Ian Bremmer

By Ian Bremmer
The opinons expressed are his own.

As violent protests rock the Arab world, Prime Minister Benjamin Netanyahu’s Israeli government has tried to keep a low profile. It has largely succeeded. That’s about to change.

This year’s upheaval in North Africa and the Middle East is not quite finished. As President Saleh recovers from injuries suffered during an attack on Yemen’s presidential palace, the country remains plagued with protests and crackdowns. Libya’s Qaddafi clings to power, Syria’s Assad copes with surges of public anger, and Egypt’s zigzag path toward democracy reminds us how hard it is to fill the hole left behind by a castoff autocrat.

Israelis have watched closely from the sidelines to better understand what all this turmoil means for their future. As the dust begins to settle, it has become clear that they have plenty to worry about. Populism is taking root in the Middle East, a region where ordinary people have been forced for years to scream in unison to make themselves heard. Now they find that they have the power to bring about change. In response, Arab leaders—the newly elevated, those clinging to power, and even those simply facing a more uncertain future—are now listening to public opinion much more closely.

That’s bad news for Israel, because one of the most popular causes across the Middle East is a more genuine and vigorous defense of Palestinians. The Arab world’s uprisings have had virtually nothing to do with Israel. They are spontaneous expressions of public outrage that governments are corrupt, that average citizens have no power to do anything about it, that living standards aren’t rising, and that nothing ever changes. But the protests have now empowered large numbers of people who also want to see Israel face enormous political pressure.

They’re about to get their wish. In New York next month, Palestinians will seek UN recognition of statehood, and the General Assembly will likely vote to give it to them. Mahmoud Abbas, president of the Palestinian National Authority, is well aware that tides are moving in his favor. Not content with a symbolic declaration of his people’s right to form a state, Abbas has pledged to seek UN member status for the new state of Palestine. That’s almost certainly a bridge too far, but he most likely will win enough votes to move the Palestinian Authority from “non-member entity status” to “non-member state status.” The difference is important because, at the very least, it would give the PA greater standing at the UN and other international organizations. It’s also an important psychological achievement that will more deeply legitimize a Palestine state in the eyes of many nations.

America is Israel’s only reliable ally, but the White House wants no part of the UN theatrics. President Obama would welcome an opportunity to prove his commitment to support Israel, and he’ll make clear both Washington’s opposition to a General Assembly move and U.S. intent to veto in the Security Council any Palestinian effort to acquire full UN membership as a state. But he’d also like a chance to back the Arab world’s lunge toward self-determination. He won’t be able to support both sides in September, and he faces much more immediate challenges at home. Reviving the US economy, creating jobs, managing a draw-down of troops from Afghanistan while battling increasingly aggressive Republicans will leave the president with little extra time and political capital to spend on Israeli-Palestinian diplomatic fireworks.

The bad news for Israel is that Palestinians are aware of the limits on what they can get, and will likely focus their fight on the General Assembly, not the Security Council, where Obama wouldn’t cast America’s veto. Add the famously troubled relationship between Obama and Netanyahu, and Israel is about to look more isolated than ever.

This essay is based on a transcribed interview with Bremmer.

Photo: A woman holds a Palestinian flag during the 2014 FIFA World Cup qualification soccer match between Thailand and the Palestinian Territories at A-Ram stadium near Jerusalem July 28, 2011. REUTERS/Mohamad Torokman

By Ian Bremmer
The opinions expressed are his own.

The European Union now faces a sovereign debt crisis that threatens the viability of the entire experiment, one that looms over the economies of even the sturdiest EU countries. Fair or not, debt crises in Greece and Portugal, and the spectre of them in Spain and Italy, have markets questioning whether the eurozone remains viable.

There is some good news. Everyone in Europe, from Germany’s state-level officials to Members of the EU Parliament, takes this issue seriously. The time for kicking the can down the road has passed. The bad news is that the only long-term solution to the crisis is the one that may be a bridge too far for most of the major players: a fiscal union that controls spending across all of the EU’s economies. Fiscal union might sound like a politically impossible concept, but market leaders, like Pimco’s Mohammed El-Erian, are urging Europe to at least consider, ”a unified European balance sheet,” as a logical and badly needed extension of the currency union. To join the euro, governments surrendered control of their monetary policy. Surrendering control of fiscal policy amounts to an enormous psychological step.

