Diplomacy & Crisis News

Lu Shaye keeps alienating his foreign hosts.

For a decade, as democratic institutions in Venezuela crumble, the United States has been paralyzed by a single choice: to engage President Nicolás Maduro or not. As his grip over the country remains steadfast, Washington is working for a breakthrough in supporting ongoing negotiations between the Maduro government and opposition. A potential opportunity opened last week when the United States hosted the first-ever Cities Summit of the Americas.

The United States has long overlooked the role of mayors and governors in restoring democratic institutions from within, yet the Cities Summit presents a unique opportunity to redefine U.S. policy towards Venezuela. The U.S. Department of State invited mayors from across the Western Hemisphere, including Venezuela, for a two-day conference to help local leaders develop solutions to global challenges, including “democracy renewal”—signaling a growing focus on city and state diplomacy. By applying this subnational approach to U.S.-Venezuela relations, the United States could breathe new life into a protracted situation.

Venezuela’s humanitarian and economic crises cause ripples across the hemisphere that will fundamentally alter regional stability if gone unresolved. With over seven million migrants and refugees, Venezuela’s population is the third largest group of internationally displaced people after Syrians and Ukrainians. The crisis leads to a steady stream of human suffering, strains host countries’ resources, and facilitates the rise of criminal networks. Formerly the United States’ largest single supplier of crude oil, Venezuela is entrenched in debt. At a time of growing tension with Russia and China, the decade-long crisis in the United States’ hemisphere weakens the country’s ability to compete across the world.

Some of the few bright spots in Venezuela over the last decade have been driven by local leaders. The United States should support this momentum and reorient its strategy around a new objective—not only presidential elections in 2024, but gubernatorial and municipal elections in 2025. By using a variety of levers across government and multilateral agencies, the United States can help support a long-term approach to restoring Venezuela's democratic institutions. The upcoming regional elections are an opportunity to show support for democratic actors across the political spectrum.

A closer look at the landscape of city and state leadership in Venezuela reveals great potential. Venezuela’s tradition as a federal republic has allowed local and regional leadership to continue exercising public functions and representation. Municipal elections have been held since 1989, and the 2025 subnational elections will appoint leaders to over 3,000 positions. While many Venezuelan opposition leaders have boycotted elections in recent years, individual candidates have had unexpected victories that revitalize the country’s opposition movement.

In 2021, opposition candidate Sergio Garrido defeated Maduro’s former foreign minister and preferred candidate in Barinas after a series of political setbacks. The opposition’s victory in what’s considered the political cradle of Chavism reignited hope in the promise of regional elections. The United States should set its sights on replicating victories such as Garrido’s, but local Venezuelan leaders currently face systemic obstacles that make Garrido an exception, not a rule.

The Maduro government has tried to marginalize local opposition politicians by limiting subnational resources and centralizing programs. As of 2020, the largest share of local government revenue came from central government grants and subsidies, which allows Maduro to control levers that reduce the power of mayors and governors. Starting in Hugo Chávez’s time, opposition leaders have lost authority to administer airports, toll roads, and local police. The tactic of weaponized centralization is most evident by the decrease in local government expenditures, which have dramatically declined from 7.1 percent of GDP before 2014 to 1.8 percent in 2020.

The launch of the first-ever Cities Summit is an opportune moment to kickstart a new approach to subnational engagement in Venezuela. As State Department’s Bureau of Western Hemisphere Affairs and Unit for City and State Diplomacy brainstorm next steps after the Summit, they should consult with partners in the Venezuela Affairs Unit and on the ground to understand how future summits could fit into broader U.S.-Venezuela policy. The United States could consider convening country-specific subnational conferences or regional conferences between mayors from border communities, and should start by helping to connect Venezuelan cities to international networks such as C40 Cities, Metropolis and Strong Cities Network. In the coming months, the State Department should consider including a Venezuelan city in the Cities Forward initiative, a three year program announced at the summit that will help cities in Latin America and the Caribbean develop and fund action plans.

The United States should also take decisive action to include subnational diplomacy in its long-term approach to Venezuela. In calling for a timetable for credible elections to be announced in the context of Venezuelan-led negotiations, the United States should also urge the Maduro government to reinstate the powers of municipalities. According to the Venezuelan constitution, municipalities have a broad mandate to govern policies relating to their interests and local life, including urban roadways, waste collection, and city police services—many of which have been assumed by the central government.

In addition to restoring municipal powers, it’s also crucial to help Venezuelan cities access funding sources so that they can implement programs for their communities. While Maduro has abolished many of the revenue structures established in the constitution, the United States should pull together experts from domestic and multilateral agencies to identify strategies for supporting local private sector investment that supports city budgets. Specifically, the Department of the Treasury’s Office of Foreign Assets Control and the Department of Commerce’s Bureau of Industry and Security could lead this initiative, in consultation with the Inter-American Development Bank given their regional expertise on subnational financing.

Local Venezuelan leaders can also help implement the multibillion-dollar Social Agreement signed by the Maduro government and opposition in November 2021, in the context of the ongoing negotiations process. The Social Agreement aims to address crises in the electric, public health, and education systems, and when fully implemented will be managed by the United Nations. Mayors and governors are best equipped to help reconstruct state infrastructure given their first-hand experience helping communities manage blackouts, healthcare crises, and gaps in education, and the United States should encourage the UN to work with them to carry out this historic package.

The United States can tap into the momentum following the inaugural Cities Summit to initiate a new approach to Venezuela that sidesteps Maduro to engage directly with mayors. While most international attention is drawn to next year’s presidential elections, the United States must not lose sight of long-term strategy. There is still time to support transformative change ahead of the 2025 regional elections. In a broader region all too familiar with democratic backsliding, a U.S.-Venezuela subnational policy could inspire broader strategies for engaging with local leaders who are fortifying their base of democracy and sparking hope in future generations, against all odds.

Willow Fortunoff is an assistant director at the Atlantic Council’s Adrienne Arsht Latin America Center. She leads the Center’s work on city and state diplomacy and is a 2023 Fulbright recipient studying subnational diplomacy between the United States and Ecuador.

Adriana D’Elia is a senior counselor at the Office of the Executive Director for Panama and Venezuela at the Inter-American Development Bank and former General Secretary of Government of Miranda State, Venezuela (2008–2015). She is also a Nonresident Senior Fellow at the Atlantic Council’s Adrienne Arsht Latin America Center.

Image: Edgloris Marys/Shutterstock.

Secretary of State Antony Blinken’s recent trip to Central Asia, where he emphasized that the United States supports the territorial integrity of regional countries and hopes to expand economic ties, missed the opportunity to highlight more substantial areas of cooperation—namely, nuclear proliferation and arms control. Amid Russia postponing New START meetings in late 2022 and China steadily increasing its nuclear warhead count, the prospects of arms control between Russia and the United States seem bleak. Moreover, worsening U.S.-Russia arms control relations could also threaten future cooperation on nonproliferation. However, one Central Asian country can play a critical role in these dire circumstances: Kazakhstan.

Kazakhstan has been and can continue to be a partner for the United States in the nonproliferation of weapons of mass destruction (WMDs). After the fall of the Soviet Union, Kazakhstan was left with one of the most significant remnants of the Soviet nuclear arsenal and associated nuclear infrastructure. Removing and dismantling these weapons was one of the outstanding achievements of U.S. nonproliferation policy, and it continues to be an integral part of U.S.-Kazakh relations.

Recently, the United States has taken the initiative regarding nonproliferation in the region. For example, Jill Hruby and Frank Rose, the administrator and principal deputy administrator, respectively, of the National Nuclear Security Administration, completed a trip to Kazakhstan on October 5 of last year to commemorate the achievements of U.S.-Kazakh joint nonproliferation efforts. Previously, these efforts brought about the successful 1994 “Project Sapphire,” which reduced the threat of nuclear proliferation by removing nuclear material from Kazakhstan as part of the Nunn-Lugar Cooperative Threat Reduction Program. “Cooperation on nuclear security and nonproliferation is a cornerstone of the strong relationship between our countries,” Hruby said.

Since Kazakhstan dismantled these Soviet weapons, it has become a leader in arms control and disarmament diplomacy. Not only has Kazakhstan been able to secure nuclear weapons and material left in its territory, but it also has led nonproliferation efforts to make Central Asia a Nuclear Weapon Free Zone via a treaty signed in 2006.

Kazakhstan also has a track record of nonproliferation diplomacy beyond its backyard.  Kazakhstan’s president Nursultan Nazarbayev participated in all four of the Nuclear Security Summits organized by the Obama administration. Nazarbayev articulated to Iran the drawbacks of operating nuclear programs and that it could choose peace like Kazakhstan. These efforts culminated in Kazakhstan’s crucial coordination of the Joint Comprehensive Plan of Action. This involved hosting two rounds of negotiations between Iran and P5+1 in 2013. Kazakhstan’s participation through hosting negotiations reinforced its status as a valued member of the nonproliferation community.

For the United States, WMD nonproliferation continues to be an avenue to work with the Russians, who historically share similar concerns about the spread of these weapons. Moreover, Russia understands the dangers of the spread of WMDs on its periphery. Therefore, the United States must make the case that adhering to nonproliferation norms promotes a more stable international security environment.       

Given Kazakhstan and Russia’s geographical proximity and historical bonds, Kazakhstan will likely be an increasingly critical partner for the United States in future arms control negotiations with Russia. Concretely, multilateral support for arms control treaties will be essential in maintaining accountability for nuclear stability. New START lasts through 2026 and is the only active arms control treaty aiming to provide guardrails between the United States and Russia. However, this area of cooperation stands on shaky ground due to the increasingly adversarial relations and limited diplomatic contact between the United States and Russia since the beginning of the Russo-Ukrainian conflict.

Russia’s suspension of New START talks is not great news, but a third-party country like Kazakhstan could potentially play a mediator role and host future arms control talks. Thankfully, Russia’s suspension does not mean the deal is nullified and that a buildup of Russian nuclear weapons is inevitable. U.S. policymakers should resist the pressure from defense hawks to expand nuclear buildup, considering that more nuclear weapons do not ensure U.S. security. Instead, they could easily have the opposite effect by raising threat perceptions in Moscow.

Despite the current dire straits that envelop the Russo-Ukrainian conflict, the record of nonproliferation is impressive, given that no new countries have acquired nuclear weapons since North Korea acquired them in 2006. This speaks to the effectiveness of treaties like the Treaty of the Nonproliferation of Nuclear Weapons. Arms control efforts to prevent the buildup of nuclear weapons among great powers have been an even more significant challenge. With regional partners like Kazakhstan that have a greater understanding of their respective regional landscape and security dynamics, the United States stands a better chance of fostering nuclear stability.

Alex Little is an MS graduate of Georgia Tech and specializes in Russian and Central Asian affairs.

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Understanding how politics and law work requires facing the realities of power.

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Despite having among the highest gun ownership in Europe, the country has not experienced high levels of gun violence in recent years—until now.

It is worth remembering, more than a year into Russia’s war in Ukraine, that the conflict was initiated not by an artillery shell or missile or any kinetic action, but with a cyberattack on the Ukrainian financial system with the deliberate aim of terrorizing Ukrainian citizens alongside more conventional cyberattacks on the Ukrainian Defence Ministry, according to Ukrainian intelligence services. As the world would later learn through more acute horrors in the physical world, such crimes were always the plan, not an accident of an army run amuck.

Although Russia has mostly used cyberattacks throughout the conflict for tactical support to its battlefield operations—including successful early efforts to knock out satellite communications—and not the more spectacular attacks on critical infrastructure we have become accustomed to seeing, it is noteworthy they began with an attack on the people of Ukraine themselves.

China is studying the progress of the war in Ukraine for lessons that might inform its own potential invasion of Taiwan, perhaps as early as 2027, according to CIA Director William Burns. But while Moscow has relied on nuclear weapons to deter decisive intervention by the Biden administration and NATO, Beijing is likely to wield a broader toolkit to keep Americans and our Indo-Pacific allies out of any future fight.

This includes the potential for “aggressive cyber attacks against the U.S. homeland” with the goal of “inducing societal panic,” according to the latest threat assessment from the U.S. intelligence community. Whereas the Kremlin has used its cyber capabilities to raise the perceived cost of resistance among ordinary Ukrainians while eschewing potentially escalatory attacks on the U.S. that might draw us into the conflict, Zhongnanhai is preparing to gamble that a shocking cyberattack on the American people—not just its military networks—would make a nation already weary from decades at war reconsider the cost of standing up for Taiwan’s democracy.

