Global Thoughts 17 June 2007


Eating cheerios and enjoying the view at Acadia National Park in Maine

As you know, we’ve been on vacation for much of the past month and a half. Little Elizabeth is growing up fast; she even knows to take her shoes off when we get close to the airport security check. We are awaiting our second child the first week in August. Today is Father’s Day — here is Elizabeth’s poem to me:

On a special father’s day from me to you
I am remembering all the things you do
From taking me on walks to the pier
To putting Clorox on my rear (I mistook it for a baby wipe)
From buying dresses in Italy that wow them all
To watching me so I never fall
From doing rollie-pollies in exotic places
To never forgetting to tie my laces
From giving me your tefillin boxes to play (during prayer)
To putting my fingers in huggies boxes to stay (ooops again)
From holding me on the choo-choo train
To helping me with TSA (airport security) as we board the plane
Together we will always be
I especially love watching you pee
Through thick ‘n thin you are there for me
Not a better father can there be.

There is some real news to report in the Middle East so let’s get to it.

Israel/Fatah-Land/Hamasistan….So much for the binational or  two state solutions; now there are two Palestinian states. It’s been clear for the past month that Hamas was the power in Gaza and was only to decide when to announce it. I have no reason to believe the Israelis are surprised at this outcome and believe they wanted it this way. Otherwise, they would have done something to prevent it such as release Marwan Barghouti who was the only person on the Palestinian side that I can imagine who could have possibly kept the sides together. Where to go from here is tricky: 1. You could work with Fatah in the West Bank, make a deal with them and then go and obliterate Hamas in Gaza and then turn it over to the Fatah people. 2. You could let Hamas get a toehold in the West Bank, thoroughly discrediting Fatah and give yourself a blank check to take over all of the Palestinian territories or do whatever you want once the entire place is in chaos. 3. Any other ideas? Either way, the end result is that the Israelis are going to have to go and deal with Gaza if for no other reason than the fact is that their neighbors Egypt and Jordan are scared to death of having a Hamasistan on their borders and this threatens to upset the whole order. I am also told that the Hamas buildup in Gaza exceeds that which exists in Lebanon; the longer the Israelis wait the more painful the campaign is going to be.

I don’t agree that you can keep Gaza penned inside a wall and think Israel won’t suffer from it. In a matter of months they will have rockets that reach Ashkelon, a city of 100,000 people. Not what it was when I last visited in 1983 when the municipal bus picked up anyone at the 8pm movie and took them home when it was over. I also don’t think any Israeli government is prepared to wipe out entire villages in Gaza in order to establish the deterrence many people feel is the only way to bring the terrorist element under control. Gaza doesn’t operate in a vacuum either; one important reason the Israelis haven’t gone in there for the kill is that they know they have to commit substantial ground troops and they don’t feel comfortable taking resources away from Syria’s front given the Syrian moves to prepare for war this summer. I should say that I hear different opinions as to whether the Syrian moves are really something to be concerned about. But I do think that the Syrians are being manipulated by Iran and Russia to be more hostile toward Israel than may be good for them; not much different than what led to the 1967 war which as we all know at this point was a grand manipulation by Russia over Syria and Egypt. A new documentary shows Israeli intercepted telephone conversations between the Syrian and Egyptian leaders in 1967 and in it they admit that Russia deceived them and they are trying to decide who they should blame for this fiasco. (They decided to blame America.)

What should one learn from the past 2 months of activity? The #1 point is that Saudi money can’t beat Iranian guns. The Saudis with their billions couldn’t get their Mecca-brokered deal between the Palestinian factions to last even a week. So as I have consistently said the Iranians are the fulcrum — you either have to deal with them or wipe them out. No less than Mubarak said this week of Hamas “no way” meaning plain and simple that you can never make peace with them because they are not interested in making peace; they exist solely to make trouble to advance the causes of their sponsors who can only advance in the event of instability. The fact that Barak is now going to be defense minister is a testament to the fact that the Israelis held their noses and voted in a military tactician known to be both brilliant and arrogant and I believe that there is an expectation that Iran is going to be dealt with this coming year because nobody in Israel thinks they can have a normal life with a nuclear Iran with this kind of government in power. The Iranians are openly blackmailing the Gulf by telling them that they will be hit by their missiles in the event that the Americans strike the Iranians, so I can’t imagine these people can live with it either. The Israeli power structures don’t want Bibi Netanyahu although he is better suited than Barak to win a general election. Therefore, they agreed to back his candidacy to win the Labor Party to cohabit with Olmert (and prevent a general election which would result in the removal of many incumbents from office), and for whatever reasons the Israelis Arabs backed Barak and this was the decisive backing he needed. I should add that Barak’s record in the private sector these last 5 years has been less than impressive with no record that any of his projects ever came to fruition. I think he is still overrated but I do know that he is very familiar with the Iran portfolio on the military side. If he does a good job this year, he can either survive with Olmert or go on himself to take over the prime minister’s chair once he has become electable.

