Ian Bremmer's blog

By Ian Bremmer

Two years ago, there was a debate in Washington about whether a strong Europe or a weak Europe was preferable. There's no disagreement today. A more multilateral U.S. foreign policy needs a stronger Europe. As the G20 weakens the West's global strategic position, the United States will increasingly need coherent policies from its principal allies to maintain its international influence and leadership. Europe, however, appears to be fragmenting.

Witness Germany moving away from EU fiscal targets, which will make it harder for the European Commission to compel other countries to develop credible and consistent fiscal policy. Meanwhile, European tax policy changes need to be implemented to cover the costs of interventions, stimulus packages, and revenue shortfalls-but they have barely begun. Upcoming elections in the United Kingdom could produce major ripple effects next year. And the risk of a complete breakdown in negotiations over Turkey's bid to join the EU could further divide the continent.

Overall, political issues will be tougher to deal with in 2010 than they were at the height of the economic crisis. As things unraveled in late 2008 to early 2009, governments had no choice but to use existing policy tools. Now they may have to take up the difficult task of developing new ones.

The European agenda next year will be full of challenges, many of which require policy coordination. There will be impediments to effectively managing a crisis in a truly pan-European bank; uncertainty over corporate refinancing, particularly in eastern Europe; and emerging political problems combined with social discontent as the difficult tasks of footing the bill for crisis responses become more pressing. At this point, a real move toward greater European consolidation looks like it's still a long way off.

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By Ian Bremmer

As President Obama works toward finalizing a new plan for Afghanistan, here are five reasons why the challenges U.S. forces face in building stability there are more formidable than those in Iraq:

1) Political legitimacy. Parliamentary elections in Iraq scheduled for January will spark violence, the results will create controversy, and the eventual leaders will take their places within a system that pits lawmakers and cabinet ministers against one another in a more-or-less direct struggle for power. But voters will turn out in large numbers, and Iraq's new political institutions are slowly developing a broad popular legitimacy. That's not true in Afghanistan, which might have been better off without elections earlier this year. Virtually no one believes President Hamid Karzai won the August vote; few will embrace him when he claims victory following the November 7 run-off. He may hold the office, but he has virtually no natural political base in the country. Karzai is not exactly a reliable partner in efforts to build lasting stability.

2) Training of local forces. U.S. forces have had real success in helping the Iraqi government build its police and security forces. The large-scale drawdown of U.S. troops beginning next year will create a power vacuum that encourages battles over political turf and control of oil revenues. We've seen an uptick in violence in recent weeks, and we'll see more in months to come. Corruption remains a serious problem. But the Iraqi government has shown considerable progress over the past year in asserting control over territory and in beating back challenges from insurgents. In Afghanistan, there's almost no local support for a national professionalized military. Because Karzai's government has so little legitimacy, and few local leaders believe he can offer protection against Taliban attacks, very few people are lining up to don a uniform and pick up a rifle.

3) International coordination. In the battle against insurgents in Iraq, the United States has called most of the shots -- with significant (though now more modest) help from Great Britain. American and British forces have been well coordinated from the start, both operationally and strategically. Afghanistan's International Security Assistance Force has included troops from 43 countries with widely varying degrees of professionalism, morale and operational capability. Short of the U.S. military accepting responsibility for the entire mission, there's no short-term fix here.

4) Tribal/warlord patronage networks. More than any other factor, the willingness of Sunni tribal leaders to partner with U.S. forces against a common external enemy has been central to improvements in Iraq's security over the past two and a half years. In Afghanistan, tribal leaders and local warlords face US requests for help against a domestic foe, the Taliban, with whom they may find themselves negotiating long after NATO forces have left the country.

5) Resource base. Iraq has enormously underdeveloped oil reserves, a relatively well-educated urban elite, a population with some limited but real sense of national identity, and a favorable geographical position for development of trade and investment ties with other countries in the region and beyond. For the foreseeable future, the bulk of Afghanistan's cash will come from foreign aid and opium production. Neither offers much hope as a source of long-term stability.

