-Caveat Lector- > VISIT OUR NEW INTELLIGENCE CENTERS > http://www.stratfor.com/ > ______________________________________ > Stratfor's Third Quarter Forecast > June 27, 1999 > > Note: This Forecast should be read in conjunction with Stratfor's > Decade Forecast prepared in 1995 > (http://www.stratfor.com/services/giu/decade.asp), > its 1999 Annual Forecast (http://www.stratfor.com/services/giu/1999.asp) > and its Second Quarter, 1999 Forecast > (http://www.stratfor.com/services/giu/2q1999.asp) > > > > Stratfor's organizing theme for its 1999 Annual Forecast is found > in the title: "A New and Dangerous World." That concept remains > valid and the fundamental trends identified within that theme > remain intact. The most important trend identified in that > forecast has now become manifest. We wrote that "Russia and China > will be moving into a closer, primarily anti-American alliance in > 1999." That process is the most important global trend today. It > is well under way and is also intensifying. > > It should be understood that this trend was not put into play > because of the Kosovo crisis, although it is clear that it was > intensified and accelerated by it. Indeed, Stratfor's ability to > predict the Kosovo crisis in its 1999 Annual Forecast was > predicated on this trend already being in place. A critical > element in Milosevic's strategy was his view that the deteriorating > relationship between Russia and the United States had opened a > window of opportunity for dealing with the Kosovo situation. It > was precisely because Milosevic saw this process in Russian foreign > policy as already under way that he took the risks he did. At the > same time, Milosevic's failure to allow U.S.-Russian tensions to > mature opened Serbia to a partial reversal in Russian policy that > left him in a series of untenable positions. > > The split between Russia and China on one hand and the United > States on the other has still not fully matured. Therefore, the > response, a Sino-Russian alliance, has not yet fully taken shape. > Nevertheless, matters are rapidly moving in that direction. > Therefore, it is our view that the single most important global > theme of the Third Quarter of 1999 will be fairly quiet, yet > intense, diplomacy between Russia and China as they explore the > precise meaning and implementation of their strategic relationship. > A summit meeting will take place in Beijing between Boris Yeltsin > and Jiang Zemin some time this summer or autumn. The precise date > is not altogether certain at this point. There are two reasons for > this uncertainty. First, and most important, there is a tremendous > amount of work to be done at the ministerial level and below prior > to the summit. It is one thing to speak of a strategic alliance. > It is another thing to implement one. There are some real issues > outstanding between Russia and China. Second, both Russia and > China will use the available time to try to extract concessions > from the United States and the West in general, under the > assumption that they will be eager to prevent a Sino-Russian > alliance from solidifying. Both of these reasons point to a fairly > slow process. > > There are fundamental geopolitical issues that need to be resolved > by the Russians and Chinese. The most important of these is the > status of the Central Asian republics of the former Soviet Union. > China is experiencing substantial unrest from Moslem groups in its > Xinjiang province. These groups are drawing support from, at > least, elements within predominantly Moslem states of the former > Soviet Union, and perhaps from some of the states themselves. > China clearly wants Russia's help in dealing with that problem. > Russia, however, is hesitant at this point to get bogged down in > pacifying the region. Yet, at the same time that it is hesitant, > there is a growing movement inside of Russia that regards the > collapse of the Soviet Union as a monumental error and which dreams > of its geographic, if not institutional, resurrection. We think > these forces are gaining strength, which means that there is > growing support for a more expansionary Russian foreign policy. > The geopolitics of the region may actually be a force pulling > Russian hard-liners and Beijing closer together. > > A more important issue on the table is what the alliance will mean > in relation to the United States. The purpose of the alliance is > twofold. First, it is to create a counter-weight to the United > States that would force the U.S. to take Russia and China > seriously. The second purpose would be to provide a focal point > for secondary states looking for a safe haven from American power, > which would, in turn, enhance the power of the Sino-Russian bloc. > What this means in practical terms is unclear. It might range from > a general policy of coordination to a mutual defense pact pledging > each side to support the others' wars. Neither side wants to be > excessively exposed to the adventures and vulnerabilities of the > other. At the same time, too loose a relationship leaves room for > manipulation. Thus, this summer will be devoted to very quiet and > very important discussions in Moscow and Beijing aimed at defining > the relationship in concrete terms. The goal is clear: to have a > summit conference sealing the relationship no later than mid-autumn > and hopefully sooner-perhaps by the end of the summer. > > There is an important second reason for delay. Neither Russia