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The EU and the US

by erpic-manager on February 13, 2017 in Uncategorized with No Comments

The EU and the US
Sherle R. Schwenninger
May 2010

The Great Recession of 2008-09 has put enormous strain on the social contracts of Western economies. This paper provides an American perspective on how well the social welfare systems of the United States and the European Union countries have performed in cushioning their populations against the economic dislocations associated with the Great Recession and how effective U.S. and European policy has been in softening the severity of the recession and in creating the conditions for future socio-economic progress.

In many respects, the responses of the United States and the European Union to the onset of the Great Recession have followed very predictable patterns.   With a tradition of an activist and Keynesian oriented macroeconomic policy but with a relatively weak social safety net, U.S. authorities responded with a large $787 economic recovery program and with swift Federal Reserve action to stabilize the financial markets, including measures to buy mortgage-backed securities.  By contrast, the core European economies were generally more conservative in their fiscal response, relying on the automatic stabilizers in their social welfare systems to soften the blow to the economy.

Thus, it is not surprising that while the U.S. economy show signs of a more vigorous recovery than does the European Union as a whole, the core European economies can claim to have weathered the Great Recession with less social and economic dislocation than the United States.   But the Great Recession has also revealed wide variations in the   experience of countries within the European Union showing that the Union is far from offering a shared  European  standard  of  social  security.  While  the  Germans,  Dutch,  and  French  weathered  the  crisis comfortably in spite a serious fall-off in economic growth, those in the economies on the so-called periphery are experiencing double digit unemployment and facing prolonged economic slumps and fiscal crises that will erode living standards for years to come.

The Great Recession has also exposed serious structural weaknesses in the capacity of the European Union to respond to serious economic downturns and to generate ongoing socio-economic progress among all its member countries.   Not only does the Europe’s Stability and Growth Pact inhibit robust macroeconomic responses to economic  downturns,  the  very  structure of  euro-zone  membership  eliminates  many  of  the standard  tools  of adjustment, such as exchange rate depreciation, to such crises, and places the burden of adjustment on the weaker members.  Indeed, the Great Recession has more than ever cemented the reality of a two-tier Europe and puts into question the very model of economic growth that the European Union has pursued over the past decade.  In that sense, the experience of the European Union is very similar to that of the United States, where the Great Recession has also reinforced America’s growing two-tier society and put into question its model of economic growth.  The question for the future is whether the United States and Europe can find a common agenda to expand their social welfare  systems  or  whether  they  are  forced  to  become  greater  competitors  in  a  demand-constrained  world dominated by Asian mercantilism and producerism.

Comparing the American and European Safety Nets

The Great Recession may have revealed the advantages the United States has with its tradition of expansionary macroeconomic policy.  But it also clearly exposed the many holes in America’s rather porous social safety net. Ironically, it was the much touted modernization of the safety net for the new economy that has caused the greatest gaps in America’s economic security.  In the late 1990s, reforms in America’s social welfare system made many benefits contingent upon work not anticipating that unemployment might climb to double digits.  Other so-called modernization measures embraced the notion of the ownership society, ignoring that housing and equity prices can go down as well as up.

Since the Great Recession began, the inadequacies of America’s social and economic security system have quickly showed up in the data.   To begin with, the ranks of America’s poor have swollen by at least an additional 2.5 million; child poverty has climbed to 19 percent from 17.8 percent a few years earlier.  One in eight Americans, including  one in four  children,  is  now on the food  stamps  because they are not  eligible for  unemployment compensation or any other social welfare program.  Nearly 50 million Americans lack health insurance, and over 17 percent of households report that they have postponed or delaying seeking healthcare over the past year for financial reason.

As to the ownership society, for a period of time rising home prices and access to credit helped mask the effects of stagnating wages.  But now the debt left in the wake of the housing crash, is dragging down millions of American families.  As of October 2009, nearly one in four mortgages was underwater, meaning the mortgage holder owes more on the mortgage than the underlying home is worth; that number is expected to increase to 48 percent by 2011. Overall, American households have suffered a $12.6 trillion loss in household wealth, a significant portion in their homes and retirement accounts, and as a result, one in four Americans over 62 are putting off retirement because they cannot make ends meet.

By contrast to this  American picture, there has been little increase in poverty in the core EU countries, no precipitous drop in household wealth or income, little or no evidence of people having to forego health care for financial reasons, and little or no increase in the number of people who are putting off retirement for financial reasons.  If one were not rich and one could choose where to experience an economic downturn as serious as the Great Recession, one would clearly choose Germany, the Netherlands, France, Belgium, Italy, or the Nordic members of the European Union, not the United States.   The experience of working and middle class in other European economies of course has been more difficult but these economies do not have the same level of social welfare protections as do the richer core economies.

There are three reasons why the United States has done so much more poorly in cushioning the impact of the Great Recession on its working and middle class than has these core European Union economies.  First, the American system of social and economic security revolves much more closely around employment—having a job—than does Europe’s.  As is well known, health insurance in the United States is still largely employer based; if you lose your job, you most likely lose your health insurance as well.   But so are other features of America’s social welfare system.  As a result of the welfare reforms passed under the Clinton Administration, America’s principal welfare program—Temporary Assistance for Needy Families—is now linked to work requirements.  Not surprisingly, the number of people accessing the program has scarcely expanded during the recession because employment itself has declined even as the number of poor has increased alarmingly.

Likewise, America’s main program for helping the working poor—the earned income tax credit–is dependent on being in work or having earned income.  Individuals who can show they have earned income up to a certain level is eligible for a refundable tax credit to supplement their income; those who have not been employed and have no earned income are not.  And what is true for America’s working poor is as true for America’s middle class.

Many of America’s most important social welfare state benefits relating to education, child care, home ownership, and retirement are delivered through the tax codes as deductions against income.  This has created a social welfare state that heavily favors upper and middle income groups; indeed the majority of benefits now go to the top 20 percent not to those who need them most, creating in effect a two-tier welfare state.  But that also means that as unemployment and underemployment rise and the incomes of those in the middle decline, so do their social benefits for education, child care and retirement.   As a result, they can quickly find themselves pushed into the bottom tier of America’s social welfare system fighting for limited resources.

Yet even as the economic security of Americans has become ever more linked to employment, America’s job machine has broken down.  Since 2000, the economy has created very few new private sector jobs, and the number of the effectively unemployed (a wider measure of unemployment has steadily increased.  As of December 2009, the official rate of unemployment was 10 percent, but that number rises to 17.3 percent when people who have given up looking for work and those working part-time of necessity are included.   That means the one in six working Americans are effectively unemployed, and because they are unemployed, many of them have lost their access to health care and other social insurance benefits.

Second, U.S. labor markets are characterized by less unemployment protection than those in Europe where it is more difficult to fire or let workers go.  Thus job losses occur more quickly than they do in Europe.   It is therefore doubly tragic that the unemployment insurance programs available to workers in the United States are a lot less robust than they are in the core European Union countries.  Since the beginning of the recession, the official U.S. unemployment rate increased by 5 percent, while the unemployment rate in the Euro areas during the same period increased by just 2.5 percent.  But unlike in Europe, many of those experiencing unemployment have not been able to have the protection of unemployment  insurance.   In most European countries, unemployment benefits are available to nearly all workers, cover well over half of an employee’s earlier salary, and extend for more than a year.

