Europe

After my previous posts in this series grappled with the likely plight of the falling dollar and some of the economic implications of its privileged status in the global economy, this concluding post will consider the question:

What do the dollar's role and value mean for U.S. foreign policy?

There is a macho tinge to the U.S. Treasury mantra that a strong dollar is in the U.S. interest. After all, isn't it always better to be strong than weak? There is a suggestion that at $1 to the euro, we are virile and able to bend other nations to our will, while at $2 to the euro, we will be feeble and submissive.

It is not obvious why that should be so. There are a couple upsides to a weaker dollar. Fred Bergsten, in a new Foreign Affairs analysis, argues that "the United States itself would benefit from a reduction in the international role of the dollar." In Bergsten's view, the easy credit that has accompanied dollar primacy has tempted the country into misguided policies. He writes: "Unless the United States quickly achieves and maintains a sustainable economic position, its ability to pursue autonomous economic and foreign policies will become increasingly compromised." A falling dollar is thus a mechanism whereby excessive U.S. borrowing from abroad can be rolled back. To the extent a weakened dollar would bring about such global rebalancing, it would help to meet a stated goal of world leaders in recent G-20 meetings.

Beyond this indirect gain, the most direct effect of a weakened dollar would be to hike the cost of goods imported into the United States and make American goods appear cheaper to the rest of the world. This, over time, would likely ease the pressures for trade protectionism that have increasingly strained U.S. relations with countries like China, Canada, Mexico, and the members of the European Union.

Each of those benefits to a diminished dollar shares a similar quality. Under a strong dollar, the argument goes, we cannot resist the temptation to sin. We know that excessive borrowing is a bad idea, but we just can't help ourselves. We know that trade protection is ill-advised, but who can resist the political pressure?

As soon as we move away from introspection, we see some of the foreign policy downsides to a weaker dollar. The first and most direct are the economic impacts. With a weaker dollar, all U.S. ventures abroad become more expensive. During the period of the dollar's decline, the United States becomes less attractive as an investment destination, since foreign investors would expect to recoup fewer yen, yuan, or euros when they cash out. Future financial crises - and they are sure to come -- will be much more painful if global investors do not rush to the dollar as a safe haven.

An even greater difficulty, from a foreign policy standpoint, could be a sense among allies that the United States is an unreliable partner. As the provider of the world's reserve currency, America has had both special rights and special obligations. The rights have included the ability to print money to pay for whatever we liked (technical term: seigniorage). The obligation has been to keep the value of the dollar relatively stable. From the reactions to the dollar's recent slide, we can anticipate the sort of discord that might accompany a more significant move. From Thursday's Washington Post:

The weak dollar is becoming a source of international tension, particularly in U.S.-European relations. Officials in the 16 countries that use the euro warn a continued slide of the dollar may pose long-term structural problems for Europe, forcing down wages and hurting employment in the months and years ahead. This week, a top aide to French President Nicolas Sarkozy called the value of the dollar "a disaster" for Europe, warning of dire consequences to the global economy if it remains at its current levels.

China reacted to U.S. borrowing plans at the beginning of this year with a call for guarantees of the value of its dollar lending. They were clearly worried about a depreciation of the dollar, which would undercut the value of China's massive reserves.  While G-20 nations were calling for global rebalancing at their Pittsburgh summit (by which they really meant that China should appreciate its currency and import more goods), Chinese President Hu Jintao said:

"Major reserve-currency issuing countries should take into account and balance the implications of their monetary policies for both their own economies and the world economy with a view to upholding stability of international financial markets."

This nicely captures the dilemma facing the Obama Administration. How do you catch a falling dollar? A classic approach would be for the U.S. government to stand ready to raise interest rates and adopt plans for future fiscal austerity. It would be responsible, but it would not be much fun, particularly at a time when U.S. unemployment is approaching 10 percent.

Suppose, instead, the dollar continues to slide and loses its premier status among world currencies. There could be domestic political benefits, but it would leave key countries economically bruised and seething. It is very difficult to tell such a story in which the United States' standing, prestige, and ability to project power do not decline along with its currency. U.S. foreign policy prowess would not be immune should the dollar fall from grace.

John Moore/Getty Images

By Peter Feaver

It has been interesting to see how quickly the Obama administration has retreated from some of the more extravagant soft power claims that greeted it during the honeymoon period. A few short weeks ago, you could find newspapers touting how "U.S. Offers Goodwill, and Expects Something in Return." Nowadays, one is more apt to find "Obama May Find Europe Reticent on Some U.S. Goals."

