Showing posts with label Grand Strategy. Show all posts
Showing posts with label Grand Strategy. Show all posts

Monday, May 28

Lagarde Sacrifices Herself to Help Greece's Pro-Bailout New Democracy Party?

The Eurogeddon chess game is getting desperate so don't be surprised to see a few political/PR curveballs over the next few weeks in front of the 17 June Greek election runoff.

Case in point is this weekend's snarky comment from the typically ladylike Madame Lagarde. But before we get to that, some background:

The single worst thing than can happen from the perspective of the Troika (the IMF, EU, and ECB) and Greek elites right now is for Syriza and its 37-year old leader, 'Sexy Alexis', as he's now being called, to do well in the 17 June Greek election runoff.

In the most recent May elections Greek voters turned away from the two pro-bailout/austerity parties, PASOK and New Democracy, as they were seen as tools of the Troika. This rejection by voters sent a shiver up the Troika's spine as they know that should Syriza and Alexis Tsipras prevail he will likely walk away from the terms of the bailout and thereby call the Troika's bluff to either a) cut off Greece's banking system from further ECB funding or b) terminate any further bailout money to Greece's government. Either one of these moves will likely trigger a financial panic and spoil everyone's summer vacation plans.

So the Troika are now desperate to see PASOK and or New Democracy do better in the 17 June election. So how can they help them?

Agent Provocateur: Christine Lagarde, IMF Chief

Angry Greek voters are looking for someone to blame, and as long as PASOK and New Democracy are seen as part of the problem it's unlikely that voters will put them back into power. So one strategy is to try and reshift the political blame onto the external Troika, which would have the effect of diverting negative feelings away from PASOK and New Democracy. This would help the two pro-bailout Greek parties reposition themselves as domestic victims rather than as co-conspirators with the hated foreigners.

And now you understand why the typically politie Christine Lagarde, head of the IMF, probably deliberately roiled the Aegean kettle this weekend with a comment about how it's 'payback time', and Greeks need to pay their taxes.

Queue the Greek firestorm.

And lo and behold, New Democracy, who of course along with PASOK quickly denounced Lagarde's rhetoric, is again rising in the polls.

Nice move, Troika.

And, by the way, Lagarde doesn't pay any taxes on her $551,700 in annual compensation.

Thursday, May 17

Greece Can Physically Print Its Own Euros In Spite Of ECB 'Choke' Efforts

Euro printing press
As the long ago predicted Greek 'bank jog' accelerates there is much talk in the econoblogosphere of the Greek banking system being 'choked off' by the ECB.

If this is in fact the Brussels/Frankfurt plan to force Greece out of the euro there is a perhaps not insignificant obstacle to this strategy: as noted in this post last year, Greece has its own euro printing press. 

The ECB does not print any euro banknotes but actually assigns this task to local member country central banks, with the ECB instructing the local central bank how much of which denominations to print.

So what does this mean?

In opinion polls Greeks want two things: a) to default on their sovereign debt less fiscal austerity and b) stay in the Eurozone. However, European elites (read: Germany) are saying to Greece that you can't have both. But is Germany correct?

An important point to keep in mind here is that there is no legal mechanism to force Greece to drop the euro and readopt the drachma. Hence the idea of choking off the Greek banking system and forcing the Greeks to renounce the euro versus organizing some type of formal action, such as a vote to eject Greece from the euro, which would not be allowed under current EU law.

But in the event of a full-fledged run on Greece's banking system, where Greek banks literally have no cash on hand to give to depositors, it would seem reasonable and (crucially) perhaps legal for the Greek central bank to start printing euro notes even if the ECB disavows this action.

If this were to take place is there anything the ECB could do to stop the Greek central bank from printing euros? Probably not.

It's hard to imagine the situation reaching a stage where the Greek central bank openly revolts against the ECB and starts printing euros. However, Greece need only hint at playing this card for it to have the desired effect, which is to force the ECB to continue accepting Greek bank collateral on reasonable terms. In other words, the fact the Greeks can print their own euros nullifies the ECB's ability to choke the Greek banking system into submission and force a 'voluntary' abandonment of the euro.

