Thursday, May 29, 2008

Soli Özel – “America and the Middle East ” - Alternatives Internationale

The American “war of choice” against Iraq as part of a grand project to transform the Middle East and to shape the world order by military fiat has failed. Today despite the limited, and arguably reversible, successes of the “surge”, the United States is not any nearer to accomplish this mission.

Even in its failure though the war changed, indeed transformed, the political and strategic landscape of the region. With the fall of the Baathi regime in Iraq, the majority Shi’a came to rule this critical Arab country. Shi’a elsewhere began to ask more aggressively for their citizenship rights and Hizbullah in Lebanon with the support of Syria and Iran challenged both the domestic political structure of Lebanon and the military might of Israel. Through Hizbullah, Iran the unintended main beneficiary in strategic terms of the American war against Saddam Hussein’s regime and gained much advantage in the Gulf region, also acquired a presence in Eastern Mediterranean.

By destroying the Iraqi regime and throwing the country into turmoil the United States also took the balancer to Iran in the Gulf out of the equilibrium. Given the fact that the rulers of Iraq today, the Da’wa Party or Supreme Islamic Iraqi Council (formerly SCIRI) are Iran’s allies also meant that the strategic rise of Iran has also been compounded by significant influence in Iraq until the country settles down.

Such an advantageous strategic condition for Iran scared the Sunni Arab Gulf regimes and turned them into the low profile but keen allies of Israel. Tel Aviv loudly expresses its discomfort with Iran’s rising power, its nuclear program and the strategic challenge Tehran poses to Israel both by its own posturing and through the activities of its allies in the region, notably Hizbullah and to a lesser extent, Hamas. In Syria the Ba’thi regime that was once considered to be at razor’s edge after the assassination of Rafiq Hariri that brought Damascus the ire of Saudi Arabia and isolation in the Arab world and beyond is more relaxed. Despite the open animosity of Washington against the regime of Beshar al Asad, the Syrians hold their own and are bargaining hard to return to Lebanon in their own terms as they open second-track negotiations with Israel through the good offices of the Turkish government.

The next American administration will need to deal with this strategic landscape in the Middle East while the precariousness of the Afghan war and the fragility of Pakistan’s politics still continue. Arguably the most important decision to be made by the upcoming administration will be how to handle relations with Iran once that country elects its new President as well in 2009. Thirty years after the Iranian Revolution, Tehran and Washington face the need to decide between themselves the division of hegemony in the Persian Gulf.

The latest events in Lebanon whereby Hizbullah forcefully challenged the Lebanese government that is backed by most Arab regimes and the United States underscored the inability of the United States to single-handedly determine the pace and direction of events. That Hizbullah ultimately acted with restraint and accepted the position of the army as an arbiter showed that the final goal is not one of dominance but a new power sharing arrangement. Undoubtedly this was also a message on the part of Iran that it did not wish to totally disrupt the Arab order.

Can this be another instance of Iranian-American cooperation like the tacit cooperation that goes on in Baghdad alongside the strategic rivalry between Washington and Tehran as some commentators argue? It is quite obvious by now that without the assistance of Iran the United States will not be able to provide stability by itself including in Afghanistan. The fact that Washington is unable or unwilling to pull all its weight to broker an agreement between Israel and the Palestinians that would include all parties and be considered fair undermines its own position as the ultimate arbiter of a settlement in the whole of the Middle East.

The next American administration then will have to prepare its positions with these realities in mind. Many observers suspect or fear, depending on their stance, a military attack against Iran’s nuclear facilities before the Bush administration is removed from the stage. As much as the vice President’s office, Sunni Arab states and Israel may wish this to happen, the mood in the country including the elite and the military is not favorable to such an option unless Iran provokes it. As Andrew Bachevich notes “The United States today finds itself with too much war and too few warriors”. Furthermore the limits of military power to attain strategic objectives were made all to clear by the Iraq debacle.

Therefore the next American President is more likely to try non-military means to solve strategic problems and advance American strategic interests in the Middle East and beyond. The issue of withdrawing the troops from Iraq will be the most complex and difficult that the next administration will face. The United States will still want to control access to the world’s energy resources and its presence in the region will continue for the relevant future. Still, the domestic public opinion has turned against the costly war and the military wishes to avoid further straining its institutional health.

The decision to withdraw is a risky one since this would indeed leave a void in Iraq that is likely to unleash conditions for full-scale civil war. The Iraqi state is not yet strong enough to provide security and order as the disintegration of the military during the recent battles in Basra amply demonstrated. Violent instability in Iraq will have repercussions throughout the region. At the limit should Iraq disintegrate, all states in the region will face similar pressures. This is one of the reasons why the dynamics of the region itself will not favor or allow such an eventuality.

As I suggested earlier the United States has the option of accommodation or confrontation with Iran. The latter option, if taken, will further destabilize the region. So, the logical course to take would be accommodation. In this case Iran’s own behavior and whether or not it, too, will be carried away by hubris may determine the outcome. As for the United States the war in Iraq may have taught the American system to know the limits of its enormous power.

IN today’s Middle East it is almost impossible to attain strategic goals without taking into account the interests and the relative power of different players. This imposes upon the United States to seek cooperation and privileges diplomacy and negotiation over military might to pursue her goals. In fact, a regime as weak as the Syrian one successfully defied Washington. It managed to maintain its positions as well as undermine the American efforts in Lebanon.

Although the strategic center of gravity of the region has shifted decisively to the Gulf, the irresolution of the Israeli-Palestinian conflict still presents an obstacle to the realization of any great design. For that reason as big a challenge as the relations with Iran and how to find a balance with Tehran is, ending the conflict in the Holy Land may prove to be still as difficult a nut to crack as any.


