War profits

Last week at the Middle East Institute, Tim Eaton of Chatham House defined “war economies” simply as an economy during wartime, including but not exclusive to the parts of the economy that directly fuel conflict. Eaton was joined by fellow Chatham House experts Lina Khatib and Renad Mansour on October 19 in a panel on “Wartime Economies in the Middle East: A Look into Libya, Syria, and Iraq.” The Middle East Institute’s Paul Salem moderated.

Eaton provided an overview of the economic situation in Libya, identifying four modalities: individuals with goods to sell, those who generate rent money, those who prey on state revenue, and those who receive salaries from external backers. Concerning those who sell goods, one of the main avenues for such activity has long been the smuggling of subsidized products, an industry which persists post-revolution. Criminalized trade, especially in drugs, has also been a major source of revenue, generating $400-$500 million per year. Additionally, since 2013, the movement of people has been included in this category. The biggest industry, however, is still oil and fuel smuggling, which generates about $2.5 billion. 

Rents are another avenue for certain individuals, the money coming from the establishment of checkpoints and the control of territory. This has led to extortion through blockades imposed on roads and oil fields, with such blockades costing the state over $160 billion in the East alone. The state has also been experiencing losses due to those who are able to “prey upon state revenue.” Since 97% of revenue comes from oil and gas trade, Eaton considered this a critical area from which revenue has been taken. These losses have also been augmented due to the discrepancy between the US dollar to Libyan dinar exchange rate both in the official sector, where it is 1.4 dinars, and in the black market, where it is 8 dinars. Those with the means to buy products at the official rate and sell them in the black market have seen major profits. 

Eaton emphasized that all actors in Libya have been benefiting from the conflict, finding ways to take advantage of the country’s situation. Since armed groups have been able to obtain salaries as a result of the conflict, this has encouraged them to maintain the status quo. There is little incentive to find a solution to the conflict or undergo a political process. On a state level, economic difficulties, as well as “administrative chaos” and questions of legitimacy, have hindered the functioning of the three most important state institutions: the National Oil Company, the Central Bank, and the Libyan Investment Authority.

Mansour focused on the effect of economic factors on the survival and functioning of ISIS in Iraq. The international community has tried military and political solutions. The one solution most overlooked has been the economic solution. The key concept here, according to Mansour, is that organizations and individuals are opportunistic: they go where jobs and money are available, such as ISIS. In looking for ways to defeat ISIS, creating alternatives that would allow potential members to survive economically is important. ISIS has three key sources of revenue: trade (goods, oil, antiquities, etc.), fees (through taxation, rents, and licenses), and state resources. Looking to the future, ISIS is now investing in “legitimate industries” such as hotels, pharmaceuticals, and currency exchanges, to maintain their economic power and facilitate a future revival. In response, Iraqi state institutions and international actors have been working on limiting ISIS’s influence. Their flaw, according to Mansour, has been that none of these actors are working together.

Khatib gave an overview of the war economy in Syria, grouping the different areas of the country into three categories: areas under the control of Hay’at Tahrir al-Sham, areas besieged by the regime, and areas under regime control. Hay’at Tahrir al-Sham has been following a similar model to that of ISIS in that they have been investing in formal industries while also setting up private companies to maintain the group’s economic independence. They have also been benefiting from their control of water and electricity in Idlib, collecting charges from residents. There has also been much trade activity between such rebel-held areas and regime areas, which has encouraged both sides to maintain the status quo, much like the situation in Libya.

Besieged areas have also witnessed trade activities, primarily through tunnels operated by middlemen. The government has been manipulating the formal exchange rate, making the rate inside besieged areas higher than elsewhere and consequently accumulating more revenue.

Regime-held areas have experienced much change. Since 2011, the state budget has decreased from $18 to $4 billion, with half now coming from external actors supporting the regime, and inflation has increased by 700%. To evade sanctions, the regime has set up front companies in loyalists’ names. For example, the Syrian Council for Metal and Steel set up in 2015 has contracts with its international partners Iran and Russia. Iran has militias and business-people working for it in the country. Khatib noted that the extent of outside interference has begun to worry the regime, and that true reconstruction, particularly including a return of refugees is not a goal of the state.

