By Marko Papic and Peter Zeihan
Stratfor.com
February 8, 2010  

The situation in Europe is dire.After years of profligate spending, Greece is becoming overwhelmed. Barring some sort of large-scale bailout program, a Greek debt default at this point is highly likely. At this moment, European Central Bank liquidity efforts are probably the only thing holding back such a default. But these are a stopgap measure that can hold only until more important economies manage to find their feet. And Europe’s problems extend beyond Greece. Fundamentals are so poor across the board that any number of eurozone states quickly could follow Greece down.  

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And so the rest of the eurozone is watching and waiting nervously while casting occasional glances in the direction of Berlin in hopes the eurozone’s leader and economy-in-chief will do something to make it all go away. To truly understand the depth of the crisis the Europeans face, one must first understand Germany, the only country that can solve it.   

Germany’s Trap

The heart of Germany’s problem is that it is insecure and indefensible given its location in the middle of the North European Plain. No natural barriers separate Germany from the neighbors to its east and west, no mountains, deserts, oceans. Germany thus lacks strategic depth. The North European Plain is the Continent’s highway for commerce and conquest. Germany’s position in the center of the plain gives it plenty of commercial opportunities but also forces it to participate vigorously in conflict as both an instigator and victim.   

Germany’s exposure and vulnerability thus make it an extremely active power. It is always under the gun, and so its policies reflect a certain desperate hyperactivity. In times of peace, Germany is competing with everyone economically, while in times of war it is fighting everyone. Its only hope for survival lies in brutal efficiencies, which it achieves in industry and warfare.   

Pre-1945, Germany’s national goals were simple: Use diplomacy and economic heft to prevent multifront wars, and when those wars seem unavoidable, initiate them at a time and place of Berlin’s choosing.   

“Success” for Germany proved hard to come by, because challenges to Germany’s security do not “simply” end with the conquest of both France and Poland. An overstretched Germany must then occupy countries with populations in excess of its own while searching for a way to deal with Russia on land and the United Kingdom on the sea. A secure position has always proved impossible, and no matter how efficient, Germany always has fallen ultimately.   

During the early Cold War years, Germany’s neighbors tried a new approach. In part, the European Union and NATO are attempts by Germany’s neighbors to grant Germany security on the theory that if everyone in the immediate neighborhood is part of the same club, Germany won’t need a Wehrmacht.   

There are catches, of course — most notably that even a demilitarized Germany still is Germany. Even after its disastrous defeats in the first half of the 20th century, Germany remains Europe’s largest state in terms of population and economic size; the frantic mindset that drove the Germans so hard before 1948 didn’t simply disappear. Instead of German energies being split between growth and defense, a demilitarized Germany could — indeed, it had to — focus all its power on economic development. The result was modern Germany — one of the richest, most technologically and industrially advanced states in human history.   

Germany and Modern Europe

That gives Germany an entirely different sort of power from the kind it enjoyed via a potent Wehrmacht, and this was not a power that went unnoticed or unused.   

France under Charles de Gaulle realized it could not play at the Great Power table with the United States and Soviet Union. Even without the damage from the war and occupation, France simply lacked the population, economy and geographic placement to compete. But a divided Germany offered France an opportunity. Much of the economic dynamism of France’s rival remained, but under postwar arrangements, Germany essentially saw itself stripped of any opinion on matters of foreign policy. So de Gaulle’s plan was a simple one: use German economic strength as sort of a booster seat to enhance France’s global stature.   

This arrangement lasted for the next 60 years. The Germans paid for EU social stability throughout the Cold War, providing the bulk of payments into the EU system and never once being a net beneficiary of EU largesse. When the Cold War ended, Germany shouldered the entire cost of German reunification while maintaining its payments to the European Union. When the time came for the monetary union to form, the deutschemark formed the euro’s bedrock. Many a deutschmark was spent defending the weaker European currencies during the early days of European exchange-rate mechanisms in the early 1990s. Berlin was repaid for its efforts by many soon-to-be eurozone states that purposely enacted policies devaluing their currencies on the eve of admission so as to lock in a competitive advantage vis-à-vis Germany.   

But Germany is no longer a passive observer with an open checkbook.   

In 2003, the 10-year process of post-Cold War German reunification was completed, and in 2005 Angela Merkel became the first postwar German leader to run a Germany free from the burden of its past sins. Another election in 2009 ended an awkward left-right coalition, and now Germany has a foreign policy neither shackled by internal compromise nor imposed by Germany’s European “partners.”   

The Current Crisis

Simply put, Europe faces a financial meltdown.   

The crisis is rooted in Europe’s greatest success: the Maastricht Treaty and the monetary union the treaty spawned epitomized by the euro. Everyone participating in the euro won by merging their currencies. Germany received full, direct and currency-risk-free access to the markets of all its euro partners. In the years since, Germany’s brutal efficiency has permitted its exports to increase steadily both as a share of total European consumption and as a share of European exports to the wider world. Conversely, the eurozone’s smaller and/or poorer members gained access to Germany’s low interest rates and high credit rating.   

And the last bit is what spawned the current problem.   