Cybersecurity and Infrastructure Security Agency director Jen Easterly warned about this recently when she alluded to plans that an invasion of Taiwan “might very well be coupled with the explosion of multiple U.S. gas pipelines; the mass pollution of our water systems; the hijacking of our telecommunications systems; the crippling of our transportation nodes.”

This problem is worse than it seems. Water systems in the United States are highly federated, matching thousands of individual municipal systems often defended by just a few employees benefitting from minimal cybersecurity investment against the skill and resources of China’s military concentrated at the point of cyberattack—a hopeless mismatch at present.

China’s ability to threaten U.S. infrastructure persists across sectors, driven not only by hacking power but including supply chain threats driven by its manufacturing prowess as well, with a commercial reach that already successful Russian cyber operatives would envy.

For example, natural gas systems have been mentioned in every Annual Threat Assessment of the U.S. intelligence community for the past several years—two of which I coauthored—reflecting longstanding concern. Left unsaid is that many natural gas compressors in the United States are imported from China, meaning that if they are held at risk during a time of heightened tension or conflict the U.S. would be relying on its adversary for replacement parts. This is not a promising prospect for security and national success.

National efforts to address cybersecurity shortcomings too often seek to treat every problem like cybercrime—solutions meant to scale, at the lowest financial and political cost; the low-hanging fruit. But Beijing’s operatives include not only criminals turned to national purpose but uniformed professionals who rival our own in skill, professionalism, and access to cutting-edge resources. They won’t give up just because the front door is locked, and the United States needs to prepare more seriously for what a wartime conflict in cyberspace would look like if fought at home rather than in some distant continent.

2027 is closer than it seems. The kinds of engineering changes, investments, and policies that must be crafted to form a cohesive national defense against this kind of national digital attack take years to put into place under the best of circumstances.

The new U.S. National Cybersecurity Strategy rightly calls for stepped-up responsibility from key private sector players, but the U.S. government must do more to show that it takes its own intelligence assessments of this cyber threat seriously and is taking action proportionate to the risk: unambiguously stating what escalation foreign nation-states can expect if they disable U.S. critical infrastructure by cyber means, akin to the warnings we give for impairing our key national space assets such as early warning satellites; more aggressively declassifying intelligence of a tactical defensive nature—even if it means accepting marginal increased risk to classified sources—with a recognition that it is the same private sector likely to be on the front lines of cyber war; and committing to the defense of critical but under-defended sectors, such as water systems, during wartime with priority more comparable to efforts made to keep U.S. military networks up.

America’s spies are telling us there is a direct, credible, foreseeable threat to U.S. citizens coming in only a few years; it’s past time to take them seriously and move beyond the standard toolkit for cybersecurity.

Christopher Porter is a Senior Fellow with the Atlantic Council’s Cyber Statecraft Initiative. From 2019 to 2022 he was the National Intelligence Officer for Cyber, leading the U.S. intelligence community’s analysis of cyber threats and threats to U.S. elections as a member of the National Intelligence Council.

This article does not represent the views of the U.S. government or any current or past employer.

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From wind turbines to electric vehicles, rare earth elements—rare earths for short—are needed for key technologies to transition to a sustainable energy revolution. In addition, rare earths power modern military technology, such as radar systems and precision-guided munitions. Furthermore, as technological advancements continue in these areas, companies will need more rare earth for future technologies to function.

The Chinese government has committed tremendous financial and political resources to control the global rare earth elements market. These actions have yielded great dividends for the Chinese economy, which now controls 85 percent of the global rare earth processing market. With decades of financial and institutional support, Chinese refining businesses have developed the technology and skills to refine rare earth at a far lower price than the United States and other countries.

It is alarming that China is willing to leverage its rare earth monopoly to accomplish its foreign policy objectives. After the Japanese government detained a Chinese fish trawler due to an ongoing border dispute, China responded by embargoing its rare earth supply to Japan. Japan, which had imported 30 percent of its rare earth elements from China, was eventually forced to release the fishing captain back to China so that they could have a supply of rare earth. During the ongoing trade war, China has threatened to restrict rare earth exports to the United States.

To counter this threat, former President Donald Trump signed an executive order to increase the domestic production of rare earth for military technology. The Biden administration has also noted in its 2023 Annual Threat Assessment that China’s dominance in the critical minerals market “could pose a significant risk to U.S. and Western manufacturing and consumer sectors if the Government of China was able to adeptly leverage its dominance for political or economic gain.” The Biden administration has devised a few policies to diminish China’s dominance in the rare earth market. Notably, U.S. Defense Department has granted $10 million to MP Materials Inc, one of America’s rare earth mines. Furthermore, President Joe Biden signed executive order 14051 to ensure an adequate stockpile of rare earth for national security purposes. However, these policies are equivalent to shuffling deck chairs on the Titanic, as they are inadequate in addressing China’s current dominance.

The timeframe for Biden’s current investments in mining and extraction will take too long to materialize. A study found that rare earth mines from 2010 to 2019 took over sixteen years from initial discovery to production. The process takes this long because it typically takes twelve years to conduct feasibility studies of potential mining locations, followed by four years of construction. The urgent shortage of rare earth elements means the United States cannot rely on opening new mines and immediately seeing current problems disappear.

To address this, the Biden administration should also continue to invest in businesses that can efficiently decrease their dependence on rare earth elements. Following the 2010 Senkaku boat collision incident, the Japanese government began investing in rare earth recycling and electric vehicle battery production that did not require rare earth to function. The United States should take notes and needs to continue to invest in businesses dedicated to decreasing its dependence on rare earthsWhile many U.S. startups will fail, just a few startups surviving in the market will provide the U.S. with the ability to diminish China’s concentration and leverage in the rare earth market.

Most importantly, the Biden administration must recognize and prioritize the rare earth elements it needs to ensure national security. In a recent congressional hearing about U.S. energy policy, Interior Secretary Haaland stated that the administration is currently “identifying those critical minerals within the U.S. Geological Survey.” Not all rare earth are created equal. Some rare earth, like yttrium, is essential for munitions, while others, like neodymium, is more useful for powering electric vehicles. Given the time frame and the severity of the shortage, the Biden administration needs to prioritize this research. Only with an understanding of the type and quantity of certain rare earth can the Biden administration devise the optimal rare earth policy for the United States’s economic and national security.

Rare earth elements have propelled the global economy. The nations that control rare earth element refining capabilities will be able to determine the future environmental, economic, and military capabilities of their country and its allies. ​​In 1992, while visiting a Chinese Rare Earths Research Institute in Baotou, Deng Xiaoping famously stated that “there is oil in the Middle East; there is rare earth in China.” America’s leaders must share the same attitude that Deng had for China.

Richard Li is an undergraduate student at Cornell University. He can be contacted at rll246@cornell.edu. Follow him on Twitter @RichardLuLi1.

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In June 2021, President Joe Biden made fighting global corruption an official priority, directing the National Security Council to conduct an interagency review and promulgate an all-of-government anti-corruption strategy. In December of that year, the Biden White House published its Strategy on Countering Global Corruption, and for the first time in history, fighting global corruption became a “core United States national security interest.” This is commendable, but it would be more effective if the fight against global corruption also highlighted—and targeted—the symbiotic relationship between organized crime, terror finance, and corruption.

The president already has, by virtue of legislation and executive orders enacted by his predecessors, a panoply of tools to go after transnational organized crime and terror finance networks. And the Biden White House also expanded its toolkit in 2021, appointing a State Department coordinator to fight global corruption, establishing the U.S. Council on Transnational Crime, and issuing an executive order to impose sanctions on foreign persons involved in the global illicit drug trade. Yet what’s missing is an integrated approach based on an understanding of how these threats intersect, which targets them simultaneously. It is not enough to prioritize corruption. The Biden anti-corruption strategy must go after both bribers and bribed. Hezbollah is a perfect candidate.

On April 18, 2023, the U.S. Department of Justice (DOJ) indicted Nazem Said Ahmad and eight associates for their alleged role in a fraudulent transaction involving artwork, luxury goods, and precious stones, many of them purchased in the United States. Contemporaneously, the Treasury Department sanctioned Ahmad’s international network, expanding its 2019 designation against him and his companies. Ahmad, Treasury asserts, is a Hezbollah financier and an associate of Hezbollah financier Mohammad Bazzi, whom Treasury designated in 2018. (Romanian authorities arrested Bazzi in Bucharest last February, and he is awaiting extradition to the United States.)

These actions, as well as past DOJ and Treasury actions, show Hezbollah’s global reach as a terrorist organization funded through criminal activities by its members, associates, and sympathizers. Less evident, though no less important, is something else these cases all have in common: corruption. The Ahmad network, the Treasury designation states, leveraged “Hizballah’s influence at … ports of entry to move assets into Lebanon without paying the applicable taxes and duties”—a likely reference to immigration, security, and customs officials in Hezbollah’s payroll. Bazzi, for his part, leveraged his connection with Yahya Jammeh, then dictator of Gambia, buttressing local corruption in exchange for the ability to run illicit businesses that ultimately financed Hezbollah.

Outside of Lebanon, Hezbollah buys impunity from local scrutiny and prosecution for its illicit networks through bribery and corruption at the highest levels of government and local public administration. In Lebanon, it uses its influence and political power to buy impunity—through bribes—for those running illicit businesses. Such extensive corruption contributes to the erosion of good governance, weakens democratic institutions, undermines the rule of law, and empowers corrupt officials and politicians.

Corruption, then, is a critical tool in Hezbollah’s strategy to self-fund through illicit activities, which has been underscored by previous Treasury designations against Hezbollah operations in the Gambia, Guinea, and Paraguay. Since it is also a top foreign policy priority for the Biden White House, the president should recognize that corruption is an integral element of Hezbollah’s modus operandi, and target, through designations, both sides of the corruption equation. Why not, for example, sanction the corrupt Lebanese officials who facilitated the recently sanctioned Ahmad network’s operations?

Terror organizations like Hezbollah self-finance by engaging in extensive transnational criminal activities, often in close cooperation with international criminal syndicates. The crime-terror finance nexus is nothing new. Across the span of history and geography, terrorism has been self-financed, at least in part, through criminal activities. The Bolsheviks in tsarist Russia funded their subversive activities through crime—which catapulted a young Joseph Stalin to center stage in the party machine. More recently, Ireland’s Irish Republican Army, the Italian Red Brigades, the Basque ETA, Colombia’s FARC, the Taliban, Al Qaeda, and the Islamic State all engaged in criminal activities to fundraise—including the illicit drug trade, human trafficking and organ harvesting, and trafficking in antiquities. Hezbollah continues to be involved in a multiplicity of criminal activities, including, critically, money laundering on behalf of international criminal syndicates. The Trump administration designated Hezbollah as a transnational criminal organization for its involvement in global criminal activities.

Trafficking and laundering depend on the ability of terror groups to establish working relations with crime syndicates, which can evolve into symbiotic partnerships. Criminals and terror financiers depend on one another for the supply of illicit merchandise and the transport, distribution, and laundering of the proceeds from sales.

Critically, both rely, for the success of their criminal endeavors, on their ability to infiltrate state institutions at all levels—police, customs, border guards, port workers, the judiciary, and elected officials—and to put these people on their payroll to protect their commercial enterprise.

Hezbollah is no exception. As Marshall Billingslea, then assistant secretary for Treasury’s Office of Terrorism and Financial Intelligence, said in a speech at the Atlantic Council in September 2019, “Hizballah supplements its income by using businessmen to operate a wide range of companies, using political relationships to gain favored contracts and even monopolies in prominent sectors … Hizballah also benefits from various international criminal schemes, including money laundering, drug trafficking and counterfeiting, operated by its supporters, sympathizers, and members.”

Examples abound of Hezbollah’s systematic reliance on corruption to grease the wheels of its complex criminal enterprises. Take Paraguay, one of the most corrupt countries in Latin America, ranked 137 out of 180 in the Transparency International 2022 corruption index, whose systemic corruption makes it a gangster’s paradise. While historically a hub for smuggling, in recent years, Paraguay has been turned by international crime syndicates into a key transit point for narcotrafficking. The U.S. Department of State’s 2022 annual International Narcotics Control Strategy Report (Volume II) noted that crime syndicates in Paraguay, especially in the tri-border area it shares with Brazil and Argentina, often rely on “the assistance of co-opted government officials” for their trafficking. The corruption of politicians and public officials has deep roots in the local political culture, and criminals, including Hezbollah, exploit this.

