By Carroll Colley
While Russia will enter the WTO in late August, U.S. industry will be left on the sidelines until Congress removes the Cold War-era impediment to greater trade between the former foes. But it's a safe bet that Congress won't graduate Russia from the Jackson-Vanik amendment, which is necessary to grant permanent normal trade relations to Russia and take advantage of its accession to the WTO, before the November election. The reason? Russia is perpetually steeped in controversy, and U.S.-Russia relations have become a campaign issue in the race between Republican Mitt Romney and President Barack Obama. U.S. industry likely won't be able to take advantage of greater market access in Russia until the lame-duck session at the end of the year, and possibly later.
The White House is much more focused on November 6 (Election Day) than August 23 (the approximate date of Russia's WTO entry). Only after repeated requests from Republican lawmakers for senior level officials to testify on the Hill -- widely viewed as a Republican maneuver to force the administration to speak on the record about its Russian policy -- did the administration relent by sending the duo of Deputy Secretary of State William Burns and U.S. Trade Representative Ron Kirk to testify before the House Ways and Means Committee and the Senate Finance Committee. The White House calculates that a "yes" vote on graduating Russia from Jackson-Vanik (a 1974 provision that ties trade relations to freedom of emigration and other human rights considerations) would have little electoral upside, and might even harm Obama before the election.
Obama's meeting on June 18 with President Vladimir Putin on the margins of the G20 in Los Cabos seemingly failed to produce a breakthrough on Syrian policy. Headlines about ongoing arms shipments bound for Syria and the potential for continued Russian intransigence at the U.N. Security Council also represent potential political liabilities during the election home stretch, not to mention a host of domestic political issues. Romney, meanwhile, has called Russia the U.S.'s greatest political "enemy" -- and later changing that description to "foe" -- because he senses a potential weakness in an Obama foreign policy that has otherwise produced several notable successes.
It would be much simpler, politically, if supporters of graduating Russia from Jackson-Vanik could cast it as a vote for American business, as Secretary of State Hillary Clinton did in a recent opinion piece. But they can't. Passage is complicated by the Magnitsky bill, human rights legislation that targets government officials involved in the case of Sergei Magnitsky, a Russian lawyer who died in police custody in 2009. Largely viewed as a replacement for Jackson-Vanik, the stated aim of the bill is to deny visas to corrupt officials, freeze any U.S. accounts they have, and publish their names. The reality is that the Obama administration last summer instituted its own visa ban and any potential offenders have long ago transferred any funds from the U.S.. The net effect of the bill, therefore, is the "naming of names," which would represent a significant embarrassment to the Putin regime. The bill enjoys broad bipartisan support, with a number of lawmakers stating publicly that passage of the Magnitsky bill is a prerequisite for their vote on Jackson-Vanik.
The Obama administration has sent contradictory messages about its support for the Magnitsky bill. While originally opposing the bill, the administration seems to have accepted the inevitable and has been working with its primary author, Democratic Sen. Ben Cardin of Maryland. One recent Senate version provides for the public list as well as a confidential annex, which would largely allow the administration to circumvent the thrust of the bill by invoking national security exemptions. This is strongly opposed by a number of senior lawmakers, including Sen. John McCain, who was a co-sponsor of the effort to repeal Jackson-Vanik on the caveat of corresponding passage of the Magnitsky bill.
As the August recess rapidly approaches, the window for graduating Russia from Jackson-Vanik prior to its WTO accession closes. Obama appears to have little room to maneuver in expending political capital on the matter without raising the risk of elevating Russia-and its collateral baggage including Syria, Georgia, Iran, and domestic protests-to a legitimate campaign issue. Unless Congress moves forward on its own prerogative-which appears unlikely-the repeal of Jackson-Vanik won't get passed before November, or later, leaving the world's largest economy unable to take advantage of the accession of the WTO's newest member.
Carroll Colley is the director of Eurasia Group’s Eurasia practice.
By Alexander Kliment
Russian President Vladimir Putin's last minute decision to skip a G8 summit with President Barack Obama is a snub to Washington, but the Russian president's no-show may in fact increase the chances for a constructive relationship between the two countries.
Last week, just days after his inauguration, Putin let it be known that he would not attend the upcoming G8 summit at Camp David, where he and Obama were set for a one on one meeting.
The White House, in turn, said Obama wouldn't attend the 2012 Asia Pacific Economic Conference (APEC) summit this fall in Vladivostok, Russia -- though it was always hard to imagine Obama skipping the Democratic National Convention.
According to the Kremlin's official explanation, Putin can't leave Russia right now because approving the cabinet nominations submitted to him by Prime Minister Dmitry Medvedev is too sensitive a task for Putin to oversee by phone from Maryland. So Medvedev will send the list to Putin and head to the summit himself.
Putin's decision is a breach of G8 protocol, which expects that sitting heads of state will attend the group's summits. French President Francois Hollande, for example, will attend, just days after his 15 May inauguration. And by sending his number two to an organization in which Russia is already something of a second fiddle, Putin is raising questions about the wisdom of keeping Russia in the group at all.
Accordingly, many analysts have cast the move as a brazen rebuke to the U.S., which Putin alleges is behind the unprecedented street protests that have become a feature of Moscow life since last December.
It's true that the Kremlin's official explanation isn't wholly credible. Most cabinet decisions have likely been agreed upon already, Putin's re-election was never in doubt, and the G8 summit's date has been known for some time. That said, he reassumes the presidency amid rising popular opposition, which has sowed fresh doubts about his legitimacy. Keen to prevent infighting or, worse, insubordination among Russia's powerful elites, Putin could well be preoccupied with some last minute horse-trading at home.
The timing may, in fact, be no better in Washington than it is in Moscow.
Obama is entering a challenging re-election campaign in which he has already drawn fire from his Republican opponent Mitt Romney about the pursuit of a reset with Russia and his broader foreign policy track record. U.S.-Russia ties have deteriorated recently -- on account of disagreements over Syria, continuing friction over missile defense, and Putin's allegations of U.S. complicity in the protest movement -- meaning the U.S. president would be under pressure to take a hard line with Putin.
But that could risk an unpredictable flare-up with the notoriously sharp-tongued and pugnacious Putin. At the very least, it might complicate White House attempts to secure congressional support for granting Russia normal trade relations status so that U.S. companies can benefit from Russia's WTO accession.
In short, with both men facing heightened domestic concerns and pressures, Obama's meeting with Medvedev, who has warmer relations with Obama and who is seen chiefly as a messenger for Putin, carries much less political significance, but also much lower political risk. The practical result is that it leaves open the chance of greater flexibility between Washington and Moscow that could help maintain a pragmatic relationship in the medium term.
Alexander Kliment is an analyst with Eurasia Group's Eurasia practice.
JEWEL SAMAD/AFP/Getty Images
By Jennifer Lee
The new, young regime in North Korea surprised more than a few observers when it agreed last week to a moratorium on its nuclear activities in return for 240,000 tons of U.S. food aid so soon after Kim Jong Un assumed leadership. Instead of the legitimacy-building provocations expected from the young Kim (who is in his late 20s), the world got a measured concession from a totalitarian regime that demonstrated a degree of consensus and decision-making ability. In some ways, it was the story of the young son continuing his father Kim Jong Il's efforts to improve relations with the U.S. prior to his death.
There is general optimism surrounding the agreement, which stalls North Korea's uranium enrichment program, and nuclear and long-range missile tests, and allows the International Atomic Energy Agency to inspect the Yongbyon nuclear facility. Last week's step forward, however, does not necessarily presage a more substantive shift in North Korea's posture. The agreement allows North Korea to possibly address its immediate concerns (economic sanctions) and affect domestic politics in South Korea, without ceding its ability to provoke or flip the switch (again) on its nuclear program.
While it is easy to think that the U.S. food aid "carrot" must have been the main reason behind North Korea agreeing to this deal, it is unlikely the case. North Korea is not known for being particularly concerned about the hunger of its people (allegedly more than one million people died during the famine in the 90s, and food security has been dismal for the past few decades); and the totalitarian nature of the regime means that its leaders are not very concerned about their approval ratings.
North Korea is more concerned about the economic condition of the state and the long-term implications of sanctions (North Korea's version of the statement mentions that it would want to discuss the lifting of sanctions and provision of light water reactors if the Six Party Talks resume). The current move is probably a gambit to see if it can resume the Six Party Talks and have sanctions lifted without giving up the nuclear program. The deal is also likely an effort by Pyongyang to slight the Lee Myung-bak administration in Seoul, which it views with hostility, in the hope of increasing the chances of the liberal parties in South Korea's presidential election in December.
