Transcript Rimrock - WikiLeaks

Stratfor’s Big Seven
(aka Stratfor 201)
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The Preponderance of American Power
Seeking a Balance in the Persian Gulf
Russia’s Resurgence and Fall –now with more Georgia!
Asian Financial Instability
Germany’s Reemergence
Brazil’s Rise
Tomorrow’s Depression
Successful
Countries Have...
• Ample sheltered sea
access
• Large plain/prairie
regions cut by useful,
interconnected rivers
• Minimal internal
buffers
• Large external buffers
(mountains good,
oceans better)
Unsuccessful
Countries Have...
• Limited to no sea
access
• Flat regions
connecting them to
those of other states
• Lack of internal
natural waterways
• Internal mountain
chains or
impenetrable forests
Preponderance of American Power:
Land, Labor, Capital and Global Power
The United States
• The result is manic
depression
– Sputnik
– Vietnam
– Oil shocks,
Japanphobia and the
1980s recessions
– September 11, 2001
Preponderance of American Power
No challenger
state boasts the
geographic
capability of
challenging
North America’s
advantages
Their only option
for resisting
American power
is to form
coalitions with
states that they
see as rivals and
create a single
Eurasian
superpower
Preponderance of American Power
The U.S. is only losing ground
by one measure – relative total
economic size
Power projection is about
relative economies of scale and
absolute levels of disposable
income (how much can you
build? how much wiggle room
do you have?)
The United States leads in both
categories – and has since
roughly 1870
Result: No matter how badly
managed, the US (under
current technology) is immune
to the cycles that rule the ebb
and flow of the major powers –
and has the freedom to
intervene in Eurasia when and
where it chooses
Geopolitics 101:
A Survival Guide to
Dealing with the
United States
• Don’t get in the way of
the five precepts:
– Secure control over North
America
– Secure strategic depth
– Control sea approaches
– Dominate the oceans
– Keep Eurasia divided
How We Got Here
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9/11: Al Qaeda’s strength
Nukes: The limits of hegemony
War: Ditching the dirty work
Aftermath: Iraq is no Wisconsin
Buyer’s Remorse: dealing w/Iran
The Crux: striking a deal
Iraq: From Beginning to End
The Battle of Nightmares
• The American Fear
• The Iranian Fear
• Iraq is 60 percent Shia
• Mesopotamia has never
been so weak
• The western coast of the
Arabian Peninsula is
similarly Shia
• That coast houses the bulk
of the region’s oil production
and export capacity
• One country controlling 25
percent of global oil
production
• Every time “Iraq” has ever
been united, it has invaded
Iran/Persia
• The last invasion cost one
million casualties and set the
country back a generation
• The Shia have never ruled
Iraq
• The Gulf Arabs – and their
pocketbooks – would rather
see a new Saddam than a
resurgent Iran
Seeking a Balance in the Gulf
Man of the Hour:
Gen David Petraeus
Forget healing Iraq:
shatter the bitch
(especially the Shia)
From surge to
symmetry
Bye-bye Sadr
The Great Satan and
the Axis of Evil do lunch
Target: Pakistan
Seeking a Balance in the Gulf
Seeking a Balance in the Gulf:
Aftermath
• The United States
– Large transfer of
forces to Afghanistan
– Free hand to deal with
the rest of the world
(The Great Rotation)
• Iran
– Become an energy
superpower
– Explore options
• Russia
– Begin panic mode
• Saudi Arabia
– Begin panic mode
• Israel
– Begin panic mode
Russia: Resurgence and Fall
Jan-July 2008:
Besiegement
Kosovo’s independence made a mockery
of Russian power
The U.S. followed Kosovo up with
battalion level exercises in Georgia -- the
latest challenge that cannot go
unanswered
The EU is implementing an energy policy
that could eliminate Russian dependence
NATO more coherent than ever
Shrinking strategic and demographic
window
China’s Central Asian land grab
One bright spot: the U.S. is distracted
This Year:
What’s Needed
Rejection of erosion and
demonstration of power where the
West cannot respond: Georgia
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Token NATO protection
Strong Western energy interests
Russian forces pre-positioned
Pro-Russia regions
Core to Russian identity
Core to Russian security
The Problem
– Putin’s fear of losing control has led
him to install a patsy as president
– Medvedev has earned neither
experience nor respect
– The shift from indirect to direct
power
– Personalization of leadership =
failure to institutionalize stability
– Can real authority be transferred?