In fact, as Der Spiegel put it, "Europe's Obama Euphoria Wanes." President Obama remains a wildly popular public figure and everyone, heads of state included, would like to get their picture taken with him. But when it comes to the tough issues of the day -- the ramp up of commitments in Afghanistan or coordinating global stimulus packages -- the Obama team and its fans in Europe are not quite the Fred Astaire and Ginger Rogers team that we had been promised. Or rather they are more this than this.

Some Obama critics might blame the apparent inefficacy of soft power on the Obama team's rookie mistakes, whether it is needless insults, botched gifts, or the vacancies in key posts. I think such a view is unfair to the administration, and wrongly implies that if only it could hit its own "reset" button, it could reclaim the honeymoon. But the truth is, the issues that bedevil Obama are the very same ones that bedeviled President Bush, and having a more popular leader at the top may not do much to change the underlying conflicts of interest.

On many issues, our European partners are more like "in-laws" than "allies." In-laws are people who share a common identity, even a shared long-term and enduring covenant, and this common identity is strong enough (usually) to outlast many frequent (and sometimes stormy) conflicts of interest. Allies submerge their conflicts of interests in order to accomplish an overriding goal, typically victory against a common enemy. In-laws will continue to meet at family reunions (what is the G-20 if not a family reunion?; perhaps a dysfunctional family reunion?), but they may only agree on where to stand for the family photo. We should all be grateful for in-laws (I am deeply grateful for mine, in case they are reading), but we should not be surprised by conflicts. And we should attribute failures of cooperation to those underlying conflicts of interest rather than to boorish diplomacy.

Many people thought the election of Obama would yield a soft power bonanza, but it hasn't worked out that way. Soft power is the ability to get other states to want what you want, and it is distinguished from hard power, which is the ability to get other states to do what you want (even if they don't want to). Obama at the start undoubtedly has more soft power at his disposal than Bush did at the finish, but so far this has not produced much greater European cooperation on American goals. The atmospherics and optics are more positive, but the actual results are not.

Does this mean soft power is overrated? Perhaps some are naïve about what it can do, but I would characterize the naiveté more as a misunderstanding -- specifically, a failure to understand that soft power operates in both directions. We are seeking to exert soft power on others, and others are seeking to exert soft power on us. Viewed this way, in recent months we have witnessed a fairly impressive display of transatlantic soft power, but it has traveled mostly east to west, rather than west to east.

Not too long ago, America wanted Europe to:

• adopt more American approaches to addressing the global financial crisis;
• shoulder more of the military and economic load in Afghanistan; and
• accept more responsibility for holding the detainees currently at Guantanamo Bay.

And Europe wanted the opposite -- for America to:

• adopt more European approaches to addressing the global financial crisis;
• shoulder more of the military and economic load in Afghanistan; and
• accept more responsibility for holding the detainees currently at Guantanamo Bay.

These conflicts of interest have been worked out not with hard power tools of threats and intimidation but with soft power tools of shaming and suasion. And the results so far are:

• America is going to adopt more European approaches to addressing the global financial crisis;
• America is going to shoulder more of the military and economic load in Afghanistan; and
• America is going to accept more responsibility for holding the detainees currently at Guantanamo Bay.

My purpose here is not to critique the results. So far, they are more or less what I expected, and I can imagine far more disastrous foreign policy moves than the ones Obama has made thus far. But we should not miss the opportunity to learn a bit of realism that should be obvious to anyone who served in a position of responsibility in American foreign policy since the end of the Cold War. Soft power is a useful component of foreign policy, but it is a means to an end, not an end in itself. And if you make "being liked" a centerpiece of your foreign policy, you will find your soft power eroding and the soft power of others growing.

I am pretty sure the Obama team -- the one running foreign policy now, not the one running for office last fall -- already understands this. And I am pretty sure they are going to return from Europe understanding it even better.

By Christian Brose

Can someone explain this to me? 

Despite the administration's call for more troop contributions from its allies, Biden avoided making specific requests for increased deployments. This is a tender subject, since several European governments have already said they are unwilling to contribute more soldiers.

Obama recently decided to send an additional 17,000 U.S. troops to join the 38,000-strong U.S. force in Afghanistan. He made it clear he is seeking similar additions to the 25,000-member contingent of non-U.S. forces in Afghanistan, many of whom are engaged in noncombat missions, along with increased commitments in money and supplies for the rebuilding effort that many experts say is just as important as the military campaign.

But Biden indicated at the news conference that the Obama administration is also willing to listen to European suggestions that Western goals in Afghanistan should be scaled back, saying they must be "clear and achievable."