Iraq's government has a long way to go before it can function as a set of independent, secure and self-confident institutions and as guarantor of Iraq's long-term stability. But in Afghanistan, it will be years before local leaders can move from coping with serious problems to solving them. 

Ian Bremmer is president of Eurasia Group.

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By Kim Iskyan

There's a reason for the popular perception that Russians like their drink: The average Russian citizen consumes 18 liters of pure alcohol per year, compared with about 11 liters per year in Western Europe. But if President Dmitry Medvedev's new anti-drinking campaign is a success, Russians will be toasting a lot less often.

Russian history is littered with failed attempts by imperious leaders with a social engineering streak to interfere in Russians' tippling habits. The most recent effort, the mid-1980s anti-drinking campaign spearheaded by Mikhail Gorbachev, was abandoned in part because it was hugely unpopular.

But the Kremlin has good reason to try again. Russia's drinking problem, which Medvedev has called a "national disaster," has long been cited as a key cause of Russia's ongoing demographic collapse. Alcohol abuse is a key reason why Russian men have a life expectancy of just 60 years, on par with North Korea and Papua New Guinea. In no small part due to alcohol abuse, the U.N. forecasts that Russia's population will fall from the current 142 million to 131 million by 2025, endangering economic growth and national security over the long term.

Medvedev has charged the government with developing an anti-drinking strategy by Dec. 1. Media reports suggest it may include new restrictions on advertising for alcoholic beverages; tightened regulations for low-alcohol content beverages; limitations on the times and locations at which alcoholic beverages can be sold; and price floors for and increased taxes on vodka. The plan will include additional measures to reduce Russia's gray alcohol market. The government is also contemplating whether to re-establish its monopoly on distilled spirits used to make vodka.

The campaign's chances of success may be better than previous Russian battles with the bottle. Some polls have suggested broad support for a temperance campaign. From a fiscal perspective, the relative contribution to the federal budget of alcohol taxation is a small fraction today of what it was during previous attempts to crack down on alcohol consumption, ensuring that lower consumption wouldn't dramatically decrease government revenue. It might even boost government coffers via higher taxes. Finally, the apparent success in the government's effort to eradicate legalized gambling -- as of July 1, all casinos and slot machine parlors operating outside four specified zones were closed -- reflects considerable political will to engineer positive social change, which could be channeled into an anti-alcohol effort.

Russia's anti-alcohol campaign is still in its very early stages. The politically powerful alcohol lobby, wary of higher taxes, could dilute the effort. And there are a lot more Russians drinking than gambling.

Kim Iskyan is a Europe and Eurasia analyst at Eurasia Group

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By Ian Bremmer

The most obvious long-term effect of the financial crisis is a shift in economic decision-making power from capitals of finance to capitals of politics. We see this trend in the United States, where decisions on how best to value assets and allocate capital are now made in Washington on a scale unthinkable until about this time last year. Outside the United States, nowhere is this development more obvious than in the United Arab Emirates, where power and wealth have shifted at startling speed from Dubai (until recently a financial powerhouse) to Abu Dhabi (the seat of political power). But the American trend is temporary; the UAE's might not be.

Remember when newspapers, magazines, and TV business reports produced feature after feature on lavish investment in Dubai's newest architectural marvel and the corporatist management style of its ruler, Sheikh Mohammed al Maktoum? As foreign investment stopped flowing into Dubai, large-scale infrastructure projects ground to a halt. Thousands of foreigners lost work permits in the construction sector. Thousands more saddled with loans they could no longer repay simply abandoned their property and left the country. By January 2009, local police complained that about 3000 cars had been abandoned at the airport. Dubai found itself buried beneath a mountain of IOUs, and for a few days in February 2009, the financial world lost faith. The emirate's credit rating tanked, and foreign investors began to plan for the once unimaginable risk that Dubai would default on its sovereign debt.

