Time to Revisit Sykes-Picot

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The news that Islamic State has taken Ramadi should provoke a profound re-think of the West’s Middle Eastern Policy. The killing by the US of a middle-ranking Islamic State finance expert, and the seizure of his wife, is scant compensation. In Iraq, the Kurds and Iraqi army, with US air support, have been holding Islamic State at bay, but have not been rolling them back. After Ramadi, maybe not even that. The story is the same in Syria, with the archaeological treasures of Palmyra now at the jihadists’ mercy. Successes in Iraq, for example re-taking Tikrit, have depended heavily on the presence of Iranian Revolutionary Guard and Shiite militias, which risks turning this into a Shiite crusade against Sunnis. Obama’s promise to eradicate Islamic State remains empty rhetoric.

This should not be surprising. The rhetoric was never supported by a coherent strategy for securing its aims. Obama cannot deploy serious boots on the ground, and has had difficulty in finding credible surrogates. The Iraqi army is not up to the job, even with US air support. The Kurds fight well in defence of their homelands, but are reluctant to venture further afield. Neither the Turks or Saudis (who have their own problems in the Yemen) have been wiling to deploy ground forces. This leaves the Iranians. At least part of the motivation for Obama’s cautious rapprochement with Tehran has been the potential of Iranian forces as allies, albeit tacit, in the fight against Islamic State. The trouble is that this only makes the situation worse. Not only does it irritate the U.S.’ traditional allies the Saudis (hence their snub of the recent Camp David meeting), it also convinces the Sunni tribal leaders that they have no stake in abandoning Islamic State.

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In many ways the situation is similar to that in 2007, when a coalition of Al Qaeda in Iraq with Sunni tribes and ex-Baathists nearly dominated Western Iraq. Although many claimed that this was stopped by the “surge” in military forces, the Al Qaeda in Iraq assault had already peaked by then. More important was the Sunni Awakening movement which broke the alliance between Al Qaeda in Iraq and the Sunni tribes. To a large extent, Sunni tribal leaders were convinced to sign up by large quantities of cash. But they were also given assurances about their treatment by the Shiite dominated Iraqi government. These assurances proved empty, as the al-Maliki government pursued its sectarian policies. As a result, the Sunni tribes are again allying with foreign jihadists and ex-Baathists, this time in Islamic State. The only successful strategy will again be to break up the coalition. But it will not be as easy as in 2007. I doubt CIA officers will be as keen as then to drive around Western Iraq with suitcases full of dollars. More seriously, it will be difficult to convince the Sunni tribal leaders to break with Islamic State after they felt betrayed last time.

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A successful strategy will need innovation, both in content and substance. Western Iraq is a dangerous place. Attempting physical contact with Sunni tribal leaders or ex-Baathist officers could prove suicidal. This is where digital diplomacy can come into its own, not just tweeting and blogging about the inequities of Islamic State, but by providing networking tools and platforms to achieve a diplomatic objective, namely to take down one coalition and put together another one in its place. Specifically, digital tools can be used to build relationships with Sunni tribal leaders and ex-Baathists to break up the Islamic State coalition and to construct a new coalition which will leave the jihadists isolated and vulnerable. Western security and intelligence agencies already make extensive use of chatrooms and other digital means to secure intelligence and disrupt terrorist operations. Diplomats should make similar use of such technologies to reach out to potential partners, exploring possible weak links and what their real agendas might be. Once these are clearer, diplomats can begin to use these digital tools to start breaking up Islamic State’s coalition and constructing a new one. Digital tools do not rule out eventual face-to-face meetings: the trust essential to good diplomacy cannot be created online (not least because you never quite know who you are talking to). But they can make the initial steps a good deal safety.

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But there is no point in engaging in negotiations if you have nothing to offer. We may need to be even more innovative in substance than in process. Money alone may not be enough, not least because the jihadists with their oil revenues may be able to outbid us. Assurances about treatment in a multi-ethnic Iraqi state will not work again, even with Al-Maliki removed from power. The Sunni tribesman will know that, with the U.S. withdrawn from the region, Iran will inevitably dominate any Iraq government. It may be time to revisit Sykes-Picot. The borders that derive from that agreement reflect efforts to balance Anglo-French interests in the region rather than reflect any reality on the ground. The British and French are long gone. Islamic State has blown Sykes-Picot apart, creating a de facto Sunni jihadist state straddling the Syria-Iraq border. We should offer the Sunni Tribal leaders and Ex-Baathists to formalize a Sunni state in the region, provided they join with us in expelling the jihadists and guaranteeing that the new state has democratic structures. As a quid pro quo, the rump Syria and rump Iran could be combined into a Shia state, with a Kurdish state formed in the north. Would it wash? The Sunni tribal chiefs would get their state, but without the misery and violence of doing so with the Jihadists. Turkey would resist the creation of a Kurdish state, but would get rid of Islamic state and, probably, Assad. Iran would maintain a Shiite axis through to Hezballah. The Saudis would get a new Sunni ally in the region, and get of the Islamic State hook of their own making. More importantly, being willing to think in such radical terms could help open up an issue that otherwise looks like slipping out of control.

