Yesterday, we took a walk in Central Park. Instead of going the usual route, we turned north and saw some beautiful hilly areas of the park we had never seen before, that were by comparison deserted because 96th Street is an invisible line across which people don’t tend to go. We were just a few blocks away from our apartments but could as well just have been in another country. One of the wacky but great things about New York. Don’t be afraid to change directions once in a while!

OK, now to the rest of our so-happy world. This edition is primarily concerned with guidance for future planning. 

Asia

China really cares about low oil prices. They wanted the Iraq war to start earlier because the pre-war spike in prices was hurting their economy. SARS is China’s 9/11; in the long-range it is a welcome development because it is a wake-up to their antiquated health system and secretive government that what was tolerable in the past will no longer work. There is a serious crisis in confidence because the bond that government would take care of the basic needs of people has been put into doubt as people no longer trust the government’s word but increasingly take matters into their own hands. SARS is also affecting the rest of the world’s trust of anything Chinese and the end result is the government’s worst nightmare – higher unemployment leading to greater likelihood of civil unrest. All things being equal, the new head of state is consolidating his power according to standard operating procedure and the previous leader will be phased out over the next few years.

China wants the U.S. to take the lead in dealing with North Korea and it will privately not be hostile to any military campaign nor view it as a dangerous precedent with regard to Taiwan. This is a view that includes both the military and political leadership. China’s main concern is a flow of refugees over its borders and this is what American planners must take into consideration in order to keep the Chinese happy. This is important guidance because it was reported properly here a year ago that China would view a U.S. military campaign in Iraq as a domestic American affair and stay out of it.

The Americans have a tough decision to make; either make a stand on Korea or watch as Korea and Iran develop the bomb and then blackmail the Americans to tolerate their regimes. This of course will let all future Iraqs know that developing the bomb is critical to getting the best of the U.S. The Americans need to deal with North Korea and I don’t know yet that any decisions have been made; Iran is different and will be discussed later. The best information I have as to North Korea is that the Americans will try and control what kind of technology leaves North Korea and to do its best to isolate the country and hope that it collapses from within, even if it takes 10 years. The Americans don’t want to do the Chinese’ dirty work for them, assuming that China will do what it has to do in order to prevent the Japanese from starting a nuclear program. Last month, the Chinese showed it could help by shutting off North Korean oil for a few days in order to get the Koreans to the talks in Beijing. North Korea won’t last a week if China lets go of it. There is no chance of the U.S. trading anything for what the North Koreans promised to do in 1994 and reneged upon. No blackmailing Team Bush.

Syria

The operative word of policy is Behavior Modification, not Regime Change. The U.S. does not intend and does not need to invade Syria. Assad is a two-bit dictator who is not worth the effort. It is hoped that shaking him up will cause enough change from within. Nevertheless, Washington is making it clear that it does not intend to be thwarted by the likes of a Bashar Assad. While Assad for now is trying to throw bones in order to get the Americans off his back, even Arabists of Western countries have been letting Syria’s diplomatic representation know that major changes are absolutely necessary if Syria expects anything except hostility from the U.S. Tom Lantos, an important congressman, was in Damascus last week and reports a more subdued Assad than he has seen before.

The view of Bashar is that he is saddled with baggage (the deal his father didn’t make) and old advisors. Last year Abdullah of Jordan invited him to join a panel of young Middle East leaders in Davos and at the UN Millennium summit and Assad agreed, only to pull out after his advisors balked. Assad sent Sharon a private message last week, for the first time since Sharon took office. 

Jordanians are now openly derisive of Syria and are no longer afraid of that country. 

Here’s a fact I dug up based on an eyewitness account of the Clinton / Assad Sr. meeting in Geneva who was also at the talks that preceded the meeting. Clinton overpromised Assad that the Israelis would withdraw to a “mutually agreed upon” line that, to the Syrians, meant the shore of the Lake of Galilee. It is not clear that Clinton fully understood the issue because the international armistice line is not what the Syrians wanted; they wanted a line about 300 meters further in that they had encroached onto between 1948 and 1967. What is clear is that when Hafez Assad got to Geneva and saw that the line was 300 meters away from what he was expecting, he walked out. Barak wouldn’t give the extra 300 meters because his polls showed that the Israeli public wouldn’t swallow the Syrians reaching the shoreline. In any event, the Golan issue is clearly within the range of solution and Assad Sr. didn’t do his son any great favor by saddling him with the obligation to agree about it instead of Hussein who did the hard part and left his son to implement it and turn his focus to the Jordanian economy with his Jordan First program.