A little background: EU member states still control their own spending — and their indebtedness. The EU specifies spending and debt limits for its member nations, but can’t really enforce its guidelines. That’s why Greece was able to hide the problem that too many of its citizens have evaded income taxes for decades, despite the government providing them substantial social benefits. This problem created the country’s debt crisis. Local control of fiscal policy also allowed Portugal to base its budgets on wildly optimistic economic growth projections for years. That’s why the debt crisis spread out of control — every country kept its own books, but few of the strong countries realized that to protect the euro, they would have to bail out weaker countries that rode the economic boom for years—including up to and during the global financial crisis and its aftermath.

Some more background: Soon after the dawn of the euro, as the benefits became clear, European governments were all too eager to join, to enjoy the rising tide, and to abandon their national currencies. This may have been the right economic move, but few of these countries understood the impact of surrendering control of their money supplies. Perhaps they were just too caught up in the long economic boom to care.

Now, in a time of crisis, European governments know exactly what must give up if they are to form a fiscal union. For the greater economic good of the EU—that is, for the good of citizens in other countries—they would have to surrender control of national spending priorities. A piece of their sovereignty would have to be renounced, probably forever. Before the current crisis, this is something most European leaders probably never seriously considered. The signatories to the Maastricht Treaty that created the EU and the conditions for adopting the euro hoped they would never be forced to test the strength of their union. Now, that is exactly what they are being asked to do.

Despite excellent leadership from Olli Rehn, currently serving as EU Economic and Monetary Affairs Commissioner, the EU is clearly an imperfect union, one that allows individual member countries to stray too far from what should have been common economic goals. The U.S. government as formulated under a comparably strong Constitution was able to create a bailout package that saved the financial system (and indeed, has turned out to be profitable) without the risk of fracturing the union. Can the EU move beyond a loose confederation into a stronger union to realize its full economic potential? The first indicator of whether this is possible should come at the European Commission summit this Thursday, where a solution to the Greek debt problem will be the most important item on the agenda.

Any votes that the EU takes to retroactively penalize countries like Greece and Portugal for straying from debt limits and putting the euro at risk will be seen as political punishments. In essence, the EU can’t exercise its strongest powers because they are punitive. It needs the power to prevent these problems from happening in the first place. But why is fiscal union such a politically fraught idea in the first place?

Just as American voters punished some Democratic lawmakers for their votes in favor of health care reform, the rise of right-wing nativist parties in Europe adds to the risk that moves to strengthen the power of the EU at local expense could endanger the very governments that are now asking voters to accept painful austerity measures. These leaders are caught between a rock and a hard place: they have to move Europe towards a strong union on one hand, but on the other, those very moves are likely to sway local voters to elect ultra-nationalist coalitions, endangering the cohesion of the entire European project.

Europe can’t afford this risk, for one very big reason: China. Here’s another: Saudi Arabia. So far, these wealthy countries and other holders of euros or euro-denominated debt have remained on the sidelines, but they have ample reason to want a viable alternative to the U.S. dollar as a reserve currency. They simply won’t let the currency tank — if it gets cheap due to strife over the bailout, propping it up becomes a buying opportunity for them.

In taking on more euro holdings, the influences of Asia and the Middle East over EU economic policy will grow, perhaps to uncomfortable levels. For now, countries with means are watching and waiting, while Europe’s politicians contemplate a fiscal union or some other solution to the crisis. But make no mistake, the outsiders won’t wait forever. If further debt crises hit larger economies in Europe, “muddling through” will no longer be a credible option—for markets or major debt holders, sovereign or otherwise. To avoid a repeat of this process, the EU will need a sustainable economic framework for the future. We’ll see renewed calls for fiscal union, but that would demand a willingness to compromise that today’s Europe may not have.

This essay is based on a transcribed interview with Bremmer.

PHOTO: EU Economic and Monetary Affairs Commissioner Olli Rehn addresses a news conference in Brussels on May 13^th. Thierry Roge / Reuters

Bremmer spoke to Reuters correspondent Kyoko Gahsa about Japan’s recovery, the lessons of the Europe crisis, and the new leadership at the International Monetary Fund.

