The Value of a Nuclear Program

By George Friedman

This was a week of nuclear weapons. The North Koreans seemed to promise that they would abandon their nuclear weapons program, while the Iranians made it clear that they had no intention of abandoning theirs. The confluence of these events causes us to raise a fundamental question rarely addressed: Why would small nations want to spend their national treasure on developing a handful of nuclear weapons that would be difficult to deliver to a target and that could be destroyed by another country -- like the United States -- almost at will, if the United States chose to use their own enormously more plentiful weapons?


The answer is not as obvious as it might seem. One of the concerns normally expressed about the North Korean nuclear program is that Pyongyang might one day choose to destroy Tokyo. That is not a trivial concern, but it is not clearly a realistic one. Assume that North Korea developed four or five fission bombs. Assume also that they fired some of those weapons at Tokyo. Obviously, Tokyo would be destroyed. But what would North Korea gain? The most likely outcome -- certainly one that the North Koreans would have to assess as the most likely response -- would be a massive counterstrike by the United States. The intent would be not only punitive, but would be to destroy any remaining nuclear weapons and capabilities.


In this scenario, then, Tokyo would be lost, but so would North Korea. Thus, for the original equation to work, it has to be assumed that the North Koreans are crazy or that the Iranians have reached such a level of religious intensity that the destruction of Tel Aviv would be worth the rain of destruction that would be brought against Iran by Israel's much larger nuclear capability. The standard analysis, therefore, begins with the assumption that nuclear weapons in the hands of smaller nations -- particularly North Korea or Iran -- are dangerous because these countries have non-rational calculations of their national interests. They are religious fanatics, ideological fanatics or simply nuts. Therefore, the possession of nuclear weapons in their hands poses a tremendous danger. The mere desire to develop nuclear weapons is a sign of instability (among anyone other than large nations who already have them, of course).


Before buying into the lunatic theory, let's consider what happened this week. North Korea, for example, took part in a six-power conference -- meeting with representatives of South Korea, Japan, Russia, China and the United States. Absent nuclear weapons, North Korea has the intrinsic geopolitical weight of Ethiopia. For it to be noticed by any of these nations, except perhaps South Korea, would require a natural disaster. But here the North Koreans were, hanging with the big dogs, all because they might be in the process of developing a few small nuclear devices -- the deliverability and reliability of which were completely unclear.


Iran is a much more substantial country than North Korea in every respect. It is not, however, a great power, let alone a superpower. Nevertheless, the United States is focused obsessively on Iran's capabilities, while Germany, France and Britain stand ready to mediate and deliver stern warnings. Russians send messages to the United States via their relations with Iran, while the Chinese buy oil and happily fish in muddy waters. Iran would always have international attention, but certainly not on the order that it receives every time it rattles its nuclear development program.


The possession of a nuclear weapons development program has one obvious result: international attention is drawn to the country developing the weapon. It really doesn't matter much how well the country is doing in developing the weapon; it is only necessary that the intent be known and their ability to build the weapon uncertain. The question is, therefore, what the value is of being noticed, when one of the consequences of being noticed might be a pre-emptive nuclear strike.


There has been only one pre-emptive strike against a nuclear capability, and that in itself wasn't a nuclear strike -- it was Israel's attack against Iraq's Osirak reactor in 1981. Other than that, nuclear programs have not been attacked. The reason is simple: Those who might choose to attack are loath to use nuclear weapons. It is not in their interest to break the effective taboo that has been in place since Nagasaki. A conventional strike is uncertain at best. After Iraq, countries have learned to disperse and harden their nuclear programs. Preemptive strikes, barring massive provocation or imminent threat, have simply not been practical or desirable.


The normal response by world leaders has been to find levers that are persuasive to the country developing nuclear weapons. Once you get past the "stiff diplomatic note" stage -- i.e., hot air -- the options are penalties and rewards.


There are usually a range of penalties, economic and political. The problem is that -- as with all international sanctions -- they require unanimity, at least among major powers. Since at least one power invariably finds it in its interest to circumvent the sanctions for political or economic reasons, sanctions usually turn out to be useless. Indeed, sanctions have the mild benefit of making the country involved appear to be the victim of great-power bullying. There is always some value in that.


The real benefit occurs, however, when the carrot is used. Since military action is not desired, since stern warnings embodied by U.N. resolutions don't carry as much weight as they might and since sanctions rarely work, all that is left is the carrot. At a certain point, if the United States or some other country becomes convinced that the North Koreans, for example, are really developing a bomb -- and simultaneously become convinced that they might, for whatever perverse reason, use it -- a game of "Let's Make a Deal" begins. Whether it is money, food, technology, politics or season tickets to the Dallas Cowboys, the discussion usually comes around to a payoff.


