Where do we go from here?

Another day, another loss. As commemorations and mourning begins for the victims in Belgium, a numbness has settled across Europe. Things weren’t supposed to be like this anymore. The world was supposed to be different. Europe was supposed to be different.

Like many of my friends I found the latest attacks upsetting, but no longer shocking. We have seen the images before and seen the same motions performed by our leaders, individuals in our social media circle and figures in our respective communities. As sad as it may be, it seems that a dawning realisation has settled across Europe that these attacks are no longer “abnormal”, but rather a new normal.

Terrorism is powerful because it taps into our most primal of instincts. It removes certainty in our lifestyles and it corrodes personal confidence in our broader society to protect us from threats. In an atmosphere of fear, we retreat into our personal networks and further isolate communities from each other. If one ever needed an example of this, then the public attitude towards 1,000’s of migrants seeking a new life in Europe, seen in the corresponding growth of far right political movements, provides clear evidence.

But while we don’t know the specifics of the latest attacks, what we do know is that the largest source of threats to European nationals thus far has come not from migrants or refugees, but from our own citizens. These individuals are not all poor, nor lacking in education or somehow psychologically “unhinged”. They are, in a sense, normal Europeans and they often come from good families. Most (or certainly many) were educated within largely secular systems and they have (and perhaps continue to) enjoy the benefits of western lifestyles[1]. In short they are very much our own problem, and one which we must accept we have helped (to varying degrees) to create.

The fact is that certain people in our communities feel so disconnected and lost in our society that they are prepared to commit unspeakable horrors to join the death cult that is ISIS today. This is not a religious motivation. ISIS are not endorsed by Muslim scholars, nor do they follow Islamic principles. Rather, these people have lost hope in the ability of democracies to make life better for themselves, their community and other communities overseas, with whom they feel an affiliation.

It is perhaps the most human of all things to simply throw in the towel and say “enough!”. Don’t let anyone else in. Build high walls and borders. Increase surveillance of our Muslim communities and restrict our human rights more if necessary. Ignore arbitrary detention laws and pursue extrajudicial killing. In short, anything that will make us believe we will be more safe (even if they wont or don’t work in reality). Certainly a few politicians and voters hold these views. Suffice to say they don’t require naming.

But sitting around and feeling helpless is not a solution and neither is extreme, knee jerk policy making. While Europe has been poor at showing solidarity for acts of terror in other parts of the world, such as Turkey, Lebanon, Nigeria and Indonesia (to name a few), everyone could learn a lot by studying how the ordinary people in these communities have responded to acts of terror in their day-to-day lives. In short, the people moved on, just as life moves on. As the Brits used to say during the Blitz “Keep calm and carry on”.

So if we are going to look at how to make our societies stronger, our people safer and ISIS unappealing to our citizens, then we have to look hard at ourselves. Do we really allow people the chance to create a better life for themselves, do we honestly believe what we say on Human Rights and universal values and perhaps most importantly, do we honestly consider the views of all our citizens as equivalent?

I am not saying that any system or any society is perfect, nor that such a goal is realistic. But as any politician knows only too well, the signalling can matter as much as the substance. It is a duty upon all of us to campaign and push for society to reconnect with politics and our governments. To fight against simplistic arguments which propagate ignorance and division. To resist the temptation to fall into despair. And, to make the most of every day and opportunity that this world gives us.

This piece was titled “Where do we go from here” in adapting to acts of terrorism at home, and humbly I submit my answer: we make the most of every opportunity that the world has to offer and we strive to improve understanding and engagement between individuals and our communities. We go for our passions and we fight for our values. Above all we never forget that this world is our home and it is only going to get better when the silent majority of our citizens fight to protect it when it’s threatened and to change it when its broken.

That is our challenge for this time and that’s how we must face this new normal.

[1] (as an aside here: Planet Money’s podcast on ISIS fighter expenditures is excellent, including $90 chocolate bars and french aftershave). http://www.npr.org/sections/money/2015/12/04/458524627/episode-667-auditing-isis

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The Case for BREXIT

The starting gun has been fired and now begins the race. By the end of June 2016, the UK will have made the most important decision it has faced in 25 years. Do we stay or do we go?

The BREXIT debate is one of identity, and it is on this issue that the referendum must deliver a clear answer. The question of Britain’s role and place in Europe has always been defined by this question: are we Europeans or are we something different?

Many misunderstand this notion. To say you are different makes people uncomfortable. In this context, it inspires claims either that British people are exhibiting national chauvinism or that they are being willfully ignorant of the realities of today’s world. These claims, however natural they may be given the appalling narrative on immigration in Britain today, are wrong. Britain is different not because we do not share with other Europeans the common bonds of humanity, shared love and respect for liberty and human decency, respect and tolerance of others and a commitment to helping those in need. We are different because we do not believe, nor do we accept, that Europe’s methods of how to build a society are the right ones.