By contrast, in most states in the United States, unemployment benefits are restricted to a narrow group of workers, often compensate workers for less than half of their previous wages, and generally last less than one year.  Less than half of unemployed workers in the United States are eligible for and receive unemployment insurance benefits. That is because many states in the United States have very rigorous eligibility requirements that exclude low- income or part-time workers and that limit any compensation to a very short period of unemployment.  As a result, while 15  million workers  in the United States are officially unemployed, less than 10  million are receiving unemployment  insurance benefits,  either  because they  did not  qualify  initially or  because they  have already exhausted their benefits.  In sum, America’s system of economic security works reasonably well during periods of full employment but quickly collapses during periods of rising unemployment.

Another reason why workers in the core EU economies have faced less hardship than their American counterparts has to do with these economies’ successful experience with what are called short-time work programs, which have limited the number of jobs losses.  Although the details of the programs vary country to country, the purpose is consistent—to subsidize employers to keep people in their work by reducing the number of hours they work. These programs have enabled European companies to keep much of their work force in tact but at the same time cut costs.  They have also helped hold down unemployment and to avoid the loss of human capital associated with long periods of joblessness.

To be sure, there are reports of a few interesting experiments in job sharing among U.S. employers.  But for the most part, American companies have resisted these measures and have continued to rely heavily on layoffs to control labor costs.  And despite a few advocates on the left, expert opinion continues to oppose the idea of short- time work programs.   According to the critics, these programs end up protecting jobs that are not viable even when the economy recovers; they drag down labor productivity and make companies less competitive; and they will only lead to an artificial spike in unemployment later.  Moreover, as the critics contend, these programs work best if at all in short downturns, as the name short-time work implies, and are not well suited for a prolonged period of negative or weak job growth such as we are now experiencing.

This  American resistance to short-time work programs reflects a major difference in the U.S. and European approach to the Great Recession.   In the United States, there is still a prevailing view that economic downturns should lead to market-enforced restructuring and downsizing (banking being an exception), while in Europe there is the view that governments must take care if possible to preserve their industrial capacity.   This difference in philosophy was evident in the different approach Washington and European capitals have taken to their ailing auto industries.

In the United States, Chrysler and GM were forced into bankruptcy and were downsized and reorganized.  As part of the restructuring plan, nearly two dozen North American plants were shut down and thousands of car dealerships were closed.  By contrast, in most of euro-zone Europe, with the government’s blessing and help, automakers have resisted shutting down plans, and have chosen instead to temporarily idle capacity or put workers on partial pay. The contrast between how the United States and core European economies have responded is all the more striking given that the left-of-center Obama administration took a tough-love approach while Mr. Sarkozy’s and Ms. Merkel’s center-right governments took pains to soften the blow on French and Germany auto workers.

Finally, the United States has embraced much more readily the idea of ownership society than has Europe, and thus the American social contract has come to rely much more heavily on home ownership and private pension plans than has the European counterpart.    This embrace obviously has advantages when asset prices are rising but it wreaks havoc in a bubble-prone economy when the bubble burst.     For the past decade, rising home values compensated American workers for stagnant wages, allowing them to maintain and even improve their standard of living by tapping home equity.  In addition, easy access to credit allowed families to weather economic downtowns or medical emergencies but at the expense of rising household indebtedness.  With the bursting of the housing and credit bubble, this essential feature of the Clinton-Bush era imploded, leaving many households with a large debt hangover.  As a result, the Great Recession has dealt a double blow to many Americans; not only have they lost their job but they have lost their home and their life savings as well.  Worse, there is little in the way of programs available to help them pick up the pieces.

By contrast, most Europeans in the core Euro-zone economies have been relatively unaffected from housing price declines and from the tightening of consumer and household credit, because home ownership and credit have never played the same role in core European countries as they have in the United States.   Europeans have also been largely protected from the collapse of the value of private retirement programs, which have hit many Americans hard.  Over the past two decades, American companies have steadily shrunk their private pension contributions and have put more of the risk onto employees.   They have done so in two ways: either by eliminating company retirement plans altogether or by shifting from a defined benefit to a defined contribution pension program.  In a defined benefit system, a retired worker knows exactly how much he or she will receive each month; in a defined contribution system, the employee makes a contribution into his or her retirement account—most likely a 401k– that is then invested in the bond and equity markets with attendant risks.

The experience of the past decade shows that this shift in the nature of U.S. retirement system has worked to the disadvantage of American workers while creating more vulnerability and uncertainty.  Seniors who retired in the late 1990s before the collapse of the stock market in 2000-01 may be able to enjoy a comfortable retirement but those who were planning to retire this decade face a much bleaker retirement future having seen much of their retirement savings lost during the past two market crashes.   That is why for nearly 70 percent of seniors, social security is the main source of retirement income but social security is less generous than most European pension programs.  To be sure, Europe’s state-supported or state-run pension systems face their own solvency questions but they  have  not  experienced  the  kinds  of  shocks  America’s  private  retirement  accounts  have  in  the  decade culminating in the Great Recession.

A Two-Tier America, and a Two-Tier Europe

Unlike other economic downturns, which are largely transitory events that have little lasting impact on American society, the Great Recession is likely to be a multi-year society-shaping force that leaves deep and ugly scars.  The most significant effect is likely to be the further collapse of the American middle class, particularly that part of the middle class that has withstood three decades of stagnant wages only by enjoying the benefits of rising home prices and easier credit.  The greatest concentration of housing foreclosures to-date has occurred among sub-prime and Alt A mortgages, mortgages that carried greater risk because the owners had more limited means and incomes. This means that the housing bust is having its most concentrated effect on people on the lower and middle rungs of middle class life, hitting particularly hard those who have bought a home in the last three years.  Many of these were first-time home buyers that had achieved a tentative hold on middle class status but now are being pushed back into poverty with the loss of their home and their job.  Others were upwardly mobile middle class families who got caught up in the optimism of the housing bubble and moved from a starter home to a more expensive (and overpriced) house during the same time, and these families now are confronted with a staggering mortgage debt that they will never be able to work off.

The overall effect of the housing bubble bursting, then, has been to make the United States even more of a two-tier society than it was before the crisis, with large number of the middle class falling to a more precarious position in the American economy.  The uneven jobless economic recovery from the Great Recession that is beginning to take shape will only further accentuate this move.  From all indications, employment and wages will lag behind GDP and profit growth, resulting in a top-heavy recovery in income and consumption.  While the top 10 or 20 percent are currently enjoying a recovery in equity prices and benefiting from the trickle-around growth of the return of Wall Street bonuses, much of the rest of the population struggles with high unemployment, stagnant wages, soft housing prices, and a huge debt burden.

Because housing and credit play a much less central role in the European social contract, the core countries of the Euro-zone will largely avoid the harmful societal effects of the Great Recession that the United States is now experiencing.  But the Great Recession will affect European Union in other equally profound ways, creating or more accurately reinforcing a two-tier Europe.    While the impact of the Great Recession in the United States falls principally along class lines (although some geographic areas have been hit much harder than others), the main effect in Europe is seen between countries, between the core economies of the euro-zone, which have stronger safety nets, most of which avoided the worst of the housing and the credit bubbles, and the so-called periphery economies, which experienced credit and property bubbles even larger than those in the United States and which have weaker economic bases and social safety nets.

