S. resolution on genocide. Although an actual agreement hasn’t been signed just yet, anticipation is building on all sides.

The Turkish opening to Armenia has potentially significant implications for the balance of power in the Caucasus. The August 2008 Russo-Georgian war created an unstable situation in an area of vital importance to Russia. Russian troops remain deployed, and NATO has called for their withdrawal from the breakaway Georgian regions of South Ossetia and Abkhazia. There are Russian troops in Armenia, meaning Russia has Georgia surrounded. In addition, there is talk of an alternative natural gas pipeline network from Azerbaijan to Europe.

Turkey is the key to all of this. If Ankara collaborates with Russia, Georgia’s position is precarious and Azerbaijan’s route to Europe is blocked. If it cooperates with the United States and also manages to reach a stable treaty with Armenia under U.S. auspices, the Russian position in the Caucasus is weakened and an alternative route for natural gas to Europe opens up, decreasing Russian leverage against Europe.

From the American point of view, Europe is a lost cause since internally it cannot find a common position and its heavyweights are bound by their relationship with Russia. It cannot agree on economic policy, nor do its economic interests coincide with those of the United States, at least insofar as Germany is concerned. As far as Russia is concerned, Germany and Europe are locked in by their dependence on Russian natural gas. The U.S.-European relationship thus is torn apart not by personalities, but by fundamental economic and military realities. No amount of talking will solve that problem.

The key to sustaining the U.S.-German alliance is reducing Germany’s dependence on Russian natural gas and putting Russia on the defensive rather than the offensive. The key to that now is Turkey, since it is one of the only routes energy from new sources can cross to get to Europe from the Middle East, Central Asia or the Caucasus. If Turkey — which has deep influence in the Caucasus, Central Asia, Ukraine, the Middle East and the Balkans — is prepared to ally with the United States, Russia is on the defensive and a long-term solution to Germany’s energy problem can be found. On the other hand, if Turkey decides to take a defensive position and moves to cooperate with Russia instead, Russia retains the initiative and Germany is locked into Russian-controlled energy for a generation.

Therefore, having sat through fruitless meetings with the Europeans, Obama chose not to cause a pointless confrontation with a Europe that is out of options. Instead, Obama completed his trip by going to Turkey to discuss what the treaty with Armenia means and to try to convince the Turks to play for high stakes by challenging Russia in the Caucasus, rather than playing Russia’s junior partner.

This is why Obama’s most important speech in Europe was his last one, following Turkey’s emergence as a major player in NATO’s political structure. In that speech, he sided with the Turks against Europe, and extracted some minor concessions from the Europeans on the process for considering Turkey’s accession to the European Union. Why Turkey wants to be an EU member is not always obvious to us, but they do want membership. Obama is trying to show the Turks that he can deliver for them. He reiterated — if not laid it on even more heavily — all of this in his speech in Ankara. Obama laid out the U.S. position as one that recognized the tough geopolitical position Turkey is in and the leader that Turkey is becoming, and also recognized the commonalities between Washington and Ankara. This was exactly what Turkey wanted to hear.

The Caucasus is far from the only area to discuss. Talks will be held about blocking Iran in Iraq, U.S. relations with Syria and Syrian talks with Israel, and Central Asia, where both countries have interests. But the most important message to the Europeans will be that Europe is where you go for photo opportunities, but Turkey is where you go to do the business of geopolitics. It is unlikely that the Germans and French will get it. Their sense of what is happening in the world is utterly Eurocentric. But the Central Europeans, on the frontier with Russia and feeling quite put out by the German position on their banks, certainly do get it.

Obama gave the Europeans a pass for political reasons, and because arguing with the Europeans simply won’t yield benefits. But the key to the trip is what he gets out of Turkey — and whether in his speech to the civilizations, he can draw some of the venom out of the Islamic world by showing alignment with the largest economy among Muslim states, Turkey.

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For Publication in Letters to STRATFOR

Turkey and Russia on the Rise

2009-03-21T08:47:00.000-05:00

March 17, 2009

By Reva Bhalla, Lauren Goodrich and Peter Zeihan

Russian President Dmitri Medvedev reportedly will travel to Turkey in the near future to follow up a recent four-day visit by his Turkish counterpart, Abdullah Gul, to Moscow. The Turks and the Russians certainly have much to discuss.

Russia’s World

Russia is among the world’s most strategically vulnerable states. Its core, the Moscow region, boasts no geographic barriers to invasion. Russia must thus expand its borders to create the largest possible buffer for its core, which requires forcibly incorporating legions of minorities who do not see themselves as Russian. The Russian government estimates that about 80 percent of Russia’s approximately 140 million people are actually ethnically Russian, but this number is somewhat suspect, as many minorities define themselves based on their use of the Russian language, just as many Hispanics in the United States define themselves by their use of English as their primary language. Thus, ironically, attaining security by creating a strategic buffer creates a new chronic security problem in the form of new populations hostile t o Moscow’s rule. The need to deal with the latter problem explains the development of Russia’s elite intelligence services, which are primarily designed for and tasked with monitoring the country’s multiethnic population.

(click image to enlarge)

Russia’s primary challenge, however, is time. In the aftermath of the Soviet collapse, the bottom fell out of the Russian birthrate, with fewer than half the number of babies born in the 1990s than were born in the 1980s. These post-Cold War children are now coming of age; in a few years, their small numbers are going to have a catastrophic impact on the size of the Russian population. By contrast, most non-Russian minorities — in particular those such as Chechens and Dagestanis, who are of Muslim faith — did not suffer from the 1990s birthrate plunge, so their numbers are rapidly increasing even as the number of ethnic Russians is rapidly decreasing. Add in deep-rooted, demographic-impacting problems such as HIV, tuberculosis and heroin abuse — concentrated not just among ethnic Russians but a lso among those of childbearing age — and Russia faces a hard-wired demographic time bomb. Put simply, Russia is an ascending power in the short run, but it is a declining power in the long run.

The Russian leadership is well aware of this coming crisis, and knows it is going to need every scrap of strength it can muster just to continue the struggle to keep Russia in one piece. To this end, Moscow must do everything it can now to secure buffers against external intrusion in the not-so-distant future. For the most part, this means rolling back Western influence wherever and whenever possible, and impressing upon states that would prefer integration into the West that their fates lie with Russia instead. Moscow’s natural gas crisis with Ukraine, August 2008 war with Georgia, efforts to eject American forces from Central Asia and constant pressure on the Baltic states all represent efforts to buy Russia more space — and with that space, more time for survival.

Expanding its buffer against such a diverse and potentially hostile collection of states is no small order, but Russia does have one major advantage: The security guarantor for nearly all of these countries is the United States, and the United States is currently very busy elsewhere. So long as U.S. ground forces are occupied with the Iraqi and Afghan wars, the Americans will not be riding to the rescue of the states on Russia’s periphery. Given this window of opportunity, the Russians have a fair chance to regain the relative security they seek. In light of the impending demographic catastrophe and the present window of opportunity, the Russians are in quite a hurry to act.

Turkey’s World

Turkey is in many ways the polar opposite of Russia. After the dissolution of the Ottoman Empire following World War I, Turkey was pared down to its core, Asia Minor. Within this refuge, Turkey is nearly unassailable. It is surrounded by water on three sides, commands the only maritime connection between the Black and Mediterranean seas and sits astride a plateau surrounded by mountains. This is a very difficult chunk of territory to conquer. Indeed, beginning in the Seljuk Age in the 11th century, the ancestors of the modern Turks took the better part of three centuries to seize this territory from its previous occupant, the Byzantine Empire.

The Turks have used much of the time since then to consolidate their position such that, as an ethnicity, they reign supreme in their realm. The Persians and Arabs have long since lost their footholds in Anatolia, while the Armenians were finally expelled in the dying days of World War I. Only the Kurds remain, and they do not pose a demographic challenge to the Turks. While Turkey exhibits many of the same demographic tendencies as other advanced developing states — namely, slowing birthrates and a steadily aging population — there is no major discrepancy between Turk and Kurdish birthrates, so the Turks should continue to comprise more than 80 percent of the country’s population for some time to come. Thus, while the Kurds will continue to be a source of nationalistic friction, they do not constitute a fundamental challenge to the power or operations of the Turkish state, like minorities in Russia are destined to do in the years ahead.

Turkey’s security is not limited to its core lands. Once one moves beyond the borders of modern Turkey, the existential threats the state faced in years past have largely melted away. During the Cold War, Turkey was locked into the NATO structure to protect itself from Soviet power. But now the Soviet Union is gone, and the Balkans and Caucasus — both former Ottoman provinces — are again available for manipulation. The Arabs have not posed a threat to Anatolia in nearly a millennium, and any contest between Turkey and Iran is clearly a battle of unequals in which the Turks hold most of the cards. If anything, the Arabs — who view Iran as a hostile power with not only a heretical religion but also with a revolutionary foreign policy calling for the overthrow of most of the Arab regimes — are practically welcoming the Turks back. Despite both its imperial past and its close security association with the Americans, the Arabs see Turkey as a trusted mediator, and even an exemplar.

With the disappearance of the threats of yesteryear, many of the things that once held Turkey’s undivided attention have become less important to Ankara. With the Soviet threat gone, NATO is no longer critical. With new markets opening up in the former Soviet Union, Turkey’s obsession with seeking EU membership has faded to a mere passing interest. Turkey has become a free agent, bound by very few relationships or restrictions, but dabbling in events throughout its entire periphery. Unlike Russia, which feels it needs an empire to survive, Turkey is flirting with the idea of an empire simply because it can — and the costs of exploring the option are negl igible.

Whereas Russia is a state facing a clear series of threats in a very short time frame, Turkey is a state facing a veritable smorgasbord of strategic options under no time pressure whatsoever. Within that disconnect lies the road forward for the two states — and it is a road with surprisingly few clashes ahead in the near term.

The Field of Competition

There are four zones of overlapping interest for the Turks and Russians.

First, the end of the Soviet empire opened up a wealth of economic opportunities, but very few states have proven adept at penetrating the consumer markets of Ukraine and Russia. Somewhat surprisingly, Turkey is one of those few states. Thanks to the legacy of Soviet central planning, Russian and Ukrainian industry have found it difficult to retool away from heavy industry to produce the consumer goods much in demand in their markets. Because most Ukrainians and Russians cannot afford Western goods, Turkey has carved out a robust and lasting niche with its lower-cost exports; it is now the largest supplier of imports to the Russian market. While this is no exercise in hard power, this Turkish penetration nevertheless is cause for much concern among Russian authorities.

So far, Turkey has been scrupulous about not politicizing these useful trade links beyond some intelligence-gathering efforts (particularly in Ukraine). Considering Russia’s current financial problems, having a stable source of consumer goods — especially one that is not China — is actually seen as a positive. At least for now, the Russian government would rather see its trade relationship with Turkey stay strong. There will certainly be a clash later — either as Russia weakens or as Turkey becomes more ambitious — but for now, the Russians are content with the trade relationship.

Second, the Russian retreat in the post-Cold War era has opened up the Balkans to Turkish influence. Romania, Bulgaria and the lands of the former Yugoslavia are all former Ottoman possessions, and in their day they formed the most advanced portion of the Ottoman economy. During the Cold War, they were all part of the Communist world, with Romania and Bulgaria formally incorporated into the Soviet bloc. While most of these lands are now absorbed into the European Union, Russia’s ties to its fellow Slavs — most notably the Serbs and Bulgarians — have allowed it a degree of influence that most Europeans choose to ignore. Additionally, Russia has long held a friendly relationship with Greece and Cyprus, both to complicate American policy in Europe and to provide a flank against Turkey. Still, thanks to proximity and trading links, Turkey clearly holds the upper hand in this theater of competition.

But this particular region is unlikely to generate much Turkish-Russian animosity, simply because both countries are in the process of giving up.

Most of the Balkan states are already members of an organization that is unlikely to ever admit Russia or Turkey: the European Union. Russia simply cannot meet the membership criteria, and Cyprus’ membership in essence strikes the possibility of Turkish inclusion. (Any EU member can veto the admission of would-be members.) The EU-led splitting of Kosovo from Serbia over Russian objections was a body blow to Russian power in the region, and the subsequent EU running of Kosovo as a protectorate greatly limited Turkish influence as well. Continuing EU expansion means that Turkish influence in the Balkans will shrivel just as Russian influence already has. Trouble this way lies, but not between Turkey and Russia. If anything, their joint exclusion might provide some room for the two to agree on something.

The third area for Russian-Turkish competition is in energy, and this is where things get particularly sticky. Russia is Turkey’s No. 1 trading partner, with energy accounting for the bulk of the trade volume between the two countries. Turkey depends on Russia for 65 percent of its natural gas and 40 percent of its oil imports. Though Turkey has steadily grown its trade relationship with Russia, it does not exactly approve of Moscow’s penchant for using its energy relations with Europe as a political weapon. Russia has never gone so far as to cut supplies to Turkey directly, but Turkey has been indirectly affected more than once when Russia decided to cut supplies to Ukraine because Moscow felt the need to reassert its writ in Kiev.

Sharing the Turks’ energy anxiety, the Europeans have been more than eager to use Turkey as an energy transit hub for routes that would bypass the Russians altogether in supplying the European market. The Baku-Tbilisi-Ceyhan (BTC) pipeline is one such route, and others, like Nabucco, are still stuck in the planning stages. The Russians have every reason to pressure the Turks into staying far away from any more energy diversification schemes that could cost Russia one of its biggest energy clients — and deny Moscow much of the political leverage it currently holds over the Europeans who are dependent on the Russian energy network.

There are only two options for the Turks in diversifying away from the Russians. The first lies to Turkey’s south in Iraq and Iran. Turkey has big plans for Iraq’s oil industry, but it will still take considerable time to upgrade and restore the oil fields and pipelines that have been persistently sabotaged and ransacked by insurgents during the fighting that followed the 2003 U.S. invasion. The Iranians offer another large source of energy for the Turks to tap into, but the political complications attached to dealing with Iran are still too prickly for the Turks to move ahead with concrete energy deals at this time. Complications remain for now, but Turkey wi ll be keeping an eye on its Middle Eastern neighbors for robust energy partnerships in the future.

The second potential source of energy for the Turks lies in Central Asia, a region that Russia must keep in its grip at all costs if it hopes to survive in the long run. In many ways this theater is the reverse of the Balkans, where the Russians hold the ethnic links and the Turks the economic advantage. Here, four of the five Central Asian countries — Kazakhstan, Uzbekistan, Kyrgyzstan and Turkmenistan — are Turkic. But as a consequence of the Soviet years, the infrastructure and economies of all four are so hardwired into the Russian sphere of influence that it would take some major surgery to liberate them. But the prize is a rich one: Central Asia possesses the world& #8217;s largest concentration of untapped energy reserves. And as the term “central” implies, whoever controls the region can project power into the former Soviet Union, China and South Asia. If the Russians and Turks are going to fight over something, this is it.

Here Turkey faces a problem, however — it does not directly abut the region. If the Turks are even going to attempt to shift the Central Asian balance of power, they will need a lever. This brings us to the final — and most dynamic — realm of competition: the Caucasus.

Turkey here faces the best and worst in terms of influence projection. The Azerbaijanis do not consider themselves simply Turkic, like the Central Asians, but actually Turkish. If there is a country in the former Soviet Union that would consider not only allying with but actually joining with another state to escape Russia’s orbit, it would be Azerbaijan with Turkey. Azerbaijan has its own significant energy supplies, but its real value is in serving as a willing springboard for Turkish influence into Central Asia.

However, the core of Azerbaijan does not border Turkey. Instead, it is on the other side of Armenia, a country that thrashed Azerbaijan in a war over the disputed Nagorno-Karabakh enclave and still has lingering animosities toward Ankara because of the 1915 Armenian “genocide.” Armenia has sold itself to the Russians to keep its Turkish foes at bay.

This means Turkish designs on Central Asia all boil down to the former Soviet state of Georgia. If Turkey can bring Georgia fully under its wing, Turkey can then set about to integrate with Azerbaijan and project influence into Central Asia. But without Georgia, Turkey is hamstrung before it can even begin to reach for the real prize in Central Asia.

In this, the Turks do not see the Georgians as much help. The Georgians do not have much in the way of a functional economy or military, and they have consistently overplayed their hand with the Russians in the hopes that the West would come to their aid. Such miscalculations contributed to the August 2008 Georgian-Russian war, in which Russia smashed what military capacity the Georgians did possess. So while Ankara sees the Georgians as reliably anti-Russian, it does not see them as reliably competent or capable.

This means that Turkish-Russian competition may have been short-circuited before it even began. Meanwhile, the Americans and Russians are beginning to outline the rudiments of a deal. Various items on the table include Russia allowing the Americans to ship military supplies to Afghanistan via Russia’s sphere of influence, changes to the U.S. ballistic missile defense (BMD) program, and a halt to NATO expansion. The last prong is a critical piece of Russian-Turkish competition. Should the Americans and Europeans put their weight behind NATO expansion, Georgia would be a logical candidate — meaning most of the heavy lifting in terms of Turkey projecting power eastward would already be done. But if the Americans and Europeans do not put their weight behind NATO expansion, Georgia would fall by the wayside and Turkey would have to do all the work of projecting power eastward — and facing the Russians — alone.

A Temporary Meeting of Minds?

There is clearly no shortage of friction points between the Turks and the Russians. With the two powers on a resurgent path, it was only a matter of time before they started bumping into one another. The most notable clash occurred when the Russians decided to invade Georgia last August, knowing full well that neither the Americans nor the Europeans would have the will or capability to intervene on behalf of the small Caucasian state. NATO’s strongest response was a symbolic show of force that relied on Turkey, as the gatekeeper to the Black Sea, to allow a buildup of NATO vessels near the Georgian coast and threaten the underbelly of Russia’s former Soviet peri phery.

Turkey disapproved of the idea of Russian troops bearing down in the Caucasus near the Turkish border, and Ankara was also angered by having its energy revenues cut off during the war when the BTC pipeline was taken offline.

The Russians promptly responded to Turkey’s NATO maneuvers in the Black Sea by holding up a large amount of Turkish goods at various Russian border checkpoints to put the squeeze on Turkish exports. But the standoff was short-lived; soon enough, the Turks and Russians came to the negotiating table to end the trade spat and sort out their respective spheres of influence. The Russian-Turkish negotiations have progressed over the past several months, with Russian and Turkish leaders now meeting fairly regularly to sort out the issues where both can find some mutual benefit.

The first area of cooperation is Europe, where both Russia and Turkey have an interest in applying political pressure. Despite Europe’s objections and rejections, the Turks are persistent in their ambitions to become a member of the European Union. At the same time, the Russians need to keep Europe linked into the Russian energy network and divided over any plans for BMD, NATO expansion or any other Western plan that threatens Russian national security. As long as Turkey stalls on any European energy diversification projects, the more it can demand Europe’s attention on the issue of EU membership. In fact, the Turks already threatened as much at the start of the year, when they said outright that if Europe doesn’t need Turkey as an EU member, then Turkey doesn’t need to sign off on any more energy diversification projects that transit Turkish territory. Ankara’s threats against Europe dovetailed nicely with Russia’s natural gas cutoff to Ukraine in January, when the Europeans once again were reminded of Moscow’s energy wrath.

The Turks and the Russians also can find common ground in the Middle East. Turkey is again expanding its influence deep into its Middle Eastern backyard, and Ankara expects to take the lead in handling the thorny issues of Iran, Iraq and Syria as the United States draws down its presence in the region and shifts its focus to Afghanistan. What the Turks want right now is stability on their southern flank. That means keeping Russia out of mischief in places like Iran, where Moscow has threatened to sell strategic S-300 air defense systems and to boost the Iranian nuclear program in order to grab Washington’s attention on other issues deemed vital to Moscow’s national security interests. The United States is already leaning on Russia to pressure Iran in return for other strategic concessions, and the Turks are just as interested as the Americans in taming Russia’s actions in the Middle East.

Armenia is another issue where Russia and Turkey may be having a temporary meeting of minds. Russia unofficially occupies Armenia and has been building up a substantial military presence in the small Caucasian state. Turkey can either sit back, continue to isolate Armenia and leave it for the Russians to dominate through and through, or it can move toward normalizing relations with Yerevan and dealing with Russia on more equal footing in the Caucasus. With rumors flying of a deal on the horizon between Yerevan and Ankara (likely with Russia’s blessing), it appears more and more that the Turks and the Russians are making progress in sorting out their respective spheres of influence.

Ultimately, both Russia and Turkey know that this relationship is likely temporary at best. The two Eurasian powers still distrust each other and have divergent long-term goals, even if in the short term there is a small window of opportunity for Turkish and Russian interests to overlap. The law of geopolitics dictates that the two ascendant powers are doomed to clash — just not today.

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Internal Divisions and the Chinese Stimulus Plan

2009-03-09T01:01:00.000-05:00

February 23, 2009

By Rodger Baker and Jennifer Richmond

Due in large part to fears of dire consequences if nothing were done to tackle the economic crisis, China rushed through a 4 trillion yuan (US$586 billion) economic stimulus package in November 2008. The plan cobbled together existing and new initiatives focused on massive infrastructure development projects (designed, among other things, to soak up surplus steel, cement and labor capacity), tax cuts, green energy programs, and rural development.

Ever since the package was passed in November, Beijing has recited the mantra of the need to shift China’s economy from its heavy dependence on exports to one more driven by domestic consumption. But now that the sense of immediate crisis has passed, the stimulus policies are being rethought — and in an unusual development for China, they are being vigorously debated in the Chinese media.

Debating the Stimulus Package

In a country where media restrictions are tightening and private commentary on government officials and actions in blogs and online forums is being curtailed, it is quite remarkable that major Chinese newspaper editorials are taking the lead in questioning aspects of the stimulus package.

The question of stimulating rural consumption versus focusing the stimulus on the more economically active coastal regions has been the subject of particularly fierce debate. Some editorials have argued that encouraging rural consumption at a time of higher unemployment is building a bigger problem for the future. This argument maintains that rural laborers — particularly migrant workers — earn only a small amount of money, and that while having them spend their meager savings now might keep gross domestic product up in the short term, it will drain the laborers’ reserves and create a bigger social problem down the road. Others argue that the migrant and rural populations are underdeveloped and incapable of sustained spending, and that pumping stimulus yuan into the countryside is a misallocation of mo ney that could be better spent supporting the urban middle class, in theory creating jobs through increased middle-class consumption of services.

The lack of restrictions on these types of discussions suggests that the debate is occurring with government approval, in a reflection of debates within the Communist Party of China (CPC) and the government itself. Despite debate in the Chinese press, Beijing continues to present a unified public face on the handling of the economic crisis, regardless of internal factional debates. Maintaining Party control remains the primary goal of Party officials; even if they disagree over policies, they recognize the importance of showing that the Party remains in charge.

But, as the dueling editorial pages reveal, the Party is not unified in its assessment of the economic crisis or the recovery program. The show of unity masks a power struggle raging between competing interests within the Party. In many ways, this is not a new struggle; there are always officials jockeying for power for themselves and for their protégés. But the depth of the economic crisis in China and the rising fears of social unrest — not only from the migrant laborers, but also from militants or separatists in Tibet and Xinjiang and from “hostile forces” like the Falun Gong, pro-Democracy advocates and foreign intelligence services — have added urgency to long-standing debates over economic and social policies.

In China, decision-making falls to the president and the premier, currently Hu Jintao and Wen Jiabao respectively. They do not wield the power of past leaders like Mao Zedong or Deng Xiaoping, however, and instead are much more reliant on balancing competing interests than on dictating policy.

Party and Government Factions

Hu and Wen face numerous factions among the Chinese elite. Many officials are considered parts of several different factional affiliations based on age, background, education or family heritage. Boiled down, the struggle over the stimulus plan pits two competing views of the core of the Chinese economy. One sees economic strength and social stability centered on China’s massive rural population, while another sees China’s strength and future in the coastal urban areas, in manufacturing and global trade.

Two key figures in the Standing Committee of the Politburo (the center of political power in China), Vice President Xi Jinping and Vice Premier Li Keqiang, highlight this struggle. These two are considered the core of the fifth-generation leadership, and have been tapped to succeed Hu and Wen as China’s next leaders. They also represent radically different backgrounds.

Li is a protege of Hu and rose from the China Youth League, where Hu has built a strong support base. Li represents a newer generation of Chinese leaders, educated in economics and trained in less-developed provinces. (Li held key positions in Henan and Liaoning provinces.) Xi, on the other hand, is a “princeling.” The son of a former vice premier, he trained as an engineer and served primarily in the coastal export-oriented areas, including Hebei, Fujian and Zhejiang provinces and Shanghai.

In a way, Li and Xi represent different proposals for China’s economic recovery and future. Li is a stronger supporter of the recentralization of economic control sought by Hu, a weakening of the regional economic power bases, and a focus on consolidating Chinese industry in a centrally planned manner while spending government money on rural development and urbanization of China’s interior. Xi represents the view followed by former President Jiang Zemin and descended from the policies of Deng. Under that view, economic activity and growth should be encouraged and largely freed from central direction, and if the coastal provinces grow first and faster, that is just fine; eventually the money, technology and employment will move inland.

Inland vs. the Coast

In many ways, these two views reflect long-standing economic arguments in China — namely, the constant struggle to balance the coastal trade-based economy and the interior agriculture-dominated economy. The former is smaller but wealthier, with stronger ties abroad — and therefore more political power to lobby for preferential treatment. The latter is much larger, but more isolated from the international community — and in Chinese history, frequently the source of instability and revolt in times of stress. These tensions have contributed to the decline of dynasties in centuries past, opening the space for foreign interference in Chinese internal politics. China’s leaders are well aware of the constant stresses between rural and coastal China, but maintaining a balance has been an ongoing struggle.

Throughout Chinese history, there is a repeating pattern of dynastic rise and decline. Dynasties start strong and powerful, usually through conquest. They then consolidate power and exert strong control from the center. But due to the sheer size of China’s territory and population, maintaining central control requires the steady expansion of a bureaucracy that spreads from the center through the various administrative divisions down to the local villages. Over time, the bureaucracy itself begins to usurp power, as its serves as the collector of taxes, distributor of government funds and local arbiter of policy and rights. And as the bureaucracy grows stronger, the center weakens.

Regional differences in population, tax base and economic models start to fragment the bureaucracy, leading to economic (and at times military) fiefdoms. This triggers a strong response from the center as it tries to regain control. Following a period of instability, which often involves foreign interference and/or intervention, a new center is formed, once again exerting strong centralized authority.

This cycle played out in the mid-1600s, as the Ming Dynasty fell into decline and the Manchus (who took on the moniker Qing) swept in to create a new centralized authority. It played out again as the Qing Dynasty declined in the latter half of the 1800s and ultimately was replaced — after an extended period of instability — by the CPC in 1949, ushering in another period of strong centralized control. Once again, a more powerful regional bureaucracy is testing that centralized control.

The economic reforms initiated by Deng Xiaoping at the end of the 1970s led to a three-decade decline of central authority, as economic decision-making and power devolved to the regional and local leadership and the export-oriented coastal provinces became the center of economic activity and power in China. Attempts by the central government to regain some authority over the direction of coastal authorities were repeatedly ignored (or worse), but so long as there was growth in China and relative social stability, this was tolerated.

With Hu’s rise to power, however, there was a new push from the center to rein in the worst of excesses by the coastal leaders and business interests and refocus attention on China’s rural population, which was growing increasingly disenfranchised due to the widening urban-rural economic gap. In 2007 and early 2008, Hu finally gained traction with his economic policies. The Chinese government subsequently sought to slow an overheating economy while focusing on the consolidation of industry and the establishment of “superministries” at the center to coordinate economic activity. It also intended to put inland rural interests on par with — if not above — coastal urban interests. When the superministries were formed in 2008, however, it became apparent that Hu was not omnipotent. Resistance to his plans was abundantly evident, illustrating the power of the entrenched bureaucratic interests.

Economic Crisis and the Stimulus Plan

The economic program of recentralization and the attempt to slow the overheating economy came to a screeching halt in July 2008, as skyrocketing commodity prices fueled inflation and strained government budgets. The first victim was China’s yuan policy. The steady, relatively predictable appreciation of the yuan came to a stop. Its value stagnated, and there is now pressure for a slight depreciation to encourage exports. But as Beijing began shaping its economic stimulus package, it became clear that the program would be a mix of policies, representing differing factions seeking to secure their own interests in the recovery plan.

The emerging program, then, revealed conflicting interests and policies. Money and incentives were offered to feed the low-skill export industry (located primarily in the southeastern coastal provinces) as well as to encourage a shift in production from the coast to the interior. A drive was initiated to reduce redundancies, particularly in heavy industries, and at the same time funding was increased to keep those often-bloated industrial sectors afloat. Overall, the stimulus represents a collection of competing initiatives, reflecting the differences among the factions. Entrenched princelings simply want to keep money moving and employment levels up in anticipation of a resurgence in global consumption and the revitalization of the export-based economic growth path. Meanwhile, the rur al faction seeks to accelerate economic restructuring, reduce dependence on the export-oriented coastal provinces, and move economic activity and attention to the vastly underdeveloped interior.

Higher unemployment among the rural labor force is “proving” each faction’s case. To the princelings, it shows the importance of the export sector in maintaining social stability and economic growth. To the rural faction, it emphasizes the dangers of overreliance on a thin coastal strip of cheap, low-skill labor and a widening wealth gap.

Fighting it Out in the Media

With conflicting paths now running in tandem, competing Party officials are seeking traction and support for their programs without showing division within the core Party apparatus by turning to a traditional method: the media and editorials. During the Cultural Revolution, which itself was a violent debate about the fundamental economic policies of the People’s Republic of China, the Party core appeared united, despite major divisions. The debate played out not in the halls of the National People’s Congress or in press statements, but instead in big-character posters plastered around Beijing and other cities, promoting competing policies and criticizing others.

In modern China, big posters are a thing of the past, replaced by newspaper editorials. While the Party center appears united in this time of economic crisis, the divisions are seen more acutely in the competing editorials published in state and local newspapers and on influential blogs and Web discussion forums. It is here that the depth of competition and debate so well hidden among the members of the Politburo can be seen, and it is here that it becomes clear the Chinese are no more united in their policy approach than the leaders of more democratic countries, where policy debates are more public.

The current political crisis has certainly not reached the levels of the Cultural Revolution, and China no longer has a Mao — or even a Deng — to serve as a single pole around which to wage factional struggles. The current leadership is much more attuned to the need to cooperate and compromise — and even Mao’s methods would often include opportunities for “wayward” officials to come around and cooperate with Mao’s plans. But a recognition of the need to cooperate, and an agreement that the first priority is maintenance of the Party as the sole core of Chinese power (followed closely by the need to maintain social stability to ensure the primary goal), doesn’t guarantee that things can’t get out of control.

The sudden halt to various economic initiatives in July 2008 showed just how critical the emerging crisis was. If commodity prices had not started slacking off a month later, the political crisis in Beijing might have gotten much more intense. Despite competition, the various factions want the Party to remain in power as the sole authority, but their disagreements on how to do this become much clearer during a crisis. Currently, it is the question of China’s migrant labor force and the potential for social unrest that is both keeping the Party center united and causing the most confrontation over the best-path policies to be pur sued. If the economic stimulus package fails to do its job, or if external factors leave China lagging and social problems rising, the internal party fighting could once again grow intense.

At present, there is a sense among China’s leaders that this crisis is manageable. If their attitude once again shifts to abject fear, the question may be less about how to compromise on economic strategy than how to stop a competing faction from bringing ruin to Party and country through ill-thought-out policies. Compromise is acceptable when it means the survival of the Party, but if one faction views the actions of another as fundamentally detrimental to the authority and strength of the Party, then a more active and decisive struggle becomes the ideal choice. After all, it is better to remove a gangrenous limb than to allow the infection to spread and kill the whole organism.

That crisis is not now upon China’s leaders, but things nearly reached that level last summer. There were numerous rumors from Beijing that Wen, who is responsible for China’s economic policies, was going to be sacked — an extreme move given his popularity with the common Chinese. This was staved off or delayed by the fortuitous timing of the rest of the global economic contraction, which brought commodity prices down. For now, China’s leaders will continue issuing competing and occasionally contradictory policies, and just as vigorously debating them through the nation’s editorials. The government is struggling with resolving the current economic crisis, as well as with the fundamental question of just what a new Chinese economy will look like. And that question goes deeper than money: It goes to the very role of the CPC in China’s system.

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Munich and the Continuity Between the Bush and Obama Foreign Policies

2009-02-10T11:42:00.001-06:00

By George Friedman

February 9, 2009

While the Munich Security Conference brought together senior leaders from most major countries and many minor ones last weekend, none was more significant than U.S. Vice President Joe Biden. This is because Biden provided the first glimpse of U.S. foreign policy under President Barack Obama. Most conference attendees were looking forward to a dramatic shift in U.S. foreign policy under the Obama administration. What was interesting about Biden’s speech was how little change there has been in the U.S. position and how much the attendees and the media were cheered by it.

After Biden’s speech, there was much talk about a change in the tone of U.S. policy. But it is not clear to us whether this was because the tone has changed, or because the attendees’ hearing has. They seemed delighted to be addressed by Biden rather than by former Vice President Dick Cheney — delighted to the extent that this itself represented a change in policy. Thus, in everything Biden said, the conference attendees saw rays of a new policy.

Policy Continuity: Iran and Russia

Consider Iran. The Obama administration’s position, as staked out by Biden, is that the United States is prepared to speak directly to Iran provided that the Iranians do two things. First, Tehran must end its nuclear weapons program. Second, Tehran must stop supporting terrorists, by which Biden meant Hamas and Hezbollah. Once the Iranians do that, the Americans will talk to them. The Bush administration was equally prepared to talk to Iran given those preconditions. The Iranians make the point that such concessions come after talks, not before, and that the United States must change its attitude toward Iran before there can be talks, something Iranian Majlis Speaker Ali Larijani emphasized after the meeting. Apart from the emphasis on a willingness to talk, the terms Biden laid out for such talks are identical to the terms under the Bush administration.

