Iraq: The Policy Dilemma
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Today I am sending out a Special Edition of Outside the Box. My good friend George Friedman, the President of, has posted a very insightful essay on the dilemma facing the U.S. on the situation in Iraq. Contrary to many of the conflicting assessments by politically motivated pundits, each with their own agendas, that are put forth as "analysis," Stratfor provides reality based in-depth and logical analysis. Again, if you are in the business of managing money (someone else's or your own) where an eye to what is happening in the world is critical, or you are a student of geo-politics, or both, I strongly suggest that you stay up-to-date on the geopolitical landscape as it can have broad implications for both investment and political decision making.

As I have said in the past, Stratfor is my main and favorite source for geo-political news and analysis. They have often been referred to in the mainstream press as a 'private CIA,' but I would say in Stratfor's defense that they seem to be more right than their government counterpart.

A subscription to Stratfor is well worth the money as George tells me that the renewal rates are close to 90%, which demonstrates how valuable their readers regard the information that they receive on a daily basis. While this essay is on Iraq, they also cover the rest of the world, and you can get information on whatever part of the world you are interested in on their website.

Once again I talked George into dropping his subscription price to half. Click here to find out more and to signup. And I would say I hope you enjoy the essay, but what George suggests the new reality of Iraq to be is not actually fun reading. Iraq may be on its way to becoming a real problem with no easy answers from a US perspective.

John Mauldin, Editor

Iraq: The Policy Dilemma

By George Friedman

U.S. President George W. Bush now has made it clear what his policy on Iraq will be for the immediate future, certainly until Election Day: He does not intend to change U.S. policy in any fundamental way. U.S. troops will continue to be deployed in Iraq, they will continue to carry out counterinsurgency operations, and they will continue to train Iraqi troops to eventually take over the operations. It is difficult to imagine that Bush believes there will be any military solution to the situation in Iraq; therefore, we must try to understand his reasoning in maintaining this position. Certainly, it is not simply a political decision. Opinion in the United States has turned against the war, and drawing down U.S. forces and abandoning combat operations would appear to be the politically expedient move. Thus, if it is not politics driving him -- and assuming that the more lurid theories on the Internet concerning Bush's motivations are as silly as they appear -- then we have to figure out what he is doing.

Let's consider the military situation first. Bush has said that there is no civil war in Iraq. This is in large measure a semantic debate. In our view, it would be inaccurate to call what is going on a "civil war" simply because that term implies a degree of coherence that simply does not exist. Calling it a free-for-all would be more accurate. It is not simply a conflict of Shi'i versus Sunni. The Sunnis and Shia are fighting each other, and all of them are fighting American forces. It is not altogether clear what the Americans are supposed to be doing.

Counterinsurgency is unlike other warfare. In other warfare, the goal is to defeat an enemy army, and civilian casualties as a result of military operations are expected and acceptable. With counterinsurgency operations in populated areas, however, the goal is to distinguish the insurgents from civilians and destroy them, with minimal civilian casualties. Counterinsurgency in populated areas is more akin to police operations than to military operations; U.S. troops are simultaneously engaging an enemy force while trying to protect the population from both that force and U.S. operations. Add to this the fact that the population is frequently friendly to the insurgents and hostile to the Americans, and the difficulty of the undertaking becomes clear.

Consider the following numbers. The New York Police Department (excluding transit and park police) counts one policeman for every 216 residents. In Iraq, there is one U.S. soldier (not counting other coalition troops) per about 185 people. Thus, numerically speaking, U.S. forces are in a mildly better position than New York City cops -- but then, except for occasional Saturday nights, New York cops are not facing anything like the U.S. military is facing in Iraq. Given that the United States is facing not one enemy but a series of enemy organizations -- many fighting each other as well as the Americans -- and that the American goal is to defeat these while defending the populace, it is obvious even from these very simplistic numbers that the U.S. force simply isn't there to impose a settlement.

Expectations and a Deal Unwound

A military solution to the U.S. dilemma has not been in the cards for several years. The purpose of military operations was to set the stage for political negotiations. But the Americans had entered Iraq with certain expectations. For one thing, they had believed they would simply be embraced by Iraq's Shiite population. They also had expected the Sunnis to submit to what appeared to be overwhelming political force. What happened was very different. First, the Shia welcomed the fall of Saddam Hussein, but they hardly embraced the Americans -- they sought instead to translate the U.S. victory over Hussein into a Shiite government. Second, the Sunnis, in view of the U.S.-Shiite coalition and the dismemberment of the Sunni-dominated Iraqi Army, saw that they were about to be squeezed out of the political system and potentially crushed by the Shia. They saw an insurgency -- which had been planned by Hussein -- as their only hope of forcing a redefinition of Iraqi politics. The Americans realized that their expectations had not been realistic.

