NAFTA’s Witching Hour

We’re about halfway through the NAFTA (North American Free Trade Agreement) talks and things…have taken a turn for the worse.

Let me back up a bit. Wherever you land on the issue of trade and U.S. engagement with the broader world, there are a few key truths:

For the United States, trade has only rarely been about trade. It has instead been about security. The Americans created the global trade order at the end of WWII to bribe up an alliance to fight the Cold War. The Americans subsidized their allies, granting access to the U.S. market and safe sea lanes, and in exchange those allies gave the Americans security deference to battle the Soviets the American way.

The Cold War is long gone, but the Americans never adjusted their strategy, resulting in a steady bleed of political support for a security policy that is now three decades out of date. One result, among many, is a broadscale shift on the American Left (Bernie Sanders and Elizabeth Warren) and Right (Donald Trump and Ted Cruz) towards populism, broadly discrediting the very concept of free trade. It’s understandable: why continue subsidizing the allies if the war is long since over?

So that’s the big picture. Let’s look at some of the specifics:

Most of the United States’ Eastern Hemispheric trade is wrapped up in rules run by the (U.S.-designed) World Trade Organization, which among other things provides the legal and structural baselines for trade with the European Union and China. Other pieces of the global trade portfolio are based on bilateral deals with key allies – think South Korea, Australia, Morocco, Jordan, Israel, Singapore. For the most part, economic rationale was not the driving force in any of this. The deals designed to cement strategic alliances, either as incentives to cooperate (the WTO) or as a reward for consistently loyal behavior (Australia).

With the Americans changing their internal weightings on the trade-vs-security question, all such deals are subject to re-evaluation. Since none of these deals were made with economic linkages in mind, the U.S. government never prioritized making such linkages. In percentage terms, the United States remains one of the least internationally-wired economies in the world, so the economic consequences to the United States for walking away from those deals are somewhat limited.

NAFTA has understandably gotten caught up in the anti-trade tirades, but NAFTA is notlike America’s other trade deals. It was never part of the global trade-for-security trade-off. Its primary purpose was to deepen and broaden American economic penetration throughout the North American continent. Nearly unique among America’s trade deals, NAFTA wasn’t about security. It was actually about trade. Today, roughly 30% of America’s entire trade portfolio is within NAFTA.

The result has been a complex entanglement of the economic and political fortunes of the three signatories. Manufacturing supply chains now crisscross the two international borders at multiple points in multiple industries with the deepest integration occurring in automotive, aerospace, electronics and agriculture. Regardless of what you think of the balance of such integration or how well/badly NAFTA was negotiated by the George (no W) Bush administration, an outright severing of such links would have horrific results.

  • The United States and Canada would suffer a deep recession. Texas, the state most dependent upon trade with Mexico, would be worst hit.
  • Mexico would suffer a flat-out depression. The United States is the end-destination for four-fifths of its exports.
  • Economic calamity would uproot millions of Mexicans from their jobs. One of the great NAFTA success stories is the creation of a Mexican middle class where there didn’t used to be one. Throwing these people back into destitution would trigger the greatest migration surge in Mexican history, and there is really only one place for them to go: north.
  • Ending NAFTA would enflame the North American drug war. Part of the reason why the Mexican cartels have expanded so slowly (feel free to read that again) is that NAFTA has bolstered the living standards of tens of millions of Mexicans. Deny those Mexicans the ability to earn a living by trading with the United States and Canada and the cartels will find their recruitment and bribing operations far easier. And not just on the south side of the border…

It isn’t that a NAFTA renegotiation doesn’t makes sense, it does; NAFTA is a quarter-century old. When it was implemented the Internet didn’t even exist. An update is perfectly logical. Necessary even. And since the United States is far better at all things tech-related than either Canada or Mexico, a meaningful update would certainly address things like the trade imbalance that so impassions so many of NAFTA’s US-based detractors.

But simply uprooting NAFTA would be a catastrophic mistake for the American economy. Add in Texas’ reputation as an anything-but-liberal state with 38 electoral votes, and I’ve always assumed that in time cooler heads would prevail and that NAFTA was never in any real danger.

But four things changed recently that have made me far more sanguine.

First, in Mexico the drug war is turning hot at exactly the wrong time. Violence is rising in areas very visible to the Americans, most notably tourist areas such as Cabo and Puerto Vallarta, and the border towns of Tijuana and Juarez. I expect the violence to surge in a few months in what is a quintessential example of bad timing: just as the NAFTA renegotiations are pegged to be completed, just as the new NAFTA documents will be presented to Congress for ratification, and just as the United States’ off-year Congressional elections campaigns kick off.

Populists of all stripes will be railing against free trade in general and Mexico in specific, just as record levels of gratuitous gunfire exchanges, beheadings and kidnappings just across the border populate local newscasts in San Diego, El Paso and Laredo. It will seem very attractive to many Americans to simply walk away from NAFTA altogether.

Second, Trump’s general anti-Mexican mood has put most Mexicans into a general anti-American mood. The United States is hardly the only country with inconvenient elections in 2018; Mexico’s presidential campaign is already heating up, and the full vote occurs next July. While calling an election this far out is silly, a bugaboo from Mexico’s past – one Andrés Manuel López Obrador – is polling disturbingly strongly. López Obrador is in essence the Mexican equivalent of a Trump-Sanders mashup when it comes to trade policy and bilateral relations. A López Obrador election wouldn’t simply crash NAFTA on the Mexican side of the border, López Obrador combined with Trump would sour every piece of the American-Mexican relationship. Everything from cooperation on the drug war to water rights would turn from today’s cold cooperation to pathological hostility.

Third, never forget that while Mexico and Canada are both eager to work with the United States, they view each other as the primary competitors for access to American markets and investment. That competition may well be getting more cut-throat than usual.

There are a pair of issues the Canadians have highlighted as make-or-break: tribunals and government contracting.

NAFTA’s tribunal clause manages disputes within the treaty’s competencies. Should a firm in one country feel it is being treated unfairly, it calls for a bilateral panel to adjudicate the dispute rather than suing in the court of the offending party. This keeps disputes out of often-slow and clogged courts, prevents countries from enacting protectionist measures that can fall back under the protection of their home legal system, and in general speeds and ensures the fairness of the dispute resolution. The government contracting clause is similarly straightforward: it codifies that governments cannot discriminate against non-national companies for contracts.

The Trump administration has very strong opinions on both topics: it wants the tribunals to go and it wants to be able to preference domestic companies for domestic government work (The White House calls the latter the “Buy American” provision.)

The Canadians have diametrically opposite positions. For them, the tribunal issue is a red line – both now and during the initial negotiations. They know that should disputes with the United States be remanded to U.S. courts, they’d either not have a chance or couldn’t stand the years-long appellate process. (Brian Mulroney, the Canadian prime minister during the original NAFTA negotiations, nearly closed off talks altogether over the tribunal issue.) And of course the Canadians would like for their firms to be able to keep taking cracks at servicing the U.S. government.

Which is why Canadian Foreign Minister Cristina Freeland has been playing hardball on both issues, to the point that by most reports the Mexicans are simply standing to the side while the Anglos slug it out. And by some reports it is the Canadians – not the Americans – who have stalled the talks altogether.

Which makes a sort of backwards sort of sense. While NAFTA is the issue for Mexico’s modern political and economic survival, for Canada the issue isn’t so clear. Equal access for both Canadian and Mexican manufactures to the U.S. market has cratered Canadian competitiveness; Mexican manufacturers have moved up the value-added chain quickly this past decade, while Canadian manufacturing – particularly in the Toronto region – has more or less stalled. Add in Mexico’s cheaper wage structure, and NAFTA is far more of a wash economically for the Canadians than it is for the Americans.

Yet, Canada has a separate free trade deal with the United States that pre-dates NAFTA. If NAFTA were to fail, Canada doesn’t simply have a fall-back, a tanked NAFTA would boost Canada in American markets at Mexico’s expense.

Cold. Brutal. Arguably very unCanadian. But damnably effective.

Fourth, back in Washington, NAFTA has lost its loudest cheerleader. There were never a lot of free-traders on the Trump Team, most of what few there were have already left the administration. The most prominent of the Remainers is Commerce Secretary Wilbur Ross.

The Commerce Department tends to view NAFTA from a data point of view, not a nationalistic one. A few weeks ago, Ross warned that NAFTA has not really deepened economic linkages among the NAFTA signatories, but instead has encouraged countries beyond North America to ship parts to Mexico and Canada, get a few tweaks made so that they qualify for the Made-in-NAFTA stamp, and then get shipped on to the United States. He argues that in all actuality, NAFTA has squeezed out American-made components not in favor of Mexican or Canadian components, but instead Chinese and German components. (His op-ed is here.)

If there is any truth to Ross’s concerns, then forget gut-nationalism and rabid-populism, the economic case for NAFTA suddenly looks a lot weaker. And even if all the data Ross cited is cherrypicked and/or questionable – and my left eyebrow is fully arched – anything other than full-throated praise from the Commerce Department lands NAFTA with a pretty damning problem.

