A Nobel for Humility in Economics

Nobel Prize

As you are by now all probably aware, Richard Thaler won this year’s Nobel Memorial Prize in Economic Sciences. All question of whether this is a “real” Nobel can now be laid to rest, since the announcement was made via the Nobel Prize’s official verified Twitter account.

Thaler won the prize for his research in behavioral economics, although he’s far from the first behaviorist to win it — Herbert Simon, Daniel Kahneman, and Robert Shiller all got the big gold medal from Sweden. But Thaler’s work is arguably more wide-ranging and influential than any of those earlier pioneers. And it’s the sheer breadth of Thaler’s research that offers a peek into where the discipline of economics is headed.

Loosely speaking, the economics of the past was a search for a grand unified theory. At first, supply-and-demand was the idea that tied econ together. Later, that was replaced with explicit modeling of economic decision-making as the optimization of a rational economic “agent.” To predict anything from the price of tomatoes in Wyoming to the savings rate in Bangladesh, you would just assume that people maximize utility and companies maximize profit, then write down a mathematical optimization problem that would spit out an answer. This method — sometimes called the neoclassical approach — grew so popular that economists started applying it to sociology, law and politics.

Lots of people justifiably made fun of the unrealistic hyper-rational agents in these economic models. Early behaviorists like Kahneman gained credence by poking holes in the idealized vision of homo economicus. But there was still the hope that a general theory of economic behavior existed and could be found. Kahneman tried to replace standard rational optimization with prospect theory. Behaviorists like Matt Rabin hoped that human irrationality could be represented as small deviations from a single unified theory.

I see Thaler’s research as qualitatively different. Whereas many behaviorists want to replace or tweak the standard theory, Thaler started smashing it left and right. He pointed out anomaly after anomaly. And instead of trying to design a new theory-of-everything to explain the anomalies, he borrowed or created situation-specific theories, such as mental accounting and the endowment effect and so on. Sometimes the theory was a very simple one. Or sometimes, like Shiller, he merely documented where standard theory went wrong, and left the theorizing to someone else.

Critics of behaviorism see this as a flaw. They bemoan the replacement of one theory with many. If you have a different explanation for every situation, the anti-behaviorists say, what’s to stop you from telling just-so stories? These critics tend to see Thaler’s research as a destructive force.

But Thaler isn’t just a bomb-thrower — his approach is far smarter than that. I believe he’s out to create a new paradigm — one that doesn’t rely on a grand unified theory of human behavior.

There’s no reason that economics has to be like physics. Physicists are always trying to unify their theories — to show how what appear to be different forces and principles are actually the same. But human behavior might just not be like that — the way that a person decides which brand of soy sauce to buy might simply be different from the way she decides when to buy Apple Inc. stock. Thaler’s research is all about forcing economists to acknowledge this possibility.

So how can we know which theory to use in which situation? Data. The behavioral revolution goes hand in hand with the empirical revolution now sweeping the wider economics profession. Over the past couple of decades, economists have steadily been theorizing less and measuring more.

Let’s hope this isn’t just a fad, but a fundamentally new paradigm for the field. The old way of choosing between different explanations was to start with the assumption of a grand unified theory and then find the minimum possible deviation that explains the phenomenon in question. The new way should be — and in some cases, already is — to gather a number of plausible explanations and let the data dictate which one applies. Then as economists find theories that each work for a small, limited domain, they can explore other areas where each theory might also apply. Slowly, each successful theory’s domain will expand, and when two of them happen to bump up against each other — that is, when they give equivalent results — economists can work on unifying the two.

This is basically how natural scientists approach the world. Instead of jumping to a conclusion that looks as clean and pretty as physics, economists should more closely follow the methods that physicists actually use.

So behaviorism isn’t really about psychology — it’s about humility. Sometimes things people do can be explained by psychological biases, sometimes by purely rational optimization and sometimes by other things entirely. Thaler is intent on making econ about what works, instead of what we think ought to work. As such, it has the potential to have reach and power far beyond the specific topics Thaler has spent his storied career investigating.

(Bloomberg)

Saudi Arabia’s Armament Policy

Russian President Putin shakes hands with Saudi Deputy Crown Prince and Defence Minister bin Salman during a meeting at the Kremlin in Moscow

After Saudi King Salman’s visit to Moscow ended with serious talks over two major military agreements, it seemed more pressing than ever to delve into the why behind Riyadh gravitating closer towards importing all sorts of arms deals in an unprecedented manner.

The matter of the fact is that Saudi Arabia faces considerable foreign threats emerging from the growing Iranian menace and America’s receding commitment to defend it.

Iranian threats increased across all Saudi borders. From the north, Tehran expanded its influence in Iraq and Syria in the north, while on the southern front has meddled with Yemen’s civil war.

Tehran would have tightened its grip on the entire region had the Muslim Brotherhood’s rule in Egypt lasted under the presidency of Mohammed Mursi.

