hms iron duke

hms iron duke

Tuesday, 30 June 2015

Strategic Islamism must be defeated in the Field

Alphen, Netherlands. 30 June. In responding to the terrible events in Tunisia in which thirty or more Britons were gunned down on Friday Prime Minister David Cameron talked of an existential struggle, a generational struggle.  And yet he seems to completely under-estimate the scale of the challenge posed by Islamic State, the Caliphate which was established a year ago this week and the strategic Islamism they champion.  He also refused to state the blindingly obvious; Islamic State will need to be defeated in the field BEFORE it can be defeated on our streets. That means armed forces that must have the capability and the capacity to go back and fight in the Middle East.   

So, why does strategic Islamism, and in particular IS, pose an existential threat (note the use of Islamism not Islamic, which is a vital distinction)?  First, strategic Islamism threatens to destroy the state system across the Middle East with enormous political and humanitarian implications.  Second, strategic Islamism reaches deep into now complex European societies. Third, there is no doubt that IS would seek to gain and use mass destructive and disruptive weapons and technologies against open societies. Fourth, there is no conceivable political accommodation with IS.

Prime Minister Cameron as ever says all the right things, but as ever does very little to back his words with action.  For example, my well-placed sources tell me that Cameron is sympathetic to the need to rebuild the British armed forces.  However, Chancellor (finance minister) George Osborne has made further cuts to the British armed forces in the forthcoming Strategic Defence and Security Review (SDSR) a leitmotif for his fixation with achieving an arbitrary budget surplus by 2018-2019.

Osborne apparently told Cameron that if he agrees to the NATO target of maintaining Britain’s defence budget at 2% GDP then he can “say goodbye to the budget surplus”. Osborne has even threatened to resign if the coming Review does not confirm further swingeing cuts to Britain’s forces.  Worse, those around Osborne in the Treasury by and large adhere to the end of history nonsense believing there to be no real need to the world’s fifth largest economy and Permanent Member of the UN Security Council to have powerful armed forces.

Rather, they believe that a mix of strong intelligence services, an intrusive state and extended policing can contain the Islamist threat within Britain, allied to the constant downplaying of the threat posed by strategic Islamism.  For example, a very well-informed contact of mine tells me that far from there being 700 British ‘fighters’ in Syria and Iraq there are some 2000 and that some 1000 have recently returned to Britain. This is strategic illiteracy at its dangerous worst, especially when one considers such retreat against the backdrop of a rapidly rearming, aggressive Russia.

Consequently, the armed forces are forced to perform political fig-leaf operations.  Cameron likes to say that Britain is the second most active member of the anti-IS coalition.  In fact, the US carries out some 94% of all operations.  Given the caution of the Obama administration and the extremely lukewarm commitment of America’s allies (both within and without the region) the entire strategy upon which the coalition is founded has become fundamentally flawed with no real link between the strategic objective of defeating IS and the forces and resources committed.  Local fighters are incapable of defeating IS in the field which now has at its command resources that increasingly give it the appearance of a state.   

The result is that IS continues to cultivate the myth of military invincibility which makes it so attractive to the aggrieved, the marginalised and the fanatical across both the region, Europe and the wider world.  Therefore, until IS is defeated in the field and if needs be by a ground force with Western troops to the fore then the allure of IS well beyond Syria and Iraq will only grow.

Critically, Cameron has to ask himself a profound question and for once honestly answer it; which is the most important struggle – reducing national debt or fighting strategic Islamism.  If he is to honestly answer that question Cameron will also for once have to take a strategic position rather than a political position and with other European leaders stop running scared from the memory of Afghanistan and Iraq. That means recommitting Britain to fight the very existential struggle he proclaims with an existential mind-set whatever the near-term political costs.  It is as though Winston Churchill had said in 1940 that Britain was determined to fight Nazism, but only if it did not exacerbate the national debt. 

First, Cameron must commit more of Britain’s forces to the struggle and end the ridiculous constraint by which IS can only be attacked in Iraq not Syria.  Second, he must stop playing political games with Britain’s defences, particularly the capacity of Britain’s armed forces to undertake sustained operations.  Given the current threats ‘maintaining’ the NATO target of 2% GDP on defence simply by cooking the books is a dereliction of duty.  Folding the aid budget, intelligence and the nuclear deterrent into the defence budget simply to give the appearance of 2% in fact represents a massive cut to the operational forces and their ability to act.

Finally, if an increasingly obsessive George Osborne refuses to realise the world has moved on since 2010 and that his fixation with his arbitrary budget surplus is in fact yesterday’s struggle then he must be removed from office.  If not Britain and indeed the wider coalition will go on fighting strategic Islamism with one hand tied behind its back and the only winner will be IS. 

Prime Minister Cameron made a solemn promise to avenge Friday’s victims by dealing with the threat at source.  To do so he must help defeat IS in the field.  Anything less and yet again words will be seen as hollow as the promises he made yesterday to the victims.

Julian Lindley-French 

Monday, 29 June 2015



Dear Friend and Colleague,

it is with pleasure I announce the publication by Routledge of my latest book NATO: The Enduring Alliance 2015.  The book is a complete re-write and update of my successful 2007 edition.  The focus of the book is NATO's place in the twenty-first century world and consideration of the impact of the Afghanistan campaign on the Alliance.  However, the backbone of the book is a fast-paced telling of NATO's story since its founding in 1949 against the backdrop of contemporary change.  

