The Political Conundrum!

Now all the ballots have been counted and the Presidential election decided (apart from Missouri which remains too close to call) it seems like an appropriate time to comment on the seeming lack of any attempt by al-Qaeda (or affiliates) to influence the election through video messages or strategic attacks.

In the month prior to polling day a variety of commentators publicly and privately released material suggesting there may be an al-Qaeda attack towards the end of October. Some of the more extreme assessments cited a series of ‘Internet launch codes’ contained in video broadcasts made by Ayman al-Zawahiri in August and Adam Gadahn in October. Regardless of the presence or not of coded messages, this analysis always relied on a belief that al-Qaeda would seek to influence the US Presidential election. A belief, which is arguably flawed and has its roots in the Madrid attacks of 2004. These attacks three days before the Spanish general election caused the fall of the pro-Bush Spanish Prime Minister, José María Aznar and reversed the course of the election. However, this result could not have been predicted by al-Qaeda as it relied heavily on the governing Partido Popular (PP) mishandling the immediate political aftermath of the bombing in a spectacular way, by blaming the Basque separatist terrorist group ETA. Similarly, Bin Laden released a tape in 2004, which is also thought to have tipped that election to President Bush. This theory relies on the assumption that al-Qaeda has a favored candidate in any given election and that this candidate would then behave in the way they expect - this is a significant theoretical mistake to make. While al-Qaeda will take advantage of short-term tactical positions it is noted for playing the “infinite game” rather than the finite one. It also doesn’t address the fact that any American President would continue to conduct vigorous counter-terrorist action against al-Qaeda. As the former British Prime Minister Lord Palmerston remarked, "Britain has no permanent friends, she only has permanent interests." Similarly, the US clearly has a permanent interest in combating trans-national terrorism.

Therefore, while al-Qaeda’s motivation to insert itself into the US domestic political process is open to question, its desire to disrupt the American economy has always been clear. This is where heightened danger persists. With Western economies continuing to reel from financial instability significant terrorist attacks against key infrastructure targets would be amplified in the magnitude of their effect at this time. It would not be lost on al-Qaeda that money used for supporting banks or failing industry is money that cannot be used for fighting. Further, unlike planning to disrupt the US Presidential election, whose schedule is known by Western security officials, the timing of a potential attack now rests with al-Qaeda. With the global recession predicted to bite for the next eighteen months al-Qaeda has a large window within which to operate.

There is no doubt there has been a political paradigm shift, which broadly favors American attempts to lead the fight against terrorism. As President-Elect Obama begins to receive his daily briefings from the CIA there is also no doubt he will be aware of the threat the US continues to face from terrorism. While American politics has fundamentally changed the larger-scale global trends of increased digital and social connectivity continue to move steadily forward - these undoubtedly enhance al-Qaeda or even the next version of ‘global guerillas’. Therefore, if I were to presume to pick a top five of themes for those CIA briefings relating to terrorism I would highlight Pakistan/Afghanistan, Yemen, Somalia/East Africa, proliferation of nuclear attack capability to terrorists and conflict in virtual spaces (which given the Obama campaign’s brush with hackers, wouldn’t need emphasizing too much). While these themes are all immensely challenging there is an opportunity to bring fresh and positive thinking to them. This is perhaps best exemplified by Dr. Irwin Redlener in a lecture entitled ‘how to survive a nuclear attack’. Redlener is a fierce critic of farcical countermeasures and planning based on past patterns. Not a bad place to start.

The recent GAO report on the lack of success of U.S. aid to Colombia is striking because it lays out the fundamental paradox of the multi-pronged war there.

The GAO finds, as many of us have written about, that the $6.1 billion in U.S. aid since 2000 has helped Colombia achieve notable successes. This is especially notable in recouping territory and dismantling much of the infrastructure of the Revolutionary Armed Forces of Colombia (FARC), and the disarming (with many flaws) of the United Self Defense Forces (AUC). Both are designated terrorist organizations, and both presented direct and real threats to the Colombia state.

