Mideast eager for Hollywood business
Money currently flowing from U.S. to Emirates
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DUBAI -- The enticements are irresistible: Abu Dhabi has its Film Financing Circle. Neighboring Dubai is building its own Studio City. Big bucks beckon.

At the Cannes Film Festival, starting this week, representatives of the Emirates will be a center of attention. Huge deals will be discussed and the wine will flow.

But Hollywood these days has been making a reality check of its relations with the Emirates, and some interesting conclusions have been reached:

To date, the flow of money seems to be from the U.S. to the Emirates, not the other way around. And the reps of Abu Dhabi and Dubai have turned out to be as much competitors as they are brethren.

Further, the deals being made so far are more about theme parks and hardware than about film funding.

Abu Dhabi and Dubai -- the two best known of the seven members of the United Arab Emirates -- are rivals in attracting Western attention and, in their competitive eagerness to lure Hollywood, both have hinted at opportunities that sound delicious but are not so easy to pull off.

Both are eager to set up deals, but investing in films is a distant goal. Hollywood is looking for a quick fix. Abu Dhabi and Dubai both want long-term relationships in which Hollywood will help educate their people in the nuts and bolts of the business (everything from talent management to film-crew staffing) and bring U.S. productions to the area.

Film funding? That's part of the deal. But in the Middle East, patience is a highly prized virtue, and more than one exec in the oil-rich region has spoken vaguely of 20-year plans.

As one wealthy Abu Dhabi exec says with a subtle smile, "They come to me and they all have that look in their eye: Money!" He pauses. "But I am not an ATM machine."

Execs in the Abu Dhabi government admit they contributed to some confusion by labeling their plan the Abu Dhabi Film Fund. (A more appropriate title might be Creative Partnership Opportunities.) The problem was exacerbated at Abu Dhabi's first film festival last October when one of the associates got over-enthused and told the media the fund was "unlimited."

Abu Dhabi honchos groan that they are still dealing with the repercussions and dashed hopes caused by that one word.

Even without the quick-fix funds, the area would seem to have plenty of potential for Western congloms as they look to find new areas of revenue.

Paramount, Universal, DreamWorks Animation, MGM and Marvel have inked megabucks deals to open a theme park in Dubailand, an epic-scale destination center that will feature 22 theme parks in an area the size of Singapore. It is skedded for a 2010 launch and due for completion in 2020 (yet another reminder that, in the Middle East, the key word is patience).

"Investors are still distracted by real estate," says Gianluca Chacra of UAE-based distrib Front Row. "The money is definitely there. In fact, it's overflowing. It's almost like Germany in the mid-'90s, but Germany had a film culture while here it's something totally new. It's going to take time to develop that understanding and know-how of the way the film industry works. Europe is an old continent. This place is only 30 years old."

In the 1970s, the oil boom created a breed of petro-rich Arabians who were happy to invest in Western films as long as they could party with celebs and starlets.

Many in Hollywood were hoping for a repeat. But those days are gone, and the new generation comprises savvy businessmen who want to see a hefty return on their investment.

"I think the idea of just going in there to get money is a big mistake," says Richard Fox, exec VP of Warner Bros. Intl. "We're looking at this as a two-way street. We see great potential in the Arab-speaking world, and it's not just that money will come to the studios."

The entire Arab world is perhaps the planet's biggest untapped entertainment market, with a population of roughly 300 million, two-thirds of whom are under the age of 30. Since all speak the same language, albeit with different dialects and different cultural sensibilities, the region should be on a par with Western Europe or Japan in terms of box office revenues.

"It's tremendously exciting when you look at the demographics over there," says WB's Fox. "They're young, they all speak Arabic, they're all Internet-savvy, there's a sophisticated base in the bigger cities. But it has to come from within. There's no way we'll force-feed them American or European stories."

It won't be easy. Religious traditions and censorship are factors. Despite its mild nature, "The Queen" was given an adult rating in some Gulf states because it included references to Princess Diana having sex outside marriage. So salty U.S. hits like "Superbad" or "Knocked Up" often find themselves heavily cut or, in some cases, not released at all. "Borat" was denied a release by the UAE censor who observed that if all the offensive scenes were removed, all that would be left would be a half-hour movie.

Meanwhile, "Spider-Man 3" struggled to reach $10 million thanks to piracy and an underdeveloped distribution-exhibition system. Many local laws favor indigenous films; for example, Egyptian legislation limits foreign films to a maximum of eight prints.

In Saudi Arabia, the most conservative of all Gulf states, cinemas have been banned for three decades, although pressure has been growing in recent months for the ban to be lifted. (Satellite dishes were officially illegal in the country until 2002.)

As for the goal of luring Hollywood filming, the Emirates must solve some problems. There are no incentive plans. And, unlike the Vancouver boom in the 1970s, there are not a lot of experienced local crews and it's not cheap to find housing for an entire imported workforce.

And then, of course, there is political instability across wide swaths of Arab countries such as Iraq and Lebanon. (The Arab world spans Gulf states such as Saudi Arabia, the UAE and Kuwait; North African countries such as Algeria and Morocco, and Levant countries such a Lebanon and Syria.)

As a result of this regional situation, Dubai and Abu Dhabi have become important markets for producers and distributors.

Many hope that the two are the shape of the future for the Arab world. As new cities -- Abu Dhabi did not have a paved road until 1961, and Dubai got its first skyscraper in 1979 -- they are more experimental and open to innovations than most of their Arab neighbors. In showbiz terms, their number of multiplexes and screens is mushrooming.

The two Emirates have offered opportunities for American film execs in unexpected areas. Hollywood's top agencies have sent over reps for meetings with the existing media companies there. As one Mideast exec says, "We have local stars, but we need to learn how to build careers."

The New York Film Academy has established a school helping to train aspiring filmmakers, with hints that other U.S. film schools may similarly come to the area.

And they are interested in working with the Hollywood majors on films. But, as one exec says, "A violent cop movie that films entirely in L.A. -- what does that have to do with me? I'm not really interested in funding that." He says he is interested in films that will interest local audiences, or ones that depict their region and their people. Arab characters don't necessarily have to be the leads in the film; he just wants "to see us depicted as something beyond terrorists or Ali Baba."

Abu Dhabi and Dubai are sometimes spoken of as if they're a unit, but in fact, they're quite different.