North Korea, which pioneered this model, learned that in order to carry this out successfully, three things were needed:

1. It was imperative for the world to know North Korea had a secret program under way. A truly secret program would have no value; therefore, it is important to permit international inspections long enough to confirm that you are building a weapon, and then to expel the inspectors in order to frighten everyone around you.


2. It is vital that you adopt a political culture in which foreigners believe that the total annihilation of your country is a matter of monumental indifference to you, so long as you get to destroy part of some other country. At the very least, you must
appear crazy enough to raise questions in the minds of foreign diplomats as to whether you might do something crazy.

3. You must never actually do anything really crazy, like make it appear that you are about to launch a nuclear attack with your three weapons. Since you're not really good at this yet, it will take time to move the weapon, load it on a missile or plane, and launch. During that time, someone might conclude that you really have weapons and that you really have lost your mind and nuke you. Don't do anything that actually appears to make you an immediate danger -- just create the impression that you are
almost posing an immediate danger. It's probably best to spend ten years almost ready to be a threat.

Now, this entire strategy rests on one key assumption: that your country is situated in a sufficiently strategic locale that great powers should care whether you have nuclear weapons or not. Otherwise, you might find yourself following the Libyan model -- making all the right poker moves and not exciting anyone, because there is nothing really important within reach of your potential weapons. This might also explain why other small countries, such as Argentina and South Africa, simply gave up their pursuit of nuclear programs. In the game of nuclear poker, as in geopolitics, "place" matters.


The geographic location of both North Korea and Iran is, however, important, and for the past decade or so, the North Koreans have been giving a clinic on how to extract maximum value from almost having a nuclear weapon and appearing to be nuts. They have gotten money, food, technology. Most of all, they have been treated as the equal of the United States, China, Russia, Japan and South Korea. This has tremendous value domestically, in that it legitimizes the regime. It also creates a bargaining situation that not only allows Pyongyang to extract benefits, but achieves the ultimate political goal.


That goal is regime survival. With the end of the Cold War, North Korea's survival was in serious jeopardy. It had survived by being of some value to the Soviets or to the Chinese. By the early 1990s, however, North Korea no longer was of value to anyone. The probability of the regime in Pyongyang surviving appeared minimal. But developing and publicizing its nuclear program made North Korea a wild card: It was too dangerous to attack or even to undermine. Its nuclear program was in an uncertain state -- and the regime, feeling threatened, might choose to go nuclear. There was, therefore, a consensus that the survival of the North Korean regime was less of a problem than its fall.


Which is just the consensus North Korea was after.

Iran has learned a great deal from the North Koreans. It has learned that it is extremely important for the world to know it has a nuclear program, and Tehran has been quite content to allow inspectors in -- and then jerk them around after they have confirmed everyone's worst fears. The Iranians have learned to display a political culture that forces other nations to believe they are quite capable of using nuclear weapons, even at the price of national catastrophe. They have learned to be extraordinarily cautious in not crossing a line that would bring down a pre-emptive strike. It makes no sense to do what Saddam Hussein did, which was to spend a fortune on a nuclear facility that the Israelis then blew up.


The Iranians have used their nuclear program in a far more sophisticated manner than have the North Koreans. The North Koreans engaged in very skillful quid pro quos, with the only complexity being that they just about never kept their word after they got what they wanted. The Iranians are not nearly as concerned about regime survival as the North Koreans. Their regime is going to survive. Iranian leaders are concerned with a range of regional issues, the most important at this moment being Iraq.


The Iranian interest in Iraq is profound. Tehran wants to see the creation of an Iraq that, at the very least, poses no threat to Iran -- and which would be, at most, an Iranian satellite. The Iranians and Americans are engaged in a dizzyingly complex game in Iraq, and Tehran needs every lever it can find. The nuclear card increases the Iranians' leverage and gives them something with which to bargain. They also managed to skillfully draw in the British, French and Germans as mediators in an effort to drive another wedge between the United States and the Europeans. They have not been fully successful at this, but so long as the ultimate threat is recourse to the
U.N. Security Council -- where any resolution permitting military action will be vetoed -- they have channeled the process in harmless directions.

The value of a nuclear program for a small country is not that it provides a military option. It does not. The value is not even in possessing nuclear weapons, which might actually turn out to be too dangerous. The value of a nuclear program is that it exists and is known to exist. That very fact redefines its possessor's place in the international system and provides it with opportunities to extract concessions. So long as the country does not push its position in such a way that anyone is convinced of an imminent threat -- or, to put it differently, so long as the line between potential threat and "ready to launch" is never crossed -- great powers will sooner make concessions than take risks.


In other words, North Korea and Iran are very rationally engaged in appearing to be irrational risk-takers. It is interesting to note that, aside from its pursuit of nuclear weapons, North Korea has taken few strategic risks since the end of the Korean War, while Iran -- willing to underwrite any number of covert groups -- has been very careful, since the end of the Iran-Iraq war, with its own military adventures. If we forget the rhetoric, these are countries that have prudently managed risks. Possessing a program to develop nuclear weapons is, therefore, part of a prudent portfolio for managing their position in a dangerous world. It only appears to be risky. In practice, it reduces risk by limiting the threats others pose against them and by increasing the willingness of others to make concessions.