Most would like this vote to be about a simpler issue. The “vote leave” seeks a migration narrative, the “vote stay” wants an economic narrative. But for the future of Britain, they must both fail in their endeavours. Instead, voters should understand the clear meaning of their actions. To “vote stay” means that British people must finally accept that they have a shared responsibility to working with Europeans to help solve their problems as well as our own. To “vote leave” requires British people to acknowledge that if we do not feel a responsibility to help Europeans outside of our national interest, then we must acknowledge simultaneously that Europe has no responsibilities to support our national interest.

In the narrative of history, we must all hope that the story of Europe continues. The European Union has made life better for the continent and its people. It is a symbol of hope and idealism to many across the world, despite all its failings. But it is not our story. I believe in BREXIT because in viewing my home and those from it, I see the world differently from those on the continent. Our nation is not afraid of no longer being a titan on the world stage, nor are we afraid of a world where we do not control the global agenda. Britain has always thrived on its ability to innovate, to be pragmatic and to take risks in order to survive. Such has always been the necessity of island nations.

Europeans see the EU as a mechanism to sit at the world table in the rising new world order. As an equal to China, the US and to India. Today’s modern Britain does not see that necessity. The reality of the modern world is that no nation, or body of nations, can unilaterally determine their economic environment or their security environment. The age of autarky and isolationism is dead. The challenge of our time is not do we choose to work with others, but how we choose to do so. In this context, one must always remember that national interests reflect national character.

The UK does not believe that protectionist trade tariffs, strict labour laws, state controlled economies or heavy state regulation leads to a greater quality of life for our people. The history of our nation shows that our prosperity has been driven by the periods where we innovate, where we seek out new ideas and where we search the world for new markets. The wealth of our nation similarly should never be dependant on one single trading block. It is often forgotten that before the European Union the UK’s biggest trading market was India. Why it is that such a pattern could not re-emerge is one of many unanswered questions that the “Vote stay” movement has yet to address.

The security of our nation has been achieved through the strength of our national endeavours. No foreign-armed force has landed on the British islands in over 300 years and when left alone to defend our citizens rights abroad, we have shown our ability to act unilaterally to protect them. Many mistakenly associate peace in Europe with the European Union. This is wrong. Peace in Europe has been achieved by NATO and de-facto by America. The “Special relationship”, for all its failings, has always been the recognition by Britain that Europe lacks the motivation internally to unite collectively in its own self-defence. If evidence of that were ever needed, the use of NATO in the Balkans and the European reliance on new US armoured brigades in Eastern Europe, provide two immediate examples (there are of course others). The Freedom of our nation therefore will always rely, first and foremost, on our own efforts and our relationship with the US. As to threats of terrorism and transnational crime, it is often forgotten that the UK’s worst period of terrorism came during the “Troubles” in Northern Ireland. If at the height of the cold war our allies were unwilling to help us when it conflicted with their national interest, it seems disingenuous (to say the least) that this will change in the future.

The challenge facing those who campaign to leave has been to explain “what comes next”. Setting aside the unchallenged assumption that staying in Europe will ensure that the UK follows a clear and predictable path for 20 years, it is not unreasonable to say that a vote to leave also requires a plan on how to leave and what should happen after we leave. As with all well laid plans, few survive contact with reality. Assumptions of behaviour and of processes are notoriously challenging even where precedents exist, let alone where they do not. But setting these aspects aside, a strategy for the UK would go as follows.

Following a vote to leave the UK will not immediately leave the EU. This is the reality and yet it appears often ignored. The UK will enter into a period of negotiation on the terms of our exit, while remaining in the Union. The negotiations are likely to require 4-5 years and, in essence, they will require the UK to accept EU governance for its companies who wish to trade in Europe. Conversely, European firms who wish to trade in the UK will have to follow English laws and governance. As most global regulation is increasingly being harmonised, over time there will remain few significant differences in regulation between the two. On immigration, the UK will move to a points based system. In so doing, it will significantly ease work and residency related visa requirements for Australian, New Zealand, US and Canadian nationals. Over time, these restrictions are likely to be expanded to other commonwealth states as their levels of development increasingly reach parity with our own.

From a trade perspective, we will work with the WTO to expand its effort for a new set of global standards and a reduction in global trade restrictions. We will also explore deals with ASEAN and other regional markets across the world. Such action was how we once thrived. We will re-discover this talent, as many of our young entrepreneurs already are doing.

At the International level, the UK will continue to sit and act in partnership with European nations. We will join with Canada, Australia, Norway, Switzerland, Turkey, New Zealand (and occasional the USA and Japan) as part of the EU+ grouping which exists within the major multilateral banks and other international organisations. On security matters, we will remain committed to the defence of Europe and particularly Eastern Europe, where we have already increased our presence and where we played an instrumental role in bringing these nations into both the EU and NATO. For issues of transnational crime, a bilateral extradition agreement will be made with the EU as part of our terms of exit. On this last matter, there is little disagreement between the EU and the UK and little incentive from either party to prevent such an outcome.

This is the case for BREXIT. A UK that remains a friend and partner of Europe, whilst remaining an independent nation state that pursues the best interests of its people on its own terms. To “Vote leave” is not a rejection of liberal values and a statement of disregard for the well-being of Europeans. Instead, it is a re-assertion of the well known principle that the best form of governance is self-governance. It is time British people remembered this principle.