A key takeaway from the speakers’ overviews of the topic and the ensuing discussion is that economic alternatives to the present situation–which presents many economic incentives–must be found. The importance of political processes will not surpass the importance of economic security for citizens and state institutions alike. So long as the current situation is more profitable than any alternatives, it will persist.

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Assad will fight to the last Iranian

I did this interview last week for Nozhan Etezadosaltaneh of the Islamic Republic’s Tehran daily Iran. I was informed today that it has been published. I’ll appreciate it if anyone can let me know whether it has been fully and accurately translated into Farsi: 

  1. As a experienced Counselor who knows about the functioning of international institutions, do you think the UN can help to end the Syria crisis ? Some people say institutions like UN don’t have executive power and can not take positive steps toward peace in conflict regions. What is your opinion about the view?

A: The UN is already playing important roles: it provides a great deal of humanitarian assistance in Syria and to refugees in neighboring countries, it has a commission that has reported extensively on human rights violations in Syria, it has established an international, impartial and independent mechanism to assist in investigating and prosecuting international crimes committed in Syria, and it also sponsors the Geneva talks on political transition. Behind the scenes it has played a role in some particular ceasefires and other agreements that have saved lives. Of course it lacks executive power to determine the outcome of the war, but is doing things that lessen the war’s impact, make it possible to hold parties accountable for their wartime behavior, and may lead to an end to the fighting. Those aren’t bad things, they just aren’t all I might hope for.

2. After the end of ISIS in Raqqa, which actor can take control of the city and restore order and public services? Iran and Russia along with the Syrian government, the Kurdish forces or the Syrian armed opposition and their Western allies?

A: My impression is that initial control of Raqqa lies with the Kurdish-led but partly Arab-manned Syrian Democratic Forces, with support from the Western coalition. In the east, Iran and Russia have focused on Deir Azour.

3. Do you think the American troops will enter Syria directly after ISIS defeat in the country?

A: American troops have been in Syria for months fighting ISIS. I don’t know if they will stay. The Trump Administration might prefer that they withdraw, but that will leave US allies open to attacks from both the regime coalition (including Russia and Iran) as well as Turkey, which regards the Kurds who fought against ISIS under US protection as terrorists because they are connected to the PKK inside Turkey. If the Americans stay, it will be to ensure ISIS does not return, to restrain the Kurds, protect Arabs who have fought ISIS, and to prevent attacks from either Turkey or the regime coalition.

4. What will be the consequences of ISIS defeat for the neighboring countries in the region in your opinion? Do you think we should expect more confrontations and problems or it could help to bring stability and peace in the region?

A: I am not seeing an end to instability yet. With Assad still in power, I expect an insurgency to  continue against his dictatorship, by both relatively moderate and extremist forces. Assad will not be happy with US troops in the east and Turkish troops in northern Syria and Idlib, or relatively moderate rebels in the south. Turkey, Iran and Russia, which have collaborated in recent months, may have a falling out, as their visions of a future Syria may well conflict.

4. Analysis shows that for example around six thousand Tunisian joined to ISIS in Iraq and Syria. Do you think the jihadists will return to their countries and cause trouble for their countries?

A: Trouble from jihadis returning to their home countries is certainly to be expected. Local grievances in those countries played an important role in recruitment. Now that they are trained and deadly, their return could generate big problems.

5. Do you think that ISIS defeat in Syria will be an opportunity for re-rise of Al-Qaeda in the country and the region?

A: Al Qaeda has played a savvier game in Syria and elsewhere by embedding itself with local forces, whereas ISIS sought a monopoly on power and was content to be led and partly manned by people who were not native to the country they were fighting in. But I also think a lot of people are fed up with the jihadis and will get rid of them if empowered to do. That is certainly true in parts of Idlib.

6. Some analysts believe that the Arab countries of the region especially Saudi Arabia have directly and indirectly contributed to ISIS. Do you agree with the opinion? What will the effect of ISIS failure in Syria on Saudi Arabia?