Most investors assumed that all eurozone economies had the blessing — and if need be, the pocketbook — of the Bundesrepublik. It isn’t difficult to see why. Germany had written large checks for Europe repeatedly in recent memory, including directly intervening in currency markets to prop up its neighbors’ currencies before the euro’s adoption ended the need to coordinate exchange rates. Moreover, an economic union without Germany at its core would have been a pointless exercise.   

Investors took a look at the government bonds of Club Med states (a colloquialism for the four European states with a history of relatively spendthrift policies, namely, Portugal, Spain, Italy and Greece), and decided that they liked what they saw so long as those bonds enjoyed the implicit guarantees of the euro. The term in vogue with investors to discuss European states under stress is PIIGS, short for Portugal, Italy, Ireland, Greece and Spain. While Ireland does have a high budget deficit this year, STRATFOR prefers the term Club Med, as we do not see Ireland as part of the problem group. Unlike the other four states, Ireland repeatedly has demonstrated an ability to tame spending, rationalize its budget and grow its economy without financial skullduggery. In fact, the spread between Irish and German bonds narrowed in the early 1980s before Maastricht was even a gleam in the collective European eye, unlike Club Med, whose spreads did not narrow until Maastricht’s negotiation and ratification.   

Even though Europe’s troubled economies never actually obeyed Maastricht’s fiscal rules — Athens was even found out to have falsified statistics to qualify for euro membership — the price to these states of borrowing kept dropping. In fact, one could well argue that the reason Club Med never got its fiscal politics in order was precisely because issuing debt under the euro became cheaper. By 2002 the borrowing costs for Club Med had dropped to within a whisker of those of rock-solid Germany. Years of unmitigated credit binging followed.   

The 2008-2009 global recession tightened credit and made investors much more sensitive to national macroeconomic indicators, first in emerging markets of Europe and then in the eurozone. Some investors decided actually to read the EU treaty, where they learned that there is in fact no German bailout at the end of the rainbow, and that Article 104 of the Maastricht Treaty (and Article 21 of the Statute establishing the European Central Bank) actually forbids one explicitly. They further discovered that Greece now boasts a budget deficit and national debt that compares unfavorably with other defaulted states of the past such as Argentina.   

Investors now are (belatedly) applying due diligence to investment decisions, and the spread on European bonds — the difference between what German borrowers have to pay versus other borrowers — is widening for the first time since Maastricht’s ratification and doing so with a lethal rapidity. Meanwhile, the European Commission is working to reassure investors that panic is unwarranted, but Athens’ efforts to rein in spending do not inspire confidence. Strikes and other forms of political instability already are providing ample evidence that what weak austerity plans are in place may not be implemented, making additional credit downgrades a foregone conclusion.

 

Germany’s Choice

As the EU’s largest economy and main architect of the European Central Bank, Germany is where the proverbial buck stops. Germany has a choice to make. 

The first option, letting the chips fall where they may, must be tempting to Berlin. After being treated as Europe’s slush fund for 60 years, the Germans must be itching simply to let Greece and others fail. Should the markets truly believe that Germany is not going to ride to the rescue, the spread on Greek debt would expand massively. Remember that despite all the problems in recent weeks, Greek debt currently trades at a spread that is only one-eighth the gap of what it was pre-Maastricht — meaning there is a lot of room for things to get worse. With Greece now facing a budget deficit of at least 9.1 percent in 2010 — and given Greek proclivity to fudge statistics the real figure is probably much worse — any sharp increase in debt servicing costs could push Athens over the brink. 

From the perspective of German finances, letting Greece fail would be the financially prudent thing to do. The shock of a Greek default undoubtedly would motivate other European states to get their acts together, budget for steeper borrowing costs and ultimately take their futures into their own hands. But Greece would not be the only default. The rest of Club Med is not all that far behind Greece, and budget deficits have exploded across the European Union. Macroeconomic indicators for France and especially Belgium are in only marginally better shape than those of Spain and Italy. 

At this point, one could very well say that by some measures the United States is not far behind the eurozone. The difference is the insatiable global appetite for the U.S. dollar, which despite all the conspiracy theories and conventional wisdom of recent years actually increased during the 2008-2009 global recession. Taken with the dollar’s status as the world’s reserve currency and the fact that the United States controls its own monetary policy, Washington has much more room to maneuver than Europe. 

Berlin could at this point very well ask why it should care if Greece and Portugal go under. Greece accounts for just 2.6 percent of eurozone gross domestic product. Furthermore, the crisis is not of Berlin’s making. These states all have been coasting on German largesse for years, if not decades, and isn’t it high time that they were forced to sink or swim? 

The problem with that logic is that this crisis also is about the future of Europe and Germany’s place in it. Germany knows that the geopolitical writing is on the wall: As powerful as it is, as an individual country (or even partnered with France), Germany does not approach the power of the United States or China and even that of Brazil or Russia further down the line. Berlin feels its relevance on the world stage slipping, something encapsulated by U.S. President Barack Obama’s recent refusal to meet for the traditional EU-U.S. summit. And it feels its economic weight burdened by the incoherence of the eurozone’s political unity and deepening demographic problems. 