Now consider Russia. Officially, the Russians were delighted to hear that the United States was prepared to hit the “reset button” on U.S.-Russian relations. But Moscow cannot have been pleased when it turned out that hitting the reset button did not involve ruling out NATO expansion, ending American missile defense system efforts in Central Europe or publicly acknowledging the existence of a Russian sphere of influence. Biden said, “It will remain our view that sovereign states have the right to make their own decisions and choose their own alliances.” In translation, this means the United States has the right to enter any relationship it wants with independent states, and that independent states have the right to enter any relationship they want. In other words, the Bush administratio n’s commitment to the principle of NATO expansion has not changed.

Nor could the Russians have been pleased with the announcement just prior to the conference that the United States would continue developing a ballistic missile defense (BMD) system in Poland and the Czech Republic. The BMD program has been an issue of tremendous importance for Russians, and it is something Obama indicated he would end, or change in some way that might please the Russians. But not only was there no commitment to end the program, there also was no backing away from long-standing U.S. interest in it, or even any indication of the terms under which it might end.

Given that the United States has asked Russia for a supply route through the former Soviet Union to Afghanistan, and that the Russians have agreed to this in principle, it would seem that that there might be an opening for a deal with the Russians. But just before the Munich conference opened, Kyrgyzstan announced that Manas Air Base, the last air base open to the United States in Central Asia, would no longer be available to American aircraft. This was a tidy little victory for the Russians, who had used political and financial levers to pressure Kyrgyzstan to eject the Americans. The Russians, of course, deny that any such pressure was ever brought to be ar, and that the closure of the base one day before Munich could have been anything more than coincidence.

But the message to the United States was clear: While Russia agrees in principle to the U.S. supply line, the Americans will have to pay a price for it. In case Washington was under the impression it could get other countries in the former Soviet Union to provide passage, the Russians let the Americans know how much leverage Moscow has in these situations. The U.S. assertion of a right to bilateral relations won’t happen in Russia’s near abroad without Russian help, and that help won’t come without strategic concessions from the United States. In short, the American position on Russia hasn’t changed, and neither has the Russian position.

The Europeans

The most interesting — and for us, the most anticipated — part of Biden’s speech had to do with the Europeans, of whom the French and Germans were the most enthusiastic about Bush’s departure and Obama’s arrival. Biden’s speech addressed the core question of the U.S.-European relationship.

If the Europeans were not prepared to increase their participation in American foreign policy initiatives during the Bush administration, it was assumed that they would be during the Obama administration. The first issue on the table under the new U.S. administration is the plan to increase forces in Afghanistan. Biden called for more NATO involvement in that conflict, which would mean an increase in European forces deployed to Afghanistan. Some countries, along with the head of NATO, support this. But German Chancellor Angela Merkel made it clear that Germany is not prepared to send more troops.

Over the past year or so, Germany has become somewhat estranged from the United States. Dependent on Russian energy, Germany has been unwilling to confront Russia on issues of concern to Washington. Merkel has made it particularly clear that while she does not oppose NATO expansion in principle, she certainly opposes expansion to states that Russian considers deeply within its sphere of influence (primarily Georgia and Ukraine). The Germans have made it abundantly clear that they do not want to see European-Russian relations deteriorate under U.S. prodding. Moreover, Germany has no appetite for continuing its presence in Afghanistan, let alone increasing it.

NATO faces a substantial split, conditioned partly by Germany’s dependence on Russian energy, but also by deep German unease about any possible resumption of a Cold War with Russia, however mild. The foundation of NATO during the Cold War was the U.S.-German-British relationship. With the Germans unwilling to align with the United States and other NATO members over Russia or Afghanistan, it is unclear whether NATO can continue to function. (Certainly, Merkel cannot be pleased that the United States has not laid the BMD issue in Poland and the Czech Republic to rest.)

The More Things Change …

Most interesting here is the continuity between the Bush and Obama administrations in regard to foreign policy. It is certainly reasonable to argue that after only three weeks in office, no major initiatives should be expected of the new president. But major initiatives were implied — such as ending the BMD deployment to Poland and the Czech Republic — and declaring the intention to withdraw BMD would not have required much preparation. But Biden offered no new initiatives beyond expressing a willingness to talk, without indicating any policy shifts regarding the things that have blocked talks. Willingness to talk with the Iranians, the Russians, the Europeans and others shifts the atmospherics — allowing the listener to think things have changed — but does not address the question of what is to be discussed and what is to be offered and accepted.

Ultimately, the issues dividing the world are not, in our view, subject to personalities, nor does goodwill (or bad will, for that matter) address the fundamental questions. Iran has strategic and ideological reasons for behaving the way it does. So does Russia. So does Germany, and so on. The tensions that exist between those countries and the United States might be mildly exacerbated by personalities, but nations are driven by interest, not personality.

Biden’s position did not materially shift the Obama administration away from Bush’s foreign policy, because Bush was the prisoner of that policy, not its creator. The Iranians will not make concessions on nuclear weapons prior to holding talks, and they do not regard their support for Hamas or Hezbollah as aiding terrorism. Being willing to talk to the Iranians provided they abandon these things is the same as being unwilling to talk to them.

There has been no misunderstanding between the United States and Russia that more open dialogue will cure. The Russians see no reason for NATO expansion unless NATO is planning to encircle Russia. It is possible for the West to have relations with Ukraine and Georgia without expanding NATO; Moscow sees the insistence on expansion as implying sinister motives. For its part, the United States refuses to concede that Russia has any interest in the decisions of the former Soviet Union states, something Biden reiterated. Therefore, either the Russians must accept NATO expansion, or the Americans must accept that Russia has an overriding interest in limiting American relations in the former Soviet Union. This is a fundamental issue that any U.S. administration would have to deal with — particularly an administr ation seeking Russian cooperation in Afghanistan.

As for Germany, NATO was an instrument of rehabilitation and stability after World War II. But Germany now has a complex relationship with Russia, as well as internal issues. It does not want NATO drawing it into adventures that are not in Germany’s primary interest, much less into a confrontation with Russia. No amount of charm, openness or dialogue is going to change this fundamental reality.

Dialogue does offer certain possibilities. The United States could choose to talk to Iran without preconditions. It could abandon NATO expansion and quietly reduce its influence in the former Soviet Union, or perhaps convince the Russians that they could benefit from this influence. The United States could abandon the BMD system (though this has been complicated by Iran’s recent successful satellite launch), or perhaps get the Russians to participate in the program. The United States could certainly get the Germans to send a small force to Afghanistan above and beyond the present German contingent. All of this is possible.

What can’t be achieved is a fundamental transformation of the geopolitical realities of the world. No matter how Obama campaigned, it is clear he knows that. Apart from his preoccupation with economic matters, Obama understands that foreign policy is governed by impersonal forces and is not amenable to rhetoric, although rhetoric might make things somewhat easier. No nation gives up its fundamental interests because someone is willing to talk.

Willingness to talk is important, but what is said is much more important. Obama’s first foray into foreign policy via Biden indicates that, generally speaking, he understands the constraints and pressures that drive American foreign policy, and he understands the limits of presidential power. Atmospherics aside, Biden’s positions — as opposed to his rhetoric — were strikingly similar to Cheney’s foreign policy positions.

We argued long ago that presidents don’t make history, but that history makes presidents. We see Biden’s speech as a classic example of this principle.

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Strategic Motivations for the Mumbai Attack

2008-12-17T16:11:00.000-06:00

December 1, 2008

By George Friedman

Last Wednesday evening, a group of Islamist operatives carried out a complex terror operation in the Indian city of Mumbai. The attack was not complex because of the weapons used or its size, but in the apparent training, multiple methods of approaching the city and excellent operational security and discipline in the final phases of the operation, when the last remaining attackers held out in the Taj Mahal hotel for several days. The operational goal of the attack clearly was to cause as many casualties as possible, particularly among Jews and well-to-do guests of five-star hotels. But attacks on various other targets, from railroad stations to hospitals, indicate that the more general purpose was to spread terror in a major Indian city.

While it is not clear precisely who carried out the Mumbai attack, two separate units apparently were involved. One group, possibly consisting of Indian Muslims, was established in Mumbai ahead of the attacks. The second group appears to have just arrived. It traveled via ship from Karachi, Pakistan, later hijacked a small Indian vessel to get past Indian coastal patrols, and ultimately landed near Mumbai.

Extensive preparations apparently had been made, including surveillance of the targets. So while the precise number of attackers remains unclear, the attack clearly was well-planned and well-executed.

Evidence and logic suggest that radical Pakistani Islamists carried out the attack. These groups have a highly complex and deliberately amorphous structure. Rather than being centrally controlled, ad hoc teams are created with links to one or more groups. Conceivably, they might have lacked links to any group, but this is hard to believe. Too much planning and training were involved in this attack for it to have been conceived by a bunch of guys in a garage. While precisely which radical Pakistani Islamist group or groups were involved is unknown, the Mumbai attack appears to have originated in Pakistan. It could have been linked to al Qaeda prime or its various franchises and/or to Kashmiri insurgents.

More important than the question of the exact group that carried out the attack, however, is the attackers’ strategic end. There is a tendency to regard terror attacks as ends in themselves, carried out simply for the sake of spreading terror. In the highly politicized atmosphere of Pakistan’s radical Islamist factions, however, terror frequently has a more sophisticated and strategic purpose. Whoever invested the time and took the risk in organizing this attack had a reason to do so. Let’s work backward to that reason by examining the logical outcomes following this attack.

An End to New Delhi’s Restraint

The most striking aspect of the Mumbai attack is the challenge it presents to the Indian government — a challenge almost impossible for New Delhi to ignore. A December 2001 Islamist attack on the Indian parliament triggered an intense confrontation between India and Pakistan. Since then, New Delhi has not responded in a dramatic fashion to numerous Islamist attacks against India that were traceable to Pakistan. The Mumbai attack, by contrast, aimed to force a response from New Delhi by being so grievous that any Indian government showing only a muted reaction to it would fall.

India’s restrained response to Islamist attacks (even those originating in Pakistan) in recent years has come about because New Delhi has understood that, for a host of reasons, Islamabad has been unable to control radical Pakistani Islamist groups. India did not want war with Pakistan; it felt it had more important issues to deal with. New Delhi therefore accepted Islamabad’s assurances that Pakistan would do its best to curb terror attacks, and after suitable posturing, allowed tensions originating from Islamist attacks to pass.

This time, however, the attackers struck in such a way that New Delhi couldn’t allow the incident to pass. As one might expect, public opinion in India is shifting from stunned to furious. India’s Congress party-led government is politically weak and nearing the end of its life span. It lacks the political power to ignore the attack, even if it were inclined to do so. If it ignored the attack, it would fall, and a more intensely nationalist government would take its place. It is therefore very difficult to imagine circumstances under which the Indians could respond to this attack in the same manner they have to recent Islamist attacks.

What the Indians actually will do is not clear. In 2001-2002, New Delhi responded to the attack on the Indian parliament by moving forces close to the Pakistani border and the Line of Control that separates Indian- and Pakistani-controlled Kashmir, engaging in artillery duels along the front, and bringing its nuclear forces to a high level of alert. The Pakistanis made a similar response. Whether India ever actually intended to attack Pakistan remains unclear, but either way, New Delhi created an intense crisis in Pakistan.

The U.S. and the Indo-Pakistani Crisis

The United States used this crisis for its own ends. Having just completed the first phase of its campaign in Afghanistan, Washington was intensely pressuring Pakistan’s then-Musharraf government to expand cooperation with the United States; purge its intelligence organization, the Inter-Services Intelligence (ISI), of radical Islamists; and crack down on al Qaeda and the Taliban in the Afghan-Pakistani border region. Former Pakistani President Pervez Musharraf had been reluctant to cooperate with Washington, as doing so inevitably would spark a massive domestic backlash against his government.

The crisis with India produced an opening for the United States. Eager to get India to stand down from the crisis, the Pakistanis looked to the Americans to mediate. And the price for U.S. mediation was increased cooperation from Pakistan with the United States. The Indians, not eager for war, backed down from the crisis after guarantees that Islamabad would impose stronger controls on Islamist groups in Kashmir.

In 2001-2002, the Indo-Pakistani crisis played into American hands. In 2008, the new Indo-Pakistani crisis might play differently. The United States recently has demanded increased Pakistani cooperation along the Afghan border. Meanwhile, President-elect Barack Obama has stated his intention to focus on Afghanistan and pressure the Pakistanis.

Therefore, one of Islamabad’s first responses to the new Indo-Pakistani crisis was to announce that if the Indians increased their forces along Pakistan’s eastern border, Pakistan would be forced to withdraw 100,000 troops from its western border with Afghanistan. In other words, threats from India would cause Pakistan to dramatically reduce its cooperation with the United States in the Afghan war. The Indian foreign minister is flying to the United States to meet with Obama; obviously, this matter will be discussed among others.

We expect the United States to pressure India not to create a crisis, in order to avoid this outcome. As we have said, the problem is that it is unclear whether politically the Indians can afford restraint. At the very least, New Delhi must demand that the Pakistani government take steps to make the ISI and Pakistan’s other internal security apparatus more effective. Even if the Indians concede that there was no ISI involvement in the attack, they will argue that the ISI is incapable of stopping such attacks. They will demand a purge and reform of the ISI as a sign of Pakistani commitment. Barring that, New Delhi will move troops to the Indo-Pakistani frontier to intimidate Pakistan and placate Indian public opinion.

Dilemmas for Islamabad, New Delhi and Washington

At that point, Islamabad will have a serious problem. The Pakistani government is even weaker than the Indian government. Pakistan’s civilian regime does not control the Pakistani military, and therefore does not control the ISI. The civilians can’t decide to transform Pakistani security, and the military is not inclined to make this transformation. (Pakistan’s military has had ample opportunity to do so if it wished.)

Pakistan faces the challenge, just one among many, that its civilian and even military leadership lack the ability to reach deep into the ISI and security services to transform them. In some ways, these agencies operate under their own rules. Add to this the reality that the ISI and security forces — even if they are acting more assertively, as Islamabad claims — are demonstrably incapable of controlling radical Islamists in Pakistan. If they were capable, the attack on Mumbai would have been thwarted in Pakistan. The simple reality is that in Pakistan’s case, the will to make this transformation does not seem to be present, and even if it were, the ability to suppress terror attacks isn’t there.

The United States might well want to limit New Delhi’s response. U.S. Secretary of State Condoleezza Rice is on her way to India to discuss just this. But the politics of India’s situation make it unlikely that the Indians can do anything more than listen. It is more than simply a political issue for New Delhi; the Indians have no reason to believe that the Mumbai operation was one of a kind. Further operations like the Mumbai attack might well be planned. Unless the Pakistanis shift their posture inside Pakistan, India has no way of knowing whether other such attacks can be stymied. The Indians will be sympathetic to Washington’s plight in Afghanistan and the need to keep Pakistani troops at the Afghan border. But New Delhi will need something that the Americans — and in fact the Pakistanis — can’t deliver: a guarantee that there will be no more attacks like this one.

The Indian government cannot chance inaction. It probably would fall if it did. Moreover, in the event of inactivity and another attack, Indian public opinion probably will swing to an uncontrollable extreme. If an attack takes place but India has moved toward crisis posture with Pakistan, at least no one can argue that the Indian government remained passive in the face of threats to national security. Therefore, India is likely to refuse American requests for restraint.

It is possible that New Delhi will make a radical proposal to Rice, however. Given that the Pakistani government is incapable of exercising control in its own country, and given that Pakistan now represents a threat to both U.S. and Indian national security, the Indians might suggest a joint operation with the Americans against Pakistan.

What that joint operation might entail is uncertain, but regardless, this is something that Rice would reject out of hand and that Obama would reject in January 2009. Pakistan has a huge population and nuclear weapons, and the last thing Bush or Obama wants is to practice nation-building in Pakistan. The Indians, of course, will anticipate this response. The truth is that New Delhi itself does not want to engage deep in Pakistan to strike at militant training camps and other Islamist sites. That would be a nightmare. But if Rice shows up with a request for Indian restraint and no concrete proposal — or willingness to entertain a proposal — for solving the Pakistani problem, India will be able to refuse on the grounds that the Americans are asking India to absorb a risk (more Mumbai-style attacks) without the United States’ willingness to share in the risk.

Setting the Stage for a New Indo-Pakistani Confrontation

That will set the stage for another Indo-Pakistani confrontation. India will push forces forward all along the Indo-Pakistani frontier, move its nuclear forces to an alert level, begin shelling Pakistan, and perhaps — given the seriousness of the situation — attack short distances into Pakistan and even carry out airstrikes deep in Pakistan. India will demand greater transparency for New Delhi in Pakistani intelligence operations. The Indians will not want to occupy Pakistan; they will want to occupy Pakistan’s security apparatus.

Naturally, the Pakistanis will refuse that. There is no way they can give India, their main adversary, insight into Pakistani intelligence operations. But without that access, India has no reason to trust Pakistan. This will leave the Indians in an odd position: They will be in a near-war posture, but will have made no demands of Pakistan that Islamabad can reasonably deliver and that would benefit India. In one sense, India will be gesturing. In another sense, India will be trapped by making a gesture on which Pakistan cannot deliver. The situation thus could get out of hand.

In the meantime, the Pakistanis certainly will withdraw forces from western Pakistan and deploy them in eastern Pakistan. That will mean that one leg of the Petraeus and Obama plans would collapse. Washington’s expectation of greater Pakistani cooperation along the Afghan border will disappear along with the troops. This will free the Taliban from whatever limits the Pakistani army had placed on it. The Taliban’s ability to fight would increase, while the motivation for any of the Taliban to enter talks — as Afghan President Hamid Karzai has suggested — would decline. U.S. forces, already stretched to the limit, would face an increasingly difficult situation, while pressure on al Qaeda in the tribal areas would decrease.

Now, step back and consider the situation the Mumbai attackers have created. First, the Indian government faces an internal political crisis driving it toward a confrontation it didn’t plan on. Second, the minimum Pakistani response to a renewed Indo-Pakistani crisis will be withdrawing forces from western Pakistan, thereby strengthening the Taliban and securing al Qaeda. Third, sufficient pressure on Pakistan’s civilian government could cause it to collapse, opening the door to a military-Islamist government — or it could see Pakistan collapse into chaos, giving Islamists security in various regions and an opportunity to reshape Pakistan. Finally, the United States’ situation in Afghanistan has now become enormously more complex.

By staging an attack the Indian government can’t ignore, the Mumbai attackers have set in motion an existential crisis for Pakistan. The reality of Pakistan cannot be transformed, trapped as the country is between the United States and India. Almost every evolution from this point forward benefits Islamists. Strategically, the attack on Mumbai was a precise blow struck to achieve uncertain but favorable political outcomes for the Islamists.

Rice’s trip to India now becomes the crucial next step. She wants Indian restraint. She does not want the western Pakistani border to collapse. But she cannot guarantee what India must have: assurance of no further terror attacks on India originating in Pakistan. Without that, India must do something. No Indian government could survive without some kind of action. So it is up to Rice, in one of her last acts as secretary of state, to come up with a miraculous solution to head off a final, catastrophic crisis for the Bush administration — and a defining first crisis for the new Obama administration. Former U.S. Defense Secretary Donald Rumsfeld once said that the enemy gets a vote. The Islamists cast their ballot in Mumbai.

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On G-20 and GM: Economics, Politics and Social Stability

2008-11-19T11:31:00.000-06:00

November 17, 2008

By George Friedman

The G-20 met last Saturday. Afterward, the group issued a meaningless statement and decided to meet again in March 2009, or perhaps later. Clearly, the urgency of October is gone. First, the perception of imminent collapse is past. Politicians are superb seismographs for detecting impending disaster, and these politicians did not act as if they were running out of time. Second, the United States will have a new president in March, and nothing can be done until he defines his policy.

Given the sense in Europe that this financial crisis marked the end of U.S. economic supremacy, it is ironic that the Europeans are waiting on the Americans. One would think they would be using their newfound ascendancy to define the new international system. But the fact is that for all the shouting, little has changed in the international order. The crisis has receded sufficiently that nothing more needs to be done immediately beyond “cooperation,” and nothing can be done until the United States defines what will be done. We feel that our view that the international system received fatal blows Aug. 8, when Russia and Georgia went to war, and Oct. 11, when the G-7 meeting ended without a single integrated solution, remains unchallenged. Now, it is every country for itself.

From Financial Crisis to Cyclical Recession

The financial crisis has been mitigated, if not solved. The problem now is that we are in a cyclical recession, and that every country is trying to figure out how to cope with the recession. Unlike the past two recessions, this one is more global than local. But unlike the 1970s, when recession was global, this one is not accompanied by soaring inflation and interest rates.

All recessions have different dynamics, but all have one thing in common: They impose punishment and discipline on economies run wild. This is happening around the world.

China, for example, faces a serious problem. China is an export-oriented economy whose primary market is the United States. As the United States goes into recession, demand for Chinese goods declines. Chinese businesses have always operated on very tight — sometimes invisible — profit margins designed to emphasize cash flow and to pay off debts to banks. As U.S. demand contracts, many Chinese firms find themselves in untenable positions, without room to decrease prices, lacking operating reserves and insufficiently capitalized. Recessions are designed to cull the weak from the herd, and a huge swath of the Chinese economy is ripe for the culling.

If the world were all about economics, culling is what the Chinese would do. But the world is more complex than that. A culling would lead to massive unemployment. Many Chinese employees live on Third World wages; indeed, the vast majority of Chinese have incomes of less than $1,000 a year. To them, unemployment doesn’t mean problems with their 401k. It means malnutrition and desperation — neither of which is unknown in 20th century Chinese history, including the Communist period. The Chinese government is rightly worried about the social and political consequences of rational economic policies: They might work in the long run, but only if you live that long.

Economic Restructuring vs. Stability

The Chinese have therefore prepared a massive stimulus package that is more of a development program to make up for declining U.S. demand. It aims to keep businesses from failing and spilling millions of angry and hungry workers into the street. For the Chinese, the economic problem creates a much larger and more serious issue. It is also an issue that must be solved quickly, and the amount of time needed outstrips the amount of time available.

This is not only a Chinese problem. Wherever there is an economic downturn, politicians must decide whether society — and their own political futures — can withstand the rigors recessions impose. Recessions occur when, as is inevitable, inefficiencies and irrationalities build up in the financial and economic system. The resulting economic downturn imposes a harsh discipline that destroys the inefficient, encourages everyone to become more efficient, and opens the doors to new businesses using new technologies and business models. The year 2001 smashed the technology sector in the United States, opening the door for Google Inc.

The business cycle works well, but the human costs can be daunting. The collapse of inefficient businesses leaves workers without jobs, investors without money and society less stable than before. The pain needed to rectify China’s economy would be enormous, with devastating consequences for hundreds of millions of Chinese, and probably would lead to social chaos. Beijing is prepared to accept a high degree of economic inefficiency to avoid, or at least postpone, the reckoning. The reckoning always comes, but for most of us, later is better than sooner. Economic rationality takes a back seat to social necessity and political common sense.

Every country in the world is looking inward at the impact of the recession on its economy and measuring its resources. Countries are deciding whether they have the ability to prop up business that should fail, what the social consequences of business failure would be, and whether they should try to use their resources to avoid the immediate pain of recession. This is why the G-20 ended in meaningless platitudes.

Each country is also trying to answer the question of how much pain it — and its regime — can endure. The more pain imposed, the healthier countries will emerge economically — unless of course the pain kills them. Ultimately, the rationality of economics and the reality of society frequently diverge.

Recession and the U.S. Auto Industry

For the United States, this choice has been posed in stark terms with regard to the dilemma of whether the U.S. government should use its resources to rescue the American auto industry. The American auto industry was once the centerpiece of the U.S. economy. That hasn’t been true for a generation, as other industries and services have supplanted it and other countries’ auto industries have surpassed it. Nevertheless, the U.S. auto industry remains important. It might drain the U.S. economy by losing vast amounts of money and destroying the equity held by its investors, but it employs large numbers of people. Perhaps more important, it purchases supplies from literally thousands of U.S. companies.

There can be endless discussions of why the U.S. auto industry is in such trouble. The answer lies not in one place but in many, from the decisions and makeup of management to the unions that control much of the workforce, and from the cost structure inherent in producing cars in the American economy to a simple systemic inability to produce outstanding vehicles. There might be varying degrees of truth to all or some of this, but the fact remains that each of the U.S. carmakers is on the verge of financial collapse.

This is what recessions are supposed to do. As in China and everywhere else, recessions reveal weak businesses and destroy them, freeing up resources for new enterprises. This recession has hit the auto industry hard, and it is unlikely that it is going to survive. The ultimate reason is the same one that destroyed the U.S. steel industry a generation ago: Given U.S. cost structures, producing commodity products is best left to countries with lower wage rates, while more expensive U.S. labor is deployed in more specialized products requiring greater expertise. Thus, there is still steel production in the United States, but it is specialty steel production, not commodity steel. Similarly, there will be specialty auto production in the United States, but commodity auto production will come from other countries. < /p>

That sounds easy, but the transition actually will be a bloodletting. Current employees of both the automakers and suppliers will be devastated. Institutions that have lent money to the automakers will suffer massive or total losses. Pensioners might lose pensions and health care benefits, and an entire region of the United States — the industrial Midwest — will be devastated. Something stronger will grow eventually, but not in time for many of the current employees, shareholders and creditors.

Here the economic answer, cull, meets the social answer, stabilize. Policymakers have a decision to make. If the automakers fail now, their drain on the economy will end; the pain will be shorter, if more intense; and new industries would emerge more quickly. But though their drain on the economy would end, the impact of the automakers’ failure on the economy would be seismic. Unemployment would surge, as would bankruptcies of many auto suppliers. Defaults on loans would hit the credit markets. In the Midwest, home prices would plummet and foreclosures would skyrocket. And heaven only knows what the impact on equity markets would be.

In the U.S. case, the healthful purgative of a recession could potentially put the patient in a coma. Few if any believe the U.S. auto industry can survive in its current form. But there is an emerging consensus in Washington that the auto industry must not be allowed to fail now. The argument for spending money on the auto industry is not to save it, but to postpone its failure until a less devastating and inconvenient time. In other words, fearing the social and political consequences of a recession working itself through to its logical conclusion, Washington — like Beijing — wants to spend money it probably won’t recover to postpone the failure. Indeed, governments around the world are considering what failures to tolerate, what failures to postpone, and how much to spend on the latter. General Motors is merely the American case in point.

The Recession in Context

The people arguing for postponement aren’t foolish. The financial system is still working its way through a massive crisis that had little to do with the auto industry. Some traction appears to be occurring; certainly there was no crisis atmosphere at the G-20 meeting. The economy is in recession, but in spite of the inevitable claims that we have never seen anything like this one before, we have. There is always some variable that swings to an extreme — this time, it is consumer spending — but we are still well within the framework of recent recessions.

Consider the equity markets, which we regard as a long-term measure of the market’s evaluation of the state of the economy. In January 2000, the S&P 500 peaked at 1,455. This was the top of the market. In July 2002, 18 months later, the S&P bottomed out at 935. Over the next five years it rose to 1,519 in July 2007, the height for this cycle. It fell from this point until Nov. 12, 2008, when it closed at 852.30. This past Friday, it was at 873.29.

We do not know what the market will do in the future. There are people much smarter than we are who claim to know that. What we do know is what it has done. And what it has done this time — so far — is almost exactly what it did last time, except that in 2000-2002 it took 18 months to do it, while this time it was done in about 16 and a half months (assuming it bottomed out Nov. 12). But even if the market didn’t bottom out then, and it falls to 775, for example, it will have lost 50 percent of its value from the peak. This would be more than in 2000-2002, but not unprecedented.

The point we are making here is that if we regard the equity markets as a long-term seismograph of the economy, then so far, despite all the storm and stress, the markets — and therefore the economy — remain within the general pattern of the 2000-2002 market at the 2001 recession. That recession certainly was unpleasant, what with the devastation of the tech sector, but the economy survived. At the same time, however, it is clear that things are balanced on a knife’s edge. Another hundred points’ fall on the S&P, and the markets will be telling us that the world is in a very different place indeed.

A massive bankruptcy in the automotive sector could certainly set the stage for an economic renaissance in the next generation. But at this particular moment in time (it’s no coincidence that the crisis in the U.S. automotive industry comes as we enter a recession), a wave of bankruptcies would dramatically deepen the recession. This probably would be reflected by the destruction of trillions more in net worth in the equity markets.

There is a powerful counterargument to bailing out the U.S. auto industry. This argument holds that the auto industry is a drain on the U.S. economy, that it will never be globally competitive, and that if it is dragged back from the edge, no one will then say it is time to push it to the edge and over. The next time it will be on the brink will be during the next recession, and the same argument to save it will be used. In due course, the United States, like China, will be so terrified of the social and political consequences of business failure that it will maintain Chinese-like state owned enterprises, full of employees and generation-old plants and business models. Clearly, short-run solutions can easily become long-term albatrosses.

The only possible solution would be a bailout followed by a Washington-administered restructuring of the auto industry. This causes us to imagine a collaboration between the auto industry’s current management and Washington administrators that would finally put Detroit on a path to where it can compete with Toyota. Frankly, the mind boggles at this. But boggle though we might, hitting the economy with another massive financial default, a wave of bankruptcies, massive unemployment surges and another blow to housing prices boggles our mind even more.

The geopolitical problem confronting the world at the moment is that it has been forced to offer massive support to the global financial system with sovereign wealth — e.g., via taxes and currency printing presses. The world might just have squeaked through that crisis. Now, the world is in an inevitable recession and businesses are on the brink of failure. A wave of massive business failures on top of the financial crisis might well move the global system to a very different place. Therefore, each nation, by itself and indifferent to others, is in the process of figuring out how to postpone these failures to a more opportune time — or to never. This will build in long-term inefficiencies to the global economy, but right now everyone will be quite content with that.

Thus the financial crisis became a recession, and the recession triggered bankruptcies. And because no one wants bankruptcies right now, everyone who can is using taxpayer dollars to protect the taxpayer from the consequences of mismanagement. And the last thing any one cared about was the G-20 concept for the future of the economic system.

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Iran Returns to the Global Stage

2008-11-15T21:19:00.001-06:00

By George Friedman

November 10, 2008

After a three-month hiatus, Iran seems set to re-emerge near the top of the U.S. agenda. Last week, the Iranian government congratulated U.S. President-elect Barack Obama on his Nov. 4 electoral victory. This marks the first time since the Iranian Revolution that such greetings have been sent.

While it seems trivial, the gesture is quite significant. It represents a diplomatic way for the Iranians to announce that they regard Obama’s election as offering a potential breakthrough in 30 years of U.S. relations with Iran. At his press conference, Obama said he does not yet have a response to the congratulatory message, and reiterated that he opposes Iran’s nuclear program and its support for terrorism. The Iranians returned to criticizing Obama after this, but without their usual passion.

The Warming of U.S.-Iranian Relations

The warming of U.S.-Iranian relations did not begin with Obama’s election; it began with the Russo-Georgian War. In the weeks and months prior to the August war, the United States had steadily increased tensions with Iran. This process proceeded along two tracks.

On one track, the United States pressed its fellow permanent members of the U.N. Security Council (Russia, China, France and the United Kingdom) and Germany to join Washington in imposing additional sanctions on Iran. U.S. Undersecretary for Political Affairs William J. Burns joined a July 19 meeting between EU foreign policy adviser Javier Solana and Iranian national security chief Saeed Jalili, which was read as a thaw in the American position on Iran. The Iranian response was ambiguous, which is a polite way of saying that Tehran wouldn’t commit to anything. The Iranians were given two weeks after the meeting to provide an answer or face new sanctions.

A second track consisted of intensified signals of potential U.S. military action. Recall the carefully leaked report published in The New York Times on June 20 regarding Israeli preparations for airstrikes against Iran. According to U.S. — not Israeli — sources, the Israeli air force rehearsed for an attack on Iran by carrying out a simulated attack over Greece and the eastern Mediterranean Sea involving more than 100 aircraft.

At the same time, reports circulated about Israeli planes using U.S. airfields in Iraq in preparation for an attack on Iran. The markets and oil prices — at a high in late July and early August — were twitching with reports of a potential blockade of Iranian ports, while the Internet was filled with lurid reports of a fleet of American and French ships on its way to carry out the blockade.

The temperature in U.S.-Iranian relations was surging, at least publicly. Then Russia and Georgia went to war, and Iran suddenly dropped off the U.S. radar screen. Washington went quiet on the entire Iranian matter, and the Israelis declared that Iran was two to five years from developing a nuclear device (as opposed to a deliverable weapon), reducing the probability of an Israeli airstrike. From Washington’s point of view, the bottom fell out of U.S. policy on Iran when the Russians and Georgians opened fire on each other.

The Georgian Connection

There were two reasons for this.

First, Washington had no intention of actually carrying out airstrikes against Iran. The United States was far too tied down in other areas to do that. Nor did the Israelis intend to attack. The military obstacles to what promised to be a multiday conventional strike against Iranian targets more than a thousand miles away were more than a little daunting. Nevertheless, generating that threat of such a strike suited U.S. diplomacy. Washington wanted not only to make Iran feel threatened, but also to increase Tehran’s isolation by forging the U.N. Security Council members and Germany into a solid bloc imposing increasingly painful sanctions on Iran.

Once the Russo-Georgian War broke out, however, and the United States sided publicly and vigorously with Georgia, the chances of the Russians participating in such sanctions against Iran dissolved. As the Russians rejected the idea of increased sanctions, so did the Chinese. If the Russians and Chinese weren’t prepared to participate in sanctions, no sanctions were possible, because the Iranians could get whatever they needed from these two countries.

The second reason was more important. As U.S.-Russian relations deteriorated, each side looked for levers to control the other. For the Russians, one of the best levers with the Americans was the threat of selling weapons to Iran. From the U.S. point of view, not only would weapon sales to Iran make it more difficult to attack Iran, but the weapons would find their way to Hezbollah and other undesirable players. The United States did not want the Russians selling weapons, but the Russians were being unpredictable. Therefore, while the Russians had the potential to offer Iran weapons, the United States wanted to reduce Iran’s incentive for accepting those weapons.

