Irregular Warfare: After Smart Weapons, Smart Soldiers

[Ken White]

of what you now say. Not all, but much...

When I read comments and hear military commentators expressing frustration about counterinsurgency and "Hearts and Minds" activities, etc., I am reminded of an old saying: "When your only tool is a hammer, every problem is a nail."

So are a lot of people -- and if you read more threads here you'll find that hammer problem is cited by many.

My perception of the American military (biased of course because I'm Australian) is that it has been designed for the precision application of overwhelming firepower - which is something it does very very well, as was demonstrated in Gulf War One ( by my hero - Gen. Schwartzkopf).

This is true -- and it is an object of much discussion here and all over the Army. My complaint is that we did a great job of designing the US Army after World War I to fight World war II. It did that fairly well; not great but fair. Unfortunately, the US Army still has too strong tendencies in that direction. As many here say frequently and that you apparently missed.

You might want to do more research on Schwarzkopf. He was not the architect...

The problem with a counterinsurgency environment is that firepower is not the issue, as we have sadly seen, the AK47, RPG, a few dud 155 rounds and a garage opener is quite sufficient to produce mayhem. The problem is not about having sufficient weaponry to apply to targets, its about finding the targets in the first place and then deciding what to do with them. Under such circumstances, as the Economist has pointed out, it's the brains of your troops and their training and experience that are your critical, limiting, asset.

As is also frequently said here by many...

I do not know enough about American training to be able to comment, but Australian infantry training, always emphasized the absolutely critical importance of junior leaders (Cpl, Lance Cpl) and section operations (about ten men). A very very high premium was placed on initiative, problem solving and independence, (almost to the point of insubordination).

We do not do that nearly as well as you, the Poms or the Canadians. IMO there's no excuse for not doing better. I can give you reasons (mostly involving Congress and money allocation; hardware trumps training -- dumb but there it is). So I agree with you on that. However, many here have made the same point...

I am speculating of course, but I wonder if this is where the gap is that The Economist is trying to delicately point out?

Of course it is.

As for being sensitive about culture, anthropology, etc. etc. it's not about being namby pamby and group hugs at all. It's about getting inside the enemy's skull so that the message you are sending is coherent and understood, bearing in mind that to succeed against an insurgency, you have to convince the population that there are better things to do in life than become a suicide bomber.

I'll know that the message has gotten through when I see troops taking off their sunglasses before they talk to Iraqis.

I could quibble with the wording in your penultimate paragraph but I generallyagree. Agree totally with the words in your final paragraph (though I doubt you'll see that happen for US cultural reasons)..

BTW, you do realize that the grenade simulator tossing in the example you cited in your post yesterday offered absolutely zero training value to your mob or the other guys?

Nobody's perfect...

My point in both responses to your posts is that I think you've must have missed several discussions here that touch on all the topics you mention and pretty much in the same vein as your comments. You jumped in assault mode and pretty much hit the wrong targets. Most here think pretty much the same way you do.

[Rank amateur]

You do note that you and I say it's the people -- which was my point -- and not the tools? We can agree on that much.

Well if you believe that the art of war means that there will always be countermeasures to any tool, then I'll says it's the combination of people and the terrain and the tools, but there were some very smart guys in the Pentagon who thought our technology would allow us to "Shock and Awe" the Iraqis, so the average Joe wasn't the only one who needed a reminder that it's not just about the tools.

Re: Iran. CNN reported that a couple days after Saddam's statue fell, Syria was told "You're next." I don't think the policy was changed because Cheney and Rummy had a change of heart. It was a "lack of available resources." And Syria didn't even make the "Axis of Evil," so I believe that a bunch of guys with AKs and RPGs have already bought Iran more time to work on "the bomb."

[Rank amateur]

Walrus:

It's a good idea to make sure you're on defensible ground before you expose your position. If you aren't, you will be "Schwartzoffed."

[Ken White]

It's all about people and what they do, want to do and can do. All war is -- people are the objects that develop the countermeasures to any tool and which developed the original tool.

Calling attention to items of hardware is a distractor from concentrating on what the enemy is doing -- that's what's important.

