January 10, 2008

Straits of Hormuz

Somewhat lost in all the domestic political hullabaloo of these past days was the news of several Iranian speedboats swarming US Navy ships in the Straits of Hormuz. While Bob Gates has reportedly suggested that similar occurrences have taken place in the recent past, this episode was apparently of a different degree. What explains this Iranian activity? Was it the uncoordinated act of minor, localized Revolutionary Guard players near the Straits (with the timing perhaps inspired to give President Bush a 'welcome greeting' to the region), or alternately were major national security players in Teheran aware of the action?

Put differently, was this provocation authorized by central authorities, or was it merely adventurism by lower-ranking personnel? I'd say (and this is obviously wholly speculative) perhaps something in between. Some in Ahamadi-Nejad's circle are better served by a continued tense external environment so may occasionally resort to such actions to stoke tension (particularly now in the post-NIE environment with economic grievances and assorted domestic discontent garnering relatively greater attention). Also a factor? There are parliamentary elections in the late winter, and then later the Presidentials loom, so the various factions are positioning themselves as best they can. My point is some hard-liners in Teheran may have authorized local commanders to behave this way, but it was very likely not an explicit directive emitting from Khamenei or such.

Regardless the danger, of course, is that the next time a U.S. Naval Commander (perhaps with radio communications between the parties as seemingly confused as this go around) may feel compelled to take more robust defensive measures, to include even a possible exchange of fire. A conflagration could quickly result with undetermined implications, including for our troops in Iraq. Yet another reason, in my view, to adopt (even if woefully belatedly) Baker-Hamilton's recommendations to attempt to launch meaningful dialogue with the Iranians (and at a level well above that of our Ambassador in Baghdad). Talking could well further weaken the extremists, while helping avoid renewed provocations and/or miscalculations by the parties. Which is probably a reason the residual Cheneyites in the Administration are so deathly opposed to bolder diplomatic initiatives along these lines.

Posted by Gregory at 11:56 PM | Comments (42)

Quotable

Musharraf, to the Straits Times: "I challenge anybody coming into our mountains. They would regret that day".

Excerpts:

MR PERVEZ Musharraf, Pakistan's embattled president, warned that any unilateral intervention in his country by coalition forces fighting in Afghanistan would be treated as an invasion.

Unless agreed to by Pakistan, any entry by the United States or coalition forces into Pakistan's tribal areas would be resisted as a breach of Pakistan's sovereignty, Mr Musharraf told The Straits Times in his first interview with a newspaper since the assassination of Ms Benazir Bhutto on Dec 27.

Four American politicians, all Democrats contending for the party's nomination for the race to the White House, have called for US forces now in neighbouring Afghanistan to join the Pakistan Army's counter-insurgency campaign and to hunt down Al-Qaeda leader Osama bin Laden in Pakistan's tribal areas.

President Musharraf slammed the 'perception in the United States (that) what our army cannot do, they can do'.

Added the president: 'I challenge anybody coming into our mountains. They would regret that day.'

Mr Musharraf also took issue with US Senator Hillary Clinton's proposal, made on the eve of her New Hampshire primary victory, to place Pakistan's nuclear weapons under supervision by the US and the UK. Her statement, the president said, was 'an intrusion into our privacy, into our sensitivity... She doesn't seem to understand how well-guarded these assets are'.

And I can't help wondering what Pervez would make of op-eds like this one, so energetically penned by notables among our estimable Washington wunderkind class...

Posted by Gregory at 11:30 PM | Comments (5)

January 08, 2008

More Predictions

In haste, my rapid-fire gut on NH, undertaken at the risk of tarnishing my accurate calls re: Iowa.

Democrats

Obama: The big 'mo. Youth factor, independents and 'undeclareds' bandwagon. Something of a 'RFK factor' is propelling him now, so he'll continue to snowball (but let's not yet get overly complacent). He noses up to or clears the 40% mark. Range 39-43%. For a hard number, I'm going to say he goes north of 40%, let's say 42%.

