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Obama in Havana

A British journalist compared the huge American delegation (800-1,200 people) that is accompanying President Barack Obama on his first visit to Havana to Japanese soldiers stumbling out of the jungle to discover that the war ended a generation ago. And the Rolling Stones, who are staging a free concert for half a million people in the Cuban capital on Friday, explained that Obama was their opening act.

The US embassy in Havana has already reopened, but only the US Congress can end the 55-year-old American trade embargo against Cuba. Under Republican control Congress is not going to do that, so this visit is really just a social call. Indeed, it was scheduled to coincide with spring break in US schools so the Obamas could bring their daughters along.

Yet no journalist watching all this can resist speculating about whether this opening portends great political changes in Cuba, maybe even the eventual end of the long dictatorship of the Castro brothers and the Cuban Communist Party. Least of all me, as I have been speculating about that in public, at intervals, for most of my adult life.

I never went to Cuba during the “heroic” years when the leadership lived in permanent fear of American invasion or subversion, and most Cubans really were ready to fight to defend the revolution. My first visit was in the mid-1980s, when the bloom was already off the revolutionary rose.

Most of Latin America was living under brutal US-backed military dictatorships at the time, and the Cuban dictatorship seemed to me almost gentle by comparison. It didn’t even kill people much. But Cubans, unable to travel and aware that the regime’s propaganda usually lied, were in a stroppy mood. If you spoke even a little Spanish, they unloaded their discontent on you.

So I went home and predicted that the regime, if not on its last legs, was at least in its last decade. This did not come to pass on schedule, but when I next went to Cuba, in 1994, it certainly looked imminent. The collapse of the old Soviet Union had cut off all the subsidies that had kept the Cuban economy afloat despite the American embargo and its own huge inefficiencies.

During the “Special Period in Time of Peace,” which lasted through most of the 1990s, nobody starved, but almost everybody went hungry and the average Cuban lost 9 kg (20 lbs) in body weight. Social order broke down, with crime rampant and desperate young people openly selling their bodies in the streets.

I brought my wife’s parents with me on one of these visits, and my mother-in-law was mugged in central Havana twice in a week. On the second occasion my father-in-law was injured while resisting the muggers, and I had to bribe a police inspector US $100 to free him from the police station where he was being held – technically as a witness, but really for ransom – so that I could get him proper medical attention.

So I went home and predicted the imminent collapse of the regime again. Communist regimes in Europe whose people were quite well-fed had been falling to non-violent democratic revolutions with scarcely any resistance in the past few years, so it seemed
implausible that this ageing, ramshackle dictatorship would last much longer either.

Wrong again. But when Fidel Castro retired after 42 years and handed power to his brother Raul in 2008, Western embassies in Havana (minus the United States, of course) arranged for various “experts” from their countries to visit Cuba and explain how things were done in a real democracy – which they fully expected that Cuba would shortly become.

I was asked to go along as an alleged expert in media and civil-military affairs, to tell Cuban journalists and military officers how they should operate in a democracy. It was a well-meant but ridiculous initiative, but I went anyway because it gave me unprecedented access at a very interesting time.

And I came back convinced once again that a democratic transformation was really imminent, because most of those I was speaking to expected it themselves. Few of them, even in the armed forces, feared for their jobs, and most of them thought that change would be for the better.

But fast forward another eight years, and very little has changed. Raul Castro says he will retire in 2018 (when he will be only 86), but a new generation of Communist leaders is already being promoted into key positions.

Up to three million American visitors a year are expected now that the US ban on travel to Cuba has been lifted, which will widen the economic gulf between Cubans with access to dollars and those without, but it is unlikely to trigger a revolution. The surge of incoming money will magnify corruption at every level of the regime, but that won’t cause its overthrow either.