Viewed in this way, there are more parallels between the United States and Europe than either Europeans or Americans may care to acknowledge. In the United States, the bursting of the housing and credit bubble has hit disproportionately the subprime and the Alt A mortgage space (although it has not spared the prime mortgages entirely), and with it the lower and middle rungs of the middle class.  In Europe, it has struck the European bubble economies—Ireland and the United Kingdom and the peripheral economies of Greece, Portugal and Spain within the Euro-zone and the Baltic states in the larger European Union.    In many respects, the national economies of Britain, Greece, Ireland, Portugal, and Spain and the Baltic states were part of the larger bubble economy with the United States.  Like the United States, these economies ran massive current account deficits, and experienced large credit-fueled property bubbles and private spending surges.  And like the U.S. household sector, the private sectors of these countries were spending far more than income, accumulating unsustainable debts that were backed by inflated property values.

And now like parts of the U.S. economy, these European bubble countries are experiencing many of the same wrenching economic and social consequences.   Among the Euro-zone economies, the bubbles were biggest in Ireland and Spain.  Not surprisingly, the bursting of the credit and property bubbles has sunk the Spanish and Irish economies into deep recessions and sent unemployment soaring into the double digits.  As of December 2009, the jobless rate in Spain was 18.8 percent, with youth unemployment at more than 40 percent. The bursting of the bubble has also wreaked havoc with these countries’ public finances, with budget deficits as a percentage of GDP climbing into the double digits.   Greece and Portugal have similar problems,  with Greece being the first to experience a full-fledged market-driven debt crisis.

Among the Baltic States, the consequences have been even more severe.  The Estonian, Latvian, and Lithuanian economies have all contracted by nearly 20 percent, and their public deficits have ballooned to unsustainable levels as tax revenues have dried up.  And what is worse, these economies lack the robust automatic stabilizers that core European economies have to soften the impact of economic downturns on their populations and the economy.  A recent study by economists Mathias Dolls, Clemens  Fuest, and Andreas Peich found that while in Germany automatic stabilizers absorb approximately 48 percent of an income shock, they absorb just 25 percent in Estonia, 28 percent in Spain, and 29 percent in Greece, even less than in the United States, where automatic stabilizers absorb 32 percent of an income shock.

Moreover, while the core Euro-zone economies show at least some signs of a tentative recovery, with France leading the way, the Baltic State economies face even more difficult choices in the months ahead.  Indeed, these economies find themselves in something of an economic straight-jacket created by their fixed currency pegs to the euro and by the huge euro-denominated debts they have incurred.  If they attempt to correct their budget deficits while maintaining their fixed currency arrangements, then they will most certainly deepen their economic depressions and heighten social tensions.   But if they decide to abandon the peg to the euro, they will set off a series of debt defaults that could provoke a larger banking crisis.

The peripheral economies of the euro-zone face similarly tough choices as they cope what looks like several more years of stagnant economies, high unemployment, and gaping budget deficits.  Their task is made more difficult by their membership in the European monetary union.  Their initial entry into the union provided a big boost to their economies by lowering interest rates (which in part contributed to their credit and real estate bubbles), but now it threatens to put their economies in a straight-jacket almost as restrictive as that of the Baltic States.  As economist

Desmond Lachman points out, these economies “have the unenviable task of trying to restore fiscal sustainability in the midst of deep recessions, and at a time when their countries’ international competitive positions have been greatly eroded.”  And they must do so within the constraints imposed by their euro-zone membership, which denies these countries the use of an independent exchange rate to restore competitiveness or interest rate policy to mitigate the contractionary effects of their fiscal policy tightening.

That means that we should expect prolonged downward pressure on wages, chronic recessions, and reduced national spending in most of the peripheral economies of Europe, creating a further divergence with the stronger core economies of the European Union. To the extent European Union aspires to be more than a collection of nation-states, to the extent that it seeks to promote a common experience of a being a European citizen, with a common set  of standards and roughly a comparable degree of economic and social security, then the Great Recession has struck a huge blow to that ideal.

The only hope these peripheral economies have of avoiding a prolonged Great Recession would for the core Euro- zone economies to mount a major financial rescue or for Germany, France, and the Netherlands to lead a major Keynesian-inspired economic recovery.  But the European Union lacks the political institutional arrangements for such a rescue and the political leadership of France, Germany, and the Netherlands are not inclined for full-throated Keynesian spending or ad hoc financial arrangements.   Indeed, they may face their own struggles to sustain an economic  recovery  given  their  previous  reliance  on  demand  from  the  previously  fast-growing  peripheral economies.

The Challenge of Finding a New Model of Economic Growth

Future socio-economic progress in both Europe and the United States depends upon finding a new economic growth path.   Over the past decade, U.S. economic growth was driven by a housing bubble and by a consumer spending surge made possible by an unsustainable increase in household debt.  Economists rightly worry that the United States faces a decade of Japan-style stagnation as the private sector is forced to de-lever and consumption is constrained. The problems with the pattern of American economic growth and its overreliance on debt-financed consumption are well known.

But what is less known is that Europe also faces a similar problem.  U.S. commentators often mischaracterize the problems Europe must overcome.  The main obstacle to European growth is not Europe’s inflexible labor market or its lack of entrepreneurship, as many conservatives argue.  It is the structural weaknesses of the European monetary system combined with an antipathy to demand-led growth and a commitment to export-led growth in the core economies of the European Union, above all in Germany.   Over the past five years, economic growth in the eurozone has been driven by growing demand in the peripheral economies of the European Union fueled by credit and property bubbles and rising debt.  This in turn has provided the demand that has allowed Germany and a few other core European economies to enjoy an export boom.

This pattern of economic growth is reflected in Europe’s own internal imbalances, with Germany and the Netherlands running large current account surpluses and the peripheral economies running large current deficits. Germany’s current account surplus, for example, rose from 2 percent of GDP in 2002 to 7.5 percent in 2007, while the  current  account  deficits  of  Greece,  Ireland,  Portugal,  and  Spain  all  increased  proportionately—Greece’s expanded from 6.5 percent of GDP to 14.2 percent, Ireland from 1 percent to 5.3 percent, Portugal from 8 percent to 9.4 percent, and Spain from 3.3 percent to 10 percent.   Germany’s trade surplus with other EU economies increased from 94.6 billion euros in 2002 to 174 billion euros in 2007, reflecting the fact that trade within Europe accounted for the growth of most of Germany’s current account surplus.

The development of these imbalances was in part the product of the European monetary union of the past decade that brought into being the euro.   The entry of Greece, Ireland, Portugal, and Spain into the eurozone had the benefit of dramatically reducing the cost of credit in these economies, as interest rates converged across the eurozone.  But these lower interest rates in turn contributed to the property and credit bubbles of the past decade, fueling  the  rapid  expansion  of  debt-financed  demand  in  those  economies.     It  also  led  to  huge  loss  of competitiveness because of the rise these economies’ relative unit labor costs, relative to the core countries of the European Union. At the same time, core countries like Germany and the Netherlands committed themselves to tight fiscal  policy,   which  slowed  wage  growth  and  with  it  domestic  demand,   while  improving  their   labor competitiveness. Germany also pursued labor reforms which weakened the power of labor further restraining wage gains  and  domestic  demand.  As  a  result,  their  trade  surpluses  with  peripheral  economies  surged,  and  their economies became even more export-oriented.

Now,  as  noted before,  with the bursting  of property and credit  bubbles,  domestic demand  in the peripheral economies has collapsed, and they face a long period of slow growth and economic stagnation.   But with the peripheral countries in such trouble, the question becomes what will drive demand and economic growth in the future, not just in the peripheral economies but the core countries as well?  After all, the core Euro-zone economies have relied on the peripheral economies to supply demand for their excess capacity, and without that demand sustained economic growth is problematic. As FT economics columnist Martin Wolf notes, “there can be only two answers:  external demand, with the eurozone moving into external surplus or private demand in core countries, particularly Germany.”

