• Cybersecurity
    Cyber Norm Development and the Protection of Critical Infrastructure
    In cybersecurity, protecting critical infrastructure has long been important. In the early days of this policy area, the Clinton administration identified the need to protect critical infrastructure from cyberattacks. The Obama administration’s Framework for Improving Critical Infrastructure Cybersecurity highlights the importance of protecting critical infrastructure from cyber threats. Other governments exhibit similar concerns. Recently, Germany passed legislation mandating critical infrastructure operators improve their cybersecurity. Internationally, the United States has advocated a non-binding or “soft law” norm that countries should not damage critical infrastructure in other nations, and the UN Governmental Group of Experts on Developments in the Field of Information and Telecommunications in the Context of International Security (GGE) apparently accepted this idea during its 2015 session. Given national and international activity on critical infrastructure protection, is this area producing new norms for cyberspace? As Henry Farrell observed in his CFR Cyber Brief on promoting norms in cyberspace, “U.S. policymakers argue that the United States and others need to build norms to mitigate cybersecurity problems.” Addressing cyber threats to U.S. critical infrastructure, Admiral Michael Rogers, commander of U.S. Cyber Command and director of the National Security Agency, asserted, “We have got to develop a set of norms or principles in this space.” Such emphasis on developing norms suggests that norms do not exist. However, cyberattacks by state or non-state actors against critical infrastructure are illegal under international law. In short, we have lots of norms, rather than a shortage of them. In terms of criminal activities against critical infrastructure, the Council of Europe’s Convention on Cybercrime provides substantive and procedural rules that support states parties’ responses to such activities. The International Convention for the Suppression of Terrorist Bombings applies to attacks against infrastructure facilities through weapons or devices that can cause death, serious bodily injury, or substantial property damage, which can encompass cyberattacks by terrorist groups. A cyberattack by a state that damages critical infrastructure in another state would violate the international legal principle of non-intervention and, if sufficiently bad, might violate international law’s prohibition on the use of force. If binding international law prohibits states from damaging critical infrastructure in other countries, what does a non-binding norm against the same activity contribute to norm development in cyberspace? The GGE agreed in 2013 that the UN Charter, including its principles on non-intervention and the use of force, applies in cyberspace, so the norm on not attacking critical infrastructure could be a cyber-specific application of these general rules. But, if so, this corollary should be binding under international law. Norm development usually does not move from binding rules to voluntary guidelines. Another way to interpret the non-binding norm is that the rules against intervention and the use of force are not effective in cyberspace, which requires building consensus around a cyber specific norm. But, it’s not clear why a non-binding norm will be more effective than two of the most fundamental rules of international law. Less commented upon is the possible emergence of a norm requiring national and international action to defend critical infrastructure against cyberattacks. Countries can improve national critical infrastructure cybersecurity without needing international norms. However, as cyber threats to critical infrastructure have grown more serious, states have started to use international law to address these threats. This activity highlights international interest in strengthening cybersecurity in national critical infrastructure and reveals the need for more cooperation. This potential norm arises from states using international law to advance critical infrastructure protection in two ways. First, countries increasingly use multilateral, regional, and bilateral processes to address critical infrastructure cybersecurity, including activities in, for example, the International Atomic Energy Agency, International Civil Aviation Organization, NATO, the EU, and ASEAN. Generally, these efforts involve non-binding efforts to strengthen national cyber defenses for critical infrastructure, improve information sharing on cyber threats, and facilitate assistance to other countries. Second, some countries use international law directly. An EU directive on critical infrastructure requires operators to protect themselves against cyber threats. The African Union Convention on Cyber Security and Personal Data Protection mandates that states parties take action to protect critical infrastructure in their jurisdiction. Such international activities perhaps indicate the development of a “soft law” norm that includes “cyber due diligence” obligations on countries with respect to national critical infrastructure and responsibilities to cooperate with other nations in strengthening cybersecurity for critical infrastructure. Such a norm could have other implications, including, for example, how countries deal with “zero day” vulnerabilities of concern for critical infrastructure operations. State behavior is not yet sufficient to claim that this norm is anything more than incipient, but perhaps this aspect of protecting critical infrastructure deserves more attention as efforts on developing norms for cyberspace continue.
  • Middle East and North Africa
    Europe Goes Back to the "Peace Process"
    Syria is coming apart and there are millions of Syrian refugees in Jordan, Lebanon, and Turkey. ISIS threatens Syria, Jordan, Lebanon, and Iraq-- which is also coming apart. The new Iran nuclear deal would deliver $150 billion in cash to the Islamic Republic of Iran, and the removal of sanctions will bring even more money to the Revolutionary Guards. ISIS and other jihadis are increasingly active in Sinai. Hamas has a firm grip on Gaza. What is the European Union’s reaction to all these threats? To focus on the single aspect of Middle Eastern affairs that is right now calm, and to intervene in ways likely to reduce the calm and create more turbulence. You’ve probably guessed it: fresh from the great and historic victory in the Iran nuclear deal, they now turn once again to the Israeli-Palestinian situation. The EU’s foreign-policy chief, Federica Mogherini, said "We need to build a framework—regional and international—that can lead to a more positive environment for the process to start." Apparently it has not occurred to her that emboldening and enriching Iran is a not a great way to create a "more positive environment." Nor is attacking Israel yet again for construction in settlements, which the EU did again on Monday, stating that it is "ready to take further action…to protect the viability of the two-state solution.” That’s a veiled threat of sanctions against Israel. Coincidentally, there has been a loud debate this month in Israel over the constraints on construction in settlements that the Netanyahu government has put in place. Settler organizations have been screaming about this and criticizing the government fiercely. But it seems Ms. Mogherini and her colleagues are entirely ignorant of this, as they are of the impact of their Iran deal on Israel’s willingness to take further security risks. France has been talking about a new UN Security Council resolution that demands progress toward a peace settlement and imposes a timetable. The Wall Street Journal reported that French Foreign Minister Laurent Fabius said the peace process is "on its death bed," and because "The situation is bad" he concluded that "Europe must help the two sides take initiatives to get out of this stalemate." European leaders have been discussing replacing the Quartet, which consists of