Friday, October 16, 2009

Justice Anti-Trust Div Weighs in on Health Care Reform

The U.S. Department of Justice has stepped into the battle over health care, giving ammunition to congressional Democrats who want to shake up the health insurance market.

The department made its foray today during a Senate hearing about the federal antitrust exemption that health insurers have enjoyed for more than 60 years. Democrats say a repeal of that exemption would help consumers by allowing the Justice Department to police potentially anti-competitive practices, such as market allocation and bid rigging, that are currently left up to state insurance regulators. And the department suggested today that it generally agrees.

The repeal proposal comes up, in a not-so-subtle way, as some Democrats are trying to persuade the insurance industry to accept a new public insurance plan. “It puts in perspective, for those of us who want a public option, that there has to be competition,” said Sen. Dick Durbin (D-Ill.), the No. 2 Senate Democrat.

The Democrats’ lead witness on the issue: Christine Varney, assistant attorney general for the Antitrust Division. Though the Justice Department hasn’t taken a position on a specific bill about the insurers’ exemption, Varney gave the proposal a boost this morning. “I don’t think that the reasons that were in existence in 1945 are still very viable for this exemption,” she said.

Varney, a former partner at Hogan & Hartson, testified about three decades’ worth of studies that say the exemption is outdated.

Sen. Orrin Hatch (R-Utah) said a repeal of the exemption would lead to smaller and fewer insurers. “I have, as yet, seen little evidence to justify a complete repeal,” he said.

Congress created the antitrust exemption in the McCarran-Ferguson Act of 1945. Insurers say it’s still needed to allow for the sharing of industry data — a point that Varney disputed, saying that data-sharing is frequently legal as long as it meets Justice Department guidelines.

“Repealing the McCarran-Ferguson Act would allow competition to have a greater role in reforming health and medical malpractice insurance markets than would otherwise be the case,” Varney said.

She added that, if Congress gave her the authority to prosecute in the health insurance market, she would still rely on the guidance of state authorities. And, she said, the Justice Department should be able to take into account the “rule of reason” and other flexible standards before acting against a health insurer. Click here (PDF) for a copy of her prepared testimony.

Monday, October 05, 2009

Some Answers and Questions About Iran Nuke Program

Two Leaks and the Deepening Iran Crisis

By George Friedman

Two major leaks occurred this weekend over the Iran matter.

In the first, The New York Times published an article reporting that staff at the International Atomic Energy Agency (IAEA), the U.N. nuclear oversight group, had produced an unreleased report saying that Iran was much more advanced in its nuclear program than the IAEA had thought previously. According to the report, Iran now has all the data needed to design a nuclear weapon. The New York Times article added that U.S. intelligence was re-examining the National Intelligence Estimate (NIE) of 2007, which had stated that Iran was not actively pursuing a nuclear weapon.

The second leak occurred in the British paper The Sunday Times, which reported that the purpose of Israeli Prime Minister Benjamin Netanyahu’s highly publicized secret visit to Moscow on Sept. 7 was to provide the Russians with a list of Russian scientists and engineers working on Iran’s nuclear weapons program.

The second revelation was directly tied to the first. There were many, including STRATFOR, who felt that Iran did not have the non-nuclear disciplines needed for rapid progress toward a nuclear device. Putting the two pieces together, the presence of Russian personnel in Iran would mean that the Iranians had obtained the needed expertise from the Russians. It would also mean that the Russians were not merely a factor in whether there would be effective sanctions but also in whether and when the Iranians would obtain a nuclear weapon.

We would guess that the leak to The New York Times came from U.S. government sources, because that seems to be a prime vector of leaks from the Obama administration and because the article contained information on the NIE review. Given that National Security Adviser James Jones tended to dismiss the report on Sunday television, we would guess the report leaked from elsewhere in the administration. The Sunday Times leak could have come from multiple sources, but we have noted a tendency of the Israelis to leak through the British daily on national security issues. (The article contained substantial details on the visit and appeared written from the Israeli point of view.) Neither leak can be taken at face value, of course. But it is clear that these were deliberate leaks — people rarely risk felony charges leaking such highly classified material — and even if they were not coordinated, they delivered the same message, true or not.

The Iranian Time Frame and the Russian Role

The message was twofold. First, previous assumptions on time frames on Iran are no longer valid, and worst-case assumptions must now be assumed. The Iranians are in fact moving rapidly toward a weapon; have been extremely effective at deceiving U.S. intelligence (read, they deceived the Bush administration, but the Obama administration has figured it out); and therefore, we are moving toward a decisive moment with Iran. Second, this situation is the direct responsibility of Russian nuclear expertise. Whether this expertise came from former employees of the Russian nuclear establishment now looking for work, Russian officials assigned to Iran or unemployed scientists sent to Iran by the Russians is immaterial. The Israelis — and the Obama administration — must hold the Russians responsible for the current state of Iran’s weapons program, and by extension, Moscow bears responsibility for any actions that Israel or the United States might take to solve the problem.

We would suspect that the leaks were coordinated. From the Israeli point of view, having said publicly that they are prepared to follow the American lead and allow this phase of diplomacy to play out, there clearly had to be more going on than just last week’s Geneva talks. From the American point of view, while the Russians have indicated that participating in sanctions on gasoline imports by Iran is not out of the question, Russian President Dmitri Medvedev did not clearly state that Russia would cooperate, nor has anything been heard from Russian Prime Minister Vladimir Putin on the subject. The Russian leadership appears to be playing “good cop, bad cop” on the matter, and the credibility of anything they say on Iran has little weight in Washington.

It would seem to us that the United States and Israel decided to up the ante fairly dramatically in the wake of the Oct. 1 meeting with Iran in Geneva. As IAEA head Mohamed ElBaradei visits Iran, massive new urgency has now been added to the issue. But we must remember that Iran knows whether it has had help from Russian scientists; that is something that can’t be bluffed. Given that this specific charge has been made — and as of Monday not challenged by Iran or Russia — indicates to us more is going on than an attempt to bluff the Iranians into concessions. Unless the two leaks together are completely bogus, and we doubt that, the United States and Israel are leaking information already well known to the Iranians. They are telling Tehran that its deception campaign has been penetrated, and by extension are telling it that it faces military action — particularly if massive sanctions are impractical because of more Russian obstruction.

If Netanyahu went to Moscow to deliver this intelligence to the Russians, the only surprise would have been the degree to which the Israelis had penetrated the program, not that the Russians were there. The Russian intelligence services are superbly competent, and keep track of stray nuclear scientists carefully. They would not be surprised by the charge, only by Israel’s knowledge of it.

This, of course leaves open an enormous question. Certainly, the Russians appear to have worked with the Iranians on some security issues and have played with the idea of providing the Iranians more substantial military equipment. But deliberately aiding Iran in building a nuclear device seems beyond Russia’s interests in two ways. First, while Russia wants to goad the United States, it does not itself really want a nuclear Iran. Second, in goading the United States, the Russians know not to go too far; helping Iran build a nuclear weapon would clearly cross a redline, triggering reactions.

A number of possible explanations present themselves. The leak to The Sunday Times might be wrong. But The Sunday Times is not a careless newspaper: It accepts leaks only from certified sources. The Russian scientists might be private citizens accepting Iranian employment. But while this is possible, Moscow is very careful about what Russian nuclear engineers do with their time. Or the Russians might be providing enough help to goad the United States but not enough to ever complete the job. Whatever the explanation, the leaks paint the Russians as more reckless than they have appeared, assuming the leaks are true.

And whatever their veracity, the leaks — the content of which clearly was discussed in detail among the P-5+1 prior to and during the Geneva meetings, regardless of how long they have been known by Western intelligence — were made for two reasons. The first was to tell the Iranians that the nuclear situation is now about to get out of hand, and that attempting to manage the negotiations through endless delays will fail because the United Nations is aware of just how far Tehran has come with its weapons program. The second was to tell Moscow that the issue is no longer whether the Russians will cooperate on sanctions, but the consequence to Russia’s relations with the United States and at least the United Kingdom, France and, most important, possibly Germany. If these leaks are true, they are game changers.

We have focused on the Iranian situation not because it is significant in itself, but because it touches on a great number of other crucial international issues. It is now entangled in the Iraqi, Afghan, Israeli, Palestinian, Syrian and Lebanese issues, all of them high-stakes matters. It is entangled in Russian relations with Europe and the United States. It is entangled in U.S.-European relationships and with relationships within Europe. It touches on the U.S.-Chinese relationship. It even touches on U.S. relations with Venezuela and some other Latin American countries. It is becoming the Gordian knot of international relations.

