Baghdad Politics and the U.S.-Iranian Balance

By George Friedman ~ Honorary Political Season Contributor

The status of Iraq has always framed the strategic challenge of Iran. Until 2003, regional stability — such as it was — was based on the Iran-Iraq balance of power. The United States invaded Iraq on the assumption that it could quickly defeat and dismantle the Iraqi government and armed forces and replace them with a cohesive and effective pro-American government and armed forces, thereby restoring the balance of power. When that expectation proved faulty, the United States was forced into two missions. The first was stabilizing Iraq. The second was providing the force for countering Iran.

The United States and Iran both wanted to destroy Saddam Hussein’s Baathist regime, and they collaborated to some extent during the invasion. But from there, their goals diverged. The Iranians hoped to establish a Shiite regime in Baghdad that would be under Tehran’s influence. The United States wanted to establish a regime that would block the Iranians.
The U.S. Challenge in Iraq

In retrospect, U.S. strategy in Iraq was incoherent at base. On one hand, the American debaathification program drove the Sunni community into opposition and insurgency. Convinced that they faced catastrophe from the Americans on the one side and the pro-Iranian government forming in Baghdad on the other, the Iraqi Sunni Baathists united in resistance with foreign jihadists. At the same time the Americans were signaling hostility toward the Sunnis, they also moved to prevent the formation of a pro-Iranian government. This created a war between three factions (the Americans, the Shia and the Sunnis) that plunged Iraq into chaos, shattered the balance of power with Iran and made the United States the only counterweight to the Iranians.

All of this turned what was intended to be a short-term operation into an extended war from which the United States could not extract itself. The United States could not leave because it had created a situation in which the Iranian military was the most powerful force in the Persian Gulf region. Absent the United States, the Iranians would dominate Iraq. They would not actually have to invade (Iran’s military has a limited ability to project force far from its borders in any case) to extract massive political and economic concessions from both Iraq and the Arabian Peninsula.

An unchecked Iran, quite apart from its not-yet-extant nuclear capability, represents a profound strategic threat to the balance of power in the Persian Gulf. Assuming the nuclear issue was settled tomorrow either diplomatically or through attacks, the strategic problem would remain unchanged, as the central problem is conventional, not nuclear.

The United States is set to complete the withdrawal of its combat forces from Iraq this summer, leaving behind a residual force of about 50,000 support personnel. This drawdown is according to a plan former U.S. President George W. Bush laid down in 2008, and that U.S. President Barack Obama has sped up only by a few months. Therefore, this is not a political issue but one on which there has been consensus. The reason for the withdrawal is that U.S. forces are needed in Afghanistan. Even more important, the United States has no strategic reserve for its ground forces. It has fought a two-theater, multidivisional war for seven years. The Army is stretched to the limit, and should another crisis develop elsewhere in the world, the United States would lack the land power to respond decisively.

Avoiding this potential situation requires drawing down U.S. forces from Iraq. But simply abandoning the Persian Gulf to Iranian military and political power also represents a dangerous situation for the Americans. Therefore, the United States must balance two unacceptable realities.

The only hope the United States has of attaining this balance would be to achieve some semblance of its expectations of 2003. This would mean creating a cohesive Iraqi government with sufficient military and security capabilities to enforce its will internally and to deter an attack by an Iranian force. At the very least, the Iraqis would have to be able to hold off an Iranian attack long enough to allow the United States to rush forces back into Iraq and to suppress insurgent elements from all Iraqi communities, both Sunni and Shiite. If Iraq could do the former, the Iranians likely would refrain from an attack. Iranian rhetoric may be extreme, but the Iranians are risk-averse in their actions. If Iraq could do the latter, then they eliminate Iran’s preferred mode of operations, which is covert subversion through proxies.

The issue therefore boils down to how the United States answers this question: Can the Iraqis form a coherent government in Baghdad capable of making decisions and a force capable of achieving the goals laid out above? Both the government and the force have to exist; if either one is lacking, the other is meaningless. But alongside this question are others. Does Iraq have any strategic consensus whatsoever? If so, does it parallel American strategic interests? Assuming the Iraqis create a government and build a significant force, will they act as the Americans want them to?
State vs. Faction

The United States is a country that believes in training. It has devoted enormous efforts to building an Iraqi military and police force able to control Iraq. The Americans have tried to imbue Iraq’s security forces with “professionalism,” which in the U.S. context means a force fully capable of carrying out its mission and prepared to do so if its civilian masters issue the orders. As professionals, they are the technicians of warfare and policing.

But perhaps the fundamental question of any military force, one that comes before training, is loyalty. In some militaries, the primary loyalty is to oneself. In such militaries, one joins to make a living, steal what one can and simply survive. In other militaries, the primary loyalty is not to the state, but some faction of the country, be it religious, ethnic or geographical. No one is going to give his life defending a state to which he is indifferent or even hostile, no matter how carefully trained in handling his weapon or how well-lectured he is on the question of professional responsibility. Neither of these conditions allows for a successful military in the end. A man in it for himself is not going to go into harm’s way if he can help it. A man in the military to protect his clan is not going to die to protect those to whom he has no loyalty.

The U.S. Army has trained tens of thousands of Iraqis. And Americans are great trainers. But the problem isn’t training, it is loyalty. Professionalism doesn’t imbue anyone with self-sacrifice to something alien to him.

And this is the challenge the United States faces in the Iraqi government, which like most governments, consists of many factions with diverging interests. In viable states, however, fundamental values shared by the overwhelming majority lie beneath the competing interests, be they a myth of country or of the moral principles of a constitution. It is simply not apparent that Iraqi factions have a core understanding of what Iraq should be, however, nor is it clear whether they owe their primary loyalty to the state or to some faction of Iraq.

Saddam Hussein held the state together by a complex of benefits and terror. He became the center of Iraq, and in a sense became Iraq. Once he was destroyed, Iraq’s factions went to war with each other and with the United States, pursuing goals inimical to a united Iraq. Therefore Iraq’s reconstituted military and security forces, however intermixed or homogenized they may be, still owe their individual loyalties to their factions, which will call on them to serve their people, a subset of Iraq.

The United States plans to withdraw its combat forces by the summer. Leaving aside how well-protected the remaining 50,000 noncombat troops will be, the question persists on who will hold the country together. The Iranians certainly are not eager to see the Iraqi situation resolved in favor of a government that can block Iran’s ambitions. The Iranians have longstanding relations with any number of Iraqi Shiite groups, and even with some Kurdish and Sunni groups. Iran would have every reason to do what it can to destabilize Iraq above and beyond any indigenous destabilization of Iraq in order to help shape a government it can dominate. In our view, Tehran has the tools to do this effectively.

The American leadership is certainly aware of this. It may hope or even believe that a stable Iraqi government will emerge, and it will certainly not say anything publicly that would decrease confidence in the process. But at the same time, the American leadership must privately know that the probability of a cohesive Iraqi government commanding a capable and loyal security force is far from a slam dunk.
In Search of a Plan B

Therefore, logic tells us that the United States must have a Plan B. This could be a plan to halt withdrawals. The problem with that plan is that there is no assurance that in three months or a year the core divisions of Iraq could be solved. The United States could be left without forces for a strategic reserve without any guarantee that time would solve the problem. A strategy of delay calls for some clear idea of what delay would bring.