As for the regressive American protection policy, the Obama administration bluntly dashed the “Saudi Arabia’s security is part of the US’ security” notion in the sense of serving America’s higher interest.

Henceforth, Saudi leadership was put up before a single option: enhancing national defensive capabilities.

For Western governments, there is always a close relationship between arms’ sales and foreign policies. This relation links deals to conditions and it may restrain them for political considerations.

US former President Obama’s administration had suspended its supplies of ammunition to Saudi Arabia and deprived it of intelligence cooperation due to disputes over the war in Yemen.

It is not strange that some American state institutions and some Congressmen opposed deals with Saudi Arabia or other countries. Many deals struggle due to opposition figures lobbying against them. There are hostile groups working against Saudi Arabia and some that accuse it of carrying out military operations against civilians in Yemen.

In addition, there are lobbyists doing the bid of anti-Saudi powers. Despite all this, it is the president who makes decisions based on American interests.

The military deal with Russia is not an alternative to US weapons and it does not aim to distance the kingdom from the US, as some people had suggested in their analogies.

King Salman’s visit to Moscow was the first official visit by a Saudi monarch to Russia. It was critical in terms of Saudi efforts in stabilizing oil market and mitigating Moscow’s Iran policy.
Iran’s growing threat that is forcing Riyadh to be stronger than it ever was, buying Russian and Chinese weapons will liberate it from US pressure. In case the US suspends its supply of ammunition or prevents it from using its weapons in any upcoming war, Riyadh will have other options.

The arsenal that Saudi Arabia will have two alternative missile defense systems that stand against Iranian attacks or any other attack: the American THAAD and the Russian S-400.

After possessing several resources, Saudi Arabia will not go through what it went through two years ago in Yemen.

Gulf countries, whose neighbors lurk in resourcefulness, must strengthen defense policies, not just by buying more weapons but also by improving military institutions performance and developing scientific and industrial work.

Truth be told, this is what Saudi Crown Prince Mohammed bin Salman has effectively put in action.

Crown Prince Mohammed is reformulating the concept of Saudi military might away from media spotlight.

It is the Gulf countries’ fate to live in a region swamped with wars and chaos. Saudi Arabia is forced to think that military superiority is more than sealing arms deals as it is also a doctrine that relies on science, discipline and developing industries.

It is a comprehensive system. This is what Israel, which is the largest importer of weapons, also believes. The peak of excellence is for armament not to become a burden on the state, a reason for bankruptcy or a weak point– as it must be a path for development, growth and peace.

Why Did the US Even Get Involved in Syria?

US-SECURITY-OBAMA

A candid memoir by former US Defense Secretary Ash Carter provides a rare opportunity to better understand President Barack Obama’s Syria strategy before it recedes into the historical distance. His many valuable insights raise one big question, however: Why did the US even get involved?

The apparent goal of Carter’s detailed reminiscences is to establish his role in the defeat of ISIS. The former defense secretary asserts that effective operations against ISIS and a specific battle plan, which Carter claims US and allied forces still follow (the two “red arrows” pointing toward Mosul and Raqqa), only took shape after his appointment in February 2015. But, the self-serving part aside, Carter’s 45-page report describes an effort that had few supporters in the region it affected.

Carter blames the US withdrawal from Iraq for the emergence of ISIS. But even after the terror militia set up its “state,” “the people of the region did not want invasion-sized forces to return,” the ex-secretary recalls. Throughout his two-year tenure, Carter had to “ease [Iraqi] Prime Minister [Haider al-]Abadi into accepting more US forces (which was controversial for him at home).” The Iraqi forces, too, initially were reluctant to fight, to the open irritation of Carter and US generals who had to keep prodding the Iraqis into action.

Obviously, the Syrian government of President Bashar al-Assad was even less welcoming of US intervention, even when the US administration’s idea was to set up local anti-ISIS forces from scratch “by recruiting individual fighters, forming them into units, providing them training and equipment in Turkey and Jordan, and re-inserting them into the fight in Syria.” Even though, as Carter explains, the idea was that these fighters wouldn’t get involved in the Syrian civil war, Assad was well aware of what the US thought of him. Then, Carter came in and changed the plan, switching US support to existing paramilitary formations. “Almost all the real fighters were already part of ad hoc groups and all wanted to fight Assad as well as ISIS,” he explains.

It was after the US decided that this was OK that Assad made his case to Russian President Vladimir Putin. What Putin saw was US interference in the civil war, an attempt at regime change — something he had vehemently opposed in Libya, even quarrelling with then-President Dmitri Medvedev, who had allowed the Western interference there to go unchallenged. By arming and training anti-Assad groups, the Obama administration — and Carter personally if indeed it was he who brought about the change of strategy — drew Russia into the conflict.