The U.S. and South Korea both have presidential elections this year. The agreement is likely North Korea's way of buying time for a year or so until the South Korean administration changes, while trying to extract concessions from an Obama administration that does not want any more conflicts on its hands during an election year. This is also a moratorium that is to last only while "productive dialogue continues." Everything North Korea has promised is reversible if it decides to back out. And it certainly has set a precedent for doing so. Furthermore, this moratorium applies only to the Yongbyun nuclear facilities; it is widely believed that there are several other nuclear development sites throughout North Korea that will be out of reach under this agreement.
It should not be forgotten that North Korea's nuclear capability has been extolled within North Korea as Kim Jong Il's most important legacy. It is undoubtedly seen as the single most powerful card that North Korea has, and with the recent leadership transition to a young new leader, there is little chance that the country will completely forgo this leverage, especially after the NATO operation in Libya that removed Muammar Qaddafi.
There is still a possibility that this could turn into something positive and lasting for U/S.-North Korea relations or North Korea's future behavior. Last week's agreement demonstrates that the totalitarian regime in North Korea was able to take a rational step for its self-interest. But it does not demonstrate that North Korea is contemplating giving up its nuclear weapons, or that it is on the verge of changing its behavior.
Jennifer Lee is an associate in Eurasia Group's Asia practice.
By Christopher Garman
The turmoil in the Middle East and Japan has almost completely overshadowed U.S. President Barack Obama's trip to Latin America, but his visit to Brazil is a strategic down payment on improved relations with an emerging world power.
Under former President Luiz Inacio Lula da Silva most of Brazil's foreign policy initiatives were driven primarily by the Ministry of Foreign Affairs (Itamaraty) with a long-standing preference for improved South-South ties or by Lula personally.
Brazil's President Dilma Rousseff, however, is more interested in economic concerns and there are already signs that such issues will have more impact on her foreign policy, perhaps yielding a better relationship with the United States. Some of that shift can be explained by Rousseff's economic training and her many years as a government technocrat. Equally important, however, is her underlying pragmatism, something that many pundits failed to identify during the presidential campaign.
Her more skeptical view of China yields the clearest evidence of this change. Under Lula, Brazil sought to strengthen its relationship with Beijing driven in part by a desire to counter-balance U.S. geopolitical clout. By contrast, under Rousseff, private sector concerns over how Chinese imports are undermining the competitiveness of Brazil's manufacturing are surfacing more strongly in Brazilian policy. Where Lula blamed the U.S. Federal Reserve's quantitative easing for global imbalances, Rousseff has placed equal blame on China's managed currency policy.
It would be a mistake, however, to think this new focus will translate into a wholesale transformation of the relationship. Rousseff is not about to work jointly with the United States, either bilaterally or in multilateral settings such as the G-20, to pressure China on its currency policy.
Additionally, even though Brazilian policymakers are signaling a desire to supply the U.S. market with exports from its vast new oil deposits, Brazil's new statist exploration and production framework designed to develop the country's pre-salt reserves is much less attractive to U.S. majors. In fact, there seems to be more room for cooperation on renewables and environmental regulations in deep-sea drilling than in upstream E&P.
It comes as no surprise that Obama did not support Brazil's push for a permanent seat on the U.N. Security Council in the same way it supported India's bid. The United States may want to deepen its relationship with Brazil, but the ill will generated by Iran episode (Lula's attempt to broker a nuclear deal with Tehran) hasn't yet completely faded. Obama also remains constrained on trade, given protectionist pressures in the U.S. Congress that gives him little room to deliver either reduced U.S. agricultural subsidies or lower ethanol tariffs, both of which are high among Brazil's priorities in the bilateral agenda.
But with pragmatists leading the two largest countries in the Americas, relations look set to improve.
Christopher Garman is the director of Eurasia Group's Latin America team.
PEDRO SANTANA/AFP/Getty Images
By Heather Berkman and Sean West
U.S. Trade Representative Ron Kirk told the House Ways and Means Committee on Feb. 9 that the Obama administration is serious about progress on the South Korea, Panama, and Colombia free trade agreements. He wouldn't commit to a timeline, but we think Congress will pass all three deals this year -- though not without a round of serious political deal making.
Obama campaigned on the need to extract additional concessions from South Korea, Colombia and Panama before any of these deals, all of which were negotiated and signed by President George W. Bush, deserved ratification. For example, automakers and the United Auto Workers complained that the South Korea deal opened the U.S. auto market to Korean imports without securing reciprocal liberalization.
The United States took two years to tell South Korea exactly what it wanted changed, but the two sides have finally negotiated a side deal in which the Koreans made additional concessions. With the new agreement providing political cover, Obama now officially endorses the deal and will send it to Capitol Hill for ratification soon.
The path forward for the Panama and Colombia FTAs is a bit murkier. The Panama deal -- which, frankly, will have negligible economic impact on either country -- was first held up because Pedro Miguel Gonzalez, who later became leader of the Panamanian National Assembly, was indicted by a U.S. grand jury on charges he shot and killed a U.S. serviceman in 1992. When Gonzalez left government in 2009, U.S. trade skeptics shifted their criticism to Panama's alleged role as a tax haven, forcing the Ricardo Martinelli administration to reluctantly sign a Tax Information Exchange Agreement with the Treasury Department.
The Colombia deal faces a more difficult battle. U.S. labor unions loudly oppose the pact because so many Colombian trade unionists and labor leaders have been murdered by paramilitary organizations. The number of murders has fallen in recent years, and though Colombia probably still has the highest murder rate of union members in the western hemisphere, it probably also has the highest rate of murders of priests, schoolchildren, and bus drivers. In short, despite significant government progress in cracking down on armed groups and reducing the homicide rate, Colombia remains an intensely violent place -- for labor leaders and many others. There's no way to solve that problem in the context of a trade negotiation.
By pushing these trade deals forward, the Obama administration is making a political bet. The White House knows the left has a long list of gripes with the president, and that pushing hard on trade deals will add fuel to the fire. But presidents benefit from the economic boosts provided by trade -- and Obama views the deals as a way to reach out to the independent and moderate voters he'll need in 2012.
Aware that Washington can't expect much more from these countries, the Obama administration will court reluctant Democratic lawmakers by extracting relatively minor concessions -- like a pledge from the Panamanian government to ratify a tax treaty or from the Colombian government to put more of those who kill union leaders on trial.
What will Democratic lawmakers want in return? They may well call on the White House to work much harder to enforce existing agreements before moving forward with new ones. That means moving forward with antidumping and countervailing duty cases against China -- both at the World Trade Organization and through domestic remedy.
With so little expected from a divided Congress, the White House will trumpet these deals as important accomplishments. But it will have been the U.S. political context that changed -- not the content of the deals.
Heather Berkman is an analyst in Eurasia Group's Latin America practice. Sean West is a U.S. political risk analyst with the firm.
NICHOLAS KAMM/AFP/Getty Images
By Ian Bremmer and David Gordon
Many investors wrongly assume that congressional gridlock will present few risks in 2011 and may even provide the predictability that investors look for. But a divided government can throw up unnecessary roadblocks to necessary policy changes. It can also push the White House to rely more heavily on executive powers, which are harder to predict and influence, to get things done. At a time of sluggish economic recovery and still high unemployment numbers, congressional gridlock is especially damaging.
U.S. gridlock poses three major risks this year:
First is the risk that there will be no movement on policies that investors and business leaders want to see. The most important of these is housing finance reform. Democrats and Republicans are not far apart on potential solutions, but the tough issues of winding down Fannie Mae and Freddie Mac and deciding what to do on affordable housing limits prospects for success. Failure to resolve the issue would prolong a key driver of the weak recovery, as would failure to take substantive action on the recommendations of President Obama's bipartisan deficit commission.
Second, in 2011, headline risk will be driven by both parties promoting priorities for which there is no path forward. The Republicans want to substantially revise the Dodd-Frank financial regulation bill, but they don't have the power to do it, even if they threaten to hold up funding for the Securities and Exchange Commission and the Commodity Futures Trading Commission. President Obama will resuscitate immigration reform despite the fact that the legislation will not pass the Republican-controlled House.
Third is the risk that a road-blocked White House takes heavier-handed administrative actions that are hard to predict or influence. As President Obama finds little room to legislate next year, he is likely to turn to the things he can accomplish on his own. Understanding how the president can use his powers will be critical to getting 2011 forecasts right.
On Monday, we'll take a closer look at Top Risk no. 8: Pakistan, which faces a near perfect storm of political, economic, and social crises.
Ian Bremmer is president of Eurasia Group. David Gordon is the firm's head of research.
