In the past I’ve tried my best to describe the history that underpins current issues within the Middle East, while at other times I’ve attempted to summarize the ethnic and sectarian politics in specific countries like Syria. Now, I would like to focus more specifically on the intersection of political ideology, sectarianism, and the new regional rivalry between Iran and Saudi Arabia that has dominated coverage of the region. My goal is to illuminate the apparently intractable sectarian conflict in the region and help to contextualize the recent conflict in the Middle East.

The rivalry between Saudi Arabia and Iran was brought into sharp relief when the Saudi Royal family executed Nimr Baqr al-Nimr, a prominent Shi’a activist and critic of the the Saudi monarchy, which precipitated an angry crowd sacking the Saudi embassy in Tehran. Much has been made over the interminable origin of this recent spat between predominantly Sunni Saudi Arabia and Shi’a Iran. It’s tempting to see the conflict between these two nations as part of an ancient rivalry between divisions in Islam, but as I’ve written in the past, the origins of this conflict are actually quite recent, and are the product of changing political ideologies and regional politics rather than religion itself.

The Middle East has undergone a series of transformations over the past century that have helped shape the current conflict today. Notably, many of the current boundaries of the region are the product of an agreement between great powers at the conclusion of WWI. The Sykes-Picot Agreement helped establish many of the Arab states today: Syria and Lebanon were partitioned by the French mandate, partially with the goal of creating a majority-Christian homeland in Lebanon. Israel/Palestine, Jordan, and Iraq were all administered by the British, who had their own designs on the territories they controlled. While some boundaries were drawn with religion in mind, most were the result of negotiations with France and the newly independent Turkey or even the odd hiccup. Beyond the geography witnessing upheaval, the political ideology of the region has witnessed remarkable change in the past century as well.
mandate
(Source)

These mandates did not remain under European patronage for long; by 1954 countries in the region sought legitimacy not from outside powers but from within. While religion remained important in social life, it did not form the ideological foundation of these new states. Countries were divided between hereditary monarchies and republics who derived legitimacy their from various revolutionary ideologies, often based on ethnic nationalism. During this time both Iran and Saudi Arabia were monarchies and were aligned with the West, which limited their competition with each other.

Instead, the Saudis were coping with the rise of Arab nationalism and its revolutionary proponents. Charismatic leaders like Gamal abdul-Nasser captivated mainstream Arab thought with a mixture of socialist economics and a pledge to unite the disparate Arab states against Israel. By 1967 the Saudi kingdom had seen Egyptian, Syrian, Iraqi, North Yemeni, and Libyan monarchies all fall to republican revolutions. Saudi Arabia resisted the spread of Arab Republican movements both politically and militarily, sending troops into North Yemen to support the monarchy there; this was the beginning of the little known Arab Cold War, where monarchies and Arab Republics competed for regional influence. But Nasser’s rise would be cut short, and with it his associated political vision.

When Nasser demanded that UN peacekeepers withdraw from the Sinai Peninsula in June of 1967, it precipitated a major confrontation between the Arab world and Israel, which proved disastrous for both the Egyptian state and for the secular ideology that underpinned it. In less than one week the armies of Egypt, Syria, Lebanon, Jordan, and (to a lesser extent) Iraq were defeated by Israel. Egypt’s entire air force was wiped out in a matter of days and more than 10,000 Egyptian troops lost their lives. In addition to the crippling military defeat, Israel was now in control of the remaining 22% of Palestine, including Jerusalem. The loss marked the beginning of the end of Arab nationalism’s eminence in political thought. While all of this was happening in the Arab world, Iran was facing its own political transformation.

Just as the Arab states were subject to Western influence at the end of the First World War, Iran too was the victim of power politics. For over a century Iran was the front line in the so-called Great Game, a geopolitical rivalry between the British and Russian empires. The Bolshevik revolution dramatically altered this rivalry and turned Iran in a major faultline in the Cold War. The British and US saw Iran as a front-line that separated the Soviet Union from the Middle East, and as such they went to great lengths to prop up its monarchy, led by Mohammad Reza Shah Pahlavi.

Though it was a monarchy, Iran’s political system was more open than Saudi Arabia’s and the legislature (Majles) was able to appoint a prime minister with some executive powers. In 1951 the Majles appointed Mohammad Mossadegh as Prime Minister, who instituted a variety of progressive reforms including nationalizing the then British-controlled oil industry. This angered the British and precipitated a CIA and MI6 led-overthrow of the government, with the acquiescence of the Shah. To reward the monarchy for its support in the coup and favorable energy policies, the US bankrolled the regime and helped establish the SAVAK, a brutal secret police force and security service that acted to silence opponents of the monarchy.

This betrayal of democratic values led to a growing disdain for the regime and its Western allies, which would eventually boil over in the revolution of 1979. Not all of the activists in this revolution were Islamists, but the leadership of Ruhollah Khomeini proved irresistible to the other political factions. By 1982 the Islamists aligned with the Supreme leader had crushed the internal opposition and consolidated power. The ideological basis for this revolution was overtly religious, based largely on Khomeini’s concept of Velayat-e faqih (Guardians of the Jurist). The State would be led by a jurist or Supreme Leader, a pious religious figure who would preside over a complex arrangement of elected and unelected leaders. While the basis of this revolutionary state was centered on Shi’a Islam, its consequences have altered both the geopolitical and the ideological landscape of the entire region.

The new regime began to export its revolution almost immediately, using the newly-formed Revolutionary Guards, the armed wing of the revolution to support movements modeled after their own. This included sending forces to southern Lebanon (where they essentially created Hezbollah and empowered the beleaguered Shi’a community), funding and supporting Shi’a insurgents in Iraq during Saddam’s rule, and inspiring and allegedly supporting insurgents in Saudi Arabia’s predominantly Shi’a Eastern Province.  The revolution also marked the beginning of several events which upset the sectarian balance of power in the region.
ShiasReligionCore_lg(Source: Dr. Izady, Gulf/2000)

Shortly after rising to power in Iran, the Islamist regime was invaded by Saddam Hussein’s Iraq, thus beginning an eight year conflict which would claim hundreds of thousands of lives and create immeasurable suffering. This war posed a challenge for Saudi Arabia, as it had frosty relations with Saddam’s Ba’athist republic but even worse relations with the revolutionaries in Tehran; it sided with Iraq and heavily funded its military campaign. Syria was one of the only regional actors to support Iran in this conflict, which produced a lasting connection between the two regimes. As the war drug on, Iraq became increasingly dependent on support from its Sunni neighbors, which did not go unnoticed in Tehran. Eventually the war ended in a stalemate and Iraq was so devastated by it that Saddam sought recourse by invading Kuwait. This led to both Iran and Iraq becoming isolated in the 1990s in the region and also by the US under the policy of dual containment.

The end of the Iran-Iraq war (1988) and the settlement that ended Lebanon’s civil war (1989) helped to de-escalate the rivalry between Sunni states and Iran in the 1990s, though tensions remained high. Iran continued its support for Hezbollah in Lebanon, while Saudi Arabia and the its Gulf allies supported the Sunni community there, which was given a stronger political role after the civil war ended. Sunni Arabs continued to dominate government and military posts in Saddam’s regime, but the country was isolated by its neighbors over its invasion of Kuwait. This period of calm and equilibrium was upset by two key events which brought the regional politics of sectarianism into sharp relief.

When the US invaded Iraq in 2003, it may have gotten rid of a republican regime that was disliked by Saudis, but it also dramatically altered Iran’s position in the region. Iraq’s Arab Shi’a majority had long been ruled by a regime that favored Sunni Arabs, but the invasion reversed this and empowered leaders of the Shi’a community who had long connections with Iran. Saudi Arabia has expressed disapproval with Baghdad’s sectarian policies and its close relationship with Iran, and relations between the two states remain strained.

Shortly after the invasion of Iraq, Lebanon’s delicate political arrangement was also thrown into disarray; on February 14, 2005 Rafik Hariri, the Sunni Prime Minister, was assassinated in a massive bomb blast. Hariri was seen as a close ally of the West and the Saudi Kingdom, and he was actually a Saudi dual-national. Syria and Iranian-backed Hezbollah were widely suspected of being responsible for the attack, and on March 8th and March 14th there were massive protests in support of and opposition to Syria’s intervention into Lebanese politics. Lebanese political parties are now divided into two major blocs, the pro-Syrian/Iranian March 8th Alliance and the pro-Saudi and pro-Western March 14th Alliance. Religion plays an important role in support for either bloc: the March 8th Alliance is dominant Shi’a regions, while the March 14th Alliance receives most Sunni votes, Christians are split. The pro-Syrian/Iranian March 8th Alliance currently controls government, to the irritation of Saudi Arabia. The Saudi Kingdom sees both Iraq and Lebanon as areas of conflict with Iran where it has lost ground recently, which has compounded its response to civil wars in Syria and Yemen.

syrian demographics, updatedAs I have written about Syria before I will limit my description of the conflict there. The Assad regime in Syria was one of the first Arab states to support the revolutionary government in Iran and has been a consistent ally ever since. Iran’s support for the Assad regime has been associated with the sectarian nature of the Syrian government, which is dominated by followers of the Alawite community. Alawites are adherents of the Twelver sect of Shi’a Islam but also have their own unique practices. Before the start of the civil war, Sunni Arabs (the largest group in Syria) were included in many government posts, but the increasingly brutal conflict has all but eliminated their role in the government. But Iran’s support for the regime has more to do with regional politics than religion. Syria borders Israel and Lebanon, and is closely linked to Hezbollah, a group of such geopolitical importance that it is often called Iran’s aircraft carrier in the Mediterranean. For Iran, losing Damascus could mean losing an important strategic alliance. Saudi Arabia, for its part has been arming Syrian rebels under the banner of Sunni political Islam; these militias not only battle the Assad regime, but also fight the al-Nusra Front and Islamic State, who similarly draw support from the Sunni Arab community. As the Assad regime was an ally to Iran, one could argue that Saudi Arabia is looking to enhance its influence here while Iran seeks to maintain the status quo. Syrian_civil_war
(Military situation in the Syrian Civil War as of February 1, 2016. Source)

For most of its history Yemen been dogged by instability and a lack of national unity. For much of the last century it was divided between the US-backed Yemen Arab Republic in the north and the Soviet-backed People’s Democratic Republic of Yemen in the south. After the fall of the Soviet Union the two countries were unified but conflict between the north and south soon arose. The southern rebels were put down violently by president Ali Abdullah Saleh, who consolidated power and continued to rule with an iron fist, including by in a decade-long conflict with the Shi’a Houthi rebels. The Houthis (named after their spiritual leader) are a rebel group in Yemen that draws on support from Zaidis in northern Yemen, where they are concentrated. Zaidis are fellow Shi’a Muslims but follow a different jurisprudence than the Alawites in Syria or the Twelvers in Iran, and the community has long criticized its treatment by the central government in Iran.

In 2011 president Saleh faced a popular uprising similar to those seen in Egypt and Tunisia and in short time he had fled to Saudi Arabia. His replacement, Abd Rabbuh Mansur Hadi faced the unenviable task of uniting the disparate regions of the country while also battling an active insurgency by al-Qaeda in the Arabian Peninsula. This task became insurmountable when the Houthis united with pro-Saleh Sunni tribes in the north in a bid to overthrow the Hadi regime in 2014. In short time the capital Sana’a was overrun, forcing Hadi to dissolve parliament and flee to the southern capital Aden. The Saudi Kingdom has long accused Iran of backing the Houthis (though little has been substantiated) and perhaps because of this, it has responded very aggressively to the fall of Sana’a to the Houthis, waging an expansive military campaign in the country. In a way, Yemen acts as a good example of the security dilemma facing Saudi Arabia and Iran: just as Iran fears losing influence in Syria, Saudi Arabia fears losing influence in Yemen, both have responded to these fears with military escalations.
Yemen_war_detailed_map
(Situation as of 3 February 2016: Red = Controlled by the Hadi government and the Southern Movement, Green = Controlled by Houthis, White = Controlled by Ansar al-Sharia/AQAP forces, Grey = Controlled by Islamic State. Source)

Both Yemen and Syria were republican states that were heavily criticized for their oppressive and corrupt practices; it is little surprise that they’re facing internal conflict now. One of the biggest drivers of instability in the Middle East has been the failure of revolutionary Arab Republics to deliver meaningful improvements in the lives of their citizens. Unlike the monarchies which can claim historic and religious ties to their governance, Arab Republics only ever had their own record to rely on for legitimacy. Arab Republics have by far been the biggest victims of revolution and instability since the beginning of the Arab Spring in 2011.

Yemen, Syria, Iraq, Egypt, Libya and Tunisia have all seen their regimes either toppled or fighting for their life in the new Middle East. These regimes all started out as revolutionary republics that promised to transform economic and political fortunes of their citizens but failed in a variety of ways. They quickly morphed into repressive dictatorships with sprawling bureaucracies designed to suppress dissent. State terror is so common throughout the region that all Arabs share common word for Secret Police: the feared Mukhabarat. Arab Republics not only failed to create space for political expression but also failed to improve their economies. In 1960 Egypt and South Korea had similarly sized economies and populations; they aren’t even in the same category of development today. Iran and Saudi Arabia themselves have similarly repressive state structures (the Baseej in Iran and the Mabahith in the Saudi Kingdom) but their legitimacy hasn’t been as thoroughly shaken as the Arab Republics have been. The collapse of Arab Republics both as effective states and as a political model has helped to create the power vacuum we see today, where Iran and Saudi Arabia fight to enhance their influence both militarily and ideologically. 