Abu Dhabi has a population of 200,000 who control 10% of the world's oil supply. Local investors and the government have money, but so far, their coin is flowing to banks, not filmmakers. The city, situated on an island in the Arabian Gulf, is pretty, with a cosmopolitan sophistication. Residents there seem to talk about Dubai as if it were a nouveau riche upstart.

Dubai, which is a 90-minute drive east of its rival, has significantly less oil, so it is banking on tourism. Its location makes it a hub for European, Asian and Australian financial trading and travel. It's a much better promoter than its rival Emirate, grabbing publicity by bringing celebs like George Clooney and Sharon Stone to its film festival.

Dubai is jam-packed with buildings that are recently completed, under construction or due to break ground. It has the sprawl and the constant traffic of Los Angeles, the newness of Las Vegas (but without the neon), and the eye-catching high-rises of Hong Kong. All are blended with an international flavor. English and Arabic are the main languages, but 80% of Dubai's residents are non-natives, with emigres from dozens of countries.

Aside from showmanship, Dubai has one key asset: real estate. Every day, the English-language newspaper Gulf News carries 300 pages of real-estate listings. It is this construction bonanza that has attracted so many of the U.S. studios into Dubai. One key attraction is that the Hollywood companies will own the land they buy (unlike in China, for example, where a foreign company must partner in any ownership).

Yet in some ways, Dubai has become a victim of its own success, with the cost of living skyrocketing and hotels operating at near capacity. A number of high-profile studio projects that had looked at lensing in the bustling metropolis, such as Fox's "The A-Team," were deterred by the expense involved and lack of incentives offered.

Dubai is building its own Studio City, a proposed one-stop-shop for production that will contain three state-of-the-art soundstages. The project has been plagued by delays and design problems, and promises that the first soundstage will be ready by the end of this year may be overly optimistic.

But when the soundstages do finally open their doors, they may offer a regional rival to the studios in Morocco's Ouarzazate for the affections of international productions.

More important, the Studio City will offer a foundation for the much-needed financial incentives that Dubai authorities will need to offer foreign productions to come and lens there.

All this is not to say that deals aren't being made already.

Hollywood startup the Film Dept. (from Mark Gill and Neil Sacker) has pacted with Dubai-based media giant MBC to fund films. Sheik Waleed -- a Dubai-based Saudi Arabian who turned his satellite channel MBC into one of the area's biggest media empires -- is a board member of the Film Dept.

"I think everybody realizes that the Wall Street money is going to be a lot harder to come by now, and there will need to be fresh sources of capital," Gill says. "In our case, Sheik Waleed had a strategic interest to invest, because he owns MBC and buys a lot of movies for his channels. Working with us also gives him a way to look at the movie business more thoroughly without costing himself hundreds of millions of dollars."

Rumors out of Dubai also suggest that officials there are holding talks with Disney execs about the possibility of establishing a multimedia fund that will include making coin available for Pixar features based on Middle Eastern-themed stories. Those talks are still at an early stage, and it would likely be months before any deal is formally inked or announced.

Abu Dhabi hasn't publicized its media growth as much, but people there are just as serious about its film future.

So far, much of the energy has gone into the fine arts, building its own branches of the Louvre and the Guggenheim and commissioning works by Frank Gehry.

Though the area is fiscally cautious, its first major deal was a doozy. In one fell swoop last year, Abu Dhabi pacted with the world's biggest conglom, Time Warner, in a multibillion-dollar, multimedia deal that includes a $500 million film fund and $500 million vidgame fund, plus coin for local-language production for three to seven films a year with budgets of less than $5 million each. It also will entail production facilities and cinemas.

Last October, the Emirate unveiled the inaugural Middle East Intl. Film Festival and Film Financing Circle, with the latter event attracting figures such as Harvey Weinstein, Relativity's Ryan Kavanaugh and Hyde Park Entertainment's Ashok Amritraj.

The Emirate recently announced the appointment of former Disney Intl. exec VP Ed Borgerding as chief exec of the Abu Dhabi Media Co., which will oversee the implementation of the Warner Bros. deal.

The feelers have been sent out for a high-profile figure to become head of Abu Dhabi's Film Commission and attract foreign production into the Emirate. That appointment will be made public in the next two months.

Abu Dhabi's Film Financing Circle will also be expanding its scope as it brings international film execs together with Middle Eastern investors.

Other deals may not be so rich, but this one sets the tone: Abu Dhabi wants to be in business with the West, but all the plans have to be broader than simple film financing, and must be mutually beneficial.

Weinstein has held a number of discussions with Abu Dhabi officials about the launching of a joint venture similar to the film funds the Weinstein Co. has inked with Latin America and Asia.

"We've been approached by a few countries in the Middle East, such as Egypt, Qatar and Abu Dhabi about building a similar infrastructure, and are considering the opportunity," Weinstein says. "The Middle East has a keen understanding of both the creative and financial aspects of the film industry. We remain impressed by the ongoing growth of the local production capabilities and facilities in the region, and will consider producing future projects there as well."

With hopes for a long-range relationship with Hollywood, the question remains whether Arab investors are ready to take the big step and really invest in Hollywood. In other words, would an oil-rich company buy a studio, the same way that other foreign businesses, such as France's Vivendi or Japan's Matsushita and Sony did?

"I think the region is already a player as an investor," says Tarak Ben Ammar, the Franco-Tunisian maven and dealmaker who counts Rupert Murdoch, Prince Waleed Bin Talal and Silvio Berlusconi as close business associates. "There are private funds and very rich states that are competitive and investing their money shrewdly.

"The question is will they be a player or a leader. Will they do what I've always recommended and go out and buy a company the way Matsushita or Sony did? I think that will take time. They're being smart, taking minority positions and developing locally. They have the cash and they have the patience."

Once again, it's that word to Hollywood: Patience.

The Price of the Surge

By Steven Simon
From Foreign Affairs , May/June 2008
Summary: The Bush administration's new strategy in Iraq has helped reduce violence. But the surge is not linked to any sustainable plan for building a viable Iraqi state and may even have made such an outcome less likely -- by stoking the revanchist fantasies of Sunni tribes and pitting them against the central government. The recent short-term gains have thus come at the expense of the long-term goal of a stable, unitary Iraq.
STEVEN SIMON is Hasib J. Sabbagh Senior Fellow for Middle Eastern Studies at the Council on Foreign Relations. From 1994 to 1999, he served on the National Security Council in positions including Senior Director for Transnational Threats.

