Biden Confronts Iran, China’s Lunar New Year Economic Slowdown, Pakistan’s Flawed Elections, and More

MCMAHON:
In the coming week, President Biden confronts Mideast military escalation, millions are traveling for China's Lunar New Year amid dim economic news, and Pakistan holds a tense general election. It's February 1st, 2024, and time for The World Next Week. I'm Bob McMahon.

ROBBINS:
And I'm Carla Anne Robbins.

MCMAHON:
Carla, let's jump on the prevailing headline theme of the day, which is the response or the aftermath of the drone attack by, what's described as Iranian-backed militias, on the U.S. military post in northeast Jordan. This is an attack in which three U.S. soldiers were killed. It was the first known deadly attack on the U.S. service members since the war in Gaza began in October. Now, President Biden has said that Iran is responsible for supplying the weapons. He also announced the U.S. is going to respond and used a formulation that makes it clear that it will be happening in a way that the U.S. is going to decide on, so something will happen, but at a time and place of the U.S. choosing. So what does all this say about where the U.S. finds itself, and is it caught in a bit of an escalation trap in this region?

ROBBINS:
Yes, I don't think the president has any choice but to respond. The question is whether he and his advisors can find a balance that helps deter or seriously constrained future Iranian proxy attacks, and that means deterring Tehran itself and without tipping the region into a much wider war. 

But this really is a split screen moment while the White House is weighing what military action to take, and we have to be clear here, we're recording this Thursday morning, so the first steps may happen even before our podcast drops, but the U.S. is also very focused on what it can do to suspend the fighting in Gaza, or help suspend the fighting in Gaza, and eventually move toward a larger diplomatic deal. And that current proposal, which is also under consideration, has been developed in talks between officials from the U.S., Israel, Egypt, and Qatar, which is representing Hamas, would lead to a two-month ceasefire and hostages for Palestinian prisoner swap, which they hope will also move forward. So there's a lot of balancing going on here, diplomacy moving forward, trying to avoid a wider war, but knowing that this whack-a-mole approach they've been having to these militias just isn't working.

So far, interestingly, even the threat of unspecified U.S. action has gotten Iran and its proxies nervous. On Tuesday, the Iranian-backed militia based in Iraq, this Brigades of the Party of God, that is believed to be responsible not just for this deadly drone attack, but for majority of the 160 attacks on U.S. military installations in Iraq and Syria since early October, they announced that they were suspending military operations in Iraq, making clear they weren't happy about it, but they were responding to pressure from both Baghdad and Tehran. And Iranian officials have also been speaking out, first, insisting, "We don't control these guys, we just give matches to arsonists," and on Wednesday, the head of the Revolutionary Guard Corps, who are the suppliers for these people, and they don't just give weapons, they also, as far as we can tell, give intel and targeting help, but he insisted they're not looking for a war with the U.S. while warning they would hit back if targeted, but they seem to be nervous. As for what the president will do, everyone, as I said, including the White House agrees that whack-a-mole is not working. 

The White House is now talking about, what is being described as a tiered approach, potentially multiple actions. The first thing you see is not the last thing, but President Biden has also said this week he's not looking for a wider war in the Middle East. So what are his likely choices? Perhaps the most extreme will be strikes inside Iran, and he's getting a lot of pressure from Republicans on the hill, going after economic and military interest of the Iranian Revolutionary Guard Corps, as well as its ability to ship weapons overseas. I don't want to handicap that, but I consider that one unlikely, but we'll see. 

Slightly less punitive, but still very serious option would be strikes against major Iranian assets outside Iran, possibly some naval ships, or these IRGC commanders, who are working with militias in Syria and Iraq. You may remember the very end of the Trump administration, they went after the head of the Quds Force in the Baghdad airport and killed him. Such a high-profile hit would certainly send a very strong message, but it would really further complicate the U.S. presence in Iraq, and the Iraqis are already calling to get the 2,500 American troops that are in Iraq out. And they're there not because of Iran, they're there because they're advising the Iraqis in the fight against ISIS, which is still obviously of great concern to the U.S. And option three would be, and many people consider this the most likely a sustained bombardment of proxy groups, and if Iranian advisors are on site, that too could potentially send a strong message. So we'll see what they decide, and it might be a mixture of these things, and whether it's going to be enough to deter, we'll see that as well.