Or the United States could complete the withdrawal on the assumption that the Iranians would not dare attack Iraq directly while the residual U.S. force remained. The problem with this strategy is that it is built on an assumption. This assumption is not unreasonable, but it is still an assumption, not a certainty. Moreover, Iran could covertly destabilize Iraq, putting U.S. forces without sufficient combat capability in harm’s way from Iranian-supplied forces. Finally, Iran’s major audience consists of the oil powers of the Arabian Peninsula. Tehran wants to show the Gulf Arabs that the United States will withdraw from Iraq regardless of potential consequences to them, reducing their confidence in the United States and forcing them to contemplate an accommodation with Iran.

Halting the withdrawal therefore poses substantial challenges, and completing the withdrawal poses even more. This is particularly the case if the United States completes the withdrawal without reaching some accommodation with Iran. But negotiating with the Iranians from a position of weakness is not an attractive option. The Iranians’ price would be higher than the United States wants to pay. Therefore, the United States would have to make some show of power to the Iranians that will convince the Iranians that they are at risk. Bombing Iran’s nuclear facilities could fit the bill, but it has two drawbacks. First, the attacks might fail. Second, even if they succeeded, they would not have addressed the conventional problem.

Washington’s way forward depends upon what the American government believes the probabilities are at this point for a viable Iraqi government and security force able to suppress insurgencies, including those fomented by Iran. If the Americans believe a viable Iraqi government is a possibility, they should roll the dice and withdraw. But it is not clear from our point of view what Washington is seeing. If it believes the probability is low, the United States not only will have to halt the withdrawal, it will have to reverse it to convince the Iranians that the Americans are hypercommitted to Iraq. This might cause Tehran to recalculate, opening the door for discussion.

It is now April, meaning we are four months from the deadline for the completion of the withdrawal of U.S. combat forces from Iraq. In the balance is not only Iraq, but also the Iranian situation. What happens next all comes down to whether the mass of parties in Baghdad share a common foundation on which to build a nation — and whether the police and military would be loyal enough to this government to die for it. If not, then the entire edifice of U.S. policy in the region — going back to the surge — is not merely at risk, but untenable. If it is untenable, then the United States must craft a new strategy in the region, redefining relationships radically — beginning with Iran.

As with many things in life, it is not a matter of what the United States might want, or what it might think to be fair. Power is like money — you either have it or you don’t. And if you don’t, you can’t afford to indulge your appetites. If things in Baghdad work themselves out, all of this is moot. If things don’t work out, the Obama administration will be forced to make its first truly difficult foreign policy decisions.

"This report is republished with permission of STRATFOR"

Iranian Sanctions: Does Obama Plan to Jerk the Chinese Economic Chain?

Article: China: Crunch Time by By Peter Zeihan, Strategic Forecasting March 30, 2010

The primary reason why China’s growth has been so impressive is that throughout the period of economic liberalization that has led to rising incomes, the Chinese government has maintained near-total savings capture of its households and businesses. It funnels these massive deposits via state-run banks to state-linked firms at below-market rates. It’s amazing the growth rate a country can achieve and the number of citizens it can employ with a vast supply of 0 percent, relatively consequence-free loans provided from the savings of nearly a billion workers. It’s also amazing how unprofitable such a country can be. The Chinese system, like the Japanese system before it, works on bulk, churn, maximum employment and market share. The U.S. system of attempting to maximize return on investment through efficiency and profit stands in contrast. The American result is sufficient economic stability to be able to suffer through recessions and emerge stronger. The Chinese result is social stability that wobbles precipitously when exposed to economic hardship.

Political Season Takeway: If Ziehan is accurate, China's economy is extremely vunerable to unilateral retalitation by the United States for China's currency manipulation by simply pinching off China's access to the US market.  China's holding of massive amounts of US debt and the threat of not purchasing more is not really a counter either because those debt purchases fuel US demand for China's exports, which they can't afford to have dramatically reduced.  The Obama administration's rhetoric on Chinese economic policy may mean a US-China economic showdown over the yuan is on a slow boil to either a confrontation or a caving accomodation of some sort by China, economically or on the foreign policy front, as in Iranian sanctions.

Obama's Move: Iran and Afghanistan

By George Friedman ~ Honorary Political Season Contributor

During the 2008 U.S. presidential campaign, now-U.S. Vice President Joe Biden said that like all U.S. presidents, Barack Obama would face a foreign policy test early in his presidency if elected. That test is now here.

His test comprises two apparently distinct challenges, one in Afghanistan and one in Iran. While different problems, they have three elements in common. First, they involve the question of his administration’s overarching strategy in the Islamic world. Second, the problems are approaching decision points (and making no decision represents a decision here). And third, they are playing out very differently than Obama expected during the 2008 campaign.

During the campaign, Obama portrayed the Iraq war as a massive mistake diverting the United States from Afghanistan, the true center of the “war on terror.” He accordingly promised to shift the focus away from Iraq and back to Afghanistan. Obama’s views on Iran were more amorphous. He supported the doctrine that Iran should not be permitted to obtain nuclear weapons, while at the same time asserted that engaging Iran was both possible and desirable. Embedded in the famous argument over whether offering talks without preconditions was appropriate (something now-U.S. Secretary of State Hillary Clinton attacked him for during the Democratic primary) was the idea that the problem with Iran stemmed from Washington’s refusal to engage in talks with Tehran.

We are never impressed with campaign positions, or with the failure of the victorious candidate to live up to them. That’s the way American politics work. But in this case, these promises have created a dual crisis that Obama must make decisions about now.

Iran

Back in April, in the midst of the financial crisis, Obama reached an agreement at the G-8 meeting that the Iranians would have until Sept. 24 and the G-20 meeting to engage in meaningful talks with the five permanent members of the U.N. Security Council plus Germany (P-5+1) or face intensely increased sanctions. His administration was quite new at the time, so the amount of thought behind this remains unclear. On one level, the financial crisis was so intense and September so far away that Obama and his team probably saw this as a means to delay a secondary matter while more important fires were flaring up.

But there was more operating than that. Obama intended to try to bridge the gap between the Islamic world and the United States between April and September. In his speech to the Islamic world from Cairo, he planned to show a desire not only to find common ground, but also to acknowledge shortcomings in U.S. policy in the region. With the appointment of special envoys George Mitchell (for Israel and the Palestinian territories) and Richard Holbrooke (for Pakistan and Afghanistan), Obama sought to build on his opening to the Islamic world with intense diplomatic activity designed to reshape regional relationships.

It can be argued that the Islamic masses responded positively to Obama’s opening — it has been asserted to be so and we will accept this — but the diplomatic mission did not solve the core problem. Mitchell could not get the Israelis to move on the settlement issue, and while Holbrooke appears to have made some headway on increasing Pakistan’s aggressiveness toward the Taliban, no fundamental shift has occurred in the Afghan war.

Most important, no major shift has occurred in Iran’s attitude toward the United States and the P-5+1 negotiating group. In spite of Obama’s Persian New Year address to Iran, the Iranians did not change their attitude toward the United States. The unrest following Iran’s contested June presidential election actually hardened the Iranian position. Mahmoud Ahmadinejad remained president with the support of Supreme Leader Ayatollah Ali Khamenei, while the so-called moderates seemed powerless to influence their position. Perceptions that the West supported the demonstrations have strengthened Ahmadinejad’s hand further, allowing him to paint his critics as pro-Western and himself as an Iranian nationalist.