NICHOLAS KAMM/AFP/Getty Images
Almost as soon as the midterm elections ended, President Barack Obama set off on a 10-day Asia swing. He's found friendly footing abroad so far: a receptive India looking for a general counterweight to China and a rapturous day in Indonesia, where Obama spent several formative years as a child. Next came a G20 summit hosted by South Korea, a strengthening U.S. ally, and then he'll hit Yokohama for an APEC summit and to commemorate the fiftieth anniversary of the U.S.-Japan alliance. But this happy-go-lucky itinerary doesn't even hint at an overarching foreign policy. Which got me thinking, is Obama ever going to come up with one?
Plenty of commercial and defense deals were delivered during the India visit, which shows how that relationship is improving. There were high hopes for a breakthrough in Seoul on the U.S.-Korea trade agreement, though that now seems unlikely (at least for now). The Japan visit should include broad agreement on Tokyo moving ahead (along with the United States) with a trans-Pacific partnership (TPP). But these are all small things.
What's the big picture?
I was thinking about this while listening to Undersecretary of State Bob Hormats around-the-world speech at the World Affairs Council in Washington last week. I couldn't help but compare it with a similar speech from Secretary of State Hillary Clinton a couple months before. They both talked about the necessity of focusing on issues of bilateral cooperation with China, on Japan as the lynchpin of U.S. policy in the region, on the necessity of promoting free trade, the determination to stay focused on fighting terrorism, and to continue to support democracies around the world. There was talk about not neglecting traditional U.S. allies in Europe. And then, at the end, both emphasized the need to maintain strong commitments with America's key allies in the Western hemisphere, Canada, and Mexico.
I also thought about a speech I had heard from then Secretary of State Colin Powell in 2005. How different were the speeches? How much had the basic precepts of U.S. foreign policy changed over the course of the last two administrations, and during the past five years? To be charitable, I'd say 2 percent. Maybe. Primarily, the difference is that Asia is now taking up a little more attention, Europe getting slightly shorter shrift. Yet in that same period of time, the world has clearly changed more than 2 percent.
I'd say the world has hit a decisive inflection point, even more profound than after the collapse of the Soviet Union. The fall of the wall produced a new global security balance, to be sure -- the United States emerged as the sole hegemon. But in terms of the global economic and policy order, the world basically moved from the G7 to the G7+1. And to be blunt, the +1 sped up the process of globalization, but it did not reflect a new world order. Once the financial crisis hit, by contrast, the G7+1 became the G20. And that, however unworkable, is indeed a completely new ordering principle. It means different types of countries and governments vying for influence, power, and preference on key issues of global governance-from trade to currency to the politics of austerity, on climate, and on conventional and cyber security.
Yet there's a stark disconnect between our drastically changed world and US foreign policymaking. Over the past few decades, foreign policy has been the preserve of presidents, successful or not (think about the Carter, Reagan, Clinton, and Bush "doctrines"). But two years and a Nobel Peace Prize into the Obama administration, there's no sign of an Obama doctrine. This U.S. president has handled foreign policy primarily by managing conflict as it arises (stepping in directly when absolutely required), and otherwise making small, incremental policy gains on fronts with momentum. Obama has shaped America's foreign policy apparatus accordingly, with a strong and relatively autonomous Secretary of State in Clinton, a series of senior, competent special envoys in the State Department to handle intractable, longstanding foreign concerns, and loyal but comparatively weak, non-strategic national security advisers (namely, Jim Jones and now Tom Donilon, who primarily serve to coordinate policy communication and untangle disputes, not to leverage the National Security Council as a mechanism for executive policymaking.
The biggest new idea that the Obama White House flirted with, albeit briefly, was the prospect of a G2 -- a notion that the new world order could be jointly managed by the United States and China. But that concept was essentially stillborn as the first efforts to realize it came to an embarrassing naught at the Copenhagen climate summit last December. Since then, U.S-.China relations have steadily deteriorated on most fronts. For the world at large, that means a growing disconnect on global architecture -- think Gondwanaland, inexorably splitting into continents while the old government still embraces a single state. But faster.
Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and Corporations?
JIM WATSON/AFP/Getty Images
The 11 people arrested and accused of spying for Russia have titillated the tabloids and reminded Cold War veterans of the good old days. But they won't do much damage to U.S.-Russian relations. In fact, the two governments are getting along much better at the moment. There are three major reasons for this, and all of them have to do with the view from the Kremlin.
recently ailing economy is now feeling much better. The financial crisis
inflicted more damage on Russia
than on most other emerging markets, in part because of a steep drop in oil
prices. When Obama first proposed a "reset" in U.S.-Russian relations, Moscow was hemorrhaging
reserves, and Kremlin officials hadn't arrived at any clear idea on what to do
about it. Prime Minister Vladimir Putin was traveling the country assuring local workers
that complacent oligarchs, not state officials, were to blame for the
volatility, and that their government would ensure that all would again be
well. President Dmitry Medvedev and his more western-oriented advisors were
beginning to look like convenient scapegoats should the public become restive
and Putin run out of businessmen to punish.
Things have changed. The economy has picked up thanks to some skillful economic management and a rise in oil prices out of the danger zone.
is feeling much better about its neighborhood. The Orange Revolution is now a
distant memory. In 2004, a presidential election in Ukraine lifted the Putin-endorsed
Viktor Yanukovych over Viktor Yushchenko. But Ukrainian nationalists and
several Western governments charged fraud, and the race was re-run. Yushchenko
won the do-over, fueling suspicion and hostility in Moscow. But his leadership earned little
public confidence during his five-year tenure, and Ukraine's latest election elevated
Yanukovych, who has now taken his country's bid to join NATO off the table for the foreseeable future.
Alex Wong/Getty Images
For the sixth time in less than four years, the U.N. Security Council has voted to impose new sanctions on Iran in connection with its nuclear program. Nothing new there. U.S. officials wanted stronger measures, but the Chinese in particular pushed back hard. Nothing new there either. The sanctions, which are still significantly tougher than earlier models and include tightened restrictions on arms sales, new headaches for Iranian shipping, and an assault on the finances of the Revolutionary Guard and about 40 Iranian companies, will not persuade Iran's government to renounce its nuclear ambitions. Nor is there anything new there.
The real news is that Turkey and Brazil voted no. That's a diplomatic coup for Tehran, which in five previous UNSC votes had won virtually no support. Qatar voted no on the first round of sanctions in July 2006. Indonesia abstained on the fourth round in March 2008. Support from regional heavyweights like Turkey and Brazil (and an abstention from Lebanon) give Iran something tangible to build on as its embattled government works to ease its isolation and to persuade other governments to resist U.S. and European calls for further sanctions outside the U.N. process.
President Ahmadinejad's recent dance card-a Russia/Turkey summit on security just before the sanctions vote and a trip to Beijing just after-illustrates the value of that strategy.
But there's a larger point here about the current state of international politics. It's getting harder for Washington to exercise international leadership. With 10 percent unemployment, an ambitious legislative agenda, an oil spill, and mid-term elections to worry about, President Obama has limited time and energy to invest in grand strategy on foreign policy. Managing geopolitical risk has also become much more complicated in a world that has shifted from a G7 model of international leadership to a G20 model that brings countries like Brazil and Turkey to the international bargaining table. And there is no emerging power willing and able to fill the gap left by new limits on American power and resources, because European powers, China, Russia and others who might lead on key transnational issues are likewise occupied with complex challenges at home.
In other words, no one is really steering this ship, and we can't expect it to sail smoothly through troubled waters.
Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and Corporations?
Mario Tama/Getty Images
Thus far, the Obama administration isn't making much of a showing. Undersecretary of State Bob Hormats did a strong job on yesterday's U.S.-China panel. But there's little coordination and not much of a message. If Secretary of State Clinton is too busy, why not send Vice President Biden? Combined with perfunctory foreign policy mention in the State of the Union, I'd suspect it's a feeling that anything but domestic issues isn't going to play well politically. That's not the strategy I'd be going with.
So for the American delegation, it's the U.S. private sector that's leading the charge here. And the omnipresent Barney Frank -- who yesterday told a private industry group to stop listening to what congress says, and look at actual policies ... do they have anything to complain about? Heads nod reasonably sagely.
Meanwhile, criticism of imminent political explosion grows as the nights wear on. Rogue economist/historian/documentarian Niall Ferguson, distinctly unshaven (proffered excuse--he forgot his razor on his flight from Delhi), wagered me $100 that the United States would have a new Secretary of Treasury by June 1st this year. Wager accepted. Howard Lutnick of Cantor Fitzgerald said he'd go $100 for Sept. 1. The bankers are always pushing it.
Ian Bremmer will be blogging from Davos this week sending reports and commentary from inside the World Economic Forum.
ERIC FEFERBERG / AFP / Getty Images
There's a lot of buzz about French President Sarkozy's speech last night, more than Obama's state of the union address. In part because we were sleeping, and in part because while Obama gives a better speech, Sarkozy is a more effective populist.