HRC: Below 30%, say 27-29%. She's cratering now, and while one almost can't help feeling sorry for her, it's frankly hard to, not least knowing with near certitude how dirty the Clinton campaign will fight after a defeat in New Hampshire and heading into February 5th. But I'm afraid they'll be hard-pressed to find attack-lines that stick. Obama is not some totally omnipotent Teflon-Man, but it's going to take more than poo-pooing his ability to make good speeches, or saying he can't win a match-up in the general, or that he's no JFK, RFK or MLK. Such attacks will increasingly feel like thin, petty gruel. Nor will mawkish tears work, even if they're heartfelt and genuine, and/or born of exhausted frustration.

Going forward, if Obama snags Culinary Union Workers endorsement in NV and wins SC, Hilllary is reduced to Rudy-dom (fitting somehow, no?), that is, casting about for major (and increasingly improbable) turnarounds in some big states (CA, FL) after being closed out for all of the seminal events of Chapter 1. Grim tidings for the Clinton dynasty, I'm afraid, barring major surprises indeed.

Edwards: 17-19ish%. He turned in a good debate performance recently but is still a southerner way up north, and HRC still has loyalists aplenty (which isn't to say her campaign isn't in quasi-meltdown, per above). And I'd argue--despite Edwards trying to portray Obama as having some 'academic bent' (e.g. intimating he doesn't have the real fire in the belly to create so-called 'change')--many of the Edwards/Obama 11th hour waverers will end up tilting towards Barack.

Richardson: Energy prices are a particularly big deal in NH this go around reportedly (unsurprisingly), and Richardson seems to be benefiting a bit from this given people recall his related Cabinet gig. Also, some good exposure for him given he was in a relatively more high-profile debate w/ Kucinich not included and Dodd and Biden out. He clears 5%-6%, if just.

Republicans

McCain: 'No Surrender' in gritty NH Hampshire--with a long history of liking underdogs, a plurality of independents, and where many espy Mitt's essential phoniness--looks to be playing pretty well. I say McCain comes out the winner. Still, Romney is a New Englander from a next door state, and he's no idiot. This will be close, especially as rather a few independents will steer Obama rather than McCain. Nonetheless, I predict McCain clears 32%, perhaps even 34%.

Romney: See above, and so get ready for more 'silver medalist' talk. I'm going to say 27-29%. Also, he's got cash, of course, so isn't going away anytime soon. Still, he's bloodied, and pugilists like Ed Rollins for Huck will land real blows as campaigns head south, with McCain simultaneously strengthening. I'm not saying Mitt's on life support yet, but he's in increasingly real danger if he comes in second in NH.

Huck: Decent momentum from Iowa, and perhaps siphoning a bit of Ron Paul's support as something of a 'protest vote', but nevertheless a southerner far from home (like Edwards). Still, the guitar-strumming, late-night talk-fest shtick might sell in some quarters. Let's give him 13-14%. If he comes in at this level (basically an arguably respectable 3rd), or even a smigden stronger percentage-wise, I like Huck's chances in the near to mid-term with some of the key action heading south. And as I alluded to above, Ed Rollins is a brass-tacks pro, armed with a strong BS detector, and with an instinct for the jugular better than most in the business. I expect more surprises emitting from this camp, therefore.

Ron Paul: I admit this is aspirational, but he ekes out ahead of Rudy, 10ish%. Putting it bluntly, people are mighty pissed in this country, and he's capturing quite a bit of that zeitgeist, obviously.

Rudy G (aka Jimmy Breslin's 'Small Man In Search of a Balcony'): He's been mostly MIA of late in NH, and will be making his stand later into February. Still, a gory start, with a dismal finish in Iowa and just 8-9% in NH, just behind Paul, I predict. I could be wrong on this, as it's a very close call, and again, I'm prejudiced given Rudy's foreign policy is so outrageously wacko that--even given the many nasty surprises of the Bush years--I am still stunned a major Presidential candidate in this country could hold such views. Thus my desire for Paul to visit a further humiliation on him, while also serving to better showcase the outrage of Fox News not including Paul in the recent debate.