But with September drawing to a close, talks have still not begun. Instead, they will begin Oct. 1. And last week, the Iranians chose to announce that not only will they continue work on their nuclear program (which they claim is not for military purposes), they have a second, hardened uranium enrichment facility near Qom. After that announcement, Obama, British Prime Minister Gordon Brown and French President Nicolas Sarkozy held a press conference saying they have known about the tunnel for several months, and warned of stern consequences.

This, of course, raises the question of what consequences. Obama has three choices in this regard.

First, he can impose crippling sanctions against Iran. But that is possible only if the Russians cooperate. Moscow has the rolling stock and reserves to supply all of Iran’s fuel needs if it so chooses, and Beijing can also remedy any Iranian fuel shortages. Both Russia and China have said they don’t want sanctions; without them on board, sanctions are meaningless.

Second, Obama can take military action against Iran, something easier politically and diplomatically for the United States to do itself rather than rely on Israel. By itself, Israel cannot achieve air superiority, suppress air defenses, attack the necessary number of sites and attempt to neutralize Iranian mine-laying and anti-ship capability all along the Persian Gulf. Moreover, if Israel struck on its own and Iran responded by mining the Strait of Hormuz, the United States would be drawn into at least a naval war with Iran — and probably would have to complete the Israeli airstrikes, too.

And third, Obama could choose to do nothing (or engage in sanctions that would be the equivalent of doing nothing). Washington could see future Iranian nuclear weapons as an acceptable risk. But the Israelis don’t, meaning they would likely trigger the second scenario. It is possible that the United States could try to compel Israel not to strike — though it’s not clear whether Israel would comply — something that would leave Obama publicly accepting Iran’s nuclear program.

And this, of course, would jeopardize Obama’s credibility. It is possible for the French or Germans to waffle on this issue; no one is looking to them for leadership. But for Obama simply to acquiesce to Iranian nuclear weapons, especially at this point, would have significant diplomatic and domestic political ramifications. Simply put, Obama would look weak — and that, of course, is why the Iranians announced the second nuclear site. They read Obama as weak, and they want to demonstrate their own resolve. That way, if the Russians were thinking of cooperating with the United States on sanctions, Moscow would be seen as backing the weak player against the strong one. The third option, doing nothing, therefore actually represents a significant action.

Afghanistan

In a way, the same issue is at stake in Afghanistan. Having labeled Afghanistan as critical — indeed, having campaigned on the platform that the Bush administration was fighting the wrong war — it would be difficult for Obama to back down in Afghanistan. At the same time, the U.S. commander in Afghanistan, Gen. Stanley McChrystal, has reported that without a new strategy and a substantial increase in troop numbers, failure in Afghanistan is likely.

The number of troops being discussed, 30,000-40,000, would bring total U.S. and NATO forces in Afghanistan to just above the number of troops the Soviet Union deployed there in its war (just under 120,000) — a war that ended in failure. The new strategy being advocated would be one in which the focus would not be on the defeat of the Taliban by force of arms, but the creation of havens for the Afghan people and protecting those havens from the Taliban.

A move to the defensive when time is on your side is not an unreasonable strategy. But it is not clear that time is on Western forces’ side. Increased offensives are not weakening the Taliban. But halting attacks and assuming that the Taliban will oblige the West by moving to the offensive, thereby opening itself to air and artillery strikes, probably is not going to happen. And while assuming that the country will effectively rise against the Taliban out of the protected zones the United States has created is interesting, it does not strike us as likely. The Taliban is fighting the long war because it has nowhere else to go. Its ability to maintain military and political cohesion following the 2001 invasion has been remarkable. And betting that the Pakistanis will be effective enough to break the Taliban’s supply lines is hardly the most prudent bet.

In short, Obama’s commander on the ground has told him the current Afghan strategy is failing. He has said that unless that strategy changes, more troops won’t help, and that a change of strategy will require substantially more troops. But when we look at the proposed strategy and the force levels, it is far from obvious that even that level of commitment will stand a chance of achieving meaningful results quickly enough before the forces of Washington’s NATO allies begin to withdraw and U.S. domestic resolve erodes further.

Obama has three choices in Afghanistan. He can continue to current strategy and force level, hoping to prolong failure long enough for some undefined force to intervene. He can follow McChrystal’s advice and bet on the new strategy. Or he can withdraw U.S. forces from Afghanistan. Once again, doing nothing — the first option — is doing something quite significant.

The Two Challenges Come Together

The two crises intermingle in this way: Every president is tested in foreign policy, sometimes by design and sometimes by circumstance. Frequently, this happens at the beginning of his term as a result of some problem left by his predecessor, a strategy adopted in the campaign or a deliberate action by an antagonist. How this happens isn’t important. What is important is that Obama’s test is here. Obama at least publicly approached the presidency as if many of the problems the United States faced were due to misunderstandings about or the thoughtlessness of the United States. Whether this was correct is less important than that it left Obama appearing eager to accommodate his adversaries rather than confront them.

No one has a clear idea of Obama’s threshold for action.

In Afghanistan, the Taliban takes the view that the British and Russians left, and that the Americans will leave, too. We strongly doubt that the force level proposed by McChrystal will be enough to change their minds. Moreover, U.S. forces are limited, with many still engaged in Iraq. In any case, it isn’t clear what force level would suffice to force the Taliban to negotiate or capitulate — and we strongly doubt that there is a level practical to contemplate.

In Iran, Ahmadinejad clearly perceives that challenging Obama is low-risk and high reward. If he can finally demonstrate that the United States is unwilling to take military action regardless of provocations, his own domestic situation improves dramatically, his relationship with the Russians deepens, and most important, his regional influence — and menace — surges. If Obama accepts Iranian nukes without serious sanctions or military actions, the American position in the Islamic world will decline dramatically. The Arab states in the region rely on the United States to protect them from Iran, so U.S. acquiescence in the face of Iranian nuclear weapons would reshape U.S. relations in the region far more than a hundred Cairo speeches.

There are four permutations Obama might choose in response to the dual crisis. He could attack Iran and increase forces in Afghanistan, but he might well wind up stuck in a long-term war in Afghanistan. He could avoid that long-term war by withdrawing from Afghanistan and also ignore Iran’s program, but that would leave many regimes reliant on the United States for defense against Iran in the lurch. He could increase forces in Afghanistan and ignore Iran — probably yielding the worst of all possible outcomes, namely, a long-term Afghan war and an Iran with a nuclear program if not nuclear weapons.

On pure logic, history or politics aside, the best course is to strike Iran and withdraw from Afghanistan. That would demonstrate will in the face of a significant challenge while perhaps reshaping Iran and certainly avoiding a drawn-out war in Afghanistan. Of course, it is easy for those who lack power and responsibility — and the need to govern — to provide logical choices. But the forces closing in on Obama are substantial, and there are many competing considerations in play.

Presidents eventually arrive at the point where something must be done, and where doing nothing is very much doing something. At this point, decisions can no longer be postponed, and each choice involves significant risk. Obama has reached that point, and significantly, in his case, he faces a double choice. And any decision he makes will reverberate.