It's no particular trick to go after the bankers; it's almost sport this year, but folks don't really have their heart in it.
Not so the French president. He went after the bankers, the dollar, capitalism with righteous indignation. Obama goes through the motions, but he's still all about hope and the vision thing (after all, he may need to tack back in a few months). Sarkozy wants to channel all these angry people.
To be fair, Davos folks aren't all that angry. Something like two people applauded when Sarkozy said the world had to put morality back into capitalism. There were all sorts of reasons for that (lack of) reaction -- antipathy, profound skepticism, malaise, jetlag. But it wasn't a message that was going to rile the Davos folks. Having said that, unless you're Klaus Schwab (or, nowadays, Bill Clinton), most of these speeches are for the home team.
* * *
Just overhead the Davos quote of the hour. South African President Jacob Zuma: "We must respect the culture of others. Polygamy is my culture and i treat my wives completely equal." Call it a wives' tale. Incidentally, there's a very large South African delegation accompanying the South African president, but I've only seen men.
Ian Bremmer will be blogging from Davos this week sending reports and commentary from inside the World Economic Forum.
PIERRE VERDY/AFP/Getty Images
By Ian Bremmer and David Gordon
Now for the red
herrings, the places and problems where
we think there is less risk than meets the eye.
In Iraq, elections in March will spark violence as foreign militants try to undermine the transition to Iraqi national sovereignty. A U.S. troop withdrawal beginning right after the elections will invite more violence. We could see a Sunni election boycott. But compared to what we've seen before, and what might have happened, the overall story is remarkably positive. For the markets, Iraq is suddenly an opportunity. The institutions are becoming legitimate (even with the unresolved Kurdish issue), the army is starting to work, and most importantly, political leaders from all communities are beginning to recognize the value of Iraq's tremendous natural resource base from which all can benefit if they make the compromises to maintain stability in the country. For all their basic governance problems, there's very little chance of Iraq actually becoming a failed state at this point -- a meaningful risk even a year ago. It's not a place we're ready to vacation in, but we're bullish on Iraq.
Iraq is also moving in a positive geopolitical direction. Ties with Turkey have grown particularly quickly -- not just in the Kurdish region in the north, but in Baghdad. That's one of the few positive stories for Ankara this year. Arab states in the region are still hesitant to build ties with Iraq as they wait for clarity on its next government. Maliki hasn't been a popular figure with neighboring gulf Arabs, but they recognize that Iraq's economic consolidation won't wait for another four years, and they'll start making political overtures to Baghdad if Maliki's mandate is extended. And if the Iraqi prime minister isn't returned (which is certainly plausible), we'll see a stream of head of state visits to place relations with a new leader on a more solid footing. So whatever the electoral outcome in March, we're likely to see Iraq on a faster path to integration with regional political and economic infrastructure next year. Meanwhile, Iran's role in Iraq has quietly receded. Iran's controversial presidential election and subsequent state violence did nothing to improve Tehran's influence among Iraq's Shia population, where Iraqi nationalism has been steadily growing.
The headlines for Iraq next year will undoubtedly be the timing/delays/pace of the US troop withdrawal. But the real story is going to be a moderate government, growing geopolitical influence, and the most exciting new investment opportunities the region has seen in a decade.
AHMAD AL-RUBAYE/AFP/Getty Images
By Ian Bremmer and David Gordon
Asia is still a morass in 2010, but the U.S. troop surge has given Obama some
will produce bigger and bigger domestic headlines, but not much will actually
change until the United States reaches (or, more likely, is forced to reach) a
decision point. For now, that's 2011 at the earliest.
Having said that, there's a broader South Asia risk developing this year. The decision by Pakistan to go after terrorists domestically provides Islamic extremists with powerful reasons to expand asymmetric attacks on Pakistan's urban centers and to try to reignite Indian-Pakistani conflict. That's easy enough to do. Pakistan's extremist groups have increased in sophistication and consolidated their capacity, both by joining together and by forging closer links to al Qaeda in the region. In Pakistan, a significant proportion of the population continues to believe that terrorist attacks against the population originate in India. Pakistani networks operating in India haven't gotten much attention, however, and represent a weak link on the counterterrorist front.
This means that the likelihood of attacks in India and against Indian targets in the region is increasing, a particular worry given the nature of the potential targets (government facilities and densely populated urban areas). The Indian government is aware of the threat and has sought to improve its counterterrorist response -- including via increased ground-level coordination in Delhi and Mumbai with American and British counterterrorist organizations. But progress has been slow, and India's counterterrorism capacity remains underdeveloped, badly coordinated, and vulnerable.
Meanwhile, any new attacks would put serious pressure on India to take a tougher line on Pakistan. India's Congress Party leadership is loath to escalate military tensions with Pakistan. But following a quieter line after the Mumbai attacks in late 2008, it made strong demands on Pakistan to take decisive steps against extremist networks with ties to India. Successful large-scale attacks would undermine the Congress Party's credibility on the issue, leading the Indian government to take outsized steps in raising the military posture toward Pakistan. That, in turn, means Pakistan shifting its focus away from the tribal areas and, as importantly, changing its strategic view on taking on further operations -- a shift that would sit comfortably with much of Pakistan's senior military command, who still see rising India as Pakistan's main strategic challenge.
Indian-Pakistani relations, which had been quietly improving during the final years of the Musharraf regime, have already deteriorated somewhat under President Asif Ali Zardari, and it will prove harder for both sides to back away from any high-level military alert. Meanwhile, in both Delhi and Islamabad, Obama's pledge during his Afghan speech to begin U.S. troop withdrawals in 2011 is being read as a signal that the United States is minimizing its long-term commitment to the region. This feeds the already powerful views in both capitals that they should plan for continuation of their long-term strategic rivalry. Worst case, should there be a series of terror attacks in India, we could see Indian efforts to secure international sanctions against Pakistan -- and potentially surgical strikes by India against military training camps inside Pakistan. In short, for the first time in nearly a decade, there are serious factors pushing the Indian and Pakistani governments back toward confrontation.
Next stop: Eastern Europe.
Ian Bremmer is president of Eurasia Group, and David Gordon is the firm's head of research.
ASIF HASSAN/AFP/Getty Images
By Ian Bremmer and David Gordon
On balance, 2010 is looking like a tougher year for President
Obama than 2009 proved to be. Going into the new year, he has succeeded in
and climate change down the road, but pulling off real policy success on
either still looks unlikely. Unemployment remains high as the country pulls
weakly out of recession and mid-term elections appear on the horizon. While
Obama's popularity may take a beating, the coming year will see considerably
less actual domestic policy risk in the United States than in 2009. But the
exception is in the process of financial regulatory reform. That's likely to be
a tougher issue than people expect.
The reform package that passed the House of Representatives is comprehensive, though it will be moderated in the Senate, where for the first time under Obama a serious bipartisan effort is being undertaken. Either way, substantial change is afoot -- more far-reaching than anything we've seen since the Great Depression. The result will be a structure put in place to monitor and address systemic risk, largely self-financed from the financial community, as well as changes on many other issues, ranging from derivatives regulation to the proper role of the Federal Reserve Bank.
Unlike cap and trade or immigration reform, there's a very high likelihood that comprehensive financial regulatory reform will pass. But with mid-term elections approaching, it's likely to turn populist and lose a considerable amount of its bipartisan flavor. Congress as a whole is likely to imitate what's already come to pass in the United Kingdom, where an unpopular Gordon Brown government is going after the financial sector to try to lift its poll numbers from the morass. Congress doesn't want to be tarred by Treasury Secretary Tim Geithner, bailouts, or billionaire bankers. The best way to avoid that fate is to include some visibly populist elements in the new legislation, especially on consumer protection and executive compensation. Members of Congress will look to score points by taking aim at the Fed, but actual policy change there is a step too far -- the administration will likely ensure that nothing in the ultimate bill will undermine the Fed's political independence.
But while Obama's economic team will be wary of populist measures, Democrats in Congress and the president's own political advisors will see such measures as a necessary piece of "mobilizing the base" before mid-term elections. Big banks are an easy target, especially in the context of high profits and a strong recovery for the financial markets, but a weak overall economic rebound. The legislation should pass by late spring.
Regulators will be given significant new discretionary powers, including some authority for breaking up institutions deemed a systemic risk. A key risk is that, depending on the political environment, the newly empowered regulators could use their capabilities to issue strict rulings that go well beyond what is specifically included in the legislation. Regulators will also likely issue proposals for revising capital requirements upward next year.
Another key risk to watch will be efforts to impose further fees
and taxes on the financial system. With the U.S. government running record
deficits in the wake of the financial crisis, trying to recoup these costs from
the financial services industry will be seen as a relatively low-cost political
option. Executive compensation is one likely possibility; taxes on carried
interest for hedge funds are another.
