majalla 1541

From Bad to Worse?

Richard Weitz

A Perilous World William Cohen, former Defense Secretary of the Clinton Administration

Dubai and its Discontents Amar Toor

Obama's Arc of Crisis

By Parag Khanna

Issues 1541, 15 January 2010

Editorial Cover

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to The Majalla Digital, this week our W elcome issue brings to you an analysis of Obama’s

policies after one year in office. Recognizing that such an assessment might be unfair after such a short period of time, Parag Khanna, Director of the Global Governance Initiative and Senior Research Fellow in the American Strategy Program at the New America Foundation, also takes a look at the trends that his foreign policy has set in motion, and the challenges that lie in the years ahead.

To complement this feature, Dr. Mustafa Olwi, Head of Political Sciences Department, Cairo University, and Aaron David Miller, former advisor to the Republican and Democratic Secretaries of State on Arab-Israeli negotiations, assess the first year of Obama’s policies in the Middle East in our Debate of the week.

We invite you to read these articles and much more on our website at Majalla.com/en. As always, we welcome and value our readers’ feedback and we invite you to take the opportunity to leave your comments or contact us if you are interested in writing for our publication.

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Issues 1541

05

Contents 08 Geopolitics From Bad to Worse?

11 In Brief Around The World Quotes Of The Week Magazine Round Up Letters

18 Features Obama’s Arc of Crisis

25 Debate One Year of Obama’s Administration

28 Ideas Frenemies

THE MAJALLA EDITORIAL TEAM London Bureau Chief Manuel Almeida Cairo Bureau Chief Ahmed Ayoub Editors Paula Mejia Stephen Glain Wessam Sherif Daniel Capparelli Editorial Secretary Jan Singfield Webmaster Mohamed Saleh 15 January, 2010

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33 People Profile The Uphill Battle of American Diplomacy

Interview A Perilous World

Issue 1541, 15 January 2010

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39 Economics Arab Economics The Missing Link International Investor Dubai and its Discontents Markets

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47 Reviews Books

Kryptonite or Super Sequel?

Readings Reports

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Between a Rock and a Hard Place

54 The Political Essay The Forgotten Sons of Iraq

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Geopolitics

From Bad to Worse?

Iran-US Relations under Obama

Despite genuine efforts at engaging Tehran, the Obama administration has proven unable to resolve US differences with the Iranian government over its nuclear program, regional security issues, or other disputes.

This year is likely to see further strains as the administration seeks to impose more stringent international sanctions on Tehran.

D

uring his first year in office, Barack Obama’s Iran policy has focused on limiting Tehran’s expanding nuclear energy program, which is providing the country with the potential to manufacture nuclear weapons. US representatives sought simultaneously to secure a negotiated settlement with Iran while also making the case with other governments that additional sanctions might be needed should Tehran persist in enriching uranium and in pursuing other activities banned by the UN Security Council.

The high point of these diplomatic engagement efforts occurred in October, when representatives from the United States and Iran, along with other countries, met in Geneva and Vienna to negotiate a deal that would exchange some of Iran’s current stocks of lowenriched uranium (LEU) for higherenriched fuel cells required by Tehran’s medical research reactor. The Obama administration described the proposal as a confidence-building measure that would delay Iran’s ability to make a nuclear weapon from its LEU stocks by at least several months.

Although negotiations persist, the parties have proven unable to agree where, when, and how the transaction should occur. Despite months of stalemate, Chinese and Russian representatives have endorsed continuing the talks. Neither Beijing nor Moscow have committed to imposing additional sanctions on Iran for its nuclear activities.

The Obama administration has also sought to engage the Iranian government on other issues, including regional security concerns such as the wars in Iraq and Afghanistan. Unlike the Bush administration, the Obama White House has not accused the Iranian government of assisting the antiAmerican insurgencies in neighboring countries, including Yemen, or highlighted Tehran’s links with terrorist movements seeking to attack the United States, Israel, or other countries. Obama has also dropped the rhetoric of regime change.

These engagement efforts also failed to make much progress. Despite 15 January, 2010

Richard Weitz an exchange of several letters with Ahmadinejad and Khamenei, Obama has failed to establish an enduring dialogue with Iranian leaders. Senior US and Iranian diplomats met at various international conferences and discussed Tehran’s nuclear file, Afghanistan, and other issues, but with no evident bridging of their often sharply differing positions.

Iranian representatives denounce Washington’s support for Israel, escalating war in Afghanistan, and military presence in Iraq and the Persian Gulf. They characterize Obama as simply continuing Bush’s policies, though with softer rhetoric.

The bitter disputes over Tehran’s nuclear program have poisoned the atmosphere of these exchanges, but the main problem was something entirely unexpected when Obama became president in January 2009: the emergence of a powerful mass movement in Iran seeking to change the regime’s policies and, increasingly, its form of government.

US policy makers had hoped that Ahmadinejad would not win reelection in June since they considered him a uniquely unpromising negotiating partner, but they anticipated his probable victory given his perceived support among key Iranian constituencies such as the Revolutionary Guards and the rural poor. Few had expected the mass protests that ensued from the perception of many Iranians that their votes were stolen in the 12 June presidential election. The persistent divisions within the ruling elite have also been unprecedented.

Whatever he might privately wish to occur in Tehran, Obama has been careful to shun the rhetoric of regime change. Nonetheless, partly to counter

criticisms that he has offered insufficient public support for the protesters, Obama has adopted an increasingly critical tone when commenting on Iranian domestic politics, most recently in his postChristmas news conference on terrorist threats. In response, Ahmadinejad, Khamenei, and other Iranian officials have accused the United States and its allies of fomenting domestic disorders in their country.

The continuing political unrest in Iran complicates reconciliation efforts between Washington and Tehran. An unfortunate dynamic has arisen in which, when Iranian negotiators accept a compromise on their nuclear policies or other activities, reformers as well as nationalists attack the government for selling out Iran’s interests. Although Iran is clearly not a Western-style liberal democracy, its system of competing power centers has made it difficult to reach a consensus even before the recent domestic disorders complicated the process.

Obama’s harsh denunciations of the Iranian regime following the late December protests likely portend a harder line from the White House in the coming year. That said, little enthusiasm exists for undertaking military action against Iran when the US armed forces are trying to reverse serious setbacks in Afghanistan while sustaining a precarious withdrawal from Iraq.

Most likely, the administration will seek another round of international sanctions on Iran. The effort will enjoy the support of many US political leaders but only some foreign governments.

More seriously, it will likely fail to affect the increasingly inwardly focused Iranian policy elite, who are preoccupied with perhaps the most severe political instability in the Islamic Republic’s thirty-year history.

Senior Fellow and Director, Center for Political-Military Analysis at the Hudson Institute, Washington DC 08

Issues 1541

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In Brief Around The World

Quotes Of The Week

Magazine Round Up

Letters

Š getty images

Religious Disputes Continue The Egyptian city of Naga' Hammadi witnessed clashes between Muslims and Christians on the eve of 7 January, which coincides with the birth of Christ for the Orthodox sect. During the clashes, more than two thousand Christians committed acts of vandalism, rioting and torching shops and cars, particularly in the Port Said street leading to the Church of St. George.

These incidents happened after an armed group opened fire as Christians gathered in front of the Naga' Hammadi Diocese during their exit from the church to celebrate Christmas. The incidents provoked Muslims who started taking to the streets to confront the Issues 1541

Christians.

These incidents of sectarian violence in Naga' Hammadi in the Upper Egypt governorate of Qena were not the first between Muslims and Christians, and they will not be the last as long as the cause of their occurrence still exists. Usually associated with building churches, holding religious services or as a result of rumored relationships between Muslims and Christians, these incidents flare up and can quickly turn into mass violence between Muslims and Christians.

Muslim and Christian intellectuals

have warned of the increase in sectarian violence and called upon the state to address the situation and apply the law to Muslims and Christians alike without discrimination. Experts hold Islamic and Christian religious institutions responsible for the increase in incidents of sectarian violence and consider them part of the problem, when they should in fact be looked to for the solution. Instead of the clergy communicating with citizens and upholding values of tolerance, the opposite appears to have become the norm; schools and the media are increasingly being used as tools for exercising sectarianism.

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In Brief - Around The World

Around The World 1 North Korea North Korea proposed replacing the 1953 armistice that ended the Korean War with a formal peace treaty, claiming that this step should pave the way for breaking the international impasse over its nuclear program. In a statement carried by the official news agency KCNA, North Korea said that a final settlement of the conflict is "essential" to talks aimed at persuading it to dismantle its nuclear program.

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3 Iran A Swedish diplomat in Iran was arrested and accused of participating in Iranian protests during observances surrounding the Muslim holy day of Ashura.

Sweden denies that the diplomat was involved in the protests.

Furthermore, Swedish officials reported that the diplomat was subsequently released.

4 Mali 2 Afghanistan Fourteen suspected terrorists died Tuesday night when the bus they rigged with explosives blew up prematurely, police said. The explosion occurred as the suspects were riding the bus in the province of Kunduz, said police chief Abdul Raziq Yaqobi. Yaqobi said the suspects wanted to attack Afghan police or foreign soldiers.

15 January, 2010

Al Qaeda's North African wing has threatened to kill a French hostage unless four of its members are released within 20 days. The Frenchman, Pierre Camatte, was kidnapped from a hotel in Mali in November.

The group demands from the government of Mali the release of four prisoners in exchange for Camatte's release.

5 Israel Israel apologized to Turkey over an insult to its ambassador, a government statement said, in an attempt to defuse the latest crisis between the two nations. Earlier, Israel's deputy foreign minister, Danny Ayalon, summoned the Turkish ambassador to complain about a television show. The ambassador, Ahmet Oguz Celikkol, was greeted without a handshake.

Turkey threatened to recall the ambassador.Late Accordingly, Israeli Prime Minister Benjamin Netanyahu's office said that a letter of apology had been written, and that the premier "hopes this will end the affair."

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In Brief - Around The World

8 Sri Lanka

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Sri Lanka has earmarked $4 billion to rebuild the island nation's war-shattered north, part of a plan to eliminate lingering support for the defeated Tamil Tiger separatists. For the first time in nearly three decades, Tamils will be able to vote without the Liberation Tigers of Tamil Eelam (LTTE) dictating their choice. Sri Lanka's military defeated the separatists in May, ending 25 years of civil war.

9 Venezuela 8

Government inspectors backed by soldiers have shut more than 70 shops in Venezuela accused of trying to cash in on last week's currency devaluation.

Soldiers have been on the streets to check prices as people queue to buy imports, fearing prices could rise. President Hugo Chavez had warned that businesses engaging in what he called speculation would be shut down or taken over.

7 Spain 6 USA General David Petraeus declared that The U.S. military does not intend to put ground troops in Yemen. Petraeus has denounced allegations of Yemen's desire to have American troops on its land, yet added that Yemen's presence as a "host" nation in the fight against Al Qaida is considered crucial. The statements come in light of the recent abduction of one British and five German hostages Issues 1541

Police arrested four of the "mostwanted" suspected members of the Basque separatist group ETA overnight in France and Portugal, including one who stole a police car to try to escape. The first of the operations against ETA was when the Spanish Civil Guards in the village of Bermillo de Sayago, near the Portuguese border, stopped a man driving a suspicious van,. The van contained explosives, weapons and documentation, and while Civil Guards were checking it, the man stole a police car and fled to nearby Portugal.

10 Nigeria Nigeria's president, not seen in public since going into hospital in Saudi Arabia for heart treatment in November, has told the announced that he is recovering. Nevertheless, His long absence and speculation over his health have led to calls for him to hand over power to his vicepresident in addition to protest in the capital, Abuja that urge an end to the political limbo.