Political Season Reaction: This is it folks. We are about to get a definitive demonstration of the size and vitality of President Obama's cojones. If I were the President and it appeared that I could not get the Russians and the Chinese to get on board for crippling sanctions, based on this analysis, I would opt to attack Iran directly and bomb the living daylights out of them. Obama gets reports about what they are thinking in foreign capitals and I hope to hell that he finds the perception of him as weak really distasteful and decides to smash Ahmadinejads's face. I don't like the idea of yet more warfare and bloodshed and the upheaval worldwide that will come with it if we strike Iran, but better Obama do it and take his destiny into his own hands than be pulled along by events he did not initiate. Obama stated many times during the campaign that he would not permit Iran to obtain a nuclear weapon and its going to be difficult to back away from that now. Bush doubled down and did the surge and the combatants recalculated. Obama may have to double down on Iran and force a rethink worldwide about what he is capable of and willing to do. This is it. For Obama, its gut check time.

Talking to Enemies Is Not Weakness

Obama has been the target of lots of criticism for his oft stated willingness to engage in direct dialogue with our enemies abroad where the opportunity to do so exists. The utility of this approach may well be demonstrated by the North Korean situation.

The US's messaging to North Korea and the international community since the Obama administration came to power has been that it is willing to talk with the North Korean regime. At this moment when the North Korean's are provoking strong reactions from Japan, China, Russia and their neighbor South Korea, one arguement has been removed from North Korea and the international community for delay or inaction. No one can now argue that US policy is at fault for the intransigence of the North Korean regime.

Where Is The Sys Admin Force When You Need It?

North Korea on Monday conducted an underground nuclear test and also fired off several missiles. It repeated the provocative missile firings again today. The United Nations Security Council has issued what seems like a worthless statement of condemnation and the President is promising a more vigorous effort to enlist the international community in answering the North Korean provocation.

The less discerning on the right are happy to pounce on North Korea's actions as evidence of the weakness of the Obama administration's foreign policy, but in truth, the options of the United States and indeed the rest of the international community is limited where this bat s**t crazy, continuous crime against humanity regime is concerned.

Fellow Hoosier Thomas Barnett has called for the US to embrace a grand strategy that envisions a transparent and agreed upon international system for processing politically bankrupt states like North Korea, regimes that everybody wants gone. The wisdom of this concept seems manifest when confronted with a regime like North Korea. There really is no other true solution to the North Korean problem than regime change, indeed regime replacement. However, neither the US nor the international community have a mechanism for accomplishing the toppling of this regime and its replacement with another system of governance that will immediately take up the work of providing for its people and this is what is preventing great powers such as China from taking more responsibility for addressing North Korea's behavior. The Chinese fear the influx of millions of refugees were the North Korean state to be brought down without any way of standing up a replacement regime. This is perhaps even more critical a requirement in North Korea than in other places since all indications are that this is a state and society bizarre in the extremes to which the organized oppression of its people has been allowed to proceed and where its inhabitants may be frankly unable to function in anything resembling normal society for a period of time. We have the Leviathan force, but its the Sys Admin force we need to fix the North Korean problem.

On G-20 and GM: Economics, Politics and Social Stability - Why Obama Will Bail Out Detroit

By George Friedman ~ Honorary Political Season Contributor

The G-20 met last Saturday. Afterward, the group issued a meaningless statement and decided to meet again in March 2009, or perhaps later. Clearly, the urgency of October is gone. First, the perception of imminent collapse is past. Politicians are superb seismographs for detecting impending disaster, and these politicians did not act as if they were running out of time. Second, the United States will have a new president in March, and nothing can be done until he defines his policy.

Given the sense in Europe that this financial crisis marked the end of U.S. economic supremacy, it is ironic that the Europeans are waiting on the Americans. One would think they would be using their newfound ascendancy to define the new international system. But the fact is that for all the shouting, little has changed in the international order. The crisis has receded sufficiently that nothing more needs to be done immediately beyond “cooperation,” and nothing can be done until the United States defines what will be done. We feel that our view that the international system received fatal blows Aug. 8, when Russia and Georgia went to war, and Oct. 11, when the G-7 meeting ended without a single integrated solution, remains unchallenged. Now, it is every country for itself.

From Financial Crisis to Cyclical Recession

The financial crisis has been mitigated, if not solved. The problem now is that we are in a cyclical recession, and that every country is trying to figure out how to cope with the recession. Unlike the past two recessions, this one is more global than local. But unlike the 1970s, when recession was global, this one is not accompanied by soaring inflation and interest rates.

All recessions have different dynamics, but all have one thing in common: They impose punishment and discipline on economies run wild. This is happening around the world.

China, for example, faces a serious problem. China is an export-oriented economy whose primary market is the United States. As the United States goes into recession, demand for Chinese goods declines. Chinese businesses have always operated on very tight — sometimes invisible — profit margins designed to emphasize cash flow and to pay off debts to banks. As U.S. demand contracts, many Chinese firms find themselves in untenable positions, without room to decrease prices, lacking operating reserves and insufficiently capitalized. Recessions are designed to cull the weak from the herd, and a huge swath of the Chinese economy is ripe for the culling.

If the world were all about economics, culling is what the Chinese would do. But the world is more complex than that. A culling would lead to massive unemployment. Many Chinese employees live on Third World wages; indeed, the vast majority of Chinese have incomes of less than $1,000 a year. To them, unemployment doesn’t mean problems with their 401k. It means malnutrition and desperation — neither of which is unknown in 20th century Chinese history, including the Communist period. The Chinese government is rightly worried about the social and political consequences of rational economic policies: They might work in the long run, but only if you live that long.

Economic Restructuring vs. Stability

The Chinese have therefore prepared a massive stimulus package that is more of a development program to make up for declining U.S. demand. It aims to keep businesses from failing and spilling millions of angry and hungry workers into the street. For the Chinese, the economic problem creates a much larger and more serious issue. It is also an issue that must be solved quickly, and the amount of time needed outstrips the amount of time available.

This is not only a Chinese problem. Wherever there is an economic downturn, politicians must decide whether society — and their own political futures — can withstand the rigors recessions impose. Recessions occur when, as is inevitable, inefficiencies and irrationalities build up in the financial and economic system. The resulting economic downturn imposes a harsh discipline that destroys the inefficient, encourages everyone to become more efficient, and opens the doors to new businesses using new technologies and business models. The year 2001 smashed the technology sector in the United States, opening the door for Google Inc.

The business cycle works well, but the human costs can be daunting. The collapse of inefficient businesses leaves workers without jobs, investors without money and society less stable than before. The pain needed to rectify China’s economy would be enormous, with devastating consequences for hundreds of millions of Chinese, and probably would lead to social chaos. Beijing is prepared to accept a high degree of economic inefficiency to avoid, or at least postpone, the reckoning. The reckoning always comes, but for most of us, later is better than sooner. Economic rationality takes a back seat to social necessity and political common sense.

Every country in the world is looking inward at the impact of the recession on its economy and measuring its resources. Countries are deciding whether they have the ability to prop up business that should fail, what the social consequences of business failure would be, and whether they should try to use their resources to avoid the immediate pain of recession. This is why the G-20 ended in meaningless platitudes.

Each country is also trying to answer the question of how much pain it — and its regime — can endure. The more pain imposed, the healthier countries will emerge economically — unless of course the pain kills them. Ultimately, the rationality of economics and the reality of society frequently diverge.