MiddlEast map with labels.png

It is my opinion that neither side will be successful in defeating the other through ideology or military power. Iran’s influence outside the Shi’a community has been limited, as evidenced by its complicated relationship with the Sunni Palestinian group Hamas. But Saudi Arabia faces its own obstacles: by bankrolling Abdel Fattah el-Sisi’s regime in Egypt and helping to crush of the Muslim Brotherhood there the Saudi Kingdom has alienated many mainstream Sunnis and potential allies against Iran like Qatar and Turkey. Saudi Arabia has long relied on US support, but this been strained by the recent nuclear accord with Iran and fears that the US wants to enter into closer relations with Iran. These fears aren’t entirely unfounded as the US and Iran share a strategic interest in defeating Islamic State, which Saudi Arabia is less willing to confront. Yet Iran has also alienated potential allies through its aggressive intervention in Syria and Iraq.

Unfortunately for the people of living in these areas of conflict, it seems unlikely that this rivalry between Saudi Arabia and Iran will end anytime soon. In Syria the conflict rages on while the Vienna peace talks have been suspended after a hopelessly fragmented opposition failed to agree on what representatives to send; meanwhile the most effective opposition groups (al-Nusra and IS) aren’t even participants. The powers that are participating in the Syrian civil war (including Saudi Arabia and Iran) seem totally willing to continue supporting belligerents there.

A major factor that pushes each side toward a continuation of conflict is the imbalance between perceptions of power and actual power in Saudi Arabia and Iran. Iran’s opening with the West over its nuclear program will certainly lift its economy, and it was already one of the largest economic centers in the region. It already has a longstanding history of successfully intervening in other countries in the region through the IRGC, which is as old as the Iranian revolution itself. Saudi Arabia, on the other hand, has a massive supply of foreign-exchange reserves and a modern (and expensive) military. And yet both of these countries view themselves as under threat by the other. It is this imbalance between perceived power and actual power that I believe will lead to a continuation in their regional conflict in the near future.

I have been conflicted over writing a followup post to my original blog written in 2012 (eek!). Many aspects of the conflict have changed since then and they have been mostly been for the worse. In addition to these negative updates, events have unfolded at break-neck pace: not long ago ISIS (now Islamic State) operated in a small section of eastern Syria and western Iraq. The fast-changing and often grim news emanating from the region put me off of writing more about it. The barbaric execution of Western journalists and aid workers and other recent events in Iraq and Syria have compelled me to write an updated blog about the situation there. My goal in this blog is to explain some of the historical causes for the recent outbreak of violence, but also to try to elucidate the broader ideological and geopolitical conflicts that are currently taking place throughout the region. Why are some parts of Iraq and Syria aligning with IS while others resist?

For many it will not be news that the sectarian divide among Sunni and Shia muslims predates the existing conflict by a long mark. The way the media has portrayed this conflict as both ancient and interminable (just as the Arab-Israeli conflict is portrayed) is too simplistic and ignores the relatively modern origins of the regional conflict taking place now. The schism between Shia and Sunni Islam is rooted in a disagreement over who should govern muslim world after the death of Muhammad, and thus the schism in Islam is as old as the religion itself. But while the two communities had a violent confrontation in their early history (more here) there was also a long period of coexistence and a status as co-religionists. Perhaps the biggest historical event to change this status was the conversion of the Safavid Dynasty (1501 to 1722) to Shia Islam. This conversion turned a theological dispute into a geopolitical conflict, as the Safavid empire fought a series of wars with Sunni empires such as the Ottomans and the Mughals. Even after the dissolution of these empires and the formation of modern nation states, their legacy remains:

Map_Safavid_persia

(source)

FT_14.06.17_ShiaSunni

(source)

Beyond converting what is now Iran to Shia Islam, the Safavid empire also (forcibly) converted the regions that now make up Azerbaijan and Central/Southern Iraq, which is reflected in their modern religious demographics. While the Safavid empire was not solely responsible for the spread of Shia Islam throughout the Middle East, it changed the religion’s relationship with both the Safavid empire and the subsequent Iranian nation. Unlike Sunni Islam, which has had many capitals over time (Istanbul, Cairo, Damascus, et al) Shia Islam’s theological and cultural centers are mainly in Iran.  This has meant that for many Shia muslims, religious guidance and doctrine has come from Iran; whether in the form of Iranian-educated Imams (Musa al-Sadr, Ali al-Sistani, for example), or through edicts (Fatwas) issued from Qom, Iran itself.

When the Iranian revolution took place in 1979 the state was transformed from a monarchy into an Islamic Republic, under the organizing principle of  Vilayat-e Faqih or “Guardianship of the Islamic Jurist.” This theory, which was created by Ayatollah Khomeini prior to the revolution, posits that one Shia muslim jurist (or Supreme Leader) should have guardianship over all issues for which Prophet of Islam and Shi’a Imam have responsibility, including governance of a country. Iran’s transformation into an Islamic Republic as well as its importance to Shia muslims proved destabilizing in the region.

When the Ayatollah called for a similar Islamic Revolution in Iraq he was met with hostility from Saddam’s Ba’athist regime in Baghdad. In September 1980 Saddam invaded Iran under the auspices of incorporating the Khuzestan province (with a large Arab population) into Iraq and eventually overthrowing the Islamic Republic in Iran. While the Iraqi regime did not have an explicitly Sunni organizing principle (the Ba’ath party was secular and Arab-nationalist) it was dominated by Sunni Arabs. As the war continued Saddam was forced to withdraw from Iranian territory; in 1982 the revolutionary leaders in Iran invaded Iraq with the hope of overthrowing the Ba’athist regime and introducing a Shia Islamic Republic there. After eight years neither side was successful and the status quo was reintroduced after a cease fire in 1988. This war, which lasted eight years, served as an introduction for the new geopolitical context that sectarian divisions would exist under. Iraq’s Shia-dominated government has many links to Iran, and some of the Shia militias fighting Islamic State are funded/directed by Iran.

Iran’s overt support for the Shia community in Iraq would continue long after the war but did not stop there. Historically, the Shia community in Lebanon was one of the poorest and worst represented of the religious communities there. Despite having a larger  population than either the Christians or the Sunnis, they received the least prominent role (Speaker of the House of Representatives) under the original confessional model. A major effort was made by Musa al-Sadr, an Iranian-trained Shia Imam empower the Shia community of Lebanon, forming the Amal movement before his mysterious disappearance in 1978. As the Lebanese civil war entered a third bloody stage (1982-1990) Iran became involved when it sent 1500 Iranian Revolutionary Guards paramilitary into southern Lebanon to support Shia militias fighting there. These militias would eventually form Hezbollah, a party-cum-militia which would be blamed for a series of attacks against Israel and the US during the conflict. Hezbollah was the only group not to disarm after the Taif Agreement that ended the civil war and would continue to receive military and financial support from Iran.

In Syria, Iran’s role has been both overt and multifaceted. The Iranians have had a long alliance with the Alawite-led government of Bashar al-Assad ever since the Iranian Revolution in 1979. This relationship has a religious component as the Alawite faith is a branch of the Twelver school of Shia Islam (practiced in Iran) but with syncretistic elements. Support for the Assad regime has included direct military assistance, arming Shia and Alawite militias, and sending Hezbollah (the Shia militia based in Lebanon) to fight on behalf of the Assad regime.

picture

(picture taken by me in Damascus, Syria in 2010. From left to right: Mahmoud Ahmadinejad, Bashar Assad, Hassan Nasrallah)

When looking at Iraq, Syria, and Lebanon the role of religion and ideology is undeniable: Iranian trained clerics like Ali al-Sistani and Hassan Nasrallah, who subscribe to the state ideology of Iran (Vilayat-e Faqih) lead Shia communities that are more supportive of Iran than their Sunni compatriots. But behind this broad trend of political views coinciding with sectarian ones there are differences. Iran’s anti-Western geopolitical orientation and its support for anti-Western governments/groups such as Bashar Assad in Syria or Hezbollah in Lebanon is sometimes attributed to the view of all Shia communities, however unfairly. This was especially troublesome during the 2011 Bahrain protests, where the Shia majority rose up against the Sunni monarchy, only to have the protesters unfairly linked to Iranian subterfuge. Even after the 2003 US led invasion of Iraq, Shia Arabs have a more favorable view of the US than Sunni Arabs (Kurds in Iraq have the most favorable view of the US):

Capture

(source: Zogby, poll conducted in 2011)

This survey is quite instructive in underlining the complex relationship between geopolitics and religion in the Middle East. Shia Arabs view Iran more positively than either Sunni Arabs or (mostly Sunni) Kurds, while Sunni Arabs view Saudi Arabia (KSA on the survey) more favorably than Kurds or Shia Arabs. What this survey is also helpful in illuminating is the efforts that have been made by various regional actors to engage with the various communities of Iraq. It is no coincidence that Turkey and Saudi Arabia have both worked hard to establish relations with the Sunni Arab leaders in Iraq, though Turkey has also made inroads with the Kurdish Regional Government (KRG) and some Shia leaders.

Saudi funding for Sunni militias in Syria and its support for Sunni Arabs in Iraq also has considerable history predating the rise of Islamic State. Saudi Arabian support for Sunni militia and its opposition to Shia movements has deep roots, going back to the the very founding of the modern Saudi Kingdom after the fall of the Ottoman empire. Many muslims in Saudi Arabia are followers of the the Wahhabi/Salafist movement, an ultra-conservative sect of Sunni Islam that posits that Shia Islam is not a legitimate form of Islamic faith. Prominent clerics in the Kingdom have preached violence against Shia muslims in Iraq and a great deal of money flowing to hardline Sunni militants (including Islamic State) has come from private donations from Saudi Arabia as well as other parts of the Gulf.

Turkey, itself a large, majority-Sunni nation with a democratic (though increasingly authoritarian) moderate Islamist government lead by Recep Tayyip Erdoğan, has tried to gain influence among Sunnis in the region by touting its own model of political Islam. A notable difference between Turkish and Saudi engagement in the region has been the relatively good relations Turkey has had with Iran while Erdoğan has been in power. Saudi-Iranian relations, on the other hand have been poor for a very long time, with many viewing the two states as rivals in the region. Turkey often finds itself, paradoxically, in a rivalry with the Saudi Kingdom over influence with Sunni muslims in the region and beyond. This is a good example of a contradiction I’ve mentioned before: because there is no dominant cultural/theological center for Sunni Islam, there is no one state or even one ideology which successfully advocates on behalf of Sunnis as effectively as Iran does for Shia muslims. 

Indeed, the two major ideologies within Sunni Political Islam today that both promote an Islamic role in government, though they differ widely in their interpretation of this role. Followers of the Muslim Brotherhood, a movement founded in Egypt, advocate for an Islam-inspired government that uses Islamic Law (Sharia) as either the partial or sole basis of their constitution, but wish to create a modern state with a modern economy. Salafists, on the other hand, wish to reintroduce an Islamic Caliphate and create a society modeled on the original Islamic empire, sometimes called the Islamic Golden Age. Generally, Salafists view Shia Islam and Iran critically, and have been vocal in their opposition to the Iranian state. Christians and other non-muslim minorities have also come under fire from Salafist groups at times. While there are non-violent Salafist movements like the al-Nour party in Egypt, there are violent jihadist movements like Islamic State and al-Qaeda who all share the same political vision, if not the same tactics to achieve it. While these militant groups have received some support from private donors, they have limited support by states in the region. In truth, the Salafist’s political vision threatens all contemporary majority-Sunni states, perhaps more so than to majority-Shia ones. I believe that this is why the coalition to fight Islamic State includes many Sunni Arab states.

1101070305_400

This headline from 2007 underscores just about everything that has been wrong with the coverage of the sectarian divide in Islam. Media in the West has repeatedly covered this conflict as one of “ancient hatred” that has been smouldering since the eighth century. What is missing here is an explanation of how the Sunni-Shia schism was transformed from a theological rivalry to a geopolitical one; key events like the the Safavid conversion to Shia Islam in 1501 and the 1979 Iranian Revolution helped produce this outcome. While the two communities certainly foster some distrust of the other, historically relations have been nuanced, particularly in countries with large mixed communities. Much of the fears that Sunnis and Shia have come from a very real place. Shia muslims have been historically marginalized in much of the Middle East and beyond, only very recently have they been politically empowered in places like Iraq and Lebanon. Many Shia muslims fear annihilation by well financed Salafist groups like Islamic State and al Qaeda, a fear not unreasonable given recent events. Sunnis in Iraq, Syria and elsewhere fear a future of domination and reprisals by Iranian-backed governments that will have little interest in including Sunnis in the political process. Again, these fears are not unfounded given recent events. Unfortunately, it is hard to see an outcome that calms these anxieties in the near future. In the West we can choose to leave this conflict, ignore its impact, but for the inhabitants of the Middle East, this melding of geopolitical and sectarian considerations will persist. I fear that the Iraqi Sunni Arabs will pay a very high price for their support for Islamic State.