nor > China want to burn their bridges with the West. Quite the > contrary, each is using the threat of a Sino-Russian alliance as a > lever to extract concessions from the United States. At the very > least, they do not want a split with the United States to turn into > a generalized confrontation with the West. Russia, in particular, > is engaged in a complex game in which it is using its ability to > create and solve problems for NATO, and the United States, as a > tool for solving its own massive financial problems through Western > loans, aid, and investment. China has plunged its relations into > the deep-freeze with the United States as well, but continues to > hope that U.S. fears of having to confront a Sino-Russian alliance > will cause the United States to redefine its relationship with > China on terms more favorable to China. Both Russia and China want > time to explore ways to use the threat of an alliance to extract > concessions. Each sees the very process of negotiations as being a > useful tool for extracting U.S. concessions. This means that there > is a real element of distrust between China and Russia concerning > the other's commitment to the idea of strategic alliance that needs > to be overcome. All this takes time. > > In our view, the strategy of using the threat of alliance to > extract concessions from the United States will fail and the > alliance will form. Here are some of our reasons for thinking > this: > > *The very process of using the Sino-Russian negotiations as a tool > for extracting concessions is creating the opposite effect in > Washington from what Moscow and Beijing want. The very slowness of > the process, coupled with periodic overtures, particularly from > Russia, is convincing Washington that neither the Russians nor > Chinese are serious. Therefore, the United States will not be > forthcoming and the process will indeed end in an anti-American > alliance. > > *Yeltsin has limited room for maneuver vis-a-vis the West. While > his ability to manipulate Moscow's political structure is awesome, > every tack takes him away from reform and further toward the > conservative position. Primakov may have been sacked, but Yeltsin > could only go as far as Stepashin for a replacement. The days of a > Kiriyenko are past. Each twist and turn confirms the main trend. > > *The ability of NATO to get Hungary, Romania, Bulgaria, and for a > time, Ukraine, to agree to prohibit overflights to reinforce > Pristina, has driven home Russia's geopolitical isolation to the > Russian military. The military understands that it is powerless to > influence events in Central Europe but it also understands it can > influence events along Russia's own periphery, in areas where the > Russian military still has the upper hand and NATO and the U.S. are > relatively weak. The pressure to reassert Russian power along > Russia's periphery is extremely strong and will be hard to resist. > That will increase tensions with the United States and decrease > possibilities for accommodation. > > *Russian needs and Western resources are completely out of synch. > No amount of money can save the Russian economy-certainly no amount > that the West would be rationally prepared to invest. We have no > doubt that all sorts of hints and promises were made during the > last days of the Kosovo war to induce Russian compliance. It > suited Yeltsin's short-term political interests to believe those > promises. Nothing substantial will come of it, beyond a few > billion dollars of no real consequence. > > *China's demands on the United States are essentially undefined and > indefinable. The bottom line is that China wants to go back to the > good old days of ample capital flows. These have dried up for > economic, rather than political reasons. While Asia is recovering > somewhat, we see this as a cyclical upturn in a long-term down > trend. It will not substantially change Western investors' lack of > appetite for Chinese investments and loans. > > *One of China's demands is a basic change of the atmospherics in > Washington to help facilitate China's access to potential American > financial partners. The problem is that the atmosphere is not > being defined by the Administration, which has lost control over > its China policy. The Administration's opponents are in control of > the mood toward China in Washington. They do not want to see a > thaw while Clinton remains in office. > > *Which brings us to the most important point. A scandal-weary > Washington is facing a summer of foreign policy scandals. The > China spy scandal shows every sign of exploding again, as > revelations this weekend show that the Administration clearly knew > about Chinese espionage in 1995 and did nothing about it. This > weekend also brought Kofi Annan's statement that it appears that > the U.S. used UN cover for espionage against Iraq. The U.S. > continues to bomb Iraq, toward no clear end. The Kosovo situation > is promising to reside somewhere between instability and chaos. As > elections approach, the Republicans will do everything possible to > exploit these problems. This will lead to a serious lock-down in > the Washington policy-making apparatus. > > We therefore expect that the Third Quarter of 1999 will bring > Russia and China to the brink, if not over the edge, of a formal > alliance whose goal will be to contain American power and provide a > counterbalance to American geopolitical power. > > Europe will be left in a