From an American perspective, the latter option would clearly be preferred but is not considered very likely given the German political leadership resistance to the kind of changes that would be needed to make Germany a more demand-oriented economy and given the limited mandate of the European Central Bank focused on price stability. But the first option of expanding Europe’s external surplus would put Europe into direct competition with the United States, which must replace excess domestic demand with global demand in order to help offset the effects of private deleveraging.  That is because it runs smack into the reality of the unmovable object of China and more generally Asian high-savings mercantilism, which both structurally and as a matter economic development policy is committed to running current account surpluses.  As long as China and the other Asian economies are committed to mercantilist oriented development, it will be very difficult for both the United States and the European Union to improve their external balances simultaneously.

If Asia is committed to continuing its decades-long practice of running current account surpluses, then either Europe or the United States will have to give in its effort to restore growth and improve employment conditions by tapping external demand.   While the European Union is in a much better position to pursue an expansionary domestic demand oriented recovery given the strong fiscal positions of Germany, France and the Netherlands, the question of who gives is likely to be determined by who ends up have the strongest currency.  A stronger currency will make export-led growth more difficult for both the United States and the core European economies as they compete for each other markets and for competitive advantage in Asia.  Ironically, it is here that the fiscal crises of the peripheral economies may come to help Europe because these crises could provoke concern about the future of the euro resulting in a weaker euro vis a vis the dollar.  But it is a sad day for both Europe and the United States and their long partnership that they are in a race to have the weakest currency.  It is hardly the partnership that over the past 50 years helped create the world’s largest middle class and the world’s most advanced social welfare systems.

There is a third alternative, which unfortunately is not on the political agenda of either the American or European political class.  That would be a common front against Asian mercantilism to defend their middle class way of life and a commitment to a major trans-Atlantic Keynesian project to expand public investment and social quality of life spending in both Europe and the United States and to develop the Rim of emerging economies along the European Union and North America.   Such a program would clearly benefit the working and middle classes of Europe and the United States.  It would also be in the interest of the aspiring middle class in China since China would need to rely more on domestic demand for future economic growth than it does now.   But neither the political leadership of Europe nor the Obama administration in the United States is currently thinking along these lines.  We must therefore brace for a difficult period in U.S.-European relations and a bleaker future for Western style middle class societies.

 

Sherle R. Schwenninger is Director of the Economic Growth Program at the New American Foundation and a Senior Fellow at the World Policy Institute. Mr. Schwenninger is also a member of ERPIC’s editorial advisory boad and editor of the journal Perihelion.



Cyprus, Turkey, and the Crescent of Crisis: the Question of American Strategy

by erpic-manager on February 13, 2017 in Uncategorized with Comments Off on Cyprus, Turkey, and the Crescent of Crisis: the Question of American Strategy

Cyprus, Turkey, and the Crescent of Crisis: the Question of American Strategy
Sherle R. Schwenninger
May 2010

 

I. American Strategic Priorities in the Crescent of Crisis.

  1. American strategy toward the Crescent of Crisis is defined by the following priorities: expanding the security of Israel; maintaining a controlling influence over the world oil market; neutralizing radical Islam and eliminating potential terrorist safe havens; preventing the emergence of a regional power hostile to Israel; and limiting the influence of outside powers in the region, particularly those who do not share Washington’s strategic priorities. Turkey figures prominently into American strategy for four reasons.
  1. American policy seeks to deny Russia exclusive control over EurAsia’s oil and gas resources. Turkey is seen as being one of the main counter-weights to Russia, offering an alternative transit point for the region’s oil and gas, as illustrated by Washington’s forceful support by the Baku to Ceyhan pipeline.
  1. American strategy toward the Middle East is premised on the nearly unconditional support of Israel, and thus it is predisposed to good relations with any country in the region that is willing to make peace with Israel or, even better, that is willing to be a strategic ally of Israel’s. Turkey has been and remains in Washington’s eyes Israel’s only ally in the region. In previous decades, Turkey and Israel developed substantial military and intelligence cooperation.  Most recently, Turkey has tried to improve its image in the Islamic world and so the focus of Turkish- Israeli  cooperation  has  shifted  somewhat.    For  example,  Turkey  has  served  as  a  go-between  for  informal negotiations between Syria and Israel, in an effort to capitalize on both its longstanding relationship with Israel and its improved ties with Arab countries.
  1. Washington seeks to counter the mistrust if not hatred of the United States that pervades the Islamic world. It also seeks to champion a moderate model for the Islamic world. Turkey has become the poster-child of America foreign policy toward the Islamic world—with Turkey-U.S. relations held up as an example of U.S. goodwill to countries with Muslim populations and Turkey promoted as an example of the compatibility of Islam and democracy.
  1. The United States has encouraged European integration and wants Europe to assume more of the burden for international security but it does not want a Europe that would pose a challenge to America foreign policy or chart on independent course on key issues of critical importance to the United States, especially on issues related to the Crescent of Crisis. Washington has sought to advance Turkey’s accession into the European Union, and maintain a close relationship with recently admitted Central and Eastern Europe countries, in order to dilute Europe and to retain U.S. influence on the direction of any collective European foreign policy.
  1. In general, American policy toward the region seems to be driven by a lingering suspicion of Russia and its perceived allies. At times, this suspicion seems to spill over into what appears to be a bias against the Orthodox Christian world. Over the past decade and half, the United States has sided against the Orthodox Christian side in every major conflict, irrespective of the merits of the dispute.  It favored Azerbaijan over Armenia; the Bosnian Muslims  and Croats against  the Bosnian Serbs;  the Kosovar  Albanians  over  Serbia;  Chechnya  over  Russia; Moldova over the Trans-Dienster, and the Western-leaning political leadership of Ukraine over Russia.

II. Turkey’s Role in American Strategy:  A Special Relationship

  1. Not surprisingly, American policy has almost without exception put its relationship with Turkey ahead of the interests of Cyprus, in spite of the so-called influence of the Greek lobby in the American Congress. Indeed, Turkey enjoys the status of a special relationship that is second only to that of Israel and Britain.
  1. Turkey is largely exempt from the human rights and good governance lectures other countries receive from the United States. In particular, it has been given a free ride on its treatment of the Kurds and the measures it has taken to suppress Kurdish self determination.
  1. The United States has used its power and influence to get the IMF and the European Union to periodically bail out the Turkish economy and to subsidize its economic development—with much more lax conditions than would normally be applied.
  1. It has encouraged the expansion of Turkish influence in the EurAsia region and has used its power and influence to re-direct the transportation of the region’s oil and gas resources through Turkey and away from Russia.
  1. After an initial embargo of arms sales to Turkey, it has put few if any constraints on Turkey’s occupation of northern Cyprus or on the activities of the Turkish military in the north.
  1. It has championed Turkey’s entry into the European Union. In order to further Turkey’s accession to the EU, it has pushed a political settlement of the Cyprus issue that is not in the long-term interests of the Republic of Cyprus.
  1. The special relationship is not without limits but the relationship is surprisingly asymmetrical in Turkey’s favor. Where Washington would draw the line on Turkish foreign policy is not exactly clear. There is reason to believe that that Washington would disapprove of any overt Turkish coercion or aggression against Cyprus, but it is doubtful whether it would actively oppose the slow strangulation of Cyprus’s sovereignty or take action to prevent Turkey from integrating Cyprus into its regional sphere of influence over a longer period time, notwithstanding the presence of British bases on Cyprus.  Washington, for example, would probably welcome the end to Cyprus’s role as an offshore financial center that facilitates investment into Russia, and would be happy to have Turkey subvert any ambitions on Cyprus’s part to expand its role as a regional financial center.   This is especially the case if Cyprus itself opens the door to greater Turkish control by concluding an agreement very similar to the proposed Annan Plan.
  1. In short, under current circumstances, American strategy provides little if any protection for Cypriot interests let alone an expansion of its ambitions.  For the most part, Washington sees Cyprus as a nuisance that from time to time threatens to complicate its special relationship with Turkey or to get in the way of its goal of promoting Turkey’s entry into the European Union.

