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Stratfor: Post-Election, Now What To Do In Iraq?

FORECASTS & TRENDS E-LETTER
By Gary D. Halbert
November 28, 2006

IN THIS ISSUE:

1.  New Congress – Now What In The Iraq War?

2.  The “Iraq Study Group” Report – Any Answers?

3.  Stratfor’s Analysis On What Happens Next In Iraq

4.  What The “Iraq Study Group” Will Recommend

5.  Conclusions – Iran Will Be The Big Winner

6.  Special Half-Price Offer From Stratfor.com

Introduction

The midterm election is over and the Democrats will take over when Congress reconvenes in January.  It remains to be seen what the Dems will do over the next two years while George W. Bush remains in the White House.  Maybe nothing much will happen, as some suggest; on the other hand, a lot could happen; so we’ll just have to wait and see.

Yet there is still the war in Iraq, which will have major international consequences regardless how it turns out and what our politicians and President Bush decide to do about it.  The bipartisan “Iraq Study Group” headed by former Secretary of State James Baker (Republican) and former House Foreign Relations Committee chairman Lee Hamilton (Democrat), including five Republicans and five Democrats, has conducted an in-depth study of the situation in Iraq since last spring.  The group is expected to release its formal report in a few weeks, and there will be a great deal of debate about that.

The Iraq Study Group (“ISG”) has conducted its investigation in extreme secrecy.  Therefore, it is not known what the ISG will recommend we do next in Iraq, or if it will simply produce a set of policy options in Iraq, much as the Defense Department did recently.  A recent Pentagon report suggested three options for Iraq which have come to be dubbed: “Go Big, Go Long or Go Home.”

“Go Long,” we are told, is basically an offshoot of the current Bush administration policy of ‘Staying The Course’ and fighting it out in Iraq until we win, but with a gradual reduction in troops along the way.  But if we are not winning the war with the troop level we have now, the Go Long strategy could indeed be very, very long, and could virtually assure a Democrat will win the 2008 election in a landslide.

“Go Home” means the obvious – major or total troop withdrawal over the next year or so.  This strategy would all but guarantee that Iran will seize control of Iraq and dominate the Middle East, not to mention the world energy market.

It will be interesting to see what the ISG recommends just ahead.

We all know that the Bush administration has made mistakes in the war in Iraq.  The war in Iraq cost the Republicans the Congress on November 7.  The question is what to do now?  Honestly, I don’t know the answer.  So let’s turn to our old friend Dr. George Friedman of Stratfor.com for his recent analysis of the election and what we should do in Iraq at this point.  I will comment on  Dr. Friedman’s remarks at the end.

As always, I appreciate the opportunity to share Stratfor’s insightful analysis with you.  I highly recommend that you subscribe to Stratfor, and as I will discuss at the end, I have negotiated a special deep discount offer for you to subscribe to Stratfor for a limited time. 

STRATFOR:  BACK TO IRAQ
     by Dr. George Friedman


The midterm congressional elections have given the Democrats control of the U.S. House of Representatives. It is possible -- as of this writing, on Wednesday afternoon -- that the Senate could also go to the Democrats, depending on the outcome of one extremely close race in Virginia. However it finally turns out, it is quite certain that this midterm was a national election, in the sense that the dominant issue was not a matter of the local concerns in congressional districts, but the question of U.S. policy in Iraq. What is clear is that the U.S. electorate has shifted away from supporting the Bush administration's conduct of the war. What is not clear at all is what they have shifted toward. It is impossible to discern any consensus in the country as to what ought to be done.

Far more startling than the election outcome was the sudden resignation of Defense Secretary Donald Rumsfeld. Rumsfeld had become the lightning rod for critics of the war, including many people who had supported the war but opposed the way it was executed. Extraordinarily, President George W. Bush had said last week that Rumsfeld would stay on as secretary of defense until the end of his presidential term. It is possible that Rumsfeld surprised Bush by resigning in the immediate wake of the election -- but if that were the case, Bush would not have had a replacement already lined up by the afternoon of Nov. 8. The appointment of Robert Gates as secretary of defense means two things: One is that Rumsfeld's resignation was in the works for at least a while (which makes Bush's statement last week puzzling, to say the least); the other is that a shift is under way in White House policy on the war.

Gates is close to the foreign policy team that surrounded former President George H. W. Bush. Many of those people have been critical of, or at least uneasy with, the current president's Iraq policy. Moving a man like Gates into the secretary of defense position indicates that Bush is shifting away from his administration's original team and back toward an older cadre that was not always held in high esteem by this White House.

