This is my 200th post.
It falls on a momentous event, namely the international accord on Iran's nuclear ambitions.
This provides me with the opportunity to retrace my starting hypothesis and use it to explain the new agreement from a contrarian perspective.
First, let me ask a question.
For as long as remember, we have been told that the US will never do anything against Israel's and Saudi Arabia's wishes. For the former, we are given have a mixture of explanations, ranging from AIPAC's power and the prevalence of the so called Israel firster politicians to a genuine desire to protect Israel, a vulnerable island in the middle of an Arab sea.
For the latter, we are usually offered one word, oil.
Last week's agreement with Iran was vigorously and vociferously opposed by both Israel and Saudi Arabia and they failed miserably. How did that happen?
All the commentary I read suggested that the US is now charting a whole new course in the region. But no one was sure why. Moreover, no one offered a framework that explains both the old and the new.
Let me give it a try.
Starting Point: Rethinking the Arab Spring
When I started this blog, my goal was to provide an explanatory framework for seemingly contradictory events, actions and statements in the larger Middle East. I was especially concerned about the Arab Spring and the attempts to present it as a spontaneous revolution. The yearning for more freedoms might have been genuine. But the fact that, in key instances, the "Spring" was brought forward by traditionally oppressive institutions, gave me pause. And it made me doubt the spontaneity and the revolutionary nature of the upheaval.
A long time ago, I learned from Thomas Kuhn that when an explanatory framework cannot provide answers to all your questions, it might be best to look for a framework that does. The mainstream Spring narrative could not explain why the US trained and equipped Tunisian and Egyptian armies stood by complacently and allowed the autocratic rulers of their respective countries to be deposed within a short period of time. In Egypt, the man who earned the nickname of Mubarak's Poodle for his obedient suppression of people, ordered his troops to protect the protesters against Mubarak's thugs.
When the New York Times reported that the Egyptian army was working closely with the Muslim Brotherhood from the beginning of Tahrir events, I knew that I needed a new perspective.
It was clear that the US was somehow involved especially since I knew that these armies would not act in a manner to jeopardize their relationship with Washington. It is not just the money they have been getting from the US; there is also the equipment, training and privileged relations with American armed forces, including long term exchange and cooperation structures.
But why would the US support an Islamist regime and ostensibly put the security of its closest ally in the world, Israel, in jeopardy?
The American Plan for the Middle East
What if, I said, the US was attempting a massive nation building exercise in the region in order to bring stability to it.
From an American perspective, this begs two questions.
One, why would you want to stabilize the Middle East in the first place, if you are not actually dependent on their oil? The US does import quite a bit of Saudi crude but it does not have to. Contrary to what you might read in corporate media, between Canada, Venezuela and its own oil production, the US does not need other sources. In fact, with the expansion of dubious practices like fracking, very soon, it is likely to be fully energy-independent.
That's why I never understood "X country in the Middle East is important because of US dependency on oil" type of arguments to explain America's blind devotion to Saudi Arabia or, for that matter, its determination to invade Iraq.
In my eyes, the mark of a superpower is not its military might. Its dominant position in areas that are critical for the economies of other powers is much more important. What makes the US a superpower is its dominant position in capital, technology and energy.
Consequently, as far as I am concerned, the real importance of the region stems from what it represents to other rising superpowers like China and India. A little over 70 percent of the world's oil and gas supplies move through this region. Whoever controls their distribution controls the current and future energy needs of China and India and of course, the European Union.
There is no other way of explaining the Iraqi misadventure and the bogus weapons of mass destruction pretext that led to it. Even Wolfowitz later admitted that WMD line was just to get public support for the invasion. What a Wall Street oil analyst said at the time is much closer to the real reason: "Think of Iraq as a military base with a very large oil reserve underneath."
The second question is, how do you go about stabilizing the Middle East? The two main sources of instability are the Palestinian and Kurdish statehood questions. The first one inspires most of the Jihadis to join the fight against the US. It functions as a limitless source of suicidal terrorists. The second creates massive internal frictions, if not civil wars, in Turkey, Iraq, Syria and Iran, as the contiguous Kurdistan is composed of parts of these countries.
These are the two most intractable ethnic problems in the world. How do you solve them?
To solve the Palestinian problem, the US needs to convince Israel to work in earnest towards a two-state solution. In essence, it is a move to save Israel as a Jewish state. Without a two-state solution, within a little over a decade Arabs will be the majority in the combined Israeli and Palestinian territories, leaving Israel with two equally unpalatable solutions. Accept a Palestinian government to run the country or turn Palestinians into second class citizens.
But it is a well-known truism that no American president can push Israel. The evangelicals are solidly behind Israel (awaiting the return of Jesus to the Holy Land), the Republican Party is utterly devoted to the Likud-wing of Israeli politicians and the Democrats are either too afraid of AIPAC (which is completely aligned with Likud) or genuinely supportive of Israel's conservative politicians. Papa Bush tried to nudge Israel by threatening to withhold loan guarantees and paid a price for it.
When you look at the issue this way, it appears that Israel could only be pushed towards solving the Palestinian problem, if the situation in its own neighborhood dictated a different approach than allowing ever larger settlements in Palestinian territory and hoping the problem would go away miraculously by itself.
As for the Kurdish problem, the US needed to push Turkey towards making peace with the PKK. And gently move them to form an alliance with Iraqi Kurdistan. Grabbing some land from Iran and Syria would come later and that would be a bonus, as it would weaken these two regional troublemakers. Fortunately for the US, pushing Turkey is a lot easier than pushing Israel.
What else do you need in this stabilizing mission? Since the Jihadis are mostly the product of ultra-conservative Wahhabi and Salafist schools, you need an alternative brand of Islam, one that emphasizes worldly achievements over the the next world, like economic success, education, a sense of duty to one's nation and a peaceful social conservatism.
Enter Turkey
After the Iraq debacle, the Obama Administration knew the US could no longer hope to become a regional actor. Too much bad blood in every sense of the term. Military bases with oil reserves underneath was no longer a viable option for stability. So they looked for a stand-in. There is only one country in the region that can challenge Iran. Turkey. As luck would have it, it was perfect for the job, as it had several other trump cards up its sleeve.
One, Turkey already had several pipelines going through its territory, including a major one from Iraq. And, having no significant oil reserves of its own, it really, truly, desperately wanted to be the energy hub for the region. So, they had an excellent incentive to work with the US.
Two, as the heir to the former Ottoman Empire, it has the same cachet (and the accompanying love and hate relationship) in the region, as Britain does in Commonwealth countries. But, at the time, Turkey, after 60 years of carrying NATO's and America's water, did not look like a credible actor. Worse even, it was one of the first six countries to recognize the state of Israel in 1949 and until the 1973 oil crisis, it was the only Middle Eastern country to have a diplomatic presence in Israel. The Turkish and Israeli armies and security agencies cooperated closely and since 1996 they had a mutual defense agreement in place.
In short, Turkey looked like an American agent in the Middle East. Even its Islamist government could not change that perception. However, if something could be arranged to make Turkish PM Erdogan like he was standing up to Israel (and therefore to the US), the love part of the Ottoman legacy might be actualized.
In 2009, the man who, until then, never made any statement about Israeli occupation or lifted a finger for the Palestinian cause, stood up in Davos and accused Shimon Peres of being a child killer and stormed off their joint panel. Within minutes, he was the new hero of the Middle East. (In fact, his posters were up within two hours which prompted some Turkish journalists to wonder how this could have been done without preliminary preparation.)
Turkey's third asset was its largely pragmatic Islamist government. Economically, it was very successful. At the time, it avoided overtly religious social policies and maintained a commitment to secular system. The AKP government with its this-worldly emphasis and economic success could be very nicely presented as a model for Muslim countries. You know, democracy, economic prosperity and a reasonable dose of piety.
The final trump card in the deck was a preacher by the name of Fethullah Gulen. And as I mentioned recently, he was (and still is) living in the US. His school of thought appears to be the only coherent Islamist philosophy that could stand up to Wahhabi and Salafist schools. He emphasizes education, economic success, a Calvinist sense of duty to one's society, allegiance to a nation (as opposed to a wider religious community) and a fairly moderate (next to the Salafists) understanding of what a Muslim society should look like. (Essentially, he wants women to cover their heads but wants them as educated as men and has no real problem with women being in the labor market.)
Initial Success
If you have been reading this blog or following events in the Middle East, you might know that the arrangement of using Turkey as America's stand-in was a resounding success initially.
Turkey and Israel maintained what I call the Kabuki theater (for a more detailed discussion go here, here, here, and here). As a result, Erdogan (and the AKP) became the darling of Arab streets.
Turkey signed up many pipeline projects and appeared to be on the verge of realizing its dream of becoming the most important energy hub in the world. It pursued a policy of "zero problems" with its neighbors.
After the "Spring", Egypt made the transition to an elected government. The new Muslim Brotherhood administration was extremely careful not to offend Israel and went to great lengths to express its dedication to Camp David accords and regional peace. The Egyptian army seemed like a decent security guaranty for Israel in case President Mursi lost his way and turned against Israel.
Hamas began to make conciliatory noises. It moved its HQ to Doha, Qatar and Khaled Meshaal seemed genuinely interested in a reconciliation with al Fatah. And even in an eventual peace with Israel.
Another "Spring" movement took off in Syria and that one seemed to be moving in the direction of partitioning the country according to a certain Pipelineistan logic. It was also poised to repeat the Kurdistan formula that worked so well in Northern Iraq.
Turkish government grudgingly announced a peace initiative with its Kurdish population and their largest organization, the PKK.
Iran became gradually more isolated in the region, with only the Hezbollah and Syrian President standing by it. Extensive sanctions seemed to contract its economy, jeopardizing its domestic stability.
When Israel finally decided to go back to the negotiating table, from where your humble blogger stood, it all made perfect sense.
The American plan was working.
The Saudi Wrench
Except, some people were not happy with that plan. Starting with the Saudis. They were fine with Turkey acting as a stand in. But that was not enough. Turkey was not capable of resolving what they perceived as the most pressing and important problem in the region, namely the Sunni-Shia rivalry. Only the US could destroy one side and make the other side victorious.
So, they urged the Obama Administration to bomb Iran into a giant parking lot, as the favorite neocon saying goes, and to put boots on the ground to overthrow the al Assad government in Syria. Even though they had the help of an unusual (and normally very persuasive) ally in making their case, the US did not budge. They had a working plan and they wanted to stick to it. The Saudi alternative was nothing but risk with no upside in terms of ending turmoil in the region.
The Saudis also did not like this democratic and economically vibrant Turkish model rubbish. Worse still was the idea of a moderate Islam. The new Brotherhood government in Egypt seemed to align themselves with the Turkish government and together they appeared to have taken the upper hand in Syria. The House of Saud and the House of Wahhab could not tolerate something like this. They also hated the Muslim Brotherhood with a passion, as they suspected them (if you can believe this) radicalizing the Saudi youth.
