NATO, Canada, and the U.S. Bank of Mom and Dad

Republished in my blog by kind permission of the Canadian Global Affairs Institute, which published this piece on 25 August, 2017 as part of the NATO Series. 

“Is your [Canadian] plan as cunning as a fox who’s just been appointed Professor of Cunning at Oxford University?” Blackadder, Blackadder Goes Forth

The news that by 2024 Prime Minister Justin Trudeau’s Canada will increase its defence spending from a self-proclaimed brilliantly spent one per cent of GDP to a no doubt equally brilliantly spent two per cent of GDP, and meet the 2014 Wales Summit defence investment pledge (DIP!) is very good – at least on the face of it. Canada is in many ways the country that makes the Alliance an alliance, rather than America’s somewhat unconvincing European protectorate. But what should Canada spend its new money on?

Earlier in the year, I attended the NATO Resource Conference 2017 in Reykjavik, Iceland. Three issues were central to the debate. First, the habit NATO Europeans have acquired of relying on the U.S. Bank of Mom and Dad when they cannot be bothered to spend enough on their own security and defence. Second, a profound question was raised as to whether aforesaid NATO Europeans will ever really honour the DIP, the now Holy Grail of contemporary alliance. Finally, upon what should NATO and the Allies spend any additional monies? Canada?

The goodish news first. Apparently, the decline in NATO defence spending stopped in 2015, and even increased a bit (3.8 per cent or some $10 billion) in 2016. And if NATO Europeans ever do honour the DIP – the biggest “if” since “if” was introduced into the English language by King Ethelred the Literately Uncertain – NATO would suddenly have an additional $100 billion to spend.

And yet, read between European lines and the message was (as ever) clear as mud: hurry up and wait! Yes, it was repeated ad nauseam that all NATO Europeans are “fully” committed to spending two per cent of GDP on defence. However, the “but” in the room was positively thermonuclear. In fact, most Europeans are still driven by the assumption that sooner or later the U.S. Bank of Mom and Dad will come out late on a dark, stormy night to pick up their wayward relatives, who not only forgot to save the bus fare home, but also got hammered on a toxic brew called “Welfare”, ended up in a heap in the middle of strategic nowhere, and missed the last bus.

The trouble is that Mom and Dad might not always be there. First, there is growing irritation in some parts of the U.S. administration about Euro-Junior’s refusal to get off its fat ass and get a job. Second, Mom and Dad are not as flush as they used to be. Third, Mom and Dad now have to deal with a noisy and bolshie Chinese neighbour at the other end of the street. Fourth, Mom and Dad are simply too tired and too busy.

NATO itself is also deeply divided. One group – for sake of argument, the easterners – wants the additional monies others are going to spend to be spent on high-end, expensive, big-bang stuff that defends them. The hope is that such increased expenditure will render the NATO defence and deterrence posture credible not just in the eyes of the brigade of budgeteers who control everything, but also Russia. Another group – for sake of argument, the southerners – thinks this is nonsense, and wants the bulk of the additional monies others will spend on defending them to be spent on counter-terrorism and counter-criminal activities, most notably human trafficking. Very few want NATO to have the money and most would prefer to spend it on themselves.

Here’s the problem: if NATO is to remain the West’s ultimate security and defence insurance, then henceforth NATO must be able both to deter and defend at the high end of conflict. It must prepare to fight and if needs be win a war, playing a full role in protecting its home base from penetration and attack by terrorists and globally-capable criminals. In other words, all of us are going to have to buy into all of the above if the Alliance is to be credible in the face of threats.

Which brings me back to the DIP and Canada. Yes, I am the first to say that two per cent of GDP spent on defence is better than one per cent, however brilliantly that one per cent is spent. What concerns me is the growing obsession among all the non-American NATO members with measuring inputs as a way to avoid looking seriously at desired and necessarily expensive outcomes, which at the end of the day is what security and defence must be about. Worse, I am not at all sure any NATO nation knows what it is really spending its defence budget on these days, let alone how it can get from, say, one per cent of GDP to two per cent of GDP. Other, that is, than by fiddling the books. Britain, are you listening?

The two per cent target forces Ottawa to face a profound set of strategic choices it has long been fudging. This is not least over that most fundamental of Canadian defence posers: should Ottawa invest the planned new funds in NATO or the Americans, and what mix of the two? It is a question that can no longer be dodged. For the first time in decades Canada lives in strategically relevant neighbourhoods in which others have a profound interest – and not always friendly “others”.

The Russian Northern Fleet is again contesting the North Atlantic. The Royal Canadian Navy and Royal Canadian Air Force will have critical roles to play therein. However, given the United States Navy’s focus on Asia-Pacific, much of that effort might have to be with the Royal Navy, albeit embedded in the NATO Command Structure. History beckons, eh? The High North and the Arctic Circle are also fast becoming contested. The Arctic is in the Euro-Atlantic area and thus formally a NATO responsibility. However, in addition to the Americans, it is likely that Canada will not only find itself more engaged with NATO ally Norway, and to some extent the U.K., but also non-NATO partners such as Finland and Sweden.

Canada is also a Pacific power. Given the emerging threat posed by the likes of North Korea to continental North America, as well as the coming advent of new war technologies, the defence of Canada and its neighbour is likely to call for a much reinforced, more agile and more advanced NORAD. And, the need for Canadian influence over its American neighbour to the south is, of course, a central plank of Ottawa’s grand strategy (do you Canadians do “grand strategy”, or is that too American?). One has only to look at the size and location of the Canadian embassy in D.C. to understand that.