After Putin began the Russian operation in September 2015, Carter recalls persistent Russian efforts to establish a pattern of cooperation with the US “From that first moment, Russia sought to associate us and the counter-ISIS campaign with what they were doing in Syria — constantly telling the world of their desire to coordinate and cooperate with us, asking to share targeting and intelligence information,” Carter wrote. He rebuffed these advances for three main reasons. First, coordinating with Russia, which was closely allied with Iran in Syria, could have weakened Iraqi Prime Minister Abadi’s resolve to work with the US Next, it could link the US to the “inhuman” Russian campaign (a questionable reason at best given the multiple civilian casualties inflicted by the US-led coalition). Finally — and I think most importantly for the Obama administration — “it would naively grant Russia an undeserved leadership role in the Middle East.”

Unsatisfactory interactions with Russia, and Carter’s struggle to stop John Kerry’s State Department from making a deal with Putin that would involve military coordination rather than mere deconfliction, are described in a chapter about “spoilers and fence-sitters.” Apart from Russia and Iran, these include Turkey — which, according to the ex-secretary, “caused the most complications for the campaign” — and the Arab neighborhood, the Gulf states, which, Carter writes, “were active in lobbying and PR that somehow never translated into battlefield action.”

To sum up, US interests weren’t clearly aligned with: Iraq, Iran, Russia, Turkey, the Assad government in Syria and the Gulf states. Did the US have any enthusiastic allies at all?

Well, there were some of the anti-Assad rebels (except the ones wedded to Islamist causes) and, most of all, the Kurds. US support of them, of course, was the main reason Turkey turned from an ally into a “spoiler.” But at least someone really wanted the US to be involved, if for reasons that had less to do with ISIS than with the Kurdish dream of a sovereign state. Now, the Kurds of Iraq have voted for independence, justifying all the misgivings Abadi had about the US anti-ISIS operation.

In fighting ISIS, the US managed to step on everybody’s toes in a battered, short-fused region that was already leery of US interference after the Iraq and Libya adventures. Carter’s account sheds light on how that happened, as much as into the mechanics of defeating ISIS. It explains why peace in the region won’t be a given even after ISIS is gone: Carter himself writes that he’s concerned “the international community’s stabilization and governance efforts will lag behind the military campaign.” The account also raises the question whether a more lasting solution could have been achieved if Assad and his allies on the one hand and Turkey on the other had been left to deal with the ISIS problem without US interference.

Counterfactuals, however, are useless. The US involvement has only intensified after the Obama administration left, and political stability in Syria and Iraq is ever more elusive as Middle Eastern nations and armed groups try to get used to the US/Russia/Turkey triangle of power brokers. Carter can proudly claim a part in bringing about this new, volatile configuration.

(Bloomberg)

The Nuclear Issue Isn’t the Real Iranian Challenge

Iran's Supreme Leader Ayatollah Ali Khamenei speaks live on television after casting his ballot in the 2009 Iranian presidential election in Tehran

Various cultures have different phrases for expressing the idea of having it both ways at once. “To take a swim and not get wet” is an Albanian proverb. Poles talk about “having the cookie and eating it.” Iranians want “both God and the sugar dates.”

The Trump administration has been weighing a contemporary geopolitical version of this straddle. Hard-liners have been urging the president to decertify the Iran nuclear agreement but insist that he wants to strengthen the deal, not break it. The idea is enticing politically, certainly, but it has as much chance of working as (forgive me) “washing your fur but not getting wet,” as a German aphorism puts it.

Sen. Tom Cotton (R-Ark.), a leading critic of the Iran deal, described this ambiguous diplomatic approach this week at the Council on Foreign Relations. “I don’t propose leaving the deal yet. I propose taking the steps necessary to obtain leverage to get a better deal.” Cotton wants decertification, but no sanctions, so that the United States can . . . what? Apparently, the idea is that US pressure will convince Iran to make unilateral concessions that it refused during the 13 years the deal was being negotiated.

Magical thinking is always appealing in foreign policy, but it usually produces nothing more than fairy dust. In this case, there is no evidence that putting the agreement in limbo will bring any security benefits for the United States or Israel. It will introduce uncertainty where the United States and its allies should most demand clarity — in insisting on compliance by all sides with an agreement that caps Iran’s centrifuges and stockpiles of enriched material for at least another decade.

Defense Secretary Jim Mattis, hardly a dove on Iran, bluntly told the Senate Armed Services Committee on Tuesday that the nuclear deal was “something that the president should consider staying with.” When pressed by Sen. Angus King (I-Maine) on whether he thought the pact was in the United States’ national-security interest, Mattis paused and answered: “Yes, Senator, I do.”

Officials speak truth to power at their own risk in President Trump’s Washington. So Mattis’s argument for sustaining what the president has called “one of the dumbest [and] most dangerous” deals was important, though the outcome of the debate still isn’t clear. It’s probably because of Mattis’s military advice, however, that Trump has dropped his campaign talk of simply tearing up the agreement.

How would Iran react? Seyed Hossein Mousavian, a former Iranian official who stays in close touch with his ex-colleagues, told me recently that if Trump doesn’t certify, but Congress doesn’t re-impose sanctions, and the other P5+1 negotiators assure full implementation, then Iran may continue to adhere to the agreement. But he cautioned that this line is opposed by some political factions in Iran that argue for suspending the pact if Trump challenges Iranian compliance.

