The Origins of New US-Turkish Relations

For several years, there has been a significant shift underway in U.S. strategy toward the Middle East, where Washington has consistently sought to avoid combat. The United States is now compelled to seek accommodation with Turkey, a regional power in its own right, based on terms that are geopolitically necessary for both. Their relationship has been turbulent, and while it may continue to be so for a while, it will decline. Their accommodation has nothing to do with mutual affection but rather with mutual necessity. The Turkish incursion into Syria and the U.S. response are part of this adjustment, one that has global origins and regional consequences.

Similarly, the U.S. decision to step aside as Turkey undertook an incursion in northeastern Syria has a geopolitical and strategic origin. The strategic origin is a clash between elements of the Defense Department and the president. The defense community has been shaped by a war that has been underway since 2001. During what is called the Long War, the U.S. has created an alliance structure of various national and subnational groups. Yet the region is still on uneven footing. The Iranians have extended a sphere of influence westward. Iraq is in chaos. The Yemeni civil war still rages, and the original Syrian war has ended, in a very Middle Eastern fashion, indecisively.

A generation of military and defense thinkers have matured fighting wars in the Middle East. The Long War has been their career. Several generations spent their careers expecting Soviet tanks to surge into the Fulda Gap. Cold Warriors believed a world without the Cold War was unthinkable. The same can be said for those shaped by Middle Eastern wars. For the Cold War generation, the NATO alliance was the foundation of their thinking. So too for the Sandbox generation, those whose careers were spent rotating into Iraq or Afghanistan or some other place, the alliances formed and the enemies fought seemed eternal. The idea that the world had moved on, and that Fulda and NATO were less important, was emotionally inconceivable. Any shift in focus and alliance structure was seen as a betrayal.

After the Cold War ended, George H.W. Bush made the decision to stand down the 24-hour B-52 air deployments in the north that were waiting for a Soviet attack. The reality had changed, and Bush made the decision a year after the Eastern European collapse began. He made it early on Sept. 21, 1991, after the Wall came down but before the Soviet Union collapsed. It was a controversial decision. I knew some serious people who thought that we should be open to the possibility that the collapse in Eastern Europe was merely a cover for a Soviet attack and were extremely agitated over the B-52 stand-down.

It is difficult to accept that an era has passed into history. Those who were shaped by that era, cling, through a combination of alarm and nostalgia, to the things that reverberate through their minds. Some (though not Europeans) spoke of a betrayal of Europe, and others deeply regretted that the weapons they had worked so hard to perfect and the strategy and tactics that had emerged over decades would never be tried.

The same has happened in different ways in the Middle East. The almost 20-year deployment has forged patterns of behavior, expectations and obligations not only among individuals but more institutionally throughout the armed forces. But the mission has changed. For now, the Islamic State is vastly diminished, as is al-Qaida. The Sunni rising in Iraq has ended, and even the Syrian civil war is not what it once was. A war against Iran has not begun, may not happen at all, and would not resemble the wars that have been fought in the region hitherto.

This inevitably generates a strategic re-evaluation, which begins by accepting that the prior era is gone. It was wrenching to shift from World War II to the Cold War and from the Cold War to a world that many believed had transcended war, and then to discover that war was suspended and has now resumed. War and strategy pretend to be coolly disengaged, but they are passionate undertakings that don’t readily take to fundamental change. But after the 18 years of war, two things have become clear. The first is that

  1. the modest objective of disrupting terrorism has been achieved, and the second is that
  2. the ultimate goal of creating something approaching liberal democracies was never really possible.

Consistency

The world has changed greatly since 2001. China has emerged as a major power, and Russia has become more active. Iran, not Sunni jihadists, has become the main challenge in the Middle East and the structure of alliances needed to deal with this has changed radically since Desert Storm and Iraqi Freedom. In addition, the alliances have changed in terms of capability. The massive deployments in the Middle East have ended, but some troops remain there, and to a section of the American military, the jihadist war remains at the center of their thinking. To them, the alliances created over the past 18 years remain as critical as Belgium’s air force had been during the Cold War.

There is another, increasingly powerful faction in the United States that sees the Middle East as a secondary interest. In many instances, they include Iran in this. This faction sees China or Russia (or both) as the fundamental challenger to the U.S. Its members see the Middle East as a pointless diversion and a drain of American resources.

For them, bringing the conflict to a conclusion was critical. Those who made their careers in this war and in its alliances were appalled. The view of President Donald Trump has been consistent. In general, he thought that the use of military force anywhere must be the exception rather than the rule. He declined to begin combat in North Korea. He did not attack Iran after it shot down an American drone or after it seized oil tankers in the Strait of Hormuz. After the attack on the Saudi oil facility, he increased Saudi air defenses but refused offensive actions against the Iranians.

