American Foreign Policy - A Reorientation

We are just weeks away from the 26th of December. On that date in 1991, the Soviet Union was dissolved. In August of 1990 the US and allies initiated what we now refer to as the First Gulf War, which saw the amazingly quick destruction of Saddam Hussein's much vaunted armed forces. With the dissolution of the Soviet Union, began the uni-polar moment that lasted essentially for a decade.

There is an old Chinese proverb - "Kill a chicken to scare the monkey". The complete route of Iraqi forces had terrified potential adversaries - Soviet Union, Iran and China. All three had come to the realization that their armed forces would meet a similar fate if conflict with the US were to break out. Only the Soviet threat of a Mutual Assured Destruction based on nuclear weapons could prevent such an outcome. But Communism had been proven to be a bankrupt ideology, and the Soviet Union came apart at the seams. Warsaw Pact was added to the dustbin of history.

The nineties were in many ways a golden time for the US. China was an economic midget on the global stage, hungrily seeking investment from all corners. US had established a military presence in the oil rich Arabian peninsula and Iraq. Japan was beginning its "lost decades" as managing the transition from a deflating real estate bubble sapped the vitality of the land of the rising sun. With demographic decline on the horizon, Japan would no longer be the global threat that many Americans had feared.

This US dominance was the backdrop for the following major transitions in the nineties:

1. Innovation and US dominance in new technologies based on network connectivity - the internet as we know it today, as well as the building blocks of our daily life - Search, eCommerce, to name just a couple.
2. A rapid expansion in trans pacific trade as China started to re-industrialize and Asian countries began to move up the technology ladder. Nobody understood the full impact of Chinese industrialization. Nobody heard the sucking sound as jobs and industries from the US and Western Europe started to be permanently move to China.
3. NAFTA also came into being creating a common market in North America.
4. The Glass Steagall Act was repealed, setting the stage for financial risk taking that was understood by very few, and almost brought the world to its knees within a decade!
5. A significant draw down of US defense spending was justified by the collapse of the Soviet Union and enabled the Clinton administration to reduce the US budget deficit.

In the main, challenge to US dominance was muted in the 90's. The challenge by definition had to have an asymmetrical aspect, since the US enjoyed such tremendous advantage in all aspects of military power. In the Islamic world, the challenge was based on opposition to unbelievers (US military forces) being deployed in Islam's holiest land - Saudi Arabia. Osama Bin Laden had taken advantage of state dysfunction in Sudan, and then moved on to the collapsed state of Afghanistan and allied himself to the fundamentalist Taliban regime. Major terrorist incidents were planned by Bin Laden's inner circle in Afghanistan and executed in Yemen (1992), World Trade Center in New York City (1993) and in Nairobi (1998). Iranian funded Hezbollah operatives similarly carried out the Khobar City bombing in 1993. State sponsored terror with plausible deniability as carried out by Iran (and Pakistan), and non-state sponsored attacks by Al-Qaeda emerged as major threats to US military domination. The culmination of these were the attacks on 9/11.

However, the Islamic opposition was a side show. The main action was in Asia. China was rapidly industrializing and had launched a radical modernization of all branches of its armed forces. In Russia it found a country with military technology that had fallen on hard times. Russia was more than happy to sell arms and technology to China with the full knowledge that the Chinese would reverse engineer most of the weapons systems. But there was an even bigger investment underway in China - building the tools and personnel for cyber warfare. This was once again classic asymmetric warfare - gain an advantage where the adversary is not adequately invested. The US believed that it had a huge lead in computer software and networking, but this advantage proved to be fleeting and was limited to the 90's. A unique aspect of cyber warfare is that it all it really needs is smart techies. There was no shortage of these techies in China and Russia.

As the Soviet Union collapsed, there was a gold rush to gain control of the natural resources and means of production/manufacturing. Unlike the Marshall Plan which enabled Western Europe to rebuild itself and its industrial base, there was no similar initiative forthcoming from the US or Europe. If Germany had been handled differently by Europe in the 1920's, the world would likely have been spared the rise of Hitler and the slaughter of World War II. Perhaps learning from this mistake, after World War II the US launched the Marshall Plan to turn Axis powers Germany, Japan, and Italy into allies. One key motivation was to prevent these states from falling into the Soviet orbit. However, when the Soviet Union failed, there was no real threat posed to the US or Europe. What strategic thinkers failed to understand was that the biggest potential threat from the collapsing Soviet Union was lawlessness and potential relapse of Russia into a totalitarian state. Russia in the nineties went from one crisis to another, since almost all institutions had collapsed with the demise of the Communist Party. The ship of state would be steadied by the ascent of Putin.