So, they decided to take the matter in their own hands and approach the Egyptian military. The Supreme Commander General al-Sisi was well known to the Saudi Royal family as he was Egypt's military attache in Riyadh for a long time. Normally, the Egyptian army's ties to the US are too important for them to take this bait. But the Saudis came back with an offer General al-Sisi could not refuse. $12 billion dollars in funds, a promise to give some more and a possibility of backing General Sisi as president. As the old adage goes, everyone has a price and this was al-Sisi's.
With the Brotherhood on the run, they no longer had any presence in Syria. Instead, the Hezbollah moved in to help al-Assad and suddenly the rebels were losing ground. Saudi Arabia increased its support for hardcore Jihadis and they gradually sidelined the Free Syrian Army to take the de facto leadership of the Syrian uprising.
Israel lost all interest and incentive to work with Palestinians towards a peace agreement. They met several times with absolutely no progress. Instead Netanyahu announced new settlements.
As for Turkey, it was the biggest loser in this process. Erdogan's harsh rhetoric against the Egyptian army turned him into a meddlesome villain for those Egyptian who welcomed the coup d'etat. Its relations with Saudi Arabia (source of a lot of incoming hot money) faltered. With al-Assad winning battles, Syria began to look like it could turn a major problem in the near future. Moreover, Syrian Kurds seemed capable of resisting both the government and the Jihadi rebel forces. With massive help from Barzani, they moved to control their own region.
That left Erdogan with only undesirable choices. Pressuring Barzani to stop helping Syrian Kurds could lead to al-Assad remaining in power and making life difficult for Turkey for years to come. Working with Syrian Kurds would require working with the PKK in Turkey as they are closely aligned. This in turn could lead to bigger demands from Ocalan in exchange for his cooperation. Maintaining his covert support for Jihadis has a terrible PR price as these fanatical fighters relished their own horrendous actions so much that they put them up on Youtube.
On top of all that domestic situation in Turkey took a turn for the worse and Erdogan seemed incapable of controlling the agenda for the first time since he came to power.
The New American Plan
Let's assume that my working hypothesis is valid and the US has been trying to bring stability to the Middle East. And for that it created a situation where Israel felt pressured to solve the Palestinian problem and Turkey was given enough incentive to handle the Kurdish statehood issue.
What would they do if some regional powers worked to circumvent this plan by promoting a regime change in one of the key countries in that plan?
If I were the American decision makers, I would go and find another country that represents even higher stakes for the actors who destroyed my plan.
If you read my post on Iran, you know that the dynamic duo Rouhani and Zarif were clearly aided and abetted by the White House in their effort to bring Iran into a whole new setting. After three decades of isolation, Washington changed the narrative completely. The media were mostly positive and accepting, despite articles by neocons. And Netanyahu was sidelined and ostracized.
When France (to please both Saudi Arabia and Israel) sort of sabotaged the nuclear talks in Geneva, both Kerry and Obama dismissed Netanyahu's demands for further sanctions. And they quickly renegotiated with Zarif to agree to a partial (if temporary) lifting of the sanctions.
If Saudis and Israelis were unhappy about the Brotherhood government in Egypt and the leverage it provided to the US, a rapprochement between Iran and the US should scare the living daylights out of them.
Seeing the writing on the wall, Netanyahu quietly shelved recent plans for more settlement building in Palestinian territory in an effort to placate the US. When that did not happen, he gave the go ahead again.
But now it is too late, Iran is back as the regional power and they have a direct line to the White House. Despite the sound and fury I expect Israel to return to the peace talks with some renewed urgency.
I also expect Turkey to begin assisting the Syrian Kurds and return to the peace initiative with Ocalan. The Minister of Foreign Affairs already announced that Turkey would no longer tolerate Jihadi arms shipments. I expect them to grab the olive branch Rouhani held recently.
Iran does not pose an immediate security threat to Turkey. But an Iran in strategic partnership with the US could easily undermine Turkey's rising regional power status. Iran could also influence pipeline locations and damage Turkey's aspiration to become the region's energy hub.
To be sure, the American overture towards Iran is very cautious. They are making sure that no one reads it as a full-fledged support. But they are using it to signal to their stubborn allies that they could make life difficult for them.
After all, they really don't need the oil.
27 November 2013
16 November 2013
Darkening Horizon For Turkey and Its Ruling Party
Most analysts agree that, in recent years, Turkey's rise to prominence has been spectacular. And most of them give the credit to Turkey's ruling Islamist party, the AKP.
The list is long. The GNP per capita tripled in less than a decade. The infrastructure was expanded and modernized. The government invested heavily in education and R&D. Turkey now ranks 18th among the top 20 countries in the world in terms of research output. It created a booming export economy ($153 billion in 2012). When the world economies were mired in deep crisis after 2008, Turkey grew by 9.2 percent in 2010 and 8.5 percent in 20111.
Until recently, it was the fastest growing economy in Europe and one of the fastest in the world.
Domestically, the change was even more dramatic. It is no longer a country where the army was so powerful that, after three coups (in 1960, 1971 and 1980), it could topple a duly elected government by simply issuing a memorandum. In the last four years, the elected government finally rose above the military and effectively placed them under civilian tutelage.
Internationally, Turkey underwent an equally profound transformation. From a second-tier country desperate to join every club (NATO, EU and even CENTO), it turned into a country that was courted by other clubs. After waiting for 54 years to join the EU (it first applied as an associate member in 1959) it is now sending subtle signals that it may no longer be interested to get in.
Moreover, in the same time frame, Turkey has become a regional superpower and an indispensable actor in the Middle East. After eclipsing post-Iraq war Iran, it has established itself as the leading power broker in the region and the only country capable of challenging all regional actors. It has also emerged as the main regional partner of the US, besides Israel. (If you were to believe this humble blogger, it has been doing the US' bidding in the Middle East).
This is such a rosy picture that people began talking about the Turkish Model.
But your contrarian blogger is here to argue that the glory days are fast fading and Turkey and its ruling party are entering a very difficult period.
The same forces that propelled them forward may now be reconsidering their support for the current team.
It's the Economy, Stupid
The main problem Turkey is facing is a serious possibility of sharp economic decline. There are several reasons for that.
The phenomenal growth I mentioned was primarily financed by two sectors: construction and real estate on the one hand and credit-based consumer spending. To give you an idea on the latter, the credit card debt that was 4.3 billion Turkish Lira in December 2002 climbed to almost 80 billion Liras in May 2013. Credit card use increased 20 times in the same interval and the annual transaction volume hit 450 billion Turkish Liras (the parity with dollars is roughly 2 to 1 so we are talking about $230 billion dollars). Consumer credits went from 2 billion liras to 216 billion liras, a 108-fold increase.
In the last ten years, Turkey's current account deficit increased 76 times to reach $53,6 billion. The net reserves of the Turkish Central Bank are roughly $40 billion, which means that the country does not have enough money to cover a single year deficit.
Construction/real estate is the other variable in the growth equation. The feverish rate of construction led one observer to call Turkey the biggest construction site on earth. There is also a real estate boom, or should we say, a real estate bubble like the ones we saw in the US before 2008 and Spain, Italy, Ireland, Greece and a number of other places. Banks made generous real estate loans and remained highly profitable as long as prices kept going up.
The current account deficit was financed with a constant flow of incoming capital, known as hot money. Not only did this provide fresh capital for the banks and construction sector, it also pushed up the Istanbul stock market. But since mid-May there has been a net capital outflow. Among emerging economies, Turkish stock market was the biggest looser with a drop of 22 percent on 22 May 2013. The bank stocks were hit hardest as they lost roughly 26 percent of their values. In total, the top ten companies lost $25 billion of their paper value. They have since recovered some of these losses but the trend remains downward.
It's Also the Politics, Stupid
With the economy seriously slowing down, with much smaller reserves than other emerging market countries, you would think the government would do everything in its power to create a stable political environment to pull foreign investors back in and the hot money flowing again.
Well, think again.
Just around the Gezi debacle, Erdogan decided to borrow a page from the Nixon-Rove playbook. Remember Nixon's Southern Strategy? Or Karl Rove's 50 percent plus one framework?
Basically, you do your best to polarize and divide up the electorate between "us" and "them" and you demonize one side by using the fears of the other side. You also act aggressively and when called on it, you claim to be the victim of, well, political correctness police, the effete liberal elite and the unpatriotic and godless elements in society.
You know. Them.
Since May, Erdogan has been attacking "them" at every chance he gets, using imaginative accusations that would make Bush's Brain blush. For days, he screamed at large rallies that Gezi protesters drank beer in a mosque. When the imam and muezzin of that mosque (civil servants in Turkey's strange separation of state and church) refused to corroborate these allegations, they were transferred to marginal mosques.
In his case, "them' also had a foreign component, usually in the form of an anti-semitic dog whistle like his strange crusade with the interest rate lobby. (Even though at times the anti-semitic undertone was more audible than a dog whistle, though some observers were more charitable than this blogger).
Lately, as a good Rovian, he has been introducing outlandish ideas hoping for a loud reaction, so that he could turn to his people with teary eyes and show the terrible hurt he experienced by their oh-so-mean outburst. (By the way, he cries publicly and as much as John Boehner).
As with the GOP of the last three decades, the strategy calls for him to be both the bully and the pearl-clutching perennial victim.
Case in point: Two weeks ago, Erdogan arranged for four female AKP MP's to show up in Parliament wearing headscarves, a very popular issue with Islamists and a very sensitive one with secularists. Previously, they could not do this according to the bylaws on the books. He was hoping for the main opposition party to make loud noises as these female MPs entered to Assembly so that he could go to "his people" and tell them how these lovely Islamist women were being mistreated by jackboot militarists.
Instead, in a rare moment of inspiration, the main opposition party, CHP fielded their double amputee female MP, Safak Pavey to give a rousing speech.
That's Ms. Pavey on the right walking to the podium with her exposed prosthetic leg.
She was previously prevented by the AKP MPs from wearing trousers in the National Assembly, as they claimed that such an outfit would be against Parliamentary bylaws.
You can see the irony. And how Erdogan lost his touch. Rove would not have been happy with his new pupil.
This was followed by another political faux pas. A couple of weeks ago, Erdogan stated that he was going to authorize the regional governors to conduct raids to see if university students lived in a co-ed setting in privately rented apartments.
He was hoping that the core electorate of the AKP would rally behind him as the defender of morality, family values and various sacred things. It did not happen. Since what he suggested would be plainly illegal and unconstitutional, his speech was met with sarcasm and disbelief.
But it proved to be a turning point for the AKP.
A Power Struggle Within the AKP?
