Compass

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

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

The year of the Arab Awakening is drawing to a close with an ominous air of peril and paranoia hanging over the Middle East. A movement of genuine promise for more legitimate and accountable government for the peoples of the Arab world is in danger of being overwhelmed by the forces of tyranny, corruption, fundamentalism and conflict. From Syria to Egypt to Libya, Palestine, Israel and Iran, resistance to peaceful change is manifesting itself in ways new and old – and all in the context of a global re-alignment of power that few in the region yet recognize. Preventing the four central challenges of the Middle East – Iran, the Arab Awakening, Energy Security, and the Israeli-Palestinian conflict – from turning into conflicts with global implications will be a task far more for the countries of the region themselves than at any time in recent memory. For this new reality the parties are almost completely unprepared.

This was confirmed during a visit last week to the Gulf where the collapse of trust between adversaries – as well as allies – was on stark display. Arab leaders expressed as much distrust of each other as they did of their ascendant rivals, the Persians and the Turks. The minimum demands of the Palestinians are as distant as ever from the maximum on offer from the Israeli government. And for a number of regional leaders buffeted by the extraordinary changes forced by popular movements from Syria to Tunisia, a key lesson appears to be lesser, not greater, openness to representative government. The Middle East, more than any other region of the world, gives validity to the old joke that even paranoid schizophrenics have enemies. But to the very real perils arising from deeply divergent interests among Arabs, Turks, Persians and Israelis is now added a degree of heightened paranoia that threatens to multiply the perils with consequences reaching far beyond the region itself.

Critical to understanding the new strategic landscape is an appreciation of the degree to which the United States – since Suez, the arbiter of war and peace in the Middle East – is on course for a long-term disentanglement from the cares and conflicts of the region. While its commitment to Israel certainly – and to its Arab allies less so – long has been more than just a matter of security, it is evident that a Middle East less critical as a source of oil will be one less able to claim the extraordinary expenditure of blood and treasure made by America over the past half-century. As a consequence of technological advances leading to new discoveries and new sources of oil and gas, the next oil shock will likely be one more defined by the growing irrelevance of the Middle East to the United States – however much the region’s ability to disrupt international oil markets will remain.

Energy Security. The estimates of the future U.S. dependence on non-North American sources of oil are as dramatic as they are under-appreciated. The share of U.S. oil imports from both OPEC more broadly and the Gulf, in particular, has collapsed since the 2007-09 financial crisis, replaced largely with Canadian and domestic crude. In 2008, the U.S. imported an average of 2.370 million barrels per day (bpd) from the Gulf and 5.954 million bpd from OPEC as a whole.  In 2010, the average was 1.711 million bpd from the Gulf and 4.906 million bpd from OPEC.

Critically, this is not simply attributable to a cyclical fall in U.S. import demand. Canada alone has exported an average of 2.240 million bpd to the U.S. this year, up from 1.935 million bpd in 2010 and now accounts for approximately double Saudi crude imports. Thus, if U.S. domestic tight oil production touches 2.9 million bpd, and oil sands production increases to 3.0 million bpd by 2020, it could cut OPEC imports by well over half in less than ten years. Conceivably, by 2030, OPEC imports could drop to zero if 2007 daily consumption proves to be a historic high and domestic and Canadian production is increased as projected. (The contrast with China, currently serving more than 50% of its demand through crude imports – a figure that may hit 70% by 2020 – has equally significant consequences for Beijing and its future relations with the Middle East).

Of course, even after departing Iraq and gradually reducing its dependence on Middle East oil, Washington will maintain a substantial force presence in the Middle East, and the capability rapidly to enlarge it as needed. However, the wider context of U.S. strategic repositioning towards Asia, Pentagon budget cuts, and public hostility in host states will challenge this force posture at a time of heightened tensions and uncertainty throughout the region. If the Middle East’s energy security game is in the midst of profound change with dramatic strategic consequences for the future U.S. commitment to the region, so are the dynamics of the region’s political and security challenges.

The Arab Awakening. To appreciate the depth of change in the politics of the Arab world over the past year, it is enough to look at non-Arab Turkey’s leadership role in the management of its current challenges – from Egypt to Libya to Israel and now Syria. Arab leaders are looking with fear and jealousy to the prospect of their region’s politics being dominated by three outsiders – Turkey, Iran and Israel. From Tripoli to Cairo to Damascus, hard-line resistance to genuine representative government is making a self-fulfilling prophecy of the darkest warnings of anarchy and Islamist ascendancy being the winners of the Arab Awakening. Even after the fall of governments in Egypt, Tunisia, Libya, and Yemen, critical momentum still eludes the broader push for change.

Among the monarchies and sheikdoms, the pace and depth of reform are reflective more of an attempt to do the minimum needed to assuage popular sentiment, rather than acknowledging the need for profound changes in the relationship between governed and governors. A bloody endgame in Syria is increasing fears of a sectarian civil war, drawing in outsiders in yet another intervention. An absence of political legitimacy is being joined by a power vacuum, within and among the countries of the region, suggesting that the focus of the regimes in the year ahead will be a defense of the realm at all costs.

