Introduction
The war in Vietnam lasted for seven years. At a certain point, it became a fixed feature of the international landscape. The war was fought, and the world went on. Other wars came and went. Economic cycles rose and fell. The international system continued. The Soviets invaded Czechoslovakia. The 1967 Arab-Israeli War was fought. The United States aligned with China against the Soviet Union. The United States abandoned the gold standard.
Wars move from crisis to routine. We expect 2005 to be the year in which Iraq becomes merely a notable feature of the international landscape rather than a global obsession, just as other battles in the U.S.-jihadist war -- in Afghanistan, Southeast Asia, Europe -- already have. Al Qaeda isn't broken and is fighting back in Iraq, in Saudi Arabia, in Pakistan and in other places. The United States is not about to give up either. The broad trend in this war still favors the United States, except in the Sunni Triangle of Iraq. We expect redeployments in that theater of operations that reduce the exposure of U.S. troops and reduce U.S. responsibility for security. We expect the United States to launch operations in Pakistan and possibly elsewhere. There could be further attacks by al Qaeda outside of the Muslim world. Nevertheless, the war will not end in 2005, and other important things will start to dominate the news.
The most interesting things are happening in China and Russia, the two major Eurasian powers. In China, the 30-year economic explosion that began in 1975 has become tired. The expectations of Chinese growth are as unrealistic as were the expectations of dot-com billions. China's economic growth continues, but whether it is healthy, profitable growth or running-faster-to-stay-in-place growth is not nearly as clear. We predicted last year that 2005 might be the year of China's reckoning. We still hold with that view. The business cycle always has the last laugh -- and after 30 years, and given the extreme optimism about China from all corners, we suspect it's about that time. The question that will be faced in 2005 is not so much economic -- that seems to us settled -- but how China will cope with the political consequences of even a diminution of its economic growth. This year, we expect the third major economic reversal in Asia in a generation: Japan, East and Southeast Asia and now China.
While China is facing its test, Russia has clearly reversed a cycle that began in the mid-1980s with perestroika and glasnost. The great Russian romance with the market economy has ended, as has the commitment to openness. Between Beslan and Gazprom, the Russian state has reasserted its claim to primacy in Russian society. Russia will be dealing with the geopolitical consequences of its domestic reversal -- focusing not only on Ukraine, but on the Caucasus and Central Asia. The year 2005 will not be a year of decisive crisis, but it will be the year in which the reversal of 2004 begins to take on definitive shape in Russia.
The United States now will need to develop a skill it displayed during the Vietnam period: waging war on one hand while managing global relations with another. Events in Eurasia are unfolding alongside the war with the jihadists. The obsessive concern with the war will now have to make room for other global concerns. This is not something over which the United States has a choice. Indeed, only Europe has a choice, which it is exercising: It will remain essentially irrelevant to the global system, heavily focused on its own regional concerns.
This is not to say the war will not continue to be a dominant theme in the world. It will simply cease to be the dominant theme, becoming part of the fabric of our time, rather than an assault against it. We fully expect the United States to move to the attack this year and for al Qaeda to counterattack. But some of the most interesting and disturbing news of the year might come out of Beijing and Moscow, rather than out of Baghdad and Riyadh.
2004 Report Card
Each year, as we begin to develop our annual forecast, Stratfor's first task is to
evaluate the accuracy of our previous predictions and assess current trends. We
found that our 2004 annual forecast contained two primary predictions, both of which are well on track.
The first -- and in comparison to 2003, the most critical -- prediction was the devolution of al Qaeda as a strategic threat. We predicted that if al Qaeda could strike at the West, it would need to do so in the first quarter of the year or risk irrelevance. The strike did come in March, but in Madrid instead of the United States.
That represented al Qaeda's high point in 2004. After that -- again, as we predicted -- the organization began to change. U.S. intelligence efforts prevented the network from sustaining any tempo of operations or even maintaining contact with its various affiliates. This forced al Qaeda to turn its publicized tapes into political statements directed at U.S. citizens and the Muslim ummah rather than calls to action.
Simultaneously, al Qaeda was forced to abandon efforts aimed at stoking uprisings throughout the Muslim world and limit its focus on the one state where it had the greatest chance of making progress.
As we stated in the 2003 annual forecast, "Al Qaeda needs to combine the force multiplier of anti-Americanism with U.S. interference by directly challenging a Middle Eastern state that is strategic to the United States. The state needs to be sufficiently powerful in the region to serve as a base for influencing other countries in the area, financially independent and with a population sympathetic to the militant network's ideology. Only one state in the region fits that description: the kingdom of Saudi Arabia."
Al Qaeda's change of strategy led first to attacks against expatriates and then, at the close of the year, to direct assaults against government security institutions.
Our second major forecast projected the beginning of Europe's fall. Although the European Union took in 10 new members in 2004, they are members who want Europe's economic strength (relative to their own) and market access -- not a federalized superstate. Their inclusion, on the back of sharp inter-European divisions during the Iraq war, is the first nail in the coffin of the dream of a truly politically united Europe. As we said a year ago, "2004 may not be the year of big breaks in the European Union, or even of big decisions by EU members to strike out on their own, but it will be the year that history will view as the beginning of that process."