When playing poker, the cautious player always hides his caution behind a mask of recklessness. That is the prerequisite for bluffing effectively and getting people to call into full houses. The development of nuclear programs -- not the weapons themselves -- is a useful part of the mask of recklessness. Until, that is, someone calls the bluff -- telling North Korea to go develop all the weapons it wants, save that if it deploys a single one on a launcher, it would be nuked. But the North Koreans are betting that that is too much for the United States to push into the pot, as is Iran.


They are probably right.

Send questions or comments on this article to analysis@stratfor.com.

 

Four Years On:
Who is Winning the War, and How Can Anyone Tell?

'By George Friedman

Four years have passed since al Qaeda
attacked the United States. It is difficult to remember a war of which the
status has been more difficult to assess. Indeed, there are reasonable
people who argue that the conflict between the United States and al Qaeda is
not a war at all, and that thinking of it in those terms obscures reality.
Other reasonable people argue that it is only in thinking in terms of war
that the conflict makes sense -- and these people then divide into groups:
those who believe the United States is winning and those who believe it is
losing the war. Into this confusion we must add the question of whether the
Iraq war is part of what U.S. President George W. Bush refers to as the "war
on terrorism" and what others might call the war against al Qaeda. Even the
issues are not clear. It is a war in which no one can agree even on the
criteria for success or failure, or at times, who is on what
side.

Part of this dilemma is simply the result of partisan politics.
It is a myth that Americans unite in times of war: Anyone who believes they
do must read the history of, for example, the Mexican War. Americans are a
fractious people and, while they were united during World War II, the
political recriminations were only delayed -- not suspended. The issue here
is not partisanship, however, but rather that there is no clear framework
against which to judge the current war.

Let us begin with what we all
-- save for those who believe that the Sept. 11 attacks were a plot hatched
by the U.S. government to justify the Patriot Act -- can agree on:

1.
Al Qaeda attacked the United States on Sept. 11, 2001, by hijacking aircraft
and crashing or trying to crash them into well-known buildings.
2. Since
Sept. 11, there have been al Qaeda attacks in Europe and several Muslim
countries, but not in the United States.
3. The United States invaded
Afghanistan a month after the strikes against the World Trade Center and the
Pentagon -- forcing the Taliban government out of the major cities, but not
defeating them. The United States has failed to capture Osama bin Laden,
although it captured other key al Qaeda operatives. The Taliban has
regrouped and is now conducting an insurgency in Afghanistan.
4. The
United States invaded Iraq in 2003. The Bush administration claimed that
this was part of the war against al Qaeda; critics have claimed it had
nothing to do with the war.
5. The United States failed to win the war
rapidly, as it had expected to do. Instead, U.S. forces encountered a
difficult guerrilla war that, while confined generally to the Sunni regions,
nevertheless posed serious military and political challenges.
6. Al Qaeda
has failed to achieve its primary political goal -- that is, to trigger an
uprising in at least one major Muslim country and create a jihadist regime.
There has been no general rising in the Muslim world, and most governments
are now cooperating with the United States.
7. There have been no
follow-on attacks in the United States since Sept. 11. Whether this is
because al Qaeda had no plans for a second attack or because subsequent
attacks were disrupted by U.S. intelligence is not clear.

This is not
intended to be an exhaustive list, but rather to provide what we would regard
as a non-controversial base from which to proceed with an
assessment.

From the beginning, then, it has been unclear whether the
United States saw itself as fighting a war against al Qaeda or as carrying
out a criminal investigation. The two are, of course, enormously different.
This is a critical problem.

The administration's use of the term
"war on terrorism" began the confusion. Terrorism is a mode of warfare. Save
for those instances when lunatics like Timothy McVeigh use it as an end in
itself, terrorism is a method of intimidating the civilian population in
order to drive a wedge between the public and their government. Al Qaeda,
then, had a political purpose in using terrorism, as did the British in
their nighttime bombing of Germany or the Germans in their air raids against
London. The problem in the Bush administration's use of this term is that you
do not wage a war against a method of warfare. A war is waged against an
enemy force.

Now, there are those who argue that war is something
that takes place between nation-states and that al Qaeda, not being a
nation-state, is not waging war. We tend to disagree with this view. Al
Qaeda is not a nation-state, but it is (or has been) a coherent, disciplined
force using violence for political ends. The United States, by focusing on
the "war on terror," confused the issue endlessly. But the critics of the
war, who insisted that wartime measures were unnecessary because this was
not a war, compounded the confusion. By the time we were done, the "war on
terror" had extended itself to include campaigns against animal rights
groups, and attempts to prevent terror attacks were seen as violations of
human rights by the ACLU.