I'd submit that the guys in the Pentagon and anywhere else in the US government who created, used or allowed to be used the term "shock and awe" were far from smart. Rather stupid, IMO. Same goes for anyone from Bush down to include uniformed people who applied words like 'war,' 'win,' 'lose,' or 'victory' to the operations in either Afghanistan or Iraq. I could add more but you get the drift.

Those are the same people who took 18 months to tumble to the fact that they had created an insurgency, another 18 months to wake up and start turning it around -- and that's twice as fast as the same 'smart guys' (or same types, ranks and egos) did in Viet Nam. So we gotta give 'em a little credit for being quicker on the uptake than the Kennedy and Johnson crowds -- but only a little...

It's all about people.

We have been playing footsie with Iran for 28 years. They bluster and stamp their foot, then we do the same thing. It's a push and shove match, not a fight.

We did the same thing, precisely, with North Korea from 1953 forward -- that's 54 years; long time -- and it may or may not be over yet. We'll be playing the same game with Iran for a bit longer

My personal belief is the we had and have no intention of invading Iraq or Syria for a great many reasons. Rhetoric by politicians is a constant bother, I pay no attention to them myself -- just watch what they do...

Iran isn't stupid; like the Kims, they'll push us just so far and will pull back before going over the line. They know that in spite of Putin's visits and talk, they cannot really depend on Russia. They know the US troops in Iraq (and Afghanistan, both sides of Iran) can turn pretty quickly, the Air Bases have all been expanded, the US Army is now the most combat experienced large Army in the World, the Navy and the Air Force are not heavily committed and our defense industrial base is cranked up. Ahmadinejad and some of the Pasdaran dipwads may say they discount that but Khameini knows all that and he's a shrewd old dude. Our presence in Iraq is a drag, not a facilitator, for Iran. And they know it.

[Watcher In The Middle]

Originally posted by Ken White:

Ahmadinejad and some of the Pasdaran dipwads may say they discount that but Khameini knows all that and he's a shrewd old dude. Our presence in Iraq is a drag, not a facilitator, for Iran. And they know it.

Ken, would you be kind enough to expand on your comments above (particularly the last 2 lines)?

It strikes me that the Iranian leadership isn't worried so much about tomorrow, as much as the "day after tomorrow", where it seems like Iraqi military development left unto itself is somewhat uneven, but under US tutalege, seems to develop to a much higher standard of competence, and it also happens considerably faster. If similar principles are also applied to different sectors of the economy, and also to infrastructure in Iraq, that could spell some very serious issues for Iran down the road. Iran could be facing an Iraq that could literally zoom right on by them in terms of both political and economic development.

Thoughts?

[Ken White]

First, my comment you quote was based mostly on the military factors and near term at that. Simplistic.

I always get caught when I get lazy...

In the final analysis, the internal security of Iraq has to be an Iraqi effort, no question. However, for now, we effectively are the guarantors of Iraq's external security and we can do that. We will probably do that for some time. Iran would obviously like to delay Iraq's ability to do that themselves (the Iran-Iraq war is still fresh in their minds) so they have a desire to keep us in Iraq and to keep us occupied internally; two birds and all that, keep Iraq discombobulated and tweak us at the same time. However, they have a conflict because they also really want us out of the area to avoid us being the local cop but my guess (and that's all it is) is they don't want that to happen too soon. Thus they have a balancing act and I suspect that balance is a matter of controversy among the power structure in Tehran.

You are quite right to look at the broader considerations. Based on living there -- no expert, no westerner will ever really be expert on the people of the ME in my opinion -- I have no doubt they are worried about several years down the pike but I doubt the economic considerations are terribly significant in their minds. Regime survival is probably paramount and regional hegemony is a close second. They put great stock in the Persian Empire and are inclined to be dismissive of Arabs (Which the Arabs know and which makes for some interesting interplays) and have a sense of superiority in that regard. That and a lot of Oil give them a near term sense of some power.

My one fear is that their near term problems will cause them to to miscalculate and do something dumb; probably not but they can be volatile and overly excitable.

I'm sure their sharp Economists -- and they are a nation of bright people -- are warning of the future as well as trying to fix the rather poor internal conditions at this time but I also suspect the political concerns are paramount and the economic considerations fall in down the column a bit.