The appointment of Gates is of particular significance because he was a member of the Iraq Study Group (ISG). The ISG has been led by another member of the Bush 41 team, former Secretary of State James Baker. The current president created the ISG as a bipartisan group whose job was to come up with new Iraq policy options for the White House. The panel consisted of people who have deep experience in foreign policy and no pressing personal political ambitions. The members included former House Foreign Relations Committee chairman Lee Hamilton, a Democrat, who co-chairs the group with Baker; former New York Mayor Rudy Giuliani, a Republican; former Clinton adviser Vernon Jordan; Leon Panetta, who served as White House chief of staff in the Clinton administration; former Clinton administration Defense Secretary William Perry; former Sen. Chuck Robb, a Democrat; Alan Simpson, a former Republican senator from Wyoming; and Edwin Meese, who served as attorney general under the Reagan administration [and Sandra Day O’Connor, former Supreme Court Justice].

Before Rumsfeld's resignation, it had not been entirely clear what significance the ISG report would have. For the Democrats -- controlling at least one chamber of Congress, and lacking any consensus themselves as to what to do about Iraq -- it had been expected that the ISG report would provide at least some platform from which to work, particularly if Bush did not embrace the panel's recommendations. And there had, in fact, been some indications from Bush that he would listen to the group's recommendations, but not necessarily implement them. Given the results of the Nov. 7 elections, it also could be surmised that the commission's report would become an internal issue for the Republican Party as well, as it looked ahead to the 2008 presidential campaign. With consensus that something must change, and no consensus as to what must change, the ISG report would be treated as a life raft for both Democrats and Republicans seeking a new strategy in the war. The resulting pressure would be difficult to resist, even for Bush. If he simply ignored the recommendations, he could lose a large part of his Republican base in Congress.

At this point, however, the question mark as to the president's response seems to have been erased, and the forthcoming ISG report soars in significance. For the administration, it would be politically unworkable to appoint a member of the panel as secretary of defense and then ignore the policies recommended.

Situation Review

It is, of course, not yet clear precisely what policy the administration will be adopting in Iraq. But to envision what sort of recommendations the ISG might deliver, we must first consider the current strategy.

Essentially, U.S. strategy in Iraq is to create an effective coalition government, consisting of all the major ethnic and sectarian groups. In order to do that, the United States has to create a security environment in which the government can function. Once this has been achieved, the Iraqi government would take over responsibility for security. The problem, however, is twofold. First, U.S. forces have not been able to create a sufficiently secure environment for the government to function. Second, there are significant elements within the coalition that the United States is trying to create who either do not want such a government to work -- and are allied with insurgents to bring about its failure -- or who want to improve their position within the coalition, using the insurgency as leverage. In other words, U.S. forces are trying to create a secure environment for a coalition whose members are actively working to undermine the effort.

The core issue is that no consensus exists among Iraqi factions as to what kind of country they want. This is not only a disagreement among Sunnis, Shia and Kurds, but also deep disagreements within these separate groups as to what a national government (or even a regional government, should Iraq be divided) should look like. It is not that the Iraqi government in Baghdad is not doing a good job, or that it is corrupt, or that it is not motivated. The problem is that there is no Iraqi government as we normally define the term: The "government" is an arena for political maneuvering by mutually incompatible groups.

Until the summer of 2006, the U.S. strategy had been to try to forge some sort of understanding among the Iraqi groups, using American military power as a goad and guarantor of any understandings. But the decision by the Shia, propelled by Iran, to intensify operations against the Sunnis represented a deliberate decision to abandon the political process. More precisely, in our view, the Iranians decided that the political weakness of George W. Bush, the military weakness of U.S. forces in Iraq, and the general international environment gave them room to reopen the question of the nature of the coalition, the type of regime that would be created and the role that Iran could play in Iraq. In other words, the balanced coalition government that the United States wanted was no longer attractive to the Iranians and Iraqi Shia. They wanted more.

The political foundation for U.S. military strategy dissolved. The possibility of creating an environment sufficiently stable for an Iraqi government to operate -- when elements of the Iraqi government were combined with Iranian influence to raise the level of instability -- obviously didn't work. The United States might have had enough force in place to support a coalition government that was actively seeking and engaged in stabilization. It did not have enough force to impose its will on multiple insurgencies that were supported by factions of the government the United States was trying to stabilize.

By the summer of 2006, the core strategy had ceased to function.