Tuesday, May 27, 2008

Brzezinski & Odom - A Sensible Path on Iran

By Zbigniew Brzezinski and William Odom
Tuesday, May 27, 2008; A13

Current U.S. policy toward the regime in Tehran will almost certainly result in an Iran with nuclear weapons. The seemingly clever combination of the use of "sticks" and "carrots," including the frequent official hints of an American military option "remaining on the table," simply intensifies Iran's desire to have its own nuclear arsenal. Alas, such a heavy-handed "sticks" and "carrots" policy may work with donkeys but not with serious countries. The United States would have a better chance of success if the White House abandoned its threats of military action and its calls for regime change.

Consider countries that could have quickly become nuclear weapon states had they been treated similarly. Brazil, Argentina and South Africa had nuclear weapons programs but gave them up, each for different reasons. Had the United States threatened to change their regimes if they would not, probably none would have complied. But when "sticks" and "carrots" failed to prevent India and Pakistan from acquiring nuclear weapons, the United States rapidly accommodated both, preferring good relations with them to hostile ones. What does this suggest to leaders in Iran?

To look at the issue another way, imagine if China, a signatory to the nuclear Non-Proliferation Treaty and a country that has deliberately not engaged in a nuclear arms race with Russia or the United States, threatened to change the American regime if it did not begin a steady destruction of its nuclear arsenal. The threat would have an arguable legal basis, because all treaty signatories promised long ago to reduce their arsenals, eventually to zero. The American reaction, of course, would be explosive public opposition to such a demand. U.S. leaders might even mimic the fantasy rhetoric of Iranian President Mahmoud Ahmadinejad regarding the use of nuclear weapons.

A successful approach to Iran has to accommodate its security interests and ours. Neither a U.S. air attack on Iranian nuclear facilities nor a less effective Israeli one could do more than merely set back Iran's nuclear program. In either case, the United States would be held accountable and would have to pay the price resulting from likely Iranian reactions. These would almost certainly involve destabilizing the Middle East, as well as Afghanistan, and serious efforts to disrupt the flow of oil, at the very least generating a massive increase in its already high cost. The turmoil in the Middle East resulting from a preemptive attack on Iran would hurt America and eventually Israel, too.

Given Iran's stated goals -- a nuclear power capability but not nuclear weapons, as well as an alleged desire to discuss broader U.S.-Iranian security issues -- a realistic policy would exploit this opening to see what it might yield. The United States could indicate that it is prepared to negotiate, either on the basis of no preconditions by either side (though retaining the right to terminate the negotiations if Iran remains unyielding but begins to enrich its uranium beyond levels allowed by the Non-Proliferation Treaty); or to negotiate on the basis of an Iranian willingness to suspend enrichment in return for simultaneous U.S. suspension of major economic and financial sanctions.

Such a broader and more flexible approach would increase the prospects of an international arrangement being devised to accommodate Iran's desire for an autonomous nuclear energy program while minimizing the possibility that it could be rapidly transformed into a nuclear weapons program. Moreover, there is no credible reason to assume that the traditional policy of strategic deterrence, which worked so well in U.S. relations with the Soviet Union and with China and which has helped to stabilize India-Pakistan hostility, would not work in the case of Iran. The widely propagated notion of a suicidal Iran detonating its very first nuclear weapon against Israel is more the product of paranoia or demagogy than of serious strategic calculus. It cannot be the basis for U.S. policy, and it should not be for Israel's, either.

An additional longer-range benefit of such a dramatically different diplomatic approach is that it could help bring Iran back into its traditional role of strategic cooperation with the United States in stabilizing the Gulf region. Eventually, Iran could even return to its long-standing and geopolitically natural pre-1979 policy of cooperative relations with Israel. One should note also in this connection Iranian hostility toward al-Qaeda, lately intensified by al-Qaeda's Web-based campaign urging a U.S.-Iranian war, which could both weaken what al-Qaeda views as Iran's apostate Shiite regime and bog America down in a prolonged regional conflict.

Last but not least, consider that American sanctions have been deliberately obstructing Iran's efforts to increase its oil and natural gas outputs. That has contributed to the rising cost of energy. An eventual American-Iranian accommodation would significantly increase the flow of Iranian energy to the world market. Americans doubtless would prefer to pay less for filling their gas tanks than having to pay much more to finance a wider conflict in the Persian Gulf.

Zbigniew Brzezinski was national security adviser in the Carter administration and is the author, most recently, of "Second Chance." William Odom, a retired Army lieutenant general, is a former director of the National Security Agency. Both are affiliated with the Center for Strategic and International Studies.

Tuesday, May 13, 2008

Forecast for the next decade

Yedioth Ahronoth,7340,L-3540899,00.html

Forecast for the next decade

Ron Ben-Yishai foresees nuclear Iran, northern war, but also a stronger, more advanced IDF
Ron Ben-Yishai 05.08.08

First, a personal comment: Everyone knows that since the destruction of the Temple in Jerusalem, prophecy is given to fools, and that 10 years in the Middle East are more or less equal to eternity. Yet when I was asked to write my own forecast for Israel’s 60th Independence Day I couldn’t fight the temptation. Yet as opposed to a prophecy, an assessment for the next decade is a challenge that forces one to ask: Does the current security and diplomatic activity have a chance to improve our situation in the future, and is there a chance that in 10 years we will see peace prevail? Therefore, despite the risk that I will be proven wrong, I will attempt to answer.