The AKP has always been an umbrella party. It is a large tent that covers a core Islamist group, social conservatives, small business owners, nationalists who also cherish their Muslim identity and economic opportunists in the best capitalist sense of the term.
The Islamist core is divided into hard core fundamentalists (but not in the Salafist sense), formerly pious-recently affluent folks and people who are "inspired by" Fethullah Gülen, the Islamist preacher who lives in a large compound in Pennsylvania on a special visa. He is the kind of Islamist whose Green Card application was supported by Graham Fuller, George Fidas and Morton Abramowitz. You draw your own conclusions.
The President Abdullah Gül and Deputy Prime Minister Bülent Arinç are among the founders of the party and are the most visible members of the fraction "inspired by" Fethullah Gülen. A couple of years ago, Erdogan floated the idea of a constitutional change to establish a presidential system. He wants a system closer to the Russian regime (as opposed to the US or French arrangements) where the President can dissolve the Parliament, presides over Cabinet meeting and appoints all rectors, ambassadors and half of the Constitutional Court judges. And he wants to be that President.
Erdogan assumed that Abdullah Gül would simply cede the presidency (as he gave up his Prime Minister post in the past), even though the Constitutional Court ruled that the President was eligible for a second and final term despite a constitutional amendment that shortened his mandate from seven years to five.
Instead, Gül signalled his intention to stay put by launching a full-fledged re-branding effort. He used to be known as a hardcore Islamist, more conservative and ideologically principled than Erdogan. His new image is a lot more centrist, open minded, tolerant and democratic.
Last October, he addressed the Parliament to urge them to pass democratic reforms, to extend liberties and to adopt a position of reconciliation towards Kurds. Since then, he kept pushing for more democracy and distancing himself from the government and the PM at every chance he got. Especially after the Gezi incidents, Gül's (and Arinç's) tolerant message which disapproved of police brutality stood in sharp contrast to Erdogan's vociferous law and order rhetoric.
In fact, Gül is now seen as the wise elder statesman and opinion polls show that a majority of the electorate prefer him over Erdogan as President. Even the opposition CHP stated (albeit hypothetically) that they would support him for president.
To sharpen the divide, Gül also advocated, rather publicly, a more peace-oriented foreign policy, especially towards Turkey's neighbors. And he favored continuity over Erdogan's seemingly impulsive foreign policy priorities: When Erdogan suggested to abandon the EU in favor of Shanghai Five, Gül became the voice of Turkey's longstanding European aspirations.
Moreover, the Gülen movement closed ranks behind Gül and used their considerable media muscle to support his re-branding effort. Pro-Gülen media organizations began criticizing Erdogan's policies while voicing support for Gül's more moderate alternatives. This is what they wrote about Erdogan's female MP stunt. Moreover, the co-ed story was leaked by their flagship newspaper Zaman, which happens to be the largest Turkish daily.
The movement was especially worried that the seriously flawed prosecution of Sledgehammer and Ergenekon cases reflected badly on them and turned the public opinion against them, as there is a widely held belief that the justice system has been infiltrated by pro-Gülen prosecutors and judges. The movement figured that supporting Gül's more democratic and centrist message would be mutually beneficial.
There are some observers who believe that Gül may be creating his own political organization.
However, I am not entirely convinced that Gül needs to undertake such a drastic effort. Especially since all he has to do is wait. You see, Erdogan and 73 AKP MPs (of whom 18 are Cabinet members) cannot stand for re-election, as they will have reached their self-imposed term limits by the 2015 general elections. This is why Erdogan wants to be President as it enables him to bypass these term limits.
Simply blocking Erdogan's path to presidency would be enough to get rid of him and his most important lieutenants. So, all Gül needs to do is to work on his image as a moderate politician who believes in a multi-cultural country and make Erdogan look like an out-of-control-autocrat.
And the best way to do that is to give Erdogan enough rope with which he can hang himself.
The co-ed apartments statement provided just the perfect length.
After the (pro-Gülen) Zaman daily reported that Erdogan was contemplating to direct the authorities to conduct raids against mix-gender housing arrangements, Deputy Prime Minister Bülent Arinç, as the spokesman for the government, denounced it as a fabrication. He suggested that Erdogan could not have meant what was reported since such raids would be illegal and unconstitutional. Within a short span of time, Erdogan retorted that he was planning such raids and that he meant every word.
In the past, when such public disagreements surfaced, Arinç always retreated. This time, he did not flinch. He went on TV and said that he stood by his views. He looked into the cameras and added that clearly there was a contradiction between the two statements but it was up to the PM to explain the discrepancy.
And that was that. Erdogan refused to talk about it any more but the damage was done. He stood there as an-out-of-control bully and Gül, Arinç and other "inspired by Gülen" politicians appeared as law-abiding, tolerant and democratic people.
The re-branding of Gül was complete and in the process, he let Erdogan to re-brand himself as a terrible autocrat.
There is one more thing.
Erdogan once suggested that Turkey was a democracy train that carries him to his destination (at the time, widely assumed to be an Islamist end point). This summer, during Gezi incidents, when a group of foreign investors met with Gül to express their concerns, he used the same metaphor but to highlight the difference:
I don't think the message could be any clearer.
Is it Dusk or a New Dawn for Erdogan?
No one knows the answer to that, at least not with any certainty. Personally, I am not very optimistic about his chances for survival.
Besides his under-reported health issues, to succeed, he has to overcome a number of intractable problems. And with his diminishing regional political capital and tightening room of maneuver, I seriously doubt that he can tackle them.
Take a look at a sample of regional problems:
- In Syria, he aligned himself to the Muslim Brotherhood only to lose them after the Egypt coup. He refused to acknowledge my long held belief that Kurds are the sword to cut the Syrian knot. Instead, he backed the bloodthirsty Jihadis in an effort to weaken the PYD in Syrian Kurdistan. This support is coming back to haunt him and any opening towards PYD (and the PKK in Turkey) will be that much more difficult to negotiate. Yet, without them he has a huge problem in his Southeastern border.
- In Iraq, Turkey's other Southeastern neighbor, he made gas and oil deals with the Kurdistan Regional Government (KRG) and openly backed its leader Masoud Barzani. Now, Barzani is getting involved in Syrian Kurdistan and Erdogan is trying to backtrack by attaching new importance to Baghdad. But the Iraqi PM Nouri Maliki is clearly aligned with Iran. Forming an alliance with him will infuriate Saudi Arabia as the Kingdom is likely to see this as a betrayal against the backdrop of a sharp Sunni-Shiite divide in the region.
That would mean further loss of hot money coming from the Gulf and the peninsula.
- In Iran, his newly initiated efforts to placate the regime constitute a serious problem for the Saudis and the Israelis. Besides, if Iran manages to get the sanctions lifted, it could become a serious rival in the region. A rapprochement with Iran could also negatively affect Turkey's relations with Israel especially with Natanyahu fighting a loosing battle to demonize Iran and Avigdor Lieberman is back as Minister of Foreign Affairs. With Syria's simmering civil war and Lebanon and Jordan in jeopardy, regardless of what I called the Kabuki theater rhetoric, Israel remains a strategic partner Erdogan cannot afford to lose.
- In the general region, how could Turkey be crowned again the leader of the Sunni alliance without creating a host of other problems? There is a massive resentment in Egypt caused by his fiery rhetoric after the coup. Since the coup was orchestrated by the Saudis, the resentment is shared by them. If Erdogan disavows his early reactions and welcome General al-Sisi, the AKP's rank and file would rise up against him, as they see themselves the targets and victims of previous coups in Turkey.
Domestically, the situation is even more challenging for the embattled leader of the AKP.
To win elections convincingly, even the upcoming (March 2014) local elections, he needs to get the economy going again. In the short run, this means he has to find a way to get the hot money faucet fully open. But with Europe still mired in crisis, Russia sitting on the fence because of Syria, the only major source of foreign capital is the Gulf countries and Saudi Arabia. They will not budge unless he changes his foreign policy in a certain direction.
Chicken and egg conundrum.
Also, to convince other foreign investors that Turkey is a stable country open for business, he needs to scrap his "interest lobby" rhetoric, appear more conciliatory and give up his Rovian polarization strategy. Without such steps, hedge funds and Western investors will simply go to other emerging markets.
Moreover, if he is to fight off the Gül-Gülen challenge, he needs an even more dramatic image make-over.
But re-branding Erdogan quickly might be very difficult. His polarizing image is too vivid and too fresh in people's minds. More importantly, the core groups that support him might be turned off by such a move. They don't see him as a polarizing autocratic politicians. To them he is their dragon slayer, their hero who stands up to the international "interest lobby" and their backstabbing partners inside the country.
As you can see, he does not have many straightforward options.
To use Gül's train metaphor, I would not be surprised if there was a change of locomotive in the next year or so.
The list is long. The GNP per capita tripled in less than a decade. The infrastructure was expanded and modernized. The government invested heavily in education and R&D. Turkey now ranks 18th among the top 20 countries in the world in terms of research output. It created a booming export economy ($153 billion in 2012). When the world economies were mired in deep crisis after 2008, Turkey grew by 9.2 percent in 2010 and 8.5 percent in 20111.
Until recently, it was the fastest growing economy in Europe and one of the fastest in the world.
Hence, Turkey has been meeting the “60 percent EU Maastricht criteria” for public debt stock since 2004. Similarly, from 2002 to 2011, the budget deficit decreased from more than 10 percent to less than 3 percent, which is one of the EU Maastricht criteria for the budget balance.Nominally, it is the 17th economy in the world (15th by Purchasing Power Parity). Symbolically, Istanbul has 37 billionaires (ranking fifth in the world after Moscow(84), NYC(62) and London (43) and Hong Kong (43)).
Domestically, the change was even more dramatic. It is no longer a country where the army was so powerful that, after three coups (in 1960, 1971 and 1980), it could topple a duly elected government by simply issuing a memorandum. In the last four years, the elected government finally rose above the military and effectively placed them under civilian tutelage.
Internationally, Turkey underwent an equally profound transformation. From a second-tier country desperate to join every club (NATO, EU and even CENTO), it turned into a country that was courted by other clubs. After waiting for 54 years to join the EU (it first applied as an associate member in 1959) it is now sending subtle signals that it may no longer be interested to get in.
Moreover, in the same time frame, Turkey has become a regional superpower and an indispensable actor in the Middle East. After eclipsing post-Iraq war Iran, it has established itself as the leading power broker in the region and the only country capable of challenging all regional actors. It has also emerged as the main regional partner of the US, besides Israel. (If you were to believe this humble blogger, it has been doing the US' bidding in the Middle East).
This is such a rosy picture that people began talking about the Turkish Model.
But your contrarian blogger is here to argue that the glory days are fast fading and Turkey and its ruling party are entering a very difficult period.