STRATFOR first focused on the Russian connection with Iran in the wake of the Iranian elections and resulting unrest, when a crowd of Rafsanjani supporters began chanting “Death to Russia,” not one of the top-10 chants in Iran. That caused us to focus on the cooperation between Russia and Iranian President Mahmoud Ahmadinejad and Supreme Leader Ayatollah Ali Khamenei on security matters. We were aware of some degree of technical cooperation on military hardware, and of course on Russian involvement in Iran’s civilian nuclear program. We were also of the view that the Iranians were unlikely to progress quickly with their nuclear program. We were not aware that Russian scientists were directly involved in Iran’s military nuclear project, which is not surprising, given that such involvement would be Iran’s single-most important state secret — and Russia’s, too.

A Question of Timing

But there is a mystery here as well. To have any impact, the Russian involvement must have been under way for years. The United States has tried to track rogue nuclear scientists and engineers — anyone who could contribute to nuclear proliferation — since the 1990s. The Israelis must have had their own program on this, too. Both countries, as well as European intelligence services, were focused on Iran’s program and the whereabouts of Russian scientists. It is hard to believe that they only just now found out. If we were to guess, we would say Russian involvement has been under way since just after the Orange Revolution in Ukraine, when the Russians decided that the United States was a direct threat to its national security.

Therefore, the decision suddenly to confront the Russians, and suddenly to leak U.N. reports — much more valuable than U.S. reports, which are easier for the Europeans to ignore — cannot simply be because the United States and Israel just obtained this information. The IAEA, hostile to the United States since the invasion of Iraq and very much under the influence of the Europeans, must have decided to shift its evaluation of Iran. But far more significant is the willingness of the Israelis first to confront the Russians and then leak about Russian involvement, something that obviously compromises Israeli sources and methods. And that means the Israelis no longer consider the preservation of their intelligence operation in Iran (or wherever it was carried out) as of the essence.

Two conclusions can be drawn. First, the Israelis no longer need to add to their knowledge of Russian involvement; they know what they need to know. And second, the Israelis do not expect Iranian development to continue much longer; otherwise, maintaining the intelligence capability would take precedence over anything else.

It follows from this that the use of this intelligence in diplomatic confrontations with Russians and in a British newspaper serves a greater purpose than the integrity of the source system. And that means that the Israelis expect a resolution in the very near future — the only reason they would have blown their penetration of the Russian-Iranian system.

Possible Outcomes

There are two possible outcomes here. The first is that having revealed the extent of the Iranian program and having revealed the Russian role in a credible British newspaper, the Israelis and the Americans (whose own leak in The New York Times underlined the growing urgency of action) are hoping that the Iranians realize that they are facing war and that the Russians realize that they are facing a massive crisis in their relations with the West. If that happens, then the Russians might pull their scientists and engineers, join in the sanctions and force the Iranians to abandon their program.

The second possibility is that the Russians will continue to play the spoiler on sanctions and will insist that they are not giving support to the Iranians. This leaves the military option, which would mean broad-based action, primarily by the United States, against Iran’s nuclear facilities. Any military operation would involve keeping the Strait of Hormuz clear, meaning naval action, and we now know that there are more nuclear facilities than previously discussed. So while the war for the most part would be confined to the air and sea, it would be extensive nonetheless.

Sanctions or war remain the two options, and which one is chosen depends on Moscow’s actions. The leaks this weekend have made clear that the United States and Israel have positioned themselves such that not much time remains. We have now moved from a view of Iran as a long-term threat to Iran as a much more immediate threat thanks to the Russians.

The least that can be said about this is that the Obama administration and Israel are trying to reshape the negotiations with the Iranians and Russians. The most that can be said is that the Americans and Israelis are preparing the public for war. Polls now indicate that more than 60 percent of the U.S. public now favors military action against Iran. From a political point of view, it has become easier for U.S. President Barack Obama to act than to not act. This, too, is being transmitted to the Iranians and Russians.

It is not clear to us that the Russians or Iranians are getting the message yet. They have convinced themselves that Obama is unlikely to act because he is weak at home and already has too many issues to juggle. This is a case where a reputation for being conciliatory actually increases the chances for war. But the leaks this weekend have strikingly limited the options and timelines of the United States and Israel. They also have put the spotlight on Obama at a time when he already is struggling with health care and Afghanistan. History is rarely considerate of presidential plans, and in this case, the leaks have started to force Obama’s hand.

This article is reprinted with permission from Stratfor.

Friday, August 28, 2009

Max Weber on the Press

This is an excerpt from a lecture Max Weber gave back between the Great Wars entitled "Politics as a Vocation."

In this lecture, he is generally talking about the role of professional politicians, the civil bureaucrats that serve them, and the style and character of the rulers themselves. After the following critical digression about the slop that "boulevard sheets" deem it fit to present to us, he remarkably still has some praise for (some) journalists. Indeed, were he to give this lecture today, he might even be referring to some of the better bloggers.

Thus far, however, our great capitalist newspaper concerns, which attained control, especially over the 'chain newspapers,' with 'want ads,' have been regularly and typically the breeders of political indifference. For no profits could be made in an independent policy; especially no profitable benevolence of the politically dominant powers could be obtained.

The advertising business is also the avenue along which, during [World War I], the attempt was made to influence the press politically in a grand style--an attempt which apparently it is regarded as desirable to continue now. Although one may expect the great papers to escape this pressure, the situation of the small ones will be far more difficult.

In any case, for the time being, the journalist career is not among us, a normal avenue for the ascent of political leaders, whatever attraction journalism may otherwise have and whatever measure of influence, range of activity, and especially political responsibility it may yield. One has to wait and see. Perhaps journalism does not have this function any longer, or perhaps journalism does not yet have it.

Whether the renunciation of the principle of anonymity would mean a change in this is difficult to say. Some journalists--not all--believe in dropping principled anonymity.

What we have experienced during the war in the German press, and in the 'management' of newspapers by especially hired personages and talented writers who always expressly figured under their names, has unfortunately shown, in some of the better known cases, that an increased awareness of responsibility is not so certain to be bred as might be believed.

Some of the papers were, without regard to party, precisely the notoriously worst boulevard sheets; by dropping anonymity they strove for and attained greater sales. The publishers as well as the journalists of sensationalism have gained fortunes but certainly not honor.

Nothing is here being said against the principle of promoting sales; the question is indeed an intricate one, and the phenomenon of irresponsible sensationalism does not hold in general. But thus far, sensationalism has not been the road to genuine leadership or to the responsible management of politics. How conditions will further develop remains to be seen.

Yet the journalist career remains under all circumstances one of the most important avenues of professional political activity. It is not a road for everybody, least of all for weak characters, especially for people who can maintain their inner balance only with a secure status position. [In this regard, Ted Koppel and his "fast cars" springs to mind.]

If the life of a young scholar is a gamble, still he is walled in by firm status conventions, which prevent him from slipping. But the journalist's life is an absolute gamble in every respect and under conditions that test one's inner security in a way that scarcely occurs in any other situation. The often bitter experiences in occupational life are perhaps not even the worst. The inner demands that are directed precisely at the successful journalist are especially difficult. It is, indeed, no small matter to frequent the salons of the powerful on this earth on a seemingly equal footing and often to be flattered by all because one is feared, yet knowing all the time that having hardly closed the door the host has perhaps to justify before his guests his association with the 'scavengers from the press.'

Moreover, it is no small matter that one must express oneself promptly and convincingly about this and that, on all conceivable problems of life--whatever the 'market' happens to demand--and this without becoming absolutely shallow and above all without losing one's dignity by baring oneself, a thing which has merciless results.

It is not astonishing that there are many journalists who have become human failures and worthless men. Rather, it is astonishing that, despite all this, this very stratum includes such a great number of valuable and quite genuine men, a fact that outsiders would not so easily guess.