So, where should the focus be of Ottawa’s balance of defence investments? Given evolving Canadian security and defence interests, it is again vital that Ottawa exerts influence over the Americans and the Alliance. Ottawa needs to understand this truism of Canadian strategy. There is some evidence that Ottawa does indeed get this, which is why Canada sent a battle group to Latvia as part of NATO’s Enhanced Forward Presence to deter an aggressive Russia. Equally, Canada’s skills in stabilization and reconstruction are also recognized the world over, as is Canada’s mastery of soft power, and all that goes with it. These skills must not be lost.

However, if Canada really wants to influence the Americans – Donald Trump or no – Ottawa must avoid falling into the European trap by claiming to spend two per cent of GDP on defence, when it is not. The use of soft power dressed up as hard power is a trick some Germans and other Europeans are trying to pull at the moment. The aim is to achieve the two per cent DIP target, but only by political sleight-of-hand. Nor should Canada follow the British down the road of creative defence accounting by which everything that might have even the most tenuous link to defence is included in the defence estimate. Britain is fast abandoning sound defence in pursuit of sound money and losing a lot of influence over both – large, empty aircraft carriers or no.

You see, at the end of the day, the two per cent DIP is meant to be spent on hard defence, of which 20 per cent each year must be spent on new hard defence kit, because that is what sound strategy demands right now. And what is really cunning about the increase in defence expenditure implied by the DIP is that it is not only about enhanced or strengthened defence. It is about the use of cutting edge military capabilities to strengthen the role an ally might play in the coalitions that will be the strategic method of the 21st century, in order also to strengthen the strategic and political influence a state has over the structure and conduct of such coalitions. Given Canada’s new strategic reality, Ottawa has no choice but to ensure it can indeed exert such influence over the Americans and the Europeans. Well, no, I am wrong. Ottawa could instead choose to retreat into defence pretence, like so many of its allies, and see what happens.

Until political leaders in NATO capitals, including Canada, stop sacrificing sound long-term strategy for the sake of facile short-term politics and continue to hide hard defence truths, then I fear the artifice of input will continue to exercise tyranny over the strategy of outcomes.

Cunning, eh? Canada, you had better spend on a hard two per cent, and mean it!

Julian Lindley-French,

Fellow,

Canadian Global Affairs Institute

Donald Trump’s Great Game?

"If the British Government would only play the grand game — help Russia cordially to all that she has a right to expect — shake hands with Persia — get her all possible amends from Oosbegs — force the Bokhara Amir to be just to us, the Afghans, and other Oosbeg states, and his own kingdom…The expediency, nay the necessity of them will be seen, and we shall play the noble part that the first Christian nation of the world ought to fill."

Arthur Conolly, 1840

Alphen, Netherlands. 24 August. The Great Game was the nineteenth century struggle between Britain and Russia for India, with much of the conflict over all-important control of Afghanistan. It was British diplomat Arthur Conolly who in 1840 coined the phrase Great Game. This week President Trump committed the US to the latest iteration of it, the latest twist in America’s now sixteen year Afghan War, its longest. The President also said, “We are going to win”. He would be the first. No outside power has ever won the Great Game in Afghanistan. And, the US will have little chance of ‘winning’ it without a counter-terrorism, governance and regional strategy reinforced by strategic patience. What can President Trump hope to achieve?

In his address to the American nation on Monday the President clearly indicated the continuing need for multifaceted strategy which came out of last week’s meeting with his senior generals at Camp David. The main effort at present is to reinforce the Kabul government of President Ashraf Ghani by focusing on the capacity-building of the Afghan National Security Forces (ANSF).  An extra 3,800 troops will be sent back to Afghanistan to reinforce the 8,400 troops already in theatre to bolster counter-terrorism operations and reinforce ANSF training.  This ‘new approach’ has the fingerprints of Secretary of Defense James Mattis and National Security Advisor H.R. McMaster all over it.

The Administration is correct to be concerned.  Since the withdrawal of US forces from Afghanistan at the end of 2015 the Taliban have extended their traditional reach beyond the Pashtun heartlands on either side of the Afghanistan-Pakistan border, into Uzbek and Tadjik areas. Worse, according to London Al Qaeda (AQ) are also showing signs of once again exploiting a lack of governance to re-establish safe havens, and ISIS is also now present on the ground.

Critically, the Administration seems to want to establish a proper joined-up regional strategy, without which there can be no stability in Afghanistan, and may just work this time. The threat posed by Al Qaeda and ISIS is one of those strange conjunctions in geopolitics that could unite all the contending Great Powers and regional-strategic powers that surround Afghanistan. Shia Iran hates ISIS, and it is in the interests of China, Russia, and India, all three of which are very active in Afghanistan – both overtly and covertly – to block the return of AQ to Afghanistan, and most certainly ISIS.

The challenge, and the key to the strategy having any success, is Pakistan. Or, to be more precise, the need to separate the Indian-Pakistan regional-strategic conflict from the path to something like stability in Afghanistan. Some years ago the late, great Ron Asmus and I were briefed by Inter-Services Intelligence (ISI) at the Pakistan Army’s General Headquarters in Rawalpindi. Naturally, we were given the Pakistani regional view. It was a view all about the strategic threat posed to Islamabad by Indian activities in southern Afghanistan, Pakistan’s fear of being caught in a strategic sandwich between Afghanistan and India, and the consequent need for Pakistan to maintain ‘strategic depth’ in Afghanistan.

Of course, if the strategy is to have any chance of succeeding the ‘Talib’ will need to brought to some form of accommodation with Kabul government. To that end, the US is also offering ‘unconditional’ peace talks with the Taliban in an effort to get them to abandon AQ and ISIS. However, the Taliban will not feel at all obliged to talk until their two main shuras (councils), based in Pakistan’s Peshawar and Quetta respectively, are forced to treat terms.  In other words, Islamabad will need to be either convinced or coerced to help exert such pressure.

