Free Preview of Members-Only Content
To view the requested intelligence, you must be a Stratfor.com member.
In 2006, the U.S.-jihadist war appeared to reduce itself to the scope of Iraq and to be transformed into a U.S.-Iranian confrontation. Hopes of a political settlement blew apart in the middle of the year, focusing global attention on the outcome in Iraq. But, contrary to the self-indulgent myth, appearances are not reality. The reality is that Iraq is not synonymous with the war, and the U.S.-jihadist war is not the most important thing going on in the world.
In 2006, the Russians began aggressively transforming the face of Eurasia, moving to reclaim the sphere of influence they lost in the 1990s. And China started to deal with its severe financial problems -- chiefly, by avoiding the consequences. It let the economy roar ahead, failing to bring it under control -- and thereby buying time while it increased the power of the Communist Party and the security apparatus, making sure that whatever fallout there is will not endanger the regime. In 2007, Russia and China certainly will rank as least as high in importance as the U.S. conflicts in the Muslim world. Indeed, these developments will force the United States to reconsider just how many resources it can afford to devote to the jihadist war when faced with an increasingly dangerous world filled with great powers, if not superpowers.
The year 2006 ended with U.S. President George W. Bush trying to recoup in Iraq. With the Iranians blocking the emergence of a coalition government in Baghdad, it became clear that the Iranians expected the United States to fail in Iraq. Indeed, following the U.S. elections in November, most reasonable people expected the United States to begin withdrawing forces. If that were the case, the United States would have no ability to influence events in Iraq. Bush chose to confound expectations by actually increasing the number of troops. The term "surge" is a misnomer. Still, it was not what was expected, and Bush's hope is that this strategy will cause all parties to the war to reconsider their comfortable assumptions about the United States in Iraq.
In 2007, we will see whether the strategy succeeds. The fact is that the United States cannot simply withdraw forces from Iraq, as that would leave Iran the dominant power in the region. That is an unacceptable outcome for the United States, and for Saudi Arabia and other Persian Gulf states. However, an increase of about 20,000 troops will not provide the resources needed for a military solution. At the same time, the Iranians are risking much too. If they overplay their hand, they know that the United States has both resources and limits. The United States is blocking Iranian ambitions as much as Iran is blocking American ambitions. As 2007 unfolds, this will open new possibilities for political arrangements. We would not be surprised to see some moves, however tentative, toward a political settlement in 2007. This war will not end in victory for anyone. That is the basis of all negotiations.
This will raise the broader question of al Qaeda. The situation in Afghanistan has deteriorated dramatically. As we have always argued, the Taliban retreated from the cities, but they never were defeated. Now they are back. The Soviets failed to defeat the Afghans with 300,000 troops and an endless supply of ruthlessness. The United States and its allies will not succeed with a small fraction of that number. The war against jihadists has now spread to Somalia and elsewhere. Iraq is not the whole of the war by any means, and in 2007 we expect to be hearing a great deal more about problems -- military and otherwise -- in the rest of the Muslim world, from the Atlantic to the Pacific.
Meanwhile, the weakness of the Bush administration clearly is not ending. Bush seems to be acting decisively, until one considers how small his room for maneuver actually is. These things happen periodically in the United States. Presidents Nixon, Johnson, Truman -- all ended their years in office unable to wield power. The United States always recovers from this. Nevertheless, such cycles in the presidency create opportunities for other powers to act. Whenever the world's leading power moves toward political paralysis, others become much more aggressive. We see this and will continue to see this in places from Venezuela to Asia. But the most important actions will be taken by the great powers, Russia and China.
Russia has clearly reasserted itself. The state is now the center of both Russian society and economy. Russia now clearly intends to return to being the center around which all former Soviet states revolve. Moscow has discovered, not surprisingly, that energy and other natural resources provide it with a tremendous lever in the region. That, plus the ubiquitous Russian intelligence service, allows the Russians to shape the region. At the moment, given U.S. preoccupations, the response of the Americans to the Russian resurgence has not been substantial. The Russians would not be deterred anyway; for them, this is a matter of fundamental national interests. But they also need not be concerned: The United States has neither the appetite nor bandwidth for resistance.
