Tag: Libya

Oil Price Blues (Read: Dangers) for Some

As the price of crude oil continues its downward tumble towards $80 per barrel, I am reminded of a similar scenario from near the end of the Cold War in the 1980s. When Saudi Arabia announced in 1985 that protecting oil prices was no longer its main priority, oil production surged and prices fell off a cliff, briefly plunging below $10 per barrel, as I had correctly predicted.

Lower prices delivered a fatal blow to the Soviet economy, which ended up seeing $20 billion per year in oil revenues evaporate. The resulting fiscal shortfalls proved to be a dagger in the heart of the U.S.S.R.

On October 1st of this year, Saudi Arabia’s national oil company announced that it had abandoned a policy of price protection and would start to focus on protecting its market share. Combined with falling global demand and rising supplies elsewhere, oil prices have fallen accordingly. This has put a squeeze on eight of the world’s top oil producers. States like Iran, Venezuela, and Iraq can only balance their current budgets at oil prices ranging from $110 to $135 per barrel (so-called break-even prices).

If oil prices stay below $90 per barrel for any length of time, we will witness massive fiscal squeezes and regime changes in one or more of the following countries: Iran, Bahrain, Ecuador, Venezuela, Algeria, Nigeria, Iraq, or Libya. It will be a movie we have seen before.

Coping with the Legacy of Arab Socialism

Countries of the Arab Spring suffer from many economic, social, and political ills. At their center lies the unfortunate legacy of Arab Socialism, which established itself in the region during the 1950s and 1960s. One of its features, besides the ideology of Pan-Arabism and international ‘non-alignment,’ was an emphasis on government ownership and industrial planning. Far from generating prosperity and economic growth, these policies resulted in large, vastly inefficient government-operated sectors in several Arab economies. My new Cato Policy Analysis provides a sense of the magnitude of the problem and of its evolution over time:

In Egypt, for example, the share of government investment fell from around 85 percent in the late 1990s to below 40 percent in 2012. Over the same period of time, the share of government investment in Algeria doubled, from around 30 percent to above 60 percent. Throughout much of the same period, the average for lower-middle-income countries hovered under 30 percent.

Some Arab governments, most prominently Hosni Mubarak’s regime in Egypt, attempted to put in place large-scale privatization programs. However, these were perceived (and rightly so!) as attempts by the political elites and their cronies to simply seize publicly owned assets, without much regard for the future restructuring of the companies and their exposure to competition. My paper reviews the experience of privatization in other countries and tries to provide some practical lessons to policymakers in countries such as Egypt or Algeria.

First and foremost, privatization needs to be perceived as fair and transparent. Bidding should be competitive and open to a large spectrum of potential bidders, domestic and foreign. Second, private ownership of the financial sector is a requisite for successful privatization and restructuring of the rest of the economy–otherwise Arab countries risk creating a dangerous nexus of cronyism through which the state-owned banks and financial institutions would provide funding to newly privatized companies. Third, in order to avoid the danger of simply replacing government-run monopolies with privately-run ones, privatization should be far-reaching and accompanied by broad economic liberalization and opening up both to trade and investment.

Privatization is not very high on the agenda of Arab policymakers or foreign experts, and is typically eclipsed by the more immediate political concerns about the region. It is not, however, an issue that can be simply ignored.

It is a mistake to think that economic reforms can wait until Middle Eastern countries address their internal political and economic problems. There are not many examples of countries that have transitioned successfully to a representative constitutional government while maintaining economic rules that deny opportunity to large segments of the population. State ownership, accompanied by regulations that favor existing state-owned incumbents, are a critical part of the problem facing countries in the MENA region, most notably Egypt, Libya, Algeria, Syria, and Yemen

Obsession with Syria Obscures Other Middle East Problems and Pertinent Lessons

The Obama administration and most of the U.S. foreign policy community have become so obsessed with Syria that other important developments around the world are receiving inadequate attention. In a piece over at the National Interest Online, I describe some of the key trends in South Asia and East Asia, two regions that are more important than the Middle East to long-term U.S. security and economic interests.