the UN, Russia, the EU, and the United States, with some new mechanism. This would be sensible if there were the slightest indication that there has been no progress in the "peace process" due to failures of the Quartet mechanism. Perhaps it works too slowly, or isn’t persuasive enough, or something like that. But that is false, and clearly any new mechanism that includes only the EU but not the United States will have little clout. It also appears that the history of the last decade is unknown to EU leaders. In that decade PLO chairman Mahmoud Abbas first said no to Israeli prime minister Olmert’s peace offer after the Annapolis conference, and Abbas then refused to engage in the negotiations with Israel that Secretary of State Kerry and President Obama were trying to arrange. Moreover, there is no reason whatsoever to think that the two parties are any closer together on basic issues such as refugees and Jerusalem. Some things have changed in the last few years, of course, but all of them will make an agreement even harder to reach. The growth of terrorist groups like ISIS and Al Qaeda makes an Israeli military withdrawal from the West Bank even more dangerous to Israel and Jordan- and to the Palestinians. Abbas’s advanced age makes it ever less likely that he will take a leap and sign any agreement, and as the years pass since the last Palestinian elections (Abbas was elected to a four year term in 2005) he has less and less legitimacy to make such decisions. So the European decision to turn its efforts to insisting on a comprehensive Israeli-Palestinian peace agreement are foolish and will lead nowhere. With one exception, perhaps: it seems likely that they will blame Israel for their failure, so perhaps the effort will lead to more criticism of Israel from EU governments. It should be obvious, looking at the Middle East today, that Arab governments such as Saudi Arabia, the UAE, Egypt, and Jordan are not clamoring for this EU effort and recognize that the Israeli-Palestinian conflict is marginal to their own security needs and nightmares. Only the EU continues blindly to insist on its centrality. To the Sunni Arab governments, Israel looks like an ally against the jihadis and against Iran. Perhaps this new European effort cannot be headed off, but it will achieve nothing positive. Instead it will be another example of the sort of wishful thinking about international security that EU diplomacy must shake off if it is ever to be truly effective.
  • Europe and Eurasia
    The Policy Implications of Hacking the Hacking Team
    The irony of Hacking Team—an Italian company that sells surveillance software—being hacked (or as Wired put it, “disemboweled”) is delicious, especially given Hacking Team’s denials it sold to governments with notorious human rights records. Hacking Team still insists it broke no laws and has behaved ethically. Whether Hacking Team survives remains to be seen, but this episode’s importance extends beyond one company. What the hack revealed touches on important policy issues. Cyber Surveillance Tools and Sanction Regimes The disclosed materials indicate Hacking Team sold its wares to the Sudanese government and a state-owned Russian company that produces military radar. Marietje Schaake, member of the European Parliament, argues that the sale to Sudan violates sanctions imposed by the UN Security Council—sanctions implemented through EU law. Schaake also states that the sale to the Russian company appears to violate EU sanctions imposed in response to Russian activities in Ukraine. Whether Hacking Team violated these sanctions I leave for others to decide, but the accusations suggest that future sanction regimes should explicitly cover the type of surveillance tools Hacking Team sold. In March 2015 correspondence, the UN Panel of Experts involved in monitoring the Sudan sanctions stated that Hacking Team’s software “may potentially” fall within the prohibited categories of “military equipment” or “assistance” related to prohibited items. This less-than-definitive phrasing invites questions about the interpretation of the UN sanctions. Such questions can be avoided in the future by including surveillance software within the scope of prohibitions imposed by UN sanctions. Wassenaar Arrangement Rules on Intrusion Software The Hacking Team disclosures focuses new attention on rules adopted in December 2013 that subjected intrusion software to the Wassenaar Arrangement, an export-control regime for dual-use technologies involving forty-one countries. As Kim Zetter noted, this change sought “to restrict the sale and distribution of computer surveillance tools to oppressive regimes,” though some argue it could chill cybersecurity research. Experts identified Hacking Team products as falling within these new rules. However, revelations that Hacking Team’s customers included countries with poor human rights records reinforce why the Wassenaar regime included intrusion software. The episode gives momentum to the Wassenaar approach of regulating cyber surveillance companies. While the momentum does not resolve the security research community’s concerns, the incident strengthens the position of governments and human rights groups interested in more regulation in this area. The Future of Lawful Hacking Hacking Team’s clients include not only repressive governments but also government agencies in democracies, including EU members and the United States, which connects the disclosures with controversies about “lawful hacking.” In June 2015, Senator Charles Grassley, Chair of the Senate Judiciary Committee, wrote to FBI Director James Comey seeking information about the FBI’s use of spyware, their legal justification that authorizes deployment of such software, and whether the FBI has purchased spyware from, among others, the Hacking Team. The disclosure that the FBI has been a Hacking Team customer will intensify scrutiny of its use of hacking in criminal investigations. The same might occur in other countries where government agencies are listed as Hacking Team clients, such as Australia, Chile and Mexico. This trajectory will increase tensions building between government interest in exploiting digital technologies for law enforcement and advocates for privacy and other civil liberties. International Human Rights in the Digital Age The nature of Hacking Team’s products and the global scale of its sales make the leaked information important for international human rights. Concerns about the threat government surveillance poses to the use of digital technologies existed prior to the Hacking Team disclosures. But, like the Snowden leaks, these disclosures will heighten worries that governments are engaging in surveillance that violates human rights. In response to the disclosures, the UN Special Rapporteur on the Right to Freedom of Opinion and Expression tweeted that the documents revealed the depth and extent of digital attacks on civil society and underscored the importance of encryption and anonymity. The disclosures will also be important to the work of the newly appointed UN Special Rapporteur on the Right to Privacy. Making It Too Easy for Authoritarian Regimes Hacking Team might go out of business, but its demise would not affect how authoritarian governments behave. Much like Snowden’s leaks, the Hacking Team contretemps reinforces their perceptions of the hypocrisy of democracies. They can easily point out double standards: multiple U.S. government agencies are clients of a company that sells to a Sudanese regime accused of genocide, even after the Hacking Team has been credibly accused of doing business with Sudan and other repressive governments? And it takes another spectacular criminal act to expose gaps between rhetoric about Internet freedom and the reality of governmental and private-sector behavior? Authoritarian governments do not need the travails of democracies to harness digital technologies for repression, but the democratic world’s struggles with these disruptive technologies are giving cyber repression too much space to metastasize.
