Compass Navigating the global archipelago Fri, 06 Feb 2015 15:44:36 +0000 en-US hourly 1 Arming Ukraine will put the West in danger Fri, 06 Feb 2015 12:36:32 +0000 A member of the armed forces of the separatist self-proclaimed Donetsk People's Republic looks on near a building destroyed during battles with the Ukrainian armed forces in Vuhlehirsk

A member of the armed forces of the separatist self-proclaimed Donetsk People’s Republic stands near a building destroyed during battles with the Ukrainian armed forces in Vuhlehirsk, Donetsk region, Feb. 4, 2015. REUTERS/Maxim Shemetov

A dangerous, possibly irreversible, dynamic of conflict is taking hold of Russian-Western relations.

In every arena of the Ukraine crisis, escalation is the order of the day. On the ground, where fresh fighting rages in the Donbass region. In the skies over Europe, where British fighter jets are intercepting Russian nuclear bombers. In Washington, where Congress and ambitious policymakers with an eye on the 2016 presidential elections are forcing the White House’s hand on lethal assistance to Kiev. In Moscow, where the few remaining voices of compromise are considered weaklings or traitors. Even in the realm of global finance, where expelling Russia from the SWIFT payment system is now under serious consideration.

At this rate, someone’s really going to get hurt soon. This is not to make light of the suffering already being caused by the conflict in eastern Ukraine, with half a million people displaced and thousands killed and wounded in fighting there. What it does suggest is the need for perspective amid the increasingly unhinged talk of war with Russia.

Memories are short. The fallout from the wars of 9/11 in Afghanistan, Iraq, Libya and now Syria has all but consumed Western strategic thinking. But the Cold War ended only 25 years ago, and Ukraine’s singular strategic significance to Russia ought to make the memory of a nuclear crisis over Cuba seem positively quaint by comparison.

Russia still possesses a nuclear arsenal in excess of 8,000 warheads. It has a conventional military of nearly one million men under arms, and in the age of cyberwarfare has the ability to inflict catastrophic damage on critical Western infrastructure.

To their credit, President Barack Obama and German Chancellor Angela Merkel have sought to keep the West on a sober path, addressing Moscow’s annexation of Crimea with firm diplomacy in the pursuit of a peaceful solution. Even as this conflict has demonstrated the speed with which Washington can push for sanctions whose consequences are largely borne by Europeans, Merkel has made maintaining trans-Atlantic, as well as European, unity her lodestar.

What the current escalation risks, however, is a breakdown of this unity — even as the possibility of open conflict is growing. A new approach is urgently needed.

It must begin with a reality check on the nature of the adversary, and the futility of the current course of action. The features of Russian President Vladimir Putin’s regime that its critics most like to cite — kleptocracy, repression, chauvinism, revisionism, paranoia — are the very characteristics that will make it utterly unwilling to capitulate under pressure, be it financial or military.

The more the West emphasizes a belligerent course of action, the more Putin’s popular support, already in a range undreamed of by Western leaders (80 percent approval), will harden rather than soften.

The West is increasingly dealing with a government in Moscow whose most liberal and pluralist elements see a reality of economic war with the West, and a future of responses “without limits” to further sanctions — as that most pliable (and unrepresentative) of Russian leaders, Dimitri Medvedev, noted Jan. 27.

Moscow will view a decision to expel the Russian banking system from SWIFT as not just an economic measure but as a strategic one. To be met by any and all means at Russia’s disposal. Cyber, energy, finance, nonstate groups in neighboring states — all could become weapons in such a response. That is also without considering the risk of a catastrophic miscalculation or overreaction by a single pilot, nuclear submarine captain or militia member with a shoulder-fired missile.

In an atmosphere of zero trust, anything becomes possible.

If a diplomatic solution is to be found before — and not after — a terrible conflagration involving the world’s two nuclear superpowers, a new U.S.-German diplomatic initiative toward Moscow must be launched.

Moscow will have to accept that the people of Ukraine freely elect their own leaders and can choose membership in the European Union. The West will have to accept that the minority rights we trumpet elsewhere also should apply to Russian-speakers in eastern Ukraine, and that membership in the North Atlantic Treaty Organization will make Ukraine — and the alliance itself — less secure, not more.

For this kind of settlement to be possible, the Kremlin will have to walk back its most extreme rhetoric — and ambitions — about a Novorossiya. The West will have to reverse its folly of walking the people of Ukraine out on a plank of military and economic dependency on Europe in a conflict with Russia that has no sustainable political support among European populations.

The contours of a deal acceptable to both sides has long been clear. Given the cataclysmic consequences of an armed conflict with Russia, only the absence of an all-hands-on-deck diplomatic push by the West is a mystery.

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To build a coalition against Islamic State, U.S. must try a little humility Thu, 25 Sep 2014 05:00:24 +0000

U.S. President Barack Obama chairs the U.N. Security Council summit in New York

When President Barack Obama assumed the presidency of the United Nations Security Council Wednesday, he summoned the full weight of U.S. power to a cause with seeming universal appeal: defeating the barbarism of Islamic State — or, as Obama calls the militant group, Islamic State in Syria and the Levant (ISIL).

Much of the world, however, will question how Washington can hope to achieve this without launching a wider political agenda for accountable government in the failing states of the Arab world.

They seek U.S. recognition of the diversity of legitimate interests represented today in the Security Council chamber — and of the wider diffusion of power and capital that defines this age. In short, they look for an American president who can see the world through a genuine pluralist prism.

What they hear, however, is talk of yet another global expeditionary mission driven largely by U.S. foreign and domestic politics. More than a failure of will, intelligence or even strategy, the Obama administration’s foreign policy seems marked by a failure of imagination. This will doom the White House’s attempts to forge a sustainable global alliance.

U.S. President Obama meets in New York with representatives of Arab nations that contributed in air strikes against Islamic State targets in SyriaWhat makes this failure so tragic is the lost opportunity to rethink the design of global partnerships in the midst of an expanding archipelago of diverging power, values and interests. Yet the interests of the key powers are actually more aligned than they appear to be on issues ranging from Syria to the wider Middle East, from Ukraine to East Asia.

What’s needed in each case is a new strategy that begins — and doesn’t end — with consulting all the crucial parties that have a role to play in these conflicts. One that forges a mission in which every country has a stake, no matter how disparate their starting points may be.