We like to think that this mixture of religion and politics is foreign to us, but in reality there are modern examples of Christian sectarian hysteria in West. Imagine if there were very powerful, highly militarized states advocating for a politicized version of Catholicism and Protestantism in the West; it isn’t hard to imagine that our own perceptions of faith and politics would be different if this were the case.

Update: Here are some important links for up to date information on Iraq and Syria

This year has been filled with big international stories so far. From the nuclear deal with Iran to the protests in Venezuela there have been a variety of stories that has been caught the attention of many across the globe. Ukraine’s political upheaval and the subsequent Russian annexation of Crimea has received possibly the most hyperbolic coverage out of any event. With the Foreign Secretary of the UK calling the Crimean annexation “the biggest crisis in Europe in the 21st century” and various pundits drawing comparisons to the German invasion of Sudetenland 1938, one might suspect that leaders in the West are preparing for war. Instead the United States and European allies have passed a series of mostly symbolic sanctions, such as suspending Russia from the G8.

It is striking how quickly things have developed in the crisis. On November 21st, when Ukraine’s then president Viktor Yanukovych abandoned an Association Agreement with the European Union to seek better ties with Moscow he could not have predicted how quickly the backlash against his government would come to bear. This was in part because of the protestors desire for the country to be closer with Europe but also a reaction to the government’s violent crackdown on protesters. By the end of February Yanukovych had fled the country a coalition of opposition members and Maidan-affiliated politicians formed an interim government. During this time unmarked gunmen took control of several government buildings in Crimea, flying Russian flags at some. The Parliament of Crimea replaced the sitting Prime Minister of Crimea with pro-Moscow Sergey Aksyonov; who, among other things, is nicknamed “Goblin” and has a disputed history with organized crime. On March 11 the Crimean Parliament declared independence from Ukraine and agreed to hold a referendum on joining the Russian Federation. By mid-March Russian forces had taken control of most institutions and helped administer the referendum, which allegedly passed with 97% support. Eventually the last remaining Ukrainian troops agreed to surrender, making it unlikely that Crimea will ever be part of Ukraine again. The crisis has not ended there: Russia has massed troops on its border with Ukraine and pro-Russian militants have taken control of several Eastern Ukrainian towns and cities.

Something that makes the sudden developments in Ukraine so striking is that I can recall very well what the sentiment was like six years ago when Russia invaded parts of Georgia. Then, like now, many pundits and foreign ministers denounced the move, but most of them seemed to think that the special circumstances in that conflict were unique and there was little risk of Russia repeated the move in Crimea. “Georgia is a small country, Ukraine is much larger and better armed” was often repeated; surely the West would not allow Russia to annex part of a country of 44 million seeking to join Western institutions like NATO and the EU. My point is not to mock the incorrect predictions made by people six years ago but instead to point out the unpredictable nature of international affairs. Instead of making bold prognostications I would like to discuss some of the possible longer term outcomes in the region and across the world.

The first potential implication I’d like to mention is a theoretical one: the undermining of the so-called “international order.” Among the terms that have been used repeatedly without definition has been the “international order” that Russia is supposedly undermining. I would like to explain what this term means before speaking to the effect Russia’s actions have had on it. Most pundits use international order as shorthand for a number of institutions and processes that exist to enforce international law; chief among these is the United Nations General Assembly and the UN Security Council. Not only has Russia ignored the very long held norm of respecting territorial sovereignty, but it has specifically violated a treaty which it signed with Ukraine agreeing to do so (the 1994 Budapest Memorandum). Vladimir Putin has tried to defend its actions on humanitarian grounds, saying that ethnic Russians are vulnerable to “fascist” Ukrainians whom he alleges control Kiev. They also allege that most Crimeans would support Russian annexation, but ignore the misgivings of the local Ukrainian and Tatar population.  Most of Russia’s allegations remain hard to prove or are disputed by other foreign offices, Russia has been thoroughly isolated at both the UN General Assembly and the UN Security Council in recent votes.

Perhaps the biggest elephant in the room when US Secretary of State John Kerry accuses Russia of undermining the international order has been America’s own foreign policy since 2003. Prior to the invasion in Iraq the Bush administration was unable to secure the support of not only Russia or China on the UN Security Council, but also France. This made a vote meaningless, and made another NATO operation a non-starter, as France and Germany were opposed to any action in Iraq. By circumventing the institutions that uphold international law and ignoring the norms that underpin international order, the United States damaged its own claim as an upholder of the international order. This does not, however, justify Russia’s actions in itself and it’s worth noting that the Obama administration has placed much emphasis on using international organizations as vehicles of its foreign policy. Right now Crimea looks like a lost cause for Ukraine and the West, but there are other outcomes that should be mentioned both with Ukraine and the wider region in mind.

Ukraine’s connection to the Russian state and Russian history cannot be understated. The modern Russian, Ukrainian, and Belarusian ethnicities all trace their ancestry to the Kievan Rus‘ which was governed by Vladimir the Great (a Swedish Viking who converted a Slavic kingdom to Orthodox Christianity when he was baptized by the Byzantine Empire). Ukraine’s modern history is similarly tied to Russia’s; as part of the Russian Empire, Ukraine became part of the Soviet Union and experienced a massive terror-famine in 1932-3. With the fall of the Soviet Union political borders were created that did not necessarily match ethnic ones: millions of ethnic Russians reside in nations outside of the Russian Federation.

Map of Ethnic Russians complete

Before annexing Crimea, Putin said in a speech that he reserved the right to protect ethnic Russians living outside of Russia; as one can see with the map above, Ukraine is not the only country with a large ethnic Russian population. The dissolution of the Soviet Union left large ethnic Russian communities in countries whose post-independence foreign policy has sometimes been at odds with the Russian Federation. Perhaps the best examples of this has been the so-called Baltic states: Estonia, Latvia and Lithuania. All three states are members of both the European Union and NATO, and all retain a large ethnic Russian population (Latvia and Estonia in particular). This had lead to ethnic tensions in these countries after the Russian takeover of Crimea. But the Baltic states have certain advantages that Ukraine lacked when Crimea was invaded by Russia. Being members of NATO, all member states are obliged to treat an attack on one as an attack on all, with Article 5 of the treaty. This collective security guarantee makes it unlikely that Russia would consider threatening the Baltic states with military invasion. Non-NATO countries with Russian populations face a less clear future.P

Moldova, with its own ethnic Russian breakaway province (Transnistria), lacks any such agreement with the West and there have been fears that a renewed offensive by Russia could cross through southern Ukraine all the way into this breakaway province. Central Asia was also part of the Soviet Union and possesses its own large ethnic Russian population. In Kazakhstan nearly a quarter of the population is ethnically Russian and Russian is the language of business there. This connection, along with shared Soviet history, has resulted in a deep bilateral relationship between Kazakhstan and Russia. Kazakhstan along with Belarus and Russia are the only current members of the Eurasian Customs Union that Ukraine’s former president tried to join in place of a European Association Agreement. Despite these close relations, there has been some ambivalence in Kazakhstan about the Russian annexation of Crimea. This has been underscored by the decision to suspend Russian missile testing in Kazakhstan after an accident in Western Kazakhstan. While the suspension of testing occurred in response to the missile accident, Russia’s decision to place missiles near its border with Kazakhstan has been called a “Russian show of force” by some analysts there. Russia claims that the border missiles are there to protect Kazakhstan from “external threats” in Central Asia, but there are critics in Kazakhstan who view the military buildup as part of an “imperial policy” by Russia.  The long term consequences of Putin’s pledge to protect Russians living abroad will have a varied effect from Kazakhstan to Estonia. I believe that the most important factor in Russia’s relationship with its neighbors won’t be the proportion of Russians living there, but the geopolitical orientation and treaties those countries are party to.

new geopolitical map

Russia’s annexation of Crimea underscores the increasingly geopolitical lense with which the Kremlin views domestic politics in Ukraine; these views have been reinforced by a historical sense of injustice. In Putin’s speech, he not only vowed to defend ethnic Russians living abroad, but also decried a quarter-century of “injustice” by the West. Specifically, he accused the West of expanding NATO to Russia’s border without consulting it, saying: “with the deployment of military infrastructure at our borders. They always told us the same thing: ‘Well, this doesn’t involve you.’ ” I emphasized the latter part of the quote because I think it underscores just how differently the Kremlin views the post-Soviet order from the West. While the West views former Warsaw Pact states and Soviet Republics joining organizations like the EU and NATO as a free choice made by democracies, the Kremlin sees a plot to undermine Russia. In light of this it is unsurprising that Putin viewed the Maidan protests as a Western plot to remove Ukraine from his “sphere of influence.” These divergent interpretations of events in Ukraine and other neighboring countries are at the heart of why Russia and the West struggle to understand each other’s intentions.

To be frank, I believe that Russia’s geopolitical approach to events in neighboring countries underscores the very weakest points of Realist theory in international relations. To briefly summarize this school of thought, Realists believe that international relations are dictated by an anarchic system of nation-states where power politics determine relationships. When Yanukovych declined to take steps to join NATO and later to sign an Association Agreement with the EU, the West accepted it not because it didn’t value Ukraine’s participation, but because the West viewed Ukraine’s domestic politics as the crucial determinant of any treaty. By ignoring this, or viewing it cynically, the Kremlin has alienated a large number of Ukrainians or other neighboring countries who may have otherwise supported close relations with Russia: domestic politics matter in international politics. Secondly, Russia’s realist/geopolitical take on the Association Agreement with the EU ignores the true appeal of the EU and NATO: these institutions are governed by the rule of law and offer meaningful incentives to members. The EU offers access to a massive single market and the promise of modernizing the economy of a country; one only has to look at the difference in economies of Ukraine and Poland since 1990 (graph below). NATO, with its Article 5 guarantee is possibly the golden standard of collective security; it is also a democratic institution, with core members often refusing to participate in the military adventures of others. Russia’s alternative alliance (the proposed Eurasian Economic Union) is both economically weak and imposes many costs on its members in addition to some benefits: the Eurasian Economic Union is no rival the European Union.

gdp thing

(Source)

Some pundits have speculated that the continuing crisis in Ukraine and annexation of Crimea could lead to a new Cold War between Russia and the West. There are a variety of reasons why I don’t believe that this will take place. The Russian Federation has a population that is 1/3 the size of the United States and an economy that is 1/8 the size in nominal terms; the Soviet Union had a larger population than the US and an economy about half the size in 1989. Russia is no longer part of a broader military alliance like the Warsaw Pact during the Cold War, and while the Shanghai Cooperation Organization has been muted as a rival to NATO, it lacks any treaty obligation on its’ members collective security. And unlike during the Cold War, there aren’t two rival ideologies that are being promoted by great powers; the Kremlin’s “model” has hardly proven itself within Russia. This is not to say that Russia is incapable of imposing costs on the West, Europe’s dependence on Russian gas and oil gives it potent leverage over the continent. Even the proposed export of US liquified natural gas to Europe couldn’t begin to supplant Russian gas, a fact not lost on the Russian government. But even if the West is limited in its ability to sanction Russia, negative sentiment in the markets could hurt its economy, possibly causing a recession. It is because of these realities that I do not expect there to be a greater escalation of conflict between the West and the Russian Federation, but instead think that relations between the two will enter a “new phase.”

All of the potential outcomes I’ve mentioned so far are, at their heart, speculations on my part; with that said, I believe I have defended my predictions well. Russia’s annexation of Crimea will undermine the international order, but that order was already weakened by the US invasion of Iraq. While Putin’s irredentist pledge to defend ethnic Russians abroad has worried neighboring countries with large Russian populations, many of these states are already members of the EU and NATO, making military action more costly to Russia. The few countries (Ukraine, Moldova) that aren’t members of either treaty are, however, at risk of facing economic/military pressure from the Kremlin. The risk of the crisis escalating into a new Cold War between Russia and the West seems unlikely for a variety of reasons including the weakness of Russia’s economy and Europe’s dependence on Russian petroleum. What is less certain right now is how events will unfold in Ukraine. As I write this blog pro-Russian militants have seized control of several towns and cities in Eastern Ukraine. How the government in Kiev responds to this will have a greater effect on the future of Ukraine than any power politics by Russia or the West.

As it prepares for the 2014 World Cup, Brazil hosted Mexico’s national soccer team in the Confederations Cup recently. The hosts won 2-0 and clinched a spot in the semifinals of the Confederations Cup. This wasn’t the first victory of sorts that Brazil has secured over it’s Latin American rival: in May the World Trade Organization elected Brazil’s Roberto Azevedo to lead the body over Mexican Herminio Blanco. In a way this race best defined the terms of the rivalry between Mexico and Brazil and what defines their more broad motives in Latin America. Mr Blanco is known as a liberal advocate of free trade policy; he negotiated the country’s entry into the North American Free Trade Agreement (NAFTA). While Roberto Azevedo doesn’t necessarily contradict this view, Brazil has more protectionist trade policies than Mexico and Mr Azevedo was seen as more of a WTO insider than Mr Blanco. While the candidates’ respective nationalities certainly was not the deciding factor in this race, it is an example of the type of role that both nations compete for, both regionally and globally.