The Islamic state jihadists are worried about their coalition being broken up. Hence the videoed decapitations of western hostages or burning alive of the Jordanian pilot. Hence the destruction of archaeological treasures. Like Himmler in his 1943 speeches in Posen, they want to implicate their coalition partners so deeply in their atrocities that they see no way of breaking out, or expecting acceptable terms. If the jihadists are that concerned about the fragility of their coalition, breaking it open should be the focus of our policy. It will require radical and innovative thinking, in both substance and process.

Digital Diplomacy: A Tale from the Near Future

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The Foreign Minister was awakened by the beeping from his smart phone. Rolling over in bed, he lifted it from his bed-side table. It flashed a Twitter warning about an offshore earthquake near Indonesia and a possible Tsunami. He copied the text into the Foreign Office’s internal messaging system (laughingly nick-named “Britter”), tagged it #natural disaster, #consular, #eastasia, typed “Advice?”, and hit the “send” button. The tags would ensure it reached the relevant officials, and any message from the Minister would bleep them out of sleep. The Minister smiled at the idea of ruining their sleep as well, although they would have received the same Twitter alert as him. Looking at the phone he saw it was already 6 am and nearly time to get up anyway. He padded off towards the shower.

By the time he emerged from the shower, his phone was already blinking to show he had messages. The first was from the Director of Consular Affairs. It simply asked “Implement ContactBrit?” The idea of contacting British citizens in the area that might be affected by the Tsunami to warn them was a no-brainer. But the background to the project was controversial, and it could not be implemented without Ministerial approval. The Government had sought access to the data which internet companies mined from people’s use of mobile devices and social media. Internet companies sold this information to advertising companies. The Government used it to identify where their citizens were in the world, whether to locate them in crises, like now, or for more nefarious purposes, as others suggested. From this information, the Government had been able to build up profiles of device users, including if they were British or British-linked (eg foreign spouses) and where in the world they were likely to be, whether as expatriates, tourists or on business.

Once the Minister gave the go ahead, warning messages would automatically be sent to all those device holders identified by the project as British or British-linked and likely to be in the danger areas. Simply opening the message would locate the device through its in-built GPS and confirm to the Consular Department where the owner was. This would allow them to build up an accurate picture of how many British citizens were in the danger zone. Not only would citizens be warned, but it would generate invaluable information for any rescue operation. No doubt using the system would resurrect concerns about privacy, but that would get little traction in the media if British lives were saved. The Communications Department would make sure that the social media were saturated with “good news” stories about rescued Brits. He tapped “approved” into his phone and looked at the next message.

This was also from the Consular Department, but was longer. It proposed setting up the contingency plans for assisting distressed nationals in a natural disaster. It also sought permission to participate in other countries’ contingency plans. Over the years the Consular Department had developed global online contact networks with other governments, multinational organizations, humanitarian groups, universities, companies, NGOs, hospitals and even individual doctors and experts. The idea was that in an emergency it would be able to generate an international coalition of state and non-state actors to facilitate the rescue and repatriation of British nationals. Other countries of course would be doing the same, with the British Foreign Office as one of the nodes in their network. These multilevel and overlapping online coalitions would make the response to an international crisis more effective, at least in relation to consular protection. Humanitarian response depended on similar overlapping online networks, but this was not the Minister’s responsibility, although he had taken part in the regular online simulations the Overseas Aid Minister organized (compared to his own Foreign Office simulations, they seemed a bit simplistic). The Head of Consular Department wanted both to begin the task of identifying the partners relevant to an East Asian tsunami and begin generating the coalition and permission to respond positively to requests from other countries. The Minister did not need to know the details. These too had been gamed in simulations. He again tapped in “approved” and hit the send button.

The final message was from the Communications Directorate. It contained a draft tweet expressing concern about the danger of the tsunami and wishing the people of Indonesia God speed. The Minister reflected briefly on the wisdom of wishing a Muslim people “God speed”, but they are people of the book and the Communications Directorate were supposed to know things like that. He copied the message into his Twitter account, added the #indonesiantsunami tag (feeling absurdly proud he had remembered to do it when the Directorate hadn’t) and tweeted. Checking, he was pleased to see he was the first Foreign Minister to tweet on the subject. He had even beaten the Prime Minister. The PM wouldn’t like that, but the No10 operation was absurdly slow. Feeling that all was under control, he began to get dressed.