Both the Americans and Europeans are aware of the risk of driving the financial industry into the ground with too much (or too drastic) regulation or taxation. But as reform becomes an election-year domestic battleground, the need to serve political interests will be increasingly at odds with the need to create an efficient framework for regulatory reform.
Next up: Japan.
Ian Bremmer is president of Eurasia Group, and David Gordon is the firm's head of research.
JEWEL SAMAD/AFP/Getty Images
By Ian Bremmer and David Gordon
By far the biggest purely geopolitical risk in 2010 comes from Iran. Its
government now faces growing pressure on three fronts. At home, the regime has
had a tough time since last June's presidential election; hardliners had
initially consolidated, but are now under intensifying pressure as domestic
protests continue. Regionally, Tehran has lost
considerable influence, with elections in Lebanon
turning against Hizbullah, rising Iraqi nationalism making it harder for Tehran to exert influence upon their principal historic
competitors, and Iran's
financial outpost in Dubai put at risk by the
growing influence of Abu Dhabi.
Globally, Iran faces a considerably tougher sanctions regime over its nuclear program, a push spearheaded by the United States, Europe, and Japan, with even Russia and China unhappy over Tehran's aggressive rhetoric. A Western push for negotiations will continue, but divisive local politics and insufficient leadership coordination make it very unlikely that Iran's leadership could reach a negotiated settlement even if it wanted one. And it doesn't. Even under considerable domestic pressure, the hardliners in charge of the regime will continue to try to buy time to achieve their nuclear ambitions.
That's why the government is likely to overreact to sanctions when they hit. 2010 carries the highest risk to date of Iranian provocation in the region, in the form of harassment of shipping in and around the Strait of Hormuz, support for radical organizations in neighboring countries, and instigation of trouble for Iraq and other neighbors in demonstrations of muscle. The Iranian regime looks increasingly like a cornered, wounded animal. In 2010, it's likely to act like one.
Israeli military strikes have actually become less likely -- certainly for the first half of the year as sanctions are put in place. Faced with strong opposition from the Obama administration (even as it uses the threat of strikes to gain support for sanctions and to pressure Tehran), mounting intelligence challenges on the location of key Iranian targets, and recognition of the military limitations of Israeli strikes, some Israeli government officials now privately are beginning to discuss how to cope with an eventual nuclear Iran as much as the nature of its "existential threat." Still, the perceived Israeli national security issue is enormous. Looking toward the final months of the year, the Israelis remain an important question mark.
Over time, if the regime in Tehran remains in power, the Iran danger will become more diffuse and start to look more like North Korea. It's clearly a significant long-term negative for global stability. Though for Iran itself, by 2011, we'll probably see a bunch of countries start thinking about how they'd like to start investing there, even as the Western powers seek to prolong sanctions.
Next up: Fiscal issues in Europe
Ian Bremmer is president of Eurasia Group, and David Gordon's is the firm's head of research.
AMIR SADEGHI/AFP/Getty Images
By Jun Okumura and Ross Schaap
The conventional wisdom in U.S.-Japanese relations is that things were largely fine until the Democratic Party of Japan (DPJ) upset the apple cart by winning control of Japan's government. Security policy observers appear to accept the idea that the DPJ has strained the close relationship that Japan's former ruling party, the Liberal Democratic Party (LDP) had developed with the United States over the past several decades. A show of bilateral solidarity during President Obama's one-night stand in Tokyo last week has done little to change these opinions. The conventional wisdom has it wrong.
The source of this mistaken belief centers on the DPJ's electoral promise to review the 2006 U.S.-Japanese agreement that would move the bulk of a US Marine base out of the center of Ginowan, a city of nearly 100,000 in Okinawa, to Guam. The remainder -- a large contingency of helicopters-would relocate to a more remote location near Nago, also within Okinawa. The DPJ's indecision on whether to move ahead with construction of a new airfield above a coral reef near Nago seems to have thrown a wrench in the works, but the real difference between the DPJ and the LDP is simply in the visibility of its reluctance to give Washington what it wants.
The disconnect here is in overestimation of cooperation from the LDP. The long history of this redeployment headache gets left out of most accounts of the current controversy. The initial U.S. force redeployment deal was agreed in 1996, and the new airfield and redeployment were supposed to be completed by 2004. Instead, after seven years without progress, both sides went back to the bargaining table, a process that eventually yielded the 2006 agreement. Yet, more than three years of LDP rule later, authorization of construction at the airfield still falls to the new DPJ government. In other words, the LDP agreed to give the United States what it wanted ... and then did virtually nothing to make it happen.
So what has changed? The DPJ, not to mention its coalition partner the Social Democratic Party of Japan, is much more openly antagonistic to the 2006 agreement. The visibility of that reluctance has moved the US to respond publicly on an issue that slid by without action on a much lower profile during the Bush years. Unusually blunt public statements from US Defense Secretary Robert Gates, insisting on quick implementation of the 2006 agreement, generated headlines -- and much chatter on bilateral strains. Though the Obama administration appears to have taken a step back, agreeing to set up a joint working group on the Ginowan issue, it continues to reject the one alternative that the Japanese Foreign Minister has been pursuing on his own -- moving the Marine helicopters to Kadena Air Base, an idea which the locals also reject.
That the United States started from a position of intransigence on renegotiation isn't remarkable. But this doesn't mean that's where the issue will end. The U.S. side has waited 13 years; it has no practical reasons to reject a technically and politically viable alternative even if it means a few more years of delay. In fact, further delay is the next likely course of action/inaction. The two sides have been stuck on the status quo conundrum for 13 years for reasons we can only guess at, but likely include operational requirements that leave little or no room for a non-Okinawa solution, while no other viable Okinawa alternative is in sight.
That said, the DPJ's political links to the anti-U.S. military presence in Okinawa, the SDP presence in the coalition, and the unfortunate political calendar, including a mayoral election in January in Nago and an Upper House election in the summer of 2010, are making it exceedingly difficult for the DPJ leadership to make up its mind to accept the lesser evil and give the go-ahead to construction work at Nago.
All this dictates the continuation of the status quo. But then, such a turn of events -- or the lack of one -- should not come as a surprise. In reality, history shows that for U.S.-Japanese relations, there's much less difference between the DPJ and LDP than meets the eye -- in principle or in practice.
Jun Okumura is a senior adviser to Eurasia Group and Ross Schaap is Director of Comparative Analytics.
ISSEI KATO/AFP/Getty Images
By Ian Bremmer
President Obama embarks today on a tour of East Asia, a region central to U.S. geopolitical interests and its economic recovery. The primary goal is "strategic reassurance," a term Deputy Secretary of State Jim Steinberg has used to describe U.S. relations with China.
On Friday, he'll reassure Japan's brand new Prime Minister Yukio Hatoyama that, despite well-publicized recent frictions in U.S.-Japanese relations and a broader U.S. engagement with China, his administration considers ties with Japan a cornerstone of U.S. foreign policy. And he'll seek some reassurance that the new DPJ government isn't about to revisit key assumptions in the relationship. Hatoyama will likely take the opportunity to "clarify" his view on the importance of the security partnership. Throw in a highly publicized Obama speech on Saturday, and we can expect an easing of suspicion and a lot of warm smiles, especially since the two sides now appear to have a deal on a joint-commission to resolve the Okinawa troops and base relocation issues.
On Sunday, Obama will be in Singapore, where he'll reassure Prime Minister Lee Hsien Loong that the US isn't planning on reducing its Asian presence anytime soon. He'll then join the festivities at the Asia-Pacific Economic Cooperation summit. During the meetings, there will be early discussion of an "Asian Economic Community" and rumors that Obama is involved in discussion with ASEAN leaders on a U.S.-ASEAN free trade agreement -- though he'll more likely simply be offering reassurance that his government hasn't set its trade agenda on indefinite hold. The meeting will end with public pledges from all sides to reject protectionism, the sort of empty reassurances we've seen in recent months at G20 meetings in Washington and London. Much of the media focus will be on the silk shirts and blouses inspired by Singapore's Peranakan culture that the leaders will be wearing.
More interesting are the side meetings that we'll hear much less about. Obama is scheduled to sit down with Myanmar's prime minister to reassure him that the United States is willing to engage the country's military junta if there's any prospect that engagement might yield results. Back home, Obama will reassure critics in Washington that he won't move to lift sanctions until Myanmar's generals offer something of substance. He's also scheduled to meet with Indonesian President Yudhoyono to assure him that the U.S. views the emerging regional player as a valuable local partner, and with Russia's President Medvedev to assure him that his administration is serious about improving strained relations with Moscow.
