Odious Obligations

Russia and China may feel fine with making bad moral decisions when it comes to Syria, but even they don’t like to make bad economic decisions. Can preemptive sanctions turn up the heat on Assad?

Syria marked the first anniversary of its uprising -- and almost immediate crackdown -- last week. As the army expands its use of tanks and artillery against towns loyal to the rebellion, as many as 8,000 have been killed, and nearly a quarter-million have fled their homes. The United Nations remains incapable of agreeing to place water-tight sanctions on the country, however, thanks to opposition from Russia (still supplying arms to the regime) and China (still taking its oil).

The good news is that a new approach to sanctions is being proposed -- and one that does not require consensus at the Security Council. The approach -- declaring Syria's successor governments unbound to honor the Assad regime's contracts -- will provide additional pressure on a government that desperately needs outside financing to shore up its economy.

The West has already imposed a range of sanctions alongside those of the Arab League. European and U.S. sanctions include a ban on oil imports from or new investments in Syria, as well as a freeze on assets. And there is some evidence that they are having an impact. Before the uprising, Europe was the largest importer of Syria's major export, oil, and alternate markets are proving difficult for Syria to acquire. A number of Western energy firms are still operating in Syria, including Britain's Gulfsands Petroleum, Royal Dutch Shell, and France's Total, but they have suspended exploration and new investment. Foreign direct investment to Syria declined from around $1.4 billion to $500 million between 2010 and 2011. International Monetary Fund estimates suggested the Syrian economy would shrink by 2 percent in 2011.

Nonetheless, and despite widespread condemnation from many of Syria's Middle Eastern neighbors, Europe and America, the international community remains hamstrung on tougher measures, with Russia and China blocking any concerted action at the United Nations. And without international agreement, the long-run impact of traditional sanctions will be blunted. Asian refiners, among others, might be willing to pick up the slack when it comes to buying Syria's oil -- especially at a discount. Over the longer term, if Assad continues to hold out, even investment flows might pick up again. Perhaps the China National Petroleum Corporation -- already a minority shareholder in Shell's Syrian operations -- might invest in the country's oil sector on its own, for example.

But what if any contracts signed with the Assad regime from now on were considered illegitimate in the international financial system? Owen Barder and Kim Elliott, my colleagues at the Center for Global Development, are proposing that the Arab League, United States, and Europe unite to declare that any new contracts signed by the Assad regime need not be honored by a successor government. Call it preemptive contract sanctioning -- or declaring odious obligations, if you'd rather.

The aim of the declaration is to reduce the risks to a future legitimate Syrian government of defaulting on contracts signed while the Assad regime was shelling its own people. Traditionally, governments that have come to power in the wake of illegitimate regimes have nonetheless taken on those regime's obligations, driven by the concern to earn a reputation as a safe home for investment. The African National Congress kept up payments on $23 billion in debt accumulated by the apartheid regime in South Africa for fear of what a default would do to its ability to borrow going forward. In 1979, the Sandinistas in Nicaragua chose not to repudiate debt piled up as President Anastasio Somoza looted the country at gunpoint in the 1970s. They took advice -- offered by Fidel Castro, no less -- that the risk of alienating Western capitalists was too high.

But what if the countries whose laws are used to enforce most international contracts (Britain and the United States), along with the Arab League and others, declared that they would consider any contracts signed by the Assad regime unenforceable on successor governments? New investors would have little reason to consider Syria a bad prospect purely on the grounds that it renounced those same contracts. And firms that are thinking of signing deals with the Assad regime now (expecting them to be honored later on) would have considerable difficulty enforcing a contract declared illegitimate in major financial centers.

What is particularly attractive about preemptive contract sanctioning in the case of Syria is that, unlike the existing trade sanctions, they work even if many countries refuse to enforce them. Take Russia's recent insistence that it will continue selling weapons to Syria, for example. If the Assad regime wants to buy arms and Russia is the only country willing to sell, that merely strengthens Russian firms' ability to charge a high price for guns and ammo. But an odious regime designation -- even if Russia didn't take part -- would at the least make the arms companies demand payment up front (assuming they aren't already). And what if the Assad regime wants international investment to help build a power plant? If the world's major financial centers will only accept a new construction contract as valid if a legitimate successor regime subsequently chooses to endorse it, that adds immense risk to the deal -- wherever the investing firm is based.

