US Republicans challenge the foreign policy ‘blob’

In my experience, the widely quoted adage about America’s capital — “You want a friend in Washington? Get a dog” — makes a fair point; imagine a city populated entirely by high school student council presidents. Nevertheless, in my glory days in D.C. I managed to buck the odds and acquire a number of great colleagues who I have remained close to over the 16 years I have run my political risk firm.

I’ve just checked in with them over a marathon week, with 16 intensive meetings in five days. This concentrated process is by far the best way to take a mental snapshot of what is really going on in what remains the most important country in the world.

There are two major political risk takeaways from the week. Point one is that the current Western unity over the Ukraine war is misleading. It was pointed out to me by many that there are three strands of Western thinking on Russia, and they do not strategically agree.

First, the Eastern Europeans and the UK (for rather odd and specific reasons) want to roll back all Russian gains at almost any cost. But it is also true that of the three strands, those advocating total rollback are geopolitically the weakest.

Second, the Biden administration finds itself in a balancing position, writing Ukraine a series of blank checks, with the US having no specific war aims of its own but working hard to limit the conflict. The Biden team have a studied aversion to the no-fly zones that Western hawks are screaming for, as they could lead to a direct confrontation between superpower America and great power Russia — a breach of the “Kennedy Rules” that nuclear powers do not ever directly fight one another.

Third, European Council on Foreign Relations polling makes clear that Western European publics increasingly favor “peace” (the war stopping now so as to stem the looming tsunami of the cost-of-living crisis and rampant inflation brought on by Europe’s feckless energy policy) over “justice” (Ukraine regaining every yard of its territory, but at great economic cost to the continent).

In other words, there is trouble ahead for the Western alliance over the war, as strategically these fundamental differences become apparent to even the dimmest analyst.

Beyond the coming possible schisms in Western unity over the war, there was a second, vastly underreported takeaway from my fascinating trip — namely the coming rejuvenation of the Republican Party in foreign policy terms.

In Washington I met with every branch of foreign policy opinion formers for the GOP. They included the Heritage Foundation, the largest think tank in the world and the most important on the right in the US; the Congressional Research Service, Congress’s own in-house think tank; the over-arching and increasingly powerful Stand Together Alliance, which unites the Jeffersonian and Jacksonian wings of the GOP around a realist orientation; and two venerable establishment pillars, the Center for the National Interest and the Atlantic Council. I also had private meetings with senior foreign policy grandees. All the above testified to the fact that there is a revolt catching fire in the party to do away with its longstanding links to the foreign policy “blob,” the disastrous, overly interventionist elite that gave us the Iraq and Afghanistan wars.

It is far less likely the Republican Party will remain linked to the discredited foreign policy establishment if it comes back to power in 2024, as it is embracing a new, more skeptical and realist orientation, having under Trump jettisoned from positions of power in the party the fantasist, hyper-interventionist neo-conservatives who futilely and fatally wanted to impose democracy around the world — nation building at the point of a gun.

In essence, this new realist alliance between Jeffersonians (the Stand Together Alliance) and Jacksonians (Heritage) is fused around a more realist orientation, whereby the GOP is no longer content to serve as the junior interventionist member of the Washington foreign policy establishment, in lockstep with the liberal Wilsonian hawks who perpetually dominate the Democratic Party. Instead, they believe the US should focus its strategic engagement in regions where its primary interests are at stake, as in the Indo-Pacific, the source of most of the world’s coming economic growth and much of its political risk peril.

For them, Ukraine is a sideshow, and a terribly expensive one at that — obscuring America’s necessary pivot to Asia. It should be supported, but with clear limits to that support, as the US cannot care more about European security than Europeans do. At present America is responsible for about 70 percent of the military wherewithal heading to Kyiv, while Germany does as little as possible. While Biden is spending tens of billions of dollars on secondary-interest Ukraine, what should be the obvious, overriding focus on the Indo-Pacific is being lost. What I learned in my fascinating week in D.C. is that at last the karmic wheel is turning, as the Republican Party forsakes its disastrous adherence to the foreign policy blob and rediscovers its precious realist heritage.

This piece was originally published in Arab News.

The Ukraine war reaches its Gettysburg moment. Will we see a draft that could end Putin, or the disintegration of western unity?

The early 1900s baseball star (and sometime philosopher, they often go together) ‘Wee’ Willie Keeler put it perfectly – that the key to the sport is to ‘hit ‘em where they ain’t.’

The same simple, effective philosophy, to an even larger extent, explains Ukraine’s dramatic strategic offensive of last week to the northeast of the country, relieving the pressure on its second city, Kharkiv.

While the world, including the Russian general staff, was engrossed by the much-advertised Ukrainian offensive in the south around Kherson – a centre of over 200,000 people and the largest city to be captured by the Russians so far – the Ukrainians adroitly followed Keeler’s maxim. So when Russian troops were dispatched from the Kharkiv area to support its defenders in Kherson, the Zelensky government masterfully struck the suddenly-undermanned northeast.

In the space of just as few days, the front lines – which had stabilized into almost World War I-style trench warfare following the petering out of the Russian offensive in the Donbas in June – were magically opened up by Ukraine’s surprise attack.

In the course of just the past few days, Kiev has retaken up to 700 square miles of territory in the northeast, even as the Russians have scrambled to repair the breach in the line. At a tactical minimum, it is the greatest Ukrainian victory in the war since March, when it dramatically turned Russian forces away from the gates of Kiev itself.