Jordan

The King’s Jordan First program is succeeding. The economy is improving and the country is getting a real peace dividend with the U.S. via Israel and the Qualified Industrial (trade) Zones. Trade is up from $15 million per year about 5 years ago to over $400 million per year. Over 30,000 jobs were created through the QIZ and Jordanian courts last year ruled that it was illegal for trade unions to blacklist members who did business with Israel. Clearly, that ruling was based on union leaders being from the old school who were resisting change and not bowing to the economic interest that indeed a peace dividend existed that could not be ignored except at the cost to Jordanians in their pocketbooks. Where the king is weak is in holding hands and sitting down to eat with tribal leaders around the country who feel his father did a better job in this department and sucked up to them more. Queen Rania is a big asset to the king.

Egypt

Mubarak continues to rule from under the table, having gotten his job by ducking for cover when Sadat was shot. Mubarak shows no guts, but no adventurous streak either, which at least makes him predictable. Arafat called a spade a spade; when a European diplomat brought him a letter from Mubarak urging change, he said I’ll take it seriously when I see him say it in Arabic to his own people. No serious opposition to Mubarak is anticipated any time soon; Mubarak sees himself as a Pharaoh whose job it is to name his successor. Even though a human rights activist recently was released from jail after being there for several years for criticizing Mubarak’s succession plans (the release came the day the US offensive started in Iraq), the experience was enough to deter others.

Shift Toward Bilateralism and away from Multilateralism

Given frustration with the UN and “Old Europe,” America is moving toward a new policy based on bilateral agreements instead of broad multilateral coalitions that have hamstrung initiative or been used as a filibuster to keep America in check for its own sake. This explains why bases are being set up in Hungary, Bulgaria, Romania, Qatar and the various Central Asian republics and are being removed from France, Germany, Turkey and Saudi Arabia. Old partners who fought the Soviets and who are no longer finding themselves aligned with the U.S. are being dumped in favor of countries who share present interests aligned with the U.S. This is overdue and has taken a decade because it is the first time since the Cold War that the various alliances were tested to see if they were of practical effect. Historically, international unions that required unanimity were not success stories and various organizations such as the EEC, Arab League and the GCC need to re-examine whether or not these quasi-fictions should be preserved in light of the fact that individual nations have interests and whether the quest for Unity and Consensus has provided too much of an escape from the need to pursue Responsibility and Accountability by individual countries.

The War on Terror: Who’s Winning?

Point for Bin Laden. The Americans are leaving Saudi Arabia. However, even before Bin Laden struck, I recommended the Americans find a better ally after visiting this place. Nobody else in 1999 thought the Americans could or would walk out on the Saudis. You know that the Saudis cannot expect to survive now without making real changes because their protection is going away and their oil is not a good enough reason to keep America supporting its royal mafia. You read it first on Global Thoughts in 1999.

Game point for America. The Americans now have been welcomed warmly to set up bases all over the world in places we couldn’t pronounce 2 years ago (and still can’t spell). There is a sense in America that we are, for the first time in 30 years, on the right track around the world and that the funk surrounding the nation’s mission and military is over. In my first writing after 9/11, I predicted that a sleeping giant has been awoken, that after a learning curve it will get its act together and ultimately lead to a Big Bang in the Arab World that would result in unforeseen profound changes. It is too early to see who gets the Match Point, but consider the changes in India & Pakistan (restoration of diplomatic relations), Iran, Syria, North Korea, Saudi Arabia and elsewhere since the American military offensive got underway.