The book consdiers in depth the impact of the financial crisis on the Alliance and explores the evolving relationship between NATO and the EU.  Critically, the book confronts squarely the strategic implications of Russia's invasion of Ukraine.  The book also looks to the strategic future of NATO in a dangerous world faced not just by Moscow's challenge but American over-stretch and the murderous Islamists of ISIS.  The book concludes by confirming the continuing importance of the Alliance not just to European security and defence but the security and well-being of the wider world. 
To be honest, I am proud of this book as I put a lot into re-writing and updating it.  Indeed, with a Foreword by former SACEUR Admiral (Retd.) James T. Stavridis NATO: The Enduring Alliance 2015 is a new book on the Alliance which I have the honour to offer to you. The book is available via Amazon and/or Routledge web-sites.

All best, 


Friday, 26 June 2015

EU Summit Sitrep: Crisis Mismanagement

Alphen, Netherlands. 26 June. Yesterday’s EU Summit meetings (Day One) finished today at 0300 hours.  The three main issues for debate were Grexit, Brexit and the migration invasion.  In other words, one state that could be thrown out, another that might walk out, and the up to one million people from outside the EU trying, and by and large succeeding, to get in.  Let me take each crisis in order of importance to EU leaders (save that is David Cameron).

Grexit: Implicit in the Grexit crisis is a battle for primacy between EU obligations and national democracy. The theatre of crisis that has developed over a possible Grexit would make a fascinating thesis for Greece’s game theoretician finance minister Yanis Varoufakis.  The simple truth is that one way or another Greece will remain in the Euro and one way or another Greece’s debts will be forgiven. This is because the Euro is an ideology not a currency and thus at the very heart of ‘Project Europe’ and Greece simply cannot be squeezed anymore.  Thus, the game now is one of political chicken.  Specifically, can ‘Brussels’ force the fall of the current Greek government over the crisis and thus install a more amenable coalition or if needs be a new Athens government.  

Migration invasion: Implicit in the migration invasion is a core debate about ‘competence’ and who gets to decide a key area of Home Affairs - immigration policy. Is it the member-states or the European Commission? The inability of Europe to tackle the current migration invasion and the unwillingness of any EU member-state to properly comply with the Dublin Convention demonstrates how easily EU ‘solidarity’ collapses in the face of a crisis.  The Commission had wanted to impose a binding directive that would have instructed all member-states that do not ‘enjoy’ an opt-out to take quotas of migrants.  The idea was that up to 60,000 migrants would be spread proportionately across the Union.  Instead, last night the member-states agreed a ‘voluntary’ mechanism, which in EU-speak means no-one need or will comply. 

Consequently, Italy and Greece will go on refusing to document new arrivals on their territory, the convention by which asylum must be claimed by a migrant in the first EU member-state of arrival will be ignored, and the beggar my neighbour tactic of passing the problem onto the next member-state will continue. Why?  With 500,000 migrants believed to be in Libya and another 500,000 on the way a migration invasion on this scale would have enormous social implications and the very real prospect that parts of Europe could be turned into Africa or the Middle East.  As for dealing with problem at source there is neither the will nor the means.

Brexit: Implicit in Brexit is a vital debate over the future balance of powers within the EU between a deeper and more politically integrated Eurozone (the real EU) and those EU member-states outside the Eurozone (associate members).  However, British Prime Minister David Cameron (ever the tactician, never the strategist) chose instead to focus his efforts over dinner on how best to extricate himself from the promise of an EU referendum he made to the British people prior the May general election.  Indeed, listening to allies such as Italy’s Matteo Renzi this morning one gets the distinct impression of friends trying to extricate Cameron from a hole of his own digging.  One can only imagine Cameron’s pitch last night over dinner.  “Look friends, I have to go through this process because I said I would so please bear with me and pretend you are taking my calls for reform seriously. Sorry”.

The simple and sad truth is that any reforms worth having to Britain’s relationship with the the EU will require treaty change.  Last night Downing Street admitted that Cameron is not going to get treaty change and certainly not before the end of 2017 by which time the referendum will have taken place.  So Cameron is now in the ridiculous position of holding an in-out referendum with nothing decided or achieved and on at best a promise of reform.  In practice that means any vote to remain in the EU will negate the need for the very reforms Cameron claims he is fighting for.  Or, the British people vote to leave and the other EU leaders are finally forced to offer Cameron a reform package by which time it will be too late.  As a negotiating strategy it reminds me of the time I was sent off in a football match for head-butting an opponent’s fist! Cameron’s referendum will thus offer no change of substance, decide even less and fail completely to resolve Britain’s troubled relationship with the EU. Therefore, why he is putting himself, Britain and the EU through what will be a very difficult process with no obvious strategic or political gain?

Julian Lindley-French

Thursday, 25 June 2015

Germany: Community Champion?

Alphen, Netherlands. 25 June.  Her Majesty Queen Elizabeth II and I have had a lot in common this week; we both spent a lot of time either in Germany or discussing Germany.  The Queen is in the midst of a state visit to Germany and I have just completed a 1200 plus kilometre round car trip to take part in the Kiel Conference part organised by the German Navy and the University of Kiel.  The previous week I was in Warsaw with the Weimar Forum.  Both events were outstanding in their very different ways and both revealed to me how Germany sees power and indeed its own power role in twenty-first century Europe.  Too powerful to be simply another EU member-state and yet not powerful enough to dominate Germany is casting itself as Europe’s community champion.  It is and will be a difficult role to play.