My forecast is based on the assumption that current trends in the world and in the Middle East will continue in the next decade and may even intensify. We should also recall that 10 years are, more or less, the time required to develop new weapon systems. The Israeli experience also proves that every 10 years on average we face war or a major military campaign. Therefore, below I detail the main developments that in my estimate will take place within the next decade:

  • Radical militant Islam will attempt to take over Saudi Arabia, Egypt, Jordan, Lebanon, Palestine, Pakistan, and Iraq – but it will start the process of fading away. We are not only talking about global Jihad, but also local Jihad movements. The main reason for this is their failure to produce, over time, new operational and political success stories. The West, Russia, and China, as well as the secular Muslim regimes, will cooperate and learn to “contain” the radical Islamic groups. Meanwhile, the masses will be disappointed by the extremist groups’ inability to provide their basic needs and improve their quality of life.

  • The United States will continue to maintain its military and civilian presence in Iraq and operate militarily against Iranian targets that assist Iraqi terror. NATO forces will continue to operate alongside American units and civilian aid groups in Afghanistan. In both regions, the extent of Western forces and aid will be smaller compared to the current situation.

  • Rising food prices and natural disasters, which will become more frequent because of global warming, will increase the dependence of Muslim and Arab states on wealthy Western countries that boast highly developed agriculture and the ability to offer aid of all kinds in order to cope with natural disasters. This is also true with regards to the Muslim oil exporters, which will have to spend more money on food, desalination, and basic necessities – and less money on arms.

  • Iran will acquire military nuclear capabilities and will also possess various strategic launching means. The international community and Israel will not be able to prevent it. As a result, more Mideastern countries will launch their own nuclear activity.

  • Iran, Syria, Hizbullah, and Egypt will accumulate thousands of missiles and rockets that will be accurate, long-ranged, and fitted with larger warheads than in the past. In addition, they will possess modern anti-tank rockets and will significantly improve, through Russian equipment and independent development, their aerial defense systems. All of the above will boost their ability to sow destruction in Israel’s territory, and make it more difficult for our ground forces and Air Force to operate in their territory.

  • In the next 10 years, we will see several more wide-scale clashes between Israel and the Palestinians and possibly with Syria and Hizbullah as well. After these clashes and as a result of them, we will secure partial diplomatic agreements with the Palestinians, as well as with Syria and Lebanon, with active international backing and participation.But those will still not be full peace treaties.

  • The administrations of the next two American presidents will continue to support Israel diplomatically and militarily, and will attempt to advance peace agreements, more or less in line with the current format.

  • In light of the above, I estimate that Israeli governments will continue to adhere to Ben-Gurion’s security doctrine, that is: Avoid war as much as possible via deterrence and diplomatic maneuvers; build and maintain intelligence deterrence power that would enable us to thwart war and prepare for it in advance; and if war is forces upon us, or if Israel initiates war in order to thwart a clear and tangible threat to destroy us – the IDF will win it by defeating the enemy in its own territory; Israel will build its defense force while utilizing its human and technological advantage and with American assistance; on the diplomatic front, Israel will work to advance peace treaties in stages, in a way that preserves Washington’s support and the international legitimacy for our existence and for our defense efforts.

  • The implementation of the above principles will likely lead to the maturation of several processes in the next decade:

  • A multilayered system for intercepting ballistic missiles, cruise missiles, aircraft, and rockets of all types and sizes will be deployed in Israel (this system will also include laser-based systems.) The home front will undergo an intensive process of fortification and preparation for non-conventional attacks. In Tel Aviv, Haifa, Beer Sheba, and Dimona we will be in the process of constructing huge public bomb shelterspublic will undergo drills that will simulate evacuations and long-term stay in bomb shelters. (some of them will have dual purposes such as a subway for example.) The

  • Israel will possess a long strategic arm that would be able to provide an offensive response not only to the Iranian nuclear threat but also to conventional and non-conventional threats posed by other countries in the region. This strategic arm, which will enjoy high survivability, will have four capabilities: Long-distance warning premised on independent intelligence capabilities as well as the global American alert system; the ability to intercept and destroy various types of missiles and rockets on enemy territory or in early stages of launching, via unmanned aircraft; the ability to deliver a long-range “preventative strike” or “advanced strike” on enemy territory; the ability to deliver both a short-range and long-range “second strike” in case Israel is attacked. These strategic arm capabilities, most of which have been published in the foreign media, will be significantly upgraded when Israel acquires from the US one or two squadrons of stealth-type JSF F-35 fighter jets and when the Navy receives the two new submarines being built for it in Germany.

  • The IDF’s ground forces will maintain their current format and scope, with the possible addition of one or two divisions. However, they will be boosted by highly advanced weapons and protective means, which will provide the forces with currently non-existent maneuvering and survivability capabilities in a battlefield replete with anti-tank weapons. The emphasis will be placed on quick movements that would enjoy uninterrupted and tight support and cover from the air in terms of firepower, intelligence, and logistics. The combat divisions will also possess their own heavy and accurate weapons as well as independent logistic abilities.

  • The Navy will possess five Dolphin submarines and possibly another missile frigate,protection of our shores against terror infiltration and the prevention of arms smuggling to Gaza will be increasingly based on unmanned vessels to be operated in every sector by mother ships or from the shore. which will be part of its strategic arm. On the other hand, the

  • The overall trend in the IDF would be to boost to the maximum the utilization of advanced military technologies and unmanned platforms across the military. In 10 years, a significant part of our combat soldiers – in the sea, air, and land – will apparently be the operators of unmanned systems.

As to our northern front, and I hope I am proven wrong here, we will likely see another war.