particularly uncomfortable position. On > one hand, Europe's interests are intimately linked with those of > the United States. On the other hand, Europe has much greater > vulnerability than the U.S. to tensions within the international > system. As such, Europe is inherently more risk averse. A > conservative, assertive evolution in Russian politics will leave > countries like Germany with major strategic challenges with which > it doesn't want to deal. The weaknesses of NATO's geography, where > Hungary is physically isolated from any other NATO country and in > which strategic countries like Romania are outside the alliance, is > something that comes to the fore only when there is confrontation > with Russia. Ongoing confrontation will mean the need for rapid > and dangerous evolutions in NATO. This is something that the > Europeans do not want to see happen. Aside from the costs inherent > in expanding NATO, NATO expansion logically means EU expansion. > With the euro doing so poorly, and an emerging cyclical weakness in > Europe's economy, this is not something the Europeans want to deal > with now. > > Therefore, France and Germany will be working throughout the summer > to get the United States to respond to the evolution of events in > Moscow and Beijing. They will be joined by Japan, which does not > want to see itself trapped between China and the United States > while struggling with its economic problems. Thus, a secondary > round of diplomacy can be expected within the Western alliance as > the second tier powers try to find a way to focus Washington's > attention on the unfolding reality. We expect them to fail. > Washington will be utterly self-absorbed this summer. In failing, > we expect to see a new process emerge. Countries like Japan and > Germany, rather than simply marching in lock-step with Washington, > will start to search for means to establish some sort of political > neutrality between the new China-Russia alliance and the United > States, while still maintaining economic ties with the United > States. As the Sino-Russian situation solidifies, the Western > alliance will become more fluid. Indeed, one of the strategies of > a Sino-Russian alliance will be to use German and Japanese fears of > a new confrontation to create both fluidity and opportunities for > favorable economic relations with these increasingly insecure > countries. Germany is particularly vulnerable, given its fairly > harrowing experience following the American lead in Kosovo. > > In short, the inevitable readjustment in the international system > will be nearing fruition during the summer of 1999. American power > from 1989-1999 was simply too overwhelming economically, > politically, and militarily to endure. It led to risk-taking and > carelessness that while not exposing the United States to major > risk, did expose others. These others inevitably are working to > create a counterbalance to the United States in order to increase > control over it. The process will not be confined to the Eurasian > powers, Russia and China, but will extend to more traditional > allies, who will redefine and modify their behavior to take > advantage of the new geopolitical reality. > > There are, of course, issues not directly connected to this main > theme that will be of importance during the Third Quarter of 1999: > > *The Indonesian elections seem to be promising a dangerously > ambiguous outcome. The leading candidate, Megawati, may well not > be able to form a government or, if successful, may not be able to > govern because of the political configuration. We judge the risks > to be not only high, but also an opportunity for Chinese-American > competition as each tries to influence events in this strategic > country. > > *The United States still regularly conducts minor air attacks on > Iraq. The purpose of these attacks is unclear and they seem to be > going on more out of habit than out of a coherent strategy with a > clear goal. We do not think that this situation can go on > indefinitely. Since this is a domestic political issue as well as > a foreign policy issue, we expect a major review of U.S. policy on > Iraq during the Third Quarter, triggered by political criticisms of > the ongoing and endless air campaign. > > *The tension within Iran is rising once again, with moderates and > traditionalists locked in an endless battle that does not seem able > to resolve itself or go away. As Russia's presence in the Caucasus > Mountains increases over the summer, these two issues will begin to > intersect. > > *We do not regard the Asian recovery as a reversal of the main > trend. This is particularly true in Japan, where the basic issues > that caused the banking collapse have not been dealt with. > > The post-Cold War world is over. We are now deep into the > transition to a new era. > > > ___________________________________________________ > > To receive free daily Global Intelligence Updates, > sign up on the web at: > http://www.stratfor.com/services/giu/subscribe.asp > or send your name, organization, position, mailing > address, phone number, and e-mail address to > [EMAIL PROTECTED] > ___________________________________________________ > > > STRATFOR, Inc. > 504 Lavaca, Suite 1100 > Austin, TX 78701 > Phone: 512-583-5000 > Fax: 512-583-5025 > Internet: http://www.stratfor.com/ > Email: [EMAIL PROTECTED] > DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. 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