To my countrymen and women, whatever your opinion, please make sure that you vote on 23rd June. This is our future and I hope you vote to leave with me.

In defence of Airstrikes

Yesterday, Wednesday the 2nd of December, the United Kingdom formally approved plans to strike Daesh/ISIS targets in Syria. The vote in the House of Commons was a resounding majority in favour of action, with over 60 defections from the Labour party, led by Hillary Benn, whose speech is being touted as one of the great speeches of the House of Commons itself.

Yet the vote has re-awakened in the UK the debate about the nation’s role in foreign wars, and specifically whether we should be militarily involved in the Middle East at all.

It is important at times like this to reflect on why the UK public is so strongly resistant to military engagement abroad. The legacy of the 2003 decision to invade Iraq and the memory of significant casualties from the war in Afghanistan, have taught the British general public to be cynical of politicians when they talk of the necessity for action. But while a certain dose of cynicism is necessary to tamper the effects of jingoistic tendencies, there is also the risk that excessive cynicism paralyzes necessary action.

The war against ISIS is a war which, as of today, cannot be won in its present form. To defeat ISIS requires a broad, internationally accepted strategy for how to resolve the conflict in Syria. This is not only lacking, but further; the goodwill to achieve this end is deteriorating. Yet it is also always important to reflect that inaction and inactivity is a policy response to events, and that inaction carries consequences with it as well.

Many in the British public appear to be unaware that the British military have been engaged in attacks against ISIS in Iraq for many months, as a result of a public request by the Iraqi government for military assistance to fight ISIS. Moreover the attacks against ISIS have UN Security Council approval and have involved a large group of major parties, not normally known for mutual cooperation.

When the British public see Daesh, they see Al Qaeda. This is a problem because it is not true. The constituent audiences and values have many similarities, but they are separate political movements with separate desired outcomes. Again I emphasise, these are political movement’s not religious ones. The actions of ISIS are to engage those from the global Muslim population who feel disenfranchised and disposed, and to channel that frustration towards political aims. Those who therefore feel that airstrikes are the key source of recruitment, or perhaps simply a major source of recruitment, miss the point entirely. The campaign to persuade young Muslims from committing acts of violence cannot be won without addressing much more pressing, underlying societal issues. Airstrikes or no, these individuals will use violence against those they perceive to be the source of their frustrations and that will continue to be the US, the western world and their allies.

But while airstrikes may not win wars, they can certainly play significant roles within them. We must not forget that ISIS advances against Baghdad and into Kurdish controlled Iraq were only halted due to western military airstrikes. Had these not occurred, millions more people would be living under the savagery of the ISIS state.

The choice of the word state is intentional. ISIS defines itself and its being through the control of territory and through its ability to perform civic, state-like, functions. If ISIS are not able to control or administer their territory they lose their Raison D’etre and their Modus Vivendi. Here then is where airstrikes are essential. Crippling communications between ISIS administered territories and preventing their mobilisation of military units, which may be necessary to launch large, coordinated offences, are concrete measures which airstrikes can achieve.

While airstrikes are often tarnished by the US legacy in Pakistan, Yemen, Somalia and the legacy of Libya after the allied airstrikes, we must not forget that each situation is different and that there are times where military force has played decisive roles. If we consider Britain’s involvement in Sierra Leone, which was essential to defeating the RUF, or the French military action in northern Mali which prevented the country being split into two. We could also reflect on whether the war in the Balkans would have ended when it did, without the pressure exerted on Serbian forces due to NATO airstrikes.

So to the last line of defence for those opposing airstrikes, civilian casualties. Yes they will happen and yes we will be blamed for them. This is an unavoidable fact of war and a fact which ISIS no doubt wishes to fully exploit. However it is also an unavoidable reality that the longer ISIS as an entity survives and controls territory, greater numbers of civilians will be tortured, raped and murdered. Our unwillingness to risk civilian casualties does not prevent this fact. Furthermore, the simple matter that emergency food aid and medical supplies cannot reach ISIS controlled territories is already causing civilian casualties and human suffering. Our inaction has therefore already cost others their lives and their dignity.

The UK has made a decision and now we must come to terms with it. Our actions may seem small, but they serve a purpose. The real challenge now is for our society to reflect within itself why joining ISIS and providing support for the entity is so attractive for many of our fellow citizens and others across the world. Our failure to reflect on this discontentment and anger is the great failing of our current political leadership. We must ensure it does not continue.

Militarised Multinationals?

Why the decline in State Security forces is leaving the private sector to provide its own security.

Since the 1990’s Immanuel Kant’s perpetual peace thesis, nowadays better known as the Democratic Peace Theory, has returned with a vengeance. The theory, for those who were spared having to actually read Kant (a good save there) is that Democracies do not fight democracies and so as the world has become more democratic it has become less violent.

Now admittedly this topic has primarily stayed as a bitter debate in the academic world of International Relations, but what is important for those without MA’s and PhD’s in Political theory is that the nature of warfare and violence has been changing.