Monday, June 29, 2009

The Real Struggle in Iran

Protesters in Tehran: Several hundred thousand government opponents took
to the streets of the Iranian capital. Photo: Der Speigel

The Real Struggle in Iran and Implications for U.S. Dialogue

By George Friedman

Speaking of the situation in Iran, U.S. President Barack Obama said June 26, “We don’t yet know how any potential dialogue will have been affected until we see what has happened inside of Iran.” On the surface that is a strange statement, since we know that with minor exceptions, the demonstrations in Tehran lost steam after Iranian Supreme Leader Ayatollah Ali Khamenei called for them to end and security forces asserted themselves. By the conventional wisdom, events in Iran represent an oppressive regime crushing a popular rising. If so, it is odd that the U.S. president would raise the question of what has happened in Iran.

In reality, Obama’s point is well taken. This is because the real struggle in Iran has not yet been settled, nor was it ever about the liberalization of the regime. Rather, it has been about the role of the clergy — particularly the old-guard clergy — in Iranian life, and the future of particular personalities among this clergy.

Ahmadinejad Against the Clerical Elite

Iranian President Mahmoud Ahmadinejad ran his re-election campaign against the old clerical elite, charging them with corruption, luxurious living and running the state for their own benefit rather than that of the people. He particularly targeted Ali Akbar Hashemi Rafsanjani, an extremely senior leader, and his family. Indeed, during the demonstrations, Rafsanjani’s daughter and four other relatives were arrested, held and then released a day later.

Rafsanjani represents the class of clergy that came to power in 1979. He served as president from 1989-1997, but Ahmadinejad defeated him in 2005. Rafsanjani carries enormous clout within the system as head of the regime’s two most powerful institutions — the Expediency Council, which arbitrates between the Guardian Council and parliament, and the Assembly of Experts, whose powers include oversight of the supreme leader. Forbes has called him one of the wealthiest men in the world. Rafsanjani, in other words, remains at the heart of the post-1979 Iranian establishment.

Ahmadinejad expressly ran his recent presidential campaign against Rafsanjani, using the latter’s family’s vast wealth to discredit Rafsanjani along with many of the senior clerics who dominate the Iranian political scene. It was not the regime as such that he opposed, but the individuals who currently dominate it. Ahmadinejad wants to retain the regime, but he wants to repopulate the leadership councils with clerics who share his populist values and want to revive the ascetic foundations of the regime. The Iranian president constantly contrasts his own modest lifestyle with the opulence of the current religious leadership.

Recognizing the threat Ahmadinejad represented to him personally and to the clerical class he belongs to, Rafsanjani fired back at Ahmadinejad, accusing him of having wrecked the economy. At his side were other powerful members of the regime, including Majlis Speaker Ali Larijani, who has made no secret of his antipathy toward Ahmadinejad and whose family links to the Shiite holy city of Qom give him substantial leverage. The underlying issue was about the kind of people who ought to be leading the clerical establishment. The battlefield was economic: Ahmadinejad’s charges of financial corruption versus charges of economic mismanagement leveled by Rafsanjani and others.

When Ahmadinejad defeated Mir Hossein Mousavi on the night of the election, the clerical elite saw themselves in serious danger. The margin of victory Ahmadinejad claimed might have given him the political clout to challenge their position. Mousavi immediately claimed fraud, and Rafsanjani backed him up. Whatever the motives of those in the streets, the real action was a knife fight between Ahmadinejad and Rafsanjani. By the end of the week, Khamenei decided to end the situation. In essence, he tried to hold things together by ordering the demonstrations to halt while throwing a bone to Rafsanjani and Mousavi by extending a probe into the election irregularities and postponing a partial recount by five days.

The Struggle Within the Regime

The key to understanding the situation in Iran is realizing that the past weeks have seen not an uprising against the regime, but a struggle within the regime. Ahmadinejad is not part of the establishment, but rather has been struggling against it, accusing it of having betrayed the principles of the Islamic Revolution. The post-election unrest in Iran therefore was not a matter of a repressive regime suppressing liberals (as in Prague in 1989), but a struggle between two Islamist factions that are each committed to the regime, but opposed to each other.

The demonstrators certainly included Western-style liberalizing elements, but they also included adherents of senior clerics who wanted to block Ahmadinejad’s re-election. And while Ahmadinejad undoubtedly committed electoral fraud to bulk up his numbers, his ability to commit unlimited fraud was blocked, because very powerful people looking for a chance to bring him down were arrayed against him.

The situation is even more complex because it is not simply a fight between Ahmadinejad and the clerics, but also a fight among the clerical elite regarding perks and privileges — and Ahmadinejad is himself being used within this infighting. The Iranian president’s populism suits the interests of clerics who oppose Rafsanjani; Ahmadinejad is their battering ram. But as Ahmadinejad increases his power, he could turn on his patrons very quickly. In short, the political situation in Iran is extremely volatile, just not for the reason that the media portrayed.

Rafsanjani is an extraordinarily powerful figure in the establishment who clearly sees Ahmadinejad and his faction as a mortal threat. Ahmadinejad’s ability to survive the unified opposition of the clergy, election or not, is not at all certain. But the problem is that there is no unified clergy. The supreme leader is clearly trying to find a new political balance while making it clear that public unrest will not be tolerated. Removing “public unrest” (i.e., demonstrations) from the tool kits of both sides may take away one of Rafsanjani’s more effective tools. But ultimately, it actually could benefit him. Should the internal politics move against the Iranian president, it would be Ahmadinejad — who has a substantial public following — who would not be able to have his supporters take to the streets.

The View From the West

The question for the rest of the world is simple: Does it matter who wins this fight? We would argue that the policy differences between Ahmadinejad and Rafsanjani are minimal and probably would not affect Iran’s foreign relations. This fight simply isn’t about foreign policy.

Rafsanjani has frequently been held up in the West as a pragmatist who opposes Ahmadinejad’s radicalism. Rafsanjani certainly opposes Ahmadinejad and is happy to portray the Iranian president as harmful to Iran, but it is hard to imagine significant shifts in foreign policy if Rafsanjani’s faction came out on top. Khamenei has approved Iran’s foreign policy under Ahmadinejad, and Khamenei works to maintain broad consensus on policies. Ahmadinejad’s policies were vetted by Khamenei and the system that Rafsanjani is part of. It is possible that Rafsanjani secretly harbors different views, but if he does, anyone predicting what these might be is guessing.

Rafsanjani is a pragmatist in the sense that he systematically has accumulated power and wealth. He seems concerned about the Iranian economy, which is reasonable because he owns a lot of it. Ahmadinejad’s entire charge against him is that Rafsanjani is only interested in his own economic well-being. These political charges notwithstanding, Rafsanjani was part of the 1979 revolution, as were Ahmadinejad and the rest of the political and clerical elite. It would be a massive mistake to think that any leadership elements have abandoned those principles.

When the West looks at Iran, two concerns are expressed. The first relates to the Iranian nuclear program, and the second relates to Iran’s support for terrorists, particularly Hezbollah. Neither Iranian faction is liable to abandon either, because both make geopolitical sense for Iran and give it regional leverage.

Tehran’s primary concern is regime survival, and this has two elements. The first is deterring an attack on Iran, while the second is extending Iran’s reach so that such an attack could be countered. There are U.S. troops on both sides of the Islamic Republic, and the United States has expressed hostility to the regime. The Iranians are envisioning a worst-case scenario, assuming the worst possible U.S. intentions, and this will remain true no matter who runs the government.

We do not believe that Iran is close to obtaining a nuclear weapon, a point we have made frequently. Iran understands that the actual acquisition of a nuclear weapon would lead to immediate U.S. or Israeli attacks. Accordingly, Iran’s ideal position is to be seen as developing nuclear weapons, but not close to having them. This gives Tehran a platform for bargaining without triggering Iran’s destruction, a task at which it has proved sure-footed.

In addition, Iran has maintained capabilities in Iraq and Lebanon. Should the United States or Israel attack, Iran would thus be able to counter by doing everything possible destabilize Iraq — bogging down U.S. forces there — while simultaneously using Hezbollah’s global reach to carry out terror attacks. After all, Hezbollah is today’s al Qaeda on steroids. The radical Shiite group’s ability, coupled with that of Iranian intelligence, is substantial.

We see no likelihood that any Iranian government would abandon this two-pronged strategy without substantial guarantees and concessions from the West. Those would have to include guarantees of noninterference in Iranian affairs. Obama, of course, has been aware of this bedrock condition, which is why he went out of his way before the election to assure Khamenei in a letter that the United States had no intention of interfering.