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In Brief - Quotes Of The Week

Magazine Round Up

Quotes Of The Week

"It is a sign failure and weakness" Said Jalili accusing USA of plotting the attacks on the Iranian scientist

“Charges of US involvement are absurd�

State Department spokesman Mark Toner referring to the Iranian allegations

"Proscription is a tough choice but necessary power to tackle terrorism and is not a course we take lightly" British Home Secretary Alan Johnson referring to his country's banning of a controversial Muslim group that was planning to stage an anti-war march.

"Our security agencies are capable of tackling terrorist threats" Yemeni Foreign Minister Abubakr al-Qirbi, referring to the death of Al-Qaeda leader.

15 January, 2010

1

Magazine Round Up 1 Newsweek The Recession Generation

Rana Foroohar claims that a "recession generation" will result from the current economic downturn. "Rcession generations", according to Foroohar, are those whose economic behavior is greatly affected by a stumbling economic opportunities.

Accordingly, "recession babies" tend to be more conservative in their spending habits and display more wisdom when dealing with economic transactions. Foroohar supports her arguments by drawing analogies to prior "recession generations" including those that were affected by the Great Depression.

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3 New Statesman The Year of Living Dangerously

2 2 Time

Alec MacGillis argues that unlike his inspirational electoral campaign, Obama has implemented weak policies. The strong opposition facing many of Obama's proposals suggests that something is missing in how he rallies support. MacGillis elaborates thoroughly on many of Obama's initiatives and how they were publicly met, giving an analytical perspective on Obama’s presidency thus far.

Yemen: The Most Fragile Ally This week's cover story handles disrupted Yemen as a country of flailing peace. The article discusses President Ali Abdullah Saleh's ruling policies in addition to the country's external relations.

The article also builds a historical background to the current status quo, showing in the process how ruling Yemen eventually became like "dancing on the heads of snakes".

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4 4 Foreign Affairs The New Population Bomb

The New Population Bomb claims that international security will be greatly affected by "megatrends" in population composition. Jack Goldstone introduces population trends as factors that are liable to pose security threats. However, according to Goldstone, the number of people inhabiting the world is not the determinantal factor, rather it is the demographic qualities of the populations that are growing which poses a threat.

Consequently, he argues, factors such as demographics and age should be thoroughly considered when forecasting potential security threats in certain regions of the world.

Cover Of The Week

Cover of the Week The Economist Bubble Warning

Fortunately, many of last year's expectations of a decrease in asset values and predictions of slipping into another depression proved false. Accordingly a market rebound is at hand, although it is not without its risk. This article of the economist argues that bubbles are being created in the market specifically in the private-sector. No traces of this bubble is apparent, however if interest rates remain low, the bubble risk shall remain eminent.

Issues 1541

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In Brief - Letters

Letters

LAST ISSUE

One Year On

In the interest of complete transparency, I will admit that I am a right-leaning pro-Israeli American Jew. I decided to read this article, assuming it would be, at the very least, extremely partial vis-a-vis the Palestinian cause and at worst anti-Semitic. This is a solid and extremely objective account that I appreciate. You sold me on the notion of keeping an open mind regarding some Arab media, and intend on adding "Majalla" to my daily political fix. Thank you, Dr. Gawad.

Scott

15 January, 2010

Generation X I agree with you that a wave of change is taking place in the countries of the Gulf due to western influence.

Youth now is between two cultures, a culture born in the Arab Gulf and the culture triggered by education in the Western countries. This Western culture led Gulf youth to rebel against the culture of their homeland.

Unfortunately however, some young people absorb both the pros and cons of this western culture, hence leading to the demise of their countries.

Ali Bandar

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In Brief - Magazine Round Up

Read The Majalla weekly in English and Arabic Regular Contributors

Cover Story

Dr Jon Alterman

Everyone’s Crisis

Director and Senior Fellow of the Middle East Programme at the Centre for Strategic and International Studies in Washington D.C.

Syria’s State of Play

Aaron David Miller, scholar, author and policy adviser

Christopher Boucek

Geopolitics

Everyone’s crisis: Yemen’s quagmire and the need for regional involvement

Putting the House in Order Elsy Melkonian

Christopher Boucek

Debate

Can Assad be the second Sadat?

Dr. Joshua Muravchik Saeed Al-Lawendi Samir Al-Taqi

Ph.D Richard Weitz

Senior Fellow and Director at the Center for Political-Military Analysis, Hudson Institute, Washington DC

Dr Steven Heydemann

Ideas

Tough Love The Paradox of Syrian-Iraqi Interdependence

Assad

National investment Funds Company and Board Member Of Young Arab Leaders UAE Chapter

Phase II

Chris Phillips

People

By Stephen Glain

Aaron David Miller Syria’s State of Play

Mohammed Suleiman

Economics

Issue 1537, 21 December 2009

Board Member of Young Arab Leaders, UAE chapter of World Economic Forum.

Putting the House in Order Elsy Melkonian

www.majalla.com Features

Geopolitics

Everyone’s Crisis:

In Brief

Yemen’s quagmire and the need for regional involvement Yemen’s stability and security situation is rapidly deteriorating, and its potential implosion will have a dramatic impact on the region. Ultimately, there is no Yemeni or American solution for Yemen’s problems. They cannot be solved without the help of Yemen’s neighbors and international partners.

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s the Gulf Cooperation Council met for its 30th summit in Kuwait this week, the organization discussed a number of issues of mutual concern. Iranian nuclear ambitions, a unified currency, and the ongoing global financial situation were all expected to be on the agenda. Regardless of all these legitimate concerns, the most critical issue facing the GCC is the future of Yemen.

Yemen’s stability and security situation is rapidly deteriorating, and its potential implosion will have a dramatic impact on neighboring states. The country faces an astonishing confluence of unprecedented challenges – violent extremism, economic collapse, a looming water shortage, and a growing secessionist movement. If any one of these challenges comes to a head, it could overwhelm the Yemeni government. Unless appropriate steps are taken, Yemen risks becoming a failed state and a training ground for Islamist extremism, in which case its problems will quickly envelop the entire region.

Owing to the central government’s historically weak control, Yemen has often stood on the brink of chaos. The country has survived several individual crises in the past, but today, multiple interconnected challenges are poised to converge at the same time. At the heart of the country’s problems is a looming economic crisis. Yemen’s petroleum reserves are fast running out, and it has few viable options for creating a sustainable post-oil economy. Moreover, the country is consuming its limited water resources much faster than it can now replenish them. A rapidly expanding and increasingly poor population places unbearable pressure on the government’s ability to provide basic services. Islamist terrorism, magnified by a resurgent alQaeda organization, an armed insurrection in the North, and an increasingly active secessionist movement in the South, all endanger domestic security.

Historically, the central government has faced stuff resistance in expanding its authority, as the Yemeni people associate it with corruption, cronyism, nepotism, and thwarted economic and social opportunities. Yemeni officials are considering a policy of decentralization, granting more autonomy to local 21 December, 2009

Christopher Boucek authorities, thereby institutionalizing the informal patronage systems that operate in lieu of an effective national government.

Corruption remains a major challenge for the government, amid allegations that almost 30 percent of government revenue is never deposited in government accounts. To address the serious and continuing problem of government graft, the country will need to institute sweeping judicial reforms, establishing fair and transparent prosecutions.

The situation is further complicated by a pending political transition. President Ali Abdullah Saleh has ruled the Republic of Yemen since its unification in 1990, and the next presidential election is scheduled for 2013. It is unclear whether Saleh will be constitutionally eligible to stand for reelection for what would be a third term, and he has no obvious successor in place.

Meanwhile, since 2004, the Yemeni government has been fighting a sporadic civil war against Zaidi Shi’a revivalists in the northern province of Sa'ada known as the Houthis. This conflict again erupted into open fighting in August when the government launched Operation “Scorched Earth”. Over the course of the conflict, fighting has been both fierce and indiscriminate, punctuated by periods of relative calm. The toll has been severe in Saada itself, resulting in extensive damage to infrastructure and an estimated 175,000 internally displaced people.

The conflict stems from a complex combination of competing sectarian identities, regional underdevelopment, perceived socioeconomic injustices, and historical grievances. Over time, the antagonism has increased, and the rebels want little to do with the regime.

Around The World

Quotes Of The Week

Magazine Round Up

Letters

The conflict has strained the Yemeni army, leading to questions about its ability to simultaneously engage in other missions, including counterterrorism operations. Moreover, the government’s failure to put down the rebellion has prompted concerns that other domestic challengers may perceive the regime as vulnerable, and possibly move against the central government. Islamist militants or other disaffected groups could mount attacks on other fronts while the government is distracted by the war in Saada. Ultimately – and perhaps most ominously – the war is worsening the economic crisis in Yemen. A large budget deficit is forecast for next year and the government is spending its foreign currency reserves at an alarming rate.

In November 2009, the conflict has expanded, drawing in Saudi Arabia.

After an incursion by Zaidi rebels into Saudi territory, Riyadh reportedly allowed Yemeni forces to transit through its territory in order to attack Houthi positions. Saudi aircraft later were reported to have hit Houthi positions inside Yemen. This marks a major deterioration in the situation, and provides yet another example of how instability in Yemen threatens the entire region.

Though the region has much to lose in Yemen’s ongoing meltdown, it has much to gain by coordinating an international approach to improve stability there.

The international community should encourage the Gulf states to offer Yemen membership in (or at least a ‘special relationship’ with) the Gulf Cooperation Council in exchange for tough steps, including progress on security concerns, curbing government subsidies, and addressing corruption.

Assad

Ultimately, there is no Yemeni or American solution for Yemen’s problems.

They cannot be solved without the help of Yemen’s neighbors and international partners. The consequences of inaction could be too severe to contemplate, especially as the country’s demographic and economic woes exacerbate its worsening security situation.

GCC Summit agrees joint military force to deal with security threats

Phase II

Associate in the Middle East Program at the Carnegie Endowment for International Peace.

By Stephen Glain

08

21 December, 2009

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Issue 1537

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The 30th GCC Supreme Council Summit in Kuwait concluded its activities with renewing solidarity with Saudi Arabia against threats, mainly that of the Houthi rebels and supporting Saudi actions against Houthi infiltrators. The GCC leaders stressed that any violation of security and stability of the Kingdom will be seen as a violation of the GCC countries' security and stability. The six nations' leaders agreed to form a deployment force to deal with any security threats that would face any of the member countries like the threat of Houthis.

Issue 1537

The leaders approved a defense strategy of the GCC countries and stressed the importance of developing capabilities of the Joint Jazirah Shield and shared military projects. They stressed the cooperation between their countries in confronting arm smuggling to the GCC countries. The Gulf leaders renewed their unified stance on confronting terrorism and fighting its financing sources and the extremist intellect leading to it. They also called for collective and international efforts to confront terrorism, exchange information and not use or let the land of their countries be used for preparing,

planning or fostering terrorist activities.

The Summit came at a time in which Iran tested an optimized version of the solid-fuel Sejjil-2 deterrent missile.

The international community considers this missile a very bad sign that Iran is making significant advances in its missile programme. The missile that Iran tested is capable of reaching the Gulf states. This may escalate the already severe tensions between the Iranian leadership and the Gulf countries.

Many experts stress that Iran's ballistic programme is just a military arm of its nuclear programme.

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Features

Š getty images

15 January, 2010

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Obama’s

Arc of Crisis

By Parag Khanna

Issues 1541

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Features

Obama’s Arc of Crisis

What was, what is and what might be yet to come after Obama’s first year in office

Parag Khanna

The first year of Obama’s administration has passed so quickly that it would be unfair to focus only on reviewing the events of the past twelve months without examining with equal vigor the trends that Obama’s election and foreign policy have set in motion and scenarios for the year ahead.

