Tag: Economy
No sword dancing on treacherous terrain
President Biden’s op/ed in the Washington Post previews his visit next week to the Middle East. He will stop in Jerusalem, the West Bank, Jeddah (for a regional Arab meeting), and Riyadh. The piece has two audiences: the domestic one and the international one, especially in the Middle East but also in Europe and the Far East.
What the Americans want
There are four salient issues for Biden’s domestic audience: the Iran nuclear deal, support for Israel, oil prices, and human rights. America is split on the Iran nuclear deal. Half support Biden’s desire to re-enter it. The other half want to continue the so far unsuccessful effort to sanction Iran into submission, with the possibility of military action if that fails. On support for Israel’s security, there is overwhelming support. But Americans increasingly want accountability for Israeli abuses against Palestinians. Biden avoids that subject in the op/ed.
Most Americans want lower oil prices. Saudi Arabia has been reluctant to increase production, partly in retaliation for Biden’s criticism of human rights practices in the Kingdom, particularly the murder of Jamal Khashoggi. That is not a dinnertime conversation topic in the US. But there are many informed voices calling for accountability beyond the minimum the Saudis have so far done.
What the world wants: nuclear deal and Iran’s regional power projection
The rest of the world has a somewhat different set of priorities: not only Iran’s nuclear program but also its regional power projection as well as oil prices. Beyond the US, there is little concern for Israel’s security or human rights, apart from the plight of the Palestinians.
Most of the world would like to see the Iran nuclear deal operating once again. Saudi Arabia and the United Arab Emirates have not, despite the risks to them of war if Israel or the US seeks to destroy the Iranian nuclear facilities. Biden should be aiming to understand their perspective better. My guess is they would be fine with re-entry into nuclear deal provided the US pushes back harder on Iran’s regional power projection.
That could mean doing more to weaken the Houthis in Yemen. It could also mean reducing Iran’s presence in Syria, Lebanon, and Iraq, where the Islamic Revolutionary Guard Corps and its proxies are major players. Strengthening the nascent regional air defense system (see video above) or even Saudi entry into the Ibrahimic accords are other possibilities.
What the world wants: oil prices and Palestinians
On oil prices, the Saudis may seek some assurances on the downside while the Americans push for increased production. Europe and the Far East will wish the Americans success. Russia, Iran, Iraq, and other major producers will want prices to remain above $100 per barrel. That is what they all need to balance their budgets. No American president can promise sustained high oil prices. But the US is now a net oil and gas exporter. A nod to stability in the oil market is not out of the question.
While Biden will visit the West Bank, he has so far done little more than restore aid to the Palestinians President Trump had zeroed out. The op/ed fails to mention the two-state solution or Israeli responsibility for human rights abuses against Palestinians. It doesn’t even mention the rumored intention to re-open the US consulate in Jerusalem. That had acted for decades before Trump as a de facto embassy to Palestine. We can only hope Biden will be more forthcoming on those issues during his trip.
Treacherous terrain
The Middle East is treacherous terrain for any American president. Trump blundered by sword dancing with the Saudis, both literally and figuratively. He also wrote the Israelis a blank check (including for their territorial ambitions) and ended support for the Palestinians. Biden won’t commit those mistakes. He will try to build on the Ibrahimic accords that Trump initiated, strengthen and unify Arab defenses against Iran, and reach some sort of accommodation on oil production and prices. Odds are the trip will not be a brilliant success, but the ambitions are at least more realistic than his predecessor’s.
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Stevenson’s army, July 1
FYI, I [Charlie Stevenson] have grandparent duty for much of the next few weeks and won’t be able to read and report on the news as often as usual.
Meanwhile. note that the Army has paused its rule allowing enlistment of kids without a high school degree.
Sen. Leahy’s hip surgery really complicates Democratic plans in the 50/50 Senate.
Sen. McConnell threatens to block action on the popular bipartisan America Competes Act if Democrats push a reconciliation bill.
Commerce plans to increase limits on technology exports.
Yesterday, Charlie posted this, while I was traveling, under the heading NATO and more:
– WaPo summarizes the meeting. Here’s the official communique and the new NATO Strategic Concept.