MCMAHON:
Yeah, it does really all seem to point to a further escalation, and the IR term, escalation dominance started to echo in my head as you were talking about all these different scenarios, Carla. I mean, the Iranians certainly, with, as you say, 160 plus attacks since October, mounted against U.S. target, certainly there is an Iranian role there. Whether or not it's the puppet master role that some people see or something that's just more sort of pervasive and consistent, but maybe not necessarily pulling all the strings, it still seems to have been doing Iran's bidding. 

And if we go back to the history of the U.S. entanglements in the Middle East, of course, back to, around the Hezbollah founding, it's been a very damaging, tricky terrain for U.S. forces, the worst such incident being the barracks, the marine barracks being bombed in Lebanon, but there are still U.S. forces on the ground in the region. As we see in this Jordan base, I don't think most people were aware of, prior to the attack, and the ability to use drones really creates this different type of asymmetric playing field that seems to make it a much trickier position, but I agree with you, Carla. I think there's going to be something, some sort of potent signal from the U.S., and whether or not that further inflames or maybe deters, we'll have to see.

ROBBINS:
Well, Biden is trying to, as I said, find this balance here, because it's not just that he wants to deter, it's obviously the number one goal here, is to keep American troops safe. But he also has a wider goal here, which is he wants to stop the war in Gaza. He wants to keep Israel safe as well, but he also wants to push forward to a greater deal in the Middle East, whether he can pull that off. Lots of presidents have tried, but he really does want to push forward with a revamp Palestinian authority, a future for Gaza, some sort of deal between the Saudis and the Israelis. Hard to imagine, you can pull this off with Netanyahu there, but they are talking about some greater deal here, because they know what they have right now is dangerous for the U.S., dangerous for Israel, dangerous for stability in the region, but how you balance that at the same time when you got drones flying through the air, and the first American troops dying, and also in the midst of presidential campaign. This is a hard balance to find here, but it's one they're completely focused on, so we'll see what's going to happen potentially in the next few hours. 

So Bob, let's talk about what's happening in China. Since last week, millions of Chinese are returning to their hometowns to celebrate Lunar New Year. This isn't a great time of festivity because it's a lot of economic uncertainty in China. They've had an economic downturn since they reopened in 2023. To make matters worse, earlier this week, Chinese real estate supergiant, Evergrande, was ordered to liquidate. So how bad's the economy, and how are people feeling on the ground there?

MCMAHON:
Well, it's first worth, again, taking a fresh look at what the Lunar New Year is. It's the most important on the calendar of Chinese holidays. It's a very long period. I think it's almost a month in duration. Millions of Chinese travel during this period. The impact was born out during the COVID period, when it really affected and interrupted that very happy, very meaningful, very symbolically important time of year. And it's especially meaningful this year, as you say, because of China's coming out of an, unusual for China, economic funk, and it's weird to call a country an economic funk that's had 5.2 percent growth last year, but this was a country of the economic miracle that was decades-long, and it slowed down, and then they're alarming things like the Evergrande liquidation fiasco, which points to a very weak real estate sector and a sector that's very important to the Chinese economy. And you add to that a number of other things, it all adds up to a very serious concerns of a nature that we haven't seen with China. 

And again, the Chinese New Year, people wish each other great happiness and prosperity in Cantonese. I think in Mandarin it's, "wishing you to be prosperous in the coming year." It's also the year of the dragon. The dragon is supposed to convey power and strength. And so these are kind of cross-cutting currents for normal Chinese at a time when their government is trying to create some sense of reassurance that the economy is not going into the tank, it's going through a bit of a ripple. But in addition to the Evergrande case, to slow down in what they had expected to be stronger growth figures, this is a country that's dealing with a decline in foreign direct investment last year, which is, that's something that's basically unheard of, and-

ROBBINS:
Can I ask you a question about that, this decline in foreign direct investment? Is that because of pressure from the United States? Is that because of policies that Xi is doing? Is it Western foreign direct investment? Is it other countries? What's behind that?

MCMAHON:
Yeah. My understanding is it's a combination, I think. It's certainly you can't rule out the U.S. export controls, that have had a broader effect in terms of limiting what can be exported into China in terms of what can be invested in China. Investors have been taking their money out of China, and then reinvesting operations in other places. Out of those concerns, there have been concerns about Chinese governance issues, concerns about what the U.S. has been raising, and some other countries about the role of Xinjiang and repressed Uyghurs in global supply chains.