So the Vice President goes to Europe (wasn't Secretary Clinton just there a week ago, by the way?), and with Afghanistan in dire need of a better U.S. and NATO policy, with 17,000 more Americans headed to fight there, with less than a month to go before the NATO Summit, and with presumably even less time before the "Af-Pak" policy review makes its prescriptions, Biden not only doesn't ask our allies to contribute more forces; he goes out of his way to solicit their views on how we can lower our sights and invite failure.

Am I missing something here?

I'm all for multilateralism. I'm all for consulting our allies and taking their views into account when making U.S. policy. But isn't the whole point to get results? Building bridges to America's friends and allies is a worthy endeavor, but they really should lead somewhere productive.

By Kristen Silverberg

President Obama's speech last night regrettably omitted any mention of Iran. Any major presidential address is the subject of careful analysis in foreign capitals, and many of our partners will conclude that Obama views the Iranian nuclear question with less urgency than his predecessor. That is precisely the wrong message to send on the heels of the latest IAEA report, especially in Europe, where we need partners willing to continue tightening pressure against Iran.

The day after he became the presumptive Democrat nominee, Obama delivered a speech to the American Israel Public Affairs Committee outlining his approach to the Iranian nuclear question. As he described it, his Iran policy would have two elements: 1) direct engagement with Iran combined with 2) tougher multilateral sanctions. Before a skeptical crowd, he defended his willingness to engage Iran directly by drawing a link between the two elements, noting that our willingness to engage directly could be used as leverage to convince international partners to support tougher sanctions. This would allow us to pursue, as he put it, "diplomacy backed by real leverage."

Following Obama's election, European officials assumed there would be a link between U.S. willingness to engage Iran directly and Europe's responsibility to tighten financial pressure against the Iranian regime. As EU officials understood it, Obama would, like President Bush, adopt a carrot-and-stick approach, but would offer bigger carrots and would want to wield bigger sticks. Late last year, the EU -- perhaps anticipating an Obama request -- took a decision in principle to strengthen its own sanctions against Iran and began the process of debating specific measures. 

Today, however, the Obama administration seems poised to miss the opportunity to work with Europe to tighten financial pressure against Iran.  Having heard repeated public reassurances that the United States is looking for opportunities to engage, without an equally strong public insistence that Europe first produce tougher sanctions, the EU seems less inclined to follow through on its earlier decision to consider new measures. For now, the EU has told Obama administration officials that further sanctions would be inappropriate before the administration completes its Iran policy review, but one worries that the EU has concluded that it is off the hook permanently.    

If this moment is missed, it will be a terrible lost opportunity. EU sanctions, even more than unilateral U.S. sanctions, are capable of capturing the Iranian regime's attention, as we learned following the EU's decision last year to freeze the assets of Bank Melli, one of Iran's most important banks. 

What's more, once a negotiating process with the United States has begun, it will be difficult to convince Europe to take punitive action that could risk disrupting ongoing discussions. A commitment from Europe, China, and Russia to adopt new sanctions only if discussions with Iran eventually fail would be meaningless. By the time talks fail, it will be too late. I'm not optimistic that direct engagement with Iran will produce an acceptable agreement, but if the Obama administration is committed to this course, it would be wise to give itself the strongest possible chance for success.

Obama has enormous capital to use in Europe, and Europeans will be reluctant to turn down a public U.S. request. If we are going to convince Europe to move ahead, it will happen only as a result of explicit insistence from the Obama administration that new European (and ideally Chinese and Russian) sanctions are a necessary prerequisite to any new diplomatic strategy. 

Obama administration officials have been vocal in criticizing the Bush team's approach to Iran, but Bush's multilateral diplomacy produced overwhelming support in the UN Security Council for five Chapter VII Security Council resolutions, three of which impose binding multilateral sanctions. The Bush administration worked with numerous capitals, including Brussels, to adopt sanctions even beyond those mandated by the Security Council.

What's more, the Bush administration, led by Treasury Undersecretary Stuart Levey (who President Obama has wisely decided to retain) persuaded international financial institutions that Iran's deceptive use of front companies had so blurred the lines between licit and illicit conduct that legitimate financial institutions could no longer afford to do business with official Iranian entities. Some eighty financial institutions have since suspended business with Iran, and its difficulties in obtaining financing in turn dried up Western investment in the Iranian oil and gas sector.

The Obama administration has the opportunity to further increase Iran's incentives to take a different course. Let's hope they seize it.