Recession and the U.S. Auto Industry

For the United States, this choice has been posed in stark terms with regard to the dilemma of whether the U.S. government should use its resources to rescue the American auto industry. The American auto industry was once the centerpiece of the U.S. economy. That hasn’t been true for a generation, as other industries and services have supplanted it and other countries’ auto industries have surpassed it. Nevertheless, the U.S. auto industry remains important. It might drain the U.S. economy by losing vast amounts of money and destroying the equity held by its investors, but it employs large numbers of people. Perhaps more important, it purchases supplies from literally thousands of U.S. companies.

There can be endless discussions of why the U.S. auto industry is in such trouble. The answer lies not in one place but in many, from the decisions and makeup of management to the unions that control much of the workforce, and from the cost structure inherent in producing cars in the American economy to a simple systemic inability to produce outstanding vehicles. There might be varying degrees of truth to all or some of this, but the fact remains that each of the U.S. carmakers is on the verge of financial collapse.

This is what recessions are supposed to do. As in China and everywhere else, recessions reveal weak businesses and destroy them, freeing up resources for new enterprises. This recession has hit the auto industry hard, and it is unlikely that it is going to survive. The ultimate reason is the same one that destroyed the U.S. steel industry a generation ago: Given U.S. cost structures, producing commodity products is best left to countries with lower wage rates, while more expensive U.S. labor is deployed in more specialized products requiring greater expertise. Thus, there is still steel production in the United States, but it is specialty steel production, not commodity steel. Similarly, there will be specialty auto production in the United States, but commodity auto production will come from other countries.

That sounds easy, but the transition actually will be a bloodletting. Current employees of both the automakers and suppliers will be devastated. Institutions that have lent money to the automakers will suffer massive or total losses. Pensioners might lose pensions and health care benefits, and an entire region of the United States — the industrial Midwest — will be devastated. Something stronger will grow eventually, but not in time for many of the current employees, shareholders and creditors.

Here the economic answer, cull, meets the social answer, stabilize. Policymakers have a decision to make. If the automakers fail now, their drain on the economy will end; the pain will be shorter, if more intense; and new industries would emerge more quickly. But though their drain on the economy would end, the impact of the automakers’ failure on the economy would be seismic. Unemployment would surge, as would bankruptcies of many auto suppliers. Defaults on loans would hit the credit markets. In the Midwest, home prices would plummet and foreclosures would skyrocket. And heaven only knows what the impact on equity markets would be.

In the U.S. case, the healthful purgative of a recession could potentially put the patient in a coma. Few if any believe the U.S. auto industry can survive in its current form. But there is an emerging consensus in Washington that the auto industry must not be allowed to fail now. The argument for spending money on the auto industry is not to save it, but to postpone its failure until a less devastating and inconvenient time. In other words, fearing the social and political consequences of a recession working itself through to its logical conclusion, Washington — like Beijing — wants to spend money it probably won’t recover to postpone the failure. Indeed, governments around the world are considering what failures to tolerate, what failures to postpone, and how much to spend on the latter. General Motors is merely the American case in point.

The Recession in Context

The people arguing for postponement aren’t foolish. The financial system is still working its way through a massive crisis that had little to do with the auto industry. Some traction appears to be occurring; certainly there was no crisis atmosphere at the G-20 meeting. The economy is in recession, but in spite of the inevitable claims that we have never seen anything like this one before, we have. There is always some variable that swings to an extreme — this time, it is consumer spending — but we are still well within the framework of recent recessions.

Consider the equity markets, which we regard as a long-term measure of the market’s evaluation of the state of the economy. In January 2000, the S&P 500 peaked at 1,455. This was the top of the market. In July 2002, 18 months later, the S&P bottomed out at 935. Over the next five years it rose to 1,519 in July 2007, the height for this cycle. It fell from this point until Nov. 12, 2008, when it closed at 852.30. This past Friday, it was at 873.29.

We do not know what the market will do in the future. There are people much smarter than we are who claim to know that. What we do know is what it has done. And what it has done this time — so far — is almost exactly what it did last time, except that in 2000-2002 it took 18 months to do it, while this time it was done in about 16 and a half months (assuming it bottomed out Nov. 12). But even if the market didn’t bottom out then, and it falls to 775, for example, it will have lost 50 percent of its value from the peak. This would be more than in 2000-2002, but not unprecedented.

The point we are making here is that if we regard the equity markets as a long-term seismograph of the economy, then so far, despite all the storm and stress, the markets — and therefore the economy — remain within the general pattern of the 2000-2002 market at the 2001 recession. That recession certainly was unpleasant, what with the devastation of the tech sector, but the economy survived. At the same time, however, it is clear that things are balanced on a knife’s edge. Another hundred points’ fall on the S&P, and the markets will be telling us that the world is in a very different place indeed.

A massive bankruptcy in the automotive sector could certainly set the stage for an economic renaissance in the next generation. But at this particular moment in time (it’s no coincidence that the crisis in the U.S. automotive industry comes as we enter a recession), a wave of bankruptcies would dramatically deepen the recession. This probably would be reflected by the destruction of trillions more in net worth in the equity markets.

There is a powerful counterargument to bailing out the U.S. auto industry. This argument holds that the auto industry is a drain on the U.S. economy, that it will never be globally competitive, and that if it is dragged back from the edge, no one will then say it is time to push it to the edge and over. The next time it will be on the brink will be during the next recession, and the same argument to save it will be used. In due course, the United States, like China, will be so terrified of the social and political consequences of business failure that it will maintain Chinese-like state owned enterprises, full of employees and generation-old plants and business models. Clearly, short-run solutions can easily become long-term albatrosses.

The only possible solution would be a bailout followed by a Washington-administered restructuring of the auto industry. This causes us to imagine a collaboration between the auto industry’s current management and Washington administrators that would finally put Detroit on a path to where it can compete with Toyota. Frankly, the mind boggles at this. But boggle though we might, hitting the economy with another massive financial default, a wave of bankruptcies, massive unemployment surges and another blow to housing prices boggles our mind even more.

The geopolitical problem confronting the world at the moment is that it has been forced to offer massive support to the global financial system with sovereign wealth — e.g., via taxes and currency printing presses. The world might just have squeaked through that crisis. Now, the world is in an inevitable recession and businesses are on the brink of failure. A wave of massive business failures on top of the financial crisis might well move the global system to a very different place. Therefore, each nation, by itself and indifferent to others, is in the process of figuring out how to postpone these failures to a more opportune time — or to never. This will build in long-term inefficiencies to the global economy, but right now everyone will be quite content with that.

Thus the financial crisis became a recession, and the recession triggered bankruptcies. And because no one wants bankruptcies right now, everyone who can is using taxpayer dollars to protect the taxpayer from the consequences of mismanagement. And the last thing any one cared about was the G-20 concept for the future of the economic system.

American Truimph

This is the portrait of total victory, a living breathing expression of athletic supremacy. Michael Phelps has been phenomenal thus far in the Olympics, making us proud at every turn. As a former athlete, I enjoy watching the Olympics and the many sports, in part because when athletes win the gold, I can relate to the thrill of victory. I understand the sacrifice, the hours of practice, the pain, the commitment required to become an Olympian, let alone win a medal.
So I am completely impressed with the dominance of Michael Phelps, the unparalleled prowess that is on display each and every time he slips his 6 foot four inch frame beneath the waves.