Faced with that, Dubai announced a $20 billion bond program to raise the needed cash. In February 2009, Abu Dhabi moved in with $10 billion bailout, underwritten by the UAE's central bank. So far, Dubai has yet to find the other $10 billion, and Abu Dhabi may have to step in again. But the bursting of Dubai's real estate bubble and the sudden collapse of its economy have already allowed Abu Dhabi's ruling al Nahayan family to buy a big share of the al Maktoum's assets.

On a recent visit, I saw the evidence for myself. Abu Dhabi is bustling as the city state prepares for its first Formula One championship this Sunday.  In Dubai, the traffic jams are gone, the hotels are struggling, and everyone's waiting for something to change. What a difference a year makes.

There's plenty of reason to fear that things won't get better soon. Real estate prices are now at about half their peak, but overbuilding on many projects continues because the state controls many of the emirate's largest construction companies. Many of Dubai's biggest construction projects are still underway, because the government wants to minimize further job losses. That's likely to continue through 2010, leaving the emirate with large amounts of unused commercial space.

In many cases, local firms haven't paid their employees in weeks, and there have been some moderately violent protests. The government appears aware of the seriousness of the problem and is working to improve healthcare and living facilities for the laborers. Dangerous levels of unrest are unlikely given that most guest workers can't afford to risk deportation.  

But there's another cloud on the horizon. If the United States moves to intensify sanctions on Iran next year (a good bet given the low likelihood that the current diplomatic optimism will last), Dubai will be vulnerable. Much of Iran's financial flows move through Dubai, and sanctions would hit the emirate especially hard.

Ian Bremmer is president of Eurasia Group.

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By Greg Priddy

Saudi Arabia faces a complex set of challenges in its role as leading member of OPEC amid ongoing economic and financial market volatility. After achieving an unprecedented level of compliance with OPEC production cuts from other members earlier this year, the kingdom now confronts a problem: compliance is beginning to fray, even as a weakening of the U.S. dollar and a surge in global equities markets push the oil market surging ahead.

If the breakout above $75 per barrel for West Texas Intermediate (WTI) crude oil is sustained and the momentum continues, it's entirely possible that Saudi Arabia will intervene to try to tamp down prices. If that happens, it wouldn't be as part of any understanding with the United States -- a relationship now under serious strain -- but from pure self-interest. With the global economic recovery still fragile, a rapid momentum-driven escalation in oil prices could weigh on consumer confidence and economic growth. That could produce a drop in oil prices. Saudi Oil Minister Ali al Naimi has spoken in recent months of a "goldilocks" range for crude oil at around $75 per barrel, and hinted at action to blunt any sustained push past $80 per barrel.

The Saudis also need to manage price increases to maintain pressure on Iran. Iran's nuclear progress has Gulf Arab governments on edge -- and the Saudis, in particular, would like to avoid taking any action that provides Iran's government with extra revenue. The Saudi government can balance its budget with WTI crude oil in the vicinity of the high $50s. That means they are now replenishing reserves at a rapid pace after running a deficit for the first half of this year. Despite spending cuts, Iran is still under financial pressure, and the Saudis would like to keep it that way.

Managing output levels and prices will be difficult, given that global inventories of crude oil and petroleum products remain well above their normal ranges. Any move by the Saudis to tamp down a surge in prices would likely involve a modest amount of increased exports -- say 500,000 bpd -- and could be pulled back once it has its intended effect of breaking the market's momentum. To bring inventories down, however, the leading Gulf Arab members of OPEC (Saudi Arabia, Abu Dhabi, Qatar, and Kuwait) will need to keep their own output well below pre-September 2008 levels through at least the end of 2010. Right now, compliance outside the Gulf Arab members has receded, particularly in Iran and Angola. Nigeria remains at its target, but that's a result of the continuing violence in the Niger Delta, not a policy decision to keep its promises.  

Greg Priddy is a Global Energy & Natural Resources analyst at Eurasia Group.

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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.