A: Wahhabi ideology has had a role in generating ISIS, but it has been clear for some time now that ISIS and Al Qaeda are enemies of the Saudi monarchy and Saudi Arabia does not support them through official channels. There may be Saudi private individuals who do however, including of course Osama bin Laden. This, too, the Saudis have tried to stop.

7. Saudi Arabia consistently criticized Obama’s policy toward the Syria crisis and and accused Obama of passivity and strengthening Hizbollah and Iran in the region. What do you think about current Saudi Arabia approach about US policy on Syria ? do you think Trump is able to satisfy the Saudis in this regard ? What will be the impact of the recent US and Saudi Arabia getting closer to each other on the future of Syria?

A: The Saudis haven’t shown a lot of interest in Syria lately. Trump has doubled down on what Obama started–the drone war plus cooperation with the Kurds and their Arab allies against ISIS–but I haven’t heard a lot of applause from Riyadh, which is far more focused for now on Yemen. That said, the Saudis clearly prefer Trump to Obama, because they think he will do more to counter Iranian influence in the region, even if not in Syria.

8. Which one will be winner in a possible conflict in Syria in your opinion? Iran or US?

Both will win the war they are fighting: the US will win its war against ISIS; Iran will win its war to keep Assad in power, at least for now. Tehran may also gain its desired land bridge through Iraq and Syria to Lebanon, as well as a permanent presence for Hizbollah in Syria. Washington has, oddly, not yet begun to counter those efforts in a serious and concerted way.

9. What do you think about Israel policy after ISIS defeat in Syria? It seems that ISIS presence in Syria to have benefited Israel. What do you think about the view? Do you think Israel will get into the phase of military operation in Syria fearing that Hizbollah will be closer to Golan and the borders of that country? Will ISIS failure be a threat for Israel?

A: I don’t think the Israelis think they benefited from ISIS in Syria. They do not want ISIS on the border. Nor do they want Hizbollah on their border. Many have thought they would prefer Assad, who has done nothing against Israel despite a lot of talk. Hizbollah and ISIS are both threats to Israel, and I expect it to take what measures it needs to protect itself. Assad has shown little will or ability to respond effectively.

10. Recently, The King of Saudi Arabia traveled to Russia. Some believe that in exchange for economic privileges he urged Russia to persuade Iran to withdraw from Syria and limit its role in the country. Do you think he has succeeded in convincing Putin on the matter?

A: I think the Russians already want to withdraw some of their forces from Syria, no matter what the Saudis say. Syria has cost Moscow quite a bit in money and lives. I don’t expect Iran to reduce its influence (presence is a different matter), so long as Assad is in power. He is now essentially an Iranian puppet.

11. What will Russia program for Syria after the ISIS defeat in your opinion? How long will Russia be able to move between the Shiite and Sunni poles? Don’t you think Putin finally will have  to choose one side? Do you think Russia will leave Tehran and cooperate with Saudi Arabia and Sunni countries or will continue to cooperate with Iran on the Syria issue?

A: Russia has already chosen the Shiite side, though it maintains Sunni links even inside Syria. So long as Iran is not hostile to Russia’s military presence in Syria, I think Moscow will continue to cooperate with Tehran.

12. Do you think the situation of Syria without ISIS will be better for all of the region or this is only beginning a new phase of war among the main international and regional actors? Are you optimistic about the future of Syria after ISIS and the consequences? Read more

