Kaplan Focuses On Middle East

Kaplan Focuses On Middle East

Iran is a bright spot, but Saudi Arabia is key.

Founder & CEO
Reviewed by: Jim Wiandt
Edited by: Jim Wiandt
Jim Wiandt, founder and former CEO of ETF.com, recently spoke with author and journalist Robert Kaplan to get his views on the big picture around some key global conflicts. Kaplan will be one of the featured speakers at Inside ETFs Europe.

ETF.com: What are you working on?

Robert Kaplan: I have a new a book that’s finished. It’s about American geography and foreign policy.

ETF.com: Interesting. Can you give more details?

Kaplan: It’s about how America’s geographical placement still determines its foreign policy. It’s about how our first empire was not Cuba or the Philippines. It was the Rocky Mountain West, and that formulated how we saw the outside world into the 20th century.

ETF.com: Tell me a little bit about what your views are on what’s going on in the Middle East—in particular, Syria and the broader implications of the Syrian conflict for the Middle East and Europe.

Kaplan: There are underlying causes for greater Middle Eastern anarchy that haven’t been in the newspapers. What’s happened is we’ve seen the successive collapses of imperial systems. Don’t believe that empire was bad; empire was very good.

Most of humanity for most of history has been governed by one sort of imperial system or another. At the end of World War I, the Ottoman imperial system in the Middle East collapsed. At the end of World War II, the French and British imperial systems in the Middle East collapsed.

Then we had rule by post-imperial strongmen—who governed according to the borders set up by imperialism, and they erected totalitarian prison states—like Saddam Hussein; Gaddafi; the Assad family. They’re almost all gone.

American power projection for a host of reasons I could go into is not limited to President Obama’s view of the world, is not what it used to be. So, you have vacuum. We’re in what I call a “post-imperial moment.” And I can break that down into details.

Another thing that’s happened that’s very relevant to Europe is that the Mediterranean for thousands of years was the center of Europe. But when the Arabs invaded in the seventh and eighth centuries, they split the Mediterranean into halves.

Europe was mainly thought of as a Northern enterprise, with the exception of Islamic and Christian Spain. Now we see the chickens are coming home to roost. We’re seeing the Mediterranean reunited by refugee migrations from North Africa, from the Levant back into Europe.

What I see in the Middle East is, despite all the discussions in the media about peace talks, the war in Syria is going to go on. These states—Iraq and Syria—are not going to come back together in their former form.

ETF.com: Where do you see the major risks of increasing conflict, and what do you think that that looks like? For example, with the split of Iraq and Iran into the tribal areas, how does that ripple out, and what are the implications of that?

Kaplan: Well one thing I would keep in mind is, because of technology, the communications revolution, the collapse of distance because of military innovations, it’s not that geography has been defeated, it’s that it’s been shrunken. Every region of the Earth interacts with every other one as never before.

When you think about the crises in Iran and Iraq and Syria, keep in mind they’re interrelated with what’s going on in Ukraine and Europe. Everything interacts with every other as never before. For example, Putin intervenes in Syria partly to take the spotlight off Ukraine, and then buys leverage with the Europeans in terms of his ability to regulate the refugee migrations from Syria to Turkey into Europe.

I think that Iran is one of the bright spots in the Middle East, because it’s a coherent, historically rooted state—an empire in its own right through most of history. I always thought that the nuclear deal—I wrote this in advance, long before the deal was concluded—that the U.S. and Iran are destined to have a rapprochement.

ETF.com: Yes, you talked about that at Inside ETFs last year.

Kaplan: I did. And I see this going forward. You see now Boeing in talks with Iranian Airlines to sell them more jets. This is just the beginning. Five years ago, I wrote that, within 10 years, the U.S. would have closer relations with Iran and then with Saudi Arabia. And I see that as on track, essentially.

But if you think of the violence in Syria and Iraq, to move away from Iran, that’s going to continue, and that means Europe is going to continue to be pressured by refugees.

ETF.com: Your thinking would be that that’s going to extend into Saudi Arabia and other parts of the Middle East as well? They don’t have a lot of built-in stability the way Iran does. What’s the range of potential outcomes there?