– Reuters says there’s a deal on Kaliningrad.
– Norway suffered a cyber attack.
-Former SASC staffer wants more for Pacific Deterrence Initiative.
– VA reform blocked by parochial Senators, WaPo says.
My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I republish here. To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
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Stevenson’s army, April 26
– Gen Milley says time is not on Ukraine’s side.
– US will re-fill allies who ship to Ukraine.
– Reuters reports Finland and Sweden will seek to join NATO next month.
– Axios has Big Facts on defense spending worldwide.
– WSJ says Russia is hiding economic data.
– Yes, Macron won but big test in June in parliamentary elections.
– Also good news in Slovenia.
My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I republish here. To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
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Things will be worse for Russians
In my piece last week on how bad things could get, I gave short shrift to the situation inside Russia. I noted only that Putin is using his war against Ukraine as an opportunity to complete Moscow’s transition to autocracy. But there will be other consequences, especially on the economy. Branko Milanovic takes a look at these in two well-crafted posts, one on the short-term and one on the long-term. I recommend reading him, but I’ll offer here a layman’s account of what I think he says.
The short term is bad
Branko uses past economic crises in Russia, especially in the 1990s, to come to a rough guess at how sanctions might affect growth:
One can thus, very roughly, put the expected decline in 2022-23 at high single digits, or low double digits: it is not going to be as sharp as in 1992, nor as (relatively) mild as in 1998.
He also guesstimates that unemployment could go back up to 7-8%, with inflation rising sharply due to the ruble’s fall. That’s pretty bad, especially for lower incomes. He judges government policy responses so far “very weak,” because there are no good choices to be made.
Bottom line:
The coming years of Putin’s rule will thus look very much like the worst years of Yeltsin’s rule.
https://braveneweurope.com/branko-milanovic-russias-economic-prospects-the-short-term
The long term is worse
Next Branko looks at the long term, assuming that sanctions will remain in place for decades, because that is what American sanctions generally do. He identifies two possible strategies for Russia: import substitution and a pivot to Asia. But Russia lacks the industrial base and growing labor supply required for import substitution as well as the infrastructure and investment funds required for a pivot to Asia.
Bottom line:
…the future of the Eurasian continent looks very much like its past: the maritime areas along the Atlantic and the Pacific coasts will be fairly rich, much better-off than the significant large continental areas in the middle. Th[is] opens up the question of how politically viable will be such an uneven distribution of economic activity: will migrations, or political reconfigurations “solve” such disequilibria?
https://braveneweurope.com/branko-milanovic-long-term-difficulties-of-import-substitution-and-delocalization
It’s not just the economy
Let me add a few words about the broader social implications of this dire scenario. Putin isn’t going to allow freedom of expression if most of it will be criticism of him. So he has already taken charge of virtually all the media and made criticism of the war in Ukraine (even calling it a war) illegal. Domestic oppression is the necessary counterpart to a war that most Russians did not expect and don’t want.
In addition, Western sanctions will create money-making opportunities for evading them. The miscreants will often be people involved in the country’s secret services and the managers of state-controlled businesses. Putin has surrounded himself with former colleagues from the KGB, the security service where he started his career. His chosen oligarchs are already strong.
The West will try to damage the interests of the KGBers and oligarchs with personal sanctions on their finances, foreign property, and travel. But the smartest and luckiest of them will wriggle free. A society already plagued with organized crime will find itself firmly in the grip of whoever can help Putin evade Western sanctions.
The West is not immune
A Russian Mafia state does nothing to help the cause of democracy and freedom. You can hope Russians will rebel and chase out Putin and his cronies, but hope is not a policy. Nor can anyone in the West be sure that some Europeans and Americans won’t help Putin’s corrupt governance, as some did before the Ukraine invasion. Germany didn’t wander blindly into the Nordstream 2 natural gas pipeline. German politicians, including former Chancellor Schroeder, guided Berlin there.
In the US, the Ukraine invasion has frightened most Republicans out of their romance with Putin. But some still spout his praise, especially lead talker Tucker Carlson and lead presidential candidate Donald Trump:
They admire him as a smart and decisive autocrat. They care not about corruption. Ukrainian President Zelensky is fortunate indeed that the president who tried to withhold weapons to extort dirt on candidate Biden is no longer in office.
