World Affairs

Trump is Pushing Iran into Russian Arms

The most important consequence of the Bush demolition of the Iraqi state has been the reemergence of Iran as the most influential power in southwest Asia. The core of southwest Asia is now a vast zone of Iranian influence that General Suleimani ominously calls the “Greater Persian Gulf region.” Iran is now the dominant foreign power in Lebanon, Syria and Iraq, and has significant influence in Yemen and Afghanistan as well. With thousands of Iranian troops fighting in the Levant, Iran is projecting its power further west and more deeply than at any time since the peak of Safavid power in the seventeenth century.

Part of the reason is simply that Iran is arguably the most powerful state in the region. Figure 1 shows the distribution of war potential in the Middle East. All data is represented as national shares of selected power resources of the regional powers. Iran has a population of 80 million, a close second to Egypt’s 85 million. Its economy is comparable in size to Turkey’s and Saudi Arabia’s (although the latter is mostly income from oil sales on the global market and is not reflective of national capabilities). Iran has proven oil reserves of 160 billion barrels, second only to Saudi Arabia’s 269 billion. Its endowment of arable land is second only to Turkey’s. Most astonishingly, some 269,000 Iranians graduate with degrees in engineering or the sciences every year compared to just 212,000 in the rest of the regional powers combined.

WarPotentialMidEast

Figure 1. Distribution of war potential in southwest Asia. Source: CIA, World Economic Forum. 

Israel is barely visible in the spider chart of war potential—a major flaw of these metrics. Israel punches dramatically above its weight for a number of reasons. First, Israel is a settler colony of the crème de la crème of Europe. Perhaps as a result of sustained selection on cognitive ability in medieval Europe or the survival effect of the liquidation of the bulk of European Jewry (smarter Jews presumably escaped at higher rates than dumber Jews from the Nazis), Ashkenazi Jews have the highest IQs of any ethnic group ever recorded. Not coincidently, Jewish people are massively overrepresented among Nobel Laureates. Combined with the traditional Jewish emphasis on education (with universal literacy probably as early as the second century CE), the per capita skill-set and knowhow of the Jewish state has no counterpart anywhere else in the world. Second, Israelis are far more willing to fight for the flag—a very important factor in warfighting capabilities since the rise of nationalism at the end of the eighteenth century—than any other nation for obvious historical reasons. Third, like Prussia in the classical European balance of power, Israel’s geostrategic position has led to the development of a highly effective operational art of war that has made it into a modern day Sparta. Surrounded by hostile states and with neither the resources nor the manpower to win long, drawn-out wars of attrition, the militaries of both states cultivated an art of war that sought to front-load conflicts and seek the decisive victory. Fourth, Israel has successfully cultivated a close security relationship with the unipole—in no small part due to the influence of American Jewry. This has given Israel greater access to advanced weapons and military knowhow than any other regional power including Turkey (even though Turkey, unlike Israel, is a member of Nato).

Still, modulo the special case of Israel, Figure 1 provides a good approximation of the war potential of regional powers in southwest Asia. It shows that Iran has the most balanced portfolio of intrinsic power resources in the region. Saudi Arabia, by contrast, is a pure petrostate. Iran’s population is 2.7 times as large as Saudi Arabia’s. It has 5 times as much arable land, 4 times as many graduates, and produces 6.7 times as many engineers and scientists every year as Saudi Arabia. The Kingdom has been able to access and sell—with foreign expertise and knowhow—a much greater portion of its oil deposits and has, as a result, accumulated considerably greater financial resources than Iran.

Saudi Arabia has tried to convert its financial firepower into military might by spending gargantuan sums of money on weaponry. Figure 2 displays the real military spending of the regional powers as well as the real price of crude. (We start the clock in 1971 when the British left and the gulf RSC emerged.) The salafi oil monarchy is by far the biggest military spender in the region. Since 2003, Saudi military spending has grown rapidly along with the price of crude to reach levels dramatically higher than other regional powers.