The Chinese Communist Party tenaciously hung on to power. The expectation that China would over time transition from a totalitarian state to some semblance of representative democracy proved to be a mirage. The Chinese Communist Party owes Bin Laden a debt of gratitude. The 9/11 attacks brought forth the wrath of the US on the Taliban regime and Bin Laden's organization in Afghanistan. In a moment of hubris, the US followed this up with an attack on Iraq with the goal of regime change. Afghanistan defied multiple attempts at re-imposition of the writ of the state by the US and its Afghan allies. Regime change in Iraq proved to be a complete disaster. The US had blundered into Iraq and the genie of communal strife was out of the bottle. A fire had been lit whose embers would be fed by the opposing power centers of Iran, Turkey and Saudi Arabia. The frail states of the middle east with few if any durable institutions eventually came apart. The US spent the next 15 years in the Middle East muddling its way from one crisis and one failed nation state to another. It was all consuming and the cost to the US exchequer was in the trillions of USD.

This involvement on the part of the US gave the Chinese Communist Party the time needed for China to execute a plan for growth along every imaginable axis, the likes of which the world may never see again. One important axis was that of its armed forces. It is clear the Chinese armed forces are on a trajectory to achieve parity with the US over the next decade or so. More importantly, China has become the workshop to the world and a manufacturing power that eclipses Japan, Germany, and the US. By virtue of its population, resources, and manufacturing prowess China is now able to dominate much of East Asia and increasingly South Asia. Obama's Asian Pivot proved to just talk and little action. The TPP was supposed to be the hallmark of the Asian Pivot. With the TPP on the chopping block, US credibility is further eroded and China is in a position to pick up the pieces in terms of new Asian allies.

As President Trump takes office, it is clear that the US electorate has limited interest in fighting foreign wars. Trump was elected to set right the domestic economy and bring jobs and growth back to the US. Trump has said multiple times that allies need to pull their weight and cannot expect the US to continue to shoulder the burden of their defense. By the same token, the US cannot unilaterally withdraw from defense alliances without destabilizing the balance of power.

There is another major constraint on US actions. It is the US role as the preeminent power and the policeman of the global commons. This enables the USD to be the global reserve currency and allows the US to run the huge trade deficits because the rest of the world craves USD's. The Euro faces an uncertain future. The Yuan could be buffeted if China is unable to slowly deflate its own real estate and financial bubbles. The Yen has lost relevance as Japan's demographic decline continues. Basically, there is no serious claimant to the role of default currency, just as there is no serious claimant to being the peacekeeper of the global commons.

US strategy post WW II has been based on avoiding the emergence of a peer competitor on the global stage. While Japan emerged as a formidable economic power, its foreign policy was guided by the US and it posed no military threat to the US. European resurgence after the war made NATO much stronger than the Warsaw Pact. The Cold War took a heavy toll on the Soviet Union and eventually led to its demise. Which in turn led to the uni-polar moment of the early '90's.

The US needs to focus its resources. This is not a new realization. The Obama administration has been trying to extricate itself from the quagmires in Afghanistan and Iraq. Political disunity, religious factionalism and sheer incompetence on the part of the Iraqi army has forced the US to go back in to take on ISIS. The US avoided boots on the ground as most of North Africa descended into chaos. It has intervened selectively in sub-Saharan Africa and East Africa. The US has kept an eye on the badlands of Pak-Afghan region since its straddles some of the most virulent breeding grounds of Islamic fundamentalism. But the Obama administration has had to do this while keeping Russia in check in the Ukraine and along the frontiers of NATO, as well as on opposite sides of the civil war in Syria.

What the Trump administration needs to do is arrive at some sort of a modus operandi with Putin. An arrangement that freezes conflict in Europe and allows some sort of formal partitioning of Syria could be important elements of this. This enables Putin to save face by keeping the Assad regime in power in Western Syria. This is not a new Sykes-Picot agreement that we are talking about. Just a cessation of hostilities in the Middle East that posit the US and Russia on opposite sides.