So is this Ukraine’s ‘Gettysburg Moment’ – the decisive battle that will determine not just the immediate and tactical, but the outcome of the war itself?

More than a few caveats are in order before we answer this central political risk question. For while what is strategically going on is momentous, there is a lot of terrible fighting still to come. It must be remembered that, as of this morning, Russia still controls a significant 20 per cent of Ukrainian territory. For all of Kiev’s undoubted heroics, all it has managed to do up, until the present, is to show its vital western backers it can heroically lose the war at a far slower pace than had been expected.

Furthermore, geography matters mightily in evaluating the (relatively) good news. Liberating the northeast is important, but it is not the key to the present situation; the struggle for Kherson has far more strategic impact, since re-taking this major city would upend Vladimir Putin’s current ‘southern strategy’ in Ukraine.

While stopped in his earlier blitzkrieg effort to quickly decapitate the Ukrainian government, take Kiev, and make the country a genuine colony of the Kremlin, Putin has been far more successful in the south.

He has largely succeeded in militarily establishing a land bridge – connecting Rostov on Don in Russia itself, much of the Donbas, and the City of Mariupol (making the Sea of Azov a Russian lake), linking a good portion of the north coast of the Black Sea to already-held Crimea.

If Putin can stabilise the Donbas, he may settle for this major bite of the Ukrainian apple, declare victory and initiate a cease-fire – in essence partitioning Ukraine itself. This is the major strategic gambit of the war at present; comparatively, the Kharkiv region is a sideshow.

But for all these necessary caveats, the Ukrainian offensive might just herald the climax of the present conflict. There are two major – and woefully undiscussed – reasons for my bold political risk call (and do remember that my firm said there would be an invasion in the near term in November of last year).

First, the strategic initiative in a war matters; someone is always on the offensive and someone on the defensive. Since the Ukrainian army’s heroism before the gates of Kiev in March, the strategic initiative has been largely with the Russian army. They have glacially, and at great loss, inched their way forward in the Donbas, taking the whole of Luhansk, and much of Donetsk in the late Spring-early Summer of this year. It is been slow, ugly, and unedifying, but the Russians have retained the initiative until their latest June offensive petered out over the summer.

Now, beyond doubt, in both the northeast around Kharkiv and the south around Kherson, the strategic initiative has gone over the Ukrainians; they are in the offensive driver’s seat now. While it is true that this may be a short-lived phenomenon (winter will likely put on end to both armies’ freedom to manoeuvre and stage large-scale operations), for the present the momentum of the war has swung back in the Ukrainians favor. This is a truly momentous development.

Second, as the great Prussian military theorist, Carl von Clausewitz, put it, war is politics by other means. Both Putin and Volodymyr Zelensky have real political challenges ahead, which amount to the decisive factors as to which side will ultimately emerge victorious in the conflict. The present Ukrainian offensive amplifies their present political difficulties, throwing into stark relief the political risk factors that will determine the outcome of the war.

For the Kremlin, their choice of words about the Ukrainian conflict is instructive; they call their barbarity a ‘special military operation;’ God forbid it is discussed as a war. This is not just the usual Orwellian pronouncements of an increasingly totalitarian state. For were Putin to admit that his dreams of federation with Ukraine had been this terribly miscalculated, that the country did not welcome the invading Russian forces with open arms, but instead fought them tooth and nail for control of the country, would be to call Putin’s strategic judgement, and Putin alone, into dangerous question.

A ‘war’ would require a general draft of the Russian people – another hardship visited upon them by their beleaguered leadership. The political risk trap for Putin is that he has to finish his invasion of Ukraine with one hand tied behind his back. For him to unleash total war, which he may have to do to actually conquer a country as vast and well-defended as Ukraine, would be to admit his great miscalculations in the first place. The all-out draft he needs to win could paradoxically bring about his end.

On the other hand, in the words of Tennesse Williams’s tragic heroine, Blanche DuBois, the Ukrainians are dependent on the kindness of strangers – particularly the United States, which has accounted for a decisive 70 percent of all military aid given to Kiev. It is estimated that Ukraine, a political and economic basket case even before the war, needs around $9 billion a month just to keep going.

The political risk danger point is the West is afflicted with a serious cost-of-living crisis, with the beast of inflation loosed from its cage, and with an energy-induced recession about to hit the European continent. It is an open question, as energy is rationed in Europe and America has to weather significant economic troubles of its own, how long Washington and the others are prepared to write tens of billions dollars of open-ended checks for a Ukraine unable to re-take ground in its own country (in essence, just losing gallantly) as its own people suffer for a strategic cause that is secondary at best.

It is in this larger political and strategic context that the present Ukrainian offensive must be seen. If Zelensky’s forces can re-take ground around Kharkiv, the political pressure on the Biden White House lessens, and the necessary cheques will keep being written.

In such a situation, the pressure on Putin to institute a wide-ranging draft to avoid disaster becomes almost unbearable. On the other hand, a stalled offensive would keep the political heat on western leaders from their increasingly restive publics, even as Putin has time to put his announced new 130,000 men in the field by the Spring.  It is for these other, whispered, political risk factors that we have indeed arrived at our ‘Gettysburg Moment’ in Ukraine.

A global food crisis could spell a bigger catastrophe than Vladimir Putin’s war

You always knew you had reached an intellectual dead end when foreign policy grandees sat around a table and recommended sanctions as an all-purpose answer to any problem.

While such an initiative almost never practically worked in terms of changing the policy of the offending country, it made political sense in a Washington sort of way. ­­­­The beauty of such an outcome is that countries that enact sanctions are seen to be “doing something” about an important foreign policy problem while at the same time not doing enough to risk an escalation of the crisis. However, more often than not, it led to unintended consequences that made the sanctions cure worse than the original disease.  