Listen to this essay:

In January 2007, President George W. Bush announced a new approach to the war in Iraq. At the time, sectarian and insurgent violence appeared to be spiraling out of control, and Democrats in Washington -- newly in control of both houses of Congress -- were demanding that the administration start winding down the war. Bush knew he needed to change course, but he refused to, as he put it, "give up the goal of winning." So rather than acquiesce to calls for withdrawal, he decided to ramp up U.S. efforts. With a "surge" in troops, a new emphasis on counterinsurgency strategy, and new commanders overseeing that strategy, Bush declared, the deteriorating situation could be turned around.

More than a year on, a growing conventional wisdom holds that the surge has paid off handsomely. U.S. casualties are down significantly from their peak in mid-2007, the level of violence in Iraq is lower than at any point since 2005, and Baghdad seems the safest it has been since the fall of Saddam Hussein's regime five years ago. Some backers of the surge even argue that the Iraqi civil war is over and that victory on Washington's terms is in sight -- so long as the United States has the will to see its current efforts through to their conclusion.

Unfortunately, such claims misconstrue the causes of the recent fall in violence and, more important, ignore a fatal flaw in the strategy. The surge has changed the situation not by itself but only in conjunction with several other developments: the grim successes of ethnic cleansing, the tactical quiescence of the Shiite militias, and a series of deals between U.S. forces and Sunni tribes that constitute a new bottom-up approach to pacifying Iraq. The problem is that this strategy to reduce violence is not linked to any sustainable plan for building a viable Iraqi state. If anything, it has made such an outcome less likely, by stoking the revanchist fantasies of Sunni Arab tribes and pitting them against the central government and against one another. In other words, the recent short-term gains have come at the expense of the long-term goal of a stable, unitary Iraq.

Despite the current lull in violence, Washington needs to shift from a unilateral bottom-up surge strategy to a policy that promotes, rather than undermines, Iraq's cohesion. That means establishing an effective multilateral process to spur top-down political reconciliation among the major Iraqi factions. And that, in turn, means stating firmly and clearly that most U.S. forces will be withdrawn from Iraq within two or three years. Otherwise, a strategy adopted for near-term advantage by a frustrated administration will only increase the likelihood of long-term debacle.

THE SURGE'S FALSE START

After the February 2006 bombing of the Askariya shrine in Samarra, the White House started to become increasingly concerned that there were too few U.S. troops in Iraq. A network of retired army officers led by Jack Keane, a former vice chief of staff of the U.S. Army, had been pushing from the outside for an increase in forces, and Senators John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) kept up a drumbeat of criticism of what they saw as a lackluster military effort. The November 2006 congressional elections, which handed the House and the Senate to the Democrats, added to the sense that a new strategy was needed. In a December 2006 memo, Bush's national security adviser, Stephen Hadley, somewhat gingerly noted that the United States might "need to fill the current four-brigade gap in Baghdad with coalition forces if reliable Iraqi forces are not identified."

On December 13, 2006, Bush met with the Joint Chiefs of Staff at the Pentagon to persuade them to allocate more troops to Iraq. It was not an easy sell. U.S. ground forces are not configured to fight such a long war, and the repeated deployment of the same active-duty and Reserve units had taken a toll. The reenlistment rate of young captains, for example, had fallen to an unprecedented low; about half of the West Point classes of 2000 and 2001 had decided against an army career. The pace of unit rotations and the tempo of operations had also taken their toll on equipment, which was wearing out at nine times the normal rate, faster than it could be replaced. The chairman of the Joint Chiefs of Staff made clear his concern about the army being stretched too thin. A shortfall of 10,000 company-grade officers meant that the Reserve units would have to rob both people and materiel from other units. Meanwhile, the mounting expense of the war was crowding out the procurement of new combat systems for the navy and the air force, and there was a growing risk that the military might find itself without the capacity to meet other strategic challenges, whether from Afghanistan, Iran, or elsewhere.

Bush tried to allay these worries, pledging to, among other things, increase the size of the U.S. Army and the Marine Corps and boost defense spending. But the Joint Chiefs also conditioned their reluctant support of the surge on a promise from the president to hold Iraqi Prime Minister Nouri al-Maliki's feet to the fire on political reconciliation. So when Bush unveiled his surge strategy in January 2007 (the deployment of an additional 21,500 troops, through September, with the initial military objective of restoring order to Baghdad), the stated purpose was to ensure that "the [Iraqi] government will have the breathing space it needs to make progress in other critical areas. Most of Iraq's Sunni and Shia want to live together in peace -- and reducing the violence in Baghdad will help make reconciliation possible." Bush quoted Maliki's promise that the Baghdad security plan would "not provide a safe haven for any outlaws, regardless of their sectarian or political affiliation."

Even then, however, the administration was already starting to doubt Maliki's competence and willingness to pursue reconciliation, the principal determinant of long-term stability in Iraq. Two months earlier, Hadley had visited Iraq to assess the prospects for a cross-sectarian political rapprochement and come away unsure of Maliki's stance. "Do we and Prime Minister Maliki," Hadley had wondered in his December 2006 memo, "share the same vision for Iraq? If so, is he able to curb those who seek Shia hegemony or the reassertion of Sunni power? The answers to these questions are key in determining whether we have the right strategy in Iraq." Hadley proposed several ways to test Maliki's intentions and bolster his resolve, including initiatives to rejigger parliamentary support to free Maliki from his Shiite base linked to Muqtada al-Sadr and enable him to take conciliatory steps toward the Sunnis. The United States, however, lacked the influence necessary to put this approach into practice. Before long, events in Iraq revealed the answers to Hadley's questions: in both cases, a resounding no.

The deployment of the five new brigades proceeded more or less as planned, but from the start there was little headway made toward the broader goals of the surge, particularly reconciliation, as measured by the Iraqi government's inability to meet key benchmarks. The Constitutional Review Committee, which was charged with redressing Sunni grievances, made little progress, and there was no progress on de-Baathification reform, amnesty, provincial elections, or the implementation of oil legislation. The Sunni Iraqi Accordance Front had walked away from Maliki's cabinet, and Bush's reportedly regular calls to Maliki urging him to mobilize his government were ineffective. The Iraqi committees created to support the Baghdad security plan were left unfilled, and the three Iraqi brigades needed to help implement it arrived late and understrength. Diplomatic efforts to get Iraq's neighbors involved fizzled.