We expect the Russians to continue to step up their regional assertiveness through the coming year. We already have seen crises all around the Russian periphery, and we expect to see more. At a certain point, the Russian desire to dominate the former Soviet sphere will clash substantially with U.S. and other interests, including those of the Chinese. The Russians are not foolhardy, but they are feeling their strength. The way business is conducted in Russia has changed dramatically in the last couple of years: Who you do business with and how you do it has changed. Now, those changes will be extended to the region. The Russians do not intend to exclude Western economic interests from their sphere, but they do intend to make certain that those economic interests behave in ways that suit Russian national interest.
The Russians will not be solely concerned with what they call their near abroad. They are masters of leverage, and they know the United States is bogged down in Iraq and the Muslim world. They have made it clear to the Americans that it cannot be assumed that Russia will simply support the U.S. position on international issues. Moscow's position on Iran and Syria has been unacceptable to the United States. But then, Washington's position on Ukraine and Georgia has been unacceptable to the Russians. The Russians will continue to exacerbate problems for the United States in the Muslim world. They want to limit American power, and they will use such means to do so.
The Chinese are looking inward primarily. Their problem is internal, with a huge overhanging portfolio of nonperforming and troubled loans. A conservative estimate is that bad loans in China equal about 40 percent of gross domestic product. A more reasonable estimate is about 60 percent. These numbers closely resemble those of Japan in 1990 and tower over those of South Korea or Taiwan in 1996. The Chinese have huge currency reserves -- but then so did Japan, South Korea and Taiwan. Those reserves historically have not stabilized Asian banking systems when the consequences of undisciplined lending come home to roost. Chinese enterprises have used exports -- as did Japan and South Korea and Taiwan -- to maintain cash flow to pay loans. But surging profitless exports merely exacerbates the problem. The Chinese government tried to stop the runaway train in 2006; it failed to do so. Westerners have again confused high growth rates with economic health, as they did with Japan and East Asia. But where rates of return on capital are extremely low or even negative, high growth rates are a symptom of disease.
China's financial system already has changed dramatically from the way it was a few years ago. Internal lending and financing patterns have shifted, and foreign direct investment -- excluding money being recycled by the Chinese -- has declined substantially. Many deals that were launched with high expectations five years ago are facing substantial problems or failure. But the most important changes in China can be seen in their politics. The Communist Party chief in Shanghai and hundreds of his allies have been arrested for corruption. Incidents of resistance to land seizures have increased, bringing with them violence and arrests. The Party has reasserted itself as the master of the state, and the Chinese security services have increased their intrusiveness and vigilance. In China, putting off the reckoning as long as possible and controlling the social and political consequences as efficiently as possible are the orders of the day. Beijing is trying to regain control of the economy -- but it is more likely to do so through political power than through economic processes.
For Westerners, the question on China is, when will it crash? For the Chinese, the question is, how do you save the Party apparatus in the face of enormous economic and social stress? It should be recalled that Japan did not just fall apart one day. It experienced an enormous growth surge, followed by a managed decline of growth in which the pain was distributed economically. For China, the problem is the failure to slow growth. This failure has told the leadership that they need to increase the power of the state, and of the Party over the state. In a hundred ways, that is happening.
At the same time, China is becoming more insecure about its geopolitical position. Issues ranging from trade disputes to Taiwan are being exacerbated by the insecurity that clearly is being felt by Beijing. The regime sees the United States as a threat to its security over the long term, and is taking steps to assert itself against the United States. China's lasers hit U.S. satellites last year as a demonstration of prowess, and a Chinese submarine penetrated the perimeter of a U.S. carrier battle group. China is not about to undertake military adventures in 2007, but it also is not prepared to be a passive onlooker in the Pacific. There will be more friction.
The United States, Russia and China are the active great powers. The Europeans and Japan remain largely passive and reactive. They will not be shaping the global environment in 2007. Latin America will churn and shift, but there is no decisive event coming there. Africa remains what it has been. Thus, 2007 will be a year for great powers -- and for that matter, for those who would challenge great powers, particularly the United States.