By Mitchell Reiss

Reuters has the story:

The European Union has made a gesture towards accepting a Palestinian unity government that could include Hamas, a move it hopes can help heal a rift between the Islamists and their Western-backed rivals, Fatah.

EU foreign policy chief Javier Solana, speaking to reporters in Jerusalem on Wednesday, used new language to describe the conditions under which the bloc would be prepared to work with a new coalition, should Hamas and Fatah manage to agree to one....

Instead of spelling out three long-standing conditions, also adopted by the United States, that Hamas must renounce violence, recognise Israel and accept existing interim peace accords, Solana said only that a new Palestinian government that included Hamas should commit to pursuing a two-state solution.

Perhaps Solana was misquoted, perhaps he was selectively quoted. Otherwise, he surely must have known that this statement undercuts the new president and secretary of state, who only days ago repeated publicly the three conditions for the United States engaging with Hamas: renounce violence, respect previous agreements, and pace Reuters, not "recognize Israel" diplomatically, but simply accept Israel's right to exist.

More broadly, Solana's statement sends a signal to those in the region, including Iran, that the Europeans will always look for the lowest common denominator when negotiations get difficult rather than adhering to commonly agreed principles. This message also undermines those in the region, especially other Palestinians, who are trying to moderate Hamas’s extremist positions. It is far more likely to prolong conflict, not shorten it.

By Steve Biegun

Unlike the clumsy and ill-timed blast that Russian President Medvedev launched at the United States on the day after Barack Obama was elected president, the Russian government now appears to be trying to make more of the opportunities presented by Obama's inauguration. To wit, Medvedev and Prime Minister Putin have both welcomed Obama's arrival as an opportunity to undo NATO's decision to proceed with a Central Europe-based missile defense system (to defend against a potential threat from Iran) and to hold back Ukrainian and Georgian ambitions to join NATO. Most recently, sources within the Russian Ministry of Defense appear to be hinting at a retreat from their plan (which Medvedev announced in his November 5 speech) to deploy Iskander short range missiles closer to Central Europe, in the Russian exclave of Kaliningrad. 

Good news?  Perhaps. Here are a few things to consider:

1.  The Russian government can and should use the opportunity presented by the U.S. election to arrest the downward spiral in U.S.-Russian relations. Driven by a general American difference toward Russia's concerns in the world (right or wrong) and an exaggerated sense of injury and overt anti-Americanism by Russian leaders, with a little effort, Medvedev and Obama should be able to show whether there is still a reasonable basis for U.S.-Russian cooperation on many issues.

2.  The Russian government is hardly in a position to spend the vast sums necessary to deploy costly new missiles in Kaliningrad as a symbolic gesture against the missile defense sites in Poland and the Czech Republic. In effect, the Russian government -- with its economy in tatters and hemorrhaging badly -- may be making a virtue out of necessity by walking away from this ill-considered deployment.

3.  President Obama should move in a measured but sincere way to strengthen U.S. relations at every level -- including at the top -- but the top means President Medvedev. It is an objective fact that, today, Putin is the most powerful politician in Russia. Even with the election of Medvedev last year, it was not possible for President Bush to shift the locus of relations away from Putin, who had been his interlocutor for seven years. Now, with Obama in place, the United States can truly test the degree to which Medvedev can be the leader of Russia -- and whether his instincts run any closer to the liberal political and market thinking that Washington hopes for.

4.  Obama has to beware that the Russian piper will want to be paid. During the campaign, Obama fudged questions on the NATO missile defense by saying he wanted to be sure the system was first viable before moving to construct it. Those evasions will not work for long as president: Either the system will have to be built or the Czech and Polish governments, which committed to its construction at significant political risk, will have to be cut loose. All of this is complicated of course by Iran's continued aggressive pursuit of both a nuclear weapon and a long range missile delivery system (and Russia's unhelpful role in ending those pursuits).

5.  The Russian government's other demand is to reject Ukrainian and Georgian desires to join NATO. For nearly two decades, the United States has held inviolable the right of all European nations to make a sovereign choice of the institutions (e.g. NATO) that they will join to ensure their security. To rebuff outright the Ukrainian and Georgian desires to join NATO is likely to have a steep cost both in terms of the message it sends to struggling democracies in Central and Eastern Europe as well as the encouragement it gives to Russian irredentists.

So, it is a good thing the Russian government is signaling a desire to ease tensions. And both we and Russia are better off if the Iskander missiles are not deployed to Kaliningrad. But it should also be understood that this is still the preliminaries -- positioning in advance of the three, real conversations that are likely to take place in the coming year between Medvedev and Obama (in London at the G-20 Summit in April, in Italy at the G-8 in July, and in Singapore at the APEC Summit in September). 