Ross’s solution is to sharply update NAFTA’s rules-of-origin criteria, and hardwire a 5-year sunset provision into the agreement, forcing all three players to revisit and update NAFTA about once a president. It would be laborious, contentious and make NAFTA a political issue in all three countries All. The. Freaking. Time.

But if the emerging American position on trade is to ensure it doesn’t undermine local economies, and if the future of trade is that it can only occur with strong public support, that may well be the only way forward.

Mexico’s Next Drug War

Urban violence has been a stable feature of the news and politics mash-up of the past year or so. Whether it’s the murder rate in Chicago, or the threat of immigrants and the call for a southern border wall, or the civilizational threat of Antifa, it seems like there’s a lot out there to be spooked about.

Which makes it kind of odd that we’ve heard so little about Mexican drug violence as of late. The issue would play into hard right talking points regarding immigration, law enforcement, and The Wall™.

But, while there is certainly a lot of violence throughout Mexico still, things have quieted. The decline in violence since its peak in 2011 has been substantial and real – but it is not lasting. Violence is already very much on the rise again and Mexico is on the verge of a much more violent chapter in its drug war.

The story of these fluctuations in violence can all be told through the evolution of the Sinaloa cartel, by far the most active drug trafficking organization (DTO) in terms of smuggling and transporting activities within the United States. The cartel owes it success to a few key pillars:

  • Geography: Sinaloa has control over the Golden Triangle, a region in northwestern Mexico between the cities of Chihuahua to the north, Sinaloa on the Pacific coast, and Durango near central Mexico. The golden triangle is one of the few places in Mexico with a climate conducive to growing drug crops on a large scale. While that would be important income stream regardless, the real benefit is that all Mexico’s other DTOs are largely dependent upon transiting drugs from South America. Should something interrupt those supply chains, only the Sinaloa maintains independent sourcing. Meanwhile, the Sinaloa’s position on the coast also gives Sinaloa access to imported chemicals and other ingredients in producing synthetic drugs, which have become extremely important to cartel profits in recent years. In fact, the Sinaloa is in many ways a pioneer in pushing synthetics into the U.S. market.
  • Timing: The United States has been surprisingly successful lately in its anti-drug programs. Large-scale, domestic production of meth has all been shut down since a 2005 initiative against precursors. Marijuana began a path to legalization that has shifted a lot of production to the United States and out of the hands of cartels. Legal opioids were attacked head on, shutting down pill-mills and placing heavy restrictions on prescriptions. But this success has been ironically self-defeating. The Sinaloa was quick to take up meth production to fill the gap of lost U.S. production. And while legalization of marijuana certainly hurt the cartels, cutting into the profits of some DTOs by nearly half, it only drove Sinaloa to refocus its energies on local production of heroin.

  • Opioids: As a result, cheap heroin has flooded the markets to win back market share even as people in need of pain relief (or a fix) are willing to go to extreme measures to get now-less plentiful opioids. Complicating the picture, the Sinaloa has pioneered putting their heroin and synthetics into pill form and marketing it as counterfeit opioids, earning them a big new market across Middle America. Such heroin/opioid pills are a big reason why U.S. overdose deaths have tripled in recent years.
  • Structure and Tactics: The Mexican government began its crackdown on cartels in earnest in the mid-2000s and it has been broadly successful in carrying out a kingpin strategy. But as other cartels found their leaders picked off and their cartels fractured, the Sinaloa Cartel was able to continue uninterrupted due to its cellular structure and strategic use of intelligence. The head of the Sinaloa Cartel, known as El Chapo, was no street corner dealer. He excelled at managing the various factions within his cartel, encouraging them to experiment with new drugs (fentanyl) and new delivery mechanisms (heroin in “opioid” pill form), while discouraging them from engaging in petty crime – better to keep the Mexican government and Mexican population agnostic about Sinaloa activities. He was not afraid to play government forces off his rivals, supplying the government with both strategic and tactical intelligence on the other DTOs. And then there is simple mechanics: Mexico’s DTOs have proven so numerous and tenacious that Mexico City couldn’t possibly fight them all simultaneously. Why fight the Sinaloa if the Sinaloa is making it easier to fight the rest?
  • Border connections: By 2008, the Sinaloa Cartel was one of the most important DTOs in Mexico, but they didn’t directly control any of the border plazas. Plazas are not the quant city squares you might be thinking of, but key drug trafficking marketplaces or smuggling points. So the Sinaloa embarked on a campaign against the smaller but still powerful cartels who controlled the plazas of interest along the Northern border, most notably the Tijuana and Juarez cartels. What proceeded was the most violent chapter of the drug war to date as the Sinaloa literally fought in the streets to forcibly assimilate these cartels. It was during this Sinaloa consolidation effort that the city Juarez became the most violent city in the world.

And then, suddenly, the violent murder rate fell just as quickly as it rose.

As the other cartels faced inner-turmoil and a quickly changing market up north, El Chapo’s Sinaloa Cartel thrived and expanded as he gained a reputation for cutting down his allies. By 2014, Sinaloa was the major wholesaler in most American cities and Mexico had come under what came to be known as Pax-Sinaloa over a huge swath of Mexican territory. It wasn’t exactly rainbows and unicorns, but compared to the incredible violence of 2011 and 2012, Mexico was at peace. Juarez became safer than many large U.S. cities because the drugs could now flow without hinderance through the territory of a single (huge) cartel.

And this is the key point: the violence stops when someone wins.

The U.S.-Mexican Border

But that victory was short lived. Success in the plazas meant the Sinaloa could easily expand north of the border. By 2015 the Sinaloa was not just the top DTO in the world, but also the top organized crime group in the United States. El Chapo and the Sinaloa quickly became priority number one in the U.S. as opioid deaths rose to epidemic levels. El Chapo still had significant protection in Mexico, but he underestimated American interest in his removal. By 2016 El Chapo had been arrested (and escaped and re-arrested) and extradited to the United States. Bereft their leader’s sophisticated management, the Sinaloa immediately started to break down.

Which brings us to today. As the Sinaloa slides into internecine warfare, other cartels seek pieces of the Sinaloa’s empire; violence is again on the rise. The most important of these was a one-time partner of the Sinaloa known as the Jalisco New Generation Cartel. Based in the southwest, the Jalisco also has important geographic advantages, primarily in their control of the two most important Pacific ports as well as the synthetic drug capital of Mexico, Guadalajara. Their leader – El Mencho – lacks El Chapo’s diplomatic and personal touches. Instead he is more paramilitarily-minded, and more than willing and able to bring heavy equipment and advanced tactics to intimidate and/or eradicate his foes. He has formed alliances with several of the groups that El Chapo once sought to cut down and is continuing to take advantage of shifts in the American drug market. The Jalisco is far more violent than the Sinaloa ever was… and the Sinaloa were f’ing brutal.

The Jalisco started by taking advantage of the collapse of the Gulf Cartel in Mexico’s east, exacerbating the violence between the Gulf’s remnants and that of the Gulf’s former enforcers, the Zetas. Of late the Jalisco has barged into core Sinaloa territory, taking them on throughout the Baja Peninsula (ergo the Cabo violence) and especially the Tijuana border plaza. They are just now starting in on Chihuahua and the Juarez plaza. And within a year – unless the incredibly reclusive El Mencho falls to the kingpin strategy – the Jalisco will likely be in Nuevo Laredo as well.

That would put all the meaningful plazas in the hands of a single group that is arguably the most violent and organized major cartel yet. Even in the unlikely event that the violence does not spill over into the American side of the border, it will be very visible to Americans at a time when American-Mexican relations are already at a generational low.

Just in time for the NAFTA renegotiations to reach a critical point…

The Next Iraq War

Trouble is (again) brewing in Iraq.

The Middle East is a wild and wacky place. The core issue is geographic: basic resources – especially water – are in short supply and resource competition breeds violence. Cultural and sectarian differences are what outsiders are often aware of, and for good reason. Out-of-region powers ranging from the British to French to Russians to Americans have been playing Persians and Turks and Arabs of various flavors against one another for centuries. First to get beneficial trading relationships with the Eastern world (think spices and silk), then to keep potentially hostile forces locked up in the sand box, and finally to get preferential access to the bounty of oil and gas resources in the area.

The Middle East boasts five major civilizational zones, four of which we’ll examine here. What sets them apart from the wastes that dominate the broader region is the simple fact that they have water. It is a basic concept, but it bears stating plainly: water enables agriculture enables populations enables cities enables education enables technology enables a military. Without water, it is damnably hard to develop into, well, anything.