MidEastMilSpend

Figure 2. Military spending by regional powers in southwest Asia. Source: SIPRI.

But it is extremely difficult, if not outright impossible if other ingredients of national power are lacking, to convert financial resources into warfighting capabilities simply by spending giant sums of money. The most important determinants of national warfighting capability are after all the size and skill-set of the populace and its willingness to fight for the flag of the nation-state. The Saudi populace is much smaller, much less skilled, and not nearly as motivated to fight for the flag as that of Iran. This is why a war between Iran and Saudi Arabia will be pretty much a one-sided affair. However, since Saudi Arabia is a US protectorate it is not at risk of being conquered by its stronger neighbor. Due to the presence of the US pacifier, security competition in the bipolar gulf region has instead been projected onto regional playing fields.

The dominant story of the region since 2003 has been the expansion of the zone of weakness. Three hitherto strong states of the region, Iraq, Syria, and Libya, have joined Lebanon, Palestine, Yemen and Afghanistan (the last is on the border of southwest and south Asia) as the playing fields of the regional powers. The regional players are Iran, Saudi Arabia, Egypt, Turkey, and to a lesser extent Israel. Although each regional power has their own particular security interests, the object of the regional game is to secure the orientation of weak states, or if there is no central authority, to secure influence in the polity or security zone by bankrolling and arming local security actors. Even more important than the push factors of regional security competition are the pull factors of sub-state actors seeking patrons. These features are manifest in the Syrian war but are no less true of other parts of the zone of weakness.

Some players are more in demand than others. No one except the Phalangists wants to be caught hobnobbing with the Israelis. Even the Kurds are tight lipped about their security cooperation with the Jewish state. More generally, transnational identities allow states in the region to mobilize opinion across borders. Sunni Arab groups, including many salafi jihadists, look to Saudi Arabia and the other Sunni Arab oil monarchies for support. Shiite actors seek Iranian support. Due to the rise in sectarian temperature—most dramatically as a result of the Syrian war—regional Sunni Arab actors, like the Palestinian resistance groups Hamas and Islamic Jihad, that used to be Iranian clients have pulled back. On the other hand, actors that were barely Shiite, such as the Alawi regime in Syria and the Houthis in Yemen, have become Shitte, and pushed further into Iranian arms. So the rise in sectarian temperature cuts both ways.

this-map-shows-the-brewing-proxy-war-between-iran-and-saudi-arabia

Figure 3. The regional game.

When the Syrian uprising began, Saudi Arabia saw a major opening to wrestle away Syria—a state that is central to the Sunni Arab imaginary—from the Iranian orbit. Weapons, money and fighters poured into the warzone through the Turkish rat line. Much of the flow originated in the oil monarchies and went to salafi jihadist groups such as ISIS, JN and Arhar al Sham. But the Iranian-Hezbollah intervention prevented the fall of Assad. Once the Russians intervened on the regime’s side, the great Saudi dream of rolling back Iranian influence in the Levant became tenuous. With the fall of Aleppo to the regime’s forces, all such hopes were dashed.

Meanwhile, the US-Saudi puppet in Yemen had been displaced by the Houthis with the support of the former Yemeni president (a Sunni). Saudi Arabia’s aggressive young leader Mohammed bin Salman al Saud (MBS), responded by launching an air war with the logistic and diplomatic help of the Obama administration.  There was a lot of brouhaha about Iranian influence in Yemen; Saudi Arabia’s backyard. But Iranian influence was always more imagined than real. The Houthi political movement, in fact, enjoyed broad-based, cross-ethnic support and was neither simply a Shiite group nor an Iranian proxy. The main consequence of the Saudi terror campaign in Yemen was to give a boost to Al Qaeda in the Arabian Peninsula (AQAP), one of the most dangerous and capable salafi jihadist groups in the region. (Yemen was not the only place where the main result of Saudi meddling was to strengthen salafi jihadism.)