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t the outset, it is important to note that in a year which for Obama was equally marked by domestic and foreign policy crises— with issues like the economic recession blurring that divide—the U.S. did not take the course that many would have predicted: retrenchment. Instead, he made four major trips overseas, his Secretary of State, Hillary Clinton, seems to have spent as much time abroad as in Washington, and special envoys were appointed to focus roundthe-clock on Palestine, AfghanistanPakistan, North Korea, and other hotspots.

Within Obama’s first one hundred days, he over-turned decades of American foreign policy which sought 15 January, 2010

to identify and isolate so-called “rogue states” or “states of concern.”

He reached out in a variety of ways to Cuba, Venezuela, Iran, Myanmar, North Korea and others, instigating a positive dynamic whose potential, though yet to be realized in any of these cases, holds promise for the future.

Equally importantly, he set a new tone in relations with major powers, particularly Russia as it relates to arms control and China on re-balancing the global economy. This makes him the first American president to truly appreciate the reality of a multi-polar world and a geopolitical marketplace in which not even a superpower has enough leverage to isolate its enemies when other great powers can engage and provide them with diplomatic,

financial, and military lifelines. Taken together, this shift in diplomatic mentality and tone was the main justification for Obama being awarded the Nobel Peace Prize.

Ultimately, however, Obama will be judged on whether or not he is deserving of that prize on the basis of his handling of the arc of crisis stretching from the Near East to Central Asia. This is the region where American interests and the lives of its troops are continuously on the line.

Palestine Palestine remains an ever-present thorn in the side of the White House.

Already during the U.S. presidential 20

Features campaign there were mixed signals over his position, with Hillary Clinton (who later became Secretary of State) signaling resolute commitment to Israel, and the Obama campaign sacking a prominent advisor for his non-governmental dialogues with Hamas. Several attempts at generating early momentum through IsraeliPalestinian summits were met with an icy reception as newly elected Israeli Prime Minister Benjamin Netanyahu sought to punish Obama for his criticism of West Bank settlement expansion. Even when they finally met, it only served to highlight the divide between these historic allies.

One year on, there is less reason to be hopeful than in past years. A two-state solution has become the outcome most profess to want and few are working towards. No particular “road map” or “peace plan”—whether American, Saudi, or Israeli—stands out as having sufficiently broad appeal. Expressing pre-emptive frustration with the lack of American support for the Arab peace plan, Saudi Prince Turki AlFaisal declared early this year, “We don’t want any new American plan from Obama. Just help us implement the existing ones.” George Mitchell, Obama’s special envoy for the conflict, continues in vain to do just that.

Then there is the question of what will it take to deliver a breakthrough in the coming year and beyond. First, there must be reconciliation between Hamas and Fatah rather than a counterproductive civil war across the two Bantustans of the West Bank and Gaza.

Only then can the Palestinians regain negotiating strength vis-à-vis Israel.

For its part, Israel is best served reining in its increasingly pugnacious settlers before they become a destabilizing force in Israel itself. That they support Netanyahu has created a deep rift between Israel’s stated policy and its actual practice, and the consequences could be severe for Israel as much as for the Palestinian territories. Foreign powers and donors then need to get on the same page. Egypt’s renewed role as a corridor and broker in Gaza must be used constructively to lift the territory from its chaotic, disheveled state towards investments in factories and the seaport. The so-called “arc” of road and rail infrastructure linking Gaza and the West Bank must vigorously move ahead, creating jobs and physically building Palestinian Issues 1541

unity.

Independence infrastructure is futile.

without

Iraq 2009 will be remembered as the year that Afghanistan replaced Iraq in America’s geopolitical conscience, and yet in 2010 Iraq may remain as much a headache as ever. Even as the U.S. quickly draws down the number of troops active there, constant car bombings attributable to Sunni insurgent militias targeting the Shi’a led government, military and police of Nouri Al Maliki are indicative of how fragile the veneer of Iraqi democracy remains. Particularly the country’s election law, still biased against minorities and reinforcing the Maliki bloc and Maliki’s powers, remains contentious with no workable compromise in sight. There is good news in foreign investment moving ahead in the energy sector, but energy prices have fallen and Iraq remains some time away from operating at full capacity.

Even more fundamentally, that Iraq will remain a single, sovereign, unified state remains an open question.

Federalism is of course preferred by the Arab Sunni and Shi’a populations, but the northern Kurds clearly have different ambitions. As one of their guerilla leaders, Jalal Talabani, transitions out of the national presidency, Kurdish calculations could shift even further in 2010. With the Kirkuk census postponed indefinitely, so too is genuine clarity as to what territories will actually constitute Iraq several years from now.

Given the Kurdistan Regional Government’s success in recruiting foreign investors, warming relations with its neighbors, especially Turkey, and serving as a willing host to residual U.S. forces, we can see where Kurdish plans are eventually, and justifiably, headed. Indeed, if Kurdistan can balance its landlocked geography with a stable role as an energy source for pipelines across Turkey, Syria, and Iraq, then all sides could benefit. But we can just as soon imagine that the vacuum left by the withdrawal o U.S. forces will gradually give way to a Saudi-Iranian, Sunni-Shi’a proxy war over the rump Iraq – with Iraq again being the loser.

Iran Obama’s greatest personal disappointment with respect to his first year handling Mideast diplomacy must surely be Iran. The Islamic Republic, sometimes mentioned by name but always implied during Obama’s lofty campaign speeches, was meant to be the main thrust of his “open hand” foreign policy. Iran’s June 2009 presidential election, however, pushed both the country and Obama into a lurch. How could he extend a hand to a regime which rigged elections and so brutally cracked down on protestors led by a dignified opposition candidate? Furthermore, how to find a window and interlocutor in Iran in the midst of the most open confrontations within Iran’s otherwise labyrinth and opaque leadership since 1979?

And yet Obama made the right decision in two ways. He didn’t wag his finger at Iranian president Ahmadinejad, knowing too well that this would only bolster his antiimperialist credentials on the Iranian street. But Obama also resumed the nuclear dialogue with Iran at the first decent moment, giving the green light to a face-to-face meeting between State Department veteran William Burns and Iranian negotiator Saad Jalili.

Nonetheless, revelations as to a third major nuclear reactor program and announcement of a dozen more planned facilities—the former as disturbing as the latter is farcical— now drive the options and possibilities for engagement with Iran more than any shift in American doctrine. Obama will largely be in reactive mode over the coming months: reactive to Iranian decisions, IAEA reports, and Israeli intimations. It may be up to the Iranian people, who continue to agitate daily while breaking through barricades in more visible clashes every few months, to change the internal dynamic which now stands in the way of external diplomacy.

“Af-Pak” or “Pak-Af”?

It is likely that no geopolitical hotspot will define Obama’s presidency like Afghanistan-Pakistan. Obama spent 2008 on the campaign and 2009 as president making South-Central Asia his war, and in 2010 we will all bear witness to the impact of strategies 21

Features finally shaped over the past year. The surge of 30,000 troops, bringing the overall NATO total to over 100,000, will have precisely eighteen months to achieve marked progress in Afghanistan, as measured by training effective Afghan security and police forces, pushing the Taliban out of major urban centers across the country, and establishing sound provincial and district level governance.

Each of these goals is fraught with nearly insurmountable obstacles.

The Afghan National Army remains a rag-tag force, riddled with ethnic tensions, poor training and equipment, frequent desertions and high turnover.

Indeed, it remains unclear as to whether supporting such a long-term project of Afghan “national security” is at all in anyone’s interest, not least given its likely infeasibility.

Co-opting and partnering with local community and tribal militias seems a sounder strategy given the social fragmentation of Afghan society and the tight deadlines NATO forces are working under. Secondly, two years is not a long time for the Taliban to wait in the mountains as they have been trained to do for decades. They could still overwhelm urban centers after Western forces withdraw just as they have almost effortlessly swarmed in and around under NATO’s very eyes in recent years. The strategy to reinforce sound local governance remains the best one, hopefully generating a momentum and stability which Afghans themselves will prize enough to want to fight off the Taliban.

But it is by no means guaranteed that it can work as quickly as the Obama administration and American public would like.

Then there is the “Pak-Af” view, namely that nuclear-armed, overpopulated, and strategically located Pakistan is the far more pressing regional crisis, and while any gains in Afghanistan will likely not resonate beyond the immediate region, failure in and of Pakistan may have global 15 January, 2010

US President Barack Obama (L) during an arrival ceremony at the King Khaled international airport in Riyadh © getty images

Barack Obama poses for a photo in front of the Sphinx during a tour of the Great Pyramids of Giza following his landmark speech to the Muslim World © getty images

repercussions. America’s response to this, the Kerry-Lugar legislation offering $1.5 billion in annual nonmilitary assistance, unfortunately carries many of the same flaws which characterized American assistance in the 1980s: pouring millions of dollars into ministries better skilled at hiding, squandering, and siphoning funds than using them for service delivery to the people. Ramping up America’s embassy in Islamabad to staff over 1,000 people also seems like a robust complement, but few if any of these Foreign Service officers and security personnel will have the requisite local knowledge to build leverage within the Pakistani establishment to ensure that the money is spent right.

There is positive potential in special envoy Richard Holbrooke’s convening of Afghan and Pakistani ministers in the areas of intelligence, border control, and economy, but ingrained strategic calculations continue to trump America’s hopes. Pakistan sees America’s withdrawal from the region as imminent, justifying its perennial pursuit of “strategic depth” in a weakened Afghanistan while also trumpeting inflated fears of a proxy struggle with India there as well.

Still, the long-neglected regional approach, which encourages Indian development projects, Chinese natural resource investments, and Iranian gas pipelines, is the only strategy which can meaningfully embed both 22

Features military power overseas, France lost trust in its European and NATO allies and pursued its own nuclear weapons program (which then benefited Israel), and, lesser known, Canada changed its flag to the Maple Leaf to remove any symbols of association with British colonialism.

Israeli Prime Minister Benjamin Netanyahu (L) and Palestinian President Mahmoud Abbas (R) shake hands before a trilateral meeting at the Waldorf Astoria in New York

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Barack Obama and Turkish Prime Minister Recep Tayyip Erdogan leave after a meeting in the Oval Office at the White House in Washington

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countries in a regional architecture that withstands America’s looming military exit. Landlocked regions cannot be occupied from afar forever.

Looking Back to Look Ahead The entire Southwest Asia, Persian Gulf, Arabian Sea, and Indian Ocean region is becoming the geopolitical center of gravity. From nuclear proliferation to energy security to piracy, the main choke points, threats, risks, protagonists, antagonists, imperial forces and rising powers are all ever more present here.

What is the fate of America in this Greater Middle East? A worst-case scenario comes to mind not from an Issues 1541

analysis of the past year, but rather from a powerful analogy a half-century old: the 1956 Suez Crisis. Then it was Britain and France, desperately clinging to influence in a decolonized region, who responded to Egyptian president Gamal Abdel Nasser’s nationalization of the Suez Canal by plotting with Israel to invade the Sinai and restore European control over the canal’s operations. The U.S. responded by threatening to dump the Pound/ Sterling, Saudi Arabia embargoed oil exports to Britain and France, and the United Nations launched its first major peacekeeping operation in the Sinai. The consequences were long-lasting: Britain was humiliated and never again projected significant

Could America’s Iraq blunder, heavy military footprint in the region, and waning diplomatic credibility combine into a perfect storm which leads to its eventual ejection? While small Persian Gulf states such as Qatar and the United Arab Emirates value America’s security umbrella vis-à-vis Iran, Saudi Arabia has increased its courting of India and China as strategic partners in the energy and military sectors. There is no immediate replacement for American hegemony in the Middle East, but most in the region would prefer to fumble along in their own affairs that continue under America’s gaze. Obama’s first year gives only faint hope that he can reverse that view – if indeed it is even desirable to do so.