It is odd to raise these points at the
beginning of an analysis of a war, but no war can be fought when there isn't
even clarity about what it is you are doing, let alone who you are fighting.
Yet that is precisely how this war evolved, and then degenerated into
conceptual chaos. The whole issue also got bound up with internal
name-calling, to the point that any assertion that Bush had some idea of
what he was doing was seen as outrageous partisanship, and the assertion
that Bush was failing in what he was doing was viewed the same way. Where
there is no clarity, there can be no criteria for success or failure. That
is the crisis today. No one agrees as to what is happening; therefore, no
one can explain who is winning or losing.

Out of this situation came
the deeper confusion: Iraq. From the beginning, it was not clear why the
United States invaded Iraq. The Bush administration offered three
explanations: First, that there were weapons of mass destruction in Iraq;
second, that Iraq was complicit with al Qaeda; and finally, that a
democratic Iraq -- and creation of a democratic Muslim world -- would help
to stop terrorism (or more precisely, al Qaeda).

The three
explanations were untenable on their face. Contrary to myth, the Bush
administration did not rush to go to war in Iraq. The administration had
been talking about it for nearly a year before the invasion began. That
would not have been the case if there truly was a fear that the Iraqis might
be capable of building atomic bombs, since they might hurry up and build
them. You don't give a heads-up in that situation. The United States did.
Hence, it wasn't about WMD. Second, it wasn't about Iraq's terrorist ties.
Saddam Hussein had no problem with the concept of terrorism, but he was an
ideological enemy of everything bin Laden stood for. Hussein was a secular
militarist; bin Laden, a religious ideologue. Cooperation between them
wasn't likely, and pointing to obscure meetings that Mohammed Atta may or
may not have had with an Iraqi in Prague didn't make the case. Finally, the
democracy explanation came late in the game. Bush had campaigned against
nation-building in places like Kosovo -- and if he now believed in
nation-building as a justification for war, it meant he stood with Bill
Clinton. He dodged that criticism, though, because the media couldn't
remember Kosovo or spell it any more by the time Iraq rolled
around.

Bush's enemies argued that he invaded Iraq in order to (a)
avenge the fact that Hussein had tried to kill his father; (b) as part of a
long-term strategy planned years before to dominate the Middle East; (c) to
dominate all of the oil in Iraq; (d) because he was a bad man or (e) just
because. The fact was that his critics had no idea why he did it and
generated fantastic theories because they couldn't figure it out any more
than Bush could explain it.

Stratfor readers know our view was that
the invasion of Iraq was intended to serve three purposes:

1. To
bring pressure on the Saudi government, which was allowing Saudis to funnel
money to al Qaeda, to halt this enablement and to cooperate with U.S.
intelligence. The presence of U.S. troops to the north of Saudi Arabia was
intended to drive home the seriousness of the situation.
2. To take
control of the most strategic country in the Middle East -- Iraq borders
seven critical countries -- and to use it as a base of operations against
other countries that were cooperating with al Qaeda.
3. To demonstrate in
the Muslim world that the American reputation for weakness and indecisiveness
-- well-earned in the two decades prior to the Sept. 11 attacks -- was no
longer valid. The United States was aware that the invasion of Iraq would
enrage the Muslim world, but banked on it also frightening
them.

Let's put it this way: The key to understanding the situation
was that Bush wanted to blackmail the Saudis, use Iraq as a military base
and terrify Muslims. He wanted to do this, but he did not want to admit this
was what he was doing. He therefore provided implausible justifications,
operating under the theory that a rapid victory brushes aside troubling
questions. Clinton had gotten out of Kosovo without explaining why signs of
genocide were never found, because the war was over quickly and everyone was
sick of it. Bush figured he would do the same thing in Iraq.

It was
precisely at this point that the situation got out of control. The biggest
intelligence failure of the United States was not 9-11 -- only Monday
morning quarterbacks can claim that they would have spotted al Qaeda's plot
and been able to block it. Nor was the failure to find WMD in Iraq. Not only
was that not the point, but actually, everyone was certain that Hussein at
least had chemical weapons. Even the French believed he did. The biggest
mistake was the intelligence that said that the Iraqis wouldnÕt fight, that
U.S. forces would be welcomed or at least not greeted hostilely by the Iraqi
public, and that the end of the conventional combat would end the
war.

That was the really significant intelligence failure. Hussein,
or at least some of his key commanders, had prepared for a protracted
guerrilla war. They knew perfectly well that the United States would crush
their conventional forces, so they created the material and financial basis
for a protracted guerrilla war. U.S. intelligence did not see this coming,
and thus had not prepared the U.S. force for fighting the guerrilla war.
Indeed, if they had known this was coming, Bush might well have calculated
differently on invading Iraq -- since he wasnÕt going to get the decisive
victory he needed.