But despite those historic gains, the production of cocaine has not diminished. The GAO report says (borne out recent conversations I had with senior Colombian police and military leaders) that cocaine production has actually increased. Here is what the report found:

From 2000 to 2006, estimated opium poppy cultivation and heroin production declined about 50 percent, but coca cultivation and cocaine production increased over the period. To put Colombia’s 6-year drug reduction goal in perspective, we note that although U.S. funding for Plan Colombia was approved in July 2000, many U.S.-supported programs to increase the Colombian military and police capacity to eradicate drug crops and disrupt the production and distribution of heroin and cocaine did not become operational until 2001 and later. Meanwhile, estimated illicit drug cultivation and production in Colombia continued to rise through 2001, with estimated cultivation and production declining in 2002 through 2004. However, the declines for coca cultivation and cocaine production were not sustained. In addition, the estimated flow of cocaine towards the United States from South America rose over the period.

The obvious question is, why is this so? My full blog is here.

For nearly a week, 40 of America's best trained, most elite Soldiers from the 1st Special Forces Operational Detachment Delta, or "Delta Force," combed the 14,000 foot peaks with wavering Afghan militia allies to hunt down the world's most wanted man: Osama bin Laden.

In the first letter of its kind from an Iranian leader to an American president elect since the Iranian revolution, Iranian President Mahmoud Admedinejad congratulated President Elect Obama on his victory and called for an end to America's "war-oriented policies, occupation, bullying, deception and intimidation of nations and imposing discriminatory policies on them and international affairs, which have evoked hatred toward American leaders." Other Iranian officials have been more specific, calling for Obama to show goodwill by ending U.S. sanctions on Iran. That, however, is unlikely to happen.

Yesterday the Treasury department made clear there would be no change in direction (no U-turn, if you will) from the current policy of exposing -- and taking countermeasures against -- the involvement of Iranian banks in the regime's support for terrorist groups and nuclear and missile proliferation. Following the recommendation of the Financial Action Task Force (FATF) to strengthen measures to protect the financial sector from the risks posed to the international financial system by Iran, the Treasury revoked the "U-Turn" license under which Iran had previously been able to indirectly access the U.S. financial system to dollarize transactions.

Treasury also provided an updated fact sheet detailing Iran's misuse of the international financial system to support illicit activities.

As I argued in a recent lecture on the subject at the Emirati Center for Strategic Studies and Research (ECSSR) in Abu Dhabi, by exposing Iran's deceptive financial conduct in support of its illicit activity, the international community has made it clear that doing business with Iran is increasingly risky business.

The Obama administration, focused as it is on fully deploying an "all elements of national power" national security strategy, is likely to further develop the use of financial tools in the national security toolkit, not reduce them. One area to watch in the near future is the extrapolation of these tools beyond the financial sector to other sectors -- such as the insurance sector -- that provide other forms of "financial instruments" to Iran that may already fall under the existing language of UN Security Council Resolution 1737.

Barack Obama's election heralds a new era for the two Koreas, a pro-North Korean newspaper said Friday as analysts began gauging how the Obama administration will affect the divided peninsula.

Hungary, Bulgaria and South Korea will each withdraw their troops from Iraq by the end of 2008, a spokesman for Iraq's Ministry of Defence told the Voices of Iraq news agency on Friday.

US Iran sanctions policy is again front and center with the Treasury Department’s announcement, November 6th, cutting off “U-Turn” privileges under general license for all transactions involving Iran’s financial institutions. This measure could have a significant impact on Iran, and those international banks that continue to do business as usual with her. The new measure, along with the sharp decline in oil prices, certainly will make doing business with Iran riskier, and less attractive.