  • Sub-Saharan Africa
    Eritrea’s Humanitarian Crisis and Mediterranean Migration
    This is a guest post by Amanda Roth, a former intern for the Council on Foreign Relations Africa Program. She is a recent graduate from the Columbia School of International and Public Affairs, where she studied international security policy.  According to the International Organization for Migration, 23 percent of the 170,100 refugees that arrived in Italy by sea last year were from Eritrea. In a country of only 6.3 million, the United Nations estimates that approximately five thousand people flee every month. Eritrea has been largely ignored internationally, but increasing numbers of refugees, a growing diaspora community, and the regime’s involvement in instability in the Horn of Africa may mean that it is time to take a closer look at the police state that has been called the “North Korea of Africa.” Earlier this month, the UN released a report illuminating the country’s horrific conditions and accusing the Eritrean government of “systematic, widespread, and gross human rights violations.” The report is only the latest to condemn the government of President Isaias Afwerki, who has ruled the country without elections for more than twenty years and exerts control over nearly every aspect of daily life. One of the primary reasons that Eritreans are fleeing is the forced national service that all Eritrean men and women must complete. Citing the country’s violent conflicts with Ethiopia (from whom it gained independence in 1993) and other neighboring countries, the government maintains one of the largest armies in sub-Saharan Africa. Men and women are forced to serve indefinitely with little or no pay. One study found that the average length of service among former conscripts was six and a half years, although some served twice as long. Entire families go hungry because potential breadwinners must choose between forced conscription and fleeing the country. The UN report also outlined “widespread use of torture” and “ubiquitous” arbitrary detention. There is no free press, and Afwerki’s government operates a system of mass surveillance, with government informants everywhere. There is a severe shortage of food and basic goods. Because so much money and manpower is devoted to the military, there is very little internal capacity to meet people’s needs. Given these conditions, it is not surprising that the UN High Commission for Refugees counts more than 400,000 refugees and asylum seekers from Eritrea, approximately 6 percent of the country’s population. Even the Afwerki regime’s alleged "shoot to kill" policy on the border does not dissuade thousands from fleeing. However, even if individuals do manage to escape, they are not safe from the government’s reach. There have been reports that Afwerki supporters working as translators in Europe inform the Eritrean government about the private statements migrants make during asylum hearings. Eritrea uses extortion and threats of violence to exact an involuntary tax from the diaspora. The government also allegedly tortures and punishes deserters’ families that remain behind. As Europe continues to debate how to respond to the migrant crisis along the Mediterranean, there are repeated calls for the European Union to attempt to address the “root causes” that lead tens of thousands of migrants to flee. The UN report, which states that the Eritrean government may be guilty of crimes against humanity, casts a harsh light on some of these root causes in one of the world’s most brutal dictatorships. Countries and international organizations seeking to address Mediterranean migration should take notice.
  • Greece
    High Stakes in Greece
    Greece teeters more than ever on the brink of a eurozone exit, a move that carries far greater consequences for Western interests than severing the monetary union, says CFR’s Sebastian Mallaby.
  • Sub-Saharan Africa
    Nigeria Security Tracker: Weekly Update June 6-June 13
    Below is a visualization and description of some of the most significant incidents of political violence in Nigeria from June 6, 2015 to June 13, 2015. This update also represents violence related to Boko Haram in Cameroon, Chad, and Niger. These incidents will be included in the Nigeria Security Tracker.   June 6: A bomb in Maiduguri, Borno killed sixteen. Boko Haram is suspected. June 6: A suicide bomber in Monguno, Borno killed two. Boko Haram is suspected. June 8: Boko Haram killed nineteen in Askira/Uba, Borno. June 9: Chadian soldiers killed 207 Boko Haram insurgents and lost one of their own. June 9: Three female suicide bombers’ IEDs detonated early, killing them. They are suspected agents of Boko Haram. June 10: Boko Haram killed fourty-three in six villages in Damboa, Borno. June 12: Sectarian violence resulted in the deaths of four in Barkin Ladi, Plateau State.
  • Europe and Eurasia
    Guest Post: Promoting a Ukraine-EU Agenda on Human Trafficking
    Luke Drabyn is a former intern for global health, economics, and development at the Council on Foreign Relations. Ukraine has one of the highest levels of human trafficking in Europe. Over 120,000 Ukrainian men, women, and children have been exploited for labor and sex since the country became independent in 1991. The Eastern Partnership (EaP) Summit in Riga, Latvia provides a valuable forum to discuss collaboration on human trafficking between the European Union (EU) and Ukraine. For Ukraine, successful reform and a display of leadership could instill trust among its disillusioned citizens. For the EU, fulfilling its commitments under the 2012–2016 Strategy Toward the Eradication of Trafficking in Human Beings could protect it from criticism. Many of the EU’s 90 migration-related projects to non-EU countries since 2012 have included anti-trafficking provisions. However, none address trafficking in Ukraine specifically. At its most basic level, human trafficking—the second most lucrative illicit industry worldwide—is a moral issue that contributes to the collective “deprivation of liberty and denial of freedom of movement” for vulnerable men, women, and children alike. Ukraine-EU collaboration on human trafficking would not only be mutually beneficial, but it is also feasible, and the EaP Summit provides this opportunity. Ukraine’s anti-trafficking record is dismal. The State Department’s 2014 Trafficking in Persons Report indicates that, in terms of the number of trafficked victims and the government’s efforts to comply with the standards outlined in the Trafficking Victims Protection Act, the country fares worse than others ravaged by war and human exploitation, like Syria and Afghanistan. Although registered trafficking crimes decreased from 415 in 2005 to 109 in 2014—under former presidents Viktor Yushchenko (2005–2010) and Viktor Yanukovych (2010–2014)—NGOs operating in Ukraine report “a very large number of trafficking victims.” Notably, within the past five years there has been a “significant increase” in trafficking for labor exploitation. The Interdepartmental Council, established to coordinate a national anti-trafficking program, has not convened since 2010. With the support of the people and a generous financial aid package—a luxury his predecessors lacked—President Petro Poroshenko can display leadership at a time when his grip on power is tenuous. This is an issue upon which the Ukrainian population—notoriously divided on most political issues, such as the country’s official language or the signing of an Association Agreement with the EU—stands united. A 2014 national poll found that 73 percent of Ukrainians “felt that trafficking was a problem” in the country. Perhaps