The intelligence failure was compounded by a
command failure. By mid-April 2003, it was evident to Stratfor that a
guerrilla
war was starting. Donald Rumsfeld continued vigorously to deny that any such war was
going on. It was not until July, when Gen. Tommy Franks was relieved by John
Abizaid as Central Command chief, that the United States admitted the
obvious. Those were the 45-60 critical days. Intelligence failures worse
than this one happen in every war, but the delay in recognizing what was
happening -- the extended denial in the Pentagon -- eliminated any chance of
nipping it in the bud. By the summer of 2003, the war was raging, and foreign
jihadists had begun joining in. Obviously this increased anti-American
sentiment, but not necessarily effective anti-American sentiment. Hating the
United States is not the same as being able to run secure covert operations
in the United States.

The war did not and does not cover most of
Iraq's territory. Only a relatively small portion is involved -- the Sunni
regions. At this point, the administration has done a fairly good job in
creating a political process and bringing the Sunni elders to the table, if
not to an agreement that will end the insurgency. But the problem is that
American expectations about the war have been so strangely set that whatever
esoteric satisfaction experts might take in the evolution, it is clear that
this war is not what the Bush administration expected, that it is not what
the administration was prepared to fight, and that the administration is now
in a position where it has to make compromises rather than impose its
will.

We believe that a war started on Sept. 11, 2001. We believe
that from a strictly operational point of view, al Qaeda has gotten by far
the worst of it. Having struck the first blow, al Qaeda has been crippled,
with each succeeding attack weaker and weaker. We also think that the U.S.
invasion of Iraq achieved at least one of Washington's goals: Saudi Arabia
has behaved much differently since February 2003. But the ongoing war has
undermined the ability of the United States to use Iraq as a base of
operations in the region, and the psychological outcome Washington was
hoping for obviously didn't materialize.

What progress there has been
is invisible, for two reasons. First, the Bush administration had crafted an
explanation for the entire war that was based on two premises -- first, that
the American public would remain united on all measures necessary after Sept.
11, and second, that the United States would achieve a quick victory in Iraq,
sparing the administration the need to explain itself. As a result, Bush has
never articulated a coherent strategic position. Furthermore, as the second
premise proved untrue, the failure to enunciate a coherent strategic vision
began to undermine the first premise -- national unity. At this point, Bush
is beginning to face criticism in his own party. Sen. Chuck Hagel's
statement, that the promise to stay the course does not constitute a
strategy, is indicative of Bush's major problem.

The president's
dilemma, now, is this. He had a strategy. He failed to explain what it was
because doing so would have carried a cost, and the president assumed it was
unnecessary. It turned out to be necessary, but he still didn't enunciate a
strategy because it would at that point have appeared contrived. Moreover,
as time went on, the strategy had to evolve. It is hard to evolve an
unarticulated strategy. Bush rigidified publicly even as his strategy in
Iraq became more nimble.

Figuring out how the war is going four years
after 9-11, then, is like a nightmare fighting ghosts. The preposterous
defense of U.S. strategy meets the preposterous attack on U.S. strategy:
Claims that the United States invaded Iraq to bring democracy to the people
competes with the idea that it invaded in order to give contracts to
Halliburton. Nothing is too preposterous to claim.

But even as U.S.
politics seize up in one of these periodic spasms, these facts are still
clear:

1. The United States has not been attacked in four
years.
2. No Muslim government has fallen to supporters of al
Qaeda.
3. The United States won in neither Iraq or Afghanistan.
4. Bin
Laden is still free and ready to go extra rounds.

So far, neither side
has won -- but on the whole, weÕd say the United States has the edge. The war
is being fought outside the United States. And that is not a trivial point.
But it is not yet a solution to the president's problems.

Oil, Food and Politics: After the Hurricane

By George Friedman

In Hurricane Katrina, the United States has
suffered a catastrophic geopolitical event -- though at least for the near
term, in some respects, it does not appear to have been quite as
catastrophic as initially feared.

For the past week, we have been
discussing precisely why Katrina should be considered a "geopolitical
event." This is an unusual way to view a natural disaster, but we consider
Katrina to be the ultimate geopolitical event because it had, first, broad
geographical significance, and second, substantial regional consequences.
The hurricane certainly wreaked humanitarian and economic devastation upon
the U.S. Gulf Coast, but it also impacted three much broader aspects of the
geopolitical system: Oil, food and politics.

We could as easily
classify these effects in terms of time: immediate fears, near-term worries
and long-term concerns for the Bush administration. They would still appear
in the same order.