_68271234_bramex

(Source)

While the WTO functions as a global body for deliberations on matters of trade, Latin America has no regional equivalent. Instead, there are various regional trade blocs such as Mercosur and the Andean Community of Nations (CAN) that seek to both increase regional trade (between member states) and global trade with their organization. Despite being the older of the two, CAN has recently lost influence, with Venezuela leaving in 2006 to join Mercosur. Bolivia has also recently applied for membership in the larger Mercosur trade bloc. These movements have empowered Mercosur, whose members now includes Brazil, Argentina, Venezuela, Uruguay, and Paraguay (on a suspended membership). These countries had a combined economic output of $3.59 Trillion in 2012, with Brazil having the largest single economy by far:

GDP Mercosur

(Source)

Despite these countries having a reputation as fast-growing emerging markets, the trade bloc averaged just 2.18% GDP growth last year, with lower than expected growth in Brazil and Argentina pushing the average down. This is surprising because in the year prior the bloc averaged 5.16% in 2011, and while Brazil’s economic growth has been slower lately it is still a nation that Jim O’Neill compared favorably with China and India when he first proposed the concept of BRICs. So where does Mexico fit into all of this? Mexico is neither a member of Mercosur nor has it attempted to join it. Instead Mexico helped found The Pacific Alliance, a trade bloc that was created in 2012 and now includes Mexico, Chile, Colombia, Costa Rica and Peru. Combined these countries had a smaller but still considerable GDP of $2.96 Trillion in 2012. Like Brazil in Mercosur, Mexico’s economy looms large within the Alliance:

Capture

(Source)

If 2012 was a difficult year for Brazil and Mercosur the opposite was true of Mexico and the Pacific Alliance. The five nations averaged 4.94% growth last year, and 5.51% in 2011, and the Pacific Alliance actually accounted for more international trade than than Mercosur in 2011. When you break this trade down there are a number of interesting findings:

trade breakdown mercosur pacific alliance

(For a country-specific breakdown refer here)

Despite the Pacific Alliance having an 18% smaller economy than Mercosur, the Alliance had 9% more total trade in 2011 (Source). Beyond this there are a few other important things to point out: the Pacific Alliance had more overall trade than Mercosur, but the two blocs had very different terms of trade. While Mercosur posted a narrow trade surplus of +1.9% (meaning they exported more than they imported) the Pacific Alliance posted a trade deficit of -1.3%. This comes despite the Alliance having more total exports ($586 Billion vs $505 Billion). When you break down these figures further, the relative strengths or “comparative advantage” of each country is exposed:

total exports

Mexico has the largest total exports by a long shot; despite having an economy that was 16% smaller than Brazil’s in 2011, its exports were 11% larger in that year. But beyond having a different level of trade, the composition of Mexico’s trade is quite different: 70% of its material exports were manufactured goods, while Brazil’s material exports are fairly evenly distributed between agriculture, fuels and mining, and manufacturing. More examples of comparative advantage come from other countries in these blocs: Venezuela has the fourth largest exports of this group yet its travel industry is less than half the size of smaller Costa Rica. Instead, Venezuela exports vast amounts of oil (categorized as fuel and mining goods), which makes up 93% of its material exports. Chile’s exports are similarly dominated by this category, with fuels and mining making up 62% of material exports. While Colombia’s underground wealth is worth $37 Billion, Argentina’s agriculture sector is worth even more in annual exports. All of these country specific findings are intriguing by themselves, but the overall trend that divides the two blocs is clear: the Pacific Alliance both trades more on average and more overall than Mercosur.

Beyond trade, the two blocs have political differences that are as notable as their trade differences. Mercosur is controlled by several charismatic and leftist governments, from the legacy of Hugo Chavez in Venezuela to Mrs. De Kirchner’s Argentina. The addition of Venezuela in particular has caused some analysts to ponder whether Mercosur exists solely as a trade bloc or if it has a more political role. “Mercosur is no longer about trade,” Johns Hopkins’ Riordan Roett, told the Council on Hemispheric Affairs. “The organization is more and more political and to some degree anti-American.”

Others have pointed out that the bloc hasn’t really done much when it comes to trade: the bloc has only signed regional trade agreements with Israel, Egypt and the Palestinian Authority. The protectionist policies used by some of the bloc’s members have also been criticized, sometimes by surprising sources. Uruguayan President José Mujica allegedly said protectionist policies under Argentine president Cristina Fernandez de Kirchner are “even worse” than they were under her deceased husband Nestor Kirchner. Whether or not this particular allegation is true, the bloc has had a trade imbalance that has heavily favored Brazil over other members: from 2002 to 2011 Brazil had a trade surplus of $36.8 Billion against other Mercosur members (Venezuela was not yet a member). While this might not be connected to protectionist policies and the imbalance has gotten smaller over time, concerns remain over trade imbalances, particularly in Venezuela, which had a $4 Billion trade deficit with Brazil last year.

gdp growth

(Source)

While the Pacific Alliance has not faced the same scrutiny, it’s pro-American orientation has been not gone unnoticed. The Alliance’s level of trade with the US is incomparably higher than Mercosur’s, Mexican-US trade alone dwarfs all trade between Mercosur and the United States. Beyond trade, the Alliance includes right-wing governments that have very close relations to the United States, particularly in Colombia and Mexico. The Pacific Alliance’s connection to American foreign policy has been criticized as unnecessarily dividing Latin America to its own detriment as America seeks to reaffirm its dominance in the Pacific.

Specifically, the Pacific Alliance’s support for the Trans Pacific Partnership (a trade treaty) has been criticized. The treaty has been called (both negatively and positively) the NAFTA of the Pacific. Currently only Chile, New Zealand, Singapore, and Brunei are the only full members but there is a large list of countries negotiating to enter in: Japan, Canada, America, Australia, Vietnam, Malaysia, Mexico, and Peru have all begun negotiation talks, and Costa Rica and Colombia have expressed interest in entering the treaty. With all of the Pacific Alliance members either seeking to be or already members of the treaty, where does opinion stand in Mercosur on the Trans Pacific Partnership? While the bloc itself has not condemned the treaty, it is perhaps telling that Brazilian Roberto Azevedo (the director-in-waiting to the WTO) himself criticized the treaty and said that it could derail broader trade liberalization globally.

While it seems unlikely that the two blocs will form into military alliances, dividing Latin America like the Warsaw Pact and NATO divided Europe, there are reasons to care about these developments. Latin America was itself badly hurt by the conflicts on the Cold War, and while this new division between the slightly more statist Mercosur and the market-led Pacific Alliance might not resemble the bad old days, it could set the region back. Most importantly, by dividing the region along political lines, the rival camps may impede regional integration that is needed to ensure both stability and prosperity across Latin America.

Hi again, it’s been too long. I’m starting to make a habit of apologizing at the start of each new blog; I think instead of doing that I will just try to update this more often. While you may not have enjoyed my 3,000 word wall text about the New Year last time, you’re sure to enjoy this blog about government debt! And while this blog is very similar to some other posts I’ve written in the past, I think it addresses some important newer information. In a way I will be piling onto an issue and a paper (more specifically) that has already gotten much attention. The Reinhart-Rogoff research paper has been refuted for its macroeconomic theory by Nobel-winning economists and for it’s specific (excel-related) errors by grad students, even Stephen Colbert piled it on eventually. While opinions on the paper vary, no one can dispute it’s significance in framing the debate for policymakers from across the world. Others have already thoroughly refuted the paper’s conclusion, so I won’t try to do this directly. Instead, I would like to look into some of the broader questions that are raised in this paper; specifically, what is the relationship between government indebtedness and the overall health of the economy. 

To begin, I want to briefly explain the paper’s thesis and how it’s been refuted. In 2010, Carmen Reinhart and Kenneth Rogoff of Harvard authored a paper titled “Growth in a Time of Debt” that argued that after a certain threshold of indebtedness (90% of GDP) a nation’s growth will drop off dramatically. Underlying this claim was a statistic stating that average GDP growth in developed countries with 90% public debt to GDP will see GDP growth of -0.1% on average. The pair refused to release their data to others until a grad student at the University of Massachusetts, Thomas Herndon, was allowed to use it for a term project where he intended to replicate their findings. Instead, he found that their excel spreadsheet had somehow omitted the results of  five countries and incorrectly averaged New Zealand’s GDP growth. When those countries are taken into account, particularly Australia (!), Belgium, Canada, and New Zealand, Thomas found that average growth for countries with 90% debt to GDP was actually 2.2%, a very different result than -0.1%! Now, instead of chest thumping this news that broadly confirms my own interpretation of recent history, I’d like to dig deeper into the broader question raised by the Reinhart-Rogoff paper: what effect does high government debt have on the economy? 

Before touching on any further numbers I’d like to briefly explain some terms I’ve used to get at the heart of what is being debated. GDP (Gross Domestic Product) is a nation’s total economic output (consumption+investment+government spending+exports-imports); this is the most common measurement of the size of a nation’s economy. Measuring government debt to GDP then is a way of comparing the size of a nation’s debt versus it’s entire economy. Economists prefer this measure over total debt amounts because it helps express the relative size of a country’s debt. With that said, here are two modern examples of the metric Reinhart and Rogoff explored and their divergent conclusions:

japanese debt and gdp growth 2008 2012 Spanish debt and gdp growth 2008 2012

Both Japan and Spain have received a lot of media coverage lately for their economic circumstances, specifically their indebtedness. But as you can see in the graphs above, their levels of indebtedness do not correlate to growth with any consistency. Japan’s level of debt has remained above 100% of GDP since 1998, it’s economy has grown at an average rate of 0.55% annually. While that number looks quite weak (it is), it occurred during: the 1997-8 Asian Financial Crisis, the 2007-8 Global Financial Crisis, and the 2011 Tohoku Earthquake and Tsunami. Even with all of these headwinds the Bank of Japan predicts annual growth to be 2.9% in 2013. While Spain’s pre-crisis growth was higher than Japan’s, its much lower levels of indebtedness have not shielded it from the stagnation being felt throughout much of the Eurozone today. To further illustrate this, lets take a look at another useful economic indicator: unemployment rates and levels of indebtedness.

japanese debt and unemployment rate 2008 2012 spanish debt and unemployment rate 2008 2012

As you can see, despite relatively low growth and high levels of government debt, Japan’s unemployment is considerably lower than Spain’s astonishing rate; one in four Spaniards were unemployed in 2012 (currently it stands at 27.2%). If you’re thinking, “hey, Spain is very different from Japan, there’s more to the story than this” then you’re on to something. The problem with Reinhart and Rogoff’s conclusion (aside from its Excel errors) is that its simplicity obscures larger questions about debt and the economy: there’s more to it than “big debt bad, small debt good.” I want to explore what other factors are at play between public debt and the economy in the remainder of this post. There are several areas of concern that economists look at when it comes to public debt, many of these ultimately derive from one issue: borrowing costs. The short answer to why Spain has relatively little debt yet still faces economic headwinds is because it has had to borrow money at high costs in recent years. This cost is measured by the yield that is paid by Spain to buyers of its government bonds, like an interest rate (%) paid on a private loan. While Spain has seen its borrowing costs improve this year, it faced years of high yielding bonds before: Spanish borrowing costs 3year

Years of high borrowing costs have done more than just complicate the finances of Spain’s government, it has found its way into the real economy as well. Spain is an example of what can happen when a country’s debt is not denominated in a currency that is controlled by the debtor nation’s central bank. Under normal circumstances (i.e. when a country borrows in a currency it also issues) a central bank has flexibility when it comes to both controlling a nation’s borrowing costs and shielding the economy from its harmful effects. For example, the central bank for the UK (the Bank of England) has used its power to both lower the yield on long-term government bonds (by purchasing them with printed money) and lowering interest rates (0.5% since 2009) to try and boost available credit in the real economy. In addition to these tools, central banks like the Bank of England have also intervened at times to lower their currency’s exchange rates with other countries. Without these options, Spain has instead had to rely on the policies of the central bank for the Euro, the ECB, with limited success. 

The ECB dropped interest rates to 0.50% earlier this month (from a previous 0.75%) yet these rates have not translated into lower borrowing costs in Spain (among other countries). Instead, banks in Spain and other “peripheral” Eurozone countries like Italy and Portugal have had to pay more, in line with their government’s own higher borrowing costs. This, in turn, has translated into higher borrowing costs for Spanish and Italian businesses and decreased business lending overall: 20130504_FNC549
(Source: The Economist)

As you can see on the above graph, borrowing costs for Spanish and Italian businesses and the overall lending environment have fallen out of sync with ECB lending rates. The message I want to convey here is not that Spain’s economy is doomed to failure; Spain’s circumstance has actually improved somewhat recently. Instead I want to point out Spain’s high borrowing costs had nothing to do it’s government’s debt levels or deficits; before the Global Financial Crisis, Spain ran a budgetary surplus and had relatively little debt. So why has Spain been punished with high borrowing costs while countries with much larger debts (Japan and the US, for example) have not? The answer, as well as a new set of problems, come with control over the currency that debt is denominated in.