more importantly, Poroshenko has foreign financial support. An undetermined portion of the $17.1 billion of the IMF funds allotted to Ukraine next year will address “governance,” which includes promoting the rule of law and government transparency while rooting out corruption. Currently, the criminal justice system is so corrupt that it needs to be “rebuilt nearly from scratch,” making it tremendously difficult for prosecutors to swiftly bring legal proceedings against traffickers. However, some of the IMF funding could be allocated specifically toward streamlining the judicial process for prosecuting traffickers. Alternatively, Ukraine could organize an EU-backed conference on human trafficking crimes and prosecution, modeled after the 2014 Ukraine-Organization for Security and Co-operation in Europe conference that brought together over one hundred prosecutors, judges, and policemen and women. While giving substantial anti-trafficking attention (and funding) to other non-EU countries, the EU has neglected Ukraine. One of the five key priorities outlined in the EU’s anti-trafficking strategy includes “enhanced coordination and cooperation” with strategic countries beyond the EU’s borders. Anti-trafficking projects, financed under the EU’s Global Approach to Migration and Mobility (GAMM), were set up as early as 2012 in countries like Morocco, Nigeria, Ghana, and the United States. However, not one has been established in Ukraine. Instead, the EU offered Ukraine €66 million in 2010 toward strengthening border management policy and €28 million in 2013 to align its migration and asylum systems to European standards. These funds have allowed Ukraine to upgrade its border infrastructure, which is only one component in stemming human trafficking. As the 2016 deadline approaches, setting up an anti-trafficking program in one of the most afflicted countries in the region, Ukraine, would allow the EU could uphold its commitments and deflect criticism. A framework for combatting trafficking is already available to be employed. The  2014 Council of Europe’s Group of Experts on Action against Trafficking in Human Beings report outlines twenty-eight proposals for reform in Ukraine. This would serve as a platform on which the EaP could discuss human trafficking cooperation at the Riga Summit. Alternatively, the EU could establish a Mobility Partnership (MP) with Ukraine—a bilateral framework that promotes policy dialogue on migratory issues between the EU and interested third countries. The MPs established in Morocco and Tunisia outline a commitment to coordinated human trafficking prevention, providing an easy model for an MP with Ukraine. Outside of impending deadlines and increasing human labor trafficking, what makes the fourth EaP Summit an appropriate forum in which to strengthen collaboration on human trafficking? The meeting has been coined a “survival summit,” where implementing “deliverable” agreements is important. With funding, public support, and model frameworks in place, discussing and delivering an agreement on multilateral human trafficking cooperation would be feasible. Additionally, this is an opportunity for President Poroshenko’s government to strengthen the public perception of its leadership and for the EU to live up to its commitments.
  • Asia
    Little Chance of a Regional Solution for the Rohingya
    In the wake of the latest horrific reports of Rohingya fleeing Myanmar, the United States government has called Southeast Asian nations to come together and adopt a region-wide strategy for addressing the refugee crisis. “This is a regional issue. It needs a regional solution in short order," State Department spokesman Jeff Rathke told reporters last week, according to the Associated Press. As of today, thousands of Rohingya reportedly remain at sea, off the coasts of Malaysia and Indonesia, on rickety boats, after human smugglers abandoned them; Malaysia and Indonesia refuse to accept any more of the refugees stranded at sea. Last week, Malaysia turned away two boats of Rohingya migrants. Meanwhile, Thailand continues to investigate the story behind a mass grave, found earlier this month, at an abandoned camp in southern Thailand known to be used by Rohingya traffickers. This regional solution is unlikely. The Rohingya crisis is, sadly, not new to Southeast Asian leaders, even though the discovery of the mass graves and the vivid reporting on the crisis by the New York Times has raised awareness of the problem in the United States and around the world. Rohingya have been fleeing Myanmar en masse for at least three years now, as the country’s increasingly open politics have also fostered rising Burman nationalism and a wave of attacks on Rohingya shops and homes through western Myanmar. At least 100,000 Rohingya, and probably many more, have fled their homes in Myanmar since 2012. Governments in the region have had ample time to respond, and have demonstrated little interest in doing so. The Myanmar government has taken no concrete action to stem the tide of refugees or help them be resettled safely. Bangladesh takes the position that the Rohingya are Myanmar’s problem. Indonesia, Malaysia, and Thailand have refused, over the past three years, to devise any comprehensive solution to the Rohingya problem; Reuters’ investigative reporting, which won the Pulitzer Prize last year, has revealed the cooperation of the Thai authorities in trafficking of Rohingya. (Indonesia, at least, has adopted a policy under which migrants who reach its shores are not sent back, a policy not unlike the United States’ longtime policy on Cuban migrants.) Only since the discovery of the mass grave has the Thai government arrested police and other authorities for allegedly being involved in human trafficking. Whether any of these suspects will be tried and potentially penalized remains an open question. In addition, the Association of Southeast Asian Nations (ASEAN) has once again shown itself incapable of handling a real crisis. ASEAN’s Secretary-General has been all but mute. The ASEAN Secretariat in Jakarta, which has had three years to formulate a regional policy on Rohingya migrants in collaboration with Southeast Asian leaders, has declined to do so; Malaysia is the current chair of ASEAN, while Myanmar was the chair last year. Myanmar reportedly has blocked discussion of the Rohingya at ASEAN meetings for at least two years. Over the weekend, the Myanmar government blamed its neighbors for the migration crisis, with the office of President Thein Sein declaring that Myanmar’s leader will not even attend a proposed regional meeting to discuss the issue if the migrants are referred to as Rohingya. The Myanmar government prefers to call them “Bengalis,” a term that suggests they have no right to be in Myanmar. Major Zaw Htay, director of the office of Myanmar’s president, told the Associated Press over the weekend: "We will not accept the allegations by some that Myanmar is the source of the problem.” Given the lack of action by Southeast Asian (and South Asian) leaders, there is room for outsiders, like the United States, Australia, and Japan, to play a role. Other than calling for a regional solution, will the Obama administration do anything else about the Rohingya crisis? Will it provide naval ships for search and rescue missions, or increase aid to Thailand, Malaysia, and Indonesia, to help them take in Rohingya? Will the United States and Japan, which sees Myanmar as important strategically and is encouraging Japanese investment there, do more than express concern about the Myanmar government’s tolerance of Burman paramilitary groups that have stoked the violence against Rohingya?