According to my best information, Bin Laden is in Pakistan near the border, and Saddam is still in or near Baghdad and was about 70 feet away from the building that was bombed toward the end of the war and would have been hit had the Americans been given better intelligence as to which building he was in because the bombs did hit their intended targets. The Americans know quite a bit about where Iraq’s senior leadership is. A good number of them wound up in a 4 star hotel in Damascus and it is no coincidence that a number of them who escaped to Syria have been “caught” just over the border back in Iraq. It is not rocket science these days to get good information about what is going on; it is more of a question of what is being published. The Americans are not keen to let the word out that Saddam’s generals negotiated surrenders; they prefer Arabs to think they were defeated lest others think that they could do a better job of defeating the Americans. The interesting hunt right now is for the cash that went into Syria, Lebanon and Jordan. Museum artifacts are being found by customs officials, and it turns out that most of the national treasures were hidden away at the start of the war so that looters couldn’t get to them.

Post-War Iraq

The information published in Global Thoughts a month ago about Rumsfeld’s frustration with the army brass has been proven correct because I also predicted that heads would roll in response, and they have since then.

I’m a bit surprised that the Americans appear to have done less post-Iraq-war planning than I thought. I am OK with the fact that there was an initial void in Baghdad because the war ended faster than people expected and the city had combat soldiers instead of peace-keepers at the ready, but the roll-out of rebuilding plans has been rather slow and early versions that were presumably prepared by the Pentagon are being switched with other programs and personnel.

A word about France. Remember what I said a few months ago, that evidence would embarrass the French about what they were doing. The word is that investigators are coming across evidence of very large cash payments to influential Frenchies from the Iraqis. It has already reached the major newspapers that the Iraqis were paying a prominent British parliamentarian about $650,000 per year which helps explain why he was doing all these TV interviews saying such nice things about Saddam (he has since been suspended). Just wait and see what comes out in the months ahead.

This guy Chalabi has the goods on lots of Arabs in the region; for instance he’s got files on Jordanian royalty and their profitable deals with Saddam and lists of Al-Jazeera reporters who were informants to Iraqi intelligence. He is dangerous to Arab leaders in the region who do not want people to know what kind of payola they took from Iraq and others. He will use this information against those who wish to prevent him from reaching his ambitions to have a major role in Iraq and obviously the U.S. wants him and his friends to be in a powerful position since the Pentagon and people such as Cheney are backing him. There will obviously be attempts to get rid of him.

So Saddam’s son heisted a billion dollars from the central bank and people are looking for the loot. Guess it’s just a matter of time before he gets on the Republican National Committee’s mailing list for fundraising letters. “Dear Qusay: We would like to invite you to be a Special Advisor to the President...”

Some good news; I am talking to people in the Middle East today who were in a rather bad mood a month ago. They seem to be cheering up and have moved into the “Let’s Do Some Business” mode. As long as the U.S. doesn’t look like it’s going on the rampage (ie: invading Syria), there is a wait and see and hope-things-go-all-right feeling right now.

The Media: Shift in Tone

CNN and MSNBC have shifted their tone to be more like FOX. That means a bit more jingoistic and a bit less impartial. The reason is ratings and in this down economy CNN had to change to survive. Americans don’t want to hear news from the BBC (nicknamed the Baghdad Broadcasting Corporation) or anything that questions their mission and the Beeb can continue doing this because they are not dependent on commercials for revenues. Arabs like Al-Jazeerah; Americans like Fox. No surprise there.

Israel / Palestine

Sharon is happy to hit hard at Hamas, agitate them and egg them on to retaliate to create bigger headaches for the Palestinian Authority, which he hopes will disappear anyway. Abu Mazen is having a problem; Arafat is blocking Dahlan as interior minister even though he had agreed to this a few weeks ago, and Abu Mazen is not going to look like he’s a prime minister in control over anything if Arafat retains control of the security apparatus.

America will tell Europe that the admission price to getting back into the Middle East game is their cooperation in freezing Arafat out. Sharon has decided not to kill or expel him because the diplomatic cost would be too high (ie: he’d have to offer the surviving Abu Mazen a better diplomatic plan), but to let him instead rot into irrelevancy. People such as Germany’s Foreign Minister Fischker will be urged to say publicly what they say privately about Arafat. There is almost zero probability that Arafat will be allowed foreign travel; the Jordanians say they don’t want him to come there and tell them a thousand lies to their faces, and the Egyptians have said they don’t want him either. The New York Times may soon publish an editorial urging the Europeans to join in the freeze.