III. Fault-lines in the U.S.-Turkish Special Relationship

  1. There are, however, some cracks or fault-lines in the U.S.-Turkish special relationship and the American strategy.  These fault-lines may reduce Turkey’s perceived importance to American strategy in the future.  They may also force some changes in American strategy.  But they are not likely to be so serious as to call into question the priority the United States gives to its relationship with Turkey as it affects Cypriot interests.
  1. The refusal of Turkey to allow the American military to use Turkey’s facilities and territory for the 2003 invasion of Iraq planted some seeds of doubt, albeit very small ones, into the minds of some American officials about the reliability of Turkey as an American ally.
  1. Turkey’s goal of limiting the autonomy of the Kurds in Turkey conflicts at times with American policy toward Iraq and with American sympathy for the Iraqi Kurds. Whether there is a potential for the Kurds to become the next cause of American foreign policy idealism, however, remains doubtful.
  1. The strategy of seeking to deny Russia control over the oil and gas resources of the EurAsia region has thus far been counterproductive, stiffening Russia’s nationalist resolve, and has actually delayed the commercial development of the region’s energy resources. It has also has added to the cost of the development and transport of these resources since many of the alternatives to Russian transit are commercially less viable and require greater subsidy.   Moreover, it turns out that Turkey has less influence in the region than Washington assumed, and thus has not been able to advance Washington’s interests in the region. A better strategy would be for Washington to improve relations with Russia and seek greater cooperation in the development of the region’s resources.   If it did so, Turkey’s importance to the U.S. strategy would be greatly reduced.
  1. Despite Washington’s efforts to promote its relationship with Turkey as evidence of its comity with Islam, Turkey is not seen as a model for moderate Islam in other countries in the region, particularly in the Arab countries. Rather Turkey is seen as a former imperial power who is an Israeli ally. Turkey has improved its Islamic credentials in recent years but that has not substantially changed the suspicion with which it is viewed in many Arab capitals.
  1. Even though Turkey has facilitated contacts between Syria and Israel, a peace between Syria and Israel and a stable Lebanon would reduce Turkish importance, since it would reduce the value of Turkey’s strategic relationship with Israel. Given Syria’s influence with Hamas and its relationship with Iran, Syria’s position would increase at the expense of Turkey’s.
  1. Turkey’s human rights and economic problems may be too large for an overstretched European Union to accept especially in light of the stresses created by the world financial crisis. For some time, the leading economies of Europe will have their hands full manage the debt and banking crises of Central Europe and are in no position to take on more financial burdens that Turkey’s entry into the European Union would create. If Washington continues to push Europe on Turkey’s accession then it is possible that may become an increasing source of irritation in US- European relations, especially if Washington continues to back Turkey’s accession.

IV. Cyprus’s Strategic Options Given American Strategy

  1. What, then, are Cyprus’s strategic options given American strategy and Washington’s still considerable power and influence in the region? Previous Cypriot governments do deserve credit for successfully maneuvering Cyprus into the European Union and for avoiding an agreement that would have unduly limited Cypriot freedom of action (beyond that of being a good member of the European Union).  From an outsider’s perspective, the Annan plan was seriously flawed and would have made Cyprus more vulnerable to Turkey’s pressure and would have given Turkey more opportunity to influence Cyprus’s future.   Avoiding such an outcome while gaining full membership in the European Union has considerable strengthened Cyprus’s position, giving it some leverage over Turkey’s future while reducing Turkey’s ability to influence the course of government and economic development in the Republic of Cyprus.   That said, one must face up to the reality that the strategy of resting Cyprus’s future security and prosperity upon membership in the European Union has limits given the weaknesses of the European Union and given the emerging neo-Ottoman foreign policy tendencies of the current Turkish government.  Cyprus therefore must think seriously about its strategic options before it enters into a bi-communal agreement.
  1. The place to begin that thinking is to consider that the Crescent of Crisis is no longer an American dominated region. Rather, it is a region of competing and overlapping geopolitical, geoeconomic, and geocultural alliances and spheres of influence and interest. Cyprus needs to understand these various forces and how best to align itself with them given its values and strategic interests.   It needs to counter the neo-Ottoman tendencies of Turkish regional policy that could limit the island’s future security and prosperity and undermine the advantages it now enjoys as a member of the European Union.
  1. In addition to Turkey’s nascent neo-Ottoman sphere of influence, there are five other overlapping and/or competing geopolitical and geoeconomic spheres of power and interest in the region to consider: the American- Israeli relationship; the Transatlantic Alliance as represented by NATO and the U.S.-British relationship, of which Cyprus is tangentially involved as the host to British bases; the European Union, of which it is a full member; the Russian and Christian Orthodox community, to which it is connected by culture and by being a gateway to investment in Russia and a offshore banking center for Russian money; and the New Silk Road as represented by the expansion of commerce from Dubai, Iran, to India and China, of which it has only marginal relations.   One must  also  mention  the  Sunni  Arab-American  axis  as  represented  by  the  Saudi-American  oil  and  security relationship; and the competing Iranian-led Shite alliance, which includes Syria, Hezbollah, and Hamas.
  1. To oversimplify somewhat, Cyprus has essentially two strategic choices—to deepen or to widen, beyond its current strategy  of  pursuing an  inter-communal  agreement.    The first  choice is  to seek  to  deepen Cyprus’s integration into the Transatlantic relationship as a complement to its current membership in the European Union and as part of a larger bargain relating to an inter-communal agreement.  The touchstone of such a strategy would be for Cyprus to become a member of NATO and to upgrade its security relationship with Britain and the United States.  It might also have as a complementary strategy the acceptance of Turkey into the European Union under the theory that Turkey’s integration into the European Union would constrain (rather than empower) Turkey’s neo- Ottoman foreign policy goals.
  1. Such a strategy faces several obstacles. Turkey could use its influence with the United States to block Cyprus’s entry into NATO; Britain may not want to share its bases in Cyprus with the United States even as it is forced to reduce its overseas commitments; and  even if Cyprus was able to gain entry into NATO it  might  not  alter Washington’s calculations about the priority of its relationship with Turkey.   Such a strategy would also have a number of serious costs. It would most likely spell the end of Cyprus’s aspirations of becoming a regional financial center and would call into question Cyprus financial relationship with Russia.  It would reduce Cyprus’s foreign policy and economic choices but without necessarily improving Cyprus’s security from the low-intensity threats that would emanate from an expanding Turkish sphere of influence.  And It would reduce the ability of Cyprus to block Turkey’s into the European Union but without any guarantee that the European Union would be able to constrain or alter the course of Turkish foreign policy.
  1. The second choice would be to widen Cyprus’s involvement in the region’s competing spheres of interest with the goal of balancing Turkey. The principal idea behind this strategy is that Cyprus would be able to make itself less vulnerable to the Turkish foreign policy by increasing its role and usefulness in as many of the other competing spheres of influence as possible.   Such a strategy would recognize that the main threat to Cyprus’s security is not outright Turkish aggression but its potential vulnerability to Turkish pressure and influence over its political and economic future.   Thus Cyprus should avoid an inter-communal agreement that would open itself up to Turkish manipulation and should seek to expand its international ties with the goal of increasing its economic and political options.
  1. In addition to using its membership in the European Union to its best advantage, a widening strategy would pursue the following three goals. The first would be to expand Cyprus’s role as a regional financial center by extending its existing international financial relationships to include India, China, and the New Silk Road relationships and to include other petro-dollar states as well as well as Russia.  In addition, Cyprus may be able to capitalize on the crack-down of international tax havens to be able to offer itself as a legitimate low-tax jurisdiction thereby attracting European and American companies to set up international and regional headquarters there for tax purposes.  The second goal would be for Cyprus to establish itself as an international meeting place—to become a transnational geo-economic and geo-cultural hub, if you will, for the exchange of ideas and information.   The third element would be to build on Cyprus’s potential as a place of higher education and scientific research, which would go hand in hand with the second element of enhancing Cyprus’s importance as an international meeting place.   If successful, Cyprus emergence as a transnational hub for meetings and higher education would replace mass tourism as one of the main sources of economic growth.  Becoming an international meeting place and a place of higher education  would  yield  more  political  and  economic  influence  than  would  mass  tourism  while  being  more compatible with Cyprus’s long-term ecological health.
  1. This second strategic option would also face a number of obstacles, including the question of whether there is the necessary political leadership to implement such an ambitious international strategy. It also would have some potential downsides, including the possibility of furthering alienating Washington and making Cyprus a target of American pressure.  But the United States is likely to be distractive by more critical challenges for the foreseeable future.
  1. As a non-Cypriot, it is not for me to say what the best strategic course of action is for Cyprus. But I can lay out what I see as Cyprus’s options in light of American strategy and in light of emerging forces within the region.  And that is what I hope I have done with some clarity in this paper.

