Ruminations, December 6, 2009

Afghanistan strategy

In reviewing President Obama’s strategy for the war in Afghanistan, the first thing we need to recognize is that we have one Commander-in-Chief and one strategy for Afghanistan; and the Commander is Barack Obama and the strategy is America’s. Contrary to what you hear from some commentators, the war in Afghanistan is not Obama’s but America’s.

Developing a new strategy for Afghanistan is a difficult task and perhaps we should review our new strategy in light of some of the points of Obama’s speech at West Point last Tuesday.

Obama made the point of why it is in our national interest to win in Afghanistan. We won’t repeat the rationale here but if you’re interested, you can read his entire speech here http://www.whitehouse.gov/the-press-office/remarks-president-address-nation-way-forward-afghanistan-and-pakistan

“The status quo is not sustainable”

According to Obama, General McChrystal has reported “that the security situation is more serious than he anticipated. In short: The status quo is not sustainable.” Status quos are seldom sustainable but even if this one were, would we want the status quo – continuing attacks on NATO troops and Afghan civilians, the coercing of the civilian population and the continuing protection of al Qaeda – to be sustainable? Probably not. 

“After 18 months, our troops will begin to come home”

One of the more controversial points, judging by the complaints from Washington, is that troops will begin to come home in July 2011. Those on the left who disagree think that Afghanistan is not a threat to our national security and our troops should come home – now. Those on the right think that tipping off the enemy as to your troop movements, including withdrawal, is wrong.

Actually, Obama has given us some flexibility on withdrawal. July 2011 is the start date for withdrawal and no timetable has been set for the completion. Furthermore, there will be periodic reviews — remember that Obama announced a new strategy in March 2009 and another one on December 1 – so he does react to conditions on the ground and to strategies that are not working.

Then why bother with a withdrawal date at all?

1. It does put additional pressure on the Afghan government and Afghan military to assert themselves. There is the inertia and comfort of letting the United States do everything – just look at NATO (more about that later). “But it will be clear to the Afghan government — and, more importantly, to the Afghan people” Obama said “that they will ultimately be responsible for their own country.” 
2. Recently, al Qaeda released a statement calling the United States a colonial power. Setting a date for withdrawal demonstrates to the Afghans that the al Qaeda statement is false. “We have no interest in occupying your country,” said Obama. 
3. When the United States began to get the upper hand in Iraq, al Qaeda in Iraq began to leave and many traveled to Afghanistan. If and when we begin to do the same in Afghanistan, al Qaeda may begin to send more operatives elsewhere – Somalia or Yemen, for example. If U.S. intervention is required elsewhere, setting a withdrawal date contributes to our flexibility.
4. There is a political consideration. Many Democrats, believing that the troops should get out of Afghanistan immediately, object to waiting. Presidents need the support of the home front during any war – especially support from their constituency. By setting a date, Obama has done what he can to ameliorate those objections and gain support.

Obama is the first president to announce an end date for a war. It does have risk. But, for the reasons above and perhaps others, Obama has decided that the risk is worth it.

Contributions from our allies

“What's at stake,” said Obama, “is not simply a test of NATO's credibility,” but that’s a lot of it.

One of the reasons that our NATO allies can afford many social programs is that they live under the protection of the American defense umbrella and they don’t pay for it – we do. While the war in Afghanistan is officially a NATO effort, consider the following:

• The population of NATO countries is about one billion. The United States makes up 30 percent of that number.
• There will soon be approximately 140,000 troops in Afghanistan. The United States makes up approximately 70 percent of that number.
• Some NATO members restrict what their troops can do (e.g., they cannot go out on patrols) and many NATO troops are inadequately trained and supplied. When questioned by Congress, Secretary of Defense Robert Gates said that he would grade five allies’ troops as “A”: Canada, Poland, Netherlands, Australia and Denmark. These countries, together with the United States, provide approximately 110,000 troops. Of that number, 100,000 troops are American.

So, with 30 percent of NATO’s population, the United States provides over 90 percent of the reliable troop base – and virtually all the air power.

Obama went on to say that “the struggle against violent extremism …extends well beyond Afghanistan and Pakistan…. Where al Qaeda and its allies attempt to establish a foothold — whether in Somalia or Yemen or elsewhere — they must be confronted by growing pressure and strong partnerships.” To repeat, “they must be confronted by … strong partnerships.”

We fight al Qaeda because it is a war of necessity and because it is vital to all our interests. It is also in the vital interests of NATO. It’s time that NATO stepped up and did their fair share. (Obama said this more tactfully.)

Pakistan

In 2001, President Bush did a remarkable job making Pakistan an ally, albeit a reluctant one. Obama is building on that and Pakistan is becoming more of a full-fledged partner in this war. “There is no doubt,” the President said, “that the United States and Pakistan share a common enemy….And … we know that al Qaeda and other extremists seek nuclear weapons.” Pakistan’s nuclear weapons cache makes Pakistan an al Qaeda target.

But Pakistan has an adversary that it does not share with the United States – India. Pakistan and India have long had a rivalry that, at times, has erupted into armed conflict. Last year’s terror attack in Mumbai, India killed almost 200, injured more than 300 and came from terrorists based in Pakistan. The Indian government is rationally suspicious of any military aid that the United States provides to Pakistan lest that aid be turned south and aimed at India. This is why last week’s state dinner honoring India’s Prime Minister Manmohan Singh was so important. Obama needed to reassure Singh that a military alliance with Pakistan will not carry over into hostilities with India.

