Month: February 2016
Iran needs more than sanctions lifted
On Wednesday, the Johns Hopkins School of Advanced International Studies and the Middle East and Central Asia Department of the International Monetary (IMF) fund hosted ‘After Sanctions: Challenges Facing the Iranian Economy.’ Masood Ahmed, Director of the Middle East and Central Asia Department at the IMF, gave a presentation on the condition of the Iranian economy during the past four years. He then participated in a discussion with Martin Cerisola, Assistant Director of the Middle East and Central Asia Department at the IMF, Nadereh Chamlou, an international development advisor, and Suzanne Maloney, Deputy Director of the Foreign Policy program at the Brookings Institution. Vali Nasr, Dean of the Johns Hopkins Paul H. Nitze School of Advanced International Studies, moderated.
Ahmed explained how the past four years have been difficult for Iran. The introduction of harsh sanctions in 2011 hit the Iranian economy hard. Oil exports declined by nearly 50 percent, the economy shrank, the exchange rate declined, and inflation increased.
Removal of sanctions will boost the economy immediately: production and the export of oil will increase, the cost doing business will decrease, and transactions will become easier. Maintaining this boost in the long-run should be the goal. Some chronic problems existed prior to the sanctions, so the economy can only make a full recovery if these are addressed properly. Concentrating on all facets of the economy is not just important for Iran, but for the countries it trades with. Primary trading partners India, China, Turkey, and Iraq stand to gain immediately from the removal of Iranian sanctions.
Iran has to adjust in order to sustain a strong economy. Iran will have to:
- Live with the oil price fluctuations
- Create a better macroeconomic policy framework
- Construct a more conducive business environment
- Revamp its productive structure
With lower oil prices comes a big loss of revenue and growth. Iran will have to become less dependent on oil price volatility. Other challenges include improving the business climate, restructuring banks, and creating more employment in sectors with the highest productivity. Currently, the most employment is in sectors with the lowest productivity. Iran has one of the least flexible labor markets, so finding a creative solution to unemployment is a pivotal reform Iran should take on. Overall, though, the fundamentals of the Iranian economy are strong. The country is resource-rich, its market size is beneficial, it has a highly skilled labor force, and the infrastructure is there and only needs to be modernized.
Nasr asked what sort of investment Iran’s economy requires. Ahmed replied that investment is most needed for modernizing, improving, and sustaining oil production. Cerisola said they need enough investment to sustain eight percent growth projections. Two hundred million dollars is needed for oil alone.
The panel then addressed reforms. Chamlou said the parliament asked the government to submit another version of a six-year plan because not enough substance was in the original plan. Iran is in need of deep-rooted reforms, and she hopes that outside pressure and investors will bring about these reforms. With the amount of investment that will come in, the government and business sectors will both have to alter their practices.
Maloney then discussed how President Rouhani would help Iran open up to foreign investment. He was elected because of his focus on both prosperity and national security. He has put together a fantastic team to lead Iran into a better economic position. The ideological divide in Iran will challenge Rouhani. His political rivals will look to make certain opportunities more difficult for him. But Rouhani does have an excellent ability to build alliances and seems to be savvy about the issues he takes on.
Ahmed believes the removal of sanctions will help the Iranian economy, but it will not solve all the problems. Managing expectation and fostering consensus is critical to success. Structural challenges are formidable and require extensive reforms. Maloney added that if Iran does not see the economy boom quickly enough, that it could see some political backlash.
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Russian “immunity”
Milana Pejic of the Belgrade daily Blic asked me yesterday about immunity for Russian troops stationed in Serbia, which President Putin has reportedly requested. I responded:
I’m not sure what “immunity” means. As the state sending soldiers, sailors or airmen to deploy in a foreign country, the US always requires that it retain jurisdiction over them. If they commit a crime, they get tried in the US, not in the state in which they are deployed, unless the US waives its right to exercise jurisdiction (which it occasionally does). There is no “immunity” in the sense of protection from prosecution. This is all regulated in what is called a “status of forces agreement.” I really don’t know what the Russians do, though I wouldn’t be entirely surprised if they insist on something closer to immunity.