Your move, Angela.

Tuesday, October 18

Ever Heard of Somaliland, the Peaceful and Democratic Neighbor of Somalia?

Somaliland's flag
Contrary to the piracy and kidnappings which the media tends to focus on positive things are happening in parts of the Horn of Africa.

Somaliland is one such example. President Ahmed Mohamoud Silyano describes his people's quest for international recognition here.

Here's the BBC's profile of Somaliland.
Though not internationally recognised, Somaliland has a working political system, government institutions, a police force and its own currency. The territory has lobbied hard to win support for its claim to be a sovereign state. 
The former British protectorate has also escaped much of the chaos and violence that plague Somalia, although attacks on Western aid workers in 2003 raised fears that Islamic militants in the territory were targeting foreigners. 
Although there is a thriving private business sector, poverty and unemployment are widespread. The economy is highly dependent on money sent home by members of the diaspora. Duties from Berbera, a port used by landlocked Ethiopia, and livestock exports are important sources of revenue.
Information about traveling in Somaliland, including guidance on safety, can be read about here.

Tuesday, October 4

As Predicted U.S.-China Economic War Heating Up

Another prediction which is coming in right on schedule: this Presidential political season the one thing Republicans and Democrats can agree upon (the generally conservative Senate voted 79-19) is that China is manipulating the value of its currency to make its exports more price competitive.

We're still in the early rounds of the latest Congressional flare-up over China's currency policy, so stay tuned.

Monday, August 15

Playing it Safe, Losing it All

Two facts worth highlighting from Drew Westen's controversial NY Times piece titled 'What Happened to Obama':
  1. Obama published nothing (except his autobiography) during his twelve years as a faculty member at the University of Chicago
  2. Before joining the Senate he voted 'present' (instead of 'yea' or 'nay') 130 times
What is one to make of this?

I won't speculate on Obama's not publishing anything in an academic journal, but one thing presidential candidates are often attacked on is their voting record. During a heated political campaign a candidate's previous legislative votes are scrutinized and picked over for any possible controversy (see John Kerry). As an astute observer of political history and campaigns, Barrack Obama would be well aware of this.

Was his voting 'present' strategy all about playing it safe and as Westen puts it "dodging difficult issues"? Or is there another explanation all together?

From Westen:
Perhaps those of us who were so enthralled with the magnificent story he told in “Dreams From My Father” appended a chapter at the end that wasn’t there — the chapter in which he resolves his identity and comes to know who he is and what he believes in.
One of the hallmark qualities of Barrack Hussein Obama's rise to the presidency has been his exceptional risk aversion. That strategy worked well in the campaign but is not serving President Obama or the country well at a time when bold, visionary political leadership is needed.

Like many, I've been scratching my head trying to put my finger on what it is about Obama that just doesn't seem right. And then I remembered a comment made by fashion designer Karl Lagerfeld when he was asked to describe himself: 
"I don't want to be real in other people's minds. I want to be an apparition."

I completely agree with Westen that right now the U.S. desperately needs the gregarious optimism and energy of a Franklin Delano Roosevelt or Teddy Roosevelt type personality in the White House, and not the Lagerfeld-esque 'complete improvisation' we seem to have at present
.

I will never wholly forgive and forget the missed opportunity in 2009 to conduct a perhaps once-in-a-century overhaul of the global financial system, along with Obama's decision to reappoint many of the same people who led us into the crisis - Larry Summers, Tim Geithner, and Greenspan protege Ben Bernanke.

With the way things are going at Bank of America and the Eurozone we may soon get a second bite at the financial system overhaul apple. Fighting to keep Timothy Geithner on as Secretary of the Treasury doesn't exactly instil in one a sense of optimism, but there is still time for President Obama to do what is necessary to restore American optimism.

Tuesday, June 21

European Debt Mexican Standoff: Why Greece Holds All the Cards

A no-win scenario?
Markets are signalling that tonight's vote of confidence for the government of Greek Socialist leader George Papandreou will pass.