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White flag

The Kurdistan Regional Government tried today to surrender in its dispute with Baghdad:
Therefore, in order to fulfill our responsibilities and obligations towards the people of Kurdistan and Iraq, we propose the following to the Iraqi Government and the Iraqi and world public opinion:
1. An immediate ceasefire and halt to all military operations in the Kurdistan Region.
2. Freeze the results of the referendum conducted in Iraqi Kurdistan.
3. Start an open dialogue between the Kurdistan Regional Government and Iraqi Federal Government on the basis of the Constitution.
This is an effort to freeze the situation on the ground before Baghdad forces take back all the territory into which Kurdish forces have expanded since 2003, while conceding at least temporarily that the results of the independence referendum will not be implemented and that future dialogue has to be on the basis of the Iraqi constitution of 2005.
Will Baghdad accept? I hope so. There is really no point in going much further on the ground, especially in areas where Kurds are clearly in the majority. Doing so risks violence that would make future dialogue even more difficult than it already is. The concessions are real: Baghdad has wanted Erbil to renounce the results of the referendum and to agree to settle things on the basis of the constitution, which provides for referenda in disputed territories on whether they want to join the KRG or not.
Those referenda will now have to be conducted under Baghdad’s authority, not the KRG’s, in the retaken areas, including Kirkuk. While Erbil won’t like that, it does mean that any votes in favor the the KRG will be perceived, both in Baghdad and internationally, as valid. That is good for the KRG, not bad, even if it means some loss of territory. The KRG can try to minimize the losses by ensuring international supervision of the referenda.
The referenda haven’t been conducted before now because of disputes over who should be able to vote. Erbil has wanted Saddam Hussein’s importation of Arabs into Kurdish areas, especially Kirkuk, reversed before referenda are held. Baghdad will feel the same about Kurds who have moved into the disputed territories since 2003, and especially since 2014. The UN will need to help resolve these issues, which have proven intractable in the past.
Territory is not the only issue. Baghdad and Erbil need also to solve the hydrocarbon equation: who is entitled to do what with which oil and gas, and where the revenue goes. These issues are soluble: there is more than enough oil and gas to meet both Erbil’s and Baghdad’s needs. Failure to reach agreement has hindered its exploitation and corrupted governance in both capitals. Whatever is decided on the specifics, it is vital that future arrangements be transparent and verifiable. My guess is that will entail some sort of third party monitoring and guarantees.
The political status of Iraqi Kurdistan, that is whether it will remain part of Iraq or become independent, will not be at issue in this initial dialogue held under the constitution. But I don’t think it can be postponed forever. If Baghdad and Erbil can solve the territorial and hydrocarbon issues in the next several years, it will soon be time to consider whether Kurdistan can gain not only independence but sovereignty, which is determined by both its capacity to control its territory and recognition by other sovereign states. A deliberative and cooperative process to decide political status is likely to produce much better results for both Baghdad and Erbil than the unilateral one President Barzani attempted with the September referendum.
Surrender is never easy. But it is sometimes wise. Now Baghdad has to show its wisdom by accepting it gracefully and avoiding humiliation of the Kurds, which would only prolong a conflict that neither Erbil nor Baghdad can benefit from.
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Two chairs

Hoyt Yee, the deputy assistant secretary of State whose bailiwick includes the Balkans, said yesterday in Belgrade that Serbia “cannot sit on two chairs at the same time.” He was referring to Belgrade’s efforts to both accede to the EU and maintain close relations with Vladimir Putin’s Russia. These goals are just too far apart, he suggested.

I agree, but the question arises: why would anyone in a country that needs economic and political reform latch on to Moscow? Russia has an economy the size of Spain’s (with Catalonia) and a political system that resorts to prosecution and assassination to eliminate competition. While the Russian military has enjoyed some success in its interventions in Ukraine and Syria, it has nowhere near the capacity the West has to protect its friends and allies. Russia is a declining regional power, one heavily dependent on hydrocarbons rather than a diversified economy.

There are nevertheless people in Serbia who feel they need “the warm embrace of the Russian bear,” as one of them put it to me. “When,” he asked, “was the last time an American president visited Belgrade?” I didn’t know it at the time, but the correct answer seems to be Jimmy Carter, in 1980. That is indeed a long time ago. President Trump has allegedly promised to visit next year.

What does the warm Russian embrace entail? While fundamentally a political link, Belgrade’s affection for Moscow also entails military cooperation, economic interests, and Slavic cultural affinity. The Russians have given Serbia MiGs, involved Serbia in military exercises, and established a “humanitarian” logistics base near Nis. They prevent Kosovo from entering the United Nations. They have also taken possession of much of the Serbian energy sector. Belgrade might prefer F16s, but Washington doesn’t give them away, and lack of appropriate pipelines hinders efforts to wean Serbia from Russian gas. Russia Today and Sputnik News are making big efforts to sustain the long history of Slavic brotherhood with Serbia, not to mention the efforts of the Serb and Russian Orthodox Churches.