Part 2 of Ron Ben Yishai’s analysis to be published Thursday evening,7340,L-3541024,00.html

Forecast for the next decade

Part 2: Ron Ben-Yishai says Palestinians won’t have a state, but Iran will possess nukes
Ron Ben-Yishai

Ron Ben-Yishai continues his analysis of what lays ahead for Israel in the next decade:

  • As to our northern front, and I hope I am proven wrong here, we will likely see another war. I am daring to assume that this confrontation, should it take place, will end with a clear Israeli victory. That is: After about two weeks of aerial and ground combat, the missile and rocket attacks from Syria and Lebanon will end or be limited to several dozen short-range rockets a day. Syria and Lebanon will plead for a Security Council ceasefire.

  • Israel will suffer significant destruction of property, but the number of casualties among civilians would be relatively small. In Syria and Lebanon, on the other hand, the extent of devastation and casualties would be unprecedented in the history of Mideastern wars. Iran will issue threats and may send a symbolic force to Syria, but it will not be involved in the fighting.

  • Following the war and as a result of it, diplomatic negotiations will be launched that will see Israel agree to partial withdrawal on the Golan Heights as well as the demilitarization an the area that extends up to the Sea of Galilee. Syria will in turn agree to lease the rest of the Golan to Israel for a period of 99 years, and would also accept internationally monitored security arrangements and phased normalization of ties.

  • In Lebanon, Hizbullah will continue to be the dominant force – yet as a result of the war, Iranian support for the organization will weaken and it would be forced to compromise and share power with other sects in the country. Meanwhile, its appetite for yet another confrontation with Israel will grow smaller.

  • It is reasonable to assume that even in 10 years we will not see the establishment of a Palestinian state in the West Bank and Gaza Strip. The talks will continue and may even lead to a “shelf agreement,” yet it’s doubtful whether it will be implemented. The Palestinian people’s political maturation process, which would enable them to assume responsibility for themselves and for the security of their neighbors, will continue, but it will not be reaching the required critical mass. This apparently won’t happen until the radical Islamic wave will fade.

  • It is also doubtful whether Israel will see the emergence of a government with the political power required to dismantle the settlements and outputs located beyond the large settlement blocs. Therefore, we will likely witness, in the next 10 years, more than one wide-scale IDF operation in Gaza, as well as yet another Intifada or two in the West Bank. The result would be reinforcement of Gaza as a separate entity. It would be jointly managed by a multinational force and a Palestinian coalition that would also include Hamas.

  • Israel will construct a “smart” wall around the Strip that will prevent direct fire and the digging of tunnels. This wall will feature crossings for goods and people, yet most supplies and movement into and out of the Strip – including goods, fuel, and electricity – will come via Egypt. The Rafah Crossing will become the main crossing. Meanwhile, the airport that Israel built years ago will serve as the Strip’s airport. A seaport will be under construction as well as a large desalination plant.

  • In the West Bank we will likely see a new political force rise up on the ruins of the old and corrupt Fatah. Mahmoud Abbas will step down, as will other members of the “Tunisia generation. The new political movement will be headed by a collective leadership that will be based on Arafat’s Fatah young guard (either with or without Barghouti.) This group, most of whose members spent time in Israeli prisons, will be better equipped to engage in dialogue and agree on a compromise with Israel. After the third Intifada will die down, Israel will dismantle several isolated outposts and settlementshand over more territory to the Palestinian Authority. and

  • Along the borderlines with the Palestinians, Egyptians, and in the north we will see a fence or wall that will feature advanced technological means, thereby requiring less troops. In the West Bank, the Shin Bet and IDF will continue to engage in anti-terror activity in its current format, but they will have more technological means at their disposal. The major change will be the absence of roadblocks within the West Bank, thereby allowing for free Palestinian movement. Orderly and well-equipped border crossings – between the West Bank and Israel and between the West Bank and Jordan – will enable controlled, secure, and relatively quick movement.

  • As noted, I estimate that Iran will possess military nuclear capabilities in 10 years. Tehran will not admit to this, but hint at it. The United States and Israel will not be putting the military option into practice. However, the international community will tighten the sanctions and economic siege on Iran based on the assumption that skyrocketing food prices and ecological disasters will increase the Ayatollah regime’s dependency on developed countries, and mostly on the world’s leading food producer – the United States.

It is very possible that in 10 years, and maybe even before that, we will see the opening of negotiations between Tehran and the West in line with the North Korean model. The Ayatollahs will bargain with the West on a “nukes in exchange for grain” deal.

At the end of the negotiations, Iran will agree to reveal and dismantle its military nuclear capabilities and subject them to monitoring in exchange for the lifting of sanctions and ongoing supply of food and other aid. Another reasonable possibility is that due to the food crisis pressure and other domestic problems, the Ayatollah regime will collapse, and the Jews shall rejoice, God willing.