Given the shift in American strategy, three missions emerge. The first is the

  1. containment of China. The second is the
  2. containment of Russia. The third is the
  3. containment of Iran. In the case of China, the alliance structure required by the United States is primarily the archipelago stretching from Japan to Indonesia and Singapore – and including South Korea. In dealing with Russia, there are two interests. One is the North European Plain; the other is the Black Sea. Poland is the American ally in the north, Romania in the south. But the inclusion of Turkey in this framework would strengthen the anti-Russia framework. In addition, it would provide a significant counter to Iranian expansion.

Turkey’s importance is clear. It is courted by both Russia and Iran. Turkey is not the country it was a decade ago. Its economy surged and then went into crisis. It has passed through an attempted coup, and internal stress has been massive. But such crises are common in emerging powers. The U.S. had a civil war in the 1860s but by 1900 was producing half of the manufactured goods in the world while boasting a navy second only to the British. Internal crises do not necessarily mean national decline. They can mean strategic emergence.

Turkey’s alignment with Iran and Russia is always tense. Iran and Russia have at various times waged war with Turkey and have consistently seen Iraq as a threat. For the moment, both have other interests and Turkey is prepared to work with them. But Turkey is well aware of history. It is also aware that the U.S. guaranteed Turkish sovereignty in the face of Soviet threats in the Cold War, and that the U.S., unlike Russia and Iran, has no territorial ambitions or needs in Turkey. Already allied through NATO and historical bilateral ties, a relationship with Turkey is in the American interest because it creates a structure that threatens Iran’s line to the Mediterranean and compliments the Romanian-U.S. Black Sea alliance. The U.S. and Turkey are also hostile to the Syrian government. For Turkey, in the long term, Russia and Iran are unpredictable, and they can threaten Turkey when they work together. The American interest in an independent Turkey that blocks Russia and Iran coincides with long-term Turkish interests.

Enter the Kurds

This is where the Kurds come into the equation. Eastern Turkey is Kurdish, and maintaining stability there is a geopolitical imperative for Ankara. Elements of Turkey’s Kurds, grouped around the Kurdistan Workers’ Party, or PKK, have carried out militant attacks. Therefore it is in Turkey’s interest to clear its immediate frontiers from a Kurdish threat. The United States has no overriding interest in doing so and, indeed, has worked together with the Kurds in Iraq and Syria. But for the Turks, having Kurds on their border is an unpredictable threat. American dependency on the Kurds declines as U.S. involvement in the Middle East declines. Turkey becomes much more important to the United States in relation to Iran than the Kurds.

Trump clearly feels that the wars in the Middle East must be wound down and that a relationship with Turkey is critical. The faction that is still focused on the Middle East sees this as a fundamental betrayal of the Kurds. Foreign policy is a ruthless and unsentimental process. The Kurds want to establish a Kurdish nation. The U.S. can’t and doesn’t back that. On occasion, the U.S. will join in a mutually advantageous alliance with the Kurds to achieve certain common goals. But feelings aside, the U.S. has geopolitical interests that sometimes include the Kurds and sometimes don’t – and the same can be said of the Kurds.

At the moment, the issue is not al-Qaida but China and Russia, and Turkey is critical to the U.S. for Russia. The U.S. is critical for Turkey as well, but it cannot simply fall into American arms. It has grown too powerful in the region for that, and it has time to do it right. So Trump’s actions on the Syrian border will result in President Recep Tayyip Erdogan’s visit to Washington and, in due course, a realignment in the region between the global power and the regional power.

 

The Anatomy of the Coming Recession

Unlike the 2008 global financial crisis, which was mostly a large negative aggregate demand shock, the next recession is likely to be caused by permanent negative supply shocks from the Sino-American trade and technology war. And trying to undo the damage through never-ending monetary and fiscal stimulus will not be an option.

NEW YORK – There are three negative supply shocks that could trigger a  by 2020. All of them reflect political factors affecting international relations, two involve China, and the United States is at the center of each. Moreover, none of them is amenable to the traditional tools of countercyclical macroeconomic policy.

The first potential shock stems from the Sino-American , which  earlier this month when US President Donald Trump’s administration threatened additional tariffs on Chinese exports, and formally labeled China a currency manipulator. The second concerns the slow-brewing cold war between the US and China over technology. In a rivalry that has all the hallmarks of a “,” China and America are vying for dominance over the industries of the future: artificial intelligence (AI), robotics, 5G, and so forth. The US has placed the Chinese telecom giant Huawei on an “entity list” reserved for foreign companies deemed to pose a national-security threat. And although Huawei has received temporary exemptions allowing it to continue using US components, the Trump administration this week announced that it was adding an additional 46 Huawei affiliates to the list.