A couple of weeks ago a senior British officer said to me that Germany had in fact won World War Two and that Britain had lost.  On the face of it one can understand his upbeat view of Germany and his downcast view of Britain.  Germany has indeed succeeded in achieving Kaiser Wilhelm’s dream of a Europe organised around Germany.  Indeed, it was rather bizarre (and indeed a great pleasure) for me to be sailing across the great sound of Kiel in a German naval vessel with HMS Ocean, a huge British helicopter carrier, dominating the skyline (and the generators of which kept me awake – note to Royal Navy).  Kiel was once the base for the High Seas Fleet which tried and failed to defeat the Royal Navy during the First World War. It is also the port from which the massive super-battleship KM Bismarck left in 1941 en route to destroying HMS Hood and her own destruction under the guns of the Royal Navy some three days later.

In response to my British colleague I said World War Two was never fought to destroy Germany but rather to ensure that the nature of Germany was rendered forever constructive and peaceful.  Britain played a massive role in achieving that objective and Britain can be proud that today Germany is a model parliamentary democracy.

Yes, Germany can be bombastic.  Tell me what great power isn’t.  Apart of course from Britain which is and never has been bombastic about anything, ever.  Yes, Germany has interests which it on occasions pursues with real rigour.  Yes, quite a few Germans have a nauseating tendency to believe they are right about everything all of the time.  And, not a few Germans seem to enjoy an exaggerated sense of Schadenfraude at Britain’s seemingly endless un-Germaness firm in their belief that because Britain is not Germany the British are doomed to failure, irrelevance, misery etc. etc.  Taken together these ‘endearing’ German traits can lead Berlin on occasions to step over the boundary between community champion and Imperium.

However, my time with German leaders this past year and indeed this past week have reinforced my sense that modern Germany is a power that is deeply embedded indeed enmeshed is a sense of European community.  Contemporary German history, which blots out the rest of German history like a dark cloud blots out the sun, is powerfully eloquent in the minds of most modern Germans, with the holocaust rightly to the fore.

Consequently, German power is ring-fenced with self-restraint and the desperate need to act with the approval of other Europeans.  That sense of self-awareness, self-restraint was clearly apparent at the Weimar Forum meeting in Warsaw, particularly in the relationship with Poland which in many ways acts a Germany’s power conscience.  It is also apparent in Chancellor Merkel’s clear desire to keep Greece in the Eurozone and Britain in the EU.  Indeed, unlike most great powers Germany wants to be constrained by institutions, precisely because Germans understand that a Europe in which power becomes unbalanced is inevitably a very dangerous place.  This is a state of affairs to which Her Majesty alluded in last night’s speech in Berlin and why the unbalancing of European power is precisely why President Putin’s attitude and actions are so dangerous.

Behind the immediate issues raised by Prime Minister David Cameron’s renegotiation of Britain’s relationship with the German-led EU lurks a much deeper question of power.  Whatever happens with the Brexit referendum most indicators have Britain emerging as Europe’s second strongest economy by a mile (or should that be a kilometre) and most powerful military actor.  Therefore, how Germany deals with the likes of Britain and indeed France will help determine whether German leadership of Europe succeeds or fails.

Berlin clearly understands that.  Indeed, the very real pomp and circumstance afforded Her Majesty in Berlin and the fact the Luftwaffe accompanied her plane over German air space signifies the importance Germany places in its strategic partnership with Britain.  For that reason far from fearing Germany’s role as community champion Britain must support it.

Europeans can never replace power by and with institutions.  Russia is dangerous because it is a weak state with too much force and it insufficiently embedded in international institutions.  Germany is a powerful state with too little force that has an exaggerated sense of the role of institutions as an alternative to power. Therefore, Germany can only and will only ever succeed in partnership with powerful allies for too much German armed force would negate Germany’s role as community champion.  That is why the ungainly but powerful presence of HMS Ocean signified to me the new strategic partnership Britain and Germany must forge. 

Julian Lindley-French

Thursday, 18 June 2015

How Waterloo Shaped Europe

Alphen, Netherlands. 18 June. The Duke of Wellington once said, “The history of a battle is not unlike the history of a ball. Some individuals may recollect all the little events of which the great result is the battle won or lost, but no individual can recollect the order in which, or the exact moment at which, they occurred, which makes all the difference as to their value or importance”. Two hundred years ago today just down the road from here the Battle of Waterloo took place.  Seventy-three thousand French troops under Napoleon faced some 68,000 troops of the “Seventh Coalition” under the command of Arthur, Duke of Wellington. 

Coalition forces included 25,000 British troops, 17,000 Dutch, 11,000 Hanoverians, 6000 Brunswickians, 6000 members of the King’s German Legion and eventually (and famously) 50,000 Prussians under Blucher. By day’s end over 40,000 Frenchmen were killed or missing with some 10,000 of the Coalition suffering a similar fate.

Waterloo was not any old European battle. It was the battle that shaped modern Europe and began the long and very tortuous road to an institutionalised Europe.  A new age of politics and warfare dawned at Waterloo as the battle marked the true end of the aristocratic age as the modern industrial nation-state came of power age. 

And, although the Iron Duke would contest my thesis European democracy also marched at Waterloo. The Napoleonic Wars which Waterloo brought to a decisive end marked the first real struggle between vested power and radicalism and thus helped established the European world order that is only today coming to an end.  The battle also paved for way for the creation of modern Germany some fifty years later and the three wars of European supremacy (1870-71, 1914-18, 1939-1945) which followed and which culminated in today’s European Union. 