The Russian embrace also entails acceptance of Putin’s governing norms. They include assassination. Last year, Moscow attempted to mount, through Serbia, an assassination plot against Montenegrin Prime Minister Djukanovic, a good friend of Vucic. To his enormous credit, Vucic not only helped to foil the plot but also provided vital testimony as to its reality. Fear of such an attempt in Serbia is motive enough for some politicians to hedge their bets.

But they have other reasons too. The reforms the European Union seeks as a condition for accession require political leaders to do difficult things that block at least some of the corruption endemic to the Balkans. At least one Balkan leader, Ivo Sanader (erstwhile prime minister of Croatia) found himself arrested, tried, and convicted as a consequence of the judicial reforms for which he himself was responsible. The “Sanader effect” has made other Balkan leaders extra cautious about judicial independence and anti-corruption prosecutions.

President Vucic, who has repeatedly won elections on a pro-EU platform, would make an enormous mistake not to opt for the EU chair, though in doing so he will need to give up his control of the press and accept a far more independent judiciary ready to take on corruption and other official malfeasance. Those are not easy things for a former Information Ministry in a Milosevic government to do. Some bad habits are so ingrained they are hard to break, even if you in principle want to do so. I even wonder whether the Serbian media and courts would believe Vucic if he were to signal clearly that he was surrendering his influence over them.

That however is what he needs to do, not to please me or Hoyt Yee but to enable Serbia to emerge as a real and liberal democracy politically more tied to the EU and far less to the Russian bear.

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Compare and contrast

I’m just going to leave this eloquent and dignified testimony here:

Most of my readers will have no difficulty comparing and contrasting it with the mendacity of the Donald Trump, who tweeted this morning:

I had a very respectful conversation with the widow of Sgt. La David Johnson, and spoke his name from beginning, without hesitation!

Would someone who respected the families of fallen soldiers react this way?