Crucial events include India’s growing financial woes, the simmering tensions between China and its neighbors over territorial disputes in the South China and East China Seas, and Japan’s increased willingness (in large part because of its problems with China) to boost its military spending and adopt a more confrontational stance toward Beijing. 

I also note that Syria is hardly the only source of worry in the Middle East itself. The renewed sectarian violence next door in Iraq is escalating at a frightening pace, Sunni-Shiite tensions in Bahrain are moving from a simmer to a boil, Libya is imploding, and Egypt is perched on the brink of civil war. The problems in Iraq and Libya hold pertinent lessons for those Americans who are eager to embark on a war against Syria. After all, those were Washington’s last two military crusades to oust odious dictators. And to be blunt, they have not turned out well.

Since the early spring, the level of bloodshed in Iraq has reached alarming proportions. And much of the violence reflects bitter sectarian divisions similar to those that make Syria such a fragile political entity. Iraq after the United States overthrew Saddam Hussein has not turned out to be the peaceful, democratic, multi-religious society that George W. Bush’s administration touted as the goal of U.S. policy. 

The situation in Libya is even worse. Overthrowing Muammar Qaddafi has led to an awful aftermath. The horrifying September 11, 2012 attack on the U.S. consulate in Benghazi that killed Ambassador Christopher Stevens and three other Americans was an early symptom of the chaos that has made Libya a thoroughly dysfunctional country. Today, a growing number of militias (many of which have rabidly Islamist orientations) have established small fiefdoms throughout the country, and the national government in Tripoli becomes increasingly impotent. Libya’s oil production has plunged, and with it the government’s principal source of revenue. 

Given the dismal outcomes of Washington’s last two military ventures in the Middle East and North Africa, one would think that proponents of a crusade in Syria would be sobered by the experience. But warhawks such as Senators John McCain and Lindsey Graham, Representative Peter King, and Weekly Standard editor William Kristol appear to have learned nothing from those debacles. More prudent figures in Congress and the broader foreign policy community need to overrule their wishes.

Learning to Leave Bad Enough Alone: Washington’s Clumsy Meddling in Fragile Countries

U.S. officials too often succumb to the temptation to try to impose order and justice in unstable or misgoverned societies around the world. The temptation is understandable. It is hard to learn about—much less watch on the nightly news—brutality, bloodshed, and gross injustice and not want to do something about it. Some foreign policy intellectuals, including the new U.S. ambassador to the United Nations, Samantha Power, have become strident lobbyists for the notion of a “responsibility to protect” vulnerable populations.

But it is a temptation that wise policy makers should avoid. U.S. meddling has frequently caused already bad situations to deteriorate further—especially when Washington has based its humanitarian interventions on the false premise that the subject of our attentions is, or at least ought to be, a coherent nation state. As I point out in an article over at The National Interest, U.S. administrations have made that blunder in Bosnia, Iraq, Libya, and other places.

In many parts of the world, the Western concept of a nation state is quite weak, and the concepts of democracy and individual rights are even less developed. The primary loyalty of an inhabitant is likely to be to a clan, tribe, ethnic group or religion. U.S. officials appear to have difficulty grasping that point, and as a result, the United States barges into fragile societies, disrupting what modest order may exist. Washington’s military interventions flail about, shattering delicate political and social connections and disrupting domestic balances of power.

An especially naive and pernicious U.S. habit has been to try to midwife a strong national government in client states when the real power and cohesion lies at the local or subregional level. Thus, Washington still insists on keeping the chronically dysfunctional pretend country of Bosnia intact and on international life support more than 17 years after imposing the Dayton peace accords that ended the fighting there. Similarly, the United States harbored the illusion that Hamid Karzai could run a strong, pro-Western, democratic Afghan central government from Kabul, and even Karzai’s ineptitude and extensive misdeeds have not entirely dispelled that notion. In both cases, the national cohesion, underlying democratic values, and strong civil societies needed for such a scheme to work are woefully lacking.