Lost in the regional narrative was a potential gamechanger. This was an alliance between Russia and Iran—something that has never obtained ever before in history. Even though both were simply fighting together to save the Assad regime and there were no plans for a broader alliance, there was always the potential for one. The Obama administration was smart enough to know that it would not be in the US interest if Iran acquired a rival great power patron. (Obama went so far as to say that the Saudis and the Iranians would have to “share the region.”) As long as the United States could keep the door ajar just a little bit, Iran had more to lose from defying the Western alliance than gaining a great power patron.

In this trip, Trump has slammed the door in Iran’s face. It may further the interests of the oligarchs connected to the Trump White House. But it makes no sense in terms of US interests in the region. We should not be surprised if Iran gets closer to Russia and the Ruskies extend their influence in the Middle East as a result. I am not suggesting that this is a certainty. Russia has so far pursued defensive and limited aims—basically shoring up the Assad regime. But that is no guarantee that the Kremlin will not exploit this opening.

There was something deeply shameful about Trump declaring Iran to be a sponsor of terror whilst standing in the heart of terror finance; entirely bogus claims based on Iranian patronage of Hezbollah and Hamas, which for all their Islamic rhetoric are nationalist resistance groups; not Islamic terrorists. Islamic terrorists, like the one who murdered young kids in Manchester this week, are without a single exception salafi jihadists who are bankrolled by financiers in the permissive jurisdictions of the gulf oil monarchies that Trump just declared his eternal love for. In fact, Iran is the one Muslim power that is guaranteed to be an ally against salafi jihadism. If the United States was serious about tackling salafi jihadism, the place to start is to put the oil monarchies is a financial straightjacket—all financial flows out of the gulf ought to monitored by a terror finance task force set up by Western intelligence agencies.

It’s too easy to blame the Trump administration for following policies that are so manifestly against the US and Western interest. The truth is that the blame lies on a broad swath of the foreign policy community—including Democrats. Somehow the debacles of the Bush administration have failed to kill the rogue states doctrine that is at the root of America’s failed foreign policy.

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World Affairs

The Russian Intervention in Syria

It seems that Soleimani made quite an impression on Putin. Rather than simply supplying Assad with more arms and ammunition as the Policy Tensor had imagined, Russia has chosen to deploy a significant number of military assets in Syria. What is the scale of the Russian deployment and what prompted it? What is Putin up to now? And where is this going?

What seems to have forced Putin’s hands is the recent setbacks suffered by Assad this year. Islamist rebel forces led by Jabhat al-Nusra (JN) conquered Idlib City in March and kicked regime forces out of all but one of their positions in Idlib Province by September. This has placed the rebels in a position to launch attacks into the Alawite heartland on the Syrian coast. That the primary purpose of the deployment is to thwart the rebel offensive is clear from the location and nature of Russian assets in Syria.

Al Assad Airbase

Instead of deploying assets to their existing naval base at Tartus, the Russians have deployed their forces further north in Latakia Province where they will be closer to the frontline. The center of activity is the Bassel al-Assad International Airport at Jableh in Latakia Province. Satellite imagery provided by AllSource Analysis has confirmed the presence of tanks, armoured personnel carriers, howitzers, trucks, and prefabricated housing for 1,500 personnel. The equipment in the field so far is consistent with the deployment of a single army brigade.

That’s right: Russia is deploying ground forces in Syria. On September 13, reports filtered in that fifteen buses carrying Russian troops arrived in Hama City and turned its Equestrian Club into military barracks. More troops are on the way. Transport aircraft continue to airlift assets to what is now a de facto Russian military base at the rate of up to two per day. Under the cover of a large military exercise involving a hundred thousand troops, Russia has buildup its military assets at Taganrog Central airbase in southern Russia. Located 800 miles from Latakia, the airbase is perfectly positioned to supply the war effort in Syria.