Thus, the Americans went through a series of political cycles. First, they sided with the Shia as they sought to find their balance militarily facing the Sunnis. When they felt they had traction against the Sunnis, following the capture of Hussein -- and fearing Shiite hegemony -- they shifted toward a position between Sunnis and Shia. As military operations were waged in the background, complex repositioning occurred on all sides, with the Americans trying to hold the swing position between Sunnis and Shia.

The process of creating a government for Iraq was encapsulated in this multi-sided maneuvering. By spring 2006, the Sunnis appeared to have committed themselves to the political process. And in June, with the death of Abu Musab al-Zarqawi and the announcement that the United States would reduce its force in Iraq by two brigades, the stage seemed to be set for a political resolution that would create a Shiite-dominated coalition that included Sunnis and Kurds. It appeared to be a done deal -- and then the deal completely collapsed.

The first sign of the collapse was a sudden outbreak of fighting among Shia in the Basra region. We assumed that this was political positioning among Shiite factions as they prepared for a political settlement. Then Abdel Aziz al-Hakim, the head of the Supreme Council for Islamic Revolution in Iraq (SCIRI), traveled to Tehran, and Muqtada al-Sadr's Mehdi Army commenced an offensive. Shiite death squads struck out at Sunni populations, and Sunni insurgents struck back. From nearly having a political accommodation, the situation in Iraq fell completely apart.

The key was Iran. The Iranians had always wanted an Iraqi satellite state, as protection against another Iraq-Iran war. That was a basic national security concept for them. In order to have this, the Iranians needed an overwhelmingly Shiite-dominated government in Baghdad, and to have overwhelming control of the Shia. It seemed to us that there could be a Shiite-dominated government but not an overwhelmingly Shiite government. In other words, Iraq could be neutral toward, but not a satellite of, Iran. In our view, Iraq's leading Shia -- fearing a civil war and also being wary of domination by Iran -- would accept this settlement.

We may have been correct on the sentiment of leading Shia, but we were wrong about Iran's intentions. Tehran did not see a neutral Iraq as being either in Iran's interests or necessary. Clearly, the Iranians did not trust a neutral Iraq still under American occupation to remain neutral. Second -- and this is the most important -- they saw the Americans as militarily weak and incapable of either containing a civil war in Iraq or of taking significant military action against Iran. In other words, the Iranians didn't like the deal they had been offered, they felt that they could do better, and they felt that the time had come to strike.

A Two-Pronged Offensive

When we look back through Iranian eyes, we can now see what they saw: a golden opportunity to deal the United States a blow, redefine the geopolitics of the Persian Gulf and reposition the Shia in the Muslim world. Iran had, for example, been revivifying Hezbollah in Lebanon for several months. We had seen this as a routine response to the withdrawal of Syrian troops from Lebanon. It is now apparent, however, that it was part of a two-pronged offensive.

First, in Iraq, the Iranians encouraged a variety of factions to both resist the newly formed government and to strike out against the Sunnis. This created an uncontainable cycle of violence that rendered the Iraqi government impotent and the Americans irrelevant. The tempo of operations was now in the hands of those Shiite groups among which the Iranians had extensive influence -- and this included some of the leading Shiite parties, such as SCIRI.

Second, in Lebanon, Iran encouraged Hezbollah to launch an offensive. There is debate over whether the Israelis or Hezbollah ignited the conflict in Lebanon. Part of this is ideological gibberish, but part of it concerns intention. It is clear that Hezbollah was fully deployed for combat. Its positions were manned in the south, and its rockets were ready. The capture of two Israeli soldiers was intended to trigger Israeli airstrikes, which were as predictable as sunrise, and Hezbollah was ready to fire on Haifa. Once Haifa was hit, Israel floundered in trying to deploy troops (the Golani and Givati brigades were in the south, near Gaza). This would not have been the case if the Israelis had planned for war with Hezbollah. Now, this discussion has nothing to do with who to blame for what. It has everything to do with the fact that Hezbollah was ready to fight, triggered the fight, and came out ahead because it wasn't defeated.

The end result is that, suddenly, the Iranians held the whip hand in Iraq, had dealt Israel a psychological blow, had repositioned themselves in the Muslim world and had generally redefined the dynamics of the region. Moreover, they had moved to the threshold of redefining the geopolitics to the Persian Gulf.

This was by far their most important achievement.