In fact, I now think that the regime will probably survive until and unless the US Congress finally ends the embargo and exposes Cuba to the full force of international capitalism. Of course, I have been wrong in the past.
To shorten to 725 words, omit paragraphs 8 and 14. (“I brought…attention”; and “Up to…either”)

North Korea’s Deterrent

Here we go again. North Korea launched a ballistic missile of intercontinental range on Sunday (saying it was just putting up a satellite) only weeks after it carried out its fourth nuclear weapons test (which it claimed was a hydrogen bomb).The United Nations Security Council strongly condemned it, and even the People’s Republic of China, North Korea’s only ally, expressed its “regret” at what the country had done.

There will certainly now be more UN sanctions against Kim Jong-un’s isolated regime. But there have already been four rounds of UN military and economic sanctions since North Korea’s first nuclear test in 2006, and Pyongyang just ignores them.

Clearly, this is something that the North Korean regime wants so badly that it is willing to endure considerable punishment in order to get it. But why is this very poor country spending vast sums in order to be able to strike its neighbours – and even the United States, for that is what the intercontinental ballistic missiles (ICBMs) are about – with nuclear weapons?

Well, here’s a clue. What the North Korean government said after last month’s hydrogen bomb test was this: “The DPRK (Democratic People’s Republic of Korea) is a genuine peace-loving state which has made every effort to protect peace on the Korean Peninsula and security in the region from the vicious US nuclear war scenario.”

“The US is a gang of cruel robbers that has worked hard to bring even a nuclear disaster to the DPRK….By succeeding in the H-bomb test…the DPRK proudly joined the advanced ranks of nuclear weapons states…and the Korean people demonstrated the spirit of a dignified nation equipped with the most powerful nuclear deterrent.”

Never mind the stilted rhetoric and gutter abuse; North Korean propagandists always talk like that. Listen to the key words that are almost buried under the surrounding invective. North Korea’s nuclear weapons programme, they say, is meant to “protect…the region from…the US …nuclear war scenario” by creating a “most powerful nuclear deterrent.”

Really? Do they actually fear that the United States might use nuclear weapons on them, and that they can only be safe if they have their own hydrogen bombs and ICBMs? Are they doing all this purely as a defensive measure?

Of course they are. However bad-tempered and impulsive they sounded, the men of the Kim family, father, son and grandson, who have ruled North Korea in dynastic succession for the past 68 years, were not crazy. They never started a war, because they knew they would lose it, and the current incumbent is certainly not going to start a nuclear war.

He would have to be crazy to do that. North Korea lacks the resources to build more than a few bombs a year, and it does not have the technologies to ensure that the missiles it may one day have won’t get shot down. It will probably never be able to guarantee that it can strike even South Korea or Japan with nuclear missiles, let alone the United States.

Everybody in the North Korean hierarchy (along with some millions of other North Koreans) would certainly be dead only hours after the regime launched nuclear weapons at any of those countries. The United States has literally thousands of nuclear weapons. It would take only a few dozen quite small ones to virtually exterminate the entire ruling elite, and North Korea would have no way of stopping them.

A few not-very-high-tech nuclear weapons would give Pyongyang no usable ability to launch a nuclear attack against the United States or its allies. They would, however, give it a pretty credible nuclear deterrent.

Launching a few nuclear weapons against a major nuclear power is suicidal, but those same few weapons can be a perfectly good deterrent against a nuclear attack by that same power, because they give the weaker party a capacity for “revenge from the grave.” Even a country as powerful as the United States will behave very cautiously when faced with the possibility that an opponent might land even one or two nuclear weapons on its territory.

North Korea has lived under the implicit threat of US nuclear weapons for almost seven decades, and the United States has never promised not to use those weapons against it. It’s almost surprising that we haven’t seen North Korean nuclear weapons before now.

North Korea is just doing the same thing that Pakistan did in the 1980s and 90s out of fear of Indian nuclear weapons, and that Iran was doing in fear of both Pakistani and Israeli nuclear weapons in the last fifteen years.