The Iranians have a long history with the Russians, including the occupation of northern Iran by Russia during World War II. The Russians are close to Iran, and the Americans are far away. Tehran’s desire to get closer to the Russians is therefore limited, although under pressure Iran would certainly purchase weapons from Russia, just as it has purchased nuclear technology in the past. With the purchase of advanced weapons would come Russian advisers — something that might not be to Iran’s liking unless it were absolutely necessary.

The United States did not want to give Iran a motive for closing an arms deal with Russia, leaving aside the question of whether the Russian threat to sell weapons was anything more than a bargaining chip with the Americans. With Washington rhetorically pounding Russia, pounding Iran at the same time made no sense. For one thing, the Iranians, like the Russians, knew the Americans were spread too thin. Also, the United States suddenly had to reverse its position on Iran. Prior to Aug. 8, Washington wanted the Iranians to feel embattled; after Aug. 8, the last thing the United States wanted was for the Iranians to feel under threat. In a flash, Iran went from being the most important issue on the table to being barely mentioned.

Iran and a Formal U.S. Opening

Different leaks about Iran started to emerge. The Bush administration posed the idea of opening a U.S. interest section in Iran, the lowest form of diplomatic recognition (but diplomatic recognition nonetheless). This idea had been floated June 23, but now it was being floated after the Russo-Georgian War. The initial discussion of the interest section seemed to calm the atmosphere, but the idea went away.

Then, just before U.S. presidential elections in November, the reports re-emerged, this time in the context of a new administration. According to the leaks, U.S. President George W. Bush intended to open diplomatic relations with Iran after the election regardless of who won, in order to free the next president from the burden of opening relations with Iran. In other words, if Obama won, Bush was prepared to provide cover with the American right on an opening to Iran.

If we take these leaks seriously — and we do — this means Bush has concluded that a formal opening to Iran is necessary. Indeed, the Bush administration has been operating on this premise ever since the U.S. troop surge in Iraq. Two things were clear to the Bush administration in 2007: first, that the United States had to make a deal with the Iraqi Sunni nationalist insurgents; and second, that while the Iranians might not be able to impose a pro-Iranian government in Baghdad, Tehran had enough leverage with enough Iraq Shiite factions to disrupt Iraq, and thus disrupt the peace process. Therefore, without an understanding with Iran, a U.S. withdrawal from Iraq would be difficult and full of potentially unpleasant consequences, regardless of who is in the White House.

The issue of Iran’s nuclear program was part of this negotiation. The Iranians were less interested in building a nuclear weapon than in having the United States believe they were building one. As Tehran learned by observing the U.S. reaction to North Korea, Washington has a nuclear phobia. Tehran thus hoped it could use the threat of a nuclear program to force the United States to be more forthcoming on Iranian interests in Iraq, a matter of fundamental importance to Iran. At the same time, the United States had no appetite for bombing Iran, but used the threat of attacks as leverage to get the Iranians to be more tractable.

The Iranians in 2007 withdrew their support from destabilizing elements in Iraq like Muqtada al-Sadr, contributing to a dramatic decline in violence in Iraq. In return, Iran wanted to see an American commitment to withdraw from Iraq on a set timetable. Washington was unprepared to make that commitment. Current talks over a Status of Forces Agreement (SOFA) between Washington and Baghdad revolve around just this issue. The Iraqi Shia are demanding a fixed timetable, while the Kurds and Sunnis — not to mention foreign governments like Saudi Arabia — seem to be more comfortable with a residual U.S. force in place to guarantee political agreements.

The Shia are clearly being influenced by Iran on the SOFA issue, as their interests align. The Sunnis and Kurds, however, fear this agreement. In their view, the withdrawal of U.S. forces on a fixed timetable will create a vacuum in Iraq that the Iranians eventually will fill, at the very least by having a government in Baghdad that Tehran can influence. The Kurds and Sunnis are deeply concerned about their own security in such an event. Therefore, the SOFA is not moving toward fruition.

The Iraqi Stumbling Block

There is a fundamental issue blocking the agreement. The United States has agreed to an Iraqi government that is neutral between Washington and Tehran. That is a major defeat for the United States, but an unavoidable one under the circumstances. But a U.S. withdrawal without a residual force means that the Iranians will be the dominant force in the region, and this is not something United States — along with the Iraqi Kurds and Sunnis, the Saudis and Israelis — wants. Therefore the SOFA remains in gridlock, with the specter of Russian-Iranian ties complicating the situation.

Obama’s position during the election was that he favored a timed U.S. withdrawal from Iraq, but he was ambiguous about whether he would want a residual force kept there. Clearly, the Shia and Iranians are more favorably inclined toward Obama than Bush because of Obama’s views on a general withdrawal by a certain date and the possibility of a complete withdrawal. This means that Obama must be extremely careful politically. The American political right is wounded but far from dead, and it would strike hard if it appeared Obama was preparing to give Iran a free hand in Iraq.

One possible way for Obama to proceed would be to keep Russia and Iran from moving closer together. Last week, Obama’s advisers insisted their camp has made no firm commitments on ballistic missile defense (BMD) installations in Poland and the Czech Republic, repudiating claims by Polish President Lech Kaczynski that the new U.S. president-elect had assured him of firm support during a Nov. 8 phone conversation. This is an enormous issue for the Russians.

It is not clear in how broad of a context the idea of avoiding firm commitments on BMD was mentioned, but it might go a long way toward keeping Russia happy and therefore making Moscow less likely to provide aid — material or psychological — to the Iranians. Making Iran feel as isolated as possible, without forcing it into dependence on Russia, is critical to a satisfactory solution for the United States in Iraq.

Complicating this are what appear to be serious political issues in Iran. Iranian President Mahmoud Ahmadinejad has been attacked for his handling of the economy. He has seen an ally forced from the Interior Ministry and the head of the Iranian central bank replaced. Ahmadinejad has even come under criticism for his views on Israel, with critics saying that he has achieved nothing and lost much through his statements. He therefore appears to be on the defensive.

The gridlock in Baghdad is not over a tedious diplomatic point, but over the future of Iraq and its relation to Iran. At the same time, there appears to be a debate going on in Iran over whether Ahmadinejad’s policies have improved the outlook for Iran’s role in Iraq. Finally, any serious thoughts the Iranians might have had about cozying up to the Russians have dissipated since August, and Obama might have made them even more distant. Still, Obama’s apparent commitment to a timed, complete withdrawal of U.S. forces poses complexities. His advisers have already hinted at flexibility on these issues.

We think that Bush will — after all his leaks — smooth the way for Obama by opening diplomatic relations with Iran. From a political point of view, this will allow Bush to take some credit for any breakthrough. But from the point of view of U.S. national interest, going public with conversations that have taken place privately over the past couple of years (along with some formal, public meetings in Baghdad) makes a great deal of sense. It could possibly create an internal dynamic in Iran that would force Ahmadinejad out, or at least weaken him. It could potentially break the logjam over the SOFA in Baghdad, and it could even stabilize the region.

The critical question will not be the timing of the U.S. withdrawal. It will be the residual force — whether an American force of 20,000 to 40,000 troops will remain to guarantee that Iran does not have undue influence in Iraq, and that Sunni and Kurdish interests are protected. Obama promised to end the war in Iraq, and he promised to withdraw all U.S. troops. He might have to deal with the fact that he can have the former only if he compromises on the latter. But he has left himself enough room for maneuver that he can do just that.

It seems clear that Iran will now return to the top of the U.S. foreign policy agenda. If Bush re-establishes formal diplomatic relations with Iran at some level, and if Obama responds to Iranian congratulations in a positive way, then an interesting dynamic will be in place well before Inauguration Day. The key will be the Nov. 10 meeting between Bush and Obama.

Bush wants to make a move that saves some of his legacy; Obama knows he will have to deal with Iran and even make concessions. Obama also knows the political price he will have to pay if he does. If Bush makes the first move, it will make things politically easier for Obama. Obama can afford to let Bush take the first step if it makes the subsequent steps easier for the Obama administration. But first, there must be an understanding between Bush and Obama. Then can there be an understanding between the United States and Iran, and then there can be an understanding among Iraqi Shia, Sunnis and Kurds. And then history can move on.

There are many understandings in the way of history.

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Obama’s Challenge

2008-11-06T21:25:00.000-06:00

By George Friedman

Barack Obama has been elected president of the United States by a large majority in the Electoral College. The Democrats have dramatically increased their control of Congress, increasing the number of seats they hold in the House of Representatives and moving close to the point where — with a few Republican defections — they can have veto-proof control of the Senate. Given the age of some Supreme Court justices, Obama might well have the opportunity to appoint at least one and possibly two new justices. He will begin as one of the most powerful presidents in a long while.

Truly extraordinary were the celebrations held around the world upon Obama’s victory. They affirm the global expectations Obama has raised — and reveal that the United States must be more important to Europeans than the latter like to admit. (We can’t imagine late-night vigils in the United States over a French election.)

Obama is an extraordinary rhetorician, and as Aristotle pointed out, rhetoric is one of the foundations of political power. Rhetoric has raised him to the presidency, along with the tremendous unpopularity of his predecessor and a financial crisis that took a tied campaign and gave Obama a lead he carefully nurtured to victory. So, as with all politicians, his victory was a matter of rhetoric and, according to Machiavelli, luck. Obama had both, but now the question is whether he has Machiavelli’s virtue in full by possessing the ability to exercise power. This last element is what governing is about, and it is what will determine if his presidency succeeds.

Embedded in his tremendous victory is a single weakness: Obama won the popular vote by a fairly narrow margin, about 52 percent of the vote. That means that almost as many people voted against him as voted for him.

Obama’s Agenda vs. Expanding His Base

U.S. President George W. Bush demonstrated that the inability to understand the uses and limits of power can crush a presidency very quickly. The enormous enthusiasm of Obama’s followers could conceal how he — like Bush — is governing a deeply, and nearly evenly, divided country. Obama’s first test will be simple: Can he maintain the devotion of his followers while increasing his political base? Or will he believe, as Bush and Cheney did, that he can govern without concern for the other half of the country because he controls the presidency and Congress, as Bush and Cheney did in 2001? Presidents are elected by electoral votes, but they govern through public support.

Obama and his supporters will say there is no danger of a repeat of Bush — who believed he could carry out his agenda and build his political base at the same time, but couldn’t. Building a political base requires modifying one’s agenda. But when you start modifying your agenda, when you become pragmatic, you start to lose your supporters. If Obama had won with 60 percent of the popular vote, this would not be as pressing a question. But he barely won by more than Bush in 2004. Now, we will find out if Obama is as skillful a president as he was a candidate.

Obama will soon face the problem of beginning to disappoint people all over the world, a problem built into his job. The first disappointments will be minor. There are thousands of people hoping for appointments, some to Cabinet positions, others to the White House, others to federal agencies. Many will get something, but few will get as much as they hoped for. Some will feel betrayed and become bitter. During the transition process, the disappointed office seeker — an institution in American politics — will start leaking on background to whatever reporters are available. This will strike a small, discordant note; creating no serious problems, but serving as a harbinger of things to come.

Later, Obama will be sworn in. He will give a memorable, perhaps historic speech at his inauguration. There will be great expectations about him in the country and around the world. He will enjoy the traditional presidential honeymoon, during which all but his bitterest enemies will give him the benefit of the doubt. The press initially will adore him, but will begin writing stories about all the positions he hasn’t filled, the mistakes he made in the vetting process and so on. And then, sometime in March or April, things will get interesting.

Iran and a U.S. Withdrawal From Iraq

Obama has promised to withdraw U.S. forces from Iraq, where he does not intend to leave any residual force. If he follows that course, he will open the door for the Iranians. Iran’s primary national security interest is containing or dominating Iraq, with which Iran fought a long war. If the United States remains in Iraq, the Iranians will be forced to accept a neutral government in Iraq. A U.S. withdrawal will pave the way for the Iranians to use Iraqi proxies to create, at a minimum, an Iraqi government more heavily influenced by Iran.

Apart from upsetting Sunni and Kurdish allies of the United States in Iraq, the Iranian ascendancy in Iraq will disturb some major American allies — particularly the Saudis, who fear Iranian power. The United States can’t afford a scenario under which Iranian power is projected into the Saudi oil fields. While that might be an unlikely scenario, it carries catastrophic consequences. The Jordanians and possibly the Turks, also American allies, will pressure Obama not simply to withdraw. And, of course, the Israelis will want the United States to remain in place to block Iranian expansion. Resisting a coalition of Saudis and Israelis will not be easy.

This will be the point where Obama’s pledge to talk to the Iranians will become crucial. If he simply withdraws from Iraq without a solid understanding with Iran, the entire American coalition in the region will come apart. Obama has pledged to build coalitions, something that will be difficult in the Middle East if he withdraws from Iraq without ironclad Iranian guarantees. He therefore will talk to the Iranians. But what can Obama offer the Iranians that would induce them to forego their primary national security interest? It is difficult to imagine a U.S.-Iranian deal that is both mutually beneficial and enforceable.

Obama will then be forced to make a decision. He can withdraw from Iraq and suffer the geopolitical consequences while coming under fire from the substantial political right in the United States that he needs at least in part to bring into his coalition. Or, he can retain some force in Iraq, thereby disappointing his supporters. If he is clumsy, he could wind up under attack from the right for negotiating with the Iranians and from his own supporters for not withdrawing all U.S. forces from Iraq. His skills in foreign policy and domestic politics will be tested on this core question, and he undoubtedly will disappoint many.

The Afghan Dilemma

Obama will need to address Afghanistan next. He has said that this is the real war, and that he will ask U.S. allies to join him in the effort. This means he will go to the Europeans and NATO, as he has said he will do. The Europeans are delighted with Obama’s victory because they feel Obama will consult them and stop making demands of them. But demands are precisely what he will bring the Europeans. In particular, he will want the Europeans to provide more forces for Afghanistan.

Many European countries will be inclined to provide some support, if for no other reason than to show that they are prepared to work with Obama. But European public opinion is not about to support a major deployment in Afghanistan, and the Europeans don’t have the force to deploy there anyway. In fact, as the global financial crisis begins to have a more dire impact in Europe than in the United States, many European countries are actively reducing their deployments in Afghanistan to save money. Expanding operations is the last thing on European minds.

Obama’s Afghan solution of building a coalition centered on the Europeans will thus meet a divided Europe with little inclination to send troops and with few troops to send in any event. That will force him into a confrontation with the Europeans in spring 2009, and then into a decision. The United States and its allies collectively lack the force to stabilize Afghanistan and defeat the Taliban. They certainly lack the force to make a significant move into Pakistan — something Obama has floated on several occasions that might be a good idea if force were in fact available.

He will have to make a hard decision on Afghanistan. Obama can continue the war as it is currently being fought, without hope of anything but a long holding action, but this risks defining his presidency around a hopeless war. He can choose to withdraw, in effect reinstating the Taliban, going back on his commitment and drawing heavy fire from the right. Or he can do what we have suggested is the inevitable outcome, namely, negotiate — and reach a political accord — with the Taliban. Unlike Bush, however, withdrawal or negotiation with the Taliban will increase the pressure on Obama from the right. And if this is coupled with a decision to delay withdrawal from Iraq, Obama’s own supporters will become restive. His 52 percent Election Day support could deteriorate with remarkable speed.

The Russian Question

At the same time, Obama will face the Russian question. The morning after Obama’s election, Russian President Dmitri Medvedev announced that Russia was deploying missiles in its European exclave of Kaliningrad in response to the U.S. deployment of ballistic missile defense systems in Poland. Obama opposed the Russians on their August intervention in Georgia, but he has never enunciated a clear Russia policy. We expect Ukraine will have shifted its political alignment toward Russia, and Moscow will be rapidly moving to create a sphere of influence before Obama can bring his attention — and U.S. power — to bear.

Obama will again turn to the Europeans to create a coalition to resist the Russians. But the Europeans will again be divided. The Germans can’t afford to alienate the Russians because of German energy dependence on Russia and because Germany does not want to fight another Cold War. The British and French may be more inclined to address the question, but certainly not to the point of resurrecting NATO as a major military force. The Russians will be prepared to talk, and will want to talk a great deal, all the while pursuing their own national interest of increasing their power in what they call their “near abroad.”

Obama will have many options on domestic policy given his majorities in Congress. But his Achilles’ heel, as it was for Bush and for many presidents, will be foreign policy. He has made what appear to be three guarantees. First, he will withdraw from Iraq. Second, he will focus on Afghanistan. Third, he will oppose Russian expansionism. To deliver on the first promise, he must deal with the Iranians. To deliver on the second, he must deal with the Taliban. To deliver on the third, he must deal with the Europeans.

Global Finance and the European Problem

The Europeans will pose another critical problem, as they want a second Bretton Woods agreement. Some European states appear to desire a set of international regulations for the financial system. There are three problems with this.

First, unless Obama wants to change course dramatically, the U.S. and European positions differ over the degree to which governments will regulate interbank transactions. The Europeans want much more intrusion than the Americans. They are far less averse to direct government controls than the Americans have been. Obama has the power to shift American policy, but doing that will make it harder to expand his base.

Second, the creation of an international regulatory body that has authority over American banks would create a system where U.S. financial management was subordinated to European financial management.

And third, the Europeans themselves have no common understanding of things. Obama could thus quickly be drawn into complex EU policy issues that could tie his hands in the United States. These could quickly turn into painful negotiations, in which Obama’s allure to the Europeans will evaporate.

One of the foundations of Obama’s foreign policy — and one of the reasons the Europeans have celebrated his election — was the perception that Obama is prepared to work closely with the Europeans. He is in fact prepared to do so, but his problem will be the same one Bush had: The Europeans are in no position to give the things that Obama will need from them — namely, troops, a revived NATO to confront the Russians and a global financial system that doesn’t subordinate American financial authority to an international bureaucracy.

The Hard Road Ahead

Like any politician, Obama will face the challenge of having made a set of promises that are not mutually supportive. Much of his challenge boils down to problems that he needs to solve and that he wants European help on, but the Europeans are not prepared to provide the type and amount of help he needs. This, plus the fact that a U.S. withdrawal from Iraq requires an agreement with Iran — something hard to imagine without a continued U.S. presence in Iraq — gives Obama a difficult road to move on.

As with all American presidents (who face midterm elections with astonishing speed), Obama’s foreign policy moves will be framed by his political support. Institutionally, he will be powerful. In terms of popular support, he begins knowing that almost half the country voted against him, and that he must increase his base. He must exploit the honeymoon period, when his support will expand, to bring another 5 percent or 10 percent of the public into his coalition. These people voted against him; now he needs to convince them to support him. But these are precisely the people who would regard talks with the Taliban or Iran with deep distrust. And if negotiations with the Iranians cause him to keep forces in Iraq, he will alienate his base without necessarily winning over his opponents.

And there is always the unknown. There could be a terrorist attack, the Russians could start pressuring the Baltic states, the Mexican situation could deteriorate. The unknown by definition cannot be anticipated. And many foreign leaders know it takes an administration months to settle in, something some will try to take advantage of. On top of that, there is now nearly a three-month window in which the old president is not yet out and the new president not yet in.

Obama must deal with extraordinarily difficult foreign policy issues in the context of an alliance failing not because of rough behavior among friends but because the allies’ interests have diverged. He must deal with this in the context of foreign policy positions difficult to sustain and reconcile, all against the backdrop of almost half an electorate that voted against him versus supporters who have enormous hopes vested in him. Obama knows all of this, of course, as he indicated in his victory speech.

We will now find out if Obama understands the exercise of political power as well as he understands the pursuit of that power. You really can’t know that until after the fact. There is no reason to think he can’t finesse these problems. Doing so will take cunning, trickery and the ability to make his supporters forget the promises he made while keeping their support. It will also require the ability to make some of his opponents embrace him despite the path he will have to take. In other words, he will have to be cunning and ruthless without appearing to be cunning and ruthless. That’s what successful presidents do.

In the meantime, he should enjoy the transition. It’s frequently the best part of a presidency.

The United States, Europe and Bretton Woods II

2008-10-22T00:59:00.000-05:00

October 20, 2008
By George Friedman and Peter Zeihan

French President Nicolas Sarkozy and U.S. President George W. Bush met Oct. 18 to discuss the possibility of a global financial summit. The meeting ended with an American offer to host a global summit in December modeled on the 1944 Bretton Woods system that founded the modern economic system.

The Bretton Woods framework is one of the more misunderstood developments in human history. The conventional wisdom is that Bretton Woods crafted the modern international economic architecture, lashing the trading and currency systems to the gold standard to achieve global stability. To a certain degree, that is true. But the form that Bretton Woods took in the public mind is only a veneer. The real implications and meaning of Bretton Woods are a different story altogether.

Conventional Wisdom: The Depression and Bretton Woods

The origin of Bretton Woods lies in the Great Depression. As economic output dropped in the 1930s, governments worldwide adopted a swathe of protectionist, populist policies — import tariffs were particularly in vogue — that enervated international trade. In order to maintain employment, governments and firms alike encouraged ongoing production of goods even though mutual tariff walls prevented the sale of those goods abroad. As a result, prices for these goods dropped and deflation set in. Soon firms found that the prices they could reasonably charge for their goods had dropped below the costs of producing them.

The reduction in profitability led to layoffs, which reduced demand for products in general, further reducing prices. Firms went out of business en masse, workers in the millions lost their jobs, demand withered, and prices followed suit. An effort designed originally to protect jobs (the tariffs) resulted in a deep, self-reinforcing deflationary spiral, and the variety of measures adopted to combat it — the New Deal included — could not seem to right the system.

Economically, World War II was a godsend. The military effort generated demand for goods and labor. The goods part is pretty straightforward, but the labor issue is what really allowed the global economy to turn the corner. Obviously, the war effort required more workers to craft goods, whether bars of soap or aircraft carriers, but “workers” were also called upon to serve as soldiers. The war removed tens of millions of men from the labor force, shipping them off to — economically speaking — nonproductive endeavors. Sustained demand for goods combined with labor shortages raised prices, and as expectations for inflation rather than deflation set in, consumers became more willing to spend their money for fear it would be worth less in the future. The deflationary spiral was broken; supply and demand came back into balance.

Policymakers of the time realized that the prosecution of the war had suspended the depression, but few were confident that the war had actually ended the conditions that made the depression possible. So in July 1944, 730 representatives from 44 different countries converged on a small ski village in New Hampshire to cobble together a system that would prevent additional depressions and — were one to occur — come up with a means of ending it shy of depending upon a world war.

When all was said and done, the delegates agreed to a system of exchangeable currencies and broadly open rules of trade. The system would be based on the gold standard to prevent currency fluctuations, and a pair of institutions — what would become known as the International Monetary Fund (IMF) and the World Bank — would serve as guardians of the system’s financial and fiduciary particulars.

The conventional wisdom is that Bretton Woods worked for a time, but that since the entire system was linked to gold, the limited availability of gold put an upper limit on what the new system could handle. As postwar economic activity expanded — but the supply of gold did not — that problem became so mammoth that the United States abandoned the gold standard in 1971. Most point to that period as the end of the Bretton Woods system. In fact, we are still using Bretton Woods, and while nothing that has been discussed to this point is wrong exactly, it is only part of the story.

A Deeper Understanding: World War II and Bretton Woods

Think back to July 1944. The Normandy invasion was in its first month. The United Kingdom served as the staging ground, but with London exhausted, its military commitment to the operation was modest. While the tide of the war had clearly turned, there was much slogging ahead. It had become apparent that launching the invasion of Europe — much less sustaining it — was impossible without large-scale U.S. involvement. Similarly, the balance of forces on the Eastern Front radically favored the Soviets. While the particulars were, of course, open to debate, no one was so idealistic to think that after suffering at Nazi hands, the Soviets were simply going to withdraw from territory captured on their way to Berlin.

The shape of the Cold War was already beginning to unfold. Between the United States and the Soviet Union, the rest of the modern world — namely, Europe — was going to either experience Soviet occupation or become a U.S. protectorate.

At the core of that realization were twin challenges. For the Europeans, any hope they had of rebuilding was totally dependent upon U.S. willingness to remain engaged. Issues of Soviet attack aside, the war had decimated Europe, and the damage was only becoming worse with each inch of Nazi territory the Americans or Soviets conquered. The Continental states — and even the United Kingdom — were not simply economically spent and indebted but were, to be perfectly blunt, destitute. This was not World War I, where most of the fighting had occurred along a single series of trenches. This was blitzkrieg and saturation bombings, which left the Continent in ruins, and there was almost nothing left from which to rebuild. Simply avoiding mass starvation would be a challenge, and any rebuilding effort would be utterly dependent upon U.S. financing. The Europeans were willing to accept nearly whatever was on offer.

For the United States, the issue was one of seizing a historic opportunity. Historically, the United States thought of the United Kingdom and France — with their maritime traditions — as more of a threat to U.S. interests than the largely land-based Soviet Union and Germany. Even World War I did not fully dispel this concern. (Japan, for its part, was always viewed as a hostile power.) The United States entered World War II late and the war did not occur on U.S. soil. So — uniquely among all the world’s major powers of the day — U.S. infrastructure and industrial capacity would emerge from the war larger (far, far larger) than when it entered. With its traditional rivals either already greatly weakened or well on their way to being so, the United States had the opportunity to set itself up as the core of the new order.

In this, the United States faced the challenges of defending against the Soviet Union. The United States could not occupy Western Europe as it expected the Soviets to occupy Eastern Europe; it lacked the troops and was on the wrong side of the ocean. The United States had to have not just the participation of the Western Europeans in holding back the Soviet tide, it needed the Europeans to defer to American political and military demands — and to do so willingly. Considering the desperation and destitution of the Europeans, and the unprecedented and unparalleled U.S. economic strength, economic carrots were the obvious way to go.

Put another way, Bretton Woods was part of a broader American effort to extend the wartime alliance — sans the Soviets — beyond Germany’s surrender. After all wars, there is the hope that alliances that have defeated a common enemy will continue to function to administer and maintain the peace. This happened at the Congress of Vienna and Versailles as well. Bretton Woods was more than an attempt to shape the global economic system, it was an effort to grow a military alliance into a broader U.S.-led and -dominated bloc to counter the Soviets.

At Bretton Woods, the United States made itself the core of the new system, agreeing to become the trading partner of first and last resort. The United States would allow Europe near tariff-free access to its markets, and turn a blind eye to Europe’s own tariffs so long as they did not become too egregious — something that at least in part flew in the face of the Great Depression’s lessons. The sale of European goods in the United States would help Europe develop economically, and, in exchange, the United States would receive deference on political and military matters: NATO — the ultimate hedge against Soviet invasion — was born.

The “free world” alliance would not consist of a series of equal states. Instead, it would consist of the United States and everyone else. The “everyone else” included shattered European economies, their impoverished colonies, independent successor states and so on. The truth was that Bretton Woods was less a compact of equals than a framework for economic relations within an unequal alliance against the Soviet Union. The foundation of Bretton Woods was American economic power — and the American interest in strengthening the economies of the rest of the world to immunize them from communism and build the containment of the Soviet Union.

Almost immediately after the war, the United States began acting in ways that indicated that Bretton Woods was not — for itself at least — an economic program. When loans to fund Western Europe’s redevelopment failed to stimulate growth, those loans became grants, aka the Marshall Plan. Shortly thereafter, the United States — certainly to its economic loss — almost absentmindedly extended the benefits of Bretton Woods to any state involved on the American side of the Cold War, with Japan, South Korea and Taiwan signing up as its most enthusiastic participants.

And fast-forwarding to when the world went off of the gold standard and Bretton Woods supposedly died, gold was actually replaced by the U.S. dollar. Far from dying, the political/military understanding that underpinned Bretton Woods had only become more entrenched. Whereas before, the greatest limiter was on the availability of gold, now it became — and remains — the whim of the U.S. government’s monetary authorities.

Toward Bretton Woods II

For many of the states that will be attending what is already being dubbed Bretton Woods II, having this American centrality as such a key pillar of the system is the core of the problem.

The fundamental principle of Bretton Woods was national sovereignty within a framework of relationships, ultimately guaranteed not just by American political power but by American economic power. Bretton Woods was not so much a system as a reality. American economic power dwarfed the rest of the noncommunist world, and guaranteed the stability of the international financial system.

What the September financial crisis has shown is not that the basic financial system has changed, but what happens when the guarantor of the financial system itself undergoes a crisis. When the economic bubble in Japan — the world’s second-largest economy — burst in 1990-1991, it did not infect the rest of the world. Neither did the East Asian crisis in 1997, nor the ruble crisis of 1998. A crisis in France or the United Kingdom would similarly remain a local one. But a crisis in the U.S. economy becomes global. The fundamental reality of Bretton Woods remains unchanged: The U.S. economy remains the largest, and dysfunctions there affect the world. That is the reality of the international system, and that is ultimately what the French call for a new Bretton Woods is about.

There has been talk of a meeting at which the United States gives up its place as the world’s reserve currency and primacy of the economic system. That is not what this meeting will be about, and certainly not what the French are after. The use of the dollar as world reserve currency is not based on an aggrandizing fiat, but the reality that the dollar alone has a global presence and trust. The euro, after all, is only a decade old, and is not backed either by sovereign taxing powers or by a central bank with vast authority. The European Central Bank (ECB) certainly steadies the European financial system, but it is the sovereign countries that define economic policies. As we have seen in the recent crisis, the ECB actually lacks the authority to regulate Europe’s banks. Relying on a currency that is not in the hands of a sovereign taxing power, but dependent on the political will of (so far) 15 countries with very different interests, does not make for a reliable reserve currency.

The Europeans are not looking to challenge the reality of American power, they are looking to increase the degree to which the rest of the world can influence the dynamics of the American economy, with an eye toward limiting the ability of the Americans to accidentally destabilize the international financial system again. The French in particular look at the current crisis as the result of a failure in the U.S. regulatory system.

And the Europeans certainly have a point. If fault is to be pinned, it is on the United States for letting the problem grow and grow until it triggered a liquidity crisis. The Bretton Woods institutions — specifically the IMF, which is supposed to serve the role of financial lighthouse and crisis manager — proved irrelevant to the problems the world is currently passing through. Indeed, all multinational institutions failed or, more precisely, have little to do with the financial system that was operating in 2008. The 64-year-old Bretton Woods agreement simply didn’t have anything to do with the current reality.

Ultimately, the Europeans would like to see a shift in focus in the world of international economic interactions from strengthening the international trading system to controlling the international financial system. In practical terms, they want an oversight body that can guarantee that there won’t be a repeat of the current crisis. This would involve everything from regulations on accounting methods, to restrictions on what can and cannot be traded and by whom (offshore financial havens and hedge funds would definitely find their worlds circumscribed), to frameworks for global interventions. The net effect would be to create an international bureaucracy to oversee global financial markets.

Fundamentally, the Europeans are not simply hoping to modernize Bretton Woods, but instead to Europeanize the American financial markets. This is ultimately not a financial question, but a political one. The French are trying to flip Bretton Woods from a system where the United States is the buttress of the international system to a situation where the United States remains the buttress but is more constrained by the broader international system. The European view is that this will help everybody. The American position is not yet framed and won’t be until the new president is in office.

But it will be a very tough sell. For one, at its core the American problem is “simply” a liquidity freeze and one that is already thawing. Europe’s and East Asia’s recessions are bound to be deeper and longer lasting. So the United States is sure — no matter who takes over in January — to be less than keen about revamps of international processes in general. Far more important, any international system that oversees aspects of American finance would, by definition, not be under full American control, but under some sort of quasi-Brussels-like organization. And no American president is going to engage gleefully on that sort of topic.

Unless something else is on offer.

Bretton Woods was ultimately about the United States trading access to its economic might for political and military deference. The reality of American economic might remains. The question, then, is simple: What will the Europeans bring to the table with which to bargain?

Tell Stratfor What You Think

States, Economies and Markets: Redefining the Rules

2008-10-14T05:23:00.001-05:00

October 13, 2008

By George Friedman

A complex sequence of meetings addressing the international financial crisis took place this weekend. The weekend began with meetings among the finance ministers of the G-7 leading industrialized nations. It was followed by a meeting of finance ministers from the G-20, the group of industrial and emerging powers that together constitute 90 percent of the world’s economy. There were also meetings with the International Monetary Fund (IMF) and World Bank. The meetings concluded on Sunday with a summit of the eurozone, those European Union countries that use the euro as their currency. Along with these meetings, there were endless bilateral meetings far too numerous to catalog.

The weekend was essentially about this: the global political system is seeking to utilize the assets of the global economy (by taxing or printing money) in order to take control of the global financial system. The premise is that the chaos in the financial system is such that the markets cannot correct the situation themselves, and certainly not in an acceptable period of time; and that if the situation were to go on, the net result would be not just financial chaos but potentially economic disaster. Therefore, governments decided to use the resources of the economy to solve the problem. Put somewhat more simply, the various governments of the world were going to nationalize portions of the global financial system in order to stave off disaster. The assumption was that the resources of the economy, mobilized by the state, could manage — and ultimately repair — the imbalances of the financial system.

That is the simple version of what is going on in the United States and Europe — and it is only the United States and Europe that really matter right now. Japan and China — while involved in the talks — are really in different places structurally. The United States and Europe face liquidity issues, but the Asian economies are a different beast, predicated upon the concept of a flood of liquidity at all times. Damage to them will be from reduced export demand, and that will take a few weeks or months to manifest in a damning way. It will happen, but for now the crisis is a Euro-American issue.

The actual version of what happened this weekend in the financial talks is, of course, somewhat more complex. The United States and the Europeans agreed that something dramatic had to be done, but could not agree on precisely what they were going to do. The problem both are trying to solve is not technically a liquidity problem, in the sense of a lack of money in the system — the U.S. Federal Reserve, the European Central Bank and their smaller cousins have been pumping money into the system for weeks. Rather, the problem has been the reluctance of financial institutions to lend, particularly to other financial institutions. The money is there, it is just not getting to borrowers. Until that situation is rectified, economic growth is pretty much impos sible. Indeed, economic contraction is inevitable.

After the failures of so many financial institutions, many unexpected or seemingly so, financial institutions with cash were loath to lend money out of fear that invisible balance-sheet problems would suddenly destroy their borrowers, leaving lenders with worthless paper. All lending is driven by some appetite for risk, but the level of distrust — certainly after many were trapped in the Lehman Brothers meltdown — has meant that there is no appetite for risk whatsoever.