I am equally impressed if not more so by his demeanor and carriage. It is clear he commands the respect of his teammates and fellow swimmers. He is a team player, cheering on his teammates in the 4x100 relay with tremendous fervor, celebrating triumph with them when they won. His comments to reporters after winning are modest, confidently humble. He's clear that talking smack is unnecessary. He does all his talking in the water. When they won the relay and he roared in triumph, I roared with him. Phelps is an obviously determined individual with a laser focus on what he has come to the Olympics to do. He is supplying thrills and inspiration to Americans back home on his road to a history making 8 gold medal performance. Even more inspirational is watching him do it with class, humility and true Olympic spirit.

Olympic Glory

Cullen Jones, a U.S. freestyle sprint swimmer and now Olympic gold medalist made history at the Olympics when he swam a leg (split of 47.96) in the world record breaking 4x100 m Freestyle Relay along with Michael Phelps, Jason Lezak and Neil Walker. In an Olympic sport that does not appear to boast many swimmers of color, it was a pleasant and gratifying surprise to see this young brother from the Bronx on the team. Even more thrilling was watching him contribute to a world record shattering gold medal performance along with his teammates. The incredible performance of Michael Phelps at this Olympics has understandably overshadowed Cullens presence and contribution, as it has his other teammates, in particular Jason Lezak, who I would argue is the man that won that relay, hawking down from behind Bernard of France to win gold.

Cullen's quiet contribution to victory was heartwarming, thrilling and inspiring. The star power of Phelps shines so brightly that these other stories are getting far less oxygen by comparison, but I hope Black America will take every opportunity following these Olympics to acknowledge and honor Cullen's contribution, committment and outstanding representation of his country and his community.

Chinese Geopolitics and the Significance of Tibet

By George Friedman (Honorary Political Season Contributor)
This is a timely post with direct relevance to various pro-Tibet protests and campaigns.

China is an island. We do not mean it is surrounded by water; we mean China is surrounded by territory that is difficult to traverse. Therefore, China is hard to invade; given its size and population, it is even harder to occupy. This also makes it hard for the Chinese to invade others; not utterly impossible, but quite difficult. Containing a fifth of the world’s population, China can wall itself off from the world, as it did prior to the United Kingdom’s forced entry in the 19th century and under Mao Zedong. All of this means China is a great power, but one that has to behave very differently than other great powers.

Analyzing Chinese Geography

Let’s begin simply by analyzing Chinese geography, looking at two maps. The first represents the physical geography of China.

The second shows the population density not only of China, but also of the surrounding countries.

China’s geography is roughly divided into two parts: a mountainous, arid western part and a coastal plain that becomes hilly at its westward end. The overwhelming majority of China’s population is concentrated in that coastal plain. The majority of China’s territory — the area west of this coastal plain — is lightly inhabited, however. This eastern region is the Chinese heartland that must be defended at all cost.

China as island is surrounded by impassable barriers — barriers that are difficult to pass or areas that essentially are wastelands with minimal population. To the east is the Pacific Ocean. To the north and northwest are the Siberian and Mongolian regions, sparsely populated and difficult to move through. To the south, there are the hills, mountains and jungles that separate China from Southeast Asia; to visualize this terrain, just remember the incredible effort that went into building the Burma Road during World War II. To the southwest lie the Himalayas. In the northwest are Kazakhstan and the vast steppes of Central Asia. Only in the far northeast, with the Russian maritime provinces and the Yalu River separating China from Korea, are there traversable points of contacts. But the balance of military power is heavily in China’s favor at these points.

(click image to enlarge)

Strategically, China has two problems, both pivoting around the question of defending the coastal region. First, China must prevent attacks from the sea. This is what the Japanese did in the 1930s, first invading Manchuria in the northeast and then moving south into the heart of China. It is also what the British and other European powers did on a lesser scale in the 19th century. China’s defense against such attacks is size and population. It draws invaders in and then wears them out, with China suffering massive casualties and economic losses in the process.

The second threat to China comes from powers moving in through the underpopulated portion of the west, establishing bases and moving east, or coming out of the underpopulated regions around China and invading. This is what happened during the Mongol invasion from the northwest. But that invasion was aided by tremendous Chinese disunity, as were the European and Japanese incursions.

Beijing’s Three Imperatives

Beijing therefore has three geopolitical imperatives:

1. Maintain internal unity so that far powers can’t weaken the ability of the central government to defend China.
2. Maintain a strong coastal defense to prevent an incursion from the Pacific.
3. Secure China’s periphery by anchoring the country’s frontiers on impassable geographical features; in other words, hold its current borders.

In short, China’s strategy is to establish an island, defend its frontiers efficiently using its geographical isolation as a force multiplier, and, above all, maintain the power of the central government over the country, preventing regionalism and factionalism.

We see Beijing struggling to maintain control over China. Its vast security apparatus and interlocking economic system are intended to achieve that. We see Beijing building coastal defenses in the Pacific, including missiles that can reach deep into the Pacific, in the long run trying to force the U.S. Navy on the defensive. And we see Beijing working to retain control over two key regions: Xinjiang and Tibet.

Xinjiang is Muslim. This means at one point it was invaded by Islamic forces. It also means that it can be invaded and become a highway into the Chinese heartland. Defense of the Chinese heartland therefore begins in Xinjiang. So long as Xinjiang is Chinese, Beijing will enjoy a 1,500-mile, inhospitable buffer between Lanzhou — the westernmost major Chinese city and its oil center — and the border of Kazakhstan. The Chinese thus will hold Xinjiang regardless of Muslim secessionists.

The Importance of Tibet to China

Now look at Tibet on the population density and terrain maps. On the terrain map one sees the high mountain passes of the Himalayas. Running from the Hindu Kush on the border with Pakistan to the Myanmar border, small groups can traverse this terrain, but no major army is going to thrust across this border in either direction. Supplying a major force through these mountains is impossible. From a military point of view, it is a solid wall.

Note that running along the frontier directly south of this border is one of the largest population concentrations in the world. If China were to withdraw from Tibet, and there were no military hindrance to population movement, Beijing fears this population could migrate into Tibet. If there were such a migration, Tibet could turn into an extension of India and, over time, become a potential beachhead for Indian power. If that were to happen, India’s strategic frontier would directly abut Sichuan and Yunnan — the Chinese heartland.

The Chinese have a fundamental national interest in retaining Tibet, because Tibet is the Chinese anchor in the Himalayas. If that were open, or if Xinjiang became independent, the vast buffers between China and the rest of Eurasia would break down. The Chinese can’t predict the evolution of Indian, Islamic or Russian power in such a circumstance, and they certainly don’t intend to find out. They will hold both of these provinces, particularly Tibet.

The Chinese note that the Dalai Lama has been in India ever since China invaded Tibet. The Chinese regard him as an Indian puppet. They see the latest unrest in Tibet as instigated by the Indian government, which uses the Dalai Lama to try to destabilize the Chinese hold on Tibet and open the door to Indian expansion. To put it differently, their view is that the Indians could shut the Dalai Lama down if they wanted to, and that they don’t signals Indian complicity.