Alarmingly, a recent example of this doleful pattern is brewing. The prospects of a food crisis, as a result of Western sanctions on those companies connected to the agribusiness and fertiliser industry, could unwittingly damage the fragile global ecosystem. Such a crunch is increasingly likely, primarily caused by skyrocketing prices for fertilisers previously supplied from Russia and Belarus.

For the past three generations, mineral fertiliser has played a decisive role in alleviating global famine. According to the UN, since 1960, global food production has skyrocketed by 211 percent. The clear reason for this is the industrialization of ammonia production, the game-changer in terms of the world feeding itself. Today, roughly half of the world’s population (48 per cent) depends on fertiliser use.  

There is no getting away from its importance, or from the fact that at present Russia and Belarus are both key players in the global fertiliser market, with a combined share of 16 percent of global production of mineral fertilisers and 22 percent of their export. Globally, 2 billion people depend on the import of fertilisers, with the two sanctioned states feeding a substantial 450 million of this number in 2019.

The EU’s feel-good sanctions have already heavily affected the global supply of mineral fertilisers, but the trade off is unclear. In Ukraine, the war wages on.

One example will suffice. Eurochem, headquartered in Switzerland and founded by Russian businessman Andrey Melnichenko, is the world’s second largest mineral fertiliser company by sales­­. European sanctions have hit the company at almost every conceivable level, in terms of finance, sales, logistics, production, and procurement, decimating this vital conduit for food production. As a result, the company has been forced to close two critical fertiliser plants in Belgium and Lithuania, which stands to hurt the neediest people in the world.

In fact, so far sanctions have led to a decrease in Russian fertiliser exports of 34 per cent in the first three months since their imposition, sufficient to feed 134 million people on an annual basis. And this is just the beginning. Overall, due to EU sanctions, more than 20 per cent of the global fertiliser trade is under threat, potentially affecting an astounding 750 million people.

Of course, there is a distinct geopolitical component to such folly. Limiting the fertiliser supply could lead to the threat of crop failures and famine in the most fragile countries in the tottering Middle East and North Africa, with catastrophic consequences for Europe itself. Refugees could then well flood across the Mediterranean, leading to further political radicalization in an already shaky southern Europe.

As for North Africa, anarchy and chaos worse than the 2011 Arab Spring could easily take place in famine-stricken countries if the food crisis gathers pace. Radical Islamists under the banner of jihad are well trained in using hardship to buoy themselves to power – a nightmare scenario for Europe and the world. Beyond the horrendous human suffering, Europe may well come to reap the whirlwind of its sanctions-happy folly.

What should the UK do about all this? First, the new government should encourage its European partners (and to do so itself) to look specifically at every sanctions plank and package from the commonsense realist notion of whether it helps or hinders global stability. Sanctions are neither always useful nor always disastrous. In the case of indirectly sanctioning the mineral fertiliser industry, London should strongly encourage Brussels to look at fertiliser and food security as a humanitarian issue and remove such strictures from imperiling the global food ecosystem.

No one is doubting that the Putin regime must be checked, or that some specific sanctions on Moscow are absolutely necessary. The question is one of policy, of how to do this in the most effective way, one which will not leave millions of people in danger of starvation.

This piece was originally published in The Hill.

A terror network’s struggle for influence in Afghanistan

The presence of al Qaeda’s leader, Ayman al-Zawahiri, under the protection of the Taliban in a luxury villa in Kabul raises important questions about who is actually running the country and what this means for U.S. and allied interests. 

When U.S. forces killed al-Zawahiri on July 31, he was not just visiting Afghanistan’s capital city. He and his family were staying in a home owned by the family of Interior Minister Sirajuddin Haqqani, who has emerged as Afghanistan’s most important and lethal power broker. As one of two deputies to the Taliban’s senior leader, Haqqani wields oversized influence in the government’s senior councils, with the power to appoint the governors of Afghanistan’s eastern provinces.  

His position as interior minister gives him control over Kabul, Afghanistan’s internal security forces and its intelligence apparatus. In short, Haqqani runs the country’s “power ministries.” The clan’s personal army, the powerful Haqqani network, is a radical Afghan Islamist group that was designated a foreign terrorist organization by the State Department in 2012, and the FBI offers a reward of up to $10 million for information that leads to Haqqani’s arrest. 

One year on from its return to power, the Taliban predictably has run Afghanistan into a ditch. More than half the population requires urgent food aid, including more than a million malnourished children. The health sector is collapsing. International donors, who had funded almost 80 percent of the country’s economy, have ceased their financial support. The United Nations estimates that as much as 97 percent of the country may fall below the poverty line by the second half of this year.

Afghanistan’s political struggles have exacerbated this humanitarian tragedy. Haqqani’s power grab appears to have sidelined the Taliban old guard, epitomized by Abdul Ghani Baradar, who led the Taliban’s negotiations with the United States in Doha to end the war. Last September, the increasingly confident Haqqani faction forced Baradar and Defense Minister Yaqoob Omar, son of Taliban founder Mullah Omar, to flee Kabul to the safety of their home base in Kandahar in a dispute over ministerial appointments. In the ensuing struggle for control of the government, the head of Pakistan’s intelligence service traveled to Kabul to ensure that the key positions went to Pakistani loyalists from the hardline Haqqani network, not those who led the Doha negotiations.