 

Sherle R. Schwenninger is Director of the Economic Growth Program at the New American Foundation and a Senior Fellow at the World Policy Institute. Mr. Schwenninger is also a member of ERPIC’s editorial advisory boad and editor of the journal Perihelion.

 

This article was originally published in the Middle East Economic Survey (MEES), 22 March 2010



The Rise of Turkey and the Cyprus Problem

by erpic-manager on February 13, 2017 in Uncategorized with No Comments

The Rise of Turkey and the Cyprus Problem
Dr Andrestinos N. Papadopoulos (Ambassador a.h.)
June 2010

The purpose of this presentation is to offer an analysis of recent developments concerning Turkish foreign policy with a view to encouraging your comments, rather than your questions.  Your interpretation of the moves of the Turkish diplomacy will be of value to all of us, and will certainly help us to gain a better understanding of the situation.  I intend to refer to the new strategy of Turkey, and to some of the changes that have occurred affecting the Cyprus problem, and also to the positive and negative aspects of this strategy, before reaching my conclusions.

It is generally accepted that the appointment of Ahmet Davutoğlu to the Foreign Ministry has greatly contributed to the rise of Turkey.  The new strategy of Turkey is based on his theory of “strategic depth” and neo-Ottomanism.  Through his Ottoman lenses, Davutoğlu sees Turkey as being concurrently part of the Middle East and the Caucasus, Europe and Asia, the Black Sea and the Mediterranean.  We will explore how this is implemented in practice.

The end of the Cold War, and the fall of the Soviet Union created new opportunities for Turkey to expand its zone of influence in the Turkish speaking countries of Central Asia and the Caucasus.  At the time, the excuse was to bar Iranian influence.   American funds were given to Turkey to develop television programmes, and to provide books for this purpose.

With Russia, Turkey used its economic influence.  The volume of their bilateral trade is forty billion US dollars, with Turkey importing sixty-five percent of its natural gas, and forty percent of its oil from Russia.

With Bulgaria, their relations are normalized, since the Turkish minority of Bulgaria is represented in the country’s coalition governments.

In the Balkans, which represents a stepping-stone for Europe, Turkey established her position by participating  in  the  peacekeeping  operations  of  the  UN,  NATO,  and  the  EU,  in  Kosovo,  Bosnia- Herzegovina and in FYROM, investing in various projects, and supporting the Muslims of these countries.

There have been big changes in the Middle East.   Firstly, regarding Israel, we are all aware of what happened in Davos when Prime Minister Erdoğan attacked the Israelis, for the bombing of Gaza, in front of Shimon Peres.  We also know that Erdoğan received the leader of Hamas.  There are, however, several other events that we should mention, such as the fact that Turkey cancelled military exercises with Israel, in  accordance  with  the  Treaty  of  Military  co-operation  of  1996,  and  instead  held  common  military exercises with Syria.   Ten years ago, Turkey was ready to go to war with that country, because, as you know, Syria was supporting the PKK.  More importantly, there is the recent development concerning the blockade of Gaza, and the fact that Turkey did not allow an Israeli military aircraft to pass via her airspace. This represents another escalation.

Within the framework of the Middle East, Turkey has made visits to Iraq where they were speaking with the Kurds, and to Iran, where President Gül was received at the highest level by Ayatollah Khamenei, despite the fact that he is the leader of a NATO country and an ally of the US.  I should also mention here, that even when Rasmussen was in the process of being elected as Secretary General of NATO, Turkey created some problems at the beginning, saying that he comes from a country that attacked Muslims, and by having indecent pictures published of Prophet Mohammed in the press. We, therefore, observe that Turkey has openly chosen the Arab camp.

In general, through a multi-dimensional foreign policy, Turkey managed to project the image of a strong regional power.  They participate in peace-keeping operations all over the world.  They promote economic co-operation with various countries, especially in the Caribbean and Latin America.  As you know, they are the sixth largest economic power in Europe, and the seventeenth in the world, hence their participation in the G20.  They pay visits at the highest level to various countries, and have done so in more than sixty countries, in order to promote their interests at an international level.

Without producing a drop of petrol or natural gas, they are energy players.  East and West need Turkey as a transit country, as it is demonstrated by the NABUCCO, and South Stream projects.

As a result of all these efforts, Turkey was elected as a non-permanent member of the Security Council, gaining an additional margin of diplomatic maneuvering.

Having such capital at his disposal, Prime Minister Erdoğan visited President Obama last December, reciprocating Obama’s April 2009 visit to Turkey.   Allow me to open a parenthesis here, and make a reference to the US-Turkey relations.   President Obama had a stepfather from Indonesia, who was a Muslim, and Obama lived in Indonesia for some time.  So he has been influenced by the Muslim faith.  In his mind, therefore, there was a mixture of democratic values from his American mother, and the Muslim faith from his stepfather.  Due to this mix of values he was of the belief that Turkey was the model to be projected.  In this respect we should not forget that Obama’s first visit overseas after his election was to Turkey and that he described US-Turkish relations as “a model partnership”, asking the Europeans in Prague to accept Turkey into the EU.

On the basis of the above, we observe the importance of Turkey for the US and NATO.  We also note that there is support for the European perspective of Turkey that serves American interests, and the question is why?