Consider: In Syria, only President Bashar al-Assad and Islamic State have an interest in seeing the country destroyed. A return to the policy of creating a transition to broad-based government set out by former U.N. Secretary General Kofi Annan two years ago could still bring together the United States, Russia, Iran and Saudi Arabia.

In the battle against Islamic State, virtually every nation — even those whose financial support contributed to the extremists’ rise — now recognizes that a metastasizing militant group that is highly disciplined and well-armed is a threat to all.

In Ukraine, the polarized positions of both Moscow and the West aside, a basic compromise has always been apparent. It would recognize the reality of Ukraine’s ties to Russia, but enable Kiev to escape the trap of a failed state.

And in East Asia, the rivalry between China and Japan is not one that either side wants to see escalate into war. But the solution requires Washington to act as a “pacific power” that will also recognize the interests, history and values of both China and Japan.

Obama signs America's Promise Summit Declaration in WashingtonAn alliance of diverse, sometimes contrasting, value systems, agendas and national perspectives is no contradiction in terms. Indeed, it is only kind of alliance that reflects today’s fragmenting global landscape — and can summon common purpose among diverse parties.

On Feb. 5, 2003, another U.S. leader, Secretary of State Colin Powell, staked his unique global standing on the claim that Iraqi leader Saddam Hussein possessed weapons of mass destruction. I was in the Security Council chamber that day and vividly recall the contrast between the power of Powell’s rhetoric and the weakness of his case — and the gnawing suspicion that he didn’t believe his own words.

What the United States lost on that fateful day — and in the calamitous war that followed — was the benefit of the doubt. Recovering that singular global asset may be possible. But turning back the clock to a world of unipolar dominance is not.

Pluralism remains America’s strength at home. A new diplomacy of pluralism can be America’s strength abroad. But only if Washington has the confidence and imagination to abandon, finally, the costly illusion of unipolarity and embrace the opportunity to lead as first among equals.

PHOTO (TOP): President Barack Obama chairs the U.N. Security Council summit in New York September 24, 2014. REUTERS/Kevin Lamarque

PHOTO (INSERT 1): President Barack Obama meets in New York with representatives of the five Arab nations that contributed in air strikes against Islamic State targets in Syria, September 23, 2014. Sitting next to Obama are Secretary of State John Kerry and U.S. Ambassador to the United Nations Samantha Power. REUTERS/Kevin Lamarque

PHOTO (INSERT 2): Former Secretary of State Colin Powell stands over President Barack Obama during the signing of America’s Promise Summit Declaration at the White House in Washington, September 22, 2014. REUTERS/Kevin Lamarque

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Putin’s action is no surprise Fri, 28 Mar 2014 18:08:26 +0000

Surprise is the least forgivable sin of statecraft. Yet nothing has so characterized the Ukraine crisis as the West’s continuing surprise at Russia’s behavior.

The past 30 days have provided almost daily reminders of the deep disconnect between Western expectations of what statecraft would — and ought to — look like in the 21st century, and the reality of how the Kremlin seeks to assert its interests in the world.

From the outset of this crisis, the West consistently underestimated the strategic significance of Ukraine, and Crimea, to Russia. The West also assumed that the threat, and subsequent reality, of economic sanctions would alter Russian President Vladimir Putin’s strategic calculus. One month later, Russia has irreversibly annexed a region of Ukraine and left the West divided and floundering in its response.

That Putin may have won a short-term victory at the cost of a long-term defeat by setting every European country on a path to energy independence from Russia should be small comfort to the United States and European leaders meeting in Brussels this week.

If this were merely a matter of misreading the moves and motivations of a declining great power whose economic vulnerabilities are as severe as they are structural, the annexation of Crimea could be considered a mere geopolitical nuisance. At its root, however, this failure is rooted in a dangerous vanity about the West’s inevitable dominance — and an illusion about a global acceptance of its norms and forms of economic and political governance.

To believe, therefore, that the remedy is a question of better intelligence or information about the decision-making dynamic in the Kremlin is to focus on symptoms rather than causes. It is also to assume that Putin, or even Russia, are exceptions to an otherwise coalescing global environment — when they are more likely canaries in the coal mine of a fundamentally fragmenting geopolitical landscape.

The West consistently misjudged Putin’s economic pain threshold because we assume a global convergence to its political norm threshold. The Russian leader, and many other leaders around the world, have neither the personal motivation nor the domestic constituency to sustain such a choice.

A real — as opposed to idealized — map of the new geopolitical world would shine the light on capitals as diverse as Tokyo, Brasilia, Riyadh, Delhi, Beijing, Ankara and Bangkok and reveal an emerging archipelago of diverging politics, economics and ideals of governance. With such a map — however unwelcome and unfamiliar it may appear — decisions driven by historic grievances, nationalist rivalries, unrequited respect, elite interests and a deep desire to chart a course independent of the dominant Western narrative will seem rather less surprising.

Davos was set alight earlier this year by the offhand comparison offered by the Japanese Prime Minister Shinzo Abe between the origins of World War One and today’s tensions between his country and China. What should have garnered as much attention was Abe’s absolute, and almost casual, defense of his visit to the Yasukuni shrine — which honors Japanese sacrifices in World War Two and serves as a searing reminder to the Chinese of Japan’s reluctance to acknowledge its record of aggression and atrocities in those years. A Western audience obsessed with its own centenary memorials had little to suggest by way of a 21st dialogue between Asia’s two giants marching to an increasingly nationalist drum.

Turkey’s once-heralded example of democratic politics in a modernizing, economically successful Muslim country straddling the borders between Europe and Asia is coming undone in a struggle at once personal and structural.

At one level, what might be considered a case of severe Putinism seems to have struck Prime Minister Recep Tayyip Erdogan — who, despite winning successive elections, appears determined to destroy his own legitimacy through a series of power-grabs. On another level, however — and one that may, again, surprise the West — there are indications that Erdogan’s AK Party may well snatch victory from the jaws of defeat because it is convincing more and more Turks that the only thing worse than its own overreach is a takeover by the state by the shadowy Gulenist movement.