There is an interesting subtext to this discussion. Accounting rules have required that assets be “marked to market,” that is, evaluated according to their current market value — which in the current environment is not very generous, to say the least. Many want to abolish “mark to market” valuation and replace it with something based on the underlying value of the asset, which would be more generous. The problem with this theory is that, while it might create healthier balance sheets, financial institutions don’t trust anyone’s balance sheet at the moment. Revaluing assets on paper will not comfort anyone. Trust is in very short supply, and there are no bookkeeping tricks to get people to lend to borrowers they don’t trust. No one is going to say once the balance sheet is revalued, “well, you sure are better off than yesterday, here is a hundred million dollars.”

The question therefore is how to get financial institutions to trust each other again when they feel they have no reason to do so. The solution is to have someone trustworthy guarantee the loan. The eurozone solution announced Oct. 12 was straightforward. They intended to have governments directly guarantee loans between financial institutions. Given the sovereign power to tax and to print money, the assumption was — reasonable in our mind — that it would take risk out of lending, and motivate financial institutions to make loans.

The problem with this, of course, is that there are a lot of institutions who will want to borrow a lot of money. With the government guaranteeing the loans, financial institutions will be insensitive to the risk of the borrower. If there is no risk in the loan whatsoever, then banks will lend to anyone, knowing full well that they cannot lose a loan. Under these circumstances, the market would go completely haywire and the opportunities for corruption would be unprecedented.

Therefore, as part of the eurozone plan, there has to be a government process for the approval and disapproval of loans. Since the market is no longer functioning, the decision on who gets to borrow how much at what rate — with a government guarantee — becomes a government decision.

There are two problems with this. First, governments are terrible at allocating capital. Politics will rapidly intrude to shape decisions. Even if the government could be trusted to make every decision with maximum efficiency, no government has the administrative ability to manage the entire financial sector so directly. Second, having taken control of interbank finance, how do you maintain a free market in the rest of the financial system? Will the government jump into guaranteeing non-interbank loans to ensure that banks actually lend money to those who need it? Otherwise the banking system could be liquid, but the rest of the economy might remain in crisis. Once the foundation of the financial system is nationalized, the entire edifice rests on the nationalized system.

The prime virtue of this plan is that it ought to work, at least in the short run. Financial institutions should start lending to each other, at whatever rate and in whatever amounts the government dictates and the gridlock should dissolve. The government will have to dive in to regulate the system for a while but hopefully — and this is the bet — in due course the government can unwind its involvement and ease the system back to some sort of market. The tentative date for that unwinding is the end of 2009. The risk is that the distortions of the system could become so intense after a few months that unwinding would become impossible. But that is a problem for later; the crisis needs to be addressed now.

The United States seems to dislike the eurozone approach, at least for the moment. It will be interesting to see if Washington stays with this position. U.S. Treasury Secretary Henry Paulson, who appears to be making the decisions for the United States, did not want to obliterate the market completely, preferring a more indirect approach that would leave the essence of the financial markets intact.

Paulson’s approach was threefold. First, Washington would provide indirect aid to the interbank market by buying distressed mortgage-related assets from financial institutions; this would free up the lenders’ assets in a way that also provided cash, and would reduce their fears of hidden nightmares in each others’ balance sheets. Second, it would allow the Treasury to buy a limited stake in financial institutions that would be healthy if not for the fact that their assets are currently undervalued by the market; the idea being that the government takes a temporary share, in exchange for cash that will recapitalize the bank and reduce its need for access to the interbank market. Finally — and this emerged at 2 a.m. on Monday — the government would jump into the interbank market directly. The Federal Reserve promised to lend any amount of dollars to any bank so long as the borrower has some collateral that the Fed will accept (and these days the Fed accepts just about anything). The major central banks of Europe have already agreed to act as the Fed’s proxies in this regard.

The United States did not want to wind up in the position of micromanaging transactions between financial institutions. Washington felt that an intrusive but still indirect approach would keep the market functioning even as the government intervened. The Europeans feared that the indirect approach wouldn’t work fast enough and had too much risk attached to it (although the Fed’s 2 a.m. decision may take the air out of that belief). They also believed Washington’s attempt to preserve the market was an illusion. With the government buying distressed paper and investing in banks, they felt, what was left of the market wasn’t worth the risk or the time.

There is also an ideological dimension. The United States is committed to free-market economics as a cultural matter. Recent events have shown, if a demonstration was needed, that reality trumps ideology, but Paulson still retains a visceral commitment to the market for its own sake. The Europeans don’t. For them, the state is the center of society, not the market. Thus, the Europeans were ready to abandon the market much faster than the Americans.

Yet the Europeans and the Americans both had to intervene in some way, and now they face exactly the same problem: having decided to make the pig fly, there remains the small matter of how to build a flying pig. The problem is administrative. It is all very well to say that the government will buy paper or stock in companies, or that it will guarantee loans between banks. The problem is that no institutions exist to do this. There are no offices filled with officials empowered to do any of these things, no rules on how these things are to be done, no bank accounts on which to draw — not even a decision on who has to sign the checks. The faster they try to set up these institutions, the more inefficient, error-prone and even corrupt they will turn out to be. We can assure you that some bright lads are already thinking dreamily of ways to scam the system, and the faster it is set up, the fewer controls there will be.

But even if all of that is thrown aside, and it is determined that failure, error and corruption are an acceptable price to pay to avoid economic crisis, it will still take weeks to set up either plan (with the possible exception of the Fed’s announcement to jump into the interbank market directly). Some symbolic transactions can take place within days — and they will undoubtedly be important. But the infrastructure for processing tens of thousands of transactions simply takes time to build.

This, of course, is known to the eurozone finance ministers. Indeed, the Europeans will hold an EU-wide summit on the topic this week, while the Americans are going to be working very hard to clarify their own processes in the next few days. The financial institutions will need to have guarantees to start lending — or some sort of retroactive guarantee — but the bet is that the stock markets will stop falling long enough to give the finance ministries time to get organized. It might work.

We need to add to this another dimension we find very interesting. We have discussed elsewhere the axes on which this decision will be made: one is the degree of government intervention, the other is the degree of international collaboration. Clearly, governments are going to play the pivotal role. What is interesting is the degree to which genuine international collaboration is missing. Certainly there is voluntary collaboration — but there is not an integrated global strategy, there is not an integrated global institution administering the strategy, nor is there an irrevocable commitment on the part of governments to subordinate their sovereignty to relevant global institutions.

The Americans and Europeans seem to be diverging in their approaches, with Paulson delivering a warning about the consequences of protectionism. But the European Union is also now being split between members of the eurozone and EU members who have their own currencies (primarily the United Kingdom). Indeed, even within the eurozone, the solutions will be national. Germany, France, Italy and the rest are all pursuing their own bailouts of their own institutions. They have pledged to operate on certain principles and to coordinate — as have the United States and Europe — but the fact is that each state is going to execute a national policy through national institutions with its own money and bureaucracies.

What is most interesting in the long run is the fact the Europeans, even in the eurozone, have not attempted a European solution. Nationalism is very much alive in Europe and has emerged, as one would expect, in a time of crisis. And this raises a crucial question. Some countries have greater exposure and fewer resources than others. Will the stronger members of the eurozone help the weaker? At present it seems any such help would be simply coincidental. This is a global question as well. The Europeans have pointed out that the contagion started in the United States. It is true that the Americans sold the paper. But it is also true that the Europeans bought it readily. If ever there was a systemic failure it was this one.

However, it has always been our view that the state ultimately trumps the economy and the nation trumps multinational institutions. We are strong believers in the durability of the nation-state. It seems to us that we are seeing here the failure of multinational institutions and the re-emergence of national power. The IMF, the World Bank, the Bank for International Settlements, the European Union and the rest have all failed to function either to prevent the crisis or to contain it. The reason is not their inadequacy. Rather it is that, when push comes to shove, nation-states are not prepared to surrender their sovereignty to multinational entities or to other countries if they don’t have to. What we saw this weekend was the devolution of power to the state. All the summits notwithstanding, Berlin, Rome, Paris and London are looking out for the Germans, I talians, French and British. Globalism and the idea of “Europe” became a lot less applicable to the real world this weekend.

It is difficult to say that this weekend became a defining moment, simply because there is so much left unknown and undone. Above all it is unclear whether the equity markets will give governments the time they need to organize the nationalization (temporary we assume) of the financial system. No matter what happens this week, we simply don’t yet know the answer. The markets have not fallen enough yet to pose an overwhelming danger to the system, but at the moment, that is the biggest threat. If the governments do not have enough credibility to cause the market to believe that a solution is at hand, the government will either have to throw in the towel or begin thinking even more radically. And things have already gotten pretty radical.

Tell Stratfor What You Think

The German Question

2008-10-07T13:51:00.001-05:00

By George Friedman

German Chancellor Angela Merkel went to St. Petersburg last week for meetings with Russian President Dmitri Medvedev. The central question on the table was Germany’s position on NATO expansion, particularly with regard to Ukraine and Georgia. Merkel made it clear at a joint press conference that Germany would oppose NATO membership for both of these countries, and that it would even oppose placing the countries on the path to membership. Since NATO operates on the basis of consensus, any member nation can effectively block any candidate from NATO membership.

The fact that Merkel and Germany have chosen this path is of great significance. Merkel acted in full knowledge of the U.S. view on the matter and is prepared to resist any American pressure that might follow. It should be remembered that Merkel might be the most pro-American politician in Germany, and perhaps its most pro-American chancellor in years. Moreover, as an East German, she has a deep unease about the Russians. Reality, however, overrode her personal inclinations. More than other countries, Germany does not want to alienate the United States. But it is in a position to face American pressure should any come.

Energy Dependence and Defense Spending

In one sense, Merkel’s reasons for her stance are simple. Germany is heavily dependent on Russian natural gas. If the supply were cut off, Germany’s situation would be desperate — or at least close enough that the distinction would be academic. Russia might decide it could not afford to cut off natural gas exports, but Merkel is dealing with a fundamental German interest, and risking that for Ukrainian or Georgian membership in NATO is not something she is prepared to do.

She can’t bank on Russian caution in a matter such as this, particularly when the Russians seem to be in an incautious mood. Germany is, of course, looking to alternative sources of energy for the future, and in five years its dependence on Russia might not be nearly as significant. But five years is a long time to hold your breath, and Germany can’t do it.

The German move is not just about natural gas, however. Germany views the U.S. obsession with NATO expansion as simply not in Germany’s interests.

First, expanding NATO guarantees to Ukraine and Georgia is meaningless. NATO and the United States don’t have the military means to protect Ukraine or Georgia, and incorporating them into the alliance would not increase European security. From a military standpoint, NATO membership for the two former Soviet republics is an empty gesture, while from a political standpoint, Berlin sees it as designed to irritate the Russians for no clear purpose.

Next, were NATO prepared to protect Ukraine and Georgia, all NATO countries including Germany would be forced to increase defense expenditures substantially. This is not something that Germany and the rest of NATO want to do.

Finally, and perhaps most importantly, Germany spent 1945-1992 being the potential prime battleground of the Cold War. It spent 1992-2008 not being the potential prime battleground. Germany prefers the latter, and it does not intend to be drawn into a new Cold War under any circumstances. This has profound implications for the future of both NATO and U.S.-German relations.

Germany is thus in the midst of a strategic crisis in which it must make some fundamental decisions. To understand the decisions Germany has to make, we need to understand the country’s geopolitical problem and the decisions it has made in the past.

The German Geopolitical Problem

Until 1871, Germany was fragmented into dozens of small states — kingdoms, duchies, principalities, etc. — comprising the remnants of the Holy Roman Empire. The German-speaking world was torn apart by internal tensions and the constant manipulation of foreign powers.

The southeastern part of the German-speaking world, Austria, was the center of the multinational Hapsburg Empire. It was Roman Catholic and was continually intruding into the predominantly Catholic regions of the rest of Germany, particularly Bavaria. The French were constantly poaching in the Rhineland and manipulating the balance of power among the German states. Russia was always looming to the east, where it bordered the major Protestant German power, Prussia. (Poland at the time was divided among Prussia, Russia and Austria-Hungary.) Germany was perpetually the victim of great powers, a condition which Prussia spent the roughly half-century between Waterloo and German unification trying to correct.

To unify Germany, Prussia had to do more than dominate the Germans. It had to fight two wars. The first was in 1866 with the Hapsburg Empire, which Prussia defeated in seven weeks, ending Hapsburg influence in Germany and ultimately reducing Austria-Hungary to Germany’s junior partner. The second war was in 1870-1871, when Prussia led a German coalition that defeated France. That defeat ended French influence in the Rhineland and gave Prussia the space in which to create a modern, unified Germany. Russia, which was pleased to see both Austria-Hungary and France defeated and viewed a united Germany as a buffer against another French invasion, did not try to block unification.

German unification changed the dynamic of Europe. First, it created a large nation in the heart of Europe between France and Russia. United, Germany was economically dynamic, and its growth outstripped that of France and the United Kingdom. Moreover, it became a naval power, developing a substantial force that at some point could challenge British naval hegemony. It became a major exporting power, taking markets from Britain and France. And in looking around for room to maneuver, Germany began looking east toward Russia. In short, Germany was more than a nation — it was a geopolitical problem.

Germany’s strategic problem was that if the French and Russians attacked Germany simultaneously, with Britain blockading its ports, Germany would lose and revert to its pre-1871 chaos. Given French, Russian and British interest in shattering Germany, Germany had to assume that such an attack would come. Therefore, since the Germans could not fight on two fronts simultaneously, they needed to fight a war pre-emptively, attacking France or Russia first, defeating it and then turning their full strength on the other — all before Britain’s naval blockade could begin to hurt. Germany’s only defense was a two-stage offense that was as complex as a ballet, and would be catastrophic if it failed.

In World War I, executing the Schlieffen Plan, the Germans attacked France first while trying to simply block the Russians. The plan was to first occupy the channel coast and Paris before the United Kingdom could get into the game and before Russia could fully mobilize, and then to knock out Russia. The plan failed in 1914 at the First Battle of the Marnes, and rather than lightning victory, Germany got bogged down in a multifront war costing millions of lives and lasting years. Even so, Germany almost won the war of attrition, causing the United States to intervene and deprive Berlin of victory.

In World War II, the Germans had learned their lesson, so instead of trying to pin down Russia, they entered into a treaty with the Soviets. This secured Germany’s rear by dividing Poland with the Soviet Union. The Soviets agreed to the treaty, expecting Adolf Hitler’s forces to attack France and bog down as Germany had in World War I. The Soviets would then roll West after the bloodletting had drained the rest of Europe. The Germans stunned the Russians by defeating France in six weeks and then turning on the Russians. The Russian front turned into an endless bloodletting, and once again the Americans helped deliver the final blow.

The consequence of the war was the division of Germany into three parts — an independent Austria, a Western-occupied West Germany and a Soviet-occupied East Germany. West Germany again faced the Russian problem. Its eastern part was occupied, and West Germany could not possibly defend itself on its own. It found itself integrated into an American-dominated alliance system, NATO, which was designed to block the Soviets. West and East Germany would serve as the primary battleground of any Soviet attack, with Soviet armor facing U.S. armor, airpower and tactical nuclear weapons. For the Germans, the Cold War was probably more dangerous than either of the previous wars. Whatever the war’s outcome, Germany stood a pretty good chance of being annihilated if it took place.

On the upside, the Cold War did settle Franco-German tensions, which were half of Germany’s strategic problem. Indeed, one of the by-products of the Cold War was the emergence of the European Community, which ultimately became the European Union. This saw German economic union and integration with France, which along with NATO’s military integration guaranteed economic growth and the end of any military threat to Germany from the west. For the first time in centuries, the Rhine was not at risk. Germany’s south was secure, and once the Soviet Union collapsed, there was no threat from the east, either.

United and Secure at Last?

For the first time in centuries, Germany was both united and militarily secure. But underneath it all, the Germans retained their primordial fear of being caught between France and Russia. Berlin understood that this was far from a mature reality; it was no more than a theoretical problem at the moment. But the Germans also understand how quickly things can change. On one level, the problem was nothing more than the economic emphasis of the European Union compared to the geopolitical focus of Russia. But on a deeper level, Germany was, as always, caught between the potentially competing demands of Russia and the West. Even if the problem were small now, there were no guarantees that it wouldn’t grow.

This was the context in which Germany viewed the Russo-Georgian war in August. Berlin saw not only the United States moving toward a hostile relationship with Russia, but also the United Kingdom and France going down the same path.

French President Nicolas Sarkozy, who happened to hold the rotating EU presidency at the time, went to Moscow to negotiate a cease-fire on behalf of the European Union. When the Russians seemed unwilling to comply with the terms negotiated, France became highly critical of Russia and inclined to back some sort of sanctions at the EU summit on Georgia. With the United Kingdom being even more adamant, Germany saw a worst-case scenario looming on the distant horizon: It understood that the pleasant security of the post-Cold War world was at an end, and that it had to craft a new national strategy.

From Germany’s point of view, the re-emergence of Russian influence in the former Soviet Union might be something that could have been blocked in the 1990s, but by 2008, it had become inevitable. The Germans saw that economic relations in the former Soviet Union — and not only energy issues — created a complementary relationship between Russia and its former empire. Between natural affinities and Russian power, a Russian sphere of influence, if not a formal structure, was inevitable. It was an emerging reality that could not be reversed.

France has Poland and Germany between itself and Russia. Britain has that plus the English Channel, and the United States has all that plus the Atlantic Ocean. The farther away from Russia one is, the more comfortable one can be challenging Moscow. But Germany has only Poland as a buffer. For any nation serious about resisting Russian power, the first question is how to assure the security of the Baltic countries, a long-vulnerable salient running north from Poland. The answer would be to station NATO forces in the Baltics and in Poland, and Berlin understood that Germany would be both the logistical base for these forces as well as the likely source of troops. But Germany’s appetite for sending troops to Poland and the Baltics has been satiated. This was not a course Germany wanted to take.

Pondering German History

We suspect that Merkel knew something else; namely, that all the comfortable assumptions about what was possible and impossible — that the Russians wouldn’t dare attack the Baltics — are dubious in the extreme. Nothing in German history would convince any reasonable German that military action to achieve national ends is unthinkable. Nor are the Germans prepared to dismiss the re-emergence of Russian military power. The Germans had been economically and militarily shattered in 1932. By 1938, they were the major power in Europe. As long as their officer corps and technological knowledge base were intact, regeneration could move swiftly.

The Soviet Union collapsed in 1991 and its military power crumbled. But as was the case in Weimar Germany, the Russian officer corps remained relatively intact and the KGB, the heart of the Soviet state, remained intact if renamed. So did the technological base that made the Soviets a global power. As with Germany after both world wars, Russia was in chaos, but its fragments remained, awaiting reconstruction. The Germans were not about to dismiss Russia’s ability to regenerate — they know their own history too well to do that.

If Germany were to join those who call for NATO expansion, the first step toward a confrontation with Russia would have been taken. The second step would be guaranteeing the security of the Baltics and Poland. America would make the speeches, and Germans would man the line. After spending most of the last century fighting or preparing to fight the Russians, the Germans looked around at the condition of their allies and opted out.

The Germans see their economic commitment as being to the European Union. That binds them to the French, and this is not a bond they can or want to break. But the European Union carries no political or military force in relation to the Russians. Beyond economics, it is a debating society. NATO, as an institution built to resist the Russians, is in an advanced state of decay. To resurrect it, the Germans would have to pay a steep economic price. And if they paid that price, they would be carrying much of the strategic risk.

So while Germany remains committed to its economic relationship with the West, it does not intend to enter into a military commitment against the Russians at this time. If the Americans want to send troops to protect the Baltics and Poland, they are welcome to do so. Germany has no objection — nor do they object to a French or British presence there. Indeed, once such forces were committed, Germany might reconsider its position. But since military deployments in significant numbers are unlikely anytime soon, the Germans view grand U.S. statements about expanded NATO membership as mere bravado by a Washington that is prepared to risk little.

NATO After the German Shift

Therefore, Merkel went to St. Petersburg and told the Russians that Germany does not favor NATO expansion. More than that, the Germans at least implicitly told the Russians that they have a free hand in the former Soviet Union as far as Germany is concerned — an assertion that cost Berlin nothing, since the Russians do enjoy a free hand there. But even more critically, Merkel signaled to the Russians and the West that Germany does not intend to be trapped between Western ambitions and Russian power this time. It does not want to recreate the situation of the two world wars or the Cold War, so Berlin will stay close to France economically and also will accommodate the Russians.

The Germans will thus block NATO’s ambitions, something that represents a dramatic shift in the Western alliance. This shift in fact has been unfolding for quite a while, but it took the Russo-Georgian war to reveal the change.

NATO has no real military power to project to the east, and none can be created without a major German effort, which is not forthcoming. The German shift leaves the Baltic countries exposed and extremely worried, as they should be. It also leaves the Poles in their traditional position of counting on countries far away to guarantee their national security. In 1939, Warsaw counted on the British and French; today, Warsaw depends on the United States. As in 1939, these guarantees are tenuous, but they are all the Poles have.

The United States has the option of placing a nuclear umbrella over the Baltics and Eastern Europe, which would guarantee a nuclear strike on Russia in the event of an attack in either place. While this was the guarantee made to Western Europe in the Cold War, it is unlikely that the United States is prepared for global thermonuclear war over Estonia’s fate. Such a U.S. guarantee to the Baltics and Eastern Europe simply would not represent a credible threat.

The other U.S. option is a major insertion of American forces either by sea through Danish waters or via French and German ports and railways, assuming France or Germany would permit their facilities to be used for such a deployment. But this option is academic at the moment. The United States could not deploy more than symbolic forces even if it wanted to. For the moment, NATO is therefore an entity that issues proclamations, not a functioning military alliance, in spite of (or perhaps because of) deployments in Afghanistan.

Everything in German history has led to this moment. The country is united and wants to be secure. It will not play the role it was forced into during the Cold War, nor will it play geopolitical poker as it did in the first and second world wars. And that means NATO is permanently and profoundly broken. The German question now turns into the Russian question: If Germany is out of the game, what is to be done about Russia?

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Part 2 - Obama's Foreign Policy Stance

2008-09-24T17:06:00.001-05:00

By George Friedman

Barack Obama is the Democratic candidate for president. His advisers in foreign policy are generally Democrats. Together they carry with them an institutional memory of the Democratic Party’s approach to foreign policy, and are an expression of the complexity and divisions of that approach. Like the their Republican counterparts, in many ways they are going to be severely constrained as to what they can do both by the nature of the global landscape and American resources. But to some extent, they will also be constrained and defined by the tradition they come from. Understanding that tradition and Obama’s place is useful in understanding what an Obama presidency would look like in foreign affairs.

The most striking thing about the Democratic tradition is that it presided over the beginnings of the three great conflicts that defined the 20th century: Woodrow Wilson and World War I, Franklin Delano Roosevelt and World War II, and Harry S. Truman and the Cold War. (At this level of analysis, we will treat the episodes of the Cold War such as Korea, Vietnam or Grenada as simply subsets of one conflict.) This is most emphatically not to say that had Republicans won the presidency in 1916, 1940 or 1948, U.S. involvement in those wars could have been avoided.

Patterns in Democratic Foreign Policy

But it does give us a framework for considering persistent patterns of Democratic foreign policy. When we look at the conflicts, four things become apparent.

First, in all three conflicts, Democrats postponed the initiation of direct combat as long as possible. In only one, World War I, did Wilson decide to join the war without prior direct attack. Roosevelt maneuvered near war but did not enter the war until after Pearl Harbor. Truman also maneuvered near war but did not get into direct combat until after the North Korean invasion of South Korea. Indeed, even Wilson chose to go to war to protect free passage on the Atlantic. More important, he sought to prevent Germany from defeating the Russians and the Anglo-French alliance and to stop the subsequent German domination of Europe, which appeared possible. In other words, the Democratic approach to war was reactive. All three presidents reacted to events on the surface, while trying to shape them underneath the surface.

Second, all three wars were built around coalitions. The foundation of the three wars was that other nations were at risk and that the United States used a predisposition to resist (Germany in the first two wars, the Soviet Union in the last) as a framework for involvement. The United States under Democrats did not involve itself in war unilaterally. At the same time, the United States under Democrats made certain that the major burdens were shared by allies. Millions died in World War I, but the United States suffered 100,000 dead. In World War II, the United States suffered 500,000 dead in a war where perhaps 50 million soldiers and civilians died. In the Cold War, U.S. losses in direct combat were less than 100,000 while the losses to Chinese, Vietnamese, Koreans and others towered over that toll. The allies had a complex appreciation of the United States. On the one hand, they were grateful for the U.S. presence. On the other hand, they resented the disproportionate amounts of blood and effort shed. Some of the roots of anti-Americanism are to be found in this strategy.

Third, each of these wars ended with a Democratic president attempting to create a system of international institutions designed to limit the recurrence of war without directly transferring sovereignty to those institutions. Wilson championed the League of Nations. Roosevelt the United Nations. Bill Clinton, who presided over most of the post-Cold War world, constantly sought international institutions to validate U.S. actions. Thus, when the United Nations refused to sanction the Kosovo War, he designated NATO as an alternative international organization with the right to approve conflict. Indeed, Clinton championed a range of multilateral organizations during the 1990s, including everything from the International Monetary Fund, the World Bank, the General Agreement on Tariffs and Trade, and later the World Trade Organization. All these presidents were deeply committed to multinational organizations to define permissible and impermissible actions.

And fourth, there is a focus on Europe in the Democratic view of the world. Roosevelt regarded Germany as the primary threat instead of the Pacific theater in World War II. And in spite of two land wars in Asia during the Cold War, the centerpiece of strategy remained NATO and Europe. The specific details have evolved over the last century, but the Democratic Party — and particularly the Democratic foreign policy establishment — historically has viewed Europe as a permanent interest and partner for the United States.

Thus, the main thrust of the Democratic tradition is deeply steeped in fighting wars, but approaches this task with four things in mind:

Wars should not begin until the last possible moment and ideally should be initiated by the enemy.
Wars must be fought in a coalition with much of the burden borne by partners.
The outcome of wars should be an institutional legal framework to manage the peace, with the United States being the most influential force within this multilateral framework.
Any such framework must be built on a trans-Atlantic relationship.

Democratic Party Fractures

That is one strand of Democratic foreign policy. A second strand emerged in the context of the Vietnam War. That war began under the Kennedy administration and was intensified by Lyndon Baines Johnson, particularly after 1964. The war did not go as expected. As the war progressed, the Democratic Party began to fragment. There were three factions involved in this.

The first faction consisted of foreign policy professionals and politicians who were involved in the early stages of war planning but turned against the war after 1967 when it clearly diverged from plans. The leading political figure of this faction was Robert F. Kennedy, who initially supported the war but eventually turned against it.

The second faction was more definitive. It consisted of people on the left wing of the Democratic Party — and many who went far to the left of the Democrats. This latter group not only turned against the war, it developed a theory of the U.S. role in the war that as a mass movement was unprecedented in the century. The view (it can only be sketched here) maintained that the United States was an inherently imperialist power. Rather than the benign image that Wilson, Roosevelt and Truman had of their actions, this faction reinterpreted American history going back into the 19th century as violent, racist and imperialist (in the most extreme faction’s view). Just as the United States annihilated the Native Americans, the United States was now annihilating the Vietnamese.

A third, more nuanced, faction argued that rather than an attempt to contain Soviet aggression, the Cold War was actually initiated by the United States out of irrational fear of the Soviets and out of imperialist ambitions. They saw the bombing of Hiroshima as a bid to intimidate the Soviet Union rather than an effort to end World War II, and the creation of NATO as having triggered the Cold War.

These three factions thus broke down into Democratic politicians such as RFK and George McGovern (who won the presidential nomination in 1972), radicals in the street who were not really Democrats, and revisionist scholars who for the most part were on the party’s left wing.

Ultimately, the Democratic Party split into two camps. Hubert Humphrey led the first along with Henry Jackson, who rejected the left’s interpretation of the U.S. role in Vietnam and claimed to speak for the Wilson-FDR-Truman strand in Democratic politics. McGovern led the second. His camp largely comprised the party’s left wing, which did not necessarily go as far as the most extreme critics of that tradition but was extremely suspicious of anti-communist ideology, the military and intelligence communities, and increased defense spending. The two camps conducted extended political warfare throughout the 1970s.

The presidency of Jimmy Carter symbolized the tensions. He came to power wanting to move beyond Vietnam, slashing and changing the CIA, controlling defense spending and warning the country of “an excessive fear of Communism.” But following the fall of the Shah of Iran and the Soviet invasion of Afghanistan, he allowed Zbigniew Brzezinski, his national security adviser and now an adviser to Obama, to launch a guerrilla war against the Soviets using Islamist insurgents from across the Muslim world in Afghanistan. Carter moved from concern with anti-Communism to coalition warfare against the Soviets by working with Saudi Arabia, Pakistan and Afghan resistance fighters.

Carter was dealing with the realities of U.S. geopolitics, but the tensions within the Democratic tradition shaped his responses. During the Clinton administration, these internal tensions subsided to a great degree. In large part this was because there was no major war, and the military action that did occur — as in Haiti and Kosovo — was framed as humanitarian actions rather than as the pursuit of national power. That soothed the anti-war Democrats to a great deal, since their perspective was less pacifistic than suspicious of using war to enhance national power.

The Democrats Since 9/11

Since the Democrats have not held the presidency during the last eight years, judging how they might have responded to events is speculative. Statements made while in opposition are not necessarily predictive of what an administration might do. Nevertheless, Obama’s foreign policy outlook was shaped by the last eight years of Democrats struggling with the U.S.-jihadist war.

The Democrats responded to events of the last eight years as they traditionally do when the United States is attacked directly: The party’s anti-war faction contracted and the old Democratic tradition reasserted itself. This was particularly true of the decision to go to war in Afghanistan. Obviously, the war was a response to an attack and, given the mood of the country after 9/11, was an unassailable decision. But it had another set of characteristics that made it attractive to the Democrats. The military action in Afghanistan was taking place in the context of broad international support and within a coalition forming at all levels, from on the ground in Afghanistan to NATO and the United Nations. Second, U.S. motives did not appear to involve national self-interest, like increasing power or getting oil. It was not a war for national advantage, but a war of national self-defense.

The Democrats were much less comfortable with the Iraq war than they were with Afghanistan. The old splits reappeared, with many Democrats voting for the invasion and others against. There were complex and mixed reasons why each Democrat voted the way they did — some strategic, some purely political, some moral. Under the pressure of voting on the war, the historically fragile Democratic consensus broke apart, not so much in conflict as in disarray. One of the most important reasons for this was the sense of isolation from major European powers — particularly the French and Germans, whom the Democrats regarded as fundamental elements of any coalition. Without those countries, the Democrats regarded the United States as diplomatically isolated.

The intraparty conflict came later. As the war went badly, the anti-war movement in the party re-energized itself. They were joined later by many who had formerly voted for the war but were upset by the human and material cost and by the apparent isolation of the United States and so on. Both factions of the Democratic Party had reasons to oppose the Iraq war even while they supported the Afghan war.

Understanding Obama’s Foreign Policy

It is in light of this distinction that we can begin to understand Obama’s foreign policy. On Aug. 1, Obama said the following: “It is time to turn the page. When I am President, we will wage the war that has to be won, with a comprehensive strategy with five elements: getting out of Iraq and on to the right battlefield in Afghanistan and Pakistan; developing the capabilities and partnerships we need to take out the terrorists and the world’s most deadly weapons; engaging the world to dry up support for terror and extremism; restoring our values; and securing a more resilient homeland.”

Obama’s view of the Iraq war is that it should not have been fought in the first place, and that the current success in the war does not justify it or its cost. In this part, he speaks to the anti-war tradition in the party. He adds that Afghanistan and Pakistan are the correct battlefields, since this is where the attack emanated from. It should be noted that on several occasions Obama has pointed to Pakistan as part of the Afghan problem, and has indicated a willingness to intervene there if needed while demanding Pakistani cooperation. Moreover, Obama emphasizes the need for partnerships — for example, coalition partners — rather than unilateral action in Afghanistan and globally.

Responding to attack rather than pre-emptive attack, coalition warfare and multinational postwar solutions are central to Obama’s policy in the Islamic world. He therefore straddles the divide within the Democratic Party. He opposes the war in Iraq as pre-emptive, unilateral and outside the bounds of international organizations while endorsing the Afghan war and promising to expand it.

Obama’s problem would be applying these principles to the emerging landscape. He shaped his foreign policy preferences when the essential choices remained within the Islamic world — between dealing with Iraq and Afghanistan simultaneously versus focusing on Afghanistan primarily. After the Russian invasion of Georgia, Obama would face a more complex set of choices between the Islamic world and dealing with the Russian challenge.

Obama’s position on Georgia tracked with traditional Democratic approaches:

“Georgia’s economic recovery is an urgent strategic priority that demands the focused attention of the United States and our allies. That is why Senator Biden and I have called for $1 billion in reconstruction assistance to help the people of Georgia in this time of great trial. I also welcome NATO’s decision to establish a NATO-Georgia Commission and applaud the new French and German initiatives to continue work on these issues within the EU. The Bush administration should call for a U.S.-EU-Georgia summit in September that focuses on strategies for preserving Georgia’s territorial integrity and advancing its economic recovery.”

Obama avoided militaristic rhetoric and focused on multinational approaches to dealing with the problem, particularly via NATO and the European Union. In this and in Afghanistan, he has returned to a Democratic fundamental: the centrality of the U.S.-European relationship. In this sense, it is not accidental that he took a preconvention trip to Europe. It was both natural and a signal to the Democratic foreign policy establishment that he understands the pivotal position of Europe.

This view on multilateralism and NATO is summed up in a critical statement by Obama in a position paper:

“Today it’s become fashionable to disparage the United Nations, the World Bank, and other international organizations. In fact, reform of these bodies is urgently needed if they are to keep pace with the fast-moving threats we face. Such real reform will not come, however, by dismissing the value of these institutions, or by bullying other countries to ratify changes we have drafted in isolation. Real reform will come because we convince others that they too have a stake in change — that such reforms will make their world, and not just ours, more secure.

