Monthly Archives: April 2015

Foreign Policy, ISIL, Middle East

The Root of All ISIL?

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There is a lot of soul-searching nowadays regarding the origins of the Islamic State of Iraq and the Levant (ISIL).  Historians and political scientists of all sorts have logged a lot of air time and print space answering the questions:  “How could ISIL have happened and where did these savages come from?”  Their answer is almost always a history lesson of the Iraq war with the occasional biopic on the Assad family thrown in for balance. Very rarely do they explore ISIL’s roots beyond that so there is something missing in the coverage.  While the post-2011 situation in Iraq undoubtedly led to the conception and birth of ISIL, let us remember that the group grew up in Syria.  For those of us paying attention then, our thoughts on the genesis of ISIL must inevitably turn to the Arab Spring and its mishandling by the Obama Administration and others.

Are the White House's failures at the roots of ISIL? Tahrir Square protesters communicate the scope of the problem.
Are the White House’s failures at the roots of ISIL?  Tahrir Square protesters communicate the scope of the movement in 2011.

Leading from Behind

We all know the mixed history of the Arab Spring.  On one hand it promised to liberate political thought in the Middle East from its despotic modern history but on the other led to the jarring realization that Islamism may indeed come to US allies like Egypt through the ballot box.  The Obama Administration should have learned a lesson from the electoral victory of Hamas but instead meekly transmitted mixed messages of support for America’s distasteful but stable ally Mubarak.  On 11 February 2011, Egypt announced Mubarak’s resignation while other regional allies watched in horror as America abandoned the second-largest recipient of US military aid.  Four days later, as if on cue, violence erupted at Arab Spring protests in Benghazi, Libya, igniting the civil war that ultimately led to the ignominious downfall of Muammar Ghaddafi and the slow descent of the country into perpetual balkanized dysfunction.  Less than three weeks after the first shots were fired in Benghazi, Britain and France were rushing headlong into the fray, enforcing a no fly zone and bombing Ghaddafi’s forces on the ground.  To support this they waved the flag of humanitarian intervention but found themselves critically limited in two ways: by their own inability to sustain a protracted air campaign in Africa, and by the insistence of the Obama Administration to “lead from behind” and achieve victory through airpower.

UntitledIn what must be one of history’s most stunning examples of the costs of alliance politics, the United States very quickly found itself compelled to rescue its allies from spectacular failure in a campaign it was verbally supporting.  Constrained by the President’s refusal to lead from the front, the United States Military took the reins under the guise of a NATO intervention while the French and British happily withdrew to the familiar position of supporting a US-led military endeavor America never wanted and did not benefit from.  In Libya, the rest is history.  Freed from control of the Ghaddafi regime and armed by a flood of loose weaponry, groups like Al Qaeda in the Islamic Maghreb (AQIM) unleashed direct assaults on governments across northern Africa.  As I argue in “The Illusion of Suddenness“, The infectious cocktail of successful rebellion in Egypt and weaponry from Libya transformed another Arab Spring protest, this time in Syria, into a raging insurgency.  The stage was set for ISIL to come of age.

The Birth of ISIL

As the war in Syria intensified, the United States continued to display hesitation in its foreign policy.  With the Assad regime clinging desperately to survival, western governments began to grow concerned about the potential for its use of chemical weapons. At a 20 August 2012 press conference, the President of the United States, who seemed to have recovered from his earlier lack of conviction in regional affairs, delivered a clear and powerful deterrent threat to Damascus by drawing a “red line” against the use of chemical weapons in the conflict.   But as a string of mysterious chemical weapons began exploding in rebel-held neighborhoods in October of that year, the “red line” began to bend and eventually broke in August 2013 after the undeniable use of Sarin in the town of Ghouta.  Rather than use authority under the War Powers Resolution to defend the “red line”, the President sought and received a specific resolution from Congress on 6 September which, among other things, required him to use “all appropriate diplomatic and other peaceful means to prevent the deployment and use of weapons of mass destruction by Syria”.  In this he complied with further delay, announcing that air strikes could be averted if Syria were to give up its chemical stockpiles.  Sensing an opportunity, Russia sent its Foreign Minister to negotiate the handover, managing by his success to destroy what little deterrent credibility the United States had left in the region.