As for the administration’s hope of forcing Iran to renegotiate the “sunset” provisions and other details of the agreement, Mousavian says that’s a nonstarter in Tehran.

The real challenge with Iran isn’t the nuclear issue, which was put in a box for at least a decade by the agreement, but Tehran’s aggressive behavior in the region. Iran and its proxies continue to destabilize the Middle East. They seek to manipulate and control nearly every major capital: Beirut, Damascus, Baghdad, Saana. According to the White House, Iranian proxies are mining the Bab el-Mandeb Strait, pointing missiles from Yemen toward Riyadh and Abu Dhabi, and seeking to carve a zone of influence on the ruins of ISIS in Syria and Iraq.

The administration claims to be focused on this big Iran problem. Would that it were so. Officials say that Trump has signed off on a broad strategy that makes Iran’s behavior the central issue going forward. But the decertification debate will probably dominate the headlines over the next weeks and months — needlessly focusing attention on the one part of the Iran problem that is capped and manageable, and defusing efforts on the real challenge.

There’s a final, crucial reason Trump should certify that Iran is complying with the nuclear deal: because it’s true. Even Cotton conceded as much this week, arguing against certification “not primarily on the grounds related to Iran’s technical compliance, but rather based on the long catalogue of the regime’s crimes and perfidy against the United States.”

A question for the Iran hawks: If the United States refuses to certify an agreement when a country is “technically” in compliance, why would any other country ever make a deal with us again? A great country keeps its word.

(The Washington Post)

An Unhappy US Congress is Not a Good Congress

No one feels sorry for members of Congress. Nor should they, but we probably should care about their working conditions, which are pretty much awful right now:

Congress scholar Josh Huder reacted with a blunt assessment: “Congress is a crap place to work. More crap than any time certainly in recent history, but likely distant history too.” Moreover, he pointed out why it matters: If the main thing members of Congress do is dial for dollars, the results will be a legislature full of very rich folks who have little interest in or aptitude for legislating. 

My entirely subjective opinion (for what it’s worth) is that for whatever reason, that’s become more of a problem in the House than in the Senate. Not the rich part: U.S. senators are very wealthy. But I do think there’s less dead wood in the Senate now than there was, say, 10 or 20 or 30 years ago. On the other hand — and again this is just purely guesswork on my part — the average quality of members of the House has been lower this decade than at any point in recent history. 

Of course, you learn in part by doing, and there’s been very little legislating at all since January 2011. Not none, but a lot less than usual. 

The outcome I’d hate to see would be the rotting away of Congress’s “transformative” powers. It’s possible to imagine that eventually it could evolve into an “arena”-type legislature, in which its main function is to debate the president’s policy choices but not to make its own choices. Congress’s control over executive-branch departments and agencies — such as its influence over the Federal Reserve — could also erode over time. That wouldn’t end US democracy. But the result would be a far less robust democracy, with citizens and groups finding it much harder to reach points of influence within the system. And it also, as many have pointed out, would fit poorly with the constitutional structure, leading perhaps to constitutional crises. 

All of which are very good reasons to find ways to make service in Congress more appealing for talented, civic-minded (or, for that matter, power-hungry) citizens. 

Now, to be fair, neither House nor Senate retirements have spiked in recent electoral cycles, with only one senator so far calling it quits instead of running in 2018. So perhaps there’s less here than meets the eye. But I don’t think so. I think McCain and Huder are exactly correct.

1. Erica Chenoweth and Jeremy Pressman at the Monkey Cage have their monthly report on political protests and other activism.

2. Dhrumil Mehta at FiveThirtyEight has the data on the news media paying less attention to Puerto Rico. Which probably is one of the reasons (but of course no excuse for) the Donald Trump administration has been slow to act.

3. You know what also can’t be helping with Puerto Rico? That Trump still hasn’t nominated a new Department of Homeland Security secretary. Politico’s Andrew Restuccia and Eliana Johnson report that the White House isn’t close to doing anything about it after two months. 

4. My Bloomberg View colleague Megan McArdle on the Trump — and Reagan — tax bills. 

5. And a little fun: Yair Rosenberg has a list of social media sins to atone for. 

A Must-Have Man

Russian President Vladimir Putin in Red Square, Moscow, Russia with St. Basil’s in the background.

In Moscow, you cannot miss visiting the Red Square. It will be a coincidence if you go there in October. This month marks the centennial anniversary of the “October Revolution”, which shook the last century and the world. The orchestrator of that revolution, Vladimir Ilyich Lenin, is still lying there. If you happen to be there on the seventh of the month, you must remember that the Master of the Kremlin is turning 65 on that day. One can say that a part of history meets at this specific moment.