Monday, July 16, 2007

Turkey Increasingly Shuns U.S. Weapons


Recent Turkish procurement practices that favor non-U.S. suppliers in key defense programs may indicate a larger tendency to avoid the purchase of American weapons where the Turks easily can find alternatives, analysts and industry sources said.
“At some point in a not-so-distant future, we may see that Turkey practically buys only fighter aircraft and related services from the United States, and almost nothing else,one Ankara-based analyst said.
Turkey’s ongoing complaints over what it sees as the United States’ strict restrictions on technology transfer and other sale difficulties have prompted the NATO ally to seek closer industry ties with other suppliers, the analyst said.
This year, Turkish procurement authorities have shunned U.S. products in three programs collectively worth billions of dollars, selecting an Italian-British group for attack helicopters, and South Korean companies for trainer aircraft and main battle tanks.
The United States has been Turkey’s closest Western ally and largest weapon supplier since World War II. The defense-industrial relationship has two aspects: government-to-government purchases from the United States, Washington’s Foreign Military Sales based on(FMS) mechanism; and commercial sales, in which U.S. companies usually have to compete with rivals from other countries. It is the second category in which the Americans are struggling.
The government-to-government sales will continue to flourish, with Turkey set to buy new fighter aircraft and related services worth nearly $15 billion over the next 10 to 15 years. These include a Turkish plan to buy 100 next-generation F-35 Joint Strike Fighter jets worth $10.7 billion; a recent contract for the sale to the Turkish Air Force of 30 F-16 Block 50 fighters worth $1.85 billion; and an ongoing modernization of older Turkish F-16s for $1.1 billion. In all these cases, Lockheed Martin is the prime contractor.
In addition, Turkey buys various types of Air Force and naval missiles and other services under FMS deals.
But commercial sales are faltering. The only recent commercial contract won by the United States is last year’s $580 million purchase of 17 S-70B Seahawk naval warfare helicopters. And Sikorsky was the sole source in that deal.
U.S. Government Complains
The U.S. government and companies blame the deterioration on the Turkish procurement agency’s strict rules of acquisition that took effect in 2005.
In unusually candid language, a senior Pentagon official recently accused the Undersecretariat for Defense Industries (SSM), Turkey’s procurement agency, of “hindering Turkey’s military modernization, interoperability with NATO allies and U.S.-Turkey defense industry cooperation.”
“Onerous terms and conditions — liability, work share, technology transfer and upfront U.S. government approval requirements in Turkey’s standard contracts — have kept U.S. firms from bidding,” Daniel Fata, deputy assistant secretary of defense for Europe and NATO, told a House of Representatives panel March 15.
Since then Turkey has selected the Italian-British AgustaWestland, maker of the A-129 Mangusta International, for its $2.7 billion attack helicopter program. Ankara also has opted for the KT-1 Woongbi, developed by South Korea’s Korea Aerospace Industries, for the $450 million trainer aircraft contract. As the model for Turkey’s national tank program, South Korea’s XK-2 platform, made by the Agency for Defense Development, has been chosen. With follow-on contracts, the South Korean share in this deal may exceed $1 billion.
U.S. companies were nonplayers in all three programs, with leading manufacturers, including Boeing, Bell Helicopter Textron and Raytheon, even failing to bid. The U.S. firms said the Turkish terms and conditions were not compatible with U.S. export laws and regulations.
Earlier, U.S. company General Atomics lost a nearly $200 million UAV deal to Israel’s Israel Aerospace Industries.
“Winning Turkish contracts is becoming increasingly difficult for U.S. firms, and we’re not happy about that at all,” one U.S. industry official said.
Turkish procurement officials deny charges of discrimination, with SSM chief Murad Bayar saying that his agency had softened terms and conditions to enable U.S. participation. But Bayar and other officials also say that companies from other countries do not share U.S. complaints.
“The Turks, to borrow their language, are kind of fed up with U.S. restrictions on technology transfer and other sale problems, and are effectively telling the Americans that as long as they can find equivalent systems from less problematic suppliers, they will prefer non-U.S. solutions,” the Ankara-based analyst said. “And I see no reason for the Turks to change this approach in the foreseeable future.”
One exception in Turkey’s recent preference for non-U.S. systems for commercial deals is helicopters.
Sikorsky Aircraft, maker of the S-70 Black Hawk International, is expected to win an ongoing tender for 32 military utility helicopters for $500 million over European rivals. Boeing’s CH-47 Chinook is seen as an early favorite in an upcoming program for heavy-lift helicopters.
Although not directly related, the faltering U.S. commercial sales to Turkey come at a time of deteriorating political relations, mainly because of the Iraq war and increased terrorist attacks inside Turkey by separatist Kurdish rebels based in northern Iraq. Ankara’s calls on Washington and Baghdad to put an end to the presence of the outlawed Kurdistan Workers Party in Iraq so far have produced no visible result.
Turkey has emerged as the world’s “most anti-U.S. country,” according to this year’s annual global poll by the Pew Research Center, released June 27. The poll’s results indicate only 9 percent of Turks have favorable views of the United States, Pew said. •

Sunday, July 15, 2007

FT REPORT - GREECE: Rising prosperity brings feel-good facto

By Kerin Hope, Financial Times

Published: Jul 13, 2007

Greece's reputation for presenting unreliable statistics that flatter its public accounts has long undermined its credibility with European partners.

Those days may be over, however.

In May, the Athens government received a green light to exit the European Commission's excessive budget deficit procedure, ending almost three years of close scrutiny by Eurostat, the organisation's audit arm.

The 2006 budget deficit fell to 2.6 per cent of gross domestic product - the first time it had fallen within the 3 per cent of GDP limit set for members of the eurozone since Greece joined the currency in 2001. This year, the deficit is projected to shrink only marginally to 2.5 per cent of GDP.

However, backsliding is not an option, says George Alogoskoufis, the finance minister. "We're preparing for larger cuts next year. As a eurozone member, we're committed to balancing the budget by 2010," he says.

Eurostat is expected to approve later this year a revision of the national accounts - the first in more than 20 years - that shows an increase in GDP by as much as 25.7 per cent annually since 1994.

Improved information-gathering has enabled the state statistical service to capture more activity in the fast-growing services sector, along with a larger percentage of the thriving grey economy.