Middle East: Pivoting on Developments Between Washington and Tehran
Our 2006 forecast said that the United States would succeed in creating a political solution in Baghdad that would allow for a drawdown in the Sunni insurgency and the implementation of a U.S. exit strategy from Iraq. For much of the year, this forecast held true: In June 2006, Abu Musab al-Zarqawi was killed in an airstrike followed by the complete formation of the Iraqi government and an announcement by the United States that it would reduce its force in Iraq by two brigades. Al-Zarqawi's death signaled a commitment from the Sunni bloc to the political process, and it was then up to the Shiite bloc to reciprocate.
However, we made a critical error in reading Iran's intentions at this point. The Iranians saw an opportunity to use their militant and political assets in Iraq to delay a political resolution through a major escalation in Sunni-Shiite sectarian violence. As a result, the United States was buried deeper in Iraq, and Iran was able to strengthen its negotiating position substantially. The Iranian strategy involved activating Hezbollah, which manifested in the summer war between Hezbollah and Israel that left Israel politically and militarily paralyzed. Contrary to our prediction that the general trend for the Middle East would be toward political accommodation, the region witnessed a number of flare-ups that were largely attributed to the Iranian calculus in consolidating its gains in Iraq.
We were correct, however, in forecasting that the Iranian nuclear issue would make its way to the U.N. Security Council, but no substantive punitive measures would be taken against Iran. In the Israeli-Palestinian arena, we correctly forecast that Hamas would emerge as a major player on the Palestinian political scene in the wake of the parliamentary elections in January, and that this would lead to major internal upheaval within the Palestinian territories. However, despite the gains it made in the elections, Hamas was unable to assume control of the security forces as we anticipated. We were right in saying that the Kadima Party in Israel would win the March elections and a center-left coalition would emerge, but would not be able to make significant headway toward unilateral disengagement from the Palestinian territories.
We also anticipated that Syrian President Bashar al Assad would be able to keep his regime intact despite the blowback incurred from the assassination of former Lebanese Prime Minister Rafik al-Hariri, and that fledgling militant Islamist movements in Lebanon would make their presence known in the Levant, but would not be able to ignite sustainable insurgencies. Regarding the al Qaeda movement, we accurately said the group would further devolve into local insurgencies, though the group did not end up losing its grip on Iraq as we anticipated.
The U.S.-Iranian standoff over the fate of Iraq will have a profound impact on the course of geopolitical events in 2007. After the 2003 U.S. invasion of Iraq, Iran seized the opportunity to assert itself as the regional kingmaker while the United States became increasingly paralyzed in Iraq. The United States now finds itself at a critical juncture: It no longer can afford to stay the course in Iraq and dedicate U.S. troops to an unattainable mission of securing the country solely through military force. As advocated by the Baker-Hamilton report, the time has come for the United States and Iran to stop giving each other the silent treatment and work toward a comprehensive settlement for Iraq.
But the United States is still far from its desired negotiating position, and thus will continue to shy away from the Baker-Hamilton report's recommendations until it can level the playing field against Iran. Before Washington moves forward on the diplomatic front, it will need to disprove the perception that the United States has been permanently marginalized in Iraq and ultimately will have to withdraw its forces -- something that would leave Iran to pick up the pieces and project Shiite influence into the heart of the Arab world. This perception of marginalization is what has driven heightening Sunni concerns that United States no longer will be the security guarantor against an empowered Shiite bloc, led by Iran.
To shatter these expectations and demonstrate that the United States is still very much in the game, U.S. President George W. Bush announced Jan. 10 a strategy to "surge" U.S. troops in Iraq. The increase will total 21,500 troops, with a peak of 17,500 in Baghdad and another 4,000 in Anbar province. Ultimately, this looks unlikely even to bring the total level of U.S. forces to their peak strength of 160,000 -- the number of troops that were in Iraq in November and December 2005, in the buildup to the general elections Dec. 15. It is likely to be accompanied by a shift in tactics to focus more specifically on counterinsurgency operations.