Lenin’s tomb is only hundreds of meters away from Vladimir Putin’s office on the other side of the square. Lenin certainly believed that Russia would live under the “comrades” party forever. Great victors have this habitude. They imagine that their successes are capable of fighting time and that their ideas cannot be killed or assassinated.

The mighty do not learn that history is addicted to destroying convoys. Perhaps it did not occur to Lenin that those who had grown up under his cloak would one day repress his victories through their indolence and obstinacy.

The clock does not turn back. Putin originally emerged from the Lenin party and from the ingenuity of the KGB. But Putin’s Russia keeps the vestige of the founding father only in his shrine.

The current Russian president has words that reflect the cruelty of the fate of the October Revolution. He sees the collapse of the Soviet Union as “the greatest geopolitical disaster of the 20th century.” He even stated more expressive words: “Whoever does not miss the Soviet Union has no heart. Whoever wants it back has no brain.”

Before I go to the Square, I asked a Russian academic, joking: “Who will be the next president following the upcoming March elections?”

“We both know the answer”, he replied, smiling.

He meant that there was no president except The President. When I asked for an explanation, he said: “Russia cannot live without a strong state and a strong leader. It is the size of a continent and consists of 83 federal entities and includes 160 ethnic groups that speak about 100 languages. It includes Christians, Muslims, Buddhists, Jews and areas of fluctuating growth. It neighbors 14 countries. Only a strong man can convince this wondrous mixture to co-exist or force them when needed.”

He continues: “At historical turning points, a strong man appears armed with will and vision. He advances, and everyone believes that the country has summoned him to stop its slide towards suicide. This is what happened with Putin.

The Russian Federation was on the brink of disintegration when he entered the Kremlin at the beginning of this century. He managed to speak to the ordinary Russian people and to repress all those who were preparing to leave or blow up the train. He restored the Russian sense of dignity. Russia was re-instated as a major international player. Look at Syria, where the Russian solution is the only proposed solution.”

Russia got tired of the indolence of the Communist Party’s cardinals. Then it feared the mess of Yeltsin era. Moscow has receded and the lost provinces were preparing to fight for the legacy. A man was waiting the day he will enter the Palace and History. At the right moment, he struck.

Perhaps Lenin imagined that he would run the country from his tomb after his death. This did not happen. The master of the palace does not listen to the late man’s advice. He only defended him when many called for removing his body from his symbolic stronghold off the Kremlin and laying him to rest next to his mother, like any ordinary citizen sliding into oblivion.

It is a different Russia, which is ruled by Putin today. In the Red Square, I remembered that Asharq al-Awsat has sent me to this land in 1992, one year after the fall of the Soviet Union. I went to Arbat Pedestrian Street. Suddenly I heard a Russian man shouting loudly. I asked my colleague, Sami Amara, what he was saying. He replied: “He says that the uniform of the colonel is on sale for $25 with its decorations. I approached a pile of uniforms of the Red Army officers for sale in a humiliating sight for that old army and its majestic country.”

When I returned to London, I wrote about the sick Russia under Boris Yeltsin, the colonel uniform on sale for $25, and Lenin, who is left to tourists.

Vladimir Putin was close to the Berlin Wall when it collapsed. He saw scenes of humiliation in the streets of Russia. He made his decision and made his way. He made his story and changed the fate of his country.

At first sight, Russia seemed far away, groaning under the snow and longing for its Soviet clothes. Putin launched his war. He reformed the Red Army’s spirit, budget and arsenal. He domesticated the governors of the provinces and barons, who came to the country with their wealth from Soviet rubble. He sought a truce with the West until he gathered his strength. He responded to NATO’s drawing near his country’s borders and began settling his scores. He took advantage of Barack Obama’s hesitation and struck. He intervened militarily in Syria and rescued the regime “whose fall was likely within two months.” And here is the Russian solution ahead of everything else.

The Syria crisis was his chance to respond to what he considered to be Western “treason” in Libya… his opportunity to avenge the colorful revolutions and human rights organizations… his golden opportunity to strike Islamists away from Russian soil… and his chance to remind that Russia is a mandatory and crucial partner.

There is a weakness that the tsar failed to conceal. The decline in oil prices revealed that his era did not achieve the desired economic progress. His country’s economy is still lingering far behind European economies. The US and European sanctions have doubled the sufferings. His hopes for an opportunity to forge a deal with the arrival of Donald Trump have evaporated. This is why the regime today is looking for partners and investors.

At the hotel, I asked the young man who brought the coffee for his favorite candidate in the upcoming presidential elections. “It is Putin because he is strong; whether you like it or not, he is a must-have man. He gives you a feeling of reassurance. We do not want chaos back.”

It is not simple that the exercise of power does not drain the balance of the president-leader. It is not simple that the majority feels that he is a guarantee… that he was able to sail in the midst of storms… It is not simple that the academic, businessman and hotel worker are convinced that a man who changed the fate of his country is a must-have man. While destiny makes most of men, some men make their own destinies.

Trump’s New Policy Will Focus on Iran’s Meddlers

Iran

After more than nine months in office, President Donald Trump finally has an Iran policy.

