Dear Friends –
Occasionally I need a fast answer. So I'll run a Google search, and 2.54 MILLION responses later I've learned how to handle a Thanksgiving turkey-roasting crisis but nothing useful about Turkey's financial crisis.
There's certainly no shortage of data these days. But what's in all-too-short supply is understanding. As investors, what creates opportunities isn't access to data but to ways of thinking about the world. I created Outside the Box precisely for this reason, to share with you some of the best thinkers in the world and some of the best ways to think about investments.
To understand how geopolitical events impact your investments, there's simply no one better than my friend George Friedman and his team at STRATFOR. They couple objective facts with unbiased context and analysis so you know what it all means for you. This understanding is a critical piece of my investment formula, and I strongly encourage you to click here to take advantage of a special offer that George is offering my readers.
In the meantime, take a look at this article about Israel, the U.S., and the chance for peace in the Middle East. If you've ever wondered why this conflict doesn't have a simple, Hollywood resolution, you'll be blown away by the clarity George provides.
An Israeli Prime Minister Comes to Washington Again
By George Friedman
Related Special Topic Page
Israeli-Palestinian Geopolitics and the Peace Process
Israeli Prime Minister Benjamin Netanyahu is visiting Washington for his first official visit with U.S. President Barack Obama. A range of issues — including the future of Israeli-Palestinian negotiations, Israeli-Syrian talks and Iran policy — are on the table. This is one of an endless series of meetings between U.S. presidents and Israeli prime ministers over the years, many of which concerned these same issues. Yet little has changed.
That Israel has a new prime minister and the United States a new president might appear to make this meeting significant. But this is Netanyahu's second time as prime minister, and his government is as diverse and fractious as most recent Israeli governments. Israeli politics are in gridlock, with deep divisions along multiple fault lines and an electoral system designed to magnify disagreements.
Obama is much stronger politically, but he has consistently acted with caution, particularly in the foreign policy arena. Much of his foreign policy follows from the Bush administration. He has made no major breaks in foreign policy beyond rhetoric; his policies on Iraq, Afghanistan, Iran, Russia and Europe are essentially extensions of pre-existing policy. Obama faces major economic problems in the United States and clearly is not looking for major changes in foreign policy. He understands how quickly public sentiment can change, and he does not plan to take risks he does not have to take right now.
This, then, is the problem: Netanyahu is coming to Washington hoping to get Obama to agree to fundamental redefinitions of the regional dynamic. For example, he wants Obama to re-examine the commitment to a two-state solution in the Israeli-Palestinian dispute. (Netanyahu's foreign minister, Avigdor Lieberman, has said Israel is no longer bound by prior commitments to that concept.) Netanyahu also wants the United States to commit itself to a finite time frame for talks with Iran, after which unspecified but ominous-sounding actions are to be taken.
Facing a major test in Afghanistan and Pakistan, Obama has more than enough to deal with at the moment. Moreover, U.S. presidents who get involved in Israeli-Palestinian negotiations frequently get sucked into a morass from which they do not return. For Netanyahu to even request that the White House devote attention to the Israeli-Palestinian problem at present is asking a lot. Asking for a complete review of the peace process is even less realistic.
Obstacles to the Two-State Solution
The foundation of the Israeli-Palestinian peace process for years has been the assumption that there would be a two-state solution. Such a solution has not materialized for a host of reasons. First, at present there are two Palestinian entities, Gaza and the West Bank, which are hostile to each other. Second, the geography and economy of any Palestinian state would be so reliant on Israel that independence would be meaningless; geography simply makes the two-state proposal almost impossible to implement. Third, no Palestinian government would have the power to guarantee that rogue elements would not launch rockets at Israel, potentially striking at the Tel Aviv-Jerusalem corridor, Israel's heartland. And fourth, neither the Palestinians nor the Israelis have the domestic political coherence to allow any negotiator to operate from a position of confidence. Whatever the two sides negotiated would be revised and destroyed by their political opponents, and even their friends.