Thompson: Dead man walking up there. Why is he wasting his time amidst the frozen tundra, so far from the cheery homefires down home, one wonders? At best, 3-4%.

P.S. More substantively, expect a piece on my take re: Obama's foreign policy in this space soon...

UPDATE: Well, time for some humble pie over here at B.D. I got a lot of predictions wrong this go around. C'est la vie. Guess we're in for a long ride, for both parties, re: who'll be the nominee. Look, I won't pretend not to be disappointed about Obama's loss in N.H., not least because I think he'd have a superior foreign policy to HRC's. I'll try to explain why soon. Until then, as I said, humble pie time...

...I should also add I agree w/ Sullivan's take here:

Part of me is crushed. But part of me is happy to see two candidates forced to battle it out in a long slog. We find out more that way. They grow more. More people get a say. That's a good thing. And I should say that although I remain a passionate Obama supporter among the Democrats, I also feel little compunction in recognizing that Clinton did have something of a personal breakthrough in the last few days. The brittle exterior cracked. What was beneath is more human and less calculated. She was forced to explain from the heart why she really wants to win. People responded. As they would. I have no doubt that Obama is the better candidate, for America and the world. And I believe after this very close race, he will go on to Nevada and South Carolina stronger for not winning in a wave of euphoria. Nothing worth winning comes easily. But Clinton is learning from Obama as he has from her. And both are growing as a result. This is a good thing.

Put differently, you might say the tears helped her some. Now we're in for a long, hard slog, one where we'll get to know better each candidates strengths and weaknesses.

Posted by Gregory at 08:42 AM | Comments (24)

January 03, 2008

Predictions, Predictions!

Spurred on by Larison, I'll risk showcasing my potentially pitiable prognostication skills too. Here goes. Obama wins Iowa tonight, if narrowly (but hopefully by more than 2-3%, so it feels somewhat convincing). Edwards comes in second, but just by a hair breadth or two north of HRC. Edwards spins this as the second coming, but of course Obama heads to NH w/ the most mojo. The Clinton camp speaks of early exuberances that will fade, and caution sobriety and, er, experience! They also stress they basically placed a de facto second, as they'll argue Edwards won't be able to maintain the momentum into NH (which is likely right, as lots of Edwards support post-Iowa--amidst the Barack-mania--may steer towards the Senator from Illinois). Also, Richardson comes in 4th. Dodd, notwithstanding the good guy that he is, doesn't pull off any miracles, nor the (cheerily loquacious) Biden.

On the Republican side? I'm going to say Huckabee pushes past Romney (love him or hate him, Huck feels real, and Mitt just screams phony), and Thompson and McCain battle it out for a lackluster third. While Thompson maybe ekes out a bit ahead of McCain, it doesn't matter, as McCain is able to portray for a NH audience a pretty solid 3rd place type finish, and deep down (isn't it painfully clear?) Thompson doesn't have the fire in the belly for this job regardless (and a good thing too, as he's terrifyingly mediocre). Meantime, Paul surprises clipping at Thompson and McCain's heels in Iowa perhaps more than expected, so is still positioned with reasonably strong momentum for a potentially higher than expected finish in NH (wouldn't 3rd be an earthquake, or even a strong 4th?). Oh, and the 'small man in search of a balcony' comes pretty much last, and waddles in NH too--helping erode going forward support in places like FL and NV (well, here's hoping).

Yes, some of the above handicapping is admitedly aspirational (I'd like to see Obama, Paul and McCain perform well--I still respect McCain as an honorable man--but one whose overarching strategic antenna on foreign policy have failed him, so can no longer support him). And to be sure, I still wish Hagel were running (when I see the passionate support for Ron Paul I wonder how much better Hagel might have done calling B.S. to Rudy's tired 9/11 nostrums at major debates instead?). Last, the Bloomberg, Nunn (and now, Hagel) etc. centrist players should keep bobbing around, as this field is too chaotic and in flux to not merit some close monitoring in the coming months in case of any strategic openings. All this said, my preferred candidate at this time (of which more soon) is Obama.