While Baradar and the Kandahari faction are attempting to broadly abide by the Doha Accord — in which the Taliban committed to preventing Afghanistan from becoming a safe haven for terrorists in order to secure the release of $7 billion of Afghan foreign reserves frozen by the United States and its allies — the former commander of U.S. Central Command (CENTCOM) recently acknowledged: “They’re finding it difficult to do.” 

According to a recent U.N. report, the reason for this failure is clear: “The Haqqani Network remains a hub for outreach and cooperation with regional foreign terrorist groups and is the primary liaison between the Taliban and al Qaeda.” Counterterrorism experts also assess that the Haqqani Network is using the Islamic State-Khorasan (ISIS-K) as another tool to consolidate its power. 

As long as the Haqqanis remain Afghanistan’s ascendant power, international recognition of the country, containment of jihadist extremists and alleviation of Afghanistan’s accelerating humanitarian crisis will prove impossible. 

Two countries in particular bear a significant share of responsibility for this state of affairs: Pakistan long has provided sanctuary for the Haqqanis, as well as logistical and political support for the network. It is a notoriously two-faced U.S. ally whose military and security services work at cross-purposes to U.S. interests throughout the region. As one noted expert observed: “The removal of the Haqqanis from Afghanistan is an ambition which would unite most regional powers as well as the Kandaharis. However, it is difficult to see how it could possibly happen even if the support of Pakistan could be secured. The Haqqanis control Kabul, are heavily armed and intend to stay.”

The United Arab Emirates (UAE) also plays an unhelpful role in support of the Haqqanis. Senior members of the Haqqani network, including Afghanistan’s current minister of refugees, Khalil al Haqqani, have relied on sources in the UAE for fundraising and have used the UAE as a base for their front companies. Emirati banks hold the accounts of senior Haqqani members. In return, this year the Haqqanis awarded the Emiratis a no-bid contract to run Kabul airport, which they control. In short, the UAE provides an essential financial lifeline to the Haqqani network. 

If the Biden administration is truly serious about fighting terror and helping the people of Afghanistan, it will have to adopt a tougher approach to putative allies such as Pakistan and the UAE. They are enabling a known terrorist enemy, in open contravention of both U.S. interests and international commitments. Enabling evil never works; it merely spawns more evil.  

This piece was originally published in The Hill.

After the Queen: Charles has a tough act to follow. His weaknesses will make it harder

Even though Her Royal Majesty Queen Elizabeth II was 96 when she died Thursday, I find the news almost impossible to comprehend. 

Growing up as a college, and then graduate, student at the University of St. Andrews, where Will and Kate met, I found the Queen was a living part of every day. Her picture was ubiquitous, in every building. St. Andrews was a conservative place, with more than its share of the high-bred folks, all of whom were lesser planets orbiting around the sun that was the royal family. Even as I marched into the university’s fabled debate society to have at it with my competitors in front of thousands, a rousing “God save the Queen!” capped every Latin chant. Elizabeth II was everywhere.

However, like something so omnipresent, it is easy to lose sight of what the Queen managed to personally do for the monarchy. In political risk terms — and I’ve taught the history of the British monarchy to British students, some who couldn’t believe that a mere American could fathom 1,000 years of their history — she has been one of the best rulers the United Kingdom has ever had.

Three of Elizabeth’s characteristics stand out. First, and she learned this at the feet of her adored father, George VI: The Queen was a plodder, doggedly going ahead with her public relations duties, come hell or high water, whether she was happy or sad, fulfilled or neglected, popular or out of fashion. In her quiet, dutiful way, she followed in the footsteps of both her father and her grandfather, George V, two popular kings. The other branch of the Windsor family — typified by the callow Edward VIII, the Queen’s tragic sister, Margaret, and now by her grandson Harry, the Duke of Sussex — might be more fun to hang out with at a party, but none of them could be counted on to go the distance, serving their country day in and day out, whatever the social and political weather. Doing this over many decades rightfully made Elizabeth II a legend.

Second, Elizabeth understood that the magic of the monarchy meant that she carefully tended the distance between the rulers and the ruled. Prince Philip’s ill-advised foray into television in the late 1960s, ludicrously using a BBC documentary to feebly attempt to make the royal family look “ordinary,” flopped miserably, just as did the “It’s a Royal Knockout” game show in the 1980s, brainchild of Prince Edward, the Queen’s youngest son. In both cases, the Queen was outwardly loyal to her errant family, but must have inwardly cringed. Elizabeth understood that people do not want the monarchy to be “just like us.” For regal majesty to survive, there simply must be distance.

Third, Elizabeth was rightfully a conservative in this most conservative of institutions. I am not talking specifically about her politics — which may well have been centrist — but rather how little her politics mattered. She knew, to the marrow of her bones, that the last thing the country wanted was a political monarch. The tragedy of her early life was precisely that her soon-to-be Nazi sympathizing uncle, David (Edward VIII), was far too outspokenly political for his (or former prime minister Stanley Baldwin’s) good. When Edward’s forced abdication to marry Wallis Simpson came about, Elizabeth’s brave but untested father, suffering from an almost debilitating shyness that came from his pronounced stutter, assumed a throne that both his wife and daughters came to believe killed him prematurely, thus setting the young Elizabeth on the throne.