The Situation in Iraq on 8 August 2014
The Situation in Iraq on 8 August 2014

The ISIL assault on Iraq began predictably three months later with the fall of al Qaim in December.  By the end of February 2014, Fallujah and Ramadi, taken at such cost by American soldiers ten years earlier, were firmly in Islamist hands.  In June, ISIL attacked the Tigris river valley, taking Mosul on the 10th and Tikrit the next day.  By the end of the month, large formations of the Iraqi Army had been completely destroyed, Tal Afar was in ISIL hands, and both Syria and Iran were actively intervening in Iraq.  Even then, America held off taking action until ISIL’s slaughter of Yezidis in Sinjar and simultaneous advance on the Kurdish capital Irbil.  By this time, ISIL controlled all the major cities in the north and west of Iraq, the Kurds were on the verge of being shattered into four exiled refugee communities, Baghdad was surrounded on two sides, and Iran was intervening openly in the situation.  The specter of state on state sectarian war was becoming very real indeed as the buffer between traditional enemies Iran and Saudi Arabia was collapsing precisely as Washington’s resolve was in serious doubt.

A Silver Lining?

The chronology of this is as disheartening as it is hard to deny.  A series of American half measures, broken promises, and false threats is the real root of all ISIL in the Middle East.  Faced with nothing but bad options, the White House now finds itself fighting shoulder to shoulder in Iraq with its old enemy, the Quds Force. Meanwhile, Riyadh has felt compelled to build an independent coalition (read: without the USA) to wage open war against Iranian proxies on their Yemeni frontier leading to the possibility that once again, the United States will get dragged into a conflict it doesn’t want in order to rescue an ally from failure.  Egypt, Qatar, and the UAE have all conducted offensive military strikes against ISIL and Arab Spring-related forces in the last five years, and large rifts are developing between the United States and critical allies Turkey and Israel.  If there is a silver lining to the quickening foreign policy disaster in the Middle East, it is that the crisis has given Tehran and Washington an opening to start talking about the Iranian nuclear program.  One gets the sense however, that the rapprochement comes amid declining American leverage rather than the reverse.

Lino Miani is a retired US Army Special Forces officer, author of The Sulu Arms Market, and CEO of Navisio Global LLC. 

South America

The Current Brazilian Crisis Explained

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Over the past several weeks, an economic and political crisis of a magnitude and scale not seen in over a generation has gripped Brazil. Economic stagnation has taken the place of what was once robust economic growth. The country’s GDP is expected to contract 0.5% this year. Unemployment is at 6% and rising fast. And inflation, which had been tame for the past 20 years, raised its ugly had once again as it passed the 8% mark. All of these developments have taken a heavy toll on second term president Dilma Rousseff, who has seen her approval rating plummet to 34%. In recent weeks over 1 million people took to the streets of Sao Paulo demanding Dilma’s impeachment.

But how did this happen? How could the fortunes of an emerging power like Brazil, a member of the BRIC bloc, and a country that until a few months ago was the darling of many financial analysts and investors, have changed so quickly?

The seeds of Brazil’s current crisis were planted back in 2003, when then president-elect Lula took office. Despite being a former head of a worker’s union and leader of the very left-wing Worker’s Party, Lula opted to mostly stick to the orthodox economic policies of his predecessor, the center-left politician, Fernando Henrique Cardoso. These policies, known as the “tripod of stability” were centered on balanced budgets, free-floating currency exchange rates, and an independent central bank. Many credited these policies with ending a period of high inflation that had plagued Brazil for over 50 years.

One of the reasons Lula opted not to break from the policies implemented by his predecessor was the fact that most of his cabinet was composed of political pragmatists that followed the adage: “if it ain’t broken, don’t fix it”. Over time however, most of the original “pragmatists” in his cabinet had to resign from their posts due to accusations of corruption.  Lula replaced them with hard-line old guard former communist guerrillas from the 1960s, and fellow union leaders, all whom openly despised the orthodox economic policies that had been in place until then.  The “tripod of stability” was completely reversed. Government banks (BNDES, Caixa and Banco do Brasil) were ordered to give out low-interest loans to pretty much anyone, but especially to people with good government connections. One of such was magnate Eike Baptista, who borrowed billions from those banks while offering very little collateral as a guarantee, to invest in oil exploration, build semiconductor plants and bio-diesel plants.