They do the math and know they have a significant numerical advantage but I think there may be some concern Iraq will settle down and draw in western investment while they fear Iran will likely not do as well in that regard so they are indeed confronted with a very delicate long term problem as well as the near term problem of our presence.

I would anticipate little change as long as Khameini is alive. There will likely be an internal squabble over his replacement; If Rafsanjani succeeds, life may get interesting.

Just some quick late night thoughts. Perhaps Rex, who's been there recently and is far more current than I am has a better idea.

[Watcher In The Middle]

Ken:

Having been a pol, and on the sidelines by my choices, I've been watching as the various factions of our (US) political leadership (both parties) try to figure out how best for the West to "negotiate" with Iran. Having somewhat of a political understanding helps me understand how different political environments here in the US are framing the issues, and why.

But your comments on this and other threads are the first real logical (what I would call "street smart") approaches to developing a coherent set of logical objectives/methods which we should be using in approaching any negotiations with Iran.

Examples: Let's assume your comments re: Iran on both this and previous threads are reasonably (at least 85%+) valid. If so, then I would comment the following conclusions are available to us:

01 The Islamic Republic of Iran is much more of a "Statist" type of government than most of the other ME nations.

02 This approach (maybe the wrong word) carries over into the economic climate, and does not appear to be decreasing influence. But the effects are a stagnating economy, even with oil prices.

03 Internal political concerns are the driving factor, including over their economy (Much different from the West, where at the end of the day, economics drives virtually everything - certainly political).

04 With economics you know what the sides (factions) are - with political factions, you don't. So Iranian leadership has communications which become much more complex, decision making avenues are far less clear, and few, if any decisions get made quickly. "Today's rules aren't tomorrow's rule, and just forget about what next week's rules will be".

05 Our real strength in "negotiating" with Iran isn't in politics (we are way too impatient), but in economics.

Reasoning: We are trying to get Iran to "move" on certain issues. But their entire governing structure is predicated upon not moving quickly, and certainly not predictably. So, we end up pitching our weakness as a negotiating position against their strength. Does not look to be smart on our part.

06 But if we pitch on economics, and also upon rebuilding Iraq's economy/infrastructure (regardless of Iran), we can totally change the formula. We keep talking to Iran, just don't expect to really achieve anything out of the negotiations. If Iraq's economy develops & gets stronger, Iran will be facing a set of very unfavorable choices. Under those terms, we will end up negotiating from a position of strength.

Opinions? Btw, comments are very welcome and much appreciated. Btw, please excuse my approach in writing this - I'm probably writing/framing the issue as typical political types would.

[Ken White]

your sanity with that 85% attribute; they barely give me 50% on average. The boys will go with 90, the girls way, way less...

Excellent post. I agree with most all of it and would only add some very minor comments.

On 01, you are correct but their desire to be even more statist than they are is adversely impacted by their size geographically and by the diversity ethnically. About 70% are Persian and thus essentially similarly inclined but are very much divided into really secular, partly secular and hard line religious camps -- with the obvious leanings and shadings. The other 30% are Arab (~4%) and various tribes including Baluch -- who are anti-Persian -- and Kurds who have mixed emotions and ties. The are a number of smaller tribes but most are not total adherents to the line from Tehran. Thus, correct but with recurring problems in implementation.

With respect to 04, true and greatly exacerbated by the custom of Taarof (LINK) which complicates everything in Iran from religion to the economic patterns. It shades all their dealings, internally and externally. I'd note here that one of their big complaints is that they believe we do not accord them the respect the inheritors of the Sassanid dynasty, fellow Aryans and the largest nation in the ME deserves. IMO, they have a valid point.

Re: 05, true and that is made more difficult by the fact that haggling is the national pastime there.

I think your 06 is where we are. That's why I've never subscribed to the mantra that "Iran is the big winner." They aren't, they're in a tenuous position and they know it; thus their balancing act.

As I said, excellent summation. All I offer is some slight amplification on three points as I see the situation. Again, Rex has been there recently and could offer other thoughts.