Europe has an image problem in the Bush administration and in Israel: It is perceived as feeling colonial guilt, viewing Israel as the source of all evil in the Middle East, afraid of its increasing Moslem population and generally being anti-semitic. In Belgium, a very radical Moslem has become quite popular. The feeling is that if France and Germany couldn’t support the U.S. on what the U.S. felt was a matter of national security (Iraq), how could Israel possibly trust the Europeans with its security? If the Europeans can’t surmount this, they will find themselves without leverage in this conflict.

It is a good sign that the Palestinian legislature has been rebuffing Arafat. It is a ground-level indication of a growing acceptance in their eyes of a division between Arafat as a symbol and Abu Mazen, the head of state. Abu Mazen is not popular but will become popular if he can deliver goods. Sharon is intrigued by Abu Mazen and will try to work with him, at least to some extent. Israeli public opinion and its leadership want to see Abu Mazen do two things: Discredit rejectionists as being illegitimate and take action against them, not just say he condemns what they do.  Shortly after Israel was established, Ben Gurion sunk a ship of the Irgun militia named the Alta Lena that resulted in deaths among those aboard. It was a painful event but it set forth the precedent in Israel that private militias were illegal and that the country would have unity of government and force. There is a sense that the Palestinians need to go through their own Alta Lena in order to achieve this and create the basis of a true national entity.

Arafat would rather have Abu Mazen fail. The road map isn’t going anywhere and Arafat figures he’ll let Abu Mazen twist in the wind and himself become more relevant after people tire of him and view him as an American-Israeli puppet. A few potshots at Arafat based on new information from good human intelligence. Saudi Prince Bandar said recently that Arafat’s refusal to sign with Clinton was “criminal.” A person who met with Arafat said to his face that he was a failure for having brought his people nothing and didn’t he care that people were dying in the Intifadah. Arafat flicked his wrist and said to him “10,000 people is nothing – they are martyrs.” He told Wahid of Indonesia last year “There is no reason to sign with the Israelis; they won’t be around in 100 years.” The flick of the wrist and the comment about 10,000 in addition to several other meetings led my source to the conclusion that Arafat sees himself as the State and success for him is not in what he can achieve but in what he can manage not to give away. More than anything, he does not want to be remembered as the man who sold out to Israel.

Sharon has said a few things lately that normally would go down as heresy. He has said that places such as Shiloh, Beit El and Bethlehem might have to be given up. He said peace was necessary for Israeli economic progress. Sharon wants Labor back in the government and Labor wants to be back in power. Mitzna had integrity and refused; he just resigned as party chief and this gives you an indication of where things will go. Sharon might not be the person to make a comprehensive peace but he is considered to be a person who could agree to incremental steps that would lead to a comprehensive agreement after his successor then comes to power. Labor won’t elect a new chair for a year because nobody even wants the job except Peres and that would ensure for years that nobody new rises to the top which is suicide for the party. 

Sharon has power and is going to be around for a while. Whether or not Arafat will be around, it is clear that the Palestinians are not benefitting from the status quo. It is most productive to try and make some kind of arrangement with Sharon; a “truce” goes down badly among Israelis, even if it is the most likely result. An interim agreement is the same thing by another name and this is the best bet for now. Syria, however, could reach a final deal with Sharon.

One thing has changed in the Arab world these past few years – Al Jazeerah puts pictures of Palestinians onto everyone’s TV’s and the leaders of the various countries cannot ignore what their citizens are watching. They want this conflict finished as soon as possible because their citizens want to know why their governments aren’t doing anything about it. However, as David Makovsky says “If you want engagement, then go out and get an engagement ring” (meaning the various countries have to help make things happen, not just pass resolutions and wait for the US to do all the work.) Also, sometimes the lack of engagement results in the greater possibility of engagement (ie: freezing out Arafat to bring about Abu Mazen and a new start). 