“Our alliances also require constant management and revision if they are to remain effective and relevant. For example, over the last 15 years, NATO has made tremendous strides in transforming from a Cold War security structure to a dynamic partnership for peace.

“Today, NATO’s challenge in Afghanistan has become a test case, in the words of Dick Lugar, of whether the alliance can ‘overcome the growing discrepancy between NATO’s expanding missions and its lagging capabilities.’”

Obama’s European Problem

The last paragraph represents the key challenge to Obama’s foreign policy, and where his first challenge would come from. Obama wants a coalition with Europe and wants Europe to strengthen itself. But Europe is deeply divided, and averse to increasing its defense spending or substantially increasing its military participation in coalition warfare. Obama’s multilateralism and Europeanism will quickly encounter the realities of Europe.

This would immediately affect his jihadist policy. At this point, Obama’s plan for a 16-month drawdown from Iraq is quite moderate, and the idea of focusing on Afghanistan and Pakistan is a continuation of Bush administration policy. But his challenge would be to increase NATO involvement. There is neither the will nor the capability to substantially increase Europe’s NATO participation in Afghanistan.

This problem would be even more difficult in dealing with Russia. Europe has no objection in principle to the Afghan war; it merely lacks the resources to substantially increase its presence there. But in the case of Russia, there is no European consensus. The Germans are dependent on the Russians for energy and do not want to risk that relationship; the French are more vocal but lack military capability, though they have made efforts to increase their commitment to Afghanistan. Obama says he wants to rely on multilateral agencies to address the Russian situation. That is possible diplomatically, but if the Russians press the issue further, as we expect, a stronger response will be needed. NATO will be unlikely to provide that response.

Obama would therefore face the problem of shifting the focus to Afghanistan and the added problem of balancing between an Islamic focus and a Russian focus. This will be a general problem of U.S. diplomacy. But Obama as a Democrat would have a more complex problem. Averse to unilateral actions and focused on Europe, Obama would face his first crisis in dealing with the limited support Europe can provide.

That will pose serious problems in both Afghanistan and Russia, which Obama would have to deal with. There is a hint in his thoughts on this when he says, “And as we strengthen NATO, we should also seek to build new alliances and relationships in other regions important to our interests in the 21st century.” The test would be whether these new coalitions will differ from, and be more effective than, the coalition of the willing.

Obama would face similar issues in dealing with the Iranians. His approach is to create a coalition to confront the Iranians and force them to abandon their nuclear program. He has been clear that he opposes that program, although less clear on other aspects of Iranian foreign policy. But again, his solution is to use a coalition to control Iran. That coalition disintegrated to a large extent after Russia and China both indicated that they had no interest in sanctions.

But the coalition Obama plans to rely on will have to be dramatically revived by unknown means, or an alternative coalition must be created, or the United States will have to deal with Afghanistan and Pakistan unilaterally. This reality places a tremendous strain on the core principles of Democratic foreign policy. To reconcile the tensions, he would have to rapidly come to an understanding with the Europeans in NATO on expanding their military forces. Since reaching out to the Europeans would be among his first steps, his first test would come early.

The Europeans would probably balk, and, if not, they would demand that the United States expand its defense spending as well. Obama has shown no inclination toward doing this. In October 2007, he said the following on defense: “I will cut tens of billions of dollars in wasteful spending. I will cut investments in unproven missile defense systems. I will not weaponize space. I will slow our development of future combat systems, and I will institute an independent defense priorities board to ensure that the quadrennial defense review is not used to justify unnecessary spending.”

Russia, Afghanistan and Defense Spending

In this, Obama is reaching toward the anti-war faction in his party, which regards military expenditures with distrust. He focused on advanced war-fighting systems, but did not propose cutting spending on counterinsurgency. But the dilemma is that in dealing with both insurgency and the Russians, Obama would come under pressure to do what he doesn’t want to do — namely, increase U.S. defense spending on advanced systems.

Obama has been portrayed as radical. That is far from the case. He is well within a century-long tradition of the Democratic Party, with an element of loyalty to the anti-war faction. But that element is an undertone to his policy, not its core. The core of his policy would be coalition building and a focus on European allies, as well as the use of multilateral institutions and the avoidance of pre-emptive war. There is nothing radical or even new in these principles. His discomfort with military spending is the only thing that might link him to the party’s left wing.

The problem he would face is the shifting international landscape, which would make it difficult to implement some of his policies. First, the tremendous diversity of international challenges would make holding the defense budget in check difficult. Second, and more important, is the difficulty of coalition building and multilateral action with the Europeans. Obama thus lacks both the force and the coalition to carry out his missions. He therefore would have no choice but to deal with the Russians while confronting the Afghan/Pakistani question even if he withdrew more quickly than he says he would from Iraq.

The make-or-break moment for Obama will come early, when he confronts the Europeans. If he can persuade them to take concerted action, including increased defense spending, then much of his foreign policy rapidly falls into place, even if it is at the price of increasing U.S. defense spending. If the Europeans cannot come together (or be brought together) decisively, however, then he will have to improvise.

Obama would be the first Democrat in this century to take office inheriting a major war. Inheriting an ongoing war is perhaps the most difficult thing for a president to deal with. Its realities are already fixed and the penalties for defeat or compromise already defined. The war in Afghanistan has already been defined by U.S. President George W. Bush’s approach. Rewriting it will be enormously difficult, particularly when rewriting it depends on ending unilateralism and moving toward full coalition warfare when coalition partners are wary.

Obama’s problems are compounded by the fact that he does not only have to deal with an inherited war, but also a resurgent Russia. And he wants to depend on the same coalition for both. That will be enormously challenging for him, testing his diplomatic skills as well as geopolitical realities. As with all presidents, what he plans to do and what he would do are two different things. But it seems to us that his presidency would be defined by whether he can change the course of U.S.-European relations not by accepting European terms but by persuading them to accommodate U.S. interests.

An Obama presidency would not turn on this. There is no evidence that he lacks the ability to shift with reality — that he lacks Machiavellian virtue. But it still will be the first and critical test, one handed to him by the complex tensions of Democratic traditions and by a war he did not start.

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Part 1 - The New President and the Global Landscape

2008-09-24T16:18:00.000-05:00

By George Friedman

It has often been said that presidential elections are all about the economy. That just isn’t true. Harry Truman’s second election was all about Korea. John Kennedy’s election focused on missiles, Cuba and Berlin. Lyndon Johnson’s and Richard Nixon’s elections were heavily about Vietnam. Ronald Reagan’s first election pivoted on Iran. George W. Bush’s second election was about Iraq. We won’t argue that presidential elections are all about foreign policy, but they are not all about the economy. The 2008 election will certainly contain a massive component of foreign policy.

We have no wish to advise you how to vote. That’s your decision. What we want to do is try to describe what the world will look like to the new president and consider how each candidate is likely to respond to the world. In trying to consider whether to vote for John McCain or Barack Obama, it is obviously necessary to consider their stands on foreign policy issues. But we have to be cautious about campaign assertions. Kennedy claimed that the Soviets had achieved superiority in missiles over the United States, knowing full well that there was no missile gap. Johnson attacked Barry Goldwater for wanting to escalate the war in Vietnam at the same time he was planning an escalation. Nixon won the 1968 presidential election by claiming that he had a secret plan to end the war in Vietnam. What a candidate says is not always an indicator of what the candidate is thinking.

It gets even trickier when you consider that many of the most important foreign policy issues are not even imagined during the election campaign. Truman did not expect that his second term would be dominated by a war in Korea. Kennedy did not expect to be remembered for the Cuban missile crisis. Jimmy Carter never imagined in 1976 that his presidency would be wrecked by the fall of the Shah of Iran and the hostage crisis. George H. W. Bush didn’t expect to be presiding over the collapse of communism or a war over Kuwait. George W. Bush (regardless of conspiracy theories) never expected his entire presidency to be defined by 9/11. If you read all of these presidents’ position papers in detail, you would never get a hint as to what the really important foreign policy issues would be in their presidencies.

Between the unreliability of campaign promises and the unexpected in foreign affairs, predicting what presidents will do is a complex business. The decisions a president must make once in office are neither scripted nor conveniently timed. They frequently present themselves to the president and require decisions in hours that can permanently define his (or her) administration. Ultimately, voters must judge, by whatever means they might choose, whether the candidate has the virtue needed to make those decisions well.

Virtue, as we are using it here, is a term that comes from Machiavelli. It means the opposite of its conventional usage. A virtuous leader is one who is clever, cunning, decisive, ruthless and, above all, effective. Virtue is the ability to face the unexpected and make the right decision, without position papers, time to reflect or even enough information. The virtuous leader can do that. Others cannot. It is a gut call for a voter, and a tough one.

This does not mean that all we can do is guess about a candidate’s nature. There are three things we can draw on. First, there is the political tradition the candidate comes from. There are more things connecting Republican and Democratic foreign policy than some would like to think, but there are also clear differences. Since each candidate comes from a different political tradition — as do his advisers — these traditions can point to how each candidate might react to events in the world. Second, there are indications in the positions the candidates take on ongoing events that everyone knows about, such as Iraq. Having pointed out times in which candidates have been deceptive, we still believe there is value in looking at their positions and seeing whether they are coherent and relevant. Finally, we can look at the future and try to predict what the world will look like over the next four years. In other words, we can try to limit the surprises as much as possible.

In order to try to draw this presidential campaign into some degree of focus on foreign policy, we will proceed in three steps. First, we will try to outline the foreign policy issues that we think will confront the new president, with the understanding that history might well throw in a surprise. Second, we will sketch the traditions and positions of both Obama and McCain to try to predict how they would respond to these events. Finally, after the foreign policy debate is over, we will try to analyze what they actually said within the framework we created.

Let me emphasize that this is not a partisan exercise. The best guarantee of objectivity is that there are members of our staff who are passionately (we might even say irrationally) committed to each of the candidates. They will be standing by to crush any perceived unfairness. It is Stratfor’s core belief that it is possible to write about foreign policy, and even an election, without becoming partisan or polemical. It is a difficult task and we doubt we can satisfy everyone, but it is our goal and commitment.

The Post 9/11 World

Ever since 9/11 U.S. foreign policy has focused on the Islamic world. Starting in late 2002, the focus narrowed to Iraq. When the 2008 campaign for president began a year ago, it appeared Iraq would define the election almost to the exclusion of all other matters. Clearly, this is no longer the case, pointing to the dynamism of foreign affairs and opening the door to a range of other issues.

Iraq remains an issue, but it interacts with a range of other issues. Among these are the future of U.S.-Iranian relations; U.S. military strategy in Afghanistan and the availability of troops in Iraq for that mission; the future of U.S.-Pakistani relations and their impact on Afghanistan; the future of U.S.-Russian relations and the extent to which they will interfere in the region; resources available to contain Russian expansion; the future of the U.S. relationship with the Europeans and with NATO in the context of growing Russian power and the war in Afghanistan; Israel’s role, caught as it is between Russia and Iran; and a host of only marginally related issues. Iraq may be subsiding, but that simply complicates the world facing the new president.

The list of problems facing the new president will be substantially larger than the problems facing George W. Bush, in breadth if not in intensity. The resources he will have to work with, military, political and economic, will not be larger for the first year at least. In terms of military capacity, much will hang on the degree to which Iraq continues to bog down more than a dozen U.S. brigade combat teams. Even thereafter, the core problem facing the next president will be the allocation of limited resources to an expanding number of challenges. The days when it was all about Iraq is over. It is now all about how to make the rubber band stretch without breaking.

Iraq remains the place to begin, however, since the shifts there help define the world the new president will face. To understand the international landscape the new president will face, it is essential to begin by understanding what happened in Iraq, and why Iraq is no longer the defining issue of this campaign.

A Stabilized Iraq and the U.S. Troop Dilemma

In 2006, it appeared that the situation in Iraq was both out of control and hopeless. Sunni insurgents were waging war against the United States, Shiite militias were taking shots at the Americans as well, and Sunnis and Shia were waging a war against each other. There seemed to be no way to bring the war to anything resembling a satisfactory solution.

When the Democrats took control of Congress in the 2006 elections, it appeared inevitable that the United States would begin withdrawing forces from Iraq. U.S expectations aside, this was the expectation by all parties in Iraq. Given that the United States was not expected to remain a decisive force in Iraq, all Iraqi parties discounted the Americans and maneuvered for position in anticipation of a post-American Iraq. The Iranians in particular saw an opportunity to limit a Sunni return to Iraq’s security forces, thus reshaping the geopolitics of the region. U.S. fighting with Iraqi Sunnis intensified in preparation for the anticipated American withdrawal.

Bush’s decision to increase forces rather than withdraw them dramatically changed the psychology of Iraq. It was assumed he had lost control of the situation. Bush’s decision to surge forces in Iraq, regardless by how many troops, established two things. First, Bush remained in control of U.S. policy. Second, the assumption that the Americans were leaving was untrue. And suddenly, no one was certain that there would be a vacuum to be filled.

The deployment of forces proved helpful, as did the change in how the troops were used; recent leaks indicate that new weapon systems also played a key role. The most important factor, however, was the realization that the Americans were not leaving on Bush’s watch. Since no one was sure who the next U.S. president would be, or what his policies might be, it was thus uncertain that the Americans would leave at all.

Everyone in Iraq suddenly recalculated. If the Americans weren’t leaving, one option would be to make a deal with Bush, seen as weak and looking for historical validation. Alternatively, they could wait for Bush’s successor. Iran remembers — without fondness — its decision not to seal a deal with Carter, instead preferring to wait for Reagan. Similarly, seeing foreign jihadists encroaching in Sunni regions and the Shia shaping the government in Baghdad, the Sunni insurgents began a fundamental reconsideration of their strategy.

Apart from reversing Iraq’s expectations about the United States, part of Washington’s general strategy was supplementing military operations with previously unthinkable political negotiations. First, the United States began talking to Iraq’s Sunni nationalist insurgents, and found common ground with them. Neither the Sunni nationalists nor the United States liked the jihadists, and both wanted the Shia to form a coalition government. Second, back-channel U.S.-Iranian talks clearly took place. The Iranians realized that the possibility of a pro-Iranian government in Baghdad was evaporating. Iran’s greatest fear was a Sunni Iraqi government armed and backed by the United States, recreating a version of the Hussein regime that had waged war with Iran for almost a decade. The Iranians decided that a neutral, coalition government was the best they could achieve, so they reined in the Shiite militia.

The net result of this was that the jihadists were marginalized and broken, and an uneasy coalition government was created in Baghdad, balanced between Iran and the United States. The Americans failed to create a pro-American government in Baghdad, but had blocked the emergence of a pro-Iranian government. Iraqi society remained fragmented and fragile, but a degree of peace unthinkable in 2006 had been created.

The first problem facing the next U.S. president will be deciding when and how many U.S. troops will be withdrawn from Iraq. Unlike 2006, this issue will not be framed by Iraq alone. First, there will be the urgency of increasing the number of U.S. troops in Afghanistan. Second, there will be the need to create a substantial strategic reserve to deal with potential requirements in Pakistan, and just as important, responding to events in the former Soviet Union like the recent conflict in Georgia.

At the same time, too precipitous a U.S. withdrawal not only could destabilize the situation internally in Iraq, it could convince Iran that its dream of a pro-Iranian Iraq is not out of the question. In short, too rapid a withdrawal could lead to resumption of war in Iraq. But too slow a withdrawal could make the situation in Afghanistan untenable and open the door for other crises.

The foreign policy test for the next U.S. president will be calibrating three urgent requirements with a military force that is exhausted by five years of warfare in Iraq and seven in Afghanistan. This force was not significantly expanded since Sept. 11, making this the first global war the United States has ever fought without a substantial military expansion. Nothing the new president does will change this reality for several years, so he will be forced immediately into juggling insufficient forces without the option of precipitous withdrawal from Iraq unless he is prepared to accept the consequences, particularly of a more powerful Iran.

The Nuclear Chip and a Stable U.S.-Iranian Understanding

The nuclear issue has divided the United States and Iran for several years. The issue seems to come and go depending on events elsewhere. Thus, what was enormously urgent just prior to the Russo-Georgian war became much less pressing during and after it. This is not unreasonable in our point of view, because we regard Iran as much farther from nuclear weapons than others might, and we suspect that the Bush administration agrees given its recent indifference to the question.

Certainly, Iran is enriching uranium, and with that uranium, it could possibly explode a nuclear device. But the gap between a nuclear device and weapon is substantial, and all the enriched uranium in the world will not give the Iranians a weapon. To have a weapon, it must be ruggedized and miniaturized to fit on a rocket or to be carried on an attack aircraft. The technologies needed for that range from material science to advanced electronics to quality assurance. Creating a weapon is a huge project. In our view, Iran does not have the depth of integrated technical skills needed to achieve that goal.

As for North Korea, for Iran a very public nuclear program is a bargaining chip designed to extract concessions, particularly from the Americans. The Iranians have continued the program very publicly in spite of threats of Israeli and American attacks because it made the United States less likely to dismiss Iranian wishes in Tehran’s true area of strategic interest, Iraq.

The United States must draw down its forces in Iraq to fight in Afghanistan. The Iranians have no liking for the Taliban, having nearly gone to war with them in 1998, and having aided the United States in Afghanistan in 2001. The United States needs Iran’s commitment to a neutral Iraq to withdraw U.S. forces since Iran could destabilize Iraq overnight, though Tehran’s ability to spin up Shiite proxies in Iraq has declined over the past year.

Therefore, the next president very quickly will face the question of how to deal with Iran. The Bush administration solution — relying on quiet understandings alongside public hostility — is one model. It is not necessarily a bad one, so long as forces remain in Iraq to control the situation. If the first decision the new U.S. president will have to make is how to transfer forces in Iraq elsewhere, the second decision will be how to achieve a more stable understanding with Iran.

This is particularly pressing in the context of a more assertive Russia that might reach out to Iran. The United States will need Iran more than Iran needs the United States under these circumstances. Washington will need Iran to abstain from action in Iraq but to act in Afghanistan. More significantly, the United States will need Iran not to enter into an understanding with Russia. The next president will have to figure out how to achieve all these things without giving away more than he needs to, and without losing his domestic political base in the process.

Afghanistan, Pakistan and the Taliban

The U.S. president also will have to come up with an Afghan policy, which really doesn’t exist at this moment. The United States and its NATO allies have deployed about 50,000 troops in Afghanistan. To benchmark this, the Russians deployed around 120,000 by the mid-1980s, and were unable to pacify the country. Therefore the possibility of 60,000 troops — or even a few additional brigades on top of that — pacifying Afghanistan is minimal. The primary task of troops in Afghanistan now is to defend the Kabul regime and other major cities, and to try to keep the major roads open. More troops will make this easier, but by itself, it will not end the war.

The problem in Afghanistan is twofold. First, the Taliban defeated their rivals in Afghanistan during the civil war of the 1990s because they were the most cohesive force in the country, were politically adept and enjoyed Pakistani support. The Taliban’s victory was not accidental; and all other things being equal, without the U.S. presence, they could win again. The United States never defeated the Taliban. Instead, the Taliban refused to engage in massed warfare against American airpower, retreated, dispersed and regrouped. In most senses, it is the same force that won the Afghan civil war.

The United States can probably block the Taliban from taking the cities, but to do more it must do three things. First, it must deny the Taliban sanctuary and lines of supply running from Pakistan. These two elements allowed the mujahideen to outlast the Soviets. They helped bring the Taliban to power. And they are fueling the Taliban today. Second, the United States must form effective coalitions with tribal groups hostile to the Taliban. To do this it needs the help of Iran, and more important, Washington must convince the tribes that it will remain in Afghanistan indefinitely — not an easy task. And third — the hardest task for the new president — the United States will have to engage the Taliban themselves, or at least important factions in the Taliban movement, in a political process. When we recall that the United States negotiated with the Sunni insurgents in Iraq, this is not as far-fetched as it appears.

The most challenging aspect to deal with in all this is Pakistan. The United States has two issues in the South Asian country. The first is the presence of al Qaeda in northern Pakistan. Al Qaeda has not carried out a successful operation in the United States since 2001, nor in Europe since 2005. Groups who use the al Qaeda label continue to operate in Iraq, Afghanistan and Pakistan, but they use the name to legitimize or celebrate their activities — they are not the same people who carried out 9/11. Most of al Qaeda prime’s operatives are dead or scattered, and its main leaders, Osama bin Laden and Ayman al-Zawahiri, are not functional. The United States would love to capture bin Laden so as to close the books on al Qaeda, but the level of effort needed — assuming he is even alive — might outstrip U.S. capabilities.

The most difficult step politically for the new U.S. president will be to close the book on al Qaeda. This does not mean that a new group of operatives won’t grow from the same soil, and it doesn’t mean that Islamist terrorism is dead by any means. But it does mean that the particular entity the United States has been pursuing has effectively been destroyed, and the parts regenerating under its name are not as dangerous. Asserting victory will be extremely difficult for the new U.S. president. But without that step, a massive friction point between the United States and Pakistan will persist — one that isn’t justified geopolitically and undermines a much more pressing goal.

The United States needs the Pakistani army to attack the Taliban in Pakistan, or failing that, permit the United States to attack them without hindrance from the Pakistani military. Either of these are nightmarishly difficult things for a Pakistani government to agree to, and harder still to carry out. Nevertheless, without cutting the line of supply to Pakistan, like Vietnam and the Ho Chi Minh Trail, Afghanistan cannot be pacified. Therefore, the new president will face the daunting task of persuading or coercing the Pakistanis to carry out an action that will massively destabilize their country without allowing the United States to get bogged down in a Pakistan it cannot hope to stabilize.

At the same time, the United States must begin the political process of creating some sort of coalition in Afghanistan that it can live with. The fact of the matter is that the United States has no long-term interest in Afghanistan except in ensuring that radical jihadists with global operational reach are not given sanctuary there. Getting an agreement to that effect will be hard. Guaranteeing compliance will be virtually impossible. Nevertheless, that is the task the next president must undertake.

There are too many moving parts in Afghanistan to be sanguine about the outcome. It is a much more complex situation than Iraq, if for no other reason than because the Taliban are a far more effective fighting force than anything the United States encountered in Iraq, the terrain far more unfavorable for the U.S. military, and the political actors much more cynical about American capabilities.

The next U.S. president will have to make a painful decision. He must either order a long-term holding action designed to protect the Karzai government, launch a major offensive that includes Pakistan but has insufficient forces, or withdraw. Geopolitically, withdrawal makes a great deal of sense. Psychologically, it could unhinge the region and regenerate al Qaeda-like forces. Politically, it would not be something a new president could do. But as he ponders Iraq, the future president will have to address Afghanistan. And as he ponders Afghanistan, he will have to think about the Russians.

The Russian Resurgence

When the United States invaded Afghanistan in 2001, the Russians were allied with the United States. They facilitated the U.S. relationship with the Northern Alliance, and arranged for air bases in Central Asia. The American view of Russia was formed in the 1990s. It was seen as disintegrating, weak and ultimately insignificant to the global balance. The United States expanded NATO into the former Soviet Union in the Baltic states and said it wanted to expand it into Ukraine and Georgia. The Russians made it clear that they regarded this as a direct threat to their national security, resulting in the 2008 Georgian conflict.

The question now is where U.S.-Russian relations are going. Russian Prime Minister Vladimir Putin called the collapse of the Soviet Union a geopolitical catastrophe. After Ukraine and Georgia, it is clear he does not trust the United States and that he intends to reassert his sphere of influence in the former Soviet Union. Georgia was lesson one. The current political crisis in Ukraine is the second lesson unfolding.

The re-emergence of a Russian empire in some form or another represents a far greater threat to the United States than the Islamic world. The Islamic world is divided and in chaos. It cannot coalesce into the caliphate that al Qaeda wanted to create by triggering a wave of revolutions in the Islamic world. Islamic terrorism remains a threat, but the geopolitical threat of a unifying Islamic power is not going to happen.

Russia is a different matter. The Soviet Union and the Russian empire both posed strategic threats because they could threaten Europe, the Middle East and China simultaneously. While this overstates the threat, it does provide some context. A united Eurasia is always powerful, and threatens to dominate the Eastern Hemisphere. Therefore, preventing Russia from reasserting its power in the former Soviet Union should take precedence over all other considerations.

The problem is that the United States and NATO together presently do not have the force needed to stop the Russians. The Russian army is not particularly powerful or effective, but it is facing forces that are far less powerful and effective. The United States has its forces tied down in Iraq and Afghanistan so that when the war in Georgia broke out, sending ground forces was simply not an option. The Russians are extremely aware of this window of opportunity, and are clearly taking advantage of it.

The Russians have two main advantages in this aside from American resource deficits. First, the Europeans are heavily dependent on Russian natural gas; German energy dependence on Moscow is particularly acute. The Europeans are in no military or economic position to take any steps against the Russians, as the resulting disruption would be disastrous. Second, as the United States maneuvers with Iran, the Russians can provide support to Iran, politically and in terms of military technology, that not only would challenge the United States, it might embolden the Iranians to try for a better deal in Iraq by destabilizing Iraq again. Finally, the Russians can pose lesser challenges in the Caribbean with Venezuela, Nicaragua and Cuba, as well as potentially supporting Middle Eastern terrorist groups and left-wing Latin American groups.

At this moment, the Russians have far more options than the Americans have. Therefore, the new U.S. president will have to design a policy for dealing with the Russians with few options at hand. This is where his decisions on Iraq, Iran, Afghanistan and Pakistan will intersect and compete with his decisions on Russia. Ideally, the United States would put forces in the Baltics — which are part of NATO — as well as in Ukraine and Georgia. But that is not an option and won’t be for more than a year under the best of circumstances.

The United States therefore must attempt a diplomatic solution with Russia with very few sticks. The new president will need to try to devise a package of carrots — e.g., economic incentives — plus the long-term threat of a confrontation with the United States to persuade Moscow not to use its window of opportunity to reassert Russian regional hegemony. Since regional hegemony allows Russia to control its own destiny, the carrots will have to be very tempting, while the threat has to be particularly daunting. The president’s task will be crafting the package and then convincing the Russians it has value.

European Disunity and Military Weakness

One of the problems the United States will face in these negotiations will be the Europeans. There is no such thing as a European foreign policy; there are only the foreign policies of the separate countries. The Germans, for example, do not want a confrontation with Russia under any circumstances. The United Kingdom, by contrast, is more willing to take a confrontational approach to Moscow. And the European military capability, massed and focused, is meager. The Europeans have badly neglected their military over the past 15 years. What deployable, expeditionary forces they have are committed to the campaign in Afghanistan. That means that in dealing with Russia, the Americans do not have united European support and certainly no meaningful military weight. This will make any diplomacy with the Russians extremely difficult.

One of the issues the new president eventually will have to face is the value of NATO and the Europeans as a whole. This was an academic matter while the Russians were prostrate. With the Russians becoming active, it will become an urgent issue. NATO expansion — and NATO itself — has lived in a world in which it faced no military threats. Therefore, it did not have to look at itself militarily. After Georgia, NATO’s military power becomes very important, and without European commitment, NATO’s military power independent of the United States — and the ability to deploy it — becomes minimal. If Germany opts out of confrontation, then NATO will be paralyzed legally, since it requires consensus, and geographically. For the United States alone cannot protect the Baltics without German participation.

The president really will have one choice affecting Europe: Accept the resurgence of Russia, or resist. If the president resists, he will have to limit his commitment to the Islamic world severely, rebalance the size and shape of the U.S. military and revitalize and galvanize NATO. If he cannot do all of those things, he will face some stark choices in Europe.

Israel, Turkey, China, and Latin America

Russian pressure is already reshaping aspects of the global system. The Israelis have approached Georgia very differently from the United States. They halted weapon sales to Georgia the week before the war, and have made it clear to Moscow that Israel does not intend to challenge Russia. The Russians met with Syrian President Bashar al Assad immediately after the war. This signaled the Israelis that Moscow was prepared to support Syria with weapons and with Russian naval ships in the port of Tartus if Israel supports Georgia, and other countries in the former Soviet Union, we assume. The Israelis appear to have let the Russians know that they would not do so, separating themselves from the U.S. position. The next president will have to re-examine the U.S. relationship with Israel if this breach continues to widen.

In the same way, the United States will have to address its relationship with Turkey. A long-term ally, Turkey has participated logistically in the Iraq occupation, but has not been enthusiastic. Turkey’s economy is booming, its military is substantial and Turkish regional influence is growing. Turkey is extremely wary of being caught in a new Cold War between Russia and the United States, but this will be difficult to avoid. Turkey’s interests are very threatened by a Russian resurgence, and Turkey is the U.S. ally with the most tools for countering Russia. Both sides will pressure Ankara mercilessly. More than Israel, Turkey will be critical both in the Islamic world and with the Russians. The new president will have to address U.S.-Turkish relations both in context and independent of Russia fairly quickly.

In some ways, China is the great beneficiary of all of this. In the early days of the Bush administration, there were some confrontations with China. As the war in Iraq calmed down, Washington seemed to be increasing its criticisms of China, perhaps even tacitly supporting Tibetan independence. With the re-emergence of Russia, the United States is now completely distracted. Contrary to perceptions, China is not a global military power. Its army is primarily locked in by geography and its navy is in no way an effective blue-water force. For its part, the United States is in no position to land troops on mainland China. Therefore, there is no U.S. geopolitical competition with China. The next president will have to deal with economic issues with China, but in the end, China will sell goods to the United States, and the United States will buy them.

Latin America has been a region of minimal interest to the United States in the last decade or longer. So long as no global power was using its territory, the United States did not care what presidents Hugo Chavez in Venezuela, Evo Morales in Bolivia and Daniel Ortega in Nicaragua — or even the Castros in Cuba — were doing. But with the Russians back in the Caribbean, at least symbolically, all of these countries suddenly become more important. At the moment, the United States has no Latin American policy worth noting; the new president will have to develop one.

Quite apart from the Russians, the future U.S. president will need to address Mexico. The security situation in Mexico is deteriorating substantially, and the U.S.-Mexican border remains porous. The cartels stretch from Mexico to the streets of American cities where their customers live. What happens in Mexico, apart from immigration issues, is obviously of interest to the United States. If the current trajectory continues, at some point in his administration, the new U.S. president will have to address Mexico — potentially in terms never before considered.

The U.S. Defense Budget

The single issue touching on all of these is the U.S. defense budget. The focus of defense spending over the past eight years has been the Army and Marine Corps — albeit with great reluctance. Former Defense Secretary Donald Rumsfeld was not an advocate of a heavy Army, favoring light forces and air power, but reality forced his successors to reallocate resources. In spite of this, the size of the Army remained the same — and insufficient for the broader challenges emerging.

The focus of defense spending was Fourth Generation warfare, essentially counterinsurgency. It became dogma in the military that we would not see peer-to-peer warfare for a long time. The re-emergence of Russia, however, obviously raises the specter of peer-to-peer warfare, which in turn means money for the Air Force as well as naval rearmament. All of these programs will take a decade or more to implement, so if Russia is to be a full-blown challenge by 2020, spending must begin now.

If we assume that the United States will not simply pull out of Iraq and Afghanistan, but will also commit troops to allies on Russia’s periphery while retaining a strategic reserve — able to, for example, protect the U.S.-Mexican border — then we are assuming substantially increased spending on ground forces. But that will not be enough. The budgets for the Air Force and Navy will also have to begin rising.

U.S. national strategy is expressed in the defense budget. Every strategic decision the president makes has to be expressed in budget dollars with congressional approval. Without that, all of this is theoretical. The next president will have to start drafting his first defense budget shortly after taking office. If he chooses to engage all of the challenges, he must be prepared to increase defense spending. If he is not prepared to do that, he must concede that some areas of the world are beyond management. And he will have to decide which areas these are. In light of the foregoing, as we head toward the debate, 10 questions should be asked of the candidates:

If the United States removes its forces from Iraq slowly as both of you advocate, where will the troops come from to deal with Afghanistan and protect allies in the former Soviet Union?
The Russians sent 120,000 troops to Afghanistan and failed to pacify the country. How many troops do you think are necessary?
Do you believe al Qaeda prime is still active and worth pursuing?
Do you believe the Iranians are capable of producing a deliverable nuclear weapon during your term in office?
How do you plan to persuade the Pakistani government to go after the Taliban, and what support can you provide them if they do?
Do you believe the United States should station troops in the Baltic states, in Ukraine and Georgia as well as in other friendly countries to protect them from Russia?
Do you feel that NATO remains a viable alliance, and are the Europeans carrying enough of the burden?
Do you believe that Mexico represents a national security issue for the United States?
Do you believe that China represents a strategic challenge to the United States?
Do you feel that there has been tension between the United States and Israel over the Georgia issue?

The Russian Resurgence and the New-Old Front

2008-09-17T14:39:00.000-05:00

By Peter Zeihan

Russia is attempting to reforge its Cold War-era influence in its near abroad. This is not simply an issue of nostalgia, but a perfectly logical and predictable reaction to the Russian environment. Russia lacks easily definable, easily defendable borders. There is no redoubt to which the Russians can withdraw, and the only security they know comes from establishing buffers — buffers which tend to be lost in times of crisis. The alternative is for Russia to simply trust other states to leave it alone. Considering Russia’s history of occupations, from the Mongol horde to Napoleonic France to Hitler’s Germany, it is not difficult to surmise why the Russians tend to choose a more activist set of policies.

As such, the country tends to expand and contract like a beating heart — gobbling up nearby territories in times of strength, and then contracting and losing those territories in times of weakness. Rather than what Westerners think of as a traditional nation-state, Russia has always been a multiethnic empire, heavily stocked with non-Russian (and even non-Orthodox) minorities. Keeping those minorities from damaging central control requires a strong internal security and intelligence arm, and hence we get the Cheka, the KGB, and now the FSB.

Nature of the Budding Conflict

Combine a security policy thoroughly wedded to expansion with an internal stabilization policy that institutionalizes terror, and it is understandable why most of Russia’s neighbors do not like Moscow very much. A fair portion of Western history revolves around the formation and shifting of coalitions to manage Russian insecurities.