So it's a mix of different things that has had that kind of chilling effect, and we've heard the term, derisking, decoupling come up. There's just, last year was a big year for sort of major investors in China to kind of reconsider their options. And in the case of the U.S., we've heard other terms, like reshoring, or friendshoring, bringing supply chains closer to home where you have countries that are aligned, if not, allies, that can be more reliable in the flow of important supply chains. So I think it's a combination of those things. It was noted at the recent Davos gathering, that we talked about previously, that Chinese officials came there, and according to many reports, were pretty much focused on trying to convey good economic news, that China is back, China's healthy, China's ready to be an economic partner, and not so much the China throwing its geopolitical weight around and weighing in and other issues.

So I think all of that kind of adds up to China trying to spread some reassurance abroad, and also, it would like its citizens in this meaningful holiday to kind of take stock and maybe show a little bit more confidence in the economy, because of all the things we talk about every year that you look towards and all the potential conflicts and big elections and everything else, one thing that, I think, the world is certainly not ready for is a major downturn in Chinese economy. So I think it's going to be very interesting to see how this holiday, how the discussions play out, but also, this holiday might provide a little bit of a reboot or a boost. Chinese, in the past, have spent more on this holiday, so we'll have to see how that plays out, Carla.

ROBBINS:
Of all the data that's out here, youth unemployment rate was 21.3 percent in June, and the numbers were so bad, that they stopped publishing the data temporarily. A lot of other countries...could spell major unrest. I mean, that's just an enormously high number. Chinese leaders, their number one goal is the political survival of the party in their own political survival, and Xi, more than anybody. I mean this guy's really into control. Do we have any sense beyond happy talk at Davos, what Xi's response to this is?

MCMAHON:
So, there's been talk about sort of a ramp up in monetary support for the economy, that there's a combination of some sort of fiscal and monetary levers to try to boost the economy, some sort of version of quantitative easing that we're, a term we are used to hear in the U.S., and providing more liquidity, but also, what's been termed economic propaganda, so doing things like removing references to high youth unemployment figures, kind of suppressing any kind of broad publication of the negatives and trying to play up the positives. And we've seen that again and again under Xi. We saw it under the COVID response, and it was all supposed to be about how brilliant the government was in handling it, and then when things went really badly, real misgivings, if not, outright protests surfaced, and then that was heavily suppressed. So it's going to be this combination of stage managing and real steps. A number of experts say that the steps, so far envisioned, are not nearly enough to help deal with the country's big problems, but the country is also, it's got a lot going for it too.

We shouldn't overlook that, and the close China watchers will say, "Economic growth is still happening there." There's reports like China is now the world leader in auto production due to its enormous advantage in starter position in electric vehicles, for example. It's heavily invested in renewable energy sources like wind power and solar power, for example. It has, obviously, many, many things going for it, but to your point, the inability to maintain robust growth levels is a serious concern because of the domestic unrest that that could trigger, and that's something that really concerns the CCP, Carla. 

Carla, I want to move to southwest Asia, and specifically Pakistan. Next Thursday, Pakistanis are going to head to the polls, to elect what will be a new prime minister and National Assembly. Now, we've touched on this before, but Pakistani politics have been in a bit of turmoil since the ouster of the former prime minister, Imran Khan, in 2022. The country has a struggling economy. It's got growing security concerns, Khan's own recent convictions and sentencing, which came out this week, so the country seems to be at a boiling point. Is this election going to contribute to that, or is it going to bring some stability, perhaps?

ROBBINS:
No, on the stability, I fear. Pakistan does not have a strong democratic history. This is incredibly a state where no prime minister has ever finished their term.

MCMAHON:
That's amazing. It's an amazing stat.

ROBBINS:
And this is the third parliamentary election in a row, which is a national record, but this is not going to burnish that record, unfortunately, and you can see that when you look at the two key players in the election in their own past. Arguably, Imran Khan is currently the most popular politician in the country. He's a former cricket star and a former prime minister, as you said. He lost his job in a vote of no-confidence in 2022, and then infuriated his former military backers by accusing them of plotting against him, and denouncing them for being undemocratic and all of this, mainly because they turned against him. And he's also really frightened the military because he's built a national following because he has this remarkable facility for social media and other modern campaign techniques.

He's not a big democracy advocate. He wasn't a democrat when he was in power himself, and corruption charges against him and all these other things, but right now, he's sitting in jail in a host of convictions, including for allegedly leaking a classified document. He's been barred from running. Its party, meanwhile, has been all but disenfranchised. Many of its leaders are also behind bars or have defected under pressure. Its candidates that are running or having to stand as independents, and the party was also stripped of its cricket ballot symbol, which is really important in a country that has millions of illiterate voters. So they're fundamentally been disenfranchised for this vote, and the polling suggests that he's the most popular candidate who isn't running. 