Quite apart from the question of criminal jurisdiction, I can’t think of any EU countries that host Russian bases on their territory. Are there any?* If Serbia is serious about EU membership, I wonder if it wants to continue to host the Russians at all. If not, there would be no point in providing immunity (or even sending state jurisdiction). An easy way out might be to refuse the Russian request.
I see Prime Minister Vucic is talking in the press about the importance of NATO to the protection of Serbs in northern Kosovo. Belgrade needs to weigh carefully whether its present policy of hedging between NATO/EU and Russia is really in the Serbian interest.
Some day fairly soon all Serbia’s neighbors will be NATO members. What sense would it make then for Serbia to host a Russian base? What impact will that have on relations with the neighbors? Moscow may call it a humanitarian center, but we know from the recent intentional Russian bombing of hospitals in Syria how serious Moscow is about humanitarian issues.
*PS: the answer to this question is no.
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Will the hostilities cease?
The only real question about the cessation of hostilities supposedly agreed in Munich last week is when it will collapse. It may never go into effect or it may last a week or two, but it will be surprising if it lasts much longer than that. The Russians have made it clear enough the cessation of hostilities doesn’t apply to its efforts against ISIS, which have never really targeted ISIS but are instead directed mainly against any forces opposing the Assad regime. Assad has likewise indicated that his forces will not cease fighting whoever opposes them.
The US and its Coalition allies, who are focusing for now on ISIS forces in eastern Syria, also intend to continue their air attacks. Turkey is shelling Kurdish and allied Arab forces trying to take control of the relatively small part Syria’s northern border that they don’t yet own. Saudi Arabia is talking about deploying ground forces to Syria, but only as part of a US-led Coalition effort that has not real possibility of materializing.
If Damascus allows humanitarian aid convoys into some of the areas it is besieging, that will only be for fear of the consequences if they don’t. If no relief reaches the besieged areas, Secretary of State Kerry will want to make another run at President Obama to urge stronger military action, at the very least provision of antiaircraft weapons to the opposition forces the US has trained. Preventing this eventuality could be a good enough reason for Assad to allow the aid shipments to move forward for a while. Assad’s air force is already decimated, but loss of its remaining helicopters would constrain its ability to terrorize civilian areas with indiscriminate barrel bombs.
President Obama still shows no appetite for getting more deeply involved in Syria. He remains exclusively focused on the fight against the Islamic State (ISIS). None of his putative allies in the region share that single mindedness, though the Kurds are making a good show of it. Their real objective is to carve out part of Syria that they can claim to govern, and from which they can support Kurdish insurgents inside Turkey. The Turks are trying to prevent that. The moderate opposition, supported by the Gulf, is targeting Assad. Coalition warfare, which for the US is more the rule than the exception, is always difficult, but this Coalition is proving particularly unruly.
Russian air attacks have already devastated a large part of the area around Aleppo, where several hundred thousand people are at risk of being besieged. Idlib could be next. The costs of future reconstruction in Syria are already astronomical, with no sign of anyone willing or able to pay. The Russians and Iranians haven’t contributed even to the humanitarian relief effort. The Americans and the Gulf won’t be interested in reconstructing anything if Assad remains in power. The Europeans may want to provide some aid, if only to relieve the refugee pressure that is bearing down on them. The Syrian government is broke and will remain so–even if it regains control of its oil fields, they are now depleted and damaged.
So the war will continue sooner or later, despite the human and economic costs. And the post-war period will be no less challenging. Woe to Syria.
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Republicans and Democrats like Jordan
On Thursday, the House Foreign Affairs Committee’s Subcommittee on the Middle East and North Africa hosted a hearing on “Jordan: A Key US Partner.” Opening statements were delivered by the following members of the Subcommittee on the Middle East and North Africa: Representative Ileana Ros-Lehtinen, Chairwoman, Representative Ted Deutch, Ranking Member, Representative David Cicilline and Representative Lois Frankel. Witnesses included Gerald Feierstein, Principal Deputy Assistant Secretary, Bureau of Near Eastern Affairs, Department of State, Paige Alexander, Assistant Administrator, Bureau for the Middle East, USAID, and Fatema Sumar, Regional Deputy Vice President, Europe, Asia, the Pacific and Latin America, Department of Compact Operations, Millennium Challenge Corporation.