Bottom line: Central and Eastern Europeans beware. Early handicapping is that the NATO missile defense system is dead and that Ukrainian and Georgian ambitions to join NATO will be on the slow boat to China.

By Vance Serchuk

Chris has written a thoughtful post about NATO’s manifest failings in Afghanistan, and what seems to be a shift toward the “re-Americanization” of the war effort there. This prompts an expression of anguish on his part. What’s the point of the Atlantic Alliance, he suggests, if it can’t be the robust and capable partner we need in prosecuting a tough and costly war on the other side of the world?

The answer, actually, is still quite a lot, I think. Though there’s much to be said about the counterinsurgency campaign in South Asia, the direction it is heading, and the role our European allies should, and should not, be asked to play under the new administration, I’d argue the time is also ripe to think afresh about NATO’s mission and meaning—not just in the Hindu Kush, but in the Euro-Atlantic backyard.

For the past several years, there has been an unspoken assumption among many American foreign policy thinkers that Europe -- after being ground zero for the great and grisly geopolitical contests of the twentieth century -- was, for lack of better phrase, pretty much “fixed.” The Soviet Union was gone and the European Union was expanding. The Yugoslav civil war had been successfully stamped out, and its successor states were gradually being pulled, magnetically, into happy Euro-Atlantic orbit. Self-destructive nationalism, ethnic cleansing, inter-state rivalries -- Europe had evolved beyond all of that nastiness. The strategic center of gravity of the 21st century would be in the Middle East and Asia. Hence, while NATO could continue to absorb the countries on its eastern periphery, more or less cost-free, the real prize was beyond the Urals, the Bosphorus, and the Mediterranean. Indeed, for NATO to stay relevant, it was a choice between “out of area, or out of business.” Thus the imperative of going to Afghanistan.

I very much hope that this assessment of Europe as having safely arrived at the "end of history" proves accurate. But the skeptic in me can’t help but wonder: by the most optimistic estimate, Europe has been at peace for less than ten years -- considerably less than that, actually, if you count the war in the Caucasus last August. But no matter when you start dating it, the relative peace, prosperity, tolerance, and stability we see today stretching from Lisbon to Tallinn is by any historical measure not exactly the natural state of the European continent. On the contrary, this has been a part of the world that has proven quite prone to conflict -- which is perhaps not surprising, given how diverse and fragmented political power there has historically been in Europe.

My purpose here isn’t to suggest that we are likely to face a new Cold War or an unraveling of the democratic peace in Europe, or that we’re on the path to these things. I don’t think we are. But it is to suggest that peace and security enjoyed in the Euro-Atlantic world today shouldn’t be taken for granted by strategists, nor should it be presumed that it will persist naturally in perpetuity, in the absence of wise decisions and continued careful stewardship. A Europe that is whole, free, and at peace is not the preordained result of some dialectic of history; it’s the product of a remarkable combination of events, driven by good decisions by key leaders at critical points along the way, and no small share of good luck. And it’s all too easy to imagine how, surveying the last few decades, it might have gone another way.

And indeed, looking forward, there are some clouds on the horizon that demand attention. Although the Balkans has largely vanished from the headlines, the situation on the ground in Bosnia, Serbia, and Kosovo remains far from settled, as assiduously documented by the International Crisis Group, the Democratization Policy Council, and others who stuck around after the camera crews moved on to Kabul and Baghdad. Add to the mix the variable of a volatile Russia, upon which Europe remains heavily dependent for energy, a global economic crisis that is sparking riots from the Baltic to the Balkans, a serious internal schism over how much farther to expand NATO, an uncertain path forward for EU integration -- and while you certainly don’t have the ingredients for World War III, neither does it look quite like the end of history either.

All of this is simply to say, perhaps it’s time to start spending a bit more time and energy thinking strategically about Europe again. And that, in turn, means some very careful thinking about the future of NATO and its strategic concept, not only as a force provider in expeditionary out-of-area operations like Afghanistan, but as an organization whose foremost objective is to preserve and deepen the hard-won security that Europeans today enjoy closer to home.

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As this is my first post, I should offer the all-important disclaimer that I am in almost any imaginable respect the odd man out on this blog. I never worked in the Bush administration, and furthermore I am still happily serving in government, for a Democratic member of Congress. Consequently, I am obliged to underline that any and all views expressed herein are my own and very much only my own—written on my own time, my own computer, etc., far from the federal government.