  1. Anatolia (aka Asia Minor, aka Turkey). This first zone gets both the most and the most reliable rainfall. The real gem is western Anatolia – not only is this zone (relatively) wet, its mountains low, and its valleys broad, it directly abuts the Sea of Marmara: a warm temperate zone with fertile lands and excellent trade opportunities, making it among the world’s richest and most advanced regions going back to antiquity. Move further east in Asia Minor, however, and the land rises and sharpens. The Marmara region can – and often has – projected power deep into the Middle East, but it must always first negotiate its own internal rugged zones before venturing out. For the past half millennia, Anatolia has been home to the Turks.
  2. Persia (aka Iran). The second-most powerful regional geography are the Persian Highlands. Geographically an extension of eastern Anatolia, the lands are riven by dozens of minor mountain chains generating hundreds of tiny valleys with dozens of distinct cultural and linguistic communities. Like the Turks, the Persians can only venture out when they have their internal house in order. They’re getting close. It has taken the largest group – the Persians – the better part of recorded history to consolidate the messy region under their control, in part by promulgating a multi-ethnic/religious, semi-nationalist identity we know today as “Iranian”.
  3. The Levant (aka the Eastern Mediterranean shore). Whereas Persia is shot through with micro-climates and hundreds of separate identities, the Levant’s mountains are lower, its valleys bigger, and its flat lands more contiguous, meaning it has only generated a score of so peoples. It is also somewhat hived off from the other areas by mix of deserts and mountains, allowing the bigger fish in this smaller pond to carve out their own worlds. The Jews proved capable of re-creating their ancient homeland, albeit at the cost of the Palestinians who had been living there since the Old Testament was completed. A more motley crew involving Sunni, Shia, Maronite Christians and others has attempted with some success to spackle together Lebanon. The Alawites of the northern Levantine coast partnered with the Shia and Christians of the mountains to dominate the interior cities of Homs, Hama, Aleppo and Damascus to run Syria – a partnership that has yet to breakdown despite the agonizing civil war.
  4. Mesopotamia (aka Iraq). In the final area it hardly ever rains at all, but it still has water courtesy of the Tigris and Euphrates Rivers. The saddle of desert land separating the pair is so low that stone-age level irrigation technologies can turn it green. Unique among the four for its broad, unified flat lands, when Mesopotamia is able to rise it is able to rise very quickly (all the neighbors are constantly dealing with the agony of a difficult, rugged, arid geography while the lowlanders simply shift around some water and build roads through flat areas for a quick economic pick-me-up). As such Mesopotamia is the most likely region to launch invasions…but also the power that is the least defensible and most likely to get wrecked in a prolonged war.

Between the competing nationalities, ethnicities (map courtesy of the Gulf/2000 Project), religions, clans and factions, there just isn’t anything that most – much less all – of them can agree on. Or at least there wasn’t until about four years ago. That’s when the Islamic State popped up.

Istanbul, Turkey

Unlike Persia or the Levant where it rains or Mesopotamia where irrigation is easy, the lands in the Middle East’s middle are hard desert. The Euphrates does flow through the area, but the middle Euphrates’ banks are steeper than those in southern Iraq, so the “green zone” from the high point above one bank to the other is typically but a few miles. With so little usable land stretched across so much empty, in no era has controlling this narrow ribbon been worth the effort, particularly since desert raiders can easily punch anywhere into it.

Consequently, the regional powers simply leave what is today western Iraq and eastern Syria alone until some of the local crazies (or resource competitors, if you’d rather) cause sufficient problems that one of the regional powers feels moved to send the army in and burn everything to the ground. The Islamic State is merely the most recent manifestation of a problem that has plagued this area since the dawn of civilization.

IS owes not just its rapid rise, but its very existence, to the Middle East’s recent geopolitical disarray. Syria has been locked into a civil war and been unable to patrol, much less act decisively, in its eastern lands. Israel’s glee at watching the Syrian war continue to wreck its primary regional foe has prevented it from acting. After their World War I defeat, the Turks closed themselves off from the world and ceased participating in Middle Eastern affairs; they are out of practice. Iraq faced not only the U.S. occupation and its own civil war, but its Western-trained and -supplied army proved so incompetent that it had to be disbanded. Iran has had bigger fish to fry in Iraq – a country it is hoping to turn into a client state – and Syria – a regional ally it very nearly lost. Americans, gun-shy from their Iraqi occupational experiences, didn’t want to take the lead on another Middle Eastern war. (Incidentally, the only reason Americans care at all about IS is that a few idealistic Americans refused to believe that the local mass-murdering militant group known for enslaving or beheading any Christians they came across would target even secular American aid workers.)

But all this and more has recently changed.

Six years into the Syrian civil war, the Iranians (and Russians) have poured in resources sufficient to turn the tide in the government’s favor. Anti-government rebels in the country’s west have suffered a litany of defeats, freeing Damascus to push more resources against IS in the east. The Turks have recently consolidated their own internal political schisms and for the first time in a century, started venturing out again. Syria and Iraq are the first step on a broader…regional tour. The Iraqi army was re-mustered, re-trained and re-supplied, and during the past year it has made steady gains against IS in Fallujah, Ramadi and Mosul. American forces did a bizarre dance of advising-but-not-fighting-but-ok-sort-of-fighting-sure-really-fighting.

One functional regional power would have been enough to roll IS up given time, but three plus some international add-ons were more than enough to decimate it. At long last, IS in its Middle East “caliphate” form is rapidly deteriorating after a two-year-long staccato of steady, significant losses. Recently their “capital” at Raqqa fell, and what little remains of the institutional core of IS-prime is itself no longer a significant geopolitical threat. It has been a long, messy, bare knuckle brawl, but it is nearly over.

Tehran, Iran

Given the cast of characters we’re talking about there was never 100% unity behind how or if or when or to what extent IS needed to be crushed, but to have folks as widely divergent as Persia and Arabia, Russia and America, Israel and Syria on the same page – however briefly – is far more than a mere historical footnote.

Now, with the unifying threat the Islamic State posed largely fading into the desert, things in the Middle East are about to get a hell of a lot uglier. No longer will everyone be putting their other beefs aside to deal with the threat of IS. Now they have to deal with each other.

The next crisis will boil up out of Iraq, a country comprised of three mutually-loathing groups:

Iraq’s Arab Shi’ites make up the bulk of the population, and have for centuries. But being the majority does not work for them. Living primarily in the southeast edge of the country near Iran, their Shi’ite beliefs have placed them at odds with the Sunni Ottoman, Hashemite and Baathist leadership that have ruled Mesopotamia since the 16th century. Proximity to Iran should have had benefits, but then again being Arab subjects of a Persian empire isn’t a great position to be in. With roots in the marshy swamplands of the southern tip of Iraq, these Arabs have long been poor, but Iraq’s Shi’ite core now rests atop most of Iraq’s superfields. After the fall of Saddam and the introduction of representative democracy thanks to the United States, Iraq’s Shi’ite Arabs (with plenty of community organizing thrown in by Iran) have the numbers and oil wealth, much to the dismay of everyone around them. As much as the Iranians want to have Shi’ites running things in Baghdad, they don’t want a wealthy, ethnically Arab oil competitor on their western flank who can challenge their regional role. Iraq’s Shi’ites have grown to resent not only their typical Sunni masters, but also Iranian attempts at puppeteering Iraqi suffering to their benefit. Iran saw this coming, and has spent decades sowing infighting and competition among Iraq’s Shi’ites – and it did so expertly.

The Sunni Arabs have a long cultural pedigree, with tribal links to Saudi Arabia and especially Jordan. Bedouin tribesmen gave their support and legitimacy to the Hashemite monarchy (a branch of which still rules in Amman). Sectarian links to distant Ottoman sultans, and tribal links to Saddam gave the sectarian minorities oversized control and the lion’s share of state oil revenues (before American-led forces bombed them twice, the Sunni triangle had excellent connectivity with Baghdad, European-built highways, good hospitals and universities even as Shi’ite Iraqis were living like 14th century peasants). Unfortunately, the Sunni live along the fringe of the broad, arid expanse of Iraq’s Western Desert. Of late their fortunes have reversed: they have no oil, their sons are wooed by an alphabet soup of militant groups, and they are vehemently opposed to any subgroup – be it Shi’ites or Kurds – dismantling what they view as an inherently Arab Iraqi state or taking their share of national oil revenues… which comes from oil fields they no longer control. In addition to having fallen the furthest, the Sunni Arabs are the smallest of the three groups. They simply cannot win at either representative democracy or open warfare, so they have learned to change the game and fight irregularly, kicking over the table. Iraq’s Sunnis are the ones who ran the Baath insurgency and the local al Qaeda chapter against the Americans, and who gave birth to the Islamic State.

Iraq’s Kurds are a subgroup of a broader community stretching from Iran through Iraq and Turkey to Syria. Like most other groups in the Middle East, the Kurds are as prone to infighting as anyone else. More in fact, as they hail from not only the steppes of northeastern Syria, and highlands of Iraq, but also the riven mountain valleys of southeastern Anatolia and northwestern Iran. Simply – if not entirely accurately – put, Iraq’s Kurds are divided between pro-Turkish and Iranian camps, and Iraqi Kurds have been slow to support Syrian Kurds in their fight against IS or Turkish Kurds in their armed resistance against Ankara (with Iranian Kurds another entity entirely). Iraq’s Kurds also have something no other Kurdish group does: control over significant oil and natural gas reserves. This infuriates Iraq’s Sunni Arabs to no end for taking the money, Iraq’s Shi’ites to no end for taking de facto political control of their territory, and gives the Kurdish Regional Government in Erbil an effective bargaining chip against Baghdad. It also – so far – makes them valuable to Turkey, an oil importer.

