source: www.stratfor.com

Strategic Forecasting, Inc.
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GEOPOLITICAL DIARY: PAKISTAN'S ARMY AND THE NEW STATE

Pakistan continues to simmer. One of the two four-star generals in Pakistan's army, Chairman of the Joints Chiefs of Staff Committee Gen. Tariq Majeed, said Monday that cross-border missile strikes into Pakistan's tribal belt are killing civilians and contributing to the popular perception that U.S. military operations in the region are "anti-Islam." His comments came the same day that a suicide bomber struck the Danish Embassy in Islamabad, killing eight people and wounding two dozen others.

Pakistan's new government is facing the same balancing act that plagued President Pervez Musharraf prior to the Feb. 18 elections. Pakistan is a frontline U.S. ally in Washington's war against jihadists, but the U.S.-Pakistani relationship has entered uncharted territory with a new civil and military leadership having replaced Musharraf's hybrid civil-military system. Washington is concerned that the new government's approach to Islamist militants -- that is, negotiating with them -- will only strengthen the jihadists. Meanwhile, Islamabad cannot afford to be perceived domestically (either by voters or by jihadists) as putting Washington's interests above those of Pakistanis or of Muslims generally.

Another, far more dangerous indicator of how uncertain things have gotten in Pakistan has surfaced in the last few days: A.Q. Khan has come out saying that his 2004 confession claiming he sold nuclear technology to North Korea, Iran, and Libya was made under duress, having been forced by Musharraf.

Despite his international reputation of running a nuclear arms syndicate, Khan is still a national hero in Pakistan and it is likely that he is trying to take advantage of the new political circumstances to rehabilitate himself (or is being used by those forces within Pakistan who are trying to get rid of Musharraf). But regardless of the reasons, Khan's retraction is important because it reopens an all-but-shut case and potentially implicates the military in nuclear proliferation.

Hardly anyone believed that Khan alone was responsible for passing along nuclear technology -- but because Musharraf was firmly in control at the time and had a special relationship with the Bush administration after 9/11, the United States agreed not to pursue the matter once Khan confessed and was placed under house arrest. All along it has been an open secret of sorts that Khan was carrying out orders from the top generals of the Pakistani army -- who, after all, have always had full control over the country's nuclear assets.

All of this matters a great deal because the army is the ultimate guarantor of the Pakistani state, but its role in governance has become uncertain since Musharraf was forced to give up his military title and become a purely civilian president. Along with Musharraf, the army has seen its power weakened by the recent changes in Pakistan. For Khan to retract his confession opens the door for fingers to point at the military, and creates a new source of pressure and a potential challenge to the army's power. The army is also the same institution that for decades nurtured Islamist militant groups as domestic and foreign policy tools -- and these groups are now also challenging the writ of the state within Pakistan.

What happens to Musharraf or Khan or any other individual is of very little consequence. What is crucial is whether the military will reassert control over the state, or whether the old system will be replaced with a new one (or with anarchy). It is unlikely that civilian leadership will be able to replace the army as a force to unite Pakistan.

Thus, issues such as nuclear proliferation and the state's relationships with Islamist militants (most of whom are less and less amenable to control by the government or the military) are becoming critical concerns. It is in the interest of the new military leadership to make a push to reassert its power -- but the army as an institution is under a great deal of strain from the ongoing instability and insecurity in the country. We continue watching Pakistan to see whether, or when, the crisis will reach a break point.

Copyright 2008 Strategic Forecasting, Inc.

OIL AND THE SAUDI PEACE OFFENSIVE

By George Friedman

The Saudis are hosting an interfaith conference June 4. Four hundred Islamic scholars from around the world will be there, with one day devoted to interfaith issues. Saudi King Abdullah will open the conference, over which Saudi Shura Council head Saleh bin Huma will preside. This is clearly intended to be a major event, not minimized by the fact that Ali Akbar Hashemi Rafsanjani, Iran's most influential leader -- who heads Iran's Assembly of Experts, the body that elects and can remove the Supreme Leader -- will be attending as well. Rafsanjani was specifically invited by the Saudi ambassador to Iran last Wednesday with the following message: "King Abdullah believes you have a great stature in the Islamic world … and he has assigned me the duty of inviting you to the conference." We would not have expected to see a meeting on interfaith dialogue even a year ago.

