Relationship Advice

Don't believe the loose talk of Barack Obama exacting vengeance on Benjamin Netanyahu -- the two leaders need each other too much to let old grudges get in the way.

In the wake of U.S. President Barack Obama's reelection victory, some have suggested that he will pursue a feud against Israeli Prime Minister Benjamin Netanyahu, given the two leaders' disagreements over how to pursue peace with the Palestinians and deal with the Iranian nuclear threat.

There is no denying that the relationship between the two leaders has been rocky. Yes, Obama believed Netanyahu had wrongly lectured him about borders in front of the media in the Oval Office in May 2011. Netanyahu has his own grievances: He was upset that he could not get a September meeting with the president to discuss Iran, for instance. As Israeli Interior Minister Eli Yishai put it the day after the U.S. election, "It seems like it is not such a good morning for Prime Minister Benjamin Netanyahu."

While it is safe to assume Netanyahu personally preferred Mitt Romney, he in fact did not endorse Obama's Republican challenger -- despite every Israeli reporter's efforts to entice him into doing so. As one Netanyahu aide put it privately, when it comes to the U.S. election, "our room to maneuver on this issue has the width of dental floss."

But at the end of the day, a settling of scores between Obama and Netanyahu is unlikely. It is counterproductive for the two leaders to focus their energies on the past when they are confronted by an array of challenges that will require them to work together.

Obama's cerebral style toward foreign leaders made Israelis skeptical of him, in part because it was a departure from the bear-hug style of President Bill Clinton. But it is also one reason the United States and Israel will now avoid a public feud. As Dan Shapiro, Obama's former top White House aide and current U.S. ambassador to Israel, told a panel in Tel Aviv on Nov. 7, "The president is a strategic thinker; his policies are not governed by emotion." He termed talks of Obama taking revenge against Netanyahu "ridiculous."

Too much is at stake for both countries to let old grudges dictate policy. It is no secret that the Obama administration views a new diplomatic initiative toward Tehran as integral to its sanctions policy. The potent international sanctions currently in place, combined with diplomacy, are the world's one hope of solving the Iran nuclear crisis peacefully. Nobody can guarantee that Iran will back off from its program, but a U.S.-led offer is still inevitable to test that proposition.

And Israel knows this. Contrary to perception, Netanyahu would also like to see a peaceful end to the crisis -- there is no Gen. Curtis LeMay figure in the Israeli government out to firebomb Iran. Whether it is in the format of bilateral U.S.-Iran talks or the P5+1 (the five permanent members of the U.N. Security Council plus Germany), the United States will want Israel on board with U.S. diplomatic efforts to avoid the prospect of an Israeli strike. This does not give Netanyahu any kind of veto over the U.S. offer to Iran, but it is hard to imagine that the United States would not welcome Israel's thoughts to ensure that the two countries do not act at cross-purposes.

This process will test the personal relationship between Obama and Netanyahu like no other foreign-policy issue -- and it will leave no time for petty score settling. Israel and the United States are going to need to be in closer consultation than ever about Obama's highest foreign-policy priority: namely, ensuring that Iran does not go nuclear and that a nuclear arms race does not break out in the region. Failure would mean the end of Obama's plans to promote nuclear nonproliferation, and it would also cripple U.S. credibility after three administrations -- Democrat and Republican alike -- have vowed that Iran will not get the bomb.

Moreover, those who are playing up the possibility of an Obama-Netanyahu feud believe that the laws of political gravity are suspended for a second-term president. In fact, while reelection can revitalize a president's mandate, political capital remains a finite commodity -- even for a second-term U.S. president. Just ask President George W. Bush, who saw his clout diminished in his second term by Hurricane Katrina, a failed attempt to privatize Social Security, and a debilitating war in Iraq. Bush allocated all his efforts to the 2007 Iraq surge, and administration officials at the time said not much political capital was left over for anything else. As it is, Obama is facing a divided Congress that he will need to win over for a grand budget deal in 2013, which will be central to resolving the country's economic crisis.