One would hope that U.S. officials would be sobered by those bruising experiences, but there is little evidence of that. Even now, the Obama administration continues to flirt with intervening in Syria. That would be a huge mistake. Syria’s ethno-religious divisions make those of Bosnia, Afghanistan, Iraq, and Libya look mild by comparison. Bashar al-Assad is undoubtedly a thuggish ruler, and the humanitarian situation in Syria is tragic. But a U.S.-led intervention could cause Syria’s fragile political and ethnic tapestry to unravel entirely, and that might make the current situation far worse. The Obama administration needs to exercise great care and restraint.

Obama’s Perilous Foreign Policy Path

To both a greater and lesser degree of success, foreign policy scholars have tried to explain the disconnect between President Obama’s soaring idealism of America’s role in the world and his halting political caution about it in discrete situations. That vacillation has drawn criticism, both for being too meddlesome and for not being meddlesome enough. 

Daily Caller contributor Adam Bates ably sums up the president’s incoherence as “not based on any particular logic or worldview beyond the president’s own desire to distance himself from America’s foreign policy past without bothering to actually change any policies.” Indeed. As this author has written in the past, specifically on counterterrorism policies, 

On the one hand, Obama openly rejected Bush’s ‘with us or against us’ approach to foreign affairs. On the other hand, Obama’s sophisticated demeanor opened him to criticism, with hawks condemning him as too weak and easily manipulated by America’s enemies. 

The administration has supported policies that have failed to deliver tangible benefits to the American people (Libya), continued to prop up brutal regimes (Bahrain, Saudi Arabia, and Egypt), and helped tether our country to the region’s parochial quarrels (Afghanistan, Pakistan, and perhaps ever-more-so in Syria). Despite seemingly courageous attempts to distance itself from failed policies of the past, the Obama administration has managed to drift into strategic purgatory. 

WSJ Calls for No-Fly Zone in Syria, Acknowledges No-Fly Zone Isn’t Enough

It seems the Wall Street Journal editorial board has yet to identify a conflict in which the United States should not intervene. Today, they again call for U.S. military intervention in Syria and criticize President Obama for his inaction. Their main recommendation? Easy: set up a no-fly zone: 

The U.S. could boost its diplomatic leverage with the rebels and their regional allies by enforcing no-fly zones over portions of Syria. That would help prevent the regime from using its attack jets and helicopter gunships against civilian targets while allowing insurgents to consolidate and extend their territorial gains. It also means we could use limited force in a way that strengthens the hand of rebels we support at the expense of those we don’t. 

The key point here is that the Journal leaves open the possibility of using “limited force” to help the rebels. Indeed, this is what no-fly zones often become: precursors to additional involvement at a later date (think Iraq and Libya). I argued as much last week: 

If the no-fly zone fails to swiftly halt the violence, some will claim that preserving U.S. credibility requires an even deeper commitment. Or [no-fly zones] can just become a slippery slope in their own right. The ink was barely dry on the UN Security Council resolution authorizing a no-fly zone over Libya before the mission morphed into a no-drive zone on the ground, and then a major military operation to overthrow Qaddafi’s government. 

As a general rule, we shouldn’t send our military on feel-good missions that have little chance of success. And that is what no-fly zones are. They also have a clear political purpose, in this case to ensure that the opposition prevails over the Assad regime and its supporters. There is no such thing as an impartial intervention. 

In Libya, there wasn’t such an explicit call for a no-fly zone as a means to toppling Muammar Gaddafi. The UN resolution authorizing the no-fly zone did not include “regime change” as a goal, but that’s what it became. In Syria, a no-fly zone would be used explicitly for the purpose of toppling Bashar al-Assad’s regime. But if regime change is the goal, a no-fly zone will not do much to lead us there. They are security-theater, as Ben Friedman has pointed out: “No-fly zones commit us to winning wars but demonstrate our limited will to win them. That is why they are bad public policy.” 