Previously, the no-U-Turn policy vis a vis Iran was applicable only to those specific transactions involving designated Iranian entities such as Bank Saderat and Iranian state-owned banks Melli, Mellat, Sepah, Future Bank and the Export Development Bank of Iran. U.S. financial institutions could still process funds transfers for the direct or indirect benefit of Iranian banks, other than for those designated, provided the payments were initiated offshore by a non-Iranian, non-U.S. financial institution and only passed through the U.S. financial system en route to another offshore, non-Iranian, non-U.S. financial institution. That left enough wiggle-room in the system for many banks to circumvent the intended controls when it came to doing business with Iran.

These new measures should be seen as sending a clear message to the international financial community that the US will continue to use the various tools in our domestic arsenal to pressure Iran into compliance with international non proliferation and counter-terrorism norms, and that we intend, also, to use our financial influence to gain the cooperation of the international banking community in seeking these objectives.

Coming just after the elections, one must also assume that the policy was cleared with, and approved by, President-Elect Obama’s advisors, and that it will be maintained, and built upon, in the new Administration. During the campaign, Obama indicated on several occasions that he would work to strengthen the sanctions on Iran, including working to bring greater international participation and implementation of such sanctions measures.

So, the question now, is just what impact are these measures likely to have on doing business with Iran?

Iran had become quite adept at side-stepping the full impact of the previous US sanctions measures directed against them. Helped by the high price of oil, and loopholes in the US measures, they were able to use intermediaries, many of which were located in neighboring Gulf states, through which they could conduct their business. But, this may now be turning around.

Dubai, which handles an estimated 60% of Iran’s merchandise trade and hosts nearly 10,000 Iranian owned firms, is beginning to tighten up, and is beginning to show some reticence in serving as a foil for Iran trade. A recent article in the Economist reports that it is becoming increasingly difficult for Iranian businesses to handle their transactions via Dubai, since fewer banks there are willing to process transactions and open accounts for them. There has also been a perceptible shift away from Iran, the article reports, as Dubai, and other Gulf states seek to more closely align themselves to Saudi Arabia and the West.

The reaction from Europe to these new measures has been muted. European leaders are still largely preoccupied with the world financial crisis and remain indecisive concerning any new financial measures to be taken vis a vis Iran. Investment in Iran still looks attractive to many European businesses and investors, and the world economic downturn will make it even more difficult for European firms to voluntarily withdraw from the Iranian market. Nevertheless, French President Sarkozy and British Prime Minister Gordon Brown are continuing to push for a concerted European move to place greater economic pressure on Iran. They continue to be resisted, in this effort, by German Chancellor Angela Merkel and her allies in Italy and Austria. Merkel maintains that the question of sanctions on Iran should be handled in the UN Security Council, where, she knows full well, China and Russia, will maintain the status quo.

Reports indicated that Javier Solana has again renewed his offer for further talks with Iran’s chief nuclear negotiator, Saeed Jalili.

Europe banks and firms have reportedly already cut back somewhat their direct financial and business dealings with Iran, and have become more cautious when it comes to engaging in new business or financial relationships. Yet, many European firms are still active in Tehran, or have set up special arrangements to deal with Iran through Dubai or other third locations. The boardrooms of these firms will now begin to re-assess the cost/benefit/risk equations associated with these activities. They are likely now to hesitate when it comes to new business, and to wait and see what will actual happen when the new Administration takes office. The major question they will pose is whether the Treasury Department will actually take any real action to make an example out of one or more overseas banks that knowingly,or unwittingly violates these new No-U-turn regulatory prohibitions.

Erie County lawmakers Thursday unanimously approved a partial property tax exemption for veterans of the Cold War.

General Douglas O'Dell, federal coordinator for Gulf Coast Rebuilding, today in a videotaped message told investors, builders and key leaders at the Miami to New Orleans Construction Summit that they have an historic opportunity to help in the rebuilding of New Orleans and the greater Gulf Coast.

U.S. Department of Homeland Security (DHS) Deputy Secretary Paul A. Schneider and U.S. Department of Justice Deputy Assistant Attorney General Bruce Swartz signed an agreement today on enhancing cooperation in preventing and combating crime with Ambassador Lee Tae-sik.