The forces will certainly be useful -- assisting with security inside Baghdad and leaving units that would otherwise be shifted to the capital available to confront issues in their respective areas of responsibility. However, in and of itself, this new deployment will be insufficient to turn the tide in Iraq. Operation Together Forward -- the failed attempt after Abu Musab al-Zarqawi's death to use a small surge in troop levels in Baghdad to impose security there -- is a case in point. Together Forward was essentially the U.S. military's last, best effort to secure Baghdad with the existing force structure.
Baghdad remains the key. Without stability there, there can be no Iraqi state. But the proposed surge of 21,500 troops -- without a new, concerted diplomatic effort -- is unlikely to succeed in effecting a political resolution in Baghdad.
However, there is a key psychological element to this strategy. The United States will spend the coming months taking an aggressive stance against Iranian operations in Iraq, including additional raids on Iranian diplomatic offices and arrests of Iranian officials in the country who are suspected of orchestrating attacks against U.S. and Iraqi forces. The U.S. military will be posturing to dispel the Iranian perception that the battleground will remain within Iraq's borders. The United States could also step up covert efforts to ramp up the militant activities of Iran's indigenous separatist groups, such as the Ahvazi Arabs in the oil-rich province of Khuzestan in western Iran. Coinciding with U.S. moves, Israel will accelerate its own psychological warfare campaign, using a variety of leaks and denials to heavily publicize Israeli military plans to strike Iranian nuclear sites. By upping the ante against Iran, the United States is placing a critical bet that the Iranians will reconsider their Iraq strategy and come to the negotiating table rather than risk a serious miscalculation.
To go along with the troop surge, the United States will focus on rearranging the Iraqi Cabinet to try to create a stronger, more functional government in Baghdad. This will involve sidelining allies of Shiite rebel leader Muqtada al-Sadr and bringing in a stronger Sunni presence, which will undoubtedly be a complicated and messy affair. Iraqi Prime Minister Nouri al-Maliki also could resign in as little as four months, triggering a struggle for power and a substantial flare-up in intra-Shiite frictions over his replacement. By the year's end, Iraq's largest and most influential Shiite party, the Supreme Council of Islamic Revolution in Iraq, might be better able to solidify its position in the government.
Iraq is unlikely to split up into federal zones in the coming year, but neither will it behave as a coherent state entity. Violence will escalate on all sides: Shiite, Sunni, jihadist and even Kurdish, with the Sunni-Kurdish fault line in northern Iraq becoming active toward the end of the year, as the Kirkuk referendum issue approaches.
For its part, Iran has been keen to bring the Americans to the negotiating table on its terms. It wields the ability, through militants, to manipulate the security situation in Iraq and thus to keep an effective government from taking power in Baghdad, but it lacks the means to impose a government of its own creation there. Tehran will focus this year on increasing the political and military costs of the United States remaining in Iraq -- by lending more support to militants there, including Shiite gunmen and segments of the Sunni insurgency -- but ultimately, given the limitations and uncertainties on both sides, it is possible that a political settlement of sorts, however weak and tenuous, will be forged in 2007.
Iran will also use this year to push its nuclear agenda forward. The U.N. Security Council will be unable to pressure Tehran into curtailing its nuclear program. Iran will use the U.S. distraction in Iraq to move closer to its objective of becoming a full-fledged nuclear power, which will in turn strengthen Tehran's bargaining position on Iraq and expand its influence in the region.
The United States and Israel are militarily occupied by Iraq and Hezbollah, respectively. The logic behind Iran's strategy is to use this window of opportunity to advance its nuclear program to the point where a nuclear Iran will have to be accepted as part of any deal the United States wants on Iraq.
All the pieces might appear to be falling into place for Iran, but a major shake-up in the Iranian regime is likely to happen this year, and it could upset Iran's calculus in dealing with the United States on Iraq. Iranian Supreme Leader Ayatollah Ali Khamenei is terminally ill with cancer and could die this year. His death will send a shockwave through the Iranian public, which will come to doubt the Iranian government's ability to navigate the country through this critical period. There will not, however, be a complete breakdown of the Iranian political system. There are mechanisms in place to ensure the leadership transition goes relatively smoothly.
| Stratfor Members, please log in at the top left hand corner |