The only way for Germany to matter is if Europe as a whole matters. If Germany does the economically prudent (and emotionally satisfying) thing and lets Greece fail, it could force some of the rest of the eurozone to shape up and maybe even make the eurozone better off economically in the long run. But this would come at a cost: It would scuttle the euro as a global currency and the European Union as a global player. 

Every state to date that has defaulted on its debt and eventually recovered has done so because it controlled its own monetary policy. These states could engage in various (often unorthodox) methods of stimulating their own recovery. Popular methods include, but are hardly limited to, currency devaluations in an attempt to boost exports and printing currency either to pay off debt or fund spending directly. But Greece and the others in the eurozone surrendered their monetary policy to the European Central Bank when they adopted the euro. Unless these states somehow can change decades of bad behavior in a day, the only way out of economic destitution would be for them to leave the eurozone. In essence, letting Greece fail risks hiving off EU states from the euro. Even if the euro — not to mention the EU — survived the shock and humiliation of monetary partition, the concept of a powerful Europe with a political center would vanish. This is especially so given that the strength of the European Union thus far has been measured by the successes of its rehabilitations — most notably of Portugal, Italy, Greece and Spain in the 1980s — where economic-basket case dictatorships and pseudo-democracies transitioned into modern economies. 

And this leaves option two: Berlin bails out Athens. 

There is no doubt Germany could afford such a bailout, as the Greek economy is only one-tenth of the size of the Germany’s. But the days of no-strings-attached financial assistance from Germany are over. If Germany is going to do this, there will no longer be anything “implied” or “assumed” about German control of the European Central Bank and the eurozone. The control will become reality, and that control will have consequences. For all intents and purposes, Germany will run the fiscal policies of peripheral member states that have proved they are not up to the task of doing so on their own. To accept anything less intrusive would end with Germany becoming responsible for bailing out everyone. After all, who wouldn’t want a condition-free bailout paid for by Germany? And since a euro-wide bailout is beyond Germany’s means, this scenario would end with Germany leading the EU hat-in-hand to the International Monetary Fund for an American/Chinese-funded assistance package. It is possible that the Germans could be gentle and risk such abject humiliation, but it is not likely. 

Taking a firmer tack would allow Germany to achieve via the pocketbook what it couldn’t achieve by the sword. But this policy has its own costs. The eurozone as a whole needs to borrow around 2.2 trillion euros in 2010, with Greece needing 53 billion euros simply to make it through the year. Not far behind Greece is Italy, which needs 393 billion euros, Belgium with needs of 89 billion euros and France with needs of yet another 454 billion euros. As such, the premium on Germany is to act — if it is going to act — fast. It needs to get Greece and most likely Portugal wrapped up before crisis of confidence spreads to the really serious countries, where even mighty German’s resources would be overwhelmed. 

That is the cost of making Europe “work.” It is also the cost to Germany of leadership that doesn’t come at the end of a gun. So if Germany wants its leadership to mean something outside of Western Europe, it will be forced to pay for that leadership — deeply, repeatedly and very, very soon. But unlike in years past, this time Berlin will want to hold the reins. 

. . . . . . . . . . . . . . . . . . . . . . . . . . . 

This report is republished with permission of STRATFOR 

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By Peter Zeihan
Stratfor.com
January 26, 2010

Ukrainians go to the polls Feb. 7 to choose their next president. The last time they did this, in November 2004, the result was the prolonged international incident that became known as the Orange Revolution. That event saw Ukraine cleaved off from the Russian sphere of influence, triggering a chain of events that rekindled the Russian-Western Cold War. Next week’s runoff election seals the Orange Revolution’s reversal. Russia owns the first candidate, Viktor Yanukovich, outright and has a workable agreement with the other, Yulia Timoshenko. The next few months will therefore see the de facto folding of Ukraine back into the Russian sphere of influence; discussion in Ukraine now consists of debate over the speed and depth of that reintegration.

The Centrality of Ukraine

Russia has been working to arrest its slide for several years. Next week’s election in Ukraine marks not so much the end of the post-Cold War period of Russian retreat as the beginning of a new era of Russian aggressiveness. To understand why, one must first absorb the Russian view of Ukraine.

Since the break-up of the Soviet Union, most of the former Soviet republics and satellites found themselves cast adrift, not part of the Russian orbit and not really part of any other grouping. Moscow still held links to all of them, but it exercised few of its levers of control over them during Russia’s internal meltdown during the 1990s. During that period, a number of these states — Estonia, Latvia, Lithuania, Poland, Hungary, Romania, Bulgaria and the former Czechoslovakia to be exact — managed to spin themselves out of the Russian orbit and attach themselves to the European Union and NATO. Others — Azerbaijan, Georgia, Moldova, Uzbekistan, Kyrgyzstan and Ukraine — attempted to follow the path Westward, but have not succeeded at this point. Of these six, Ukraine is by far the most critical. It is not simply the most populous of Russia’s former possessions or the birthplace of the Russian ethnicity, it is the most important province of the former Russian Empire and holds the key to the future of Eurasia.