The third major risk concerns oil supplies. Although oil prices have fallen in recent weeks, and a recession triggered by a trade, currency, and tech war would depress energy demand and drive prices lower, America’s confrontation with Iran could have the opposite effect. Should that conflict escalate into a military conflict, global oil prices could spike and bring on a recession, as happened during previous Middle East conflagrations in 1973, 1979, and 1990.

All three of these potential shocks would have a stagflationary effect, increasing the price of imported consumer goods, intermediate inputs, technological components, and energy, while reducing output by disrupting global supply chains. Worse, the Sino-American conflict is already fueling a broader process of deglobalization, because countries and firms can no longer count on the long-term stability of these integrated value chains. As trade in goods, services, capital, labor, information, data, and technology becomes increasingly balkanized, global production costs will rise across all industries.

Moreover, the trade and currency war and the competition over technology will amplify one another. Consider the case of Huawei, which is currently a global leader in 5G equipment. This technology will soon be the standard form of connectivity for most critical civilian and military infrastructure, not to mention basic consumer goods that are connected through the emerging Internet of Things. The presence of a 5G chip implies that anything from a toaster to a coffee maker could become a listening device. This means that if Huawei is widely perceived as a national-security threat, so would thousands of Chinese consumer-goods exports.

It is easy to imagine how today’s situation could lead to a full-scale implosion of the open global trading system. The question, then, is whether monetary and fiscal policymakers are prepared for a sustained – or even permanent – negative supply shock.

Following the stagflationary shocks of the 1970s, monetary policymakers responded by tightening monetary policy. Today, however, major central banks such as the US Federal Reserve are already pursuing monetary-policy easing, because inflation and inflation expectations remain low. Any inflationary pressure from an oil shock will be perceived by central banks as merely a price-level effect, rather than as a persistent increase in inflation.

Over time, negative supply shocks tend also to become temporary negative demand shocks that reduce both growth and inflation, by depressing consumption and capital expenditures. Indeed, under current conditions, US and global corporate capital spending is severely depressed, owing to uncertainties about the likelihood, severity, and persistence of the three potential shocks.

In fact, with firms in the US, Europe, China, and other parts of Asia having reined in capital expenditures, the global tech, manufacturing, and industrial sector is already in a recession. The only reason why that hasn’t yet translated into a global slump is that private consumption has remained strong. Should the price of imported goods rise further as a result of any of these negative supply shocks, real (inflation-adjusted) disposable household income growth would take a hit, as would consumer confidence, likely tipping the global economy into a recession.

Given the potential for a negative aggregate demand shock in the short run, central banks are right to ease policy rates. But fiscal policymakers should also be preparing a similar short-term response. A sharp decline in growth and aggregate demand would call for countercyclical fiscal easing to prevent the recession from becoming too severe.

In the medium term, though, the optimal response would not be to accommodate the negative supply shocks, but rather to adjust to them without further easing. After all, the negative supply shocks from a trade and technology war would be more or less permanent, as would the reduction in potential growth. The same applies to Brexit: leaving the European Union will saddle the United Kingdom with a permanent negative supply shock, and thus permanently lower potential growth.

Such shocks cannot be reversed through monetary or fiscal policymaking. Although they can be managed in the short term, attempts to accommodate them permanently would eventually lead to both inflation and inflation expectations rising well above central banks’ targets. In the 1970s, central banks accommodated two major oil shocks. The result was persistently rising inflation and inflation expectations, unsustainable fiscal deficits, and public-debt accumulation.

Finally, there is an important difference between the 2008 global financial crisis and the negative supply shocks that could hit the global economy today. Because the former was mostly a large negative aggregate demand shock that depressed growth and inflation, it was appropriately met with monetary and fiscal stimulus. But this time, the world would be confronting sustained negative supply shocks that would require a very different kind of policy response over the medium term. Trying to undo the damage through never-ending monetary and fiscal stimulus will not be a sensible option.

This U.S. Warship Threatens Iran (From 600 Miles Away)

ABOARD THE U.S.S. ABRAHAM LINCOLN, in the North Arabian Sea — Out here, deterring Iran means avoiding Iran.

The 5,600 men and women aboard this nuclear-powered aircraft carrier do not venture near Iranian waters, despite a warning from President Trump’s national security adviser that the warship is in the Middle East “to send a clear and unmistakable message” to Iran to steer clear of American interests in the region.