After getting dressed he went down to the dining room. His activity on the smart phone had alerted the Chevening staff and breakfast was awaiting him. As he poured his coffee, the butler put his head round the door to tell him that his car was ready when he was. After breakfast, the car would take him from the Kent countryside to the Foreign Office. Although with modern IT there was no real need to go into the Office, all could be done by the continuous online communication, he still preferred the face to face contact with his officials. His smart phone beeped again. This time it was his daily agenda: an internal online simulation of policy options in the Balkans; a virtual scenario building exercise with European colleagues over the future of the EU; the implementation of digital strategies to deal with Islamic State; the proposal that the UN be reconfigured as a neutral online platform for simulating world crises; and now the possible tsunami in Indonesia.

After coffee and toast, he put on his jacket and picking up his encrypted tablet made for the front door. His official car was waiting on the gravel outside. He greeted the driver who had already opened the door for him. Settling down into the back seat, he fired up the tablet. He first looked through the briefing notes for the online simulation for the Balkans. For his generation, this was computer gaming. It had replaced the old policy submissions. Instead of a written policy recommendation, the Minister could now take part in a real time simulation of a crisis situation and the likely outcomes to policy decisions. Embassies in the region would play the individual countries, and other officials would play NGOs, companies and other non-state actors (including terrorists). Sometimes academic experts and even trusted NGOs would be brought in as players. It was much more realistic than the old policy submission system and allowed the Minister to game different policy submissions. Non-linear problems like the Balkans in particular benefited from non-linear modeling.

Online scenario building was another area he had sought to promote since being appointed Minister. Scenario building was as hold as the hills. He had been told that Shell had been using it in 60s. But doing it online made it more flexible. Participants no longer needed to be in the same room (important if they didn’t like, or feared, each other) and timing became more flexible. Building scenarios together with other actors generated shared visions of the future and common language of debate. From the shared scenarios, participants could reverse engineer back to current policy decision making. The aim with his European colleagues would be to try to hang on to precious gains in CFSP, and to prevent short sighted decision making now leading to policy fragmentation in the near future.

The digital strategies to deal with Islamic state were the outcome of simulations internal and external with foreign partners, European and Arab. Online scenario building exercises had served to show the dangers of getting it wrong. The conclusion of all this online activity had been that Islamic State was an alliance of foreign jihadists with Sunni tribes and old Baathists. The strategy was to break up this alliance. Diplomats and intelligence officers would use Internet chatrooms and other online techniques to identify and access possible points of entry into the Islamic State alliance. Many of the online profiling techniques they used were the same as those they had borrowed from the online marketeers to identify British citizens and their whereabouts. At the same time a renewed online scenario building exercise would be launched by the U.S. and EU to try to identify concessions that could be offered to the old Baathists and Sunni tribesman (perhaps re-writing Sykes-Picot).

Finally the UN proposal. This was perhaps the most idealistic, and probably wouldn’t run. But the PM was keen and so the Minister had to push. If it worked it could make the UN relevant again. The idea was that the UN would create a neutral online platform on which countries could “game” crisis situations before committing themselves to irrevocable policy decisions. It had attraction as an idea. It was as if you could try going to war without risk, or killing anyone, and if it didn’t work out try another option. It appealed to the Minister as a teenage (and not so teenage) gamer. But no doubt there would be endless problems, such as guarantees of neutrality and the sheer hell of getting it past the UN bureaucracy.

As the Minister’s car pulled into London, his smart phone began beeping again. This time it was the messaging system set up between EU foreign ministers. All were of the same generation, growing up on Twitter and computer gaming. It had been only natural to set up their own messaging system, although it drove their officials, who felt excluded, wild. The minister swapped texts with his colleagues on the Indonesian Tsunami, which now looked a bit of a wet squib (perhaps he had been a bit too keen on that one), the Balkan scenario building, Islamic State and the UN proposal. By the time his car swept into King Charles Street, the Minister felt pretty good about his world and his command of his technology.

The car swung into the quad of the Foreign Office. The Minister’s phone made a new sound, a squark reserved for utmost emergencies. The Minister read the message: “Islamic State claim to have mined your online data – all Internet records. Intelligence suggests claim is credible. Any reason for concern?” The message came from the Minister’s private secretary. The gnawing abyss grew in the Minister’s stomach as he remembered the pornographic websites he had accessed over the last few months. Any reason for concern, or hoisted by his own technology?