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By Nicholas Consonery

During the next six months or so, as leaders in Beijing and Taipei see their window of opportunity shrinking, they will make a concerted push toward remedying one of the world's major geopolitical dilemmas. Both sides will work feverishly to expand economic ties-in the hopes of strengthening Tawainese President Ma Ying-jeou's domestic standing and staving off a rebound for the opposition Democratic Progressive Party (DPP). Ma's political strength hemorrhaged in August when Typhoon Morakot created a humanitarian and public relations disaster, leaving 700 dead or missing. Now, the president's approval ratings remain below 30% and the DPP looks set to regain some strength.

When he was elected last year, President Ma had already become a relative darling in Beijing by promising to focus on the economics of the cross-strait relationship, without addressing the politics. Beijing was happy to accommodate this approach because it coalesced with the leadership's broader plan to secure sovereignty over the island through gradual economic integration. With hardliners in Beijing threatening to undermine Chinese President Hu Jintao's Taiwan policy after a tumultuous eight-year presidency of DPP member Chen Shui-bian, progress was needed quickly.

Concessions began in the months after Ma's election, as charter flights and other tourism channels between the two sides were expanded. Later, in April 2009, the first-ever direct corporate investment from China into Taiwan was announced, with mainland telecom giant China Mobile planning to purchase a 12% stake Taiwan's Far EasTone. The next day, Taiwan's domestic market jumped nearly 7%. In following days, then Minister of Economic Affairs Yiin Chii-ming announced that Chinese investments would soon be allowed into 99 Taiwanese business sectors.

But political troubles for President Ma are making Beijing concerned that all this progress could be for naught. The president's popularity ratings had already fallen precipitously during the global financial crisis. Now, with the mishandling of the Morakot disaster, Beijing fears that Ma's reelection prospects in 2012 may be imperiled. Certainly things seem to be trending downward for Ma and his Kuomintang (KMT) political party, and based on recent experience, Beijing dreads a resurgence of the more confrontational DPP.

As a result, China will be handing out economic concessions to Taiwan in the next six months, hoping that they will bolster Ma's prospects. For his part, Ma will happily accept, fearing a stronger opposition and believing that he can regain some political strength by improving commercial ties with the mainland and boosting Taiwan's growth prospects. The big deliverable could be an economic cooperation framework agreement, which would set the stage for a significant expansion in economic ties, investment, and trade flows. Negotiators for both sides are purportedly working for an agreement by early next year, and rumors are swirling that President Hu himself is calling for a deal. More cross-strait corporate activity looks likely, perhaps including chances for Chinese firms to invest in Taiwan's leading tech industries, though this will face popular resistance on the island. A planned memorandum on financial cooperation, which will allow mutual investments in the banking sector, also looks set to be signed by early December.

On the political stage in Taiwan, Ma recognizes that the DPP's growing strength will make concessions to the mainland more contentious heading into 2010, motivating him to accomplish as much as possible before then. Although recent polling indicates general disgust with both parties, the opposition is positioning itself to rebound from recent lows by increasing its representation in local government and in the island's legislature. Two weeks ago, a DPP candidate won a by-election for a seat in the legislature to represent the second district of western Yulin County. While KMT-affiliated candidates split the vote, affording the DPP candidate an easy win, the victory left the opposition just one vote short of holding one-fourth of the total seats in the legislature. The DPP could also gain more representation during local mayor and magistrate elections on 5 December, which would be a blow to Ma and his KMT party.

The DPP stands a decent chance of securing one-fourth representation in the legislature in the next few months, as another by-election must be held in Nantou County before 10 December for the seat abandoned by Wu Den-yih, who was installed as premier in September. This would give the DPP more leverage in combating the KMT's majority coalition in the legislature. The DPP would also be able to propose recalls of the president, a political move that would be easily blocked by the dominant KMT. But such infighting would steal the domestic news cycle, distracting Ma from his strategic and economic goals, and causing more than a little heartburn in Beijing.

