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World Outlook for 2013

Interviewee: James M. Lindsay, Senior Vice President, Director of Studies, and Maurice R. Greenberg Chair
Interviewer: Bernard Gwertzman, Consulting Editor
December 28, 2012

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As the year draws to an end, the United States faces three major challenges in 2013, says James M. Lindsay, the head of CFR's Studies Program. One is the Middle East, where the continuing conflict in Syria is upsetting to stability in the region, and where Iran is approaching a "red line" on its ability to make nuclear weapons. He says the "rising tensions" in East Asia between China and its neighbors threaten the peace. And lastly, he says that how the United States resolves its current "fiscal cliff" crisis may play a major role in the overall health of the world's economy.

What are the major issues facing the United States next year?

The United States faces three clusters of challenges in 2013. The first is the conflict in the Middle East, most immediately in Syria, but potentially down the road with the question of Iran approaching the red line on nuclear weapons activities. Second, the United States faces rising tensions in East Asia, especially between China and its neighbors over boundary lines in the East China Sea and the South China Sea. The third set of issues is the overall health of the international economy. That will be driven by what happens in the eurozone, what happens in the Chinese economy, and the economies of other emerging powers, and by how the debate in the United States over the fiscal crisis unfolds. If the United States manages to solve its problem with the "fiscal cliff," there's a good chance the U.S. economy will pick up, which will be a boost not just for the United States, but for the broader global economy.

In the Middle East, the crisis in Syria seems unending, even though there are some signs of weakening in the Assad government. Is there more the United States should be doing?

Let's look at the challenge that Syria poses. The immediate challenge is the ongoing fighting and the potential use of chemical weapons. But there's also the broader challenge of what comes after the Assad regime. The United States has taken steps toward trying to influence the outcome recently by recognizing the Syrian opposition group. But the reality is that there's a lack of political enthusiasm in the United States for a direct military intervention. In fact, there is a real question about what a direct military intervention could produce, and there are serious reservations about the consequences of even indirect support--particularly arming rebel groups. There are concerns about whether the Assad government will be tempted to use chemical weapons. The Obama administration has said the use of chemical weapons would be unacceptable. But the question is whether that deterrent threat will work. As the tide of battle moves against the Assad regime, and it's clearly doing so, the harder it'll be to deter the use of chemical weapons.

Is there a spillover effect from the Syrian fighting in neighboring countries, Iraq, Jordan, and Lebanon?

There's a real potential for a spillover effect among Syria's neighbors, particularly in the case of Jordan. It is one country I'd keep an eye out on over the next six to eight months in terms of the pressure being put on Jordan, partly coming from Syria, partly because of the dynamics that have been unleashed by the broader Arab Spring. There also could be a potential for a spillover effect in Lebanon, and there are broader questions of what will happen with Kurds in the northern part of Syria, eastern Turkey, and northwestern Iraq. Syria has the potential to unleash dynamics that could be very difficult to control. That doesn't mean it will, but those are things to be keeping one's eyes on in 2013.

Should we worry about Egypt?

We should always worry about Egypt, because Egypt is the most populous, most influential country in the Arab world. The big questions are whether or not Egypt will be able to make its democracy stick, and secondly, what kind of democracy the Egyptians are going to have. We're witnessing fairly predictable and understandable political tensions over defining what a democratic Egypt is going be. And it's likely to be a tumultuous road over the next couple of years, and that's not surprising. Democratic transitions don't all work. Even when they succeed, they don't necessarily follow a smooth trajectory. One of the big questions to watch on Egypt is the health of its economy. The question is whether you can get the kind of economic growth you need in Egypt as long as it suffers from political instability.

Iran hovers over the whole area because of this continuing crisis over its nuclear program.

For several years now, we've been talking about the push-comes-to-shove moment arriving in Iran, and that moment may come in 2013 since the Iranians seem to be creeping closer and closer to what are presumed to be the red lines on its nuclear weapons program. One possibility is that this leads to negotiations and we get a compromise agreement that stops Iran short of possessing a nuclear weapon, or the capacity to build one quickly. But no one knows whether those negotiations are going to take place or succeed. If not, we could very well in 2013 reach the moment where the Obama administration has to decide whether it wishes to use force to stop the Iranians from going nuclear. And obviously, that raises a whole series of questions about the ramifications of the uses of military force, how the Iranians might react, how successful the strike would be, and the consequences for stability in the region. So it's obviously a very, very big question.