This is not an argument for Obama to avoid the Palestinian issue and focus solely on Iran. To the contrary, advancing a two-state solution is essential if Israel is to remain a Jewish, democratic state and not a de facto binational state, and for the Palestinian national movement to have a real future. Moreover, whatever the arguments between the parties at the U.N. General Assembly this month, when the Palestinian Authority is expected to pursue its bid for statehood, it is important that the Palestinian Authority does not go bankrupt. The collapse of the one existing institution that could potentially serve as the core of a new Palestinian state would not benefit the United States, Israel, or the Palestinians.

Once again, Obama is going to need Netanyahu's help to advance these goals -- and the president should assume that the Israeli prime minister will remain on the political scene for some time yet. Polls show Netanyahu is likely to win the Israeli election on Jan. 22, given his merger with the right-wing Yisrael Beiteinu party and his natural alliance with religious parties. Former Prime Minister Ehud Olmert may enter the race looking to unite the center, and he may hint in his campaign about his proven willingness to make tough decisions -- notably, a still officially secret strike against a Syrian nuclear reactor in 2007 and his willingness to make difficult concessions on peace to the Palestinians. The odds favor Netanyahu at this time, however.

An Obama swipe at Netanyahu would not necessarily hurt the current prime minister, but could boomerang against the president. Obama does not have Clinton's endless reservoir of support among the Israeli public, regardless of the important strides in bilateral security between the two countries over the last four years. One poll showed a majority of Israelis favoring Romney.

At the same time, Netanyahu can learn from the past as well. He is shrewd enough to realize that a broad-based unity government is essential if he wants to avoid the disproportionate influence of hard-line elements within his coalition, which could lead him to focus excessively on settlements. With the challenge of Iran and the Palestinian issue, a broad-based government will minimize the prospects of friction with Washington.

Of course, the Palestinians must also do their part for negotiations to be a success. They need to return to the table after leaving in September 2010 over demands for an extended settlement freeze in the West Bank. Obama has every right to insist that both Palestinian President Mahmoud Abbas and Netanyahu provide a sense to the United States of not just what they are willing to gain, but what they are willing to concede if they want the United States to devote precious resources to a renewed push on the Israeli-Palestinian front.

These discussions won't be easy, and they will require close coordination between Obama and Netanyahu to achieve the leaders' mutual goals. Like it or not, the two leaders will look to manage their differences and find a way to work together better than they have in the past -- if only because they must.



Xi Jinping's Challenge

Why China's new president has a much tougher job than Barack Obama.

Now that the U.S. election finally is over, it's time to focus on the other most important leadership transition in the world: China's.

Like the United States, China is also at a turning point, and though the specifics differ, the crux of the problem is the same: major structural change is critical to sustained future growth and stability, but the country's current leaders have been unable, or unwilling, to implement the necessary reforms to shift its economy onto a path of sustainable development.

If anything, China's heirs apparent have the harder task.

Unlike Barack Obama, for instance, the incoming leader Xi Jinping won't be able to choose most of his own team. Beginning Nov. 8, when the Communist Party convenes its 18th Party Congress, and continuing in March 2013, Beijing will in two steps replace about 70 percent of the incumbents in its top communist party, government, and military bodies. China watchers expect Xi Jinping and Li Keqiang to ascend to the most powerful two spots on the Politburo Standing Committee, the country's highest decision-making body, but nobody outside a small circle of insiders knows who will fill the other 5-7 spots -- let alone what those individuals think about how to run the world's second-biggest economy and one of its major military powers.

Nor is the president of China as powerful as is commonly assumed. Since Hu Jintao, the outgoing leader, ascended to the top job in 2002, collective leadership built around consensus decision making has become the norm. Each Standing Committee member manages a distinct part of the overall Chinese system. The outgoing premier Wen Jiabao runs the cabinet, Zhou Yongkang runs domestic security, and so forth.

This system has its advantages, such as the ability to mobilize enormous resources and act quickly when all Standing Committee members agree on a priority course of action. But it has also produced a willingness to spend more money on top priorities ("you vote for my priority and I'll vote for yours"), coupled with an inability to adopt decisions that seriously disadvantage any member's sector, such as reducing subsidies to major state-owned enterprises or cutting back the scope of the civilian security apparatus. There have thus been no major structural reforms in China for the past five years, and few in the half-decade before then.