Parag Khanna - Director of the Global Governance Initiative and Senior Research Fellow in the American Strategy Program at the New America Foundation. Author of the book “The Second World: Empires and Influence in the New Global Order”(Ranbdom House 2008), which has been translated into over a dozen languages. During 2007 he was a senior geopolitical advisor to United States Special Operations Forces in Iraq and Afghanistan. In 2008 he was named as one of Esquire’s 75 Most influential People of the 21st Century.

He also served in the foreign policy advisory group to the Barack Obama for President Campaign.

Parag Khanna - Director of the Global Governance Initiative and Senior Research Fellow in the American Strategy Program at the New America Foundation. Author of the book “The Second World: Empires and Influence in the New Global Order

23

Debate One Year of Obama’s Administration What has really changed in US foreign policy towards the Middle East?

President Barak Obama began his administration’s approach to the Middle East in a way that distinguished him from his predecessor. His welcomed speech in Cairo combined passages from the Bible and the Koran, symbolic of the collaboration he was looking for between the US and the Middle East. One year on, Obama is being measured against his eloquent promises. In the region, much like within the US itself, lofty promises are being met by demands for action. Although his presidency is still in its infancy, two contributors rise to the challenge of assessing his policies.

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Issues 1541

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25

Debate

A Herculean Task

A Second Chance for Obama in the Arab-Israeli Issue

By year’s end, the President had managed to get three nos: one from Israel on a comprehensive freeze; a second from the key Arabs states like Saudi Arabia on partial normalization; and a third from Mahmoud Abbas on returning to negotiations. Still, the Administration will try. And I suspect they will be successful in getting negotiations resumed.

Aaron David Miller

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s the clock ticks down on the first year of the Obama Presidency, the balance sheet on Arab-Israeli peacemaking is in the red.

The President inherited a difficult set of circumstances on this issue to be sure; but his Administration made some significant tactical mistakes which made the situation worse. Nothing fatal here; but 2010 starts with a sizeable dent in America’s credibility.

I wouldn’t count the President out by any means. For reasons that aren’t altogether clear, Barack Obama cares deeply about an Israeli-Palestinian peace.

But his own priorities and the dysfunction and division in the Palestinian and Israeli houses will make it hard (though not impossible) for him to get closer to one.

Barack Obama isn’t Jimmy Carter in terms of his commitment—almost obsession—with the Arab-Israeli issue.

But he did come out faster and louder on this issue than any of his immediate predecessors.

Within days of his inauguration, he’d appointed the talented and tenacious George Mitchell as special envoy, come out strongly behind a two state solution, and started beating the drums hard against Israeli settlement activity. His speech in Cairo raised hopes and expectations that here was an American who finally understood the Arabs and Muslims on the Palestinian issue.

But words without deeds to back them up can prove to be pretty hollow. The Administration’s strategy seemed to be eerily reminiscent of the failed Oslo approach: get confidence building steps from all sides. So you ask Israel for a settlements freeze; the Arab states for partial normalization with Israel; and the Palestinians to return to the negotiating table. Somehow all of this was to 15 January, 2010

result in re-launching negotiations and progress on the toughest issues.

Unfortunately there was very little strategy here, let alone leverage to accomplish any of this. Nor was there much of an understanding of the politics on any side. This was particularly evident in the way the Administration dealt with Israel. To ask an Israeli Prime Minister, particularly Benjamin Netanyahu, loudly in public for a comprehensive settlements freeze, including natural growth and to expect him to accept it revealed a profound misreading of the man and his times.

By year’s end, the President had managed to get three nos: one from Israel on a comprehensive freeze; a second from the key Arabs states like Saudi Arabia on partial normalization; and a third from Mahmoud Abbas on returning to negotiations. And when small powers say no to the big ones without costs or consequence, this is very bad for the great power’s reputation on which its leverage really depends. The fact is when America succeeds in Arab-Israeli negotiations, it does so because the regional players are responsive in part for their own reasons, but also because they don’t want to say no to America.

As 2010 dawns, certain realities about Washington and the region need to be confronted openly and honestly. First, the prospect of Benjamin Netanyahu and Mahmoud Abbas agreeing to a conflict-ending solution which resolves conclusively borders, Jerusalem, refugees and security seems remote – even fanciful. Profound divisions exist between Hamas and Fatah which even a tactical reconciliation won’t address.

And Israel has no stake in making major concessions in order to make peace with 60% – even 80% of the Palestinian people if the remaining part has access to guns and rockets and a demonstrated capacity to use them.

On the Israeli side, it’s by no means

clear that there is consensus about what price Israel is prepared to pay on the core issues; it’s easier to see the current coalition dealing with the border issue than it is to imagine the current Prime Minister dividing Jerusalem. And it may well be that 2010 will emerge as the year of Iran where Israeli fears of Iran’s getting closer to a nuclear weapon dominate its decision-making process.

Second, it’s not as if Barack Obama has nothing else to do at home and abroad. A serious breakthrough either between Israel and Syria or Israel and the Palestinians takes time, resources, and expenditure of political currency he may not have right now. Fighting two wars in Iraq and Afghanistan, managing a jobless recovery, all against the backdrop of midterm elections later this year which don’t look terribly positive (for the moment) for the Democrats may not be the most auspicious environment for a major American push on Israeli-Palestinian peace.

Still, the Administration will try. And I suspect they will be successful in getting negotiations resumed. Then the real work and challenge will begin.

There’s always the possibility of an Israeli-Syrian breakthrough (far easier on paper); but this will require big decisions by Bashar Assad and Netanyahu.

In any event, the Israeli–Palestinian negotiations will be a Herculean task and it won’t be a labor of love. The parties will have to make tough, excruciatingly choices they really don’t want to make; and America will need to be deeply involved.

former advisor to the Republican and Democratic Secretaries of State on Arab-Israeli negotiations. Currently a public policy scholar at the Woodrow Wilson Center in Washington, he’s writing a new book “Can America Have Another Great President?”

26

Debate

Actions Speak Louder Than Words

One year after Obama’s Speech in Cairo

Obama’s presidency has been marked by a complete turnaround in foreign policy. Lofty discourse, in particular, marked the beginnings of his new approach to the Middle East.

However, some consider those views idealistic and untenable. After one year, what has Obama really accomplished, and what stands in the way of progress?

W

ithin a few days, Obama's first year in the White House will have passed.

He was elected with a large majority, speaking to the belief in the necessity of transition that accompanied inauguration as President.

Signs of transition in Obama's assumption of power were not limited to his unusual electoral campaign. These signs can also be seen in the new policies that dictated American politics at home and abroad. With regards to his foreign policy, the most important views Obama put forth included the re-branding of the American image abroad—a problem he aimed to fix by establishing new relations with the Islamic world based on mutual dialogue, diplomacy and cooperation.

Obama also stressed that America would target Al-Qaeda and the Taliban specifically, not the Islamic world or Muslims. He rejected the idea that Muslims were by definition terrorists. In this regard, Obama's views of two-state solution to the Israeli-Palestinian conflict emerged. He considered the two-state solution vital to American national interests.

Additionally, Obama called for Issues 1541

Dr. Mustafa Olwi adopting a strategy of exit Iraq, leaving the country’s future in the hands of its people.

The problem associated with his new, bold ideas is that many have considered them no more than unfeasible theoretical suggestions.

There is no doubt that this opinion hints at the slow pace of progress.

Obama's policies in dealing with the issues of Iraq, Iran and its nuclear program, are also better than those of his predecessor Yet, these ideas are evidence of a great shift— compared to what things used to be like in the days when the neo-conservatives dominated the White House.

When Obama himself spoke about ridding the world of nuclear weapons, he said that it was a strategic goal that he sought, but he was aware that it was not achievable during his lifetime.

However, he said that this would

not prevent negotiations and policies aimed at reducing the military nuclear arsenals of the United States and Russia.

Obama's policies in dealing with the issues of Iraq, Iran and its nuclear program, are also better than those of his predecessor. We should acknowledge that these new policies have had a positive effect not only on the two countries, but also on the future of the Gulf region and the Middle East.

However, the situation in Palestine and the difficulty of converting Obama's words into actions lead many analysts to believe that Obama's ability to achieve the dream is not as strong as his inspiration.

However, we must note that the inter-Palestinian division, and the dominance of the radical right wing on politics in Israel are major obstacles to any efforts adopted by Obama or others.

Obama alone cannot achieve his dreams without serious cooperation from the rest of the world.

Head of Political Sciences Department, Cairo University, Member in the State Consultative Council 27

Ideas

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15 January, 2010

28

Frenemies

By Constantino Xavier

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29

Ideas

Frenemies

How India and Pakistan are Learning to Coexist Constantino Xavier

It is not always about nukes, terrorism and hatred between India and Pakistan. Over the last several years, the rivals have reached unprecedented levels of cooperation. The new generation now debates how to consolidate this rapprochement into a lasting friendship.

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“Nuclear war to break out in South Asia,” announced the sensationalist title of a recent report by Russian news agency Pravda. Such alarmist readings of the South Asian security scenario are not new. Whenever the India-Pakistan relationship heats up, most recently after the 2001 attack on the Indian Parliament and the 2008 Mumbai terrorist strike, catastrophic scenarios proliferate and the world holds its breath.

From afar, in the cozy comfort of Western diplomatic and media corridors, the fears of a nuclear holocaust do seem 15 January, 2010

valid. After all, Indian and Pakistani nuclear capabilities could wipe out several million people in the span of a few minutes. The two countries have a history of conflict, following a violent partition process in 1947, which displaced more than ten million people and left a trail of devastation, they fought four major wars. So is the hyperbole of a South Asian nuclear war just the overactive imagination of bored journalists and fearful diplomats? Three reasons explain why such a catastrophic scenario is not pure fantasy, yet still

widely exaggerated.

First, domestic opposition actors actively exploit the explosive nature of bilateral relations in order to maximize immediate political gains. On the Indian side, after each major terrorist attack blamed on militants from across the border, seeking to galvanize support, Hindu nationalists impulsively advocate responses ranging from missile strikes on Pakistani terrorist camps to fullfledged nuclear war. But as soon as their party controls the government, such 30

Ideas opportunist and inflammatory rhetoric is immediately abandoned.

Second, the nuclear capabilities of both countries have led to a mini-Cold War in South Asia, with a stalemate induced by the spectre of mutual assured destruction.

There is thus little incentive for any of them to press the red button, and recent research suggests that their command and control authorities are actually far more cautious and rational than previously assumed.

Finally, there is also a latent interest among other great powers to exaggerate the possibility of a nuclear war. Pravda’s claim that it is up to Russia and the US to force India and Pakistan into dialogue is no innocent coincidence. Both Moscow and Washington, and more recently China, are keen to explore any available opportunity to intervene in a region long considered India’s strategic backyard.

A slow but steady rapprochement “We are not neighbours, but worlds apart,” complained A. J. Akbar, one of India’s most reputed editorialists, in a recent comment on the relationship between the two rivals. However, current trends suggest a different reality: there has been surprisingly more than just the habitual mutual accusations, terrorists and exchange of gunfire across the Indo-Pakistani border.

According to a recent policy brief by the Peterson Institute of International Economics, Indo-Pakistani trade shot up from $300 million in 2003–04 to more than $2 billion last year, or close to $5 billion including informal trade via the Middle East. While Indian infrastructure, healthcare and entertainment industries are lured by attractive investment opportunities in Pakistan, Pakistani companies are now present at every major trade fair in India.