On Monday, Obama
heads for Shanghai and Beijing for a three-day visit that includes some
sightseeing and a Q&A with Chinese students around meetings with President
Hu Jintao and Premier Wen Jiabao. The talking points for these sessions are
nearly as ambitious as what you'd expect from one of those G20 meetings. There
will be discussion of the recently contentious U.S.-Chinese trade relationship,
energy, human rights, stability in Pakistan and Afghanistan, and the nuclear
programs in North Korea and Iran. Obama can reassure China's leaders that he
seeks mutually profitable engagement with the one subject he's NOT likely to
bring up: The value of China's currency. The Chinese wouldn't welcome the
discussion, and Obama has no interest in inviting the Chinese to comment on the
state of the U.S. economy and Washington's role in it.
If there's any tangible progress from Obama's time in China, it will be on climate change/green energy issues. There may well be an agreement to expand joint development and investment in renewable energy technology. It won't be a true "breakthrough," but given the low likelihood that anything especially important comes out of climate change meetings in Copenhagen next month, the Obama team will use any sign of modest progress to reassure skeptics of his commitment on the issue and to tout the trip as a success.
On the way home, Obama will stop off in Seoul to tell South Korean President Lee Myung-bak that KORUS, the U.S.-South Korean free trade agreement, isn't dead. He'll also reassure Lee that, though the US won't reduce troop levels on the peninsula, Washington can help make their stay a little easier for South Korea's government to manage.
Ian Bremmer is president of Eurasia Group.
JACQUES WITT/AFP/Getty Images
By Ian Bremmer
Last week was perhaps the most surreal one of Barack Obama's presidency so far. In the midst of a massive internal debate about what to do with a failing war in Afghanistan, he won the Nobel Peace Prize -- a mixed blessing for several reasons.
Domestically, the Nobel creates a problem because it focuses political attention on foreign policy, which is not Obama's strength. To date, the U.S. president hasn't secured any meaningful foreign policy accomplishments. More importantly, foreign policy isn't the part of his presidency that Obama wants to prioritize. Of course, the prize won't damage Obama's approval ratings at home. His initial response to winning the Nobel was suitably modest and low key, and he'll surely dominate airwaves with a rousing speech when he makes his formal acceptance. However broad the criticism, it's hard to blame the president for the fact that the Norwegians apparently really like him. The challenge will arise in December when Obama flies to Oslo. He'll have to talk up his foreign policy agenda, taking critical headline space away from healthcare reform and the U.S. economy.
Internationally, the prize is a bigger boon for the U.S. president. It burnishes Obama's multilateralism, and shines a light on the enthusiasm about his presidency that's been evinced in much of the world -- particularly compared to his predecessor. Most of the constraints on Obama's foreign policy are structural, given the international indifference to global leadership in general. But at the margins, playing to more ebullient crowds around the world should give Obama a bit more policy flexibility with international interlocutors.
To date, Obama's foreign policy has been largely reactive. He hasn't had the time or the inclination to lay out a sweeping worldview -- a more ideological and strategic approach to foreign policy that would be clearly identified as his own. Instead, his administration's foreign policy has been marked by professionalization, with most of the policy formation done at the bureaucratic level. The Nobel acceptance speech calls for more than that, and it's conceivable that we'll see the outlines of an Obama doctrine in it. It's hard to know what gets top priority in such a speech, but clearly democratic values would play a greater role, which so far we've only seen in non-priority areas (such as in Obama's trip to Ghana, which snubbed Nigeria). But if that's true, it could create conflict. A U.S. grand strategy driven by values is less likely to prove as compatible with the "pragmatic growth" approach of Beijing or authoritarian Western allies in the Middle East.
Ian Bremmer is the president of Eurasia Group.
Win McNamee/Getty Images
By Willis Sparks and Geoff Porter
As the world focuses on the diplomatic tug of war over Iran's nuclear program, Israel lives with the worrying hum of all those centrifuges spinning just a thousand miles to the east. Yet, Benjamin Netanyahu's government knows that if Israel launches airstrikes, there's a limit to how much damage can be done and how long Iran's progress can be delayed. It therefore has to persuade the Obama administration -- and anyone else who might help slow Iran's march -- to see the risks from Iran as Israel sees them.
It helped that Iran recently revealed the existence of an undeclared nuclear site near the city of Qom. At the very least, that revelation of Iranian dishonesty might have made it a little more difficult for Beijing and Moscow to justify continued resistance to sanctions. Yet, Israel remained quiet. Suddenly it appeared Netanyahu, Defense Minister Ehud Barak, and National Security Advisor Uzi Arad might have a wind at their backs. Though they'd like the wind to blow a bit more steadily and to get them to their destination quicker, they can't risk the rhetoric that might label them as blowhards.
But now there's talk of a diplomatic breakthrough. Following talks in Geneva with negotiators from the United States, China, Russia, Britain, France, and Germany, Iran has signed on to a tentative "interim agreement" to accept a U.S.-Russian proposal (that has been on the table for more than a year) to ship much of its low enriched uranium outside the country for reprocessing. Ensuring that this uranium is processed outside the country would help verify that it's used for civilian, not military, purposes. And then over the weekend, Iran ostensibly agreed to allow IAEA inspectors into the Qom facility on Oct. 25.
This leaves the Israeli government in a bind. First, because the details have yet to be worked out and Iran could renounce a completed agreement at any time, Israel can't take much comfort from it. Second, the fact that others treat it as a potential diplomatic breakthrough makes it even less likely than before that Israel could justify military strikes or that the US can persuade Russia and (especially) China to support sanctions tough enough to make any difference in Iran's strategic planning.
Israel has no faith that the potential for diplomatic détente between Iran and the US and EU is anything more than an Iranian stalling tactic, buying Tehran more time to speed toward the nuclear finish line. Likewise, Israel doesn't believe that sanctions -- no matter how tough they are -- will back Iran down. For Israel, diplomacy and sanctions are merely different forms of delay, but Netanyahu has little choice but to wait them out.
He'll be waiting for some time. First, diplomacy has to run its course. Following the tentative agreement in Geneva and the announcement that Iran will allow inspection of its Qom facility, the diplomatic track seems to be gaining momentum. Once that momentum slows and stalemate resumes, sanctions will be debated and some of them will be implemented. That won't happen before spring 2010 at the earliest.
In the meantime, Israel has little choice but to sit on its hands. Netanyahu knows that strikes on Iran's nuclear sites during delicate negotiations would inflict much more damage to Israel's international reputation -- and its relations with Washington, in particular -- than to Iran's nuclear program. Nothing brings this home more clearly than the U.N. Human Rights Council's report investigating Israel's military campaign in the Gaza Strip in 2008-09, which came very close to launching a legal process within the UN that could have produced a referral to the U.N. Security Council -- and possibly a war crimes tribunal. That's not going to happen, but it underscored already shifting international attitudes toward Israel.
Former Defense Minister Shaul Mofaz has said 2010 would be the year of sanctions. His government was hoping for a year of action. Instead, Israel will wait.
Willis Sparks is Global Macro Analyst and Geoff Porter is Middle East & Africa Director at Eurasia Group.
Alex Wong/Getty Images
By Eurasia Group analyst Alexander Kliment
The Obama administration's decision last Thursday to radically rework Washington's missile defense plans may have had more to do with reassuring Tel Aviv than placating Moscow. But when it comes to resetting U.S.-Russia ties, the move placed the ball squarely in the Kremlin's court.
One of the key goals of the Obama administration's "reset" with Russia has been to enlist Russian support for more robust multilateral sanctions against Iran. In recent years, the Bush administration's missile defense plan emerged as a key irritant in the U.S.-Russia relationship. Russian elites saw it as further evidence of a sinister Western plot of encirclement and feared, despite U.S. assurances, that the missile defense system could eventually be used against Russia's nuclear arsenal. In recent months, top Russian officials, including both Putin and Medvedev, have called on Washington to augment the reset rhetoric with concrete action. With its announcement on missile defense this month, Washington did just that.
In Moscow, the news was appreciated -- though perhaps with a somewhat inflated sense of the Russian dimension in Obama's thinking on the question -- but Russia's top generals are already screaming again about the unacceptability of any missile defense plan that does not explicitly include Russian participation. On Iran, Russia will likely show support during the engagement phase of U.S. and EU diplomacy with the Islamic Republic, but any Kremlin backing for harsher sanctions would reflect a significant, and very unlikely, change of heart. Russian Foreign Minister Sergey Lavrov has repeatedly said, flatly, that Russia opposes harsher sanctions against Iran.
Russia is unlikely to respond to the missile defense shift with any grand gesture as part of a "reset." The problem goes beyond missile defense -- Russia and the United States have fundamentally different views of what a reset means. For Washington, improved ties with Moscow are a foundation on which each country can work to accommodate the other's goal. In particular, Washington would like to see some flexibility in Moscow's position on key disputed issues: NATO expansion, Eurasian energy politics, and, crucially, Iran.