The Options

It is in this context that the ISG will issue its report. There have been hints as to what the group might recommend, but the broad options boil down to these:

1. Recommend that the United States continue with the current strategy: military operations designed to create a security environment in which an Iraqi government can function. 

2. Recommend the immediate withdrawal of U.S. forces and allow the Iraqis to sort out their political problems. 

3. Recommend a redeployment of forces in Iraq, based around a redefinition of the mission. 

4. Recommend a redefinition of the political mission in Iraq.

We are confident that the ISG will not recommend a continuation of the first policy. James Baker has already hinted at the need for change, since it is self-evident at this point that the existing strategy isn't working. It is possible that the strategy could work eventually, but there is no logical reason to believe that this will happen anytime soon, particularly as the president has now been politically weakened. The Shia and Iranians, at this point, are even less likely to be concerned about Washington's military capability in Iraq than they were before the election. And at any rate, Baker and Hamilton didn't travel personally to Iraq only to come back and recommend the status quo.

Nor will they recommend an immediate withdrawal of troops. Apart from the personalities involved, the ISG participants are painfully aware that a unilateral withdrawal at this point, without a prior political settlement, would leave Iran as the dominant power in the region -- potentially capable of projecting military force throughout the Persian Gulf, as well as exerting political pressure through Shiite communities in Gulf states. Only the United States has enough force to limit the Iranians at this point, and an immediate withdrawal from Iraq would leave a huge power vacuum.

We do believe that the ISG will recommend a fundamental shift in the way U.S. forces are used. The troops currently are absorbing casualties without moving closer to their goal, and it is not clear that they can attain it. If U.S. forces remain in Iraq -- which will be recommended -- there will be a shift in their primary mission. Rather than trying to create a secure environment for the Iraqi government, their mission will shift to guaranteeing that Iran, and to a lesser extent Syria, do not gain further power and influence in Iraq. Nothing can be done about the influence they wield among Iraqi Shia, but the United States will oppose anything that would allow them to move from a covert to an overt presence in Iraq. U.S. forces will remain in-country but shift their focus to deterring overt foreign intrusion. That means a redeployment and a change in day-to-day responsibility. U.S. forces will be present in Iraq but not conducting continual security operations.

Two things follow from this. First, the Iraqis will be forced to reach a political accommodation with each other or engage in civil war. The United States will concede that it does not have the power to force them to agree or to prevent them from fighting. Second, the issue of Iran -- its enormous influence in Iraq -- will have to be faced directly, or else U.S. troops will be tied up there indefinitely.

It has been hinted that the ISG is thinking of recommending that Washington engage in negotiations with Iran over the future of Iraq. Tehran offered such negotiations last weekend, and this has been the Iranian position for a while. There have been numerous back-channel discussions, and some open conversations, between Washington and Tehran. The stumbling block has been that the United States has linked the possibility of these talks to discussions of Iran's nuclear policy; Iran has rejected that, always seeking talks on Iraq without linkages. If the rumors are true, and logic says they are, the ISG will suggest that Washington should delink the nuclear issue and hold talks with Iran about a political settlement over Iraq.

This is going to be the hard part for Bush. The last thing he wants is to enhance Iranian power. But the fact is that Iranian power already has been enhanced by the ability of Iraqi Shia to act with indifference to U.S. wishes. By complying with this recommendation, Washington would not be conceding much. It would be acknowledging reality. Of course, publicly acknowledging what has happened is difficult, but the alternative is a continuation of the current strategy -- also difficult. Bush has few painless choices.

What a settlement with Iran would look like is, of course, a major question. We have discussed that elsewhere. For the moment, the key issue is not what a settlement would look like but whether there can be a settlement at all with Iran -- or even direct discussions. In a sense, that is a more difficult problem than the final shape of an agreement.

We expect the ISG, therefore, to make a military and political recommendation. Militarily, the panel will argue for a halt in aggressive U.S. security operations and a redeployment of forces in Iraq, away from areas of unrest. Security will have to be worked out by the Iraqis -- or not. Politically, the ISG will argue that Washington will have to talk directly to the other major stakeholder, and power broker, in Iraq: Tehran.

In short, the group will recommend a radical change in the U.S. approach not only to Iraq, but to the Muslim world in general.

Conclusions

In short, there aren’t any conclusions at this point.  What does seem clear is that there is soon to be a significant change in US military policy in Iraq.  While we don’t know what the Iraq Study Group is going to recommend, it is clear that the Bush administration is maneuvering into a position to make a change.  That much is clear with the abrupt resignation of Donald Rumsfeld and the immediate nomination of Robert Gates – a member of the Iraq Study Group – as the new Secretary of Defense.