With Americans already concerned about high oil
prices, attention immediately fixed on oil. The Gulf of Mexico is a major
source of U.S. energy supplies, and the Louisiana Offshore Oil Port (LOOP)
is one of the largest U.S. facilities handling supertankers, which cannot
enter most ports. There is Port Fourchon, which handles oil pumped from the
LOOP and is a center for companies that service the offshore oil platforms.
Major refineries are scattered throughout Louisiana and Mississippi, and
pipelines running through the region deliver critical supplies to other
parts of the country.

However, of the three major geopolitical
effects of the hurricane, the impact on the oil markets was possibly the
least serious or long-lasting. As has already become obvious, no major
system was damaged more than moderately by Katrina. The offshore platforms
did not survive completely intact, but most survived. The LOOP and Port
Fourchon survived, as did the refineries and the pipelines.

Now,
attention is turning to world food supplies. Whereas the Gulf is a
significant source of oil for the United States, it is a critical source of
food commodities for much of the world. The fall harvest is beginning in the
upper Midwest. More than half of the grain and soybean harvest comes down the
Mississippi River in barges to the ports at New Orleans, from whence it is
redistributed around the United States or is shipped to Europe, Asia and
Latin America. Certainly, the world markets have other sources of grain and
foodstuffs, but the American harvest is the major source.

In
considering this issue, the navigability of the Mississippi becomes crucial.


The initial fear after Katrina struck was that the levees on the
Mississippi (as opposed to the levees on the canals surrounding New Orleans)
would break, causing the river to shift its course. This was a regular
occurrence in the past: As rivers age, their meanderings shift -- with all
that that means for populations living nearby, and with concomitant effects
on their channels. In modern times, the Mississippi has been controlled by
levees, which keep it on a firm course, with clear channels and easy
navigation.

The fear was that if the river were blocked, the harvest
wouldn't be able to get out. However, we can see now that this danger did
not come to pass: New Orleans is flooded, but the Mississippi is not
blocked. It did not change its course, it was not silted over, and no ship
sank in the hurricane to stop up its channels.

That is not the end of
the food supply issue, however -- one must also consider the ports. As we
have previously pointed out, New
Orleans has been the place where barges offloaded their cargoes of
produce, and where the foodstuffs have been stored and reloaded onto
oceangoing vessels. Likewise, those ocean-going vessels have delivered
precious cargoes of industrial goods -- rubber, steel, petrochemicals --
needed by the Midwestern farmers and others. The port facilities at New
Orleans are vital to the nation's economic well-being. There are
workarounds, at least for a short time, but none that can as
cost-effectively handle the tonnages that regularly pass through the ports
of South Louisiana and New Orleans.

Katrina's devastation of New
Orleans presents a serious medium- and long-term problem for the U.S.
economy. Though the port complex survived relatively intact, the larger
issue is one of population displacement. In order for the ports to be useful
at all, the area must be able to house and sustain the labor force that
operates them -- and the city clearly is in no condition to do that, and
will not be for quite a long time.

However, about 50,000 U.S. troops
-- including National Guard and regular Army units -- have moved into the
area and begun the work of repairs. The Army Corps of Engineers and military
logisticians are trained in the maintenance and operation of ports, so we
logically could expect that, first, the ports will be functioning when the
harvest comes pouring down the Mississippi at the end of September, and,
second, that if civilian laborers are not available, U.S. troops will be
filling in for them.

In short, the near-term problems are being
handled.

That brings us to Katrina's third impact -- politics -- and
a much larger unknown.

The human suffering resulting from the
hurricane and perceptions of a slow government response have generated a
cacophony of political finger-pointing and second-guessing, and President
George W. Bush is taking an incredible drubbing. He is not the only
politician being singled out for blame, of course -- but as the United
States' commander-in-chief and leader of the free world, it is the verbal
bullets being fired at him that are geopolitically significant.

There
are many conceivable reasons why events transpired as they did -- including
the possibility (if not probability) that the president and his advisers,
who have been fighting a war since Sept. 11, 2001, were simply too exhausted
to grasp the full scope of the Katrina situation before or in the first days
after the hurricane struck. Other explanations have been and likely will
continue to be put forth -- some with merit, others without -- but at the
end of the day, the political controversy is merely semantic noise
surrounding the core geopolitical issue.

And that issue is simply
this: The power of any particular president, at any particular time,
personifies American power. In the long run, U.S. power is, in our view,
unassailable; but in the short run, it is possible that a president can be
so beset by political controversies that his power is hollowed out. And if
that happens, foreign powers not only might, but probably would, attempt to
exploit the situation to their own advantage. If the perception is that the
Bush administration has been substantially weakened or that the president is
losing control of his domestic situation, new challenges within the
international system are likely to arise and existing ones -- Iraq, Israel,
Russia, China -- will be strengthened.

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New Orleans: A Geopolitical Prize

By George Friedman

The American political system was founded in
Philadelphia, but the American nation was built on the vast farmlands that
stretch from the Alleghenies to the Rockies. That farmland produced the
wealth that funded American industrialization: It permitted the formation of
a class of small landholders who, amazingly, could produce more than they
could consume. They could sell their excess crops in the east and in Europe
and save that money, which eventually became the founding capital of
American industry.