Something that astonished me when I first wrote about debt in the US two years ago was how low Japan’s borrowing costs are compared to its high debt:

Japanese debt and borrowing costs 2008 2012 spanish debt and borrowing costs 2008 2012

Despite it’s astronomical levels of debt, Japan has been able to borrow at remarkably low rates in recent years, much lower than Spain even in 2008, years before Greece would seek a bailout. Even when you compare Japan to other countries that issue debt in their own currency their rates seem quite low. Fortunately, there are very smart people who write about these things who have explained the situation for us. Essentially, through a mixture of Financial Repression by the Ministry of Finance and a willingness by Japanese households to put their savings into government bonds, rates have been kept quite low. But all is not well in Japan with this arrangement, as Noah Smith points out:

… it seems to me that the Japanese government’s success in holding down its borrowing costs has probably had big negative effects on the economy. Banks that are forced to buy JGBs can’t lend as much to firms, which seems like it would depresses economic activity, holds down growth, and probably contribute to deflation via suppressed wages. Households have been squeezed and squeezed by falling incomes until their savings rates have gone negative, yet they are still earning nothing on their savings.

In most countries we don’t think of deflation as a problem, but it can be just as damaging to an economy as inflation. Deflation, which Japan has experienced for most of the past decade, makes private borrowing more expensive, and pushes down consumption and investment over time. This has become a big enough problem that Shinzo Abe has implemented aggressive monetary and fiscal policies that are designed to increase inflation and decrease the value of the Yen, with mostly positive results so far. But Japan is unique in this regard: many countries fear the opposite when regarding inflation at a time of high debt.

argentina inflation

(source)

Argentina is a useful example of both the benefits and the pitfalls that come with controlling your own currency. From the 1970s to the early 1990s, Argentina suffered a series of currency shocks and generally high inflation, culminating in a spectacular 5000% annual inflation rate in 1989 (pictured above). That crisis was sufficient enough that Argentina began a currency peg with the US Dollar in 1991; under the new regime, anyone could exchange one Argentine Peso for one US Dollar. To maintain this “convertibility”, the central bank of Argentina had to maintain an equal amount of US Dollars in reserve as there were Pesos in circulation. While this had the positive effect of limiting inflation and increasing foreign investment in Argentina, it had many negative effects as well. 

By tying the value of the Peso to the USD, Argentina effectively ceded its monetary policy to the US Federal Reserve. In addition to receiving the low inflation of the US Dollar, Argentina experienced the pitfalls of its high value: for the duration of the currency peg (1991-2001) Argentina’s current account (net trade and net investment) was negative. Unemployment started to increase as the currency’s high cost made difficult for businesses to pay living wages while remaining internationally competitive. By 1999, the unemployment rate reached 16% and the economy entered a three-year recession as Pesos and Dollars became scarce. At the same time, the government faced pressure from the IMF to lower its deficit with spending cuts, which it implemented to the detriment of the economy (sound familiar?). Argentina was forced to borrow at high interest rates before being shut out of bond markets entirely. With debt levels reaching 164% of GDP in 2002, the country defaulted on most of its debt and abandoned the currency peg  shortly after. By devaluing its currency and effectively ignoring calls by the IMF for further austerity, Argentina was able to recover from the crisis with average growth above 8% since then. The downside to this recovery has ironically and not entirely unsurprisingly been a return to higher inflation levels. 

Perhaps out of fear of the panic and political upheaval that precipitated the economic crises in 1989 and 2000, the Argentinian government has consistently underestimated official levels of inflation since 2007. This is best demonstrated by the average change of prices found online, which has been aggregated by groups like PriceStats; this index shows inflation for 2012 to be ~10% higher than the official figure of 13%. Inflation has become such a hot button issue there that when an interviewer pressed the economy minister on the matter he abruptly ended the interview. But does this high inflation have a relationship with the size of Argentina’s public debt? 

Surprisingly, inflation in post-crash Argentina hasn’t corresponded with higher debt levels; even when you factor in higher inflation after 2007 there is no relationship between debt levels and inflation rate:

argentina inflation vs debt

(source)

Yet while Argentina’s inflation might not directly correspond with debt levels, there appears to be a connection between the fiscal and monetary policies of president Cristina Fernandez de Kirchner, including her management of the national debt. Perhaps most importantly, by using the central bank’s reserves to fund domestic spending, the government has removed an important guarantor of both currency stability and low inflation by removing the central bank’s independence.

At times, writing about these countries felt a little like writing Isaac Asimov’s A Choice of Catastrophes: is the world really this unforgiving when countries accumulate large debt? Judging by these three very different examples you might conclude that we are faced with three awful choices: crushing austerity (Spain), financial repression and deflation (Japan), or runaway inflation and dishonest institutions (Argentina). In truth, these are all extreme examples that I used to drive home a few points.

Firstly, if a country’s debt is not denominated in its own currency it runs the risk of defaulting on it’s loans, just like a private borrower runs the same risk. Conversely, it is difficult (perhaps impossible) for a country to default on its debt if it is denominated in its own currency. With this in mind, the risks of high levels of debt to a nation’s economy vary considerably depending on whether a county’s debt is denominated in its own currency or not. For countries with debt in a foreign currency, (the Euro counts in this case) the risk of actual default makes austerity much more likely and therefore the greatest risk of high debt levels comes from these possibilities. For countries with large debts denominated in their own currency the greatest threat to the economy stems from the effects of their own government’s actions directed at controlling the debt. This can come in the form of inflationary policies as in Argentina or in financial repression as Japan has employed.

So where does that leave the rest of us? What, for example, should the US do in response to it’s high levels of debt, currently exceeding Reinhart and Rogoff’s deadly 90% threshold? In reality, it’s not impossible for a nation to climb down from high levels of debt as long as a few things fall into place, if history is any guide:

historic us debt

Looking the above graph, one could imagine the extraordinary fiscal tightening that the US had to manage after World War II to eventually get debt levels from 120% of GDP in 1946 to just 31% in 1975. What might be surprising to some is that the United States almost never runs a budgetary surplus, even when debt levels have been very high: 

deficits cbo slide

(Source)

While there have been some periods of budgetary surplus, (eight in total before 1998) the overwhelming majority of the past 70 years has been spent in the red for the United States Treasury. How does this square with debt levels that remained low, or have fallen for long periods of time? The answer comes from a few factors that one might not consider at first when looking at government debt and spending (Krugman explains this in depth here). The two most important of these are the effects of economic growth and inflation on government debt. Say the government owe $1,000 in 10 years, and the average inflation for that period is a very acceptable 2.0%, and at the same time the economy grows at an average rate of 2.5% (the long term norm for the US economy). In ten years time, that debt would shrink by 45%, to a mere $550 relative to the rest of the economy. This is why during the 1990s the US debt to GDP level shrank even before the government ran a surplus:

us debt to gdp 1990s

(sources I used)

Essentially, if an economy can maintain average levels of growth, (say 2.5%) and average inflation (~2%) then government debt will decline as long as deficits do not exceed this combined total (in this case ~4.5%). This holds true in more than just the US case:

australian debt

historic australian deficit surplus

To summarize some points: high debt levels certainly have caused some serious problems for many economies, BUT these problems appear to be much more manageable when the debt issued is under a local currency. And while the high debt levels in the United States and other large economies might appear impossible to repay, equally large debts have been repaid in the past without default or high inflation being part of the outcome. I hope you enjoyed reading this blog as much as I enjoyed writing it, until next time.

Well, it’s been a while! In my defense, I’ve moved across the world since I last wrote here, and I now have to contend with some very loud birds as I write this. But I have good reason to write now; so much has transpired since I last wrote. You’ll have to forgive me for the length of this blog post, if you read it in it’s entirety you’ll have digested over 3000 words, there’s just so much to write about. With a remarkable confluence of political transitions taking place across the globe, there seems now, even more-so than in 2012, a real opportunity that the world will look very different 12 months from now. From the reelection of Barack Obama to Xi Jinping’s ascent to top spot within the Communist Party of China, many regions appear poised for change and uncertainty. From Israel to Myanmar there has been no shortage of speculation and intrigue regarding what the future will bring. But while there have been notable transitions across the world, some regions seem to have experienced less upheaval than others… so far.

Europe

Twelve months ago the world was fixated on the volatility of the European debt crisis and what might happen if an anti-austerity party won in Greece. This did not come to fruition, and while the anti-austerity party Syriza became the official opposition, they remain far from power in Greece. With relatively mundane results in the other European elections (Czechs and Slovenes both elected remarkably boring presidents) you might wonder if Europe really belongs in a blog about political upheaval in 2013. The good news is that very soon that will change, thanks to a combination of factors in Italy’s general election on February 24th.

Italy Prime Minister Silvio Berlusconi makes a face as he attends a meeting in Rome

After resigning in 2011, few could have imagined that the scandal-ridden media mogul would return to politics, but underage prostitute scandals notwithstanding, Berlusconi will contest yet another election. He will lead the People of Freedom party against the social-democrat PD, which is leading in polls at the moment; but in an added twist he will be competing with two other unlikely figures for the job.

When Mario Monti was asked to form a technocratic government in the wake of Berlusconi’s resignation he was not expected to contest the election after his government implemented economic reforms, but on December 28th he announced he would run for Prime Minister under the “With Monti for Italy” party. While Monti’s entrance into politics may have been surprising, his background is very different from the leader of Five Star Movement. Beppe Grillo entered politics as a comedian and blogger, and has taken Italian politics by storm; at one point his party scored as high as 20% in national opinion polls, though its popularity has since waned. The Five Star Movement can be defined broadly as an anti-austerity party, though some of Grillo’s other policy prescriptions include more direct democracy and free internet. While few expect either Monti or Grillo to garner enough support for the top spot, their impact on the election could be vast.

Public polling has consistently placed the center-left Democratic Party (PD) in first place, but the latest polls hinted at the possibility of a hung parliament in the Senate, where seats are allocated on a regional basis. This would force Pier Barsani (leader of the PD) to form a coalition, either with Mario Monti or even Beppe Grillo, though this is unlikely. You might wonder why the election in Italy is getting so much attention when so many different political transitions have taken place. Italy sits in a unique place within the EU: while it has come under scrutiny for its large debt (only the US and Japan have more) and its sluggish economy (only Zimbabwe and Haiti grew more slowly from 2000 to 2010) it also commands the largest share of the Eurozone economy outside of Germany and France. It also holds the distinct role of being the largest Eurozone member that is currently undergoing harsh austerity, which is being administered by an unelected, technocratic government. France has already replaced the center-right government of Nicolas Sarkozy with Socialist Francois Hollande, in part because of his promise to transition Eurozone policy away from austerity. If a center-left government emerges in Italy, it might just be enough to move EU policymakers away from austerity, or at least away from its current manifestation. Lastly, Italy’s election matters because it precedes an election in Germany in September, where Angela Merkel’s center-right coalition has faced recent difficulties.

Middle East/North Africa

When revolutions swept the Arab world in 2011, it seemed like the greatest emotion expressed in the crowds was relief and optimism; since then, ambiguity has shrouded interpretations of events. Tunisian protesters clash with riot police during demonstration after death of Tunisian opposition leader Belaid, outside Interior ministry in Tunis

This picture was taken in Tunisia on Feb. 6th of this year (source: Reuters/Anis Mili). The killing of left-wing opposition leader Chokri Belaid has sparked the largest demonstrations in Tunisia since the government of Ben Ali was overthrown two years ago. The Islamist-dominated government has dissolved parliament in response to this, and is calling for fresh elections in the wake of the unrest. Elections that took place in Tunisia and in Egypt after their respective revolutions saw Islamist parties win the largest share of the vote. While the outcome of the election was not disputed (unlike Iran in 2009) within those countries or by observers, the conduct of the resultant governments has been very critical. Mohamed Morsi, the president of Egypt and member of the Muslim Brotherhood has seen his first term riddled with controversy ranging from his handling of the drafting of a new constitution, to recent violence between police and demonstrators. Instead of focusing on these internal debates taking place in Egypt and other MENA countries, I’d like to talk about the regional implications of recent political transitions.

Two countries that dominate media coverage of the Middle East and I think warrant special attention for their regional impact are Israel and Iran. Both countries have an awkward (to put it nicely) relationship with many of their neighbors, and both essentially exist on the opposite sides of a diplomatic arrangement with the US. Iran has counted on support from Hezbollah in Lebanon, the Assad regime in Syria, and Shi’a leaders in Iraq, surprisingly.

I mention Iraq as a surprise because this wasn’t always the case; before the US invasion in 2003 Saddam-governed Iraq was actually a fierce opponent of the Islamic Republic in Iran. From 1980-88 they fought a protracted war that cost half a million lives, both Saddam Hussein and the Ayatollah sought to overthrow the regime in the other country. After the first Gulf War, the US engaged in a policy of “dual containment” that attempted to limit the influence of both regimes simultaneously. While this strategy was broadly viewed as “stupid” and had limited success containing either regime, the effects of the US occupation in 2003 had a more dramatic impact on regional influence. Nouri al-Maliki, the current prime minister of Iraq, is Shi’a Muslim (the main religion of Iran) and has close ties to the Islamic Republic in Iran, he actually lived there in exile for most of the 1980s. With the elections in 2005, Iraq has become one of Iran’s closest regional allies and has even helped sustain the Assad regime in Syria, another close ally to Iran.