More Calls for Intervention in Syria

Pressure is building on President Obama to involve the United States more deeply in the brutal civil war in Syria that may have claimed as many as 70,000 lives, and created more than a million refugees. Late last week, the editorial board of the Washington Post called for “aggressive intervention by the United States and its allies to protect the opposition and civilians.” 

Sen. Lindsey Graham (R-SC) apparently believes that the Post didn’t go far enough because the editorial explicitly ruled out sending U.S. ground troops. He wants the U.S. military to secure suspected chemical weapons caches there. But where Graham is leading few will follow, aside from his frequent co-conspirator, Sen. John McCain (R-AZ). The American people are not anxious to send U.S. troops into the middle of yet another civil war in the region.

Some do want the U.S. government to do more, however, and not just the people who sold us the war in Iraq. For example, during a stop in Saudi Arabia earlier this month, Secretary of State John Kerry made vague references to increasing the flow of arms to the Syrian opposition. Back here in Washington, Senate Armed Services Committee Chairman Sen. Carl Levin (D-MI) became the latest to call for establishing a no-fly zone over Syria. Arms supplied to resistance fighters can be directed against other targets when the regime collapses (or may simply prolong the war if it doesn’t), which is why no-fly zones are seen as the less risky option. They could satisfy the understandable human instinct to be seen as doing something, anything, in the face of enormous human suffering. As such, if President Obama were to institute a no-fly zone, it might forestall an even more costly and risky operation, one that did involve U.S. troops on the ground. 

But no-fly zones often become precursors to additional involvement at a later date. If the no-fly zone fails to swiftly halt the violence, some will claim that preserving U.S. credibility requires an even deeper commitment. Or they can just become a slippery slope in their own right. The ink was barely dry on the UN Security Council resolution authorizing a no-fly zone over Libya before the mission morphed into a no-drive zone on the ground, and then a major military operation to overthrow Qaddafi’s government. 

As a general rule, we shouldn’t send our military on feel-good missions that have little chance of success. And that is what no-fly zones are. They also have a clear political purpose, in this case to ensure that the opposition prevails over the Assad regime and its supporters. There is no such thing as an impartial intervention. We are choosing sides, and arguably already have, without a clear sense that the regime that comes after will be an improvement over what came before. We are placing ourselves into the middle of a much wider sectarian dispute taking place throughout the region. 

Claims that the United States has a unique opportunity to shape the political process in Syria are equally misguided. Though we wish otherwise, a U.S. government stamp of approval is likely to undermine the legitimacy of genuine democrats in Syria, to the extent that there are any. And we know that the opposite is true: individuals or groups singled out for criticism, for example the al-Nasra Front, have seen their stature rise. The reason is simple: the American brand has never been lower in the region, and is held in particularly low regard in Syria. 

When I wrote about Syria late last year (here and here), I was reasonably confident that President Obama would not intervene, in spite of the fact that his decision to help the Libyan rebels overthrow Muammar Qaddafi established a precedent for a similar regime-change operation in Syria. The key distinctions between the two cases include UN Security Council support for intervention in Libya, but not in Syria, a relatively well-defined mission in Libya, but not in Syria, and a reasonable expectation that the costs of military operations could be kept limited, and would deliver clear results, which was true in Libya, but is not true in Syria. Earlier this week, Joint Chiefs of Staff chairman Gen. Martin Dempsey threw cold water on the notion that the military could produce an acceptable outcome in Syria. 

The general’s candor is both welcome and refreshing. Although the suffering in Syria is gut-wrenching, the U.S. military lacks the ability to resolve the underlying social and political disputes that are driving the civil war. Indeed, as Ben Friedman pointed out last year, outside intervention might actually prolong such conflicts, or initiate new ones, resulting in even greater loss of life. 

The American people have so far proved unwilling to intervene in Syria, and are particularly resistant to the idea of U.S. troops marching on Damascus. They were similarly disinclined to become involved in Libya, however, and the president ignored the public in that previous case. He should not do so with respect to Syria. And Congress shouldn’t allow it if he tries.

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