FROM TOP DOWN TO BOTTOM UP

The president's hopes for the top-down political efforts that were supposed to accompany the surge quickly faded. As a substitute, however, a new bottom-up strategy was embraced. Bush had observed in his January surge speech that the Sunnis were challenging al Qaeda's presence in Iraq, and a February 2007 National Intelligence Estimate on Iraq recommended "deputizing, resourcing, and working more directly with neighborhood watch groups and establishing grievance committees -- to help mend frayed relationships between tribal and religious groups, which have been mobilized into communal warfare over the past three years." A few months later, the president signaled a formal shift in strategy in a speech at the Naval War College: "To evaluate how life is improving for the Iraqis, we cannot look at the country only from the top down. We need to go beyond the Green Zone and look at Iraq from bottom up. This is where political reconciliation matters the most, because it is where ordinary Iraqis are deciding whether to support new Iraq or to sit on the fence, uncertain about the country's future." What the president was proposing was a shift in the U.S. approach to counterinsurgency. Now, the United States would work to exploit a grass-roots anti-al Qaeda movement already under way by taking the pressure off the insurgents who had begun to point their weapons at the jihadists and funneling money to tribal leaders. In theory, this would help dismantle the jihadist infrastructure and create islands of stability that would eventually join up like "oil spots."

After the U.S. invasion, the Sunni groups that would go on to make up the insurgency arrived at a marriage of convenience with the foreign and local jihadists who made up al Qaeda in Iraq. The two shared a common goal: to reverse the triumph of the Shiites and restore the Sunnis to their lost position of power. For the Sunni insurgents, the presence of foreign jihadists also helped divert the attention of U.S. forces. Up to a point, therefore, al Qaeda's excesses -- such as its attempt to impose strict Wahhabi-style rule by banning music and satellite dishes and compelling women to cover themselves entirely -- were to be tolerated.

But for al Qaeda, the link with the insurgents was supposed to serve two additional purposes that went well beyond the shared goal of chipping away at Shiite predominance -- and ultimately went against the interests of the Iraqi Sunnis themselves. The first was to establish an al Qaeda-dominated ministate as a base for carrying out jihad against enemies outside of Iraq. (The November 2005 attack against three Western tourist hotels in Amman, Jordan, allegedly ordered by Abu Musab al-Zarqawi, then the leader of al Qaeda in Iraq, was a harbinger of this wider strategy.) The second was to seize a leading position within the insurgency and thereby block a power-sharing arrangement between Baghdad and the Sunni nationalists, an arrangement that would entail the selling out of al Qaeda by the Sunnis.

The Iraqi Sunnis' enthusiasm for the alliance waned as al Qaeda increasingly attempted to assert its leadership. In October 2006, al Qaeda declared the formation of an Islamic state in Iraq, demanding that Sunni insurgent leaders pledge allegiance to the new (and many believed fictional) jihadist commander Abu Omar al-Baghdadi, whose name was supposed to signify an authentically Iraqi origin. To the nationalist insurgents, accepting the declaration of a separate state and ceding leadership to al Qaeda made little sense. Doing so would have fueled the process of decentralization, emboldened those Kurds and Shiites who sought their own fiefdoms, and, crucially, further distanced the Sunnis from eventual access to Iraq's potentially massive oil revenues. Moreover, despite the spectacular successes that had been attributed to al Qaeda, it was the nationalist Sunnis who provided the backbone of the insurgency and had done most of the killing and dying.

Some tribes had also grown increasingly resentful of al Qaeda's efforts to seize control of resources. The Albu Risha tribe, for example, had lost control over portions of the road from Baghdad to Amman, undermining its ability to raise revenue by taxing or extorting traders and travelers. When the Albu Rishas' leaders protested, the chieftain, Sheik Bazi al-Rishawi, was killed along with one of his sons, and two more of his sons were abducted. In response, Rishawi's fourth son, Sheik Abdul Sattar, assembled a small group of tribal figures (with the help of funds from the local U.S. military commander) under the banner of the Anbar Salvation Council to roll back al Qaeda's influence. The bodies of al Qaeda personnel soon began turning up in alleyways.

This strategic schism might have been papered over had the jihadists not overreacted to the opposition of other insurgent groups. In 2007, there was a wave of sensational killings of Sunni leaders by al Qaeda, including Abdul Sattar (who had met with President Bush two weeks before his death). The assassinations of Sunni leaders warranted retaliation under the prevailing tribal code, opening the door to more systematic cooperation between the tribes and U.S. forces. In the wake of Abdul Sattar's death, a Sunni leader complained that al Qaeda's assassinations had "left resistance groups with two options: either to fight al Qaeda and negotiate with the Americans or fight the Americans and join the Islamic State of Iraq, which divides Iraq. Both options are bitter." After their defeat in the battle of Baghdad -- thanks to the entrenched power of Sadr's Shiite Mahdi Army and the arrival of additional U.S. troops -- the Iraqi Sunnis went decisively with the first option, marking the start of the Sunni Awakening groups. The United States, for its part, had its own incentive to cooperate with the insurgents: June 2007, with 126 troop deaths, was the second-worst month for the U.S. military in Iraq, and General David Petraeus, the U.S. ground commander, was facing pressure to reduce casualties quickly. The most efficient way to do so was to strike deals with the newly pliable insurgents.

The deals were mediated by tribal leaders and consisted of payments of $360 per month per combatant in exchange for allegiance and cooperation. Initially referred to by the United States as "concerned local citizens," the former insurgents are now known as the Sons of Iraq. The total number across Iraq is estimated at over 90,000. Although the insurgents turned allies generally come well armed, at least one unit leader, Abu al-Abd, commander of the Islamic Army in Iraq, who controls Sunni neighborhoods in Baghdad, has said that he receives weapons as well as logistical support from U.S. units. His arrangement is probably typical. In November 2007, he agreed to a three-month pact, open to extension.

This strategy has combined with other developments -- especially the fact that so much ethnic cleansing has already occurred and that violence in civil wars tends to ebb and flow, as the contending sides work to consolidate gains and replenish losses -- to bring about the current drop in violence. The Sunni sheiks, meanwhile, are getting rich from the surge. The United States has budgeted $150 million to pay Sunni tribal groups this year, and the sheiks take as much as 20 percent of every payment to a former insurgent -- which means that commanding 200 fighters can be worth well over a hundred thousand dollars a year for a tribal chief. Although Washington hopes that Baghdad will eventually integrate most former insurgents into the Iraqi state security services, there are reasons to worry that the Sunni chiefs will not willingly give up what has become an extremely lucrative arrangement.