Last January, the U.S. Treasury Department sanctioned Paraguay’s past president, Horacio Cartes, and its current vice president, Hugo Velazquez, “for their involvement in the rampant corruption that undermines democratic institutions in Paraguay.” (Cartes’s attorney dismissed the allegations as politically tainted; Velazquez announced, through his attorney, that he will challenge them in a U.S. court.) But according to Treasury, both politicians have ties with members of Hezbollah, which, Treasury explained, “has regularly held private events in Paraguay where politicians make agreements for favors, sell state contracts, and discuss law enforcement efforts in exchange for bribes. Representatives of both Cartes and Velazquez have collected bribes at these meetings.” If confirmed, this situation—in which Hezbollah representatives buy off Paraguayan politicians in exchange for favors, state contracts, and information on law enforcement efforts, presumably against their interest—calls for U.S. sanctions not only against those Paraguayan officials who were bribed, but also the Hezbollah emissaries who put money in their pockets.

This is not the first time the United States has tied Hezbollah’s illicit finance to corruption in Paraguay. In 2021, Treasury sanctioned Kassem Mohamad Hijazi, a Lebanese-Brazilian dual national who was subsequently extradited to the United States and indicted, for buying off law enforcement officials in order to guarantee protection for a trade-based money laundering network.

Although sanctioned for corruption and indicted on money laundering charges, Hijazi is, according to leaked classified State Department cables from 2005, a Hezbollah fundraiser and supporter. Paraguayan media have reported that Hijazi, to derail the extradition proceedings, allegedly paid a bribe to a family member of a Paraguayan Supreme Court judge, who has denied any involvement. This, then, is a case where U.S. authorities targeted an alleged Hezbollah briber, but not the beneficiaries of his bribes.

As goes Paraguay, so go other countries with high rates of corruption. Guinea, in West Africa, ranks even worse than Paraguay in the annual Transparency International Corruption Index. Unsurprisingly, Hezbollah has exploited political connections in that country to facilitate illicit activities. In 2022, Treasury sanctioned two Guinean-Lebanese dual nationals, accusing them of buying off airport authorities to facilitate the transit of suitcases filled with cash, destined for Hezbollah in Lebanon. The two, well-established businessmen in that country, were charged, according to Treasury, with collecting financial support for Hezbollah and transferring the funds to Lebanon. Facilitating contacts and good relations with the highest authorities in the country allegedly helped them smooth and promote commercial and financial activities for Hezbollah’s benefit. Both enjoyed diplomatic status as honorary consuls and both had close relations with the former president of Guinea, Alpha Condé, whom the State Department recently sanctioned for his role in human rights violations. The two were sanctioned for financing terrorism, not corruption. Those they presumably bought off were not sanctioned on corruption grounds.

As noted, Hezbollah also exploited close political connections in Gambia during the presidency of Yahya Jammeh, who pillaged his country’s resources during his twenty-one-year rule. Mohammad Ibrahim Bazzi, a Belgian-Lebanese dual national, was part of Jammeh’s inner circle of foreign businessmen who greatly benefited from the president’s corrupt rule. Billingslea, then Treasury assistant secretary, accused Bazzi of involvement in human trafficking, among other illicit activities, which, according to Billingslea, he was able to conduct thanks to his close relationship with Gambia’s Jammeh. The U.S. Treasury sanctioned Bazzi in 2018, highlighting his close connection to what it called “the corrupt former leader of The Gambia who, in addition to ordering targeted assassinations, plundered The Gambia’s state coffers for his personal gain.” Billingslea went further, explicitly accusing Bazzi of involvement in human trafficking, among other illicit activities he was able to conduct thanks to his close relationship with Gambia’s Jammeh. Bazzi sued Treasury to have his designation removed, but failed in his bid and settled out of court in 2021. He remained under sanctions and was arrested in Romania in February 2023, pursuant to a U.S. international arrest warrant on money laundering charges. During Jammeh’s presidency, Bazzi, too, gained the status of honorary consul for Gambia in Lebanon. In this instance, at least, the United States also sanctioned former president Jammeh and his wife on corruption charges.

As the above examples show, throughout the years, U.S. sanctions have occasionally revealed the systemic corruption of ruling elites who act as facilitators for organized crime and terror finance. The Biden administration’s decision to elevate the fight against global corruption to a national security priority is commendable, and it should now systematically highlight the inextricable link between corruption, organized crime, and Hezbollah’s terror finance. While sanctions against corrupt foreign officials make an impact, exposing the ultimate beneficiaries of their corruption, who often turn out to be those paying the bribes, will further multiple aspects of the Biden administration’s national security agenda.

It is corruption that allows the movement of illicit merchandise and dirty money on a global scale. It buys impunity for those engaged in illicit conduct and irreparably undermines democratic institutions as it bends the law to favor criminals, interferes with fairness in the allocation of public contracts, impedes and derails investigations, and in some cases, even leads to the removal, or downright murder, of prosecutors and judges who refuse to take bribes. It also provides influence over political processes and electoral outcomes that can benefit crime and terror finance networks, whose bought-off politicians and officials will continue to protect them. Finally, corruption may grant criminal syndicates and terror groups like Hezbollah critical access to state secrets.

Making global corruption a national security priority is the right decision. Recognizing Hezbollah’s systematic reliance on corruption to facilitate its illicit finance networks would make the White House strategy more effective.

Emanuele Ottolenghi is a Senior Fellow at the Foundation for Defense of Democracies, a Washington, DC-based non-partisan research institution. Follow him on Twitter @eottolenghi. 

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Part of the essence of realism in international affairs is to recognize things as they are and to deal with those actual circumstances prudently and practically, as opposed to dwelling in a realm of things as we wish they would be. In the land that Israelis and Palestinians inhabit, two major features of reality have become undeniable. One is the persistence and bloodiness of the conflict between Israelis and Palestinians, despite efforts to “shrink” the conflict, to sidestep it, or simply to ignore it. The conflict has become increasingly bloody lately, with violence surging over the past year.

The other reality is that Israel’s policies since its conquest of the West Bank fifty-six years ago have institutionalized a single state between the Mediterranean Sea and the Jordan River. The large-scale Israeli colonization of the conquered territory—with the number of Israeli settlers in the West Bank and East Jerusalem now exceeding 750,000 and growing—has been accompanied by the construction of physical and legal infrastructure to serve their needs the same as for any other Jewish Israeli citizens. Israel treats that land as an integral part of its own territory for whatever purposes it suits Israel to treat in that way.

There already is a one-state “solution” to the conflict, although it is a solution only for those content with a system of one ethnically defined group oppressing and subjugating another group that is denied political rights and self-determination, with all the resentment and potential for violence that such an arrangement inevitably involves. Meanwhile, a two-state solution, which has been part of the standard vocabulary of diplomats and politicians for decades, has been pushed ever farther out of reach and, in the view of many informed observers, is dead.

In a recent article in Foreign Affairs, Michael Barnett, Nathan Brown, Marc Lynch, and Shibley Telhami have described this reality and observed that “It is no longer possible to avoid confronting a one-state reality.” The resistance to recognizing that reality—and the implications for U.S. policy that flow from that recognition—remains strong among those determined to stick up for Israeli policies and to advocate continued U.S. condoning of those policies. Thus there inevitably has been pushback against the Barnett, et al. article, including in a recent piece in this publication by Dennis Ross and David Makovsky of the Washington Institute for Near East Policy.

Ross and Makovsky invoke many of the old chestnuts long used by American sympathizers with Israel in ways that may have been valid fifty-six years ago but now seem stuck in a time warp. They open their piece with a flourish about how the recent demonstrations in Israel against the Netanyahu government’s plan to emasculate the judiciary show “the depth of the Israeli public’s commitment to democracy.” But the democracy about which the demonstrators have been chanting has nothing to do (as Ross and Makovsky later acknowledge) with the several million Palestinians whom Israel rules and who have no say in choosing their rulers. The commitment to democracy (of some Israelis, and not, according to Ross and Makovsky’s own logic, those who back the extreme right-wing government that is pushing the judicial overhaul) may be deep insofar as it applies to themselves, but it is narrow in not applying it to other people next to whom they live.

The chestnuts also include the familiar image of Israel surrounded by hostile neighbors supposedly determined to destroy it. Ross and Makovsky write of how “Iran, Hezbollah, and Hamas deny Israel’s right to exist, support terror against it—and would even if there was no occupation—and acquire and develop weapons to act on their aims.” Such an image ignores the entire question of capabilities, and how Israel’s building of what is now by far the most capable military in the region—even at the conventional level, let alone beyond that level—makes its existence assured even in the face of any foe that might prefer that it not exist. The image also ignores the intentions of foes, such as Hamas, which, notwithstanding its extreme rhetoric, long ago made clear that it would accept a hudna, or long-term truce, as part of an arrangement of living peacefully beside a continuing Israel.

The Israeli occupation of Palestinian territory has been a big part of Israel’s conflicts with its regional foes. It obviously is with a Palestinian group such as Hamas, whose goal is to be the government for all Palestinians. It also is for Iran, which has long backed Palestinian resistance groups both because of sympathy for subjugated Palestinians and Tehran’s awareness of how much resonance the issue has elsewhere in the Arab world. And the occupation of Palestinian territory is the sole reason most Arab governments have still not begun full diplomatic relations with Israel.

To the extent that animosity toward Israel goes beyond issues related to the occupation and conflict with the Palestinians, Israel’s actions have had at least as much to do with that hostility as have the actions of the neighbors. Hezbollah, for example, was able to establish itself in the 1980s as a major political player by presenting itself as the champion of resistance to an Israeli invasion of Lebanon and the years-long occupation of a portion of that country. As for animosity between Israel and Iran, a cursory look at the rhetoric from each regime about the other shows hostility by Israel against Iran to be much more all-consuming than hostility in the other direction. It is not just rhetoric that displays this imbalance. Israeli sabotage and lethal terrorism in Iran are unmatched by anything Iran has done to Israel.

Even more to the point at hand, how exactly can the ritual invocation of Israel living in an unfriendly neighborhood constitute a rationale for clinging to the occupied Palestinian territory? It is not as if the occupation somehow bolsters Israeli security. To the contrary, it detracts from it. Besides being the main stimulants for regional resentment against Israel, the occupation and West Bank settlement project constitute a major burden on the Israeli Defense Forces (IDF) that lessens its ability to respond to any foreign threats.

Ross and Makovsky strive to convey the impression that Palestinians have been primarily responsible for the absence of a resolution to their conflict with Israel. A careful review of the decades-long history of the conflict shows that impression to be false. And never do Ross and Makovsky acknowledge the biggest asymmetry of the conflict today, which is that Israel, not the Palestinians, is the side with the military power, with control of the land, and thus with the ability to change the status quo if it wanted to.

In a manipulation of cause and effect, Ross and Makovsky repeatedly explain away Israel’s actions that have prolonged or intensified the conflict as responses to Palestinian behavior, without ever mentioning how much of what one sees on the Palestinian side is a response to Israeli behavior. For example, in response to the observation by Barnett and his co-authors that Israel’s “withdrawal” from the Gaza Strip is somewhat of a misnomer in that Israel retains to this day a suffocating control of Gaza’s airspace, sea lanes, and borders, Ross and Makovsky note that nasty Hamas is in Gaza and has attacked Israel even after the Israeli “withdrawal.” Never do they consider how the Israeli-imposed plight of the Gaza Strip as an open-air prison has much to do with a group like Hamas gaining and maintaining as much popular support as it has.

Not surprisingly, Ross and Makovsky dislike the use by Barnett et al. of the A-word. Ross and Makovsky define apartheid, implicitly referring to the South African experience, as a legal edifice involving the oppression of a majority by a minority, and declare that this is not true of Israel. So are we supposed to be less appalled when one racial or ethnic group oppresses another group that happens to be numerically inferior? Even their minority/majority semantic stratagem—which, by the way, is hardly part of any consensus conception of apartheid—breaks down when applied to the West Bank, where Palestinian residents are a clear majority and where a legal edifice institutionalizes oppression based on ethnicity.