Critically, Waterloo created the political space for the second British Empire which emerged in the wake of Napoleon’s defeat the loss of the American colonies.  Indeed, without rival on the Continent and unchallenged on the world stage for another seventy to eighty years the British constructed the largest empire the world has ever seen in the wake of Waterloo..and one of shortest lived.

Not without irony, for Waterloo was a victory of conservatism over radicalism, the Congress of Vienna which followed established the principle of an institutionalised European order, even though the Congress was dominated by the arch-conservatives Metternich of Austria and Castlereagh of Britain.  And, although Britain claimed to then retreat into “splendid isolation” Waterloo confirmed the principle of British engagement on the Continent. Moreover, the battle reinforced the fundamental principle that Britain would not permit a single power or group of powers to dominate Europe.  It is a principle that the Cameron government is in the process of abandoning or simply fails to understand.

Waterloo also exacerbated conflicts, not least the inherent conflict that existed between France and the Netherlands and between French and Dutch speakers.  At the Congress of Vienna almost the entire region of what eventually became Belgium was granted to the Kingdom of the Netherlands.  Subsequently, a new struggle for independence began that only culminated with the recognition of the Kingdom of Belgium in 1830 by the Dutch.  Belgium’s recognition was reinforced by the 1839 Treaty of London and the Belgian Neutrality Act by which Britain agreed to guarantee Belgium.  It was this Act, or rather the Kaiser’s 1914 breach of it that led to the formal declaration of war by Britain against Imperial Germany.

Some years ago I stood atop the enormous man-made hill which is crowned by the great Lion of Brabant which looks out over the great battlefield.  Alongside me were some twenty of so American students.  Those of you who know the site will recall that the modern Brussels ring-road runs close by.  Indeed, it was Napoleon’s belief that if he took Brussels he could force the Alliance to treat with him on favourable terms. Nice kids but a little na├»ve I explained to them that Napoleon faced two major problems on the day.  First, he could not get Wellington to weaken his centre and thus turn him. The Duke simply remained nailed to a ridge.  Second, I explained, Napoleon had terrible difficulties getting his army across the narrow footbridge which now crosses the highway. It took some minutes before the American penny dropped on a very European joke.

Waterloo was one of those tipping points in European history.  Indeed, far from being a British ‘victory’, which is how the British at least normally portray ‘Waterloo’, it was a very European event. In certain very important respects the struggle between Bonapartism and British-led conservatism spawned the birth of modern Europe.  Ironically, the ghosts of that struggle are present today in both the idea of ‘Europe’ which Napoleon certainly espoused and British concerns at the over-concentration of European elite power in a few elite hands.

Nor was the result of the battle a forgone conclusion.  As Wellington himself remarked the battle was, “the nearest run thing you did ever see in your life”.  As for Napoleon he escaped the battlefield following his defeat and tried to escape to North America.  Ironically, in a sign of the century to come, Napoleon was eventually captured by Captain Frederick Maitland of HMS Bellerophon.  Far from surrendering to Wellington’s Army the Emperor surrendered to what was still very much Nelson’s Royal Navy.

Julian Lindley-French 

Monday, 15 June 2015

Is it time for a new Magna Carta?

Alphen, Netherlands. 15 June. Is it time for a new Magna Carta?  Historian Simon Schama called it the “death certificate of despotism”. Eight hundred years ago today at Runnymede on an island in the middle of the River Thames midway between Staines and Windsor King John applied the Royal Seal to a document which in many ways became the foundation of contemporary Western ideas of liberty, democracy and law.  Magna Carta (Great Charter) or Magna Carta Libertatum (Great Charter of the Liberties) established the principle that not even monarchs were above the law and thus marked the beginning of the long end of arbitrary power in England and beyond. 

For most of those present at the sealing of Magna Carta it did not hold the significance it has come to represent today.  The Charter was essentially a deal between King John (1199-1216) and his barons designed to protect their Anglo-Norman aristocratic rights in the face of the king’s insatiable demands for money.  However, at least two men present may have had an inkling of the political and legal significance of the document; Archbishop of Canterbury Stephen Langton and William the Marshal, First Earl of Pembroke.

Archbishop Langton was the man who negotiated the Charter and acted as intermediary between King John and the barons. The irony is that Archbishop Langton’s election as archbishop represented an early struggle between ‘Europe’ and England.  Langton was anointed by Pope Innocent III in a struggle between Rome and King John that would have implications in time almost important as Magna Carta itself. 

William the Marshall was perhaps the greatest ever medieval knight (and a particular hero of mine).  Born in Wiltshire in 1146 into a relatively modest lower aristocratic family he became Europe’s leading chivalric champion, winning jousts across the Continent.  He went on to become England’s leading soldier and indeed under Henry II a leading statesman.  Renowned for his honour and probity Marshall was a man who stood on principle. 

Magna Carta’s key provisions were Articles 39 and 40 both of which suggest the influence of Langton and Marshall. Article 39 states that “No free man shall be arrested or imprisoned or outlawed or exiled or in any way victimised, neither will we [the royal ‘we’] attack him or send anyone to attack him, except by the lawful judgement of his peers or by the law of the land”.  Article 40 states, “To no-one will we sell, to no-one will we refuse or delay right or justice”. 