But it was not the extraordinary land nor the
farmers and ranchers who alone set the process in motion. Rather, it was
geography -- the extraordinary system of rivers that flowed through the
Midwest and allowed them to ship their surplus to the rest of the world. All
of the rivers flowed into one -- the Mississippi -- and the Mississippi
flowed to the ports in and around one city: New Orleans. It was in New
Orleans that the barges from upstream were unloaded and their cargos stored,
sold and reloaded on ocean-going vessels. Until last Sunday, New Orleans was,
in many ways, the pivot of the American economy.

For that reason, the
Battle of New Orleans in January 1815 was a key moment in American history.
Even though the battle occurred after the War of 1812 was over, had the
British taken New Orleans, we suspect they wouldn't have given it back.
Without New Orleans, the entire Louisiana Purchase would have been valueless
to the United States. Or, to state it more precisely, the British would
control the region because, at the end of the day, the value of the Purchase
was the land and the rivers - which all converged on the Mississippi and the
ultimate port of New Orleans. The hero of the battle was Andrew Jackson, and
when he became president, his obsession with Texas had much to do with
keeping the Mexicans away from New Orleans.

During the Cold War, a
macabre topic of discussion among bored graduate students who studied such
things was this: If the Soviets could destroy one city with a large nuclear
device, which would it be? The usual answers were Washington or New York.
For me, the answer was simple: New Orleans. If the Mississippi River was
shut to traffic, then the foundations of the economy would be shattered. The
industrial minerals needed in the factories wouldn't come in, and the
agricultural wealth wouldn't flow out. Alternative routes really weren't
available. The Germans knew it too: A U-boat campaign occurred near the
mouth of the Mississippi during World War II. Both the Germans and Stratfor
have stood with Andy Jackson: New Orleans was the prize.

Last Sunday,
nature took out New Orleans almost as surely as a nuclear strike. Hurricane
Katrina's geopolitical effect was not, in many ways, distinguishable from a
mushroom cloud. The key exit from North America was closed. The
petrochemical industry, which has become an added value to the region since
Jackson's days, was at risk. The navigability of the Mississippi south of
New Orleans was a question mark. New Orleans as a city and as a port complex
had ceased to exist, and it was not clear that it could recover.

The
Ports of South Louisiana and New Orleans, which run north and south of the
city, are as important today as at any point during the history of the
republic. On its own merit, POSL is the largest port in the United States by
tonnage and the fifth-largest in the world. It exports more than 52 million
tons a year, of which more than half are agricultural products -- corn,
soybeans and so on. A large proportion of U.S. agriculture flows out of the
port. Almost as much cargo, nearly 17 million tons, comes in through the
port -- including not only crude oil, but chemicals and fertilizers, coal,
concrete and so on.

A simple way to think about the New Orleans port
complex is that it is where the bulk commodities of agriculture go out to the
world and the bulk commodities of industrialism come in. The commodity chain
of the global food industry starts here, as does that of American
industrialism. If these facilities are gone, more than the price of goods
shifts: The very physical structure of the global economy would have to be
reshaped. Consider the impact to the U.S. auto industry if steel doesn't
come up the river, or the effect on global food supplies if U.S. corn and
soybeans don't get to the markets.

The problem is that there are no
good shipping alternatives. River transport is cheap, and most of the
commodities we are discussing have low value-to-weight ratios. The U.S.
transport system was built on the assumption that these commodities would
travel to and from New Orleans by barge, where they would be loaded on ships
or offloaded. Apart from port capacity elsewhere in the United States, there
aren't enough trucks or rail cars to handle the long-distance hauling of
these enormous quantities -- assuming for the moment that the economics
could be managed, which they can't be.

The focus in the media has
been on the oil industry in Louisiana and Mississippi. This is not a trivial
question, but in a certain sense, it is dwarfed by the shipping issue. First,
Louisiana is the source of about 15 percent of U.S.-produced petroleum, much
of it from the Gulf. The local refineries are critical to American
infrastructure. Were all of these facilities to be lost, the effect on the
price of oil worldwide would be extraordinarily painful. If the river itself
became unnavigable or if the ports are no longer functioning, however, the
impact to the wider economy would be significantly more severe. In a sense,
there is more flexibility in oil than in the physical transport of these
other commodities.

There is clearly good news as information comes
in. By all accounts, the Louisiana Offshore Oil Port, which services
supertankers in the Gulf, is intact. Port Fourchon, which is the center of
extraction operations in the Gulf, has sustained damage but is recoverable.
The status of the oil platforms is unclear and it is not known what the
underwater systems look like, but on the surface, the damage - though not
trivial -- is manageable.