It is the final of these three groups that perked up my attention recently. On September 25 they held an independence referendum in which some 90% of the electorate is believed to have shown up, with 93% of voters answering in the affirmative.

Pretty much everyone – including the United Nations and the United States, the two groups who have most aggressively supported Kurdish rights – have condemned the vote and called upon all parties to ignore the results.

“Why?” you might ask. And it’s not a stupid question.

The Kurds have suffered greatly at the hands of Iran, Turkey and Iraq, and their many waves of refugees haven’t exactly been welcomed in Europe with open arms despite their relatively secular approach to religion. They’ve certainly been Washington’s regional ally of choice, asking for little while supporting American efforts throughout their region with land, basing rights, tactical and strategic intelligence, and – when push has come to shove – some of the most badass fighters the region has ever produced. Of late they have done most of the heavy lifting against both the Assad regime and the Islamic State.

The problem is that the battles against IS achieved something that no other conflict in the region ever has: it gave the various factions of Kurds a singular enemy to fight, helping craft a proto-identity that might actually help the notoriously fractured ethnic group unify. And if the Kurds all agree that they are the same people, then an independence vote – regardless of obstacles – makes a lot of sense.

And that’s a problem for everyone.

It’s a problem for the Iraqi Arabs of all sectarian stripes who see Kurdish territories as theirs. It’s a problem for the Iraqi Shia who see their northern tier coming unhinged and a loss of northern oil revenues. It’s a problem for the Americans who would like nothing more than to get the hell out of the region, but who feel responsibility to their loyal Kurdish ally and would prefer to not leave them in a lurch – no matter how self-imposed that lurch is. It’s a problem for Iran and Turkey and especially Syria where local Kurdish communities have identities forged in the common anti-IS effort and who all directly border a would-be independent Iraqi Kurdistan. And it is a problem for the Iraqi Kurds, whose landlocked nature means that without the buy-in of the other regional players any independent Kurdistan would be so economically broken and dysfunctional as to make Bolivia look wildly successful.

And that’s only half the problem.

The other half is that the Islamic State was not an import – it was the noxious weed that took root in the fractures of Iraqi society. The Kurds’ push toward independence risks pushing those fractures further, and a destabilized Iraq (and yes, it can always get worse than what we see now) risks pulling its neighbors down with it. To give you an idea of just how disruptive that would be to, well, everyone in the neighborhood, the only country in the world supporting the Kurdish referendum is… Israel.

With the shiny disco ball of IS crashing down, the players of the Middle East are taking stock of each other as the lights turn back on. No longer facing a common enemy, each major player is seeking to capitalize on the weakness of their competitors. The Levant and Mesopotamia are in need of rebuilding, and Iran, Turkey, and Saudi Arabia want to limit risks while maximizing their own strategic gains in the process. Baghdad and Damascus will protest loudly during any vivisection of their territories, but the Kurds are looking to reap the rewards of fighting on the front lines against IS. Their success against the informal forces of the Islamic State has them feeling up for a fight, though the regular armies of the regional states will not be routed as quickly. Current US/NATO support belies how little overt (if any) military support the Kurds can expect in a fight against Ankara, Baghdad and Tehran, and yet the vast majority of the population is expecting Erbil to act in accordance to the referendum, and to find some dividends on the huge amount of suffering endured by Kurdish people in their frontline fight against IS.

And never forget that should the regional powers start battling an emerging Kurdistan, the no-mans-land of western Iraq and eastern Syria will once again fall off the region’s collective radar…granting yet another breed of desert militant the perfect environment to gain strength once again.

Looking Ahead

I’m in the process of my annual reset.

From time to time it is important to take a step back from the noise and splatter of the news cycle (and oh my has there been a lot of noise and splatter this year!) and take a good deep, hard look at trends old and new to see how they are strengthening, weakening, and weaving themselves into new forms.

The big three megatrends that guide my work – the American withdrawal from global management, the steepening inversion of global age demographics, and the ever-advancing shale revolution – remain my guiding stars. Shale has slowed somewhat but that’s largely irrelevant as the U.S. and Canada combined are only a rounding error away from becoming net oil exporters. The global demographic shift is right on schedule (it is far too late in the game to magic up a fresh batch of Millennials). And the American withdrawal from the global order has obviously accelerated under the ever-thoughtful, always-restrained, humble modesty of President Donald Trump.

Lurking under the rumbling tectonic plates, however, are roughly a score of significant issues that are breaking out into the open. Some of these – like the coming European crisis, the Saudis’ beef with Qatar, the breakdown of the global Left, and all things North Korean – I’ve written about. But others, still on simmer, have yet to reshape the discussion.

They’re coming, and in about a year they will be with us.

To that end I’m putting together a three-part newsletter about what everyone will be worried about next year. These are issues that will have an outsized impact not just for the United States, but the wider world that will impact regional events for a decade to come:

  1. With the Islamic State all but wrapped up, it is time for the Middle East to embark on its next – and far more violent and far reaching – military conflict.
  2. The pause in the violence of the drug war is nearly over and what comes next will have far greater implications for both Mexico and the United States.
  3. The one trade deal that the Americans made for economic, rather than strategic, reasons is in danger. The year 2018 will be when NAFTA’s future is decided one way or another.

We’ll have more, but hopefully this trio is enough to whet everyone’s appetite for what is shaping up to be an extremely active year.

It’s Time to Start Worrying About Europe (Again)

In the past yearish, the Brits have voted themselves out of the Union, Italy’s banking system has started to melt down, the Russians are on the march, the French right and left more or less dissolved, the Americans have unofficially pulled out of NATO, and now we’ve had the German general elections.

There has been hope among many that with the Trump administration removing itself from being the guarantors of the global order, that Frau Merkel would become the new leader of the free world. That hope died last night.

Merkel’s center-right Christian Democrat alliance did come in first, but both they and their coalition partners – the center-left Social Democrats – racked up their worst showings since 1949 according to official preliminary results. The pro-Soviet (not a typo) Left Party remains in Bundestag, while the neo-neo-Nazi Alternative For Germany has entered as well (its rise is partially responsible for the mainstream parties’ poor showing). With the Social Democrats refusing to consider renewing the coalition government, Merkel’s only option is an unprecedented three-way alignment with the Greens and the pro-business Free Democrats, who are nearly diametrically opposed on issues ranging from Brexit to bailouts to Ukraine to the military to NATO to the environment to refugees (i.e. every issue of note that has mattered to Germans in the past four years).

The labor required to assemble a new government out of such pieces will only be eclipsed by the labor required to maintain it.

So yes, Merkel will remain the German chancellor, but any room she had to maneuver domestically has vanished.

Then there’s the “free world” bit. What has long enabled that free world to exist is the post-WWII American security over watch which allowed countries of all sizes to escape the fear of their bigger neighbors. The Americans outlawed war among the participating members of the international system, and for the first time in world history imposed security upon the global commons so that anyone could purchase any resource from anywhere as well as export any product (most notably to the open, ravenous U.S. market). That requires a global military presence – and since the United States Navy is the only one that can patrol the oceans, there simply is no option of a replacement. Germany’s navy isn’t even one of the top five in the Baltic Sea. It isn’t regionally deployable in any meaningful sense, much less globally.

And while I personally find it mildly amusing that anyone thinks a country that is a massive net exporter can lead Europe in the first place, Merkel’s bandwidth to do so has more or less evaporated. So now the Europeans have to figure out how to manage issues as diverse as the Syrian refugee crisis, Russian encroachment onto Europe’s eastern periphery, democratic devolutions in Poland and Hungary, civilizational collapse in Greece, Turkey’s increasing belligerence, and financial collapse in Italy not just without the Brits, NATO or the Americans, but in all likelihood without all that much input from Merkel as well.

North Korea: Part III—Why I Already Worry About South Korea

In the aftermath of North Korea’s Sept 3 nuclear test, a Donald Trump Twitterstorm delivered its greatest disdain not to North Korea, but instead South Korea. Trump accused Seoul of being overly pacifist in the face of the North’s belligerence, as well as using a wide variety of measures to steal jobs from American workers. Later, piling on his own comments, Trump indicated that he was highly likely to soon withdraw completely from the United States’ free trade pact with South Korea.

Many found themselves head-scratching. The United States seems to be sliding towards a military confrontation with North Korea, and in any war scenario, coordination between the United States and South Korea would be key. As the New York Times editorial board summed it up,

“For Mr. Trump, the crisis lays bare how his trade agenda – the bedrock of his economic populist campaign in 2016 – is increasingly at odds with the security agenda he has pursued as president. It is largely a problem of Mr. Trump’s own making. Unlike several of his predecessors, who were able to press countries on trade issues while cooperating with them on security, Mr. Trump has explicitly linked the two…”

Unpacking all this – North Korea, South Korea, Trump and the relationship between trade and security – requires a few steps back.