Other smaller regional forecasts similarly came to fruition. China lost some of its shine, with foreign investors for the first time realizing that economic models based on optimism and cash flow as opposed to profitability and good books cannot succeed forever. China did not collapse -- and we did not expect it to -- but Beijing is spending more and more of its time attempting to keep foreign money flowing in, attempting to revamp the country's moribund state-owned enterprises (SOEs) and attempting to contain a brewing social explosion. As we said in the previous annual forecast, "As Chinese assets fail to hold up under closer scrutiny, the global fetish for the Chinese market will begin to wane." And it did.
Russia's geopolitical retreat intensified as we expected, with Russia suffering setbacks in Central Asia, the Caucasus and -- we must admit we are surprised -- Ukraine. Putin used 2004 to consolidate control at home, to the degree that he was -- as we expected -- utterly unable to head off major Western efforts to strip Moscow of its former empire.
In terms of the global economy, Stratfor also was on target. The year 2004 witnessed strong U.S. economic growth. It might not have been obvious in presidential election coverage, but the U.S. economy grew at rates roughly analogous to those of the 1990s boom. Meanwhile, Europe and Japan suffered from inconsistent and faltering growth as the year went on.
This is not to say we were dead-on about everything. The most significant strategic miss in our 2004 forecast cascaded out, negatively affecting a host of smaller, tactical forecasts. That miss was the underestimation of the Iraqi insurgency's strength. Contrary to our prediction, the insurgency is as strong -- if not stronger -- than ever.
We mistakenly forecast for 2004, "While the United States became caught in an unexpected guerrilla war spread across about one-third of the population sections of Iraq, the insurrection is small and shows little sign of spreading to the country's Shiite south or Kurdish north. Anti-American sentiments in the Sunni areas have not translated into mass insurrection. Stratfor sees the main trend line in the broader U.S.-jihadist war as moving in favor of the United States."
While at first the United States began to use its occupation as a basis for reshaping relations with the entire region, in 2004 the United States suffered mission creep and is now seemingly obsessed with the strategically pointless goal of turning Iraq into a developed democracy.
A mop-up operation turned into a full blown anti-guerrilla campaign in which the ebb and flow of Iraqi domestic political events have captured the full attention of top-rung U.S. policymakers. In this situation, Washington has been unable to sufficiently press Syria and Iran to move against al Qaeda. This, in turn, has delayed the expected emergence of a de facto U.S.-Iranian partnership. Only Saudi Arabia is moving against al Qaeda with a vigor Washington finds sufficient.
By extension, U.S. attention remained so focused on Iraq that our prediction of major U.S. military efforts against al Qaeda forces in northwest Pakistan has not come to pass -- yet. In short, the fighting U.S. Secretary of Defense Donald Rumsfeld famously -- and erroneously -- referred to as mopping up some "dead enders" has expanded enough to hobble U.S. efforts in the war beyond Iraq. Washington, while trying to convince the world that Iraq was (accurately) a part of the war on terrorism, somehow got muddled into actually acting like Iraq was the entire war against militant Islam -- not simply a single battle in a much wider war.
The trends on the above issues all balance on Iraq, which in turn balances on Washington's choice. Should the United States choose to declare victory and simply base out of Iraq instead of reforging it, everything else -- an Iranian partnership, the death of al Qaeda in Pakistan, the co-opting of the Syrian regime -- can still be achieved. In short, we have not yet been proven wrong on the subsequent developments -- merely premature. (We were flat wrong, however, in missing the strength of the insurgency.) However, should Washington choose to continue trying to make Iraq into a Western-style democracy, the entire U.S. effort against al Qaeda and Islamist militants might fail.
However, we might have been incorrect -- as opposed to premature -- on another topic.
We projected that 2004 would be the year in which Georgia would disintegrate under Russian pressure. Unique among all former Soviet republics, Georgia is under partial occupation of Russian peacekeepers and unwillingly hosts two Russian military bases. Should Moscow choose, it easily could snap Georgia apart.
But instead of ripping the former Soviet republic up in 2004, Russia lost much influence in the country. Pro-Russian forces in a potentially secessionist region were sent packing, a new vehemently anti-Russian president came to power, and the Baku-Tbilisi-Ceyhan oil pipeline project -- which will allow Georgia to achieve economic independence -- neared completion.
It is not so bad we predicted something that did not happen, but our basic understanding of Russia itself might be flawed. Stratfor, after all, expected Georgia to break apart not just in 2004, but also in 2003, 2002, 2001 and 2000. It is even in our 1995 and 2000 decade forecasts.
Georgia is a miniscule issue in the grand scheme of things, but for cultural, geographical and security reasons, it is critically important to Moscow. Its continued existence as a pro-Western state is a grand testament to Russia's military, economic, cultural and political weakness.
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