You mentioned East Asia as a critical point. There's new leadership in China, headed by Xi Jinping. He's going to become the next president in a couple of months. Is he someone the United States has to worry about?

I would look at the region more broadly. We're seeing transitions across the region. China has new leadership. Japan just this past weekend had parliamentary elections, bringing back Prime Minister Shinzo Abe. South Korea just had an election, electing its first woman as president, Park Geun-hye. So in the region, you have a set of new leaders, each of whom is presumably trying to consolidate his or her hold on power, reassuring their constituents that they have a good command of the issues and are going to protect the national interest. That can be a time in which it is harder for leaders of any country to make concessions. All this is happening amidst growing tensions over boundaries in the East China and South China Seas. There's a heavy dose of nationalism involved in these spats, but also very real, pragmatic economic issues because of the potential for substantial oil, gas, and other mineral deposits within a country's territorial zones.

The United States so far has said its now sending more military resources to Asia, but there hasn't been an active diplomacy by the United States, has there?

We need to put the so-called pivot, which the administration has subsequently labeled "rebalancing," in context. The administration has indicated that it would like to devote more resources to East Asia, compared to the Middle East. But the administration is finding it hard to leave the Middle East, where we find the challenges of Afghanistan, Iran, Syria, and Libya. But given the current austerity, how much in the way of funds is really available to have a much bigger U.S. presence and what would that presence actually be in East Asia? China is more assertive of its interests in East Asia. The questions are how should the United States respond, and to what extent does what the United States chooses to do shape how the Chinese behave? The question of what U.S. policy should be in East Asia—what that means in terms of military deployments and procurement, what it means in terms of economic relationships, trade deals and the like—has yet to be worked out.

The United States right now is in the process of getting out of Afghanistan, and talk is that the United States even wants to expedite the withdrawal of much of the remaining troops even before the 2014 deadline. Does that make the United States look like a weak man in the region?

No doubt critics of administration policy both at home and abroad will make that argument. But the reality has always been that the United States was never going to stay around for the long term in Afghanistan, and that any exit was likely to raise questions about America's staying power. A read of history suggests the United States frequently intervenes and then leaves before it has achieved total success. One can think of Vietnam and Lebanon in the 1980s as other examples. So the question from the vantage point of the White House is: What are the advantages to the United States of continuing to make a large investment of blood and treasure in Afghanistan? And I think it's a fair read of the administration's policy that it has concluded that there aren't large benefits to the United States. And indeed, certainly, if you look at American public opinion, Americans would prefer to be home yesterday rather than tomorrow.

As you said on the world economy, a lot depends on how the United States resolves its own fiscal cliff. But countries in Western Europe, such as Greece, Spain, Italy, and France, seem in very bad shape.

The international economy clearly is unsettled. In the 1990s, the United States had the go-go economy. In the first decade of the twenty-first century, we had the go-go emerging economies, particularly the Chinese, but also the Indians and the Brazilians to help fuel growth. What is interesting now is that the eurozone today is contracting, growth has slowed in China, it has slowed in Brazil, and it has slowed in India. So there's not a lot of winds in the sails of the international economy.

Here in the United States, we're having a very slow economic recovery. Whether the economy stalls or the recovery picks up speed will likely be influenced by the outcome of the ongoing talks about the fiscal cliff. If we go over the cliff, if tax rates go up, if sequestration plays out as its scheduled to do, most economists agree it will plunge the U.S. economy back into a recession. That clearly would have ripple effects beyond America's borders, because when the United States sneezes, the rest of the world catches a cold.

Meanwhile, Europe faces a stiff challenge. The ambition of Europe after World War II was to move toward greater economic integration by dismantling barriers between countries. And that vision, that dream, has been deeply bruised by the events of the past several years, most notably in the case of the eurozone. And while Greece's exit has been much predicted over the past year, it is still part of the eurozone. And there is a real question as to whether Greece can remain, and whether the contagion can be restricted to Greece, or whether it might actually pick up and affect Spain, Italy, and most significantly, France. The broader issue that Europe faces is that much of Europe has very high costs that are not very conducive to strong economic growth. Until Europe addresses the structural impediments to getting its economy growing again, it's likely to be in a very turbulent period. And again, given that the EU is the world's largest market, that has significant repercussions for the rest of the international economy.

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