If that happens (I don't take anything for granted in the Eurozone kabuki theatre these days) then the next step in this Greek tragedy will come next week when a package of austerity measures is put to a vote before the Greek parliament.

The new austerity measures include spending cuts, tax increases and the sale of government assets. If the Greeks don't pass these measures then the EU and IMF have threatened to not release new funds to Greece (whether they would carry through on this threat is an open question). Without these new funds Greece will run out of cash next month and default.

The Greek Bargaining Position

While a Greek default would perhaps be bad in the short-run for Greece, it would be far, far worse for the Eurozone and rest of the world. Given the risks of financial contagion and a pan-European, if not global, banking crisis that a Greek default could trigger, the Greeks find themselves in a relatively strong negotiating position. And the Greeks, the EU, the ECB, and IMF all know this.

Continue reading at Seeking Alpha here.

Saturday, June 11

Fareed Zakaria Needs to Study More History

Fareed Zakaria
A good geopolitical discussion with CNN host and Time magazine editor Fareed Zakaria on Charlie Rose, although I take issue with one of Zakaria's suggestions:

Charlie asked him for his prescription for preventing conflict between the U.S. and China, and his response smacked of the same arguments and thinking which were prevalent prior to World War I.

Fareed stated that if the U.S. and China can increase their "dependencies" then this would prevent war from occurring. I was surprised to hear Fareed say this as he generally gives off the impression as someone who is well versed in history.

Fareed's thinking about what will prevent conflict is identical to what was said prior to World War I, the original era of globalization when arguably the world was even more interconnected by trade than it is today. Because everything was so interconnected, because nations like Britain and Germany traded as much as they did, war was considered impossible.

Many people are not aware of the fact that today's interconnected world is not our first experience with globalization. One of the better quotes on just how bound up the world was prior to WWI comes from John Maynard Keynes. Below he describes just how eerily similar life in early 20th century London was to today:
The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighboring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.
Speaking of history, if you have a little extra time there was another excellent interview on Charlie Rose with the historian David McCullough about his new book, The Greater Journey: An American in Paris.

Wednesday, May 18

A Punctuation Mark in European History

By George Friedman, STRATFOR

With the Palestinians demonstrating and the International Monetary Fund in turmoil, it would seem odd to focus this week on something called the Visegrad Group. But this is not a frivolous choice. What the Visegrad Group decided to do last week will, I think, resonate for years, long after the alleged attempted rape by Dominique Strauss-Kahn is forgotten and long before the Israeli-Palestinian issue is resolved. The obscurity of the decision to most people outside the region should not be allowed to obscure its importance.

The region is Europe — more precisely, the states that had been dominated by the Soviet Union. The Visegrad Group, or V4, consists of four countries — Poland, Slovakia, the Czech Republic and Hungary — and is named after two 14th century meetings held in Visegrad Castle in present-day Hungary of leaders of the medieval kingdoms of Poland, Hungary and Bohemia. The group was reconstituted in 1991 in post-Cold War Europe as the Visegrad Three (at that time, Slovakia and the Czech Republic were one). The goal was to create a regional framework after the fall of Communism. This week the group took an interesting new turn.

Visegrad: A New European Military Force
(click here to enlarge image)


On May 12, the Visegrad Group announced the formation of a “battle group” under the command of Poland. The battle group would be in place by 2016 as an independent force and would not be part of NATO command. In addition, starting in 2013, the four countries would begin military exercises together under the auspices of the NATO Response Force.

Since the fall of the Soviet Union, the primary focus of all of the Visegrad nations had been membership in the European Union and NATO. Their evaluation of their strategic position was threefold. First, they felt that the Russian threat had declined if not dissipated following the fall of the Soviet Union. Second, they felt that their economic future was with the European Union. Third, they believed that membership in NATO, with strong U.S. involvement, would protect their strategic interests. Of late, their analysis has clearly been shifting.

First, Russia has changed dramatically since the Yeltsin years. It has increased its power in the former Soviet sphere of influence substantially, and in 2008 it carried out an effective campaign against Georgia. Since then it has also extended its influence in other former Soviet states. The Visegrad members’ underlying fear of Russia, built on powerful historical recollection, has become more intense. They are both the front line to the former Soviet Union and the countries that have the least confidence that the Cold War is simply an old memory.