The same forces that propelled them forward may now be reconsidering their support for the current team.
It's the Economy, Stupid
The main problem Turkey is facing is a serious possibility of sharp economic decline. There are several reasons for that.
The phenomenal growth I mentioned was primarily financed by two sectors: construction and real estate on the one hand and credit-based consumer spending. To give you an idea on the latter, the credit card debt that was 4.3 billion Turkish Lira in December 2002 climbed to almost 80 billion Liras in May 2013. Credit card use increased 20 times in the same interval and the annual transaction volume hit 450 billion Turkish Liras (the parity with dollars is roughly 2 to 1 so we are talking about $230 billion dollars). Consumer credits went from 2 billion liras to 216 billion liras, a 108-fold increase.
In the last ten years, Turkey's current account deficit increased 76 times to reach $53,6 billion. The net reserves of the Turkish Central Bank are roughly $40 billion, which means that the country does not have enough money to cover a single year deficit.
Construction/real estate is the other variable in the growth equation. The feverish rate of construction led one observer to call Turkey the biggest construction site on earth. There is also a real estate boom, or should we say, a real estate bubble like the ones we saw in the US before 2008 and Spain, Italy, Ireland, Greece and a number of other places. Banks made generous real estate loans and remained highly profitable as long as prices kept going up.
The current account deficit was financed with a constant flow of incoming capital, known as hot money. Not only did this provide fresh capital for the banks and construction sector, it also pushed up the Istanbul stock market. But since mid-May there has been a net capital outflow. Among emerging economies, Turkish stock market was the biggest looser with a drop of 22 percent on 22 May 2013. The bank stocks were hit hardest as they lost roughly 26 percent of their values. In total, the top ten companies lost $25 billion of their paper value. They have since recovered some of these losses but the trend remains downward.
Now Turkish assets are hovering around record lows again, with the lira's 17% decline making it one of the worst emerging-market performers, alongside India, Brazil and Indonesia. (...)
The losses magnify the imbalances in an economy dependent on imports and foreign capital, which analysts say leaves Turkey dangerously exposed to a hefty correction.
"Were global liquidity to dry up or risk appetite turn sour, the economy would be forced into a sharp adjustment," the International Monetary Fund warned in its last report. A June report from Morgan Stanley ranked Turkey as one of five emerging markets most vulnerable to a withdrawal of foreign financing.I would venture that the investors were also spooked by the rising jingoistic discourse and polarizing policies of the AKP and the growing authoritarianism of its leader, Prime Minister Erdogan.
It's Also the Politics, Stupid
With the economy seriously slowing down, with much smaller reserves than other emerging market countries, you would think the government would do everything in its power to create a stable political environment to pull foreign investors back in and the hot money flowing again.
Well, think again.
Just around the Gezi debacle, Erdogan decided to borrow a page from the Nixon-Rove playbook. Remember Nixon's Southern Strategy? Or Karl Rove's 50 percent plus one framework?
Basically, you do your best to polarize and divide up the electorate between "us" and "them" and you demonize one side by using the fears of the other side. You also act aggressively and when called on it, you claim to be the victim of, well, political correctness police, the effete liberal elite and the unpatriotic and godless elements in society.
You know. Them.
Since May, Erdogan has been attacking "them" at every chance he gets, using imaginative accusations that would make Bush's Brain blush. For days, he screamed at large rallies that Gezi protesters drank beer in a mosque. When the imam and muezzin of that mosque (civil servants in Turkey's strange separation of state and church) refused to corroborate these allegations, they were transferred to marginal mosques.
In his case, "them' also had a foreign component, usually in the form of an anti-semitic dog whistle like his strange crusade with the interest rate lobby. (Even though at times the anti-semitic undertone was more audible than a dog whistle, though some observers were more charitable than this blogger).
Lately, as a good Rovian, he has been introducing outlandish ideas hoping for a loud reaction, so that he could turn to his people with teary eyes and show the terrible hurt he experienced by their oh-so-mean outburst. (By the way, he cries publicly and as much as John Boehner).As with the GOP of the last three decades, the strategy calls for him to be both the bully and the pearl-clutching perennial victim.
Case in point: Two weeks ago, Erdogan arranged for four female AKP MP's to show up in Parliament wearing headscarves, a very popular issue with Islamists and a very sensitive one with secularists. Previously, they could not do this according to the bylaws on the books. He was hoping for the main opposition party to make loud noises as these female MPs entered to Assembly so that he could go to "his people" and tell them how these lovely Islamist women were being mistreated by jackboot militarists.
Instead, in a rare moment of inspiration, the main opposition party, CHP fielded their double amputee female MP, Safak Pavey to give a rousing speech.
That's Ms. Pavey on the right walking to the podium with her exposed prosthetic leg.
She was previously prevented by the AKP MPs from wearing trousers in the National Assembly, as they claimed that such an outfit would be against Parliamentary bylaws.
You can see the irony. And how Erdogan lost his touch. Rove would not have been happy with his new pupil.
This was followed by another political faux pas. A couple of weeks ago, Erdogan stated that he was going to authorize the regional governors to conduct raids to see if university students lived in a co-ed setting in privately rented apartments.
He was hoping that the core electorate of the AKP would rally behind him as the defender of morality, family values and various sacred things. It did not happen. Since what he suggested would be plainly illegal and unconstitutional, his speech was met with sarcasm and disbelief.
But it proved to be a turning point for the AKP.
A Power Struggle Within the AKP?
The AKP has always been an umbrella party. It is a large tent that covers a core Islamist group, social conservatives, small business owners, nationalists who also cherish their Muslim identity and economic opportunists in the best capitalist sense of the term.
The Islamist core is divided into hard core fundamentalists (but not in the Salafist sense), formerly pious-recently affluent folks and people who are "inspired by" Fethullah Gülen, the Islamist preacher who lives in a large compound in Pennsylvania on a special visa. He is the kind of Islamist whose Green Card application was supported by Graham Fuller, George Fidas and Morton Abramowitz. You draw your own conclusions.
The President Abdullah Gül and Deputy Prime Minister Bülent Arinç are among the founders of the party and are the most visible members of the fraction "inspired by" Fethullah Gülen. A couple of years ago, Erdogan floated the idea of a constitutional change to establish a presidential system. He wants a system closer to the Russian regime (as opposed to the US or French arrangements) where the President can dissolve the Parliament, presides over Cabinet meeting and appoints all rectors, ambassadors and half of the Constitutional Court judges. And he wants to be that President.
Erdogan assumed that Abdullah Gül would simply cede the presidency (as he gave up his Prime Minister post in the past), even though the Constitutional Court ruled that the President was eligible for a second and final term despite a constitutional amendment that shortened his mandate from seven years to five.
Instead, Gül signalled his intention to stay put by launching a full-fledged re-branding effort. He used to be known as a hardcore Islamist, more conservative and ideologically principled than Erdogan. His new image is a lot more centrist, open minded, tolerant and democratic.
Last October, he addressed the Parliament to urge them to pass democratic reforms, to extend liberties and to adopt a position of reconciliation towards Kurds. Since then, he kept pushing for more democracy and distancing himself from the government and the PM at every chance he got. Especially after the Gezi incidents, Gül's (and Arinç's) tolerant message which disapproved of police brutality stood in sharp contrast to Erdogan's vociferous law and order rhetoric.
In fact, Gül is now seen as the wise elder statesman and opinion polls show that a majority of the electorate prefer him over Erdogan as President. Even the opposition CHP stated (albeit hypothetically) that they would support him for president.
To sharpen the divide, Gül also advocated, rather publicly, a more peace-oriented foreign policy, especially towards Turkey's neighbors. And he favored continuity over Erdogan's seemingly impulsive foreign policy priorities: When Erdogan suggested to abandon the EU in favor of Shanghai Five, Gül became the voice of Turkey's longstanding European aspirations.
Moreover, the Gülen movement closed ranks behind Gül and used their considerable media muscle to support his re-branding effort. Pro-Gülen media organizations began criticizing Erdogan's policies while voicing support for Gül's more moderate alternatives. This is what they wrote about Erdogan's female MP stunt. Moreover, the co-ed story was leaked by their flagship newspaper Zaman, which happens to be the largest Turkish daily.
The movement was especially worried that the seriously flawed prosecution of Sledgehammer and Ergenekon cases reflected badly on them and turned the public opinion against them, as there is a widely held belief that the justice system has been infiltrated by pro-Gülen prosecutors and judges. The movement figured that supporting Gül's more democratic and centrist message would be mutually beneficial.
There are some observers who believe that Gül may be creating his own political organization.
However, I am not entirely convinced that Gül needs to undertake such a drastic effort. Especially since all he has to do is wait. You see, Erdogan and 73 AKP MPs (of whom 18 are Cabinet members) cannot stand for re-election, as they will have reached their self-imposed term limits by the 2015 general elections. This is why Erdogan wants to be President as it enables him to bypass these term limits.
Simply blocking Erdogan's path to presidency would be enough to get rid of him and his most important lieutenants. So, all Gül needs to do is to work on his image as a moderate politician who believes in a multi-cultural country and make Erdogan look like an out-of-control-autocrat.
And the best way to do that is to give Erdogan enough rope with which he can hang himself.
The co-ed apartments statement provided just the perfect length.
After the (pro-Gülen) Zaman daily reported that Erdogan was contemplating to direct the authorities to conduct raids against mix-gender housing arrangements, Deputy Prime Minister Bülent Arinç, as the spokesman for the government, denounced it as a fabrication. He suggested that Erdogan could not have meant what was reported since such raids would be illegal and unconstitutional. Within a short span of time, Erdogan retorted that he was planning such raids and that he meant every word.
In the past, when such public disagreements surfaced, Arinç always retreated. This time, he did not flinch. He went on TV and said that he stood by his views. He looked into the cameras and added that clearly there was a contradiction between the two statements but it was up to the PM to explain the discrepancy.
And that was that. Erdogan refused to talk about it any more but the damage was done. He stood there as an-out-of-control bully and Gül, Arinç and other "inspired by Gülen" politicians appeared as law-abiding, tolerant and democratic people.
The re-branding of Gül was complete and in the process, he let Erdogan to re-brand himself as a terrible autocrat.
There is one more thing.
Erdogan once suggested that Turkey was a democracy train that carries him to his destination (at the time, widely assumed to be an Islamist end point). This summer, during Gezi incidents, when a group of foreign investors met with Gül to express their concerns, he used the same metaphor but to highlight the difference:
While the Gezi protests were going on, during a meeting with representatives of foreign companies in Turkey, Gul indicated that Turkey’s democratic vocation is clear, saying that the necessary rails have been laid for it. He added, however, “If there is a problem with the locomotive, that locomotive can be changed.”When asked if they could report this to their senior management, Gül said that they could quote him verbatim.
I don't think the message could be any clearer.