“Addressing these costs openly and honestly”

Obama’s critics have asked, “Can you put a price tag on security?” The answer is, yes. Look at the 20^th century Soviet Union: they failed to put a price tag on security and became a failed nation. Economically, armed forces, however necessary, are a drain on the economy and armed forces in an open conflict drain the economy even more. Security is something that we are willing to pay for, but there are limits. As the President said, “Our prosperity provides a foundation for our power. It pays for our military. It underwrites our diplomacy. It taps the potential of our people, and allows investment in new industry. And it will allow us to compete in this century as successfully as we did in the last.” 

Conclusion

To sum up, Obama together with others in the administration and the military has developed a new strategy for the war in Afghanistan. Is it foolproof? Probably not. Are there flaws? Yes. Are there tradeoffs? Definitely. But remember, it is an American strategy led by our Commander-in-Chief. He deserves our support.

Drill, baby, drill

During the past several years, “drill, baby, drill” was a rallying cry among many conservatives in response to increasing gasoline prices. They wanted the government to lift restrictions on oil exploration within the U.S. and its territories. That would increase supply and therefore result in lower prices. It now appears that some have taken that rallying cry to heart – not in the United States but that’s not necessarily bad for the United States.

There is, we are told, likely to be a gasoline glut in the near future and that could mean lower prices. Lower than what? Even though gas prices have been going up recently that partly reflects a demand for gas partly a demand for U.S. dollars. As the deficit rises, the value of the dollar relative to physical assets — e.g., gold, oil — sinks resulting in higher prices for us. But that’s another story.

OPEC (Organization of Petroleum Exporting Countries) is planning to increase production next year in spite of the fact that supply is high. New oil fields have been discovered and, with higher oil prices of the last few years, the exploration and extraction of oil from new and heretofore costly sources became fiscally attractive. New projects in OPEC nations will raise their capacity by 15 percent next year. And while Nigeria’s oil minister, Rilwanu Lukman, warned OPEC that increases in production would lead to lower prices he also said that Nigeria could increase oil production by almost 30 percent next year.

Increasing supply will drive down prices. Why would OPEC increase production when the purpose of OPEC is to act in concert to limit production and keep prices high? Why would they want prices to sink? For two reasons:

1. If prices of oil remain high, that will exert downward pressure on the world’s fragile economy. If the economy continues downward, less oil will be purchased and used, which will drive down oil prices. That would be a double whammy for OPEC: selling less oil and selling it at a lower price.
2. Call it energy competition. The more alternative sources of energy that are available, the more the pressure on the price-point – the point where substitutes become more attractive.

We often think of OPEC as the cartel that controls oil throughout the world. They control a lot of oil but not all; in fact, the eleven members produce somewhere south of 45 percent of the world’s supply. And, with the current oversupply and reduced demand due to economic conditions, non-OPEC production is expected to rise by as much as 3% next year.

But that’s not all.. In an interview with the Wall Street Journal, British Petroleum Chief Executive Tony Hayward said, "We will never sell more gasoline in the U.S. than we sold in 2007.” What Hayward is saying is that demand has peaked in the United States and most of the world — and the International Energy Agency concurs. Olivier Jakob of Petromatrix, an independent oil industry study group, added “Yes, there is some demand growth in China, but China is not the world.”

With almost half the energy consumption in the United States going to gasoline, we are seeing newer cars achieving greater engine efficiency and the public increasingly turning to hybrids and electric cars. New synthetics such as biobutanol and cellulosic ethanol are reducing the demand for oil. Increasingly, countries with the greatest use of petroleum are turning to wind, solar and nuclear power. All this sounds good but it really doesn’t mean much for the immediate future; however, if the trend continues, it does mean something for the long term economic prospects: it means that the future of the petroleum exporting is threatened.

The western world has talked of searching for alternative energy supplies before. And talked and talked and talked. But this time we seem to be doing more than talking. Consider that the Department of Energy’s Office of Science added a $750 million increase to the $4 billion budget for the current fiscal year and the prospects for new energy innovation become even greater. And, if that’s not enough, HSBC Bank estimates that $94 billion worldwide has been spent in 2009 on alternative energy development.

Some may argue that the return on investment for these new energy sources show that the investment is a waste of money. Those folks may be right but that’s not the point as far as OPEC is concerned.

If the price of oil drops, then the financial viability of alternate sources of power drops and petroleum importing countries are more likely to stay with petroleum. So, therefore, it may be in the long-term interest of OPEC to increase production and accept lower prices for now to keep importing countries dependent on their oil – but is it too late for OPEC? Many in the oil consuming countries are saying that it is not for economic and political reasons that alternative energy sources are necessary but to fight “global warming.” And, like it or not, the “global warming” mantra has more to do with belief system than with economic issues and holders of that belief are not easily dissuaded.

What will be the long-term results? We don’t know but there is a prospect for lower oil prices in the near future. So, drill, baby, drill.

Quote without comment

Leszek Balcerowicz, economist and statesman, former Chairman of the National Bank of Poland and Minister of Finance, on December 2, 2009: “It is quite profitable to write books that criticize capitalism while living under capitalism. But, it is not profitable to write books that criticize socialism while living under socialism.”