  • Middle East and North Africa
    Obama and the Saudis: Too Many Glaring Mistakes
    Yesterday President Obama greeted the number two and three officials of Saudi Arabia, in the Oval Office. Obviously, U.S.-Saudi relations are not in good shape, as we learned from the refusal of King Salman to attend the Gulf summit Mr. Obama tried to call. But the least the President might have done was to get the names right. Here is an excerpt of what he said, from the White House web page: Remarks by President Obama and Crown Prince bin Nayef of Saudi Arabia THE PRESIDENT: Well, it’s wonderful to welcome back the Crown Prince of Saudi Arabia, Mohammed bin Nayef, as well as Deputy Crown Prince Salman. We are very pleased to have them both here today, as well as the delegation from Saudi Arabia. As all of you are aware, the United States and Saudi Arabia have an extraordinary friendship and relationship that dates back to Franklin Roosevelt and King Faisal, and we are continuing to build that relationship during a very challenging time. First of all, the name of the Deputy Crown Prince is not Salman; that’s his father’s name. His name is Mohammed bin Salman. Minor detail? How about this one: in 1945, FDR met the founder of the modern Saudi kingdom, the grandfather of the two princes he was greeting in the Oval Office. President Obama called him King Faisal, but the founder was King Abdul Aziz ibn Saud. His son Faisal ruled from 1964 to 1975. What must the Saudis, and other Gulf rulers, think when the president does not appear to know the name of the deputy crown prince, and does not know with whom FDR met? Bad staff work? Failure to Google? Lack of interest? Yes, getting the names wrong is not a casus belli, but it will deepen the sense in the Gulf and the wider Middle East that the President of the United States does not know what he is doing in their region.        
  • Europe and Eurasia
    Which Countries Stand to Lose Big from a Greek Default?
    The IMF has turned up the heat on Greece’s Eurozone neighbors, calling on them to write off “significant amounts” of Greek sovereign debt.  Writing off debt, however, doesn’t make the pain disappear—it transfers it to the creditors. No doubt, Greece’s sovereign creditors, which now own 2/3 of Greece’s €324 billion debt, are in a much stronger position to bear that pain than Greece is.  Nevertheless, we are talking real money here—2% of GDP for these creditors. Germany, naturally, would bear the largest potential loss—€58 billion, or 1.9% of GDP.  But as a percentage of GDP, little Slovenia has the most at risk—2.6%. The most worrying case among the creditors, though, is heavily indebted Italy, which would bear up to €39 billion in losses, or 2.4% of GDP.  Italy’s debt dynamics are ugly as is—the FT’s Wolfgang Münchau called them “unsustainable” last September, and not much has improved since then.  The IMF expects only 0.5% growth in Italy this year. As shown in the bottom figure above, Italy’s IMF-projected new net debt for this year would more than double, from €35 billion to €74 billion, on a full Greek default—its highest annual net-debt increase since 2009.  With a Greek exit from the Eurozone, Italy will have the currency union’s second highest net debt to GDP ratio, at 114%—just behind Portugal’s 119%. With the Bank of Italy buying up Italian debt under the ECB’s new quantitative easing program, the markets may decide to accept this with equanimity.  Yet assuming that a Greek default is accompanied by Grexit, this can’t be taken for granted.  Risk-shifting only works as long as the shiftees have the ability and willingness to bear it, and a Greek default will, around the Eurozone, undermine both.   Follow Benn on Twitter: @BennSteil Follow Geo-Graphics on Twitter: @CFR_GeoGraphics Read about Benn’s latest award-winning book, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order, which the Financial Times has called “a triumph of economic and diplomatic history.”