Is it Dusk or a New Dawn for Erdogan?
No one knows the answer to that, at least not with any certainty. Personally, I am not very optimistic about his chances for survival.
Besides his under-reported health issues, to succeed, he has to overcome a number of intractable problems. And with his diminishing regional political capital and tightening room of maneuver, I seriously doubt that he can tackle them.
Take a look at a sample of regional problems:
- In Syria, he aligned himself to the Muslim Brotherhood only to lose them after the Egypt coup. He refused to acknowledge my long held belief that Kurds are the sword to cut the Syrian knot. Instead, he backed the bloodthirsty Jihadis in an effort to weaken the PYD in Syrian Kurdistan. This support is coming back to haunt him and any opening towards PYD (and the PKK in Turkey) will be that much more difficult to negotiate. Yet, without them he has a huge problem in his Southeastern border.
- In Iraq, Turkey's other Southeastern neighbor, he made gas and oil deals with the Kurdistan Regional Government (KRG) and openly backed its leader Masoud Barzani. Now, Barzani is getting involved in Syrian Kurdistan and Erdogan is trying to backtrack by attaching new importance to Baghdad. But the Iraqi PM Nouri Maliki is clearly aligned with Iran. Forming an alliance with him will infuriate Saudi Arabia as the Kingdom is likely to see this as a betrayal against the backdrop of a sharp Sunni-Shiite divide in the region.
That would mean further loss of hot money coming from the Gulf and the peninsula.
- In Iran, his newly initiated efforts to placate the regime constitute a serious problem for the Saudis and the Israelis. Besides, if Iran manages to get the sanctions lifted, it could become a serious rival in the region. A rapprochement with Iran could also negatively affect Turkey's relations with Israel especially with Natanyahu fighting a loosing battle to demonize Iran and Avigdor Lieberman is back as Minister of Foreign Affairs. With Syria's simmering civil war and Lebanon and Jordan in jeopardy, regardless of what I called the Kabuki theater rhetoric, Israel remains a strategic partner Erdogan cannot afford to lose.
- In the general region, how could Turkey be crowned again the leader of the Sunni alliance without creating a host of other problems? There is a massive resentment in Egypt caused by his fiery rhetoric after the coup. Since the coup was orchestrated by the Saudis, the resentment is shared by them. If Erdogan disavows his early reactions and welcome General al-Sisi, the AKP's rank and file would rise up against him, as they see themselves the targets and victims of previous coups in Turkey.
Domestically, the situation is even more challenging for the embattled leader of the AKP.
To win elections convincingly, even the upcoming (March 2014) local elections, he needs to get the economy going again. In the short run, this means he has to find a way to get the hot money faucet fully open. But with Europe still mired in crisis, Russia sitting on the fence because of Syria, the only major source of foreign capital is the Gulf countries and Saudi Arabia. They will not budge unless he changes his foreign policy in a certain direction.
Chicken and egg conundrum.
Also, to convince other foreign investors that Turkey is a stable country open for business, he needs to scrap his "interest lobby" rhetoric, appear more conciliatory and give up his Rovian polarization strategy. Without such steps, hedge funds and Western investors will simply go to other emerging markets.
Moreover, if he is to fight off the Gül-Gülen challenge, he needs an even more dramatic image make-over.
But re-branding Erdogan quickly might be very difficult. His polarizing image is too vivid and too fresh in people's minds. More importantly, the core groups that support him might be turned off by such a move. They don't see him as a polarizing autocratic politicians. To them he is their dragon slayer, their hero who stands up to the international "interest lobby" and their backstabbing partners inside the country.
As you can see, he does not have many straightforward options.
To use Gül's train metaphor, I would not be surprised if there was a change of locomotive in the next year or so.
Is it Irrelevant that Rob Ford is a Conservative Politician?
You might have seen some funny clips about the hapless Toronto mayor Rob Ford.He is the overweight politician who has a weakness for legal and illegal substances.
He was shown swearing obscenities, shouting death threats, smoking crack cocaine and doing an assortment of stupid things while completely drunk. He is out of control and so far no one seems to have the power to stop him or push him out of the office.
If you haven't seen the clips and are curious, feel free to Google them, I will not provide any links.
To me, he is just another bully fallen on hard times. And like all bullies, he thought he was untouchable and he lied for a long time to cover up his aberrant and at times illegal activities.Also typical were his insincere apologies when he was caught and his subsequent threats against witnesses.
So far, there is nothing of interest for this blog.
What got my attention was the simple fact that none of the international news outlets I read reported his political affiliation. Even if I knew very little about him (and I don't know much, though enough to score 14 out of 16 in this quiz), I could guess from his "cutting taxes" platform that he was a conservative politician.
And to me this is a very salient fact: like all conservative politicians Rob Ford is big on law and order. Yet here he was buying crack cocaine, buying marijuana, driving under influence, making death threats.
How is that not part of the story?
I realize that Toronto requires mayoral candidates to run as nonpartisan individuals. But his previous political affiliation should have been relevant.
The BBC said nothing. Reuters had several pieces on him but never mentioned his party. New York Times was also silent.
Canadian media outlets seemed to know his affiliation but did not usually report it unless it had something to do with other parties. For instance, Globe and Mail mentioned his assumed political identity in relation with Ontario Liberals' posture in the scandal, but even then, it used a vague language:
One MPP acknowledged that the party appreciates the awkward position in which the scandal-prone mayor places the opposition Progressive Conservatives, the party with whom he is most closely identified and aligned.His otherwise long and detailed entry in Wikipedia was also less than direct. It said:
After Ford Sr.'s death, Rob has maintained political connections with the provincial PC party and the federal Conservative Parties. A picture of former Ontario Premier Mike Harris with Ford's father adorns the mayor's office.It is quite possible that he was not officially a member of the Progressive Conservative Party (the most oxymoronic conservative party name in history) but by all accounts he was affiliated with them.
Why not mention it?
My pet peeve is that when it comes to conservative politicians, like diaper man David Vitter, the contradiction between their beliefs and their actions (family values vs having sex with prostitutes in diaper) is downplayed and the situation is presented as a human drama.
When it comes to liberal politicians like the execrable misogynist Bob Filner, the underlying hypocrisy becomes the cornerstone of the story.
Rob Ford is a conservative.
29 October 2013
Iran Is the Rising Star of the Middle East
I don't know if you have been paying attention but Iran has recently become the rising star of the Middle East. It was partly due to its own astute tactics and partly due to a fortuitous realignment of stars that led to important regional successes and new alliances.
Let's start with their successful moves.
Like some Americans who equate a Southern accent with lack of intelligence or worse, some Westerners equate mullah headgear with stupidity. In recent months, the Supreme Leader Khamenei and his posse proved that they are anything but.
Their brilliant move for the presidential elections is a case in point.
For years, they used Mahmoud Ahmadinejad as a perfect (and powerless) stooge who was basically good at shooting his mouth off. To borrow a phrase from Lenin, he was a useful idiot whose incendiary remarks, and the rebukes they garnered, helped the regime shore up domestic support. It was a classic Us vs Them strategy. Consequently, for these recent presidential elections, everyone expected the Ayatollah and Co. to field a clone of Ahmadinejad.
Instead, they opted for a smart new strategy. With tight sanctions contracting the economy and making life unbearable for ordinary Iranians, the ruling elite realized that, if the economy circles the drain, the Islamic Republic will quickly follow it down that same drain. They badly needed those sanctions lifted. And lifted quickly. Which meant that they had to find a candidate who could start negotiating with the West about Iran's nuclear program without making it look like the mullahs are giving in to the pressure created by the sanctions.
Enter Rouhani
Hassan Rouhani was the perfect dark horse candidate. He is a cleric. He has a reputation for being a moderate even though he has worked for the Islamic Republic all his life. More importantly, he was Iran's chief nuclear negotiator until 2005 so he was and is very familiar with the whole negotiation setup. Once in, it was easy to get the previous moderate presidents (Khatami and Rafsanjani) endorse him, as Rouhani had worked with both of them in recent years.
The whole thing was packaged so well that a week before the elections most observers assumed that Tehran mayor Ghalibaf was likely to win the first round. Rouhani was mentioned as a possible runner up (which would have made him one of the two candidates in the runoff elections) but he was not the obvious number 2.
But even then, if you looked up close, you could see that Rouhani was more than the candidate of the moderates and reformists. During the presidential debates, one of the candidates thought to have Supreme Leader's support, Saeed Jalili (the top nuclear negotiator until the elections) was attacked by Ali Akbar Velayati, one of the closest advisors of Khamenei, for his handling of the nuclear issue. This shocked the Iranian public at the time but it was a clear sign of where the mullahs were going with these elections.
As we now know, Rouhani won with 50% of the vote with no need for runoff elections. Tellingly, he performed very well in conservative rural regions. And we know from the 2009 elections that you need more than charisma to do well in those districts.
First, he chose himself an unusual but brilliant Minister of Foreign Affairs.
The Elegant Mr. Zarif
Rouhani's Minister of Foreign Affairs, Javad Zarif is a well connected, Western educated career diplomat. Zarif means "elegant" in Arabic and by all accounts his diplomatic style is in line with his name.
Zarif studied at San Fransisco State University and holds a Ph.D degree (International Law and Policy) from the University of Denver. Needless to add, he is fluent in English. He was also the Ambassador to UN until 2007. He is very well connected: at the time he privately met with various politicians including (then Senator) Joe Biden and Chuck Hagel to push the Grand Bargain, a comprehensive plan to normalize relations between the US and Iran.
You could say that he is not the kind of minister the conservative Iranian Parliament would confirm easily. They did (even though they rejected Rouhani's choice for Education, Science and Sport). Without the blessing of the Supreme Leader I doubt that Zarif would have made it.
This was in mid-August. On 5 September, Javad Zarif opened a Twitter account outside Iran. The following day, he tweeted "Happy Rosh Hashana" to celebrate the Jewish New Year. When Nancy Pelosi's daughter responded to his tweet with "The New Year would be even sweeter if you would end Iran's Holocaust denial, sir" he countered it with "Iran never denied it. The man who perceived to be denying it is now gone. Happy New Year."
You see what I mean by brilliant?
Then he appeared on ABC's This Week and said that "Holocaust is a heinous crime and a genocide." Very significantly, he dismissed the phrase "the myth of the massacre of Jews" that is on Ayatollah Khamenei's Web site as poor translation. I say significantly because Khamenei and his entourage did not contest his argument. And they would have done so in the past.
A few days earlier, Zarif pulled John Kerry aside to have a talk during a UN event. This may sound trivial to you and me but it was the first such encounter since 1979. Unsurprisingly, Zarif himself announced it to the media and he emphasized the fact that it was more than a casual encounter. He also said that his goal was to get nuclear talks underway and that, sooner rather than later.