One Last Burn
• Within three years Russian “stability” will
be exposed for what it is (and that
assumes the internal power struggles end)
– Energy/financial crunch now inevitable
– Demographics bite hard
– EU/NATO expansion fills the horizon
• Everything must be put into place now –
Russia will never be stronger, and the U.S.
will never be more distracted
• 2008 is Russia’s last chance to shift
momentum
Russia: Resurgence and Fall
The Window of Opportunity
Jumping Through the
Window of Opportunity
• Russia
• Iran
Asian Finance:
The Japanese System
• Key goal of the Japanese economic
model: restore faith, profitability and
return on capital are secondary concerns
• Maximize employment, firm size, market
share, activity and throughput
• Government cannot greatly assist firms
save in one field: easy, cheap credit for all
lendees/projects
• Capital pooled into a the states hands,
funneling it to achieve national goals;
interest and payments negotiable
• Debt levels, profitability and return on
capital irrelevant
The Japanese Model’s Outcomes
• Disinterest in efficiency/profit leads to
debt
• Loan portfolios become non-performing
• Banks invest in clients’ stock for profit
• Interlocking directorates prevent change
• Starves the ‘healthy’ economy for credit
despite ZIRP
• Forces government to prime pump:
• Budget deficit of 8%, debt of 175% of
GDP
• Private financial system locked into
JGBs
• Deflation, distortion and Botswana
• Upside: has pumped at least $2 trillion
in capital abroad
What does the total financial collapse
of a first world country look like?
Japan is the Best
Case Scenario
China’s banks are far worse off
than Japan’s (minimal
international exposure)
China is the most financially
penetrated state in Asia (save
Taiwan)
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China lacks Japan’s wealth and
social cohesion but superior
social control is so far holding a
disaster off (Olympics help)
50
billions USD / year
China has (so far) burned over
$600 billion in attempting bank
bail outs
Free ports
Asia
Europe
US/Oz/Canada
China’s 2008 Fears and Plans
• Financial collapse
– Inject FDI and
expertise into the
banks
– Launch IPOs
– Dispose of NPLs via
AMCs
• Avoid inflation panic
– Develop the interior
– Seal agreements to
produce food abroad
• Salvage the Olympics
– Massive internal
crackdown
– Use overseas Chinese
to lobby for the
homeland
• Avoid post-Olympic
fallout
– Find some way to then
turn off the overseas
Chinese
OK for the Olympics,
But There Is a Deadline
The
European
Pond and
France’s
Rise
France’s Folly
and the Cold
War’s End
Germany’s
Reemergence
• From France’s dreams
to the Concert of
Powers
• Germany’s energy plan
• Germany’s EU
timebomb
• (aka - the euro)
Brazil’s Rise
Building Brazil’s Prison
Brazil’s Opportunity
Petrobras already is a supermajor in terms of
technology and output – new discoveries will
only entrench that position
Political advantage over Western
supermajors will lead to a deep absorption of
many Western economic energy positions
throughout Latin America
Petrobras: the new PDVSA -- and Citgo, and
YPBF, and Repsol, and PetroEcuador, and...
Tomorrow’s Depression
Stray Thoughts: Tomorrow’s Depression
Window of Opportunity
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US power truncated
Iran is being thoughtful
Russia is going for the gold
China just wants to be left alone
Germany has some uncomfortable
decisions to make
• Brazil is oblivious
• Recession will come anyway