Iran’s relationship with the other Arab regimes has been far less fruitful. Egypt and Iran have had icy relations since the revolution in 1979. Most notably, the Islamic Republic named a street in honor of the man (Khalid Islambouli) who assassinated Egyptian president Anwar Sadat. A precursor to this diplomatic freeze was Egypt’s peace treaty with Israel in 1978, as Iran viewed (and continues to view) Israel as its greatest enemy. The ascent of the Muslim Brotherhood in Egypt has helped improve relations, but the two countries remain far from rapprochement thus far. Perhaps the biggest illustration of these complicated new relations came with Ahmadinejad’s visit to Cairo on Feb 5th.

While Ahmadinejad was given a warm reception by President Morsi, he was grilled by other political and religious figures, most notably for Iran’s continued support of the Assad regime in Syria. In many ways the paths of these two countries were destined to be complicated, by both history and their sectarian importance. One of the tenser moments during the visit occurred when the leader of al-Ahzar (one of the most respected Sunni institutions in the world) grilled Ahmadinejad over everything from Syria to the belittlement of Islam’s first caliphate. Egypt is the most populous Arab country, and in a way it represents the broader Sunni-Arab aspirations in the region. Iran has a similar population, and it’s religious institutions in Qom are viewed with comparable regard to al-Ahzar for Shi’a Muslims across the world. This theological rift turns political when it comes to Syria, where the two countries continue to be at odds over the future of the Assad regime. I don’t want to oversimplify matters excessively: the Muslim Brotherhood’s relations with some Sunni regimes in the Gulf have been frosty at times.

Under this backdrop, the Israelis voted on Jan. 22nd, with most expecting Benjamin Netanyahu’s new Likud-Beiteinu bloc would sweep to victory, however things were not that simple.

Yesh Atid Party's Yair Lapid Awaits Israel's General Election Results(source: Ilia Yefimovich/Getty Images)

The man pictured above is Yair Lapid, a TV presenter-turned politician who now leads the second largest party in Israel, Yesh-Atid (translated: There is a Future). While Yesh Atid was expected to win about 10 seats, he nearly doubled this total with 19. Most of Mr Lapid’s platform was very centrist, with broadly popular ideas like reducing corruption and reforming education getting mention. More controversially he also proposed ending the exemption on Haredi (ultra-Orthodox Jews) from military service and negotiating with the Palestinians with the goal of creating a two-state solution. This latter declaration is significant because even after tacitly accepting a two-state solution, Netanyahu has done very little to indicate that he takes the idea seriously. Even after reaffirming his commitment to two-state solution, he said that the Palestinian Authority needed to drop any preconditions on talks, even as his government moves ahead with the controversial E1 settlement plan.

Lapid has also differentiated himself from Netanyahu on Iran, saying the Likud leader has been too confrontational towards the Obama administration regarding Iran, saying “[Netanyahu] thinks he can drag America to do what it doesn’t want to do. He is leading Israel to war too soon, before it’s necessary.” While it is less clear what meaningful differences they have w-r-t Syria, the biggest question right now is what government, if any, can emerge from this fragmented election:

_65464209_israel_election_results02_464gr

(Source: BBC) Coalition talks are expected to be very acrimonious as they have to first be led by Netanyahu (who won the most seats) who has been weakened by this electoral result. His list lost 11 seats and he is coming under scrutiny for his role in a variety of troubling and quite funny scandals. Whatever the outcome, the region faces a range of crises, from Syria’s civil war to the economic malaise that affects so many countries in the Middle East; now, more than ever, is a time for effective leadership in the region.

Asia

Perhaps more than any political transitions that have taken place this year (including the US election) changing of guard in China, Japan, and South Korea. Xi Jinping, Shinzo Abe, Park Geun-hye have all been elected to lead their countries in a time when East Asia represents an increasingly important economic area:

gdp share asia usa 2000 2012 (source)

Unfortunately this increased economic importance is being supplemented with increasing hostility between the respective governments, with the Senkaku/Diaoyu dispute receiving a great deal of media coverage. While the dispute has been simmering for over a century, things came to a head when in September Japan decided to nationalize part of the island chain, setting off a diplomatic row with China that has caused alarm across the globe. While Japan’s purchase of the disputed islands from a private owner may seem like an obviously provocative act (it certainly was by China), the action was actually intended, however clumsily, to deescalate tensions. This is because the bellicose mayor of Tokyo, Shintaro Ishihara had stated his intention to buy the islands; Japan’s government feared he would use his ownership to provoke China publicly. Things have escalated quickly since then, with anti-Japans protests and boycotts enveloping China. Perhaps most disconcerting has been an allegation by Japan that China had targeted one of its vessels near the islands with it’s fire-control radar.

Senkaku islands (Source: The Guardian)

History has played an increasingly important and often detrimental role in island disputes in East Asia; the Senkaku/Diaoyu dispute is only the most recent example. Last summer a series of symbolic gestures were taken by the South Korean government to underscore its control of the Dokdo/Takeshima Islands, whose control is disputed with Japan. What came next surprised many when South Korean President Lee Myung-bak said that were emperor of Japan to visit Korea he would demand an apology for Japan’s crimes in WWII. Lee is no longer in office, his party instead nominated Park Geun-hye to run in the 2012 Presidential election, which she won narrowly. She campaigned on a platform of economic liberalization but at deftly supported reforming the state’s relationship with the Chaeobol (powerful family-owned businesses). Perhaps more than her policies, she has been scrutinized for her own history: she is the daughter of the late dictator Park Chung-hee, a controversial figure in South Korea. She, like her predecessor has demanded that Japan apologize for its crimes in WWII, though her own nationalism is now being matched by a flamboyant counterpart in Japan.

Shinzo Abe was elected Prime Minister of Japan on a platform of expansionary economic policies (which have many left-wing champions) and a nationalist foreign policy. In October Abe visited the controversial Yasukuni Shrine, where some Class-A war criminals are enshrined; in the past he has suggested Japan should review its apology for using comfort women in WWII. Though he shelved this latter plan, his other, less symbolic proposal could signal bigger, more worrying development for neighboring countries. Shinzo Abe has suggested his government will review its interpretation of the Article 9 of the Japanese Constitution which under it’s current interpretation prohibits an act of war by the state. This has been justified as enabling Japan to engage in “global security operations” as well as allowing its military to engage in joint military operations with its allies, such as a strike on North Korea. It seems clear that while this might be accepted in Seoul and Washington, it will raise eyebrows in Japan’s biggest neighbor.

As alluded to earlier, the recent hostility between Japan and China has received most of the coverage in this region recently. In many ways the anxiety over the confrontation between Japan and China comes from the the transformation in roles the two countries have had economically:

gdp share e asia 1997 2012

Only fifteen years ago Japan laid claim to the largest economy in East Asia and despite it’s economic headwinds (the 90s were considered Japan’s “lost decade”) few anticipated the quickness with which China would overtake it. For perspective, in 1990 when Japan was considered the chief economic rival of the US, its GDP was $3.018 trillion compared to China’s $355 billion it’s growth rate was for that year was 5.57% compared with China’s 3.8%. Japan’s economic performance was so strong that it captured the fear and imagination of the American public, with popular books and films depicting a Japanese takeover of American businesses. But after 1990 events took a dramatic turn in East Asia; China (and to a lesser extent S. Korea) has overtaken Japan in GDP every year since:

gdp growth e asia

Presiding over this record-breaking growth has been a series of modernizing figures in the Communist Party of China starting with President Jiang Zemin and Premier Zhu Rongji. Their role in directing China’s State Capitalist model cannot be understated, with their successors Hu Jintao and Wen Jiabao largely following the same path. With the exception of a brief period of slower growth in 2012 the Chinese economy has looked unstoppable, but this has not stymied the internal debate about the future of China’s economy. Lost in the controversy over Bo Xilai’s role in the murder of Neil Heywood was a vigorous debate about the direction of China’s economy. Bo’s governance of the Chongqing Province was seen as a good model by observers in China and abroad. The model was characterized by its high levels of foreign investment as well as large state-sponsored projects, and succeeded in producing levels of growth that beat the national average while he was premier there. Due to his dramatic downfall, his ideas will have to be debated by Xi Jinping and Li Keqiang, who will formally be declared President and Premier of China March this year. They will preside over not only the largest economy in East Asia, but also the largest military as well:

military spending 1990 2011

(you should really get this if you want to know more about global military spending) The Senkaku/Diaoyu Island dispute comes at a time of unprecedented disparity in military spending between the two countries, unfortunately it is being coupled with unprecedented nationalism on both sides. What is particularly worrying is how lightly both sides seem to be taking the risks of escalation, especially considering the US declaring itself treaty-bound to defend Japan’s control over the Senkakus. One can only hope that the negative externalities that are at stake will compel both sides to deescalate the dispute. This is important not only because of the risks of conflict, but because of the urgent need for cooperation among the three East Asian powers. North Korea’s nuclear test just last week and it’s threat to conduct more is perhaps the best current example of this need. The world’s most important economic region needs pragmatic leadership now more than ever, it is truly disappointing to see nationalism cloud what was otherwise considered such a promising future for the region.

city_lights_asia_720

In all of the examples of political transition I have mentioned here there seem to be forces that both promote the status quo as well as forces agitating for change. In this blog I focused on the forces agitating for change, in part because I find this more compelling. You might have noticed that there were many notable omissions from this blog, I certainly do not wish to underestimate the importance of these political transitions. From Myanmar’s democratic reforms to Enrique Peña Nieto returning Mexico’s presidency to the PRI are just as important to the future as Japan’s recent elections. I will not, however, apologize for omitting the recent election in the United States. Due to my own interest/connection to US politics, I followed the election very closely. If you did not and would enjoy some analysis, I suggest you look somewhere else for relevant coverage: here are a few of my personal favorites.

Ethnic and religious minorities in the Arab world have long fascinated me. The Middle East is home to a variety of ethnic and religious communities with ancient origins; in the village Maaloula in Syria the last remaining speakers of Western Aramaic (the language spoken by Jesus) reside. While the community that lives in Maaloula is tiny (2,000 people live there) the region contains many larger groups. This can complicate nation-building and has led to some hilariously complicated political alliances. When I visited the region in 2010, I was particularly amazed at the concentration of groups into enclaves.

I took this picture in Gemmayze district in Beirut. The circular sticker with a tree in the center is actually the symbol of the Lebanese Forces, a militia-come-political party that represents Maronite Christians in Lebanon. A short taxi ride to the south of Beirut, near the Shatila refugee camp you find very different political signs along with different demographics:

In the 2006 war with Israel this area was bombed; most of the people here belong to Shi’a Islam and support either Hezbollah or Amal, whose late founder Musa al-Sadr is pictured here. Lebanon is not the only country with a unique mixture of communities, as the recent hotspots of the Arab Spring demonstrate: minorities play a big role in the outcome of the Arab Spring.

I was thrilled to add Syria to my trip after I arrived in Beirut. Many things distinguish Syria from the other countries in the region; the country’s diversity is just one of them. Syria has been in three declared wars with Israel (1948, 1967, 1973) and numerous other conflicts indirectly. Since 1971 the country has been ruled by the Assad family, first under Hafez al-Assad and currently under Bashar al-Assad. Both Bashar and his father belong to the Alawite sect: a branch of the twelver-school of Shi’a Islam.

Before going deeper into the details of this faith I would like to explain the connection the Alawites have with the Assad regime. At the time of independence from France (1946) the Alawites were marginally represented in Syrian society; most of them lived in the mountainous area east of  Syria’s coast, near Latakia. Young Alawi men began to join the military in large numbers, particularly the Air Force after Syria’s unsuccessful war with Israel in 1948. One of those men was Hafez al-Assad, who would become commander of the Syrian Air Force after a coup by the Ba’athist party in 1963. In 1966 the Ba’athist Party had an internal coup and by 1971 Hafez Assad would become the leader of an authoritarian Syrian state. The role of Syrian Alawites has been transformed since then.

In many ways the Alawi people of Syria face a similar dynamic that the Sunni Arabs of Iraq under Saddam Hussein; both groups received benefits from the state via association. Syria’s economy, like many Arab countries, is dominated by the state; about 30% of the total workforce in Syria works in the public sector. Alawites frequently direct important businesses, from private cellular companies to the real estate firms. Sadly, the darker side of this sectarian connection has been illuminated by the recent uprising in Syria: the state’s feared Idarat al-Mukhabarat al-Jawiyya (Mukhabarat for short) is controlled by the Air Force, and is currently directed by Jamil Hassan, an Alawite. The Syrian military has also increasingly relied on its 4th armored division to carry out attacks on rebels. This division is commanded by Bashar’s younger brother Maher al-Assad and is almost entirely comprised of Alawi soldiers. While the state controls this division directly, many of the gruesome atrocities recently carried out were done by militias mostly drawn from Alawite population called the Shabiha (ghost), ostensibly with support from the state.