First, the incidental reasons. Ukraine is the Russian Empire’s breadbasket. It is also the location of nearly all of Russia’s infrastructure links not only to Europe, but also to the Caucasus, making it critical for both trade and internal coherence; it is central to the existence of a state as multiethnic and chronically poor as Russia. The Ukrainian port of Sevastopol is home to Russia’s Black Sea fleet, and Ukrainian ports are the only well-developed warm-water ports Russia has ever had. Belarus’ only waterborne exports traverse the Dnieper River, which empties into the Black Sea via Ukraine. Therefore, as goes Ukraine, so goes Belarus. Not only is Ukraine home to some 15 million ethnic Russians — the largest concentration of Russians outside Russia proper — they reside in a zone geographically identical and contiguous to Russia itself. That zone is also the Ukrainian agricultural and industrial heartland, which again is integrated tightly into the Russian core.

These are all important factors for Moscow, but ultimately they pale before the only rationale that really matters: Ukraine is the only former Russian imperial territory that is both useful and has a natural barrier protecting it. Belarus is on the Northern European Plain, aka the invasion highway of Europe. The Baltics are all easily accessible by sea. The Caucasian states of Armenia, Azerbaijan and Georgia are on the wrong side of the Caucasus Mountains (and Russia’s northern Caucasus republics — remember Chechnya? — aren’t exactly the cream of the crop of Russian possessions). It is true that Central Asia is anchored in mountains to the south, but the region is so large and boasts so few Slavs that it cannot be controlled reliably or cheaply. And Siberia is too huge to be useful.

Without Ukraine, Russia is a desperately defensive power, lacking any natural defenses aside from sheer distance. Moscow and Volgograd, two of Russia’s critically strategic cities, are within 300 miles of Ukraine’s eastern border. Russia lacks any natural internal transport options — its rivers neither interconnect nor flow anywhere useful, and are frozen much of the year — so it must preposition defensive forces everywhere, a burden that has been beyond Russia’s capacity to sustain even in the best of times. The (quite realistic) Russian fear is that without Ukraine, the Europeans will pressure Russia along its entire western periphery, the Islamic world will pressure Russia along its entire southern periphery, the Chinese will pressure Russia along its southeastern periphery, and the Americans will pressure Russia wherever opportunity presents itself.

Ukraine by contrast has the Carpathians to its west, a handy little barrier that has deflected invaders of all stripes for millennia. These mountains defend Ukraine against tanks coming from the west as effectively as they protected the Balkans against Mongols attacking from the east. Having the Carpathians as a western border reduces Russia’s massive defensive burden. Most important, if Russia can redirect the resources it would have used for defensive purposes on the Ukrainian frontier — whether those resources be economic, intelligence, industrial, diplomatic or military — then Russia retains at least a modicum of offensive capability. And that modicum of offensive ability is more than enough to overmatch any of Russia’s neighbors (with the exception of China).

When Retreat Ends, the Neighbors Get Nervous

This view of Ukraine is not alien to countries in Russia’s neighborhood. They fully understand the difference between a Russia with Ukraine and a Russia without Ukraine, and understand that so long as Ukraine remains independent they have a great deal of maneuvering room. Now that all that remains is the result of an election with no strategic choice at stake, the former Soviet states and satellites realize that their world has just changed.

Georgia traditionally has been the most resistant to Russian influence regardless of its leadership, so defiant that Moscow felt it necessary to trounce Georgia in a brief war in August 2008. Georgia’s poor strategic position is nothing new, but a Russia that can redirect efforts from Ukraine is one that can crush Georgia as an afterthought. That is turning the normally rambunctious Georgians pensive, and nudging them toward pragmatism. An opposition group, the Conservative Party, is launching a movement to moderate policy toward Russia, which among other things would mean abandoning Georgia’s bid for NATO membership and re-establishing formal political ties with Moscow.

A recent Lithuanian power struggle has resulted in the forced resignation of Foreign Minister Minister Vygaudas Usackas. The main public point of contention was the foreign minister’s previous participation in facilitating U.S. renditions. Vygaudas, like most in the Lithuanian leadership, saw such participation as critical to maintaining the tiny country’s alliance with the United States. President Dalia Grybauskaite, however, saw the writing on the wall in Ukraine, and feels the need to foster a more conciliatory view of Russia. Part of that meant offering up a sacrificial lamb in the form of the foreign minister.

Poland is in a unique position. It knows that should the Russians turn seriously aggressive, its position on the Northern European Plain makes it the focal point of Russian attention. Its location and vulnerability makes Warsaw very sensitive to Russian moves, so it has been watching Ukraine with alarm for several months.

As a result, the Poles have come up with some (admittedly small) olive branches, including an offer for Putin to visit Gdansk last September in an attempt to foster warmer (read: slightly less overtly hostile) relations. Putin not only seized upon the offer, but issued a public letter denouncing the World War II-era Molotov-Ribbentrop Treaty, long considered by Poles as the most outrageous Russian offense to Poland. Warsaw has since replied with invitations for future visits. As with Georgia, Poland will never be pro-Russian — Poland is not only a NATO member but also hopes to host an American Patriot battery and participate in Washington’s developing ballistic missile defense program. But if Warsaw cannot hold Washington’s attention — and it has pulled out all the stops in trying to — it fears the writing might already be on the wall, and it must plan accordingly.