But the Russian elite, for its part, is divided. While some members of the liberal camp view Washington's overtures with cautious optimism, Putin and other important figures in the defense and military establishments see U.S. acceptance of Russia's position on these issues as a prerequisite for "hitting the reset button." In other words, Moscow thinks that a reset means Washington will reverse or change policies that the Kremlin considers antagonistic to Russia's interests. At the same time, Putin has made it clear that any moves by the United States to reverse perceived slights against Russia should not carry an expectation of reciprocity. The danger, then, is that Russia will simply view Washington's decision on missile defense as a welcome step, but not one that requires any similar moves by Russia. If Russia chooses to respond this way, any chance of a lasting reset will grind to a swift halt.
When Secretary of State Hillary Clinton visited Moscow earlier this year to begin work on a reset in relations, the occasion was largely overshadowed by the translation gaffe in which the "reset" button she presented to Lavrov actually carried the Russian word for "overload." But the risk that Washington now faces in its Russia policy is not that the Kremlin will be "overloaded," but that its actions will, in fact, be underwhelming.
by Ian Bremmer
In Afghanistan, even the good news isn't so good. The country managed to hold a presidential election in August, but there aren't many people inside or outside the country who considered it free and fair. It looks increasingly like Hamid Karzai will win without a second round, but his legitimacy will remain under a very large, very dark cloud. He'll face open revolt from Tajiks in the north, who overwhelmingly opposed his candidacy. And as evidenced by the significant recent expansion of terrorist bombings in Afghanistan's major cities and the assassination last week of the country's second-ranking intelligence officer, it will even become harder to secure Kabul. No one should have much confidence that a second round would do much to restore Karzai's credibility.
In addition, military operations against the Taliban inside Pakistan achieved some actual success this summer, but that has probably pushed some militants across the border into Afghanistan to harass coalition forces there. U.S. casualties have increased, though that's not surprising given the more aggressive operations of larger numbers of US troops. But last week's U.S. bombing on a Taliban target, which killed dozens of civilians, is just the latest in a series of setbacks for coalition military operations.
More worrisome: It's becoming increasingly clear that Afghanistan won't be able to stand on its own anytime soon. U.S. military officials report that the training of Afghan soldiers is well behind schedule. For the next two or three years, with coalition forces at their present levels, Afghan troops won't be nearly strong enough to maintain even the current level of security, let alone make any meaningful contribution to an aggressive counterinsurgency effort.
Afghanistan, more locals than ever
want the US
out, whatever the cost. There's also dwindling support for the war in the United
States, as the American media increasingly turns its
attention from an economy beginning to improve toward the growing death toll in
Within the Obama foreign-policy team, there looks to be a growing divergence of opinion on what to do next. There appears to be an internal consensus that the current strategy isn't working. But senior officials appear more divided on whether to "go long" or "go home." In the go long group, those who want more troops and more resources because "failure isn't an option," we see Secretary Clinton, envoy Richard Holbrooke, most of the generals on the ground, and most Republicans in Congress. In the go home camp, those who want to pull troops out before things get much worse, are Vice President Biden, most of Obama's political team, and a growing number of senior Democrats. Even Defense Secretary Robert Gates appears to have grown much more skeptical.
In short, Afghanistan is becoming Obama's first lasting foreign-policy crisis. A major terrorist attack somewhere in the world carried out by militants trained in Afghanistan could shift international public opinion toward greater engagement. Short of that, U.S. public opposition to the war will likely grow steadily over the coming year, bringing the issue to a head just in time for U.S. midterm elections and driving a wedge between members of the president's own party.
MANPREET ROMANA/AFP/Getty Images
By Eurasia Group analyst Philippe de Pontet
Last week's standoff between a handful of pirates and the U.S. Fifth Fleet had threatened to become a full-blown foreign-policy crisis before the dramatic rescue of Captain Richard Phillips gave President Obama a clear political win. Pirates are now less likely to target U.S. ships, but the White House is well aware that this episode won't do much to deter piracy elsewhere in the Gulf of Aden and Indian Ocean.
Just hours after Phillips's rescue, Somalia made headlines again. On Monday, Islamist insurgents in Mogadishu launched a mortar attack on a plane carrying Congressman Donald Payne (D-NJ), underscoring the multifaceted threats posed by state failure in that country. Piracy is one symptom of the problem; Islamic extremism is another. The attack by al-Shabaab fighters within 24 hours of the end of the piracy incident ensures that Somalia will remain on the Obama administration's front-burner -- and that the White House will face growing pressure to "get tough" on militants and pirates who use the failed state as a safe haven.
So, flush with its success and aware that the larger problem has not been solved, will the Obama administration up the ante by targeting pirates onshore in Somalia?
Probably not. It will likely focus instead on near-term efforts to bolster multilateral naval patrols (with more aggressive tactics) in the waters where pirates have attacked in the recent past, because the probable costs of onshore strikes would outweigh the likely benefits.
First, a direct, onshore U.S. strike on pirates would have only a limited impact on the broader piracy problem. Second, it could undermine efforts to contain Islamist militants by inviting them to tap into wounded Somali national pride, one of a very few forces that can unite divided clans. (Somali nationalism provided the Islamist movement with early legitimacy in the struggle to expel U.S.-backed Ethiopian troops from the country.) Third, it would weaken transitional President (and moderate Islamist) Sheikh Sharif Ahmed, a potential force for stability in a country that badly needs it.
African and Gulf
governments and U.S. counter-terrorism officials are well aware that strikes
could drive extremism in the region and help militants recruit local youth. But
there's another risk: Pirates in Puntland, a region in Somalia's northeast
where most of the pirates are based, have already threatened to kill some of
the 270 hostages they now hold-hostages from countries all over the world, some
of them key U.S. allies.
Targeted attacks remain under consideration. The UN Security Council approved a resolution late last year that would allow targeted military action against pirates on Somali territory. But for now, the Obama administration will likely opt for a lower-risk approach that keeps the focus offshore, while reviewing policy options and deepening intelligence on Somalia.
The pirates have now attacked enough private and commercial vessels to create a sense of vulnerability and frustration within many governments around the world. Washington will try to use this opportunity to ramp up multilateral patrolling operations in the Gulf of Aden, while giving U.S. warships greater latitude to launch offensive action against pirates at sea-including on identified "mother ships."
This policy carries risks of its own, including the creeping militarization of the Gulf of Aden and the waters of the Indian Ocean further from Somalia's shores. But this option will offer both security and political benefits while limiting the risk that another U.S. administration hits the rocks that lie just beneath Somalia's troubled waters.
STEPHANE DE SAKUTIN/AFP/Getty Images
by Ian Bremmer
vulnerabilities of emerging markets to social upheaval and state failure as a
result of the financial crisis is probably the most significant risk the world
will face this year. That's why last week's G20 decision to
significantly expand funding for the International Monetary Fund was so
important -- and part of why the meeting itself was successful. This success is
especially obvious once we accept the limits of what this forum can really
accomplish. An urgent call for help was answered, but there was never any real
chance that leaders would use this meeting to remake the international
financial and economic order in a way that genuinely reflects the shift of
recent years in the global balance of political and economic power.
But the seeds have been planted for longer-term problems. Chinese President Hu Jintao said very little during the event but was given an enormous level of respect by the other G20 participants and the media. This reflects the reality that many are now ready to accept China as a superpower. For the near term, this change will prove useful, because China has the money to help fund existing international financial institutions shepherd vulnerable countries through their domestic economic problems. But longer-term, it may become a problem, because China isn't fully ready to play this role and because China's leaders have fundamental disagreements with the leaders of other powerful states on how the global economic system should be governed.
Looking ahead, the broader promise of a G20 remaking the international order for long-term sustainability remains unrealistic. Reimagining the architecture of any multinational effort -- not just of financial institutions but of the nuclear non-proliferation regime, the composition of the United Nations Security Council, efforts to stop the international flow of illegal drugs, agreement on a single definition of "terrorism," a successor to the Kyoto protocols that will have a meaningful impact on climate change, and other difficult issues. That's just not possible in today's geopolitical environment.
Jeff J Mitchell/Getty Images
By Eurasia Group analysts Geoff Porter and Willis Sparks
The new Israeli government has wasted no time in confirming its hawkish reputation on both Iran's nuclear program and the Israeli-Palestinian conflict. Blunt comments from Prime Minister Benjamin Netanyahu and Foreign Minister Avigdor Lieberman signal a risky road ahead -- and an increasingly uneasy relationship between the U.S. and Israeli governments.