Ros-Lehtinen affirmed Jordan’s importance as an ally and King Abdullah’s status as reliable partner. Last year, the US signed an MoU with Jordan that recognized its key role in fighting ISIS and in welcoming refugees. Refugees are straining Jordan’s already limited resources. It is vital that we help Jordan shore up these resources, especially water and energy. Through the Millennium Challenge Corporation (MCC) compact, we have already invested $275 million in Public-Private Partnership (PPP) wastewater projects that are nearing completion. She and Deutch visited the Al-Samra wastewater treatment plant last year. There are other projects such as the Red-Dead Sea Conduit that could shore-up Jordan’s water resources and strengthen Jordanian-Israeli cooperation.
Another area for possible Israeli-Jordanian cooperation would be an agreement for Jordan to import Israeli gas. Jordan and Israel have shared interests and should work together. We must also support USAID and IRI in their efforts to strengthen civil society and governance. Jordan’s stability is essential for the region. She and Deutch recently introduced the United States-Jordan Defense Cooperation Act, which passed Congress and is on its way to Obama. It will expedite weapons sales to Jordan to help it fight ISIS and strengthen its borders.
Deutch thanked his colleagues for supporting the bipartisan legislation and explained that last year’s MoU increased annual US aid to Jordan from $600 million to $1 billion. This reflects our commitment and Jordan’s willingness to partner with us against ISIS. Jordan has taken in 635,000 registered refugees, but Jordanian officials believe the actual figure is much higher. Jordanian communities have welcomed them but they have strained water and energy resources. USAID programs have brought fresh water and sanitation services to 1/3 of Jordan. The expansion of the Al-Samra wastewater treatment plant will increase access to water for over 3 million Jordanians.
Schooling is key to prevent a lost generation of Syrian refugee children. Secretary of State Kerry recently announced $267 million in education spending for Jordan. More refugees will seek safety in Jordan as the conflict in Southern Syria worsens; they will be difficult to vet at the border but Deutch hopes Jordan will let those who don’t pose a threat in.
King Abdullah understands the need to both defeat ISIS and find a political solution to the conflict. As long as Assad remains in power, we won’t be able to stem the flow of refugees or defeat ISIS. Helpful actions that Jordan can take include improving refugees’ ability to work and cooperating with Israel on the Red-Dead project. Deutch thanked Jordan for its efforts to calm tensions on the Temple Mount last fall, but was alarmed by news that some Jordanian MPs had threatened to topple the government if the deal to import Israeli gas goes through.
Cicilline also expressed appreciation for Jordan’s counter-ISIS efforts and noted that he had visited the Za’atari Refugee Camp last month. Frankel noted that she had visited Jordan last month on a personal trip and had admired the beauty of the country and its people. She thanked Jordan for welcoming refugees but noted that refugees whom she met with expressed how difficult it was for them that they were unable to work and supplement their meager allowances. She wanted to know if anything was being done about this and what the US was doing to boost Jordan’s economy, including by supporting tourism. She also questioned whether our aid programs in Syria were still
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Applying
A Facebook friend wondered over the weekend whether I was being skeptical or just superficial when I tweeted:
The one thing on which #Bosnia‘ns agree is that the country is not qualified for EU membership. So what do they do? Apply.
Skeptical was more like it. All you have to do to understand in depth why is take a glance at last year’s European Commission progress report on Bosnia and Herzegovina. Guess what? It shows little progress.
Brussels reads its own reports, so we can be sure the Europeans know that. The European Union remedy has been to push a “Reform Agenda” that starts with labor market reform. The reasoning is that only by lowering labor costs and increasing labor flexibility will Bosnian companies be able to compete effectively and expand in the future.
So far so good, but that is an indirect way of attacking Bosnia’s problems, which lie in a political economy that enriches politicians and impoverishes most of the population. I don’t say labor market reform won’t help, in particular if it reduces costs, increases competition and makes it harder for politicians to exploit patronage, but it is far from sufficient.
Bosnia needs prosecutions. The rip-offs are well-documented. It seems to me inconceivable that professional prosecutors would not have sufficient evidence. The international community should be able to help by tracing the tycoons’ finances and freezing ill-gotten gains. Precious little of that has been done.