Then, Zarif offered to help with Syria's weapons of mass destruction. He stated that Iran would be happy to participate in Geneva talks but would do so only if asked. He also made it clear that Assad's pledge was not just Putin's victory and without Iran's vigorous push in the same direction things might not have gone as smoothly. (And I, for one, believe him)
While this was going on, Rouhani showed up in New York and gave an interview to Christiane Amanpour (who is of Iranian descent and presumably speaks Farsi). He made a carefully parsed statement about the Holocaust which was immediately hailed as a major turning point. It is true that the statement was a departure from the crude Ahmadinejad denials as it acknowledged that "crimes against humanity, including what the Nazis did to Jews and non-Jews are reprehensible." But it was also rather...what is the word...slippery. Yet, the following day, the headlines read "Iran's Rouhani Calls Holocaust Crimes Against Jews."
Immediately, the Pars News Agency (controlled by the Revolutionary Guards and hardliners) disputed the CNN translation and claimed that Rouhani did not make such a statement. The protest was obviously for domestic consumption but interestingly, all the usual suspects, who would normally pounce on such a vocal denial as proof of Iranian duplicity, were too busy to celebrate the new Iranian leader to notice.
While the back and forth on the meaning of the statement was preoccupying observers, Rouhani did something no other Iranian President did in thirty four years, he called the American President.
The other crucial Rouhani move was to take ownership of nuclear talks:
The two-day nuclear talks in Geneva with P5+1 (Permanent members of the Security Council plus Germany) began with low expectations. Yet, at the end of the first day, Iran had already agreed to the most detailed nuclear checks ever, according to Baroness Ashton speaking on behalf of the EU.
On the second day, Iran made a very comprehensive new proposal:
Obama Administration: Iran's New BFF
In all this, Rouhani was not alone. In fact, you could say that he was actively aided and abetted by the White House.
First proof of that is the reaction to Rouhani's extremely parsed statement on genocide. As I noted above, normally, in mainstream media, such statements are reported with a mixture of indifference and sarcasm. This time, it was branded as "the truth" right away. In the same vein, Glenn Greenwald recently noted how Brian Williams, the NBC News anchor, stated that Iranian leaders "are suddenly claiming they don't want nuclear weapons" and even though (as Greenwald went on to quote) the same leaders were saying the same thing over and over again in recent years.
Clearly, the media narrative has shifted. And that doesn't happen by itself.
An even better sign of that unusual collaboration was how Netanyahu was sidelined in the process. Right after Rouhani, he went on to the UN to denounce Iranian regime:
He was not happy.
Israel was not the only regional player getting miffed by the US-Iran rapprochement. Saudi Arabia was furious. So much so that an Israeli analyst suggested that there was now a Israeli-Sunni coalition against Iran:
In fact, Saudi reaction was so public and undisguised that most regional observers were taken aback, especially since the Kingdom has no Plan B.
Why the US Has Become Iran's BFF?
There are three clear reasons.
First, Iran committed itself to serious negotiations over its nuclear facilities. This is very open and clear cut. This is how the chief US negotiator reacted to Javad Zarif's proposals:
Second, if you know the situation in Syria, President Assad has been making some gains on the ground. That is mostly because there were 8,000-10,000 Hezbollah fighters helping the regular Syrian army and the recent gains were all due to their presence.
Out of the blue, Iran has just asked Nasrallah to reduce this massive presence and now there are a "few thousand fighters" left in Syria. That will have a marked impact on the Syrian conflict.
Finally, and it may not seem much to you, Iran has agreed to take Hamas under its wings again.
Remember Meshaal Khaled's departure from Syria to open up office in Qatar? Or his reliance on Mursi and Muslim Brotherhood even though his rival, the West Bank Prime Minister Ismail Haniyeh remained Iran's point man?
When Khaled briefly returned to West Bank I reported it with the title "The Return of the Prodigal Son." Well, Khaled has now announced his decision to visit Iran and the new President, Hassan Rouhani, said that they would greet him with open arms. His visit was reported as "The Return of the Prodigal Son.
Why is this relevant?
That is for another post.
In the meantime, keep an eye on Iran and its President.
Let's start with their successful moves.
Like some Americans who equate a Southern accent with lack of intelligence or worse, some Westerners equate mullah headgear with stupidity. In recent months, the Supreme Leader Khamenei and his posse proved that they are anything but.
Their brilliant move for the presidential elections is a case in point.
For years, they used Mahmoud Ahmadinejad as a perfect (and powerless) stooge who was basically good at shooting his mouth off. To borrow a phrase from Lenin, he was a useful idiot whose incendiary remarks, and the rebukes they garnered, helped the regime shore up domestic support. It was a classic Us vs Them strategy. Consequently, for these recent presidential elections, everyone expected the Ayatollah and Co. to field a clone of Ahmadinejad.
Instead, they opted for a smart new strategy. With tight sanctions contracting the economy and making life unbearable for ordinary Iranians, the ruling elite realized that, if the economy circles the drain, the Islamic Republic will quickly follow it down that same drain. They badly needed those sanctions lifted. And lifted quickly. Which meant that they had to find a candidate who could start negotiating with the West about Iran's nuclear program without making it look like the mullahs are giving in to the pressure created by the sanctions.
Enter Rouhani
Hassan Rouhani was the perfect dark horse candidate. He is a cleric. He has a reputation for being a moderate even though he has worked for the Islamic Republic all his life. More importantly, he was Iran's chief nuclear negotiator until 2005 so he was and is very familiar with the whole negotiation setup. Once in, it was easy to get the previous moderate presidents (Khatami and Rafsanjani) endorse him, as Rouhani had worked with both of them in recent years. The whole thing was packaged so well that a week before the elections most observers assumed that Tehran mayor Ghalibaf was likely to win the first round. Rouhani was mentioned as a possible runner up (which would have made him one of the two candidates in the runoff elections) but he was not the obvious number 2.
But even then, if you looked up close, you could see that Rouhani was more than the candidate of the moderates and reformists. During the presidential debates, one of the candidates thought to have Supreme Leader's support, Saeed Jalili (the top nuclear negotiator until the elections) was attacked by Ali Akbar Velayati, one of the closest advisors of Khamenei, for his handling of the nuclear issue. This shocked the Iranian public at the time but it was a clear sign of where the mullahs were going with these elections.
As we now know, Rouhani won with 50% of the vote with no need for runoff elections. Tellingly, he performed very well in conservative rural regions. And we know from the 2009 elections that you need more than charisma to do well in those districts.
Early on in the campaign experts suggested Rouhani was not well enough known to win. But in the end he attracted support not only in Tehran but also in provincial towns where Ahmadinejad performed well in the disputed 2009 race.Once elected, he immediately put together a very detailed and delicately balanced plan to get the sanctions removed.
First, he chose himself an unusual but brilliant Minister of Foreign Affairs.
The Elegant Mr. Zarif
Rouhani's Minister of Foreign Affairs, Javad Zarif is a well connected, Western educated career diplomat. Zarif means "elegant" in Arabic and by all accounts his diplomatic style is in line with his name.
Zarif studied at San Fransisco State University and holds a Ph.D degree (International Law and Policy) from the University of Denver. Needless to add, he is fluent in English. He was also the Ambassador to UN until 2007. He is very well connected: at the time he privately met with various politicians including (then Senator) Joe Biden and Chuck Hagel to push the Grand Bargain, a comprehensive plan to normalize relations between the US and Iran.You could say that he is not the kind of minister the conservative Iranian Parliament would confirm easily. They did (even though they rejected Rouhani's choice for Education, Science and Sport). Without the blessing of the Supreme Leader I doubt that Zarif would have made it.
This was in mid-August. On 5 September, Javad Zarif opened a Twitter account outside Iran. The following day, he tweeted "Happy Rosh Hashana" to celebrate the Jewish New Year. When Nancy Pelosi's daughter responded to his tweet with "The New Year would be even sweeter if you would end Iran's Holocaust denial, sir" he countered it with "Iran never denied it. The man who perceived to be denying it is now gone. Happy New Year."
You see what I mean by brilliant?
Then he appeared on ABC's This Week and said that "Holocaust is a heinous crime and a genocide." Very significantly, he dismissed the phrase "the myth of the massacre of Jews" that is on Ayatollah Khamenei's Web site as poor translation. I say significantly because Khamenei and his entourage did not contest his argument. And they would have done so in the past.
A few days earlier, Zarif pulled John Kerry aside to have a talk during a UN event. This may sound trivial to you and me but it was the first such encounter since 1979. Unsurprisingly, Zarif himself announced it to the media and he emphasized the fact that it was more than a casual encounter. He also said that his goal was to get nuclear talks underway and that, sooner rather than later.
Then, Zarif offered to help with Syria's weapons of mass destruction. He stated that Iran would be happy to participate in Geneva talks but would do so only if asked. He also made it clear that Assad's pledge was not just Putin's victory and without Iran's vigorous push in the same direction things might not have gone as smoothly. (And I, for one, believe him)
While this was going on, Rouhani showed up in New York and gave an interview to Christiane Amanpour (who is of Iranian descent and presumably speaks Farsi). He made a carefully parsed statement about the Holocaust which was immediately hailed as a major turning point. It is true that the statement was a departure from the crude Ahmadinejad denials as it acknowledged that "crimes against humanity, including what the Nazis did to Jews and non-Jews are reprehensible." But it was also rather...what is the word...slippery. Yet, the following day, the headlines read "Iran's Rouhani Calls Holocaust Crimes Against Jews."
Immediately, the Pars News Agency (controlled by the Revolutionary Guards and hardliners) disputed the CNN translation and claimed that Rouhani did not make such a statement. The protest was obviously for domestic consumption but interestingly, all the usual suspects, who would normally pounce on such a vocal denial as proof of Iranian duplicity, were too busy to celebrate the new Iranian leader to notice.
While the back and forth on the meaning of the statement was preoccupying observers, Rouhani did something no other Iranian President did in thirty four years, he called the American President.
White House officials described the 15 minute conversation - apparently initiated by Mr Rouhani - as cordial, the BBC's Bridget Kendall reports from New York.In the brouhaha that ensued, people began speculating whether Rouhani is the architect of a radically new policy towards the US. But the Supreme Leader intervened right away and put a stop to it:
"We support the diplomatic initiative of the government and attach importance to its activities in this trip," he said on his website.If you remember that Rouhani was sacked as the top nuclear negotiator by the Supreme Leader for being too accommodating to the US you understand the significance of that simple sentence.
The other crucial Rouhani move was to take ownership of nuclear talks:
Earlier this month Mr Rouhani transferred responsibility for talks on the country's nuclear programme to the foreign ministry.
Until now they had been conducted by the Supreme National Security Council, which is appointed by and answerable to the Supreme Leader, Ayatollah Khamenei.If you know anything about Iranian system, you would know that you don't take that kind of office from the Supreme Leader without his acquiescence.