Russia and the US can also co-operate when it comes to fighting Islamic fundamentalism in Afghanistan and Central Asia. Leaving Turkey, Iran and Saudi Arabia to squabble over Iraq, Eastern Syria, and the Arabian peninsula will lead to the power of all three being sapped over time. The Saudi regime is the weakest of the three Muslim powers, but it has always counted on Pakistani and Egyptian army reinforcements in times of need. Egypt is likely to come to the aid of the Saudis as Pakistan has problems on its own frontiers and will likely be reigned in by China. The US and to a lesser extent Russia would play the role of balancing powers in the Middle Wast to ensure that no one power emerges victorious and for that matter no two powers unite to take on the third power.

A grand bargain with the US and Europe will allow Russia to supply adequate energy to Europe if Middle Eastern oil supplies are disrupted. Similarly North America will be self-sufficient when it comes to energy supplies. The grand bargain with Russia will also allow the US to focus on Asia. If the US is not able to reassure Japan about its alliance, it is very likely that Japan will become a nuclear power in short order. This will also lead to South Korea acquiring nuclear weapons. The only way for the US to prevent this is to re-engage with its Asian allies. The US can elect to supply energy to its East Asian allies as Middle Eastern oil supplies come under a cloud.

The major impact of an unstable Middle East will be felt by the Asian giants India and China. China has never deployed its troops in battle after the brief border war with Vietnam in 1979. With its newly upgraded navy and army, it is quite possible that China will be tempted to fill some of the void left by the US in the Middle East, if only to secure energy supplies. A Chinese intervention in the Middle East may have a very similar outcome as the Russian intervention in Afghanistan. Considerable stress on the budget and significant backlash against the Communist Party as body bags start coming home. This will be a drain on China, and over time China will cease to be a peer competitor to the US.

We are on the verge of a US foreign policy that will be driven by realism as opposed to an impulse to spread democracy and capitalism. Here are the main areas of engagement:

1. A grand bargain with Russia allows for the US to draw down forces from Europe and also allows Russia to move resources from defense into social programs. Russia needs to deal with its own demographic decline.
2. Withdraw from the heart of the turbulent Middle East while still staying on the periphery to influence outcomes. Let Turkey, Iran and Saudi Arabia fight for influence and balance one another without allowing any one or two from becoming dominant. Its is clear that the Middle East needs to find its own path to conflict resolution. Outside powers only complicate matters. 
3. Redeploy key forces to Asia to keep allies from acquiring nuclear weapons and also from aligning with China. As a frenemy, allow China to get involved with the Middle East to protect its own energy supply sea lanes. Taking on this role will feed China's perception of itself as a global power. However, this will also sap Chinese power over time.
4. Ensure the economic rise of India and Indonesia as a long term balance for Chinese power in Asia. As demographic decline comes to China, this will be reflected in its economic and military power.

If the US is able to manage these foreign policy changes, it will continue to the be indispensable nation on the global stage well into this century.

The Trump campaign was fueled by resentment of the white working class. There are many campaign promises that will need to addressed. These are tactical matters that will need to be dealt with while pursuing the larger goals outlined above.

• Expect to see moves that will include browbeating US corporations to bring jobs back to the US as part of repatriating funds that have been parked abroad. Recent Carrier deal is a sign of things to come.
• NAFTA will be tweaked on the margins to placate Trump's voter block. But NAFTA is not going to be renegotiated from scratch. Expect some sections of US-Mexico border to be further controlled with walls/fences, but no new Great Wall will be coming up.
• A new detente with Russia can play well in the context of some of the identity politics that we have seen emerge this election.
• ISIS will be bombed by both Russia and the US. As the US withdraws, Turkey, Iran and Saudi Arabia will be forced to fill the unstable void. Terror attacks in the US and Europe will not stop any time soon.
• Partial withdrawal from the boiling cauldron that is Middle East will also be accompanied by strict limits on immigration from the Middle East.

The pieces on the chess board are well laid out for the US to execute a major changes in its foreign policy. The main leverage for the US vis-a-vis other major powers is demographics. All other major powers are facing demographic decline or already dealing with it (Japan and Russia for example).

Demographics can be destiny if you play your cards right.