Throughout the Middle East, a counter-revolution to the Arab Spring, led by the region’s monarchies and military governments, is taking hold, from the Gulf to Egypt. Beneath the surface of a struggle for democracy among the region’s youth, a more fundamental decision has been taken by the West’s allies to destroy the Muslim Brotherhood at all costs.

To these leaders, the Brotherhood poses the true existential challenge to their future hold on power — far more than Iran, or Israel, or even the Sunni-Shi’ite divisions. Western voices warning about the danger of extinguishing a place for legitimate politics in these societies — and the risk of creating a monster of extremism far greater through unrelenting repression — is falling on deaf ears.

Further east, India’s impending elections are likely to bring to power a leader in Narendra Modi whose core appeal — whatever protestations to Western visitors — is a nationalist and often chauvinist Hindu interpretation of his country’s identity at home and purpose abroad. In Brazil, meanwhile, an increasingly embattled government led by Dilma Rousseff had to resort in September to cancelling a state visit to the United States — after revelations that the National Security Agency had monitored her personal communications — in pursuit of domestic support rooted in resentments of U.S. overreach.

What all these seemingly disparate developments have in common is a simple, but significant, characteristic: governments both allied and adversarial toward the West are increasingly making strategic choices in direct opposition to its values and interests.

In his 1909 work The Great Illusion, Norman Angell argued that in an age of economic interdependence, war’s futility made it unlikely, if not impossible. A century later, the great illusion has been that a contested, deeply divergent geopolitics couldn’t co-exist with the interdependence of global capitalism and modern technology.

What we now have to recognize is that those tools of 21st globalization are acting as the very enablers of an archipelago world of fracturing power and identity.

Last summer — nine months before Putin’s annexation of Crimea and the subsequent sanction of persons and entities explicitly identified as associated with the Russian president — a senior Russian diplomat told me that Moscow would always retain strict control over the country’s high-tech industry. Why? Because they had to be ready for the day when they would be sanctioned by the West.

The Kremlin is not alone among non-Western governments in planning for a contest of power and security defined far more by global divergence than convergence. It’s time the West started doing the same — and then avoid finding itself quite so often in the role of a startled bystander to global events.


PHOTO (TOP): Russian President Vladimir Putin (front R) meets with newly appointed high-ranking military officers during a ceremony in Moscow’s Kremlin, March 28, 2014. REUTERS/Alexei Druzhinin/RIA Novosti/Kremlin

PHOTO (INSERT): Russia’s President Vladimir Putin (L) and Turkey’s Prime Minister Tayyip Erdogan chat following a news conference in Istanbul, December 3, 2012. REUTERS/Murad Sezer




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How to win the vote — and the war — on Syria Tue, 03 Sep 2013 21:00:27 +0000 President Barack Obama’s surprise decision to seek congressional authorization for punitive cruise missile strikes against Syrian government targets presents the West with a perhaps final opportunity to align rhetoric with reality, and policy with purpose, in its response to the Syrian civil war.

The bad news is that the White House, by gambling on its ability to convince a recalcitrant Congress to go against an isolationist public mood, has opened itself up to the very real possibility of defeat as its opponents will seek to embarrass what they consider a reluctant, irresolute Commander-in-Chief. The good news is that that path to winning the vote in Washington is paved with setting out a new and credible course for a diplomatic solution to the crisis that can justify an act of war.

This is not the contradiction in terms that the debates in Western capitals to date might suggest. If anything, the complete absence of a definition of strategic success is the single most important source of the disarray that defines the status quo. The schizophrenia at the heart of Western policy to date was on full display throughout the shambolic events in Westminster and Washington over the past week. The failure of David Cameron’s government to win a parliamentary mandate for action, and of the Obama White House to carry through promptly on its red line rhetoric was, in truth, far less about the poisonous legacy of the Iraq war than about the lack of answers to the most basic questions regarding the use of force in Syria.

What are the “strictly limited” cruise missile strikes intended to achieve, besides a vague and inherently intangible attempt to “uphold international norms” — even as they would constitute a clear violation of the U.N. Charter? What do we expect the strikes to have done to the balance of power in the civil war once the dust settles? Is there any evidence to suggest that such pin-prick attacks will change the strategic calculus among Assad’s top generals — the only real threat to his rule? The uncomfortable reality is that no one seems to know, or even care very much — as long the West is seen to have “done something.”

Two years after the beginning of the conflict — and countless lost opportunities to create the genuine global coalition for a political transition in Syria later — the unspoken prevailing sentiment among Western security and intelligence officials is that the only outcome worse than Assad prevailing in the civil war is a victory by a rebel coalition increasingly judged to be dominated by extremists and jihadists whose model for a future Syria looks a lot more like Taliban-era Afghanistan than a pluralist democracy. But to assume that a bloody, deteriorating stalemate between two scorpions in a bottle is the best of a series of bad options mocks our ostensible concern for the people of Syria, ignores the risks of further regional instability and, most importantly, misses the opportunity — even at this late hour — to forge a global alliance for change in Damascus, and an end to the war.

Before this can be done, however, two things are necessary. First, there must be an end to the amateurish U.S. insults directed at those members of the Security Council whose support and engagement is required to achieve a united front against the Assad regime. Until now, this behavior has had the predictable consequence of hardening their opposition to Western policy — even after the regime’s criminal use of chemical weapons — and has left Assad with little to worry about regarding genuine pressure on the pillars of his regime. Second, U.S. and UK officials should go back to the drawing board of strategic interests in the Syria conflict — their own, and those of the key members of the Security Council — where they will discover that there is a great deal more that unites the key powers than divides them.

Neither Russia nor China — the key obstacles to effective Security Council pressure on Assad — wish to see Syria descend into a jihadist haven; they both want a stable government that is considered legitimate and accountable to all parts of the fracturing Syrian polity; they want to avoid another break with the West over the use of military force in the Middle East in violation of the U.N. Charter; they both want to have a say in the future design of a region that is critical to global security.

All of this was clear more than a year ago, when the then-U.N. and Arab League envoy Kofi Annan succeeded in persuading all members of the U.N. Security Council to back his Geneva communiqué calling for a negotiated political transition to a new, broad-based and representative government in Syria. At the time, these efforts were derided by Western hawks and liberals alike as offering succor to the Assad regime whose days were allegedly numbered.