The Day After: Now Cameron must learn how to do Foreign Policy

British Prime Minister David Cameron And French President Nicolas Sarkozy Visit Libya

So the die is cast. Cameron will be able to govern alone with a narrow overall majority. Although foreign affairs, and even Europe, scarcely featured in the election campaign, they may come to dominate the new legislature, together with constitutional issues, with which they are closely intertwined. On both Cameron may find that he has as much trouble managing his own party as he has with the opposition. The divisions in the Conservative Party which dogged the government of John Major in the 1990s have not been resolved. They have just been forgotten. As the issue of an EU referendum hoves into view, they will return with a vengeance. Without the excuse of the coalition with the Liberal Democrats, Cameron will have difficulty reining in his own hardliners on both Europe and constitutional reform. But he will have to if he wants to prevent the scenario I described in a previous blog (http://www.shaunriordan.com/?p=125): an EU referendum provokes a split with Scotland resulting in Scotland remaining in the EU while Little England, dragging a truculent Wales behind it, condemns itself to international isolation and irrelevance.

Cameron will also have to demonstrate a far surer grasp of foreign affairs and diplomacy. The omens from his first legislature are not encouraging. In Europe, Cameron managed to isolate himself, alienating even natural allies among the more sceptical members. His pointless fight against the appointment of Junkers (http://www.shaunriordan.com/?p=85) leaves little good will for him in European institutions. Yet he will need both allies and the European institutions if he is to secure the reforms that will justify campaigning for the UK to remain in the EU. Ironically, at a time when the EU was more fragmented than ever, with serious crises in economic and foreign policy, Cameron’s inability to construct coalitions and unwillingness to engage with European issues may have driven the EU back together, more integrated around the power centre of Berlin. Pace Cameron’s PR team, the UK’s absence from the Franco-German talks with Russia on the Ukraine was not normal, but a sign of how isolated and irrelevant the UK now is. With the UK out of the game, France has no choice but to trot along as the poodle of an ever more confident Germany. Cameron’s problem in negotiating reform in Europe is not just the lack of allies, but that as far as most European leaders are concerned, the UK has already left.

Cameron has broader foreign policy problems too. In his first government he managed to damage UK-US relations both by cuts to the defence budget and by signing up to the Chinese Asian Development Bank without consulting Washington. It is not clear what kudos he gained in Beijing, but it certainly confirmed the view in Washington that the UK is neither a reliable partner nor a relevant world player. The special relationship between the UK and US always looks more special in London than in Washington, but it can disappear. Again there is a parallel with John Major’s Government, which the Clinton administration mistrusted. I recall the frustration as a Foreign Office official at the time as the Americans invariably spoke to the French and Germans first. Now it is even simpler for the Americans: Kissinger’s famous question of whom to call in Europe has its answer: Angela Merkel.

Isolating the UK from Europe and the U.S. at the same time might not be deft, but so far it has not killed anyone. The decision to launch air strikes with the French against Libya had had far more serious consequences. Not least it convinced both the Russians and Chinese that the West cannot be trusted in the UN Security Council. It is not good enough for Cameron’s PR team to blame the subsequent chaos on the Libyan people. Powell’s doctrine holds: if you break it you own it. The recklessness and irresponsibility of launching air strikes to overthrow Qadafi without any thought for what would follow, or any apparent understanding of Libya’s complex tribal society, is hard to defend, especially as the horror of Iraq should have been fresh in the mind. The expression of moral outrage cannot become a substitute for foreign policy making (http://www.shaunriordan.com/?p=95). Nor can the UK duck its responsibility for the chaos that resulted from the overthrow of Qadafi, or the more serious problems this has chaos has allowed, whether the mass migration of asylum seekers or the entry of Islamic State into North Africa.

Cameron’s new government will face a challenging foreign policy agenda, in an international environment of increasing economic and political uncertainty. It is not an environment in which any country should want to travel solo. His first priority must therefore be to repair relations with Washington and Europe. The two are related: the U.S. will be interested in the UK to the extent that the UK is able to play a useful role in the world, including within Europe. To achieve that, Cameron urgently needs to get coalition-building in Europe. It remains questionable whether he has the diplomatic vision or skills to do so, or whether his own party will let him.

The Geopolitical Elephant in the Electoral Room

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The British election has, as ever, been fought primarily about domestic issues. International issues have hardly featured. As Wolfgang Munchau points out (http://www.ft.com/intl/cms/s/0/450811b2-eff5-11e4-ab73-00144feab7de.html#axzz3ZBk6GYls) Europe has hardly featured, which is odd given the prominence of the anti-Euro UKIP and David Cameron’s promise to offer a referendum on the UK’s exit from the EU in 2017. Yet these British elections are crucial not just to Britain’s standing in the world, but also to how the EU operates, and is seen, in an increasingly multipolar world. A Conservative victory on Thursday could result in the break up of the United Kingdom, an irrelevant England and a German dominated EU where Berlin is the only European capital taken seriously by world powers. Let me explain.