Nicholas Consonery is an Asia Analyst at Eurasia Group.

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By Ian Bremmer and Willis Sparks

To mark 60 years in charge, China's Communist Party threw a lavish party last week, a triumphalist pageant with enough military hardware on parade to fill the nightmares of would-be "dragon slayers" for years to come. It was a reminder that China has developed advanced fighter aircraft, military satellites, the Dong Feng 21 missile (also known as the "aircraft carrier killer"), and has been working toward production of a first aircraft carrier of its own -- an asset that would enable China to project naval power further from its shores than ever before. As if the visuals weren't enough, the celebration included a 2,000-member military marching band.

So will China one day pose the 21st century equivalent of a Soviet-scale military challenge to America's geopolitical dominance? That's unlikely. China wants to extend its influence throughout East Asia, protect the commercial traffic that provides the oil, gas, metals, and minerals that feed China's growing economic appetite, and project national pride. It will one day pose a broader military threat than it does now, but its economy has grown so quickly and its living standards have improved so dramatically over the past two decades that it's hard to imagine the kind of catastrophic, game-changing event that would push its leadership to upend a profitable status quo and confront American leadership outside Asia. China's leaders know their government won't be ready anytime soon to bear a superpower's burdens. Their primary goal is to bolster their political control by generating prosperity for the Chinese people. Why would it allow anything short of the most dire and immediate threat to its territorial integrity to ignite a military conflict that would sever its web of commercial ties with countries all over the world -- and, in particular, with its three largest trading partners: the European Union, the United States, and Japan?

Beijing's primary military concern is the risk of a direct or proxy conflict with the United States over Taiwan. But the Chinese leadership knows that no U.S. government will support a Taiwanese bid for independence, and why should China invade the island when it can co-opt most of Taiwan's business elite with privileged access to investment opportunities on the mainland? Globalization has been good to China's Communist Party, and wars are bad for business.

Certainly, China has ambitious military modernization plans. With 2.3 million soldiers under arms, the People's Liberation Army (PLA) is already by far the world's largest. It has reportedly invested considerable time, effort, and money in cyber-warfare technology. Its total military budget probably doubled between 2003 and 2009 to about $70 billion. But that's still only about 12 percent of what the United States now spends on its military each year -- and an even smaller percentage if supplementary U.S. spending on the wars in Iraq and Afghanistan is included.

The problem for U.S. policymakers over the next several years is not that the unipolar world order will give way to a multipolar but to a non-polar system. In other words, it's not that America has company on the global stage but that it must continue to carry so much weight on its own-and at a time when pressing problems at home will limit the American public's appetite for ambitious foreign-policy commitments.

Over the past 20 years, U.S. analysts have scanned the horizon in expectation of potential challengers to America's great power advantages. The European Union was already struggling to manage the latest round of expansion before the financial crisis gave EU leaders another reason to avoid potentially onerous new commitments abroad. Russia's leaders may be unhappy with the geopolitical status quo, particularly when it comes to the balance of power within several former Soviet republics. But they're far too preoccupied at the moment with the protection of domestic markets, banks, and companies from the worst effects of the financial crisis to embark on any long-term plan to build a threat to U.S. power outside its immediate neighborhood. India has market reform issues to manage and security worries flowing across the border from Pakistan. Within the Western hemisphere, Brazil appears to have no grander near-term aspirations than to promote stability in Latin America, jumpstart an economic recovery, find new ways to profit from its recent oil discovery, and to play a broader leadership role among developing states.

It's not a challenge for dominance, but a growing vacuum of power that should worry Washington. The more important questions for the next decade are: Who will take the lead on building a new global financial architecture that reflects 21st century realities? Who will take the lead on multilateral efforts to address climate change? Who will create a new (and more credible) nonproliferation regime? Who will provide momentum behind Middle East Peace talks? Who will provide the leadership to ensure that G20 summits don't simply turn into G8-style photo opportunities with a wider angle lens?

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