It should be added that the Chinese see the American hand behind this as well. Apart from public statements of support, the Americans and Indians have formed a strategic partnership since 2001. The Chinese view the United States — which is primarily focused on the Islamic world — as encouraging India and the Dalai Lama to probe the Chinese, partly to embarrass them over the Olympics and partly to increase the stress on the central government. The central government is stretched in maintaining Chinese security as the Olympics approach. The Chinese are distracted. Beijing also notes the similarities between what is happening in Tibet and the “color” revolutions the United States supported and helped stimulate in the former Soviet Union.

It is critical to understand that whatever the issues might be to the West, the Chinese see Tibet as a matter of fundamental national security, and they view pro-Tibetan agitation in the West as an attempt to strike at the heart of Chinese national security. The Chinese are therefore trapped. They are staging the Olympics in order to demonstrate Chinese cohesion and progress. But they must hold on to Tibet for national security reasons, and therefore their public relations strategy is collapsing. Neither India nor the United States is particularly upset that the Europeans are thinking about canceling attendance at various ceremonies.

A Lack of Countermoves

China has few countermoves to this pressure over Tibet. There is always talk of a Chinese invasion of Taiwan. That is not going to happen — not because China doesn’t want to, but because it does not have the naval capability of seizing control of the Taiwan Straits or seizing air superiority, certainly not if the United States doesn’t want it (and we note that the United States has two carrier battle groups in the Taiwan region at the moment). Beijing thus could bombard Taiwan, but not without enormous cost to itself and its own defensive capabilities. It does not have the capability to surge forces across the strait, much less to sustain operations there in anything short of a completely permissive threat environment. The Chinese could fire missiles at Taiwan, but that risks counterstrikes from American missiles. And, of course, Beijing could go nuclear, but that is not likely given the stakes. The most likely Chinese counter here would be trying to isolate Taiwan from shipping by firing missiles. But that again assumes the United States would not respond — something Beijing can’t count on.

While China thus lacks politico-military options to counter the Tibet pressure, it also lacks economic options. It is highly dependent for its economic well-being on exports to the United States and other countries; drawing money out of U.S. financial markets would require Beijing to put it somewhere else. If the Chinese invested in Europe, European interest rates would go down and U.S. rates would go up, and European money would pour into the United States. The long-held fear of the Chinese withdrawing their money from U.S. markets is therefore illusory: The Chinese are trapped economically. Far more than the United States, they can’t afford a confrontation.

That leaves the pressure on Tibet, and China struggling to contain it. Note that Beijing’s first imperative is to maintain China’s internal coherence. China’s great danger is always a weakening of the central government and the development of regionalism. Beijing is far from losing control, but recently we have observed a set of interesting breakdowns. The inability to control events in Tibet is one. Significant shortages of diesel fuel is a second. Shortages of rice and other grains is a third. These are small things, but they are things that should not be happening in a country as well-heeled in terms of cash as China is, and as accustomed as it is to managing security threats.

China must hold Tibet, and it will. The really interesting question is whether the stresses building up on China’s central administration are beginning to degrade its ability to control and manage events. It is easy to understand China’s obsession with Tibet. The next step is to watch China trying to pick up the pieces on a series of administrative miscues. That will give us a sense of the state of Chinese affairs.

China: The 2008 Olympics as a Major Activist Inroad

Today, this blog is participating in In Solidarity: Global Day for Darfur called by Modern Musings and supported by Black and Missing But Not Forgotten, BlackPerspective.net, Black Women Vote, CEO Mum, Darfur: An Unforgivable Hell on Earth, Eddie G. Griffin, Electronic Village, Musings of the Night, My African Diaspora, Regina's Family Seasons, Slant Truth, Take Political Action, The Jose Vilson, Trav’s Thoughts, UltraViolet Underground, Vanessa Unplugged, What About Our Daughters and others.

Analysis courtesy of Strategic Forecasting. Also, be sure to watch the Featured Video on Darfur.
Fidelity Investments has sold off more than 90 percent of its holdings in Chinese state-owned oil giant PetroChina, Fidelity announced in May 16, 2007. Although the company declined to explain the sale, it almost certainly is related to pressure from human rights and religious activists.

Activists argue that, as the primary oil field operator in Sudan, PetroChina is propping up the Khartoum regime responsible for the genocide in Darfur, so putting pressure on PetroChina is viewed as a way to pressure the Sudanese government indirectly. Fidelity's move marks an important strategic turning point in the battle between human rights groups and China over the Darfur region, and sets the stage for a far more powerful strategic thrust that will emerge during the summer -- one in which Darfur activists move from a financial divestment campaign to one focused on the 2008 Olympic Games.

Activists have long sought effective pressure points on China, and the Olympics look to be the answer. More specifically, activists are eyeing the list of Western corporate sponsors that are investing tens of millions of dollars in the Olympics and in companion marketing campaigns designed to run before and during the Olympics.

Olympic sponsorship in 2008 means more than in most past years. For Beijing, giants such as Kodak, Coca-Cola, McDonald's and General Electric are not simply the means to put on a good show; they are integral to its efforts to radically change international perceptions of China and establish its new place in the world. Beijing can control most of the variables that come its way -- the protesters, media investigations into corruption and other potential public relations problems that usually come with hosting the Olympics. And, with the sites chosen and no backup available, it can largely ignore the International Olympic Committee. What Beijing cannot control, however, are the decisions of the games' sponsors and the pressures placed upon these companies in the West.

Through the Olympic sponsors, activists have determined that the year leading up to the Olympics offers a unique opportunity to use market mechanisms to change Beijing's policies. The first Western movement to begin to capitalize on this vulnerability is the Save Darfur Coalition, which turned Sudan into a pariah state with which no Western company will do business only to have its efforts undermined by Chinese state-owned enterprises. Many other issues could have taken this mantle, but it appears that Darfur-focused activists have taken the lead on exploiting Olympics-related vulnerabilities -- and will manage the most effective Western campaign to change China's policies.

The coming year will determine whether activists can actually make Beijing blink. Moreover, it will determine how groups active on issues other than Darfur deal with the likelihood that the more focused Darfur coalition will overshadow their use of this golden opportunity.

Olympic Sponsorship

The decision to become an Olympic sponsor is a strategic one for companies. The price of sponsorship is steep -- estimated at roughly $55 million -- but that pales in comparison to the broader investment these companies make. The largest and most familiar sponsors have attached their most valuable asset, their brands, to the games, and have built long-term marketing plans in which the Olympics play an integral part.

With so much invested, Olympic sponsorship has always brought tension. The 2004 Athens games, which were twice threatened with a move to an alternate city due to poor organization, created stress among investors. Sponsors now have established offices in future Olympic cities, where they work as closely as possible with municipal authorities to ensure that the logistics and setup are on track.

In the years since 2001, when the 2008 games were awarded to Beijing, the games have carried an added political dimension for sponsors. Beijing recruited sponsors not just as sources of money, but as partners, and for large multinational corporations trying to learn how to operate in China the opportunity to work with Beijing was tempting. Those who signed on as sponsors see the success of these games not only as an opportunity to build their market share in the West, but also as a way to increase their presence in China. Beijing also subtly offered improved market access and other preferential treatment to companies that threw in behind the 2008 games.