If it were not for the crisis in the Eurozone, it would be the area of foreign and security policy that would be seen as the greatest failing of the EU. Despite the creation of a European External Action Service and the nomination of a second “EU Foreign Minister”, the EU has failed to create a genuinely common foreign and security policy. National foreign ministries, especially in the UK and France, have jealously guarded their national control over foreign policy making and implementation. Despite it elegant headquarters in Brussels, the European External Action Service gets only the crumbs that fall from the table. No-one has answered Henry Kissinger’s question about whom to call if he wants to call Europe. Indeed, Europe has made it even worse by creating a plethora of European “presidents” in addition to the national heads of government. The rest of the world has made its own calculation. With France in secular decline and Britain abstaining from any global role, they have identified Germany as the only European power worth talking to. At the same time the Germans have tired of the incompetence of EU foreign policy making and have begun to assert themselves. Last year they convened the Review 2014 project to look again at German foreign policy and how it is implemented. Both President and Defence Minister (tipped as a possible successor to Merkel) have called for greater deployment of German defence forces abroad. The results can already be seen in Europe’s relations with the major powers: the U.S., Russia and China all prioritize relations with Berlin.

David Cameron has promised a referendum on the UK’s membership of the EU in 2017. In doing so he has mortgaged Britain’s national interest to party political advantage. He argues that he will first seek to renegotiate Britain’s membership of the EU, and, if successful, will then campaign in favour of continued membership. Given his diplomatic ineptitude during his first premiership, in which he has managed to isolate Britain even on issues on which she has many allies in the EU, it seems unlikely he would achieve much by renegotiation. It is, therefore, at least possible that in the 2017 referendum a majority in the UK as a whole would vote to leave the EU. If there may be some doubts about how a vote in the UK would go, there is no such doubt about Scotland: Scotland would vote massively to remain in the EU. Cameron’s EU referendum would thus inevitably resurrect Scottish independence, but this time with big business and European institutions in favour, to maintain some part of Britain in Europe. If the Little Englanders so eager to leave the EU fondly dream of an Anglo-Saxon alliance they will be swiftly disillusioned. Washington will have no interest in, and little sympathy for, a rump England outside the EU. The other major powers of the 21st century, Beijing, Delhi or Moscow, will have even less interest. Bad news for a trading power.

But the implications go beyond the fate of Little England. Britain is an important counterweight in Europe to Germany. France has certainly always seen Britain in this light, even if Britain has frequently disappointed French hopes (eg by not joining the Euro – perfidious Albion). With the UK out of the frame, German domination within the EU will become as obvious inside as it already is outside. France will be reduced to running alongside Germany to maintain, to itself at least, that it remains a player. The desperation of Hollande to keep himself inserted in the talks over the Ukraine, even though he must know, as does everyone else, that in the end this will be negotiated between Berlin and Moscow, will become standard practice. International relevance for EU member states will be defined in terms of proximity to Berlin.

And yet not a word of all this in the election campaign. It is understandable that Cameron has no interest in raising the nightmare he has called into being (without any necessity), but it could be powerful ammunition for Miliband. Some argue that this is just the inevitable domestic focus of elections (“It is he economy, stupid!”), but I am not convinced. Rather we have produced in Europe, but especially in Britain, a generation of professional politicians with neither interest in or knowledge or experience of foreign affairs, and this in a moment where they are more important than ever. In a networked world, contagion is unforgiving. On Thursday Britons will vote. They may condemn England to isolated irrelevancy, but they could also submit the rest of Europe to a German hegemony.

The World According to Zirp: Economics through the Looking Glass

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When I was a student, John Irving’s novel “The World According to Garp” enjoyed something close to cult status. It was subsequently made into a successful film starring Robin Williams. With apologies to Irving, I propose a remake called “The World According to Zirp”. Zirp, or more correctly ZIRP is the acronym for Zero Interest Rate Policy. It describes a world through the looking glass in which old certainties do not hold and about which traditional economic theory can tell us little. As Yeats might have said, “the centre cannot hold and the falcon cannot hear the falconer”. Our determined conviction that we are simply experiencing another economic down turn from which we will recover in due course, rather than an economic paradigm shift, may prove the greatest blunder in our response to the crisis.