  

The American plan, as it stands, represents a limited US reengagement in Afghanistan.  Washington is certainly right to reinject political energy and capital into a struggle that is central to the World-wider challenge posed by Islamism.  Sending 4000 or so extra troops that boost the counter-terror and ANSF training missions will indeed be useful. However, the most that can be said for the strategy is that it is a blocking/holding/reinforcing move. As the British, Russians, and indeed the US and its NATO allies have discovered, what matters in Afghanistan and the surrounding region is not force levels, important though they can be, but sustained good strategy over time and distance.

In November 1841 Conolly was captured in Afghanistan on a rescue mission to free a fellow British officer. The two were executed by the Emir of Bukhara on 24 June 1842 on charges of spying for the British Empire. That same year some 16,500 British soldiers and civilians were massacred at a mountain pass, the Khurd Kabul. As Rudyard Kipling once wrote, “And the end of the fight is a tombstone white with the name of the late deceased, and the epitaph drear: A Fool lies here who tried to hustle the East”.

A word of warning from history?

Julian Lindley-French

Zapad 2017

“Fear not, my lord, we will not stand to prate; Talkers are no good doers: be assured, we come to use our hands and not our tongues.”

Richard III, William Shakespeare

Alphen, Netherlands. August 22. On this day in 1485 King Richard III was defeated by Henry Tudor at the Battle of Bosworth Field and lost his crown and his life.  It seems somewhat fitting to write this as President Trump announces a re-commitment to Afghanistan (more on that later in the week) and in London soon-to-emerge Cabinet Office “review of capability” report will confirm a hole in the UK defence budget of anything between £10 billion and £30 billion. The British government will then demand the hole is filled from within the existing defence budget, which will in turn mean the abandonment of Strategic Defence and Security Review 2015, more cuts to an already lamentably small British force for a top five or six world economic power), and no doubt back to the ‘more with less’ nonsense which came close to breaking the British military.  Things are a little different at the other end of Europe. Contrast Britain’s retreat from sound defence with Russia’s forthcoming Zapad (West) 2017 exercise in Belarus.

The official theme of Zapad 2017 is the “use of forces in the interests of ensuring the military security of the Union State”. Between 14 and 20 September, 2017 Russia, and its junior partner Belarus, (the so-called ‘Union State’) will conduct the largest military exercise in Europe since the Cold War. The exercise will take place close to the Belarussian border with Poland at Brest, as well as some 60 kilometres across NATO territory in Kaliningrad, the small Russian enclave and former German Konigsberg and Old Prussia.  For Russians the location of the exercise is, indeed, dripping with historical significance.  The heroic June 1941 defence of Brest fortress by Soviet forces against Hitler’s Wehrmacht has become a symbol of Russian resistance against ‘fascist’ Western aggression.  

Russia and Belarus have formally said that Zapad 2017 will only involve the exercising of some 19,000 troops in the Western Military District, one of the Russian Federation’s four strategic operational commands. This is below the force level that requires formal notification of the exercise under the so-called Vienna Document to the Organisation for Security and Co-operation in Europe (OSCE). However, NATO and other analysts believe that Zapad 2017 will instead incorporate a massive series of wargames involving between 60,000 and 100,000 military and civilian personnel. Crucially, the exercise will also test Russian military and civilian readiness and effectiveness across a conflict spectrum that stretches from hybrid warfare to hyper warfare via cyber warfare, backed up by the threat of nuclear force and strengthening anti-air, area defence (A2/AD) capabilities – the new linear/non-linear order of twenty-first century strategic battle pioneered by the Russian Chief of the General Staff of the Armed Forces, General Valery Vasileyvich Gerasimov.

To be fair Minsk, and belatedly Moscow, are showing signs of some willingness to be transparent.  Interestingly, it is Belarus that took the lead in this effort, suggesting the Union State is not quite the union Moscow would like to portray. In July, Minsk unilaterally invited arms inspectors and the defence attachés of NATO and non-NATO countries to attend as observers.  Last week, on August 15, Moscow issued its own separate set of invitations.

Evidence would also suggest that all is not well with Russia’s military reforms, and in particular the state of morale amongst Russia’s elite formations in the Oblast.  Several strike formations which were designed to be twenty-first century ‘shock armies’ manned by professional soldiers have been forced to undertake a form of muscular insurgency role in Ukraine.  Pay has not been what was promised, and conditions for the troops are reported to be worse in some instances to those traditionally suffered by Russian conscripts. The training of key formations, such as the 1^st Guards Tank Army, has also been stalled by the Ukraine imbroglio.

Still, Russia continues to play a now familiar game of strategic maskirovka (deception) over Zapad 2017.  Moscow suggests that any criticism from the West of such a gargantuan exercise is in fact an attempt to return Europe back to the Cold War. Simply holding Zapad 2017 so close to the borders of EU members and NATO allies is an intemperate and irresponsible act of intimidation. NATO holds no exercises on anything like such a scale, and with nothing like the potential for offensive action. Sadly, Zapad 2017 fits into a well-established Russian penchant for sudden ‘snap’ exercises, big exercises, and snap, big exercises all of which are designed the keep the European democracies strategically, politically, and militarily off-balance.

NATO is worried by Zapad 2017. The problem for NATO and the West is that in the past Russia has used large-scale exercises as a prelude to war.  Now, I am not suggesting for a moment that Russia is about to start another war in Europe, beyond the war it has already started in Ukraine. However, it is the nature of defence planning, or at least it should be (clearly not in London), that the worst-case must be assumed if there is no dialogue to the contrary, and that such scenarios must form the basis for sound defence planning.