Based on the revisions, the budget deficit would shrink by up to half a percentage point. But the impact on Greece's public debt, the highest in the eurozone as a percentage of GDP, would be much larger. The debt would fall at a stroke from 104 to 85 per cent of GDP.

Greek per capita income would receive a significant boost too. In terms of purchasing power parity, the Greeks would outpace their Mediterranean neighbours Spain and Italy to become almost as well off as the French.

The revisions reflect the impact of a decade of growth at about 4 per cent a year - a rate that should be sustained over the medium-term, Mr Alogoskoufis says. He notes that the economy expanded in the first quarter by as much as 4.6 per cent on an annualised basis.

Growth is driven by strong consumption and high investment, underpinned by transfers worth €22bn over eight years from the latest EU structural package. The jump in Greece's per capita income resulting from the statistical revision is not expected to affect current levels of EU funding.

"There's a feel-good effect and a neighbourhood effect," explains Paul Mylonas, chief economist at National Bank of Greece. "People in the private sector are investing quite a lot, and economies in the neighbouring countries, increasingly important export markets for Greece, are growing fast."

Larger Greek companies are deepening their presence in Bulgaria and Romania following their EU accession. Smaller companies are finding opportunities in the less-developed markets of the western Balkans.

Shipping and tourism,the main growth drivers together with cross-border expansion, are benefiting from a buoyant global economy.

Investment in new tonnage is at record levels. Tourism bookings are at a 10-year high, thanks to a recovery in Germany, the biggest market for Greece, and rising numbers of American, Chinese and Russian visitors.

Mr Alogoskoufis says the benign climate provides an opportunity to crack down on widespread tax evasion among small businesses and Greece's high percentage of self-employed workers, from plumbers to doctors and lawyers.

A previous campaign aimed at corporate tax evaders has borne fruit, thanks to improved electronic cross-checking of invoices and payments, and tighter enforcement by the finance ministry's special police unit.

But as a percentage of GDP, tax receipts are among the lowest in the EU, at a little below 20 per cent according to the revisedstatistics.

"We need to engage both the public and the social partners.

"There'll be incentives for households to ask for receipts, for example, for repair jobs, and measures to encourage the reporting of extortionary practices during tax audits," Mr Alogo-skoufis says.

Yearly reductions have cut corporate tax rates from 27 to 22 per cent. Rates for personal income tax are also being reduced. But the tax code remains complex, with overlapping legislation that is open to different interpretations by middle-ranking revenue officials.

Yannis Stournaras, an Athens University economics professor, says that the tax system needs a thorough overhaul.

He says: "There are some tough choices to be made in order to maintain revenue growth. There are few alternatives to raising VAT, but it also needs to be better administered. And the government has to consider introducing a capital gains tax."

As Greece enters the run-up to a general election, Mr Alogoskoufis faces pressure to loosen fiscal policy. He insists that next year's budget will not contain hand-outs for special interest groups.

But as the election campaign gets under way, it will become clear that the optimistic climate in Athens and other major cities does not extend to smaller towns and places off the tourist track. There are fewer new jobs in the provinces and income disparities are growing.

Although the jobless rate has fallen in the past three years from almost 11 per cent to about 9 per cent, it remains among the highest in the eurozone.

Unemployment is low among heads of households, but among young workers the rate exceeds 24 per cent, the highest in the EU.

"Measures to free the labour market are crucial," Mr Mylonas says.

"The minimum wage is far too high for inexperienced workers: it discourages employers from hiring.

"Such high rates of youth unemployment don't bode well for growth in the future."

Thursday, July 12, 2007

NYT - Bush to Declare Gains in Iraq on Some Fronts

July 12, 2007

WASHINGTON, July 11 — The Bush administration will assert in the next few days that progress in carrying out the new American strategy in Iraq has been satisfactory on nearly half of the 18 benchmarks set by Congress, according to several administration officials.

But it will qualify some verdicts by saying that even when the political performance of the Iraqi government has been unsatisfactory, it is too early to make final judgments, the officials said.

The administration’s decision to qualify many of the political benchmarks will enable it to present a more optimistic assessment than if it had provided the pass-fail judgment sought by Congress when it approved funding for the war this spring.

The administration officials who provided details of the draft report to The New York Times, insisting on anonymity, did so partly to rebut claims by members of Congress in recent days that almost no progress had been made in Iraq since President Bush altered course by ordering the deployment of about 30,000 additional troops earlier this year.

The report will land in the middle of a two-week Senate debate that has pitted advocates of an early American troop withdrawal against Mr. Bush, who wants to defer major policy decisions on Iraq until September, when a more comprehensive report is due from the top two Americans in Iraq, Ambassador Ryan C. Crocker and Gen. David H. Petraeus.

The White House report says the most progress has been achieved in the military realm. The American command’s latest unpublished monthly figures, prepared for the White House report, show a substantial decline in two major categories of violence, the number of Iraqi civilians killed in sectarian violence and casualties from car and truck bomb explosions.

But the report also acknowledges that some military benchmarks have not been met, including improvements in the ability and political neutrality of the Iraqi security forces and the Iraqi government. Even in some areas where the report will cite progress, the officials in Washington said the document would acknowledge that the overall goal of political reconciliation remained elusive and would chide the Iraqis for failing to take advantage of the presence of more American troops to take more far-reaching steps.

Administration officials said the report could be made public as early as Thursday, though the White House said the timing of the release had not been determined. At the same time, officials said, the White House would like to avoid giving Congress ammunition to use in seeking to enact restrictions on the United States military presence in Iraq.

The report will “not conclude, as it has been characterized, that this is a colossal failure,” one of the officials said. “It is a mixed bag, with some areas that are too early to pass judgment on.”