Azerbaijan has always attempted to walk a fine line between Russia and the West, knowing that any serious bid for membership in something like the European Union or NATO was contingent upon Georgia’s first succeeding in joining up. Baku would prefer a more independent arrangement, but it knows that it is too far from Russia’s western frontier to achieve such unless the stars are somewhat aligned. As Georgia’s plans have met with what can best be described as abject failure, and with Ukraine now appearing headed toward Russian suzerainty, Azerbaijan has in essence resigned itself to the inevitable. Baku is well into negotiations that would redirect much of its natural gas output north to Russia rather than west to Turkey and Europe. And Azerbaijan simply has little else to bargain with.

Other states that have long been closer to Russia, but have attempted to balance Russia against other powers in hopes of preserving some measure of sovereignty, are giving up. Of the remaining former Soviet republics Belarus has the most educated workforce and even a functioning information technology industry, while Kazakhstan has a booming energy industry; both are reasonable candidates for integration into Western systems. But both have this month agreed instead to throw their lots in with Russia. The specific method is an economic agreement that is more akin to shackles than a customs union. The deal effectively will gut both countries’ industries in favor of Russian producers. Moscow hopes the union in time will form the foundation of a true successor to the Soviet Union.

Other places continue to show resistance. The new Moldovan prime minister, Vlad Filat, is speaking with the Americans about energy security and is even flirting with the Romanians about reunification. The Latvians are as defiant as ever. The Estonians, too, are holding fast, although they are quietly polling regional powers to at least assess where the next Russian hammer might fall. But for every state that decides it had best accede to Russia’s wishes, Russia has that much more bandwidth to dedicate to the poorly positioned holdouts.

Russia also has the opportunity. The United States is bogged down in its economic and health care debates, two wars and the Iran question — all of which mean Washington’s attention is occupied well away from the former Soviet sphere. With the United States distracted, Russia has a freer hand in re-establishing control over states that would like to be under the American security umbrella.

There is one final factor that is pushing Russia to resurge: It feels the pressure of time. The post-Cold War collapse may well have mortally wounded the Russian nation. The collapse in Russian births has halved the size of the 0-20 age group in comparison to their predecessors born in the 1970s and 1980s. Consequently, Russian demographics are among the worst in the world.

Even if Russia manages an economic renaissance, in a decade its population will have aged and shrunk to the point that the Russians will find holding together Russia proper a huge challenge. Moscow’s plan, therefore, is simple: entrench its influence while it is in a position of relative strength in preparation for when it must trade that influence for additional time. Ultimately, Russia is indeed going into that good night. But not gently. And not today.

This report is republished with permission of STRATFOR

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By Fred Burton and Ben West
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January 13, 2009

U.S. President Barack Obama outlined a set of new policies Jan. 7 in response to the Dec. 25, 2009 Northwest Airlines bombing attempt, which came the closest to a successful attack on a U.S. flight since Richard Reid’s failed shoe-bombing in December 2001. As in the aftermath of that attempt, a flurry of accusations, excuses and policy prescriptions have emanated from Washington since Christmas Day concerning U.S. airline security. Whatever changes actually result from the most recent bombing attempt, they will likely be more successful at pacifying the public and politicians than preventing future attacks.

At the heart of President Obama’s policy outline were the following key tactics: pursue enhanced screening technology in the transportation sector, review the visa issuance and revocation process, enhance coordination among agencies for counterterrorism (CT) investigations and establish a process to prioritize such investigations. While such measures are certainly important, they will not go far enough, by themselves, to meaningfully address the aviation security challenges the United States still faces almost nine years after 9/11.

Holes in the System

For one thing, technology must not be seen as a panacea. It can be a very useful tool for finding explosive devices and weapons concealed on a person or in luggage, but it is predictable and reactive. In terms of aviation security, the federal government has consistently been fighting the last war and continues to do so. Certain practical and effective steps have been taken. Hardening the cockpit door, deploying air marshals and increasing crew and passenger awareness countered the airline hijacking threat after 9/11; requiring passengers to remove their shoes and scanning them prior to boarding followed Reid’s 2001 shoe-bombing attempt; and restrictions on liquids and gels followed the 2006 trans-Atlantic plot. Not enacting these measures would have meant not learning from past mistakes, and they do ensure that unsophisticated “copycat” attackers are not successful. But such measures — even those that are less technological — fail to take into account innovative militants, who are eager and able to exploit inevitable weaknesses in the process.

Even advanced body-imaging systems like the newer backscatter and millimeter-wave systems now being used to screen travelers cannot pick up explosives hidden inside a person’s body using condoms or tampons — a tactic that was initially thought to have been used in the Aug. 28 assassination attempt against Saudi Deputy Interior Minister Prince Mohammed bin Nayef. (It is now believed that the attacker in that case used an underwear bomb like the one used in the Christmas Day attempt.) Moreover, X-ray systems cannot detect explosives cleverly disguised in carry-on baggage or smuggled past security checkpoints — something that drug smugglers routinely do.