The Security Council is quite right to try to block North Korea’s nuclear weapons programme, and the successful use of international sanctions to stop Iran offers some hope that it may succeed. But North Korea is not a crazy state plotting a nuclear holocaust at the cost of its own extinction. Its nuclear weapons programme is a perfectly rational – although highly undesirable – policy for a small country with a big problem.
To shorten to 725 words, omit paragraphs 9 and 13. (“He would…United States”; and “North Korea…now”)

War with China: The Thucydides Trap

There is a small but significant industry in the United States that predicts the “coming war” with China, and Atlantic Magazine is foremost among reputable American monthlies in giving a home to such speculation. It has just done it again, in an article that includes a hearty dose of geopolitical theory. The theory is “The Thucydides Trap”.

The author is Graham Allison of Harvard University, the man who coined that phrase. Thucydides, the historian of the Peloponnesian War in the 5th century BC, explained what caused the war this way: “It was the rise of Athens, and the fear that this inspired in Sparta, that made war inevitable.” It lasted twenty years, and at the end of it the two great powers of the ancient Greek world were both devastated.

Yet they didn’t really go to war over anything in particular, according to Thucydides. The problem was that Athens was overtaking Sparta in power (like China is overtaking the United States now), and just that one fact was enough to send them to war. So are China and the United States doomed to go to war in the next decade?

Graham Allison knows better than to make a hard prediction, but he does point out that out of the past sixteen cases when one major power was gaining in power and its rival feared relegation to the second rank, twelve ended in war.

Such predictions and formulas have an impact in the real world. When Chinese President Xi Jinping arrived in Seattle two weeks ago at the beginning of his US visit, he felt obliged to respond to Allison’s article: “There is no such thing as the Thucydides Trap in the world,” Xi said. “But should major countries time and again make the mistakes of strategic miscalculation, they might create such traps for themselves.”

Well, he wasn’t going to say “Yeah, we’re doomed to go to war with each other,” was he? But it’s clear that Chinese (and American) leaders worry about this – and that worrying about it paradoxically makes it more likely to happen, because it places the whole question of ‘Who’s on top?’ at the centre of their thinking.

Does it really matter who’s more powerful when China and the United States have no shared border, make no territorial claims against each other, and are separated by the world’s largest ocean? Lots of people in each country would say no, but both countries have military-industrial-academic complexes that thrive on the threat of a US-Chinese military conflict.

They wouldn’t benefit from an actual war, of course. But the threat of a great war kept millions of people in the military, in defence industries and in various universities and think tanks in interesting and sometimes very profitable work during the four decades of the US-Soviet Cold War.

The threat of a US-Chinese war already provides gainful employment to a lot of people, though nothing like as many as those who made a living off the threat of World War III during the Cold War. If the perceived threat of war grows, so will the number of American and Chinese experts who make a living from it. So it’s worth examining Graham Allison’s assumptions to see if they hold water.

There are only two key assumptions. One is that China will decisively surpass the United States in national power in the coming decade. The other is that such transfers of power from one dominant nation to another are still likely to end in war. Neither is as certain as it seems.

Chinese dominance is certain if the country keeps growing economically even at its new, lower rate of seven per cent a year. That is still at least twice the US rate, and the magic of compound interest will still do its work. But the era of 10 per cent annual growth ended for Japan and South Korea, the other East Asian “miracles”, after about thirty years. Each country then fell to a normal industrialised-country growth rate or (in Japan’s case) below it.

China is at around the 30-year point now. Maybe its managers are cleverer and it can avoid the same fate, but their recently ham-fisted efforts to prop up the stock market suggest otherwise.

Most observers believe that China’s economic growth this year is already below seven per cent – maybe four per cent or even less. Neither of the other East Asian miracles ever got back onto the ultra-high growth track after they fell off it. At four per cent growth or less, China would not be overtaking the United States any time soon.

As for twelve out of sixteen changes in the great-power pecking order ending in war, that’s true. But according to Allison’s own data, three out of the four that didn’t end in war were the last three, covering the last half-century. Recent history is a great deal more encouraging than older history.

Maybe more effective international institutions have helped the great powers to avoid war. Maybe the existence of nuclear weapons has made them much more cautious. Probably both. But a US-Chinese war is not inevitable. It may not even be very likely.