[tequila]

01 The Islamic Republic of Iran is much more of a "Statist" type of government than most of the other ME nations.

I'd disagree on this. Iran is definitely a "statist" economy in that there are few truly independent private entities, but this is true for almost every single ME economy with the possible and recent exceptions of Lebanon, Turkey, and Israel. Egypt has taken some liberalizing steps of late, but has not escaped the model by a long shot.

06 But if we pitch on economics, and also upon rebuilding Iraq's economy/infrastructure (regardless of Iran), we can totally change the formula. We keep talking to Iran, just don't expect to really achieve anything out of the negotiations. If Iraq's economy develops & gets stronger, Iran will be facing a set of very unfavorable choices. Under those terms, we will end up negotiating from a position of strength.

I think you are overestimating two things - the near-term vitality of the Iraqi economy and its negative effects upon Iran.

The Iraqi economy has been shredded not just by the past five years but also by the 30 years of Ba'athist corruption, war with Iran, and the ruinous sanctions regime. Its literacy rate was below 50% in 2003, and much of the remaining educated and professional class has fled. Their return will require both peace and a government that they find acceptable - since many of these are Sunni expelled by Shi'i religiously-based party militia, a government dominated by the same may not be. Even given peace in the region, the Iraqi economy for the next 10-15 years will be utterly dependent on the oil sector and American aid.

I think also that you underestimate the capacity of Iran to economically engage with a peaceful Iraq. All the major Shi'i and Kurdish parties have extensive ties with Iran and it has already become the principle import conduit for southern Iraq. Anecdotal reports indicate that Iranian manufactures and Chinese imports routed through Iran dominate Iraqi markets in the south. This flow, along with the enormous pilgrim trade to Najaf and Karbala, will integrate southern Iraq into Iran's economic orbit in the coming years. What do you think persuaded Iraq's southern tribes to convert to Shi'ism in the 1800s, anyways? A peaceful Iraq dominated by Iran-friendly parties will only seek closer ties to its permanent neighbor.

Thus I disagree with Ken about Iran being the winner of this war. The removal of a hostile Saddam is a huge plus already. It removes their primary security threat and opens up a previously closed arena for trade. That southern Iraq and now Baghdad are dominated by Shi'i religious parties that Iran has built close partnerships with for the past 20 years is another enormous boost. A ferocious enemy has been converted into, at worst, a weak and divided hinterland to be exploited and at best a friend and ally.

About 70% are Persian and thus essentially similarly inclined but are very much divided into really secular, partly secular and hard line religious camps -- with the obvious leanings and shadings. The other 30% are Arab (~4%) and various tribes including Baluch -- who are anti-Persian -- and Kurds who have mixed emotions and ties. The are a number of smaller tribes but most are not total adherents to the line from Tehran. Thus, correct but with recurring problems in implementation.

Don't forget the Azeri population. About 20-25% of the population and represented out of proportion in the clerical leadership (including the Supreme Leader and several prominent hardliners), the officer ranks of the military and IRGC. Hardly "oppressed", but there is some resentment amongst the lower classes about the dominance of Persian language and Persian culture. The ethnic Persian population is under 55%.

[Ken White]

You're correct about the Azeris but they are not marginalized the way the tribes are and thus I included them with the Persians; ethnically different to be sure but an integrated part of the Persian polity and believers in the 'Greater Persian Empire.' Thus 24% Azeri and 51% Persian equate to "about 70%."

You say:

"That southern Iraq and now Baghdad are dominated by Shi'i religious parties that Iran has built close partnerships with for the past 20 years is another enormous boost. A ferocious enemy has been converted into, at worst, a weak and divided hinterland to be exploited and at best a friend and ally."

All true -- but I think you ignore the deep antipathy of the Persian (and the Azeri ) for the Arab and the strength with which that feeling is returned by the Arabs. That and powerful Iraqi xenophobia mitigate quite strongly against any real win for Iran. Recall that Iraqi Shia fought well against Iran in the Gulf War. They will cooperate as long as it suits but the likelihood of bedding down together is I believe remote.

I agree that Iraq will be divided on sectarian lines but that line is bridgeable and I think economic recovery in Iraq will exceed your expectations and will help in that bridging. On that, we'll have to wait and see. If I learned nothing else in the ME I learned that things are rarely as they seem and you have to bore down a few layers to get even an approximate sensing. Even then, your probability of accuracy is only about 50%...