  • Europe and Eurasia
    The Digital Single Market Strategy Will Complicate the Economic Relationship Between the United States and Europe
    Today’s release of the European Union’s Digital Single Market Strategy starts a new era in digital diplomacy within the union and between the EU and the United States. The strategy identifies the ways in which the EU is unprepared to harness the economic opportunities digital technologies create. In response, the European Commission, the union’s executive arm, proposes the creation of a digital single market (DSM) through comprehensive reforms. While the strategy is undeniably important to Europe’s economic competitiveness, the reforms will significantly affect U.S. technology companies operating in the EU. As a result, the strategy will likely complicate already difficult transatlantic relations on e-commerce issues. The DSM Strategy The strategy analyzes how the EU’s single market does not allow Europeans to take advantage of the benefits associated with integrating digital technologies into economic activities. Despite claims that “Europe has the capabilities to lead in the global digital economy,” the strategy (and the accompanying evidence document) identifies a sobering litany of problems that holds the EU back. These problems include the geo-blocking online services, copyright laws and licensing regimes that impede access to digital content, burdensome tax codes, cybersecurity threats, barriers to cross-border parcel delivery, challenges with radio-spectrum allocations, poor adoption of digital technologies by European companies, shortages of skilled professionals, and lack of investment in digital skills and businesses. To create a DSM, the strategy sets three core objectives supported by concrete actions: Produce better access to online goods and services by harmonizing e-commerce laws, improving parcel delivery across borders, reforming copyright regimes, and reducing the tax burdens associated with the online sale of goods and services; Create market conditions for European digital activities to flourish by harmonizing telecommunication laws, improving cybersecurity and data protection, and investigating online platforms to ensure compliance with EU laws; and Maximize the growth potential of Europe’s digital economy by building a single market for big data and cloud computing services, improving e-government, and investing in digital infrastructure. European and Transatlantic Implications The DSM strategy addresses the digital revolution’s threat to the effectiveness of the European single market, one of the EU’s greatest achievements. While the digital revolution has been years in the making, Europe hasn’t kept up. According to the European Commission, “[o]nly 1.7% of EU enterprises make full use of advanced digital technologies, while 41% do not use them at all.” EU policymakers face a daunting challenge to implement the proposed reforms. They touch virtually every aspect of the digital economy and will affect the single market comprehensively—from pan-European policymaking to decision-making in small start-ups. The extent and complexity of the reforms mean the strategy will influence policy for years as the EU modernizes existing legislation and formulates new regulations. Like the push for the single market in the 1980s, translating the strategy into policy and law is a decisive test for the EU’s ability to adapt to technological and economic change. Given the strategy’s importance to fundamental EU interests, it would be simplistic to criticize it as digital protectionism designed only to limit the power of U.S. tech companies. In fact, if implemented, some reforms will create growth opportunities for U.S. firms operating in the EU. However, it is disingenuous for European officials to claim that the strategy does not target U.S. companies that dominate European digital markets. The innovations and market successes of U.S.-based enterprises cast long shadows over Europe’s ineffective responses to the digital revolution. The strategy declares the EU’s intent to continue enforcing its antitrust rules (as it has against Microsoft and Google) and to launch a “comprehensive assessment” of the roles and power of online platforms (e.g., Google, Amazon), including those associated with the sharing economy (e.g., Uber, Airbnb). The likely outcome will be “level-the-playing-field” actions and regulations that disproportionately affect leading U.S. tech companies. The United States and the EU already butt heads over data protection, privacy, and the application of EU competition law to U.S. tech companies. The DSM strategy will complicate the transatlantic relationship by increasing the friction between these two economic powers as Europe implements the proposed reforms.
  • Sub-Saharan Africa
    Europe’s Migrant Crisis
    This is a guest post by Amanda Roth, a former intern for the Council on Foreign Relations Africa Program. She is a graduate student at the Columbia School of International and Public Affairs, where she studies international security policy.  Last week, a ship carrying hundreds of migrants trying to reach Europe capsized in the Mediterranean, killing nearly 900. The tragic incident and unprecedented death toll has reignited a discussion of the growing migration crisis in the Mediterranean and Europe’s obligation to assist. Last year, Italy terminated Operation Mare Nostrum, an extensive and relatively successful search and rescue operation. The operation began in response to the 2013 Lampedusa crash, in which more than 300 migrants died. Under Mare Nostrum, Italy rescued thousands of migrants, housed and clothed them, and attempted to adjudicate asylum claims. However, with challenges of its own, Italy struggled to fund the program and to provide services for all migrants within its own borders. The Dublin Regulation, an EU law, dictates that the European country that is the first point of entry must handle the asylum application, leaving countries bordering the Mediterranean, such as Italy and Malta, overwhelmed by applications. Approximately 90 percent of refugees end up in only a few EU member states. European leaders refused to help fund Operation Mare Nostrum and to accommodate migrants. Some argued that rescue missions served as a “pull factor” and encouraged migrants to make the dangerous journey, knowing that they would be rescued. Unable to foot the costs itself, Italy ended the program. It’s difficult to know if Operation Mare Nostrum could have prevented this week’s tragedy. However, two things are clear. The first is the glaring fault in the logic that ended Operation Mare Nostrum—search and rescue operations in the Mediterranean aren’t a significant “pull factor” attracting migrants. Political violence in Mali, terrorism in West Africa, the Syrian civil war, and continued poverty and oppression mean that just as many people continue to make the journey. The second obvious conclusion is that search and rescue operations are a short-term fix, not a long-term solution. Operation Mare Nostrum helped save thousands of lives, but it could not address the root causes of migration from Africa and the Middle East to Europe. European leaders are gathering in Luxemburg this week to discuss possible solutions—including increased funding for operations such as Mare Nostrum, and targeted missions to arrest smugglers and dismantle their networks. Leaders gathered in Luxemburg this week should look at solutions that may help stem the flow of migrants in more incremental yet sustainable ways. While it is beyond Europe’s capacity to fix violence in Mali or stop the repressive regime in Eritrea, improving its own immigration system may help mitigate the flow and reduce deaths. Providing more funding for search and rescue is one critical step, but like that of the United States, Europe’s immigration system is deeply flawed. There are more creative solutions being discussed. Setting up processing centers in Africa and the Middle East, so individuals can apply for asylum before crossing the Mediterranean, may help. Family reunification processes can be simplified. The EU could revisit the Dublin Convention, which disproportionately burdens poorer Southern European nations with the responsibility of responding to waves of undocumented migrants. Immediately allowing for larger number of asylum claims is critical. These measures won’t stop the flow of migrants to Europe. But, they could keep the crisis from escalating. It is clear that leaders must look beyond short-term fixes, and address this issue in a more sustainable and comprehensive way.