The only really high-level prosecution these days is directed at an upstart politician, Fahrudin Radoncic, not for ripping off the state but rather for witness tampering in a Kosovo drug investigation. I don’t have any idea whether Radoncic is guilty or innocent (and he should be presumed the latter of course), but I am pretty sure that case will not do much to undermine the web of corruption and misappropriation of state assets that plagues Bosnia. The prosecutors’ use of wiretaps, however, demonstrates unequivocally that the judicial system in Bosnia has the means, but not the will, to attack other high-level corruption.
I’d be the first to admit that the United States suffers from high-level corrupt practices as well. A year doesn’t go by without charges against a governor here, a couple of members of Congress there, and dozens of state legislators, including in states far larger and with bigger economies than Bosnia. You need to be worried not when such cases are pursued but when they aren’t.
That’s the situation in Bosnia today. Despite a newly inked anti-corruption plan, the European Commission reports:
Organized crime cases in 2015 led to the confiscation of 550,000 euros. That’s peanuts. Hundreds of millions if not billions would be more like it.
If Bosnia and Herzegovina is serious about getting into the EU, it will need to skip confiscating the peanuts and trap the elephants. If the application for membership helps to mobilize the political will required, it’s all for the better. But it is far more likely to amount to nothing more than a maneuver to convince an already disheartened electorate that progress is being made.
Bosnia needs not only to apply to the EU, but also to apply itself to qualifying for membership.
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Besieged
The Atlantic Council hosted ‘Inside the Sieges: Scope and Implications of Besieged Syria’ on Wednesday. Mohamad Katoub, Protection Officer for the Syrian American Medical Society, Valerie Szybala, Executive Director of The Syria Institute, and Jan Jap van Oosterzee, Middle East Policy Lead at PAX led the discussion, while Faysal Itani, Senior Fellow at the Atlantic Council, moderated and Frederic C. Hof, Senior Fellow at the Atlantic Council offered opening remarks.
Katoub began by explaining the circumstances he and his family were under when they left Damascus. He had no milk to feed his son, and the situation was becoming dire. In a besieged area, people will do anything to survive, and the main concern is to feed the children. Katoub’s family decided it was time to seek a better situation. Katoub, his wife, and son were able to leave Damascus, as it is easier to go through checkpoints as a family. Katoub stated plainly that he does not want asylum. He wants to be able to return to Syria, which will only be possible if peace is secured.
In Damascus, nearly 5,000 people have died from cluster bombs. Smuggling medication past checkpoints is very dangerous, and there are not enough vaccinations to serve the entire population. The situation in the newly besieged area of Aleppo shows just how much the UN resolution for humanitarian aid needs to be implemented. Civilians do not have food, vaccinations, medication, and are suffering from barrel bombs. The civilians of Syria cannot wait for negotiations to succeed in order to receive aid.
Oosterzee explained that PAX has been working in Syria since 2003 and has worked with civil society activists even before the uprising. PAX has worked with local councils since the conflict began, too. PAX has received questions on why they are so focused on exact numbers. Having the correct numbers shows if there is a pattern. One of the trends in Syria is how starvation has become a weapon of war. The situation looks worse based on the data. Oosterzee pointed out that a lot of international attention helps a little bit.
Szybala talked about The Syria Institute’s Siege Watch report, which was written because recognition is needed of what is actually happening on the ground in Syria. The United Nations is not reporting the real damage. For instance, the UN only recognizes only 181,000 people in Damascus under siege, while the real total is close to 500,000. This report’s information was collected from contacts on the ground, who submit surveys on population movements, deaths, and food amounts in their communities.
Siege Watch found that siege leads to economic collapse. Extortion and smuggling are far too common. Massive displacement occurs, from movement out of the area or from movement from one besieged area to another besieged area. Recruitment by the regime and extremist groups often takes place, as unemployment is high.
Current besieged areas include Idlib, Homs, Damascus and its countryside, and Deir Ezzor. Idlib is the only siege implemented by opposition troops. Civilians there have received airdrops from the Syrian government. The Syrian regime carries out a siege much more efficiently because it has the manpower and resources to do so. Collective punishment and the prevention of humanitarian aid are common. The Siege Watch report is critical to understanding the ground situation and to have exact information on war crimes.
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