Since the 1990’s (and well before too) there has unquestionably been a dramatic rise in violence conducted by non-state actors, with the most famous contemporary group being probably Al Qaeda (with the IRA, FARC, MEND and ETA all being close contenders too). But the problem with saying the world is less violent because less states fight each other is that this argument becomes a political cover for politicians to cut defence spending, and contrary to popular belief this is a problem.

Taking aside the ridiculously expensive F-35 programme (at over $200 million a jet on current estimates) and the Trident nuclear submarine project (at £100 Billion for 4 submarines over 25 years), the British armed forces has never been smaller. By 2015 the Air force and Navy will number under 70,000 on current estimates with only 120 fighter jets (the same number as Belgium) and 80,000 members of the army across all disciplines (engineers, artillery, infantry, armour). And Britain is not alone.

Only 5 members in NATO managed to keep to the charters 2% of GDP on defence spending in 2012 and this may fall even lower in 2013.

So why is this relevant and how does it fit into this articles premise? Quite simply, I want to argue that as governments reduce their ability to provide physical security against the threats of violence by non-state actors, businesses will take their personal security into their own hands. And in fact this is already happening.

Marine Piracy and the Private Sector:

Piracy since 2007 has largely been internationally associated with one word, “Somalia”. In a country where the state has not technically had an Armed Forces since 1991 and where the UN and USA have been forced to pledge commitments of around $390 Million to the AMISOM mission it is perhaps not surprising that piracy has been able to flourish. What had been so surprising was its success.

With certain vessels like the Samho Dream being released after the payment of $9.5 million (2011) and an estimated $135 million being netted in ransom payments in 2011, it is hardly surprising that piracy groups proliferated and became so well equipped at such a fast level. Combine that with an area of over 3.4 Million km2 at risk (IISS) and the fact that round 22,000 vessels pass through the Gulf of Aden each year and it’s not hard to see why 802 people had been taken hostage by pirates in 2011 on the East and West coasts of Africa.

In fact between 2008 and 2010, NATO claim that 131 vessels were hijacked and 315 vessels were physically attacked by pirates. As a direct consequence of this an estimated $7.5 billion is now being spent by navies from across the world under 3 separate multinational missions, which would seem to emphasise that the issue is being taken pretty seriously.

Sadly though it is not the response of governments that seem to have led to the much lauded reductions since 2012. According to data from Lloyd’s List there was nearly a 65% reduction in piracy attacks in 2012 and what people are saying behind the scenes (and seeing in the budget sheets) is that this change all comes down to one main reason, Armed Guards.

Since the advent of Armed Guards there has been a significant drop in successful piracy attacks and then you have Typhoon. Typhoon is a private security firm that provides close quarter support for convoys of vessels traveling through the Gulf of Aden and is being rolled out in collaboration with Glencore. The firm aims to replicate the tactics of pirates by using smaller fast response, armed patrol boats, launched from mother ships to counter the pirates using their own tactics. By using this method Typhoon believe they can deliver a more robust and effective deterrent to would-be attackers in a far cheaper and more advantageous way than the Royal Navy can.

In effect, the private sector has the flexibility to adapt rapidly to demand where there is a personal financial gain. Armed forces and certainly naval forces cannot.

Whilst Typhoon is just limited to the Gulf of Aden it is important to note that the highest region in the world for piracy historically and in 2012 is actually Indonesia. In addition West Africa and many of the Littoral South-East Asian states experience significant piracy threats, in particular in the Malacca straits. With an increasing amount of global trade going through more politically insecure areas and the value of vessels increasing (think of the ransom on an 18,000 TEU Maersk C-Class vessel) the relative success of Typhoon will be watched closely and almost certainly emulated in some form.

Most significantly in this rise of privatised security arrangements are the terms of engagement these new actors adhere to. Yet again the lead in this respect has been left to a variety of non-governmental bodies like the International Maritime Bureau to listen to the concerns of their members (shipping companies largely) and then recommend best practises. The reality however is very complicated.

As the demand for armed guards has soared, the cost and quality for these PMSC’s[1] has continued to diverge and the lack of reporting when arms have been discharged is a growing concern for those maritime forces operating in the region. In essence the issue is becoming one of which the PMSC’s are able to decide what is a legitimate target and what is an appropriate level of response and may hide behind flags of convenience and the legal ambiguity of combat in the high seas. The lesson being taken is clearly that if security is left to private actors then private actors will also take the lead on establishing how they provide their own security. 

Oil and Gas – Africa and the Middle East

As the recent situation in Algeria has demonstrated, Oil and Gas workers are always a high value target regardless of their location. The very fact that this particular BP facility was so far from the Mali border, where AQIM[2] are said to operate, is merely a further reminder that private sector actors in even relatively secure developing nations cannot rely exclusively on state protection for their security.

 Image Courtesy of Statoil

Figure 1 – Courtesy of Statoil

But the recent flurry around Algeria is just the tip of the global issue of kidnapping the employees of oil and gas businesses. Whether it is Shell employees and their families in Nigeria or BP, Shell, Exxon staff facing threats to security in places like Iraq or the high kidnapping rate in Venezuela and Colombia, there has been a long growing trend for multinational firms to seek their own security arrangements.