For all these reasons her son, now Charles III, has an almost impossible act to follow. But worse, Charles’s present weaknesses will be painfully illuminated by his mother’s great strengths. Where Elizabeth talked about general duty to “the firm’s” basic public relations calling, Charles is more interested in either specific idiosyncratic projects (his decided views about architecture, or organic food) rather than the slog of opening regional swimming pools in Swindon. Where Elizabeth understood the majesty of monarchical distance, Charles talks unknowingly about making the whole edifice more accessible. Where no one knew the Queen’s political views, Charles is on record for hectoring ministers of all parties about their duty, which he seems to believe is to be a rather odd Liberal Democrat in his own image. All of this is dangerous, both for Charles specifically and for the furtherance of the monarchy as a whole.

Elizabeth II played her part so perfectly that, as the decades passed, she as an individual seemed to merge with the very institution of the monarchy itself; remember her first premier in the faraway 1950s was the great Winston Churchill. The problem with this is that the monarchy, as with every other great man-made institution, must be bigger than the person themselves; even kings and queens are just passing through while the Crown is forever. 

In ruling so adroitly for so long, Elizabeth II’s success itself, and the ease with which she seemed to pull the whole thing off, makes following her little more than accepting a poisoned chalice. Her success will perhaps be Charles’s great problem.

This piece was originally published in The Hill.

Tough times ahead for Britain’s new PM

In the spring of 1945, after towering over the American political landscape for a generation, Franklin Delano Roosevelt died suddenly at his retreat in Warm Springs, Georgia. At the time, Vice President Harry Truman was up on Capitol Hill, sharing a customary drink with the Congressional leadership at the end of a hard week (yes, opposing leaders actually socialized with one another in those faraway days).

Abruptly summoned to the White House, Truman ran straight into the president’s wife, Eleanor, who told him the news. Shocked into his basic Midwestern decency, Truman asked if there was anything he could do for her. She wisely replied: “No, Harry, is there anything we can do for you? For you are the one in trouble now.”

I thought of this historical vignette last week as Liz Truss succeeded the shambolic Boris Johnson as prime minister of the UK. When Britain’s period of official mourning for Queen Elizabeth comes to an end and the business of government resumes, rarely will a new political leader have been confronted with such a bulging and dangerous in-tray.

Following the semi-criminal failure of Europe and the UK to worry much about their energy policies for the past few decades (indeed, just days before the Ukraine war began, Berlin was still pushing to get the Nord Stream 2 gas pipeline operational, which would have preposterously increased its energy dependence on Moscow), knock-on inflation marching in tune with stratospheric energy price rises has been the doleful result — both on the continent and in the UK.

The beast of inflation, now fully loosed from its cage in Britain, sits at an unhealthy 10.1 percent. The specter of stagflation, and a permanent cost-of-living crisis, beckons. Indeed, in political risk terms, if both Europe and the UK do not master (and quickly) the current economic crisis, the grim reality of overall absolute decline awaits them.

Calmly (a blessed relief from Johnson’s rollercoaster tenure), Truss has set out a four-pronged strategy for dealing with the calamity. First, her administration intends to freeze average annual household energy prices for the next two years at £2,100 ($2,400), including an already agreed-upon energy rebate, with equivalent support for businesses for at least six months. The cost will be a monumental £150 billion. This unprecedented bailout dwarfs the COVID-19 furlough bailout of £69 billion, and will be paid for entirely through new borrowing.

Unlike her Labour Party opponents, Truss refuses to implement a windfall tax on energy companies, on the ground that it would discourage their future investment in further energy projects. This massive spending gamble is designed to allow the Bank of England to more slowly raise interest rates (mitigating the coming recession) and to cap overall inflationary pressures themselves. On her very first day, Truss has wagered the overall success of her premiership on this one, overwhelming economic bet. She is all in.

Second, Truss wants to make sure the UK never again finds itself the prisoner of its energy supply. Fracking, outlawed under the Johnson premiership, will be allowed, in an effort to increase domestic energy production, as will further drilling for oil and natural gas in the waning but still profitable North Sea fields.

Third, the new prime minister is betting on aggressive growth as the ultimate way out of the crisis. Despite the mammoth new borrowing, Truss is pressing for large tax cuts amounting to £30 billion to free up the animal spirits of British business and extricate the UK from its parlous economic state. She has called upon Jacob Rees-Mogg, the new business and energy secretary, to drastically cut government regulation and further unshackle the British commercial sector.

Fourth, with rising Conservative Party star Kemi Badenoch the new trade secretary, Truss will try to bank the winnings from Brexit. I have long been exasperated by both sides of the Brexit debate, locked as they are in their deafening self-regarding theologies. In policy terms, the issue is simple. If, in the medium term, Britain manages to secure free trade deals with the parts of the world that are actually economically growing (India, the US, the Anglosphere countries), then Brexit will have been worth it as the UK looks beyond an economically sclerotic Europe for its economic future. If it does not manage to do so, then Brexit will have failed, and all Britain will have done is alienate its largest trading partner.

On these monumental policy issues, the Truss leadership will rise or fall. During her inaugural session at Prime Minister’s Question Time in the House of Commons, Truss’s tone was strikingly different from Johnson’s. Gone was the bombast, the showmanship, the sly humor, and the loose relationship to the facts. In their place were sobriety, a low-key confidence, a reassuring calmness. In both cases, the style of the two leaders belies reality. For all his gaudiness, Johnson’s actual policy agenda was incredibly boring; he was a vanilla, garden-variety Macmillanite. On the other hand, beneath Truss’s dullness lies a radical, updated, Thatcherite policy agenda that will either actually work or obviously fail. In terms of substance, as was true for Truman, stirring days lie ahead.

This piece was originally published in Arab News.