Putin’s goals are limited: Protect Russia’s only naval base in the Middle East at Tartus and make sure than the Assad can hold on to the territory still under his control. The troops in the field are mandated to thwart the rebel advance and perhaps conduct counter-offensives against JN et al. These limited objectives are likely to be achieved.

Given that the United States is conducting daily airstrikes in the vicinity, it is necessary to have military-to-military contacts to ensure that there are no incidents. The Russian intervention has changed the calculus somewhat in as much as it is now even harder to see how Assad could possibly be dislodged. The United States should finally surrender its futile opposition to Assad and play ball. A great power settlement in Syria is very much possible and was held up by US opposition to Assad. Now that the United States seems finally ready to fold, a deal is indeed likely in the coming months. 

That Putin has managed to force Obama’s hand is not altogether surprising. US policy in Syria has been ham-handed from the get-go. It was very much possible in the beginning to get ahead of the curve. The US could’ve armed moderate rebels while they were still viable and forced Assad to the table with the threat of military escalation. The Obama White House foolishly outsourced the arming of the rebels to the oil monarchies; with predictable results. Once the Islamists had essentially taken over the rebellion there was no choice but to back Assad. Yet, the White House could not drop its opposition to the Assad regime. This short-circuited any possibility of a great power settlement in Syria. Forging a Syrian army to oust Assad might have worked had it been given sufficient time and resources. But it served no discernible US interest and was not worth the effort given that the alternate strategy of backing Assad was always available. The actual effort of course was laughable.

Russia is not about to replace the United States as the dominant power in the region for the obvious reason that the United States continues to be vastly stronger than Russia. Strength alone is not enough however. If the US leaves security vacuums in the region, like it has in Syria and Iraq, others will be pulled in despite themselves. (Although one can’t help but feel that Putin must relish deploying Russian troops in the region for the first time since the collapse of the Soviet Union.) The extent to which Russia has been pulled in will become clear in the coming months.

Russia is also not about to conquer the Islamic State. Despite all the anti-ISIS rhetoric emanating from Moscow, nothing so far suggests that Russian ground forces will even engage the fighters of the Islamic State. And even if they did, it would require a considerably bigger military deployment than a single army brigade to make an impression on Baghdadi. The existence of the Islamic State is the principal security threat to US protectorates in the region. It cannot be conquered without ground forces; as I predicted and is now amply clear after 4,700 airstrikes with little to show for them. And the Russian troops heading to Syria non-withstanding, no state has taken up the mantle. In particular, President Obama has effectively decided to kick the can down the road to the next administration.

Stephen Walt has proposed that the Islamic State can be contained. I have very serious misgivings about such a course of (in)action. Specifically, the Islamic State poses an existential threat to the Kingdom of Saudi Arabia. It could potentially overrun the entire Arabian peninsula in short order on the backs of a very sympathetic populace. It may not be in a position to do so now, but it is bound to get stronger as state formation proceeds apace. It would be a grave mistake indeed to tolerate the existence of the Islamic State and run this risk for an extended period. In any case, there is no sign that the US security apparatus would tolerate a Salafist-Jihadist state bang in the heart of the Middle East to survive for long. If not this president then the next one will be going after the Islamic State. 

The big news is not the likely survival of the Assad regime or the Islamic State. Both of these were already baseline scenarios. The big news is the military alliance between Russia and Iran; something that has never obtained previously. The alliance is not a serious threat to the United States for the simple reason that Russia cannot protect Iran against the United States. In the event of a confrontation between the United States and Iran, Russia would be in no position to intervene. And in the worst case scenario, if the Russians did threaten to do so, their fleet could be bottled up in the Black Sea. In any case, the US could easily blockade both nations without incurring significant damage. 