It isn’t my intention to portray the Alawites as an evil sect, or to conflate the actions of the regime with the larger community. With that said, Alawites face a future that is complicated by demographics and a unique relationship with the regime in Syria; they are hardly alone:

(note: I used statistics from the US Dept. of State in part because exact percentages for each community are often disputed by different sources while the DoS estimates are at least internally consistent)

The truth is, more than a third of Syria’s population faces an uncertain future that could be reshaped by democracy; a fact not lost on the regime. I hold the not-uncommon opinion that Assad uses the threat of sectarian conflict to raise the stakes for minority communities in Syria. I think the regime hired Alawites to carry out the massacre in Houla with the expectation that it would provoke a sectarian response by Sunni Arabs. Assad might have gotten his wish at the start of the month when footage was released of Syrian rebels executing four prisoners, allegedly members of the Shabiha based in Aleppo. But the people killed in the video were not from the Alawi sect, they reported to be Sunni Arabs from the Al-Berri clan. Whether or not the opposition is currently engaged in sectarian conflict, there are deep issues about the fate of the Alawi population in Syria once the regime collapses. Some distrust of the sect seems inevitable: the Alawi connection to the Assad regime is complicated by the secretive nature of the group, which keeps certain aspects of the faith secret.

While the Alawi have a connection to the regime poses the primary challenge to the group’s future in Syria, the Druze there face a mainly religious one. While the Alawi have a secretive past, the sect underwent a so-called “Sunnification” under Hafez Assad; this helped bring the Alawi into the mainstream and settle tensions between the Sunni majority and the small sect. The same did not happen for the Druze, whose faith is still considered by most Muslims to be a separate religion from Islam, many Muslim scholars go so far as to call it a cult. Even more so than the Alawi, the Druze keep large portions of the faith a secret and it is alleged that male believers are forbidden from learning certain principles of the faith until they are 40 years old.

In addition to the doctrinal differences that separate Syria’s Druze (about 3% of the population) there is a history of regionalism, and even brief autonomy for them during the French Mandate of Syria:

As pictured, the historic center of the Syrian Druze community has been near the mountain Jabal al-Druze. Most of this resides in the modern governate of as-Suwayda, which retains a Druze majority. While many Druze reside in this area, they can also be found in Syria’s major urban centers, Aleppo and Damascus. Despite the history of autonomy in Jabal al-Druze, Druze in Syria and in neighboring countries are known for their loyalty to the nations they live in.  While the Druze of Syria have tried to avoid taking sides in the recent conflict, recent violence has drawn them in at times.

While they remain silent, the Druze living in Lebanon to the west and in Israel to the southwest have become vocal and divided over the revolution. The influential leader of Lebanon’s Druze community, Walid Jamblatt, has endorsed the opposition and asked foreign powers to help overthrow Assad. Meanwhile the Druze living in the Israeli-occupied Golan Heights have become divided, with many youth siding with the opposition. It should be noted that there are about 100,000 Druze living in de-jure Israel who are integrated into Israeli society, holding political posts and serving in the military. Eventually I think the Druze community in Syria will support the opposition, but not until a more clear shift in the balance of power emerges.

If the Syrian Druze face a future partially dictated by the actions of their community abroad, the Kurds of Syria face a future dominated by it. The Kurdish people are dispersed across the region, millions live in Turkey, Iran, Iraq, and Syria. Broader Kurdish relations with the governments of the area have played into local politics in Syria. In 1998 Turkey nearly went to war with Syria (then under Hafez Assad) over Assad’s alleged support for the Kurdish Workers Party (PKK) which was accused of terrorist acts in Turkey. Hafez Assad reversed his support for the PKK and forced its leader Abdullah Ocalan to leave  Syria; relations with Turkey improved soon after.

The biggest and best armed Kurdish group in Syria, the Democratic Union Party (PYD) has recently taken control of government institutions and set up road blocks in parts of Syria’s northeast. The PYD has connections to the PKK and some have speculated that Assad is allowing the PYD to take control of the northeast in exchange for not joining the opposition. This action been condemned by some Turkish lobbyists, who see it as an opportunity for renewed violence in Turkey’s southwest. In addition to Turkey holding a position on the Kurds of Syria, Iraq’s Kurdish leaders have also become involved. The leader of Iraq’s Kurdish region, Masoud Barzani, recently got Syria’s two biggest Kurdish organizations the PYD and the Kurdish National Council to share power. This has in turn inflamed tensions between Iraq’s central government and the Kurdish Regional Government (KRG), as there was a brief standoff between soldiers in the Iraqi Army and the KRG’s Peshmerga near the border separating Iraq and northeastern Syria. While the Syria the Kurds might not be united behind either the regime or the opposition they remain united in their demand for autonomy: by now the opposition realizes that autonomy, in some form, will be the price for Kurdish support.

The article that inspired me to write this blog (from the WSJ titled: Can Syria’s Christians Survive?) focuses on the final group I want to discuss. Christians have lived in Syria since the advent of the faith, the apostle Paul famously made his conversion there and the community of Christians has stayed there ever since.

(me at the site of Paul’s baptism in Damascus)

The largest Christian denominations in Syria are Greek (Eastern) Orthodox, Eastern Catholic, Melkite Greek Catholic, and the Oriental Syriac Orthodox Church. While different sources dispute the size of the Christian community in Syria, few sources put them under 10% of the total population. Syria has experienced a region-wide phenomenon of large-scale Christian emigration over the past 30 years.  The secular orientation of Hafez and Bashar Assad’s regimes has been popular with many of the Christians in Syria, this has led to tensions with the Sunni majority in places of fighting. In al-Qusayr (a town south of Homs) Christians took up arms and manned regime checkpoints. This provoked a violent response and the town was Christians suspected of supporting the regime were allegedly executed, with thousands later fleeing the city. With this painting a bleak picture for the future of Syria’s Christians, there are Christian leaders within the opposition. George Sabra is a Christian in the leadership of the Free Syrian Army, he argues that the regime is an ally to no faith and that the Free Syrian Army has had Christians in its ranks since the beginning. But even he admits that most Christians are afraid of the future and choose to stay out of the conflict as a result.

The fear of long-term communal violence has led some academics suggest partitioning Syria along sectarian and ethnic lines, but this solution is riddled with flaws in my opinion. Syria is a nation dominated by the two cities Damascus and Aleppo; over a quarter of all Syrians live in the metropolitan areas of these cities and most minorities have large communities there. The two cities might contain more Kurds than the north and northeastern sections of the country, where PYD and KNC fighters have been most active. The countries Druze might be concentrated near Jabal al-Druze but many reside in the two main cities. And while the Alawi have a heavy presence in the northwestern part of the country, their large communities in Aleppo and Damascus would be separated by hundreds of miles from any Alawite State. Finally, the country’s Christians are mostly concentrated in the two cities, but also have communities west of Homs mountains (in Wadi al-Nasara). Despite being 10% of Syria’s overall population, there appears to be no partition of the state that could protect them.

(from the WSJ article)

Some have responded that the sectarian tensions within Syria are so insurmountable that we should just give up and support the regime; again I see many problems with this outlook. It’s true that Christians have complained about the rebels and some refugees have gone on record saying:

The nightmare for Christians is when the revolution took an Islamist face, it is not the moderate Islam we know in Syria. We are talking about a kind of aggressive and impulsive Islam.”

This sentiment underscores legitimate grievances from the Christian minority, but it makes little sense to deduce from this statement that the murderous regime of Assad needs to be supported. The regime is responsible for the majority of the over 20,000 dead in Syria so far. The fighting has created a humanitarian crisis and given the UN and aid agencies a herculean task as more than 200,000 refugees pour into neighboring countries, according to the UN. It seems unlikely at this point that the regime could ever survive in its current state, regardless of outside influence. While Bashar’s father was able to quell an Islamist uprising in Hama in 1982 with similar brutality (killing 20,000 in the process) the world has changed since then. The Cold War has ended and despite Russia’s opposition to any direct action by the UN Security Council there is already evidence of material  support for the rebels pouring into the country.

The region’s march toward democracy does not need to come at the expense of its religious and ethnic minorities, democracy and pluralistic societies can coexist. We should not feel like we’re faced with a choice between the autocratic oppression of the past and a new populist oppression of minorities. For democracy to thrive in the Arab world, there needs to be a change in attitudes towards minorities and towards the state itself. The violent cycle of authoritarian regimes being replaced with new ones that use violence to avenge the past has to stop.  The process of finding truth and reconciliation as it has taken place in Latin America offers some guidance to this end. Until then, the alienation of minorities in the Arab world will only serve to create more enemies and continue the tragic trend of emigration by minorities.

so it’s been a month since I’ve updated my blog and some of you might be asking why. Unlike last time, there is only good news for what has prevented me from updating now. In the past month I’ve moved, started an internship at an unspecified Senators office, and in four days I will be flying to Sydney where I will stay for a month (with my wonderful girlfriend). I couldn’t be more excited/distracted by all of this and sadly it has prevented me from drafting any new ideas for a blog post, despite all of the big news around the world.

for an update on the state of the world I present you with the following:

  • The US economy’s growth has tapered off dramatically in recent months and it now looks likely that the Fed will institute additional measures in the future to increase demand (while agreeing to extend Operation Twist immediately). For more on the Fed’s FOMC meeting read here.
  • Spain has taken a bailout package designed to capitalize its banking sector worth 100bn euros. The money will come in the form of sovereign loans with favorable conditions, but because the money isn’t being directly injected into the banks it will cause Spain’s sovereign debt to increase. This has had a negative impact on Spain’s borrowing costs. For more on the good and the bad of this bailout you really ought to read this excellent blog post.
  • Greece elected a pro-bailout/pro-EU set of parties and it now looks like they will be able to form a coalition government that supports staying in the single currency.
  • Egypt’s military leadership (Scaf) has dissolved parliament and delayed results for the presidential election that just took place. Some have speculated that the elections will be canceled and the military won’t give up power.

That’s all for now, I probably won’t update this while I’m in Australia but feel free to give suggestions for what my next blog should be about.

It only takes a cursory glance at the global press to see how the recent European elections have been viewed:

I don’t really have to translate der Spiegel to get the message across but it says: Why Greece must now leave the Euro.

Wow. So France elected a “dangerous” Socialist and Greece is going to leave the Euro. Not only that, the markets apparently believe that the sky is falling as well: (links here)

To summarize broadly the narrative that has come out of the press in the past week: European voters have rejected austerity, now the end (of the Euro) is near.

I want to go beyond that narrative though, there’s much more behind this “democracy interferes with a solution to the European crisis” than is being reported.

So lets start with the election of Socialist François Hollande. The Economist is a publication I hold dear most of the time; usually their articles promote a mostly centrist, albeit pro-globalization view. But there are so many problems with the Op-Ed piece on Hollande that I struggle to find merit in any of it. They malign him for not seeking to trim the size of the French state, while admitting that he seeks a balanced budget. And while they say that he “gets one big thing right” with his criticism of German-let austerity they posit that he isn’t doing it for the right reasons, as if intentions make a difference in modern electoral politics. (I’ll go into more detail on the German austerity program but to avoid being redundant here’s a relink a blog I wrote about it earlier). So The Economist was alarmed by the prospect of Hollande winning, what about the markets?

As you can see yields on French 10-year government bonds initially dropped before rising later in the trading week. But even at its current peak French bonds are still more highly valued than they were for most of the end of Nicolas Sarkozy’s term, a less “dangerous” candidate.

But while Hollande’s ascension might have drawn criticism of The Economist, Greece’s electoral result was far less conclusive. While people viewed the Socialists rise with ambivalence, almost everyone has taken the Greek result as a sign of the volatility. From the BBC:

New Democracy was awarded 50 additional seats for coming in first place, but no party won even 20% of the popular vote in this election. It should also be noted that only PASOK and New Democracy supported continuing the bailout-induced austerity program. After four separate attempts to form a coalition, the parties gave up and planned a new election on June 17th. Current polls have the left wing anti-austerity party Syriza coming in first place with 22% of the vote.

While the potential for a Greek government that opposes austerity has rattled the markets, people should be equally concerned over what the response could be from Germany. Angela Merkel telephoned the interim leader of Greece and was reported to have suggested Greece should hold a referendum on its Euro membership, though Germany denies this was proposed. Greece would not be alone in seeing voters reject austerity: Italian local elections also saw supporters of austerity get voted out. And while not facing an election, Spain’s prime minister Mariano Rajoy said that the country would breach the deficit targets imposed by the so-called Fiscal Pact led by Germany.

I’d like to expand the often cited “fiscal pact” for a moment here. The EU treaty now called the fiscal pact was signed at the beginning of March 2011, it stipulates that signing nations must not run a budget deficit of more than 3% of GDP or they will be fined. The fiscal pact has been maligned by many (Joseph Stiglitz even called it a suicide pact) but the treaty was enacted in order to fix a real problem inside the Eurozone.

Unlike the United States, where both our currency (monetary policy) and the national budget (fiscal policy) is set by the federal government, the EU only has direct control over the currency (the Euro). This causes many complications, of these the most well understood has been a competitiveness problem in certain European countries. Countries like Italy and Spain gave up a competitive advantage when they joined the Euro by giving up their cheaper local currencies. A way of offsetting this was to lower the borrowing costs for new members to help eliminate the competitiveness problem without devaluing the Euro currency itself. The problem now is that 10 years after the creation of the Euro, the competitiveness gap still exists.