In the American case specifically, the issue is one of continental control. The United States is the only country in the world that effectively controls an entire continent. Mexico and Canada have been sufficiently intimidated so that they can operate independently only in a very limited sense. (Technically, Australia controls a continent, but with the some 85 percent of its territory unusable, it is more accurate in geopolitical terms to think of it as a small archipelago with some very long bridges.) This grants the United States not only a potentially massive internal market, but also the ability to project power without the fear of facing rearguard security threats. U.S. forces can be focused almost entirely on offensive operations, whereas potential competitors in Eurasia must constantly be on their guard about the neighbors.

The only thing that could threaten U.S. security would be the rise of a Eurasian continental hegemon. For the past 60 years, Russia (or the Soviet Union) has been the only entity that has had a chance of achieving that, largely due to its geographic reach. U.S. strategy for coping with this is simple: containment, or the creation of a network of allies to hedge in Russian political, economic and military expansion. NATO is the most obvious manifestation of this policy imperative, while the Sino-Soviet split is the most dramatic one.

Containment requires that United States counter Russian expansionism at every turn, crafting a new coalition wherever Russia attempts to break out of the strategic ring, and if necessary committing direct U.S. forces to the effort. The Korean and Vietnam wars — both traumatic periods in American history — were manifestations of this effort, as were the Berlin airlift and the backing of Islamist militants in Afghanistan (who incidentally went on to form al Qaeda).

The Georgian war in August was simply the first effort by a resurging Russia to pulse out, expand its security buffer and, ideally, in the Kremlin’s plans, break out of the post-Cold War noose that other powers have tied. The Americans (and others) will react as they did during the Cold War: by building coalitions to constrain Russian expansion. In Europe, the challenges will be to keep the Germans on board and to keep NATO cohesive. In the Caucasus, the United States will need to deftly manage its Turkish alliance and find a means of engaging Iran. In China and Japan, economic conflicts will undoubtedly take a backseat to security cooperation.

Russia and the United States will struggle in all of these areas, consisting as they do the Russian borderlands. Most of the locations will feel familiar, as Russia’s near abroad has been Russia’s near abroad for nearly 300 years. Those locations — the Baltics, Austria, Ukraine, Serbia, Turkey, Central Asia and Mongolia — that defined Russia’s conflicts in times gone by will surface again. Such is the tapestry of history: the major powers seeking advantage in the same places over and over again.

The New Old-Front

But not all of those fronts are in Eurasia. So long as U.S. power projection puts the Russians on the defensive, it is only a matter of time before something along the cordon cracks and the Russians are either fighting a land war or facing a local insurrection. Russia must keep U.S. efforts dispersed and captured by events as far away from the Russian periphery as possible — preferably where Russian strengths can exploit American weakness.

So where is that?

Geography dictates that U.S. strength involves coalition building based on mutual interest and long-range force projection, and internal U.S. harmony is such that America’s intelligence and security agencies have no need to shine. Unlike Russia, the United States does not have large, unruly, resentful, conquered populations to keep in line. In contrast, recall that the multiethnic nature of the Russian state requires a powerful security and intelligence apparatus. No place better reflects Russia’s intelligence strengths and America’s intelligence weakness than Latin America.

The United States faces no traditional security threats in its backyard. South America is in essence a hollow continent, populated only on the edges and thus lacking a deep enough hinterland to ever coalesce into a single hegemonic power. Central America and southern Mexico are similarly fractured, primarily due to rugged terrain. Northern Mexico (like Canada) is too economically dependent upon the United States to seriously consider anything more vibrant than ideological hostility toward Washington. Faced with this kind of local competition, the United States simply does not worry too much about the rest of the Western Hemisphere — except when someone comes to visit.

Stretching back to the time of the Monroe Doctrine, Washington’s Latin American policy has been very simple. The United States does not feel threatened by any local power, but it feels inordinately threatened by any Eastern Hemispheric power that could ally with a local entity. Latin American entities cannot greatly harm American interests themselves, but they can be used as fulcrums by hostile states further abroad to strike at the core of the United States’ power: its undisputed command of North America.

It is a fairly straightforward exercise to predict where Russian activity will reach its deepest. One only needs to revisit Cold War history. Future Russian efforts can be broken down into three broad categories: naval interdiction, drug facilitation and direct territorial challenge.

Naval Interdiction

Naval interdiction represents the longest sustained fear of American policymakers. Among the earliest U.S. foreign efforts after securing the mainland was asserting control over the various waterways used for approaching North America. Key in this American geopolitical imperative is the neutralization of Cuba. All the naval power-projection capabilities in the world mean very little if Cuba is both hostile and serving as a basing ground for an extra-hemispheric power.

The U.S. Gulf Coast is not only the heart of the country’s energy industry, but the body of water that allows the United States to function as a unified polity and economy. The Ohio, Missouri, and Mississippi river basins all drain to New Orleans and the Gulf of Mexico. The economic strength of these basins depends upon access to oceanic shipping. A hostile power in Cuba could fairly easily seal both the Straits of Florida and the Yucatan Channel, reducing the Gulf of Mexico to little more than a lake.

Building on the idea of naval interdiction, there is another key asset the Soviets targeted at which the Russians are sure to attempt a reprise: the Panama Canal. For both economic and military reasons, it is enormously convenient to not have to sail around the Americas, especially because U.S. economic and military power is based on maritime power and access. In the Cold War, the Soviets established friendly relations with Nicaragua and arranged for a favorable political evolution on the Caribbean island of Grenada. Like Cuba, these two locations are of dubious importance by themselves. But take them together — and add in a Soviet air base at each location as well as in Cuba — and there is a triangle of Soviet airpower that can threaten access to the Panama Canal.

Drug Facilitation

The next stage — drug facilitation — is somewhat trickier. South America is a wide and varying land with very little to offer Russian interests. Most of the states are commodity providers, much like the Soviet Union was and Russia is today, so they are seen as economic competitors. Politically, they are useful as anti-American bastions, so the Kremlin encourages such behavior whenever possible. But even if every country in South America were run by anti-American governments, it would not overly concern Washington; these states, alone or en masse, lack the ability to threaten American interests … in all ways but one.

The drug trade undermines American society from within, generating massive costs for social stability, law enforcement, the health system and trade. During the Cold War, the Soviets dabbled with narcotics producers and smugglers, from the Revolutionary Armed Forces of Colombia (FARC) to the highland coca farmers of Bolivia. It is not so much that the Soviets encouraged the drug trade directly, but that they encouraged any group they saw as ideologically useful.

Stratfor expects future Russian involvement in such activities to eclipse those of the past. After the Soviet fall, many FSB agents were forced to find new means to financially support themselves. (Remember it was not until 1999 that Vladimir Putin took over the Russian government and began treating Russian intelligence like a bona fide state asset again.) The Soviet fall led many FSB agents, who already possessed more than a passing familiarity with things such as smuggling and organized crime, directly into the heart of such activities. Most of those agents are — formally or not — back in the service of the Russian government, now with a decade of gritty experience on the less savory side of intelligence under their belts. And they now have a deeply personal financial interest in the outcome of future operations.

Drug groups do not need cash from the Russians, but they do need weaponry and a touch of training — needs which dovetail perfectly with the Russians’ strengths. Obviously, Russian state involvement in such areas will be far from overt; it just does not do to ship weapons to the FARC or to one side of the brewing Bolivian civil war with CNN watching. But this is a challenge the Russians are good at meeting. One of Russia’s current deputy prime ministers, Igor Sechin, was the USSR’s point man for weapons smuggling to much of Latin America and the Middle East. This really is old hat for them.

U.S. Stability

Finally, there is the issue of direct threats to U.S. stability, and this point rests solely on Mexico. With more than 100 million people, a growing economy and Atlantic and Pacific ports, Mexico is the only country in the Western Hemisphere that could theoretically (which is hardly to say inevitably) threaten U.S. dominance in North America. During the Cold War, Russian intelligence gave Mexico more than its share of jolts in efforts to cause chronic problems for the United States. In fact, the Mexico City KGB station was, and remains today, the biggest in the world. The Mexico City riots of 1968 were in part Soviet-inspired, and while ultimately unsuccessful at overthrowing the Mexican government, they remain a testament to the reach of Soviet intelligence. The security problems that would be created by the presence of a hostile state the size of Mexico on the southern U.S. border are as obvious as they would be dangerous.

As with involvement in drug activities, which incidentally are likely to overlap in Mexico, Stratfor expects Russia to be particularly active in destabilizing Mexico in the years ahead. But while an anti-American state is still a Russian goal, it is not their only option. The Mexican drug cartels have reached such strength that the Mexican government’s control over large portions of the country is an open question. Failure of the Mexican state is something that must be considered even before the Russians get involved. And simply doing with the Mexican cartels what the Soviets once did with anti-American militant groups the world over could suffice to tip the balance.

In many regards, Mexico as a failed state would be a worse result for Washington than a hostile united Mexico. A hostile Mexico could be intimidated, sanctioned or even invaded, effectively browbeaten into submission. But a failed Mexico would not restrict the drug trade at all. The border would be chaos, and the implications of that go well beyond drugs. One of the United States’ largest trading partners could well devolve into a seething anarchy that could not help but leak into the U.S. proper.

Whether Mexico becomes staunchly anti-American or devolves into the violent chaos of a failed state does not matter much to the Russians. Either one would threaten the United States with a staggering problem that no amount of resources could quickly or easily fix. And the Russians right now are shopping around for staggering problems with which to threaten the United States.

In terms of cost-benefit analysis, all of these options are no-brainers. Threatening naval interdiction simply requires a few jets. Encouraging the drug trade can be done with a few weapons shipments. Destabilizing a country just requires some creativity. However, countering such activities requires a massive outlay of intelligence and military assets — often into areas that are politically and militarily hostile, if not outright inaccessible. In many ways, this is containment in reverse.

Old Opportunities, New Twists

In Nicaragua, President Daniel Ortega has proven so enthusiastic in his nostalgia for Cold War alignments that Nicaragua has already recognized Abkhazia and South Ossetia, the two territories in the former Soviet state (and U.S. ally) of Georgia that Russia went to war to protect. That makes Nicaragua the only country in the world other than Russia to recognize the breakaway regions. Moscow is quite obviously pleased — and was undoubtedly working the system behind the scenes.

In Bolivia, President Evo Morales is attempting to rewrite the laws that govern his country’s wealth distribution in favor of his poor supporters in the indigenous highlands. Now, a belt of conflict separates those highlands, which are roughly centered at the pro-Morales city of Cochabamba, from the wealthier, more Europeanized lowlands. A civil war is brewing — a conflict that is just screaming for outside interference, as similar fights did during the Cold War. It is likely only a matter of time before the headlines become splattered with pictures of Kalashnikov-wielding Cochabambinos decrying American imperialism.

Yet while the winds of history are blowing in the same old channels, there certainly are variations on the theme. The Mexican cartels, for one, were radically weaker beasts the last time around, and their current strength and disruptive capabilities present the Russians with new options.

So does Venezuelan President Hugo Chavez, a man so anti-American he seems to be even a few steps ahead of Kremlin propagandists. In recent days, Chavez has already hosted long-range Russian strategic bombers and evicted the U.S. ambassador. A glance at a map indicates that Venezuela is a far superior basing point than Grenada for threatening the Panama Canal. Additionally, Chavez’s Venezuela has already indicated both its willingness to get militarily involved in the Bolivian conflict and its willingness to act as a weapons smuggler via links to the FARC — and that without any heretofore detected Russian involvement. The opportunities for smuggling networks — both old and new — using Venezuela as a base are robust.

Not all changes since the Cold War are good for Russia, however. Cuba is not as blindly pro-Russian as it once was. While Russian hurricane aid to Cuba is a bid to reopen old doors, the Cubans are noticeably hesitant. Between the ailing of Fidel Castro and the presence of the world’s largest market within spitting distance, the emerging Cuban regime is not going to reflexively side with the Russians for peanuts. In Soviet times, Cuba traded massive Soviet subsidies in exchange for its allegiance. A few planeloads of hurricane aid simply won’t pay the bills in Havana, and it is still unclear how much money the Russians are willing to come up with.

There is also the question of Brazil. Long gone is the dysfunctional state; Brazil is now an emerging industrial powerhouse with an energy company, Petroleo Brasileiro, of skill levels that outshine anything the Russians have yet conquered in that sphere. While Brazilian rhetoric has always claimed that Brazil was just about to come of age, it now happens to be true. A rising Brazil is feeling its strength and tentatively pushing its influence into the border states of Uruguay, Paraguay and Bolivia, as well as into regional rivals Venezuela and Argentina. Russian intervention tends to appeal to those who do not feel they have meaningful control over their own neighborhoods. Brazil no longer fits into that category, and it will not appreciate Russia’s mucking around in its neighborhood.

A few weeks ago, Stratfor published a piece detailing how U.S. involvement in the Iraq war was winding to a close. We received many comments from readers applauding our optimism. We are afraid that we were misinterpreted. “New” does not mean “bright” or “better,” but simply different. And the dawning struggle in Latin America is an example of the sort of “different” that the United States can look forward to in the years ahead. Buckle up.

Israeli Strategy After the Russo-Georgian War

2008-09-13T17:25:00.000-05:00

By George Friedman

The Russo-Georgian war continues to resonate, and it is time to expand our view of it. The primary players in Georgia, apart from the Georgians, were the Russians and Americans. On the margins were the Europeans, providing advice and admonitions but carrying little weight. Another player, carrying out a murkier role, was Israel. Israeli advisers were present in Georgia alongside American advisers, and Israeli businessmen were doing business there. The Israelis had a degree of influence but were minor players compared to the Americans.

More interesting, perhaps, was the decision, publicly announced by the Israelis, to end weapons sales to Georgia the week before the Georgians attacked South Ossetia. Clearly the Israelis knew what was coming and wanted no part of it. Afterward, unlike the Americans, the Israelis did everything they could to placate the Russians, including having Israeli Prime Minister Ehud Olmert travel to Moscow to offer reassurances. Whatever the Israelis were doing in Georgia, they did not want a confrontation with the Russians.

It is impossible to explain the Israeli reasoning for being in Georgia outside the context of a careful review of Israeli strategy in general. From that, we can begin to understand why the Israelis are involved in affairs far outside their immediate area of responsibility, and why they responded the way they did in Georgia.

We need to divide Israeli strategic interests into four separate but interacting pieces:

The Palestinians living inside Israel’s post-1967 borders.
The so-called “confrontation states” that border Israel, including Lebanon, Syria, Jordan and especially Egypt.
The Muslim world beyond this region.
The great powers able to influence and project power into these first three regions.

The Palestinian Issue

The most important thing to understand about the first interest, the Palestinian issue, is that the Palestinians do not represent a strategic threat to the Israelis. Their ability to inflict casualties is an irritant to the Israelis (if a tragedy to the victims and their families), but they cannot threaten the existence of the Israeli state. The Palestinians can impose a level of irritation that can affect Israeli morale, inducing the Israelis to make concessions based on the realistic assessment that the Palestinians by themselves cannot in any conceivable time frame threaten Israel’s core interests, regardless of political arrangements. At the same time, the argument goes, given that the Palestinians cannot threaten Israeli interests, what is the value of making concessions that will not change the threat of terrorist attacks? Given the structure of Israeli politics, this matter is both substrategic and gridlocked.

The matter is compounded by the fact that the Palestinians are deeply divided among themselves. For Israel, this is a benefit, as it creates a de facto civil war among Palestinians and reduces the threat from them. But it also reduces pressure and opportunities to negotiate. There is no one on the Palestinian side who speaks authoritatively for all Palestinians. Any agreement reached with the Palestinians would, from the Israeli point of view, have to include guarantees on the cessation of terrorism. No one has ever been in a position to guarantee that — and certainly Fatah does not today speak for Hamas. Therefore, a settlement on a Palestinian state remains gridlocked because it does not deliver any meaningful advantages to the Israelis.

The Confrontation States

The second area involves the confrontation states. Israel has formal peace treaties with Egypt and Jordan. It has had informal understandings with Damascus on things like Lebanon, but Israel has no permanent understanding with Syria. The Lebanese are too deeply divided to allow state-to-state understandings, but Israel has had understandings with different Lebanese factions at different times (and particularly close relations with some of the Christian factions).

Jordan is effectively an ally of Israel. It has been hostile to the Palestinians at least since 1970, when the Palestine Liberation Organization attempted to overthrow the Hashemite regime, and the Jordanians regard the Israelis and Americans as guarantors of their national security. Israel’s relationship with Egypt is publicly cooler but quite cooperative. The only group that poses any serious challenge to the Egyptian state is The Muslim Brotherhood, and hence Cairo views Hamas — a derivative of that organization — as a potential threat. The Egyptians and Israelis have maintained peaceful relations for more than 30 years, regardless of the state of Israeli-Palestinian relations. The Syrians by themselves cannot go to war with Israel and survive. Their primary interest lies in Lebanon, and when they work against Israel, they work with surrogates like Hezbollah. But their own view on an independent Palestinian state is murky, since they claim all of Palestine as part of a greater Syria — a view not particularly relevant at the moment. Therefore, Israel’s only threat on its border comes from Syria via surrogates in Lebanon and the possibility of Syria’s acquiring weaponry that would threaten Israel, such as chemical or nuclear weapons.

The Wider Muslim World

As to the third area, Israel’s position in the Muslim world beyond the confrontation states is much more secure than either it or its enemies would like to admit. Israel has close, formal strategic relations with Turkey as well as with Morocco. Turkey and Egypt are the giants of the region, and being aligned with them provides Israel with the foundations of regional security. But Israel also has excellent relations with countries where formal relations do not exist, particularly in the Arabian Peninsula.

The conservative monarchies of the region deeply distrust the Palestinians, particularly Fatah. As part of the Nasserite Pan-Arab socialist movement, Fatah on several occasions directly threatened these monarchies. Several times in the 1970s and 1980s, Israeli intelligence provided these monarchies with information that prevented assassinations or uprisings.

Saudi Arabia, for one, has never engaged in anti-Israeli activities beyond rhetoric. In the aftermath of the 2006 Israeli-Hezbollah conflict, Saudi Arabia and Israel forged close behind-the-scenes relations, especially because of an assertive Iran — a common foe of both the Saudis and the Israelis. Saudi Arabia has close relations with Hamas, but these have as much to do with maintaining a defensive position — keeping Hamas and its Saudi backers off Riyadh’s back — as they do with government policy. The Saudis are cautious regarding Hamas, and the other monarchies are even more so.

More to the point, Israel does extensive business with these regimes, particularly in the defense area. Israeli companies, working formally through American or European subsidiaries, carry out extensive business throughout the Arabian Peninsula. The nature of these subsidiaries is well-known on all sides, though no one is eager to trumpet this. The governments of both Israel and the Arabian Peninsula would have internal political problems if they publicized it, but a visit to Dubai, the business capital of the region, would find many Israelis doing extensive business under third-party passports. Add to this that the states of the Arabian Peninsula are afraid of Iran, and the relationship becomes even more important to all sides.

There is an interesting idea that if Israel were to withdraw from the occupied territories and create an independent Palestinian state, then perceptions of Israel in the Islamic world would shift. This is a commonplace view in Europe. The fact is that we can divide the Muslim world into three groups.

First, there are those countries that already have formal ties to Israel. Second are those that have close working relations with Israel and where formal ties would complicate rather than deepen relations. Pakistan and Indonesia, among others, fit into this class. Third are those that are absolutely hostile to Israel, such as Iran. It is very difficult to identify a state that has no informal or formal relations with Israel but would adopt these relations if there were a Palestinian state. Those states that are hostile to Israel would remain hostile after a withdrawal from the Palestinian territories, since their issue is with the existence of Israel, not its borders.

The point of all this is that Israeli security is much better than it might appear if one listened only to the rhetoric. The Palestinians are divided and at war with each other. Under the best of circumstances, they cannot threaten Israel’s survival. The only bordering countries with which the Israelis have no formal agreements are Syria and Lebanon, and neither can threaten Israel’s security. Israel has close ties to Turkey, the most powerful Muslim country in the region. It also has much closer commercial and intelligence ties with the Arabian Peninsula than is generally acknowledged, although the degree of cooperation is well-known in the region. From a security standpoint, Israel is doing well.

The Broader World

Israel is also doing extremely well in the broader world, the fourth and final area. Israel always has needed a foreign source of weapons and technology, since its national security needs outstrip its domestic industrial capacity. Its first patron was the Soviet Union, which hoped to gain a foothold in the Middle East. This was quickly followed by France, which saw Israel as an ally in Algeria and against Egypt. Finally, after 1967, the United States came to support Israel. Washington saw Israel as a threat to Syria, which could threaten Turkey from the rear at a time when the Soviets were threatening Turkey from the north. Turkey was the doorway to the Mediterranean, and Syria was a threat to Turkey. Egypt was also aligned with the Soviets from 1956 onward, long before the United States had developed a close working relationship with Israel.

That relationship has declined in importance for the Israelis. Over the years the amount of U.S. aid — roughly $2.5 billion annually — has remained relatively constant. It was never adjusted upward for inflation, and so shrunk as a percentage of Israeli gross domestic product from roughly 20 percent in 1974 to under 2 percent today. Israel’s dependence on the United States has plummeted. The dependence that once existed has become a marginal convenience. Israel holds onto the aid less for economic reasons than to maintain the concept in the United States of Israeli dependence and U.S. responsibility for Israeli security. In other words, it is more psychological and political from Israel’s point of view than an economic or security requirement.

Israel therefore has no threats or serious dependencies, save two. The first is the acquisition of nuclear weapons by a power that cannot be deterred — in other words, a nation prepared to commit suicide to destroy Israel. Given Iranian rhetoric, Iran would appear at times to be such a nation. But given that the Iranians are far from having a deliverable weapon, and that in the Middle East no one’s rhetoric should be taken all that seriously, the Iranian threat is not one the Israelis are compelled to deal with right now.

The second threat would come from the emergence of a major power prepared to intervene overtly or covertly in the region for its own interests, and in the course of doing so, redefine the regional threat to Israel. The major candidate for this role is Russia.

During the Cold War, the Soviets pursued a strategy to undermine American interests in the region. In the course of this, the Soviets activated states and groups that could directly threaten Israel. There is no significant conventional military threat to Israel on its borders unless Egypt is willing and well-armed. Since the mid-1970s, Egypt has been neither. Even if Egyptian President Hosni Mubarak were to die and be replaced by a regime hostile to Israel, Cairo could do nothing unless it had a patron capable of training and arming its military. The same is true of Syria and Iran to a great extent. Without access to outside military technology, Iran is a nation merely of frightening press conferences. With access, the entire regional equation shifts.

After the fall of the Soviet Union, no one was prepared to intervene in the Middle East the way the Soviets had. The Chinese have absolutely no interest in struggling with the United States in the Middle East, which accounts for a similar percentage of Chinese and U.S. oil consumption. It is far cheaper to buy oil in the Middle East than to engage in a geopolitical struggle with China’s major trade partner, the United States. Even if there was interest, no European powers can play this role given their individual military weakness, and Europe as a whole is a geopolitical myth. The only country that can threaten the balance of power in the Israeli geopolitical firmament is Russia.

Israel fears that if Russia gets involved in a struggle with the United States, Moscow will aid Middle Eastern regimes that are hostile to the United States as one of its levers, beginning with Syria and Iran. Far more frightening to the Israelis is the idea of the Russians once again playing a covert role in Egypt, toppling the tired Mubarak regime, installing one friendlier to their own interests, and arming it. Israel’s fundamental fear is not Iran. It is a rearmed, motivated and hostile Egypt backed by a great power.

The Russians are not after Israel, which is a sideshow for them. But in the course of finding ways to threaten American interests in the Middle East — seeking to force the Americans out of their desired sphere of influence in the former Soviet region — the Russians could undermine what at the moment is a quite secure position in the Middle East for the United States.

This brings us back to what the Israelis were doing in Georgia. They were not trying to acquire airbases from which to bomb Iran. That would take thousands of Israeli personnel in Georgia for maintenance, munitions management, air traffic control and so on. And it would take Ankara allowing the use of Turkish airspace, which isn’t very likely. Plus, if that were the plan, then stopping the Georgians from attacking South Ossetia would have been a logical move.

The Israelis were in Georgia in an attempt, in parallel with the United States, to prevent Russia’s re-emergence as a great power. The nuts and bolts of that effort involves shoring up states in the former Soviet region that are hostile to Russia, as well as supporting individuals in Russia who oppose Prime Minister Vladimir Putin’s direction. The Israeli presence in Georgia, like the American one, was designed to block the re-emergence of Russia.

As soon as the Israelis got wind of a coming clash in South Ossetia, they — unlike the United States — switched policies dramatically. Where the United States increased its hostility toward Russia, the Israelis ended weapons sales to Georgia before the war. After the war, the Israelis initiated diplomacy designed to calm Russian fears. Indeed, at the moment the Israelis have a greater interest in keeping the Russians from seeing Israel as an enemy than they have in keeping the Americans happy. U.S. Vice President Dick Cheney may be uttering vague threats to the Russians. But Olmert was reassuring Moscow it has nothing to fear from Israel, and therefore should not sell weapons to Syria, Iran, Hezbollah or anyone else hostile to Israel.

Interestingly, the Americans have started pumping out information that the Russians are selling weapons to Hezbollah and Syria. The Israelis have avoided that issue carefully. They can live with some weapons in Hezbollah’s hands a lot more easily than they can live with a coup in Egypt followed by the introduction of Russian military advisers. One is a nuisance; the other is an existential threat. Russia may not be in a position to act yet, but the Israelis aren’t waiting for the situation to get out of hand.

Israel is in control of the Palestinian situation and relations with the countries along its borders. Its position in the wider Muslim world is much better than it might appear. Its only enemy there is Iran, and that threat is much less clear than the Israelis say publicly. But the threat of Russia intervening in the Muslim world — particularly in Syria and Egypt — is terrifying to the Israelis. It is a risk they won’t live with if they don’t have to. So the Israelis switched their policy in Georgia with lightning speed. This could create frictions with the United States, but the Israeli-American relationship isn’t what it used to be.

Georgia and Kosovo: A Single Intertwined Crisis

2008-08-30T20:41:00.000-05:00

By George Friedman

The Russo-Georgian war was rooted in broad geopolitical processes. In large part it was simply the result of the cyclical reassertion of Russian power. The Russian empire — czarist and Soviet — expanded to its borders in the 17th and 19th centuries. It collapsed in 1992. The Western powers wanted to make the disintegration permanent. It was inevitable that Russia would, in due course, want to reassert its claims. That it happened in Georgia was simply the result of circumstance.

There is, however, another context within which to view this, the context of Russian perceptions of U.S. and European intentions and of U.S. and European perceptions of Russian capabilities. This context shaped the policies that led to the Russo-Georgian war. And those attitudes can only be understood if we trace the question of Kosovo, because the Russo-Georgian war was forged over the last decade over the Kosovo question.

Yugoslavia broke up into its component republics in the early 1990s. The borders of the republics did not cohere to the distribution of nationalities. Many — Serbs, Croats, Bosnians and so on — found themselves citizens of republics where the majorities were not of their ethnicities and disliked the minorities intensely for historical reasons. Wars were fought between Croatia and Serbia (still calling itself Yugoslavia because Montenegro was part of it), Bosnia and Serbia and Bosnia and Croatia. Other countries in the region became involved as well.

One conflict became particularly brutal. Bosnia had a large area dominated by Serbs. This region wanted to secede from Bosnia and rejoin Serbia. The Bosnians objected and an internal war in Bosnia took place, with the Serbian government involved. This war involved the single greatest bloodletting of the bloody Balkan wars, the mass murder by Serbs of Bosnians.

Here we must pause and define some terms that are very casually thrown around. Genocide is the crime of trying to annihilate an entire people. War crimes are actions that violate the rules of war. If a soldier shoots a prisoner, he has committed a war crime. Then there is a class called “crimes against humanity.” It is intended to denote those crimes that are too vast to be included in normal charges of murder or rape. They may not involve genocide, in that the annihilation of a race or nation is not at stake, but they may also go well beyond war crimes, which are much lesser offenses. The events in Bosnia were reasonably deemed crimes against humanity. They did not constitute genocide and they were more than war crimes.

At the time, the Americans and Europeans did nothing about these crimes, which became an internal political issue as the magnitude of the Serbian crimes became clear. In this context, the Clinton administration helped negotiate the Dayton Accords, which were intended to end the Balkan wars and indeed managed to go quite far in achieving this. The Dayton Accords were built around the principle that there could be no adjustment in the borders of the former Yugoslav republics. Ethnic Serbs would live under Bosnian rule. The principle that existing borders were sacrosanct was embedded in the Dayton Accords.

In the late 1990s, a crisis began to develop in the Serbian province of Kosovo. Over the years, Albanians had moved into the province in a broad migration. By 1997, the province was overwhelmingly Albanian, although it had not only been historically part of Serbia but also its historical foundation. Nevertheless, the Albanians showed significant intentions of moving toward either a separate state or unification with Albania. Serbia moved to resist this, increasing its military forces and indicating an intention to crush the Albanian resistance.

There were many claims that the Serbians were repeating the crimes against humanity that were committed in Bosnia. The Americans and Europeans, burned by Bosnia, were eager to demonstrate their will. Arguing that something between crimes against humanity and genocide was under way — and citing reports that between 10,000 and 100,000 Kosovo Albanians were missing or had been killed — NATO launched a campaign designed to stop the killings. In fact, while some killings had taken place, the claims by NATO of the number already killed were false. NATO might have prevented mass murder in Kosovo. That is not provable. They did not, however, find that mass murder on the order of the numbers claimed had taken place. The war could be defended as a preventive measure, but the atmosphere under which the war was carried out overstated what had happened.

The campaign was carried out without U.N. sanction because of Russian and Chinese opposition. The Russians were particularly opposed, arguing that major crimes were not being committed and that Serbia was an ally of Russia and that the air assault was not warranted by the evidence. The United States and other European powers disregarded the Russian position. Far more important, they established the precedent that U.N. sanction was not needed to launch a war (a precedent used by George W. Bush in Iraq). Rather — and this is the vital point — they argued that NATO support legitimized the war.

This transformed NATO from a military alliance into a quasi-United Nations. What happened in Kosovo was that NATO took on the role of peacemaker, empowered to determine if intervention was necessary, allowed to make the military intervention, and empowered to determine the outcome. Conceptually, NATO was transformed from a military force into a regional multinational grouping with responsibility for maintenance of regional order, even within the borders of states that are not members. If the United Nations wouldn’t support the action, the NATO Council was sufficient.

Since Russia was not a member of NATO, and since Russia denied the urgency of war, and since Russia was overruled, the bombing campaign against Kosovo created a crisis in relations with Russia. The Russians saw the attack as a unilateral attack by an anti-Russian alliance on a Russian ally, without sound justification. Then-Russian President Boris Yeltsin was not prepared to make this into a major confrontation, nor was he in a position to. The Russians did not so much acquiesce as concede they had no options.

The war did not go as well as history records. The bombing campaign did not force capitulation and NATO was not prepared to invade Kosovo. The air campaign continued inconclusively as the West turned to the Russians to negotiate an end. The Russians sent an envoy who negotiated an agreement consisting of three parts. First, the West would halt the bombing campaign. Second, Serbian army forces would withdraw and be replaced by a multinational force including Russian troops. Third, implicit in the agreement, the Russian troops would be there to guarantee Serbian interests and sovereignty.

As soon as the agreement was signed, the Russians rushed troops to the Pristina airport to take up their duties in the multinational force — as they had in the Bosnian peacekeeping force. In part because of deliberate maneuvers and in part because no one took the Russians seriously, the Russians never played the role they believed had been negotiated. They were never seen as part of the peacekeeping operation or as part of the decision-making system over Kosovo. The Russians felt doubly betrayed, first by the war itself, then by the peace arrangements.

The Kosovo war directly effected the fall of Yeltsin and the rise of Vladimir Putin. The faction around Putin saw Yeltsin as an incompetent bungler who allowed Russia to be doubly betrayed. The Russian perception of the war directly led to the massive reversal in Russian policy we see today. The installation of Putin and Russian nationalists from the former KGB had a number of roots. But fundamentally it was rooted in the events in Kosovo. Most of all it was driven by the perception that NATO had now shifted from being a military alliance to seeing itself as a substitute for the United Nations, arbitrating regional politics. Russia had no vote or say in NATO decisions, so NATO’s new role was seen as a direct challenge to Russian interests.

Thus, the ongoing expansion of NATO into the former Soviet Union and the promise to include Ukraine and Georgia into NATO were seen in terms of the Kosovo war. From the Russian point of view, NATO expansion meant a further exclusion of Russia from decision-making, and implied that NATO reserved the right to repeat Kosovo if it felt that human rights or political issues required it. The United Nations was no longer the prime multinational peacekeeping entity. NATO assumed that role in the region and now it was going to expand all around Russia.

Then came Kosovo’s independence. Yugoslavia broke apart into its constituent entities, but the borders of its nations didn’t change. Then, for the first time since World War II, the decision was made to change Serbia’s borders, in opposition to Serbian and Russian wishes, with the authorizing body, in effect, being NATO. It was a decision avidly supported by the Americans.

The initial attempt to resolve Kosovo’s status was the round of negotiations led by former Finnish President Martti Ahtisaari that officially began in February 2006 but had been in the works since 2005. This round of negotiations was actually started under U.S. urging and closely supervised from Washington. In charge of keeping Ahtisaari’s negotiations running smoothly was Frank G. Wisner, a diplomat during the Clinton administration. Also very important to the U.S. effort was Assistant Secretary of State for European and Eurasian Affairs Daniel Fried, another leftover from the Clinton administration and a specialist in Soviet and Polish affairs.

In the summer of 2007, when it was obvious that the negotiations were going nowhere, the Bush administration decided the talks were over and that it was time for independence. On June 10, 2007, Bush said that the end result of negotiations must be “certain independence.” In July 2007, Daniel Fried said that independence was “inevitable” even if the talks failed. Finally, in September 2007, Condoleezza Rice put it succinctly: “There’s going to be an independent Kosovo. We’re dedicated to that.” Europeans took cues from this line.