Preventing attacks against U.S. airliners would require unrealistically invasive and inconvenient measures that the airline industry and American society are simply not prepared to implement. El Al, Israel’s national airline, is one international carrier that conducts thorough searches of every passenger and every handbag, runs checked luggage through a decompression chamber and has two air marshals on each flight. The airline also refuses to let some people (including many Muslims) on board. While these practices have been successful in preventing terrorist attacks against the airline, they are not in line with American and European culture and President Obama’s insistence that measures remain consistent with privacy rights and civil liberties. It is also economically and politically unfeasible for major U.S. airlines operating hundreds of flights per day from hundreds of different cities to impose measures such as those followed by El Al, an airline with fewer planes and a smaller area of operation.

And as long as U.S. airport security relies on screening techniques that are only moderately invasive, there will be holes that innovative attackers will be able to exploit. While screening technology is advancing, there is nothing in the foreseeable future that would be able to do more screening with less invasiveness. The U.S. prison system grapples with the same problem, and even there, where inmates are searched far more invasively than air travelers, contraband is still able to flow into facilities.

Focusing on the visa issuance and revocation process also leaves holes in the system. The Christmas Day bomber, Umar Farouk Abdulmutallab, had been given a multiple-entry U.S. visa, which allowed him to travel to the United States. When Abdulmutallab’s father expressed concerns to officials at the U.S. Embassy in Abuja, Nigeria, on Nov. 19, 2009, that his son might have been involved with Yemen-based Islamist militants, Abdulmutallab’s name and passport number were sent from the U.S. Embassy in Abuja to Washington and placed in the “Visa Viper” system, which specifically pertains to visas and terrorist suspects. His name and passport number were also logged into the Terrorist Identities Datamart Environment, but not the “no-fly” list.

This standard operating procedure (which does not automatically result in a visa revocation) passed the responsibility from the CIA agents who spoke to Abdulmuttalab’s father on to the U.S. State Department, where agents unfamiliar with the specifics of the case did not, apparently, decide to act on it. In hindsight, the decision not to take the father’s warning more seriously appears to be a glaring mistake, but in context it seems less obvious. The father’s tip was vague, with little indication of what his son was up to or, more important to U.S. CT agents, that he was planning even to travel to the United States, much less attack a U.S. airliner.

Intelligence Limitations

The possibility of yet another jihadist suspect emerging in the Middle East does not pose an existential threat to the United States, so this raises the third challenge: prioritizing CT investigations. Vague warnings such as the tip from Abdulmuttalab’s father spring up constantly throughout the world and CT investigators have to prioritize them. Only the most serious cases get assigned to an investigator to follow up on while the rest are filed away for future reference. If the same name pops up again with more information on the threat, then more action is taken. U.S. CT agents are most concerned about specific threats to the United States, and with no actionable intelligence that Abdulmutallab was plotting an attack against the United States, his case was given a lower priority.

Nevertheless, not acting immediately on the father’s vague threat proved to be a near-fatal move. This highlights the danger of the unsophisticated, ill-trained militant, referred to in U.S. CT circles as a “Kramer jihadist” (after the bumbling character in the sitcom “Seinfeld”). By himself, a Kramer jihadist poses a minimal threat, but when combined with a trained operative or group, he can become a formidable weapon. Abdulmutallab had been radicalized, but there is nothing to suggest that he had extensive jihadist training or any tactical expertise. He was simply a willing agent with a visa to the United States. When put in the hands of a competent, well-trained operator (such as those involved with al Qaeda in the Arabian Peninsula), a Kramer jihadist can be outfitted with a device and given a support network that could supply him with transportation and direction to carry out an effective attack. There are simply too many radical Islamists in the world to investigate each one, but immediately revoking visas to keep suspects off U.S. airliners until they can be investigated further is a fairly simple process and would be an effective deterrent.

Finally, the lack of coordination among agencies in CT investigations is an old problem that dates back well before 9/11. This challenge lies in the fact that the U.S. intelligence community is broken up into specific agencies — each with its own specific jurisdiction and incentive to leverage its power in Washington by controlling the flow of information. This system ensures that no single agency becomes too powerful and self-interested, but it also fractures the intelligence community and bureaucratizes intelligence sharing.

National Counterterrorism Center

In order to investigate a case like Abdulmutallab’s, agents from the CIA must work with agents from the FBI, and the State Department is tasked with coordinating the requests for information from various foreign governments (whose information is not always reliable). For foreign threats specifically aimed at airlines, agents from the Transportation Security Administration, Federal Aviation Administration, Office of Director of National Intelligence, and Immigration and Customs Enforcement must be notified. Rallying and coordinating all the appropriate actors and agencies to respond to a threat requires careful bureaucratic maneuvering and presents numerous opportunities to be bogged down at every step. Certainly, the more overt the threat, the easier it is to move the bureaucracy, but a case as opaque as Abdulmutallab’s would not likely inspire a quick and decisive follow-up.

The U.S. National Counterterrorism Center (NCTC) was created to aggregate threats from various local, state and federal agencies all over the world in order to streamline the threat-identification and investigation process. However, the additional bureaucracy that was generated with the formation of the NCTC has essentially canceled out any benefit that the center might have contributed.

When it comes down to it, modern airliners — full of people and fuel — are extremely vulnerable targets that can produce highly dramatic carnage, characteristics that attract militants and militant groups seeking global notoriety. And Abdulmutallab’s efforts on Christmas Day certainly will not be the last militant attempt to bring an airliner down. As security measures are changed in response to this most recent attempt, terrorist planners will be watching closely and are sure to adapt their tactics accordingly.