In general, things are moving in the right direction. Problems are being spoken about and not being swept under the rug, and people are being held accountable, making dictators nervous.

Iran

The problem here is that the Iranian nuclear program is so far advanced that it can run without any additional help from third countries. It is also well protected so that it cannot be stopped from the outside. The Americans don’t view Iran as an irresponsible party, the Israelis have second-strike nuclear capability and in any event it is assumed that within a few years the Iranians will undergo a change of regime and become less hostile to the U.S. and Israel. It is also assumed that Iran should be expected to be a nuclear power because it is too large a country in a wacky region not to be. The fact that it now for all intents and purposes borders a U.S. territory is likely to facilitate change inside Iran more so than Iran will effect change inside Iraq. 75% of Iranians want relations with the U.S.

The subtleties of Shiite politics are there for those who want to know them in the American press and the Americans are no longer quite the ignoramuses they have tended to be (though that isn’t saying much). The Americans and Iranians both understand that Iran is playing with an Iraqi scorpion that could bite its master in Iran as well as in Iraq because historically Iraq, not Iran, has been the agent of Shiite theology and because the Khomeini version of a theocracy is not where Iraq finds itself most comfortable and is itself a modern experiment in Iran that has been discredited. Strangely enough, the conservative factions in Iran have more of an interest in cooperating with George Bush right now to keep the reformists at bay. It is an interesting circumstance that is developing and bears watching.

Turkey

The generals have not been enjoying the Islamic party in power running the government into the ground and costing the country billions of dollars in U.S. aid and influence over Iraq because it stood on the sidelines during the war. The country might well go bankrupt during the summer. Tensions have been bubbling over during the past few weeks and it is not inconceivable that the generals will stage a coup and throw out the civilian government. It is not clear whether or not the generals stayed out of the politics just before the war in order to let this government self-destruct. So far it seems more likely that they want to scare them, not throw them out or at least set the stage for what might happen if and when the country does go bankrupt. The fact that Turks in Cyprus are moving toward reconciliation does not bother the generals; Cyprus as a Turkish interest was abandoned several years ago according to Global Thoughts in October 2001 and it was more a matter of getting the Turkish leadership on the island to get with the program because it was clear that the Turks on the mainland as well as the Turks on the island wanted the conflict and subsidy to end.

Japan: Camper of the Month Award goes to Koizumi

Koizumi has been a good camper, going out of his way throughout this war and afterward to show patronage to Bush and Blair. He knows that he needs them to deal with North Korea.

Argentina

Yes, here’s something for you southerners. The country’s runoff election is 18 May. Kirchner is my favorite to win; Menem’s negatives are close to 60% and that makes him unelectable.

Markets

I still am afraid to give Buy recommendations. Some companies are reporting profits but few companies are spending money; the profits are from cost-cutting and layoffs. I am more into indexes than individual stocks. There are still problems with the American economy and the post-war optimism isn’t enough. Fortunately, the fear of terrorism is beginning to subside as Americans feel they now have terrorists on the run. Unfortunately, it only takes a few people to make terrorism and the incentive to act now is greatest, as I wrote a month ago. So I shall wait and see a bit more before buying. The reality here in New York is that rents are down, taxes are up, and all kinds of businesses are hurting. In the U.S. people are dropping out of the job market after being unemployed for over a year and having their benefits run out. It is not a good time and I personally think the Republican program of tax cuts is irresponsible though irresistible. The Euro has continued its rise against the Dollar and the Economist (10 May) makes some strong arguments that it will continue to rise, even to $1.60 this year.

Eyeglass Cleaner Tip for Traveling

Here’s some news you can really use, if you wear eyeglasses. I get frustrated cleaning them. I’ve tried dishwasher detergent and Windex glass cleaner with Bounty paper towels. But neither of these things work well for travel. A company called Quality Accessories of Munster, Indiana makes a Lens Cleaner that is a shpritzer in a small 1 oz. bottle that cleans them well and is suitable for travel. You still need a paper towel or cloth but this at least is a liquid that cleans.