For its part, al Qaeda condemned the conference. Its spokesman, Abu Yahya al-Libi, said of Abdullah via videotape that "He who is called the defender of monotheism by sycophantic clerics is raising the flag of brotherhood between religions ... and thinks he has found the wisdom to stop wars and prevent the causes of enmity between religions and peoples." He went on to say "By God, if you don't resist heroically against this wanton tyrant ... the day will come when church bells will ring in the heart of the Arabian Peninsula." In the past, the Saudis have been very careful not to push al Qaeda, or the kingdom's own conservatives, too far.

One reason for the change might be the increasing focus by conservative Saudi clerics on the Shia, particularly Iran and Hezbollah. Twenty-two leading conservative clerics issued a statement condemning the Shia as destabilizing the Arab world and hostile to Sunnis. More important, they claimed that Iran and Hezbollah are only pretending to be hostile to the United States and Jews. In a translation by The Associated Press, the clerics said that "If they (Shiites) have a country, they humiliate and exert control in their rule over Sunnis. They sow strife, corruption and destruction among Muslims and destabilize security in Muslim countries ... such as Yemen." This view paralleled statements by al Qaeda No. 2 Ayman al-Zawahiri a few weeks back.

No Fear of the Conservatives
To begin understanding all this, we need to start with the obvious fact that the Saudi government is no longer afraid of antagonizing conservatives. It should be remembered that there was extensive al Qaeda activity in Saudi Arabia in 2003 and 2004 after the Saudis increased their cooperation with the United States. The Saudis eliminated this activity, and the royal family has done extensive work in decreasing its internal rifts as well as reaching out to tribal leaders. Nevertheless, the Saudi government has been careful not to push too far. Holding a meeting to study interfaith dialogue would appear to be crossing the line. But clearly the Saudis don't think so.

There are three reasons for this. First, al Qaeda has been crippled inside Saudi Arabia and in the broader region. The U.S. boast that al Qaeda in Iraq is on the run is no exaggeration. Al Qaeda in Saudi Arabia and Iraq are on the run because of a split among Sunni conservatives. Conservative Sunnis have their roots in local communities. Al Qaeda is an international grouping that moves into communities from the outside. As such, they threaten the interests of local Sunni leaders who are more unlikely to share theological values with al Qaeda in the long-term, and don't want to be displaced as communal leaders nor want to see their communities destroyed in al Qaeda's adventures. Theology aside, al Qaeda pushed its position too far, and those Sunnis who might theoretically support them have come to see them as a threat.

Second, and far more important, there is Saudi money. At current oil prices, the Saudis are absolutely loaded with cash. In the Arabian Peninsula as elsewhere, money buys friends. In Arabia, the rulers have traditionally bound tribes and sects to them through money. At present, the Saudis can overwhelm theological doubts with very large grants and gifts. The Saudi government did not enjoy 2004 and does not want a repeat. It is therefore carefully strengthening its ties inside Saudi Arabia and throughout the Sunni world using money as a bonding agent. That means that conservative Sunnis who normally would oppose this kind of a conference are less apt to openly criticize it.

Third, there is the deepening Sunni-Shiite split. In Christian history, wars between co-religionists like Roman Catholics and Protestants were brutal, and the distrust still echoes today. The Sunni-Shiite split, like the Catholic-Protestant split, ranges across theological and national interests. Iran is the major Shiite nation. It is mistrusted and feared by the Sunni Saudis, whose enormous wealth and military weakness leaves them vulnerable to the Iranians and forces them into an alliance with the Americans.

At this particular point, where Tehran's mismanagement of Iran's economy and particularly its oil industry has caused it to be left out of the greatest benefits of the surge in oil prices, the Saudis are worried that internal Iranian tensions and ambitions will cause Tehran at least to increase its subversive activities among Shia in the Arabian Peninsula and in Lebanon. Hence conservative Saudi clerics have focused their attacks on Iran and Hezbollah -- officially without government sanction, but clearly not shut down by the government.