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Peace picks October 23 – 27

  1. Countering Violent Extremism: Qatar, Iran, and the Muslim Brotherhood | Monday, October 23 | 11:30 am – 5:15 pm | Hudson Institute (held at the Ronald Reagan Building and International Trade Center) | Register Here | This full-day event includes two keynote addresses, the first by Secretary Leon E. Panetta, and the second by former White House chief strategist Steve Bannon, as well as two panels titled “Sinews of Terrorism – Communications, Funding, and Ideological Support” and “New Dynamism in Congress.” General David H. Petraeus, formerly of the Central Intelligence Agency, and Ambassador Hussain Haqqani will also speak at the event.
  2. The Future of Orthodox Christianity in Syria and America | Tuesday, October 24 | 12:00 – 1:30 pm | Hudson Institute | Register Here | Over the last two thousand years, the Church of Antioch has played a major role in the formation and development of Christian theology and philosophy. Today the Church is facing tremendous challenges in its native homeland, Syria. Six years after the beginning of the Syrian civil war, the country is in ruins and millions of its citizens have become refugees or are internally displaced within Syria. The ongoing war has flamed sectarian tensions that threaten the existence of Christianity in one of its earliest locations. Though suffering at home, the Church of Antioch is flourishing abroad with a growing congregation in the United States. What place do Christians and the Antiochian Church have in the future of Syria? What role has the Church played in humanitarian assistance to the millions in need? Why is Orthodoxy finding renewed appeal in Western countries? For answers to these and many other questions regarding the future of Orthodox Christianity in Syria and America, Hudson Institute’s Center for Religious Freedom will host a conversation with His Beatitude, John X, Patriarch of Antioch and All the East, and His Eminence, Metropolitan Joseph, Metropolitan of All North America and Archbishop of New York. Hudson Senior Fellow Samuel Tadros will moderate the conversation.
  3. Tunisia’s Corruption Contagion | Wednesday, October 25 | 12:00 – 2:30 pm | Carnegie Endowment for International Peace | Register Here | Corruption in Tunisia is perceived to be even more pervasive today than under former president Zine el Abidine ben Ali, despite numerous legal measures and civil society initiatives working to fight it. In their upcoming Carnegie paper, “Tunisia’s Corruption Contagion: A Transition at Risk,” Sarah Yerkes and Marwan Muasher argue that corruption has become endemic, as more and more people engage in and benefit from corrupt practices. For the democratic transition to survive, Tunisia must simultaneously address the kleptocracy of the previous regime and the emergence of widespread petty corruption. Can Tunisia’s government and civil society win this fight? Yassine Brahim will provide keynote remarks, and Chaima Bouhlel and Safwan Masri will join Carnegie’s Sarah Yerkes in a discussion of the paper’s findings moderated by Marwan Muasher. Tunisian Ambassador to the United States Fayçal Gouia will provide closing remarks. A light lunch will be served at 12:00 p.m. The discussion will begin at 12:30 p.m.
  4. Trump and the Arab World: First Year Assessment and Policy Recommendations | Thursday, October 26 | 9:00 am – 5:00 pm | Arab Center DC (held at JW Marriott Washington DC) | Register Here | The Arab Center’s second annual conference will begin with an opening keynote titled “US Policy in the Arab World: An Arab Perspective given by Tarek Mitri of the American University of Beirut and will consist of four panels. The first panel, “What Arabs Want: Arab Public Opinion and US Policy,” will feature panelists Tamara Kharroub of the Arab Center DC, Dalia Mogahed of the Institute for Social Policy and Understanding, and Shibley Telhami of the University of Maryland- College Park. The second, “US Policy and Political and Economic Challenges in the Arab World” will include Phyllis Bennis of the Institute for Policy Studies, Perry Cammack of the Carnegie Endowment for International Peace, Hani Findakly of Potomac Capital, and Najib Ghadbian of the University of Arkansas and Special Representative of the Syrian National Coalition to the US. The panel will be moderated by Dina Khoury of George Washington University. The third panel is titled “US-Gulf Relations and US Policy in the Arabian Gulf,” and moderator Khalid Al-Jaber of Qatar University will be joined by Abdullah Baabood of Qatar University, Sheila Carapico of the University of Richmond, David Des Roches of the National Defense University, and Barbara Slavin of the Atlantic Council. The final panel, “US Policy Recommendations in the Arab World” will feature Marwan Kabalan of the Arab Center for Research and Policy Studies, Rami Khouri of the American University of Beirut, Ibrahim Fraihat of the Doha Institute for Graduate Studies, Ellen Laipson of George Mason University, and will be moderated by Laurie King of Georgetown University.
  5. Public Perspectives Toward Democracy | Thursday, October 26 | 12:30 pm | Council on Foreign Relations | Register Here | Panelists discuss global public opinion towards democracy amid the rise of populists and autocrats, and the implications for the future of democracy and U.S. foreign policy. Speakers include Stewart M. Patrick of the Council on Foreign Relations, Ken Wollack of the National Democratic Institute, and Katie Simmons of the Pew Research Center.
  6. The Path Forward on Iran: Contain, Enforce, Engage | Thursday, October 26 | 11:00 am – 12:00 pm | Carnegie Endowment for International Peace | Register Here |  What comes next after President Donald Trump’s decision not to recertify the Iran nuclear deal? Experts from the Carnegie Endowment for International Peace and the Center for a New American Security offer a suggested way ahead in a new joint report: Contain, Enforce, and Engage: An Integrated U.S. Strategy to Address Iran’s Nuclear and Regional Challenges. Carnegie President William J. Burns will introduce the report, and Carnegie’s Jen Psaki will moderate a discussion with some of the report’s authors. Speakers include Ariel E. Levite and Karim Sadjadpour of the Carnegie Endowment for International Peace, as well as Ilan Goldenberg and Elizabeth Rosenberg of the Center for a New American Security.
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