Last month before the opening of the UN General Assembly, Trump approved the long-awaited strategy to deal with Iran, according to administration officials. These officials tell me it will outline a new aggressive approach to countering Iranian threats all over the globe and endeavor to use the leverage of Trump’s threats over the Iran nuclear deal, or Joint Comprehensive Plan of Action, to spur US allies to begin to address its flaws.

On Wednesday at a press conference to dispel news reports that he considered quitting his post over the summer, Secretary of State Rex Tillerson hinted the new policy was coming. Speaking of the Iran nuclear agreement, he said, “the JCPOA represents only a small part of the issues we have to address with Iran.”

The centerpiece of Trump’s new Iran strategy will be the designation of Iran’s Revolutionary Guard Corps as a terrorist organization, placing it in the same category as al-Qaeda and ISIS. Congress mandated this designation over the summer, but allowed Trump to waive the requirement.

The designation would be significant.

The Revolutionary Guard in Iran controls a large portion of the state’s economy. Iranian economist and businessman Bijan Khajehpour, in an article in al-Monitor in August, estimated that the guard was responsible for 15 percent of Iran’s gross domestic product. (He also acknowledged that it’s difficult to arrive at a precise statistic because there are no official statistics on the web of companies it controls and its stake in enterprises with state and semi-state entities in Iran’s economy.)

The designation of the Revolutionary Guard as a terrorist organization could create problems for foreign companies seeking to invest in Iran. While the Treasury Department under President Barack Obama issued rules requiring private companies to do due diligence and avoid investment in the Revolutionary Guard, the rules were weakened in the final months of the administration. The new designation will make life harder for those companies.

“It’s important because it means if you are doing business with Iran in key sectors of its economy, you run a significant risk you are doing business with a terrorist organization,” Mark Dubowitz, the executive director of the Foundation for Defense of Democracies, told me this week.

The designation of the Revolutionary Guard is one element of what administration officials have described as a whole-government approach to pushing back against Iran’s regional aggression.

This includes a new policy on countering Iran’s threats to shipping lanes in the Arab Gulf and particularly the threat of anti-ship missiles and the harassment of US Navy vessels. It will include a new emphasis on countering Iranian networks inside Latin America; Iran’s development of ballistic missiles; Iranian human rights violations against its own citizens; and support for terrorist groups and proxies in the Middle East.

Two US intelligence officials tell me that an element of the strategy that will not be publicized includes a ramping up of intelligence operations against the Revolutionary Guard and other Iranian proxies like “Hezbollah” in the Middle East.

Already, CIA Director Mike Pompeo has approved new authorities for US intelligence officers to begin tracking and targeting Iranian agents abroad. These kinds of programs include psychological operations, such as placing funds in secret accounts belonging to Iranian officers in order to create the impression such officers are working for foreign powers.

Obama wound many of these programs down in his second term, particularly after the formal negotiations over the Iran nuclear deal began in 2013. Pompeo is winding them back up, according to these officials. As The New York Times reported in June, Pompeo has placed the CIA officer, nicknamed the “dark prince,” who led the hunt for Osama bin Laden, in charge of the agency’s Iran operations.

Despite the administration’s crystallizing policy on Iran, US officials tell me there is still no formal plan on how to secure Syrian and Iraqi territory after the ISIS is driven out. This is particularly important in Syria today as Iran’s proxies and the Revolutionary Guard have already begun to take over some of these areas as the war against ISIS has turned. In Iraq, militias loyal to the Revolutionary Guard still play a key part in the state’s war against the terrorist group. Since 2014, the US has at times provided air support in operations that include these militias.

Dubowitz told me that for now he is assessing how comprehensive the new effort against Iran’s Revolutionary Guard will be. “I’m looking for measures that will drain the Guard Corps’ resources and have an economic impact on their funding of aggression abroad and patronage networks at home,” he said.

If Dubowitz gets his wish, it’s likely the Iranians themselves will accuse Trump of violating the nuclear deal forged by his predecessor, and threaten to pull out. Unlike Obama, Trump would probably consider that a favor.

Bloomberg

Saudi Alliances between Washington and Moscow

Saudi

Hours after Moscow’s announcement that Saudi Arabia is interested in purchasing the most advanced Russian air defense system, the S-400, Washington declared that the American government agreed to sell the advanced THAAD missile defense system to the kingdom. This means that Riyadh has obtained the two most advanced air defense systems in the world to add to its military systems.

More important than the military deal is the political one that the Saudi government is making with the two rivals in the east and west. Saudi Arabia has the unique ability, shared with a few countries in the world, to deftly grasp the lines of alliance between the two rivals, who eye each other suspiciously whenever anyone cooperates with the other. It is only natural that neither Washington nor Moscow would want any partner to cooperate with their rival, as voiced by the Pentagon when it expressed its concern that many countries that the US considers as its ally, such as Turkey and Saudi Arabia, are buying military equipment from Russia. These stances are made out of understandable political, economic and commercial considerations.