For this reason, the entire peace process — including the two-state solution — is a chimera. Neither side can live with what the other can offer. But if it is a fiction, it is a fiction that serves U.S. purposes. The United States has interests that go well beyond Israeli interests and sometimes go in a different direction altogether. Like Israel, the United States understands that one of the major obstacles to any serious evolution toward a two-state solution is Arab hostility to such an outcome.
The Jordanians have feared and loathed Fatah in the West Bank ever since the Black September uprisings of 1970. The ruling Hashemites are ethnically different from the Palestinians (who constitute an overwhelming majority of the Jordanian population), and they fear that a Palestinian state under Fatah would threaten the Jordanian monarchy. For their part, the Egyptians see Hamas as a descendent of the Muslim Brotherhood, which seeks the Mubarak government's ouster — meaning Cairo would hate to see a Hamas-led state. Meanwhile, the Saudis and the other Arab states do not wish to see a radical altering of the status quo, which would likely come about with the rise of a Palestinian polity.
At the same time, whatever the basic strategic interests of the Arab regimes, all pay lip service to the principle of Palestinian statehood. This is hardly a unique situation. States frequently claim to favor various things they actually are either indifferent to or have no intention of doing anything about. Complicating matters for the Arab states is the fact that they have substantial populations that do care about the fate of the Palestinians. These states thus are caught between public passion on behalf of Palestinians and the regimes' interests that are threatened by the Palestinian cause. The states' challenge, accordingly, is to appear to be doing something on behalf of the Palestinians while in fact doing nothing.
The United States has a vested interest in the preservation of these states. The futures of Egypt, Saudi Arabia and the Gulf states are of vital importance to Washington. The United States must therefore simultaneously publicly demonstrate its sensitivity to pressures from these nations over the Palestinian question while being careful to achieve nothing — an easy enough goal to achieve.
The various Israeli-Palestinian peace processes have thus served U.S. and Arab interests quite well. They provide the illusion of activity, with high-level visits breathlessly reported in the media, succeeded by talks and concessions — all followed by stalemate and new rounds of violence, thus beginning the cycle all over again.
The Palestinian Peace Process as Political Theater
One of the most important proposals Netanyahu is bringing to Obama calls for reshaping the peace process. If Israeli President Shimon Peres is to be believed, Netanyahu will not back away from the two-state formula. Instead, the Israeli prime minister is asking that the various Arab state stakeholders become directly involved in the negotiations. In other words, Netanyahu is proposing that Arab states with very different public and private positions on Palestinian statehood be asked to participate — thereby forcing them to reveal publicly their true positions, ultimately creating internal political crises in the Arab states.
The clever thing about this position is that Netanyahu not only knows his request will not become a reality, but he also does not want it to become a reality. The political stability of Jordan, Saudi Arabia and Egypt is as much an Israeli interest as an American one. Indeed, Israel even wants a stable Syria, since whatever would come after the Alawite regime in Damascus would be much more dangerous to Israeli security than the current Syrian regime.
Overall, Israel is a conservative power. In terms of nation-states, it does not want upheaval; it is quite content with the current regimes in the Arab world. But Netanyahu would love to see an international conference with the Arab states roundly condemning Israel publicly. This would shore up the justification for Netanyahu's policies domestically while simultaneously creating a framework for reshaping world opinion by showing an Israel isolated among hostile states.
Obama is likely hearing through diplomatic channels from the Arab countries that they do not want to participate directly in the Palestinian peace process. And the United States really does not want them there, either. The peace process normally ends in a train wreck anyway, and Obama is in no hurry to see the wreckage. He will want to insulate other allies from the fallout, putting off the denouement of the peace process as long as possible. Obama has sent George Mitchell as his Middle East special envoy to deal with the issue, and from the U.S. president's point of view, that is quite enough attention to the problem.
Netanyahu, of course, knows all this. Part of his mission is simply convincing his ruling coalition — and particularly Lieberman, whom Netanyahu needs to survive, and who is by far Israel's most aggressive foreign minister ever — that he is committed to redefining the entire Israeli-Palestinian relationship. But in a broader context, Netanyahu is looking for greater freedom of action. By posing a demand the United States will not grant, Israel is positioning itself to ask for something that appears smaller.