  • Iran
    Neither Shocked nor Awed: The Arab Reaction to the Iran Deal
    My research associate, Amr Leheta, wrote this terrific post on the Arab reaction to the framework agreement between the P5+1 and Iran. Enjoy! “The Nuclear Agreement…A Strategic Earthquake in the Middle East” read one headline in a London-based, pan-Arab newspaper on April 4. In the article underneath, published a couple of days after the announcement of the Joint Comprehensive Plan of Action (JCPOA) regarding Iran’s nuclear program, the editorial board of Al-Quds Al-Arabi wrote the following: There are few who are able to debate [against the notion that] the framework agreement [over the Iranian nuclear program] reached by Iran and the P5+1 countries in Lausanne the day before yesterday represents a historic event and a strategic earthquake that has hit regions already suffering from windy political, security, and military “storms.” There are few who can also claim that they are capable of anticipating the sweeping results of this earthquake, which is redefining the balance of power in a region that is embellished by vitality and sensitivity and is the most significant arena for conflict and the interests of the great powers. This editorial, one of the first to be published in Arab media after the announcement of the deal, encapsulated the essentials of the Arab reaction to the agreement: solemn acceptance that it represents a significant watershed moment for the Middle East—it has been likened to the 1979 Camp David peace treaty between Egypt and Israel—and a nervous disquiet over the future of Gulf security, the alliance between the United States and Arab Gulf countries, and Saudi hegemony in the region. The profound mistrust toward Iran, a country seen by many as expansionist, antagonistic, and sectarian, informs much of the commentary on the deal. Support for the ongoing Saudi-led bombing campaign of Yemen to reverse recent power grabs by the Houthis and roll back Iranian influence in the peninsula has also shaped the general reaction. In the Saudi-owned, pan-Arab newspaper Al-Hayat (also based out of London), Khalid al-Dakhil, a Saudi academic, and Dawood al-Shirian, a television host and journalist, recently argued over which is more of an enemy to Arab states, Iran or Israel. Both agree that Iran is the bigger threat given its involvement in sectarian conflict in the region—manifested in Arab-Iranian terms as well as Sunni-Shia—and al-Shirian insinuated that some believe Israel is not even a threat to begin with. Thus, the biggest question on Arab minds since the April 2 announcement is, as the editorial board of the Egyptian state-owned daily Al-Ahram wrote, “What are the assurances and guarantees [of security] that Iran has put forward for its Arab Gulf neighbors?” One Saudi newspaper, Al-Riyadh, expanded on this and outlined four more questions in need of answers: Is it possible for Iran to resort to deception? At that point, would the United States or any other power have the capacity to respond in time? Would these powers use military force? And is it possible for the final agreement to dispel global concerns of Iranian intentions? Moreover, much of the Arab concern about the agreement is rooted in the conviction that Iran has emerged as the biggest winner of the negotiations and the Arab world has been left in the lurch by the United States. Habib Fayad wrote in the Lebanese daily As-Safir that Iran has achieved what it most wanted since 2003, “the world’s recognition of Iran’s right to manufacture and possess nuclear energy.” This compromise has already spurred much speculation about what will happen next. Ahmad al-Ahmad wondered in Al-Riyadh if the time was right for the Gulf countries to start their own nuclear enrichment program, writing: It has become imperative for Gulf and Arab countries, which have received assurances from U.S. President Barack Obama that there will not be an agreement with Iran at their expense, to declare that any concessions awarded to Tehran in its agreement with the West and the [P5+1 countries] must also necessarily be applied to Gulf and Arab countries. Thus, if Iran is permitted to have a peaceful [nuclear] program, then it is the right of Gulf and Arab countries to have a peaceful program, and if [Iran] is permitted to enrich uranium to a certain level, then it is the right of Gulf and Arab countries to enrich [uranium] to a certain level. Like Ahmad, numerous other writers have concluded that if the United States is to make a deal with Iran, then it ought to make a similar deal with the Arab world, particularly the Gulf. For them, it is a way to be reassured of their security interests and of the strength of their relationship with the United States. Given that the Arab world was left out of the these negotiations, it is no wonder that many Gulf Arabs are insecure about where the deal leaves them, how they can secure their interests, and what it means for their relationship with the United States. Several have gone further and suggested that the United States and Arab countries are drifting apart. Salman al-Dossary, the editor-in-chief of the Saudi-owned, London-based, pan-Arab Asharq Al-Awsat, is concerned that the United States no longer understands the needs and interests of the Arab world. In an April 7 column entitled “Does Obama Understand ‘Sunni Arabs’?” Dossary betrayed bewilderment at how the United States is seemingly trusting of Iran and expects the Gulf to be just as welcoming (the piece is translated into English here). He wrote: Does Obama expect the Gulf—which has long suffered from Iran’s interventions and sponsorship of terrorism—to simply believe his efforts to improve the image of Tehran? Isn’t it the same Tehran that has posed a clear and present danger to Gulf states for the past 36 years?...The US administration has made a major diplomatic mistake when, during talks with Iran, it sent an indirect message that it is incapable of waging war against Tehran over its nuclear program…Instead, Washington has thrown the ball into the Gulf’s court, calling on them not to worry about Iran. One thing Mr. Obama has not done yet is present himself as a go-between for his Gulf “allies” and his friends in Tehran. With all the disappointment in the United States, the same commentators are hoping that the upcoming meeting of the heads of the GCC states—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—and the U.S. president at Camp David will quell the growing anxieties. It will, after all, be a significant opportunity for Obama to convince his Arab allies that the deal with Iran is in their interests as well. In the meantime, the Arab media is looking to Operation Decisive Storm in Yemen as an example of Arab independence and capability. And even though the military campaign in Yemen is intended in part to show that the Arab world can protect its interests without the United States, Arab writers and thinkers still prefer to think that the JCPOA will fail in the haggling to come over the technical details of a final agreement so that the status quo will remain. Potential opposition from “America’s hardliners”—the Republican Party—as well as Iran’s gives them hope. The commentary is not all pessimistic though, and some see room to secure Arab interests in the final iteration of the deal. Abdulrahman al-Rashed, a Saudi media personality who is a former editor-in-chief of Asharq Al-Awsat and a previous general manager of the Al Arabiya News Channel, cautions that the details of the final agreement could push Iran in one of two directions. He wrote in an op-ed (translated into English here): The agreement may be a victory for the Iranian regime over its rivals inside and outside Iran, but it might turn out to be a submissive deal. If halting Iran’s nuclear project, for the moment, results in just the lifting of nuclear-related sanctions and setting Iran free to become a major regional power, we will be then [sic] embarking on a more serious crisis and an era stained with more blood. Nevertheless, if halting Iran’s nuclear project results in the freezing of Iran’s militarized nuclear activities, controlled by the lifting of Western sanctions, and an end to political antagonism against Iran, then we would be witnessing positive progress. It would mean that Iran has finally surrendered and will become, like any other country in the region such as Egypt and Saudi Arabia, a peaceful state that defends its borders. In others words, limited but crucial exchanges can make this a better deal in the end, one that would bring Iran into the community of nations. For Rashed, this also means the hopeful possibility of unraveling the Iranian regime. He continued, “Ayatollah [Ali Khamenei]’s regime has weakened with time…[and] the deal requires the openness of the regime, however Iran is not ready for it yet and could face what happened to the Soviet Union after the deals to reduce its nuclear arsenal and be [sic] cooperative with the West: it rapidly collapsed.” Others are less speculative about the benefits of a deal with Iran in the short-term. Also writing for Asharq Al-Awsat, Mamoun Fandy contended that “Despite [the many obstacles and questions], reaching an agreement will be better for the region and its stability,” although, he went on to say, the Arab world must keep its eyes open to see if Iran will behave transparently going forward. What does all this tell us? Well, contrary to the popular belief in Washington that the Arab world was going to flat-out reject the framework agreement, the response has been far more measured and nuanced than expected. What has been surprising to many is the cautious Saudi acceptance of the deal. Indeed, in his phone call to Obama, King Salman bin Abdul Aziz al-Saud expressed a desire to reach a “final and mandatory accord conducive to consolidating regional as well as international security and stability.” Given this hopeful tone, perhaps even the Arab world will accept a deal in the end.