An even bigger motivation for these two denizens of the Washington policy world to take issue with the article by Barnett and company is that article’s policy recommendation to condition U.S. aid to Israel “on clear and specific measures to terminate Israel’s military rule over the Palestinians.” The Israeli occupation is contrary to U.S. interests on multiple grounds, including its contribution to persistent instability in the Middle East and the association of the United States with ethnically-based repression. The end to the military rule also would be necessary to realize any version of a two-state solution, which Ross and Makovsky claim to support.

With no direct answer to those facts, Ross and Makovsky try to argue that any loosening of the unconditional U.S. support to Israel would somehow embolden Israel’s regional foes. They ask how “the Iranians, Hezbollah, and Hamas would react to an American cut-off of military assistance to Israel” (in a formulation that implicitly assumes that Israel, given the chance to continue receiving voluminous U.S. aid if it ends the occupation, would refuse that option). Wouldn’t those foreign foes, they suggest, “perceive great opportunity in such a circumstance?”

Ross and Makovsky support this line of speculation by pointing to the schadenfreude-laden reactions to Israel’s current internal political turmoil by the likes of Ayatollah Khameini and Hezbollah leader Hassan Nasrallah. But that turmoil has nothing to do with the status of U.S. aid to Israel. It instead stems from the efforts of the far right in Israel to cement its power.

If U.S. aid to Israel were to be cut off, it is unlikely any of those foreign foes of Israel would change their calculations—Israel would still be by far the most powerful military power in the region. Given Israel’s wealth, it can afford to maintain that superiority by itself. The difference the U.S. aid makes is that American taxpayers rather than Israeli taxpayers pay for some of that military power.

If making U.S. aid conditional were, despite all the indications of Israeli obstinacy, to lead to an end to the occupation and a resolution of the Israeli-Palestinian conflict, security challenges to Israel from regional foes would not become more likely and probably would become less so. The biggest regional grievance against Israel would be gone, the change would take the wind out of the sails of the Iranians and others who have used the issue to seek influence elsewhere in the region, and the IDF would no longer have the major distraction of administering the occupation.

Ross and Makovsky are right that Palestinian violence does not contribute to a solution to a conflict and has only exacerbated the problem at multiple points in the conflict’s history. But their repeated suggestion that if only Palestinians would act differently then something good “could” happen to them is of a piece with how the whole so-called peace process has understandably become, in Palestinian eyes, a never-ending charade about a promised land that is frequently pledged but never arrives.

The authors state that “a serious Palestinian move to reform the Palestinian Authority or a determined and more public and peaceful form of Palestinian protest against occupation could help stimulate the debate in Israel” about how best to resolve the conflict. But the Palestinian Authority was intended as a temporary transitional arrangement and passed its sell-by date a quarter-century ago. It has become little more than a security auxiliary to the IDF, as such has lost credibility among the Palestinian people, and it will hardly be a needle-mover whether reformed or unreformed.

As for a “more public and peaceful form of Palestinian protest,” consider one of the most time-honored forms of peaceful protest—the boycott—which in the Palestinian case has taken the form of the BDS (boycott, divestment, sanctions) movement. Far from stimulating a constructive debate, let alone any constructive Israeli policy changes, the Israeli response has been a no-holds-barred (and mostly successful) effort, extending into the United States and elsewhere abroad, to extinguish support for any boycott by asserting that the entire movement, not just some elements in it, is an illegitimate and antisemitic campaign to destroy Israel.

Ross and Makovsky also are right about the strength of nationalism among both Israeli Jews and Palestinian Arabs, and how a two-state arrangement would be the best way of accommodating the nationalist impulses of both. Or make that “would have been” the best way. There was an opportunity to do this, but the policies that have entrenched the one-state reality may mean that the two-state solution will have to enter the history books alongside the U.S. failure to join the League of Nations and other departures that would have been beneficial but never were taken.

Ross and Makovsky present themselves as being on the good side of advocacy in charting a course for Israel and take pains to distinguish themselves from Itamar Ben-Gvir, Bezalel Smotrich, and other extremists in the Israeli government. They say they support a two-state solution, but they in effect are advocating a continuation of the current one-state “solution” with unchanged Israeli subjugation of the Palestinians. Too much history has transpired to believe otherwise. It has not only been fifty-six years since the conquest of the West Bank, but also thirty years since the Oslo Accords, which created the supposedly transitional Palestinian Authority. There is no reason to think that the same tired talk of support for a two-state solution and intimations that nice things “could” happen if only the Palestinians would behave better will bring about—absent a fundamental change in U.S. policy toward Israel—any more results than they have in the last several decades. With the political trend in Israel having brought to power those who are more explicit than ever in rejecting any self-determination for Palestinians, there is strong reason to believe that the tired talk will bring about no positive results at all.

Paul Pillar retired in 2005 from a twenty-eight-year career in the U.S. intelligence community, in which his last position was as a National Intelligence Officer for the Near East and South Asia. Earlier he served in a variety of analytical and managerial positions, including as chief of analytic units at the CIA covering portions of the Near East, the Persian Gulf, and South Asia. Professor Pillar also served in the National Intelligence Council as one of the original members of its Analytic Group. He is also a contributing editor for this publication.

Image: Shutterstock.

The late February reception of the American Chamber of Commerce in Egypt was a swanky affair. Wine flowed in the majestic foyer of the new Grand Egyptian Museum, the buffet brimmed with sushi, and a harpist played soothing music. Despite the festive environs, however, the Egyptian businessmen I met were despondent. These commanders of industry were in a dour mood because the Egyptian economy was in freefall.

Today’s precipitous decline was set in motion nearly a decade ago, when Cairo embarked on an unsustainable spending spree, borrowing money for profligate outlays on weapons, megaprojects, and infrastructure. Making matters worse, during this period the military’s role in the economy dramatically expanded, choking off the private sector and disincentivizing foreign direct investment. The downward trajectory of the most populous Arab country should concern Washington greatly.

The quagmire is deep. Since President Abdel Fattah el-Sisi was elected in 2014, the state’s external debt has more than tripled to nearly $160 billion. This year, 45 percent of Egypt’s budget will be devoted to servicing the national debt. Meanwhile, inflation hovers around 30 percent, and food prices have increased over the past year by more than 60 percent.

To be sure, the deterioration is not all Sisi’s fault. Covid-19 and the war in Ukraine further stressed Egypt’s economy, curtailing tourism—12 percent of GDP—and driving up commodity prices, especially wheat. Last year, Saudi Arabia, Qatar, and the United Arab Emirates delivered $22 billion in investments and Central Bank deposits to cover recurrent state deficits and stabilize the financial situation in Cairo. As with previous Gulf bailouts, however, the support failed to stem the crisis.

Facing an inflection point, in December, Sisi signed Egypt up for yet another International Monetary Fund (IMF) program. The conditional arrangement promised to deliver $3 billion in cash and the prospect of an additional $14 billion in regional and international investment and financing. In return, Egypt committed to floating the currency and curtailing the military’s role in the economy. The Egyptian pound was floated and has devalued by 50 percent to date. But Sisi has yet to follow through on his pledge to reduce the military’s reported control over an estimated 30-40 percent of the economy.

Inflow of capital from the Gulf is predicated on military divestment from the economy. To this end, in February, the government published a list of some thirty-two military-owned companies to be sold off. Initial optimistic appraisals of this initiative quickly faded, however, when it emerged that only minority shares in these enterprises were on offer. While some assets on the block may be appealing, Gulf investors are unlikely to enthusiastically invest in non-controlling interests in opaquely operated—and perhaps overvalued—state-owned enterprises.

Like oil-rich Gulf States, the IMF is also skeptical about Sisi’s commitment to actually sideline the military from the Egyptian economy. The first review in the four-year program was slated for March 15, but the IMF has delayed the evaluation—and the disbursal of loan tranches—until Cairo makes progress on privatization.

Sisi’s reticence to undertake this reform is understandable. He’s a former flag officer, and his regime relies heavily on the continued support of the military. But Sisi has few options. This past January, Saudi Arabia—Cairo’s financier of last resort—made it clear the days of unconditional grants and enormous string-free deposits in the Egyptian Central Bank were over. Henceforth, Gulf capital will flow to Egypt only if there is a return on investment.

Egypt already owes $23 billion to the IMF, and it remains unclear whether the state will eventually meet its onerous obligation to the fund. There is little indication in any event that Cairo is changing its approach to spending. To wit, in February Egypt issued $1.5 billion in so-called “sukuk” financial instruments, bonds paying 11% interest. The sukuk are intended to enable the state to repay its Eurobonds debt, whose interest rate was only 5.57%. So even as Egypt is borrowing from the IMF, it is accruing more debt, borrowing more money at even higher interest rates to repay outstanding liabilities.

Meanwhile, average Egyptians are struggling. Amidst skyrocketing inflation, the nearly one-third of the population living below the poverty line—making less than $3.80 per day—is having a harder time making ends meet. The middle class has also been hit hard. Since Sisi took power, the Egyptian pound has lost nearly 80 percent of its value—50 percent alone over the past year—effectively wiping out life savings. Food staples like bread, rice, and meat are all more expensive, and strains on foreign currency reserves have resulted in spikes in cost and limited availability of some medications. Meanwhile, Egypt’s wealthiest, anecdotally at least, are increasingly moving into gated communities and compounds on the outskirts of Cairo.

Ultimately, Sisi may relent, embrace IMF reforms, and stanch Egypt’s downward trajectory. Absent a significant course correction, however, it’s difficult to imagine the situation changing for the better. Should the crisis persist, the bitter experience of the 2011 Revolution would seem to mitigate against wide-scale protest. Still, things could get worse. Egypt could see episodic spontaneous protests, increased crime, more capital flight, and heightened repression. Like Tunisia and Lebanon, Egyptians may try to migrate, either legally or illegally, via boat to Europe.

The Biden administration seems to recognize that Egypt has a problem, albeit not a particularly urgent one. At a joint press conference this past January, Secretary of State Antony Blinken described Egypt’s economic difficulties as a “challenge,” in contrast to his Egyptian counterpart, who characterized the situation as a “crisis.” Meanwhile, Washington is attributing the financial crunch to a “perfect storm” of Covid-19 and the war in Ukraine—as exogenous rather than endogenous factors such as Egypt’s ill-advised economic policies. More than a month after the IMF postponed its program review, Washington has yet to publicly comment on Egypt’s reticence to meet its IMF obligations.

With a population nearing 110 million, Egypt has been described as “too big to fail.” Hesitant to move the military out of the economy and without its traditional Gulf financial safety net, however, a further deterioration is possible. While Washington may not yet be seized with concern about developments in Egypt, it appears that Egyptians increasingly are. Notwithstanding the regime’s notorious intolerance for dissent, during a recent visit to Cairo, a number of Egyptians I met expressed a surprising nostalgia for the good old days of former President Hosni Mubarak.

David Schenker is a senior fellow at the Washington Institute for Near East Policy and a former assistant secretary of state for Near East affairs during the Trump administration.

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The recent negative trajectory in U.S.-China relations underscores a profoundly important question: is peaceful coexistence between the two countries still possible and achievable? Or are the United States and China destined for a hostile adversarial relationship? What purpose or objective might still be served by reviving substantive diplomacy between Beijing and Washington?

Recurring claims that a new “cold war” is emerging obviously evoke the U.S.-Soviet precedent. And although there are many differences between that historical example and the current U.S.-China relationship, there nonetheless are lessons to be learned from making the comparison. Several such lessons can be derived from scholar Frank Costigliola’s new biography of George F. Kennan, the intellectual author of the U.S. policy of containment of the Soviet Union. One of the key themes of the book—Kennan: A Life Between Worlds—is Kennan’s failure over the latter half of his life to convince his policymaking successors in Washington that containment was not intended as a military strategy, and was instead meant as a prerequisite for negotiating the terms of peaceful coexistence between the United States and the Soviet Union.