Beijing, in order to assert itself on the international stage, has spent billions of dollars preparing for the games. It brought in the best stadium architects to build venues and hired Stephen Spielberg to choreograph the opening and closing ceremonies. In addition, the Chinese have razed entire neighborhoods to ease transportation and shuttered industries to clean Beijing's air. If it can be bought, Beijing is buying.

The support and presence of high-profile Western companies provided one thing that Beijing could not buy: legitimacy. The thinking is that the participation of major corporate icons will give a degree of continuity with previous Olympics, and that by extension China will be seen as a modern country rather than a developing one or, more negatively, as the killer of Tiananmen Square, the violator of human rights and the repressor of basic freedoms.

Activists who succeed in portraying corporate sponsors of Beijing's Olympics as supporters of China's behavior would undermine not only the companies' marketing efforts, but also Beijing's plan to use the games as a coming-out party

Darfur

The human rights controversy surrounding the civil war in Darfur has been growing since 1998. Khartoum's operations in Darfur mostly target Christians, and the issue surfaced from the concerns of evangelical Christian organizations active in Africa. By 1999, Darfur had emerged as a mainstream human rights concern, and organizations such as Amnesty International and Human Rights Watch joined religious groups in calling for the United States and other Western governments to impose sanctions on the regime in Sudan.

Sudan essentially was a pariah state by the late 1990s, so it was obvious even at the beginning of the movement that diplomatic pressure on Sudan would be of limited value. Instead, recognizing the country's dependence on its southern oil production -- and on the companies that turn the resource into revenues for the regime -- activists focused on the corporations. With the flight of most Western companies in the first half of this decade, Khartoum, rather than lose its oil revenue, turned to China. Thus, through PetroChina the Asian giant has managed Sudan's oil operations and kept the money flowing into Khartoum.

Beyond the funding aspect, however, PetroChina's entry into Sudan has stood as a major symbol for Western human rights activists, who have come to view state-owned oil and resources companies as the most significant barrier to their ability to use market campaign pressure to change policies in developing countries.

In response to the globalization of corporations' operations and the rise of the World Trade Organization, human rights groups have come to rely increasingly on codes of conduct and other marketplace initiatives, such as the Extractive Industry Transparency Initiative, to hold corporations accountable for their activities in developing countries. Western companies in particular are sensitive to allegations that they are complicit in human rights violations. State-owned enterprises abroad, on the other hand, are insulated from these pressures, and have begun to thrive in those places that Western companies dare not operate.

In human rights discussions, this is termed the "parastatal problem." It is the chief unsolvable barrier to successful efforts by nongovernmental organizations (NGOs) to use corporations as instruments of change in developing countries.

'Genocide Olympics'

Bumping up against the parastatal problem, the Save Darfur Coalition has begun to build toward using Olympic sponsors as leverage against Beijing. In a Wall Street Journal op-ed article published in late March, actor and activist Mia Farrow and her husband called for a boycott of the Beijing Olympics. The threat will fall on deaf ears, as the vogue of boycotting Olympics -- started by U.S. President Jimmy Carter in 1980 and re-tried in 1984 by the Soviets -- had no diplomatic effect and only made the boycotters' citizens angry.

The Farrow op-ed, however, contained a more serious threat: As long as China's state-owned enterprises remain in Sudan, the coalition aims to attack Olympic sponsors directly and rebrand the 2008 games as the "Genocide Olympics" (a term first used by Amnesty International to describe China's internal human rights record and the human rights implications of its foreign policy). More sensationally, the coalition threatened to name Stephen Spielberg the "Leni Riefenstahl of the Beijing games," a reference to the German filmmaker whose documentary of the 1936 Berlin games glorified the Nazi regime in the broader context of the Olympics. Spielberg now publicly calls for China to change its policy toward Sudan.

The threat to boycott is idle talk, but the threat to change the perception of the games is not. The Save Darfur Coalition includes many of the most talented corporate campaign groups in the world, and the realistic opportunity to change the situation in Darfur is attractive to Western activists of almost all stripes. In addition, the public has a high level of awareness of Darfur as a controversial issue, and most U.S. consumers recognize that China has a controversial human rights record. Sponsors are likely to be sensitive to allegations that they are supporting a "Genocide Olympics" and will take their complaints to Beijing. Given these factors, then, the campaign has an excellent chance of attaining at least some degree of success.

That said, defining "success" is a difficult task. China cannot simply stop the genocide in Darfur with a wave, and it must make a move that simultaneously satisfies its critics, has a chance of changing what is happening on the ground in Darfur and results in China's continued presence in Sudan. (Sudan supplies more than 5 percent of China's oil.) One problem is that China remains one of the last countries with any leverage against Sudan, so it is valuable to activists and governments alike as a point of communication with Khartoum. If pushed too hard, Khartoum could simply open to another state-owned company immune to Western public condemnation, kicking China out. Ultimately, China has few options. It could agree to try to convince Sudan to allow more U.N. and Africa Union peacekeepers into Darfur, but that would end the campaign only if the Save Darfur Coalition agreed that such a deal was sufficient.

In focusing the "Genocide Olympics" campaign squarely on Darfur, however, human rights groups are using a one-time opportunity to achieve a relatively modest goal -- and are passing up a unique moment to effect major change in China.

Falun Gong is another group that appears to recognize the unique opportunity the Olympics offer. This summer, Falun Gong is planning a wave of protests and actions that will bring world attention directly to China's human rights record. Other organizations -- labor, environmental, religious -- also could try to swoop in and use the Olympic moment.

China might be able to manage activist campaigns effectively and relatively peacefully. However, should pressure on internal fronts -- from Falun Gong or other human rights, democracy or free-expression activists -- get too high for Beijing to handle temperately, it could consider using Darfur as a public relations safety valve. Giving in and basically agreeing to work with NGOs on Darfur would satisfy critics by addressing what is for Beijing a third-tier issue.

Here are some things you can do, courtesy of Modern Musings and Dream for Darfur.

All actions sponsored by Dream for Darfur

1. Write to the ambassadors of the US, the UK, Russia and France to the UN. Urge them to help China insist that Khartoum stop its obstruction.

2. Email or call the Olympic Corporate Sponsors.
Send a letter to companies sponsoring the 2008 Olympics, hosted by China. (Dream for Darfur’s email system will let you do this with the touch of a button.)

3. Pledge to turn off the commercials of Olympic Sponsors during the Games. Olympic corporate sponsors have been silent about China’s financing of the Darfur genocide, even as the sponsors are spending billions to enhance China’s image as Olympic host. If sponsors continue to ignore China’s complicity in the Darfur genocide, we will ignore their million-dollar ad campaigns.

4. Write to the UN Special Adviser on Sport for Development and Peace.
Mr. Adolf Ogi represents the UN Secretary-General in contacts with international sports bodies. Tell him you are concerned that the world will gather for the Olympics while the people of Darfur are being slaughtered.

5. Petition the International Olympic Committee.
Urge the IOC to work with the international community to ensure that China uses its leverage with the government of Sudan to help stop the genocide in Darfur, and avoids tarnishing the 2008 Games in Beijing.

Organizations dedicated to ending the genocide in Darfur

• 24 Hours for DarfurSave Darfur
• Darfur Genocide
• Amnesty International
• Eyes on Darfur
• Human Rights Watch
• Crisis Group
• United States Holocaust Museum
• Dream for Darfur