Europe lacks a captain for its drifting ship of state

One of the things I have learned from my decades in the political risk business is that experts usually ignore the fact that specific people truly make policy.

It is easy, and intellectually correct, to focus on the grand historical forces of analysis: to look at things like the global macroeconomic situation, the overall geopolitical state of global power, the abiding ideology of the times. All of this is absolutely necessary to get right, and almost never makes it into the facile and simplistic column inches of the mainstream media, whose lack of genuine depth is increasingly becoming a global problem.

But there is another, historical level of analysis that eludes most of my political risk competitors, and explains their dire records on predicting what will come next in the world; they simply do not understand that specific people, with their individual strengths and weaknesses, are in charge of the world. Really understanding these specific people, as well as comprehending the general state of the planet, is absolutely necessary for getting political risk right.

US Supreme Court Justice Oliver Wendell Holmes understood this perfectly when he said of Franklin Roosevelt that he had a second-class intellect but a first-class temperament. It is not that Holmes thought FDR was stupid; he did not, as Roosevelt was one of the smarter men ever to have been president. It is that Holmes correctly saw that the key to Roosevelt’s unparalleled political success lay instead in his character, his almost feline ability to sense, in any social situation, what others wanted, and to know what he was prepared to give. This specific attribute of a specific man is not studied by anyone other than historians (and not by enough of them, either) but it is a vital piece of the puzzle in making specific sense of perhaps the most important person of the 20th century.

All of which brings me to the present becalmed state of the declining great power that is Europe. Yes, there are a legion of structural reasons for the continent’s present malaise: It lacks a common army to matter in our increasingly rough-and-tumble geopolitical world (as well as, in its decadence, the will to have one); it lacks the economic dynamism to grow its way out of macroeconomic difficulties, with far too many entitlements and far too few working hours; it lacks an overarching country able to drive the European process forward, instead having a hodgepodge of great powers (Spain, Italy, France, and Germany) constantly vying for advantage.

All of this is true and all of this must be thought about far more often by a mainstream media that mindlessly cheerleads for Brussels, without wondering why the continent perpetually disappoints in great power terms. But there is also the historical, specific, personal level of assessing the continent’s present leaders that is hamstringing Europe, dooming it to decline even faster than all the more general factors would allow for.

Currently, perhaps only vainglorious, (overly) confident, bold French President Emmanuel Macron has the temperament to move the European project forward. However, his specific political problem is that the French people have just knobbled him in parliamentary elections, denying him a majority precisely because they feel he spends too much time swanning around the world making grand pronouncements and too little time governing France.

Nor is German Chancellor Olaf Scholz the answer. He won office precisely because he was inoffensive, cautious, and meek; in other words, he most resembled the suicidally beloved outgoing Angela Merkel. While having the qualities of your local branch bank manager might work in calmer times, in our age of perpetual crisis such attributes prove to be self-negating.

The other lesser European powers are also of little help. Prime Minister Pedro Sanchez leads a rickety coalition government in Madrid, behind in the polls to his center-right People’s Party rivals. For these specific political reasons, his famously insular country, never keen to take center stage in Europe, can be of little help, even if it wanted to dramatically move the European project forward.

The same is even more true for Italy, where outgoing premier Mario Draghi’s unelected administration — parachuted in to somehow govern an increasingly ungovernable country —failed to provide Rome with the stability that had been confidently expected; it fell in just a year and a half. Instead, Italy’s new (and at least elected) government will come from the right, with populist Giorgia Meloni the putative new premier. While she is unlikely to bite the EU hand that is feeding her (with Brussels set to provide Rome with a gargantuan €200 billion in post-COVID aid), her basic euroskeptic ideology means she is more likely to block Brussels having a common approach (over immigration above all) than to champion the European project.

For all these specific historical and political reasons, as well as grand world historical forces, the easiest bet in the political risk world is to see Europe as an idea whose time has passed. The only way this downward trajectory would be altered is if Europe produced a leader with a first-class temperament, and a decisive political majority to match. In the world we actually live in, that simply won’t happen.

This piece was originally published in Arab News.

Why Biden’s mid-term ‘comeback’ is just wishful thinking

Climate analyst Bjorn Lomborg put it perfectly when he said: “Wishful thinking is not sound public policy.”The vast majority of political risk mistakes are made for this one simple reason; most analysts confuse what they would like to happen with what is likely to happen.

This is a primary analytical lesson the in-the-tank leftist mainstream American media have yet to learn. Functioning as little more than the propaganda arm of the Democratic Party — while arrogantly professing to represent some sort of objective truth (i.e. all sane people agree with them) — the popularly derided press continually confuse what they would like to happen with the facts dancing in front of their eyes. This explains their excitement at Joe Biden’s political “comeback,” and what it means for the revival of Democratic hopes in the November mid-term election.

The standard media argument, backing up their favored Democratic Party, goes something like this: “The overturning of Roe vs. Wade is unpopular, as a majority of Americans support abortion rights, which plays to the White House’s advantage. The president has things moving again with finally passing a watered-down version of his grab-bag progressive spending bill, allocating $740 billion for climate change projects and to lower medical costs. The forgiveness of billions of dollars of student loan debts is immensely popular, particularly among young millennials who will now vote for the Democrats in droves. The FBI raid on Mar-a-Lago has exposed arch-enemy Donald Trump once again as a menace to society at large. All of this will allow us (er, I mean the Democrats) to overcome the historical odds and actually win the mid-terms.”