The government also started injecting huge amounts of public money into the real estate market. The government implemented a policy in which any worker with a formal job would received a government backed loan of at least 100 thousand Reais (about US$30K at the time). As a consequence, overnight 100 thousand Reais became the floor price of any home, in any condition, anywhere in Brazil. A huge construction boom started, as massive amounts of government credit flooded the real estate market. Home prices sky rocketed and there was a shortage of construction workers, which pressured wages across the economy.

At the same time, control of the massive state-owned energy company, Petrobras, was handed to one of Lula’s union friends. He immediately put Petrobras’ vast financial resources to work on expensive projects of very questionable economic value, but with potential for huge political dividends.  Such projects included a US $17 billion refinery in Lula’s home state. Many technical experts within Petrobras criticized the investment, saying that such a massive refinery was not needed, and even if it was, Lula’s poor and remote home state in the north was hardly the best place for such an endeavor. Those critics were quickly silenced and the project was placed on a fast track.

Other questionable investments conducted by Petrobras included the construction of a massive shipyard, also in Lula’s home state, and an acquisition of a refinery in Texas from a Belgian company for almost $900 million. Interestingly, that same refinery had been acquired by this Belgian company for $42 million only 4 years prior.

So, the stage was set for the tragedy that would follow. The artificial real estate boom gave Brazilian families a false sense of economic prosperity, as they watched the value of their homes triple or quadruple in just a few years. As a consequence, many of them went into deep consumer debt, trusting on the high value of their homes as backing. Magnate Eike Batista, who borrowed billions from government banks without any collateral, went bankrupt as most of his enterprises went nowhere, and the taxpayers were left holding the bag. Petrobras, as a consequence of the many new investments directed by the Lula’s cronies, became the most indebted energy company in the world ($179 billion). Most of its very bad investments tanked as multiple corruption scandals surfaced, where politically appointed Petrobras executives would demand bribes from suppliers and contractors. They pocketed part of the money, the other part went to the Worker’s Party campaign fund.  So far, the police have uncovered more than US$800 million paid in bribes.

So, Brazil today is facing not only a nearly insolvent Petrobras, but state-owned banks sitting in hundreds of billions of dollars in bad loans. Having to rescue the banks, the government is facing one of the largest budget deficits in modern history. All companies suspected of paying bribes to Petrobras had all government contracts suspended pending an independent audit. This means that constructions of bridges, subways, power plants, and roads have all been put on hold. Two of those very large construction companies have gone out of business as consequence of the moratorium, which caused tens of thousands of construction workers to lose their jobs. As the bribery investigation continues, more construction companies are expected to fold.

Predictably, the government created real estate bubble has burst. Apartment buildings are sitting empty across the country.  A large chunk of the population got into debt expecting the value of their “investments” to grow but now inflation is rising quickly and with it, the payments on their inflation-adjusted mortgages.  Meanwhile, the value of their “investments” plummet.  Overly leveraged home builders are sitting on unsustainable amounts of unsold real estate inventory. Many have folded, resulting in many more layoffs. The fear exists that this is just the tip of the iceberg, and that the police will now uncover similar corruption scandals in the state-owned banks and utility companies, which would escalate the crisis by an order of magnitude.

Renato Duque at the time of his arrest. www.ecuadortimes.net

Despite all of the dark clouds in the Brazilian skies, there are positive signs that the institutions are working. The police are investigating, indicting and arresting people. The courts are convicting and sentencing them. The press is covering and investigating the events and publishing their findings. People on the streets are outraged and protesting.  Looking at things from that angle, there are some positive actions taking place. One can also argue that the Lula/Dilma and the Worker’s Party experience ruling Brazil has brought a lot of political maturity to the country. Many citizens used to fantasize about the “heroes of the people” of the sixties and how those former Marxist guerrillas were idealists, pure hearted and really cared about the poor.  Many think that their stint running the country has shattered that image, and showed to even most romantic and naive of their supporters how corrupt, ruthless and devious these people really are. These events in many ways are eradicating the last remnants of that old view of evil capitalists vs. good communists that still existed in Brazil.

Pedro M Calmon is a business development executive with extensive experience in Latin America. He attended the University Of Brasilia and has a MBA from Nicholls State University. He currently resides in the United States and works at Google Inc. The views presented in this article are his alone and do not necessarily represent the views of his employer.