The recognition of the need for sectoral reform of the Chinese economy -- and related political reforms to make that happen -- is so widespread that Xi undoubtedly has this on his agenda. But it is unclear how high a priority he attaches to this or whether he can fairly easily be dissuaded by other considerations.

And even if Xi proves to be an ardent reformist (which is by no means clear), he may prove unable to move the system sufficiently in the directions he knows it must go. Wen has called for such changes for at least the past half decade, even as the system has in fact moved in the opposite direction. Success or even rapid progress here is far from assured.

The hurdles are high for Xi. Because he does not even get to pick most of the members of his own team, virtually no other Standing Committee member will owe his job solely to him -- current and former members select the lineup of the new Standing Committee in order to achieve a balance among their interests. It may take an impending or actual major crisis, therefore, for Xi to garner the authority to drive through necessary but painful decisions.

And painful decisions are essential to avoid snowballing structural drags on growth and heightened social tension and instability. With the government already spending more on domestic security than on the military in the face of a reported 180,000 "mass incidents" in 2010, serious reform is necessary.

The outgoing leadership of President Hu and Premier Wen has in recent years chosen to muddle through, handing off the problems to their successors. But China's huge economic gains over the past decade primarily reflect the payoffs from reforms made in the decade before that, including the privatization of housing, drastic downsizing of state-owned enterprises, restructuring of the banking system, joining the WTO, and expanding the political base of the party to include businesspeople. Despite early signs that Hu and Wen would continue to promote reforms meant to improve social equality and rural living standards, these initial initiatives took place years ago, and problems have since multiplied.

Beijing's economic strategy must be drastically overhauled. The Hu/Wen leadership, recognizing the danger, in March 2011 formally adopted a new development strategy that stresses increasing household consumption, reducing reliance on exports, expanding services, and moving to more innovative, less resource-intensive manufacturing. A study released this February by the World Bank in conjunction with the State Council Development Research Center, one of China's top government think tanks, confirmed the importance of this new strategy. But little serious reform has happened to date.

A key obstacle is that the old way of doing business is now built into the DNA of the leaders of the roughly 40,000 political jurisdictions outside of Beijing, from the province to the city to the county to the township level. These officials, rewarded primarily on the basis of producing rapid GDP growth while keeping a lid on social unrest, have used their political power to nurture infrastructure building and other capital-intensive projects. This in turn has generated short-term GDP growth and employment, along with massive flows of bank loans and other funds from which they can skim.

The results have been clear: breakneck growth, huge infrastructure and manufacturing development, enormous corruption, massive environmental devastation, growing inequality of wealth, and rising social tensions. If they wish to change the behavior of these local leaders, Xi and his colleagues must expend enormous political capital to do so.

And local officials are hardly the only impediments to reform. Beijing has fostered "national champions" -- state-owned corporate behemoths, many of which are seen as key to the party’s grip on power and are closely tied to elite political families. This marriage of wealth and political power presents major obstacles to effective changes in economic strategy.

Corruption at all levels, moreover, makes reforms even more difficult to implement through China's massive bureaucracy. And the fear that reform itself can generate expectations that may get out of hand adds to the hurdles to making necessary changes.

Thus, there are no simple solutions to China's challenges, almost all of which are more difficult than those confronting the United States. In the United States, the core issue is one of gaining a political consensus on federal revenues and expenditures. For China, the challenges require major structural overhaul of the economy and wide-ranging changes in the political system. The complexity of both the problem and the necessary corrective measures are massively more daunting in Beijing than in Washington.

The reforms China knows it should undertake are very much in America's interests -- reducing Beijing's need to resort to unfair trade practices, while at the same time further opening its economy, increasing the role of the market, and allowing greater opportunities for U.S. investments in sectors (such as financial services) in which the United States is highly competitive. In addition, putting China on a path of more sustainable, less environmentally damaging growth increases the chances that its government will be more confident, outward-looking, and constructive internationally. China, in turn, has a major interest in U.S. success in getting its deficit under control, given how heavily Beijing has invested in the health of the U.S. dollar and the American economy.

U.S.-China relations, in short, will almost certainly experience less strain if both Beijing and Washington deal more effectively with their need to undertake significant reforms. If each falls short, the opposite is true. Leaders on both sides should keep this fundamental reality in mind over the coming years.

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