The two-day nuclear talks in Geneva with P5+1 (Permanent members of the Security Council plus Germany) began with low expectations. Yet, at the end of the first day, Iran had already agreed to the most detailed nuclear checks ever, according to Baroness Ashton speaking on behalf of the EU.
On the second day, Iran made a very comprehensive new proposal:
Iran has put forward a new proposal to resolve the nuclear crisis that includes a freeze on production of 20% enriched uranium, a pledge to convert its stockpile to fuel rods and an agreement to relinquish spent fuel for a still-to-be completed heavy water reactor, according to an Iranian source who has proven reliable in the past.The talks will resume on 7 and 8 November and Javad Zarif made it clear that uranium enrichment freeze and spot checks were on the table.
Obama Administration: Iran's New BFF
In all this, Rouhani was not alone. In fact, you could say that he was actively aided and abetted by the White House.
First proof of that is the reaction to Rouhani's extremely parsed statement on genocide. As I noted above, normally, in mainstream media, such statements are reported with a mixture of indifference and sarcasm. This time, it was branded as "the truth" right away. In the same vein, Glenn Greenwald recently noted how Brian Williams, the NBC News anchor, stated that Iranian leaders "are suddenly claiming they don't want nuclear weapons" and even though (as Greenwald went on to quote) the same leaders were saying the same thing over and over again in recent years.
Clearly, the media narrative has shifted. And that doesn't happen by itself.
An even better sign of that unusual collaboration was how Netanyahu was sidelined in the process. Right after Rouhani, he went on to the UN to denounce Iranian regime:
Netanyahu called Rouhani a "wolf in sheep's clothing" saying his recent "charm offensive" with Western leaders is a "ruse and a ploy" to "fool the world" while Iran continues toward nuclear armament. He maintained that Israel would not permit Iran to develop nuclear weapons, even if it meant taking unilateral military action. He also accused Tehran of supporting terrorist attacks and fostering insecurity in other countries in the Middle East.And this is how Bibi Netanyahu's UN speech was reported by Reuters:
Israeli Prime Minister Benjamin Netanyahu said this week that Iran's new president was a "wolf in sheep's clothing", but he himself looked increasingly like a lone wolf as his allies seek to bring Tehran into the fold.Do you ever remember reading such a dismissive line about a sitting Israeli President in mainstream media?
He was not happy.
Israel was not the only regional player getting miffed by the US-Iran rapprochement. Saudi Arabia was furious. So much so that an Israeli analyst suggested that there was now a Israeli-Sunni coalition against Iran:
The recent events as well as America's waning resolve vis-Ã -vis Iranian President Hassan Rouhani's "charm offensive" have made the ties Israel has fostered with senior states from the Sunni axis much less secretive than they used to be. What we have here, in essence, is a quiet coalition between the Gulf countries and Israel versus America and Europe — with Iran being the only topic on the agenda.Saudi Arabia also turned down a seat in the Security Council to protest the US handling of Syria's chemical weapons episode.
In fact, Saudi reaction was so public and undisguised that most regional observers were taken aback, especially since the Kingdom has no Plan B.
Why the US Has Become Iran's BFF?
There are three clear reasons.
First, Iran committed itself to serious negotiations over its nuclear facilities. This is very open and clear cut. This is how the chief US negotiator reacted to Javad Zarif's proposals:
Undersecretary of State Wendy Sherman, who is the chief US negotiator with Iran, told Christiane Amanpour of CNN, “Foreign Minister Zarif and his delegation came prepared for detailed, substantive discussion with a candor that I certainly have not heard in the two years I’ve been meeting with Iranians, and my P5+1 colleagues, some of whom have been doing this for quite some time, found quite new and different.”Essentially, Iran showed its willingness to play a less menacing role in the region by agreeing to freeze its enrichment efforts and to allow extensive checks (potentially including spot checks). That certainly removed the urgency pushed by Israel and diffused the so-called Iranian threat.
Second, if you know the situation in Syria, President Assad has been making some gains on the ground. That is mostly because there were 8,000-10,000 Hezbollah fighters helping the regular Syrian army and the recent gains were all due to their presence.
Out of the blue, Iran has just asked Nasrallah to reduce this massive presence and now there are a "few thousand fighters" left in Syria. That will have a marked impact on the Syrian conflict.
Finally, and it may not seem much to you, Iran has agreed to take Hamas under its wings again.
Remember Meshaal Khaled's departure from Syria to open up office in Qatar? Or his reliance on Mursi and Muslim Brotherhood even though his rival, the West Bank Prime Minister Ismail Haniyeh remained Iran's point man?
When Khaled briefly returned to West Bank I reported it with the title "The Return of the Prodigal Son." Well, Khaled has now announced his decision to visit Iran and the new President, Hassan Rouhani, said that they would greet him with open arms. His visit was reported as "The Return of the Prodigal Son.
Why is this relevant?
That is for another post.
In the meantime, keep an eye on Iran and its President.
03 October 2013
NSA: Keith Alexander as James T. Kirk
Sometimes a picture is worth a thousand words.
I came across these pictures of the NSA Situation Room. When I saw them, the NSA's ambitious grab for information made perfect sense.
The room is called Information Dominance Center.
Yes, Information Dominance.
These are eleven years old boys.
The person who dominates information (Information Dominatrix?) is sitting in the Captain James T. Kirk chair in the middle. Currently, that's General Keith Alexander.
He was not the person who designed the room (one of his predecessors did it but no one knows for sure).
Some Hollywood studios helped out, with Disney producing a custom graphics chip for the 22' screen in front of Kirk, I mean Alexander.
It has been reported that the doors to the Dominance Center open with a Start Trek whoosh. Nice.
While the center was called something else before (Land Information Warfare Activity) the chair has always been known as the Kirk Chair. Apparently, all the Congressmen who visited the facility demanded to sit in it (presumably to pretend shooting Klingons).
This is how the architect who designed the Dominance Center describes it.
I don't know about you but after seeing these pictures, I feel I can trust these people with my private information.
I came across these pictures of the NSA Situation Room. When I saw them, the NSA's ambitious grab for information made perfect sense.
The room is called Information Dominance Center.
Yes, Information Dominance.
These are eleven years old boys.
The person who dominates information (Information Dominatrix?) is sitting in the Captain James T. Kirk chair in the middle. Currently, that's General Keith Alexander.
He was not the person who designed the room (one of his predecessors did it but no one knows for sure).
Some Hollywood studios helped out, with Disney producing a custom graphics chip for the 22' screen in front of Kirk, I mean Alexander.
It has been reported that the doors to the Dominance Center open with a Start Trek whoosh. Nice.
While the center was called something else before (Land Information Warfare Activity) the chair has always been known as the Kirk Chair. Apparently, all the Congressmen who visited the facility demanded to sit in it (presumably to pretend shooting Klingons).
This is how the architect who designed the Dominance Center describes it.
I don't know about you but after seeing these pictures, I feel I can trust these people with my private information.
02 October 2013
Air France vs Turkish Airlines: A Primer in Experience Economy
One of my pet peeves is the interminable refrain about the detrimental effects of labor cost for companies. Since the Reagan years (and the accompanying Mergers and Acquisitions (M&A) mania), it became the mantra of top CEOs that jobs are the main source of their economic woes. Business publications always describe corporate titans bravely slashing, cutting and shedding jobs.
The importance of achieving profitability through layoffs has been repeated so many times that, by now, everyone considers it a truism.
I don't. In fact, I believe that, in most cases, this is pure rubbish.
Recently, I came across of a perfect example to illustrate why I consider job slashing a self destructive action for most corporations.
Air France has just announced that, after six consecutive annual losses, they will be cutting 2800 jobs. This is their third round of reductions as they started the trend in 2009 with 2500 layoffs citing the economic crisis. A couple of years later, they followed through with another 5000 jobs. And now 2800 jobs. The most recent layoff plans are also accompanied by drastic fleet cuts.
Air France is not unique. Lufthansa has been in the red for some time and Iberia and British Airways are struggling as well.
The industry experts are offering several explanations for this state of affairs:
The problem is that in the same time period, there is another European airline that continued to expand, to hire people and to enlarge its fleet. Moreover, that company managed to remain profitable. In other words, economic crisis, high fuel cost and competition from cheap airlines seemed to have very little effect on that other airline.
How could this be? Either the causes offered by the traditional airlines are invalid or this other company is doing something quite remarkable despite all these adverse elements.
The company in question is the Turkish Airlines. Since the 2008 crisis, its revenues went up, the number of passengers it carried increased and its operating profits soared almost every year:
I will provide two reasons for the failure of Air France and the success of Turkish Airlines.
One is the traditional economics argument about productivity. And the other is a fairly new concept related to the Experience Economy.
Productivity
Let me put it boldly: the problem for Air France is not that its labor force is expensive. The problem is that Air France's operational and logistics infrastructure is so out of date and so badly designed that to function at a basic level it has to use too much of that expensive labor force.
I am not making this up. Here are the numbers: Take a look at where Air France stands.
Let me illustrate this with some anecdotal evidence.
If you have ever flown with Air France you would know that the average airport check-in time is 10-15 minutes. Sometimes even longer. The uniformed person behind the counter furiously types things only to surface briefly to ask you some inane questions. Then they are gone again, typing away. All that time, you are there thinking why is this taking so long. It is one passenger, one seat. What is the big deal?
Wasting your time is not important from the corporate perspective. But the problem is that, at that pace, the company has to deploy more counter agents if they hope to check-in a 300-passenger flight within two hours.
The same goes for their Web site. It is not well designed. It is not easy to reserve a ticket. And check-ins are a pain. The system crashes all the time. It loses your frequent flyer information sporadically. And infuriatingly, sometimes it refuses to check you in for no apparent reason. In such situations, you have to call a live agent and explain your predicament. And more often than not they cannot help you, as the company has given them no authority to fix things. So you need to call someone else or go to the airport and extend your time at the counter.
The software system behind the Web site and the airport check-in process is simply archaic. Let me explain with an example: Recently, I tried to upgrade an economy ticket to business by paying the difference myself. No frequent flyer miles, just straight credit card transaction, nothing complicated. I couldn't do it on the Web site. I called their number, they told me that it couldn't be done on the phone. I had to go to the main Air France agency at Invalides in Paris. It took 45 minutes to complete the transaction and three agents had to get involved and several calls had to be made.
While sitting there helplessly, I glanced at their in-house screen and it looked like a combination of UNIX and OS2. The agent who was trying to help me kept repeating to herself the key combinations she was supposed to remember for various transactions. To scroll a three page document took her 20 seconds as she had to place her finger on the down arrow key to move the cursor line by line for three pages. It was unbelievable.