According to Costigliola, Kennan sought from almost the beginning of the Cold War to end it by “pursuing serious diplomacy” aimed at reaching “an honorable settlement that would reduce tension” between Moscow and Washington and thus preempt a costly militarized struggle. Kennan’s central proposal was military disengagement from Europe by both the United States and the Soviet Union, which in his view would have defused or obviated the most dangerous aspects of the inevitable U.S.-Soviet rivalry. Kennan was focused on what he saw as the limits of U.S. power, and the consequent need to pursue some kind of accommodation with the Soviets so that the United States could devote sufficient attention and resources to addressing America’s domestic challenges. In short, Kennan advocated a combination of “patience, sacrifice, and restraint.”

But as Costigliola shows, this approach was largely dismissed by U.S. leaders for the duration of the Cold War in favor of a militarized version of containment that sought a “rollback” of Soviet power and influence. In Kennan’s view, Washington essentially adopted the unrealistic goal of achieving Moscow’s “unconditional surrender.” But even many of Kennan’s admirers dismissed his approach as unrealistic. Most supported the consensus view that a more hard-edged containment strategy brought overall stability to U.S.-Soviet relations without requiring substantial U.S. compromises with Moscow.

All of this resonates in U.S.-China relations today. Washington is embracing an almost exclusively competitive approach to Beijing that has many of the earmarks of the militarized, zero-sum containment strategy it pursued against the Soviet Union. The goal similarly appears to be China’s unconditional surrender. Many strategists and analysts have instead advocated military restraint and serious diplomacy with China, and emphasized the increasingly apparent limits on U.S. power and leverage. Some have specifically advocated negotiations with Beijing aimed at reducing military tensions in East Asia, analogous to Kennan’s proposals for U.S.-Soviet talks on military posture in Europe. But as with Kennan, these ideas have been criticized as pollyannish or unworkable given China’s presumed untrustworthiness and aggressive intentions. The relative stability of a confrontational approach to China is deemed preferable to the risks of compromise or accommodation with Beijing, which would probably be futile if not counterproductive.

This also echoes broader observations by Kennan about the U.S. approach to the Soviet Union during the Cold War, especially its vilification of the adversary and its lack of strategic empathy. In the 1970s, Kennan discerned several assumptions that Washington was making about Moscow:

That the Soviet leadership [is] inspired by a desire, and intention, to achieve world domination…and views a military showdown with the United States as the inevitable outcome of the ideological and political conflict between the two powers…That for this reason, the Soviet armed forces serve…primarily aggressive rather than defensive purposes. Supplementing these views there seems to be an assumption…that the differences in aim and outlook between the Soviet Union and the United States are indeed of such a nature that no peaceful resolution of them is conceivable.

The same assumptions are now becoming prevalent in Washington with regard to China. Kennan elaborated further that these assumptions fueled a U.S. mindset in which “the Soviet Union appeared in a far more menacing posture” than it had previously. Among the characteristics of this mindset were:

…the sweeping militarization of the American view of East-West relations; the assumption of deadly and irreconcilable conflict; the acceptance of the likelihood, if not the inevitability of a Soviet-American war; [and] the contemptuous neglect of the more favorable scenarios…All of these assumptions and scenarios are either quite incorrect or highly improbable; but they are now so deeply and widely implanted in the public mind that in all probability nothing I could say…could eradicate them…Meanwhile, we face the fact (and it is here that the greatest danger comes in) that distortions of this nature, like all false prophecies and all false images of conflict and enmity, tend to be self-fulfilling.

Again, this seems to accurately capture the emerging American mindset about China, and the inherent dangers of that mindset. In that regard, Kennan noted the particular risks of failing to recognize how the Soviets would perceive and interpret the U.S. attitude:

What impression must all this make upon the persons charged with the ultimate powers of decision in Moscow? Are we sure we know?…It seems to me more probable that…Soviet leaders will see sinister motives behind these various phenomena—that they will conclude, in particular, that we have come to see war as inevitable and have put out of our minds all possibilities for the peaceful accommodation of our differences. If they gain this impression, then they, too, will tend to push such possibilities out of theirs.

Reinforcing this absence of strategic empathy, Kennan observed separately that Washington often failed or refused to acknowledge the extent to which assertive Soviet behavior was a response to U.S. actions. He also noted occasions when Washington had little interest in negotiating with Moscow because “Russia was already identified as the epitome of evil; and it wouldn’t look good, from the domestic political standpoint, to be negotiating and compromising with evil.”

Nearly fifty years after Kennan characterized the U.S. approach to the Soviet Union this way, it clearly is reverberating in America’s emerging approach to China. The prevailing narrative in Washington is that we are facing a “deadly and irreconcilable conflict” and “the likelihood if not the inevitability” of a U.S.-China war because China seeks “to achieve world domination.” The U.S.-China contest is portrayed as a winner-take-all struggle between democracy and autocracy. Congressman Mike Gallagher, who chairs the new House Select Committee on China, told its first hearing in February that the United States and China are engaged in “an existential struggle over what life will look like in the twenty-first century.” Moreover, much of the resistance in Washington to diplomatic engagement with Beijing appears to be driven by the domestic political risks of appearing to be “negotiating and compromising with evil.” Accordingly, it would not be surprising if Chinese leaders were in the process of concluding that Americans “have put out of our minds all possibilities for the peaceful accommodation of our differences” and, as a result, were doing the same.

Beijing, of course, shares ample responsibility for this bilateral dynamic because of its own vilification of U.S. policy toward China, lack of strategic empathy with the American perspective, and periodic resistance to engagement with Washington. But what both sides need to recognize is the symmetry of their perspectives, and the mutual distrust and recrimination that are fueling it.

If Kennan failed in his efforts to get Washington and Moscow to overcome such an interactive dynamic and to reach a diplomatic modus vivendi that might have eased or ended the Cold War, the question today is whether the opportunity still exists for Washington and Beijing to negotiate a similar modus vivendi before the competitive aspect of their relationship leads inexorably to another cold war, or worse. Kennan correctly warned that mistaken attribution of motives and false assumptions of enmity can be self-fulfilling. U.S.-China relations now appear to be on that path. If there were missed opportunities to ease U.S.-Soviet relations during the Cold War, we may now be missing opportunities to put U.S.-China relations on a less hostile and more constructive path.

Proponents of negotiation with Beijing toward that end, however, face the same obstacles and counterarguments that Kennan did. “Engagement” with China is widely characterized as an approach that has already proven a failure—because its supposed purpose was to lead Beijing to adopt Western values and support Western interests. Chinese leaders, it is argued, have betrayed those American objectives, cannot be trusted to deal with Washington in good faith, and indeed are not genuinely interested in reciprocal engagement. As a result, a confrontational U.S. approach focused on “extreme competition” and what amounts to militarized containment is considered a safer bet than seeking any accommodation with Beijing, and as probably inescapable.

It may be true that mutually beneficial relations and peaceful coexistence with China are as much of a pipe dream today as Kennan’s vision of an “honorable settlement” with the Soviet Union was thought to be fifty years ago. Given the levels of bilateral distrust and the domestic politics on both sides, strategic empathy may no longer be achievable, or even politically possible, in Washington or Beijing. Leaders on both sides may not be prepared or willing to assume the risks of pursuing mutual accommodation, especially if they have already concluded that doing so would be futile.

But are they prepared to assume the risks of not doing so, or of refusing to do so? Both Washington and Beijing appear to calculate that they are approaching their competition from a position of strength, if not with the upper hand. Each side, however, almost certainly is both overestimating its own leverage and underestimating the leverage of the other side. Washington in particular is at risk of overlooking a key difference between China today and the Soviet Union during the Cold War. In the earlier episode, Washington could temporize and generally disregard Kennan’s proposals for US-Soviet military disengagement from Europe because the Soviet Union’s relative global power and influence—outside the nuclear realm—was so far behind that of the United States. There usually was no perceived imperative for the United States to consider mutual accommodation, beyond nuclear arms control.

China, however, is a genuine peer competitor of the United States, with global economic power and diplomatic influence that far exceed what the Soviet Union was ever able to exercise. Beijing and Washington are thus destined to have overlapping spheres of influence, and to possess the capability and leverage to resist each other’s will. Under these new historical circumstances, some version of mutual accommodation almost certainly is the only alternative to inevitable conflict. Both sides need to recognize this, and not dismiss the other side’s readiness to acknowledge it. For these reasons, Kennan’s idea of “serious diplomacy” in pursuit of peaceful coexistence merits even greater consideration and urgency now than it did fifty years ago.

Paul Heer is a Non-Resident Senior Fellow at the Chicago Council on Global Affairs. He served as National Intelligence Officer for East Asia from 2007 to 2015. He is the author of Mr. X and the Pacific: George F. Kennan and American Policy in East Asia (Cornell University Press, 2018).

Image: Shutterstock.

Religion, and the interplay between religious and national identities, has played and continues to play a major role in shaping Central and Eastern Europe. The dominance of an atheistic political system and atheistic regimes for nearly half a century under communism was culturally alien to the region, and the role of faith has reasserted itself quite strongly since the implosion of the Soviet Union. In the past thirty years, we’ve seen a reversion to the historical norm that illustrates the staying power of deeply embedded cultural traits, including and especially religious identity. Its role in public life and national identity is felt more strongly in some countries than it is in others—it holds more influence in Poland, for example, than in the Czech Republic—but in most cases, religion plays a very significant role in each country’s sense of identity.

Western observers and policymakers would do well to pay attention to this reality. Given the central role played by faith communities in sustaining political and social cohesion, national identity, and strengthening the region in myriad ways, the United States now more than ever needs to embrace religious freedom in the region, as it needs to elsewhere.

The Centrality of Religion in Human Affairs

Many responsible for shaping foreign policy in Washington and Western Europe have a limited appreciation, at best, for the role of religion and religious freedom in the public lives of nations. As Thomas Farr has written, the U.S. State Department’s understanding of the Catholic Church and appreciation of its role in Cold War Poland was so poor that embassy officials were caught off guard by its contribution to the events that led to the end of the Cold War and that so heavily reshaped the region after the fall of the Soviet Union. They should not have been caught off guard—if nothing else, the sight of one million Poles in 1979 gathering for Mass under the then-new Polish pope, John Paul II, and chanting, in the face of their atheist oppressors, “We want God!” should have been an indication that the Roman Catholic faith remained a powerful influence in the everyday lives of Poles and in their sense of themselves as a people.

The role of religion in sustaining cultural and national identities has historically been, and continues to be, central to the human experience. Human beings have a natural desire to create communities of meaning with those with whom they share the deepest of bonds, values, and aims. Values and aims rooted in the transcendent—that is to say, religiously based values and aims—are the deepest foundations for a sense of common identity and a shared sense of meaning. In recent years that has been difficult to grasp for many political leaders in the West, which tend to be shaped by an aggressive form of secularism that looks askance at religious devotion, despite the fact that thriving faith communities, and in particular polities characterized by strong religious freedom protections, are consistently repositories of respect for other fundamental human freedoms.

While religion can be used to support authoritarian regimes, as we see today in Russia and elsewhere around the world, religious freedom undermines authoritarian forms of government and supports a panoply of other democratic freedoms. Religious freedom, partially because it causes us to realize that our ultimate loyalties lie not with a nation or state but to a higher reality, serves to undergird other democratic freedoms. As the late sociologist Peter Berger has observed, “Religion most emphatically proposes that there are limits to the legitimate power of the state.” Religious freedom and strong faith communities are critical to any political project based on limited government and strong civil societies and citizenship rights protections. Conversely, both because religious freedom implies distinct limits on the authority of the state, and because it is a foundational freedom that allows for the existence/emergence of other freedoms, authoritarian states seek to restrict it.

Religion in Central and Eastern Europe

The conflict in Ukraine, particularly since early 2014, when Russia annexed Crimea and became militarily active in eastern Ukraine, highlights not only this trend, but also the importance of religion in this context, shaping the perceptions and loyalties of actors on both sides. While Vladimir Putin’s “Russian world” ideology may be a propaganda tool on the part of the Kremlin to justify Russian attempts to dominate its neighbors, most Russians nevertheless agree that being “Russian” is very closely intertwined with being “Russian Orthodox.” This is despite the fact that most Russians do not regularly attend service or otherwise follow behavior that would be recognized as observant. Likewise, many Russians agree that a Russian cultural sphere based upon a common Orthodox faith gives Russia a “natural” place as the culturally and geopolitically dominant actor in its neighborhood.