On the face of it again this pattern is inherently logical. A states armed forces and police cannot anticipate and protect every employee of a foreign national effectively and often the state may not have the resources to do this anyway. By contrast, Multinational companies like Shell may use their provision of private security staff to re-assure their employees and contractors to work for them in high risk areas instead of their rivals. How staff are treated in high risk areas is increasingly becoming a very significant factor within the Oil and Gas industry, with the various different levels of response to Oil and Gas firms in Libya, where Russian and Chinese nationals were effectively abandoned by their respective national industries, being a case in point. That sort of care towards staff matters.

The problem again though of relegating the security of these employees to the firms themselves is perhaps best explained by the controversy of private military contractors in Iraq. If a PMSC kills or injures a foreign national (assuming they can carry some form of weaponry, or is particularly adept with his/her hands), then how does the host state respond? If they prosecute the individuals due to public pressure then multinational firms whose investment is so desperately sought and required may not feel able to ensure it employee’s security and so may restrict their operations in that region or pull them entirely. On the other side, if individuals are not subject to local laws though this can lead to a back-lash against the government for being seen as under “foreign influences”.

General Issues:

Further highlighting these issues is the basic fact that across all industries operating in developing nations, establishing which individuals are threats and which are not is incredibly difficult. With regards to piracy, the vessels used by pirates are often identical to local fishing vessels and in certain cultures the carrying of weapons in public is not an uncommon occurrence, thus how do you distinguish between those who are carrying weapons for personal security and those carrying weapons to threaten others?

Even more worryingly many people are realising that the local state security forces may even be part of the risk themselves. The “Green-on-Blue” incidences in Afghanistan are the most high profile of these, but actual involvement by local state police with would-be-kidnappers is certainly not unheard of. Is it not perhaps un-surprising then that multinational companies are beginning to turn to the private sector for their security?

The private sector itself now provides comprehensive risk mitigation methods to enhance the security of Multinational firm’s people and assets. Whether this is in the form of better knowledge of market risks by using ControlRisks or bespoke products like the WorldRiskReview, the purchasing of Political risk insurance and Kidnap and Ransom policies or at the first (or last) stage, directly hiring PMSC’s.

Concluding remarks:

In 2004 the BBC suggested the global private security industry was globally worth $100 Billion, would anyone even be able to truly guess its value today? I doubt it. Companies like G4S and Blackwater now employee 100’s of thousands of employees each and even in combat location like Iraq the number of PMSC’s has risen from 1 in every 100 soldiers in 1991 to around 1 in 4 soldiers in 2011. The increasing use of the private sector is here to stay, and the private sector is responding to this. 

As States have gradually allowed the private sector to take responsibility for their own security, the private sector has gradually started to shape the rules and behaviour that govern their use of Private Security Providers. Furthermore, as attacks against firm continue (with a 300% increase in kidnapping’s in Mexico between 2005-2011 being just one example), the speed of these changes and the move away from the traditional reliance on the State for their security will decline.

If States do not begin to respond much quicker and more robustly to the changing threats faced by companies then there will inevitably be either a move away from the state as the sole legal source of security to a system were the private sector begins to define what is necessary for its security not the state.

 This is not just un-democratic and lacking transparency. This is a genuine concern for all states and their claim to the “Monopoly on the legitimate use of Violence” which has underpinned the modern state we live in. Governments need to start being creative or risk being outflanked on this issue.


[1] Private Military Security Providers

[2] Al Qaeda in the Islamic Maghreb

Russia 2020 – Game over Putin?

Since 1990 Russia has experienced something of an escalator ride in the nation’s fortunes. From near bankruptcy the Russian economy has bounced back since the beginning of the Putin years, largely on the back of a vast overhaul of its oil and gas industry which has fuelled the increasing spending demands of Putin’s various administrations. Yet are we about to see the Russian state experiencing another rollercoaster drop in the next decade? Here are a few humble suggestions why Russia is facing a perfect storm in 2020:

“It’s the Economy Stupid” – or more accurately it’s the Oil Price.

For most of Russia’s history its economy has been primarily driven by its primary industries which have exported the vast resources at the states disposal. But in recent years the dependency of the current Russian economy on oil and gas exports has become truly staggering. Not only does Russia’s oil and gas industry now account for 49% of the state’s revenues, but Russia also requires over 2/3rds of its gas production simply to service its own economies internal requirements.

The situation when we start to examine Russia’s much discussed export of oil and gas products gets far worse (if you are Russian). Of Russia’s 600BcM of gas produced every year, around 140BcM is exported to Europe but of that 140 BcM exported to Europe, Germany and Ukraine account for 70BcM of exports combined (at 30BcM and 40BcM respectively. To re-phrase this, Russia relies on Germany and Ukraine for around 34% of its gas sales, whilst Ukraine accounts for nearly 19% of all Russia’s gas exports. Compounding even this terrifying over-reliance, the pipelines that provide Russia’s gas to the rest of its EU markets all currently use Ukraine as a transit nation. Thus for anyone who remembers the 2009 gas crisis in Europe, this is why Russian planners are so concerned about their gas position.