American foreign policy since World War II has been based on a simple premise: the United States will create a global security structure for its allies, enabling them to access resources and markets the world over without the need to protect themselves, those resources or those markets. In exchange, those allies would allow the Americans to fight the Cold War their way. In essence the Americans bribed up an alliance via the Bretton Woods system to fight the Soviets, and in doing so not only attracted the allegiance of traditional cultural allies, but also countries with which the Americans had fought long, bitter wars – up to and including the former Axis and the U.S. own former colonial master. The end result was the strongest military alliance in human history, and also history’s longest and greatest period of peace and prosperity because nearly every imperial power of the past was on the same side (with the notable and obvious exception of the Soviet Union).

To put this in the Times‘ lexicon, trade and security were linked – with the Americans sacrificing their position on the former in order to gain deference on the latter.

The Cold War ended in 1989. The Soviet Union dissolved in 1992. And at the moment of truth when then-President George HW Bush stood poised to update America’s strategic policy, he was booted out of office in a federal election. His successor – Bill Clinton – had no time for foreign policy and so let the old system ride without a foe. The next U.S. President – George W Bush – pursued a monochromatic foreign policy completely focused on the Islamic world, and he too let the Cold War trade-for-security rubric continue, just without the trade-off. Then came Barack Obama who, in essence, didn’t have a foreign policy at all. Obama would on occasion go through the motions and say the right things about trade and allies, but actions were but rarely matched with words and the whole system atrophied. After 24 years of autopilot, the world barely resembles the bipolar alignment of 1945-1989. New power centers – think China – have emerged into what feels like a more multi-polar system.

Seoul, South Korea

This is the world the Times sees: trade and security are no longer linked. The United States negotiates on trade as an independent topic, while providing security for the global commons free-of-charge.

Everyone would do well to remember three facts:

First, throughout human history, there has never been a multipolar period in which widespread wars among constantly-shifting alliances were not the norm. If a post-American, multi-polar system really is where the world is headed, the future will be a dark, poor and war-torn place as various regional powers struggling for regional supremacy utterly overturn the global trade system that makes the world’s current safety, wealth and prosperity possible. For example, if the U.S. releases the security reins, Japan and China quickly fall into cutthroat competition over Middle Eastern oil. (Fun fact: there’s a full chapter on this “Tanker War” in The Absent Superpower.)

Second, all the powers that have arisen since 1989 are utterly dependent upon the security and trade systems the Americans created to fight the Cold War, and none of them are capable of taking up that burden from the United States. The U.S. Navy is more powerful than the combined navies of the rest of the world by a factor of ten (and that without nuclear weapons), and even if multiple powers could agree to pool their forces…whose interests would they look out for? It is hard to imagine the Chinese contributing to a force that facilitates French commercial penetration into Southeast Asia or the French navy providing the security environment required for Chinese commercial penetration into Belgium. If there is no American commitment to global order, there is no global order. That pushes every trans-national organization designed around a benevolent global security environment – that’s everything from the European Union to the Chinese Communist Party – over the brink.

Third, for the Americans, trade hasn’t been about economics – it’s been about security. Trade was the bribe to get all the world’s once-imperial powers to cooperate. Not only does an American withdrawal unleash heretofore quiescent powers as varied as Japan, the United Kingdom, and Iran to attempt to reshape their neighborhoods more to their liking, it further means that the Americans never really integrated their economy into the global whole like nearly everyone else did. And since the United States is by far the leastintegrated of the significant countries into the global trade system, it would be the one to suffer the least should that system collapse.

You might not care for Donald Trump very much, but if the United States is getting out of the global management business, you’ve got to admit that a rejiggering of the relationship between trade and security makes a lot of sense. (Whether the specifics of Trump’s preferred rejiggering make sense is, of course, an entirely different topic.)

And what about the raft of countries that did not even exist before 1945 because the various regional powers could easily subjugate them? What about places that in the intervening decades used this historic opportunity to transform themselves from backwaters to advanced economies? What happens to them when the global environment changes?

What happens to South Korea?

South Korea is a country roughly the size of Indiana with a mid-sized population and a gigantic role in global trade, currently ranking in the top ten in terms of total value of trade. Its markets span the world, with the majority not within a thousand miles. It sucks down vast volumes of raw materials – again, almost none of which are from East Asia – including over 2 million barrels of crude a day, almost all of which is sourced from the Persian Gulf. American economic sponsorship has transformed South Korea from being the world’s fifth-poorest country in 1953 to one of the richest. Remove the Americans from the world writ large, and South Korea would experience an economic crash at least twice as bad as the Great Depression.

Then there is South Korea’s military problem. The United States is South Korea’s security policy. U.S. troops not only face off against North Koreans opposite the demilitarized zone, American rapid reaction forces are stationed in Seoul, elsewhere in South Korea, Japan and throughout the Pacific to respond to any military situation the North might trigger. Remove the Americans, and the South Koreans lose air superiority, naval strike capability, ballistic missile reach, cruise missiles, missile defense and all those tough, zippy tanks. In a North-South war I firmly believe the South would emerge victorious – invasion routes through the DMZ are remarkably constrained and the South’s industrial plant and population are much larger than the North’s – but the damage to the south would be immense: North Korea has dug thousands of artillery emplacements into the hills on their side of the DMZ, most of which could target Seoul with withering fire. It isn’t something that anyone is looking forward to.

Finally, there is the overall American strategic angle:

Part and parcel of the Americans maintaining the Bretton Woods system is making the world safe and keeping the American market open for everyone. In the case of South Korea, that has come at immense cost.

As a mid-sized economy, South Korea could only develop with the direct physical and economic sponsorship of the United States. Resource-poor South Korea could have never obtained the raw materials and energy it needs without Bretton Woods. It would have never been independent without the U.S. military’s involvement in the Korean War and the decades since. It could have never grown without the American position in the Persian Gulf to ensure energy flows. It could have never built its infrastructure and industrial plant without American capital. It could have never exported its way to affluence without the American market. And there is meat to Trump’s trade accusations against South Korea: South Korea regularly uses everything from corporate welfare to state-sponsored intellectual property theft to advance corporate Korea’s interests.

The mismatch in the American mind between South Korea’s (lack of) commitment to American actions against North Korea, and the ongoing outlay of American blood and treasure for South Korea’s benefit has been an irritant in relations between Washington and Seoul since the Carter administration. The only thing that’s new about the recent criticism from the White House is that it is public. If the Americans really do back away from maintaining the global system, South Korea – as a country that cannot possibly field a navy capable of securing the markets and resources it needs – faces cataclysmic decline.

Yet while the South Koreans cannot do much about their economic exposure, they can do quite a bit about their military position. The land of Samsung, LG and Hyundai is one of the world’s most technologically advanced economies. Remove the Americans from the equation and the South will arm itself very rapidly. But tanks and planes and missiles all take time.

For a first-world country like South Korea with a lively civilian atomic power program, nukes are much easier. Delivering a ruggedized, miniaturized, thermonuclear weapon halfway around the world is hard stuff. But that’s not what South Korea would need to do. They’d just need a basic device they can lob a couple hundred kilometers. The South Koreans could probably build an explosive nuclear device in a matter of days, and mate it to a bare-bones delivery system shortly thereafter. The North Korean leadership – used to needling a Washington who views Pyongyang as a mere irritant rather than a terrified, angry sibling who knows just where to kick for the biggest effect – probably doesn’t not yet realize just how complicated their lives are about to become.

And keep in mind that North Korea is only South Korea’s danger-of-the-month. Before World War II, what is today’s South Korea tended to alternate between being an unwilling colony of Japan or China. Under most scenarios South Korea may be the runt of the neighborhood, but it will be a runt with a desperate population, a functional nuclear program and a couple million engineering doctorates used to making the impossible a functional reality. Poor, friendless, nuclear-armed, devilishly creative and testy – that is South Korea’s future.

The South Koreans won’t be alone.

Every country that was once either an imperial power or an imperial province is going to have to beef up its military simply to look after its own interests, and South Korea is hardly the only smallish country that lives in a dangerous neighborhood. A partial list of countries about to face drastically different security environments and starkly poorer economic futures while also boasting sufficient technical (and/or financial) skills to acquire a nuke include Sweden, Finland, Poland, Ukraine, Uzbekistan, Kazakhstan, Japan, Taiwan, Saudi Arabia and Turkey. All of which have pressing security concerns now, much less after the global security architecture collapses. For those of you into international relations, you may recall that some of the personalities that have topped some of those countries make Donald Trump seem calm, prudent and patient in comparison.

Each of these countries – indeed, nearly every country likely to go nuclear in the next couple of decades – sees a very specific security threat very close to home, and in no case is that threat the United States. One of the few topics on which I agree with today’s Twitterati is that a nuclear exchange is very likely a part of the not-so-distant future. But that doesn’t mean it’ll be part of America’s.