Well, tens of thousands of civilian casualties later, with the destruction of Syria as a viable state nearly complete, and a vital taboo against the use of chemical weapons grossly violated, the Obama administration may recognize that the only thing worse than having to engage in the difficult, often unpalatable give-and-take of great power diplomacy is to have to go it alone, with little prospect of success in achieving anything but the most symbolic and fleeting result.

In the kind of grim irony that only history provides, this week’s G20 summit in St. Petersburg — hosted by none other than Vladimir Putin — offers the world what may the last chance to bring Syria back from brink of a cataclysm. Not only will the permanent members of the Security Council will be present, so will a number of other key regional and global actors. If John Kerry can take a respite from his recent outing as Obama’s Secretary of War, then the the able, shrewd and experienced U.S. Secretary of State should focus all his efforts on crafting a diplomatic strategy to unite the international community.

All of this will be deeply unpalatable to a proud and often self-congratulatory Obama administration: compromising, as in any genuine negotiation, on some of its key priorities; permitting Russia and China to have a serious stake in the region’s future; agreeing to a transition that allows members of the current regime to have a role, without which they will have no incentive to abandon Assad; broadening the negotiating table to ensure that all relevant outside actors, including Saudi Arabia and Iran, have a stake in a new governance structure for Syria. But if the foreign policy legacy of the Obama administration is to be about more than “bearing witness” and “sending messages” amidst the Middle East’s historical upheavals, the hard work of diplomacy must now be done in order to win the vote — and the war.

PHOTO: U.S. President Barack Obama speaks about Syria next to Vice President Joe Biden (L) at the Rose Garden of the White House August 31, 2013, in Washington. REUTERS/Mike Theiler

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Turkey’s crisis is not about Erdogan Fri, 14 Jun 2013 19:29:28 +0000 The decision by Turkish authorities to send the riot police in to clear Taksim Square — while expressing a more conciliatory tone in a meeting between the prime minister and a delegation of Taksim activists — is a high-stakes gamble at a moment of genuine vulnerability for the country. However, the thinly disguised glee with which the protests against the prime minister’s domineering rule have been met by observers in the West is as politically shortsighted as it is strategically misguided. That Recep Tayyip Erdogan has brought much of his recent troubles on himself — with his imperial manner and his government’s creeping encroachment on the civil and political liberties of his citizens — is evident even to many of his supporters. He and his thrice-victorious party now have an essential task of dialogue and engagement ahead of them, in order to ensure that what remains a fairly limited protest movement does not escalate further and undermine the momentum enjoyed by the Turkish republic.

For the West, however, two equally important tests have presented themselves: can it calibrate its concern for domestic political liberties in Turkey with an adequate appreciation of the economic and geopolitical value that the country provides? And is it willing to accommodate more generally — and more lastingly — an alternative model of a globalized, economically thriving democracy that nevertheless ascribes profound value to its religious and cultural heritage?

For all his success and standing, Erdogan was never, in the minds of most Westerners, “our kind of leader.” Proudly Muslim; resentful of the casual and damaging racism long directed at his country and his people by a standoffish Europe; and fiercely nationalistic in his attempt to carve out a Third Way of Islamist capitalist democracy, Erdogan’s success was often seen more as a rebuke to the West than a welcome demonstration of a Muslim society’s ability to combine modernity with national identity, religious devotion with commercial vibrancy, NATO membership with an independent foreign policy.

It is a measure of the still-resilient illusion of a Western-defined process of globalization that the right kind of emerging markets leaders — and their politics — should look and sound like ours. Well, Erdogan doesn’t and won’t. Nor did Lula of Brazil. And nor will President Xi Jinping of China, something made plain under the surface of pleasantries at last weekend’s summit with President Obama.

The Turkish model was never as flawless or widely applicable as its proponents made it out to be. Tarnished, however, as it is today by over-zealous police enforcement in the streets of Istanbul and the arrogant reaction of a bewildered leadership with a sterling record of electoral success and economic growth, the danger is that the world now loses sight of just how valuable Turkey’s example remains to global politics as well as economics.

It is not simply a matter of Ankara succeeding in tripling GDP per capita; or repaying Turkey’s $23.5 billion debt to the IMF amidst a global economic crisis; or transforming Istanbul into a hub of global trade and investment, and overseeing the emergence of a Turkish banking and corporate sector whose resilience and vibrancy is the envy of much of the world.

Across a range of issues critical to Western security and geopolitical interests, Turkey is playing a role that is often far more constructive than many of our so-called allies in the wider region. From Syria to Iran to Iraq to Lebanon — and even most recently Israel — Ankara has pursued a carefully balanced strategy that has sought to preserve its strategic independence with a desire to end the conflicts and tamp down — rather than inflame — the sectarian tensions that threaten to unleash a whole new level of regional conflagration. That Erdogan’s government, at the same time, has launched a domestic political dialogue with the country’s Kurdish separatist movement is testimony to a vision of inclusive, pluralist politics that every ally of the West in the region could learn from.

Ultimately, however, this crisis is not about Erdogan — and for the West to treat it as such is to mirror, fatefully, the prime minister’s own inability to distinguish his personal power from his party’s record of delivering broad-based prosperity. Rather, this is about the importance of sustaining Turkey’s emergence as a successful capitalist, emerging market democracy — and understanding that it will continue to chart its own unique path to that destination.

In its eagerness to cut Erdogan — and his vibrant, politically legitimate, independent-minded, and remarkably successful state — down to size, the West is tempting a very real case of “be careful what you wish for.” Two years ago, at the time of Hosni Mubarak’s fall as the Western-backed dictator of Egypt, a curious lament was heard in the same corners of Western opinion that now are cheering Turkey’s troubles: that Egypt could go the way of Turkey. We — and the Egyptians — should be so lucky.

PHOTO: An anti-government protester gestures in Istanbul’s Taksim Square June 14, 2013. REUTERS/Yannis Behrakis

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Uncertainty is not going away Thu, 08 Nov 2012 17:51:19 +0000 This week, within the space of 48 hours, the United States elected its next president and the Chinese Communist Party will convene in Beijing to begin the formal handover of power to the next generation of its leadership. To many, this pivotal transition point for the world’s two largest economies holds out the promise of deliverance from the specter that’s been haunting decision-making ever since the collapse of Lehman Brothers four years ago: the specter of “uncertainty.” If there is a phrase that CEOs, politicians and investors use more often to explain everything from poor performance to halting growth to lack of investment and a reluctance to boost hiring, it might just be its near-cousin, “volatility.”