Let us pick this pathetic excuse for political risk analysis apart, line by line. First, it is true that protecting abortion rights of some kind (though not as expansively as Democrats advocate) is popular in the US. However, few people vote as a result of this issue. Abortion rights is about the fifth most important motivational issue for voters, nowhere near in the league of the dominant cost-of-living crisis as a concern. So, at best, this favors the White House only at the margins.

Second, in this time of rampant 8.5 percent inflation in July, hovering near a multidecade high, Biden’s stubborn insistence on ruinously spending money doesn’t just seem partisan, it seems dangerous. By a long way, voters are most concerned about inflation and the economy, and how the Federal Reserve and the Biden White House incompetently let the inflation genie out of the bottle, two generations after Fed chair Paul Volcker and Ronald Reagan tamed the savage beast. Instead, Biden first belittled the problem, then said inflation would be transitory, then said why don’t we focus on job creation numbers instead? Wrong, wrong, and wrong. The country blames the White House for the scourge of inflation simply because the economic illiterates in the administration have continued to spend money like drunken sailors, all reality to the contrary.

Third, the utterly unfair (I personally paid back a treasure trove of loans by working hard and am utterly mortified at being made of fool of by a White House shamefully looking to buy votes) student loan “forgiveness” policy is obviously mis-named. The loans don’t simply disappear like a magic trick, leftist fantasies to the contrary. No, they form part of the general government debt, to be paid down in taxes by non-college graduates and those of us who already paid their loans — while the millennials, whose work ethic collectively is appalling, take another “experiential holiday.” This desperate effort to buy the young’s electoral loyalty is unlikely to work, because statistically they tend to be too lazy to vote in decisive numbers, and the rest of us are furious at the unfairness of this latest progressive ploy.

Fourth, while it appears Trump has (yet again) behaved badly over keeping classified government documents, he is hardly alone. Former presidents are often at war with the government over which documents are theirs and which belong to the country. Former Clinton national security adviser Sandy Berger went so far as to stuff some unflattering documents in his pants and socks (you simply cannot make this stuff up) only to be found out as he attempted to slink away from the National Archives. And don’t get me started on the nauseatingly privileged treatment Hillary Clinton was given by the FBI over her illegal home-brew server. In these other cases, the FBI did not storm the homes of the guilty, as they did with Trump and Mar-a-Lago. Ironically, this double standard actually bolsters Trump’s standing, as his charge that there is one set of rules for Democrats and another for Republicans sadly looks all too true.

For all these reasons, don’t buy the hype about the Biden “comeback.” My firm, which called the 2020 outcome perfectly (down to the tie in the Senate) has the GOP still likely to take the House by 20-30 seats with the Senate still too close to call (today we have it at 50-50). When wishful thinking replaces genuine thinking, you get stories such as these.

This piece was originally published in Arab News.

At last Italy is about to return to democratic government

It is a remarkable, overlooked fact that Italy hasn’t governed itself in a democratic sense for quite some time. Incredibly, Silvio Berlusconi was the last prime minister who explicitly ran for the job at the head of a major political party, in 2008. Since then, Italy’s ramshackle governance has been a case study in the EU elite’s ruinous quasi-colonization of the country.

Most recently, this anti-democratic scenario reared its ugly head again. Following the failure of two governments led by the unelected Giuseppe Conte and supported by the out-of-their-depth Five Star movement, yet another unelected EU functionary was parachuted in to save the day. Mario Draghi, the former successful head of the European Central Bank, was summoned by his EU masters to take charge in Rome.

His government was designed to steer the country through the pandemic, and also to wisely allocate the more than 200 billion euros coming Italy’s way in terms of the EU’s massive aid package — the country’s last, best chance to drag itself out of its generations-long economic torpor. For the astounding reality is that Italygrew at average annual rate of zero percent between 1999-2016; this amounts to nothing less than a lost economic generation. Above all, the EU’s mandarins believed the highly respected Draghi would be able to provide stability until the next election, then scheduled for 2023.

But, as the Scottish poet Robert Burns put it, the best laid schemes of mice and men go oft awry. Like most Western governments, Draghi made monumental mistakes over the pandemic, opting for (unsurprisingly given his pedigree) a top-down, draconian approach that until recently has still forced Italians into the dinner-theater of wearing masks, long after the rest of Western Europe came to its senses. The economic losses have been immense, as has been the loss in the presumption of individual liberty.

But Draghi’s biggest failure is that the EU’s anti-democratic power play has failed in the most basic terms, in that he did not provide the stability that was the main point of his technocratic government in the first place. Having served only 17 months, on July 21 he was forced to resign as the populist Five Star movement, the rightist, populist Lega, and Berlusconi’s Forza Italia parties undermined him. Without a democratic mandate, Draghi’s government proved the opposite of what the almost-always-wrong Brussels elite had confidently predicted; it was fragile rather than strong, as it simply had no sort of popular mandate to sustain it when times got tough.

It is little wonder that the main beneficiary of the crisis, Giorgia Meloni and her rightist, populist Brothers of Italy Party, have risen in popularity as the only major party that shrewdly chose to stay outside Draghi’s technocratic government. She leads a surprisingly united Italian center-right alliance, also comprising Matteo Salvini’s populist Lega and Berlusconi’s centrist party.

An Aug. 12 Politico poll of polls has the Brothers of Italy with 24 percent of the prospective vote, the Lega at around 14 percent, and Forza Italia at seven percent. The fractured center and center-left (comprising five parties) together have only 45 percent of the vote between them. There is little doubt the Italian right are on course for a famous victory.