A year ago I wrote that in a meeting in Canada, a prominent Palestinian told me that civilians were quietly hoping the Israelis would just reoccupy the place. Now it is being openly said in the Arabic press. The one reason why the West Bank is still somewhat civilized and not throwing each other out windows is that the Israelis are still very much in charge there. For that reason, I don’t think that Hamas will take over that area unless as I stated above the Israelis for their own reason allow something to happen.

If it were my show and I were Israel, I would release Marwan Barghouti and give the Palestinians one last chance to make things work. Abbas is never going to pull people together. Only a strongman with street respect is going to get that done. If Barghouti is bad news, the Israelis can always kill him later. If he fails, the Israelis can at least say that they gave the Palestinians a fair chance and they blew it. Until now, the Palestinians can still fairly say that the Israelis hamstrung them and never gave them a fair chance by saddling them with impotent leadership within the Palestinian Authority and boxing in their economy. I do believe that most ordinary Palestinians are fed up with their lives and want a truce with Israel. When Saeb Erakat told a senior Iranian official this month to shut up about throwing the Jews out of Israel and making trouble for the Palestinians, he was telling them what Palestinians really believe. If you are running Israel, it is too easy to walk around thinking about obliterating the entire Palestinian population in Gaza because of the doings of mafias within the society. It may not be Israel’s job to do the dirty work of trying to ferret out the baddies from the rest but it is the right thing to do to the extent possible and that’s why the main debate inside Israel is whether or not to go out and do the dirty work that needs to be done as opposed to just nepalming the whole place and starting all over. 

I don’t see any good endings for this story and I think we are going toward a return to the Old Middle East where countries with stable thrones and economies are the ones that move forward even though it may appear over the next year with changes in personnel that things are changing. Qatar, the UAE, Jordan, Oman and perhaps Bahrain are the ones with a future. Saudi Arabia is moving in interesting directions but so far there is more talk than real economic reform. Lebanon is a prime example of how things won’t work in this part of the world — the factions couldn’t even agree to a truce this summer to salvage their tourist season and the Israelis have been gone for a year.  Iraq will only begin to move toward reconciliation when the warring factions run out of bullets and get tired of it all. Doesn’t matter if the US stays in there another week or for a century; there will be a bloodbath when it exits. Egypt’s Mubarak and Pakistan’s Musharraf are going the way of Zimbabwe’s Mugabe; the 3 of them will be replaced soon but as I said before that won’t necessarily lead to change.

Whether or not it was a mistake for Israel to exit Gaza and Lebanon is still an open question to me although I must admit it looks really hard to defend these days. If there was a strategy to Sharon’s moves of several years ago, it is either still playing out or the victim to his incapacity. I can’t tell yet but I think that in another year we can make a judgment on this.

Syria is another wild card. I have said before that Syria might deem it in its interest to start a war with Israel that it expects to lose so as to force Israel to negotiate on the Golan, something the Israelis are not interested in doing right now. Some say to me that if Assad loses the war, he will lose his country to fundamentalists. Nasrallah in Lebanon doesn’t look a loser to many in the West but he is in bad shape among Arabs for making the war. Assad looks like a winner in the West but he is in a bad situation among Arabs right now. He may not have much to lose by going to war if he thinks he’ll look like a hero just for fighting the Israelis to a draw. The Israelis may not be willing to let him be defeated for the reasons stated above. Some in Israel feel it may be worthwhile to let him manipulate the Israelis to the negotiating table on the Golan for precisely the reason that without a war the Israelis don’t have the constituency to open such negotiations. The military factions in Israel are the ones most open to negotiating with Assad over the Golan. The assumption here is that Assad deals for Syria and acts rationally; if he is manipulated by Russia and Iran he may not act rationally and all bets could be off. It’s a real wild card and one thing I don’t know is whether or not Assad is really looking for a fight or if this is a replay of what happened several years ago when intelligence was misinterpreted and created an unnecessary alert status by Israel when in fact the Syrians weren’t looking for trouble. The intelligence is inconclusive to me; this week you get the Israelis complaining about Hizbullah rearming in the north and the Syrians preparing for war; you also get the UN’s commander in Lebanon stating that the Hizbullah is virtually absent from South Lebanon and that they will be nonexistent within a few years.

I said months ago that Peres would be the next president of Israel so there is no surprise there. 

When I was in Rome last month, I watched Al-Jazeera’s new English channel. Good productions but a bit too much propaganda in terms of lead news items, documentaries and droning on about how the Americans are in morass in Iraq and how Israel is behind everything. On the day Tony Blair announced his resignation, their lead story was about a woman in a Gaza hospital fighting for her baby’s life. There was a documentary in two parts over two days about the Israeli Merkava tank. No real advertising other than the governments of Dubai and Qatar; this is not going to get a place on the cable TV dial inside the US anytime soon.

Other Issues in the world…

Walmart.…I went with my wife to one of these in rural Maine. We’ve never seen so many obese people anywhere in our lives. They had these huge pink donuts there; my daughter looked at them and my wife told her they were toys.