Though Iran did not hesitate to lash out at CNN’s coverage of the protests, the Iranians know that the U.S. government doesn’t control CNN’s coverage. But Tehran takes a slightly different view of the BBC. The Iranians saw the depiction of the demonstrations as a democratic uprising against a repressive regime as a deliberate attempt by British state-run media to inflame the situation. This allowed the Iranians to vigorously blame some foreigner for the unrest without making the United States the primary villain.

But these minor atmospherics aside, we would make three points. First, there was no democratic uprising of any significance in Iran. Second, there is a major political crisis within the Iranian political elite, the outcome of which probably tilts toward Ahmadinejad but remains uncertain. Third, there will be no change in the substance of Iran’s foreign policy, regardless of the outcome of this fight. The fantasy of a democratic revolution overthrowing the Islamic Republic — and thus solving everyone’s foreign policy problems a la the 1991 Soviet collapse — has passed.

That means that Obama, as the primary player in Iranian foreign affairs, must now define an Iran policy — particularly given Israeli Defense Minister Ehud Barak’s meeting in Washington with U.S. Middle East envoy George Mitchell this Monday. Obama has said that nothing that has happened in Iran makes dialogue impossible, but opening dialogue is easier said than done. The Republicans consistently have opposed an opening to Iran; now they are joined by Democrats, who oppose dialogue with nations they regard as human rights violators. Obama still has room for maneuver, but it is not clear where he thinks he is maneuvering. The Iranians have consistently rejected dialogue if it involves any preconditions. But given the events of the past weeks, and the perceptions about them that have now been locked into the public mind, Obama isn’t going to be able to make many concessions.

It would appear to us that in this, as in many other things, Obama will be following the Bush strategy — namely, criticizing Iran without actually doing anything about it. And so he goes to Moscow more aware than ever that Russia could cause the United States a great deal of pain if it proceeded with weapons transfers to Iran, a country locked in a political crisis and unlikely to emerge from it in a pleasant state of mind.

This article is reprinted by permission from Stratfor.

Thursday, June 25, 2009

Citigroup pulls another fast one

In a bid to maintain the title, "Masters of the Universe," Citigroup Inc. is increasing the base salaries of many of its employees - reportedly by as much as 50 percent for some workers - as it raises the stakes in the game of financial chicken with the Obama administration.

Taking a bead on the center stripe of the financial two-lane blacktop, "[t]he Obama administration reacted by pledging to aggressively implement a new law governing compensation at companies like Citigroup that have received billions of dollars in taxpayer-funded bailout support." according to the AP via Yahoo News.

Anybody want to dispute that those banksters aren't indeed the "best and the brightest"?

Monday, June 15, 2009

Iran: Democracy In Action

Democracy in action: Mahmoud Ahmadinejad has been decisively re-elected to the Iran presidency. The West's liberal chauvinism and cultural illiteracy has prevented so-called "experts" from accepting the reality on the ground; the Shi'ite theocracy is approved of by the majority of Iranians, despite the neo-liberal American fantasy that "democracy' equates to the American Way.

Western Misconceptions Meet Iranian Reality

June 15, 2009

By George Friedman

In 1979, when we were still young and starry-eyed, a revolution took place in Iran. When I asked experts what would happen, they divided into two camps.

The first group of Iran experts argued that the Shah of Iran would certainly survive, that the unrest was simply a cyclical event readily manageable by his security, and that the Iranian people were united behind the Iranian monarch’s modernization program. These experts developed this view by talking to the same Iranian officials and businessmen they had been talking to for years — Iranians who had grown wealthy and powerful under the shah and who spoke English, since Iran experts frequently didn’t speak Farsi all that well.

The second group of Iran experts regarded the shah as a repressive brute, and saw the revolution as aimed at liberalizing the country. Their sources were the professionals and academics who supported the uprising — Iranians who knew what former Supreme Leader Ayatollah Ruholla Khomeini believed, but didn’t think he had much popular support. They thought the revolution would result in an increase in human rights and liberty. The experts in this group spoke even less Farsi than the those in the first group.

Misreading Sentiment in Iran

Limited to information on Iran from English-speaking opponents of the regime, both groups of Iran experts got a very misleading vision of where the revolution was heading — because the Iranian revolution was not brought about by the people who spoke English. It was made by merchants in city bazaars, by rural peasants, by the clergy — people Americans didn’t speak to because they couldn’t. This demographic was unsure of the virtues of modernization and not at all clear on the virtues of liberalism. From the time they were born, its members knew the virtue of Islam, and that the Iranian state must be an Islamic state.

Americans and Europeans have been misreading Iran for 30 years. Even after the shah fell, the myth has survived that a mass movement of people exists demanding liberalization — a movement that if encouraged by the West eventually would form a majority and rule the country. We call this outlook “iPod liberalism,” the idea that anyone who listens to rock ‘n’ roll on an iPod, writes blogs and knows what it means to Twitter must be an enthusiastic supporter of Western liberalism. Even more significantly, this outlook fails to recognize that iPod owners represent a small minority in Iran — a country that is poor, pious and content on the whole with the revolution forged 30 years ago.

There are undoubtedly people who want to liberalize the Iranian regime. They are to be found among the professional classes in Tehran, as well as among students. Many speak English, making them accessible to the touring journalists, diplomats and intelligence people who pass through. They are the ones who can speak to Westerners, and they are the ones willing to speak to Westerners. And these people give Westerners a wildly distorted view of Iran. They can create the impression that a fantastic liberalization is at hand — but not when you realize that iPod-owning Anglophones are not exactly the majority in Iran.

Last Friday, Iranian President Mahmoud Ahmadinejad was re-elected with about two-thirds of the vote. Supporters of his opponent, both inside and outside Iran, were stunned. A poll revealed that former Iranian Prime Minister Mir Hossein Mousavi was beating Ahmadinejad. It is, of course, interesting to meditate on how you could conduct a poll in a country where phones are not universal, and making a call once you have found a phone can be a trial. A poll therefore would probably reach people who had phones and lived in Tehran and other urban areas. Among those, Mousavi probably did win. But outside Tehran, and beyond persons easy to poll, the numbers turned out quite different.

Some still charge that Ahmadinejad cheated. That is certainly a possibility, but it is difficult to see how he could have stolen the election by such a large margin. Doing so would have required the involvement of an incredible number of people, and would have risked creating numbers that quite plainly did not jibe with sentiment in each precinct. Widespread fraud would mean that Ahmadinejad manufactured numbers in Tehran without any regard for the vote. But he has many powerful enemies who would quickly have spotted this and would have called him on it. Mousavi still insists he was robbed, and we must remain open to the possibility that he was, although it is hard to see the mechanics of this.

Ahmadinejad’s Popularity

It also misses a crucial point: Ahmadinejad enjoys widespread popularity. He doesn’t speak to the issues that matter to the urban professionals, namely, the economy and liberalization. But Ahmadinejad speaks to three fundamental issues that accord with the rest of the country.

First, Ahmadinejad speaks of piety. Among vast swathes of Iranian society, the willingness to speak unaffectedly about religion is crucial. Though it may be difficult for Americans and Europeans to believe, there are people in the world to whom economic progress is not of the essence; people who want to maintain their communities as they are and live the way their grandparents lived. These are people who see modernization — whether from the shah or Mousavi — as unattractive. They forgive Ahmadinejad his economic failures.

Second, Ahmadinejad speaks of corruption. There is a sense in the countryside that the ayatollahs — who enjoy enormous wealth and power, and often have lifestyles that reflect this — have corrupted the Islamic Revolution. Ahmadinejad is disliked by many of the religious elite precisely because he has systematically raised the corruption issue, which resonates in the countryside.

Third, Ahmadinejad is a spokesman for Iranian national security, a tremendously popular stance. It must always be remembered that Iran fought a war with Iraq in the 1980s that lasted eight years, cost untold lives and suffering, and effectively ended in its defeat. Iranians, particularly the poor, experienced this war on an intimate level. They fought in the war, and lost husbands and sons in it. As in other countries, memories of a lost war don’t necessarily delegitimize the regime. Rather, they can generate hopes for a resurgent Iran, thus validating the sacrifices made in that war — something Ahmadinejad taps into. By arguing that Iran should not back down but become a major power, he speaks to the veterans and their families, who want something positive to emerge from all their sacrifices in the war.

Perhaps the greatest factor in Ahmadinejad’s favor is that Mousavi spoke for the better districts of Tehran — something akin to running a U.S. presidential election as a spokesman for Georgetown and the Lower East Side. Such a base will get you hammered, and Mousavi got hammered. Fraud or not, Ahmadinejad won and he won significantly. That he won is not the mystery; the mystery is why others thought he wouldn’t win.