The other key player, and likely or almost certain winner, in the vote is another former three-time prime minister, Nawaz Sharif, who never finished his term. He, too, has had extensive legal troubles. He was ousted for corruption after the Panama Papers case in 2017, and sentenced to a decade in jail. He was allowed to go to London for medical treatment and never came back, late last year with elections scheduled. He suddenly returned, and miraculously, his corruption conviction and the lifetime ban and his participation in politics were disappeared. Most analysts believed the military decided he was their guy because he had the best chance of beating Khan and was willing to play by the don't insult the military rule, and that ultimately, he also doesn't have that great social media presence, the ability to play the crowd so well so that he could win an election with their blessing, but he couldn't go that strongly against him. Sharif should also know how fickle the military can be since they ousted him in 1999, so perhaps he will play by the rules. 

There is a third candidate, Bilawal Bhutto Zardari. He's thirty-five. He's the only young guy there, and he previously served as minister of foreign affairs during the coalition government that has been served since the Khan, no-confidence. He's the son of former Prime Minister Benazir Bhutto, and former President Asif Ali Zardari. He was educated at Oxford, and he has no chance. This is not going to be a glorious moment because you got a corrupt guy who's in jail, a corrupt guy who's been suddenly miraculously allowed to run, who's going to win, Bhutto Zardari, who's got family background troubles and has no chance at all, and the overall situation in Pakistan, which we can talk about, is unraveling as well.

MCMAHON:
Yeah, and our colleague, Josh Kurlantzick, sort of summed it up in the title to his latest blog post, which is "The Winner of the Pakistani Election Will be the Pakistani Military." By the way, things have been arranged and arrayed right now, that it is calling the shots as ever. It has always been the power behind whatever political facade in power is, and it also makes you think a little cynically, like that's bad for democracy, but this is also a nuclear-armed power, and in volatile part of the world, maybe it's not terrible either, but can you talk a little bit about the security situation, Carla?

ROBBINS:
The country's sort of unraveling across the board their economy's in desperate shape. Last year, they had more terrorist attacks, mainly in sort of the no man's land, but I think killed more than 1,500 people last year, which is the highest number in, I don't know, six, seven years. There's rising tensions with the Afghanistan.

MCMAHON:
These are Afghani leaders who used to be their clients, or it used to be clients of the ISI. Isn't that right, in Pakistan?

ROBBINS:
Well, Pakistan, as we know, has played this very complex game all along, taking our money, playing games with the Taliban, thinking they could control terrorists, always the question of who was controlling whom there, and always insisting it wasn't going to come back and bite them, and then it comes back and bite them. And then perhaps, the strangest and thing that's happened recently is Iran bombed, what it said, were separatist militants in Pakistan, who they accused of terrorist attack inside their own border, and then Pakistanis turned around and bombed separatist targets in Iran, and that seemed to back off after that, but it gives you a sense of how volatile things are regionally as well. Pakistanis have always insisted, as I said, that they can control the terrorists that they nurtured, and this is one more reminder that they can't control anything inside their own borders. That is always disturbing, but you add 170 nuclear weapons to the mix, and it gets really frightening.

MCMAHON:
Okay, so we will look for a return of a familiar name to the scene by all expectations in Pakistan, and hope for the best. I'll also note, we have up on our website a bit of a scene set that just kind of walks through what the big issues are and recounts how we got here, but it's one of these points that makes me think, "Are elections necessarily a good thing in a country like Pakistan? Would we be better off in trying to get the country to sort out its governance issues?" I don't know.

ROBBINS:
Bob, you're not really arguing-

MCMAHON:
I'm trying to be provocative. I'm trying to be provocative.

ROBBINS:
You're not really arguing against elections, are you?

MCMAHON:
Just the timing of elections, that they all..."Everything, there's a season," Carla, to quote Ecclesiastes, or to misquote Ecclesiastes.

ROBBINS:
Okay. Bob, it's time to discuss our audience figure of the week. This is the figure listeners vote on every Tuesday and Wednesday @CFR_org's Instagram story. And this week, Bob, our audience selected, "Niger, Mali, and Burkina Faso Withdrew from ECOWAS." Why are these countries leaving, and can you explain to us what ECOWAS is?