Therefore, if Russia really wants to avoid creating the impression of a Europe sliding back towards a new cold war then all Russia has to do is desist with very large, expensive and dangerous exercises such as Zapad 2017.  Oh, and stop no-notice snap exercises and other forms of intimidation, such as buzzing Allied ships in international waters, violating the well-established borders of Allied states, and seeking to destabilise said states with fake news and cyber-attacks. As the Russian meerkats say in a well-known British TV commercial for insurance products, “Simples!”

Still, I am not going to hold my breath any longer in the hope that the Putin regime does the common sense thing and seeks mutually-enriching friendship with its fellow Europeans. At the end of Shakespeare’s Richard III the defeated king cries out, “Slave, I have set my life upon a cast, And I will stand the hazard of the die: I think there will be six Richmonds in the field, Five I have slain to-day instead of him. A horse, a horse, my kingdom for a horse”.

As Russia postures and intimidates I wonder how many ‘horses’ Britain is about to cut? Not so ‘simples’.

Julian Lindley-French

Britain’s Armed Forces must not become a Strategic Snatch Land Rover

"The government must and will ensure that our Armed Forces are always properly equipped and resourced."

August 2017 letter of Sir Michael Fallon, UK Secretary of State for Defence, to Mrs Sue Smith, expressing regret for the July 2005 death of her son Private Philip Hewett in Iraq.

Alphen, Netherlands. 18 August.  This morning the British news contained a story that reminds me of the importance of responsible, independent analysis in a democracy.  The job of the analyst is to analyse. In my case I do this as a well-informed citizen in an effort to make political elites, and the bureaucracies that serve them better at what they are supposed to do in my name. Call that hubris if you will, but I see it as my duty. Unlike some I am not trying to destroy elites, or make them fail, and I fully recognise how difficult the task of government is in this fractured age.

The letter Sir Michael wrote to Mrs Smith is one for which I applaud him, even though it comes only after a Supreme Court decision, the Human Rights Act, and the Sir John Chilcot report into Britain’s role in the Iraq War. The letter rightfully states: "The government entirely accepts the findings of Sir John Chilcot in the Iraq Inquiry in relation to Snatch Land Rover….I would like to express directly to you my deepest sympathies and apologise for the delay, resulting in decisions taken at the time in bringing into service alternative protected vehicles which could have saved lives."  At the time of Private Hewett’s July 2005 death the soldiers called the Snatch Land Rover ‘mobile coffins’, so vulnerable were they to roadside bombs.

However, another statement in that letter suggests the Government have really not learned the lessons which are the implicit purpose of the letter. It goes onto state, "The government must and will ensure that our Armed Forces are always properly equipped and resourced." So, why is London failing its own test?  Why is London still fixated with the appearance of defence at the expense of its substance? The reality is that in spite of the mantra that Britain is one of few NATO members that meet the 2% GDP defence investment pledge, a dangerous gap is opening up between Britain’s stated defence-strategic ambitions and its military-strategy reality.

Take the new heavy aircraft carrier HMS Queen Elizabeth which entered Her Majesty’s Naval Base Portsmouth for the first time this week, amidst much public fanfare.  Regular readers of this blog and my books will know I am a firm fan of the two new British carriers. Properly equipped they will not only afford Britain national strategic assets, exert influence ‘weight’ far beyond their 70,000 tons, they will also enable London to provide coalition maritime-amphibious command hubs for NATO, European, and the wider Allied military groupings which will be the military-strategic method for much of first half of the twenty-first century.

And yet London is screwing up the strategic opportunity the carriers represent because as ever appearance comes before substance.  Yes, HMS Queen Elizabeth provided an excellent photo op for Prime Minister May this week.  And yes, my analysis suggests that if the British properly funded their stated ambitions Britain’s armed forces would, again, be amongst the world’s best – which is precisely where they should be. And yet, London is stalling on the investment of offensive and defensive systems the ships need to do the jobs they are designed to do.  Worse, a mixture of inadequate spending and poor spending is forcing the Service Chiefs to make hard decisions that are rendering Britain’s armed forces as unbalanced as at any time possibly in a couple of centuries. And yet the defence pretence continues, a recipe for military disaster in this most unforgiving of ages.

Britain’s armed forces are fast becoming a Potemkin Village Force (PVF), which looks good, but peer behind the façade and one finds an overstretched little bit of everything, but not much of anything force.  London invests in bits of a powerful force, whilst at the same time cutting the defence budget needed to invest in the other bits vital to ensure its proper functioning, even in the possible high-intensity conflict Prime Minister May warned about this week. The problem with such a political strategy is that whilst it might fool ‘Joe Public’ for a time, and thus serve some short-term political utility, it does not fool Britain’s allies, and certainly does not fool Britain’s adversaries.

 

Sir Michael Fallon is one of Britain’s better defence secretaries and has fought hard to protect Britain’s armed forces from the obsession of HM Treasury with sound money at the expense of sound defence. If Sir Michael really means what he writes, and that he is committed to ensuring Britain’s armed forces are properly equipped and resourced, then this moment is the crunch time! The next few years could mark the last time Britain has to prepare its military for a dangerous future that London itself acknowledges, and which given Britain’s relative power in the world, it will be unable to avoid.  The operations Britain’s armed forces are likely be called upon to conduct are growing daily bigger, more intense, and more dangerous.

 

What to do? First, properly fund the commitments made in the 2010 and 2015 Strategic Defence and Security Reviews (SDSR), and end the current game of political charades with Britain’s defence. Second, use SDSR 2020 to re-establish a link between reality, strategy and British defence policy. Third, stop funding counter-terrorism and the nuclear deterrent at the expense of Britain’s conventional force.