Kaplan: Here’s how I would put it. So far, we’ve seen the collapse of Iraq, Syria, Libya, Yemen. To be very cynical, it has not affected financial markets very much. They’ve sort of priced it in. The Dow Jones industrials did not collapse because four Middle Eastern states collapsed.

The market is maybe a bit lower. People can argue about that because of what’s happened in the Middle East, but if you saw the weakening or the collapse of Saudi Arabia or, for instance, a war in the South or East China Seas, I think you would see real turmoil in financial markets.

Saudi Arabia is more important than all these other countries put together.

ETF.com: Why is that?

Kaplan: Because of its petroleum and natural gas reserves. What are the chances of a Saudi weakening and collapse? Keep in mind this Saudi royal family has orchestrated and been in power through a tumultuous revolutionary social change, from literally the Stone Age in the 1950s to the post-industrial, post-modern society of 2016. And the royal family still rules. It’s still able to buy off dissidents. Because the royal family is so large—1,500 people or so—it has networks into all facets of the society; all political tendencies.

The royal family itself functions as its own domestic intelligence agency, and this is its strong point. I’m not one of those people jumping on the bandwagon saying, “Saudi Arabia is going to collapse.”

However, even if oil prices go up somewhat, the long-range future for a country with limited water resources on a desert with regional differences is not as good as its past, is the way I would put it. The Hajar, which is the region by the Red Sea, is far more open to the world and cosmopolitan than the capital in Riyadh in the center of the country.

That’s the big question out there: What is the future of Saudi Arabia? I would say it’s worse than the past, but I’m not there yet, in terms of predicting its demise.

ETF.com: What should the West’s role be in trying to facilitate stability in these regions? It seems like a lot of our interaction has been incredibly ham-handed.

Kaplan: Well, as you’ve said, we’ve tried in every way possible to build up local armies, to build up local forces—to help to nation-build, to some extent, which begins with building an army. Without an army, there is no nation in this part of the world, but we’ve failed at that. We’ve done it smartly in some places. We’ve done it stupidly in other places, but even where we’ve done it smartly, it hasn’t really worked.

Then you get, what’s the next scenario? The only scenario is to work through local proxies, to limit severely our involvement on the ground and work through local proxies, because first of all, there’s no domestic support whatsoever in the U.S., among the public, for a significant ground presence anywhere in the Middle East.

A successful operation in the Middle East that we could copy is what Russia did in Syria. Russia succeeded in Syria; it didn’t try to build a new order. It just tried to prop up the old order for the sake of stability. It used primarily air not ground, so it would not get into a quagmire. It had limited goals, and once it felt it achieved those goals, it reduced its presence even if it has not withdrawn. And that’s a model going forward.

ETF.com: What is your view on terrorism generally and how much the West should be concerned about that?

Kaplan: Terrorism is the form of violence that occurs in this age of technology. We’re past the Industrial Age of big everything—big aircraft carriers, big railways. We’re in a post-Industrial age where you could fit enough plastic explosives in your pocket to blow up a few rooms. So, this empowers stateless groups; small groups, people like terrorists.

We can suppress it, but we cannot completely eliminate it. We should think of it as suppressing a disease rather than curing it. I think it will be a continual factor that we’ll just have to live with, and that the best protection against it is not armies. It’s intelligence agencies; wiretapping; snooping of all sorts like the NSA and police forces. The New York City Police Force has its own intelligence agency around the world. That’s the future.

ETF.com: If you look at the entire geopolitical situation in the world right now, what would you say are your chief concerns, and the things that we should be worried about most going forward?

Kaplan: I would think of the fact that our relations with Russia could be better, and Russia has the world’s biggest nuclear force after the U.S.

Russia’s still a threat. I think that the Baltic States are very tender. When we admitted the Baltic States and countries like Romania and Bulgaria into NATO, we signed a contract that we would protect them in the event of any incursion or invasion from outside, and that means Russia. So we’re legally bound by treaty to protect those states even though Russia has larger forces much closer to the borders of those states. That’s an issue.

Another thing is the South and East China Seas. It’s not in our interest and it’s not in China’s interest that there be a war of any kind, but great powers often stumble into conflicts against their own interests—throughout history this has happened.

I’m concerned about reducing U.S.-China relations completely down to the South China Sea issue. The fact that that is so has dominated larger U.S.-China relations.