Although Pope Innocent declared the Charter unlawful as part of a grubby and ultimately failed rapprochement with King John the document was established in legal and political principle. Following the death of John from dysentery in 2016 Marshall was appointed regent to the child king Henry III and re-confirmed Magna Carta following his defeat of the French at the Battle of Lincoln in 1217.  The Charter was also cited by Simon de Montfort at what is regarded as the first modern English Parliament in 1265.  In the sixteenth century Sir Edward Coke used Magna Carta in the struggle with both King James I and King Charles I over the primacy of Parliament, which led to the English Civil War (1642-1649), and the creation of England’s first and only republic under Oliver Cromwell. 

Magna Carta was central to the idea of constitutional monarchy that was established with the Restoration in 1660 and suffused the Glorious Revolution in 1688 when it was feared that King James II wanted to re-establish an absolutist monarchy.  Above all, Magna Carta inspired the 1789 American Constitution which began the long internationalisation of the Charter which continues to this day.

The essential point of the Charter concerns the right to trial of an individual by one’s peers.  This principle of the right to trial by equals has not only underpinned English law for centuries it is the central pillar of English democracy and Parliament.  Indeed, it is the idea of the peer review of power and policy that underpins the idea of parliamentary sovereignty precisely because the Charter was in time used to establish Parliament as the law of the land overseeing the law of the land, not the monarch.

Ironically, parliamentary sovereignty is under as great a threat today as at any time since 1215.  Whereas in the past Magna Carta was the great principled barrier against the ambitions of tyrants and unscrupulous monarchs today it is challenged by those all too willing to transfer power away from Parliament to Brussels bureaucrats without the will of the people having been consulted or expressed. There are clearly those in Brussels who harbour the ambition that in time they will become the new law of and in England’s lands.

Therefore, whilst those present at the sealing of Magna Carta would not have understood the concept of democratic deficit they were unwittingly at Runnymede to address it.  Today, as power leeches away from Parliament and is rendered ever further distant from the people and with ever more laws being applied from Brussels in the form of European regulations or directives it may be time to issue a new Magna Carta that returns once again power to the people.

Julian Lindley-French

Friday, 12 June 2015

HSBC: Banking on Asia’s Stability

Alphen, Netherlands. 12 June. Many years ago when I first arrived in Hong Kong I opened an account at the local branch of my local bank, the Hongkong and Shanghai Banking Corporation.  It was clearly an important moment in the bank’s history as since then HSBC has grown into one of the world’s largest banks.  When Hong Kong was returned to China in 1997 HSBC moved its headquarters to London.  Threatening to move the bank back to Hong Kong HSBC Chief Executive Stuart Gulliver this week said, “We recognise the world has changed and we need to change with it”.  Is this sound business strategy or yet another big bank gamble?

All things being equal Gulliver’s threat makes business sense. Excluding Japan Asia grew by 6% in 2014.  China’s economy grew by 8%, although down from the stunning 14% in 2007. These growth figures compared with a lamentable 0.5% in the Eurozone, the real EU. Predictions of structural economic shift are even more compelling.  According to American investment bankers Goldman Sachs, China’s gross domestic product (GDP) surpassed that of Britain in 2005 and Germany in 2008, and could even surpass the Americans as early as next year.  The Carnegie Foundation for International Peace suggests that by 2050 the three so-called ‘mega-economies’ China, India and the US will enjoy a combined GDP worth 70% more than the combined economies of all the remaining G20 states.

It is also true that HSBC has been particularly hit hard by the cult of ‘banker bashing’ beloved of the British media, the British government’s use of a banking levy to boost the national exchequer, and efforts by the European Commission to impose a whole raft of regulation on the City of London.  London clearly is no longer the the unregulated casino that a) made the City attractive to global banks; and b) encouraged casino banking.

However, all things are not equal in the world in which mega-banks live.  ‘The world’s local bank’, like many such super-corporations, believes it is too big for any single national regulator.  However, no institution bank of government is bigger than geopolitics, something British Chancellor George Osborne also fails to appreciate.  In other words, being domiciled in a place which offers sound regulation and the rule of established law clearly benefits corporations.

There is as ever a bigger picture (to which this blog is slavishly devoted). Asia might indeed be growing faster than Europe, which remains mired in the Euro crisis, the longest economic suicide in history.  However, for all of its many challenges Europe, and indeed the UK remains far more politically stable than Asia.  First, while bankers lament the regulation that has been imposed upon them their own egregious disregard for law means such regulation is self-inflicted and clearly necessary.  Second, banks need a sound legal framework in which to conduct their business and Europe/UK offers such legal stability.  Third, much of Asia’s recent growth is the function of an asset bubble and could crash at any moment.  Fourth, many Asian economies remain unreformed and are probably less prepared than many European economies for the inevitable next crash.  Fifth, the emergence of an assertive China has raised the prospect of real conflict in Asia, possibly war.

Now, if the United States succeeds in establishing a Trans-Pacific Partnership alongside a Transatlantic Trade and Investment Partnership then Asia’s economic dynamism might become more embedded in stable pan-regional politics.  However, stabilising institutions, such as ASEAN and the APEC regime, remain weak. China, not without reason, is suspicious that the TPP is an American attempt to constrain and contain Beijing.  Nor is the future attitude or political direction of China at all clear, not least in its treatment of Hong Kong.  HSBC might well find that having moved its headquarters back to Hong Kong it is subject to the most arbitrary of regulatory regimes with no legal recourse or redress.