At the end of the day the consequences of defence pretence and aspiring to play a strategic military leadership role with a military of insufficient capability or capacity are profound.  Somewhere, sometime, some poor British sailor, soldier and/or airman/woman will be sent into action inadequately equipped and poorly protected. They will be effectively asked to fill a gap, at an elevated risk to their own lives, between the empty utterances of politicians and the deadly reality they face on the ground.

My recent hard-hitting blogs Lizzie Goes Forth… and …as Britain’s Military Sinks, took a lot of criticism from some high bureaucrats, and not a few senior military officers. The hard truth for London is that my concerns about Britain’s unbalanced defence policy are correct, and those responsible know that to be the case.  The reason I am an analyst, why I do what I do, and why I will not be co-opted to support nonsense, is because of my citizen’s support for the men and women who defend me.  And, if politicians, senior bureaucrats or career-sensitive senior military officers find that politically inconvenient – tough!

London, stop turning Britain’s armed forces into a kind of strategic Snatch Land Rover!

Julian Lindley-French

Fire and Fury? A Korean Peninsula Crisis Briefing

“A bluff taken seriously is more useful than a serious threat interpreted as a bluff”.

Dr Henry Kissinger

Headline: In spite of some modest easing of rhetoric overnight by the Supreme Leader of the Democratic People’s Republic of Korea (DPRK or North Korea) Kim Jong-un, the causes of a crisis with its roots back in 1945 have not been addressed. The paradox of the latest Korean Peninsula Crisis is that it is clearly in the interests of China, the ROK, the United States, and other powerful regional actors such as Japan, to maintain strategic and political stability on the peninsula and across the wider region. However, the leadership of North Korea believes it can only survive if it promotes instability by threatening ever more devastating forms of warfare.  The strategic context and military-technological character of the crisis are turning a twentieth-century rupture into a twenty-first century world crisis that will continue unless the DPRK changes policy and/or people.

Relative power of key players (all figures from the CIA The World Factbook website unless otherwise stated):

China: estimated 2016 gross domestic product (GDP) $21.14 trillion, which makes the Chinese economy the world’s biggest using purchasing power parity. Estimated 2016 population: 1,373,541,278. Official defence expenditure amounts to 1.9%, although the US suggests that in 2016 China spent the PPP equivalent of c$140bn (SIPRI). China is an advanced nuclear power with intercontinental ballistic missiles, both land and sea-based, that is also developing significant military power projection capabilities.

Democratic People’s Republic of Korea (North Korea): whilst figures are hard to obtain the CIA estimates the North Korean economy to be worth some $40 billion per annum. This makes the DPRK one of the very poorest countries in the world.  Estimated 2016 population: 25,115,311. Effective estimates of actual North Korean defence expenditure are also hard to find. However, whilst the official budget for 2017 was set at 15.8% GDP, the Korean Times suggests the armed forces have consumed 25% of GDP for several years and that defence expenditure is set to increase. $10 billion spent each year by a militarised state on a militarised low-income economy explains the size if not the effectiveness of DPRK armed forces. US Defense Intelligence Agency estimates that the DPRK is on the cusp of becoming an operational nuclear power with some limited intercontinental ballistic missile capacity.

Republic of Korea (South Korea): the South Korean economy in 2016 was estimated at $1.934 trillion, making it the world’s fourteenth largest economy using PPP. Estimated 2016 population: 50,924,172. South Korea spends around 2% GDP per annum on defence giving Seoul the world’s 40th largest defence budget. In 2015 the ROK spent some $36.4 billion on its armed forces (Trading Economics).  The ROK is a non-nuclear power, with no intercontinental ballistic missiles.

United States: the US economy in 2016 was estimated at $18.56 trillion, making it the world’s ninth largest by PPP. Estimated 2016 population: 323,995,528. Estimated defence expenditure in 2016 was 3.29% GDP or $611.2 billion (SIPRI). The US is the world’s leading military power with Advanced nuclear systems intercontinental ballistic missiles, both land and sea-based. However, unlike any other power US forces are spread the world-over.

Background to the crisis: The current crisis is set against the backdrop of history and, on the face of it at least, the latest crisis on the Korean Peninsula would appear to reflect and repeat history. On the one side there is a small Communist state (DPRK or North Korea), backed by a powerful Communist neighbour (China). On the other side there is a more powerful but still modest capitalist liberal democracy (ROK or South Korea), backed by the world’s most powerful such state (US). Equally, there are limits to the extent history can be used to understand current events.

 

The origins of the Korean Peninsula Crisis can be traced back to a 1945 agreement between the US and Stalin’s USSR by which American forces would liberate Korea from the Japanese as far north as the 38^th Parallel, and Soviet forces would complete the liberation to the Chinese border. On 26 June, 1950 the Korean People’s Army (KPA) invaded the Republic of Korea (ROK) and the Korean War began. In July 1950, following the June invasion and the swift retreat of South Korean forces, the US and other Western countries operating under a UN mandate and under the command of General Douglas F MacArthur, began to engage the KPA and eventually pushed them all the way back up the Korean Peninsula to close to the Chinese border.

On 25 October, 1951 Chinese (PRC) forces suddenly entered the DPRK and defeated ROK forces decisively at Puchkin, and on 1 November defeated US forces at Unsan.  In April 1952 PRC forces attacked UN forces as part of a major push south down the Peninsular in an effort to take the ROK capital, Seoul. Chinese forces were held back at great cost at the Battle of Imjin River by the British Army’s Gloucestershire Regiment (‘the Glorious Glosters’) and by the British-Belgian 29^th Infantry Brigade. The Chinese thrust was blunted and UN forces were able to regroup to halt the Chinese advance. The war became a stalemate and on 27 July 1953 the Korean Armistice Agreement was signed and the Demilitarized Zone created on the 38^th Parallel.  The war has never formally been ended.