We can disagree on the Iraniha gaining much out of our attack on Iraq. That they did achieve some pluses is unquestioned but they also had a lot of problems dropped in their lap, problems they are not sure how to handle. On balance and over the long term, I believe the negatives to Iran outweigh the positives. Time will tell and we'll have to wait and see.

[Watcher In The Middle]

Originally posted by Tequila:

I think you are overestimating two things - the near-term vitality of the Iraqi economy and its negative effects upon Iran.

The Iraqi economy has been shredded not just by the past five years but also by the 30 years of Ba'athist corruption, war with Iran, and the ruinous sanctions regime. Its literacy rate was below 50% in 2003, and much of the remaining educated and professional class has fled. Their return will require both peace and a government that they find acceptable - since many of these are Sunni expelled by Shi'i religiously-based party militia, a government dominated by the same may not be. Even given peace in the region, the Iraqi economy for the next 10-15 years will be utterly dependent on the oil sector and American aid.

I think also that you underestimate the capacity of Iran to economically engage with a peaceful Iraq. All the major Shi'i and Kurdish parties have extensive ties with Iran and it has already become the principle import conduit for southern Iraq. Anecdotal reports indicate that Iranian manufactures and Chinese imports routed through Iran dominate Iraqi markets in the south. This flow, along with the enormous pilgrim trade to Najaf and Karbala, will integrate southern Iraq into Iran's economic orbit in the coming years. What do you think persuaded Iraq's southern tribes to convert to Shi'ism in the 1800s, anyways? A peaceful Iraq dominated by Iran-friendly parties will only seek closer ties to its permanent neighbor.

Got to disagree with the above. I work with a number of finance type players, and my observations are that Iraq is just starting (ever so slightly) to edge it's way onto the "Investment" radar screen.

It's not any one thing that is doing it, but changes and trends in a number of things that are starting to create ever so slight of a buzz. I got a very quick 10/15 minute run-through on Iraq, with pluses, minuses, and angles I would have never considered. But, when your investment decisions are worth big time money, you look for those factors, because oftentimes, that's all you have to work with.

The individuals drew an extremely interesting comparison of Iraq to Vietnam, only not in the way that most would think. Vietnam was a truly war ravaged nation, and they kept on fighting into the early 1990's, and the first key step to create normalize relations with the US occurred in July, 1995. The first major trade deal took place in 2000. Vietnam today is a very fast growing Asian "Tiger", and that's with a government that is well known for (still) throwing obstacles into the way of free and open trade. And yet, they are growing like a weed, and international investment money is pouring in.

Iraq will, in all likelyhood, do considerably better in terms of economic growth than Vietnam. Iraq has a well educated, very, very innovative culture (and also very entrepreneurial), and that does not even address their natural resources.

One major point brought to my attention is that post Saddam, Iraq and it's citizens have embraced technology as if it is a long lost love. Cell phone, sat TV, internet, a fairly open and free wheeling press - compare that to other neighboring nations which seem to be on a quest to suppress technology use by their citizenry.

If you are an outside investor, that's a real telling sign. Also, Iraq has another "asset" which one should not discount - there is a substantial base of Iraqi expats and naturalized US citizens living in the US, and those individuals are a tremendous asset to take into account in any investment decision making.

One last point made to me was that Iraq's trading partner might be Iran today, but tomorrow could easily be a different story. In fact, Iraq could easily be confronted with a very stark choice - if you keep trading with Iran, you loose the opportunity to trade with the West. As Iraq changes and develops, Iran will have to do the same (as a trading partner). If they don't, Iraq will change to use other trading partners. I'd bet that money will trump ideology any day - even in the ME.

Wish I could share more of the discussion here, but I can't. Let's just say that it was an amazingly fascinating discussion and insight into large scale international capital investments (developing markets).

In terns of economics, if I were Iran, I'd be concerned. Could easily be left in Iraq's dust.

[Rex Brynen]

I, like Tequila, don't see Iraq as a significant economic player for a long time to come. DFI likes political stability and the rule of law, something which is pretty distant at the moment.