Over the last four years I have coached teams of high school students in a competition on monetary policy organized by the European Central Bank (ECB). The contest neatly mirrors the challenges central bankers have confronted. Originally the competition simply required the students to carry out an analysis of economic and monetary indicators, forecast inflation over the medium term and make a recommendation on interest rates. By the time we reached the final in the first year it was already clear that the Monetary Policy Transmission Mechanism (the mechanism by which changes in central bank interest rates impact on the real economy) had broken down and that the ECB was having to undertake “non-standard” measures. By the time we reached the final this year, the ECB had reduced its main lending rate to 0.05% and “non-standard” measures included a negative interest rate for banks depositing money in the ECB, various new forms of liquidity for banks and asset purchasing schemes and finally Quantitative Easing (QE – a program by which central banks buy government debt, in effect printing money) in a desperate attempt to head off deflation. Preparing for the contest this year, the students were having to master concepts that the central bankers themselves would scarcely have recognized ten years ago.

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Orthodox monetary theory argues that reducing the interest rates at which central banks lend to commercial banks stimulates lending from commercial banks to households and firms, thus generating growth in the economy. Lower interest rates both reduce the cost of servicing existing debt, thus increasing the income disposable for spending, and encourage households and firms to take on new debt. Since the 2008 crisis, this no longer seems to work. Central banks have cut interest rates close to zero yet banks still don’t lend and economic growth is, in the best of cases, sluggish. While initially this seems to have been because banks didn’t want to lend it now also seems to be because firms and households don’t want to borrow. The British economist Keynes warned about this. He argued that in a crisis, reducing interest rates close to zero would result in a liquidity trap in which commercial banks would sit on the money rather than lending it out because they do not trust borrowers and the low interest rates offer no incentive to take risk.

The solution, first in the US and UK and now in Japan and the Eurozone, has been QE. The central bank creates (it does’t really print it any more) money which it uses to buy (mainly) government debt. In theory this has four effects. Firstly it lowers government bond yields (the interest governments pay to borrow money). In particular it flattens the yield curve (the difference in interest rates on short and long term government debt). This in turn brings down the long term interest rates companies and households have to pay. Secondly it increases the money supply, the amount of money in the economy, in the hope that some of it will leak into the real economy. Thirdly it weakens the currency, making exports cheaper and imports more expensive. Finally it has a psychological impact, especially on markets.

Despite initial euphoria, it is now unclear how effective QE has been in the US or the UK. Growth in both remains uncertain. In the US, much of the QE seems to have leaked out in portfolio investment to emerging markets. As US monetary policy tightens again, this investment is withdrawn leaving the emerging markets with a perfect storm of unsustainable current account deficits and foreign debt, bubbles in housing and equity markets and collapsing currencies. In the UK, it seems to have renewed speculation in the housing market. Despite QE continuing on a massive scale, Japan has barely been able to escape deflation. Nor is it clear how long the effects of QE last. The U.S. economy is already showing signs of slowing again. Is this a temporary blip, or the consequence of withdrawing the QE stimulus last year?

The QE undertaken by the ECB is different, and it is not clear what the intention was, other than a last desperate throw to head of deflation. The bond yields for Eurozone governments were already at historic lows, and the benefits of driving them lower are likely to be minimal. It has driven the Euro lower against other currencies, although the impact on exports again seems modest. How long the Euro remains low will depend on decisions by other central banks (eg the Fed’s decision on when, if ever, to raise interest rates). It is certainly flooding the Eurozone with money, but the effect will depend on whether the low level of lending is because banks won’t lend or borrowers don’t want to borrow. There is evidence of the latter. If so, where does the money go? There must be a risk of fueling a bubble in asset prices (a stock market bubble may be favourite – the P/E ratio – ratio of stock to price to the company’s earnings – in the US is already at levels not seen since the absurdities of the dot.com bubble). The main benefit of the ECB’s QE may in the end prove to be insurance against contagion of a Greek default and/or exit from the Euro. With the ECB serving as a guaranteed buyer of government debt, investors will not spread Greek induced fear to other countries like Spain or Italy.

Meanwhile, the world according to ZIRP, where interest rates are zero and liquidity plentiful, generates its own bestiary of fantastical financial effects. As the ECB launched QE and the Euro sank on currency markets, European countries outside the Euro were forced to respond. The Bank of Switzerland broke the link between the Swiss Franc and the Euro, to the consternation of money traders who had not seen it coming and lost millions. More extreme was the Swedish Central Bank, which took its main borrowing rate to negative. The Swedish Central Bank was in effect paying banks to borrow money from it. It did this not to encourage Swedish banks to borrow more, but to undermine the rise of the Kröner against the Euro. Is this beginning of currency wars? Economic historians increasingly agree that it was competitive devaluations, as countries broke the link to gold, rather than protectionism, that really did the damage in the 1930s depression.