The reality, however, is that the long-awaited, much-desired “certainty” is a mirage. Uncertainty and volatility, in economics and politics, are now as permanent to the macro landscape as competition, resource scarcity, disruptive technology and the race for talent. Leave aside the false nostalgia for a certainty of outlook that never quite was – or, rather, for a kind of uncertainty that only seemed to surprise on the upside during the years of the great moderation. Ignore as well the fact that uncertainty and volatility too often are used as synonyms for the structural challenge of the long period of deleveraging still facing major Western economies. No election in the United States, and no leadership change in China – however orderly, pro-growth, or politically decisive they may be – can reverse the structural shift towards uncertainty in the global macro environment.

It is a shift that is defined not just by a range of geopolitical tail risks as diverse as they are potentially consequential: a war between Israel and Iran over Tehran’s suspected nuclear weapons program; the deepening radicalization of nuclear-weapons-armed Pakistan at every level of its pulverized society; the rising tide of nationalism in East Asia threatening conflicts across multiple boundaries; the danger of far more paralyzing cyber-attacks on state and private sector organizations; the as-yet-to-drop second shoe of the Arab Awakening in the Gulf states (including Saudi Arabia) pivotal to global energy markets.

Nor is it merely a matter of economic uncertainty emerging from the still-unresolved question of whether the euro zone will manage to make its sovereign debt good through the unlimited financial commitment of its Central Bank, and the unwavering political commitment of its paymaster in Berlin; or whether the hollowing out of the moderate center in the U.S. political landscape will make going over the “fiscal cliff” – even at the cost of a 3-4 percent contraction in GDP – the better bet for a deeply polarized system; or how China’s prudent management of its next period of growth can be reconciled with a creeping oligarchy that threatens to render the all-important allocation of state capital irreversibly corrupted by personal elite interests.

Even if these geopolitical and geo-economic uncertainties were to be reduced or removed, two historical shifts would continue to multiply the variables affecting the macro landscape for investors and businesses. First, the proliferation of a diverse range of states and entities with sufficient economic and political power to affect the global agenda means that there is far less predictability and transparency in the international system. Second, the rise of state power in developed as well as developing countries has made the nexus of business and government the decisive one, with far greater policy event-risk in the markets as a consequence.

To say that uncertainty and volatility will be with us for the foreseeable future is not, however, to imply that paralysis is the only response. Recognizing that the oasis of certainty is a mirage should instead result in (at least) three changes in the way decision-making is executed today in both the private and public sector.

First, planning for the long term. It is now widely recognized that short-term thinking – from the obsession with quarterly results to aggressive compensation plans to risky investment strategies – was central to the failure of Wall Street. If you then consider that no amount of shrewd short-term planning can account for the uncertainties and volatilities of today’s global economy, then the imperative for long-term planning becomes overwhelming. Prudent risk-management and the need for institutional resilience both call for the kind of commitment that measures success over decades and not days.

Second, applying what might be termed “macro diligence” to management and investment decisions. In the era of the political economy, it matters greatly if policy-makers, regulators and public stakeholders – from Chile to China – can endorse a corporate agenda and make it sustainable. Today, earning and re-earning the license to operate is not just a challenge for the mining industry – it applies to all industries that today operate under far greater scrutiny. Learning to understand, anticipate and navigate changes in the political, economic, social, legal and regulatory context can reduce unnecessary uncertainty, and provide a framework for responding to changing terms and regulations in an effective manner.

Third, boldness. Leaders still haunted by the chaotic fall-out of the financial crisis need to stop managing for risk and start managing for reward. Yes, that is easier said than done. But if boldness is backed up by a long-term strategic commitments and rigorous diligence at all levels – micro and macro – then the alternative will seem not only irresolute but irresponsible in an increasingly competitive global environment.

So next time you hear a leader in business or politics wheel out the excuse of “uncertainty,” ask yourself if he or she has been wandering the desert timid for too long, and if you need to look elsewhere for leadership in turbulent times.

PHOTO:  A view shows newspapers with Barack Obama winning the U.S. presidential election on their front pages, at a news stand in Times Square, New York November 7, 2012. REUTERS/Chip East

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Let’s end the empty talk about Syria Tue, 05 Jun 2012 19:00:52 +0000 In every conflict, there are clarifying moments of horror, episodes that cast into stark relief the reality of the forces at work and the complex obstacles to peace. The massacre of Al Houla, where more than a hundred civilians were murdered with savage intimacy, is such a moment in the Syria crisis – but not for the reason that you may think. It will not trigger an air war or an invasion; it will not lead to the forcible removal of the Assad regime by Western troops; and it will not tip the balance of choices among the regime’s supporters. Syria has now entered a cavern of civil conflict from which there is only the slightest of hope of escape – and achieving it requires a far more honest reckoning with the realities of power, and the West’s strategic priorities, than is currently on display in the Western debate over intervention in that country.

The Assad regime is a predatory, deeply illegitimate entity that will stop at nothing to retain power. It needs to go, one way or the other, sooner rather than later. To say this, however, is the easy part. There is little moral or strategic accomplishment in such a declaration – though you’d imagine otherwise from the bombast and bluster with which the end of the regime has been urged by Western politicians, diplomats and commentators. Far more difficult – and therefore carefully and comprehensively dodged by the self-appointed avatars of Western conscience – is constructing a credible way to transition power in Damascus to a broad-based government in the absence of the use of force.

From the criticism of Kofi Annan’s mission expressed by some commentators – and the damning with faint and cowardly praise heard from the very Security Council members who pleaded with him to take on the role as envoy – you’d imagine that the former United Nations Secretary-General and Nobel Peace Prize winner is the only thing that stands in the way of a blossoming democracy in Damascus. The truth is almost certainly the opposite. When the Security Council went to Annan 14 weeks ago and asked him to set aside his philanthropic activities in Africa to take on this perilous mission, nearly a year had gone by with the world condemning the crackdown in Syria – all to no effect. The world, including the United States, was out of options – and out of ideas – when it turned to Annan to create a process that would seek an end to the killing in Syria.