North Korea: Part II—Why I Might Start Worrying About North Korea

The technical aspects of a fully-functioning nuclear weapons program are daunting. A warhead is useless unless it can reach your target. Intercontinental ballistic missiles must be accurate, durable enough to withstand the considerable pressures of the launch, transit (including a sub-orbital spaceflight), and re-entry. Since the distance between North Korea and its primary targets in the US are so considerable, fueling is key (solid fuels are trickier but offer more distance for a smaller volume), and you need a warhead that is small enough to fit at the tip of an ICBM without weighing it down too much but also powerful enough to pack a wallop (the so-called miniaturization stage, perhaps the trickiest of the lot).

It took the Soviet Union and United States the better part of two decades to master the complex process of physics, chemistry, metallurgy and engineering to construct reliable, intercontinental nuclear weapons arsenal. To think that North Korea can do the same with less than one percent the resources in a shorter timeframe is, to put it bluntly, paranoia. And even that assumes that the politics of North Korea are pushing the country in the direction of a hot war with the United States. In Part I of this series, I laid out just how unlikely that all is and why I’m not all that concerned about North Korea.

But things may be changing.

Recent changes to such outside assessments are why I’ve broken with my normal policy of ignoring North Korea to give my view on where North Korea is today, and what could well be about to happen.

Throughout August there have been rafts of leaks out of U.S. intelligence institutions and a great deal of propaganda out of North Korea on the status of the North Korean nuclear and missile programs. All point to a sharp increase in the speed of technical achievement of said programs: longer range missiles, different materials that enable for stable missile reentry, progress in miniaturizing nuclear devices to make them missile-mountable, indications of changes to the device geometry that would increase both yield and stability, and so on.

Seoul, South Korea

On September 3, North Korea tested what Pyongyang claims to have been a “thermonuclear” device rather than simply a mere “nuclear” device, which serves as a case in point. A run-of-the-mill nuclear device uses conventional explosives to split unstable uranium atoms in a process called fission: as the atoms split they unleash additional energy, magnifying the destructive potential of the initial blast. A more advanced thermonuclear device instead uses a smaller atomic device to combine light elements (typically hydrogen) to make heavier elements in a process called fusion: hydrogen atoms are smooshed together (scientific term), knocking off protons and again unleashing a devastating amount of energy. Both generate a massive amount of energy and will generally ruin your day even if you are blissfully ignorant to the difference between the two, but a fusion device requires less fuel and a smaller assembly and so is easier to mount on a missile making it the more problematic weapons system from the American point of view.

Considering how tightly-closed the North Korean system is – particularly when it comes to weapon specs – I find the near-simultaneous release of all this information a bit… convenient. On the American side, leaks about advances in miniaturization have the feel of a bureau’s carefully-crafted effort to attain more funding. On the NorK side of things, some of the propaganda is just stupid – for example the claim that Pyongyang’s new device is yield-adjustable (that it can be preprogrammed to detonate at variable explosive power levels). Such a technological advance would make North Korean nuke tech equal to current Russian and American nuke tech.

Yet too much has changed too fast for me to simply dismiss the lot. If several of the items leaked and proclaimed the past five weeks are true, then the entire balance of the region and American policy towards it change dramatically. It is one thing to toy around with nukes in your basement, quite another to mount them onto missiles, put them on your lawn and point them at people.

A meaningful, deployed North Korean nuclear weapon would leave the Americans with only two options.

Option one would be a pre-emptive strike – and not the sort of pinpoint conventional strike that gets bandied about on Fox and CNN. Since anyone who can build one nuclear weapon can build more than one, all a conventional strike would do is piss Pyongyang off and force them into a use-it-or-lose-it position. No, any preemptive strike designed to eliminate the North Korea nuclear program would need to be nuclear itself, and would need to hit at least a dozen different targets.

Option two is containment. The Americans would make sure that no weapon launched from North Korea could ever hit any American landmass. That means radically expanded missile-interception assets, on land, in the air and on the water. Putting American hardware at multiple points on every flight path for any conceivable delivery system to any possible American landmass. And backing those assets up with strike capability so that any North Korean asset even tangentially related to any missile launch facility could be eliminated within an hour of any North Korean launch.

The big loser from either option (aside from North Korea) is China. It’s hard to imagine anything that would focus minds in Beijing more on whatever Washington wants to talk about than the American carpet-nuking of China’s only real ally.

Yet if anything, containment is worse for Beijing than even North Korea’s vaporization. Any American missile defense system that can intercept missiles from North Korea to the United States could also intercept missiles from China to the United States. One way or another, North Korea’s recent evolutions make China look weak and hugely shrink China’s strategic room to maneuver.

This all, of course, assumes the Americans continue with their weird obsession with North Korea. The real hilarity of all this is that North Korea is a strategic relic of a time three decades in the past. A much more relevant discussion is about what’s about to happen in South Korea and beyond.

In the immediate aftermath of North Korea’s Sept 1 (thermo)nuclear test, U.S. President Donald Trump reserved his harshest criticism not for Pyongyang or Beijing, but instead Seoul.

From a traditional national security point of view such vitriol seems…unwise. North Korea is a foe. South Korea is an ally. Lambasting an ally you would need to combat a foe is idiotic. Right?

Well, the problem here isn’t with the Trump White House, the Kim family, or either of the Koreas – but instead with the word “traditional”…

Continued in Part III

North Korea: Part I—Why I Don’t Worry About North Korea

I’ve been in the foreign affairs, intelligence, analysis and context business for two decades now, and there are few things that annoy me more than North Korea.

It is a small, perennially poor, backwards and deliberately dysfunctional regime. Its economic heft is below negligible. It could not sustain a hot war for more than a few days as its entire population has lived on insufficient rations for years, its military equipment was antiquated thirty years ago, and all its fuels are imported so its military has little staying power. It couldn’t win a military conflict with any of its neighbors. It is so politically isolated that it simply cannot shape anything in any sphere beyond its immediate region.

North Korea is in such a sad state that its strategic policy has no real tools other than bluff and propaganda, and I don’t have a lot of respect for blowhards – particularly when they never back up their words with action – and North Korea is perhaps the most blowhardy country in the history of language. To give you an idea of just how strongly I feel about North Korea’s lack of strength, my brother is of South Korean descent and I don’t believe he has been in one whit of danger in all these past four years he’s been living in South Korea.

And then there’s the strategic angle. During the Cold War the Americans committed themselves to protecting the territories and economies of all the allies – of which South Korea was one – in order to form a cordon sanitaire around the Soviets. A large military presence in South Korea was part of that process. But the Cold War is long over, the Americans are getting out of the global management business, and the ongoing American military footprint in South Korea is the very definition of policy inertia. The inter-Korean border may still be a flashpoint, but it is no longer a flashpoint that serves any broader strategic purpose for the United States. For the Americans it is exposure and risk without any conceivable benefit, and it is high time for the American military position in the region to shift – and shift sharply.

Seoul, South Korea

And that despite all the nuclear bric-a-brac. Yes, the nuclear question for North Korea is a big one, and honestly it is the only reason that Washington should care about the country at all. But even here, I’m not impressed. My lack of concern falls into two general categories.

First, the technicalities of a nuclear program.

A nuclear weapons program isn’t easy, but the easiest part is building the explosive device itself. Obtaining the uranium, turning it into weapons grade uranium or plutonium, building an implosion device to trigger a runaway atomic explosion – this was all first done in the 1940s and to think a people as inventive as the Koreans (North and South) couldn’t achieve nuclear fission is simply silly. The NorKs did so back in the 1990s and there is no recapturing that genie.

But that’s only the first step. Now you need to deliver it. Back in World War II the Americans delivered the Hiroshima and Nagasaki nukes by high-altitude bomber – something that was possible because of the lack of surface-to-air missile defenses and absolute American mastery of islands near Japan. That option is firmly off the table for the NorKs as the United States is far too distant and far too militarily advanced for a large, slow moving aircraft to penetrate its defenses.

That leaves missiles. The obvious obstacle is range. The NorKs can currently claim accurately to be able to strike in the vicinity of Hawaii and ongoing experiments with missiles are clearly aiming for the American mainland. That is likely some time off still, but in years – not decades. It may (literally) be rocket science – and remain one of the most technically challenging military fields – but the NorKs have been working on this very hard for a very long time.

Yet even a sufficiently-ranged and designed missile isn’t enough, because a missile cannot carry a big, bulky, delicate device. Primitive nuclear devices weigh tons, and rockets can only carry hundreds of pounds. There’s also the massive issue of reentry. Falling from orbit makes everything more than a bit shaky, which is more than enough to break into irrelevance a newbie nuke.