  • China
    Are China’s Foreign Exchange Reserves Really Falling?
    Bloomberg and other media outlets have been highlighting the apparent significant recent fall in China’s foreign exchange reserves, suggesting that the development had important implications. In a recent blog post, former Fed Chair Ben Bernanke argued that a “global excess of desired saving over desired investment, emanating in large part from China and other Asian emerging economies and oil producers like Saudi Arabia, was a major reason for low global interest rates.” If this is so, then Chinese reserve sales can be expected to push up global rates.  But is China actually selling reserves? The actual currency composition of China’s reserves is unknown – so no hard measurement of sales can be made.  However, if we assume that the composition is approximately the same as that of other EMs – about 65% dollars, 20% euros, and 15% others – we can estimate it. As shown in the graphic above, once we strip out currency fluctuation effects – that is, the steep recent rise in the dollar - Chinese FX reserves actually increased mildly, rather than decreased, between last June and December.  Thus Bloomberg’s assertion that China had “cut its stockpile” of reserves appears erroneous. So to the extent that Bernanke’s global savings glut thesis is accurate, China continues to exert downward pressure on global interest rates.   Follow Benn on Twitter: @BennSteil Follow Geo-Graphics on Twitter: @CFR_GeoGraphics Read about Benn’s latest award-winning book, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order, which the Financial Times has called “a triumph of economic and diplomatic history.”
  • Thailand
    Thailand’s Teflon Economy Finally Seems to Be Cracking
    For nearly fifteen years in the 2000s and early 2010s, Thailand’s economy, once one of the fastest-growing in the world, survived the effects of near-constant political turmoil, natural disasters, and worries about the country’s future in the wake of a looming royal succession. Even after the massive floods in the monsoon season of 2011 that destroyed much of the industrial estates north of Bangkok, home to auto parts, disk drive, and other key manufacturing plants, Thailand’s economy rebounded strongly. Even after street protests in Bangkok in May 2010 led to a brutal military crackdown in which much of the downtown wound up looking like a war zone, several major commercial buildings were torched, and at least 90 people were killed, Thailand’s economy rebounded. Tourists continued to come to the kingdom---more than 22 million in 2012, the year after the flooding---and in 2012 Thailand’s GDP grew by over six percent. Many observers of the kingdom believed that, after the May 2014 coup, the Teflon economy would display its usual resilience. In fact, a large majority of the CEOs of the largest Thai businesses in Bangkok allegedly supported the military putsch, publicly or privately, according to multiple businesspeople and journalists who have spoken with top Thai CEOs. In part, they may have supported the coup because they believed that, at its heart, the Puea Thai Party and its leaders either were republicans or could not be trusted to be in power at a time of royal succession. (There is little evidence that Puea Thai leaders actually have republican sentiments.) But business leaders also may have supported the coup since they believed the generals could bring a modicum of stability, and since Thailand’s economy had performed strongly in the 1980s during a long period of de facto military/technocratic rule. But the era in which Thailand’s economy could withstand any political turbulence, and would continue to attract tourists and foreign investors, appears to be over. Fifteen years of political chaos has distracted Thai policymakers from making important investments in infrastructure or the country’s education system, which has never been upgraded to prepare people for a middle-income economy. In particular, Thailand’s English classes and information technology classes lag badly behind those of Thailand’s regional competitors. A recent article in Singapore’s Today notes that “Thailand ranks 55th out of 60 countries on the English Proficiency Index, the world’s major ranking of English-language skills. That is the lowest among Southeast Asian countries.” This despite the fact that several other countries in Southeast Asia are far poorer than Thailand and have much less resources than Bangkok to help promote English education. As the Association of Southeast Asian Nations moves toward a single market in goods and services, English skills will be even more important for businesses that want to attract regional investment and for workers in a range of industries looking for opportunities throughout ASEAN. The country’s seemingly endless turmoil also finally seems to have deterred investors, who for years continued to pour money into the kingdom because of its natural attractiveness and history of liberal investment policies. At the same time as Thailand stalls, other countries in the region, like the Philippines, Myanmar, Vietnam, and even Indonesia have promoted policies that have made them more attractive to foreign investment. The Japanese government continues to court Bangkok, even after the coup, as a means of stalling the Thai generals approach to China; Japan’s desire to blunt China’s influence is likely the major reason why Tokyo is proposing its own plan for funding a rail line in Thailand. (The Chinese government has proposed its own, competing rail project in the kingdom.) Yet unlike the Japanese government, private sector Japanese investors are not so bullish on Thailand. Japanese investors, the biggest group of foreign investors in the kingdom, have begun to shift new investments to Vietnam and other countries in the region. Other foreign investors have become increasingly cautious in approving new Thailand projects. A recent Bloomberg analysis of the growth rates of major Southeast Asian economies showed that, since 2010, Thailand’s GDP growth rate has been about half that of neighboring Malaysia, Indonesia, and the Philippines. And in 2015, the World Bank projects that Thailand’s growth rate will again be the lowest in the region. Thailand’s central bank last week cut its own forecast for Thailand’s 2015 growth rate. Expect it to cut that forecast further as the year progresses.