TRIBAL REALITIES

The surge may have brought transitory successes -- although if the spate of attacks in February is any indication, the decrease in violence may already be over -- but it has done so by stoking the three forces that have traditionally threatened the stability of Middle Eastern states: tribalism, warlordism, and sectarianism. States that have failed to control these forces have ultimately become ungovernable, and this is the fate for which the surge is preparing Iraq. A strategy intended to reduce casualties in the short term will ineluctably weaken the prospects for Iraq's cohesion over the long run.

Since the mid-nineteenth century, ruling powers in the Middle East have slowly and haltingly labored to bring tribal populations into the fold, with mixed success. Where tribes and tribalism have remained powerful, the state has remained weak. The Ottomans attempted forced sedentarization of the tribes, weakening tribal authorities by disrupting settlement patterns and replacing tribal sheiks with smaller cadres of favored leaders who became conduits for patronage. The colonial powers after World War I faced a different problem: the threat of nationalist urban elites opposed to foreign rule. In an effort to counter defiant urban leaders, they empowered rural tribes on the periphery. In Iraq, the British armed the tribes so that the sheiks could maintain order in the countryside and balance the capabilities of the nominal local governments operating under League of Nations mandates. Thus, the tribal system that Ottoman rule sought to dismantle was revitalized by British imperial policy, and the power of the nominal Iraqi government was systematically vitiated. In 1933, Iraq's King Faisal lamented, "In this kingdom, there are more than 100,000 rifles, whereas the government has only 15,000."

The tribes lost some power over the subsequent decades. This was in part a result of increasing direct British involvement in activities such as law enforcement, land tenure, and water distribution and in part a result of urbanization: as Iraqis moved from the country to the city, their affiliations shifted from the tribe to urban institutions -- principally the trade union and the mosque -- even as they held on to tribal symbols. When the Baathists took power in 1968, they explicitly rejected "religious sectarianism, racism, and tribalism ... the remnants of colonialism." The tribes, in their minds, were inevitable rivals of a centralizing state. But after taking control in a coup in 1979, Saddam leaned on his own Sunni tribal networks to staff his security services, army leadership, and bureaucracy, while suppressing other tribal life. He tried to rein in tribes by dispersing Baathist apparatchiks throughout the hinterland, but he nonetheless came to rely on the tribal system as a whole to make up for the shortcomings of the state as times became harder.

During the Iran-Iraq War, Saddam used Shiite tribes to defend regions near the Iranian border, and elsewhere tribal leaders regained some of their traditional authority as the war forced the redeployment of Baathist officials to the front. Amid the hardships created by the conflict, the flow of resources from the center shrank, leading to greater self-reliance in tribal areas and the renewed importance of tribal leaders. The Gulf War, and the grinding international sanctions that followed, accelerated these trends. In 1996, a high council of tribal chiefs was established and was granted political privilege, weapons, and land. Selected tribal leaders were allowed to enrich themselves by any means, fair or foul, and in return they were expected to defend the regime. Saddam, in effect, fostered a process of retribalization in Iraq.

Iraq's Arab neighbors, particularly Jordan and Saudi Arabia, provide a counterexample. They won enduring stability by corralling the tribes through a combination of reward and punishment. In Transjordan, King Abdullah I and the British -- helped by famine and the effects of the Great Depression -- confronted recalcitrant tribes militarily and then secured their allegiance with a steady flow of resources from the emerging state. More recently, Jordan's Hashemite monarchy has preserved the tribes' loyalty by guaranteeing them prestigious positions in the government and the military and by playing them off against the Palestinians. In Saudi Arabia, the al Saud dynasty consolidated its state by subduing the tribal challenge of rebellious Ikhwan and then endowing them with status and a military role. Strategic marriages between the al Saud family and the tribes cemented these ties. Although such efforts occasionally faltered, the thrust of the policy was always clear: to subordinate the tribes to the state.

Now, U.S. strategy is violating this principle by fostering the retribalization of Iraq all over again. In other countries in the region, such as Yemen, the result of allowing tribes to contest state authority is clear: a dysfunctional country prone to bouts of serious internecine violence. Such violence can also cross borders, especially if neighboring states are willing to use the tribes as their own agents. Pakistan provides a particularly ominous example of this dysfunctionality: its failure to absorb its Pashtun population has threatened the viability of the Pakistani state. The continued nurturing of tribalism in Iraq, in a way that sustains tribes in opposition to the central government rather than folding them into it, will bring about an Iraqi state that suffers from the same instability and violence as Yemen and Pakistan.

U.S. officials in Iraq have taken note of how the current U.S. approach has exacerbated the dangers of tribalism. Last month, a senior U.S. military adviser conceded, "We're not thinking through the impact of abetting further corruption and perpetuating tribal power." In December, a U.S. diplomat warned, "The absence of government in a lot of areas has allowed others to move in, whether militias or others." The net effect has been a splintering of the country rather than the creation of a unified nationalist Sunni front that, having regained its confidence, would be prepared to deal constructively with Baghdad.

THE CRUMBLING CENTER

The growth of warlordism is another consequence of the surge. By empowering the tribes and other networks without regulating their relationship to the state, the United States has enabled them to compete with one another for local control and what is mostly criminal revenue. It is worth noting that warlordism is not just a creeping Sunni phenomenon. Kurdish and Shiite criminals have been equally adept at exploiting the current security situation to their advantage. Indeed, warlordism appears even to be altering the sectarian divide. In Najaf, where gang warfare has erupted on more than one occasion, supporters of Sadr's Mahdi Army are engaged in street battles with members of the Badr Organization, even though both are Shiite groups.

Last December, a committee of British MPs charged with examining the security situation in Basra as British forces began to draw down concluded that warlords and criminal gangs had all but taken over the city. "Although the reduction in attacks on UK forces can only be welcome," the committee's report noted, "this alone cannot be a measure of success. The initial goal of UK forces in South Eastern Iraq was to establish the security necessary for the development of representative political institutions and for economic reconstruction. . . . This goal remains unfulfilled."