In addition, the war is already roiling Western economies, hiking the price of oil, and creating vast uncertainty for European and American trade and investment. What happens in Moscow doesn’t stay in Moscow. Things will be worse for the Russians, but the West is not immune.
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Stevenson’s army, March 3
– NYT details Western help to Ukraine.
– WSJ notes pro-Russia sentiment in Middle East
– FP China Brief notes how China is censoring Ukraine news.
– Defense News assesses chances for Ukrainian resistance.
– Atlantic assesses Russian economic vulnerabilities.
– Changing mood on Capitol Hill. Concerns over Sen. Rubio’s tweets of war info.
Policy process: All cables going from the State Dept go under the name of the SecState, though few have actually been seen by him. Axios has the story of a cable to 50 countries urging US diplomats to say India and UAE were “in Russia’s camp.” Oops. Cable recalled. The recall of the strongly worded cable indicates either a process error with a fabled and vital work product — or a policy dispute inside the U.S. government involving two key allies.
My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I republish here. To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
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China and Russia are friends but not equals
Professor Evan Medeiros of Georgetown University analyzed the Xi-Putin declaration this week on NPR:
The Washington Post comes to similar conclusions: there is less to the declaration than some think.
Craig Singleton at Foreign Policy looks also at the readouts and Chinese press coverage. He goes a step further to suggest that President Xi gave President Putin little in order to protect Chinese economic interests, especially in Europe. Those interests he suggests could provide the West with a wedge to separate China from Russia. Economic prosperity trumps authoritarian solidarity.
The good news
The combined military and economic power and geographic extent of a China/Russia alliance would be formidable. It is good news that the Putin’s Olympics jaunt did not solidify into a genuine defense pact. Unless more was agreed than we know, Russia cannot rely on China to help beat Western sanctions. The Chinese may not like NATO enlargement, but it is not a primary concern for Beijing. The flagging Chinese economy is far more important.
The bad news
Moscow and Beijing are both exercised over human rights. Their joint declaration declares their own countries democracies but denounces human rights as a nefarious concern of the West. This may sound illogical to liberal democratic ears, but it is consistent with their distortion of “democracy.” To them, it means any system that somehow expresses the supposed will of the people, even if the people have no rights and have never validated that will in a free and fair election. Xi and Putin, like many other autocrats, think of themselves as the embodiment of the people’s will, evident in their successful assent to power.
China and Russia may be friends but are not equals
For now, Russians and Chinese are putting up with that claim, which in a perverse way demonstrates the power of the democratic example. Chinese and Russians all know the consequences of contesting the power of their leaders. But there is a big difference. Beijing can afford to repress the opposition and buy off the rest. For now, they are doing it in grand style in Xinjiang and Hong Kong, as well as in more retail ways in other parts of the country. Moscow can afford to buy off a few oligarchs but is leaving the majority of the population in straitened circumstances with shortened life expectancies, low incomes, and few free means of expression.
Putin has reasons to invade
It seems likely Putin will go ahead with the invasion of Ukraine. The Russian deployment is not a Potemkin village. It has gotten him little so far that he could not have gotten for more polite asking. The Americans have offered to limit armaments in Europe, provided the agreement is reciprocal. Putin’s moves have also unified NATO in favor of drastic sanctions, including extinction of the Nordstream 2 pipeline, and solidified Ukrainian support for the Alliance, precisely the opposite of what Putin wanted.
None of that however will make Putin hesitate. He wants to prove to the world that Russia is indispensable. “Nothing about Europe without Russia” is his motto. He is trying to reassert Moscow’s claim as a superpower capital, a claim that died with the Soviet Union. For someone for whom power is he be-all and end-all, only the successful use of force can revalidate it.
Beijing stands to lose little
Beijing won’t be happy if Russia invades Ukraine and disrupts the world’s economy, but it will be in his corner when he tries. If he succeeds, the Chinese will enjoy the outcome as a defeat for the Americans, NATO, and human rights. If he fails, the Chinese can walk away unscathed, comforted in the knowledge Putin will need to sell even more natural gas. China and Russia are friends, but not equals.
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