By Ian Bremmer
The views expressed are his own.

When President Barack Obama announced in late 2009 that he would send an additional 30,000 troops to Afghanistan, few were as pleased as Defense Secretary Robert Gates. A holdover from the George W. Bush administration, Gates had championed the 2007 surge of troops into Iraq, a move that helped turn both the tide in that country and public opinion in the U.S. on its future. Gates and the generals hoped for similar success against the Taliban.

But how do you measure success in a place like Afghanistan? Soldiers, no matter how many, can’t build democratic, financial and industrial institutions overnight. At best, they can help make Afghans safer and life much harder for those who would launch attacks beyond the country’s borders. By that measure, the record of both surges is mixed, if generally positive. But post-surge, one thing is certain: Obama allowed Gates to prosecute the war on his terms, but new Defense Secretary Leon Panetta will be asked to implement a plan that has less to do with Kandahar than with Capitol Hill.

Withdrawal is the right move, maybe the only move, for Team Obama. The president has gotten the politics of the moment exactly right, yet again. In the first half of his term, he retained Bush’s team at the Pentagon and reshuffled his top generals, namely David Petraeus, through various leadership positions in Iraq and Afghanistan. A surge that seemed to be working was allowed to play out, and Bush was likely to take the blame if the strategy failed. But President Obama knows that Bush’s burdens are now his—the economy, jobs and the wars.

Now the president has put Petraeus, who understands how to use intelligence as a military commander, in charge of the CIA. In this role he’ll likely use agency operatives to conduct the kinds of covert operations that will keep Afghanistan (and Iraq) free of influence from large terrorist networks. Panetta, having learned the CIA’s capabilities during his tenure as its chief, takes charge at a Pentagon braced for budget cuts. The war is being moved off of the Defense Department’s books, but that doesn’t mean the U.S. can afford to simply pack up and head home. Afghanistan will become a quieter conflict, allowing for “nation-building here at home,” as the president said in his statement announcing the end of the surge, and a forward-looking platform for his re-election campaign next fall. Bush is the president who promised to avoid nation-building, but it’s Obama who is keeping that promise.

If Obama can afford to turn to domestic challenges, that’s largely thanks to the stunning successes of special forces and counter-terror operations—in both Iraq and Afghanistan. The effect of the troop surges on the long-term prospects for stability in these two countries is debatable, but bin Laden is dead and al Qaeda has been routed. This won’t be last time you read about the successful mission to kill Osama bin Laden in Pakistan vis-à-vis the coming presidential election.

But what if Obama is wrong? What if the Taliban refuses the president’s offer to talk? What if China or Russia or both decide that departing U.S. troops create opportunities for a bid to lay claim to the country’s vast natural resources? Worst of all, what if Afghanistan starts to crumble? What if the corrupt men that President Karzai has been protecting allow the country to again become an international locus for terrorists? What if the 68,000 U.S. troops set to remain in the country find themselves besieged by tribal warlords or Qaeda militants? What if Iran and Pakistan, for entirely different reasons, create turmoil in Afghanistan that again destabilizes the region?

In other words, it would take less than a miracle for Afghanistan to become Obama’s problem all over again. Even if Republicans nominate a candidate who wants to end the war, conservative pundits could still score points at the president’s expense. Obama — the president who killed Osama bin Laden — could find himself painted as Jimmy Carter, a leader reacting to events rather than shaping them.

More damaging still, a flare-up in Afghanistan could divert Obama from his primary electoral challenge, making it impossible for him to focus his closing political argument on job creation and the health of the American economy.

That’s a fight the president knows he must win.

This essay is based on a transcribed interview with Bremmer.

PHOTO: An Afghan shepherd walks with a flock of sheep past a U.S. Marines armored vehicle of the Weapons Company, 1st Battalion, 3rd Marines outside the Camp Gorgak in Helmand province, southern Afghanistan July 5, 2011. REUTERS/Shamil Zhumatov

People talk about the Russian presidential election like it really matters. But it doesn’t. The supposedly big news and debate right now is whether or not Russian President Dmitry Medvedev will run for president again in 2012.