Furthermore, the evidence suggests that many Western-based or inspired corporations are ever more conscious of the trade-off to be made between the promise of short-term growth and the need for political stability.  In his January 2015 State of the Union Address President Obama said, “More than half of manufacturing executives have said they are actively looking at bringing back jobs from China”.  Just as HSBC thinks about de-shoring from London many corporations are considering re-shoring.

So, Mr Gulliver and his team have a very important strategic decision to make when they make their final judgment at year’s end whether or not to quit London.  The world is indeed changing but not as much as Mr Gulliver would seem to believe.  And. all things being equal, London remains a haven of stability in an unstable world, open to the world (in spite of EU efforts to prevent that) with a culture of government that remains sensitive to the needs of big business, at times far more than I believe appropriate for a modern Western democracy.

My bet is that in a decade or so we will look back at those who predicated the economic eclipse of the West by Asia as misguided prophets.  Rather like today we look at Francis Fukuyama and his 1990 prediction that liberal-democracy and free markets represented the perfect political state and thus the end of history.  Sound business strategy or gamble? 

Julian Lindley-French

Wednesday, 10 June 2015

Brexit Watch: Dave’s Haggle-free, Life of Brian In-In Referendum

Dave the Desperate: “How much? Quick, I need to con the British people by the end of 2017 to stay in the EU”.
Angela the Haggler: “What?”
Dave the Desperate: “It's for my political survival”.
Angela the Haggler: “Oh. Uhhh, let’s say a meaningless declaration exempting Britain from ever closer union and some tripe about my agreeing non-existent welfare caps for EU migrants”.
Dave the Desperate: “Right”.
Angela the Haggler: “What?”
Dave the Desperate: “There you are”.
Angela the Haggler: “Wait a minute”. 
Dave the Desperate:   What?
Angela the Haggler: “Well, we're-- we're supposed to haggle”.
Dave the Desperate: “No, no, no. I've got to get this in-in referendum sorted”.
Angela the Haggler: “What do you mean, 'no, no, no'?”
Dave the Desperate: “I haven't time. I've got—“
Angela the Haggler: “Well, in that case I withdraw the bit about migrants and I may have to reconsider the bit about ever closer union”.
Dave the Desperate: “No, no, no. We just agreed”.
Angela: “Jean-Claude!”
Jean-Claude the Juncker: “Yeah?”
Angela the Haggler: “Dave won't haggle”.
Jean-Claude the Juncker: “Won't haggle?!”
Dave the Desperate: “All right. Do we have to?”
Angela the Haggler: “Now, look, Dave. I want an open mind on future British Euro membership, a recognition that ever closer union is a good thing if not for now, and a commitment from you to end parliamentary sovereignty so that Britain becomes a German Lande, sorry, I mean a province in a federal European super-state. Fair enough?”
Dave the Desperate: “I-- I just gave you a commitment to stay in the EU whatever the British people think”.
Angela the Haggler: “Now, are you telling me that the EU’s not worth a bit of lost sovereignty? You were happy enough to give it away to the Americans during our last little bit of local difficulty.”
Dave the Desperate: “No”.
Angela the Haggler: “Look at the EU. Feel the equality. I am determined to impose it. I am offering you a real special relationship in which you get to agree what I decide.  Not like that American nonsense. Britain’s Athens to America’s Rome. What do you British smoke?”
Dave the Desperate: “All right. I'll concede you ever closer union. Just don’t tell the British people until after I’ve conned them into voting to stay in”.
Angela the Haggler: “No, no, no, Dave. Come on. Do it properly”.
Dave the Desperate: “What?”
Angela the Haggler: “Haggle properly. The EU isn't worth ever closer union, and a minor cap on migrant welfare rights. And if you fall for that bit about eventually joining the Euro you are even weaker and more stupid than I really think you are.  Between you and me, the whole damned single currency thing was a terrible mistake, does not work and never will. We thought we were engineering a Euro-Deutschmark. Turns out we have the Euro-lire.  Need I say more?”
Dave the Desperate: “Well, you just said it was worth the effort”.
Angela the Haggler: “Ohh, dear. Ohh, dear, Dave. Come on. Haggle”.
Dave the Desperate: “Huh. All right. I'll concede you a bit on the migrant welfare thing”.
Angela the Haggler: “That's more like it, Dave. Are you trying to insult me?  Me, with a dying Greek grandmother?! And, ever closer union?!"
Dave the Desperate: “All right. I'll give you the migrant welfare thing and ever closer union”.
Angela the Haggler: “Now you're gettin' it, Dave. Migrant welfare and a bit of ever closer union!? Did I hear you right?! This will cost me at least a Grexit. You want to ruin me?!”
Dave the Desperate: “Ever closer union, the migrant welfare thing, the immediate scrapping of Parliament, Britain’s unconditional surrender and Britain to pay for the Greeks?”
Angela the Haggler: “No, no, no, no”!
Dave the Desperate: “…and the immediate arrest of the Queen and Germany to win every World Cup hereafter?”
Angela the Haggler: “No, no. You go to everything but the World Cup thing.  We bought that year’s ago”.
Dave the Desperate: “All right. All right! I'll give you ever closer union, the scrapping of Parliament, unconditional surrender, Britain to pay for the Greeks AND execution of anyone who says Germans lack a sense of humour!”
Angela the Haggler: “German sense of humour?! Are you joking?!”
Dave the Desperate: “That's what you told me to say”.
Angela the Haggler: “Ohh, dear”.
Dave the Desperate: “Ohh, tell me what to say. Please!”
Angela the Haggler: “Offer me full control of Britain, including that lunatic Celtic fringe of yours.  They want to be German anyway”.
Dave the Desperate: “OK. I'll give you full control of Britain”.
Angela the Haggler (to Jean-Claude the Juncker): “Dave's offering me full control of Britain, can you believe it? I was only meant as a joke. Why would I want it? We own the Greeks already”.
Dave the Desperate: “And, I will make it compulsory that Germany won the war is taught in all British schools”.
Angela the Haggler: “OK. Britain commits to ever closer union, the scrapping of Parliament, unconditional surrender, no migrant welfare stuff, the arrest of the Queen, the compulsory teaching in all British schools that Germany won the war and you pay for the Greeks.  AND, no more of those appalling full English breakfasts with their totally un-German bratwursty things.  Moreover, you will admit in public that Germans do have a sense of humour. Good, the renegotiation is complete and I will fully support your in-in referendum. Jean-Claude will too.  Won’t you Jean-Claude.  A pleasure to do business with you, Dave.”
Angela the Haggler: "Just one thing, Dave. Why are you holding this referendum?"