How and when independence was brought about was really a European problem. The Americans set the debate and the Europeans implemented it. Among Europeans, the most enthusiastic about Kosovo independence were the British and the French. The British followed the American line while the French were led by their foreign minister, Bernard Kouchner, who had also served as the U.N. Kosovo administrator. The Germans were more cautiously supportive.

On Feb. 17, 2008, Kosovo declared independence and was recognized rapidly by a small number of European states and countries allied with the United States. Even before the declaration, the Europeans had created an administrative body to administer Kosovo. The Europeans, through the European Union, micromanaged the date of the declaration.

On May 15, during a conference in Ekaterinburg, the foreign ministers of India, Russia and China made a joint statement regarding Kosovo. It was read by the Russian host minister, Sergei Lavrov, and it said: “In our statement, we recorded our fundamental position that the unilateral declaration of independence by Kosovo contradicts Resolution 1244. Russia, India and China encourage Belgrade and Pristina to resume talks within the framework of international law and hope they reach an agreement on all problems of that Serbian territory.”

The Europeans and Americans rejected this request as they had rejected all Russian arguments on Kosovo. The argument here was that the Kosovo situation was one of a kind because of atrocities that had been committed. The Russians argued that the level of atrocity was unclear and that, in any case, the government that committed them was long gone from Belgrade. More to the point, the Russians let it be clearly known that they would not accept the idea that Kosovo independence was a one-of-a-kind situation and that they would regard it, instead, as a new precedent for all to follow.

The problem was not that the Europeans and the Americans didn’t hear the Russians. The problem was that they simply didn’t believe them — they didn’t take the Russians seriously. They had heard the Russians say things for many years. They did not understand three things. First, that the Russians had reached the end of their rope. Second, that Russian military capability was not what it had been in 1999. Third, and most important, NATO, the Americans and the Europeans did not recognize that they were making political decisions that they could not support militarily.

For the Russians, the transformation of NATO from a military alliance into a regional United Nations was the problem. The West argued that NATO was no longer just a military alliance but a political arbitrator for the region. If NATO does not like Serbian policies in Kosovo, it can — at its option and in opposition to U.N. rulings — intervene. It could intervene in Serbia and it intended to expand deep into the former Soviet Union. NATO thought that because it was now a political arbiter encouraging regimes to reform and not just a war-fighting system, Russian fears would actually be assuaged. To the contrary, it was Russia’s worst nightmare. Compensating for all this was the fact that NATO had neglected its own military power. Now, Russia could do something about it.

At the beginning of this discourse, we explained that the underlying issues behind the Russo-Georgian war went deep into geopolitics and that it could not be understood without understanding Kosovo. It wasn’t everything, but it was the single most significant event behind all of this. The war of 1999 was the framework that created the war of 2008.

The problem for NATO was that it was expanding its political reach and claims while contracting its military muscle. The Russians were expanding their military capability (after 1999 they had no place to go but up) and the West didn’t notice. In 1999, the Americans and Europeans made political decisions backed by military force. In 2008, in Kosovo, they made political decisions without sufficient military force to stop a Russian response. Either they underestimated their adversary or — even more amazingly — they did not see the Russians as adversaries despite absolutely clear statements the Russians had made. No matter what warning the Russians gave, or what the history of the situation was, the West couldn’t take the Russians seriously.

It began in 1999 with war in Kosovo and it ended in 2008 with the independence of Kosovo. When we study the history of the coming period, the war in Kosovo will stand out as a turning point. Whatever the humanitarian justification and the apparent ease of victory, it set the stage for the rise of Putin and the current and future crises.

The Russo-Georgian War and the Balance of Power

2008-08-19T23:44:00.000-05:00

By George Friedman

The Russian invasion of Georgia has not changed the balance of power in Eurasia. It simply announced that the balance of power had already shifted. The United States has been absorbed in its wars in Iraq and Afghanistan, as well as potential conflict with Iran and a destabilizing situation in Pakistan. It has no strategic ground forces in reserve and is in no position to intervene on the Russian periphery. This, as we have argued, has opened a window of opportunity for the Russians to reassert their influence in the former Soviet sphere. Moscow did not have to concern itself with the potential response of the United States or Europe; hence, the invasion did not shift the balance of power. The balance of power had already shifted, and it was up to the Russians when to make this public. They did that Aug. 8.

Let’s begin simply by reviewing the last few days.

On the night of Thursday, Aug. 7, forces of the Republic of Georgia drove across the border of South Ossetia, a secessionist region of Georgia that has functioned as an independent entity since the fall of the Soviet Union. The forces drove on to the capital, Tskhinvali, which is close to the border. Georgian forces got bogged down while trying to take the city. In spite of heavy fighting, they never fully secured the city, nor the rest of South Ossetia.

On the morning of Aug. 8, Russian forces entered South Ossetia, using armored and motorized infantry forces along with air power. South Ossetia was informally aligned with Russia, and Russia acted to prevent the region’s absorption by Georgia. Given the speed with which the Russians responded — within hours of the Georgian attack — the Russians were expecting the Georgian attack and were themselves at their jumping-off points. The counterattack was carefully planned and competently executed, and over the next 48 hours, the Russians succeeded in defeating the main Georgian force and forcing a retreat. By Sunday, Aug. 10, the Russians had consolidated their position in South Ossetia.

(click image to enlarge)

On Monday, the Russians extended their offensive into Georgia proper, attacking on two axes. One was south from South Ossetia to the Georgian city of Gori. The other drive was from Abkhazia, another secessionist region of Georgia aligned with the Russians. This drive was designed to cut the road between the Georgian capital of Tbilisi and its ports. By this point, the Russians had bombed the military airfields at Marneuli and Vaziani and appeared to have disabled radars at the international airport in Tbilisi. These moves brought Russian forces to within 40 miles of the Georgian capital, while making outside reinforcement and resupply of Georgian forces extremely difficult should anyone wish to undertake it.

The Mystery Behind the Georgian Invasion

In this simple chronicle, there is something quite mysterious: Why did the Georgians choose to invade South Ossetia on Thursday night? There had been a great deal of shelling by the South Ossetians of Georgian villages for the previous three nights, but while possibly more intense than usual, artillery exchanges were routine. The Georgians might not have fought well, but they committed fairly substantial forces that must have taken at the very least several days to deploy and supply. Georgia’s move was deliberate.

The United States is Georgia’s closest ally. It maintained about 130 military advisers in Georgia, along with civilian advisers, contractors involved in all aspects of the Georgian government and people doing business in Georgia. It is inconceivable that the Americans were unaware of Georgia’s mobilization and intentions. It is also inconceivable that the Americans were unaware that the Russians had deployed substantial forces on the South Ossetian frontier. U.S. technical intelligence, from satellite imagery and signals intelligence to unmanned aerial vehicles, could not miss the fact that thousands of Russian troops were moving to forward positions. The Russians clearly knew the Georgians were ready to move. How could the United States not be aware of the Russians? Indeed, given the posture of Russian troops, how could intelligence analysts have missed the possibility that t he Russians had laid a trap, hoping for a Georgian invasion to justify its own counterattack?

It is very difficult to imagine that the Georgians launched their attack against U.S. wishes. The Georgians rely on the United States, and they were in no position to defy it. This leaves two possibilities. The first is a massive breakdown in intelligence, in which the United States either was unaware of the existence of Russian forces, or knew of the Russian forces but — along with the Georgians — miscalculated Russia’s intentions. The United States, along with other countries, has viewed Russia through the prism of the 1990s, when the Russian military was in shambles and the Russian government was paralyzed. The United States has not seen Russia make a decisive military move beyond its borders since the Afghan war of the 1970s-1980s. The Russians had systematically avoided such moves for years. The United States had assumed that the Russians would not risk the consequences of an invasion.

If this was the case, then it points to the central reality of this situation: The Russians had changed dramatically, along with the balance of power in the region. They welcomed the opportunity to drive home the new reality, which was that they could invade Georgia and the United States and Europe could not respond. As for risk, they did not view the invasion as risky. Militarily, there was no counter. Economically, Russia is an energy exporter doing quite well — indeed, the Europeans need Russian energy even more than the Russians need to sell it to them. Politically, as we shall see, the Americans needed the Russians more than the Russians needed the Americans. Moscow’s calculus was that this was the moment to strike. The Russians had been building up to it for months, as we have discussed, and they struck.

The Western Encirclement of Russia

To understand Russian thinking, we need to look at two events. The first is the Orange Revolution in Ukraine. From the U.S. and European point of view, the Orange Revolution represented a triumph of democracy and Western influence. From the Russian point of view, as Moscow made clear, the Orange Revolution was a CIA-funded intrusion into the internal affairs of Ukraine, designed to draw Ukraine into NATO and add to the encirclement of Russia. U.S. Presidents George H.W. Bush and Bill Clinton had promised the Russians that NATO would not expand into the former Soviet Union empire.

That promise had already been broken in 1998 by NATO’s expansion to Poland, Hungary and the Czech Republic — and again in the 2004 expansion, which absorbed not only the rest of the former Soviet satellites in what is now Central Europe, but also the three Baltic states, which had been components of the Soviet Union.

The Russians had tolerated all that, but the discussion of including Ukraine in NATO represented a fundamental threat to Russia’s national security. It would have rendered Russia indefensible and threatened to destabilize the Russian Federation itself. When the United States went so far as to suggest that Georgia be included as well, bringing NATO deeper into the Caucasus, the Russian conclusion — publicly stated — was that the United States in particular intended to encircle and break Russia.

The second and lesser event was the decision by Europe and the United States to back Kosovo’s separation from Serbia. The Russians were friendly with Serbia, but the deeper issue for Russia was this: The principle of Europe since World War II was that, to prevent conflict, national borders would not be changed. If that principle were violated in Kosovo, other border shifts — including demands by various regions for independence from Russia — might follow. The Russians publicly and privately asked that Kosovo not be given formal independence, but instead continue its informal autonomy, which was the same thing in practical terms. Russia’s requests were ignored.

From the Ukrainian experience, the Russians became convinced that the United States was engaged in a plan of strategic encirclement and strangulation of Russia. From the Kosovo experience, they concluded that the United States and Europe were not prepared to consider Russian wishes even in fairly minor affairs. That was the breaking point. If Russian desires could not be accommodated even in a minor matter like this, then clearly Russia and the West were in conflict. For the Russians, as we said, the question was how to respond. Having declined to respond in Kosovo, the Russians decided to respond where they had all the cards: in South Ossetia.

Moscow had two motives, the lesser of which was as a tit-for-tat over Kosovo. If Kosovo could be declared independent under Western sponsorship, then South Ossetia and Abkhazia, the two breakaway regions of Georgia, could be declared independent under Russian sponsorship. Any objections from the United States and Europe would simply confirm their hypocrisy. This was important for internal Russian political reasons, but the second motive was far more important.

Russian Prime Minister Vladimir Putin once said that the fall of the Soviet Union was a geopolitical disaster. This didn’t mean that he wanted to retain the Soviet state; rather, it meant that the disintegration of the Soviet Union had created a situation in which Russian national security was threatened by Western interests. As an example, consider that during the Cold War, St. Petersburg was about 1,200 miles away from a NATO country. Today it is about 60 miles away from Estonia, a NATO member. The disintegration of the Soviet Union had left Russia surrounded by a group of countries hostile to Russian interests in various degrees and heavily influenced by the United States, Europe and, in some cases, China.

Resurrecting the Russian Sphere

Putin did not want to re-establish the Soviet Union, but he did want to re-establish the Russian sphere of influence in the former Soviet Union region. To accomplish that, he had to do two things. First, he had to re-establish the credibility of the Russian army as a fighting force, at least in the context of its region. Second, he had to establish that Western guarantees, including NATO membership, meant nothing in the face of Russian power. He did not want to confront NATO directly, but he did want to confront and defeat a power that was closely aligned with the United States, had U.S. support, aid and advisers and was widely seen as being under American protection. Georgia was the perfect choice.

By invading Georgia as Russia did (competently if not brilliantly), Putin re-established the credibility of the Russian army. But far more importantly, by doing this Putin revealed an open secret: While the United States is tied down in the Middle East, American guarantees have no value. This lesson is not for American consumption. It is something that, from the Russian point of view, the Ukrainians, the Balts and the Central Asians need to digest. Indeed, it is a lesson Putin wants to transmit to Poland and the Czech Republic as well. The United States wants to place ballistic missile defense installations in those countries, and the Russians want them to understand that allowing this to happen increases their risk, not their security.

The Russians knew the United States would denounce their attack. This actually plays into Russian hands. The more vocal senior leaders are, the greater the contrast with their inaction, and the Russians wanted to drive home the idea that American guarantees are empty talk.

The Russians also know something else that is of vital importance: For the United States, the Middle East is far more important than the Caucasus, and Iran is particularly important. The United States wants the Russians to participate in sanctions against Iran. Even more importantly, they do not want the Russians to sell weapons to Iran, particularly the highly effective S-300 air defense system. Georgia is a marginal issue to the United States; Iran is a central issue. The Russians are in a position to pose serious problems for the United States not only in Iran, but also with weapons sales to other countries, like Syria.

Therefore, the United States has a problem — it either must reorient its strategy away from the Middle East and toward the Caucasus, or it has to seriously limit its response to Georgia to avoid a Russian counter in Iran. Even if the United States had an appetite for another war in Georgia at this time, it would have to calculate the Russian response in Iran — and possibly in Afghanistan (even though Moscow’s interests there are currently aligned with those of Washington).

In other words, the Russians have backed the Americans into a corner. The Europeans, who for the most part lack expeditionary militaries and are dependent upon Russian energy exports, have even fewer options. If nothing else happens, the Russians will have demonstrated that they have resumed their role as a regional power. Russia is not a global power by any means, but a significant regional power with lots of nuclear weapons and an economy that isn’t all too shabby at the moment. It has also compelled every state on the Russian periphery to re-evaluate its position relative to Moscow. As for Georgia, the Russians appear ready to demand the resignation of President Mikhail Saakashvili. Militarily, that is their option. That is all they wanted to demonstrate, and they have demonstrated it.

The war in Georgia, therefore, is Russia’s public return to great power status. This is not something that just happened — it has been unfolding ever since Putin took power, and with growing intensity in the past five years. Part of it has to do with the increase of Russian power, but a great deal of it has to do with the fact that the Middle Eastern wars have left the United States off-balance and short on resources. As we have written, this conflict created a window of opportunity. The Russian goal is to use that window to assert a new reality throughout the region while the Americans are tied down elsewhere and dependent on the Russians. The war was far from a surprise; it has been building for months. But the geopolitical foundations of the war have been building since 1992. Russia has been an empire for centuries. The last 15 years or so were not the new reality, but simply an aberration that would be rectified. And now it is being rectified.

China and Russia’s Geographic Divide

2008-07-29T19:28:00.001-05:00

By Peter Zeihan

Since the Soviet fall, Russian generals, intelligence chiefs and foreign policy personnel have often waxed philosophic about the inevitability of a global alliance to hem in U.S. power — often using the rhetoric of a “multipolar world.” Central in all of these plans has been not only the implied leadership of Russia, but the implied presence of China. At first glance, the two seem natural partners. China has a booming manufacturing economy, while Russia boasts growing exports of raw materials. But a closer look at the geography of the two paints a very different picture, while the history of the two tells an extraordinarily different story. If anything, it is no small miracle that the two have never found themselves facing each other in a brutal war.

A Hostile Geography

Russia east of the Urals and the Chinese interior are empty, forbidding places. Nearly all of Russia’s population is hard up on its western border, while China’s is in snug against its eastern and southern coasts. There is an ocean’s worth of nothing between them. But while ships can ply the actual ocean cheaply, potentially boosting economic activity, trade between Russia and China does not come easy. Moscow and Beijing are farther apart than Washington and London, and the cost of building meaningful infrastructure between the two would run in the hundreds of billions. With the exception of some resource development and sales in the border region, integration between the two simply does not make economic sense.

Yet, distance aside, there are no real barriers between the two. Southwestern Siberia is a long stretch of flatness that flows seamlessly into the steppes of Central Asia and the highlands of western China. This open expanse is the eastern end of the old Silk Road — proof that luxury trade is often feasible where more conventional trade simply cannot pay the transport bill. But where caravans bearing spice and silk can pass, so can armies bearing less desirable “goods and services.”

Ominously for Russia, there is little to separate the Russian Far East — where most of the Russian population east of the Urals resides — from Manchuria. And not only is there a 15:1 population imbalance here in favor of the Chinese (and not only has Beijing quietly encouraged Chinese immigration across its border with Russia since the Soviet breakup), but the Russian Far East is blocked from easy access to the rest of Russia by the towering mountains surrounding Lake Baikal. So while the two parts of Russia have minimal barriers separating them from China, they do have barriers separating them from each other. Russia can thus only hold its Far East so long as China lacks the desire to take it.

Geography also drives the two in different directions for economic reasons. For the same reason that trade between the two is unlikely, developing Russia would be an intimidating task. Unlike China or the United States, Russia’s rivers for the most part do not interconnect, and none of the major rivers go anywhere useful. Russia has loads of coastline, but nowhere does coast meld with population centers and ice-free ocean access. The best the country has is remote Murmansk.

So Russia’s development — doubly so east of the Urals — largely mirrors Africa’s: limited infrastructure primarily concerned with exploiting mineral deposits. Anything more holistic is simply too expensive to justify.

In contrast, China boasts substantial populations along its warm coasts. This access to transport allows China to industrialize more readily than Russia, but China shares easily crossed land borders with no natural trading partner. Its only serious option for international trade lies in maritime shipping. Yet, because land transport is “merely” difficult and not impossible, China must dedicate resources to a land-based military. This makes China militarily both vulnerable to — yet economically dependent upon — sea powers, both for access to raw materials and to ship its goods to market. The dominant naval power of today is not land-centric Russia, but the United States. To be economically successful China must at least have a civil and neutral relationship with the $14-trillion-economy-wielding and 11-aircraft-carrier-strike-group-toting United States. Russia barely even enters into China’s economic equation.

And the way Russia does figure into that equation — Central Asia — is not a positive, because there is an additional complication.

Natural gas produced in the Central Asian states until recently was part and parcel of overall Soviet production. Since those states’ infrastructure ran exclusively north into Russia, Moscow could count on this captive output to sign European supply contracts at a pittance. The Kremlin then uses those contracts as an anvil over Europe to extract political concessions.

“China” has been around a long time, but the borders of today represent the largest that the Chinese state has ever been. To prevent its outer provinces from breaking away (as they have many times in China’s past), one of Beijing’s geopolitical imperatives is to lash those provinces to the center as firmly as possible. Beijing has done this in two ways. First, it has stocked these outlying regions with Han Chinese to dilute the identity of the indigenous populations and culturally lash the regions to the center. Second, it has physically and economically lashed them to the center via building loads of infrastructure. So, in the past 15 years, China has engaged in a flurry of road, pipeline and rail construction to places such as Tibet and Xinjiang.

Merge these two seemingly minor details and it suddenly becomes clear that much of the mineral and energy riches of formerly Soviet Central Asia — resources that Russia must have to maintain its energy leverage over Europe — are now just as close to China’s infrastructure network as they are to Russia’s. And obtaining those resources is one of the few possible means China has of mitigating its vulnerability to U.S. naval power.

All that is needed are some pieces of connecting infrastructure to allow those resources to flow east to China instead of north to Russia. Those connections — road, pipe and rail — are already under construction. The Russians suddenly have some very active competition in a region they have thought of as their exclusive playground, not to mention a potential highway to Russia proper, for the past quarter millennia. Control of Central Asia is now a strategic imperative for both.

A Cold History

The history of the two powers — rarely warm, oftentimes bitter — meshes well with the characteristics of the region’s geography.

From the Chinese point of view, Russia is a relative newcomer to Asia, having started claiming territory east of the Urals only in the late 1500s, and having spent most of its blood, sweat and tears in the region in Central Asia rather than the Far East. Russian efforts in the Far East amounted to little more than a string of small outposts even when Moscow began claiming Pacific territory in the late 1700s. Still, by 1700, Russian strength was climbing while Chinese power was waning under the onslaught of European colonialism, enabling a still-militarily weak Russian force to begin occupying chunks of northeastern China. With a bit of bluff and guile, Russia formally annexed what is now Amur province from Qing China in the 1858 Treaty of Aigun, and shortly thereafter the Chinese-Russian border of today was established.

China attempted to resist even after Aigun — lumping the document with the other “unequal treaties” that weakened Chinese sovereignty and territorial integrity — and indeed the Russians had more or less swindled China out of a million square miles of territory. But Beijing simply had too many other issues going on to mount a serious resistance (the Opium Wars come to mind). Once the Trans-Siberian Railway was completed early in the 20th century, Russia was able to back up its claims with troops, and the issue definitively moved to the back burner — especially as the rising colonial aspirations of Japan occupied more attention than China had to spare.

The bilateral relationship warmed somewhat after the end of World War II, with Russian energy and weapons critical to Mao’s consolidation of power (although notably, Stalin originally backed Mao’s rival, Chiang Kai-shek). But this camaraderie was not to last. Stalin did everything he could first to egg on the North Korean government to invade South Korea, and then to nudge the Chinese into backing the North Koreans against the U.S.-led U.N. counterattack. But while the USSR provided weapons to China in the Korean War, Moscow never sent troops — and when the war ended, Stalin had the temerity to submit a bill to Bejing for services rendered.

Sino-Soviet relations never really improved after that. As part of Cold War maneuvers, Russia allied with India and North Vietnam, both longtime Chinese rivals. Therein lay the groundwork of a U.S.-Chinese rapprochement, and rapid-fire events quickly drove the Chinese and Soviets apart. The United States and China both backed Pakistan in the Indo-Pakistani wars. Some 60,000 Uighurs — a Muslim minority that the Chinese still fear hold separatist aspirations — fled across the Soviet border in 1962. In 1965, the Chinese energy industry matured to the point that Soviet oil was no longer required to keep the Chinese economy afloat. Later, Washington turned a blind eye to the horrors of the Chinese-bankrolled Khmer Rouge in Cambodia to destabilize Soviet-backed Vietnam. When all was said and done, the Soviet Union faced a foe to its south every bit as implacable as those on its w estern and eastern flanks.

But the seminal event that made the Sino-Soviet split inevitable was a series of military clashes in the summer of 1969 over some riverine islands in the Amur.

Today

China and Russia are anything but natural partners. While their economic interests may seem complementary, geography dictates that their actual connections will be sharply limited. Moreover, in their roles of resource provider versus producer, they actually have a commercial relationship analogous to that of Organization of the Petroleum Exporting Countries versus the United States — with all the angst and distrust that suggests.

Strategically, the two tend to swim in different pools, but they still share a borderland. Borderlands — where one great state flows into another — are dangerous places, as their precise locations ebb and flow with the geopolitical tides. And the only thing more likely to generate borderland friction than when one side is strong and the other weak is when both sides are strong. Currently, both China and Russia are becoming more powerful simultaneously, creating ample likelihood that the two will slide toward confrontation in regions of overlapping interest.

So why Stratfor’s interest in the topic? The primary reason the United States is the most powerful state in the international system is that it faces no challengers on its continent. (Canada is de facto integrated into the United States, and Mexico — even were it stable and rich — would still be separated from the United States by a sizable desert.) This allows the United States to develop in peace and focus its efforts on projecting its power outward rather than defending itself. For the United States to be threatened, a continental-sized power or coalition of similar or greater size would need to arise. So long as China and Russia remain at odds, the United States does not have to work very hard to maintain its position.

Which brings us back to the island battles that cemented the Sino-Soviet split: Russia is giving them back.

On July 21, Russian Foreign Minister Sergei Lavrov put Russia’s final signature — in a deal already signed and ratified by both sides — to a deal that commits Russia to the imminent removal of its forces from 67 square miles of territory on a series of Amur riverine islands. The Russians call them Tarabarov and Bolshoi Ussuriysky, the Chinese call them Yinlong Dao and Heixiazi Dao. These are two of the islands over which the Chinese and Soviets battled in 1969, formalizing the Sino-Soviet split. The final pullout of Russian forces is expected within a month.

When two states enter into alliance, the first thing they must do is stop treating each other as foes. There is a bit of wiggle room if the two states do not border each other as the United States and Soviet Union did not during World War II. But in cases of a shared land border, it is devilishly difficult to believe that those on the other side of the line have your back if they are still gunning for a piece of your backyard. If China and Russia are going to stand together against the United States — or really, anyone — in any way, shape or form, the first thing they have to do is stop standing against each other. And that is just about to happen.

There are still plenty of reasons to doubt the durability of this development. In terms of modern warfare, the islands are strategic irrelevancies, so their surrender is not exactly a huge gesture of trust. Achieving any semblance of economic integration between the two powers still would be more trouble and expensive than it would be worth, making any deepening of the bilateral relationship difficult. Russia’s demographic slide instills a perfectly logical paranoia in the Kremlin; Russians are outnumbered 7 to 1 by their “partner” in terms of population and 3 to 1 in terms of economic size — something that Russian pride will find far harder to accept than merely handing over some islands. There is no substitute to the American market for China. Period. Sharing Central Asia is simply impossible because both sides need the same resources to achieve and maintain their strategic aims. And neither power has a particularly sterling reputation when it comes to confidence building.

Yet while Moscow is known for many, many things, sacrificing territory — especially territory over which blood has been shed — is not on that list. Swallowing some pride to raise the prospect of a Chinese-Russian alliance is something that should not pass unnoticed. Burying the hatchet in the islands of the Amur is the first step on the improbable road to a warmer bilateral relationship, and raises the possibility of a coalition of forces with the geographic foundation necessary to challenge the United States at its very core.

Such a Chinese-Russian alliance remains neither natural nor likely. But, with the territory handover, it has just become something that it was not a week ago: possible.

Tell Stratfor What You Think

The New Era

2008-07-29T19:02:00.001-05:00

By Peter Zeihan

As students of geopolitics, we at Stratfor tend not to get overexcited when this or that plan for regional peace is tabled. Many of the world’s conflicts are geographic in nature, and changes in government or policy only rarely supersede the hard topography that we see as the dominant sculptor of the international system. Island states tend to exist in tension with their continental neighbors. Two countries linked by flat arable land will struggle until one emerges dominant. Land-based empires will clash with maritime cultures, and so on.

Petit vs. Grand Geopolitic

But the grand geopolitic — the framework which rules the interactions of regions with one another — is not the only rule in play. There is also the petit geopolitic that occurs among minor players within a region. Think of the grand geopolitic as the rise and fall of massive powers — the onslaught of the Golden Horde, the imperial clash between England and France, the U.S.-Soviet Cold War. By contrast, think of the petit geopolitic as the smaller powers that swim alongside or within the larger trends — Serbia versus Croatia, Vietnam versus Cambodia, Nicaragua versus Honduras. The same geographic rules apply, just on a smaller scale, with the added complexity of the grand geopolitic as backdrop.

The Middle East is a region rife with petit geopolitics. Since the failure of the Ottoman Empire, the region has not hosted an indigenous grand player. Instead, the region serves as a battleground for extra-regional grand powers, all attempting to grind down the local (petit) players to better achieve their own aims. Normally, Stratfor looks at the region in that light: an endless parade of small players and local noise in an environment where most trends worth watching are those implanted and shaped by outside forces. No peace deals are easy, but in the Middle East they require agreement not just from local powers, but also from those grand players beyond the region. The result is, well, the Middle East we all know.

All the more notable, then, that a peace deal — and a locally crafted one at that — has moved from the realm of the improbable to not merely the possible, but perhaps even the imminent.

Israel and Syria are looking to bury the hatchet, somewhere in the Golan Heights most likely, and they are doing so for their own reasons. Israel has secured deals with Egypt and Jordan already, and the Palestinians — by splitting internally — have defeated themselves as a strategic threat. A deal with Syria would make Israel the most secure it has been in millennia.

Syria, poor and ruled by its insecure Alawite minority, needs a basis of legitimacy that resonates with the dominant Sunni population better than its current game plan: issuing a shrill shriek whenever the name “Israel” is mentioned. The Alawites believe there is no guarantee of support better than cash, and their largest and most reliable source of cash is in Lebanon. Getting Lebanon requires an end to Damascus’ regional isolation, and the agreement of Israel.

The outline of the deal, then, is surprisingly simple: Israel gains military security from a peace deal in exchange for supporting Syrian primacy in Lebanon. The only local loser would be the entity that poses an economic challenge (in Lebanon) to Syria, and a military challenge (in Lebanon) to Israel — to wit, Hezbollah.

Hezbollah, understandably, is more than a little perturbed by the prospect of this tightening noose. Syria is redirecting the flow of Sunni militants from Iraq to Lebanon, likely for use against Hezbollah. Damascus also is working with the exiled leadership of the Palestinian group Hamas as a gesture of goodwill to Israel. The French — looking for a post-de Gaulle diplomatic victory — are re-engaging the Syrians and, to get Damascus on board, are dangling everything from aid and trade deals with Europe to that long-sought stamp of international approval. Oil-rich Sunni Arab states, sensing an opportunity to weaken Shiite Hezbollah, are flooding petrodollars in bribes — that is, investments — into Syria to underwrite a deal with Israel.

While the deal is not yet a fait accompli, the pieces are falling into place quite rapidly. Normally we would not be so optimistic, but the hard decisions — on Israel surrendering the Golan Heights and Syria laying preparations for cutting Hezbollah down to size — have already been made. On July 11 the leaders of Israel and Syria will be attending the same event in Paris, and if the French know anything about flair, a handshake may well be on the agenda.

It isn’t exactly pretty — and certainly isn’t tidy — but peace really does appear to be breaking out in the Middle East.

A Spoiler-Free Environment

Remember, the deal must please not just the petit players, but the grand ones as well. At this point, those with any interest in disrupting the flow of events normally would step in and do what they could to rock the boat. That, however, is not happening this time around. All of the normal cast members in the Middle Eastern drama are either unwilling to play that game at present, or are otherwise occupied.

The country with the most to lose is Iran. A Syria at formal peace with Israel is a Syria that has minimal need for an alliance with Iran, as well as a Syria that has every interest in destroying Hezbollah’s military capabilities. (Never forget that while Hezbollah is Syrian-operated, it is Iranian-founded and -funded.) But using Hezbollah to scupper the Israeli-Syrian talks would come with a cost, and we are not simply highlighting a possible military confrontation between Israel and Iran.

Iran is involved in negotiations far more complex and profound than anything that currently occupies Israel and Syria. Tehran and Washington are attempting to forge an understanding about the future of Iraq. The United States wants an Iraq sufficiently strong to restore the balance of power in the Persian Gulf and thus prevent any Iranian military incursion into the oil fields of the Arabian Peninsula. Iran wants an Iraq that is sufficiently weak that it will never again be able to launch an attack on Persia. Such unflinching national interests are proving difficult to reconcile, but do not confuse “difficult” with “impossible” — the positions are not mutually exclusive. After all, while both want influence, neither demands domination.

Remarkable progress has been made during the past six months. The two sides have cooperated in bringing down violence in Iraq, now at its lowest level since the aftermath of the 2003 invasion itself. Washington and Tehran also have attacked the problems of rogue Shiite militias from both ends, most notably with the neutering of Muqtada al-Sadr and his militia, the Medhi Army. Meanwhile, that ever-enlarging pot of Sunni Arab oil money has been just as active in Baghdad in drawing various groups to the table as it has been in Damascus. Thus, while the U.S.-Iranian understanding is not final, formal or imminent, it is taking shape with remarkable speed. There are many ways it still could be derailed, but none would be so effective as Iran using Hezbollah to launch another war with Israel.

China and Russia both would like to see the Middle East off balance — if not on fire in the case of Russia — although it is hardly because they enjoy the bloodshed. Currently, the United States has the bulk of its ground forces loaded down with Afghan and Iraqi operations. So long as that remains the case — so long as Iran and the United States do not have a meeting of the minds — the United States lacks the military capability to deploy any large-scale ground forces anywhere else in the world. In the past, Moscow and Beijing have used weapons sales or energy deals to bolster Iran’s position, thus delaying any embryonic deal with Washington.

But such impediments are not being seeded now.

Rising inflation in China has turned the traditional question of the country’s shaky financial system on its head. Mass employment in China is made possible not by a sound economic structure, but by de facto subsidization via ultra-cheap loans. But such massive availability of credit has artificially spiked demand, for 1.3 billion people no less, creating an inflation nightmare that is difficult to solve. Cut the loans to rein in demand and inflation, and you cut business and with it employment. Chinese governments have been toppled by less. Beijing is desperate to keep one step ahead of either an inflationary spiral or a credit meltdown — and wants nothing more than for the Olympics to go off as hitch-free as possible. Tinkering with the Middle East is the furthest thing from Beijing’s preoccupied mind.

Meanwhile, Russia is still growing through its leadership “transition,” with the Kremlin power clans still going for each other’s throats. Their war for control of the defense and energy industries still rages, their war for control of the justice and legal systems is only now beginning to rage, and their efforts to curtail the powers of some of Russia’s more independent-minded republics such as Tatarstan has not yet begun to rage. Between a much-needed resettling, and some smacking of out-of-control egos, Russia still needs weeks (or months?) to get its own house in order. The Kremlin can still make small gestures — Russian Prime Minister Vladimir Putin chatted briefly by phone July 7 with Iranian President Mahmoud Ahmadinejad on the topic of the nuclear power plant that Russia is building for Iran at Bushehr — but for the most part, the Middle East will have to wait for another day.

But by the time Beijing or Moscow have the freedom of movement to do anything, the Middle East may well be as “solved” as it can be.

The New Era

For those of us at Stratfor who have become rather inured to the agonies of the Middle East, such a sustained stream of constructive, positive news is somewhat unnerving. One gets the feeling that if the progress could hold up for just a touch longer, not only would there be an Israeli-Syrian deal and a U.S.-Iranian understanding, the world itself would change. Those of us here who are old enough to remember haven’t sensed such a fateful moment since the weeks before the tearing down of the Berlin Wall in 1989. And — odd though it may sound — we have been waiting for just such a moment for some time. Certainly since before 9/11.