Fracking Is Winning

“No one can set the price of oil. It’s up to Allah,” said Saudi Arabian Oil Minister Ali al-Naimi in May. But less devout people believe that Saudi Arabia has been trying very hard to set the price of oil – and to set it low. Moreover, it has been remarkably successful, because last week the price of oil was in the mid $40s per barrel, down from just over $100 last May. But Riyadh is not achieving its objective.

Saudi Arabia, like any oil producer, likes a high price for its oil, but since it is very rich and has huge reserves it thinks long-term. Watching American oil production almost double in the past seven years, mainly thanks to the rapid rise of fracking, the Saudis could see that they risked losing their role as the “swing producer” who can raise or lower the oil price just by cutting or increasing its own production.

The only way Saudi Arabia could keep that role was to drive the American frackers out of business. Production costs are secret in the oil world, but the Saudis assumed that the injection of water, sand and chemicals into shale rock at high pressure makes hydraulic fracturing – fracking – very expensive.

So the Saudi strategy is to keep its own production high in order to push the the oil price down. If the price stays low enough for long enough, high-cost producers like the frackers will have to close down. Then, once the competition had been eliminated, Saudi Arabia jacks the price back up by cutting its own production, and the glory days return.

In the meantime Saudi Arabia is losing income too, of course, and oil revenues account for 90 percent of the national budget. It can live on savings for a while, but it needs a fairly quick win.

It would be politically unwise to cut the lavish government spending that keeps the Saudi population happy, and the government is also involved in an expensive war in Yemen. The missing income has mostly been replaced by withdrawals from the country’s huge foreign reserves, estimated a year ago at $700 billion – but those reserves have fallen by $65 billion in the past year.

The Saudis don’t want to run those reserves down too far: without them, it could not afford to play the role of “swing producer”, and would lose most of its diplomatic clout. So last week, for the first time in eight years, Saudi Arabia started selling government bonds, planning to raise $27 billion by the end of the year. The strain is starting to show.

The strain of this attritional battle is also showing in the United States, where various shale oil producers have cancelled or postponed new drilling projects. But the shale producers have consolidated into bigger companies and increased the efficiency of their production processes, and US oil production is actually continuing to grow this year. It is now at about 90 percent of Saudi production.

The brutal fact is that the Saudis are losing this battle. When the US was the biggest producer of oil, before about 1970, it was the swing producer. Within a few years, it will have overtaken Saudi oil production and will be the swing producer again. And there is nothing Riyadh can do about it.

The Saudis made two mistakes. The first was to overestimate the cost of US shale oil production, and assume that any price below about $80 per barrel would make it unprofitable. There are some shale oil plays for which this is true, but the costs vary wildly, according to the local geology, and can be as low as $20 per barrel. Most shale oil is profitable at $60 per barrel, and that proportion is rising rapidly as consolidation proceeds and efficiency rises.

Their other, bigger mistake was to believe that victory was possible at all. When you stop production from a conventional oil well, there is a large permanent loss of flow when you restart production. The pores in the oil-bearing rock clog up, and that permanently reduces the “bottom-hole” pressure that forces the oil to the surface.

Stopping production at a shale-oil site incurs no such loss, since the producers create the pressure themselves. Uncap it, and the flow resumes as before.

So even if the Saudis succeeded in forcing most of the shale-oil sites to close, the shale producers would just turn the flow on again as soon as Saudi Arabia declared victory and cut production to get the price of oil back up.

It will take a little more time to the Saudis to acknowledge their mistake, and they may not even be able to get the price back up to where they need it by cutting production. American production will continue to rise, and Iranian oil will probably also be coming back on the market in a big way by next year.

The Saudis will stay rich, but they will have to cut their spending and they will suffer a permanent loss of influence. Their only consolation will be that Iran, which they see as their greatest enemy, won’t be able to use its oil to buy influence either.
To shrten to 725 words, omit paragraphs 7 and 8. (“The Saudis…production”)