Second, the infatuation with Europe, while not gone, has frayed. The ongoing economic crisis, now focused again on Greece, has raised two questions: whether Europe as an entity is viable and whether the reforms proposed to stabilize Europe represent a solution for them or primarily for the Germans. It is not, by any means, that they have given up the desire to be Europeans, nor that they have completely lost faith in the European Union as an institution and an idea. Nevertheless, it would be unreasonable to expect that these countries would not be uneasy about the direction that Europe was taking. If one wants evidence, look no further than the unease with which Warsaw and Prague are deflecting questions about the eventual date of their entry into the Eurozone. Both are the strongest economies in Central Europe, and neither is enthusiastic about the euro.

Finally, there are severe questions as to whether NATO provides a genuine umbrella of security to the region and its members. The NATO strategic concept, which was drawn up in November 2010, generated substantial concern on two scores. First, there was the question of the degree of American commitment to the region, considering that the document sought to expand the alliance’s role in non-European theaters of operation. For example, the Americans pledged a total of one brigade to the defense of Poland in the event of a conflict, far below what Poland thought necessary to protect the North European Plain. Second, the general weakness of European militaries meant that, willingness aside, the ability of the Europeans to participate in defending the region was questionable. Certainly, events in Libya, where NATO had neither a singular political will nor the military participation of most of its members, had to raise doubts. It was not so much the wisdom of going to war but the inability to create a coherent strategy and deploy adequate resources that raised questions of whether NATO would be any more effective in protecting the Visegrad nations.

There is another consideration. Germany’s commitment to both NATO and the EU has been fraying. The Germans and the French split on the Libya question, with Germany finally conceding politically but unwilling to send forces. Libya might well be remembered less for the fate of Moammar Gadhafi than for the fact that this was the first significant strategic break between Germany and France in decades. German national strategy has been to remain closely aligned with France in order to create European solidarity and to avoid Franco-German tensions that had roiled Europe since 1871. This had been a centerpiece of German foreign policy, and it was suspended, at least temporarily.

The Germans obviously are struggling to shore up the European Union and questioning precisely how far they are prepared to go in doing so. There are strong political forces in Germany questioning the value of the EU to Germany, and with every new wave of financial crises requiring German money, that sentiment becomes stronger. In the meantime, German relations with Russia have become more important to Germany. Apart from German dependence on Russian energy, Germany has investment opportunities in Russia. The relationship with Russia is becoming more attractive to Germany at the same time that the relationship to NATO and the EU has become more problematic.

For all of the Visegrad countries, any sense of a growing German alienation from Europe and of a growing German-Russian economic relationship generates warning bells. Before the  Belarusian elections there was hope in Poland that pro-Western elements would defeat the least unreformed regime in the former Soviet Union. This didn’t happen. Moreover, pro-Western elements have done nothing to solidify in Moldova or break the now pro-Russian government in Ukraine. Uncertainty about European institutions and NATO, coupled with uncertainty about Germany’s attention, has caused a strategic reconsideration — not to abandon NATO or the EU, of course, nor to confront the Russians, but to prepare for all eventualities.

It is in this context that the decision to form a Visegradian battle group must be viewed. Such an independent force, a concept generated by the European Union as a European defense plan, has not generated much enthusiasm or been widely implemented. The only truly robust example of an effective battle group is the Nordic Battle Group, but then that is not surprising. The Nordic countries share the same concerns as the Visegrad countries — the future course of Russian power, the cohesiveness of Europe and the commitment of the United States.

In the past, the Visegrad countries would have been loath to undertake anything that felt like a unilateral defense policy. Therefore, the decision to do this is significant in and of itself. It represents a sense of how these countries evaluate the status of NATO, the U.S. attention span, European coherence and Russian power. It is not the battle group itself that is significant but the strategic decision of these powers to form a sub-alliance, if you will, and begin taking responsibility for their own national security. It is not what they expected or wanted to do, but it is significant that they felt compelled to begin moving in this direction.