US Presidential Race.…I’m hoping Bloomberg decides to run. Inside New York he is a successful mayor. Outside he is the guy who wants to take away your guns. On the Republican side, the only real guy with a chance is this Mormon who has some good business experience but doesn’t connect well with people on the political trail. Giuliani is overrated and will self-destruct as people see more of him. McCain is floundering. On the Democratic side, Obama is flavor of the month and is fizzling out. Hillary Clinton is getting all the smart money endorsements but if you felt that Bush wasn’t great with the truth, you’re going to get more of the same with Hillary.

By the way, despite whatever I think of Bush, I think that his VP’s assistant Libby ought to be pardoned. He is a scapegoat for the rest of the administration and it is wrong to let him hang in jail when he basically covered up for what they did. I think the judge threw the book at him; he made his point, now it is up to the president to give out the pardon and tell the world to judge him and Cheney if they don’t agree with it.

The Ethanol Angle

I’d like to shift directions to a more far-reaching geopolitical issue I never deal with. The Middle East is important primarily because of oil and that’s going to change. It’s already changing. I rented a car last month (living in Manhattan I hardly ever drive), drove 225 miles and only 1/4 of the tank of gas was used in a full-size car. Used to be that used an entire tank. While gas prices might have increased, the truth is that they’ve gone down because we’re using less of it. The real story this month is an article in Stratfor about Ethanol. Seems that in Brazil researchers are announcing that they have perfected a new way of producing ethanol that drastically lowers the cost of production. Amidst the hype of ethanol, the main problem has been that they still haven’t figured out how to really improve the environmental impact of using ethanol over other fuel sources and that the cost of production has never really been lowered to make it viable. Also, the side effects from shifting everything to corn has simply been to create such demand in the corn market that other prices have shot up including everything from white bread and eggs to items using corn syrup. They now say they have made decisive progress in both areas. If this is so, by 2012 cars may begin to really see the fruits of this change and the oil markets will forever be changed and lessened in importance. Countries such as Iran and Venezuela would be among the worst affected and that can only be good for the rest of us. Consider that the last time oil demand dropped by 10% after the 1997 currency crisis, the price went down 75%. This is a once in a generation breakthrough that really may change our world. Coupled with the fact that corporate America and Europe has really decided that global warming is a reality and that companies need to deal with it, especially after California took the lead in regulating industry, there are real changes afoot at the Circle K. Industry would rather deal with a national standard or get out there and self-regulate rather than half to comply with 50 different state standards.

I think that oil is not where conflict will be 25 years from now; water is really the scarce resource and companies that figure out how to squeeze out more of it for human consumption will be the big winners for long-term investment. It is also the issue over which future wars will be fought, particularly in the Middle East where it is already scarce and was in fact an important reason for the 1967 war.

An insurance executive from a Fortune 500 insurance company remarked to me this week that his industry is already assuming that by 2010 there will be universal health coverage in the US. He doesn’t know how exactly it will work but the actuaries are designing insurance products assuming this will be the case….I also expect that the H1B quota will be dealt with this year by Congress. My business partner met this week with the chairman of the House Judiciary subcommittee which deals with this issue. The H1B issue is popular and even if the Congress doesn’t make an immigration bill, there is support for a stand-alone bill on this subject and I personally expect action. The Financial Times opined this week that the US policy on immigration with regard to skilled labor is “absurd and self-destructive.” If the result is simply a quota of about 150,000 visas a year, it won’t change anything. Next April 1 they’ll have 300,00 cases filed on the doorstep of the nation’s immigration bureau and we’ll just be in another mad rush to beat the cap. I think they should just remove the cap altogether and let the market seek its level….Down below in the travel section, I’ll be telling you that Hertz rental car agency won’t help you install a child car safety seat because their insurance company doesn’t want to cover them in case they do a bad job and then you sue them. Problem for us is that we’re from Manhattan and we never drive so we don’t know how to do it ourselves. The safety problem caused for us exceeds the cover-your-ass protection to Hertz. I recommend not renting from Hertz till they figure out that their priority should be to train their employees better rather than put their customers at risk. 

Rule of Law in the US — It is heartening to see things such a the district attorney who went after the Duke lacrosse team lose his license to practice law. The Guantanimo project is falling apart as cases get thrown out and the flimsy evidence on which this prison camp was built is exposed. We all know about what the CIA has done all over Europe with rendition and what the US military did in Iraq. People high up in the US administration are being convicted and the Vice President’s sway over foreign policy has been fading as a result. It may be that people in government are given to excess, but at least the system works to correct the excess. It may take a few years but basically the stories come out, people are punished and lessons are hopefully learned. Even Nasrallah in Lebanon had a kind word for Israel — they too have commissions of inquiry, even more so than the US — and they are learning from last year’s failures. People are resigning, being put before the courts and the truth comes out. It restores some measure of faith although I would much prefer that people learn from experience and do a better job in the future but of course asking people to learn from history is asking too much.

For Summer Travel Notes & Photos on Ivan’s trip to Santorini, Greece, Rome and Chewton Glen, England

For Summer Travel Notes & Photos on New England (Nantucket, Mass., Bretton Woods, NH & Bar Harbor, Maine)


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