Assessment: The 2017 conflict and the 1950-1953 war share several of the same strategic rationales. In 1953 China did not want a US-friendly state on its border, and sought a buffer between ROK and China. The US and Japan did not want a Communist regime so close to Japan at a time when the Cold War was gathering pace and anti-Communism was at its peak in Washington. Significantly, the regime in Pyongyang at the time was Stalinist not Maoist, meaning it looked towards Moscow rather than Peking (as Beijing was then known in the West) for protection. However, by boycotting its permanent seat Moscow enabled the US to get a resolution through the UN Security Council. Moscow also indicated it would not intervene against such a UN force in Korea, leading some in the Truman administration to fear Moscow was in fact seeking to weaken the US defence of Europe.

There are several important differences between 1951 and 2017. In 1951 China under Mao Zedong was a large but essentially weak and volatile strategic actor the main weapon which was manpower. 2017 China an emerging nuclear superpower.  North Korea was a Stalinist dictatorship in 1951 with more links to Moscow than Peking, which had a powerful conventional force but no nuclear weapons.  The DPRK is now believed by the US Defense Intelligence Agency to have a first generation nuclear warhead similar in punch to the atomic bombs which were dropped by the US in August 1945 Hiroshima and Nagasaki, and which were the equivalent of 12-15,000 tons of TNT.  The DIA believes DPRK has successfully miniaturised the warheads to fit atop a viable Hwasong series intercontinental ballistic missile (ICBM). The Hwasong 12, 13 & 14 missile systems all seem to have ICBM capability with ranges anywhere from 6000-12000 kms. Whilst in theory such systems could reach continental North America, they do not as yet pose an existential threat to the US. However, a nuclear-armed DPRK poses an increasingly serious danger, most notably to Japan, and US forces in Guam and on Okinawa.

Analysis: DPRK aims appear to be twofold; to force the neighbours and outside powers to continue to buy off Pyongyang with ‘free’ exports, and to maintain discipline over a militarised society. Even if this current crisis is resolved, the US and the ROK assure the DPRK that they do not seek regime change in Pyongyang, and China acts as a de facto security guarantor for the DPRK, future crises will inevitably occur unless the regime changes policy tack fundamentally, or is changed.  Nor can sudden change in the DPRK be ruled out. Analysis of economic data suggests that the DPRK is no longer economically viable without significant resource injections from abroad.  There is also some limited evidence that North Korea is becoming socially, and possibly politically, unviable as well.

The DPRK has repeatedly tried to 'globalise' the conflict because it needs the US to be an enemy for the regime of Kim Jong-un to survive. However, the cost of regime survival is increasing.  At the end of the Cold War in 1989 Russia withdrew the protection of its nuclear umbrella from DPRK. Since then Pyongyang has invested huge amounts of its very limited resources to develop nuclear weapons, with tacit support from Pakistan and some suggestion that Ukraine has provided some key missile components. Successive US Administrations and the Group of Six (G6) states of which it is a part, and which includes China, have failed to prevent DPRK efforts to acquire such weapons. DPRK conventional forces also pose a profound to the ROK, most notably the 20 million people in Seoul and its environs, which is only 30 miles/50 km from the 38^th Parallel. If any pre-emptive military action is taken to prevent Pyongyang from resorting to nuclear force it is likely that China is the only power truly in a position to undertake such action.

 

Beijing seems sensitive to American concerns. Unusually Beijing supported the US and UK drafted United Nations Security Council Resolution 2237 (UNSCR 2237) imposing more economic sanctions on the DPRK. China has in the past two days appeared to have begun to impose economic sanctions on North Korea in critical areas such as iron, lead, coal and fish products. These actions clearly indicate that Beijing does not approve of the actions of Kim Jung-un’s regime.  The Chinese have also ordered the People’s Liberation Army to prepare to move to the border with North Korea.

However, the crisis cannot be disentangled from the growing strategic tensions between China and the United States in East Asia, and the wider Asia-Pacific grand strategic region.  Over the past fortnight Washington has sought again to exercise freedom of navigation in the South China Sea which Beijing claims for its own. And, on Monday, the American again attacked China for stealing intellectual property. In other words, the 2017 Korean Peninsula Crisis has all the makings of a classic great power stand-off, tinged with nuclear weapons, and if not now, certainly in the none-too-distant future.  This is precisely what Pyongyang would like to see happen.

US Options: US strategy is essentially designed to convince Beijing that Washington sees the threat to the US and its allies in the region as so severe that Beijing must take action.  In return, China must be assured that the ROK and US will not seek to enforce the unification of the Korean peninsula, and thus remove a buffer between Chinese and US forces.

 

Given the nature of the crisis, and the complexities and difficulties enshrined within it, the balance of US efforts should remain focused on a diplomatic solution. The US achieved some diplomatic success at the United Nations with the July adoption of UNSC Resolution 2371, which seeks to cut 33% of the remaining exports of North Korea.

 

Beyond deterring Pyongyang, and assuring the defence of the ROK, Japan, and of course the US territory Guam, none of the offensive military options open to the Americans are very attractive. Subject to the agreement of ROK President Moon Jae-in, the US could send more THAAD (Theater High Altitude Air Defense) anti-missile systems to both the ROK and Japan. However, the number of THAAD systems is limited, and such a system could do nothing to prevent mass artillery strikes by DPRK forces on Seoul. It takes 45 seconds for an artillery shell fired from one of the several thousand guns dug into south facing slopes of mountains just north of the 38^th Parallel to strike Seoul.  