As you know, the European Parliament has its British “cousins” to support it, as it has the representatives of the former communist countries of Eastern Europe such as Poland, the Czech Republic and Hungary. These people no longer have the security umbrella of the Warsaw Pact, and they do not trust the Germans and the French, so they look towards the Americans.   There are also occasional “allies” such as Aznar’s Spain or Berlusconi’s Italy.  Imagine having an additional ninety or more, parliamentarians from Turkey, which is more than those of Germany. This would be a substantial means of controlling the European Parliament.

We should also keep in mind the strategic importance of the Muslim world for the US, since terror emanates from there.

Regarding the visit of the Turkish Prime Minister to Washington, we should mention that they discussed various issues of common interests, but it is remarkable to note that, on four issues that are of capital importance to the US, Erdoğan said “no”.

On the question of Afghanistan, Turkey was asked to send more troops as other NATO Member States did but the answer from Erdogan was “I will not send Muslims to kill Muslims”.

On the question of Iran, they were asked to apply stricter sanctions, but Erdoğans’ reply was that “they are not effective.”   In actual fact, when the draft resolution was discussed in the Security Council to apply stricter sanctions against Iran, Turkey voted against it, although Washington backed that decision.

On the question of Armenia, a Protocol has been signed to normalize the relations between the two countries; they have to open the borders, and establish diplomatic relations.  The Americans wanted to extradite the implementation of that protocol.   Erdoğan answered that a condition should be met: the withdrawal of Armenians from Nagorno Karabakh.  Likewise, a negative answer was given on the question of mending fences with Israel.  We, therefore, observed that Turkey is making an effort of disengagement from the US through the differentiation of its policies on many international issues.  Erdogan said clearly that: “We look towards the West, without neglecting the East”.

Let us turn now look at some changes that have occurred as a result of the Turkish efforts, which also affect the Cyprus problem.  A good example is the Organization of Islamic Conference (OIC).  In the past this Organization has had a pro-Cypriot stance, which was due to a number of factors:

  1. a) The Arabs under the Ottoman Empire suffered economic, political, racial and linguistic oppression. b)  Cessation of minorities represents a menace to certain Arab countr
  2. c) Turkey is a member of NATO and a US ally, something that provokes the sentiments of certain hard-line Arabs, like Kaddaf
  3. d) Turkey was the first Muslim country to recognize Isr

Together all of these factors have created a negative climate towards Turkey.

The friendly feelings of the Arab world towards Cyprus were confirmed after the Turkish invasion of 1974. At the time, Makarios visited Sadat of Egypt, Boumediene of Algeria, and Tito of Yugoslavia to ask for help. The Non-Aligned Movement (NAM) created a contact group which prepared the draft for Resolution 3212, which was adopted by the United Nations General Assembly in December 1974.

Turkey’s failure to associate itself with the Non-Aligned Movement in whatever form, led it to the Organization of Islamic Conference, in order to promote its interests.   Working methodically, after the illegal declaration of the “Turkish Republic of Northern Cyprus”, and upgrading its participation in the work of the organization, Turkey gradually managed to have its positions on the Cyprus problem accepted in the texts of the Organization of Islamic Conference, by using its Islamic influence.

In January 1984, I was present at the Islamic summit in Morocco, where, for the first time, Turkey was represented by General Evren, the Head of State.  This took place two months after the illegal UDI.  Until that time, they had been sending either a Foreign Minister or an Ambassador.  On that occasion, however, and ever since, they are sending someone from the highest level.

At the beginning, in the text of the OIC, reference was made to the full equality of the two sides, including the  right  of  the  Turkish-Cypriots  to  be  heard  and  represented  at  all  international  fora.    After  the referendum on the Annan Plan in 2004, Turkey exploited the negative climate affecting our side, and managed to pass onto more advanced positions.

Turkey interpreted the separate referenda as underpinning the existence of two states in Cyprus.  In the text, there was an appeal to end the so-called “isolation”, and a call for an effective solidarity with the Turkish-Cypriots.  Even the request to upgrade the status of the “Turkish Muslim people of Cyprus,” as they are registered in the OIC, from observers to full members, was presented as being made by the “Turkish-Cypriot side of Cyprus”.

More  importantly,  it  was  decided  that  the  “Turkish  Muslim  people  of  Cyprus”  should  continue  to participate in the work of the OIC with the name provided for in the Annan Plan.  It is obvious that they wanted to conceal the reference to the “Turkish-Cypriot Constituent State”.   Last, but not least, Turkey managed to have Mr. Ihsanoglu, a Turk, elected as Secretary General of the OIC.

In general, the climate in the Arab world has changed in favor of Turkey, whose arguments are now more persuasive.  It seems that economic and other interests are influencing traditional friends of Cyprus.  A good example can be seen with Syria, which allowed the maritime connection of Latakia with the illegal port of Famagusta, although Cyprus is voting in favor of the Arab positions concerning Golan Heights.  In a more recent example, Lebanon presented amendments, in favor of Turkey, to the UNSC Resolution concerning the renewal of UNIFCYP.

In the past, the European Court of Human Rights had been doing justice to our cause.  A good example can  be  seen  in  the  Loizidou  case.    Recently  things  have  changed.    Political,  and  certainly  not legal considerations, produced the decision recognizing the so-called Immovable Property Commission (IPC) as a means of exhaustion of local remedies.  Within the framework of the Council of Europe, we should also mention the election of a Turk to the Presidency of the Consultative Assembly.   This represents yet another factor in favour of Turkey.

In the United Nations, efforts are being made to use the renewal of UNFICYP, as a means of exercising pressure on our side.  We have already referred to the recent Security Council Resolution, and the tabling of a Turkish draft.   However, we must not forget the mid-2009 unprecedented efforts of the Security Council, which raised questions about the future of UNFICYP, aiming at the revision of its mandate.  The warning showed how the climate is changing, and at the same time reflected a broader international impatience, with the continuation of one of the UN’s longest-running peacekeeping operations.

On the basis of the developments that have been mentioned, we observe that the new Turkish strategy has positive and negative aspects.  By being stronger, and more prosperous, today’s Turkey is more inclined to defy the European Union, than in the past.   We have already referred to Turkeys’ negative stance on American demands.  EU members are now openly asked by Turkey to choose between the seven hundred and fifty thousand Greek Cypriots, and the commercial and strategic opportunities in Turkey, a country of seventy-five million.

Knowing that France and Germany, among other countries, are against its accession to the EU, Turkey is de-motivated by the sense that whatever it does, it will not be accepted by Europe, and that even if it helps solve the Cyprus problem, core EU states would find another issue to block accession.  Why then make concessions on Cyprus?

By using its Arabic influence in the Middle East, Turkey is presenting itself as the big Islamic power which can create problems for Israel, more effectively than Iran, without calculating political costs and alliances, if it is to expose Israel.   The other side of the coin has negative connotations.   Turkeys’ stance is embarrassing to some similarly US-allied Arab states, such as Egypt and Saudi-Arabia, who have shied away from confronting Israel despite popular demands to do so.

By projecting itself as the champion of the Muslims in the region, and providing a fresh path for the Arabs, one might expect a strong reaction from these countries in the future.  On the other hand, the advantage that Turkey could offer in bringing together people like Hamas and Israel has definitely gone.  The region has, therefore, lost its mediator.