For a time on Friday, it seemed that Mousavi might be able to call for an uprising in Tehran. But the moment passed when Ahmadinejad’s security forces on motorcycles intervened. And that leaves the West with its worst-case scenario: a democratically elected anti-liberal.

Western democracies assume that publics will elect liberals who will protect their rights. In reality, it’s a more complicated world. Hitler is the classic example of someone who came to power constitutionally, and then preceded to gut the constitution. Similarly, Ahmadinejad’s victory is a triumph of both democracy and repression.

The Road Ahead: More of the Same

The question now is what will happen next. Internally, we can expect Ahmadinejad to consolidate his position under the cover of anti-corruption. He wants to clean up the ayatollahs, many of whom are his enemies. He will need the support of Iranian Supreme Leader Ayatollah Ali Khamenei. This election has made Ahmadinejad a powerful president, perhaps the most powerful in Iran since the revolution. Ahmadinejad does not want to challenge Khamenei, and we suspect that Khamenei will not want to challenge Ahmadinejad. A forced marriage is emerging, one which may place many other religious leaders in a difficult position.

Certainly, hopes that a new political leadership would cut back on Iran’s nuclear program have been dashed. The champion of that program has won, in part because he championed the program. We still see Iran as far from developing a deliverable nuclear weapon, but certainly the Obama administration’s hopes that Ahmadinejad would either be replaced — or at least weakened and forced to be more conciliatory — have been crushed. Interestingly, Ahmadinejad sent congratulations to U.S. President Barack Obama on his inauguration. We would expect Obama to reciprocate under his opening policy, which U.S. Vice President Joe Biden appears to have affirmed, assuming he was speaking for Obama. Once the vote fraud issue settles, we will have a better idea of whether Obama’s policies will continue. (We expect they will.)

What we have now are two presidents in a politically secure position, something that normally forms a basis for negotiations. The problem is that it is not clear what the Iranians are prepared to negotiate on, nor is it clear what the Americans are prepared to give the Iranians to induce them to negotiate. Iran wants greater influence in Iraq and its role as a regional leader acknowledged, something the United States doesn’t want to give them. The United States wants an end to the Iranian nuclear program, which Iran doesn’t want to give.

On the surface, this would seem to open the door for an attack on Iran’s nuclear facilities. Former U.S. President George W. Bush did not — and Obama does not — have any appetite for such an attack. Both presidents blocked the Israelis from attacking, assuming the Israelis ever actually wanted to attack.

For the moment, the election appears to have frozen the status quo in place. Neither the United States nor Iran seem prepared to move significantly, and there are no third parties that want to get involved in the issue beyond the occasional European diplomatic mission or Russian threat to sell something to Iran. In the end, this shows what we have long known: This game is locked in place, and goes on.

Reprinted, with permission, from Stratfor.

Related: Iran elections 2009: Thousands rally for Mahmoud Ahmadinejad

Thursday, May 07, 2009

Internet an awesome threat - Jay Rockefeller

The oligarchy is getting restless again. Now they're worried (and justly so: email spam is evil incarnate) about the internet. Although, if you've been reading about ISPs such as AT&T capping internet usage by overcharging their customers for what is essentially a public utility, the following should come as no surprise.

Tuesday, April 07, 2009

Obama's Strategy and the Summits

Obama in Europe / File Photo: Getty

By George Friedman

The weeklong extravaganza of G-20, NATO, EU, U.S. and Turkey meetings has almost ended. The spin emerging from the meetings, echoed in most of the media, sought to portray the meetings as a success and as reflecting a re-emergence of trans-Atlantic unity.

The reality, however, is that the meetings ended in apparent unity because the United States accepted European unwillingness to compromise on key issues. U.S. President Barack Obama wanted the week to appear successful, and therefore backed off on key issues; the Europeans did the same. Moreover, Obama appears to have set a process in motion that bypasses Europe to focus on his last stop: Turkey.

Berlin, Washington and the G-20

Let’s begin with the G-20 meeting, which focused on the global financial crisis. As we said last year, there were many European positions, but the United States was reacting to Germany’s. Not only is Germany the largest economy in Europe, it is the largest exporter in the world. Any agreement that did not include Germany would be useless, whereas an agreement excluding the rest of Europe but including Germany would still be useful.

Two fundamental issues divided the United States and Germany. The first was whether Germany would match or come close to the U.S. stimulus package. The United States wanted Germany to stimulate its own domestic demand. Obama feared that if the United States put a stimulus plan into place, Germany would use increased demand in the U.S. market to expand its exports. The United States would wind up with massive deficits while the Germans took advantage of U.S. spending, thus letting Berlin enjoy the best of both worlds. Washington felt it had to stimulate its economy, and that this would inevitably benefit the rest of the world. But Washington wanted burden sharing. Berlin, quite rationally, did not. Even before the meetings, the United States dropped the demand — Germany was not going to cooperate.

The second issue was the financing of the bailout of the Central European banking system, heavily controlled by eurozone banks and part of the EU financial system. The Germans did not want an EU effort to bail out the banks. They wanted the International Monetary Fund (IMF) to bail out a substantial part of the EU financial system instead. The reason was simple: The IMF receives loans from the United States, as well as China and Japan, meaning the Europeans would be joined by others in underwriting the bailout. The United States has signaled it would be willing to contribute $100 billion to the IMF, of which a substantial portion would go to Central Europe. (Of the current loans given by the IMF, roughly 80 percent have gone to the struggling economies in Central Europe.) The United States therefore essentially has agreed to the German position.

Later at the NATO meeting, the Europeans — including Germany — declined to send substantial forces to Afghanistan. Instead, they designated a token force of 5,000, most of whom are scheduled to be in Afghanistan only until the August elections there, and few of whom actually would be engaged in combat operations. This is far below what Obama had been hoping for when he began his presidency.

Agreement was reached on collaboration in detecting international tax fraud and on further collaboration in managing the international crisis, however. But what that means remains extremely vague — as it was meant to be, since there was no consensus on what was to be done. In fact, the actual guidelines will still have to be hashed out at the G-20 finance ministers’ meeting in Scotland in November. Intriguingly, after insisting on the creation of a global regulatory regime — and with the vague U.S. assent — the European Union failed to agree on European regulations. In a meeting in Prague on April 4, the United Kingdom rejected the regulatory regime being proposed by Germany and France, saying it would leave the British banking system at a disadvantage.

Overall, the G-20 and the NATO meetings did not produce significant breakthroughs. Rather than pushing hard on issues or trading concessions — such as accepting Germany’s unwillingness to increase its stimulus package in return for more troops in Afghanistan — the United States failed to press or bargain. It preferred to appear as part of a consensus rather than appear isolated. The United States systematically avoided any appearance of disagreement.

The reason there was no bargaining was fairly simple: The Germans were not prepared to bargain. They came to the meetings with prepared positions, and the United States had no levers with which to move them. The only option was to withhold funding for the IMF, and that would have been a political disaster (not to mention economically rather unwise). The United States would have been seen as unwilling to participate in multilateral solutions rather than Germany being seen as trying to foist its economic problems on others. Obama has positioned himself as a multilateralist and can’t afford the political consequences of deviating from this perception. Contributing to the IMF, in these days of trillion-dollar bailouts, was the lower-cost alternative. Thus, the Germans have the U.S. boxed in.

The political aspect of this should not be underestimated. George W. Bush had extremely bad relations with the Europeans (in large part because he was prepared to confront them). This was Obama’s first major international foray, and he could not let it end in acrimony or wind up being seen as unable to move the Europeans after running a campaign based on his ability to manage the Western coalition. It was important that he come home having reached consensus with the Europeans. Backing off on key economic and military demands gave him that “consensus.”

Turkey and Obama’s Deeper Game

But it was not simply a matter of domestic politics. It is becoming clear that Obama is playing a deeper game. A couple of weeks before the meetings, when it had become obvious that the Europeans were not going to bend on the issues that concerned the United States, Obama scheduled a trip to Turkey. During the EU meetings in Prague, Obama vigorously supported the Turkish application for EU membership, which several members are blocking on grounds of concerns over human rights and the role of the military in Turkey. But the real reason is that full membership would open European borders to Turkish migration, and the Europeans do not want free Turkish migration. The United States directly confronted the Europeans on this matter.

