stratfor’s big seven (aka stratfor 201) the preponderance of american power seeking a balance in...
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Stratfor’s Big Seven(aka Stratfor 201)
• 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
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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)
• 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
Unsuccessful Countries Have...
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Preponderance of American Power:Land, Labor, Capital and Global Power
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The United States
• The result is manic depression– Sputnik– Vietnam– Oil shocks,
Japanphobia and the 1980s recessions
– September 11, 2001
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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
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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
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• 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
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Geopolitics 101:A Survival Guide to
Dealing with theUnited 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
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How We Got Here• 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
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Iraq: From Beginning to End The Battle of Nightmares
• The American 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
• The Iranian Fear
• 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
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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
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Seeking a Balance in the Gulf
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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
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Russia: Resurgence and Fall
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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
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This Year: What’s Needed
• Rejection of erosion and demonstration of power where the West cannot respond: Georgia– 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?
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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
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Russia: Resurgence and FallThe Window of Opportunity
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Jumping Through the Window of Opportunity
• Russia • Iran
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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
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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
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What does the total financial collapse of a first world country look like?
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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)
• China has (so far) burned over $600 billion in attempting bank bail outs
• China lacks Japan’s wealth and social cohesion but superior social control is so far holding a disaster off (Olympics help)
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Free ports Asia Europe US/Oz/Canada
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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
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OK for the Olympics, But There Is a Deadline
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The European Pond and France’s
Rise
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France’s Folly and the Cold
War’s End
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Germany’sReemergence
• From France’s dreams to the Concert of Powers
• Germany’s energy plan
• Germany’s EU timebomb
• (aka - the euro)
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Brazil’s Rise
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Building Brazil’s Prison
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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...
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Tomorrow’s Depression
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Stray Thoughts: Tomorrow’s Depression
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Window of Opportunity
• 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