Moreover, when Iraq is more secure, the attractions of oil-led growth will likely seduce Baghdad (as it has almost every other high income oil exporter) into policies that use economic policy for patronage and redistribution, creating economic distortions that hamper non-oil-sector growth. This will also likely be aggravated by "Dutch disease" effects on Iraqi exchange rates due to oil earnings, further undercutting non-oil sector competitiveness.

As for Iran, its a mixed picture. Non-oil economic performance has been poor, but this has been largely offset by increased oil earnings, thus reducing the incentives for reform. There are many in Iran for whom the incentives of increased trade with the West are a highly attractive part of a possible geostrategic "Grand Bargain." There are others for whom increased trade with the West is a strategic threat, or at least not much of a prize at all. Both sides influence policy.

Finally, a comment on whether Iraqi love of technology puts them in a position of comparative advantage regarding their neighbours. No, not at all--the whole region loves cell phones, and Iraq doesn't come close to the GCC states in this regard. Almost the entire region (Iran partly excepted) depends on satellite TV as their primary news source. Internet penetration in Iraq is not especially high by regional standards.

[goesh]

"I'd bet that money will trump ideology any day - even in the ME." (watcher in the middle)

You got that right:

http://www.msnbc.msn.com/id/21593805/

updated 33 minutes ago
TOKYO - Markets in Asia and Europe slumped Friday, tracking losses on Wall Street overnight as investors worried about a possible end to U.S. interest rate cuts and a slowing American economy.

Hong Kong's benchmark index plunged over 3 percent and markets in Japan, China, South Korea and Singapore fell more than 2 percent."

2+ points is huge and I got a crisp 20 says China will give the nod for increased sanctions on Iran, which of course bodes well for capital input in Iraq

[tequila]

The individuals drew an extremely interesting comparison of Iraq to Vietnam, only not in the way that most would think. Vietnam was a truly war ravaged nation, and they kept on fighting into the early 1990's, and the first key step to create normalize relations with the US occurred in July, 1995.

Uh, what? Vietnam was still fighting a civil war in the 1990s? You're not referring to Cambodia, are you?

Iraq will, in all likelyhood, do considerably better in terms of economic growth than Vietnam. Iraq has a well educated, very, very innovative culture (and also very entrepreneurial), and that does not even address their natural resources.

They used to be well-educated. Things changed after 1991, and are worse now.

The United Nations Educational, Scientific and Cultural Organisation (UNESCO) estimates literacy rates to be less than 60 percent, or 6 million illiterate Iraqi adults. People in rural areas and women are worst off. Only 37 percent of rural women can read, and only 30 percent of Iraqi girls of high school age are enrolled in school, compared with 42 percent of boys.

One major point brought to my attention is that post Saddam, Iraq and it's citizens have embraced technology as if it is a long lost love. Cell phone, sat TV, internet, a fairly open and free wheeling press - compare that to other neighboring nations which seem to be on a quest to suppress technology use by their citizenry.

Rex addressed this already, but this doesn't sound very realistic. All those are things are widely available throughout the Middle East (except for the freewheeling press, which is not really present in Iraq either) and South Asia.

If you are an outside investor, that's a real telling sign. Also, Iraq has another "asset" which one should not discount - there is a substantial base of Iraqi expats and naturalized US citizens living in the US, and those individuals are a tremendous asset to take into account in any investment decision making.

There are only 90,000 legal Iraqi immigrants in the U.S. Given the remarkable lack of American visas granted to Iraqis, I don't see how this number has increased much at all. Compare to the 280,000-strong Iranian exile community in the U.S., which is much better educated and wealthier as well.

One last point made to me was that Iraq's trading partner might be Iran today, but tomorrow could easily be a different story. In fact, Iraq could easily be confronted with a very stark choice - if you keep trading with Iran, you loose the opportunity to trade with the West. As Iraq changes and develops, Iran will have to do the same (as a trading partner). If they don't, Iraq will change to use other trading partners. I'd bet that money will trump ideology any day - even in the ME.

Iraq does very little trade with the West except for oil, and this will not change no matter what. Saddam sold oil to the U.S. up to and including 2003 - in fact, Iraq's biggest oil export year to the U.S. was in 2001.

Wish I could share more of the discussion here, but I can't. Let's just say that it was an amazingly fascinating discussion and insight into large scale international capital investments (developing markets).