Netanyahu entered office with a warning: If the U.S. administration does not lead the charge in halting Iran's nuclear ambitions, Israel may decide that it has no choice but to attack Iran's nuclear facilities. And his new foreign minister, Avigdor Lieberman, leader of the hard-line Yisrael Beiteinu party, has argued that Israel is not bound to abide by understandings reached between the previous Israeli government and the Palestinian Authority. He added that Israelis should perhaps prepare for war rather than peace.
Whether he is truly prepared to give the order to target Iran's nuclear facilities any time soon, Netanyahu's comments on Iran represent an effort to influence the Obama administration's approach to Iran, one that has begun with a call from Washington for a more constructive relationship with Tehran. The new Israeli prime minister wants to ensure that the Obama administration keeps its pledges to block Iran's nuclear program at the top of its agenda -- that it understands Israel can't afford to allow negotiations with Iran to drag on indefinitely. Israel will deliver that message again in June with a civil defense exercise that simulates multiple missile strikes on Israeli territory. Israel will also probably try to weaken Iran's regional proxies, Hamas and Hezbollah -- particularly if a U.S.-led diplomatic track makes airstrikes on Iran less feasible.
The next three months will represent a period of heightened risk ahead of Iran's presidential elections on June 12. In addition to the Israeli warnings, Iranian President Mahmoud Ahmadinejad could face a tough challenge from Mir Hossein Mousavi, a popular former prime minister who has criticized Ahmadinejad's mismanagement of an economy plagued by high inflation and gasoline rationing. Aggressive Israeli rhetoric could provide Ahmadinejad an opportunity to provoke an international crisis to rally Iranians to his government -- and to boost his position in the polls.
If Netanyahu's comments were predictable, Lieberman's were much stronger than expected. Though consistent with his previous positions on the Palestinians, Lieberman's statements offered a sharp contrast with Netanyahu's recent pledge that his government would work to ensure continuity on the Palestinian issue from the previous government to his own.
It's no surprise that the choice of Avigdor Lieberman will add an element of friction in US-Israeli relations, but his assertion that Israel is not bound by commitments made during the U.S.-brokered Annapolis negotiations will cause some serious heartburn in Washington. The Obama administration believes that a visible commitment to resolve the Israeli-Palestinian conflict will restore U.S. credibility across the Middle East and help it advance its diplomatic agenda in other countries. Lieberman's comments will make the Obama administration's goal that much harder to achieve for as long as this new Israeli government remains in power.
By Ian Bremmer
In the Pakistani city of Lahore on Tuesday, a dozen gunmen attacked a bus carrying members of Sri Lanka's cricket team, killing six policemen and a driver and injuring several of the athletes. Press accounts of the assault suggest a level of coordination similar to that used by the Pakistan-based militants who killed 173 people at several sites in Mumbai in September. Across Pakistan, suicide bombers killed two people in 2005, six in 2006, 56 in 2007, and 61 in 2008. Suicide attackers killed more people in Pakistan last year than in either Iraq or Afghanistan.
There are two important reasons why the threat of global terrorism is growing. The first is long-term and structural. The second is more directly tied to the global financial crisis. Both have everything to do with what's happening in Pakistan.
First, a report released in December from the U.S. Commission on the Prevention of Weapons of Mass Destruction, Proliferation, and Terrorism hints at both sets of problems. The report notes an increasing supply of nuclear technology and material around the world and warns that "without greater urgency and decisive action by the world community, it is more likely than not that a weapon of mass destruction will be used in a terrorist attack somewhere in the world by the end of 2013."
Destructive (and potentially destructive) technologies are now more accessible than at any time in history for small groups and even individuals. This will dramatically increase the baseline threat of disruptive violence from non-state actors over time. It's not just biological and nuclear material. GPS tracking devices help pirates operating off Somalia's coast venture further from shore and undertake increasingly ambitious attacks on private and commercial vessels.
Second, it's unlikely that we'll see the "greater urgency and decisive action by the world community" called for in the report. For the moment, political leaders around the world are too busy wrestling with the effects of the global financial crisis on their domestic economies (and their political standing) to coordinate action against such a diffuse threat.
But there's another reason why the financial crisis heightens the risk of global terrorism. Militants thrive in places where no one is fully in charge. The global recession threatens to create more such places.
No matter how cohesive and determined a terrorist organization, it needs a supportive environment in which to flourish. That means a location that provides a steady stream of funds and recruits and the support (or at least acceptance) of the local population. Much of the counter-terrorist success we've seen in Iraq's al Anbar province over the past two years is a direct result of an increased willingness of local Iraqis to help the Iraqi army and US troops oust the militants operating there. In part, that's because the area's tribal leaders have their own incentives (including payment in cash and weaponry) for cooperating with occupation forces. But it's also because foreign militants have alienated the locals.
The security deterioration of the past year in Pakistan and Afghanistan reflects exactly the opposite phenomenon. In the region along both sides of their shared border, local tribal leaders have yet to express much interest in helping Pakistani and NATO soldiers target local or foreign militants. For those with the power to either protect or betray the senior al-Qaeda leaders believed to be hiding in the region, NATO and Pakistani authorities have yet to find either sweet enough carrots or sharp enough sticks to shift allegiances.
The slowdown threatens to slow the progress of a number of developing countries. Most states don't provide ground as fertile for militancy as places like Afghanistan, Somalia, and Yemen. But as more people lose their jobs, their homes, and opportunities for prosperity -- in emerging market countries or even within minority communities inside developed states -- it becomes easier for local militants to find volunteers.
This is why the growing risk of attack from suicide bombers and well-trained gunmen in Pakistan creates risks that extend beyond South Asia. This is a country that is home to lawless regions where local and international militants thrive, nuclear weapons and material, a history of nuclear smuggling, a cash-starved government, and a deteriorating economy. Pakistan is far from the only country in which terrorism threatens to spill across borders. But there's a reason why the security threats flowing back and forth across the Afghan-Pakistani border rank so highly on Eurasia Group's list of top political risks for 2009 -- and why they remain near the top of the Obama administration's security agenda.
By Eurasia Group analysts Hani Sabra and Willis Sparks
Egyptian opposition leader Ayman Nour was bold enough to challenge Hosni Mubarak in Egypt's first contested presidential election in September 2005. He lost badly, of course, and three months later he was sentenced to five years in jail on fraud charges. But on Wednesday, the pro-democracy activist was released.
What does this tell us about Egypt and its relations with the United States?
First, the decision to release him was certainly made by Mubarak himself. His relationship with the Bush White House had soured by the time Nour was imprisoned in 2005, and Mubarak's refusal to give in to repeated administration calls for Nour's release was one of the factors that brought his regular visits to Washington to an abrupt end. Egypt's president wants to return to Washington -- and to build positive working relations with the Obama administration. By freeing Nour, Mubarak gives Obama and the U.S. Congress a good reason to take a more positive view of aid to Egypt and relations with Mubarak's government. It also strips Cairo's critics in Washington of a key talking point.
More importantly, Mubarak wants Obama to recognize that he will not play the role of America's obedient servant. When Washington applies pressure, Egypt can and will say no. Mubarak is 80 years old. He has held power for nearly three decades, and he wants some respect. The release comes on Mubarak's timetable, not Washington's.
The release of Nour also reveals that at least one Arab autocrat is no longer worried about the post-9/11 drive for democratization in the Middle East. The Bush administration's push for elections did not stabilize Iraq, and it certainly didn't produce the hoped-for outcome in the Palestinian territories. In Egypt, members of the Muslim Brotherhood, a banned Islamist movement, won more than 20 percent of the vote in parliamentary elections by running as independents. Mubarak has calculated that the Obama administration will not demand that Egypt quickly undertake substantive democratic reforms. Last weekend's bombing in Cairo, which appear to have targeted foreign tourists, reinforces that assumption.
He also reckons that the Obama team is serious about trying to revitalize the Israeli-Palestinian peace process -- and that Washington recognizes that it will again need a stable and willing Egypt to help give US efforts vital credibility with Palestinians and across the Arab world.
In other words, by releasing Ayman Nour, Mubarak is sending Washington the following message: "We know that your pressure on our government will ease now that you need our help. You have stopped making demands of us, and we will give you something you want. Now, what will you do for us?"
At home, Mubarak's decision to release Nour allows him to demonstrate renewed self-confidence. He knows that Nour will have a tough time rebuilding his political movement. He won't talk publicly about Nour or any other pro-democracy dissident. He's above that. But he's signaling that the man he has chosen to free is a minor nuisance, no longer important enough to imprison.
In other words, Mubarak's actions reveal both the limits of U.S. influence in the region and the opportunity a new U.S. administration has to rebuild relations with a key regional power.
VINCENZO PINTO/AFP/Getty Images
The Call, from Ian Bremmer, uses cutting-edge political science to predict the political future -- and how it will shape the global economy.