So the military alliance is no game changer for the global balance of power. It does however have significant implications for the balance of power in the Middle East. The biggest losers as a result of these developments are Turkey and Saudi Arabia, both of whom have expended significant resources to take down the Assad regime. The Islamist rebels on their payroll can no longer hope to topple the government in Damascus. Perhaps it is time to throw them under the bus. 

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Markets

Careful What You Wish For

 WTI

For the US stock market, good news is bad news. The Fed is waiting for the recovery to strengthen to exit the zero lower bound. When it does, we’ll see a market correction and an end to the current financial boom driven by yield-seeking investor behaviour. The magnitude of the correction will depend on the balance between the extent of the bubble in asset prices on the one hand, and the continuing positive impact of the Oil Price Counter-Revolution on the other. Let’s not get this wrong: the expectation of a genuine recovery in the non-financial economy, such as it is, is almost entirely driven by the near-collapse in the price of energy.

The Oil Price Counter-Revolution is better than a Middle Class tax cut, which does not affect the poor or the really rich, both of whom don’t pay much in income tax; but whose consumption is now a larger share than that of the Middle Class. It is a decline in the cost of making every input except people and capital for everyone except the energy firms. Since oil is used in almost every single industry, the impact is very broad, making the oil price the dominant variable for the economy. Hence, the implication of a genuine recovery. Which brings us to what is happening in the energy markets.

The cost of producing solar and wind energy has collapsed to levels last prevailing in the cost of making energy from oil and natural gas in early 2014. The shale boom has continued apace, pushing down the price of gas in the United States to a third of that prevailing in Europe, and a fourth of that in Japan. US tight oil production is increasing relentlessly, so much so that the United States is likely to briefly replace Saudi Arabia as the largest producer of crude. The Kingdom declined to accept lower quotas in the last Opec meeting. The Saudis reckoned that a brief period of benchmark prices in the sixties (Brent is now at $62 and West Texas Intermediate at $58; both were above $100 for a long time) will drive many American tight oil producers with their high costs out of the market, and undermine Iran. It is wrong on both counts.

Brent

Some of the impact of higher than anticipated gulf production will be absorbed by a divergence between Brent (Eurasian) and West Texas (American), thereby softening the impact on American producers. And unlike petrostates with their fiscal burdens, private American oil firms can survive at much lower margins by cutting costs; expanding capacity when prices revive. A prolonged period of cheap oil will lead to a consolidation of industrial structure, with marginal firms being absorbed by their stronger rivals. But it is unlikely to diminish capacity in the long term. Since tight oil fields get exhausted in a short year or two (regular fields like those in the gulf last more than a decade), American oil production is much more flexible than Opec production in the medium term. Oil firms can easily postpone capacity expansion and let existing capacity erode, thus responding relatively quickly to price signals. Since capital is cheap and credit easily secured, firms do not face a financial constraint on capacity expansion either. And if prices continue to slide, they can shelve plans to expand capacity and buy back their own shares to maintain their stock prices. The United States has too deep of bench of innovative oil firms. The Saudis cannot eliminate American competition by aggressive price-cutting.

Aggresive price-cutting can certainly hurt Iran. But that is at least as likely to backfire geopolitically on the Saudis as otherwise. Iran is already in dire straits economically due to the sanctions regime. Further pressure will quite likely undermine the hawks who are holding back on a nuclear deal with the United States. American and Iranian geopolitical interests have converged remarkably since the rise of the Islamic State. Both now very nearly want the same thing in Iraq and Syria. A greater willingness to compromise on the part of the ayatollahs, a likely result of great fiscal pressure, is very likely to clench the deal. Iranian businessmen are already rubbing their hands.

More generally, the revival of American oil production has dethroned Opec. The cartel no longer enjoys the extraordinary power it wielded in its heyday. If Iran returns to the market and Western capital underwrites an expansion of Iranian capacity, Opec itself would become bipolar. Without a thaw in Saudi-Iranian relations, it would become defunct. In either case, if Iran returns to the market in force, Saudi Arabia’s status as the swing producer will assuredly be undermined. And with it perhaps, the leverage that the Saudis have enjoyed against their protector since the Islamic revolution.