Again, the new sanctions would stop allowing Western court systems to be used to uphold a competitive advantage to firms from countries that refuse to join the sanctions effort. Under the existing rules, U.S. and British courts would declare new contracts between U.S. and British firms and Syria unenforceable, but could be used to defend the contract rights of Russian or Chinese firms still dealing with the regime. Preemptive contract sanctioning would level the playing field by declaring all new contracts, whoever signed them, unenforceable.

While governments and firms in countries opposing sanctions on Syria may be happy with making bad moral decisions, even they don't like to make bad economic decisions. And for those worried about sullying the purity of contractual obligations, a note: While trade sanctions do force companies to renege on existing contracts, preemptive contract sanctioning just takes away enforcement rights from those signing new deals.

And one reason to believe the Syrian government might be particularly vulnerable to the declaration of odious regime status is that it had already come to the conclusion that ramping up foreign investment in areas like infrastructure was key to the country's economic future. Before the uprising, Syria was actively courting foreign investors to strengthen the economy outside of the oil sector, which is facing long-term decline. In 2009, the country set up a stock exchange and changed rules to allow foreigners to take majority stakes in Syria's banks. In 2010, the regime set the target of attracting $55 billion in foreign investment over five years -- about a fivefold increase over previous levels. It formed a sovereign wealth fund to oversee the creation of joint ventures between foreign and domestic companies. The country had started bidding on an independent power project south of Damascus -- firms from Germany, Britain, Finland, and Greece had been shortlisted. And five companies, including France Telecom, were in the running for a third mobile telecommunications license.

Preemptive contract sanctions have one additional attraction: They are technically straightforward to implement. In the United States, they could be enacted under existing law. That suggests there is no good reason to delay. Of course, any new Syrian regime might feel they needed to honor contracts with Chinese or Russian firms signed under the previous government because of diplomatic concerns. And the current regime may well be so desperate that no amount of international economic isolation will change its course. But President Obama has called on the international community to consider "every tool available" to stop the slaughter in Syria. So the Arab League, the United States, and Europe should call new deals with Assad's murderous regime what they are: odious.



A New Challenge for Our Military: Honest Introspection

It's time to hold the generals accountable for Afghanistan and Iraq.

We have lost more than lives in our wars in the Middle East, more than money, more than precious elements of our national reputation. We have also lost our ability to judge our actions or their consequences with a critical eye.

Yes, certainly there has been national debate about whether we should have been involved in those wars, one that has belatedly delivered the message to our political leadership that it is time to bring our troops home. But about one crucial array of issues concerning our involvement we have been stunningly silent: the competence of our military leaders, the effectiveness of the strategies they have employed, and the very structure and character of our military itself.

Clearly, recent headlines have underscored the difficulty we have had achieving our overall objectives in both Afghanistan and Iraq -- after a decade of massive costs in lives and resources -- and raised serious questions about discipline, morale, and the consequences of our actions, both intended and otherwise. And while our political leadership must ultimately be held responsible, it is fair and indeed urgently important to ask to what degree our top military commanders should also be held accountable.

Perhaps our silence is understandable -- to a degree. It was a national scandal how badly our troops were treated in the wake of the Vietnam War. They had sacrificed greatly and served with honor, and it was wrong to take them to task as a group for the misjudgments of those who directed their actions or for a few bad soldiers who committed some terrible misdeeds. In subsequent years, political leaders like Ronald Reagan won great national approval for embracing those troops and trying to redress the wrongs done to them and their reputation.

But as with many policies of the Reagan era -- such as deregulatory fervor, contempt for "big government," jingoism, and the tax-cutting siren song of supply-side economics -- we have taken them too far in the decades since, pushing them to extremes few in either political party dare challenge. We pumped up the volume of patriotic posturing with the sap and testosterone cocktail of country songs and NFL game-opening flyovers and shots of troops rooting for their teams from distant bases. We made any serious discussion of cutting defense budgets virtually impossible, equating it with defeat and a desire to weaken America. The 9/11 attacks and the emotions they stirred only compounded these impulses, fueling an insecurity-driven national mania for massive international displays of our fortitude and resources.

We gave our military virtually everything it asked for. No part of the U.S. government illustrates the excesses of bloated big-government spending more extravagantly than the Defense Department, which, with upwards of $650 billion in spending this fiscal year, a huge 96 percent increase over the last decade, now sucks up the biggest non-entitlement portion of our federal budget. Yet, in the wars we have just been through, we are left with a troubling track record.