Just as significant is the willingness of Poland to lead this military formation and to take the lead in the grouping as a whole. Poland is the largest of these countries by far and in the least advantageous geographical position. The Poles are trapped between the Germans and the Russians. Historically, when Germany gets close to Russia, Poland tends to suffer. It is not at that extreme point yet, but the Poles do understand the possibilities. In July, the Poles will be assuming the EU presidency in one of the union’s six-month rotations. The Poles have made clear that one of their main priorities will be Europe’s military power. Obviously, little can happen in Europe in six months, but this clearly indicates where Poland’s focus is.

The militarization of the V4 runs counter to its original intent but is in keeping with the geopolitical trends in the region. Some will say this is over-reading on my part or an overreaction on the part of the V4, but it is neither. For the V4, the battle group is a modest response to emerging patterns in the region, which STRATFOR had outlined in its 2011 Annual Forecast. As for my reading, I regard the new patterns not as a minor diversion from the main pattern but as a definitive break in the patterns of the post-Cold War world. In my view, the post-Cold War world ended in 2008, with the financial crisis and the Russo-Georgian war. We are in a new era, as yet unnamed, and we are seeing the first breaks in the post-Cold War pattern.

I have argued in previous articles and books that there is a divergent interest between the European countries on the periphery of Russia and those farther west, particularly Germany. For the countries on the periphery, there is a perpetual sense of insecurity, generated not only by Russian power compared to their own but also by uncertainty as to whether the rest of Europe would be prepared to defend them in the event of Russian actions. The V4 and the other countries south of them are not as sanguine about Russian intentions as others farther away are. Perhaps they should be, but geopolitical realities drive consciousness and insecurity and distrust defines this region.

I had also argued that an alliance only of the four northernmost countries is insufficient. I used the concept “Intermarium,” which had first been raised after World War I by a Polish leader, Joseph Pilsudski, who understood that Germany and the Soviet Union would not be permanently weak and that Poland and the countries liberated from the Hapsburg Empire would have to be able to defend themselves and not have to rely on France or Britain.

Pilsudski proposed an alliance stretching from the Baltic Sea to the Black Sea and encompassing the countries to the west of the Carpathians — Czechoslovakia, Hungary, Romania and Bulgaria. In some formulations, this would include Yugoslavia, Finland and the Baltics. The point was that Poland had to have allies, that no one could predict German and Soviet strength and intentions, and that the French and English were too far away to help. The only help Poland could have would be an alliance of geography — countries with no choice.

It follows from this that the logical evolution here is the extension of the Visegrad coalition. At the May 12 defense ministers’ meeting, there was discussion of inviting Ukraine to join in. Twenty or even 10 years ago, that would have been a viable option. Ukraine had room to maneuver. But the very thing that makes the V4 battle group necessary — Russian power — limits what Ukraine can do. The Russians are prepared to give Ukraine substantial freedom to maneuver, but that does not include a military alliance with the Visegrad countries.

An alliance with Ukraine would provide significant strategic depth. It is unlikely to happen. That means that the alliance must stretch south, to include Romania and Bulgaria. The low-level tension between Hungary and Romania over the status of Hungarians in Romania makes that difficult, but if the Hungarians can live with the Slovaks, they can live with the Romanians. Ultimately, the interesting question is whether Turkey can be persuaded to participate in this, but that is a question far removed from Turkish thinking now. History will have to evolve quite a bit for this to take place. For now, the question is Romania and Bulgaria.

But the decision of the V4 to even propose a battle group commanded by Poles is one of those small events that I think will be regarded as a significant turning point. However we might try to trivialize it and place it in a familiar context, it doesn’t fit. It represents a new level of concern over an evolving reality — the power of Russia, the weakness of Europe and the fragmentation of NATO. This is the last thing the Visegrad countries wanted to do, but they have now done the last thing they wanted to do. That is what is significant.

Events in the Middle East and Europe’s economy are significant and of immediate importance. However, sometimes it is necessary to recognize things that are not significant yet but will be in 10 years. I believe this is one of those events. It is a punctuation mark in European history.