A country such as Saudi Arabia, which has a deep political heritage and a balanced and sound diplomacy, could not have struck deals with two of the world’s greatest powers without hurting its interests somewhere. This was voiced by the US after the THAAD deal was made, which could be interpreted as an American political message to Riyadh that it does not oppose its partnership with Moscow, albeit reluctantly.

Riyadh realizes very well that solidifying its ties with Moscow does not mean abandoning its historic ally, the US. The Riyadh-Washington ties are much deeper and more important strategically. Improving ties with Russia means that the kingdom is seeking national interests away from narrow alliances in their traditional sense. These alliances expired with Riyadh’s opting to expand its future options and exploiting Russian efforts to regain its role in the world in areas it had power in the past.

Riyadh’s actions are taking place at a time when the international scene is witnessing major changes with world powers where even the US’ major traditional European allies are seeking to improve their ties with Moscow. This is in contrast to the past when turning to the east used to be considered taboo. Despite their current shift to the east, the European powers have maintained their strong alliances with Washington. We also cannot overlook the turbulence affecting the ties among world powers caused by their differences over various contentious crises, such as the Ukraine conflict and regional issues related to Iran, Syria, Iraq and Libya.

Custodian of the Two Holy Mosques King Salman bin Abdulaziz’s visit to Moscow has opened the doors wide for a meeting of Saudi and Russian visions. No one can prevent Riyadh from seeking contact with influential world powers in order to improve its interests, partnerships and investments. This will in turn garner it additional support and allow it to preserve its current alliances and balances, which would serve its security and stability. It will also preserve regional and international security and stability. This is an equation that Riyadh has been able to achieve in a manner that few other countries have been successful in over the past seven decades.

Whether Saudi Arabia turns to the east or west and whether it cements its strategic alliance with Washington or opens new horizons with Moscow, Riyadh has the political and economic tools to allow it to continue to solidify its position among major players without harming its interests and those of its partners no matter where they may be.

Some Haven’t Learned from the October War

The Jewish state suffered heavy losses: almost 3,000 soldiers were killed, 8,000 were injured, 1,000 tanks and other destructive machinery were lost while 100 military air crafts went down.

It also lost possession over one of the largest lands it has seized six years prior to a rather easy and opportunistic war. This is a brief overview of the October 1973 war.

Wars are political activities, and their aim is not only to defeat the enemy. And the outcome of that war is that it has changed perceptions on the banks of the Suez Canal.

Israel is a strong and advanced state, which possesses a dangerous military and expansion project.

It lived a sense of permanent superiority and content ever since winning the war in 1967, but most of the elements of this equation have changed in the October War.

From then till now, Israel’s mission has become to protect whatever it has gained from the six-day war.
Israel has learned its lesson and so did Egypt, yet some Arabs haven’t. They are the ones you see in Qatar, Iran and remaining torn regimes in Syria and Iraq.

Perhaps the Sinai Peninsula and the Suez Canal would not have returned to Egypt if the 1973 war wasn’t waged, and perhaps Israel’s hunger for expansion would not have been put to an end without that defeat.

The October War resulted in a major difference in relations between both sides as it adjusted the power balance. After that, both sides knew that there is no such thing as guaranteed victories.

It dismissed many axioms inside the Jewish state, however, it failed to enlighten anti-Egypt Arab states, which misunderstood the war and its outcomes.

Former Egyptian President Anwar el-Sadat remains one of the history’s most prominent figures, politically and militarily. This war is only one of his many achievements.

Egypt entered the war in critical political and military circumstances; only six years after its defeat in June – a war that stripped Egypt of its arsenal and enthusiasm.

Sadat’s advisers certainly attempted to dismiss the pursuit of such a dangerous mission against a state having a massive arsenal of advanced weaponry.

It is wrong to compare both countries in terms of size and population, such as some commentators have said continuously.

Despite Israel’s smaller population when compared to Cairo alone, yet it has a bigger army. This is because most Israelis are trained and qualified soldiers for war if we count the army back-ups and the rest of the soldiers as the state demands that all those between the age of 17 and 49 should fight when needed, amounting up to 1.5 million individuals today.

This makes their numbers greater than that of the Egyptian army, who stood at half a million at the time.

Despite the difference in numbers, Israel lost then. The war came as a victory for faith, a victory over arrogance and superiority, a victory spurred for the first time a sense of insecurity among Israelis. It echoed conviction of humility and retreat after a constant desire for expansion.

After the 1973 war, Israel did not wage an expansionist war again. The dream of a “Greater Israel” was over. The following wars that Israel was engaged in were about defending itself against the Palestine Liberation Organization in Lebanon, and then against the Iranian-backed Hezbollah.

In the October War, Egypt was victorious over Israel while the latter was the winner in the Syrian front as it seized more territory, which it later returned via negations in its agreement with late Syrian President Hafez al-Assad.