Moving west, religion is perceived throughout the Central and Eastern Europe region as being an important element of national belonging whether citizens are religiously observant or not. This is the case despite the fact that levels of religious observance in the region tend to be lower than those of the United States or Latin America. Pew studies have shown that the resurgence of citizens who say religion is important to them has been much larger in Orthodox countries such as Russia and Ukraine than it has been in Roman Catholic countries such as Hungary and Poland. This likely says less about the true vitality of faith in places such as Hungary and Poland than it does about the stubbornness with which faith continued to be an important part of people’s lives in those countries even during the communist era as well as in shaping their sense of national identity, despite the overlay of the culturally alien ideology of Soviet communism.

With regards to Poland, Joseph Stalin famously called Poles “radishes”—red on the outside and white on the inside, showing that he was convinced that true belief in Marxism had not really penetrated the Polish national consciousness or psyche. This may be due to the centrality of Catholicism in shaping that national consciousness, as well as to the legacy of religious freedom that for centuries caused Poland to be characterized by flourishing faith communities in general, which in reality also shaped in very positive ways Poland’s sense of self.

The Case for Supporting Religious Freedom

The essentiality of religion to not just human affairs, but also liberal democracy, is why the United States must support religious freedom globally. Fostering such around the world helps to ensure the protection of other fundamental human rights that together, studies show, tend to result in greater political stability, greater economic vitality, greater levels of social trust and cohesion, and less aggressive international behavior. The level of religious liberty protections around the world is thus closely tied to not just democratic freedoms as a whole, but also to the stability of the international system.

The importance of Europe as well as of the larger Eurasian landmass to American strategic interests dictate that Washington make religious liberty in both Europe and in Eurasia as a whole a key policy aim. We need to pay particular attention to this issue in Eurasia at this particular point in history, in which Russia and China are attempting to strengthen their influence in Eurasia at American expense. Both take seriously the early twentieth-century British geopolitical theorist Halford Macker, who argued that any power or alliance of powers who controlled the Eurasian Heartland had the potential for world domination. That is precisely what Russia and China and their allies are attempting. In the early twenty-first century, Eurasia is undergoing a historical reintegration—economically, politically, and strategically—at a time when both relative American power and American determination to lead is an open question. This dynamic accentuates the importance of allies, such as those in Central and Eastern Europe, whose strong traditions of faith and commitment to religious freedom make them vital partners at a time when America needs all the partners it can get.

Uncomfortable as it may be for those in Washington to recognize, the American-led international order is quickly becoming a thing of the past, and the future is looking increasingly murky and dark. One of the most important ways in which to pursue American interests in this period is to strengthen those alliances that are characterized by important shared values, such as those that we share culturally and politically with most of Central and Eastern Europe. To see Eurasia come under the total sway of an alliance of authoritarian, anti-American, and anti-democratic powers would see the diminution of human rights and a general darkening of the whole global system.

It is vital, therefore, that the United States reinforce its relationship with Europe and challenge the growth of authoritarian powers that hate religious freedom. Recognition of the value of thriving faith communities to the vitality of our Central and Eastern European allies will have to be a key part of American strategy if we are to set things aright and see the renewal of a global order in which the historical American values which once animated our international behavior do so once again.

Dr. Paul Coyer is a Senior Fellow at the Common Sense Society.

Image: Shutterstock.

What happens when the U.S. military needs emergency access to satellites? With China and Russia having developed anti-satellite weapons and other nations placing their own equipment into space, being able to replace or add to U.S. capabilities in space quickly is critical to national security. That requires us to keep a number of satellites in reserve and possess the capabilities to get them into orbit. The Space Force’s ability to reassert U.S. satellite capacities in a pinch could mean the difference between intercepting threats to the homeland and not even knowing they’re on the horizon.

Other branches of the military have already shown how reserve fleets can save lives. Two programs, the Civil Reserve Air Fleet and the National Defense Reserve Fleet, provide the Air Force and the Navy the ability to use civilian aircraft and boats for military purposes in a time of extreme need. That is how we could fly civilians out of Kabul, Afghanistan, using planes from a reserve fleet so the military could secure airports and evacuate its own personnel. 

The U.S. Space Force has been putting together its own reserve fleet of commercial satellites for use when the Department of Defense’s satellite capabilities fall short in a time of crisis. Ensuring that data collected from satellites continues to flow uninterrupted to the U.S. military is essential. Dubbed the Commercial Augmentation Space Reserve, it is still in its early stages of development and only focused on keeping satellites in orbit—not keeping them on the ground. We need reserves on the ground in case a satellite is disabled or damaged while in orbit. The U.S. Space Development Agency has purchased and intends to launch hundreds of low-cost, low-orbiting satellites in the future. This ensures that should adversaries want to disrupt U.S. space capabilities, they will need to destroy hundreds of small satellites instead of disabling just one. The Space Force’s ability to seamlessly shift its stream of satellite-provided information will make certain that the U.S. military has the most up-to-date information available to inform their decisionmaking. 

Unlike boats and airplanes, satellites must usually be launched from fixed positions on Earth that are easily identifiable to adversaries. That makes quick replacement of satellites in orbit risky, as sites like Cape Canaveral, Vandenberg Space Force Base, and the Kennedy Space Center are all well-known sites that could have their payloads of satellites intercepted in a conflict. That is why the United States must have the capability to launch a satellite back into orbit from anywhere. The Air Force Research Lab is currently testing the RS1 and GS0 systems that would provide small teams of personnel the ability to launch payloads into space from a small concrete pad in under twenty-four hours. Currently, these systems are being evaluated on the amount of time it takes to train operators and ensure system sustainability but could provide military personnel with space-launch capabilities in the coming decades. 

Equipping personnel on the ground with rapid-response space launch capacities would add even more depth to reserve space systems in the CASR. These “operationally responsive space” capabilities would allow satellites and other equipment weighing less than 1,200 kilograms into orbit to either augment or replace defunct or disabled satellites with a minimal amount of large infrastructure on the ground needed to facilitate a launch. Launching objects from existing aircraft into low-Earth orbit is also within the realm of possibility: the U.S. Space Force’s TacRL-2 mission successfully placed an object in low-Earth orbit from a launch aboard an L-1011 aircraft traveling above the Pacific Ocean. As of last year, the Space Force gave three weeks’ notice to prepare for a launch, but with innovations like the RS1 and GS0 systems, the Space Force could shrink its launch time even further to just twenty-four hours. Being able to replace important capabilities in space from anywhere on the ground within a day would be a boon for overall deterrence and would add a massive amount of depth to U.S. space capabilities. The U.S. military should be prioritizing this technology to back up its satellite fleet.   

This rapid-launch technology is still nascent, and the United States needs to invest in developing it faster. A more recent test of an RS1 rocket on Alaska’s Kodiak Island failed due to engine malfunctions but was able to be on the launchpad ready at short notice. One solution could be leveraging artificial intelligence (AI) to conduct pre- and post-launch checkups of their systems could cut safety and inspection times down dramatically. Researchers at Japan’s Institute of Space and Astronautical Science were in the process of developing an AI for rockets that can perform safety checks, but tests remain ongoing.

Whether these solutions solve the problem or not, the ability for the United States to respond quickly to changes in space will be critical in future conflicts.

Roy Mathews is an Innovation Fellow at Young Voices. He is a graduate of Bates College and a former Fulbright Fellow. His work has appeared in The Wall Street Journal, National Review, and Boston Herald.

Image: Shutterstock.

Political backing for Lebanon’s central bank governor, Riad Salameh, appears to have started to wane, according to a report by Reuters citing political sources speaking on the condition of anonymity. Salameh himself has announced in an interview with Asharq News in February, and repeatedly afterwards, that he will not be seeking a new term in office once it expires in next month. However, there are unconfirmed reports that Salameh has already submitted his resignation in March to caretaker Prime Minister Najib Mikati. This reportedly is pending approval of the government, which is said to be a complex process due to the need to maintain a sectarian balance of power.

Meanwhile, investigations into Salameh’s alleged financial crimes in Lebanon and Europe are apparently gathering pace. Salameh is facing numerous accusations of alleged crimes, including embezzlement of public funds, corruption, illicit enrichment, and money laundering. European investigators returned to Lebanon in late April to continue questioning witnesses and individuals charged in Lebanon in connection with these allegations.

These developments are occurring against the backdrop of political paralysis, as the stalemate in electing a president for Lebanon persists. Yet at the same time, there is an urgent need to restore confidence in Lebanon’s financial and banking institutions as the country faces an unprecedented economic and financial catastrophe. The crisis—which combines a dire set of economic and financial factors, including hard foreign debt default, triple-digit inflation, severe currency devaluations, insolvent banks, an alarming GDP contraction, and an increasing shortage of basic goods—has been described by the World Bank as one of the worst in modern history. At this critical juncture, the selection of a central bank governor is almost as important as electing a president.

The Origins of Lebanon’s Economic Crisis

The causes of Lebanon’s financial collapse are rooted in the chronic mismanagement of public finances, leading to massive debt accrued by successive governments since the end of the Lebanese civil war in 1990. Critics point to Salameh, who pursued an aggressive monetary policy of lending to the Lebanese state since his appointment as governor of the central bank in 1993—had he not done so, previous Lebanese governments would not have been able to fund their spending and accrue such an enormous sovereign debt.

Salameh established and maintained a stable exchange rate climate in Lebanon, which was favorable for foreign direct investment, driven initially by Lebanon’s post-war reconstruction agenda then promoted by the late Lebanese prime minister and ultra-wealthy entrepreneur, Rafik Hariri. Salameh tied the Lebanese pound to the U.S. dollar, effectively dollarizing the currency and successfully pegged it at a fixed rate of 1,507 pounds per dollar since 1997.

This currency peg brought monetary and economic stability to Lebanon until a few years before the crisis. However, most economists agree that it depended on a crucial economic fundamental: steady foreign currency/dollar inflows to Lebanon, which would constantly boost the central bank’s foreign currency reserves. This was necessary to support the country’s exchange rate, keep the Lebanese pound stable against the U.S. dollar, meet debt obligations, and attract international investors. Fortunately, Lebanon's large diaspora, especially wealthy Lebanese, provided the dominant source of foreign currency through remittances. Other sources included tourism spending, foreign aid, and transactions with Gulf Arab states that bolstered central bank reserves.

In 2019, mass protests erupted as the country’s fiscal crisis deepened and Lebanese banks faced a significant share of deposit withdrawals, leading to a crash in confidence in the banking sector. In response, banks imposed capital restrictions, drastically limiting withdrawals of hard currency. The entire fixed exchange rate system collapsed. Remittances from the Lebanese diaspora—which had been declining significantly prior to the protests, particularly since 2014 when Lebanese in Gulf states reduced money transfers due to rapidly declining oil prices, job, and wage cuts, and more severely from 2016 onward—kept plummeting. There were also geopolitical causes for the acceleration of the financial crisis in Lebanon, such as the civil war that erupted in Syria in 2011, which affected foreign investment confidence in neighboring Lebanon, and Saudi Arabia withdrawing economic support for Lebanon in response to Iranian-backed Hezbollah’s growing influence in the country.

“Financial Engineering”

However, many argue that another fundamental feature that precipitated the crisis and defined Salameh’s bold and widely criticized monetary policy was the so-called “financial engineering” that took place. This scheme involved the complicit circulation of U.S. dollars between the state, the central bank, and Lebanese banks using high-interest rates, income, and profits as economic incentives. This, in reality, was part of a larger effort to continue funding successive governments’ controversial public spending. The entire endeavor worked for so long because it was structurally compatible with the policy of the currency peg, as it concurrently required constant flows of foreign currency/dollars to Lebanon, mainly deposits at Lebanese banks (which, as previously mentioned, largely originated from diaspora remittances).

In simple terms, banks received foreign currency deposits primarily from the Lebanese diaspora’s remittances and tourism, which they placed at the central bank in the form of certificates of deposits to earn generous interest income supported by a favorable (though substantially overvalued) fixed exchange rate of 1,507 pounds to the dollar. In turn, the central bank used the deposits to support government spending, pay for imports, and pay back the interest on accrued public debt but also on foreign currency deposits to the banks. Earning handsome interest income was a great incentive for both customers placing their savings at Lebanese banks and for banks themselves by lending to the state through primarily the central bank or directly. There are numerous important and complex financial details omitted here, but much of the interlinkage can be explained in this simple way.