In the world according to ZIRP, investors also do strange things. Some 40% of bond yields in the Eurozone are negative. In other words, investors are paying governments for the privilege of lending them money. The ECB’s QE programme can only make this worse. While it may make sense to lend the government at negative yields over the short term – the government keeps your money safe and, if you anticipate deflation, you won’t lose money – it makes little sense to do it over the longer term. And yet the yields on Swiss government ten year bonds are now negative, and the offer was over-subscribed. Investors are paying the Swiss government to keep their money for the next ten years. Unless they anticipate ten years of deflation, this really is economics through the looking glass. But investors are finding the world of ZIRP hard to navigate. Many (eg pension funds) are restricted as to the quality of debt they can buy, and yet find that debt of the required quality offers little, if any, return on their investment.

Perhaps this would not matter if the world according to ZIRP were a short lived era which would soon pass as the economy returned to its normal cycle. But this might not be so. Once interest rates are brought close to zero they are difficult to raise again. The Fed has repeatedly put off raising interest rates in the US, and if the economy continues to show signs of slowing may do so again. Likewise the Bank of England. There is little chance of either the Bank of Japan or the ECB raising rates in the foreseeable future. ZIRP increasingly seems like a trap from which it is hard to escape. The global economy seems like a patient in intensive care, kept alive by an array of intravenous tubes. As long as the tubes provide their stimuli, the vital signs are encouraging. But if the doctor’s hand but hovers over one of the tubes, let alone grasps it ready for removal, the indicators take a downward turn. As the People’s Bank of China appears to follow the west into zero interest rates and non-standard measures as it struggles with China’s slowing growth, the world according to ZIRP may become a truly global financial trap. The patient can survive in intensive care on the intravenous drips, but how do you get him back to the hospital ward, let alone back to normal?

 

 

Digital Diplomacy: Confusing Means with Ends

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Earlier this week I attended a workshop on Internet governance organized by Esglobal with ICANN and Telefonica. The first session raised the interesting question of whether Internet governance offered a new model of international relations. The argument seemed to be that in a world of heterogenous international actors, including NGOs, companies and civil societies as well as governments, the multi-stakeholder governance of ICANN offered a better approach to managing international (or transnational) relations than the Westphalian state-based model. At first sight this seems plausible. Both the talks on climate change and the World Trade Organization talks have seen heterogenous coalitions built of governmental and non-governmental actors brought together by shared interests or objectives rather than shared ideologies. Analogies with the governance structures and processes of ICANN seem convincing. But there is a confusion of cause and symptom. The similarities result from underlying power structures and their evolution. The details of ICANN governance reflect the geopolitical power balance of the moment of ICANN’s creation, in a period of US hegemony often described as globalization. As US hegemony declines and as globalization fragments (together with the rule sets that govern it), ICANN’s model of Internet governance will increasingly come into question. The pressure will only continue as the number of internauts in countries that do not share ICANN’s cultural or political assumptions begins to outnumber those in countries that do. If we seek alternatives to Westphalian models of international relations that help us navigate in a world of heterogenous and multi-level networks and conflicting policy agendas, we might do better to look at non-European models, or, possibly even more profitably, pre-Westphalian European models. The Holy Roman Empire might offer a better analogy for 21st century global governance than ICANN.

This confusion of cause and symptom is analogous to that between means and ends that bedevils Digital Diplomacy. The rot began with Public Diplomacy, where I must confess guilt for my own small part in that “confusion fell upon our thought”. In the early stages of the debate on public diplomacy, despair at the ineptitude of most attempts by diplomats to communicate with foreign publics or opinion formers led perhaps to excessive zeal in promoting the benefits of public diplomacy. Good public diplomacy is indeed a crucial element in the implementation of diplomatic strategies. But it is essentially a tool. The over-selling of public diplomacy, encouraged by some rather odd interpretations in Europe of Joseph Nye’s concept of “soft power”, had two main outcomes: the elevation of nation-branding and the conversion of public diplomacy from a tool of diplomacy into an end in itself.

Nation-branding is one of the more curious inanities to afflict diplomatic studies. The idea that a country can recruit consultants to create a brand for it is inherently absurd, as shown by Tony Blair’s effort to rebrand the UK as “Cool Britannia”. While there may be merit in seeking to manage and highlight a nation’s reputation, a reputation is not the same as brand and cannot be constructed from scratch or artificially. To make the point, I once showed advertisements for Armenia and Azerbaijan, culled from CNN, to students in the Diplomatic Academy in Armenia. I had first removed the names of the countries from the advertisements. The students could not tell the advertisement for their country from that of their bitterest enemy. And yet nation-branding consultants continue to make their millions and Spain appoints a high commissioner for the national brand.