Iran. The recent IAEA report on Iran’s nuclear program has triggered another round of speculation about an Israeli attack on suspected nuclear sites in Iran. The Iranian nuclear challenge has been a pre-eminent hard security focus in a period otherwise defined by economic crises and political convulsions. The U.S. commitment to the Libya campaign was circumscribed, in part, by the Pentagon’s priority monitoring of threats – both conventional and unconventional – emanating from Iran. Tehran, of course, maintains that its programme serves solely peaceful purposes, such as power generation and medical research. However, there are widespread concerns over possible military dimensions, particularly when viewed in conjunction with Tehran’s developing missile capability and alleged work on warhead technology.

Paranoia towards the actions of Iran is reaching a fever pitch in the Gulf and Israel. Gulf countries are as concerned about Iran’s meddling in their internal affairs as about its nuclear weapons program (that their own domestic policies towards their Shia minorities are giving Iran fertile ground to meddle in seems rather less appreciated by them). Combine this with Israel’s growing fear of Iran reaching a point of no-return in its nuclear weapons program (something they’ve been warning about since 2005 and one day of course will be true), and the stage is set for confrontation, either deliberate or accidental.

Looking to Iran’s domestic politics, many have questioned whether persistent elite infighting suggest any meaningful regime fragility – particularly in light of the Green Movement’s demonstration of deep and broad opposition to the regime. The reality is likely to be different – and less encouraging of change. A principal source of resilience for the regime has been its ability to apply effectively the lessons of the Shah – his rise as well as his fall. A proliferation of power centres – however much beset by rivalries between the President, the Supreme Leader, the clerical elites, the Revolutionary guards, and the military – share a fundamental fate in having everything to lose from a democratic Iran with an accountable and legitimate government, and everything to gain from sustaining the status quo.

Iran will therefore remain the wild card in the secular trend towards a West less dependent on – and less preoccupied with – the Middle East. Resolving the struggle between Iran’s strategic and tactical interest in a nuclear deterrent and Israel’s in maintaining the existing nuclear balance of power in the region is the one question that won’t be left to the region itself.

The Israeli-Palestinian Conflict. For this perennial crisis of the Middle East, the next year is likely to prove as fraught as ever. With the effective departure of the United States from the negotiations between the two parties, internal as well as external pressure for a final settlement is at a low point. Real perils from Hamas to Hezbollah to Iran combine with a deeply rooted paranoia about the irreducible hostility of Arabs – and now Turks – to the existence of the Jewish state to strengthen hard-liners in Jerusalem. For Israel, moreover, the Arab Awakening has been a profoundly disorienting experience, leading it to appear as skeptical of the promise of a democratic evolution in its neighborhood as the Saudi monarchy – as strange bedfellows as one otherwise could imagine.

Allies in Egypt and Jordan are now poised to demand greater progress on the peace process, and Islamist movements in the ascendancy across the region are likely to settle for far less. For the Palestinians and their erstwhile supporters among Arab states, the upheavals have reduced, rather than expanded, the room for direct negotiations. The Palestinian leadership, disabused about the prospect of any serious effort by Washington to pressure Israel on settlements, is more vulnerable than ever to popular revolt among its own citizens. The rise of a non-violent resistance movement among Palestinians in the West Bank and Gaza is poised to pose profound challenges to both Ramallah and Jerusalem.

Whatever the near-term developments in Palestine, the broader Arab Awakening and the Iranian nuclear challenge, the long-term strategic balance of the Middle East is destined to be defined by the rise in the relative power of Turkey and Iran. Paranoia and peril will have to be separated in this respect more than any other. Their rise will be driven by strategic aims for power and influence with deep domestic support that can’t easily be dismissed as passing pursuits by particular governments in Ankara or Tehran. This is a development that is equally unwelcome to the United States, to Israel, and to the Gulf countries allied over the past quarter-century around a status quo that is gone forever. An era far less susceptible to the hard and soft power of the United States – in any way increasingly reoriented towards Asia – will require a more patient and judicious approach by all players if conflict is to be averted and a new, peaceful, order is to emerge.

Nowhere will the burden of new strategic thinking fall heavier than in Washington. In a recent essay on the legacy of George Kennan, the architect of U.S. containment policy towards the Soviet Union, Henry Kissinger wrote that “Kennan served a country that had not yet learned the distinction between the conversion and the evolution of an adversary — if indeed it ever will. Conversion entails inducing an adversary to break with its past in one comprehensive act or gesture. Evolution involves a gradual process, a willingness to pursue one’s ultimate foreign policy goal in imperfect stages.”

The terrible price paid in blood and treasure for the Wars of 9/11 in Afghanistan and Iraq, combined with the effects of an economic crisis that now threatens a decade of stagnation in the U.S., may well make America appreciate the virtues of evolution, and accept that our ultimate goals can only be met in imperfect stages. The alternative policy of forced conversion of adversaries, based more on paranoia than true peril, is likely only to be achieved at the price of conflicts with potentially calamitous consequences – for the Middle East as well as for America itself.

An Egyptian army soldier stands as people queue outside a polling station in Cairo November 28, 2011. REUTERS/Goran Tomasevic.