Most observers agree that the political and economic elite, who managed and controlled the state’s resources, the central bank helmed by Salameh (or, allegedly, Salameh and other associates who are also the subject of investigations into embezzlement and illicit enrichment), and particularly the Lebanese banks )which hold more than 50 percent of Lebanon’s public debt) were the main beneficiaries of this financial engineering scheme. However, as a consequence, the scheme further enriched and inflated the assets of an already oversized and dominant banking sector in Lebanon on the back of the accrued state’s sovereign debt. By consistently pursuing and promoting this financial scheme, Salameh arguably prioritized safeguarding the attractiveness of local banks at the expense of the domestic economy and GDP growth.

It’s also worth noting that, while Lebanese bank customers and retail investors took some advantage of the interest income stemming from their deposits, Salameh’s financial engineering schemes mostly benefited the banks shareholders and wealthy depositors. Moreover, a research paper commissioned in 2016 by the Economic Research Forum on bank ownership mapping in Lebanon additionally highlights an underlying vicious cycle: close to 43 percent of Lebanon’s commercial banking sector assets are associated with the country’s political elites. As an unconventional Lebanese banker puts it, Lebanon’s financial assets have been controlled far beyond what is characterized as the political elites but by a Lebanese deep state.

As remittances plummeted, and foreign currency reserves fell to a strained level in 2016, Salameh reportedly doubled down on the central bank’s financial engineering operations to keep the dollars flowing in. He did this by exponentially raising the income that can be earned from interest on dollar deposits by commercial banks, far above market interest rates. At the same time, he increased Eurobond borrowings but most drastically pursued more aggressive lending to the state through regularly buying government bonds.

Salameh’s financial engineering, which the International Monetary Fund (IMF) politely described as “unconventional”  at the time, has more appropriately been likened to a ponzi scheme by the World Bank in a report published in 2022. The report noted that fiscal policy practices were consistently mismanaged by the government and central bank to serve an entrenched political and economic elite at the expense of the citizenry, including incurring massive public debt to maintain confidence in the financial system, an overvalued currency to sustain deposit inflows, macro-financial imbalances “binding” fiscal, monetary, and financial balance sheets, and the ruling elite’s exploitation of state resources for private gains.

Despite being blamed by some for Lebanon’s current distress, Salameh has insisted that the Lebanese financial crisis is not a consequence of monetary policy but of political impasse. He has complained of a political campaign seeking to undermine his record, mainly waged by the camp of former Lebanese president Michel Aoun and his son-in-law, the controversial politician Gibran Bassil. Salameh has attributed the crisis to a series of factors and contingencies, including the 2019 protests leading to the temporary closure of banks, the 2020 government default on paying its dues on Eurobonds, the coronavirus pandemic, the infamous Beirut port explosion, and the ongoing political crisis over the presidency. He has also claimed that it was the government that compelled the central bank to finance its public expenditures through laws.

Many have wondered how Salameh could still be running the central bank and not be held accountable in view of the mounting investigations into his alleged financial crimes. To answer this, many analysts and commentators point to Salameh’s support from top politicians and the country’s economic elite, and further ascribe the matter to the country’s sectarian patronage and clientelist system. Yet at the same time, this ignores the country’s broader economic and financial context. The uncomfortably truth is that while Salameh contrastively dollarized the Lebanese currency in his three-decade tenure as the governor of the central bank, he ultimately did little to break with the country’s history of an uncontested and minimally regulated laissez-faire banking system in Lebanon.

Will the IMF Rescue Lebanon?

At this moment, the path out of the financial crisis itself depends in great part on the implementation of an IMF economic reform program, following a preliminary agreement reached between the IMF and the Lebanese government in April 2022. As part of the agreement, on the condition that reform measures are fulfilled, the IMF will provide a $3 billion bailout to Lebanon aimed at restoring the country’s economic and financial sustainability. The IMF reform plan primarily requires the implementation of several painstaking reforms, including the restructuring of the country's commercial banks, the abolishing of central bank financing, a capital controls law, amending the banking secrecy law to conform with international standards of fighting financial crimes, and the unification of the multiple exchange rates for the Lebanese pound, which resulted from the collapse of the stable exchange rate following the crisis. However, according to an IMF statement following a team’s mission to Lebanon in March, limited progress has been made in fulfilling comprehensive economic reforms. The statement noted the lack of action by Lebanese authorities to enact key changes, as well as the persistence of a set of financial practices harmful to the Lebanese economy.

Above all, the IMF’s proposal calls for financial sector losses to be distributed between the government, the banks, and large depositors in a manner that protects small depositors while keeping recourse to state assets to a minimum. Not surprisingly, this proposal has been largely opposed by Lebanese banks, contributing to stalling reforms.

For now, it seems, Lebanon continues to be stuck and must wait for deliverance, both political and economic/financial. Salameh’s fate may end up being a bellwether for the country’s situation: will be held for account for his numerous alleged crimes, signaling that change is at hand, or will he somehow manage to get away with all that he has done?

Rany Ballout is a New York-based political risk and due diligence analyst with extensive experience in the Middle East. He holds a master’s degree in International Studies from the University of Montreal in Canada and a bachelor’s degree in Linguistics from Uppsala University in Sweden.

Afghanistan’s key economic sectors have long been bedeviled by the lack of security, widespread corruption, and weak law enforcement. Following the takeover of the Taliban in August 2021, national funds were frozen, sanctions were imposed, and development aid was halted by the international community. Nonetheless, the Taliban have found ways to sustain the country’s fragile economy, thanks to Afghanistan’s ample mineral resource deposits.

Estimated to be worth about a trillion dollars, the Taliban have already started converting these assets into hard revenue. Coal, for example, is already being extracted and exported—the earnings from such help sustain the new regime, particularly in light of the economic shortfall left by the country’s abrupt political crisis. To ensure a swift cash flow, in the second quarter of 2022, the Taliban’s finance ministry raised export duties on coal from 20 percent to 30 percent, coupled with the rise in coal rates from $90 to $200 per ton. By mid-2022, approximately $40 million was collected in customs duties on coal from the exports to neighboring Pakistan.

In an exclusive interview on a state-owned TV in 2022, Shahabuddin Dilawar, the acting minister of mines and petroleum, explained that Afghanistan has millions of tons of coal reserves in different provinces and that around 130–144 million Afs are generated every week as domestic revenue. For the cash-strapped Taliban, coal mining thus presents an essential economic lifeline. However, given the chronic dearth of capital and labor in other sectors of the Afghan economy—such as manufacturing, education, agriculture, and the public sectors—over-reliance on natural resources, particularly coal mining, could lead Afghanistan to suffer from the infamous Dutch Disease.

Afghanistan’s Economic Disparity

The Taliban’s newfound dependence on mining revenue bodes ill for Afghanistan, which is already suffering from a high unemployment rate—in the first weeks of the Taliban’s takeover alone, a total of more than 500,000 people lost their jobs.

Because of the country’s poor economic situation, workers are seeking jobs in cash-rich industries like coal mining. However, this has led to a severe understaffing problem in other essential sectors, such as agriculture and social services. Additionally, as the mining industry consumes a significant portion of capital, there may also be a lack of capital in these other sectors, leading to an overall imbalance in the economy.

Further complicating the situation is the ugly reality that only those with political clout can find work. This is because workers are frequently designated based on individual preferences, connections, and ideological compatibility with the Taliban. As a result, further national poverty and inequality seem likely, which could lead to an increase in child labor, as even the low wages earned by children working in fields like mining are deemed necessary by starving households.

None of this has dissuaded either domestic or international investors, however. Many parties are keen to invest in the country’s mining industry. For instance, Chinese and Iranian companies have shown interest, and may soon make huge investments in Afghan coal mining.

Kabul is thus left in an ugly situation: the Afghan economy is imbalanced in favor of mining, while other sectors go understaffed and underfunded. Yet reform is hard to achieve, due to the country’s delicate and volatile politics.

Fighting over the Mines and Power

Because of its sheer importance, the Taliban’s leaders have exerted monopolistic control over the mining sector. As reports note, the Afghan mining industry is now beholden to a few top Taliban leaders, and relying solely on income from mining likely exacerbates political fractures among these leaders. The resulting covert power struggles have unfortunately led to mismanagement and exploitation. In early 2023, for example, the Taliban’s Ministry of Public Works announced that it plans to offer coal mining extraction contracts to local (road) construction companies in exchange for the restoration of the Kabul-Kandahar highway.

Given that Afghanistan is already susceptible to economic and political threats—whether it be from disaffected local forces, the Islamic State of Khorasan Province, and/or the National Resistance Force—any disagreements over the equal distribution of coal mines and their revenues could not only lead to Dutch Disease but also to further instability.

Nonetheless, in the current context of Afghanistan’s volatile political and economic landscapes, the newfound reliance on natural resources is necessary for the country’s short-term economic survival, as was the case in some other countries such as Indonesia and Nigeria. In the long run, however, the Taliban regime needs to advance new policies, such as promoting economic diversification and the inclusion of Afghan private enterprises. This could make the use of natural resources more efficient by ensuring proper capital allocation and job creation in different sectors. In this way, the Taliban can avert a number of local threats and even pacify some anti-Taliban factions for national security.

Given that the country’s coal mines are among the Taliban’s few major sources of domestic revenue, these require tactical and careful management. Otherwise, the implications could be devastating. Conflicts over coal mines, for example, have already been reported between the Taliban and locals in Sar-e-Pol province. Such disputes over the control of the mines will further encourage locals to engage in the illicit trade of natural resources—a major problem for the Taliban given their dependence on the mines and coal.

The Need for Change

Given current circumstances, the Taliban sees the use of natural resources as a boost for their economy and survival. However, if they only invest in natural resources without creating other kinds of jobs, they risk instability and causing Dutch Disease, which could have disastrous consequences for their regime. To avoid this, they should inclusively encourage domestic startups to participate in the mining industry to create jobs. Rather than relying solely on exporting coal, the Taliban could use it as a raw material for other industries within Afghanistan, such as iron manufacturing, and/or use the surplus earnings from coal exports for capital allocation in other sectors. Another option would be to exchange coal exports for things that Afghanistan needs, such as agricultural equipment and technological services.

One thing is for sure, however: if the Taliban does not change its approach, the long-term consequences will be a natural resource curse, increased unemployment, and internal political turmoil.

Hamayun Khan is an independent researcher pursuing an MSc in International Business at George Washington University. He holds an MBA in Finance from IKG Punjab Technical University, India. Hamayun has published articles on Afghanistan with several think tanks, and news outlets including The Diplomat, Migration Policy Institute, Eurasia Review, South Asia Monitor, and South Asia Journal.

Nasrat Sayed is a researcher and commentator on Afghanistan. He has published articles on Afghanistan for several think tanks and news outlets, including the Migration Policy Institute, The Diplomat, International Growth Center, The Interpreter, South Asia Monitor, and TOLOnews.

The views and opinions expressed in this article are those of the authors.

Image: Shutterstock.

As we’ve learned from recent leaks of top secret documents on Discord, the United States is engaged in a direct conflict with Russia. It’s neither akin to covert Russian intervention in Vietnam, nor even the major U.S. role in the Soviet-Afghan War. We already knew American dollars were buying American weapons to kill Russian troops, aided by American intelligence and targeting.

What it now appears—assuming the leaks are genuine—is that American boots are on the ground, too. The media has misrepresented the state of the conflict, covering it as a traditional proxy war, but the reality is patently unsustainable.

For most Americans, foreign policy is not a top priority, especially when almost every aspect of American life has gotten harder in the past few years. Inflation is still issue number one, and its issue number two as well. But something unsettling has occurred amidst that inattention and the free hand we’ve given to Washington’s foreign policy establishment: Europe now faces its first massive land war in seventy years, and our leaders seem content to let it drag on indefinitely, underestimating the risk that a prolonged and direct conflict with a major world power could metastasize into a global catastrophe.

When I ran for Congress last year, I heard very directly from the citizenry of western Pennsylvania a deep concern that we had slipped back into a different era, one in which cataclysmic outcomes were again possible. Voters understood that without America coming to Ukraine’s aid, Russian president Vladimir Putin would conclude that he can take what he wants. But concerns about support for Ukraine were just as nuanced: are we acting in America’s interest, or expending our energy on a conflict that is not our fight? Especially given the crises we face here at home—the economy, the border, and many more. Whose sovereignty matters most?