Protecting the Oil Bonanza
Behind all of this, something much deeper and more important is going on. With crude prices in the range of $130 a barrel, the Saudis are now making more money on oil than they could have imagined five years ago when the price was below $40 a barrel. The Saudis don't know how long these prices will last. Endless debates are raging over whether high oil prices are the result of speculation, the policy of the U.S. Federal Reserve, conspiracy by the oil companies and so on. The single fact the Saudis can be certain of is that the price of oil is high, they don't know how long it will remain high, and they don't want anything interfering with their amassing vast financial reserves that might have to sustain them in lean times should they come.

In short, the Saudis are trying to reduce the threat of war in the region. War is at this moment the single greatest threat to their interests. In particular, they are afraid of any war that would close the Strait of Hormuz, through which a large portion of the oil they sell flows. The only real threat to the strait is a war between the United States and Iran in which the Iranians countered an American attack or blockade by mining the strait. It is assumed that the United States could readily deal with any Iranian countermove, but the Saudis have watched the Americans in Iraq and they are not impressed. From the Saudi point of view, not having a war is the far better option.

At the same time, if the Iranians decide to press the issue, the Saudis would be in no position to defend themselves. It is assumed that the United States would protect the Saudi oil fields out of self-interest. But any American government -- and here they are looking past the Bush administration -- might find it politically difficult to come to the aid of a country perceived as radically Islamist. Should another contingency come to pass, and the Iranians -- either through insurgency or attack -- do the unexpected, it is in the Saudi interest to create an image that is more compatible with U.S. tastes. And of course nothing does that better than interfaith dialogue. At this point, the Saudis are only at the point of discussing interfaith dialogue, but this still sets the stage.

It also creates a forum in which to drive home to the Iranians, via Rafsanjani, the unease the Saudis feel about Iranian intentions, using Hezbollah as an example. In permitting public attacks on the Shia, the Saudis do two things. First, they placate a domestic conservative constituency by retargeting them against Shiites. Second, they are boosting the theological framework to allow them to support groups who oppose the Shia. In particular that means supporting groups in Lebanon who oppose Hezbollah and Sunni groups in Iraq seeking more power in the Shiite dominated government. In doing this, Riyadh signals the Iranians that the Saudis are in a position to challenge their fundamental interests in the region -- while Iran is not going to be starting Shiite uprisings in Arabia while the price of oil is high and the Shia can be made content.

Pacifying the Region
The Saudis are engaged in a massive maneuver to try to pacify the region, if not forever, then for at least as long as oil prices are high. The Saudis are quietly encouraging the Syrian-Israeli peace talks along with the Turks, and one of the reasons for Syrian participation is undoubtedly assurances of Saudi investments in Syria and Lebanon from which Damascus can benefit. The Saudis also are encouraging Israeli-Palestinian talks, and there is, we suspect, Saudi pressure on Hamas to be more cooperative in those talks. The Saudis have no interest in an Israeli-Syrian or Israeli-Hezbollah conflict right now that might destabilize the region.

Finally, the Saudis have had enough of the war in Iraq. They do not want increased Iranian power in Iraq. They do not want to see the Sunnis marginalized. They do not want to see al Qaeda dominating the Iraqi Sunnis. They have influence with the Iraqi Sunnis, and money buys even more. Ever since 2003, with the exception of the Kurdish region, the development of Iraqi oil has been stalled. Iraqis of all factions are aware of how much money they've lost because of their civil war. This is a lever that the Saudis can use in encouraging some sort of peace in Iraq.

It is not that Saudi Arabia has become pacifist by any means. Nor are they expecting (or, frankly, interested in) lasting peace. They are interested in assuring sufficient stability over the coming months and years so they can concentrate on making money from oil. To do this they need to carry out a complex maneuver. They need to refocus their own religious conservatives against the Shia. They need to hem in Iran, the main Shiite power. They need to reposition themselves politically in the United States, the country that ultimately guarantees Saudi national security. And they need to at least lower the temperature in Middle Eastern conflicts or, better still, forge peace treaties.