So it’s the South and East China Seas; it’s the Baltic States and also all of Central Eastern Europe, essentially. The collapse of Saudi Arabia as we discussed—although I don’t predict it and I don’t expect it, it’s still a danger—has to be followed very closely, because as tense as U.S.-Saudi relations are, they’re still a bulwark of U.S. power in the region.

And I think of disease spreads; of a mass casualty terrorist attack if we’re not able to suppress it.

ETF.com: If you look around at some of the discourse in the current election cycle and with American politicians and foreign policy, what’s your view on misunderstandings that are common in the government and among various candidates for president?

Kaplan: I would make a distinction between the government and various candidates. People I know in the government, in the bureaucracy, are very pragmatic, realistic, extremely knowledgeable and competent. They have a very nuanced view of relations with China, with Russia, with countries in the Middle East, etc.

In terms of the presidential campaign, it’s been disgraceful in terms of any serious discussion of foreign affairs. A free trade deal in Asia is not bad for the U.S.; it’s good for the U.S. Not doing free trade pacts is not the way forward. We live in a globalized world. The jobs lost to American workers are mainly not going to come back. Nothing will help China more than our failure to get this trans-Pacific partnership deal in.

So the candidates are very misinformed, generally speaking, as to what’s going on in the world. I make a distinction with John Kasich and Hillary Clinton, who are very well informed.

ETF.com: What do you think are the risks if one of the less-informed candidates becomes president? Does that concern you at all?

Kaplan: Yes, it concerns me greatly because, first of all, in the case of Trump, before you can be a liberal, before you can be a conservative or a neoconservative or any of those things, you have to be polite. You have to be a role model. You have to be articulate. You cannot be vulgar. You cannot insult people. If you do those things, in my mind, you’re disqualified from high office in the first place.

ETF.com: What about Ted Cruz?

Kaplan: His positions, such as they are, are very extreme. That’s all I can say about them. I believe good foreign policy comes from the pragmatic center, not from the extremes.

And remember Ronald Reagan was not an extremist. Ronald Reagan appointed people once he was elected like James Baker, Casper Weinberger and George Shultz, who were all pragmatists.

ETF.com: What are your thoughts on energy independence and pursuing goals in that direction? I’ve got an idea in my head of the U.S. taking the lead in terms of energy independence, not necessarily with alternatives, but with a massive nuclear program. Nobody likes nuclear, but it seems that’s something you can do in a much safer way, that is probably less destructive than the petroleum that we’re using now in terms of the global impact.

Kaplan: Nuclear power is a tough sell politically because of its symbolism and because of the fear of nuclear plant malfunctions. I realize the technology is much better than it was in the early days of nuclear power, and we can make it safer and safer.

Another thing to keep in mind is that we’ve had nuclear-powered submarines and aircraft carriers on the high seas in the hundreds over the last almost half century, and there’s never been one incident.

If the U.S. Navy can do it, the civilian sector should be able to do it. So there’s certainly a significant role for nuclear power in the future. It’s a matter of discipline. The Navy is able to do it because militaries operate with a degree of discipline that simply doesn’t exist in civilian society.

ETF.com: What is your view on China and the relationship of the U.S. and the West with China? How do you see that evolving going forward in terms of both trade and power projection?

Kaplan: The U.S. cannot under any circumstances afford to get into a military conflict with China. However, the U.S. also cannot afford to let its many allies in the Pacific be overwhelmed by Chinese power.

So, it has to defend its allies, but at the same time not get into a conflict with China. I think one of the ways you do this is you work hard to have a relationship with China that’s multifaceted, that is not reduced simply to our disagreements in the South and East China Seas.

So, we have to work cooperatively with China in as many areas as possible in order to have a cushion, so to speak, regarding our disagreements in the South and East China Seas.

ETF.com: I guess the idea is that the more interconnected and multifaceted the relationship, the less incentive or opportunity for an outright conflict to arise.

Kaplan: Exactly.

Jim Wiandt is founder of etf.com and ETF Report. He founded IndexUniverse.com in 2001, creating the central hub for information and analysis on indexes, index funds and ETFs. Wiandt then acquired "Indexes: The Journal of Index Issues" from Dow Jones. In 2003, he purchased the Exchange-Traded Funds Report.