A New Look at the Region

At this point, except for the United States, Iran has by far the most powerful military force in the Persian Gulf. This has nothing to do with its nuclear capability, which is still years away from realization. Its ground forces are simply more numerous and more capable than all the forces of the Arabian Peninsula combined. There is another aspect to this: The countries of the Arabian Peninsula are governed by Sunnis, but many are home to substantial Shiite populations as well. Between the Iranian military and the possibility of unrest among Shia in the region, the situation in Saudi Arabia and the rest of the Peninsula is uneasy, to say the least. The rise of Hezbollah well might psychologically empower the generally quiescent Shia to become more assertive. This is one of the reasons that the Saudis were so angry at Hezbollah, and why they now are so anxious over events in Iraq.

If Iraq were to break into three regions, the southern region would be Shiite -- and the Iranians clearly believe that they could dominate southern Iraq. This not only would give them control of the Basra oil fields, but also would theoretically open the road to Kuwait and Saudi Arabia. From a strictly military point of view, and not including the Shiite insurgencies at all, Iran could move far down the western littoral of the Persian Gulf if American forces were absent. Put another way, there would be a possibility that the Iranians could seize control of the bulk of the region's oil reserves. They could do the same thing if Iraq were to be united as an Iranian satellite, but that would be far more difficult to achieve and would require active U.S. cooperation in withdrawing.

We can now see why Bush cannot begin withdrawing forces. If he did that, the entire region would destabilize. The countries of the Arabian Peninsula, seeing the withdrawal, would realize that the Iranians were now the dominant power. Shia in the Gulf region might act, or they might simply wait until the Americans had withdrawn and the Iranians arrived. Israel, shaken to the core by its fight with Hezbollah, would have neither the force nor the inclination to act. Therefore, the United States has little choice, from Bush's perspective, but to remain in Iraq.

The Iranians undoubtedly anticipated this response. They have planned carefully. They are therefore shifting their rhetoric somewhat to be more accommodating. They understand that to get the United States out of Iraq -- and out of Kuwait --they will have to engage in a complex set of negotiations. They will promise anything -- but in the end, they will be the largest military force in the region, and nothing else matters. Ultimately, they are counting on the Americans to be sufficiently exhausted by their experience of Iraq to rationalize their withdrawal -- leaving, as in Vietnam, a graceful interval for what follows.


Iran will do everything it can, of course, to assure that the Americans are as exhausted as possible. The Iranians have no incentive to allow the chaos to wind down, until at least a political settlement with the United States is achieved. The United States cannot permit Iranian hegemony over the Persian Gulf, nor can it sustain its forces in Iraq indefinitely under these circumstances.

The United States has four choices, apart from the status quo:

1. Reach a political accommodation that cedes the status of regional hegemon to Iran, and withdraw from Iraq.

2. Withdraw forces from Iraq and maintain a presence in Kuwait and Saudi Arabia -- something the Saudis would hate but would have little choice about -- while remembering that an American military presence is highly offensive to many Muslims and was a significant factor in the rise of al Qaeda.

3. Halt counterinsurgency operations in Iraq and redeploy its forces in the south (west of Kuwait), to block any Iranian moves in the region.

4. Assume that Iran relies solely on its psychological pre-eminence to force a regional realignment and, thus, use Sunni proxies such as Saudi Arabia and Kuwait in attempts to outmaneuver Tehran.

None of these are attractive choices. Each cedes much of Iraq to Shiite and Iranian power and represents some degree of a psychological defeat for the United States, or else rests on a risky assumption. While No. 3 might be the most attractive, it would leave U.S. forces in highly exposed, dangerous and difficult-to-sustain postures.

Iran has set a clever trap, and the United States has walked into it. Rather than a functioning government in Iraq, it has chaos and a triumphant Shiite community. The Americans cannot contain the chaos, and they cannot simply withdraw. Therefore, we can understand why Bush insists on holding his position indefinitely. He has been maneuvered in such a manner that he -- or a successor -- has no real alternatives.

There is one counter to this: a massive American buildup, including a major buildup of ground forces that requires a large expansion of the Army, geared for the invasion of Iran and destruction of its military force. The idea that this could readily be done through air power has evaporated, we would think, with the Israeli air force's failure in Lebanon. An invasion of Iran would be enormously expensive, take a very long time and create a problem of occupation that would dwarf the problem faced in Iraq. But it is the other option. It would stabilize the geopolitics of the Arabian Peninsula and drain American military power for a generation.

Sometimes there are no good choices. For the United States, the options are to negotiate a settlement that is acceptable to Iran and live with the consequences, raise a massive army and invade Iran, or live in the current twilight world between Iranian hegemony and war with Iran. Bush appears to be choosing an indecisive twilight. Given the options, it is understandable why.


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John F. Mauldin


John Mauldin is president of Millennium Wave Advisors, LLC, a registered investment advisor. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors before making any investment decisions.

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Posted 09-07-2006 8:56 PM by John Mauldin


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