The Saudis don't care if these treaties are permanent, but neither would they object if they were. Like any state, Saudi Arabia has interests to pursue; these interests change over time, but right now is the time for stability. Later is later. It is therefore no surprise that Egyptian President Hosni Mubarak visited Riyadh for talks this weekend. The discussions weren't theological in nature. Mubarak shares with the Saudis an interest in an Israeli-Palestinian peace. Mubarak fears the spread of Hamas' ideas back into Egypt and he wants the radical Palestinian group kept in its Gaza box. A large cache of weapons uncovered in the Sinai last week, including surface to air missiles, is as much a threat to Egypt as to Israel. Mubarak has been in no position to conclude such an agreement, even though he has tried to broker it. The Saudis have the financial muscle to make it happen. Clearly the Egyptians and Saudis have much to discuss.

We are not at the dawn of a new age in the Middle East. We are in a period where one country has become politically powerful because of mushrooming wealth, and wants to use that power to make more wealth. A lasting peace is not likely in the Middle East. But increased stability is possible, and while interfaith dialogue does not strike us as a vehicle to this end, hundreds of millions in oil revenue does. Peace has been made on weaker foundations.

This report may be forwarded or republished on your website with attribution to www.stratfor.com.

Copyright 2008 Strategic Forecasting, Inc.

May 10, 2008
Iraq Contractor in Shooting Case Makes Comeback

By JAMES RISEN
WASHINGTON — Last fall, Blackwater Worldwide was in deep peril.

Guards for the security company were involved in a shooting in September that left at least 17 Iraqis dead at a Baghdad intersection. Outrage over the killings prompted the Iraqi government to demand Blackwater’s ouster from the country, and led to a criminal investigation by the F.B.I., a series of internal investigations by the State Department and the Pentagon, and high-profile Congressional hearings.

But after an intense public and private lobbying campaign, Blackwater appears to be back to business as usual.

The State Department has just renewed its contract to provide security for American diplomats in Iraq for at least another year. Threats by the Iraqi government to strip Western contractors of their immunity from Iraqi law have gone nowhere. No charges have been brought in the United States against any Blackwater guard in the September shooting, either, and the F.B.I. agents in Baghdad charged with investigating whether Blackwater guards have committed any crimes under United States law are sometimes protected as they travel through Baghdad by Blackwater guards.

The chief reason for the company’s survival? State Department officials said Friday that they did not believe they had any alternative to Blackwater, which supplies about 800 guards to the department to provide security for diplomats in Baghdad. Officials say only three companies in the world meet their requirements for protective services in Iraq, and the other two do not have the capability to take on Blackwater’s role in Baghdad. After the shooting in September, the State Department did not even open talks with the other two companies, DynCorp International and Triple Canopy, to see if they could take over from Blackwater, which is based in North Carolina.

“We cannot operate without private security firms in Iraq,” said Patrick F. Kennedy, the under secretary of state for management. “If the contractors were removed, we would have to leave Iraq.”

Still, serious risks remain for Blackwater and at least some of its current and former personnel. A federal grand jury continues to consider evidence in the Baghdad shooting. Although the company is not likely to face any criminal charges, people involved in the case say that some Blackwater guards involved in the shooting are cooperating with the F.B.I. as it pursues evidence against other guards.

Separately, a former Blackwater guard is under criminal investigation for the December 2006 shooting death of an Iraqi guard for an Iraqi vice president, and may soon face federal charges. In a third case, two former Blackwater workers pleaded guilty to weapons-related charges, but both received sentences that included no jail time in return for their cooperation with federal prosecutors in a broader investigation.

A House committee has also asked the Internal Revenue Service to begin an inquiry into whether Blackwater has designated its guards as independent contractors rather than employees to in order to avoid paying and withholding federal taxes. The State Department renewed the security contract for only one year — just long enough to take the company into the start of the next administration. And Blackwater’s political connections to the Bush administration may not serve it well if the Democrats win the White House in November.

Given the furor that surrounded Blackwater after the September shooting in Baghdad, critics say the decision to renew the company’s contract in Iraq is a sign of the Bush administration’s inability to curb its reliance on outside contractors in the war.