MCMAHON:
Well, for starters, not necessarily a surprise that when this news came out, these countries, Mali, Niger, and Burkina Faso, along with Guinea, had been in the doghouse, so to speak, of ECOWAS since various coups took place. Military takeover in Mali in 2020, Guinea 2021, Burkina Faso 2022, Niger 2023. It was a nice chronological progression there. ECOWAS had also imposed financial sanctions on the countries, including no-fly zone for commercial flights, there was an asset freeze in ECOWAS Central banks, and three of them, not counting Guinea, had formed an Alliance of Sahel States, that they said was going to be used to kind of counter some of the security threats they have faced from jihadists, among others. So that's a little bit of the backdrop of these countries.

In terms of ECOWAS, this is the Economic Community of West African States, it has been touted up until recently as sort of a successful model for regional governance in Africa. It's not just economically focused, they have played a role in trying to uphold democracy, as we've seen in their response to the coups. They, at one point, were involved in some peacekeeping with something you might recall, called ECOMOG, which was, I think, involved in Liberia and Sierra-Leone, and been around almost fifty years. The big power brokers include Nigeria in the group, but the group had also had had connections with Western organizations, and these three countries are kind of playing the populist card, at least the military leaders, and saying, "They've gone too far in encroaching on our sovereignty and they are in too much enthralled to Western forces," in that you can read France, in particular, the former colonial power in region, or the United States. So we've got a situation where they are breaking away. I believe you're still going to see some talks go on between the two sides. Maybe they can patch things up. 

But the trend lines don't look good because there is another major actor that they seem to be fine with courting, which is Russia. So at this point, Russian soldiers have forces in Mali. It's the largest country of the three, but also, at least 100 military personnel are said to be deployed in Burkina Faso as well. They have been senior officials from Russia and Niger, hosting each other at the same time. So there are relationships growing there with Russia, Wagner Group, which is very much a presence. It continues to exist and to seemingly grow in this part of Africa.

ROBBINS:
So I'm not sure that ... I mean, ECOWAS claims to be committed to good governance and democracy. I mean, good riddance? We've talked a lot about how the EU struggles with countries that are veering away from democracy and that they're stuck with. Orbán actually did the right thing today, and allowed the EU to go forward with this economic aid for Ukraine, but why would ECOWAS want to keep in countries that flout their most fundamental beliefs in terms of good governance and democracy?

MCMAHON:
Well, that's an interesting point, and it could end up having ... As I say, this may not be over, and you could end up having them come limping back at some point because of the economic side of this. It could cost these countries economically quite a bit because they're among the poorest in ECOWAS. They relied on trade in the bloc. They have a pretty advanced, informal trade network, cross-border trade amongst each other, but this still is going to lead to prices going up. It's going to lead to further discontent. Whoever might've been cheering the move as a sort of an assertion of sovereignty might come down to earth pretty soon, seeing prices going up as well. 

So at the same time, you might also see nationals from these countries fleeing into the neighboring countries. Ivory Coast, for example, has five million people from all three of those countries. There's a large diaspora from Niger, in countries like Ghana, Togo, and Benin. So it's a move that seems to be a grand gesture at this point, and they might be heartened again by their growing ties with Russia, and maybe down the road, further ties with countries like China, but I think there are some compelling arguments for them to want to come back. Again, to use your EU analogy, at the end of the day, it seems like Hungary just really needed that to keep those EU checks flowing, and so decided to come and join on the Ukraine front. But ECOWAS, as you say, they could hold more leverage here. The only concern being, do they allow these states that, by keeping them close, they had a modicum of control? Do they allow them to further destabilize a region and maybe some other ECOWAS countries start looking for the exits? Who knows?

Well, that's our look at the world next week. Here are some other stories to keep an eye on. El Salvador holds general elections, and Saudi Arabia hosts its World Defense Show in Riyadh.

ROBBINS:
Please subscribe to The World Next Week on Apple Podcasts, Spotify, YouTube, or wherever you get your podcasts, and leave us a review while you're at it. We really do appreciate the feedback. If you'd like to reach out, please email us at [email protected]. The publications mentioned in this episode, as well as a transcript of our conversation are listed on the podcast page for The World Next Week on CFR.org. Please note that opinions expressed on The World Next Week are solely those of the hosts, not of CFR, which takes no institutional positions on matters of policy.

Today's program was produced by Ester Fang and Sinet Adous, with Director of Podcasting Gabrielle Sierra. Our theme music is provided by Markus Zakaria. This is Carla Robbins, saying so long.

MCMAHON:
And this is Bob McMahon saying goodbye, and be careful out there.