There remains a gap, dangerous and growing, between the commitments American elites have made and what the average American will support. That gap is our largest strategic weakness, one unaddressed by virtually everyone in the political sphere. With no prospects for a clear victory by either side in Ukraine, and these new revelations that show how our foreign policy is prolonging this attritional war, America must turn its efforts to peacemaking.

We can start by speaking plainly: our own intel suggests that Ukraine’s spring offensive is unlikely to change the tide. The diplomat ideologues and civilian think tankers who brought us to this moment have no plan for a decisive battlefield victory, nor even a sufficient advantage to convince Russia to sue for peace. This is an underappreciated risk: intervention so heavy and so direct near guarantees escalation or dangerous spillover. We are running out of time before this officially becomes a greater, messier international conflict. America cannot rely on Ukrainian or Russian leadership. We must determine the sufficient price for peace and then, quite frankly, as the senior party and chief financial partner to the conflict, impose those terms on all parties.

First, we need to stop dealing in the arbitrary posture that every new development in this conflict is the final front in stopping Putin’s territorial ambitions. Putin began his imperial project in Georgia in 2008 and continued it with little pushback in Crimea in 2014. Over the course of that time, he assumed de facto sovereignty over approximately 2.5 million people, and that can’t be ignored. But resisting Putin’s expansionism must be viewed strategically, not just tactically. The risk we take by hurling American lives and equipment into this conflict until the Ukrainians have what we judge is a sufficient advantage is that this regional conflict boils over into a global one.

Washington’s foreign policy establishment argues for no compromise, no negotiation with Putin. It believes we can work the subtle line between sapping Russian capabilities and preventing escalation. For example, it advocates for limiting Ukrainian strikes in Russia. But by prolonging the conflict and increasing Ukrainians’ and Russian desperation, we guarantee it won’t stay contained. The incentives and impact of an attritional war won’t align so cleanly.

Who will end this war if not us? Russians and Ukrainians just celebrated Orthodox Easter, and for the second year in a row, Pope Francis called for a two-week Easter truce. But there was no truce and there will be no truce. The two countries are engaged in more than a war: they are engaged in a crusade. But even crusades require resources, allies, and hope of victory. The longer we provide these to Ukraine carte blanche, the longer each side will remain convinced it needs to wait for more favorable terms before pursuing peace.

Every week there is more news and opinion about one side or the other’s battlefield advantage. These breathless reports aren’t changing the broader picture. The longer this war drags on, the likelier that leaders in Russia and Ukraine will see strikes outside the immediate battlefield or other destabilizing, asymmetric actions—as desirable and reasonable. And in the fuzzy logic of wars of attrition, they will be.

Right now, the United States foreign policy establishment is not merely supporting an ally. We are prolonging an unsustainable war and risking global security. The free people of Ukraine deserve support, but unless we are committed to running two Defense Departments—American and Ukrainian—then we need to find a solution, and soon. As the Discord leaks showed, we’re committing resources and manpower to prolong a conflict that is only uncovering additional layers of mobilization and escalation, while decimating the lives of the average Ukrainian, as hearty and committed as many are. Instead of being accomplices to this destructive deadlock, we should provide the means of ending it: forcing the parties to negotiate a structured peace, not just for their interests, but for ours.

Jason Killmeyer is a political commentator and national security expert who focuses on defense policy and emerging technologies.

Image: Drop of Light / Shutterstock.com

Argentina is set to go to the polls on October 23 to elect a new government. The election—amidst a deep economic crisis, which includes high inflation (over 100 percent), a complicated exchange rate system, a drought in prime agricultural regions, falling international foreign currency reserves, large fiscal deficits, and a messy debt situation—will be momentous. There is even some talk that the Fernández government may not last until election day. Yet despite a pervading sense of pessimism over the economy, one sector has shined: lithium. The flaky white metal is widely seen as an export that can help grow the country out of its troubles.

But there is a sharp debate about how to play the lithium card: should it be exported as a raw material (in the form of lithium carbonate), with a welcome role for foreign companies, or should there be a value-added process that extends to the creation of a local battery industry guided by the state and restrictive to the foreign sector? The discussion over how to approach this issue is likely to intensify as the election draws closer, with foreign mining companies and governments watching closely.

Lithium as Key to the World’s Energy Future

Lithium’s importance stems from its central use in the making of batteries. As the world moves away from fossil fuels to renewable energy, the need for batteries increases as they are essential to power electric vehicles (EVs) and help augment storage for wind and solar power. In the United States, the great energy transition has received a massive amount of government support, most noticeable in the $369 billion Inflation Reduction Act (IRA). The European Union, meanwhile, is taking measures to secure diverse, affordable, and sustainable supplies of critical raw materials, including lithium.

While the United States and the EU are major users of lithium, China is the largest consumer of the metal due to its use in its booming electronics and EV industries as well as being the world’s leading battery maker. Some of its largest mining/energy companies are already engaged in Argentina. Other countries are also scrambling to find secure sources of lithium, including Australia, Canada, Japan, South Korea, and the UK. According to the U.S. Geological Service, global consumption of lithium in 2022 was estimated to be 134,000 tons, a 41 percent increase from 95,000 tons in 2021. Expectations are that demand for lithium is only going to grow in the decade ahead.

In this rapidly changing energy landscape, Argentina has the good fortune to be part of the “lithium triangle” that also encompasses Bolivia and Chile. It is estimated that 60 percent of the world’s identified lithium reserves are in this region, with Chile being the second largest producer and Argentina in fourth place. Although Bolivia holds the world’s largest reserves (21 million tons) and is seeking to develop its lithium mining, political problems and a longstanding disinclination vis-à-vis foreign investment have translated into only meager output. In contrast to Bolivia, Argentina has maintained a more open investment climate for lithium mining, which is paying off. In 2022, Argentina’s mining exports hit a historic high of $3.86 billion, driven by robust lithium income. Indeed, lithium exports surged 234 percent from a year earlier, accounting for a fifth of all Argentine mining shipments. Most of the country’s lithium is produced in three northern provinces, Catamarca, Jujuy, and Salta, which have dealt with the wave of foreign companies and are indicating that they would like a larger slice of the profits, possibly through a tax increase.

Argentina’s Lithium Choices

Lithium’s attractiveness as an export has gained considerable attention from Argentina’s political class. The question they face is how to extract as much value as possible to benefit the country. The dirigiste or statist model is to nationalize lithium and/or have the state play a major role in its development. This argument is grounded in the view that the global push to renewables provides an opportunity for Argentina to advance its industrialization and technological development while avoiding the risk of reprimarization of the economy. According to Veronica Robert, the Undersecretary for Strategy for Development of the Secretariat of Strategic Affairs in the Peronista Fernández administration: “The development of a manufacturing and technological sector associated with the production of cathode materials (which are derived from lithium) such as battery cells could position our country in a privileged place within the production of electric and hybrid vehicles, in the same way that it could complement our capacity to generate electricity.”

With the dirigiste model, foreign companies are either not welcome or limited to public-private arrangements. According to Marcos Actis, Dean of Engineering at Universidad Nacional de La Plata, “Handing over the lithium mines to foreign private companies was the worst thing that could have been done.” His reasoning stems from the fact that Argentina exports a primary ingredient for batteries but must import by-products and batteries from China for the local industrial development of renewables. His preference is to require foreign companies to install local battery plants, which is being pursued by Indonesia with its nickel mining and in Bolivia.

Actis also believes that Argentina’s state-owned energy company, YPF, should play a more significant role in the lithium sector. While YPF is mainly driven by oil and gas production, it has also created YPF Tec, a technology company that is seeking to launch a lithium battery factory supplied lithium by U.S. mining company Livent (which is mining in Argentina). The plant is the first in Latin America that will produce lithium battery cells, which will be used in stationary batteries for energy storage.

The argument for a more statist role in the lithium sector received a boost from neighboring Chile, whose left-of-center president, Gabriel Boric, announced in April that he will increase the state’s role in his country’s lithium industry to strengthen the economy and protect biodiversity. Under the proposed plan, which must pass the Chilean Congress, the government will negotiate with the two licensed lithium mining companies present in the country—SQM (Chilean and partially Chinese-owned) and Albemarle (American)—for new contracts that increase the state’s share of ownership and profits. Moreover, the state-owned copper mining company, Codelco, will oversee the process as well as help to create a new state-owned lithium company. The reception to this plan was mixed, with much of the global media and investors calling the Chilean government’s action a nationalization, though there was no outright seizure of foreign company ownership.

While the dirigiste model appeals to Argentina’s populist wing, there is a more market-based option. According to Santiago J. Dondo, former Undersecretary of Mining Policy, who served during the more market-oriented administration of President Mauricio Macri (2015–2019), “In Bolivia, Evo Morales convinced everyone that they will not take our lithium if it is not in a Bolivian electric car. The result: Bolivia does not produce lithium commercially despite having the largest salt flat in the world.”

Dondo also noted that, despite discussions over an expanded state role in Chile, that country’s tax regime and mechanisms to boost local battery production have led to a cooling in foreign investment into the sector. The move to nationalize the Chilean lithium industry is likely to further chill foreign investment to Argentina’s benefit.

Dondo prefers what he calls the Australian model, which is based on market-friendly principles, openness to foreign investment, and investment in technology to lower the costs of producing lithium. Consider that while neighboring Bolivia sits on the world’s largest identified reserves, the country has struggled to launch its lithium business since Evo Morales came into office in 2006 and insisted on a very restricted foreign company role and the development of a local battery industry, all run or guided by the state. In sharp contrast, Australia is the world’s largest producer. Dondo and others worry that the adoption of the Bolivian model would take away from Argentina’s attractiveness as a place to mine lithium.

An additional risk in turning away foreign investment is that lithium mining companies and their badly needed technology can go elsewhere. Brazil is developing its own lithium sector, and African lithium-rich countries, such as Zimbabwe and Namibia, are moving to develop processing and refining industries to capture a portion of the global demand for battery material. The more difficult the investment process, the more foreign companies will look for easier points of entry.

The Geopolitics of Argentine Lithium

Argentina’s lithium debate also puts it in the geopolitical crosshairs. In 2022, China made up 43 percent of all lithium exports, followed by Japan at 29 percent, South Korea at 14 percent, and the United States at 10 percent. For the United States, Argentina accounted for 51 percent of its lithium imports in 2023, followed by Chile and China. Consequently, what happens in Argentina matters to the rest of the world. This was clearly reflected by the German chancellor Olaf Scholz’s January visit to Argentina and the current state of intense negotiations between Buenos Aires and Washington to forge some type of trade agreement to allow lithium imports under the IRA, which precludes imports except for countries that have a free trade agreement (FTA) with the United States. Argentina currently lacks a FTA.

China has also heavily invested in Argentina, complete with suggestions that the South American country join the BRICS (Brazil, Russia, India, China, and South Africa) club and a recent agreement for trade between the two nations to be conducted in yuan. China is Argentina’s second-largest trade partner after Brazil and has lent Argentina $17 billion for a wide range of infrastructure projects, many of which have been troubled by local labor and environmental issues. China also reportedly has some type of bases (supposedly linked to its space program) in the country, and Chinese companies are actively engaged in the lithium sector. Although Argentina represents a challenging environment for Chinese companies, it maintains an important geoeconomic importance, especially in terms of its natural resources. What is going on in Argentina, including the debate over the lithium production regime, is of considerable interest to Beijing.

Although Argentina’s economic crisis dominates its electoral politics, the lithium sector is enjoying considerable success, in part due to the successful handling of the business by the three major provincial governments where it is produced. Whoever wins the 2023 elections will have a say in whether the federal state plays a larger role or if Argentina will maintain an investment regime that is open to foreign investment. Argentina has a window of opportunity to make good in the lithium sector, but it needs to maintain a pragmatic approach to achieve the greatest value it can for the country and keep foreign investment positively engaged.

Dr. Scott B. MacDonald is the Chief Economist for Smith’s Research & Gradings, a Fellow with the Caribbean Policy Consortium, and a Research fellow with Global Americans. Prior to those positions, he worked for the Office of the Comptroller of the Currency, Credit Suisse, Donaldson, Lufkin and Jenrette, KWR International, and Mitsubishi Corporation. His most recent book is The New Cold War, China and the Caribbean (Palgrave Macmillan 2022).

Image: Ksenia Ragozina/Shutterstock.

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