Even if Russia is able to construct its South Stream project to reduce its reliance on Ukraine as a transit hub it is not only competing against the EU machine, which has aggressively tried to challenge Russian gas hegemony, but also the alternative gas pipeline, Nabucco West.

Taking aside the above issues however the baseline concern for the Russian economy is to do with the price of oil. With the US explosion of Shale gas, estimated to increases the US gas production by 25% by 2020, there will be an inevitable decline in demand for oil related products on the international market, especially as other BRIC nations seek their own domestic means of energy production. In addition, the climate change agenda and the effects of air pollution in major cities is leading developing nations like China to increasingly seek gas as an alternative to oil. The problem for Russia however is that, simply put, it gets such a good price from Europe that it won’t accept the terms China and others are offering.

The implication of this fall in the oil price is an inevitable decline in the Russian state revenues. If the price of oil and gas declines then Russia will face a choice: to reduce its current output of oil and gas to maintain the price level (assuming the rest of OPEC will do likewise) or to maintain its output but at a reduced profit (and in some cases certain projects will become close to loss making). All of which is disastrous for the Russian government’s spending pledges, including its $800 billion armed forces modernisation programme….

The energy crisis however is not just linked to the state revenues from oil and gas however. The World Bank’s latest report on the ECA and FSU states has indicated that they will need to invest $1.5 trillion into maintain and modernising its energy infrastructure within the next 20 years, yet to do this will require a large increase in the price of electricity. This then leads to the next problem of the Russian economy: a large proportion of high energy intensity industries whose main advantage is price competitiveness, in no small part due to low energy prices. So the question here is: if faced with a decline in global oil and gas prices will Russia reduce its supply of oil and gas and sell its products purely on the basis of the highest bidder in Europe and at home, or will it maintain its output levels and use its oil and gas industry to subsidize its domestic manufacturing industries?

The net result of any of these variables above will mean less revenue for the Russian state and hence the problems below:

Increasing domestic instability and declining state security resources:

The re-election of Vladimir Putin was considered by many competitors to be an academic exercise. He was too strong, too popular or too well connected to lose so commentators said. And sure enough they were right, except this time Russia’s voters didn’t lie down and play dead. The scale of protests was unprecedented under Putin’s rule and provides a glimmer of the hostility ordinary people feel towards the current government.

It is true that for many Putin is still deeply popular but the same is certainly not true of his lieutenants and it is their increasingly public misdemeanours that are starting to significantly chip-away at the regimes support base. The sense of insecurity felt by Putin was perhaps best displayed by the obscene levels of attention and media coverage that was generated by the Russian punk rock band “Pussy Riot” whose 30 seconds of fame generated world-wide news coverage.

Now whilst Russia has often suppressed riots and domestic violence, it is the impact of declining state revenues that will suddenly start to lead to difficult strategic decisions on where Russia spends its resources. If the state continues to focus its funding on internal suppression then it will inevitably have to reduce its spending on its planned military modernisation programme, something which will surely reduce the global reach of the Russian military and certainly the extent it can intimidate its neighbours.

Furthermore, if Russia does retrench domestically, will this lead to more aggressive actions by those states that have territorial disputes with Russia currently? Any increased belligerence by states like Georgia and Azerbaijan would be increasingly embarrassing for Moscow, whose people would demand a response. Will the Russian state be able to in the future? Even the latest Russian fighter jet project, a symbol of its super-power aspirations, could be threatened if it fails to find suitable export partners and its numbers drop below its already low order number, (expected to be initially 100 or less).

Demographic issues:

Inherently linked in Russia with domestic security concerns is population issues and immigration. The Russian state has always incorporated a large number of ethnic minorities and different faiths, but notice the word minorities. The modern Russia today is facing a marked decline in the birth rate of European, orthodox Russians, whilst its minority populations, notably those who follow Islam, continue to grow, as does the number of immigrants from central Asian states.

This again will start to stir domestic tensions where the state has historically under invested in the East and often concentrated its investments into a few key cities like Moscow. Furthermore, regional hot-spots like Chechnya may become emboldened to push for further regional autonomy if the region’s population continues to grow whilst the typically more Slavic and European population of western Russia declines.

Linking this all back in again. Under-investment in regions with high birth rates which will require greater state resources for health care and education as well as state and/or private investment to create job opportunities for a rapidly increasing young workforce will create a policy headache for a state with limited alternatives than state spending or careers in the oil and gas sector. Both of which seem certain to decline.

Squaring the Circle – concluding remarks:

So what does all this mean? In effect Russia is facing a perfect storm by the end of this decade and the only possible solutions to its problems still look as distant as ever.

The Russian state cannot generate internal investment without an end to the rampant corruption that eats away at public confidence in the state bureaucracy and decimates the ability of financial institutions to invest sensibly into growth prospects. But more fundamentally what Russia really lacks is a functioning rule of law.

