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As US power dwindles, Middle East politics will continue to shift

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I believe the Middle East is experiencing broad strategic political realignments, with insurgent forces gaining in strength, and entrenched forces entering a period of stagnation. Unsurprisingly, the regional flux is being driven by the decline of empire, and the attendant regional state opportunism. If current trends continue, the next decade will likely see a regionally diminished Egypt, an increasingly isolated Israel, and eventually less American interventionism and sponsorship. Concurrently, Syrian power and prestige will increase, Lebanon will consolidate Hezbollah’s moral authority, and Turkey will increasingly emphasize its Eastern and Islamic roots to enhance its regional role. What happens in Iran depends in large part on whether America and Israel attack, I believe. The assumption that the American empire is in decline is crucial to this analysis, so it’s worth spending time explaining its basis.

In a sense, the decline of the American Empire was hardwired into the empire’s ascendancy. The Model-T-Fordization of American society, the society-wide perception that today’s big purchase could be paid for tomorrow, has played an outsized role in the growth of that empire. Americans are the world’s biggest consumers of credit. Consequently, corporate profitability became unlinked with the productive capacity of money, and instead became dependent on demand for credit, which carries an interest rate; the cost of money. It’s more profitable for me to sell a car with a 10-year payment schedule than it is for me to sell the same car today at today’s real value. Here’s an excellent article from Harper’s shedding some light on the process of capital shift and interest rates.

As productive capacity, the money available for invention and creative research, is funneled into servicing the debt of ‘cost-of-money’ financial instruments, like collateralized debt obligations, and credit default swaps, the broader society suffers from a dearth of both talent and production – the real engine of economic growth. Many people from my graduating class, me included, took jobs on Wall St., and didn’t produce anything with a real consumption value. Without getting into too much detail, the cost of money fluctuates in real-time, and risk-averse bankers structured many financial instruments with that in mind. Many mortgages, car payment plans, etc., are ‘floating-rate’, or ‘variable-rate’ loans. The interest rate a borrower pays is linked to a reference rate, usually the three-month London Interbank Offered Rate (LIBOR) rate which is literally the interest rate banks in London pay to other banks in London to borrow money. Your home mortgage may carry a 3.5% + reference interest rate, which is why the size of your monthly payments fluctuates. LIBOR is impacted by many things, not least among them the rates at which governments can borrow from one another and the capital markets.

So when the US government decides to undertake a big war, or several, without shoring up capital (i.e. raising taxes) its cost of capital is likely going to rise. Here’s how that happens: US treasury rates, the interest rates paid by the US treasury to borrow money from the capital markets, rise correspondingly with US credit risk, which is the risk that the US government will be unable to service its debt obligations. The perception of US credit risk increases as it issues more and more debt to finance its ever more expensive wars, also dropping the value of its currency, diminishing the real value of outstanding debt. That perception also increases when it guarantees the debt of third parties. When you hear that the US has extended billions of dollars in debt guarantees to Israel, it is telling the capital markets that it is guaranteeing Israeli government debt, thereby lowering the interest rates Israel has to pay to borrow money from the capital markets. The buyers of US treasuries (China, pension funds, etc…) take that into account, and demand higher interest rates, also impacted by a weaker dollar, to buy US government debt instruments. Consequently, US banks and corporations, whose fortunes are directly and indirectly linked to the solvency of the state, also suffer from the perception of increased US government credit risk. Banks have a fiduciary responsibility to their shareholders, and act more responsibly than the US government. When their credit risk increases, they shore up capital by charging higher interest rates and in other ways. The US taxpayer ultimately pays for US government expenditures – in this case, war – twice. First, by shouldering higher interest rate payments today, and later, by paying taxes.

The real story is much more complicated that what I’ve outlined here, and the relationships described are impacted differently in different circumstances. There are many factors that impact US government solvency, the housing bubble, and the rates Israel pays to borrow money to occupy Palestine. And it wasn’t only George Bush’s and Barack Obama’s wars that adversely impacted the US economy; Bill Clinton and Alan Greenspan played a big role with their illusory economic boom in the nineties. However, I believe that the American empire is declining, in part because of what I described above. Moreover, that decline is attributable to structural weaknesses in the American political system which are not easily correctable; think of the current healthcare bill fiasco. But that’s another essay altogether and I hope the reader will indulge me; that assumption is crucial to my analysis, which is why I spent so much time speaking about the capital markets – the real source of American power.

It’s no secret that America’s participation in two shooting wars and a shadowy war-like program – the War on Terror – has greatly diminished its capacity to project its power. Friendly and unfriendly countries have been quick to capitalize on the opportunities provided to them by American neoconservatives and neoliberals. Brazil, Russia, India, China and Iran are the most obvious opportunists. But there are losers too. Egypt is one country whose political structure and historical reliance on American money has made it incapable of advantageous political maneuvering.

The ossified regime of Hosni Mubarak relies heavily on American subsidies; America has provided over $50 billion in military and economic aid since 1975. Despite its obvious reliance on America, forged by a cold peace with Israel, Egypt has harbored hopes of being a moral and political leader in the Middle East. For a long time, the Egyptian regime attempted to balance its obligations to the United States – for instance, colluding with Israel to enforce the siege on the Palestinians in Gaza – with vacant rhetorical appeals to the Arab world on behalf of those selfsame Palestinians. Indeed, Egypt largely succeeded because of its strategic importance as an intermediary between the Palestinians on one side and the Americans and Israelis on the other. This was especially the case when extremist governments in America and Israel adopted rejectionist, anti-dialogue policies regarding Hamas.