The United States' bottom-up strategy is also worsening sectarianism. For many Sunnis, reconciliation means restoration -- not inclusion in power-sharing arrangements but regaining control of the state. Instead of discouraging this mindset, the evolution of the surge into a bottom-up operation has validated it, fostering the impression that Washington has at last recognized that its strategic interests lie with the Sunnis. As the Sunnis see it, the current U.S. strategy is a policy of organizing, arming, and training them to challenge Shiite supremacy.

The Shiites and the Kurds naturally have sharply different notions of what reconciliation means. For the Kurds, reconciliation means respect for their claims to autonomy as well as for their potential territorial gains. The Shiites have tended to emphasize the need for justice before reconciliation, which, as they see it, requires that they be compensated for their suffering under previous regimes (not only Saddam's). This, in their mind, necessitates the subordination of Iraq's Sunni population to the Shiite community. Some Shiite leaders have defied such thinking -- Ayatollah Ali al-Sistani most prominently -- but Sadr has made clear that he will use violence to secure Shiite hegemony, and Maliki's government has shown no willingness to be pried away from Sadr and like-minded Shiites. Indeed, in postconflict situations, reconciliation often founders on the unwillingness of victims to surrender their claims to justice.

Some Sunnis have started to recognize that the United States has no intention of restoring their supremacy. The realization that civilian jobs and vocational training is all that is in store for the 80 percent of the former insurgents who are blocked from membership in the Iraqi army (Shiite leaders want to dominate the army in order to use it as their own instrument of control) has eroded Sunni cooperation with U.S. forces. As one volunteer told a reporter, "The Sunnis were always the leaders of the country. Is it reasonable that they are turned into service workers and garbage collectors? . . . We had not anticipated this from the American forces. Of course we will not accept that." One response has been to head back to al Qaeda. An Awakening commander in the Diyala provincial capital of Baqubah, which has never been fully pacified, said in February, "Now there is no cooperation with the Americans. . . . We have stopped fighting al Qaeda." This was doubtless an exaggeration, but one that pointed to the hard truth that for many Sunnis, Shiite rule remains unacceptable. When former Sunni insurgents no longer believe that Washington will restore them to dominance, their current U.S. paymasters will once again be their targets.

Given the current trajectory, significant Sunni segments of the postsurge Iraqi state will continue to be funded by the United States, but they will remain beyond the control of either Baghdad or Washington. They will also be in a position to establish ties with neighboring countries. All of this may well accelerate the centrifugal forces unleashed by the bottom-up strategy. When it withdraws from Iraq, the United States will be leaving a country more divided than the one it invaded -- thanks to a strategy that has systematically nourished domestic rivalries in order to maintain an illusory short-term stability.

This could mean that Iraq will remain essentially unreconstructed. The authority of the state would plummet, and the United States' ability to influence events, already limited, would become even weaker. Iraq would become a running sore, and successive crises within the country and on its borders would distract Washington from other priorities and sap its ability to normalize relations with Iran. For the Iraqis, safety, security, and economic advancement would remain uncertain. Those who could leave would. Stability would become an ever-receding prospect.

One plausible consequence of this turmoil would be the emergence of a U.S.-trained and U.S.-equipped Iraqi army, increasingly open to former officers of Saddam's military, as a powerful force in Iraqi politics. The professionalism and esprit de corps of the army is already on the rise. Officers who see themselves as having to navigate a maelstrom of unregulated militias, weak and irresponsible government officials, tribes emboldened and then embittered by their U.S. connections, and overbearing but uneven U.S. assertions of control could turn inward, as they did under the British and under Saddam. They might adopt a posture of superiority to politicians, impatience with upstart tribal leaders, and passive-aggressiveness toward their U.S. patrons and then sideline the civilian government and take control of the state. This result might be less disastrous than complete long-term breakdown: to the degree that Iraq needs a mediating military presence to sustain a fragile peace, this role might ultimately be better served by a military with its own corporate identity rather than by U.S. troops. But still, the United States would be confronted by a strong, centralized state ruled by a military junta that would resemble the Baathist regime Washington overthrew in 2003. Rather than an anarchic situation, the United States would face potentially aggressive nationalism and a regime unsympathetic to U.S. regional priorities.

RESPONSIBLE RETREAT

At this stage, the United States has no good option in Iraq. But the drawbacks and dangers of the current bottom-up approach demand a change of course. The only alternative is a return to a top-down strategy. To be more effective this time around, Washington must return to the kind of diplomacy that the Bush administration has largely neglected. Even with 160,000 troops in Iraq, Washington lacks the leverage on its own to push the Maliki government to take meaningful steps to accommodate Sunni concerns and thereby empower Sunni moderates. (The legislative package and the de-Baathification reform law passed earlier this year were seriously flawed and did more to spur the Sunnis' anxieties than redress their grievances.) What the United States could not do unilaterally, it must try to do with others, including neighboring countries, European allies, and the United Nations (UN).

In order to attain that kind of cooperation, Washington must make a public commitment to a phased withdrawal. Cooperation from surrounding countries and European partners is unlikely to be forthcoming without a corresponding U.S. readiness to cede a degree of the dubious control it now has over events in Iraq. Currently, the dominant U.S. presence in Iraq allows the rest of the world to avoid responsibility for stability in and around Iraq even as everyone realizes the stakes involved. A plan to draw down U.S. forces would therefore contribute to the success of a larger diplomatic strategy, prompting Middle Eastern states, European governments, and the UN to be more constructive and proactive in working to salvage stability in the Persian Gulf.

The point, therefore, is not to focus on the precise speed and choreography of a troop withdrawal. Rather, what is necessary is to make clear that the United States intends to withdraw. Should the Bush administration suspend the currently programmed withdrawals of the surge force, it would send precisely the opposite message. President Bush, Secretary of Defense Robert Gates, and General Petraeus have all signaled their interest in halting any further drawdowns after the last surge brigade has come home this summer. Petraeus, who has already begun to lay out his case in interviews, argues that "the key is to hang on to what you've got." The president has suggested that he is unwilling to withdraw additional troops until after the Iraqi provincial elections -- which, although originally scheduled for October, could very well be delayed. It is therefore possible that the next U.S. president will have to decide what to do with approximately 140,000 troops, a considerably larger number than most observers assumed would still be on the ground in Iraq at the end of 2008. (Some consideration will also have to be given to the problem of removing 56,000 contractors and facilitating the departure of a segment of the 30,000-50,000 Iraqi and foreign workers supporting the U.S. presence.)