Julian Lindley-French

Monday, 8 June 2015

Royal Marines: Innovation Force

Devonport, England. 8 June.  This is home to me. Plymouth and Devonport is where my family have spent generations as part of a Royal Navy that stretches back to Drake and the Armada and far beyond, a Navy which has ebbed and flowed with the many tides of British history. This visit has been particularly gratifying because I had the very distinct honour of addressing officers of the Naval Service at HMS Drake on what I call strategic amphibiosity – the vital and continuing importance of Britain’s ability to exert influence at sea and on land from the sea.

Equally, there are times when I must admit the strategic illiteracy of the British political class and the terrible damage done to Britain’s strategic brand by massive and frankly ill-considered cuts to the British armed forces infuriate and depress me.  And I am not alone. Last week US Secretary of Defense Ashton Carter said of Britain, “I think it’s a great loss to the world when a country of that much history and standing takes actions which seem to indicate disengagement”. This week I learn that a further £0.5bn of cuts are to be made to Britain’s armed forces. The fact that the announcement came BEFORE the 2015 Strategic Defence and Security Review (SDSR 2015) has been completed demonstrates all too clearly the refusal of government to properly consider ends, ways and means.  Clearly, no real strategic assessment will be made BEFORE government decides how much it is gonig to spend, or rather not spend on defence. Thus SDSR 2015 will be yet another Treasury-led strategic pretence and impecunity review. 

Worse, my visit took place against the backdrop of a new report from the House of Commons Library showing the extent of Cameron’s penchant for gesture politics and the absurdity of it. According to the report British taxpayer’s aid money is being used to subsidise the armed forces of foreign powers even whilst Britain’s armed forces are being cut.  For example, between 2013 and 2014 Tanzania’s defence spending increased from $300m to $400m following receipt of £224m ($342m) of British taxpayer's money; DRC boosted defence spending from $430m to $460m following receipt of £206m ($314m); Bangladesh increased defence spending from $180m to $196m after receiving £260m ($396m). Ludicrously, India which spent $45 billion on defence in 2014, received some £292m ($445m) of British taxpayer’s money in 2012.

In spite of all that my visit to Colonel Graeme Armour and his team at 1 Assault Group Royal Marines (1 AGRM) was all the more gratifying.  Rather than accept the decline implicit in government cuts the Royal Marines have instead championed innovation as a way to maintain their world-renowned reputation for military excellence.  Indeed, 1 AGRM’s new base struck me as the very epitome of the radical, elite future British force that London must fashion.  First, 1 AGRM is determined to maintain its warfighting edge.  Second, 1 AGRM is committed to acting as a core or hub force at the heart of coalitions. Third, 1 AGRM is predicated on deep jointness with the Army, the Royal Air Force and, indeed, across government and the wider civilian sector.  Fourth, 1 AGRM is agile enough to look to cheaper civilian solutions when the military bespoke solution is either too expensive or simply unavailable. 

Future conflict will either involve large, clunky state forces with immense destructive power or small, fanatical, non-state forces with possible access to immense destructive power. Therefore, the ability of agile, state forces to interdict and disrupt danger will be at a premium.  That is precisely the purpose of 1 AGRM and the wider Royal Marines.  Indeed, the Royal Marines are living proof that as London abandons mass in favour of elite manoeuvre by investing in Special Forces and specialised forces Britain can continue to ‘punch above its military weight’.

Such a vision implies an intelligent defence strategy that enshrines at its heart the concept of a British force able to act as an intelligent, command hub.  Such a role will be vital not just for Britain but also for the NATO alliance and indeed coalitions of allies and partners the world over.  However, if such a vision is to be realised London must abandon its short-termist tendency to use a small force as if it is still a big one. London continually hives off officers for this mission or that in support of Cameron’s gesture politics in place of sound strategy.  Consequently, all-important training and exercising are constantly being undermined.

On Thursday I witnessed a real effort to create a new thinking British force that is both agile and smart – a kind of military Turing Machine that whilst small is able to operate within and across the seven domains of future conflict – air, sea, land, space, cyber, information and knowledge. The Royal Marines are 351 years old this year.  Far from being a legacy force the Royal Marines are very much a force for the future.  My sincere hope is that those responsible in London can peer beyond the intellectual trenches of their strategic illiteracy and recognise just what a vital role the Royal Marines and indeed all of Britain’s future force must and can play in what is fast becoming a very dangerous world. A big, dangerous world that needs a big-thinking Britain, not Little Britain.