And of course, it would be nice to actually hit your target. Early ballistic missiles were notoriously inaccurate. There’s a reason NASA – not only the world’s best rocket nerds as well as the nerds with the greatest interest in accuracy – aims for the Pacific Ocean when its rockets need to make splashdown. It is sorta hard to miss the world’s biggest body of water. North Korea’s missiles probably can only be relied upon to strike within 15 miles of their targets. As of September 2 high-end estimates for a North Korean nuclear device (not deliverable weapon, device) were “only” 30 kilotons. That’s “only” enough to generate a thermal pulse 3 miles across. For comparison, in the early 1980s American ICBMs had an accuracy of +/- of 2 miles which was a big reason they opted for the big booms provided by the MX program. (If you enjoy day-dreaming of nuclear Armageddon I’m pleased to point you to the Stevens Institute of Technology’s Nukemap where you can dial up and down the kilotons and see the effects on the city of your choice.)

Bottom line: Just as the technologies required to make a missile capable of descending through the atmosphere without shaking itself or its cargo apart are more difficult than getting the missile to its destination, the technologies required to ruggedize and miniaturize a nuke so that it can fit on a missile are more difficult than “simply” making a nuclear device in the first place.

Put it together and, while the NorKs clearly are making progress, I don’t believe they are all that close to having a deliverable weapon, much less a broader deterrent. And even that assumes that the NorKs’ nuclear program is about the United States – something I’m not convinced on. This brings us to the second why-North-Korea-doesn’t-worry-me category: internal North Korean politics.

Kim Jong Un via the Korean Central News Agency

Let’s start with the obvious:

Anyone who claims they have a good picture of what is going on in North Korea is lying to you. The isolationist country has a wickedly effective internal security system and pretty much everyone’s spies are rooted out on a regular basis. Operational intelligence, particularly within the political-military space that is so crucial to informing American decisionmakers, is simply not possible with North Korea. The only thing an intelligence professional can do in such circumstances is infer and induce, something that pretty much all of us hate doing because there is no way to prove any particular theory correct or incorrect. What I’m about to share is little more than a guess, but it is an educated guess guided by some of the smartest thinkers I know.

North Korea’s bombast is not about the United States. It is about a family dinner table squabble.

Kim Il Sung is the guy who founded the modern North Korean state after World War II. He built his legitimacy fighting the Japanese during their generation-long occupation of the peninsula. He created the paranoid, ultra-poor, Stalinist backwater we know as North Korea and ruled it through the end of the Cold War. However, come 1993 the Soviet Union had disintegrated, the Chinese had agreed to join the capitalist world, and North Korea found itself utterly alone. Kim Il Sung was far from inane; he realized that his country in its current form was unsustainable, and the talk of the time was how to open negotiations with South Korea on unification.

And then, unexpectedly, he died. (Insert your favorite conspiracy here.)

The remaining ruling elites of Kim Il Sung’s First generation did the only thing they could. They helped pass the torch to the Second generation, led by Kim Il Sung’s son, Kim Jong Il. But whereas Kim Il Sung was a competent autocrat, a savvy negotiator and had the gravitas that comes from decades of rulership, Kim Jong Il was an arrogant, inept, unfeeling prick shaped by an environment of isolation and paranoia.

Unlike their co-ethnics in South Korea, the North Korean educational system is seeped less in engineering than in ideology – and not even a globally interesting ideology, but instead a homegrown one that preached that a country with no resources or friends or trade or money was somehow magically a world power. Kim Il Jong and his entire generation were raised wholly within North Korea, and they all grew up drinking the proverbial Kool-Aid. Upon becoming the Dear Leader, Kim Il Jong launched a series of economic “reforms” that inadvertently gutted the country’s agricultural capacity, causing a famine that killed between one million and three million people out of a population of roughly 20 million.

The First generation was horrified, and soon took steps to limit the damage. Ditching Kim Il Sung and the Second generation wasn’t perceived as an option, so instead the First generation sent the Third generation abroad so that they could learn how the world really worked. The goal was to, in time, bring the Thirds back to relaunch the country into the modern world. Kim Jong Un, the future North Korean leader, attended studies in Switzerland, far from the less-than-worthless educational system back in North Korea.  (I have it on good authority from the guy who sat next to Kim in class that while the younger Kim certainly has impulse control issues, “insane” is not an accurate descriptor.)

There was a problem with the Firsts’ new plan: Kim Jong Il died before the Thirds’ studies were complete. But rather than risk an unstable transition period in which no one was in control, the Firsts thought it best to recall Kim Jong Un, put him in charge at the tender age of 27, and shove the entire ruling Second generation to the side for being wastes of skin.

Now, put yourself in Kim Jung Un’s shoes.

Your grandfather’s generation – the Firsts – are now in their nineties and are dying out in dribs and drabs. But these are the guys that fought Imperial Japan and resisted the Soviets, Chinese and Americans. They are no slouches. They want you to overhaul the country, but not until they are gone – and they still control much of the sharp end of state power. Your father’s generation – the Seconds – is bat-shit crazy, and the First generation just shunted them from power, prestige and privilege in favor of… you. The Seconds are angry, bitter and want back what was taken from them.

You are trapped between a group that wants you to move, but not too quickly, and one that simply wants you dead. So what do you do? You appear erratic. Unpredictable. You launch the odd missile. Test the odd nuke. Shell the odd South Korean city. You make the Firsts think you are strong but respectful of their position, and the Seconds think you are crazier than you are. And whenever the opportunity presents itself, you purge a few Seconds. Including your relations.

Especially your relations. This is, after all, a dynastic system.

If this is true, then North Korea is a Twitter account in a teapot. All the smoke and sound is simply what domestic politics looks like, and there isn’t much to be concerned about. The biggest argument that this is true is the simple fact that the NorKs haven’t done much of strategic significance since the armistice that ended the Korean War in 1953. Six decades is a looooong time to do absolutely nothing if you really are a country full of nuclear-armed madmen. If this is true, then the Trump administration can totally lean on Pyongyang without risk of a military conflict because at the end of the day the drama is for internal consumption – it is not about the United States. If anything, Trump matching North Korea’s propaganda invective tweet for tweet is actually an effective strategy because it makes it clear that Pyongyang is firmly on the American radar and the North Korea domestic management strategy could have consequences. (Trump’s tweeting has certainly had an impact on Venezuela, but that’s a topic for another day.)

So between technical questions and political insecurity, instability and bombast, I don’t worry all that much.

Or at least I haven’t. That may now be changing.

(to be continued in Part II)

Ho Hum Harvey

Between 2000 and 2012 I worked at a place called Stratfor, which specializes in geopolitical forecasting. As I was one of the few members of the staff who had experience working in more than one region of the world, I wore many hats – one of which was to serve as an as-needed energy analyst. In that role, I found myself diving into everything from the Brazilian pre-salt to pipelines in the former Soviet Union to European Commission electricity regulations to Chinese state firm expansion policies to Japanese supply chains. And every year from May to October one additional brick was dropped onto my plate: hurricane watch.

Oil is one of the few truly global markets out there. There may be many categories of crude oil, but most are broadly fungible (you can swap out one crude for a variety of others in a pinch). Furthermore, demand for oil is inelastic – meaning that you have to have it to participate in a modern economy. So when something blocks one flow from reaching the market, the entire world suffers not just a price increase, but a sharp one. Back in the 2000s, hurricanes regularly plowed through the Gulf of Mexico – at the time home to about one-third of U.S. oil and natural gas output. In 2005 alone over a dozen major storms hit. (BTW, by far the best place to get info on active hurricanes is Weather Underground).

Each such event required an analysis of the storm’s path in relation to energy infrastructure so that I could estimate how much production had to be taken offline as precautionary measures, and then gauge the storm’s strength vis-a-vis the subsea pipe network to guesstimate how long production would remain shut in. In many cases, output would not recover for over a year. Price increases in excess of $10 a barrel for oil and $1 a gallon for gasoline were par for the course.

Hurricane Harvey is plowing through the Gulf of Mexico as I type. The storm is expected to edge into the Texas coast within the next 24 hours and then… just… sit… there. For at least three days. It is by far the worst-case scenario for the offshore energy industry. Not only does everything need to be shut-in, but the on-shore supporting infrastructure and staff will have to hunker down against 100+ mph winds for days. Damage assessments – much less repairs – will not be able to begin until at least Wednesday, and likely longer. The humanitarian impact looks dire: millions of coastal Texans will have to hold on for at least 72 hours before emergency services can begin to mitigate Harvey’s pummeling.

Harvey’s biggest economic impact will be on the various refining and petrochemical facilities that dot the Texas coast from Brownsville to Houston. It is the greatest concentration of such facilities in the world, and, at a stroke, supplies about one-third of American fuel needs. Rain that will be measured in feet as well as storm surges will flood much of the zone, and high winds will conspire with flat terrain to slow that excess waters’ draining back to the ocean. Energy prices will certainly rise in response.

But probably not by all that much.