Visegrad: A New European Military Force is republished with permission of STRATFOR.

Sunday, May 8

Timeline and Map of al-Qaeda Terrorist Attacks



From The Economist 

Investment Implications of Bin Laden's Death


Osama bin Laden was living not just within the borders of Pakistan, butwithin a mile of arguably the heart of the country's military establishment. Conspiracy theories abound, but it seems clear thatPakistan knew a lot more than it was letting on to its U.S. and NATO 'allies' operating in the region.

From 2002 to 2010, the U.S. gave $20 billion in aid to Pakistan ($13.3 billion in military and $6 billion for economic development). Over $3 billion has been requested for 2011.

At a time when Congress is sharpening its fiscal pencil, it's no surprise to see that Senators are pushing to cut Pakistan's aid. Expect calls for U.S. forces to pull-out of Afghanistan to only grow louder, which in turn will have a destabilizing effect on Pakistan and the wider region.
Investment Implications

Pakistan is classified as a 'frontier economy', and the range of pure play investment options that foreigners can easily make are limited. At present there are no U.S.-exchange traded Pakistan ETFs. However, the Aberdeen Emerging Markets Telecommunications and Infrastructure Fund, Inc. (ETF), and Guggenheim Frontier Markets ETF (FRN) both have Pakistan allocations. And not surprisingly, both have traded down since Monday's news.
Continue reading the full article at SeekingAlpha here.

Podcast: Joseph Nye on the Future of Power

Link to audio here.

Joseph Nye is a long-time analyst of power and a hands-on practitioner in government. His concept of "soft power" has been adopted by leaders from Britain to China and "smart power" has been adopted as the bumper-sticker for the Obama Administration's foreign policy. In this lecture, drawn from his new book The Future of Power, Nye outlines the major shifts of this century: new transnational challenges such as the financial crisis, global epidemics, and climate change facing an increasingly interconnected world; a changing global political and economic landscape, including the rise of China and India; and the increasing influence of non-state actors. Nye explores what resources now confer power, and argues that, in the information age, it might be the state (or non-state) with the best story. Joseph S. Nye, Jr. is University Distinguished Service Professor and former Dean of Harvard's Kennedy School of Government. He has served as Assistant Secretary of Defense for International Security Affairs, Chair of the National Intelligence Council, and a Deputy Under Secretary of State. The author of many books, he is a fellow of the American Academy of Arts and Sciences, the British Academy, and the American Academy of Diplomacy.

Wednesday, May 4

Video: Afghanistan's Next President?

Amrullah Saleh, former Afghani Spy Chief
An interesting video interview from PBS's Frontline of Amrullah Saleh, the former head of espionage for the Karzai-Afghanistan government.

Some of the points made by Saleh, who served with the deceased Northern Alliance leader Ahmed Shah Massoud killed by Al Qaeda right before 9/11, include:
  • He believes the U.S. Obama administration does not currently possess a grand strategy or vision for how to proceed in Afghanistan/Pakistan, and the wider region.
  • He broke with President Karzai and resigned his spy chief position after Karzai pivoted towards trying to strike a "deal" with the Taliban. In general believes no lasting peace can ever be achieved through deals with the Taliban ; the only lasting peace will come by integrating the Taliban into a peaceful Afghanistan democratic process.
  • On the question of how long will the U.S. need to stay in the region, "How long did it take to defeat communism?" (answer: 50 years).
  • Believes the U.S. needs to step up raids into Pakistan and should effectively deal with the Pakistani's who are proving Al Qaeda and Taliban, namely Pakistan's ISI espionage arm.
  • On how the Taliban and Al Qaeda are earning income, "they collect taxes, and they collect part of the (wheat) harvest", in addition to heroin (the Taliban has "diversified")
  • He won't confirm or deny whether he will run for office against Karzai, but he has been making the rounds in Washington, and this interview would seem to serve.
  • He appears to live out in the open in the Panjshir valley north of Kabul. And yes, he has bodyguards.
Other interview highlights not covered in the video after the break.