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“This report is republished with permission of STRATFOR”

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by George Friedman
Stratfor.com
January 4, 2010

As is well known, a Nigerian national named Umar Farouk Abdulmutallab attempted to destroy a passenger aircraft traveling from Amsterdam to Detroit on Dec. 25, 2009. Metal detectors cannot pinpoint the chemical in the device he sought to detonate, PETN. The PETN was strapped to his groin. Since a detonator could have been detected, the attacker chose — or had chosen for him — a syringe filled with acid for use as an improvised alternative means to initiate the detonation. In the event, the device failed to detonate, but it did cause a fire in a highly sensitive area of the attacker’s body. An alert passenger put out the fire. The plane landed safely. It later emerged that the attacker’s father, a prominent banker in Nigeria, had gone to the U.S. Embassy in Nigeria to warn embassy officials of his concerns that his son might be involved with jihadists.

The incident drove home a number of points. First, while al Qaeda prime — the organization that had planned and executed 9/11 — might be in shambles, other groups in other countries using the al Qaeda brand name and following al Qaeda prime’s ideology remain operational and capable of mounting attacks. Second, like other recent attacks, this attack was relatively feeble: It involved a single aircraft, and the explosive device was not well-conceived. Third, it remained and still remains possible for a terrorist to bring explosives on board an aircraft. Fourth, intelligence available in Nigeria, London and elsewhere had not moved through the system with sufficient speed to block the terrorist from boarding the flight.

An Enduring Threat

From this three things emerge. First, although the capabilities of jihadist terrorists have declined, their organizations remain functional, and there is no guarantee that these organizations won’t increase in sophistication and effectiveness. Second, the militants remain focused on the global air transport system. Third, the defensive mechanisms devised since 2001 remain ineffective to some degree.

The purpose of terrorism in its purest form is to create a sense of insecurity among a public. It succeeds when fear moves a system to the point where it can no longer function. This magnifies the strength of the terrorist by causing the public to see the failure of the system as the result of the power of the terrorist. Terror networks are necessarily sparse. The greater the number of persons involved, the more likely a security breach becomes. Thus, there are necessarily few people in a terror network. An ideal terror network is global, able to strike anywhere and in multiple places at once. The extent of the terror network is unknown, partly because of its security systems and partly because it is so sparse that finding a terrorist is like finding a needle in a haystack. It is the fact that the size and intentions of the terror network are unknown that generates the sense of terror and empowers the terrorist.

The global aspect is also important. That attacks can originate in many places and that attackers can belong to many ethnic groups increases the desired sense of insecurity. All Muslims are not members of al Qaeda, but all members of al Qaeda are Muslims, and any Muslim might be a member of al Qaeda. This logic is beneficial to radical Islamists, who want to increase the sense of confrontation between Islam and the rest of the world. This not only increases the sense of insecurity and vulnerability in the rest of the world, it also increases hostility toward Muslims, strengthening al Qaeda’s argument to Muslims that they are in an unavoidable state of war with the rest of the world. Equally important is the transmission of the idea that if al Qaeda is destroyed in one place, it will spring up elsewhere.

This terror attack made another point, intended or not. U.S. President Barack Obama recently decided to increase forces in Afghanistan. A large part of his reasoning was that Afghanistan was the origin of 9/11, and the Taliban hosted al Qaeda. Therefore, he reasoned the United States should focus its military operations in Afghanistan and neighboring Pakistan, since that was the origin of al Qaeda. But the Christmas Day terror attempt originated in Yemen, a place where the United States has been fighting a covert war with limited military resources. It therefore raises the question of why Obama is focusing on Afghanistan when the threat from al Qaeda spinoffs can originate anywhere.

From the terrorist perspective, the Yemen attack was a low-cost, low-risk operation. If it succeeded in bringing down a U.S. airliner over Detroit, the psychological impact would be massive. If it failed to do so, it would certainly increase a sense of anxiety, cause the U.S. and other governments to institute new and expensive security measures, and potentially force the United States into expensive deployments of forces insufficient to dominate a given country but sufficient to generate an insurgency. If just some of these things happened, the attack would have been well worth the effort.

The Strategic Challenge

The West’s problem can be identified this way: There is no strategic solution to low-level terrorism, i.e., terrorism carried out by a sparse, global network at unpredictable times and places. Strategy involves identifying and destroying the center of gravity of an enemy force. By nature, jihadist terrorism fails to present a single center of gravity, or a strong point or enabler that if destroyed would destroy the organization. There is no organization properly understood, and the destruction of one organization does not preclude the generation of another organization.

There are possible solutions. One is to accept that Islamist terrorism cannot be defeated permanently but can be kept below a certain threshold. As it operates now, it can inflict occasional painful blows on the United States and other countries — including Muslim countries — but it cannot threaten the survival of the nation (though it might force regime change in some Muslim countries).