What Role Europe? Beyond imploring Beijing to help resolve the crisis America’s European allies could have an important role to play. First, Europeans must give unequivocal backing to the US in the face of any threat to the American and South Korean peoples. Second, Europeans must strengthen sanctions against DPRK if the regime does not change tack. For example, the Netherlands still exports some €2m worth of goods and services to DPRK. Third, six EU member-states have embassies in Pyongyang, including Britain and Germany.  There should be a concerted European effort to establish back-channel diplomatic engagement with Pyongyang.

Conclusion: Effective crisis management by China and the United States – the two key players – will require consistent and considered policy, balanced and clear messaging, constant contact, and the separation of other issues of mutual contention from the Korean Peninsula Crisis.

Pyongyang appears to be engaging in but the latest round of force blackmail, this time with a very nuclear edge, to gain more resources and thus more time for the regime. The DPRK has repeatedly used this stratagem in the past with some success. It is clear that Supreme Leader Kim Jung-Un is prepared to to the brink of war, but it is as yet unclear if he really would fight such a war, as it would almost certainly lead to his own demise. This is especially the case given that China has indicated to the DPRK that Beijing would not support Pyongyang in a nuclear war with the Americans.

Above all, the US needs to be clear about the outcomes it seeks. At present Washington appears to want to both deter the DPRK, and compel Pyongyang to de-nuclearise at the same time. US strategy is thus insufficiently clear.  This lack of clarity over desired outcomes impacts upon the Administration’s crisis messaging. Discipline is vital with all the key US actors involved from the President down engaging in and committing to a series of carefully calibrated messaging. Here the new White House Chief of Staff Kelly and National Security Advisor McMaster have a vital role to play in imposing discipline and thus separating crisis management from White House ideology.

The American message must be consistent; the US does not necessarily regard the DPRK as an enemy, and will not start hostilities, but any hostile military action taken by Pyongyang will inevitably lead to the collapse of the regime.

Julian Lindley-French

Crash! The Ides of August 2007

SUMMER ESSAY

“There is a tide in the affairs of men. Which, taken at the flood, leads on to fortune; Omitted, all the voyage of their life, Is bound in shallows and in miseries. On such a full sea are we now afloat; And we must take the current when it serves, Or lose our ventures”.

Julius Caesar, William Shakespeare

August 2007

Alphen, Netherlands. 9 August. This blog is devoted to big stuff! Ten years ago today something really, really big began to happen which would have profound geopolitical consequences for the West, and the wider world.  BNP, a well-regarded French bank, suspended three mortgage investment funds because management was no longer sure of their value. It was the harbinger of what is now believed to have been the worst financial crash since at least the 1930s, and which was caused by power and money becoming too close. The ensuing intertwined banking, financial, economic, and political crises effectively marked the end of the West’s dominance, and the start of a new age of Great Power competition that sees ‘might’ steadily eclipsing ‘right’.  What was the real cost of his disaster, why did it happen, and what are the continuing geopolitical implications?

The financial cost of baling out the broken Western banking system, and trying to save the political skins of a failed elite was staggering.  According to the International Monetary Fund the crash cost $11.9 trillion to ‘fix’, which is about the size of China’s annual GDP, or about $2000 for every person on the planet.  In 2009-10 the crisis consumed a fifth of the entire globe’s annual output, costing developed countries some $10.2 trillion.  Due to the overbearing importance of their respective financial sectors to their respective economies, the British and American taxpayers bore a particularly heavy burden.  The cost to the UK taxpayer of supporting broke banks and mortgage lenders has cost some 81.8% of Britain’s GDP. The diversion of taxpayer’s money also crippled the public finances, with sectors such as defence particularly hard hit.  In 2006, the US budget deficit stood at around 2.5% of GDP, in 2009 it leapt to 13.5%, whilst the UK deficit in 2006 was some 2.6% of GDP, whilst in 2009 it leapt to 11.6%.

The Casino Causes of the Crash

There were several factors that caused the August crash. However, at its most simple the crash was caused as much by an accounting failure as a banking failure, as the need for money outstripped the availability of money.  Indeed, the crisis began because bank debt became too high leading to a sudden and catastrophic weakening of actual bank balance sheets, as opposed to the fantasy balance sheets many banks had been peddling. When crucial inter-bank lending, which was central to a system of flawed risk mismanagement, suddenly collapsed each bank looked to save itself.  The rest, as they say, has become a sorry history.

However, there was a range of deeper, structural, and cultural factors that were also at play, not least so-called ‘casino banking’. Rapid globalisation had seen the demand for financing grow rapidly beyond the ability of even the largest Western banks to meet.  The banks sought to close the resultant financing gap via the use of increasingly complex ‘financial instruments’, labyrinthine forms of mutual lending which also saw a steady increase in interlocking mutual risk.  Much of that risk was embedded in investments that ignored the traditional fundamentals of sound banking, such as the US mortgage sector and so-called ‘sub-prime loans’, which were not only hidden in financial instruments, but also backed by major ‘too big to fail’ American financial houses, most notably Lehman Brothers.  A mixture of ignorance, short-termism and ‘we’ve never had it so good’ demand led to banks taking on excessive debt or ‘leverage’ which far exceeded the capital reserves of many of them.  Such risk was justified by the false belief that if it was spread across the entire financial system ‘risk’ itself was effectively banished. In fact, all casino bankers did was to put the entire Western banking system at risk.  In August 2007 this house of cards began to crash down.   