In terns of economics, if I were Iran, I'd be concerned. Could easily be left in Iraq's dust.

Iran's population size, oil and gas reserves, and comparatively high education levels indicate that it has most of Iraq's good features with the added bonuses of no major sectarian violence, civil strife, or enormous refugee flows/displaced population.

[wm]

I have to agree with Tequila as to the credability of most of the stuff stuff WitM listed as making Iraq a desirable place for investing. However I do see another possible reason for seeng American venture capital going into Iraq. Several nations out there, like China, have a whole lot of bucks to invest overseas. I think the US is pretty far down on the list of nations with cash reserves available for investment. It might be that US investors are looking to jump into Iraqi investments early. Then they can sell off to investors from those other nations at a profit later. It's what I call the "I hope Microsoft buys me out" model of entrepreneurialism.

We might want to consider that we may end up losing influence in the long run if China, et. al. start investing large amounts into Iraq and other ME/SWA nations' private development coffers.

Here is an additional concern. A lot of US growth is capitalized by foreign money invested in its businesses. One might wonder what would happen should China and others find a different place to stick their extra gelt.

[Watcher In The Middle]

Originally posted by Tequila:

Iran's population size, oil and gas reserves, and comparatively high education levels indicate that it has most of Iraq's good features with the added bonuses of no major sectarian violence, civil strife, or enormous refugee flows/displaced population.

That's fine, but really quite irrelevant. There's virtually little new inflow of outside capital into Iran, because most foreign banks and investment sources are running from the possibility that they could end up in a deal with an IRGC front company, and that's heading toward committing corporate suicide, especially if you have substantial business interests in the US.

That's really unlikely to change anytime soon - in fact, all the signals are that non US banks and multinationals are looking to exit Iran (or certainly minimize their exposure) as fast as is practical.

And as in the last few years the IRGC has suddenly "appeared" as being the new business partners in a number of pre-existing deals with international corporations, which that caused those multinationals a great deal of corporate indigestion, and many of those deals have resulted in losses, if not outright loss of the contracts. After you get burned, you don't tend to be in too much of a hurry to go back for Round 2.

I'm more comfortable with iraq than Iran, simply because Iraq's government knows it is going to be facing crunch time on some very major political/economic decisions in the very near future. No side stepping those decisions - going to have to make the decisions. Good or bad - we'll see. But those decisions will get made, because there's no alternative.

Iran's political leadership does not see it that way. Looks like their intent is to maintain their own power base. And if it's a negative investment climate for outside investment, an approach of "more of the same" really doesn't result in any improvements.

To play on an old style Yogi Berra-ism, We'll see what happens after it all plays out.

[Watcher In The Middle]

Originally posted by wm:

Here is an additional concern. A lot of US growth is capitalized by foreign money invested in its businesses. One might wonder what would happen should China and others find a different place to stick their extra gelt.

The PRC had US related assets of about one trillion dollars this last reporting (little bit above, I believe). That's a hammer, but relatively speaking, it's not a giant hammer. The EU nations collectively have a much larger amount of US financial collateral, I believe (will have to check those numbers for certain).

But there's a few very recent issues (most current quarter) for the PRC, that affects their investment capabilities. First off, orders from US corporations (not all, but many sectors) to companies in the PRC are decreasing for the most current quarter. Started at the end of the last quarter, have dropped off even more for this quarter. With the US dollar being cheaper, China's trade edge shrinks, and that horde of US financial assets starts to shrink.

Secondly, the increasing oil prices per Bbl. are hitting the PRC much harder than the US. Prices in the $90's per Bbl. aren't good for us, but are even more damaging to the PRC (less efficient per Bbl.; plus many of their exports are petroleum intensive). Double whammy.

I think the US is pretty far down on the list of nations with cash reserves available for investment.

Valid assumption before the very recent (and apparently, still ongoing) subprime and related mortgage investment meltdown. But right now, that whole area currently qualifies as "Dead and Deader" in terms of being a destination for large scale investment capital. That money (non-sunk capital) that was flowing into those areas will have to go elsewhere.

This weekend could be really ugly (Re: subprime and related mortgage investment meltdown).