Given that the laws of physics are as relevant to troop redeployments as are the laws of strategy and politics, the higher baseline bequeathed by Bush would mean a longer timeline for withdrawal. As of last summer, there were 1,900 tanks and other armored vehicles, 43,000 trucks, and 700 aircraft in Iraq. Equipment is scattered over 70 bases throughout the country, along with 38 major supply depots, 18 fuel-storage centers, and 10 ammunition dumps. According to the conservative rule of thumb used by military logisticians, the U.S. Army and the Marine Corps could move a brigade per month from the Iraqi theater. Moving the 15 brigades likely to be in Iraq in January 2009 would require up to 10,000 truck trips through potentially hostile zones within Iraq.

Although fixating on an exact timetable for withdrawal might be unhelpful at this juncture, a new administration should begin to draw down deliberately and in phases as soon as its internal deliberations are complete and the process has been coordinated with Baghdad. These steps could take months, as the new team conducts its policy-review process; military planners plot safe and efficient withdrawal routes; congressional consultations are carried out; conclusions are reached about where the forces being drawn down should be redeployed; planners determine the size, roles, and missions of the residual force; and the numerous dependencies created by the occupation and the surge are gradually shed. Once under way, however, a drawdown of most of the troops now in Iraq could be completed within two years. The redeployment might proceed more quickly if U.S. public support for the war collapsed, the Iraqi government demanded a swifter withdrawal, or the political situation in Iraq settled down; alternatively, the process might take more time if U.S. forces were under attack, an atrocity claiming the lives of many Americans occurred, or a responsible, reconciliation-minded Iraqi government and a concerned international community sought a slower drawdown.

RECONCILIATION FROM ABOVE

Announcing a withdrawal will entail certain risks. Aware that U.S. forces will finally be departing, Iraqi factions might begin to prepare for a new round of fighting. The Sunnis, aware of their vulnerabilities to attack by militant Shiite forces without the United States to protect them, might resuscitate their alliance with al Qaeda. The government in Baghdad might be concerned about its own exposure to attack in the absence of a U.S. shield and proceed to forge tighter links with Tehran or encourage greater activism by the Mahdi Army. It is all the more vital, therefore, that the drawdown take place as part of a comprehensive diplomatic strategy designed to limit these risks. The interval between a decision to withdraw and the removal of the bulk of U.S. forces should provide the space in which the UN can convene a multilateral organization to foster a reconciliation process in Iraq.

There is much that can be done to revitalize a top-down approach to reconciliation if it is under UN auspices and led by a credible special envoy. First, the international community should be energized to help Iraq move forward on provincial elections, which would test the popularity of the new Sunni leaders who have emerged during the surge and lash them up to Baghdad. This would have the added benefit of isolating the radical federalists from the majority of Shiites, who would prefer to live in a united Iraq. A UN envoy would have a better chance of brokering a deal on the distribution of provincial and federal powers, the issue that led to the veto of the provincial election law, than would Washington. In a multilateral setting that is not conspicuously stage-managed by the United States, regional states, including Iran and Saudi Arabia, could play a pivotal role in this process. Although Tehran's cooperation is inevitably hostage to its broader relations with Washington, UN sponsorship of this effort might provide the leaders of Iran with the cover they need to act in their own interest. The Saudis, for their part, would like to see the UN involved and are prepared to use their influence and money to impel the parties in Iraq toward reconciliation.

Second, an institutionalized multilateral group of concerned states should mobilize the broader international community to assist with the care, feeding, and permanent housing of the millions of refugees and internally displaced Iraqis who have not been able to get to the United States or Europe. This is essential, since refugee camps and squatter settlements are incubators of radicalism and radiate violence. The longer these populations remain unmoored and cut off from education, employment, and access to adequate social services and health care, the harder it will be to resettle them permanently, whether in Iraq or elsewhere.

Third, before a new and more intense phase of the civil war begins, there should be a multilateral process put in place to prod Saudi Arabia and other Persian Gulf states to finance investment projects that provide real employment in Iraq. Furthermore, Iraq's neighbors, including Iran, should be pressing the Iraqi government to bring far more Sunni Awakening volunteers into the regular Iraqi army and, crucially, into the provincial police forces funded by the central government. The latter step would reinforce the positive effects of the provincial elections and the emergence of politically legitimate local leaders. The current commitment to enlist 20 percent of the Awakening's members is far too small to have an impact.

Finally, the tribes feeding off the surge must be weaned from U.S. assistance and linked firmly to Baghdad as their source of support. Intertwining the tribes with Baghdad in this way, as the Iraq specialist Charles Tripp has noted, would yield something very much like the imperial protectorates in the Middle East of the first half of the twentieth century. The "club of patrons" in the capital would dole out goods to tribes through favored conduits. At this juncture, the U.S. military is performing the role of the patrons -- creating an unhealthy dependency and driving a dangerous wedge between the tribes and the state. Through coordinated action by the UN sponsors of the multilateral process, the government in Baghdad, and U.S. commanders on the ground, payment responsibilities will have to be transferred from the U.S. military to Iraqi government representatives.

There is no guarantee that the old way of giving tribes a taste of the lash followed by a dollop of state largess -- the model that successfully integrated tribes in Jordan and Saudi Arabia in the twentieth century -- can be successfully applied to a divided Iraq today. Iraq is heterogeneous, unlike Jordan or Saudi Arabia, where the state and the tribes shared a religious heritage. Furthermore, overestimating Iranian or Saudi influence on Iraqi politics and the willingness of the UN Security Council to plunge into the existing morass is all too easy. In any event, it will be a slow and hazardous undertaking. Many things have to happen more or less simultaneously in a carefully coordinated chain of actions. Washington has to announce that it will begin withdrawing the bulk of its forces. The UN secretary-general, with the backing of the Security Council, must select a special envoy. A contact group of key states must be formed under UN sponsorship. Priorities and milestones will need to be set for the distribution of resources within Iraq, the recruitment of Sunnis to the army, provincial elections, foreign investment, dealing with refugees, and development assistance. Crucially, the phasing of the troop drawdown will have to mesh with this diplomatic process but not hinge on its ultimate success. This course is risky and possibly futile. Yet it is still a better bet than a fashionable, short-term fix divorced from any larger political vision for Iraq and the Middle East

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Hints of a rift at OPEC about production
By Jad Mouawad
Friday, May 9, 2008
A member of OPEC signaled for the first time in months that the oil cartel might increase its output if prices keep rising, even as oil hit another record on Friday.