The news on the river is also far better
than would have been expected on Sunday. The river has not changed its
course. No major levees containing the river have burst. The Mississippi
apparently has not silted up to such an extent that massive dredging would
be required to render it navigable. Even the port facilities, although
apparently damaged in many places and destroyed in few, are still there. The
river, as transport corridor, has not been lost.

What has been lost is
the city of New Orleans and many of the residential suburban areas around it.
The population has fled, leaving behind a relatively small number of people
in desperate straits. Some are dead, others are dying, and the magnitude of
the situation dwarfs the resources required to ameliorate their condition.
But it is not the population that is trapped in New Orleans that is of
geopolitical significance: It is the population that has left and has
nowhere to return to.

The oil fields, pipelines and ports required a
skilled workforce in order to operate. That workforce requires homes. They
require stores to buy food and other supplies. Hospitals and doctors.
Schools for their children. In other words, in order to operate the
facilities critical to the United States, you need a workforce to do it --
and that workforce is gone. Unlike in other disasters, that workforce cannot
return to the region because they have no place to live. New Orleans is gone,
and the metropolitan area surrounding New Orleans is either gone or so badly
damaged that it will not be inhabitable for a long time.

It is
possible to jury-rig around this problem for a short time. But the fact is
that those who have left the area have gone to live with relatives and
friends. Those who had the ability to leave also had networks of
relationships and resources to manage their exile. But those resources are
not infinite -- and as it becomes apparent that these people will not be
returning to New Orleans any time soon, they will be enrolling their
children in new schools, finding new jobs, finding new accommodations. If
they have any insurance money coming, they will collect it. If they have
none, then -- whatever emotional connections they may have to their home --
their economic connection to it has been severed. In a very short time,
these people will be making decisions that will start to reshape population
and workforce patterns in the region.

A city is a complex and ongoing
process - one that requires physical infrastructure to support the people who
live in it and people to operate that physical infrastructure. We don't
simply mean power plants or sewage treatment facilities, although they are
critical. Someone has to be able to sell a bottle of milk or a new shirt.
Someone has to be able to repair a car or do surgery. And the people who do
those things, along with the infrastructure that supports them, are gone --
and they are not coming back anytime soon.

It is in this sense, then,
that it seems almost as if a nuclear weapon went off in New Orleans. The
people mostly have fled rather than died, but they are gone. Not all of the
facilities are destroyed, but most are. It appears to us that New Orleans
and its environs have passed the point of recoverability. The area
can recover, to be sure, but only with the commitment of massive
resources from outside -- and those resources would always be at risk to
another Katrina.

The displacement of population is the crisis that
New Orleans faces. It is also a national crisis, because the largest port in
the United States cannot function without a city around it. The physical and
business processes of a port cannot occur in a ghost town, and right now,
that is what New Orleans is. It is not about the facilities, and it is not
about the oil. It is about the loss of a city's population and the paralysis
of the largest port in the United States.

Let's go back to the
beginning. The United States historically has depended on the Mississippi
and its tributaries for transport. Barges navigate the river. Ships go on
the ocean. The barges must offload to the ships and vice versa. There must
be a facility to empower this exchange. It is also the facility where goods
are stored in transit. Without this port, the river can't be used.
Protecting that port has been, from the time of the Louisiana Purchase, a
fundamental national security issue for the United States.

Katrina
has taken out the port -- not by destroying the facilities, but by rendering
the area uninhabited and potentially uninhabitable. That means that even if
the Mississippi remains navigable, the absence of a port near the mouth of
the river makes the Mississippi enormously less useful than it was. For
these reasons, the United States has lost not only its biggest port complex,
but also the utility of its river transport system -- the foundation of the
entire American transport system. There are some substitutes, but none with
sufficient capacity to solve the problem.

It follows from this that
the port will have to be revived and, one would assume, the city as well.
The ports around New Orleans are located as far north as they can be and
still be accessed by ocean-going vessels. The need for ships to be able to
pass each other in the waterways, which narrow to the north, adds to the
problem. Besides, the Highway 190 bridge in Baton Rouge blocks the river
going north. New Orleans is where it is for a reason: The United States
needs a city right there.

New Orleans is not optional for the United
States' commercial infrastructure. It is a terrible place for a city to be
located, but exactly the place where a city must exist. With that as a
given, a city will return there because the alternatives are too
devastating. The harvest is coming, and that means that the port will have
to be opened soon. As in Iraq, premiums will be paid to people prepared to
endure the hardships of working in New Orleans. But in the end, the city
will return because it has to.

Geopolitics is the stuff of permanent
geographical realities and the way they interact with political life.
Geopolitics created New Orleans. Geopolitics caused American presidents to
obsess over its safety. And geopolitics will force the city's resurrection,
even if it is in the worst imaginable place.

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© Copyright 2005 Strategic Forecasting Inc. All rights reserved.