During the NATO meeting, a key item on the agenda was the selection of a new alliance secretary-general. The favorite was former Danish Prime Minister Anders Fogh Rasmussen. Turkey opposed his candidacy because of his defense on grounds of free speech of cartoons depicting the Prophet Mohammed published in a Danish magazine. NATO operates on consensus, so any one member can block just about anything. The Turks backed off the veto, but won two key positions in NATO, including that of deputy secretary-general.

So while the Germans won their way at the meetings, it was the Turks who came back with the most. Not only did they boost their standing in NATO, they got Obama to come to a vigorous defense of the Turkish application for membership in the European Union, which of course the United States does not belong to. Obama then flew to Turkey for meetings and to attend a key international meeting that will allow him to further position the United States in relation to Islam.

The Russian Dimension

Let’s diverge to another dimension of these talks, which still concerns Turkey, but also concerns the Russians. While atmospherics after the last week’s meetings might have improved, there was certainly no fundamental shift in U.S.-Russian relations. The Russians have rejected the idea of pressuring Iran over its nuclear program in return for the United States abandoning its planned ballistic missile defense system in Poland and the Czech Republic. The United States simultaneously downplayed the importance of a Russian route to Afghanistan. Washington said there were sufficient supplies in Afghanistan and enough security on the Pakistani route such that the Russians weren’t essential for supplying Western operations in Afghanistan. At the same time, the United States reached an agreement with Ukraine for the transshipment of supplies — a mostly symbolic gesture, but one guaranteed to infuriate the Russians at both the United States and Ukraine. Moreover, the NATO communique did not abandon the idea of Ukraine and Georgia being admitted to NATO, although the German position on unspecified delays to such membership was there as well. When Obama looks at the chessboard, the key emerging challenge remains Russia.

The Germans are not going to be joining the United States in blocking Russia. Between dependence on Russia for energy supplies and little appetite for confronting a Russia that Berlin sees as no real immediate threat to Germany, the Germans are not going to address the Russian question. At the same time, the United States does not want to push the Germans toward Russia, particularly in confrontations ultimately of secondary importance and on which Germany has no give anyway. Obama is aware that the German left is viscerally anti-American, while Merkel is only pragmatically anti-American — a small distinction, but significant enough for Washington not to press Berlin.

At the same time, an extremely important event between Turkey and Armenia looks to be on the horizon. Armenians had long held Turkey responsible for the mass murder of Armenians during and after World War I, a charge the Turks have denied. The U.S. Congress for several years has threatened to pass a resolution condemning Turkish genocide against Armenians. The Turks are extraordinarily sensitive to this charge, and passage would have meant a break with the United States. Last week, they publicly began to discuss an agreement with the Armenians, including diplomatic recognition, which essentially disarms the danger from any U.S. resolution on genocide. Although an actual agreement hasn’t been signed just yet, anticipation is building on all sides.

The Turkish opening to Armenia has potentially significant implications for the balance of power in the Caucasus. The August 2008 Russo-Georgian war created an unstable situation in an area of vital importance to Russia. Russian troops remain deployed, and NATO has called for their withdrawal from the breakaway Georgian regions of South Ossetia and Abkhazia. There are Russian troops in Armenia, meaning Russia has Georgia surrounded. In addition, there is talk of an alternative natural gas pipeline network from Azerbaijan to Europe.

Turkey is the key to all of this. If Ankara collaborates with Russia, Georgia’s position is precarious and Azerbaijan’s route to Europe is blocked. If it cooperates with the United States and also manages to reach a stable treaty with Armenia under U.S. auspices, the Russian position in the Caucasus is weakened and an alternative route for natural gas to Europe opens up, decreasing Russian leverage against Europe.

From the American point of view, Europe is a lost cause since internally it cannot find a common position and its heavyweights are bound by their relationship with Russia. It cannot agree on economic policy, nor do its economic interests coincide with those of the United States, at least insofar as Germany is concerned. As far as Russia is concerned, Germany and Europe are locked in by their dependence on Russian natural gas. The U.S.-European relationship thus is torn apart not by personalities, but by fundamental economic and military realities. No amount of talking will solve that problem.

The key to sustaining the U.S.-German alliance is reducing Germany’s dependence on Russian natural gas and putting Russia on the defensive rather than the offensive. The key to that now is Turkey, since it is one of the only routes energy from new sources can cross to get to Europe from the Middle East, Central Asia or the Caucasus. If Turkey — which has deep influence in the Caucasus, Central Asia, Ukraine, the Middle East and the Balkans — is prepared to ally with the United States, Russia is on the defensive and a long-term solution to Germany’s energy problem can be found. On the other hand, if Turkey decides to take a defensive position and moves to cooperate with Russia instead, Russia retains the initiative and Germany is locked into Russian-controlled energy for a generation.

Therefore, having sat through fruitless meetings with the Europeans, Obama chose not to cause a pointless confrontation with a Europe that is out of options. Instead, Obama completed his trip by going to Turkey to discuss what the treaty with Armenia means and to try to convince the Turks to play for high stakes by challenging Russia in the Caucasus, rather than playing Russia’s junior partner.

This is why Obama’s most important speech in Europe was his last one, following Turkey’s emergence as a major player in NATO’s political structure. In that speech, he sided with the Turks against Europe, and extracted some minor concessions from the Europeans on the process for considering Turkey’s accession to the European Union. Why Turkey wants to be an EU member is not always obvious to us, but they do want membership. Obama is trying to show the Turks that he can deliver for them. He reiterated — if not laid it on even more heavily — all of this in his speech in Ankara. Obama laid out the U.S. position as one that recognized the tough geopolitical position Turkey is in and the leader that Turkey is becoming, and also recognized the commonalities between Washington and Ankara. This was exactly what Turkey wanted to hear.

The Caucasus is far from the only area to discuss. Talks will be held about blocking Iran in Iraq, U.S. relations with Syria and Syrian talks with Israel, and Central Asia, where both countries have interests. But the most important message to the Europeans will be that Europe is where you go for photo opportunities, but Turkey is where you go to do the business of geopolitics. It is unlikely that the Germans and French will get it. Their sense of what is happening in the world is utterly Eurocentric. But the Central Europeans, on the frontier with Russia and feeling quite put out by the German position on their banks, certainly do get it.

Obama gave the Europeans a pass for political reasons, and because arguing with the Europeans simply won’t yield benefits. But the key to the trip is what he gets out of Turkey — and whether in his speech to the civilizations, he can draw some of the venom out of the Islamic world by showing alignment with the largest economy among Muslim states, Turkey.

This article is reposted here with the permission of Stratfor.

Wednesday, March 18, 2009

AIG Bonuses: Here's what happened

New York Attorney General Andrew Cuomo has sent a letter to House Financial Services Committee Chairman Barney Frank sketching out what his office has learned so far about the bonuses paid out to the thieves at AIG who (quote) brought the firm to its knees, forcing a taxpayer bailout.(unquote)

Attorney General
NEW YORK, NY 10271
March 17, 2009
(212) 416-8050

Honorable Barney Frank
Chairman, House Committee on Financial Services
United States House of Representatives
2129 Rayburn House Office Building Washington, DC 20515

Re: AIG 2008 Retention Bonuses

Dear Chairman Frank:

I am writing to provide you and your Committee with information regarding an ongoing investigation my Office has been conducting of executive compensation at American International Group (“AIG”). I hope this information will be useful to the Committee at its hearing on AIG tomorrow.

We learned over the weekend that AIG had, last Friday, distributed more than $160 million in retention payments to members of its Financial Products Subsidiary, the unit of AIG that was principally responsible for the firm’s meltdown. Last October, AIG agreed to my Office’s demand that no payments be made out of its $600 million Financial Products deferred compensation pool. While this was a positive step, we were dismayed to learn after the fact that AIG had made multi-million dollar payments out of its separate Financial Products retention plan on Friday.

AIG now claims that it had no choice but to pay these sums because of the unalterable terms of the plan. However, had the federal government not bailed out AIG with billions in taxpayer funds, the firm likely would have gone bankrupt, and surely no payments would have been made out of the plan. My Office has reviewed the legal opinion that AIG obtained from its own counsel, and it is not at all clear that these lawyers even considered the argument that it is only by the grace of American taxpayers that members of Financial Products even have jobs, let alone a pool of retention bonus money. I hope the Committee will take up this issue at its hearing tomorrow.