What Annan did by creating his six-point plan was, in reality, to pave the path for Assad’s exit. Either, on the one hand, Assad would be forced by intense, creative diplomatic pressure backing Annan’s diplomacy to accept and implement the six-point plan – and in that case, the only logical conclusion to a proposal that calls for a broad-based rule would be a new government in which Assad, by definition, would have no place. Or, on the other hand, Assad would maneuver and manipulate his way around the plan’s demands, and thereby unleash the kind of sectarian fighting that his minority clan will win only until the day it loses, and then gets destroyed. So far, both sides have played their predictable roles: Western powers unwilling to think beyond conventional ideas in their attempts to apply material pressure on the regime; and Assad, dogged and deeply delusional, maintaining his fantasy of an elected government in Damascus besieged by a jihadist-Western conspiracy.

If Assad is unlikely to change his stripes, it is high time for the West to engage the conflict on terms that reflect the complex requirements of a successful removal of Bashar al-Assad from power. What Assad recognizes, first of all, is that there is zero appetite in Western capitals, or the Middle East, for an armed intervention in Syria of the kind we saw in Iraq or Libya. He knows that Russia will continue to block the legal foundation for enforcement action in the Security Council as long as he’s offering them a better deal than the West is prepared to do. And he understands that as long as the West looks to the external opposition for coherent leadership of the transition he can sleep easy in his bed.

To achieve the fundamental aims of the international community in Syria – an end to the bloodshed and a transition to a broad-based, legitimate government – the West will have to reverse its approach on all three fronts. On the matter of military intervention, empty talk that does little to frighten Assad – and a great deal to alienate critical members of the Security Council, such as Russia and China – needs to stop. To shift its position, a Russian state that has little love for Assad and greatly fears the salafi-jihadist aftermath of a Syrian civil war requires genuine engagement on its core interests: stability in Syria and a say in the country’s future commensurate with the West’s. Finally, the external opposition has to be understood as incapable of achieving the organizational coherence or domestic legitimacy to lead the transition.

The answer, if there is one short of all-out war, is to focus on the pressure points at the top of the Alawite security structures, whose calculation of their balance of interests has not been sufficiently altered by the diplomacy of the past 14 months. Beneath the surface image of a brutally successful regime set on prosecuting a war on its people, there is in fact a highly dynamic situation, with fluid shifts in power within the country and among interests outside, making this a moment of opportunity. Rather than focusing on a transition process in the hands of the opposition, all efforts must now center on bringing the Russians along to create a united international message to the Alawite elites: Distance yourselves from Assad and his immediate circle of henchmen and you will be part of a transition that keeps the army, and other Alawite centers of power, at the table in the design of the new, multi-party, governance of Syria.

If the Annan plan “fails,” or “has failed,” as pundits are falling over themselves to declare, it will be because the Security Council powers, and the United States in particular, did not will its success. He is their envoy, appointed to carry out their mandate, and no ruler is better placed than Assad to call a Western bluff when he sees it. The pillars of his rule – those whose betrayal is the only sure path to Assad’s speedy end – will know when Annan’s diplomacy is backed by a united council determined to effect a change at the top. There are, in other words, today two ways to see the end of the Assad regime: either by giving the Annan mission the backing it needs to make clear to the people around Assad that their survival is incompatible with their leader’s continued hold on power; or by way of a vicious civil war that will see many more Houlas yet before Syria’s people have the prospect of living without fear in their own homes.

Diplomacy, more often than we’d wish, is a matter of limited, available alternatives. For Syria, there is no deus ex machina, no intervention force waiting to provide a clean removal of the regime in Damascus with the simplicity or speed than anyone would like. This is, at heart, a profoundly Syrian conflict of power and survival – it started in the streets and alleys of Syria, and it will end there. The real tipping point in Syria still awaits – the day when a small group of men around Assad’s command center look each other in the eye and conclude that a bullet to his head is the only way to save their own. What remains is one last chance to avoid an all-out civil war whose consequences are unpredictable except in one respect: that we will all look back on this time and ask ourselves why more wasn’t done to support and sustain the one diplomatic strategy designed to shift the elite’s allegiances, and negotiate the transition away from Assad’s ruinous rule to a new, legitimate, government in Syria.

PHOTO: Anti-government protesters hold signs as part of a funeral procession for Yaser Raqieh, whom protesters say was killed by forces loyal to Syria’s President Bashar al-Assad, near Hama, June 5, 2012. REUTERS/Handout

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China’s war of the oligarchs Mon, 23 Apr 2012 19:30:13 +0000 The death of an Englishman in Chongqing has acquired all the intrigue of a John le Carré novel with none of its charms. Despite the occasionally romantic descriptions of the disgraced leader Bo Xilai as a charismatic man of the people challenging the prerogatives of Beijing’s bureaucratic leadership, this is a story without heroes, in which no one’s hands are clean. For all the elements of murder, mystery and missing fortunes occupying the Western press, in China today the focus of the country’s political and economic leaders is on the cascading power struggle that is in progress and what it holds for the future management of the world’s second-largest economy.

A year of leadership change that should have been defined by a smooth, almost seamless transition is instead shaping up to be a turning point in the direction – and ownership – of the political economy of China. Two years of plotting, positioning and maneuvering on the part of tens of thousands of party officials have been thrown into disarray by Bo’s fall, with few now confident of where their allies and masters will find themselves at the conclusion of this upheaval. Combine this with the unresolved elite debate about the cause of China’s economic miracle – the process of reform and liberalization, on the one hand; or, on the other, the still-powerful grip of the state on the means of production – and what you have are all the elements of a perfect storm for the Chinese Communist Party.

Beneath the past month’s surface impression of a resilient party able to manage with speed – and unprecedented candor – the exit of one of its princelings, two visions of China’s future are battling it out more fiercely than ever, in Beijing and throughout the provincial capitals. On one side is a movement, often but inaccurately described as “neo-Maoist,” led by Bo Xilai’s faction and dedicated to maintaining the dominance of the party in the service of the masses left behind by the rapid growth in the major cities. On the other, closely identified with outgoing Premier Wen Jiabao, is the faction dedicated to accelerating economic and political reform designed to ensure long-term sustainable growth. What they share, rhetorically, is a commitment to addressing rapidly widening income inequality. What the factions share, equally, is a reputation for corruption and family privilege of immense proportions at their leadership levels.