Several administration officials said that in the drafting of the report, which was done primarily at the National Security Council, officials tried to walk a fine line between giving a credible assessment of Iraq’s progress and giving the Iraqis an incentive, in the words of one official, “to improve their grades.”

Administration officials said the Pentagon had been much more willing than the State Department and the White House to make hard and fast calls about whether Iraqi progress was satisfactory.

An assessment of political progress provided to the House Armed Services Committee by Thomas Fingar, the deputy director for analysis at the National Intelligence Council, painted a much bleaker picture than the White House report, saying there were “few appreciable gains.”

The new military figures come from a sheaf of colored charts and graphs prepared by the American military command for submission to the White House. The documents say that sectarian killings in Baghdad declined to 300 in June, when the American force reached full strength, from 1,650 in January. Nationally, sectarian killings declined to 650 in June from 2,100 in January, according to the documents. The number of “high profile” bombings, including suicide attacks, fell below 90 in June from more than 180 in March.

In separate interviews in recent days, Ambassador Crocker and General Petraeus, the top American commander in Iraq, have offered a subdued view of the military statistics, saying that while some measures of violence showed a downward trend, it was too early to suggest that there had been a lasting turnaround in the war.

Ambassador Crocker, in an interview on Saturday, was blunt in his assessment of the war. While “by Iraqi standards, June was a pretty good month,” he said, the figure of 650 sectarian killings showed that the situation remained grim. “If 20 people killed a day is good news, that tells you how bad things were previously,” he said. “The challenges here at every level remain just huge.”

But he said he believed that the United States could avoid disaster in Iraq, given enough time. “Do I think it can still be done?” he said. “Yes, I do. I’m just not sure if it can be done on the kind of time lines and with the kind of time pressures that the situation back home has generated.”

Other figures relayed in the report to Washington showed that Iraqi casualties from car and truck bombs, which have been the war’s biggest cause of injury and death, fell below 500 in June, including more than 200 casualties from one attack on a Shiite mosque in the Rusafa area of east Baghdad, compared with 1,100 in February. According to a detailed breakdown, vehicle bombings across Iraq fell to 40 in June, compared with 115 in March; suicide bombings fell to 30 from 48; and attacks by suicide vest bombers stayed nearly equal, with 18 in June, 2 fewer than in March.

Another measure of the Baghdad violence, the number of insurgent and militia attacks, went from 200 in a two-week period just before the troop increase began in mid-February to 390 in the first two weeks of June, before falling back to 240 in the second half of the month, according to the American figures.

A senior officer who helped compile the charts said the spike reflected the heightened tempo of American-led military operations in insurgent and militia strongholds across the city. “The attacks are up because we’re going into the neighborhoods picking fights,” he said.

General Petraeus was cautious in assessing the fall-off in what the military calls “high-profile attacks,” meaning bombings with parked vehicles that cause high casualties, and suicide attacks with bomb-laden vehicles or by militants wearing suicide vests. He noted that in early July there were a number of devastating attacks, including a suicide bombing in a village southwest of Kirkuk last week that killed more than 130 people.

“That had gone down for three months in a row, April, May and June, fairly substantially,” the general said. But he added, “We will have to see if that is sustained this month or not, because there have been a number, as you know, at the beginning of this month.”

The most striking success shown by the military figures was in the western desert province of Anbar, an area declared all but lost politically to insurgents by a Marine intelligence report in 2006. The number of attacks in Anbar declined to 225 in June from 1,300 in October, according to the military data.

American officers have attributed the success in Anbar to deals with Sunni tribal leaders exhausted with the brutalities of Al Qaeda in Mesopotamia, a largely Iraqi organization that American officers assert has foreign leadership. But the military says that the extremists, under pressure in Anbar, have moved the focus of their attacks elsewhere, including the troubled province of Diyala north of Baghdad, and the oil-rich city of Mosul in the north.

On the political front, none of the benchmarks that have been achieved include the high-profile legislation on which Congress asked to see progress. Debate has not yet begun in the Iraqi Parliament on the oil law or the revenue-sharing law, both of which are crucial to keeping Iraq united over the long term.

The most direct criticism of the government of Prime Minister Nuri Kamal al-Maliki in the report, officials said, is for its failure to make headway on a law that would make it easier for former members of Saddam Hussein’s Baath Party to obtain government jobs. American officials consider the measure vital to any political reconciliation with Sunnis. Laws to disarm militias and to grant amnesty are still in their formative stages, and as a practical matter, disarming militias seems an all but impossible goal as more groups control swaths of territory.

In the report, Mr. Maliki’s government will be credited with taking steps toward forming a committee to review and overhaul the Iraqi Constitution and with making progress on “allocating and spending” its $10 billion budget for reconstruction projects, though officials privately say little of the money has been spent so far on projects.

In contrast to the White House report, Mr. Fingar’s assessment to the House committee was overtly critical. “The multiparty government of Nuri al-Maliki continues halting efforts to bridge the divisions and restore commitment to a unified country,” it concluded, “and it has made limited progress on key legislation.” But it added that communal violence and scant common ground between Shias, Sunnis and Kurds continues to polarize politics,” and Mr. Maliki’s effort at reconciliation are “only at its initial stages.”

Mr. Crocker said in an interview that he did not expect the legislative benchmarks to be achieved in the coming weeks and that in his view those measures were less significant than whether the leaders of the different factions found a way to keep talking to one another. He said he had been encouraged by signs in recent weeks that a small group of leaders representing each of the major sectarian and ethnic blocs including Mr. Maliki, a Shiite; President Jalal Talabani, a Kurd; and Tariq al-Hashemi, a Sunni — had met at times of crisis and spoken with a common voice.