This comes as a direct result of the composite dialogue, a process of mutual consultation instituted in 2004, which led to a set of unprecedented confidence-building measures. Relaxed visa policies and new air, rail and road links were opened across the border in Kashmir, Punjab and Rajasthan, Issues 1541

reactivating connections which had remained interrupted for decades and, in some cases, even allowing families to reunite after half a century.

At the official level, this led to the implementation of dozens of new treaties and consultation mechanisms, including Track-II expert meetings and new “hotlines” between high-level military and diplomatic command structures. India and Pakistan now regularly exchange prisoners, and even at the sensitive security level, Delhi and Islamabad have instituted a joint AntiTerror Mechanism and exchanged lists of nuclear facilities and installations to reduce the risk of accidental war.

Civil society takes over However, the most powerful forces can be found in civil society. Four wars and fifty years of mutual hatred have not erased the sentiment among millions of people, that the 1947 partition represents a tremendous “mistake of history.”

This is true for both older and younger generations. For those still in power, the “other side” is much too familiar to be simply wished away or exterminated: former Pakistani President Musharraf was born in New Delhi, and both India’s current Prime Minister and its Leader of the Opposition were born in what is today Pakistan.

In turn, for younger generations the traumas of the past are too distant and vague to determine the future course of South Asia – the promises of material wealth, international mobility and free cultural flows are far more attractive than facing a nuclear-armed enemy in a freezing Himalayan trench.

Thus, while Bollywood fever has taken over the Pakistani middle class in Lahore and Karachi, Pakistani rock bands such as Junoon, Fuzon or Strings now successfully tour India and gain thousands of new fans among the Delhi, Bombay and Bangalore urban youth, often in a “make peace, not war” Woodstock-like environment.

In sports, the feverish cricket rivalry persists, but Pakistani and Indian athletes now compete side by side in transnational competitions like the

Punjab Games. Initiatives like Friends without Borders, in which thousands of Pakistani and Indian children regularly exchange letters, also promise to bring about a sea change in mutual perceptions. Media projects such as the “Southasian” magazine Himal, published from Kathmandu, encourage Indians and Pakistanis to view the subcontinent holistically, beyond the eternal prism of the bilateral dispute.

And the debate has just started Rapprochement is not enough – India and Pakistan need a vision to move the dialogue forward. There are encouraging signs on both sides. After Manmohan Singh was elected Prime Minister in 2004, a group of influential Indian neo-functionalists emerged, who had been behind the creation of the South Asian Association for Regional Cooperation in 1985. They spearheaded the post-2004 composite dialogue and believe New Delhi has more to gain from a stable and friendly Pakistan, and that this is best achieved through regional integration and, in Singh’s own words, “by making borders irrelevant.”

On the Pakistani side, there also seems to be a newfound realization that cooperation with India is not just an option, but a necessity against terrorism, now seen as a “common enemy.”

Pakistani President Zardari’s recent suggestion that India should become a part of the Friends of Democratic Pakistan group is a step in the right direction.

However, in the end, it is in the hands of the younger generation to decide precisely how India and Pakistan will choose to coexist in South Asia.

And they seem ready to take on the challenge. In 2007, The Indian National Interest, one of India’s youngest and most active strategic forums, witnessed a fierce debate entitled “Can India and Pakistan re-unite?” The very fact that such a provocative question is now openly discussed on both sides indicates a willingness to move the relationship from enmity to friendship.

Researcher and Fulbright scholar, Johns Hopkins’ School of Advanced International Studies, Washington DC, and editor of the Lisbon India Monitor 31

15 January, 2010

36

People

The Uphill Battle of American Diplomacy

Christopher Hill, American Ambassador to Iraq Š getty images

Issues 1541

33

People - Profile

The Uphill Battle of American Diplomacy Christopher Hill, American Ambassador to Iraq Despite Hill’s potential shortcomings, his 32 years as a diplomat and his excellent reputation as a respectful listener and multi-level, high-stakes negotiator speak for themselves. They have earned him tremendous respect both domestically and abroad.

Christopher Hill, U.S. Ambassador to Iraq testifies during a House Foreign Affairs Committee hearing

C

hristopher Hill, the son of an American diplomat, was born in Paris in 1952. At a very young age, his family moved to Little Compton, Rhode Island, where he spent the vast majority of his childhood. From 19704, he attended Bowdoin College in Brunswick, Maine, where he obtained his Bachelor of Arts degree in Economics. In 1994, he furthered his education by obtaining a Master’s Degree at the Naval War Academy. Upon completing his undergraduate studies, Hill became a Peace Corps volunteer, serving in Cameroon from 1974-6. A year later, in 1977, he passed the American foreign service exam, enabling him to join the US State Department, 15 January, 2010

where he has served his country as a dedicated, life-long diplomat.

Due to his extensive experience in Eastern and Southern Europe and the Balkans, Hill speaks Polish, Serbo-Croatian, Macedonian, and Albanian.

Early in his foreign service career, Hill was stationed in Belgrade, Warsaw, Seoul, and Tirana.

During that time, he served in the Department of State’s Policy Planning Division and Operation Centre. Hill greatly enhanced his bargaining skills by playing an integral role in the team that negotiated the Bosnia Peace Settlement in 1995. Serving as Deputy at the Dayton Peace Talks, under the tutelage of veteran

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diplomat Richard Holbrooke, was a major learning experience in Hill’s professional evolution.

Holbrooke later described him as ‘brilliant, fearless, argumentative, very cool, and passionate’ and also praised his ‘extremely good negotiating skills’.

From 1996-9, Hill advanced his diplomatic career by serving as the Ambassador to Macedonia. From 1998-9, he was the Special Envoy to Kosovo, an experience in which failed negotiations with the Serbs, who were unwilling to relinquish their stronghold on Kosovo, resulted in the NATO bombing campaign. In the late 90s, Hill also served as Special Assistant to the President and Senior Director 34

People - Profile for Southeast European Affairs in the National Security Council.

His long European stint ended with his service from 2000-4 as Ambassador to Poland, at which time, he returned to Seoul.

From 2004-5, Hill held the position of Ambassador to South Korea. He was successful in managing a bi-lateral relationship that included the presence of 30,000 American soldiers. His open and respectful diplomatic approach quickly gained him popularity among many South Koreans. He frequently delivered speeches in traditionally antiAmerican establishments such as universities and even set up an on-line chat room in which he personally responded to controversial questions from the general public.

After serving as Ambassador, Hill was appointed as the Assistant Secretary of State for East Asian and Pacific Affairs in which capacity he served as Head of the US Delegation of the sixparty talks with North Korea.

Negotiating denuclearisation with the North Koreans proved to be a very arduous task. In 2008, following much debate, a tentative agreement was finally reached calling for the disabling of North Korea’s main nuclear facility and complete international monitoring of the country’s plutonium enrichment. Although, at the time, it seemed to be a major breakthrough, today a major stalemate still exists between North Korea and the United States over several issues, most notably, the country’s nuclear arsenal.

Nevertheless, Hill believes that the six-party talks were an important step not only in advancing relations between North Korea and the United States, but also in improving bi-lateral relations Issues 1541

with China, who he believes is America’s most important future trade partner.

In 2006, former President George W. Bush appointed Hill as Career Minister, the second highest-rank in the diplomatic service, one step below the title of Career Ambassador. On February 27, 2009, Hill was named as US Ambassador to Iraq. When announcing the decision, President Obama said ‘Ambassador Hill has been tested, and he has shown the pragmatism and skill that we need right now.’ On April 20, his nomination was approved in a Senate hearing by a vote of 73 in favour and 23 against. He thus became the fourth ambassador in Iraq since the ousting of Saddam Hussein and the establishment of the new Iraqi government.

Hill’s negotiating ability will be tested on a daily basis as he continues to push to improve relations among actors within Iraq and the Middle East region In early 2009, Hill’s appointment was heavily debated by politicians in the circles of Washington. He has received criticism in the past, particularly from former VicePresident Cheney, for being too eager to strike a deal, to liberal in granting concessions, and too media-friendly. Moreover, many have questioned what they deem as his lack of success in past dealings with nuclear proliferation and human rights in

North Korea. Furthermore, just prior to his Senate confirmation, some government officials raised doubts over his candidature due to his lack of experience in Middle Eastern politics and terrorism, and because he is not an Arabic speaker.

Despite Hill’s potential shortcomings, his 32 years as a diplomat and his excellent reputation as a respectful listener and multi-level, high-stakes negotiator speak for themselves.

They have earned him tremendous respect both domestically and abroad. Hill has won several awards for his dedicated foreign service, most notably the Secretary’s Distinguished Service Award (the Department of State’s highest achievement) on two occasions: for his work in negotiating the Bosnia peace accord (1996), and for his leadership in the six-party talks with North Korea (2009).

The Obama administration hopes that Hill can put his wide array of skills and experiences into practice in, perhaps, his greatest diplomatic challenge thus far. Hill will attempt to carry out America’s ambitious goals in the country, in particular, to strengthen the Iraqi government and security forces in order to prevent the country from falling into deeper ethno-sectarian violence. Hill’s negotiating ability will be tested on a daily basis as he continues to push to improve relations among actors within Iraq and the Middle East region.

Hill will work alongside Deputy Robert Ford, an Arabic speaker with substantial Iraq experience.

Together, they will seek to play an instrumental diplomatic role in ensuring that all American combat troops return home in 2010 and a complete withdrawal takes place, as projected by the Obama administration, by 2012.

35

People - Interview

A Perilous World

William Cohen, former Defense Secretary of the Clinton Administration William Cohen, former Defense Secretary of the Clinton Administration, spoke with The Majalla about several strategic and security issues in the Middle East, including Iran’s nuclear plans and the progress of the international presence in Afghanistan.

Former U.S. Secretary of Defense William Cohen © getty images

Cohen is the former Defense Secretary of the W illiam Clinton Administration during

Clinton’s second term, from 1997 to 2001. He was appointed Defense Secretary after retiring from Senate where he represented the Republican party. As Secretary of Defense, he played a central role in the United Sates operations in Desert Fox in Iraq and NATO operation Allied Force in Kosovo. His second year in office witnessed the al-Qaeda bombings of the United States embassies of Kenya and Tanzania. Cohen spoke with The Majalla about several strategic and 15 January, 2010

security issues in the Middle East, including Iran’s nuclear plans and the progress of the international presence in Afghanistan.

The Majalla: Even if Iran’s nuclear programme is for peaceful purposes, considering that they have the knowhow and the technology to achieve highly enriched uranium, do you think Iran can ever be trusted?

Given Iran’s past conduct and its highly illogical fervour, I think that absolutely intrusive inspections and over-site scrutiny would be an absolute

minimum. That would have to be the system if they were to go forward with their nuclear power programme.

I think that there will always be doubts about it, in terms of what their designs are. Everyone has stated, as have we, that every country is entitled to have a certain nuclear power as long as it complies fully and in line with all of the international safeguards.

That would apply to Iran as well. But I think that the burden of proof would be quite substantial in terms of what would be required of Iran by virtue of its past practices and by virtue of its 36

People - Interview expansionist objectives.

Q: According to Ambassador Carl Ikenberry, there is progress in Afghanistan. Would you agree with this?

There is some progress from what has been taking place obviously, but don’t forget we had General McCrystal’s recommendations in his report that were furnished to the President. I didn’t see it, but it was reported in the press that unless we have a substantial infusion of forces, then the risk of failure is quite high. So we were on a slope, or failure, from a security point of view. Recently, that has been somewhat reversed, or at least flattened out. Now with the thirty thousand troops that will be going in, plus the seven and possibly eight thousand from the NATO European members, the hope is the scenario in Afghanistan will improve considerably.