What to date has distinguished China’s rise from, say, Russia’s, has been a generation-long elite social compact where the wider interests of the state enjoyed at least equal priority with the personal financial interests of those guiding it. The danger is that an oligarchy – however discreet, distinctive and still grounded in the party’s program – will tip the balance of decision making decisively toward an irreversibly corrupted political economy. It is one thing for technocratic managers faced with the immense challenge of guiding China toward a consumption-based economy to make errors of capital allocation in good faith. It is quite another if, for example, the 10th commercial airport in Shanghai is built because a princeling member of the leadership stands to gain a personal fortune from the investment.

To this pivotal question, the answer does not lie in which faction of the Politburo – Wen’s or Bo’s – prevails. Yes, China must continue to integrate itself carefully into the global economy. What will matter far more, however, is to prevent the capture of the state by leaders devoted more to their own and their families’ interests than those of the hundreds of millions of Chinese still living in poverty. In the meantime, the struggle for power is paralyzing decision making across a vast range of centers – even to the extent that some observers now believe it to be contributing to the economic slowdown in ways that are outside central control.

China’s leaders know what they don’t want – Western-style liberal democracy. They remain profoundly unresolved about they do want by way of a central organizing principle for their state. In the absence of decisive leadership, the vacuum is in danger of being filled by the acquisition of oligarchical power that will be extremely difficult to reverse.

A deeply consequential reordering of Chinese politics has begun – and the path to a new equilibrium will be defined by a struggle for personal power and privilege as the vision of the ultimate destination. For investors, diplomats and analysts accustomed to weighing endlessly the quantitative evidence of a hard or soft landing for China’s growth story, this is the “landing” that ultimately will matter.

PHOTO: China’s former Chongqing Municipality Communist Party Secretary Bo Xilai (C) stands with students as they pose for group photographs during an award ceremony for Chongqing primary and secondary schools speech contests in Chongqing, December 26, 2009. REUTERS/Stringer

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In the Middle East, a bonfire of alibis Mon, 27 Feb 2012 19:45:26 +0000 Syria can set fire to Lebanon at the wave of a hand. Hezbollah can be ordered into battle with Israel at the command of a call from Tehran. Lebanon’s sectarian politics are a plaything of outsiders whose every whim determines the fate of the country. These are among the conventional wisdoms that have long held the fate of Lebanon hostage — assumptions as widely held within the country as outside it. But a closer look suggests that it is high time these preconceived notions are challenged — not because they lack a basis in reality, but because they are rooted as much in what the country’s enemies, from Damascus to Tehran, wish to be the dominant narrative as what the far more complex conditions on the ground merit.

Today, as Syria’s civil war gains speed and severity, and the crisis of Iran’s nuclear program escalates by the day, Beirut is holding its breath — too fearful and too scarred by a war-torn history to imagine anything but the worst-case scenario. And yet, the reality as acknowledged by a growing number of Lebanese observers is more complex. If Assad really could create the distraction he needs from renewed conflict in Lebanon with such ease, would he not already have done so? If Hezbollah is nothing but an arm of Iran’s forward defense, would it not have been the first agent called into action, as opposed to Tehran’s other alleged responses — from the plot to assassinate the Saudi envoy to Washington to the recent attacks on Israeli diplomats in Delhi, Bangkok and Tbilisi? As Tom Fletcher, the British ambassador to Lebanon, pointed out to me on a recent visit to Beirut, just as Sinn Fein and Hamas discovered in their time, Hezbollah’s role in the current government means that it is having to make compromises and shift from the comfortable politics of opposition.

What is true of Lebanon is true too — and far more consequentially so — when the conventional wisdom about the aims and motivations of the region’s other players are examined. At this moment of looming conflict with worldwide implications, it is time to give far greater scrutiny to the claims made by the principal protagonists about the merits of their policies — and the ways they diverge from the global interest in the security and stability of the region. This is most evidently the case with the threat of Iran’s nuclear program and the trade-off between war and containment that ultimately faces the international community.

Iran claims that it is pursuing a purely civilian interest in nuclear technology and that as signatory to the Non-Proliferation Treaty it is being held to an unjust double standard. The reality is that Iran has done little to reassure the outside world of the accuracy of this assertion and that much evidence exists to the contrary. As a repressive, deeply illegitimate regime, Tehran is using all the levers available to it, conventional and unconventional, to sustain its power and destabilize its enemies as it seeks to overwhelm its own popular uprising that began, but did not end, with the 2009 Green Movement.

Israel insists that Iran’s nuclear weapons program represents an existential threat from a regime that would seek its destruction. The reality is that this assumes the regime is not only homicidal, but suicidal. An Iranian nuclear deterrent would in reality represent a change in the regional balance of power away from Israel’s near-total military dominance over its neighbors, a prospect that it may find only slightly less concerning. That the question of Palestine is pushed further to the back burner of the global agenda is to Jerusalem a secondary, but not insignificant, benefit of the global focus on Iran.

Saudi Arabia and its Gulf Cooperation Council allies — cheerleaders as avid of a military confrontation with Iran as Israel these days — allege that Iran is the font of a rising, revolutionary “Shia crescent” that will upend the entire region. The reality is that the Gulf Arabs — with U.S. backing — have come to enjoy a dominance of the Persian Gulf unattainable in the days of the Shah and are using the very real threat from Iran to divert attention from their own domestic economic and political deficiencies. If Iran is able to stoke Shia rebellions in Bahrain and Saudi Arabia, it may have something to do with the fertile ground created by the policies of the regimes toward their minorities.

Behind all these claims and pretexts, excuses and diversions lies the expectation that the United States, backed by Europe, will have to finish a war that Israel may start and the Gulf Arabs will quietly endorse. For this reason, if no other, it is incumbent upon the friends of Israel and the Gulf Arabs to engage them more creatively on their legitimate security concerns — acknowledging the very real challenge of containing a regime in Tehran that is an enemy to its own people as well as to the world’s interest in avoiding a nuclear arms race. These friends need to call their bluff on seeking support for agendas that are at best unique to their narrow interests and at worst destructive to the wider aim, which is to ensure that the challenge to Iran’s nuclear program doesn’t metastasize into a military conflict with little prospect of achieving longer-term security. This is not — or shouldn’t be — a matter of the West’s commitment to ensuring the security and stability of key allies in the face of a rising threat. It is — and must be — about applying the necessary judgment on the utility of force, and the potential for containment, when no good option exists.