The confusion of public diplomacy as a tool in pursuit of broader diplomatic (or national) objectives with public diplomacy as end in itself may have been even more serious. Firstly, despite the best efforts of the theorists, many governments didn’t “get” public diplomacy. Many public diplomacy campaigns amounted to little more than propaganda plus marketing. While the theorists demanded two-way dialogue and genuine conversation on the “wicked” problems, foreign ministries continued to obsess with how to sell their messages better. Secondly, for many public diplomacy became diplomacy. The patient and discreet construction (and dismantling) of coalitions to secure diplomatic objectives was often abandoned in favour of public diplomacy opportunities. This tendency was strengthened by the calls for greater openness following the Iraq War. For many, Wikileaks and Snowden buried the “old diplomacy”.

In this environment in which public diplomacy was seen as end in itself, the tools of the Internet were perhaps inevitably seized into the service of public diplomacy. As a consequence, Digital Diplomacy has focused largely, if not exclusively, on the use of social media to promote public diplomacy objectives. The broader diplomatic objectives and strategies which should underlie both public diplomacy and digital diplomacy have been forgotten. Like public diplomacy, digital diplomacy has become an end in itself. New irregular verbs emerge: the ambassador blogs, first secretaries tweet, third secretaries post on Facebook. Diplomats both at home and abroad come under increasing pressure to be online. Social media presence, as opposed to any clear idea of what is being achieved, becomes the key performance criterion. Digital diplomacy departments in embassies and foreign ministries fill with communications and other social media experts.

This is not to say that the social media are not useful tools in pursuing diplomatic objectives. But they are only tools, and they are not, or should not be, the whole story. The excessive focus on Digital Diplomacy as social media can be a distraction, and even undermine the standing of more senior diplomats who try too hard to promote their social media presence. To the extent that social media and Digital Diplomacy are seen as synonymous, we miss out on more innovative ways of using the new technologies. While the U.S. already uses the full range of modeling techniques, especially those derived from the applications of complexity theory to political science and international relations, in geopolitical analysis and forecasting, Europe lags far behind. This could be an opening for EEAS to gain competitive advantage over national foreign ministries. But it is an old story. More interesting is the role that digital tools, including but not just social media, in advancing core strategic objectives. Much of traditional diplomacy has consisted of using networks to construct, and disrupt, coalitions to promote policy objectives. In as far as this remains a core diplomatic function, online platforms and digital networking tools should be playing a key role in increasing its effectiveness and reach. This is all the more so given that these coalitions must now include a broad range of governmental and non-governmental actors, not all of whom can be reached face to face.

There are many possibilities to be explored. For example, the struggle against Islamic State in Syria and Iraq. In Iraq in particular Islamic State seems to be a coalition consisting of Sunni tribes, ex-Baathists and a core of Jihadists. The trick may be to break this coalition up, as Petraeus broke up a similar coalition based on Al Qaeda in 2007. However, I suspect few will be willing to drive round Western Iraq with suitcases full of cash for the Sunni tribal leaders, as in 2007. In any case, bribery may not be enough. There may need to be a genuine dialogue with both Sunni leaders and Baathists about what would persuade them to break with the jihadists (re-writing Sykes-Picot?). This may be easier, and safer, done online than face to face, certainly initially. There are a host of online tools and techniques that could be brought into play, including chatrooms and social media. Intelligence services use chatrooms to monitor and disrupt terrorist groups. They can also be used to promote diplomatic objectives.

Online platforms can also be developed. One can conceive of circumstances in which actors in a conflict are able to game out the possibilities of an international conflict or dispute on an internationally maintained platform before committing to a given policy option. This could become a major tool of international mediation. Indeed, as a generation of world leaders emerges who grew up online, they may naturally tend in this direction. More concretely, the Mont Fleur scenarios was a scenario building exercise in Apartheid South Africa in which participants from across the political divide came together to generate future scenarios for the country. The exercise generated a common language about future developments as well as shared assumptions about possible outcomes. It contributed to a peaceful transition. In the Mont Fleur scenarios the participants physically came together. But this may not always be possible, for security or political reasons. One could imagine creating online platforms that would allow scenario building across the Internet, whether to generate shared language and assumptions, if not solutions, in a civil conflict like Libya, or shared assumptions about the nature of the issues in a crisis like Mediterranean migrations. In both cases, such online exercises would offer the prospect of ideas, if not solutions, emerging in which the participants (as opposed to western officials) had real ownership.

My aim in this, already overlong, blog is not to offer specific digital diplomacy projects. No doubt the suggestions floated above have real problems. Rather I want to stress two points: that Digital Diplomacy, like Public Diplomacy, is just another tool in the service of broader diplomatic strategies, and not an end in itself; and secondly that Digital Diplomacy must get beyond its obsession with social media to explore a wider range of online tools and techniques.