Again, it is still a moderate to high risk even with forty thousand new troops.

That in conjunction with working with the Pakistani military in a more focused way to assist them to focus on the Taliban and not lean only on the assistance we provide to deal with them.

Q: The main purpose of Obama’s new strategy is to break “the Taliban’s momentum”, as people now say. Once this happens, what do you think are the chances to negotiate?

Well, it depends. Some of the Taliban may have an interest in not being associated with the more radical elements, and possibly would lay down their arms and agree to at least conduct themselves in a fashion that would not pose a threat to the stability of the country. We’re exploring that, if that is possible. In any event, as General Petraeus said, there are some in the Taliban that must be kept close and not driven away; we’ll just have to wait.

Q: There are evidences that the link between al Qaeda and the Taliban is not exactly a love story. Can the Afghan Taliban be convinced to cut with al Qaeda for good?

It depends on how much success we have on the ground, to the extent that they [the Taliban] see that there is now a new plan, a new commitment with a new focus that will have fairly dramatic consequences in terms of their security and survival. That may alter the Taliban’s opinions and cause even greater separation.

The Majalla: The Pakistan government does not seem that concerned with the US drones programme. What do you think are the positive aspects of the programme?

It is a delicate situation for Pakistan that obviously does not welcome any foreign troops operating inside its territory. However, to the extent that the US is able to operate the drones under their control, then they perceive that as something quite beneficial. It has been quite successful. But it has been a result of a partnership of cooperation other than the US simply getting in at will into Pakistani territory to carry out these attacks.

Since the Cold War, what we have seen is the democratization of terror, namely with the way information is now made available Q Somalia is becoming a similar case to Afghanistan of the 1990s, where the Shabaab, with strong ties with and inspired by al-Qaeda, gradually taking over the country. What can be done about this?

There is going to have to be an international solution here. The first thing that you have to have again is stability. That may necessitate installing a military component on an international level. Wherever you have poverty and despair you’re going to have an open market for al-Qaeda to come in and try to sell its terrorist ideology. Economic security and military security go hand in hand and this is something that should be a high a priority on the international agenda.

Q: Do you think we live in a more dangerous world than that when you where Secretary of Defense in the Clinton administration?

The answer is yes. The world has become more dangerous in the sense

that at one point during the Cold War, we were living on the hair trigger of a nuclear exchange between the former Soviet Union and the United States, and that certainly posed an existential threat to not only our country but to many others as well. Since that time what we have seen is the democratization of terror, namely with the way information is now made available. Tom Friedman was talking about the world being flat, well, a flat world means that information is now distributed globally and just as Bill Gates has access to technology, so does Bin Laden. As a result of that, we are now in a position where just a few people can bring about catastrophic harm. That becomes more difficult to contend with because you are not necessarily dealing with rational people; you are dealing with extremists who are prepared to blow themselves up.

And if they have access to nuclear technology then it poses enormous threats to security throughout the world, so it’s a more dangerous world by virtue of information now being available to literally anyone.

Not that we can’t contend with it, we are certainly adding defensive measures, mainly intelligence through the sharing of information, but because we are democracies we remain open, we remain vulnerable. What we have to do is to try to improve regional and international cooperation to marginalize the extremist elements, reduce them down and control them as best we can, arrest them if we can, which is going to require good police work as opposed to military action. The gathering of information on individuals is central, as you saw in Pakistan most recently, with five Americans on their way to Pakistan to get training to start carrying out military actions, terrorist actions against armed forces in Afghanistan.

That means good police work targeting those individuals, getting information, intercepting phone calls. This is another whole discussion that raises the balance between gathering information and maintaining privacy for individuals.

This means that we have to share information on an international basis for those countries who are going to lengths to work together and cooperate to try and stop not only the flow of information and technology from getting into the hands of extremists, but prevent them from taking action. I’d say that’s a very dangerous world.

Interview conducted by Manuel Almeida 37

Economics Arab Economics

International Investor

Markets

The Missing

Link

By Wessam Sherif

Š getty images

Issues 1541

39

Economics - Arab Economics

The Missing Link

Between FDI and Development in the Middle East Wessam Sherif Countries of the Middle East have taken strides towards the implementation of foreign direct investment (FDI) in their long journey to development. Nevertheless, several components of this equation are still missing.

A Kuwaiti trader speaks on the phone at the Stock Exchange in Kuwait City

T

he relationship between Foreign Direct Investment and economic development has long been thoroughly discussed by leading economists. The assumption that FDI endorses development has not received unanimous support, although in theory FDI does in fact boost growth and development in host countries.

FDI directly promotes economic growth 15 January, 2010

and development by contributing to the gross capital formation of the recipient country. However, it is through indirect channels that FDI makes a significant difference in economies. FDI leads to the introduction of new goods in the economy which in turn leads to the insertion of local and intermediate goods, as a result of rising demand and market competition.

Furthermore, FDI creates employment

Š getty images

opportunities in the host country, taking advantage of unused skilled labor. This leads to the enhancement of labor skills in addition to the transfer of expertise to the local work force. As a result, a well established FDI system can break vicious cycles of underdevelopment.

However, FDI is not without its adverse effects on host economies. Without an

40

Economics - Arab Economics absorptive capacity, the positive spillover effects and the development of human capital will not take hold. There are numerous infrastructural criteria that are imperative to support FDI, such as technological preparedness, an educated work force and institutional and financial development.

Interestingly, the Middle East suffers from the aforementioned paradox. Countries of the Middle East have been able to overcome many difficulties in paving the road to a successful FDI framework, yet they still remain incapable of reaping the fruits of their labor.

Middle Eastern countries generally, and Arab countries in particular, have attracted a considerable portion of global FDI inflows during the period between the 60s and the late 90s. In Egypt, for example, FDI inflows increased substantially rising from $1,214 million in 1992 to $2,330 million in 1994 reaching $2,643 million in 1998.

At the same time, in the region as a whole, the FDI/GDP ratio increased to 1.27%.

Unfortunately however, this momentum was lost. FDI inflows dropped sharply and by 2002 FDI performance in the Arab world lagged behind most other developing regions.

The disappointing FDI outcome could be traced back to several reasons. First of all, at the time, a preponderance of FDI in the region was directed to petroleumrelated industries, while non-petroleum FDI in countries such as Egypt and Bahrain went mainly to tourism, banking, telecommunications, manufacturing, and construction. The lack of FDI recipient fields, in addition to scarcity of diversified economies in the region significantly reduced the inflow. Secondly, the region's inward oriented trade policies and relative lack of economic liberalization coupled by strict investment regulations, have acted as a barrier against investment initiatives.

Accordingly, the overall attractiveness of FDI opportunities in the region diminished considerably, due to a fear of a low rate of return by investors.

As a result, the second half of the past decade has witnessed revolutionary initiatives by many countries in the region to reform investment-support infrastructure. Countries like Saudi Arabia, Egypt and UAE have exerted impressive efforts in creating a favorable business climate, new investment opportunities and improving FDI frameworks. For example, the once unexploited Saudi Arabian mining sector, transportation, satellite transmission Issues 1541

services, wholesale/distribution, as well as retail trade and commercial agencies have all been exposed to external involvement.

The Kingdom also provided improved conditions for visas for foreign business travelers. In UAE, a new federal company law was issued allowing a 100% foreign ownership in some sectors, while on the other hand, mass privatization in many sectors of the economy has been taking place in Egypt. As a result the rankings of many Arab countries on the World Banks' "Doing Business" list have significantly improved The economic liberalization of the region has allowed for a large inflow of FDI. According to the United Nations Conference on Trade and Development, FDI to the region has risen by a record of 10% in 2007 with Saudi Arabia and UAE on top of the chart of recipients. Along with Turkey, Saudi Arabia and UAE have received ground breaking $56.9 billion aggregate inflows, accounting for two thirds of the inflows to the whole region.

FDI inflows to GCC countries have surged by one fifth in the same year reaching $43 billion, while Egypt has also received considerable inflows of $11,578 billion.

This surge has resulted in both a vertical and a horizontal inflow of FDI, in other words, not only was the region a large recipient of foreign funds, but intrainvestment activities were also underway.

Egypt and the Maghreb countries have become a major source of attraction for Gulf investors. Thus it is noteworthy that the share of GCC capital in Egypt's total FDI has ascended from 4.5% in 2005 to 25.2% in 2007. The rise in FDI inflows continued throughout 2008 reaching $93.7 billion with Saudi Arabia still in the lead with a commanding $38 billion. While on the other hand Egypt experienced a decline to $9 billion, although it remained one of the largest recipients in the region due to sustained policy reforms.

Although these are impressive initiatives, FDI does not compose a major percent of the countries' GDPs. These reform programs have been initiated recently, and it would be too soon to measure economic development based on FDI performance. Nevertheless, there are several short-term and long-term challenges that the region has to overcome before harnessing the power of FDI. First and foremost, is the global crunch that has resulted in many impediments to FDI progress in the region. The financial crisis started to take effect in the region by the end of 2008 and spread throughout 2009. Consequently, a large part of the

foreign funds were withdrawn and there was a massive drop in asset prices putting a severe strain on domestic balance sheets, which required rapid credit adaptations from banks. Furthermore the sharp decline in oil prices severely affected oil-dependant nations, which used oil revenues to initiate large investment projects; hence the GCC countries were the most affected by credit deficits and the plummeting of oil prices.

On the other hand, non-petroleum countries were also affected by the decline in tourism remittances, real estate, and the halting of many projects. As a result, FDI is estimated to have dropped by 32% in the region. What makes the issue worse is the fact that FDI inflows to the region largely surpass its outflows. This, in turn, severely curbs the region's ability to use FDI as a means to mitigate the effects of the recession.

The region is also plagued with longterm obstacles that block the bridge between FDI and development. For example, unemployment has been considered a chronic illness in the Middle East. A problem that worsened during the financial crisis. Additionally, in terms of technological progress, the region lags behind global levels of progress, which in turn deprives the region's human capital of a very important tool.

These obstacles significantly decreased the region's absorptive capacity, creating a crowding phenomenon. In other words, at many times, FDI has resulted in the increase of unemployment due to the scarcity of skilled labor. It has drawn the local work force to multinational corporations instead of optimizing the skills of the unemployed. This in turn has eliminated local competition instead of endorsing it, thus halting the process of technology and expertise sharing and limiting local and intermediate products.

In order for FDI to have its intended effects, and promote development, numerous regulatory and institutional problems of the Middle East must be addressed. These reforms should not be limited to the financial sector, but should also address the educational and institutional sectors, to make use of the massive human capital that would be able to exploit the benefits of FDI. FDI will not lead to development by solely depending on abundant resources, and regulatory facilitations, it must go hand in hand with local infrastructural reform.

Otherwise, the positive spillover cycle will be reversed.

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Economics - International Investor

Dubai and its Discontents

A wake-up call for the Dubai Investment Environment

The debt crisis that struck Dubai's largest conglomerate last November did not, as many feared, send the global financial system into a double-dip recession. While the incident was well contained in the short run, Dubai should heed the crisis as a sorely-needed wake up call, and must now begin clearing up a considerably opaque investment environment.

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hen Dubai World requested a standstill on $60 billion worth of outstanding debt, stock markets were jolted and an entire wave of nervous speculation unfurled overnight. Now, more than a month removed from the Dubai debt crisis, most analysts deem the event an isolated incident, with only evanescent ripple effects on world financial exchanges. While markets certainly did recover, the debt crisis underscores more troubling, systemic problems in Dubai’s investment environment, and merits closer attention.