Furthermore, we know that AIG was able to bargain with its Financial Products employees since these employees have agreed to take salaries of $1 for 2009 in exchange for receiving their retention bonus packages. The fact that AIG engaged in this negotiation flies in the face of AIG’s assertion that it had no choice but to make these lavish multi-million dollar bonus payments. It appears that AIG had far more leverage than they now claim.

AIG also claims that retention of individuals at Financial Products was vital to unwinding the subsidiary’s business. However, to date, AIG has been unwilling to disclose the names of those who received these retention payments making it impossible to test their claim. Moreover, as detailed below, numerous individuals who received large “retention” bonuses are no longer at the firm. Until we obtain the names of these individuals, it is impossible to determine when and why they left the firm and how it is that they received these payments.

If AIG were confident in its claim that those who received these large bonuses were so vital to the orderly unwinding of the unit, one would expect them to freely provide the names and positions of those who got these bonuses. My Office will continue to seek an explanation for why each one of these individuals was so crucial to keep aboard that they were paid handsomely despite the unit’s disastrous performance.

As you may know, my Office yesterday subpoenaed AIG for the names of those who received these bonuses, and we plan to do everything necessary to enforce compliance. American taxpayers deserve to know where their money is going, and AIG’s intransigence and desire to obscure who received these payments should not be tolerated. Already my Office has determined that some of these bonuses were staggering in size. For example:

  • The top recipient received more than $6.4 million;
  • The top seven bonus recipients received more than $4 million each
  • The top ten bonus recipients received a combined $42 million;
  • 22 individuals received bonuses of $2 million or more, and combined they received more than $72 million;
  • 73 individuals received bonuses of $1 million or more; and
  • Eleven of the individuals who received “retention” bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million;

Again, these payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG. Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout. Something is deeply wrong with this outcome. I hope the Committee will address it head on.
We have also now obtained the contracts under which AIG decided to make these payments. The contracts shockingly contain a provision that required most individuals’ bonuses to be 100% of their 2007 bonuses. Thus, in the Spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before. My Office has thus begun to closely examine the circumstances under which the plan was created.

I look forward to continuing to cooperate with the Committee in any way possible to ensure that taxpayer funds are not misspent on unjustified bonuses or otherwise misused.

Andrew M. Cuomo, Attorney General of the State of New York

Sunday, March 15, 2009

Pakistan: A Bogus Threat

US soldiers with Alpha Company, 32nd Infantry Regiment walk in a line during a patrol at Mullagora village, close to the border with Pakistan in Kunar Province, February 24, 2009. Photo/REUTERS US soldiers with Alpha Company, 32nd Infantry Regiment walk in a line during a patrol
at Mullagora village, close to the border with Pakistan in Kunar
Province, February 24, 2009. Photo/REUTERS

By Scott Stewart and Kamran Bokhari

On March 5, the Saudi Embassy in Islamabad reportedly received threatening e-mails warning of attacks on Saudi interests in Pakistan. According to English-language Pakistani newspaper The Nation, the e-mails purportedly were sent by al Qaeda and threatened attacks on targets such as the Saudi Embassy and Saudi airline facilities in Pakistan.

When we heard the reports of this threat, our initial reaction was to dismiss it. While al Qaeda has sometimes made vague threats before executing an attack, it does not provide a list of precise targets in advance. Prior to the June 2008 bombing of the Danish Embassy in Islamabad, al Qaeda leaders repeatedly threatened to attack European (and Danish) targets in retaliation for a series of cartoons published in Denmark in 2005 that satirized the Prophet Mohammed. When the issue was reignited in early 2008 with the release of a film critical of Islam called “Fitna,” by Dutch parliamentarian Geert Wilders, Osama bin Laden himself issued a statement in March 2008 in which he threatened strikes against European targets in retaliation. However, in all of these threats, al Qaeda never specified that it was going to strike the Danish Embassy in Islamabad. In addition to being out of character for al Qaeda, it is foolish to issue such a specific threat if one really wants to strike a target.

While we were able to discount the most recent e-mail threat reportedly sent to the Saudi Embassy in Islamabad, it generated a robust discussion among our analytical staff about Saudi counterterrorism and anti-jihadist activities in Pakistan and Afghanistan, the large number of threatening statements senior al Qaeda members have made against the Saudis and the very real possibility of an attack against Saudi interests in Pakistan.

Threats Against the Saudis

Beginning with some of bin Laden’s early public writings, such as his August 1996 “Declaration of War against the Americans Occupying the Land of the Two Holy Places,” al Qaeda leaders have spoken harshly against the Saudi royal family. Bin Laden and others have accused the Saudis of collaboration with the “Zionist-Crusaders alliance” that bin Laden claimed was using military force to impose “iniquity and injustice” on the people of Islam.

However, the verbal threats directed against the Saudi royal family have escalated in recent years in the wake of a string of attacks launched inside Saudi Arabia by the Saudi al Qaeda franchise in 2003 and 2004, and as the Saudi government has conducted an aggressive campaign to crush the Saudi franchise and combat the wider phenomenon of jihadism.

In fact, it is rare to see any statement from a senior al Qaeda leader that does not condemn the Saudi government specifically or in more general terms. In a July 28, 2008, video message, al Qaeda ideologue Abu Yahya al-Libi called on Muslims to act quickly and decisively to kill the Saudi king, reminding them that “killing this reckless tyrant, who has declared himself the chief imam of atheism, will be one of the greatest qurubat” (an act of devotion bringing man closer to God). In a May 2008 message, al-Libi also had urged Saudi clerics to lead uprisings against the Saudi monarchy similar to the July 2007 uprisings at the Red Mosque in Islamabad. Al-Libi never mentioned Saudi King Abdullah by nam e in that message, preferring to call him the “lunatic apostate” because of the king’s call for a dialogue among Islam, Christianity and Judaism. Commenting on this interfaith dialogue in the July 2008 message, al-Libi also said, “By God, if you don’t resist heroically against this wanton tyrant … the day will come when church bells will ring in the heart of the Arabian Peninsula.”

In March 2008, al Qaeda No. 2 Ayman al-Zawahiri said the Saudi monarchy was part of a “satanic alliance” formed by the United States and Israel to blockade the Hamas-controlled Gaza Strip. In a January 2009 message, al-Zawahiri said: “Oh lions of Islam everywhere, the leaders of Muslim countries are the guards of the American-Zionist interests. They are the ones who have given up Palestine and recognized Israel … Abdallah Bin Abd-al-Aziz has invented the interfaith dialogue and met Peres in New York, paving the way for the complete recognition of Israel.” Al-Zawahiri continued, “Thwart the efforts of those traitors by striking the interests of the enemies of Islam.” In a February 2009 audio statement, al-Zawahiri declared, “The Muslim nation must, with all its energy and skills, move to remove these corrupt, corrupting and traitorous rulers.”

After a January 2009 video by jihadists in Yemen announcing the formation of al Qaeda in the Arabian Peninsula, al-Zawahiri proclaimed in a February statement that the new organization “is the awakening, which aims to liberate the Arabian Peninsula from the Crusader invaders and their treacherous agents. It is escalating and flourishing, with God’s help and guidance, despite all the campaigns of repression, misleading, and deception, and despite all the obstacles, difficulties and hindrances.”

Focus on the Saudis

All these threats raise an obvious question: Why is al Qaeda so fixated on the Saudis? One obvious reason is that, since the launching of a disastrous offensive by the Saudi al Qaeda node, the Saudi government — which previously had turned a blind eye to many of al Qaeda’s activities — has launched a full-court press against the organization. Al-Zawahiri acknowledged this in a December 2005 message entitled “Impediments to Jihad,” in which he said the Saudi franchise in the kingdom had been defeated by collaborators. The Saudi offensive against al Qaeda also played a significant part in the Anbar Awakening in Iraq. Saudi cajoling (and money) helped persuade Iraqi tribal leaders to cooperate with the coalition forces.

One way the Saudis have really hurt al Qaeda is by damaging its ability to raise funds. For example, in March 2008, the top Saudi cleric, Grand Mufti Sheikh Abdul-Aziz bin Abdullah al-Sheikh, cautioned Saudis against giving money to charities or organizations that finance “evil groups” who are known for harming Islam and its followers — a clear reference to al Qaeda and other jihadist organizations. We have repeatedly seen appeals for more funds for the jihad, and in a Jan. 14, 2009, message by bin Laden, he noted that the jihadists were under financial “distress” and that it was the duty of the Muslim ummah to support the jihadists “with all their soul and money.”