The deal welding them together is that the party in the alliance with the most votes will select the new prime minister, an eminently democratic point of view. Meloni therefore finds herself in the driver’s seat for the job, because she leads in terms of the democratic vote. The irony is that while Meloni is trying to quell fears about her party’s quasi-fascist lineage, it is she who has been the true democrat.

Meloni, who personally gets on quite well with the outgoing Draghi, intends to follow in his economic footsteps, carrying out Italy’s recovery plan in order to receive the cascade of promised EU funds. She is likely to also push for conservative policies such as curbing immigration and flattening the tax rate for lower earners, while increasing funding for child-friendly policies (nursery schools and child benefits).

On the foreign side, given her close ties to the global conservative movement, Meloni will find the progressive Biden administration a tough partner to deal with ideologically. Likewise, within boundaries the haughty Brussels functionaries will reap what they have sown, due to Meloni’s social conservatism, latent euro-skepticism, and plans to unilaterally curb immigration. However, given Italy’s monumental and growing public debt rate (an Olympian 152.6 percent in the first quarter of this year) there are limits to how far Rome can go in biting the hand that feeds it.

Nevertheless, for all the challenges ahead, the good news is that Italy has repudiated the notion that it is a quasi-colony of the EU. Now it is up to Meloni to govern more effectively than her hapless technocratic predecessors, and thus avoid the full colonization by Brussels that economic collapse would surely bring.

This post was originally published in Arab News.

Nothing can save Democrats from midterm drubbing

July 2022 was the moment when the American mainstream media finally became completely unhinged, wholly untethered from reality, being exposed as nothing more than the propaganda arm of the Democratic Party.

The tipping point came over the media urging the American people not to believe what their lying eyes were seeing. US gross domestic product numbers showed a 0.9 percent drop in growth for the second quarter of 2022; as this was the second consecutive quarter of negative growth, this meant that America was in recession.

But the mainstream media was having none of this, as such a poor economic outcome would shift Democratic prospects in the upcoming midterm elections from dire to apocalyptic. So, instead, despite many earlier clips existing of the very same reporters saying throughout their careers that two quarters of negative growth amounted to “the R word,” they blandly echoed the out-of-touch White House in arguing that somehow, this time, the two negative quarters did not amount to a recession, but something else. Of course, this fooled no one, merely proving that the leftist mainstream media has given up any pretense to objective reporting. All of this would be funny if it were not so depressingly Orwellian.

But the media was far from done. Instead of dwelling on the reality of the US being in recession, it wanted us to focus on “Joe Biden’s big political comeback.” For, this past week, Sen. Joe Manchin of West Virginia, the pivotal swing vote in the evenly divided Senate, finally agreed to vote with the rest of his colleagues in passing the White House’s Inflation Reduction Act, which is essentially a watered-down version of the earlier $1.75 trillion Build Back Better bill, a grab-bag of progressive programs.

The new bill aims to raise $739 billion in revenue, even as it adds spending of $433 billion over the next 10 years. The new revenue will come from a 15 percent corporate tax rate (not the greatest idea in a recession) and increasing the much-feared Internal Revenue Service funding by $80 billion in order to shake down the taxpayers for an estimated $124 billion. In turn, the White House will use the new money to pick winners and losers in terms of green industries — a corporatist boondoggle at which governments throughout the social democratic West have historically proven themselves to be absolutely awful at managing.

From the mainstream media’s cheerleading point of view, this amounts to a huge win for Biden’s floundering administration — a political comeback has begun and just in time. It never seems to dawn on the commentariat that taxing businesses is not a magic answer to raising more revenue; instead, they are retarding the very growth sources that the country presently desperately needs. Also, the big state/big spending model that the new bill is part of is precisely why the beast of inflation has loosed its chains and is now devouring the Western public’s standard of living across the board. If fiscal profligacy is the ultimate problem, more fiscal profligacy cannot be the answer.

And despite the mainstream media never being burdened by self-awareness (with New York Times columnist Paul Krugman, totally wrong about the rise of inflation in the first place, telling CNN, in true Marie Antionette style, that the people he is talking to are “doing pretty well” economically), the American people know better. The math is simply the math.

Beyond the recession, inflation hit a 40-year high of 9.1 percent in June, proving to be not as “transitory” as the White House had earlier assured us it would be. A June Newsmakers poll found that a dominant 76 percent of registered voters are very concerned by inflation’s rise, with 72 percent saying it amounts to the country’s largest problem (a whopping 62 points higher in concern than COVID-19).

Despite Biden changing his tune over inflation many times — including calling it transitory before blaming it on Vladimir Putin and then greedy energy companies — the American public has made up its mind. In the same Newsmakers poll, a plurality of 42 percent say Biden is the person most to blame for inflation getting out of hand. This tracks with a July RealClearPolitics poll that found that only 33 percent approve of Biden’s handling of the economy, while a decisive 64 percent disapprove.

It is little wonder that, as he is blamed for causing the biggest problem America is presently saddled with, Biden’s approval numbers — the single most important factor in the past generation in determining the outcome of midterm elections — are subterranean. The present RealClearPolitics average of polls finds the president with only a 40 percent rating, while 56 percent disapprove of his performance. Even worse, a July CNN poll found that a decisive 75 percent of Democratic-leaning voters want someone other than Biden to run in 2024, up dramatically from only 45 percent in February.

Ignore the present desperate cheerleading; wish fulfillment must not take the place of genuine, facts-driven political risk. Biden and the Democrats are set to lose the House by a hefty margin of about 30 seats. No amount of whistling past the graveyard can wish away the ghost of inflation.

This post was originally published in Arab News.