The real news that no one is talking about is not the presidential election parlor game being played in Moscow right now, but is about an authoritarian government feeling the need to try to paint a veneer of democracy. Besides, the fall parlor game will matter much more than this spring one.

Western media can keep making it out to be as big a deal as they want to, but, ultimately, it doesn’t matter if Medvedev stays on as president or if Russian Prime Minister Vladimir Putin returns to the post. While Medvedev looks like he is trying to distance himself from Putin — he has taken a different stance on Libya and is pro-US and Europe and pro-private sector — Medvedev, as much as he may be interested in running again, is not going to run against Putin if Putin puts himself in the race.

Historically, Russia has had show trials; this is a show election. In the past, Russia has put on trials to try to convince the Western world that there is a rule of law and that government transparency exists in their country. But this presidential election is feeling much too like the Khodorkovsky trial, yet another show trial that failed to prove that fair trials exist in Russia. There is no rule of law in Russia.

What’s remarkable about the Khodorkovsky trial is that we are still talking about it a decade later. It’s not in Russia’s interest to let Khodorkovsky speak publicly, but the Russian government feels a need to allow Khodorkovsky to go through the motions of talking to the media so that it looks like he is receiving a fair trial. The trial isn’t for Russians themselves, but for Russia watchers.

Despite a handful of people and media publications who see right through Russia’s vexing charade, there is a deep rooted reason why they continue to put on such a show — Russia’s  insecurity complex. It is exactly that complex, and the diverted energy to cover it up, that makes Russia continually bluster any meaningful political and economic reform.

Despite Russia’ desire to compete with the West, the fact is their economy is not growing – in fact, banks are starting to pull out of the country. Yet Russia is so desperate to be considered a superpower and accepted as an advanced Western nation that they continue to flex their  muscles. In the end, this only makes them look  yet weaker , especially against the backdrop of their next door neighbor, China, which is growing, along with its confidence.

For now, the outcome of who’s going to run for president is probably already predetermined, but it looks nice for Russia to have foreign speculation of plurality in their country. Contrary to common wisdom, it would be a mistake to count Medvedev out. While Putin is still quite popular and could easily get reelected, going back as president shows weakness on his part and it’s great to have Medvedev be his plausible deniability.

This essay is based on a transcribed interview with Bremmer.

Photo: Russian President Dmitry Medvedev (R) and Prime Minister Vladimir Putin in Moscow on June 22, 2011. REUTERS/Denis Sinyakov

By Ian Bremmer
The views expressed are his own.

All eyes should be peeled on China, but not for the reason you think. While the biggest structural risk right now is global rebalancing, especially between China and the U.S., there is another important threat from China: cyberwars. Cyberattacks are one of the biggest fat tails (along with climate and North Korea).

It’s no surprise that the latest Google hack attack came from China. The presumption is that the vast majority of cyber attacks hitting the U.S. are coming from the Chinese government. It’s very hard to know where threats are originating – country-wise and/or person-wise -- because it’s very difficult to go back and figure out the paper trail. But at a minimum, there is an environment in China that tolerates cyber attacks.

Proprietary information around technologies – gaining profit shares, increasing revenues – allows a country to be much more economically competitive. China has leverage because everyone wants to get into China. If you want to make something in their country, you have to share the technology.

The Chinese government can really benefit from having access to proprietary data, whether it’s about Exxon's oil reserves or pricing of commodities of proprietary technologies, such as American telecommunications. China’s become much more competitive and therefore has become much more of a threat. If it’s using a non-judicious system to gain economic advantage, we need to take that very seriously.

China did something similar with high-speed rail – and that was through legal means. They undermined German and French companies in order to gain access to the technology and they now have built the best high speed rail system. If they can access that kind of information through hacking, that’s going to be seen as a direct threat.

This isn’t to say that the Chinese are evil. Historically, Western institutions invested in China, but then took the money back West. China obviously wants a good chunk of that action.

The question for Western companies and governments is: What is the appropriate way to respond to what is essentially asymmetric warfare? Cyberattacks could start affecting day to day lives of people if, for instance, a company is brought down by it. Those companies employ people and have share prices. They are a big part of American wealth.