This is not unique to Europe; in the US we also have a competitiveness gap between US states. Poorer US states like Kentucky, Mississippi, and West Virginia take in much more than they pay into the IRS, while states like California get considerably less back. This translates into long term transfers of wealth from competitive parts of the country to less competitive ones; Europe lacks this redistributive mechanism. At the same time, because the federal government issues bonds on behalf of all 50 states, the fiscal insolvency of one state (say California) is not exposed to the wrath of the markets. In other words, the risk between US states is mutualized by the federal government. Europe currently lacks both of these tools to stymie the crisis.

This brings us back to issue of democracy and the European economic crisis. While some countries have voted in opposition to the austerity drive, German voters have their own reservations on many proposed solutions to the crisis. According to a poll in November 2011, 79% of Germans oppose a European Bond that would combine sovereign debt from Germany with other Euro members. Germans are similarly opposed to any inflation outside of what they view as acceptable. A poll from an insurance company (R+V) asked Germans what their most pressing fear was: last year inflation topped the list with 63% of respondents listing it. These views have been reflected by German policymakers  as Finance Minister Wolfgang Schaeuble denied that Greek bailouts would result in any transfer union in Europe. German opposition to inflationary policy at the ECB has also been pronounced. While some of this stubbornness has changed over time, policymakers still have an obligation to follow the wishes of their citizens or face potential defeat in elections.

Right now the “strategy” to resolve the Eurozone competitiveness problem involves cutting deficits across the EU and relying on “internal devaluation” caused by austerity and falling prices in the most troubled economies (Greece, Ireland, Portugal, Spain, Italy). Unfortunately this process takes a very long time and has put many of the troubled economies into recession. This process is also complicated by German opposition to inflation, as higher inflation in Germany would help make the troubled periphery more competitive.

In the end, the problems affecting the Eurozone will probably require a combination of both austerity measures over time in some countries as well as some form of debt mutualization and fiscal transfers to less competitive countries. This is, of course, just to stymie the medium to long term imbalances facing the Eurozone. In the short term the EU has very dire questions to answer: is the current strategy sustainable, can the Eurozone survive a Greek exit, would it be worth it to tolerate countries rejecting austerity if the alternative was a disorderly departure from the single currency? Above all, can the Euro survive the challenge democracy presents to resolving its many problems?

When I took my first class on International Relations in college I was especially excited to participate in a exercise at the end of the term: everyone in class would get into groups and simulate a regional conflict with individuals acting as certain countries. I got Turkey, and it was my job to negotiate Georgian membership in NATO. The group included someone playing Georgia, the US, Iran, and Russia was supposed to have a representative but she was sick that day. It ended with me (Turkey) yelling at Iran’s sassy representative until the United States mopped things up and signed a treaty. In reality Turkey and Iran have had several shouting matches throughout history, dating back to the Ottoman and Safavid empires.

We were allowed to bicker in part because the professor was distracted by 30 other students at the time but also because certain facts about the group presented themselves. Iran and Turkey are similarly sized countries with populations of about 75 million each, with economies sized by the IMF at $930.236bn and $1,054.560 respectively. Before the US got involved, neither me (playing Turkey) nor Iran’s representative had enough of a relative advantage to sway Georgia; it took a superpower to alter the dynamics of the group. International politics aren’t usually that simple, but the exercise has always intrigued me. I’ve wondered since then what patterns you could find by taking a simple measurement of a country’s relative power (like wealth) and looked a differences within real international working groups.

In this blog I want to look at relative power and measure it within various international organizations. But before I go any further I want to make one point clear: I am not attempting to predict actual influence in international organizations, I am merely measuring theoretical influence in these organizations and leaving it up to the viewer to draw whatever conclusions from this. Having said that, I’ve found several articles about recent events that relate to the power-dynamics in these organizations. For most of these graphs I will be using Gross Domestic Product based on Purchasing Power Parity as a basis for potential influence in groups. I collected the statistics from the IMF (here) and all but a few exceptions are from 2011.

For my first group I would like to present the Arab League, with the Gulf Cooperation Council as a subgroup:

(note: the Palestinian Authority and Somalia were omitted as they lacked recent statistics, Yemen and Libya’s numbers are from 2010)

I think this graph is especially important as recent uprisings in the Middle East have captured the attention of the world. Like so many things in the region, the uprisings must be viewed in a context includes more than just relative GDP, but this graph offers some perspective on recent events. Just as Tunisia had seen its president abdicate power and Cairo’s Tahrir Square was swelling with protestors, the Gulf Cooperation Council (led by Saudi Arabia) invited the Morocco and Jordan to join the oil producing group.  The move was widely interpreted as an effort to stymie the revolution retain Saudi Arabia’s influence in the Arab League. Even without adding Jordan and Morocco the combined wealth of the Gulf Cooperation Council makes up 46% of the Arab League, it would have a majority of the League’s wealth were it to include the two monarchies.

Palestine is a perennial feature of Arab League summits, so it should come as no surprise Arab states frequently vie for influence over the politics of the territory. Egypt has repeatedly tried to broker unity within the Palestinian government; Saudi Arabia has tried to take the initiative on Arab leadership in the Israel-Palestine conflict. Personally, I think it’s no coincidence that the two largest economies in the Arab League have both taken such a critical role in the Israel-Palestine conflict. While Arab League efforts to resolve the Israel-Palestine have stagnated recently, the situation in Syria has been very much on the agenda.

While conflict and upheaval has often characterized the Middle East, Latin America has seen a recent flourishing of democracy and regional integration. For this region I would like to present two graphs representing different regional organizations:

UNASUR (The Union of South American Nations) is the main body for regional integration in South America, but its significance to greater Latin America was enough to move Mexico and Panama to observe the treaty signing that created the institution. It’s not hard to see how relative power in this institution could easily mirror the simulation I participated in in class. In 2010 a dispute between Colombia and Venezuela gave the new organization a role in resolving a long-brewing confrontation. Like Turkey and Iran, Colombia and Venezuela are neighbors with somewhat similar means ($467bn GDP for Colombia versus $370bn Venezuela) but very different ideology/foreign relations. Colombian president Álvaro Uribe, having just signed an agreement with the US to build a new base there, accused Venezuelan president Hugo Chávez of giving FARC material support. Pressure from UNASUR helped to prevent war and in August the two countries resumed diplomatic relations.

While UNASUR represents a successful  South American effort towards integration, the wider Latin America has seen varied progress towards the goal of integration.

As the Arab League seeks to integrate the Arab World, CELAC (The Community of Latin American and Caribbean States) seeks to integrate Latin America. Both groups therefore exclude obvious regional powers: the Arab League is often maligned for excluding Israel and Iran, while CELAC was created (intentionally) to promote Latin American integration without US, Canadian, or European involvement. A potential obstacle to CELAC’s success is that unlike UNASUR, Brazil faces a rival in Mexico. While Brazil is a decorated member of the BRIC (a bloc of emerging economies) and has a much larger population (190 million vs. 112 million) Mexico grew at a quicker pace in the last two quarters. Perhaps in relation to this recent shift, Brazil and Mexico are now in trade dispute with one another. Guido Mantega, Brazil’s finance minister, has recently suggested that the trade group Mercosur (part of UNASUR) increase its tariffs with outside countries, including Mexico. This doesn’t have to spell doom for the dream of Latin American integration, but it does reveal a potential rivalry that could threaten wider regional integration.

CELAC has been championed by leftist leaders in the region like Bolivia’s Evo Morales and  Hugo Chávez as an alternative to the Organization of American States, since it lacks the US and Canada. At a summit last year two declarations were adopted by the organization that reflected this reality; Argentina’s claim to the British-controlled Falkland Islands (called the Malvinas in Argentina) was supported and the US embargo on Cuba was criticized. While these declarations were adopted by all CELAC members, the body went short of calling for any direct action on the issues. Journalist Andrew Cawthorne posits that pro-US members like Mexico, Chile and Colombia have prevented CELAC from adopting more radical action against Western interests in the region. This scenario is an example of how organizations can easily lose the capacity to act unilaterally when political and economic divisions are present. The combined GDP share of Mexico, Chile and Colombia represents 35% of CELAC.

Sometimes regional groups can be so effective that they’re summits become used to coordinate bigger goals than their membership suggests. This was the case with ASEAN (Association of Southeast Asian Nations), a group founded in 1967 to represent Asian countries sandwiched between giants like China and India to the north and Australia to the south.

Security and economic integration are both included in ASEAN’s charter, but the group’s effectiveness has been varied between the two mandates. Cambodia and Thailand have had an ongoing border dispute that has persisted despite an ASEAN brokered agreement that includes Indonesian monitors in the area. But while ASEAN’s effectiveness at settling regional conflicts has been varied, it’s economic importance cannot be understated. The group plans to implement a Free Trade Agreement in 2015, which has smaller countries like Timor-Leste eager to join quickly.

ASEAN attracting small regional nations may not seem like a big deal, but certainly role in the response to the 1997 Asian financial crisis was. The financial crisis devastated much of Asia and the IMF’s response was highly criticized by many inside Asia and beyond. In 2000, finance minsters from ASEAN member-states plus China, Japan, and South Korea met at and produced what is now called the Chiang Mai Initiative. What started out as a currency-swap agreement has evolved (at least conceptually) into a regional bailout fund, with a role akin to the IMF itself. The initiative is managed at a summit connected to the annual ASEAN meetup, with the expanded group called ASEAN+3. Now, with a bailout fund of $240 billion, ASEAN+3 is a critical piece of Asian integration. What does a graph of this expanded group look like?

As evidenced by this graph, ASEAN has an outsized influence on the region it now helps to integrate.

When it comes to challenges facing a regional organization, the AU (African Union) has to be far in the lead. of the 20 countries with the lowest Human Development Index ranking 19 are members of the AU (source). With recent coups in Madagascar and Mali and Zimbabwe in perpetual crisis, the AU exists in a region that needs security and economic cooperation desperately.

(note: South Sudan, Western Sahara, and Somalia lacked current info, also not included due to GDP being under 15bn: Benin, Malawi, Rwanda, Niger, Guinea, Mauritania, Togo, Swaziland, Zimbabwe, Sierra Leone, Eritrea, Gambia, Lesotho, Central African Republic, Burundi, Djibouti, Seychelles, Cape Verde, Guinea-Bissau, Liberia, Comoros, São Tomé and Príncipe)

The AU faces several internal conflicts: the Arab north is sometimes ambivalent about the role in the AU, something brought under the spotlight when Jacob Zuma and other leaders tried to broker an AU peace plan in Libya. The AU opposed any foreign military intervention, even as Qaddafi’s troops threatened to massacre Benghazi. With a somewhat disengaged Arab north, the largest countries that back the AU enthusiastically are Nigeria and South Africa, whose support is often critical for AU resolutions.

Despite being a diverse organization with large regional/ethnic divides the AU has acted decisively on occasion. Led by Nigeria’s ambassador B. Paul Lolo the AU suspended Mali swiftly after an illegal coup took place. But sometimes the perverse influence of geopolitics has been maligned in the AU. Notably, Mugabe’s Zanu-PF government in Zimbabwe was accused of being “sheltered” by a sympathetic administration in South Africa during the worst political violence in 2008. Whether or not the AU suffers from the problems associated with power dynamics, its success is critical for the region, and perhaps the world.

With the recent election drama in France and Greece it would feel remiss to leave out the European Union in this blog.

(note: underlined countries do not use the Euro currency)

I’ll leave coverage of the eurozone sovereign debt crisis out of this as I have covered it in several other posts (and I plan on writing more shortly), but I’ll highlight a few broad observations about the EU’s politics. The UK is the largest non-Euro member-state and is often seen as the most eurosceptic member. This has distanced its role in enhancing the powers of the EU and has sometimes seen it act as a check on Franco-German aims to do so. One of the biggest recent events to upset this equilibrium has been the election of French Socialist François Hollande. German chancellor Angela Merkel actively supported his rival, incumbent Nicolas Sarkozy during the election, and many now ponder what impact the election will have on Franco-German relations. I’ll write more on this later in a dedicated EU/EuroApocalypse post.

I want to reiterate a point: as compelling as I find all of this, I have to be intellectually modest here and admit that most of it is conjecture. I’ve found most of the articles supporting this theoretical perspective on group power because I probably have a bias when I read articles about international news. Despite this, I’ve found myself drawn to this interpretation of events; I simply can’t look at news relating to China’s vetos in the UN Security Council, or India’s nuclear trade agreement with the US without seeing this interpretation of events shaping my opinion. In the very least, I hope you’ve found this to be interesting to read about.

If you’re reading this because you found one of my graphs while desperately trawling the web for statistics for an essay, feel free to use them! unless otherwise noted all of my graphs use data from the IMF found here and I’ve taken it on myself to post all of the excel docs below:

arab league GDP pie 2011

ASEAN GDP PPP 2011 pie

ASEAN+3 GDP PPP 2011 pie

AU 2011 BIG LIST

AU 2011 gdp pie

CELAC GDP PPP 2011 pie

EU27 GDP PIE 2011

NATO 2010 military spending

NATO 2011 GDP PIE

UNASUR GDP PPP 2011 pie

Follow

Get every new post delivered to your Inbox.