“The shooting incident was like a hammer blow, but where are the consequences?” said Peter W. Singer, a scholar at the Brookings Institute and author of “Corporate Warriors,” a book about contractors in Iraq. “I think it points to the fact that the dependence on contractors is like a drug addiction. They just can’t help themselves.”

Representative Henry Waxman, California Democrat who is chairman of the House Oversight and Government Reform Committee, which has been investigating Blackwater on several fronts, said, “I can’t understand why Blackwater’s contract was renewed. It seems to me the administration should have looked for others who could do the job, including the U.S. military.”

In the past administration officials have dismissed the notion of using military personnel to guard diplomats.

Founded in 1997 by Erik Prince, a former member of the Navy Seals and heir to a family fortune made in the auto parts industry, Blackwater began to generate controversy in Iraq long before last September’s shooting. Blackwater had developed a reputation among both Iraqis and American military personnel as a company that flaunted a quick-draw image that led its security personnel to take overly aggressive actions to protect the people they were paid to guard.

Last year the State Department acknowledged that Blackwater had been involved in significantly more shootings per convoy mission than DynCorp and Triple Canopy, which provide security for the State Department outside Baghdad.

The shooting death of the bodyguard for the Iraqi vice president in 2006 rankled the Iraqi government well before last September’s shooting. An off-duty Blackwater guard who American and Iraqi officials said had been drinking heavily was the sole suspect. The off-duty Blackwater guard, Andrew J. Moonen, who no longer works for the company and who is a former Army paratrooper, is now under criminal investigation by federal prosecutors in Seattle. Although Mr. Moonen has not been charged, his lawyer, Stewart Riley of Seattle, said that he had recently been in contact about the case with prosecutors from the United States Attorney’s Office in Seattle.

People familiar with the case said they believed that the Justice Department had recently concluded that it had found a way to skirt some of the jurisdictional problems that in the past made it difficult to bring charges in American courts for crimes committed by contractors in Iraq.

“I think they may come to a decision on what to do with this case in the next three or four months,” said one person familiar with the matter. Mr. Riley says that Mr. Moonen maintains his innocence in the shooting.

In addition, a wrongful death lawsuit against Blackwater filed by the families of four Blackwater guards killed in Falluja, Iraq, in 2004 — an event that prompted the first major battle in Falluja between the American military and insurgents that year — is also still pending.

A federal appeals court is expected to rule this year on whether the families can proceed with their lawsuit or be forced into arbitration with Blackwater, an outcome the company prefers, according to the families’ lawyer, Daniel Callahan of California.

Donna Zovko of Cleveland, the mother of Jerko Gerald Zovko, one of the Blackwater guards, says Blackwater has stonewalled the families.

“It is 1,501 days since he was killed, and I don’t know one-tenth of what happened to him, and no one seems to care," Mrs. Zovko said in an interview.

Given so many headlines about his company, Mr. Prince until recently seemed eager to tell his side of the story, and there were reports that he planned to write a book. But on Friday, Anne Tyrrell, a Blackwater spokeswoman, said Mr. Prince’s book project had been put on hold.

Source:
www.stratfor.com

Strategic Forecasting, Inc.
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BRAZIL: WILL PURSUE SANCTIONS AGAINST U.S.

After winning a World Trade Organization (WTO) ruling on June 2 that declared the United States failed to comply with a previous WTO verdict regarding U.S. subsidies for cotton farmers, Brazilian officials said the country intends to seek sanctions against the United States, The Associated Press reported June 3 citing Roberto Azevedo, the Brazilian Foreign Ministry's trade chief. Details of the sanctions were not reported.

Copyright 2008 Strategic Forecasting, Inc.

source: www.stratfor.com

VIETNAM: NUCLEAR ENERGY APPROVED

Vietnamese lawmakers approved the utilization of atomic energy for civilian uses June 3, opening the door for the construction of the country’s first nuclear power plant, media reported. Heavily tied to hydro-electric plants, Vietnam is struggling to meet rising consumer energy demand and an economy that expanded last year by 8.5 percent.

Copyright 2008 Strategic Forecasting, Inc.