The comments from Libya's senior oil official, Shukri Ghanem, suggested a possible rift among OPEC members. Since the cartel's last meeting in March, the Organization of Petroleum Exporting Countries has argued that the market was not lacking in oil supplies and blamed speculators for driving up prices.

In recent weeks, prices have come under renewed pressure because of a string of export disruptions from Nigeria. Crude oil for June delivery rose $2.32, or 1.9 percent, to $126.01 a barrel in New York trading on Friday. Prices have been above $100 since early February.

Since they last increased oil supplies in September, members of the Organization of the Petroleum Exporting Countries have abdicated most of their responsibilities toward the market, arguing that the higher prices had more to do with investment flows than with supply and demand.

The problem for OPEC is that prices have become largely unhinged from real market factors. As the dollar declines and the economy slows, investment funds have moved into commodities like oil or gold, which they consider safer and more profitable than stocks.

But the political cost of rising energy prices, especially in the United States, which is in the midst of a presidential election, is making OPEC's position increasingly delicate. Economic growth in the United States has slowed and gasoline demand is set to fall this year for the first time since 1991.

At a meeting of oil producers and suppliers in Rome last month, many OPEC delegates, including the Saudi Arabian oil minister, Ali Al-Naimi, said there were not enough buyers to justify an increase in production.

But some producers are becoming increasingly uneasy about the run-away prices and are finding it difficult to maintain OPEC's position.

"They are playing with fire," an analyst at Lehman Brothers, Adam Robinson, said. "Every time the price goes up, and we break a new psychological mark, they risk killing the goose that lays the golden egg. Their biggest fear is triggering something they can't control."

The group, which accounts for 40 percent of the world's oil exports, is not scheduled to meet until September. At its March gathering, OPEC ignored calls from President George W. Bush and other industrialized leaders to bolster production, opting instead to keep output steady.

"We would consider among other options the possibility of increasing output as a way to ensure market stability," Ghanem, the Libyan official, was quoted by Bloomberg News as saying Friday. "I expect a meeting before September. I am not calling for one, but I would support one."

Another OPEC delegate, quoted by Reuters on Friday, also raised the prospect of an OPEC consultation to increase production before the September meeting.

But there is no suggestion that the cartel will meet soon. On Thursday, the organization's secretary-general, Abdalla Salem El-Badri, issued a statement from the group's headquarters in Vienna, saying there was "clearly no shortage" of oil in the market.

"In recent month, oil prices have become increasingly volatile, mainly driven by financial market developments and the increased flow of speculative funds into oil futures," the statement said.

But he seemed to leave the door for OPEC. "The organization stands ready to act if the market shows a need for any further measures," he said.

http://www.latimes.com/news/nationworld/world/asia/la-fg-cellphones23apr23,1,7408228.story
From the Los Angeles Times
In Afghanistan, insurgents attacking cellphone network
Taliban fighters are blowing up telecom towers, hoping to foil NATO-led forces who from hunt them down via cellphone signals. Afghans are fuming.
By Laura King
Los Angeles Times Staff Writer

April 23, 2008

KANDAHAR, AFGHANISTAN — Afghans tend to be stoic in the face of poverty, hardship and seemingly endless warfare. But mess with their cellphones, and the response is one of undiluted outrage.

For the last two months, Taliban fighters have been blowing up telecommunications towers, with the aim of preventing NATO-led forces from hunting them down via cellphone signals. It could hardly have been a worse public-relations move for the insurgency.

Fuming Afghans call the tactic nonsensical.

"I'm so, so furious about this," sputtered businessman Rahim Agha. "Why do they have to do this to us? Why can't they just turn off their phones?"

To Afghans, the country's rapidly expanding cellphone network is a symbol of pride and hoped-for prosperity. Cellphones are a lifeline to Afghanistan's vast rural hinterlands, an engine of commerce, and a vital link with millions of Afghan refugees around the world.

There is intense competition among the country's cellphone providers -- four private companies and a state-run one. Spurred by the scramble for revenue, they provide service in 70% of Afghanistan's territory, from trackless deserts to jagged mountains.

The customer base has essentially doubled every year for three years. About 5.4 million people, about one in six Afghans, have a cellphone, an extraordinary rate of market penetration in a country so poor.

"Just look around in any bazaar," said Amirzai Sangin, the minister of communications. "Everyone in sight has a cellphone."

That includes Taliban fighters -- and therein lies the problem.

North Atlantic Treaty Organization forces recently have had unusual success in tracking and targeting mid-level Taliban field commanders, killing scores of them in pinpoint airstrikes. Military officials, without giving details, say they have a variety of means of conducting such manhunts, but the fighters blame cellphone signals for giving away their location.

The reach and availability of cellphones apparently have been seductive even to some fugitive commanders, who use numbers only for a short time before discarding them.

In addition to attacking about a dozen towers, the insurgents have threatened the telecom companies, forcing them to cut off service at night in southern Afghanistan. More than a quarter of a million people have been affected by disrupted service across the south, where fighting between insurgents and coalition troops is the most intense.

A few weeks ago, insurgents killed two police officers escorting engineers who had been sent to repair a disabled tower.

Medical professionals are particularly alarmed by the curtailed service. In remote villages, when someone falls ill or a childbirth takes a perilous turn, families are unable to call for help or get advice on how to provide emergency treatment, said Merza Khan, who runs a health clinic in the southern province of Helmand.

"People are dying from the lack of communication," he said.

Because travel in the south is so dangerous, and land-line phone service is rare outside cities, cellphone conversations often replace face-to-face encounters.

"I can't always travel to where my constituents are," said Anwar Khan, a member of parliament from Helmand province. "But they would use their cellphones to talk to me, to tell me what was happening. Now they can't."

The Taliban, though, may be reconsidering its highly unpopular campaign. Commanders have been quoted as saying they are aware of the angry public backlash and may allow the resumption of normal service.

Sangin, the Afghan communications minister, said he had heard reports that fighters themselves were grumbling about the restrictions, suggesting that the entire contretemps might have been caused by a lack of discipline in the militants' ranks when it comes to cellphone usage.

"This is not an attack on the coalition or the government, but on the people," Sangin said. "Cellphones are a huge part of everyday life, and no one is willing to go back in time."

laura.king@latimes.com