General Petraeus appeared eager to send a message to lawmakers on Capitol Hill who have grown impatient with the war. “I can understand why the folks at one end of Pennsylvania Avenue could be frustrated, angry, disappointed and upset over the situation in Iraq,” he said, adding: “I share the same emotions, and I’m the one going to the memorial services. I went to a ceremony last night for five soldiers, and the night before for four.”

David S. Cloud reported from Washington, and John F. Burns from Baghdad. Michael R. Gordon and Alissa J. Rubin contributed reporting from Baghdad, and David E. Sanger from Washington.

The Times - Is the puny dollar a sign of America’s decline? by Anatole Kaletsky July 12, 2007

Yesterday, the pound and the euro hit their highest levels in a generation against the US dollar. The dollar, meanwhile, collapsed to a record low against an average of all the world’s major currencies. It is tempting to interpret the flight from the dollar in financial markets as the clearest, most objective, indicator of America’s relative decline.

Europe has long been derided as an ageing, sclerotic continent, doomed to irrelevance in a world dominated by America and Asia. But could it actually be America, not Europe, that is failing to compete in the globalised world economy and is now threatened with long-term decline?

Much that is happening in the world today certainly seems to belie the hubristic assumptions about American hegemony that were so prevalent a few years ago. It is not just the military debacle in Iraq and the geopolitical setbacks suffered by American diplomacy from the Middle East to Venezuela to North Korea. Less prominent in the media headlines, but in some ways more troubling, are the indicators of economic underperformance: the reliance on foreign borrowing (now equivalent to $2,000 annually for every American man, woman and child); the loss of Wall Street’s global dominance in financial services to the City of London; and now to cap it all, the dollar collapsing to record lows. Surely this is the ultimate vote of no confidence in the US economy by people who are best placed to know?

Sadly, for those of us who live in Britain and Europe and would like to believe that the strength of our currencies reflects our superlative economic prospects, the answer is an emphatic “no”. There was a time in the 19th century when the strength of sterling reflected Britain’s unparalleled prosperity and imperial power. But, since the deregulation of currencies and financial markets in the 1980s and 1990s, currency strength has conveyed almost no information about the health of a national economyand none at all about a country’s competitive position in global trade. For example, anyone who believes that the falling dollar reflects America’s huge trade deficit and foreign borrowing should consider that the one leading currency even weaker in the past three years than the dollar has been the yen; yet Japan has the world’s biggest trade surplus and is the greatest creditor nation the world has ever seen.

To the extent that any relationship has existed between currencies and economic performance, it has usually been the “wrong” way round – rising currencies usually preceded periods of economic decline, while weakening currencies have presaged economic strength. Think, for example, of the collapse of sterling in 1992, which ushered in the strongest and longest period of economic expansion in British history.

Or consider the strength of the US economy in the late 1990s, just after the dollar fell to its previous nadir in 1995. Even more spectacular has been the decade of growth in China since its currency collapsed to a record low in the Asian crisis of 1997. On the other side of the ledger, there has been Japan’s stagnation after 1995, when the yen hit a record high, and Germany’s lost decade after the surge in the mark that followed German reunification and the eurozone’s dismal economic performance from 2003 to 2005, as the newly created euro appreciated by 60 per cent against the dollar.

There are many explanations for the apparently perverse relationship between currencies and economic performance, though none of them is watertight. For example, currencies tend to strengthen in response to rising interest rates and fears of inflation – which are obviously bad for economic performance – but also in response to strong economic growth.

On the other hand, a currency may weaken because inflation prospects are improving, as they are in the US at present, or because investors fear a financial collapse, which some believe to be a looming in the US mortgage market. But if the causes of currency strength are ambiguous and contradictory, the consequences are clear. A currency that keeps rising, as the euro and sterling are at present, will eventually do serious damage to almost any economy, hurting export competitiveness and stunting growth.

This is what happened to Britain and America after the pound and the dollar appreciated excessively in the early 1980s and again in the early 1990s. It happened to Germany and Japan in the mid1990s and again in the middle of this decade to the eurozone. Europe and Britain enjoyed some relief in 2005, when the euro and the pound temporarily weakened.

But now they will have to bear the full brunt of excessive currency strength. In Britain’s case, the strength of the pound may not do too much harm, since it will forestall or at least delay any further rate rises from the Bank of England. On the Continent, however, the European Central Bank seems determined to keep raising interest rates, thereby exacerbating the damage done by the euro’s excessive strength.

Americans, meanwhile, will enjoy the benefits of a super-cheap currency, which will more than offset falling property prices and problems with a small minority of mortgage loans. American politicians, for all their faults, instinctively understand this, which is why they have generally welcomed a falling dollar and have been pressuring China and Japan to let the dollar weaken against the yen and the renmimbi – not just, as at present, against the euro and the pound.

European policymakers, by contrast, seem to have no idea of how currency markets operate. In contrast with Americans and Asians, German politicians in particular still see a “hard currency” as a virility symbolnot as a threat to economic performance or an indicator that interest rates are probably too high.

There is only one leading European politician who seems to understand the dangers of an overstrong euro. This is Nicolas Sarkozy, who travelled to Brussels this week to plead for a more expansionary economic policy in Europe. But his pleas were met with ridicule from the other governments and the ECB. Within two months of promising to spark an economic revival, the new French President has already been paralysed by the rules of the eurozone.

That is the reality of life in today’s Europe – and one of the main reasons why America, despite all its problems, will continue to dominate the world economy in the decades ahead.