Upon its inception under governmental decree in 2006, Dubai World rapidly became the largest conglomerate in the Emirates. The investment firm thrived during the nascent property boom, as its subsidiary company, Nakheel, oversaw landmark real estate development projects like the Palm Islands, the Dubai Waterfront, and other ambitious endeavors that soon came to define the region. With the global financial crisis cresting in 2009, however, capital quickly evaporated, and the Dubai property boom, like many before it, became bust.

Financial analysts were quick to point out that Dubai World, unlike Lehman Brothers or Bear Stearns before it, was not a financial intermediary; its debt problems were not intrinsically linked to any sort of complex financial instruments or entangled web of continuously repackaged loans. It's no real surprise, then, that the event ended up being more of a blip on the global radar screen than any slippery inflection point that may have signaled a "double dip" international recession. From a more regional perspective, though, the event and its aftermath could bode ominously for Dubai’s investment future.

Though the Dubai government was not legally or contractually bound to “bail out” Dubai World, its refusal 15 January, 2010

Amar Toor to offer debt assistance speaks to an unhealthily opaque investment environment. For years, government owned developers like Nakheel and Tatweer were able to attract large inflows of foreign capital because of their implicit relationships to the Dubai royal family and governance.

This implied sovereign backing gave investors a certain level of assurance and confidence in the extravagant projects they were helping to finance, even if the precise nature of the government’s role remained somewhat nebulous.

Although Dubai World’s debt was, technically, never guaranteed by the government, foreign lenders treated it as such, and invested accordingly. In a post 2009 Dubai, however, it will likely be difficult to attract the same volumes of capital from investors now more wary of government owned enterprises.

The crisis also exposed Dubai’s geographic Achilles’ heel: its lack of oil, and resultant dependence on Abu Dhabi. Unlike other Middle East states, Dubai had no oil or gas assets to fall back on when it found itself strapped for cash. Until now, the emirate had always relied on high prices maintaining a steady stream of capital, and kept Abu Dhabi on speed-dial should they ever need extra support. In early 2008, Abu Dhabi provided Dubai with $10 billion worth of low-interest loans, and in early November, two staterun banks contributed $5 billion of aid. This time around, their neighbor

didn’t step in until December 14th, offering another $10 billion lifeline that helped Nakheel pay off its debt at the last minute. While many saw the assistance as an encouraging sign that the UAE would not let Dubai fend for itself, ultimately, the move only highlights Dubai’s dependence—and the capriciousness of that safety net. If Dubai, as many believe, wants to stand shoulder to shoulder alongside the likes of financial centers like Hong Kong and London, it cannot be so heavily dependent upon an unreliable source of back up. As one senior Abu Dhabi official said to Reuters news agency shortly after news of the crisis broke, the emirate will “pick and choose when and where to assist.”

Perhaps the crisis will, as some predict, engender greater caution among firms when considering investment in emerging economies or other Middle East markets in general. At the very least, though, the standstill will serve as a sorely needed wake up call to the emirate.

Throughout the property boom, Dubai was able to grow at meteoric rates through a combination of carefully calibrated expectation management and a meticulously manicured investor-friendly environment. As the late November crisis illustrated, though, much of the Dubai mystique was just that— an ideal of a financial Neverland that mushroomed on the strength of snowballing herd mentality, and that, until this autumn, successfully masked underlying gaps in financial transparency. Going forward, then, it’s paramount that Dubai and the UAE treat the debt crisis not as a mere hiccup, or as a natural byproduct of a global downturn, but as a veritable canary in their economic coal mine.

The landscape has changed. Dubai must now do the same.

Consultant in the Trade and Agriculture Department of the Organization for Economic Cooperation and Development (OECD) 42

Geopolitics In Brief

Features

Debate

Interview

Economics The Political Essay

Ideas Profile

Issues 1541

Reviews

15 January, 2010

42

Economics - Markets Port-de-Paix

50 miles

Cap-Haitien

DOMINICAN REP.

80km

Gonaives

H A I T I

Epicentre

Les Cayes

Extreme or violent shaking

Strong to severe shaking

United States: Three 70-strong search and rescue (SAR) teams with sniffer dogs. Four U.S. Coast Guard cutters, aircraft carrier USS Carl Vinson en route. American Red Cross sending $1 million in immediate aid World Bank: $100 million in aid United Nations: $10 million from emergency relief fund to speed aid Inter-American Development Bank: Redirect $90 million in undisbursed funds to Haiti Canada: C$5 million ($4.8m) in immediate aid, two Canadian navy ships with emergency supplies en route, Disaster Assistance Response Team (DART) on standby European Union: €3 million ($4.37m) in aid

Source: Government announcements

Britain: Emergency funding of £2.7 million ($4.4m). 64-strong SAR team plus rescue equipment Ireland: €2 million ($3m) in emergency assistance Netherlands: Pledge of €2 million ($3m) in emergency aid, 60-strong SAR team with sniffer dogs Germany: €1 million ($1.5m) in aid France: Two airplanes, field hospital plus rescue personnel Iceland: 37-strong SAR team Brazil: Aircraft delivering water and food, medicine, equipment, sniffer dogs Australia: A$10 million ($9.3m) aid package, half provided immediately China: $1 million in aid, 60-strong SAR team, 10 tonnes of food, medicine

Picture: Getty Images

U.S. internet giant Google’s threat to quit China over censorship and cyberspying caps a turbulent relationship between the world’s dominant search engine and the government of the world’s largest internet market Chinese internet users (%)

Projected

2010, Jan: Google finds cyber-attacks on Gmail accounts of human rights activists originated from inside China.

Google says it will end censorship of searches in China and is prepared to pull out of country

% 26 24

Jul 2009: Chinese internet users hit 338 million, or 25.5% of population

22

2009, Mar: China blocks Google’s YouTube site.

Jun: China blocks Twitter website ahead of 1989 Tiananmen massacre anniversary. Regulators order Google to block access to pornography and foreign websites. Google.com blocked in China.

Sep: Lee Kai Fu quits amid rumours that pressure from Chinese government has become intolerable

8 2009, Dec: Google faces trial in Chinese court accused of violating copyright of Chinese writer with its digital library

2006, Jan: Google.cn launched.

Site censors search results in accordance with Chinese rules 1998, Sep: Google Inc. founded by Larry Page 2005: Lee Kai Fu appointed and Sergey Brin. head of Google China “Don’t be evil” is 2002-03: Google.com corporate motto periodically blocked in China 2000: Launches Chinese-language interface for Google.com website 98

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00

01

02

03

04

05

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06

07

08

09

20 18 16 14 12

2006, Jun: Google.com blocked but Google.cn allowed to continue

Source: Google, China Internet Network Information Center

Port-auPrince

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10 8 6 4 2

© GRAPHIC NEWS

© GRAPHIC NEWS

Rising Malaysian Sukuk Issuance

The issue of corporate sukuk in Malaysia is expected to increase

by US$ 15 billion in 2010, mostly stimulated by the needs of infrastructure companies and refinancing. Malaysian Rating Corp has estimated that just roughly 50% of corporate bond issuance in Malaysia was sukuk in 2009. These trends are surprising in the context of the world economic slowdown and the Dubai Debt problem. Some pundits in the banking community, however, expect the Dubai debt restructuring to have a negative impact on the emirate’s sukuk issuance, but spare other regions.

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15 January, 2010

Reviews Books

Issues 1541

Readings

Reports

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Reviews - Books

Kryptonite or Super Sequel?

Superfreakonomics : Global Cooling, Patriotic Prostitutes and Why Suicide Bombers Should Buy Life Insurance Steven D. Levitt and Stephen J. Dubner Harper Collins Publishers October 2009 This informative sequel to the authors’ successful Freakonomics hit, is an interesting and engaging read.

Although the subjects covered are original the innovation that made Freaknomics so successful was not as easily replicated in the sequel.

W

hen authors of successful non-fiction books toy with the idea of writing a sequel to a multi-million selling title, they are usually gambling against very unfavourable odds. Nonetheless, Steven Levitt and Stephen Dubner seem to have partially won their bet by publishing a sequel to their highly successful “Freakonomics”.

“Superfreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance” is a page-turner, even if it does not shine as brightly as its predecessor.

Levit and Dubner had a daunting task from the very beginning. They had to find a way of applying the same concept that had greatly contributed to the popularity of Freakonomics to new and equally interesting topics. The challenge was massive.

One important hurdle was the public’s overly-high expectations. As a rule, as the pressure for a follow-up to a best seller grows, so do 15 January, 2010

the public’s expectations that the sequel will be better than the original. This renders the success of a sequel all the more difficult to assure.

In the case of a non-fiction like Superfreakonomics, two additional obstacles stood in their way. First, the success of the original owed a great deal to its innovative concept: that of applying the science of economics to explain subjects that at first sight had little to do with the dismal science.

Second, the pool of available case studies for the book seems not to have been as bountiful as in the original.

This should provide a window into explaining why Superfreakonomics is at best a meager success.

First, Superfreakonomics was not able to count on the novelty factor—given that the market is now replete with books emulating the concept introduced by Levitt—and further the very application of the concept seems to have fallen short of its potential this time around. Second, although

still interesting, the topics on which the studies were carried were significantly less startling than in Freakonomics.

Nevertheless, what determines the success of a book such as Superfreakonomics is its power to entertain, and in this regard the authors exceeded their goal.

Two of the five topics discussed in the book stand out as the most mesmerizing, to say the least: one on prostitution (Chapter 1), and one on alternative means of fighting global warming (Chapter 5).

It is the chapter on prostitution where Dubner and Levitt come closer to the formulae that assured the success of Freakonomics. To the prurient reader, what at times becomes a detailed study of the highend escort business offers a powerful hook to the rest of the book. The combination of such a peculiar theme with even more staggering conclusions, such as the finding that an escort gets relatively more 48

Reviews - Books

money employing a pimp than a homeowner does by employing a realtor, successfully brings the reader back to the unnerving exhilaration felt when reading Freakonomics.

No less interesting is Chapter 5, where the authors engage in a divisive and yet still motivating discussion on the best methods of tackling global warming.

The authors smartly and ably introduce geo-engineering as an alternative (even if it is not yet viable) to what has almost become the 21st century’s universal fixation, the curbing of carbon emissions. Although less baffling, this chapter does succeed in captivating the reader’s attention to the very end, by familiarizing them with a string of eerie scientific approaches to cooling down the planet.

Yet even the best chapters of the book are symptomatic of its overarching problems.

The chapter on prostitution, even if highly interesting, leaves too many questions unanswered. It spends too much time on side-stories and discussing the rationality of actors (prostitutes and pimps).

One of the main conclusions of the chapter—that the business operates according to the laws of demand and supply—is at best mundane.

The Chapter on geoengineering fares no better in answering the questions it raises. It remains a one-sided story given the quick and curt dismissals of rather valid objections to geo-engineering.

If one is to believe what the book says, the only reason why geo-engineering is not seen as a viable option is the public’s Issues 1541

Steven D. Levitt

Stephen J. Dubner

ignorance.

Despite these various shortcomings, the book remains a worthwhile read. The three other chapters contain some interesting anecdotes, such as an analysis of the famous Kitty Genovese murder, or an—albeit inconclusive—comparison between the risks of drunk driving and drunk walking.

The success Freakonomics

achieved was based on the

astonishing insights brought about by Levitt’s able datamining and analysis coupled to Dubner gifted capacity in turning the results into an interesting story. The problem with Superfreakonomics is that the “insights” are often intuitive, which reduces the reader’s feeling of awe.

Contrary to Freakonomics, Superfreakonomics seems to be based overwhelmingly on story-telling at the expense of surprising insights.