Perhaps one of the greatest threats the Saudis pose to al Qaeda is the threat to its ideological base. As STRATFOR has long argued, there are two different battlespaces in the war against jihadism — the physical and the ideological. For an ideological organization such as al Qaeda that preaches persecution and martyrdom, losses on the physical battlefield are expected and glorified. The biggest threat to the jihadists, therefore, is not a Hellfire missile being dropped on their heads, but an ideological broadside that undercuts their legitimacy and ideological appeal.

Many Saudi clerics have condemned jihadism as a “deviance from Islam.” Even prominent Saudi clerics who have criticized the Saudi government, such as Salman al-Awdah, have sent open letters to bin Laden condemning violence against innocents and claiming that al Qaeda was hurting Muslim charities through its purported ties to them.

The sting of the ideological attacks is being felt. In a May 2008 speech, al-Libi addressed the ideological assault when he said, “and because they knew that the key to their success in this plan of theirs is to turn the people away from jihad and mujahidin and to eliminate them militarily and intellectually.” Al-Libi recognized that without new recruits and funding, the jihad will wither on the vine.

In addition to financial and ideological threats against the organization, the Saudi assault has also gone after al Qaeda where it lives — in Pakistan.

Deep Connections

Saudi Arabia has long had a strong relationship with Pakistan, based on shared perspectives toward regional and international matters. A key common sphere of influence for the two sides over the past four decades has been Afghanistan. This close Saudi-Pakistani relationship was well-illustrated by the pairing up of Saudi petrodollar wealth with Pakistani logistics (along with U.S. weapons and intelligence) to support the Islamist uprising that followed the Soviet invasion of Afghanistan.

After the Soviet military withdrawal from Afghanistan, the Saudis and the Pakistanis continued to cooperate. Even though the world at large refused to accept the Taliban regime after it took power in 1996, Saudi Arabia, Pakistan and the United Arab Emirates recognized the Taliban as the legitimate rulers of Afghanistan. (These three were the only countries to do so.) However, while enjoying support from Riyadh and Islamabad, the Taliban also established relations with the transnational jihadist forces led by al Qaeda.

The Saudi and Pakistani relationship with the Taliban was shattered by the events of 9/11. In spite of aggressive negotiations with the Taliban, neither the Saudis nor the Pakistanis could convince Mullah Omar to surrender bin Laden and the al Qaeda leadership to the Americans. Because of this, the two countries were forced to end their overt relationship with the Taliban as the Americans invaded Afghanistan, though they obviously have maintained some contact with members of the Taliban leadership.

The U.S. response to 9/11 placed the Saudis and the Pakistanis into a very difficult position, where they were forced to fight jihadists on one hand and try to maintain control and influence over them on the other. As previously discussed, the Saudis possessed the resources to effectively clamp down on the al Qaeda franchise in the kingdom, but Pakistan, which is weaker both financially and politically — and which has become the center of the jihadist universe on the physical battlefield — has been hit much harder by the U.S.-jihadist war.

This situation, along with the ground reality in Afghanistan, has forced the United States to begin working on a political strategy to bring closure to the U.S.-jihadist war that involves negotiating with the Taliban if they part ways with al Qaeda and the transnational jihadists.

Hence the recent visit by Taliban officials to Saudi Arabia and the trips made by Riyadh’s intelligence chief, Prince Muqrin bin Abdel-Aziz, to Pakistan and Afghanistan. The Saudi monarch, King Abdullah, is also rumored to be personally involved behind the scenes in efforts to pressure Taliban leaders to break free from al Qaeda. But as in the past, the Saudis need help from their allies in Islamabad and Rawalpindi, and here is where they are running into problems. A weak and threatened Pakistani state means that before working with the Pakistanis on the Afghan Taliban, Riyadh has to help Pakistan combat its own Taliban problem, which the Saudis currently are attempting. The Saudis obviously have much to offer the Pakistanis, in terms of both cash and experience. They also have the religious cachet that other Pakistan allies, such as the Americans and the British, lack, giving them the ability to broach ideological subjects. However, as is the case with the Afghan Ta liban, the Saudis will have to get the Pakistani Taliban to part ways with al Qaeda and are working hard to drive a wedge between Pakistani militants and their foreign guests.

These efforts to divide the Taliban from the global jihadists are happening not only during the plush, Saudi-sponsored trips for Taliban members to conduct Hajj and Umrah in the kingdom. Following a strategy similar to what they did in Iraq, the Saudis and their agents are meeting with Taliban commanders on the ground in Pakistan and Afghanistan to twist arms and offer cash. They also are coordinating very closely with the Pakistani and Afghan authorities who are leading the campaign against the jihadists. For example, Rehman Malik, the Pakistani adviser to the prime minister on the interior (Pakistan’s de facto terrorism czar), traveled to Saudi Arabia in January at the invitation of Saudi Interior Minister Prince Naif bin Abdul-Aziz to discuss improving counterterrorism cooperation between the two countries. Many of the 85 most-wanted militants on the list recently released by the Saudi government are believed to be in Pakistan, and the Saudis are working with Malik an d the Pakistanis to arrest those militants and return them to Saudi Arabia.

A Clear and Present Danger

Bin Laden, al-Zawahiri, et al., are well aware of these Saudi moves, which they see as a threat to their very existence. When asked in a November 2008 interview what he thought of the Saudi efforts to mediate between Afghan President Hamid Karzai and the Taliban, al-Zawahiri responded that the Saudi efforts pointed out “the historical role of saboteur played by the House of Saud in ruining the causes of the Muslim ummah, and how they represent the agents whom the Crusader West uses to disperse the ummah’s energy.”

The al Qaeda leadership has nowhere to go if circumstances become untenable for them in Pakistan and Afghanistan. Caught between U.S., Pakistani and Saudi forces, the last thing al Qaeda wants is to lose local support from the Taliban. In other words, Pakistan is their final battleground, and any threat to their continued haven in Pakistan poses a clear and present danger to the organization — especially if the Saudis can play a pivotal role in persuading the Taliban in Afghanistan also to turn against them.

Leveraging its successes against the al Qaeda franchises in Saudi Arabia and Iraq, Riyadh also is working closely with governments to combat the jihadists in places like Yemen as well as Pakistan and Afghanistan. It is, in effect, a global Saudi campaign against jihadism, and we believe al Qaeda has no choice but to attempt to derail the Saudi effort in Pakistan and Afghanistan. There is not much al Qaeda can do to counter Saudi financial tools, but the militant group is in a position to hit back hard on the ideological front in order to counter any Saudi attempt to moderate and rehabilitate jihadists. As noted above, we have seen al Qaeda launch a sustained stream of ideological attacks in an attempt to undercut the Islamic credentials of the Saudi monarch and the Saudi clerical establishment.

Another avenue that al Qaeda can take to interfere with the Saudi charm offensive is to strike Saudi targets — not only to punish the Saudis, but also to try to drive a wedge between the Saudis and the Pakistanis. Al Qaeda’s military capabilities have been greatly degraded since 2001, and with the remnant of its Saudi franchise fleeing to Yemen, it likely has very little ability to make a meaningful strike inside the kingdom. However, the one place where the al Qaeda core has shown the ability to strike in recent years is Pakistan. Mustafa Abu al-Yazid, the group’s operational commander in Afghanistan and Pakistan, has claimed responsibility for the bombing of the Danish Embassy in Islamabad and for the assassination of former Pakistani Prime Minister Benazir Bhutto, and we have no reason to doubt his claims.

Also, an attack against a diplomatic mission in Pakistan that represents a regime considered an enemy of the jihadists is not unprecedented. In addition to the Danish Embassy bombing and several attacks against U.S. diplomatic facilities and personnel in Pakistan, al Qaeda also bombed the Egyptian Embassy in Islamabad in November 1995. According to al-Zawahiri, the Egyptian Embassy was targeted because it “was not only running a campaign for chasing Arabs in Pakistan but also spying on the Arab Mujahedeen.”

Based on the totality of these circumstances — Saudi activities against al Qaeda in South Asia and elsewhere, the al Qaeda perception of the Saudis as a threat and al Qaeda’s operational ability in Pakistan — we believe there is a very real threat that Saudi interests in Pakistan might be attacked in the near future.

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