Stratfor views the world as working in cycles. Powers or coalitions of powers form and do battle across the world. Their struggles define the eras through which humanity evolves, and those struggles tend to end in a military conflict that lays the groundwork for the next era. The Germans defeated Imperial France in the Franco-Prussian War in 1871, giving rise to the German era. That era lasted until a coalition of powers crushed Germany in World Wars I and II. That victorious coalition split into the two sides of the Cold War until the West triumphed in 1989.

New eras do not form spontaneously. There is a brief — historically speaking — period between the sweeping away of the rules of the old era and the installation of the rules of the new. These interregnums tend to be very dangerous affairs, as the victorious powers attempt to entrench their victory as new powers rise to the fore — and as many petit powers, suddenly out from under the thumb of any grand power, try to carve out a niche for themselves.

The post-World War I interregnum witnessed the complete upending of Asian and European security structures. The post-World War II interregnum brought about the Korean War as China’s rise slammed into America’s efforts to entrench its power. The post-Cold War interregnum produced Yugoslav wars, a variety of conflicts in the former Soviet Union (most notably in Chechnya), the rise of al Qaeda, the jihadist conflict and the Iraq war.

All these conflicts are now well past their critical phases, and in most cases are already sewn up. All of the pieces of Yugoslavia are on the road to EU membership. Russia’s borderlands — while hardly bastions of glee — have settled. Terrorism may be very much alive, but al Qaeda as a strategic threat is very much not. Even the Iraq war is winding to a conclusion. Put simply, the Cold War interregnum is coming to a close and a new era is dawning.

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Geopolitical Weekly: The U.S. Air Force and the Next War

2008-06-14T11:39:00.000-05:00

June 11, 2008

By George Friedman

U.S. Secretary of Defense Robert Gates has fired the secretary of the Air Force and the Air Force chief of staff. The official reason given for the firings was the mishandling of nuclear weapons and equipment related to nuclear weapons, which included allowing an aircraft to fly within the United States with six armed nuclear weapons on board and accidentally shipping nuclear triggers to Taiwan. An investigation conducted by a Navy admiral concluded that Air Force expertise in handling nuclear weapons had declined.

Focusing on Present Conflicts

While Gates insisted that this was the immediate reason for the firings, he has sharply criticized the Air Force for failing to reorient itself to the types of conflict in which the United States is currently engaged. Where the Air Force leadership wanted to focus on deploying a new generation of fighter aircraft, Gates wanted them deploying additional unmanned aircraft able to provide reconnaissance and carry out airstrikes in Iraq and Afghanistan.

These are not trivial issues, but they are the tip of the iceberg in a much more fundamental strategic debate going on in the U.S. defense community. Gates put the issue succinctly when he recently said that “I have noticed too much of a tendency toward what might be called ‘next-war-itis’ — the propensity of much of the defense establishment to be in favor of what might be needed in a future conflict.” This is what the firings were about.

Naturally, as soon as the firings were announced, there were people who assumed they occurred because these two were unwilling to go along with plans to bomb Iran. At this point, the urban legend of an imminent war with Iran has permeated the culture. But the Air Force is the one place where calls for an air attack would find little resistance, particularly at the top, because it would give the Air Force the kind of mission it really knows how to do and is good at. The whole issue in these firings is whether what the Air Force is good at is what the United States needs.

There is a neat alignment of the issues involved in the firings. Nuclear arms were the quintessential weapons of the Cold War, the last generation. Predators and similar unmanned aircraft are part of this generation’s warfare. The Air Force sees F-22s and other conventional technology as the key weapons of the next generation. The Air Force leadership, facing decades-long timelines in fielding new weapons systems, feels it must focus on the next war now. Gates, responsible for fighting this generation’s war, sees the Air Force as neglecting current requirements. He also views it as essentially having lost interest and expertise in the last generation’s weapons, which are still important — not to mention extremely dangerous.

Fighting the Last War

The classic charge against generals is that they always want to fight the last war again. In charging the Air Force with wanting to fight the next war now, Gates is saying the Air Force has replaced the old problem with a new one. The Air Force’s view of the situation is that if all resources are poured into fighting this war, the United States will emerge from it unprepared to fight the next war. Underneath this discussion of past and future wars is a more important and defining set of questions. First, can the United States afford to fight this war while simultaneously preparing for the next one? Second, what will the next war look like; will it be different from this one?

There is a school of thought in the military that argues that we have now entered the fourth generation of warfare. The first generation of war, according to this theory, involved columns and lines of troops firing muzzle-loaded weapons in volleys. The second generation consisted of warfare involving indirect fire (artillery) and massed movement, as seen in World War I. Third-generation warfare comprised mobile warfare, focused on outmaneuvering the enemy, penetrating enemy lines and encircling them, as was done with armor during World War II. The first three generations of warfare involved large numbers of troops, equipment and logistics. Large territorial organizations — namely, nation-states — were required to carry them out.

Fourth-generation warfare is warfare carried out by nonstate actors using small, decentralized units and individuals to strike at enemy forces and, more important, create political support among the population. The classic example of fourth-generation warfare would be the intifadas carried out by Palestinians against Israel. They involved everything from rioters throwing rocks to kidnappings to suicide bombings. The Palestinians could not defeat the Israel Defense Forces (IDF), a classic third-generation force, in any conventional sense — but neither could the IDF vanquish the intifadas, since the battlefield was the Palestinians themselves. So long as the Palestinians were prepared to support their fourth-generation warriors, they could extract an ongoing price against Israeli civilians and soldiers. The Israeli-Palestinian conflict thus became one of morale rather than materiel. This was the model, of course, the United States encountered in Iraq.

Fourth-generation warfare has always existed. Imperial Britain faced it in Afghanistan. The United States faced it at the turn of the last century in the Philippines. King David waged fourth-generation warfare in Galilee. It has been a constant mode of warfare. The theorists of fourth-generational warfare are not arguing that the United States will face this type of war along with others, but that going forward, this type of warfare will dominate — that the wars of the future will be fourth-generation wars.

Nation-States and Fourth-Generation Warfare

Implicit in this argument is the view that the nation-state, which has dominated warfare since the invention of firearms, is no longer the primary agent of wars. Each of the previous three generations of warfare required manpower and resources on a very large scale that only a nation-state could provide. Fidel Castro in the Cuban mountains, for example, could not field an armored division, an infantry brigade or a rifle regiment; it took a nation to fight the first three generations of warfare.

The argument now is that nations are not the agents of wars but its victims. Wars will not be fought between nations, but between nations and subnational groups that are decentralized, sparse, dispersed and primarily conducting war to attack their target’s morale. The very size of the forces dispersed by a nation-state makes them vulnerable to subnational groups by providing a target-rich environment. Being sparse and politically capable, the insurgent groups blend into the population and are difficult to ferret out and defeat.

In such a war, the nation-state’s primary mission is to identify the enemy, separate him from the population and destroy him. It is critical to be surgical in attacking the enemy, since the enemy wins whenever an attack by the nation-state hits the noncombatant population, even if its own forces are destroyed — this is political warfare. Therefore, the key to success — if success is possible — is intelligence. It is necessary to know the enemy’s whereabouts, and strike him when he is not near the noncombatant population.

The Air Force and UAVs

In fourth-generation warfare, therefore, unmanned aerial vehicles (UAVs) are one of the keys to defeating the substate actor. They gather intelligence, wait until the target is not surrounded by noncombatants and strike suddenly and without warning. It is the quintessential warfare for a technologically advanced nation fighting a subnational insurgent group embedded in the population. It is not surprising that Gates, charged with prosecuting a fourth-generation war, is furious at the Air Force for focusing on fighter planes when what it needs are more and better UAVs.

The Air Force, which was built around the concept of air superiority and strategic bombing, has a visceral objection to unmanned aircraft. From its inception, the Air Force (and the Army Air Corps before it) argued that modern warfare would be fought between nation-states, and that the defining weapon in this kind of war would be the manned bomber attacking targets with precision. When it became apparent that the manned bomber was highly vulnerable to enemy fighters and anti-aircraft systems, the doctrine was modified with the argument that the Air Force’s task was to establish air superiority using fighter aircraft to sweep the skies of the enemy and strike aircraft to take out anti-aircraft systems — clearing the way for bombers or, later, the attack aircraft.

The response to the Air Force position is that the United States is no longer fighting the first three types of war, and that the only wars the United States will fight now will be fourth-generation wars where command of the air is both a given and irrelevant. The Air Force’s mission would thus be obsolete. Only nation-states have the resources to resist U.S. airpower, and the United States isn’t going to be fighting one of them again.

This should be the key point of contention for the Air Force, which should argue that there is no such thing as fourth-generation warfare. There have always been guerrillas, assassins and other forms of politico-military operatives. With the invention of explosives, they have been able to kill more people than before, but there is nothing new in this. What is called fourth-generation warfare is simply a type of war faced by everyone from Alexander to Hitler. It is just resistance. This has not superseded third-generation warfare; it merely happens to be the type of warfare the United States has faced recently.

Wars between nation-states, such as World War I and World War II, are rare in the sense that the United States fought many more wars like the Huk rising in the Philippines or the Vietnam War in its guerrilla phase than it did world wars. Nevertheless, it was the two world wars that determined the future of the world and threatened fundamental U.S. interests. The United States can lose a dozen Vietnams or Iraqs and not have its interests harmed. But losing a war with a nation-state could be catastrophic.

The Next War vs. the War That Matters

The response to Gates, therefore, is that the Air Force is not preparing for the next war. It is preparing for the war that really matters rather than focusing on an insurgency that ultimately cannot threaten fundamental U.S. interests. Gates, of course, would answer that the Air Force is cavalier with the lives of troops who are fighting the current war as it prepares to fight some notional war. The Air Force would counter that the notional war it is preparing to fight could decide the survival of the United States, while the war being fought by Gates won’t. At this point, the argument would deadlock, and the president and Congress would decide where to place their bets.

But the argument is not quite over at this point. The Air Force’s point about preparing for the decisive wars is, in our mind, well-taken. It is hard for us to accept the idea that the nation-state is helpless in front of determined subnational groups. More important, it is hard for us to accept the idea that international warfare is at an end. There have been long periods in the past of relative tranquility between nation-states — such as, for example, the period between the fall of Napoleon and World War I. Wars between nations were sparse, and the European powers focused on fourth-generational resistance in their colonies. But when war came in 1914, it came with a vengeance.

Our question regards the weapons the Air Force wants to procure. It wants to build the F-22 fighter at enormous cost, which is designed to penetrate enemy airspace, defeat enemy fighter aircraft and deliver ordnance with precision to a particular point on the map. Why would one use a manned aircraft for that mission? The evolution of cruise missiles with greater range and speed permits the delivery of the same ordnance to the same target without having a pilot in the cockpit. Indeed, cruise missiles can engage in evasive maneuvers at g-forces that would kill a pilot. And cruise missiles exist that could serve as unmanned aircraft, flying to the target, releasing submunitions and returning home. The combination of space-based reconnaissance and the unmanned cruise missile — in particular, next-generation systems able to move at hypersonic speeds (in excess of five times the speed of sound) — would appear a much more efficient and effective solution to the problem of the next generation of warfare.

We could argue that both Gates and the Air Force are missing the point. Gates is right that the Air Force should focus on unmanned aircraft; technology has simply moved beyond the piloted aircraft as a model. But this does not mean the Air Force should not be preparing for the next war. Just as the military should have been preparing for the U.S.-jihadist war while also waging the Cold War, so too, the military should be preparing for the next conflict while fighting this war. For a country that spends as much time in wars as the United States (about 17 percent of the 20th century in major wars, almost all of the 21st century), Gates’ wish to focus so narrowly on this war seems reckless.

At the same time, building a new and fiendishly expensive version of the last generation’s weapons does not necessarily constitute preparing for the next war. The Air Force was built around the piloted combat aircraft. The Navy was built around sailing ships. Those who flew and those who sailed were necessary and courageous. But sailing ships don’t fit into the modern fleet, and it is not clear to us that manned aircraft will fit into high-intensity peer conflict in the future.

We do not agree that preparing for the next war is pathological. We should always be fighting this war and preparing for the next. But we don’t believe the Air Force is preparing for the next war. There will be wars between nations, fought with all the chips on the table. Gates is right that the Air Force should focus on unmanned aircraft. But not because of this war alone.

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The Shift Toward an Israeli-Syrian Agreement

2008-04-30T15:14:00.000-05:00

By George Friedman

The Middle East, already monstrously complex, grew more complex last week. First, there were strong indications that both Israel and Syria were prepared to engage in discussions on peace. That alone is startling enough. But with the indicators arising in the same week that the United States decided to reveal that the purpose behind Israel’s raid on Syria in September 2007 was to destroy a North Korean-supplied nuclear reactor, the situation becomes even more baffling.

But before we dive into the what-will-be, let us first explain how truly bizarre things have gotten. On April 8 we wrote about how a number of seemingly unconnected events were piecing themselves into a pattern that might indicate an imminent war, a sequel to the summer 2006 Lebanon conflict. This mystery in the Middle East has since matured greatly, but in an unexpected direction. Israeli-Syrian peace talks — serious Israeli-Syrian peace talks — are occurring.

First, Israeli Prime Minister Ehud Olmert told the Israeli media that Israel had been talking to the Syrians, and then that “Very clearly we want peace with the Syrians and are taking all manners of action to this end. They know what we want from them, and I know full well what they want from us.” Then Syrian President Bashar al Assad publicly acknowledged that negotiations with Syria were taking place. Later, a Syrian minister appeared on Al Jazeera and said that, “Olmert is ready for peace with Syria on the grounds of international conditions, on the grounds of the return of the Golan Heights to Syria.” At almost exactly the same moment, Syrian Foreign Minister Walid al-Moallem said that, “If Israel is serious and wants peace, nothing will stop the renewal of peace talks. What made this statement really interesting was that it was made in Tehran, standing next to Iranian Foreign Minister Manouchehr Mottaki, an ally of Syria whose government rejects the very concept of peace with Israel.

We would have expected the Syrians to choose another venue to make this statement, and we would have expected the Iranians to object. It didn’t happen. We waited for a blistering denial from Israel. Nothing came; all that happened was that Israeli spokesmen referred journalists to Olmert’s previous statement. Clearly something was on the table. The Turks had been pressing the Israelis to negotiate with the Syrians, and the Israelis might have been making a gesture to placate them, but the public exchanges clearly went beyond that point. This process could well fail, but it gave every appearance of being serious.

According to the existing understanding of the region’s geopolitical structure, an Israeli-Syrian peace deal is impossible.
The United States and Iran are locked into talks over the future of Iraq, and both regularly use their respective allies in Israel and Syria to shape those negotiations. An Israeli-Syrian peace would at the very least inconvenience American and Iranian plans.
Any peace deal would require defanging Hezbollah. But Hezbollah is not simply a Syrian proxy with an independent streak, it is also an Iranian proxy. So long as Iran is Syria’s only real ally in the Muslim world, such a step seems inimical to Syrian interests.
Hezbollah is also deeply entwined into the economic life of Lebanon — and in Lebanon’s drug production and distribution network — and threatening the relationship with Hezbollah would massively impact Damascus’ bottom line.
From the other side, Syria cannot accept a peace that does not restore its control over the Golan Heights, captured during the 1967 war. Since this patch of ground overlooks some of Israel’s most densely populated regions, it seems unnatural that Israel ever would even consider such a trade.

Forget issues of Zionism or jihadism, or even simple bad blood; the reality is that any deal between Israel and Syria clashes with the strategic interests of both sides, making peace is impossible. Or is it? Talks are happening nonetheless, meaning one of two things is true: Either Olmert and Assad have lost it, or this view of reality is wrong.

Let’s reground this discussion away from what everyone — ourselves included — thinks they know and go back to the basics, namely, the geopolitical realities in which Israel and Syria exist.

Israel

Peace with Egypt and Jordan means Israel is secure on its eastern and southern frontiers. Its fundamental problem is counterinsurgency in Gaza and at times in the West Bank. Its ability to impose a military solution to this problem is limited, so it has settled for separating itself from the Palestinians and on efforts to break up the Palestinian movement into different factions. The split in the Palestinian community between Fatah in the West Bank and Hamas in Gaza helped this strategy immensely, dividing the Palestinians geographically, ideologically, economically and politically. The deeper the intra-Palestinian conflict is, the less of a strategic threat to Israel the Palestinians can be. It is hardly a beautiful solution — and dividing the Palestinians does not reduce the security burden on Israel — but it is manageable.

Israel does not perceive Syria as a serious threat. Not only is the Syrian military a pale shadow of Israeli capability, Israel does not even consider sacrificing the Golan Heights to weakening the Israeli military meaningfully. The territory has become the pivot of public discussions, but losing it hasn’t been a real problem for Israel since the 1970s. In today’s battlefield environment, artillery on the heights would rapidly be destroyed by counter-battery fire, helicopter gunships or aircraft. Indeed, the main threat to Israel from Syria is missiles. Damascus now has one of the largest Scud missile and surface-to-surface missile arsenals in the region — and those can reach Israel from far beyond the Golan Heights regardless of where the Israeli-Syrian political border is located. Technological advances — even those from just the last decade — have minimized the need for a physical presence on that territory that was essential militarily decades ago .

The remaining threat to Israel is posed by Lebanon, where Hezbollah has a sufficient military capability to pose a limited threat to northern Israel, as was seen in the summer of 2006. Israel can engage and destroy a force in Lebanon, but the 1982-2002 Israeli occupation of southern Lebanon vividly demonstrated that the cost-benefit ratio to justify an ongoing presence simply does not make sense.

At the current time, Israel’s strategic interests are twofold. First, maintain and encourage the incipient civil war between Hamas and Fatah. The key to this is to leverage tensions between neighboring Arab states and the Palestinians. And this is easy. The Hashemite government of Jordan detests the West Bank Palestinians because more than three-quarters of the population of Jordan is Palestinian, but the Hashemite king rather likes being king. Egypt equally hates the Gaza Palestinians as Hamas’ ideological roots lie in the Muslim Brotherhood — a group whose ideology not only contributed to al Qaeda’s formation, but also that of groups who have exhibited a nasty habit of assassinating Egyptian presidents.

The second Israeli strategic interest is finding a means of neutralizing any threat from Lebanon without Israel being forced into war — or worse yet, into an occupation of Lebanon. The key to this strategy lies with the other player in this game.

Syria

Ultimately Syria only has its western border to worry about. To the east is the vast desert border with Iraq, an excellent barrier to attack for both nations. To the north are the Turks who, if they chose, could swallow Syria in a hard day’s work and be home in time for coffee. Managing that border is a political matter, not a military one.

That leaves the west. Syria does not worry too much about an Israeli invasion. It is not that Damascus thinks that Israel is incapable of such an operation — Israel would face only a slightly more complicated task of eliminating Syria than Turkey would — but that the al Assads know full well that Israel is happy with them in power. The al Assads and their fellow elites hail from the Alawite sect of Islam, an offshoot of Shiite Islam that the Sunnis consider apostate. Alawite rule in Syria essentially is secular, and the government has a historic fear of an uprising by the majority Sunnis.

The Israelis know that any overthrow of the al Assads would probably land Israel with a radical Sunni government on its northeastern frontier. From Israel’s point of view, it is far better to deal with a terrified and insecure Syrian government more concerned with maintaining internal control than a confident and popular Syrian government with the freedom to look outward.

Just as Syria’s defensive issues vis-à-vis Israel are not what they seem, neither are Syrian tools for dealing with Israel in an offensive manner as robust as most think.

Syria is not particularly comfortable with the entities that pose the largest security threats to Israel, namely, the main Palestinian factions. Damascus has never been friendly to the secular Fatah movement, with which it fought many battles in Lebanon; nor is it comfortable with the more fundamentalist Sunni Hamas. (Syria massacred its own fundamentalists during the 1980s.) So while the Syrians have dabbled in Palestinian politics, they have never favored a Palestinian state. In fact, it should be recalled that when Syria first invaded Lebanon in 1975, it was against the Palestinians and in support of Lebanese Christians.

That invasion — as well as most Syrian operations in Lebanon — was not about security, but about money. Lebanon, the descendent of Phoenicia, has always been a vibrant economic region (save when there is war). It is the terminus of trade routes from the east and south and the door to the Mediterranean basin. It is a trading and banking hub, with Beirut in particular as the economic engine of the region. Without Beirut and Lebanon, Syria is an isolated backwater. With it, Damascus is a major player.

As such, Syria’s closest ties among Israel’s foes are not with the two major indigenous Palestinian factions, but with the Shiite group Hezbollah. The Syrians have a somewhat tighter religious affinity with Hezbollah, as well as a generation of complex business dealings with the group’s leaders. But its support for Hezbollah is multifaceted, and anti-Israeli tendencies are only one aspect of the relationship. And Hezbollah is much more important to Syria as a tool for managing Damascus’ affairs in Lebanon.

The Basis of a Deal

Israel and Syria’s geopolitical interests diverge less than it might appear. By itself, Syria poses no conventional threat to Israel. Syria is dangerous only in the context of a coalition with Egypt. In 1973, fighting on two fronts, the Syrians were a threat. With Egypt neutralized now and behind the buffer in the Sinai, Syria poses no threat. As for unconventional weapons, the Israelis indicated with their bombing of the Syrian research facility in September 2007 that they know full well how — and are perfectly willing unilaterally — to take that option off Damascus’ table.

Since neither side wants a war with the other — Israel does not want to replace the Alawites, and the Alawites are not enamored of being replaced — the issue boils down to whether Israel and Syria can coordinate their interests in Lebanon. Israel has no real economic interests in Lebanon. Its primary interest is security — to make certain that forces hostile to Israel cannot use Lebanon as a base for launching attacks. Syria has no real security interests so long its economic primacy is guaranteed. And neither country wants to see an independent Palestinian state.

The issue boils down to Lebanon. In a sense, the Israelis had an accommodation with Syria over Lebanon when Israel withdrew. It ceded economic pre-eminence in Lebanon to the Syrians. In return, the Syrians controlled Hezbollah and in effect took responsibility for Israeli security in return for economic power. It was only after Syria withdrew from Lebanon under U.S. pressure that Hezbollah evolved into a threat to Israel, precipitating the 2006 conflict.

This was a point on which Israel and the United States didn’t agree. The United States, fighting in Iraq, wanted an additional lever with which to try to control Syrian support for militants fighting in Iraq. They saw Lebanon as a way to punish Syria for actions in Iraq. But the Israelis saw themselves as having to live with the consequences of that withdrawal. Israel understood that Syria’s withdrawal shifted the burden of controlling Hezbollah to Israel — something that could not be achieved without an occupation.

What appears to be under consideration between the supposed archrivals, therefore, is the restoration of the 2005 status quo in Lebanon. The Syrians would reclaim their position in Lebanon, unopposed by Israel. In return, the Syrians would control Hezbollah. For the Syrians, this has the added benefit that by controlling Hezbollah and restraining it in the south, Syria would have both additional strength on the ground in Lebanon, as well as closer economic collaboration — on more favorable terms — with Hezbollah. For Syria, Hezbollah is worth more as a puppet than as a heroic anti-Israeli force.

This is something Israel understands. In the last fight between Israel and Syria in Lebanon, there were different local allies: Israel had the South Lebanese Army. The Syrians were allied with the Christian Franjieh clan. In the end, both countries dumped their allies. Syria and Israel have permanent interests in Lebanon. They do not have permanent allies.

The Other Players

The big loser in this game, of course, would be the Lebanese. But that is more complicated than it appears. Many of the Lebanese factions — including most of the Christian clans — have close relations with the Syrians. Moreover, the period of informal Syrian occupation was a prosperous time. Lebanon is a country of businessmen and militia, sometimes the same. The stability the Syrians imposed was good for business.

The one faction that would clearly oppose this would be Hezbollah. It would be squeezed on all sides. Ideologically speaking, constrained from confronting Israel, its place in the Islamic sun would be undermined. Economically speaking, Hezbollah would be forced into less favorable economic relations with the Syrians than it enjoyed on its own. And politically speaking, Hezbollah would have the choice of fighting the Syrians (not an attractive option) or of becoming a Syrian tool. Either way, Hezbollah would have to do something in response to any rumors floating about of a Syrian deal with the Israelis. And given the quality of Syrian intelligence in these matters, key Hezbollah operatives opposed to such a deal might find themselves blown up. Perhaps they already have.

Iran will not be happy about all this. Tehran has invested a fair amount of resources in bulking up Hezbollah, and will not be pleased to see the militia shift from Syrian management to Syrian control. But in the end, what can Iran do? It cannot support Hezbollah directly, and even if it were to attempt to undermine Damascus, those Syrians most susceptible to Tehran’s Shiite-flavored entreaties are the Alawites themselves.

The other player that at the very least would be uneasy about all of this is the United States. The American view of Syria remains extremely negative, still driven by the sense that the Syrians continue to empower militants in Iraq. Certainly that aid — and that negative U.S. feeling — is not as intense as it was two years ago, but the Americans might not feel that this is the right time for such a deal. Thus, the release of the information on the Syrian reactor might well have been an attempt to throw a spoke in the wheel of the Israeli-Syrian negotiations.

That might not be necessary. Nothing disappears faster than Syrian-Israeli negotiations. In this case, however, both countries have fundamental geopolitical interests at stake. Israel wants to secure its northern frontier without committing its troops into Lebanon. The Syrians want to guarantee their access to the economic possibilities in Lebanon. Neither care about the Golan Heights. The Israelis don’t care what happens in Lebanon so long as it doesn’t explode in Israel. The Syrians don’t care what happens to the Palestinians so long as it doesn’t spread onto their turf.

Deals have been made on less. Israel and Syria are moving toward a deal that would leave a lot of players in the region — including Iran — quite unhappy. Given this deal has lots of uneasy observers, including Iran, the United States, Hezbollah, the Palestinians and others, it could blow apart with the best will in the world. And given that this is Syria and Israel, the best will isn’t exactly in abundant supply.

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Chinese Geopolitics and the Significance of Tibet

2008-04-16T19:11:00.002-05:00

By George Friedman

China is an island. We do not mean it is surrounded by water; we mean China is surrounded by territory that is difficult to traverse. Therefore, China is hard to invade; given its size and population, it is even harder to occupy. This also makes it hard for the Chinese to invade others; not utterly impossible, but quite difficult. Containing a fifth of the world’s population, China can wall itself off from the world, as it did prior to the United Kingdom’s forced entry in the 19th century and under Mao Zedong. All of this means China is a great power, but one that has to behave very differently than other great powers.

Analyzing Chinese Geography

Let’s begin simply by analyzing Chinese geography, looking at two maps. The first represents the physical geography of China.

The second shows the population density not only of China, but also of the surrounding countries.

China’s geography is roughly divided into two parts: a mountainous, arid western part and a coastal plain that becomes hilly at its westward end. The overwhelming majority of China’s population is concentrated in that coastal plain. The majority of China’s territory — the area west of this coastal plain — is lightly inhabited, however. This eastern region is the Chinese heartland that must be defended at all cost.

China as island is surrounded by impassable barriers — barriers that are difficult to pass or areas that essentially are wastelands with minimal population. To the east is the Pacific Ocean. To the north and northwest are the Siberian and Mongolian regions, sparsely populated and difficult to move through. To the south, there are the hills, mountains and jungles that separate China from Southeast Asia; to visualize this terrain, just remember the incredible effort that went into building the Burma Road during World War II. To the southwest lie the Himalayas. In the northwest are Kazakhstan and the vast steppes of Central Asia. Only in the far northeast, with the Russian maritime provinces and the Yalu River separating China from Korea, are there traversable points of contacts. But the balance of military power is heavily in China’s favor at these points.

Strategically, China has two problems, both pivoting around the question of defending the coastal region. First, China must prevent attacks from the sea. This is what the Japanese did in the 1930s, first invading Manchuria in the northeast and then moving south into the heart of China. It is also what the British and other European powers did on a lesser scale in the 19th century. China’s defense against such attacks is size and population. It draws invaders in and then wears them out, with China suffering massive casualties and economic losses in the process.

The second threat to China comes from powers moving in through the underpopulated portion of the west, establishing bases and moving east, or coming out of the underpopulated regions around China and invading. This is what happened during the Mongol invasion from the northwest. But that invasion was aided by tremendous Chinese disunity, as were the European and Japanese incursions.
Beijing’s Three Imperatives

Beijing therefore has three geopolitical imperatives:

1. Maintain internal unity so that far powers can’t weaken the ability of the central government to defend China.
2. Maintain a strong coastal defense to prevent an incursion from the Pacific.
3. Secure China’s periphery by anchoring the country’s frontiers on impassable geographical features; in other words, hold its current borders.

In short, China’s strategy is to establish an island, defend its frontiers efficiently using its geographical isolation as a force multiplier, and, above all, maintain the power of the central government over the country, preventing regionalism and factionalism.

We see Beijing struggling to maintain control over China. Its vast security apparatus and interlocking economic system are intended to achieve that. We see Beijing building coastal defenses in the Pacific, including missiles that can reach deep into the Pacific, in the long run trying to force the U.S. Navy on the defensive. And we see Beijing working to retain control over two key regions: Xinjiang and Tibet.

Xinjiang is Muslim. This means at one point it was invaded by Islamic forces. It also means that it can be invaded and become a highway into the Chinese heartland. Defense of the Chinese heartland therefore begins in Xinjiang. So long as Xinjiang is Chinese, Beijing will enjoy a 1,500-mile, inhospitable buffer between Lanzhou — the westernmost major Chinese city and its oil center — and the border of Kazakhstan. The Chinese thus will hold Xinjiang regardless of Muslim secessionists.
The Importance of Tibet to China

Now look at Tibet on the population density and terrain maps. On the terrain map one sees the high mountain passes of the Himalayas. Running from the Hindu Kush on the border with Pakistan to the Myanmar border, small groups can traverse this terrain, but no major army is going to thrust across this border in either direction. Supplying a major force through these mountains is impossible. From a military point of view, it is a solid wall.

Note that running along the frontier directly south of this border is one of the largest population concentrations in the world. If China were to withdraw from Tibet, and there were no military hindrance to population movement, Beijing fears this population could migrate into Tibet. If there were such a migration, Tibet could turn into an extension of India and, over time, become a potential beachhead for Indian power. If that were to happen, India’s strategic frontier would directly abut Sichuan and Yunnan — the Chinese heartland.

The Chinese have a fundamental national interest in retaining Tibet, because Tibet is the Chinese anchor in the Himalayas. If that were open, or if Xinjiang became independent, the vast buffers between China and the rest of Eurasia would break down. The Chinese can’t predict the evolution of Indian, Islamic or Russian power in such a circumstance, and they certainly don’t intend to find out. They will hold both of these provinces, particularly Tibet.

The Chinese note that the Dalai Lama has been in India ever since China invaded Tibet. The Chinese regard him as an Indian puppet. They see the latest unrest in Tibet as instigated by the Indian government, which uses the Dalai Lama to try to destabilize the Chinese hold on Tibet and open the door to Indian expansion. To put it differently, their view is that the Indians could shut the Dalai Lama down if they wanted to, and that they don’t signals Indian complicity.

It should be added that the Chinese see the American hand behind this as well. Apart from public statements of support, the Americans and Indians have formed a strategic partnership since 2001. The Chinese view the United States — which is primarily focused on the Islamic world — as encouraging India and the Dalai Lama to probe the Chinese, partly to embarrass them over the Olympics and partly to increase the stress on the central government. The central government is stretched in maintaining Chinese security as the Olympics approach. The Chinese are distracted. Beijing also notes the similarities between what is happening in Tibet and the “color” revolutions the United States supported and helped stimulate in the former Soviet Union.

It is critical to understand that whatever the issues might be to the West, the Chinese see Tibet as a matter of fundamental national security, and they view pro-Tibetan agitation in the West as an attempt to strike at the heart of Chinese national security. The Chinese are therefore trapped. They are staging the Olympics in order to demonstrate Chinese cohesion and progress. But they must hold on to Tibet for national security reasons, and therefore their public relations strategy is collapsing. Neither India nor the United States is particularly upset that the Europeans are thinking about canceling attendance at various ceremonies.
A Lack of Countermoves

China has few countermoves to this pressure over Tibet. There is always talk of a Chinese invasion of Taiwan. That is not going to happen — not because China doesn’t want to, but because it does not have the naval capability of seizing control of the Taiwan Straits or seizing air superiority, certainly not if the United States doesn’t want it (and we note that the United States has two carrier battle groups in the Taiwan region at the moment). Beijing thus could bombard Taiwan, but not without enormous cost to itself and its own defensive capabilities. It does not have the capability to surge forces across the strait, much less to sustain operations there in anything short of a completely permissive threat environment. The Chinese could fire missiles at Taiwan, but that risks counterstrikes from American missiles. And, of course, Beijing could go nuclear, but that is not likely given the stakes. The most likely Chinese counter here would be trying to isolate Taiwan from shipping by firing missiles. But that again assumes the United States would not respond — something Beijing can’t count on.

While China thus lacks politico-military options to counter the Tibet pressure, it also lacks economic options. It is highly dependent for its economic well-being on exports to the United States and other countries; drawing money out of U.S. financial markets would require Beijing to put it somewhere else. If the Chinese invested in Europe, European interest rates would go down and U.S. rates would go up, and European money would pour into the United States. The long-held fear of the Chinese withdrawing their money from U.S. markets is therefore illusory: The Chinese are trapped economically. Far more than the United States, they can’t afford a confrontation.

That leaves the pressure on Tibet, and China struggling to contain it. Note that Beijing’s first imperative is to maintain China’s internal coherence. China’s great danger is always a weakening of the central government and the development of regionalism. Beijing is far from losing control, but recently we have observed a set of interesting breakdowns. The inability to control events in Tibet is one. Significant shortages of diesel fuel is a second. Shortages of rice and other grains is a third. These are small things, but they are things that should not be happening in a country as well-heeled in terms of cash as China is, and as accustomed as it is to managing security threats.

China must hold Tibet, and it will. The really interesting question is whether the stresses building up on China’s central administration are beginning to degrade its ability to control and manage events. It is easy to understand China’s obsession with Tibet. The next step is to watch China trying to pick up the pieces on a series of administrative miscues. That will give us a sense of the state of Chinese affairs.