My bet is that the ISG recommends three things.  First, a swift redeployment of US troops to other less violent areas in Iraq, which virtually assures a civil war.  Second, I expect the ISG to recommend cutting US forces in Iraq by something like one-half by the end of 2007 at the latest and possibly a lot sooner.  And third, while they won’t call it a deadline, I expect there will be a “goal” of getting out of Iraq entirely by some specified date.

I could be wrong, of course.  Rumors are mounting daily about what the ISG will recommend, as the release date of the report draws nearer.

If I am correct, or at least partly correct, this will be very good news for Iran.  Their strategy of fueling sectarian violence will have worked, both in terms of convincing the US to give up and sparking a civil war that the Shia will undoubtedly win.  In that case, Iraq will become a satellite state of Iran – that is until our troops are gone, at which time Iran can physically take over.

United Nations Secretary-General Koffi Annan has called on the US to negotiate directly with Iran and Syria regarding the war in Iraq.  There are rumors that the ISG may have a similar recommendation.  That would be a disaster in my opinion.  As Newt Gingrich states in an excellent article I have linked below, “Iran and Syria are the wolves in the region. They are the primary troublemakers. You don't invite wolves into the kitchen to help with dinner or you become dinner.”  If the Bush administration elects to negotiate with Iran and Syria, terrorists will see that as utter weakness and declare it a victory for their side.

As Dr. Friedman has warned in previous reports, if Iran gains control of Iraq, then other countries in the Persian Gulf, such as Saudi Arabia, Kuwait and others could be threatened.  Let us not forget that Iran’s president is a certifiable kook, maniac and religious zealot – and one who is committed to developing nuclear weapons.  Having control of the world’s largest oil reserves will only hasten his ability to do so.

Never mind that if Iran gets control of Iraq and continues its nuclear program, other countries in the region may feel compelled to start their own nuclear programs.  Saudi Arabia has already hinted at such possibility. 

I hope my speculation above regarding the ISG and its recommendations is wrong.  But at the end of the day, James Baker is all about politics and winning elections, and Iraq lost the election for the Republicans earlier this month.  If we’re not largely out of there by late 2008, then it’s very likely the Republicans will get drubbed even harder in the next election.

So despite the risks, something must be done.  And with the nomination of ISG member Robert Gates as the new Defense Secretary, it is a safe bet that President Bush will adopt the ISG’s recommendations, or at least most of them.  Again, I hope I am wrong!

A Stratfor Deal For You

If you’ve read this E-Letter for long, you know I am a big fan of Stratfor.com and Dr. George Friedman, its founder and chief executive officer.  Stratfor has been described as a “mini-CIA” with its global intelligence network.  They provide a wealth of geopolitical and economic information.

I have negotiated a great subscription deal with Stratfor for those of you who read this E-Letter.  For a limited time, you can subscribe to Stratfor’s “Premium” service, which normally costs $349 per year, for only $199 for one year.   Or you can subscribe monthly for only $19.99, a 50% discount to their regular price of $39.99.  I highly recommend it!

[Please note that we have negotiated this special price from Stratfor as a service to our clients and readers, and we do not share in any of the proceeds.]

CLICK HERE for subscription information and this special offer.  Many thanks to George and the good folks at Stratfor for making this offer available to my readers! 

Very best regards,

Gary D. Halbert

SPECIAL ARTICLES:

Newt Gingrich (like him or not) on the Iraq Study Group
http://www.weeklystandard.com/Content/Public/Articles/000/000/013/014obmmc.asp?pg=2

We are in a war to the death with radical Islam.
http://www.telegraph.co.uk/opinion/main.jhtml;jsessionid=01KKMEA3GKOZHQFIQMGCFFOAVCBQUIV0?xml=/opinion/2006/11/27/do2701.xml&sSheet=/opinion/2006/11/27/ixopinion.html

Interesting new study on liberals versus conservatives (read this).
http://www.realclearpolitics.com/articles/2006/11/who_really_cares.html

On the Top 100 most influential Americans (few politicians made it).
http://www.boston.com/news/globe/editorial_opinion/oped/articles/2006/11/28/whos_missing_from_this_top_100_list/


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Forecasts & Trends E-Letter is published by Halbert Wealth Management, Inc. Gary D. Halbert is the president and CEO of Halbert Wealth Management, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, Halbert Wealth Management, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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