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World Affairs

More Nonsense From the White House

USS George HW Bush

When a dashing young Senator from Illinois spoke against a “dumb war” of a dumb President, we believed him. We thought President Obama would serve as a long-overdue antidote to America’s addiction to war. Once in the Oval Office, Obama slowly and deliberately implemented his plan for the withdrawal of the hated American troops from Mesopotamia. Even in Afghanistan—the “good war”—he is bringing the US occupation to a close; although with an ill-advised fetish for the calendar. The American bootprint in Eurasia has declined steadily since the high-tide of Bush’s “surge.”

There is no appetite in the United States for large-scale stabilization operations overseas. In 2011, US Secretary of Defense Robert Gates declared: “Any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should have his head examined.” Despite widespread calls for American military intervention in Libya, Mali, and Syria, the United States could not be pressed into anything more than airstrikes. Even as Isis gets busy forging a caliphate in the heart of the Middle East, President Obama has flatly ruled out the deployment of ground forces.

This is not the worst thing in the world. American combat troops have always been more useful to deter adversaries and prevent escalation—they have kept the peace between major powers in Eurasia since World War II—than in large-scale pacification campaigns. Prompted by dubious theories and imperial hubris, the deployment of American troops at any appreciable scale in the Third World has invariably been a harbinger for chaos. American pacification campaigns have left millions of dead bodies strewn across the globe—without an iota of strategic gains to show for it. If Washington has been inoculated against ground wars in poor countries for the foreseeable future, surely that is an unambiguous good?

No. Here’s why. There are some problems which cannot be solved without the application of military power. The Isis caliphate is an unambiguous security threat to everyone from Iran to America. It will serve as a breeding ground for Islamic terror. These guys are way out there on Neptune; beyond other run-of-the-mill Islamist extremists—Jabhat al-Nusra, Boko Haram, al-Qa’ida in the Islamic Maghreb, al-Qa’ida in the Arabian Peninsula, the Haqqani network, Abu Sayyaf—already a pretty scary lot. This is not hyperbole. To celebrate their victory in Mosul, Isis carried out mass executions of anyone and everyone they suspected of working for the government, or breathing while Shi’a. They claimed to have slaughtered 1,700 Iraqi soldiers, burying them into hastily dug mass graves—sixty of which can be identified from the photos gleefully posted by the group on the Internet.

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It has come to light that the White House only plans to carry out significant airstrikes against the Isis if they threaten Baghdad. What this means is that the United States is ready to tolerate the Isis forging a caliphate in the heart of the Middle East, as long as it doesn’t threaten the existence of the Iraqi rump state to the south. It is one thing for President Obama to rule out the deployment of ground forces. Quite another to cede the ground to the Isis.

If President Obama really wants out, he has to give the green light for the Iranians to go in. Indeed, letting strong states in the region do the job is preferable to sending American forces back in. Iran has a very strong interest in preserving the Iraqi state. By contrast, both Turkey and the Kurds would rather not engage the Isis. But the United States has been working to contain Iranian influence in Iraq and Syria. That this is counter-productive is clear. Indeed, Senator Lindsey Graham of the GOP has suggested cooperating with Iran in order to help Iraqi forces hold Baghdad. That still doesn’t go far enough—the Isis needs to be pushed back out of Iraq and hunted down. Either do the job yourself, or allow those who are willing, to do it.

Privileging keeping the score with the Islamic Republic of Iran over genuine security interests is an extremely pig-headed approach to international affairs. The White House would do well to remember Palmerston’s sage advice to the British House of Commons in 1848:

It is a narrow policy to believe that this country or that has marked out the eternal ally or the perpetual enemy. We have no eternal allies and we have no perpetual enemies. Our interests are eternal and perpetual and these interests it is our duty to follow.    

 

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