Going forward, I see this as becoming a HRC and Obama race coming out of NH pretty quickly, with McCain, Romney, and Huck becoming the three leaders in the Republican camp. Rudy and Thompson may stagger on for a while, but I can't imagine either goes the distance. And Paul keeps up the fight, as he's flush w/ cash, but of course won't be the nominee.

All right, so I guess we'll see how much I get wrong pretty soon....

UPDATE: This is so sweet, so sweet indeed! When the establishment of both parties is rotten--and the American people are awake enough to reward the anti-establishment insurgents--it gives hope. And helps make me proud to be an American again. Barack made history tonight, and if he can repeat the feat in NH, he may well be our next President (though let us not underestimate Huck, or the staying power of McCain or the Clintons, and yes, even a dissed Romney). So, I know. These are early days. But allow me some excitement on this incredible evening.

MORE: HRC is giving what feels like an uber-reluctant concession speech delivered through clenched teeth. Reading Bill's body language, I can't help feeling, deep down, he thinks the gig may well be up. And does having Madeline Albright stand behind a placard reading "Ready For Change" only feel oxymoronic to me?

STILL MORE: Obama's victory speech was a barnburner. He was on fire, and yet Presidential. There was a sense of history in the making. This guy is the real thing. And he's a tsunami rolling into New Hampshire now...

Posted by Gregory at 03:33 PM | Comments (58)

A 'Sick Man of Europe' Reprise?

Niall Ferguson had an interesting op-ed recently in the FT, drawing comparisons between the 70s (that is, the 1870's) and present, more particularly, credit crises impacting the Ottoman Empire then, and the U.S. now. Some key passages:

In the aftermath of the Crimean war, both the sultan in Constantinople and his Egyptian vassal, the khedive, had begun to accumulate huge domestic and foreign debts...The loans had been made for both military and economic reasons: to support the Ottoman military position during and after the Crimean war and to finance railway and canal construction, including the building of the Suez canal, which had opened in 1869...The crisis had two distinct financial consequences: the sale of the khedive’s shares in the Suez canal to the British government (for £4m, famously ad­vanced to Disraeli by the Rothschilds) and the hypothecation of certain Ottoman tax revenues for debt service under the auspices of an international Administration of the Ottoman Public Debt, on which European bondholders were represented. The critical point is that the debt crisis necessitated the sale or transfer of Middle Eastern revenue streams to Eur­opeans.

The US debt crisis has taken a different form, to be sure. External liabilities have been run up by a combination of government and household dis-saving. It is not the public sector that is defaulting but subprime mortgage borrowers.

As in the 1870s, though, the upshot of this debt crisis is the sale of assets and revenue streams to foreign creditors. This time, however, creditors are buying bank shares not canal shares. And the resulting shift of power is from west to east.

Since September, Middle Eastern and east Asian sovereign wealth funds have made a succession of investments in four US banks: Bear Stearns, Citigroup, Morgan Stanley and Merrill Lynch. Most commentators have been inclined to welcome this global bail-out : better to bring in foreign capital than to shrink balance sheets by reducing lending. Yet we need to recognise that these “capital injections” represent a transfer of the revenues from the US financial services industry into the hands of foreign governments. This is happening at a time when the gap between eastern and western incomes is narrowing at an unprecedented pace. [my emphasis]

The perils of such historical analogizing are clear, and I'm typically dubious of drawing such broad parallels so easily (in fairness to Ferguson, he does point out commodity prices were trending down back then, not up, that major reserve currencies were reasonably stable, not steadily losing value as is the greenback now, etc--so he is conscious the analogy is imperfect at very least on those points) . And many Wall Streeters would remind markets go up, and they go down (to take one example, was it just the late 80's when the Japanese were scooping up Manhattan real-estate willy-nilly, including trophy properties like Rock Center?). So the position of U.S. financial institutions could be very different indeed within a few years, and perhaps for the better. Put differently, is there really some epochal shift at play here--simply because several foreign government affiliated funds are taking large positions in a handful of bulge bracket U.S. banks--given the U.S. economy's tremendous size, it's potent (well, to a fashion) military power, and other factors pointing to its overall resilience?