No company today can invest in Russia without the concern of expropriation or state interference and those that have tried have often been burnt badly in the process, whether BNP-TNK or Shell and its development of Sakhalin island. This hampers any serious private sector investment and again places the onus of investment squarely on the Russian state.

With declining state revenues and increasing demands on its budget, does Russia have many options left open? Can it cut spending and if so what? Can it increase its level of government debt and if so for how long and at what cost? All of these questions leave Russian policy planners feeling uneasy and with Putin’s grand ambitions so publically stated what would be the political damage if the policies failed or perhaps even worse, they were cancelled?

So while for now Russia may be having its moment in the spotlight as a super-power in Syria, it’s worth waiting to see what happens next. My suspicion? Russia may just start getting that bit quieter and quieter as this decade progresses.

So keep an eye on Russia and 2020. The Russian roller coaster may just be about to drop.

The Digital Ayatollah?

Did Iran really take down 4 US drones?

So let me just see if I can clarify the crazy that is the Iranian government press department for a second:

According to the Iranian government, a nation that is reduced to bartering tankers filled with crude oil for tankers of grain, Iran has “allegedly” captured 4 US drones in a year……Not just the same design either, but 3 separate drone designs……

Now here’s the thing, the RQ170 sentinel, the first one Iran allegedly “captured” I could just about at a distant push believe. I mean at least the US government admitted it had actually gone down in the right geographical vicinity. (The fact that the drone was then shown without a scratch would suggest there is a story there but that is beyond the remit of this blog and into the world of conspiracy theorists and university Model UN attendees.) What seems utterly absurd though is the idea that Irani managed to capture 3 other drones on 3 separate occasions when the US navy who operates them say the USA have not lost a single unmanned drone in the area…..

Now I am not a military technology expert but while I can accept the argument, put forward by more learned folks, that the US GPS system on drones is “feasible” to hack (….that sentence is worrying enough), what seems implausible is that the US armed forces upon realising they had lost the ability to direct the drones would leave it there.

Now let’s add the next bit. The two latest drones, quoted by Reuters have a range of 10km’s…..That’s right, an aircraft carrier launched jet managed to get hijacked and land successfully in a perfect 10km location that was close enough to land on Iranian soil and yet far enough away that on at least two occasions the Americans A.) Couldn’t self-detonate the drone, a separate function to navigation, and B.) Couldn’t shoot the thing down themselves…..

I am all for stories that make the American armed forces show some hubris, but I’m sorry Iran, this time, even you guys have gone a bit too crazy.

Who Moves Next?

Is Israel prepared for the consequences of Status Quo?

As an outsider who has had the privilege to work and study for brief periods in Israel and also count amongst my friends some truly loving and kind Israeli citizens, it is a country that makes for a fascinating read. Formed in 1948 following the conflict that engulfed the British withdrawal from British Mandate Palestine, there is scarcely a more controversial state that exists in the world today. It has one of the most educated populations in the developed world, a young and entrepreneurial people, whose technological designs have extended from creating the world’s first online firewall to supplying drone technology to Turkey and Azerbaijan amongst others.

Yet like so many places in the world today, a country with so many wonderful resources is at risk of destroying itself from the inside by its refusal to make the tough and necessary decisions in respect of the Palestinian people. Few conflicts have been so protracted in the world today, and even fewer look still so far from resolution, yet looking at the history it’s not hard to see why it is so protracted.

Without covering ground that so many others have been over before though, and avoiding the always present danger to cite history in Israel/Palestine discussions, I want to suggest where the current trajectory of Israel/ Palestine will go next, (assuming there is no major breakthrough in peace talks in the short/medium term (5-10 years) ).

The Status Quo:

Contrary to the opinion which was once so prevalent amongst Israel/Palestine watchers, the demographic balance has swung away from a Palestinian majority in recent years and this key fact lies at the heart of why Israel cannot afford the status Quo. The explosion in birth rates of the settler population of Israel and the Haredi Jewish community will now ensure that Israel will, for the current term, retain a Jewish majority. This change in demographic fortunes comes at a political price however.

The Haredi population and that of the settler community represent two existential challenges to Jewish policy makers which will only exacerbate in the longer term.  The first is the settler’s unwillingness to exchange any land for peace and the second is the Haredi’s unwillingness to work or serve in the army, whilst living off the state. Simply put. The growth of the Settler and Haredi groups will lead to a more Conservative Israeli State that will be unwilling to negotiate on most of the Palestinian’s key terms and yet in tandem the state will have less pecuniary and human resources to utilise in the maintenance of the necessary state apparatus to maintain the status quo.

This change therefore represents challenges and opportunities therefore to various actors within the peace process. For the immediate to short term, it strengthens the hand of more nationalistic, to some extremist, parties. For Hamas and Likud, the current population growth dynamics give Likud a larger electoral base to enable the party to adopt more radical measures, which in turn plays into the Hamas’ narrative that the Israeli’s cannot be negotiated with. In contrast it is the left and centrist Israeli parties like the Labour Party and Fatah in the Palestinian Authority who are left seemingly out of touch with their electorate and the desires of the people.

Making predictions:

The question then is what happens next? And in tandem, what moves are there still available?