Israel and the Appearance of Freedom of Action
What Israel actually would do with greater freedom of action is far less important than simply creating the appearance that the United States has endorsed Israel's ability to act in a new and unpredictable manner. From Israel's point of view, the problem with Israeli-Palestinian relations is that Israel is under severe constraints from the United States, and the Palestinians know it. This means that the Palestinians can even anticipate the application of force by Israel, meaning they can prepare for it and endure it. From Netanyahu's point of view, Israel's primary problem is that the Palestinians are confident they know what the Israelis will do. If Netanyahu can get Obama to introduce a degree of ambiguity into the situation, Israel could regain the advantage of uncertainty.
The problem for Netanyahu is that Washington is not interested in having anything unpredictable happen in Israeli-Palestinian relations. The United States is quite content with the current situation, particularly while Iraq becomes more stable and the Afghan situation remains unstable. Obama does not want a crisis from the Mediterranean to the Hindu Kush. The fact that Netanyahu has a political coalition to satisfy will not interest the United States, and while Washington at some unspecified point might endorse a peace conference, it will not be until Israel and its foreign minister endorse the two-state formula.
Netanyahu will then shift to another area where freedom of action is relevant — namely, Iran. The Israelis have leaked to the Israeli media that the Obama administration has told them that Israel may not attack Iran without U.S. permission, and that Israel agreed to this requirement. (U.S. President George W. Bush and Israeli Prime Minister Ehud Olmert went through the same routine not too long ago, using a good cop/bad cop act in a bid to kick-start negotiations with Iran.)
In reality, Israel would have a great deal of difficulty attacking Iranian facilities with non-nuclear forces. A multitarget campaign 1,000 miles away against an enemy with some air defenses could be a long and complex operation. Such a raid would require a long trip through U.S.-controlled airspace for the fairly small Israeli air force. Israel could use cruise missiles, but the tonnage of high explosive delivered by a cruise missile cannot penetrate even moderately hardened structures; the same is true for ICBMs carrying conventional warheads. Israel would have to notify the United States of its intentions because it would be passing through Iraqi airspace — and because U.S. technical intelligence would know what it was up to before Israeli aircraft even took off. The idea that Israel might consider attacking Iran without informing Washington is therefore absurd on the surface. Even so, the story has surfaced yet again in an Israeli newspaper in a virtual carbon copy of stories published more than a year ago.
Netanyahu has promised that the endless stalemate with the Palestinians will not be allowed to continue. He also knows that whatever happens, Israel cannot threaten the stability of Arab states that are by and large uninterested in the Palestinians. He also understands that in the long run, Israel's freedom of action is defined by the United States, not by Israel. His electoral platform and his strategic realities have never aligned. Arguably, it might be in the Israeli interest that the status quo be disrupted, but it is not in the American interest. Netanyahu therefore will get to redefine neither the Palestinian situation nor the Iranian situation. Israel simply lacks the power to impose the reality it wants, the current constellation of Arab regimes it needs, and the strategic relationship with the United States on which Israeli national security rests.
In the end, this is a classic study in the limits of power. Israel can have its freedom of action anytime it is willing to pay the price for it. But Israel can't pay the price. Netanyahu is coming to Washington to see if he can get what he wants without paying the price, and we suspect strongly he knows he won't get it. His problem is the same as that of the Arab states. There are many in Israel, particularly among Netanyahu's supporters, who believe Israel is a great power. It isn't. It is a nation that is strong partly because it lives in a pretty weak neighborhood, and partly because it has very strong friends. Many Israelis don't want to be told that, and Netanyahu came to office playing on the sense of Israeli national power.
So the peace process will continue, no one will expect anything from it, the Palestinians will remain isolated and wars regularly will break out. The only advantage of this situation from the U.S. point of view it is that it is preferable to all other available realities.
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.
Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staffs at Millennium Wave Advisors, LLC and InvestorsInsight Publishing, Inc. (InvestorsInsight) may or may not have investments in any funds, programs or companies cited above.
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05-21-2009 8:37 AM