Ten years after the war in Iraq was set in motion — an immensely costly war variously justified on the grounds of Saddam’s WMD, his support for Al Qaeda, the certain welcome of his long-oppressed people and the transformation of Iraq into a beacon of democracy — it is well worth re-examining the claims made by the region’s interested parties about the need for another war in the Persian Gulf. When it comes to the Middle East today, a bonfire of alibis is overdue. There is no time like the present to strike the match.

PHOTO: Demonstrators burn a poster of Syrian President Bashar al-Assad during a protest in Al Mazaa, Damascus, February 12, 2012.  REUTERS/Handout

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The elephants in the Davos ski lodge Tue, 24 Jan 2012 16:53:33 +0000 The epic global shifts of 2011 transformed the political, economic, and social landscape from Shanghai to Sao Paolo, Washington to Cairo. No leader (not even Vladimir Putin) is safe from the vagaries of social unrest; no economy (not even China’s) is unaffected by contagion from an over-leveraged, under-managed euro zone. No country (not even the United States) is immune from the threat of asymmetric attacks—anything from a terrorist bomb to cyber-warfare.

Volatility will be the rule, not the exception in 2012. What I call the emerging Archipelago World of fragmenting power, capital, and ideas is inherently unstable— as vulnerable to old conflicts and new threats as it is open to the dynamic entrepreneurship of rising powers and corporations remaking the map of the world.

A 20-year period of one-world, one-way globalization is being replaced by an era of competitive sovereignty. The walls are going back up. Developed and developing states alike are vertically integrating political and economic interests across public and private sectors in a global race for growth, employment and security.

Having previously embraced interdependence as the motivation for horizontal integration across markets and regions, states as diverse as Canada, Finland, Saudi Arabia, Japan, Brazil, Turkey and the United Kingdom are now pursuing more national strategies for economic and political security. For investors, corporations, and governments doing diligence on their global exposures, acknowledging this new reality is an essential starting point. Forget stability and predictability. Abandon the notion of global solutions to global problems. Instead, develop deep, granular understanding of the distinct political and economic context of new markets. Seek cooperation and alliances of interest, beginning with the discreet interests of these states and their economies. Embrace complexity, and understand that the successful management of political and economic discontinuities will be the essence of stability in the 21st century.

Four themes are likely to dominate the environment in which global investors, companies and institutions will seek to limit the downside to risk and capture the upside to volatility in 2012.

A global reset

A new strategic landscape will take form amid a global reset marked by leadership change in China and national elections in the United States, Russia, and a halfdozen other pivotal powers. The systemic banking crisis in the euro zone will force Berlin and the European Central Bank to pick their poison—and either become a sovereign lender of last resort or see the 27-member ECB’s dreams of fiscal union evaporate. For the Middle East, the second year of the Arab Awakening will begin under a cloud of increasing peril and paranoia. The movement for more legitimate and accountable governments in the Arab world will be tested by the still-powerful forces of tyranny, corruption, and fundamentalism—a scenario that will further draw in Israel, Iran and Turkey as strategic arbiters of the region. For the global economy, 2012 will likely see continued disarray, with the gap between the debtor and creditor nations of the world likely widening.

War over a nuclear Iran

The Middle East, more than any other region, gives validity to the old joke that even paranoid schizophrenics have enemies. Add to the very real perils arising from deeply divergent interests of Arabs, Turks, Persians, and Israelis heightened paranoia about Iran’s nuclear program. Gulf countries are as concerned about Iran’s meddling in their internal affairs as they are about its nuclear ambitions. Combine this with Israel’s growing fear of Iran reaching a point of no return in its nuclear weapons program and the stage is set for a confrontation— whether planned or accidental— in 2012. Non-military options for halting Iran’s nuclear weapons program have not yet succeeded, nor have they failed. However exasperating the diplomatic track may seem, growing talk of a military option risks creating a logic all its own.

Nationalism, populism, and protectionism

A fragmenting map of the world provides, in even the best of times, an opening for the forces of populism and nationalism, and those movements are coalescing now —from China to the United States to South Africa. Factor in the cyclical deleveraging and austerity in the West, and it is only a matter of time before isolationist politics gain traction.

The best antidote to this lies not in another vacuous appeal to “global awareness,” but rather in setting out the case for why the national interest is best served through a mosaic of regional and global alliances. The countries and leaders now gaining stature on the national stages— from Turkey to Brazil—are those that understand that a sustainable economic strategy begins with delivering growth for the citizens of their own nation first. They see open markets and free trade not as ends in themselves, but as means to broadbased prosperity; they are making reforms to secure greater competitiveness and investment. Down this road lies a messier, more populist, more contingent phase of globalization with beggar-thy-neighbor policies—a spiral of currency wars, capital controls, and tariffs that could accelerate the current contraction through a wave of worldwide protectionism.

Cyber-attack on a global institution

Despite a dramatic increase in the capital and technology devoted to cyber-defense in the West, the threats from new sources of cyber-war are multiplying. The West reveled in the success of its Stuxnet and other forms of cyber-sabotage against the Iranian nuclear program, but it will soon have to face the consequences of the proliferation of these technologies. Governments, terrorists, and even solitary hackers are increasingly amassing the ability to launch a cyber-attack against a Western government or multinational. The real test of an effective cyber-defense will not be “Can you prevent an attack?” It will be, “Can you survive one?”

2012: The world of the state

The burgeoning role of the state in an age of sovereign crises and solutions will be a defining feature of the strategic landscape. The locus of political legitimacy has returned to the nation-state, and as economic and political power shifts to emerging markets, no solution that isn’t both global and national will be successful or sustainable. A new kind of Great Game will be played in 2012—winners will be those states and corporations seeking success irrespective of the traditional boundaries of geography, ideology, interest, or alliances.

PHOTO: A woman cleans chairs in front of logos of the World Economic Forum (WEF) on a podium at the congress center in the Swiss mountain resort of Davos January 24, 2012. REUTERS/Arnd Wiegmann


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