It is common knowledge that following the recent killings, by Israeli forces, of nine Turkish activists, on board a ship that tried to cross the Israeli blockade of Gaza, the relations between the two countries have hit rock bottom.  As it was expected, the reaction of the Jewish lobby in the US was furious.  US lawmakers warned Turkey that its ties with Washington would suffer if it continued to follow an anti-Israeli path.  At a news conference, Republicans and Democrats denounced Turkey for supporting the activists. However, the lawmakers criticized the Turkish opposition to a recent UN Security Council resolution, extending punitive sanctions on Iran for its nuclear program, which was strongly backed by Washington.

As for the cost that Turkey might pay for its stance, Mike Pence, the third highest Republican in the US House of Representatives, said he was ready to re-evaluate his past reluctance to support a congressional resolution denouncing as genocide, the World War One era killings of Armenians by Ottoman forces.  It seems as though the law-makers in the US are gradually becoming aware of the hypocritical stance of Turkey.    On  one  hand it  projects  itself  as  an  anti-occupation  power, denouncing  the  occupation  of Palestine, and on the other hand, it illegally occupies the northern part of Cyprus, and refuses to recognize the genocide of the Armenians.

From the picture, which I have adumbrated, we can conclude that the rise of Turkey within the regional, and international framework, is a reality.  There are certain weaknesses in its Neo-Ottoman policies that Cyprus should exploit, in particular the expected reactions of the Jewish lobby, and some core Arab states. Moreover, there is an ongoing conflict between the deep state, the secular Kemalist establishment, and the AKP, the Islamist past of Erdoğan.  We do not know which of them will have the upper hand in the end. In this respect, we should not forget that wrong calculations made by the West in Iran, at the time of the Shah, brought Ayatollah Khomeini into power.

In conclusion, I feel that, regarding the question of Cyprus, Turkey will never give in to pressures.  This is a pessimistic conclusion, but as you know, a pessimist is an optimist who is well informed.



NATO and Russia: a New “Reset” in the Eastern Mediterranean?

by erpic-manager on February 13, 2017 in Regional Security Publications with Comments Off on NATO and Russia: a New “Reset” in the Eastern Mediterranean?

NATO and Russia: a New “Reset” in the Eastern Mediterranean?
Vassilis Kappis
October 2014

Part of an alarming Cold War reboot, the ongoing crisis in Ukraine is expected to bear a far-reaching impact on international affairs, one that may still turn out to be a positive one: if Russia and the West manage to de- escalate tensions in the Eurasian land mass, a new beginning for NATO-Russian relations could lie in the maritime domain. Can the warm Mediterranean waters provide a much needed “reset”?

At first glance, nothing could “satisfy” an archetypical land power such as Russia other than restoring dominance in its surrounding land mass. This is to an extent true. Land powers do not regard ruling the seas as  an  essential  component  of their  security;  by definition,  after  all,  land  powers  possess  the  requisite geographical depth that enables them to deter potential aggressors. Incidentally, in both Georgia and Crimea, Russia’s two most recent military forays, the country’s navy took a backseat, merely ensuring that troops on the ground were in a position to accomplish their tasks without any “disturbances”.

However, to the extent that maritime routes can adversely impact the security outlook of a land power, (through blocking a vital trade or energy route for example), naval power projection may become a priority. Ancient  Sparta,  Germany  during  the  first  half  of  the  20th  century,  and  more  recently  China,  all  felt compelled to bolster their naval capabilities upon realizing that more “boots on the ground” could do little to counter the strategic impasse brought about by competing powers possessing a robust navy.

The Mediterranean could therefore be Russia’s new Achilles’ heel. The fact the Turkish straits, labelled “Russia’s Rubicon”   by Sir James Graham, First Lord of the Admiralty during the Crimean War (1853- 1856), are effectively under NATO control, exacerbates Russian fears. The Kremlin predicts, in short, that a stronger presence of NATO forces in the Mediterranean may be used to “stifle” the Russian navy by restraining it from accessing its Mediterranean allies as well as the Middle East flashpoints through the Suez Canal. It is no coincidence then that in early 2013, Russian Defense Minister Sergei Shoigu emphasised that the Mediterranean is at the core of all essential challenges to Russian national interests.

As a result, Russia, a traditional land power, is now on the brink of a major naval expansion, triggered by what Moscow perceives to be a western encroachment into its sphere of influence. Until 2020, Russia will be devoting 132 billion USD to upgrade its naval capabilities, which amounts to almost a quarter of total projected defence outlays for the entire period. In addition to featuring Russia’s sole aircraft carrier at times, Russia’s Mediterranean task force has grown to include more than ten combat ships on a permanent basis. Within the next 24 months alone, the Russian navy will take hold of at least twenty new vessels, including state of the art surface combatants, frigates and all new submarines.

But how could these developments ever lead to a breakthrough in Russian relations with NATO? If anything, they appear to be additional worrying signs of growing east-west tensions. Even more alarmingly, disagreements between Russia and Turkey over the Montreux treaty that regulates passage through the straits could resurface, exacerbating a tense security balance along the Black Sea coastline.

Nevertheless, Russia’s re-emergence in the Mediterranean waters may prove to be compatible with a new equilibrium in the Eurasian geopolitical space, as long as the ongoing standoff in Central and Eastern Europe concludes within a mutually accepted framework. In other words, it may be in Russia’s best interest to come to an understanding with western powers. This would enable Moscow to play a new, constructive role in the currently volatile Mediterranean security arrangements. And this new role could actually prove to be in perfect harmony with NATO and European Union interests in the region.

The rationale is multifaceted, yet simple: The Mediterranean faces a series of contemporary challenges that threaten to compromise the security of both Russia and the west. Illegal migration, the spread of extremism and  other  asymmetrical  threats  are  combined  with  multiple  discoveries  of  hydrocarbon  reserves  that reanimate dormant regional antagonisms. When we factor in the region’s endemic political instability, the cooperation of Mediterranean maritime powers is clearly defined as a pressing necessity.

A potential Russian contribution would not duplicate NATO efforts. The drastic reduction of European defence spending and the commitment of NATO assets away from the Mediterranean (NATO ships take part in the Ocean Shield operation in the Indian Ocean for instance) have created a hard to ignore security vacuum. Moreover, the ongoing American “pivot to Asia” primarily concerns the transfer of US naval assets, as the nature of threats in the Asia Pacific (flashpoints in the South China Sea, Taiwan and the Malacca Straits) places the maritime component at the heart of the new American grand strategy.

And neither a renewed Cold War nor the fight against ISIL can alter the US maritime strategy of gradual disengagement from the Mediterranean. From the first Gulf War in 1990-91 to the War on Terror a decade later, the US has been steadily adjusting its perception of the Mediterranean; from a confrontation stage against the Soviet Union, the region is becoming a forward launch pad, or even a transit point, towards the Gulf States and the Indian Ocean, where significant American interests lie.

Russia could thus have an opportunity to acquire sustainable gains by working with NATO member states in order to face existing and emerging threats in the Mediterranean. Not only would Moscow be putting an end to a critically escalating confrontation in Europe, but it would also pave the way for a highly stabilizing cooperation in one of the most strategically crucial, yet volatile, areas in world affairs.

 

Vassilis Kappis, ERPIC Fellow. Vassilis is an international security analyst and an advanced PhD Candidate at the University of Sydney, with his research focused on decision-making during tense militarized crises. Currently based in Cyprus, he is an expert in Eastern Mediterranean security and geopolitics and is affiliated with think tanks and consultancies in Europe and the United States. The views expressed herein are those of the author alone.



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