Recent years, however, have seen the decline of Egyptian influence in the region. That decline can be traced to diminished American prestige and power in the region, which permits some European states to take a more active role in Middle East diplomacy. Wedded to unpopular and dysfunctional American policies, like torturing prisoners kidnapped by American agents, the Egyptian regime only gains in infamy across the Arab and Muslim world. Meanwhile, the insurgent Europeans offer Hamas alternative diplomatic outlets; the prestigious Gilad Shalit portfolio, once handled by Egypt, is now being handled by the Germans. So while American money sustains the Mubarak clan, it has inextricably linked Egyptian polices to those of the Americans and Israelis, ultimately undermining Egyptian regional influence. That’s not to say that the Egyptians are wholly without recourse. For example, I believe that the decision to build the steel wall between Gaza and Egypt is partly in response to Hamas’ decision to avoid reconciling with Fatah – a project the Egyptians expended great political capital on. Egypt continues to exert pressure by refusing to allow the international Gaza Freedom March delegation access to the Strip. This may be a punitive measure in response to Hamas’ decision regarding the Shalit portfolio.

Egyptian perfidy and American decline has also permitted other regional states to benefit, with the Assad regime in Syria gaining the most. Syrian sponsorship of Hezbollah allows the Syrians to bask in each Hezbollah victory over Israel while incurring little cost in the process. For instance, the 2006 Hezbollah victory over the Israeli Army was enjoyed as a moral victory in both Syria and Iran. Meanwhile, Lebanon suffered the total impact of the destruction wrought by Ehud Olmert and his Zionist government.

The Syrians have pressed their advantage and undertaken several strategic maneuvers to strengthen their hand. For instance, oblique references to negotiations with Israel, which are unlikely, have permitted the Europeans to engage directly with the Assad regime. Furthermore, insistence that the Erdogan government be a party to those negotiations, at the expense of the French, has strengthened the Syrian orbit in the region by enhancing Turkish prestige – recently a key ally. The Turks in turn, have become increasingly sympathetic to the Muslim and Arab world. Mr. Erdogan’s domestically well-received confrontation with Shimon Peres at Davos serves as a testimonial, as does the recent cancelation of war games with Israel. The perception that Turkey can be a meaningful player in the region vs. playing a peripheral role in Europe acts as an inducement to further strengthen ties with Syria. The two countries inked a free-trade agreement in 2004 and recently lifted visa requirements resulting in greater economic activity between them.

Mr. Assad has also deftly stayed above the Iranian-American/Israeli fray, even manipulating that conflict to his advantage. Iran, in need of economic outlets and moral backing, has relied on the Syrians for support. Hezbollah, which serves as a critical Iranian deterrent against Israeli attacks – in much the same way that American soldiers stationed Iraq and Afghanistan serve as a deterrent against American attacks – is partially supplied by Iran through Syria.

The image of a weeping Emile Lahoud entreating Condoleezza Rice to intervene during the 2006 Israeli bombardment of Lebanon did much to undermine America’s allies in the region. That image was juxtaposed by a firm and resolute Hassan Nasrallah rallying the nation to steadfastness, and eventually, victory. Hezbollah emerged from the conflict invigorated, and aid from Iran and Syria helped to rebuild the southern part of the country quickly and efficiently. American allies in Lebanon, by contrast, were abandoned during the conflict. And promises of aid and support went largely unfulfilled. The new Hariri government in Lebanon appears to have learned the lessons of the past. While Lebanon currently receives roughly a billion dollars in annual US government aid, that aid is presently jeopardized by Hezbollah’s greater inclusion in government following recent statewide elections. Whether because of decline in American influence and fortunes, or because of a possible cooling in relations between America and Lebanon, Mr. Hariri is improving ties with the Syrians. His calculus has shifted; there is much to be gained by working with the liberators of southern Lebanon and their sponsors, while the value of American sponsorship continues to sink.

Needless to say, none of this augurs well for Israel. Its standing with Egyptian people is dismally low, so that the cold peace has gotten colder. In Jordan, MPs are demanding that the treaty there be rescinded – although that is unlikely. To the north, Hezbollah has transformed its military gains into political gains and has won greater legitimacy through meetings with European representatives. Syria, the most ascendant regional power, grows closer to Turkey, which has also retreated from its cooperation with Israel. Its principal sponsor is economically strained, and mired in costly conflicts around the globe, powerless to end its increasing moral delegitimization – even suffering from the association. It is possible that Israel may look for a new sponsor. Avigdor Lieberman’s recent visit with Vladmir Putin may be a sign of a loss of confidence in the Americans. But any state that adopts Israel as a client will suffer from all the problems of association that the Americans have – outlined extensively in The Israel Lobby. Furthermore, I do not see what is to be gained as Israel enters its ‘international pariah’ stage. If anything, insurgent great powers – like India and China – have much to gain from Iranian energy stores, which are currently mostly off limits to the West.

In my view, all of the elements described above are positive. It is in America’s own best interest to cease to be a force for imperial injustice – as it is overwhelmingly perceived to be. And retreat from Empire means more resources spent at home. The American people deserve to see their money spent building Maryland rather than Kandahar, and they deserve to see their sons brought home. The British Empire dissolved, and British prosperity did not suffer as a result. As for the regional states, as they gain in strength, they will be more capable of limiting the destruction wrought by a flailing America and Israel – see the wars in Afghanistan and Iraq, and the worrisome prospect of war in Iran. Incredibly, the best hope for avoiding a war in Iran may be a robust Hezbollah and increased vulnerability of American troops in Iraq and Afghanistan.

Ahmed Moor is a 25-year-old Palestinian-American from the Rafah refugee camp. A graduate of the University of Pennsylvania, he now lives in Beirut.

Ahmed Moor
About Ahmed Moor

Ahmed Moor is a Palestinian-American who was born in the Gaza Strip. He is a PD Soros Fellow, co-editor of After Zionism and co-founder and CEO of Twitter: @ahmedmoor

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