In this strategy, there are two goals. The first is preventing the creation of a jihadist regime in any part of the Muslim world. As we saw when the Taliban provided al Qaeda with sanctuary, access to a state apparatus increases the level of threat to the United States and other countries; displacing the Taliban government reduced the level of threat. The second goal is preventing terrorists from accessing weapons of mass destruction that, while they might not threaten the survival of a country, would certainly raise the pain level to an unacceptable point. In other words, the United States and other countries should focus on reducing the level of terrorist capabilities, not on trying to eliminate the terrorist threat as a whole.

To a great extent, this is the American strategy. The United States has created a system for screening airline passengers. No one expects it to block a serious attempt to commit terrorism on an airliner, nor does this effort have any effect on other forms of terrorism. Instead, it is there to reassure the public that something is being done, to catch some careless attackers and to deter others. But in general, it is a system whose inconvenience is meant to reassure.

The Challenge of Identifying Potential Terrorists

To the extent to which there is a center of gravity to the problem, it is in identifying potential terrorists. In both the Fort Hood attack and the Detroit incident, information was in the system that could have allowed authorities to identify and stop the attackers, but in both cases, this information didn’t flow to the places where action could have been taken. There is thus a chasm between the acquisition of information and the person who has the authority to do something about it. The system “knew” about both attackers, but systems don’t actually think or know anything. The person with authority to stop a Nigerian from boarding the plane or who could relieve the Fort Hood killer from duty lacked one or more of the following: intelligence, real authority and motivation.

The information gathered in Nigeria had to be widely distributed to be useful. It was unknown where Abdulmutallab was going to go or what he was going to do. The number of people who needed to know about him was enormous, from British security to Amsterdam ticket agents checking passports. Without distributing the intelligence widely, it became useless. A net can’t have holes that are too big, and the failure to distribute intelligence to all points creates holes.

Of course, the number of pieces of intelligence that come into U.S. intelligence collection is enormous. How does the person interviewing the father know whether the father has other reasons to put his son on a list? Novels have been written about father-son relations. The collector must decide whether the report is both reliable and significant, and the vast majority of information coming into the system is neither. The intelligence community has been searching for a deus ex machina in the form of computers able not only to distribute intelligence to the necessary places but also to distinguish reliable from unreliable, significant from insignificant.

Forgetting the interagency rivalries and the tendency to give contracts to corporate behemoths with last-generation technology, no matter how widely and efficiently intelligence is distributed, at each step in the process someone must be given real authority to make decisions. When Janet Napolitano or George Tenet say that the system worked after an incident, they mean not that the outcome was satisfactory, but that the process operated as the process was intended to operate. Of course, being faithful to a process is not the same as being successful, but the U.S. intelligence community’s obsession with process frequently elevates process above success. Certainly, process is needed to operate a vast system, but process also is being used to deny people authority to do what is necessary outside the process, or, just as bad, it allows people to evade responsibility by adhering to the process.

Not only does the process relieve individuals in the system from real authority; it also strips them of motivation. In a system driven by process, the individual motivated to abort the process and improvise is weeded out early. There is no room for “cowboys,” the intelligence community term for people who hope to be successful at the mission rather than faithful to the process. Obviously, we are overstating matters somewhat, but not by as much as one might think. Within the U.S. intelligence and security process, one daily sees good people struggling to do their jobs in the face of processes that can’t possibly anticipate all circumstances.

The distribution of intelligence to the people who need to see it is, of course, indispensable, along with whatever other decision supports can be contrived. But, in the end, unless individuals are expected and motivated to make good decisions, the process is merely the preface to failure. No system can operate without process. At the same time, no process can replace authority, motivation and, ultimately, common sense.

The fear of violating procedures cripples Western efforts to shut down low-level terrorism. But the procedures are themselves flawed. A process that says that in a war against radical Islamists, an elderly visitor from Iceland is as big of a potential threat as a twentysomething from Yemen might satisfy some ideological imperative, but it violates the principle of common sense and blocks the authority and the motivation to act decisively.

It is significant that this is one of the things the Obama administration has changed in response to the attempted bombing.

The U.S. Transportation Security Administration (TSA) announced Jan. 4 that anyone traveling from or through nations regarded as state sponsors of terrorism as well as “other countries of interest” will be required to go through enhanced screening. The TSA said those techniques would include full-body pat downs, carry-on luggage searches, full-body scanning and explosive detection technology. The U.S. State Department lists Cuba, Iran, Sudan and Syria as state sponsors of terrorism. The other countries whose passengers will face enhanced screening include Afghanistan, Algeria, Iraq, Lebanon, Libya, Nigeria, Pakistan, Saudi Arabia, Somalia and Yemen. A rational system of profiling thus appears to be developing.

In all likelihood, no system can eliminate events such as what happened on Christmas, and in all likelihood, the republic would survive an intermittent pattern of such events — even successful ones. Focusing on the strategic level makes sense. But given the level of effort and cost involved in terrorist protection throughout the world, successful systems for distributing intelligence and helping identify potentially significant threats are long overdue. The U.S. government has been tackling this since 2001, and it still isn’t working.

But, in the end, creating a process that precludes initiative by penalizing those who do not follow procedures under all circumstances and intimidating those responsible for making quick decisions from risking a mistake is bound to fail.

. . . . . . . . . . . . . . . . . . . . . . . . .

This report is republished with permission of STRATFOR

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