Unlike the 2000s when a moderate storm or a glancing blow would reliably send oil prices skyrocketing, things are different in 2017. Part of it is that the U.S. hasn’t been hit by a meaningful storm in a decade, and so stockpiles of various fuels are at comfortable levels. But a far bigger factor at work is the shale industry. The shale sector didn’t exist in 2005, but now it accounts for most U.S. energy production. Every single shale well in the United States is on land, which means all the 9ish million barrels a day of shale oil output – some 70% of total U.S. output, just isn’t very vulnerable any longer. (In fact, Harvey is even providing an opportunity for the industry to test the theory that shale production is stormproof: Texas’ Eagleford shale play will get over a foot of rain.)

It isn’t just hurricanes that don’t much bother energy markets. It’s that, well, nothing much does.

We’ve been at $60 for a barrel of oil or below for three years now and things have not been quiet. Think of what’s happened of late: ISIS has taken over Iraq’s western desert, Iraq’s Kurds have achieved de facto independence, China is putting a naval base in Djibouti, Brazil’s entire political order is collapsing, Mexican oil output has cratered, net Southeast Asian energy exports have ceased, North Sea oil is in terminal decline, Venezuela is giving civilizational collapse the ole’ college try, Saudi Arabia and Iran are already fighting an eight front cold war and using a lot of bullets in doing so, Russia invaded Ukraine along one of its export pipeline routes resulting in Western sanctions on the entire Russian energy sector, Donald Trump and Kim Jong Un are trading nuclear annihilation threats. And yet oil prices just cannot get a lift.

So long as we are in this happy geopolitical moment where the global system still exists, shale has poured oil on troubled waters – providing one very welcome bit of calm in an increasingly-troubled world. But don’t get too comfortable.

It is all temporary.

As the retrenchment that the Americans began under Barack Obama accelerates under the Trump administration, the ability and willingness of the United States to hold the global center is fracturing. And soon, so will the global system as a whole. At that point, the United States will have a large, deep, stable energy market that is supplied from within the confines of North America. And the rest of the world will have to learn to deal with Iraq and Iran and Saudi Arabia and Russia and Ukraine and China and Indonesia and Venezuela and Brazil without any security arbiter. The result will be an energy crisis global in scope, except for the United States which will not participate. Expect the U.S. presidency and Congress to quickly (re)enact an oil export embargo to sever local oil markets from global oil markets. U.S. and Canadian prices will likely ceiling below $70, while everyone else will be lucky to have prices double that.

For more on how the American and global energy sectors will evolve and convulse in the years ahead, read The Absent Superpower: The Shale Revolution and a World Without America.

The Turning Point

I’m on a mid-term break in my annual Unplug&Recharge effort, and am taking stock of what’s changed while I was out of cell phone range, and therefore blissfully ignorant of everything from CNN to Fox to Facebook to the Journal. The loudest development in my opinion seems to be what I’ll refer to as the Scaramucci Interregnum. Before I left for backpacking in Wyoming on July 13 Sean Spicer was the White House Communications Director, and Reince Priebus was the Trump administration’s chief of staff. While I was gone, Anthony Scaramucci rode into town, Spicer and Priebus left, and Scaramucci himself was dismissed shortly thereafter. Trump now has a new chief of staff in John Kelly, who served previously as the Secretary of Homeland Security.

Let’s break down what this all means.

First, an in-your-face personality like Anthony Scaramucci (aka “The Mooch”) was a horrible choice for a position that is all about smoothing ruffled feathers and keeping people – including  those hostile to the administration’s views and policies – informed. But his presence did present us with something very useful. His profanity-laden tirades demonstrated that Donald Trump has opinions on how much is too much. Considering the president’s own, shall we say, disinterest in self-censoring, this in and of itself is a notable discovery.

Second, the Interregnum has signposted a sharp change in the administration’s domestic political capacity. The departure of Spicer and Priebus removes two of the three “mainstream” domestically-focused Republican personalities from the administration. The only one remaining is Vice President Mike Pence. While the Veep is hardly a wilting flower, historically the Vice Presidency is only as powerful as the Presidency enables it to be. Trump may be many things, but “enabler” isn’t the word I typically reach for when I try to describe him.

Without any “establishment” personalities left, the leading advisor to Trump on all things domestic is now Steve Bannon, a nationalistic populist who has some rather… eclectic and non-standard views on how everything should be. Many were critical of the “adults” in the Trump administration for their mixed record on guiding the president to a more conventional path. On domestic politics, there are no longer any adults left. Expect things to get lively.

Third, expect them to get chaotic too. John Kelly was a fine Marine general and seemed quite capable and at home in Homeland Security. I have no problem with senior military personnel serving in civilian administrations and have written before about my support of and respect for people like Defense Secretary James Mattis and National Security Advisor H.R. McMaster. In foreign and strategic affairs, the top-down model of management that is typical of military minds works. After all, you don’t want some low-level bureaucrat making strategic policy without supervision, or even with much wiggle room on the specifics of implementation.

But chief of staff is a political job. It is about balancing dozens of competing players, many of whom by design are attempting to manipulate or deceive the president, and yet still must be considered. It is a position that is a combination of gatekeeper, ego juggler, reality-checker, cat-herder, and selective censor. The military isn’t exactly known for cranking out such people. Solid chiefs of staff have broad exposure, deep expertise and/or cut-throat political instincts: Jim Baker, Josh Bolten, Rahm Emanuel. Kelly is smart as a whip and good at what he knows, but this isn’t the job for him. Which leaves Trump both under the influence of Bannon and lacking someone who can capably manage the chief executive’s affairs. Get ready for not just press reports by Twitter, but policy by Twitter.

Speaking of Twitter, a Twitter follower recently asked me for confirmation that despite all the… activity in the White House these days, does a functional plan still exist to promulgate American power in the long run? It’s a reasonable question. I’ve long taken the view that American power will grow in both absolute and relative terms for at least the rest of this century. That, in a nutshell, is the theme of The Accidental Superpower.

Let me be clear: there is no plan. The Americans have hardly ever had a plan. From an international and strategic viewpoint, America’s strengths are not and never have been in its governing system in general or any administration in specific. Instead, America’s strengths come from a balance of factors which exist entirely outside of the political realm:

  • Geography: The United States occupies the world’s best lands interlaced with the world’s best naturally-occurring transport system, the Greater Mississippi system. In addition, any potential invaders are separated from the United States by the Atlantic and Pacific Oceans. That leaves the Americans free to develop without fear of outside interference, yet gives them the capacity to intervene across the world at times and places of their choosing. And should things get dicey, the Americans can always just head home. For them – and them alone – defeat doesn’t mean someone is parking their tanks in your lawn.
  • Demography: Countries that survive in the long-term have a population balance between mature workers to invest and pay taxes, and young workers to raise children and whose consumption powers the economy. Most of the world’s countries have run out of young workers already: Germany, Japan and Italy are the worst – all are rapidly aging into national oblivion – while Russia, China and Brazil aren’t far behind. The United States is one of the (very) few advanced countries where the balance is even remotely stable and sustainable.
  • Energy: Love it or hate it, energy is a requirement of modern life. For the last several decades, global politics was heavily colored by the need to bring energy from far-flung locations in the Middle East and Siberia to East Asia, Europe and the United States. No more. America’s shale revolution has already transformed the United States into a net energy exporter, and by 2020 it will likely even be an oil exporter in absolute terms. And if you’re of the Green persuasion, the United States is the First World power closest to the equator, making it the only one that can actually harness solar energy in meaningful volumes.

These are things that no president can screw up. The United States survived Bill Clinton, George W. Bush and Barack Obama. The ride may often be wild, but the United States will survive post-Interregnum Donald Trump as well.

Other countries, not so much.

The three factors of geography, demography and energy enabled the United States to impose a global Order during the Cold War that, in essence, outlawed conflict among the allied powers. Maintaining that Order was difficult – it required constant consultation and coordination. Falling from Order to Disorder, in contrast, is eeeeeasy. The Cold War is over, and the American president no longer has a functional executive staff that is capable of consulting and coordinating. All it requires is not a goddam thing.

Since America’s strengths are natural and apolitical, the United States will broadly be fine. For countries that lack geographic strength and isolation, demographic heft and stability, and energy access or independence, however, life outside of the Order is looking mighty scary.

Which makes it absolutely critical for other countries to have their own plans if they are to survive the Disorder to come. Unfortunately, most of them are slipping into narcissistic populism, bald denial, deer-in-the-headlights panic, or some terrifying combination of the three. There are exceedingly few countries that boast the combination of factors required to even attempt to chart their own destinies in a sustainable manner.

I’m certain that in a few years domestic pundits will (correctly) use the Scaramucci Interregnum to signpost the beginning of a (more) volatile and unpredictable Trump White House, but there’s more at stake than that. The real issue of the day is that the transition from global Order to Disorder just accelerated from a slide into a free-fall.

And now we get to see what happens next: Now we can begin to witness the rise of the New Orders. The – ultimately successful – efforts of four specific countries to reshape their neighborhoods in the wake of the American withdrawal from the world.

As for who those four countries are, how they’ll do it – and above all else – why they’ll be the only four to succeed, you’ll have to wait a bit. You see, the next book isn’t done yet.

But I do have a cover to share…