Tuesday, May 3

Analysis: Bin Laden's Hideout Strategy and Pakistan's Lack of Credibility

Osama bin Laden was living and killed about 100 kilometers outside Pakistan's capital of Islamabad in a relatively posh part of Abbottabad, Pakistan called Bilal Town.

The compound itself was located a short distance from the Pakistani military academy (the "West Point or Sandhurst of Pakistan" as it's being characterized). Detailed maps, satellite imagery and the CIA's diagram of the compound can be viewed here.

The Lair

His five-to-six year old property, believed to have been purpose built to hide the ultimate 'High Value Target' (HVT), was three stories tall and approximately eight times larger than any other nearby dwelling. Other key details:

  • 12-to-18-foot walls, topped with barbed wire
  • Internal walls sectioned off different areas of the compound
  • Access was restricted by two security gates
  • Closed-circuit cameras positioned around the property

Yet bin Laden's "mansion", as it has been characterized, did not have a phone line or internet. The couriers, Afghans brothers named Arshad and Tariq who were also gunned down by ST6, did not report any income and had no visible source of wealth. They also burned all their own trash. Neighbors also reported that the women who were living inside the house spoke in Arabic and not the local dialect.

Bin Laden's Hideout Strategy

Bin Laden's choice to hide near Pakistani military installations and in a residential community of retired Pakistani officers strikes me as both intriguing and suspicious. Less wise, perhaps, were some of the activities noted above, like burning the trash and not having a phone or internet line.

In short, Bin Laden stopped just short of hiding in veritable plain view. Did his failure to go all the way here do him in? One thing we do know is that the U.S. was only able to locate bin Laden by trailing his courier back to the compound in August 2010, and the whole reason bin Laden had to employ the services of a courier was due to his aversion to phones and the internet.

This location at least gave bin Laden some chance as the first assassination option considered by President Obama, employing B-2 Stealth Bombers, was abandoned due in part to the likelihood of collateral damage.

Was bin Laden's thinking on where to locate influenced by his correct calculation that the U.S. was unlikely to drop a bomb or conduct a Predator drone strike on this particular location? In turn, was bin Laden expecting a tip from Pakistani intelligence should any planned U.S. Special Forces assault to be attempted?

Who Does Pakistan Think They're Fooling?

Bin Laden apparently lived in this compound for the last 5-6 years. This raises very important questions about how much Pakistan, or elements of Pakistan's military and intelligence service, knew about the whereabouts of bin Laden. The U.S. has sent billions of dollars to Pakistan over the past several years to help find and kill people like bin Laden, and the American public should insist on an answer.

Pakistan has publicly denied knowing that bin Laden was within its borders. But if that's true it makes Pakistan look incompetent, particularly in light of the fact that Pakistan's most powerful man, General Ashfaq Kayani, the chief of staff, was within shouting distance of bin Laden last week giving a talk at the military academy on how Pakistan had broken the back of terrorism. More from The Economist on on the logic behind why Pakistan may have been providing bin Laden safe harbor:
Something's wrong with this picture
More likely, but no more attractive for the likes of the ISI, is that at least some in power in Pakistan knew that Mr bin Laden had been forced by American drone attacks to shift from a mountain hideout to this urban shelter. On this score Mr bin Laden (and probably others, such as the Aghan Taliban leader, Mullah Omar, who was reported earlier this year to have been taken by the ISI to Karachi for medical treatment following a heart attack) was being afforded some measure of protection by Pakistani officialdom. Why? Perhaps so that he could be used, one day, somehow to promote Pakistani interests among fighting groups in Afghanistan, or perhaps so that he (bin Laden) could be used as leverage over the Americans on a “rainy day”, as one Afghan intelligence officer speculates.
Let's be clear about Pakistan's motive: the longer bad guys like Osama bin Laden, Mullah Omar, and the presume new Al Qaeda boss, Ayman al-Zawahiri, are kept alive, then the longer the billions in U.S. dollars in development and military aid will keep flowing to Pakistan.