The Israeli’s:

For the short term it seems unlikely that the Israeli right, led most likely by Likud, will be politically outmanoeuvred by any moderate or peace advocacy movement. The Arab spring and the instability among Israel’s borders, perhaps now more unstable than at any time since arguably post 1973, will ensure that a highly militarised populace will continue to desire a strong military, fortress-esque mentality.

The medium to long term however is where I would predict the most interesting changes to occur, and by that I mean at least 5 and perhaps closer to 10 years. The Israeli protest movements over affordable housing in 2012 showed the clear frustrations amongst young Israelis over the social status quo, whilst the number of young Israelis who choose to emigrate is continuing to rise. The next generation of Israelis are increasingly deciding that whilst Israel may provide them with a great education, it is increasingly unattractive to raise a family in a country where rockets can reach every city and few people can afford a home, even with a mortgage, before 30.

The Medium term, (which in turn will affect what room to manoeuvre is left long term), has two apparent paths for Israel:

  1. A grass-roots campaign to restore the peace process but along different parameters.
  2. A continuing fortress mentality and growing conservative culture in society that will lead to a greater emigration of liberal, atheistic and/or agnostic Israelis.

The peace process parameters as set in the 1990’s cannot work today because quite simply Israel is not able to remove 500,000 people from the West Bank with a population of 6 million itself. The question therefore is whether those within Israel today will push for a change in the status quo or not. If the country cannot negotiate a resolution to the conflict then gradually you will see a migration of the best and brightest from the state. As this drain of talent continues the Israelis state will face two major long term issues that will further inhibit peace: a smaller electoral populace in favour of peace and a significant decline in the human and materiel resources of the Israeli state to keep its Security apparatus intact.

The Palestinian’s:

It is often said that there is very little that the Palestinian people are able to do to move the conflict away from the status quo. Militarily they are unable to seriously threaten the IDF and economically they are totally dependent on Israeli government cooperation and foreign aid, whilst politically the US veto has guarded Israel at the UN.

Yet Palestinians themselves do still have two big splits to consider in their medium to long term future:

  1. Continue to support violence and acts of terrorism as forms of resistance.
  2. Utilise the changing global status quo, their new UN position and the gradual change in US politics to reverse their relative power position with Israel internationally.

What do I mean by the last point? If Israel continues to become more radical and uncompromising, more and more of its major backers, certainly in Europe where pro-Palestinian sentiment is high, will refuse to support Israel’s actions. In addition the US is not the firm ally it once was to Israel and with the US pivot to Asia underway, the importance of Israel will surely diminish in US grand strategy.

There are other reasons for the US change though, particularly due to the growth of the US Hispanic population. Those in the US who were once described as “WhiteAngloSaxonProtestant’s” are now on the decline and as the Israelis’ continue to pursue an agenda which receives greater international ire, the PA could easily manoeuvre the US into a situation where Israel is facing war crimes charges in the ICJ without EU support. This scenario has been further developed by the US explosion in Shale Gas which has dramatically reduced the US demand for Middle Eastern Oil and Gas.

This final point, the development of Shale gas, is perhaps most significant and its repercussions will continue to reverberate throughout the global energy market and re-adjust the international geopolitical-economic balance. With the US less responsive to the troubles in the Middle East whilst Chinese, Indian and other developing economies move into the area to secure energy sources for the future needs, the regional-political balance will be re-calibrated, most likely to the expense of Israel.

Concluding remarks and Concerns:

To quote Selina Kyle from Batman (if I may!), “There’s a storm coming” for Israel, sadly it seems that its leaders are either unable to see it or more worryingly, unable to address it. For a people who endured such suffering and hardship in their history, it is simply madness that the Israeli’s are unable to see that their actions do not buy them security, they weaken it.

On the construction of Israel’s Security Fence in the West Bank an Israeli High court judge was quoted as saying that “High Fences makes good neighbors”. As anyone from Northern Ireland can vouch, separating people may reduce violence but it certainly does not foster respect or trust. Perhaps the two most important, missing, aspects in resolving this conflict.

Israel faces one of the most significant choices in its existence in the next 5-10 years. It cannot assume US support unconditionally as it once could, its allies in Europe and elsewhere are fading. The arab spring has emboldened the nations surrounding Israel to reject the status quo arrangements they despised, both domestically and externally, whilst the increasing military sophistication of Hamas and Hezbollah arsenal now threatens every Israeli town and city.

With a population that increasingly will not negotiate on the core, substantive issues, that will not work or serve in the army, Israel has a unique window to negotiate a final settlement to this conflict. For all that people have criticized the Israeli leadership of the political right for being radical fundamentalists, unwilling to compromise, it was Ariel Sharon that withdrew settlers from Gaza and Ehud Barack, one of Israel’s most decorated soldiers, that took Israel to camp david.

Israel has often shown its ability to innovate and surprise its watchers. It must do so again and soon. The future of Israel and its relationship with the wider world is on the line, its Israel’s move or Israel’s fall.

From a kind Palestinian gentleman living in Israel.
From a kind Palestinian gentleman living in Israel.