The agreement was not on separating forces and reordering borders as it was described, but it was an end to the direct war between Damascus and Tel Aviv. Even so, Baathists launched a false propaganda war against Egypt because it signed the Camp David Accords.

Sadat was a realist politician, who was different from them. He developed the victory to become a greater project. If it weren’t for the threats by President Saddam Hussein’s regime in Iraq and Assad regime in Syria, the Palestinian Leader Yasser Arafat would have been part of the accords.

That war could have also come to a final peace agreement if it weren’t for Syria, Iraq and Libya’s conspiracy against Egypt and the treason of Islamic groups that assassinated Sadat – the man who released them from Egyptian President Gamal Abdel Naser’s prison.

Egypt won in the October War, yet it is quite unfortunate that the Arabs lost it as an opportunity to capitalize on their only victory over Israel.

To this day, there are those who are trying to distort the war’s history and the events that followed it to cover up their defeats and their political stances, which later proved futile.

After the Saudi-Russian Summit

Saudi Arabia's King Salman arrives at Vnukovo airport outside Moscow

Several factors push the journalist who headed to Moscow to cover the Saudi-Russian Summit to describe it as an exceptional event. It is the first time a Saudi monarch walks into the Kremlin Palace.

The keenness of Russian President Vladimir Putin to receive the king with hospitality reflected Moscow’s wish to make this visit a green light for solid and deep relations to serve interests of both countries.

It is not restricted to the symbolic value of King Salman’s entrance to Kremlin, but the date has its significance based on political and economic facts. We are talking about two major petroleum-producing countries that are also among the G20.

It is no secret that each state knows the significance and strengths of the other. Russia is a country that overcame the collapse of the Soviet Union and came back as a dynamic strong, influential power in the international arena.

Two years ago, Russia became a key player in the Middle East because of its military intervention in Syria, and it is now seen as the sole and compulsory passage for a resolution in Syria. Russia is a permanent Security Council member and has the ability to block resolutions through its veto power. Moscow didn’t hesitate in recent years to underscore its right to use that power.

Russia also possesses nuclear powers and is achieving significant technological and scientific progress, as it wants to outrun the West in invading space. We shouldn’t forget that this country that sleeps under snow every year, also sleeps on a wealth of cultural mines not restricted to the fascinating novels.

Federal Russia is also concerned with Muslims who represent part of its nation and history – it is concerned with Muslims who have become its neighbors after the collapse of the Soviet Union.

In return, Russia is aware of the economic and political weight of the kingdom and its wide Arab, Islamic and international popularity — it is also aware that Saudi Arabia has the ability to take decisions in building ties based on its interests.

“Strategic Partnership” with the US and promising ties with China, Japan and many other states do not fend off tight relations with Russia. The Russian military intervention in Syria might have doubled Russia’s belief in the huge role Saudi Arabia could play in building a fair peaceful settlement.

In addition, Russia believes that a new and strong Saudi Arabia is under development and that Saudi Vision 2030 promises economic and social transformations whose impact will expand beyond the Saudi border. The Russian side doesn’t conceal its comfort towards the Saudi move, from confronting terrorism to waging a comprehensive war on extremism, its causes and roots. This builds a bridge between the two.

Matching policies are no more a condition for building ties in the current world. The Saudi-Russian cooperation to stabilize the oil market was encouraging. In the past two years, they discovered that modest trade doesn’t suit the available opportunities in the two countries willing to diversify economies and overcome dependence on oil.

A new approach became a must despite the different points of view towards Syria. Talks of Crown Prince Mohammed bin Salman had their decisive role in launching the dialogue of interest and exchange. It is a policy of building bridges and discovering investment and cooperation opportunities in a way that serves both sides and reinforces the ability to tackle topics of disagreement.

The mutual desire to open a new page of cooperation was clear from the beginning. Saudi officials and investors brought with them persuasive, detailed and realistic studies that have left a positive impact on the Russian side and forecast further agreements.

The Russian keenness to let the summit be a success is pretty obvious. On the eve of the visit, Russian FM Sergei Lavrov expected – in an interview with with Asharq Al-Awsat – that the summit will be a turning point between the two countries and will take cooperation between them to a whole new level in a way that contributes to the stability of the Middle East.

Lavrov added that both states realize the fact that there are no alternative solutions for regional crises but political and diplomatic ways via a comprehensive national dialogue in line with international law.

Economy is the key and interests are the actual backbone. It is no more possible to build ties on wishes or matching circumstantial political stances. Russia’s Putin knows that the economy is the strongest general in upcoming battles and that a booming economy is a guarantor for status as well as stability and ability to compete and deliver military equipment.

Without a strong economy, military capabilities drop and major roles relapse as well. For that, opportunities must be discovered, ties must be established based on interests, education developed, modern technology possessed, expertise exchanged and development prospects opened.

The date in Kremlin was exceptional. Two countries discover dimensions of cooperation using the language of figures, mutual interests and the wish to build bridges. The essential question is about the level these ties will reach after the Kremlin date.