From 2002 to 2010, the U.S. gave $13.3 billion in military aid to Pakistan, and $6 billion for economic development. Over $3 billion has been requested for 2011. Calls for U.S. forces to pull-out of Afghanistan will only grow, which will have a destabilizing effect on Pakistan and the wider region. It's no surprise to see that Congress is already moving to cut Pakistan's billions of dollars in annual U.S. economic and military aid.

As Pakistan plays their double-sided game, the U.S. Congress and President Obama need to think seriously about how much good all this aid is really doing in the fight against terror.

The history between Pakistan, the U.S., and the region is long and complex and for those familiar with it it really shouldn't come as a surprise that Pakistan was harboring bin Laden. For further reading I highly recommend Legacy of Ashes, by Tim Weiner, and in particular Ghost Wars, by Steve Coll. You can find both books in the 'Good Books and Film' section on the right side of this blog, and here is a recent interview with Steve Coll, David Ignatius of the Washington Post, and Dexter Filkins of the New Yorker.

Bin Laden's 9/11 ROI: a 2,514,000:1 return (and counting)

Al-Qaida pulled-off the Sept. 11 attacks for approximately $500,000, according to the 9/11 Commission report. By the end of fiscal 2011 the U.S. will have spent $1.3 trillion, or 9% of the national debt, fighting the wars in Afghanistan and Iraq according to the Center for Defense Information.

But when it's all said and done the total cost of the wars will make Bin Laden's 2,514,000:1 return at the time of his death multiply dramatically. It has been projected by Nobel prize winning economist Joseph Stiglitz and others that the lifetime cost of the Iraq and Afghanistan wars will run to approximately $3 trillion, or over 20% of current federal public debt, when long-term medical care for the wounded and other costs are factored.

Bringing Bin Laden at long last to justice represents a real victory, and since 9/11 Al Qaeda has not executed a successful terrorist attack on American soil. However, in assessing the economic war Al Qaeda has conducted against the U.S. one can't help but conclude that Osama bin Laden has received fantastic bang-for-the-buck.

Meet the New Boss. Same as the Old Boss
“We, alongside the mujahedeen,” bin Laden was reported to have said in a speech delivered right before the 2004 presidential election, “bled Russia for 10 years until it went bankrupt and was forced to withdraw [from Afghanistan] in defeat. So we are continuing this policy in bleeding America to the point of bankruptcy.”

“Every dollar of al-Qaida defeated a million dollars, by the permission of Allah, besides the loss of a huge number of jobs,” he added.

How Do You Bring Down the Most Powerful Nation in History?

In his biographies of the Rothschild banking dynasty, as well as The Cash Nexus and The Ascent of Money, Harvard Professor Niall Ferguson makes a strong case that a nation's ability to borrow in the bond market is a reflection, and perhaps key wellspring, of the state's power.

For example, the British Empire's ability to borrow more, and at cheaper rates of interest, was key in its defeat of Napoleonic France. In contrast, her crippling post-WWII debt signaled the dawning of a new era for Britain which consisted of economic malaise, military impotency, and periods of currency instability which resulted in dramatic devaluations of pound sterling in both 1949 and 1967.

Today the U.S. Treasury market is the deepest, most liquid bond market in the world. It also serves as a cornerstone of the U.S. dollar's privileged reserve currency status. In times of panic, as we saw in the 2008 financial crisis, the world flees other assets for U.S. dollar denominated securities such as T-bills.

Whether or not the U.S.'s bond market is in fact the key pillar of American power is open to debate. What is irrefutable, however, is that displacing the dominant role played by the U.S. dollar and treasuries in the world's financial system would deal a huge, perhaps even mortal, blow to what remains of America's hegemonic power.

There are perhaps several different approaches, but one surefire way to weaken a nation state's currency and ability to borrow is for its government to run persistently large deficits, just as the U.S. has done for the past decade.

Whether Osama bin Laden's original aim for 9/11 was to entice America into engaging in protracted and costly Eurasian wars is revisionist history or fact is unclear. Regardless, Al Qaeda deserves at lease some of the credit for the U.S.'s large deficits, crippling debt load, and weakening currency.

In short, how the financial blow struck by Bin Laden and Al-Qaida will play out over the long-term for the U.S. remains to be seen.