In 2010 the banking crisis turned into a sovereign debt crisis when the growing cost of money became too great to fund for fragile states already mired deep in debt.  Some Eurozone countries were particularly hard hit because they had been bingeing on borrowing since the Euro’s creation in 1999.  With the advent of the Euro the many structurally weak European economies organised around Germany, such as Greece, Italy, and Spain, suddenly discovered that they could borrow at the same low interest rates as Berlin, as the early ‘naughties’ saw the cost of money for them plummet.  Many of them over-borrowed in the false belief that the Eurozone also implied debt mutualisation and that, in the event of any crisis, German, Dutch and the taxpayers of wealthier northern and western European states would bail them out.  For a time it suited the Germans to accept such risk as the Eurozone created a German export boom, and helped offset the high cost of their domestic productivity, enabling Berlin to escape from a long period of economic malaise. In August 2007 the cost of money to ‘Club Med’ began to shoot up.  Several were effectively bankrupted, most notably Greece.  It is a crisis yet to be resolved.

America and Britain? See no evil, hear no evil, and speak no evil.  The US and UK governments simply ignored the dangers traditionally associated with excessive public debt, preferring instead to see their financial sectors as tax bonanzas to exploit at a time when low taxes and high spending were in political vogue. Consequently, the years prior to 2007 had seen sound regulation of the banking and wider financial sectors effectively abandoned as the respective governments backed New York and London as world financial hubs. The US could console itself that if its banks were too big to fail so was the US, given that much of the world held dollars in their reserves as the reserve currency. Britain was not so lucky. The situation was made far worse for the British by a Labour government which, prior to 2007, allowed personal debt to spiral, and a dangerous property bubble to develop. Britain was made even more vulnerable by an excessive level of government borrowing in the run-up to the crisis in the guise of investment. 

Geopolitical Consequences

The strategic consequences were profound, and continue to be so.  The crisis, and the bankers who caused it, destabilised the world as the ability of the leading Western states to exercise influence and power dramatically declined.

In 2007 US influence was already on the wane given the failing campaigns in Afghanistan and Iraq. The fact that the crisis originated in New York further damaged America’s reputation for sound strategic leadership, particularly in Europe.  Most Western countries reacted to the crisis by imposing austerity programmes that radically reduced the level of public debt by stringent cuts to public expenditures. However, income inequality grew rapidly to politically toxic levels as those at the lower end of the social and economic pile were hardest hit by efforts to re-establish sound money.  The political implications are there for all to see as crisis clearly played a profound role in Britain’s 2016 decision to leave the EU, as well as the election of President Trump in the US.  In Britain’s case this can be partly explained by the interaction between open door immigration, and a sudden and catastrophic recession that came close to a depression, with all the subsequent and consequent political and social tensions thus created.

The search for sound money also undermined sound defence. Europeans cut their defence budgets by 30% between 2008 and 2014. However, such cuts not only saw a loss of ‘men’ and materiel. It also critically undermined the strategic ambition of key Western powers, most notably Britain and France.  Worse, an on-paper economically far weaker Russia was emboldened by the crisis. In 2008 Russia invaded Georgia and began a programme of military modernisation and strategic agitation that continues to this day. Several Middle Eastern and North African economies, already challenged by weakening demands for oil and gas, allied to a boom in the number of young people they had to feed, educate and employ, also became dangerously unstable.

 

However, perhaps the most telling consequence of the crash was the rapid relative rise in the power and influence of China. China was a responsible actor during the crisis, using its large reserves and dollar holdings to help prevent a collapse of a system that served its strategic ambitions well. China also used the crisis to begin to exert influence far beyond its borders, most notably in Europe. Beijing achieved this ‘strategic objective’ via a series of ‘strategic’ loans and investments that had the effect of weakening transatlantic political and economic bonds, the strategic consequences of which have yet to be fully grasped. Like Russia, China also invested in its armed forces and began to expand what Beijing sees as its rightful hegemony across much of East Asia with the creation of a far-reaching Exclusive Economic Zone, and by establishing illegal military bases in the South China Sea, the strategic consequences of which are again yet to be fully grasped.

Winners and Losers

There have, of course, been winners and losers.  The winners at the geopolitical level include the world’s illiberal Great Powers, such as China and Russia, who have begun to tip the balance of power in their favour away from the West.  At the political level incumbent authority has lost much of its prestige, and popular trust in Western government has by and large collapsed, opening the door to hitherto marginal populists and radicals. And, of course, the very bankers who helped cause the crisis were not only propped up by their far poorer compatriots, but continue to enjoy incomes that others can only dream of.  Too big to fail, too grand to jail?

The real losers? You and me.  Savers have been robbed of millions of euros/dollars/pounds of interest as interest rates were driven lower by central banks in an effort to maintain some level of economic growth.  Taxpayers continue to bail out banks, whilst in the Europe the European Central Bank is quietly transferring huge amounts of ‘public’ money to prop up failed banks, most notably in Italy. As for debt mutualisation, expect to hear more about that after September’s German federal elections…but certainly not before.

Greed and Power

Ultimately, the financial crisis was the result of greed and Western political, bureaucratic, and financial elites becoming too close.  The result was that principles underlying good politics, effective oversight, and sound financing were abandoned.  Such closeness reflected the trend, particularly prevalent in the EU at the time, for elites to remove power ever further from the people in the name of ‘efficiency’ and give it to unelected bodies in the name of institution (i.e. elite) building. Democratic oversight was effectively replaced with sham forms of ‘accountability’ further ‘overseen’ by sham democracy. Little has changed.

The limited good news is that today the banks are more stable than back in 2007 because of the extra capital they are now required to hold. However, there is absolutely no guarantee that a still fragile system could not rapidly collapse in the face of another financial or economic shock.

The future?  The relative decline of the West looks likely to continue, and with it the emergence of strategic competitors in many forms.  It need not be this way.

You were screwed. We all were!

Julian Lindley-French