Still, I think the emergence of sovereign wealth funds of mammoth size (see China, Singapore, the Gulf States, Russia) is a phenomenon worthy of closer scrutiny going forward, with significant implications for the global economy (not to mention political anti-liberalization trends, with the growth of 'capitalist' autocracies) that have yet to be sufficiently understood. Nor should the historical irony that our forces are bogged down in Afghanistan and Iraq--at tremendous cost to this nation's blood and treasure--while Gulf States take major positions in some of our 'crown jewel' financials, go unnoticed. And with the dollar ailing, gold at historic highs, and oil pushing up near $100, certainly market participants (even with geopolitical risk premium having been lowered given the Iran NIE, though then countervailed much by the turbulence in Pakistan) are smelling dangerous spillage still from the subprime-fallout, credit/banking crisis, declining housing sector, and even chance of a recession in the world's biggest economy this year (not least if the American consumer finally surrenders to burgeoning inflationary pressures, the depression-like housing sector, and other financial strains).

Ferguson closes:

It remains to be seen how quickly today’s financial shift will be followed by a comparable geopolitical shift in favour of the new export and energy empires of the east. Suffice to say that the historical analogy does not bode well for America’s quasi-imperial network of bases and allies across the Middle East and Asia. Debtor empires sooner or later have to do more than just sell shares to satisfy their creditors.

Little matter, Rudy wants to surge into Afghanistan! Thank God his electoral prospects have taken a walloping these past months. But this type of 'I'm tougher than the next guy' crapola has permeated most of the Republican field (Mitt 'double Gitmo' Romney, Fred Thompson's primitive appeal to the 'Jack Bauer caucus', McCain's incredible singing of 'bomb Iran' in a display of ribald unseriousness). The American people, I think--and even after close to a decade of demagoging--can nonetheless espy that these wannabe emperors have no clothes, and that their proposed policies would only serve to damage even more our political, economic (see here for more on the possible implications of the weakening dollar) and moral standing around the world.

P.S. On related topics, don't miss Cunning on a newly identified form of BDS, as well as his take on varied inflationary pressures here. It's going to be an interesting year friends--and not just because of a Presidential election. Don your seatbelts...

Posted by Gregory at 08:40 AM | Comments (3)

January 02, 2008

Addingtonism (Belatedly) Ripe For A Comeuppance?

Thomas Kean and Lee Hamilton, chairman and vice chairman, respectively, of the 9/11 commission, writing in today's NYT:

As a legal matter, it is not up to us to examine the C.I.A.’s failure to disclose the existence of these tapes. That is for others. What we do know is that government officials decided not to inform a lawfully constituted body, created by Congress and the president, to investigate one [of] the greatest tragedies to confront this country. We call that obstruction.

Obstruction? This gang? Shocked, shocked...

...but help is on the way. Mukasey has his shortcomings, but he is certainly not the 'legal lickspittle' (Andrew Sullivan's memorable phrase) that was his predecessor. And so DOJ has appointed an outside prosecutor to investigate the above matter (though importantly, see Marty Lederman's cautionary notes here). He should be sure to focus, not only on CIA-dom, but also old friends like David Addington, and others of his ilk in and around OVP. It will doubtless be distressing for them if their typically arrogant circle the wagons M.O. gets called for what it is, that is, possibly criminal obstruction. But this isn't just about the destruction of a few tapes now is it? It's really about what the tapes showed, of course, otherwise why go the trouble of destroying them? Yes, it's high time we start getting to the bottom of who specifically in this Administration has been guilty of covering up likely war crimes. It's not pretty, I know, but that's where any sane constitutional republic must now head (the prosecutor's mandate will doubtless be more modest, and his real level of independence questionable, but one must start somewhere), if only to begin to clear the rot wrought by the shameless Sovietophiles among us...


Posted by Gregory at 04:30 PM | Comments (7)

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Gregory Djerejian comments intermittently on global politics, finance & diplomacy at this site. The views expressed herein are solely his own and do not represent those of any organization.


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