In Iraq, let's stipulate that we shouldn't have been there in the first place and attribute that gross misstep to our elected political leaders. But once asked to act, our military brass closely collaborated with their political bosses on a "shock and awe" approach that was costly, absolutely devastating to many innocents among the Iraqi people, and, in the end, as effective at achieving our goals as advertised. Indeed, it was years into the war before it was finally acknowledged that we needed to change course with "the surge."

When our AfPak military strategy also proved to be frustratingly ineffective, they dialed up a surge there too -- despite the many and profound differences between the situations in Iraq and Afghanistan. In Afghanistan as in Iraq, our actions, despite efforts to win public support, have also produced profound alienation, at least in part due to a backlash against a steady number of incidents of what the military calls "collateral damage." Such incidents inevitably occur in warfare, but given our political debate, even apologizing for these mistakes -- acknowledging them as errors -- has been made to seem a sign of weakness. From Abu Ghraib to the burning of the Qurans in Afghanistan, from urinating on corpses to the murder of civilians, there have been multiple such incidents -- yet there is little appetite to ask why so many have occurred or whether some aspect of our military or the way it is being run is contributing to their frequency.

It was the military that opted to make these two wars the first in U.S. history in which the majority of people we had on the ground were private contractors -- with all the errors, abuses, and problems that have been associated with some of those contractors. It was the military that made the spending recommendations resulting in the costliest wars in U.S. history -- even though both will end very unsatisfactorily. In Iraq, we are likely to end up with a fragmented country under the rule of a strongman and subject to Iranian influence. In Afghanistan, we are likely to turn the country over to either a corrupt, incompetent current government or the very Taliban we entered the country to flush out.

We have done great damage to al Qaeda since 9/11, thus achieving one of our principal objectives. But through our missteps, we have inflamed new terrorist organizations and worsened key relationships in the region, and it would be impossible to say that the Middle East today is more stable or less of a threat to U.S. interests than it was before we started spending the trillions of dollars we have poured into our conflicts there. Politicians like President George W. Bush and his top advisors deserve much -- even most -- of the blame for this, but so too do military leaders who have set the budgets. By any measure, they have been denied little; indeed, this generation of Americans and several to come have and will sacrifice greatly to pay for these wars. But given the results, the missteps, and the associated tragedies, wouldn't it be reasonable to expect a fair accounting, an open, candid, and nonpartisan debate about what went wrong and how we can do better?

Toward the end of these wars, it became clear that a different formula for U.S. engagement with our terrorist enemies could be quite effective. Credit Barack Obama's administration and the military top brass for finally coming around to the recognition that a more surgical, stealthy approach -- special forces, plus drones, plus intelligence and covert activities -- could better help us achieve key objectives. But why was this not advanced sooner? If it was, who rejected it? Shouldn't we better understand why for so long we focused on costly, less-than-effective overkill? Indeed, while one cannot help but celebrate the heroism of those who took out Osama bin Laden, it would be fair to ask why it took a decade to find him, especially given that in the end it turned out he was virtually hiding in plain sight.

We need to have enough confidence in ourselves and our system to know that asking questions about why our system has not worked as we might have hoped is a sign of strength, not of weakness, of genuine patriotism, not the opposite. The scars of Vietnam have healed, but in their place we are creating, through our unwillingness to have the full and open discussion of both our strengths and our weaknesses on the battlefield, new ones.

As a country, America has made a decision over the past several decades to devote the greatest part of our discretionary budget to national defense, to outspending all the world's major militaries added together. This should raise perhaps the biggest question of all -- about our priorities. Historians will look back and conclude that we bet on raw power to maintain and extend our global leadership, consistently choosing force over investments in our people, schools, infrastructure, or research. Our military leaders and their sponsors in the defense industry have been complicit in helping us arrive at this decision, reducing our risk of foreign attack perhaps but also increasing the likelihood we succumb, as other great powers have, to a combination of overreach and fear of losing what we have gained.

As these two wars come to a close, the period of healing in the region and the repatriation of our troops and the reintegration of them into society must be accompanied by one of introspection and a different kind of courage. Let's do our duty to ourselves and show our military that we respect it enough to know that it can stand up to the scrutiny it deserves.

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