There are ways, however, to protect yourself -- and your portfolio -- against such attacks. Look at companies that are most exposed as cyberattacks like Google, and companies in sectors where the Chinese are trying to gain an advantage – telecommunications, IT firms, commodities.

It’s extremely hard to prepare for the known unknowns until you take them seriously. But you should try to make sure you’re not in a position where you are angering folks connected to the inside of Chinese government, which Google is now learning. Also, you should work closely with home governments, like the NSA in the U.S. You need to share your data with them because you may need political leverage.

Cyber threats are probably going to have to get worse before the issue gets policy traction in Washington, and at that point the U.S. will have to make them a priority. When the U.S. does, it will lead to big tensions. But it’s really important for governments to be transparent, and at least officially committed to the rule of law.

Note: This essay is based on a transcribed interview with Bremmer.

By Ian Bremmer
The opinions expressed are his own.

The IMF and World Bank meet this week at a delicate moment for the global economic recovery. First, the good news: Expectations for success won’t be tough to manage, because turmoil in the Arab world, the triple disaster in Japan, and Europe’s ongoing struggles have kept the meetings from grabbing much public attention. That’s a good thing, because as capital and liquidity return to the global economy and as emerging market powers begin to assert themselves with greater confidence on the international stage, the IMF and World Bank have lost some of their prominence.

In particular, the IMF is finding it increasingly difficult to play its traditional role of global surveillance body and lender of last resort, because multinational coordination is just not that effective these days. Newly enhanced voting leverage for leading emerging powers intended to better reflect the world’s true balance of power will only add to the institution’s dysfunction, as members increasingly disagree on whether and how to correct global imbalances. Expect to hear more calls from China, India, Brazil and Russia for an end to US and European dominance of these institutions, but don’t expect any “rebalancing” of rights and responsibilities to make international consensus any easier to achieve.

For example, in advance of the meetings, the IMF has produced a framework of policy options for countries now coping with large capital inflows. Several emerging states — including Brazil, South Korea, and Indonesia — have enacted capital controls in recent months. The IMF has endorsed the use of capital controls in cases where measures to strengthen banking systems and lower interest rates have already been adopted — a fundamental reversal of previous IMF policy.

Some emerging market governments have rejected the Fund’s new policy framework with arguments that the IMF should not dictate their range. The result will be animated discussion of the issue during the meetings, with little prospect that talk will lead to action. Meanwhile, the IMF’s endorsement of capital controls (as a measure of last resort) will provide political cover for some governments to use them as they see fit.

The IMF will also discuss setting up the surveillance mechanisms for global imbalances that were agreed at last fall’s G20 summit in Seoul, but here again there are deep disagreements. China, in particular, has no incentive to allow the IMF to evaluate the fairness of its currency policy — though Beijing knows that the Fund has no enforcement powers to act on what it finds.

In addition, the “internationalization” of the renminbi will likely be on the IMF agenda. China has taken some steps toward its stated goal of making the renminbi an international currency, but the near-term prospects for yuan convertibility are bleak, since such a move demands higher tolerance from Beijing for external influence on Chinese domestic economy than the leadership has ever permitted. China is allowing the yuan to appreciate gradually — in both nominal and real terms. This trend will likely continue. But Beijing will never commit to a clear timeframe for convertibility and will refuse to negotiate the currency’s value in international forums.

Participants in World Bank meetings will discuss the rise in global food prices, food security and potential policy options to address this issue, especially for the world’s poor, but any real push for concrete proposals will probably be delayed until the G20 meeting in Cannes later this year. Only there are we liable to see any agreement on limiting speculation on commodities. Even then, there won’t be a deal on how new restrictions might be enforced — though individual members may act against speculation on their own, either through local regulation, new taxes or outright restrictions. That will add considerable unpredictability to an already uncertain international investment climate.

The World Bank meeting is also likely to include discussion of policy implications of the World Development Report issued this week, which argued that international aid should focus less on health and education and more on promoting government stability through strengthening government institutions, police and justice systems.

It’s hard to imagine a more obvious sign of our turbulent times.

Ian Bremmer is president of Eurasia Group, a global political risk research and consulting firm.