Instead, it is the Abraham Lincoln that has steered clear of Iran. In the past four months, the ship has entered neither the Persian Gulf nor the Strait of Hormuz, the crucial oil-tanker highways it is supposed to protect.

“We recognize that tensions are high, and we don’t want to go to war,” said Capt. William Reed, a fighter pilot who commands the ship’s air wing. “We don’t want to escalate things with Iran.”

In short, the Navy has carried out the order of its commander in chief to counter Iran in the Middle East, but in the least provocative way. Just where to station the Lincoln — one of the country’s 11 nuclear-powered aircraft carriers — is a decision made by the Navy’s Fifth Fleet, which has its headquarters in Bahrain. The fear is that sending an aircraft carrier through the narrow Strait of Hormuz, right when Mr. Trump has turned up the heat on Tehran, could provoke exactly the kind of conflict the Pentagon wants to avoid.

Anytime a carrier moves close to shore, and especially into confined waters, the danger to the ship goes up significantly,” said James G. Stavridis, a retired admiral and former supreme allied commander for the North Atlantic Treaty Organization. “It becomes vulnerable to diesel submarines, shore-launched cruise missiles and swarming tactics by small boats armed with missiles” — all parts of the Iranian arsenal of weaponry and tactical maneuvers.

During each of those deployments, the carriers routinely tangled with Iranian fast boats. Both sides constantly watched each other. American naval ships openly roamed the waters along Iran’s 1,100 mile-long southern coastline, their radars trained on the Iranian shore and on Iranian ships leaving their harbors. Iranian fighter jets patrolled the skies, keeping an eye on American combat planes taking off from the Roosevelt every time an Iranian jet came close to the ship.

But these are not normal times. Mr. Trump’s “maximum pressure” campaign against Iran, including his withdrawal from an agreement meant to rein in Tehran’s nuclear ambitions and the imposition of crippling sanctions, has sharply increased tensions between the two adversaries. The Navy has sent smaller warships through the Strait of Hormuz and into the Persian Gulf, but Navy officials say privately that an aircraft carrier could prove too tantalizing a target for Iran to resist.

Gibraltar rejects U.S. request to seize Iranian oil tanker

A Gibraltar court rejected a U.S. attempt to seize an Iranian oil tanker on Sunday, clearing the way for the ship to resume its journey in the Mediterranean under the Iranian flag and with a new name.

The Grace 1 supertanker, renamed the Adrian Darya 1, has been anchored off Gibraltar since it was intercepted by the British navy on July 4 on the grounds that it was carrying oil to Syria in violation of European Union sanctions. Authorities in Gibraltar lifted the detention order last week after Britain, which rules the territory, received assurances from Iran that the tanker would not take its cargo of 2.1 million barrels of oil to Syria.

But late Friday, the United States intervened, issuing a warrant for the seizure of the ship and its cargo, claiming it was violating not only U.S. sanctions against Syria but also those against Iran.

The Gibraltar court ruled that the American sanctions on Iran, which were imposed by President Trump after he walked away from the Iran nuclear deal last year, do not apply in the European Union.

The sanctions violations charged in the U.S. warrant “would not constitute offenses had they occurred in Gibraltar,” the government said in a statement. “There are no equivalent sanctions against Iran in Gibraltar, the UK or the rest of the EU.”

Among the charges laid out in the U.S. warrant is that the tanker was facilitating terrorism because of the involvement in Iran’s oil industry of the Islamic Revolutionary Guard Corps, which is designated a terrorist organization by the United States. The Gibraltar ruling noted that the E.U. does not regard the IRGC as a terrorist organization.

The court’s rejection of the U.S. request raises new questions over where the tanker will go next and whether the United States will attempt to intervene again, perhaps by forcibly intercepting it. No such action has been proposed, but Iranian media speculated that the U.S. Navy, which maintains several bases in the Mediterranean, might attempt to seize the vessel.

Iran’s navy commander, Rear Adm. Hossein Khanzadi, offered to dispatch the Iranian navy to escort the Adrian Darya 1, according to Iran’s Mehr news agency.

The tanker had been set to leave Gibraltar on Friday after the court lifted its detention order, but the captain and five crew members quit, leaving the ship’s owners to recruit replacements.

Photographs posted on social media showed the vessel, painted with its new name and flying the Iranian flag, being readied for departure by men in orange uniforms.

It was unclear whether Iran would release the British tanker seized in the Persian Gulf in apparent retaliation for Britain’s detention of the Grace 1, as the ship was then called.