The motto of the Royal Marines is Per Mare, Per Terram – by sea, by land.  Let me paraphrase that – by sea, by land…and everywhere in between and beyond.  Her Majesty’s Royal Marines – making Britain disengagement proof!

Julian Lindley-French

Tuesday, 2 June 2015

US and China: In the Strategic Balance

Alphen, Netherlands. 2 June. The May 2015 Chinese Military Strategy highlights the greatest and fastest ever shift in the balance of military power from the liberal powers to the illiberal powers. Implicit in the strategy is a simple but clear message; now is not the right time to challenge the American presence in East Asia but given the shift taking place in the balance of power that day will come and when it comes China will act to exclude the US from China’s preferred sphere of influence.

The Strategy is clear. “On the issues concerning China’s territorial sovereignty and maritime rights and interests, some of its offshore neighbours take provocative actions and reinforce their military presence on China’s reefs and islands that they have illegally occupied. Some external countries are also busy meddling in South China Sea affairs; a tiny few maintain constant close-in air and sea surveillance and reconnaissance against China. It is thus a long-standing task for China to safeguard its maritime rights and interests”.

In 2014 China will (officially) spend $132bn (and probably far more).  On the face of it this figure represents a 12.2% increase on last year’s expenditure but in reality simply harmonises official and non-official defence expenditure.  It is the latest year-on-year double-digit growth in Chinese defence spending since 1989.  China’s strategic ally Russia is also engaged in a massive hike in its defence expenditure with 40% of all public investment now committed to Russia’s armed forces.  

Meanwhile, the US defence budget will fall from $500bn in 2015 to some $450bn in 2020.  The defence budgets of the European allies are still being raided to fund social security.  The mythical NATO target of 2% GDP on defence is being observed in the breach as demonstrated by British Government plans for an insane further £1bn of cuts to an already hollowed-out British military. 

Only the strategic denial and strategic illiteracy all too prevalent in European chancelleries these days can blind one to the implications of this shift – a major twenty-first century war – a Third World War - cannot be ruled out.  Read between the ‘peace’ and ‘co-operation’ lines in the Chinese strategy and the message is clear; under the rubric of “active defence” China is the coming power, and the US, Japan, South Korea and rest of the region and the world had better watch out.

The six key takeaways of the Strategy are as follows:

1.     1. The South China Sea is Chinese and China will do whatever it takes to ‘defend’ its sovereignty.  The Strategy refers to the Americans as an “external power” that meddles in “South China Sea affairs”; 
2.     2. At some point China will act to ‘resolve’ the “Taiwan issue” on Chinese terms.  “The Taiwan issue bears on China’s reunification and long-term development…reunification is an inevitable trend in the course of national rejuvenation”;
3.     3. China intends to create global-reach deployable military force.  “In response to the new requirement of safeguarding national security and development interests, China’s armed forces will work harder to create a favourable strategic posture with more emphasis on the employment of military forces and means…”
4.    4. China is preparing for an arms race with the Americans that it believes it can win over time.  The Strategy states, “In response to the new requirement arising from the worldwide RMA, the armed forces will pay close attention to the challenges in new security domains, and work hard to seize the strategic initiative in military competition”;
5.     5. The People’s Revolutionary Army and Navy is not a function of the Chinese state, but the Communist Party of China. Under Xi Jingping the Party has a) become far more strategic in its international ambitions; and b) combines a complex mix of ideology and nationalism; and
6.    6.  Future war is a distinct possibility and China intends to fight and win such a war.

The strategic balance between the US and China in Asia-Pacific is almost the mirror image of the challenge Britain faced when the Germans passed the 1898 and 1900 German Navy Laws.  On paper the British still looked vastly superior at the time.  However, Britain had a worldwide empire to protect whereas Imperial Germany could choose where and when to complicate Britain’s strategic calculus.  Britain had to respond.

Recently I chaired two American generals at a NATO meeting.  At one point I challenged them with a scenario. It is 2020 or perhaps more likely 2025. The cuts to European defence budgets have gone on apace.  The renewed cuts to the British defence budget have left the British Armed Forces emaciated, hollowed-out and dysfunctional, and the other NATO allies are little better. Suddenly a Russian-inspired crisis breaks out in the Baltic States as a snap Russian exercise starts to look like a prelude for the invasion of Estonia.  Simultaneously, China moves military forces to occupy several of its reclaimed reefs and islands whilst the People’s Liberation Navy threatens Taiwan.  The Americans find themselves in the worst of all strategic worlds, insufficiently strong in either Asia-Pacific or Europe and with allies that are more of a complication than support.

Given last month’s Chinese-Russian exercise in the Eastern Mediterranean such engineered crises-in-parallel cannot be ruled out. So, if you think I am exaggerating ask yourself this; do you think my strategic analysis wrong in fact or by assessment?  Or is it that the whole, dark big picture I paint is so dark, so Edvard Munch, you would rather not think about it?  Sadly, for most European leaders it is a crisis too far. They would prefer instead to appease a changing strategic reality than confront it.

US-China strategic relations are in the balance, but not yet on the brink. The world is a safer place when the West together is strong. It is about time our leaders remembered that.  However, a strategic clock is ticking, and it is Made in China. 

Julian Lindley-French