World of Worry

Jonathan R. Laing, Barron's Online:

Investors have a world of worry to fret about these days, from the Middle East to Korea. But they're mostly worrying about the wrong things, contends George Friedman, who heads the private intelligence-service Stratfor.

The Austin, Texas firm has prospered since we first publicized it just weeks after the Sept. 11 attacks. Collecting real-time information from the Internet and from informants around the world, Stratfor forecasts and geopolitical analyses have become staples in stories on the war on terror. Likewise, Friedman's commentary is sought by news shows and Fortune 500 clients -- including some of the largest financial institutions. His views are frequently provocative and idiosyncratic, but always stimulating.

His forecast for 2005, conveyed via telephone, proved to be no exception. Our talk spanned the globe, building from progress in the Middle East -- despite new violence in Lebanon -- through North Korea's rumblings, on to why investors should be cautious on China and Russia.

As a political scientist and admirer of realpolitik, Friedman feels that the U.S.'s aggressive action and military presence in Iraq has inestimably helped the war on terror by, among other things, motivating reluctant allies like Saudi Arabia, Egypt and Pakistan and erstwhile enemies like Syria and Iran to help the U.S. by cutting off their support of al Qaeda and serving up better intelligence to Western governments.

"I call it the coalition of the coerced, but the tempo of timely arrests of al Qaeda operatives around the world, and the fact that the U.S. suffered no terrorist attacks running up to last year's election, can in good part be attributed to better intelligence from the Islamic world," Friedman avers. "Our victory in Afghanistan was insufficient. We had to show the Islamic world that we meant business by putting large numbers of troops into the Mideast, into harm's way, rather than cutting and running such as the U.S. had done previously in its rapid pull-out from Beirut in the 1980s and Somalia in the '1990s."

In this context, Friedman sees Syria's and Iran's recent announcement of their united front and the assassination of former Lebanese leader Rafik Hariri as an attempt by the two nations to strengthen their bargaining position with the U.S. He claims that the bombing that killed Hariri was likely contracted out to Syria's and Iran's favorite terrorist organization, Hezbollah. He adds, "Syrian intelligence doesn't do suicide bombings like we think the Hariri assassination was, but Hezbollah most certainly does. The two countries, by killing someone the U.S. really likes, seem to be sending a message that if pushed too hard by the U.S., they will react."

While Friedman cautions against excessive euphoria over the recent elections in Iraq, he contends that the situation there is beginning to stabilize. Moreover, he expects that the war will begin to recede from the headlines. The virulence of the Iraq insurgency took Stratfor somewhat by surprise. But, he adds, the violence has been largely confined to the Sunni Triangle. (See "Winning in Iraq" in the June 14, 2004 Barron's on the strategic reasons Friedman supported invading Iraq.)

Moreover, the training of the Iraqi security force is starting to bear fruit, particularly since the number of Sunni recruits has been cut back, due to their dubious loyalties [Saddam is Sunni]. Friedman also expects to see more involvement by Iranian-trained Shiite militia units in patrolling some of the hot combat zones now that the Ayatollah Ali al-Sistani slate appears to have won a victory. He expects U.S. casualties and troop levels to start trending lower in the months ahead; among other things, U.S. forces will likely be shifted to larger, well-protected bases more remote from Sunni cities.

As for Iran, Friedman is not as concerned as many other observers about its nuclear-weapons program. Iran has actually been quietly helpful to the U.S. both in the war on terror and in Iraq, and has a major stake in creating a dependable ally on its western border in the form of a Shiite-dominated united Iraq.

Iran is largely using its nuclear ambitions as a bargaining ploy with both the U.S. and the European Union. Negotiators from Germany, France and Great Britain are attempting to play the good cop with Iran, while the U.S. remains the bad cop. In the latter role, according to Friedman, the Bush Administration may well have covertly planted the exposé in the New Yorker last fall by Seymour Hersh -- which claimed that U.S. and Israeli special-operations teams operating inside Iran had already catalogued numerous special nuclear facilities for eventual attack. "Iran's nuclear program isn't really all that viable, and the country has to know that if she continues to enrich uranium in defiance of Western desires, then the U.S., or perhaps Israel, will hit them with the big stick," he insists. "Iran isn't that stupid." ...

Let it never be said that we don't live in interesting times.