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Reviews - Readings

Readings Cover

Books In the Graveyard of Empires: America’s War in Afghanistan Seth G. Jones April 2010

In the Graveyard of Empires, Seth Jones's history of post-invasion Afghanistan, is at its best when it describes the follies and occasional acts of heroism emanating from the patchwork of nations that now take collective responsibility for Afghanistan. The coalition he describes includes many dedicated soldiers and canny diplomats, but it errs frequently, and in the end its members amount to just a few fully committed nations: the U.S., the U.K., Canada, and the Netherlands. Most others commit soldiers only in nominal amounts, or halfheartedly -- under the condition, say, that they build roads and schools instead of killing Taliban, even if the Taliban are destroying the roads or murdering the teachers.

Confessions of a Mullah Warrior Masood Farivar February 2010

Cover

Masood Farivar was ten years old when his childhood in peaceful and prosperous Afghanistan was shattered by the Soviet invasion in 1979. Farivar, who was born into a long line of religious and political leaders who have shaped his nation’s history for centuries, fled to Pakistan with his family and came of age in refugee schools. At eighteen, he defied his parents and returned home to join the jihad, fighting beside not only the Afghan mujahideen but also Arab and Pakistani volunteers.

When the Soviets withdrew, Farivar moved to America and attended the prestigious Lawrenceville School, Harvard, and ultimately became a journalist in New York. In this dramatic and timely memoir, Farivar draws on his unique experience as a native Afghan, a former mujahideen fighter, and a longtime U.S. resident to provide unprecedented insight into the recent collision between Islam and the West. He paints a vibrant portrait of his family and his nation’s history, exposes the world of militant Islam by taking us deep inside the madrassas, vividly recounts his experiences on the battlefield at Tora Bora and elsewhere, and movingly conveys the culture shock of a Muslim living in contemporary America.

Reports UAE: Sheik’s Trial Insufficient to Stop Torture Human Rights Watch January 10, 2010

In this recent report by Human Rights Watch, the NGO makes calls for further action on the part of the UAE government with regards to the prosection ofSheikh Issa bin Zayed al-Nahyan, a royal family member videotaped apparently brutally torturing an Afghan grain dealer with the assistance of police. Human Rights Watch further asserted that this was necessary if the UAE was to restore confidence in the country’s judicial system.

Cover

Interview Terrorism Risks and Timeless Problems January 8 2010 Council on Foreign Relations Richard Bretts While recent intelligence failures have stirred concern and controversy, they are "timeless problems," says CFR Adjunct Senior Fellow Richard K. Betts, an occasional consultant to U.S. intelligence agencies. "There are tradeoffs in dealing with these problems that will never be resolved," he says. "The price of reducing one risk is sometimes to raise another risk or raise the cost to a level that doesn't seem worthwhile." Complicating the American counterterrorism picture, Betts says the suicide bombing by the "double agent" in Khost, which killed several CIA officers, shows how difficult it is to try to infiltrate al-Qaeda at the highest levels.

15 January, 2010

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Reviews - Reports

Between a Rock and a Hard Place Migrants and the Global Financial Crisis Uri Dadush and Lauren Falcao Carnegie Endowment for International Peace November 2009

The financial crisis has exacerbated claims that immigrant labor reduces employment opportunities for low-skilled workers in more developed countries. Dadush and Falcao dispel these claims and argue instead that migrant labor is extremely beneficial to both the host and home countries of migrant labor. However, as an under represented group, migrant workers tend to find themselves between a rock and a hard place in the context of a financial crisis.

C

ritics of globalization have many qualms, some realistic, but many exaggerated.

Amongst the fears that fall in the category of exaggeration is the understanding the migrant labor is a threat, especially during economic downturns when employment is difficult to keep, and even harder to come by. The Carnegie Endowment for International 15 January, 2010

Peace has responded to these fears and their impact on migration policy in their latest report Migrants and the Global Financial Crisis. In this report, Uri Dadush and Lauren Falcao not only dispel these rumours but strongly assert the benefits of migrant labor.

Migrants and the Financial Crisis first establishes the significance of migrants by noting that there

are over 200 million migrants in the world, with 82 percent of these originating from developing countries. With their immigration however, come specific effects on both their home and host countries. The report demonstrates that migrants make an immense contribution primarily through the remittances they send back home. ‘Their remittances represent an essential source of foreign 52

Reviews - Reports exchange for these countries, as well as a major instrument in the fight against poverty.’ The increase in foreign exchange availability through remittances also increases the food security of drought-prone countries, and it further allows them to import medicines and other technologies.

Dadush and Falcao also highlight the widely accepted view that migration has povertyalleviating effects in migrant’s countries of origin. ‘Migrants typically triple their real earnings by working overseas, and World Bank research indicates that over 10 percent increase in per capita official remittances leads to a 3.5 percent decline in the share of people living in poverty in the remittances’ destination country.’

The gains of host countries are driven by lower prices of construction and services, including hospitality, retail, health care and domestic help.

It seems then, that in the context of a financial crisis parties on all sides would be supporting the needs of migrants, yet the opposite reaction tends to dominate trends in policy. This is primarily due to the perception that migrant labor increases competition for jobs.

Dadush and Falcao refute this claim by demonstrating that it is a fear based on the assumption that migrant workers are adequate substitutes for native workers, and that native workers want the same jobs. Their research on the other hand indicated that the opposite was true, on average for example, a low skilled American worker has a high school diploma and speaks English, while the average low-skilled Mexican migrant has 6 years of education and does not speak English. The two candidates are therefore not perfect substitutes for one another, and consequently aren’t Issues 1541

competing on the same level.

In addition to differences in human capital, migrants also tend to be especially vulnerable during crises as they are most likely to be employed in the worst-hit sectors of the economy. In addition, migrants and illegal migrants included are politically stuck in the middle between their home and host countries. As a result, their demands are not heard by policy makers in either country.

Much media attention has been given to the outflow of migration in Dubai, yet this appears to be the exception. Overall, despite the difficulties that immigrants face in host countries, many are choosing to stay.

Their decision to do so is related to the border controls and immigration regulations that would inhibit them from returning once the economy recovers.

‘Migrants are often more willing to wait out unemployment or low wages in their host country than to return home…’ Ironically, the tightening of restrictions on immigrations is a common reaction in host countries, whose native workers aim to discourage migrants from coming in who might worsen their prospects for employment. ‘This year South Korea, Malaysia, and Thailand have all put some form of moratorium on incoming foreign workers. Australia, Kazakhstan and Russia have reduced their quotas for new entrants. And the Untied Kingdom has increased the academic and financial requirements for migrants attempting to enter the country as skilled workers.’

As a result of these findings the report argues that policy makers need to withstand political pressure that calls for taking measures against migrants, not only for moral reasons, but because

these measures are detrimental to their economic policy. While their research is strong in its ability to demonstrate that the value of migrant labor is underappreciated in host countries, and that the benefits of immigration on the global economy are important, it is unrealistic to ask policy makers to ignore political pressure— especially if these are elected officials.

Acknowledging that this might be easier said than done, the report urges that instead of stricter immigration regulations, policies to encourage migrants to return to their home countries be applied in their stead. Although this might be a more realistic way of dealing with constituents at home, temporary migration is not without problems. Temporary migration programs are criticized for leading to permanent migration, and those who are politically against migration all together, might not see the benefits in this alternative. Yet, should these temporary migration problems be re-designed so as to adapt to the demand and supply of the global market, there is no reason why migrant labor should not be able to continue to provide the benefits it has in the past.

The issues that Migration and the Financial Crisis raises are important for their expansive scope.

More interestingly perhaps, it highlights the tendency of domestic politics to undermine efficient economic trends.

The report further indicates that perhaps one of the major problems migration faces is one of public relations—although it is one of the most beneficial phenomena of globalization it is rarely regarded as such. How to re-brand migration and detach its association to the loss of jobs is an important obstacle that policy makers must face.

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The Political Essay

The Forgotten Sons of Iraq

And the threat of sectarian politics

If there were any doubts about the need for all-inclusive politics in Iraq, it is now obvious that there will be no bright future if the return to sectarian loyalties is not prevented. The Sunni awakening members’ increasing discontent with their condition after assisting in the single most important mission of Iraq’s stabilization is worrying.

T

he last few months in Iraq have been marked by periods of relative calm, interrupted by brutal suicide attacks mainly directed at government buildings. This is the new strategy of al Qaeda in Iraq, and has worked as a reminder that the apparent stability and normalization achieved are reversible. The frustration these attacks generate is quite understandable, both for their ability to damage Maliki’s government and for the casualties they cause. However, the unease of the Iraqi Awakening council members with their own situation is potentially more threatening to Iraq’s long-term stability.

In 2007, with security deteriorating by the day, the US military came up with a plan of courting Sunni tribal leaders to change the course of things. This became a crucial element in the counterinsurgency efforts in Iraq. Previously targeting civilians and US and Iraqi security forces, the Awakening Council (or Sons of Iraq), that comprise roughly 100,000 members, turned against al Qaeda and provided crucial intelligence about the organization’s members in Iraq. They also patrolled and secured several districts that were previously among the most problematic. More importantly, the “Sunni Awakening”, as the siding of Awakening Councils with the US and the Iraqi government came to be known, was decisive in breaking patterns of sectarian conflict.

Obviously, the Awakening Councils became the Iraqi government and the US’s most precious ally not because of an affinity that was nurtured or cultivated. The Sunni Iraqis were 15 January, 2010

Manuel Almeida tired of al Qaeda’s indiscriminate attacks and, more importantly, the US and Maliki’s government made promises to the former Sunni militants. The short-term one was the payment of salaries. The longer term one was jobs and integration into the Shia-dominated security forces. Both have been largely unfulfilled.

The Awakening Councils accused the US and then the Iraqi government, to whom this responsibility was later transferred, of missing on the payments. A budget crisis of the Iraqi government in general and the Interior Ministry in particular is partly to blame. The Awakening Councils also claim that Maliki’s government is not doing everything within its reach to honour the promises of integrating them into the security forces. These claims are supported by developments such as the inclusion into the Iraqi security forces of 10,000 fighters from the militias aligned with two Shiite parties from the United Iraqi Alliance. Until now, only a small percentage of the Sons of Iraq have been integrated, at a rather slow pace, into the Iraqi security forces.

Another issue is likely to aggravate the situation. In general,

the violence in Iraq has been decreasing steadily in the last year and a half, although some analysts disagree. As the report Iraq: Trends in Violence and Civilian Casualties of Anthony H. Cordesman, from the Centre for Strategic and International Studies shows, civilian casualties decreased steadily from the end of 2007/beginning of 2008, and registered further decrease in 2009. The suicide attacks in particular are now less frequent, but more surgical. They are aimed at government targets, but they are also directed at members of the Awakening Councils. These attacks of al Qaeda directed at the members of the Sunni awakening councils, and especially at its leaders, are more than just acts of vengeance. They are a clear strategy to explore sectarian rifts and a feeling of disappointment with the unfulfilled promises.

If there were any doubts about the need for all-inclusive politics in Iraq, it is now obvious that there will be no bright future if the return to sectarian loyalties is not prevented. The Sunni awakening members’ increasing discontent with their condition after assisting in the single most important mission of Iraq’s stabilization is worrying.

If the needs of these groups— especially unemployment—are not addressed, this ticking bomb can explode when less expected. The risk is obvious. While the majority of the Awakening Councils is likely not to align with al Qaeda again, these thousands of unemployed and resentful former militants might undo the relative stability they helped building. This would mean a return to the pre-2007 situation, when there is no more room for such high profile mistakes.

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Issues 1541

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15 January, 2010