Inside the airplanes, it is the same situation. On a recent flight to New York, I was seated in the upper cabin of an Airbus 380. There were only two flight attendants for the entire upper deck. Clearly, labor cost reductions in action. As a result, even though they skipped a number of steps (like offering refreshments before the meal), the whole process took too long and at the end, the attendants were exhausted (I caught one of them napping sitting upright on a stool) and the passengers were unhappy.
Ground services are equally dismal. When you land in Paris, it takes 30 minutes or more for your luggage to arrive. Fortunately for Air France, French border police are set up in such a way that there are rarely more than two agents available for passport control, so the actual waiting time for your suitcase (i.e. by the conveyor belt) is ten to fifteen minutes.
You might think that these are not significant issues (if you are French you might think that this is the best there is) but each of these instances illustrate lack of productivity enhancing tools, techniques and training.
In contrast, let's take a look at that other airline. From the above table you already know that they are the most productive full service airline in Europe. There is a reason for that.
With Turkish Airlines, airport check-ins rarely take more than two minutes (I mean your time at the counter) as they allow all passengers to check-in at the same row of counters, regardless of their flights. They have a state of the art logistics system behind it and it sorts out luggage and destination. Which means that 15-20 counters could check-in the passengers of multiple planes leaving within a five-hour window.
Turkish Airlines Web site won several awards. It is well designed. It is fast. It almost never crashes. It retains your information, including previous multiple searches without you making an effort. It makes price comparisons easy and it gives you the option to reserve a ticket without actually buying it (almost no airline allows this anymore).
Online check-ins are a breeze and the system is advanced enough to let you get your boarding pass in your smart phone (iOS or Android). And you can use it to board the plane by simply showing the screen to the screen reader at the gate. (My French friends shrieked with horror when they heard that notion).
In the planes, the service proceeds at a much faster rate even though they offer you more choices. Flight attendants seem happy to be there. They encourage you to ask for stuff and bring those items to you with a smile.
When you land, your suitcase will be on the conveyor belt within exactly fifteen minutes of landing because the subcontractor who handles luggage will not get paid if they arrive one minute later. I am told that it is in their contract. So when you pass the border police, your suitcase is there waiting for you.
That is the productivity part.
While the company became the fourth largest airline in the process, with 234 destinations in 103 countries, thanks to its high productivity, its cost profile is closer to Low Cost Airlines, as mentioned above. Interestingly, the company is employing some of those expensive labor elements from European airlines with no apparent ill effects:
Commoditization of Goods and Services
A product or a service becomes commoditized when they begin to be mass produced, contain no real distinguishing features from similar products and compete mainly on the basis of price. Since the Industrial Revolution countless segments of goods and services market became commoditized. What Henry Ford did to manufacturing, Ray Croc did to food. And with the massive corporate move to China in the last three decades, we can confidently maintain that most things we consume nowadays have been commoditized.
In 1999, two management consultants by the name of Joseph Pine and James Gilmore published a book called the Experience Economy. Their main argument was that unless you change your product or service to convey a specific experience to the client and immerse them in it, sooner or later your offering will become commoditized. And somebody will offer it at a lower price point and destroy your margins. If you are curious but do not wish to read about it, here is a short video clip summarizing their argument.
What they mean is better understood through a couple of example.
As you know, coffee beans are fairly cheap. The amount of beans for a cup of coffee is not worth more than 2-3 cents. If you get a cup of coffee in a gas station or a diner, it will never be priced for more 50 cents as it has no distinguishing features. But if you offer it in a specific environment like Starbucks, customers would be willing to pay $2-3 without blinking.
That's because Starbucks is more than a place you buy a cup of coffee, it is a designed experience. It has its own lingo, like Tall, Grande and Venti (which is a made up word, btw), its own interior design and color scheme; it suggests a certain lifestyle blending youthful intellectualism with refined taste and care for the environment. Those elements are insinuated by laptop carrying young clients, free Wi Fi, specially selected music you can download on the spot and signs to let you know that everything you consume comes from a Fair Trade source. There is a barista skillfully making your coffee to your exact speciications.
So having an espresso there is almost an immersion into a distinct culture.
Or they say, look at Apple, its stores and its products. Whereas all the brick and mortar computer stores went belly up (apparently because of low cost competition from Amazon and the likes), Apple stores are thriving. That's because, the authors argue, they offer you more than a product, they offer you an experience. They say that the store environment has been designed to give you the impression of a high end boutique hotel's lobby or bar. Salespeople are not salespeople. They are knowledgeable geeks walking around not pushing products. They are young and happy and pleasantly geeky. They can sell you stuff without taking you to a cash register: their iPhones will process credit cards and will email you your invoice.
Apple products also evoke a strong feeling. Most Apple computers are more expensive than PCs and in terms of specs, they are not as advanced. But they command a significant premium over those grey and black boxes. This is not just because Apple hardware is well designed but it is especially because their use provides the customer with a very special experience.
The point is that unless you redesign your product and service and turn it into a whole new experience, you will end up competing on the basis of price. And sooner or later your margins will erode and you will no longer be profitable.
Let's take a look at what Air France did when Low Cost Airlines commoditized air travel.
They tried cutting their cost by copying the Low Cost tactics. The first thing was to reduce the cost of food and beverages. Now in most short-haul destinations (in Economy) Air France will give you a stale sandwich in a Saran-wrap and water. In long-haul flights, it will offer two equally inedible choices, usually a piece of chicken or some soggy pasta.
This is from the national airline of a country famous for its refined cuisine.
Their in-flight entertainment is dismal. The screens are low resolution and they have terrible viewing angle: if the person in front of you moves slightly your movie becomes invisible.
The seats are cramped as their fleet mainly consists of ageing planes. Even in Business Class they are superseded by most other airlines in the world (their First Class is actually very good but for the price of a small car it should be).
Lately, they have been piloting a new idea: introducing a Low Cost alternative without creating a new brand: they now have flights out of Orly with no Business class and where checked-in luggage is an extra. The seat do not recline and the food is not part of the category of comestible things.
The Air France lounges for Business Class passengers are mediocre. While most of them are reasonably airy, the seating design is awkward, the service is lacking and the food is utterly unappetizing.
When you look at the other airline, things are much different.
In short haul flights (3-4 hours) in Economy class, they offer a choice of two hot meals and in most cases they are both quite good. Their menus have been created by famous Turkish chefs and they use their names to emphasize that even in in the back of the plane things are different.
In long flights, they have actual chefs in the plane with full kitchen outfits, going around in all cabins to check if people are happy with their meal. I went to Hong Kong with them and on the way in I was in Economy and on the way out I was in Premium (the class between Economy and Business) and in both cases, I was offered several choices, a chef asked my opinion about the food, flight attendants were happy to give me more wine with my meal. I felt like I was in a decent restaurant. I would take their Premium over Air France's Business class any day.
The seats were large and comfortable, they reclined quite well and the entertainment system was top-notch. The screens were high resolution and the programming was extensive. Film start times were fast and the sound was decent.
Finally, their lounge in Istanbul is simply spectacular and it is the embodiment of the Experience Economy concept.
It is immense but it is subtly divided using sphere-like structures. It has several live cooking areas, like a pizza oven, a kebab pit, a large pastry island, a salad bar and a huge buffet with various Turkish specialties.
In each case, there are chefs, rolling dough, barbecuing food and generally putting on a show.
There are fresh fruits everywhere, self-service drink carts with a large selection wine and alcohols.
There is movie theater, a flat panel TV wall with 9 screens, a billiard hall, a free locker for your hand luggage.
Google it and the first page will have several people claiming that it is the best lounge in the world.
Basically, the lounge exemplifies everything that Pine and Gilmore recommended that you do if you wish to de-commoditize your business. The whole strategy works.
Besides remaining profitable and expanding rapidly there is also this:
The importance of achieving profitability through layoffs has been repeated so many times that, by now, everyone considers it a truism.
I don't. In fact, I believe that, in most cases, this is pure rubbish.
Recently, I came across of a perfect example to illustrate why I consider job slashing a self destructive action for most corporations.
Air France has just announced that, after six consecutive annual losses, they will be cutting 2800 jobs. This is their third round of reductions as they started the trend in 2009 with 2500 layoffs citing the economic crisis. A couple of years later, they followed through with another 5000 jobs. And now 2800 jobs. The most recent layoff plans are also accompanied by drastic fleet cuts.
Air France is not unique. Lufthansa has been in the red for some time and Iberia and British Airways are struggling as well.
The industry experts are offering several explanations for this state of affairs:
- Economic crisis and low demand environment
- High fuel cost
- Competition from low cost airlines like RyanAir, EasyJet and Vueling
- High labor cost
The problem is that in the same time period, there is another European airline that continued to expand, to hire people and to enlarge its fleet. Moreover, that company managed to remain profitable. In other words, economic crisis, high fuel cost and competition from cheap airlines seemed to have very little effect on that other airline.
How could this be? Either the causes offered by the traditional airlines are invalid or this other company is doing something quite remarkable despite all these adverse elements.
The company in question is the Turkish Airlines. Since the 2008 crisis, its revenues went up, the number of passengers it carried increased and its operating profits soared almost every year:
In 2012, Turkish Airlines saw its operating profit grow almost threefold, with revenues up 26% on passenger capacity growth of 18%. It has the youngest fleet of any significant network carrier in Europe and its 7.0% operating margin puts it behind only Ryanair and easyJet. This financial success is built on one of Europe’s most efficient cost structures and a very productive work force.This is their basic statistics:
| Year | Passengers carried | Growth | Revenue (billion) |
|---|---|---|---|
| 2006 | 16,947,000 | — | US$ 2.23 |
| 2007 | 19,636,000 |  15.9% | US$ 3.0 |
| 2008 | 22,597,000 | 15.1% | US$ 4.5 |
| 2009 | 25,102,000 | 11.1% | US$ 4.0 |
| 2010 | 29,119,000 | 16.0% | US$ 5.6 |
| 2011 | 32,648,000 | 12.1% | US$ 7.1 |
| 2012 | 39,045,000 | 19.6% | US$ 9.0 |
One is the traditional economics argument about productivity. And the other is a fairly new concept related to the Experience Economy.
Productivity
Let me put it boldly: the problem for Air France is not that its labor force is expensive. The problem is that Air France's operational and logistics infrastructure is so out of date and so badly designed that to function at a basic level it has to use too much of that expensive labor force.
I am not making this up. Here are the numbers: Take a look at where Air France stands.
Overall labour productivity ranking: 2012
| Overall rank | Airline/group | Total points* |
|---|---|---|
| 1 | Wizzair | 11 |
| 2 | Ryanair | 17 |
| 3 | Vueling | 23 |
| 4 | easyJet | 34 |
| 5 | Aegean | 43 |
| 6 | Turkish Airlines | 44 |
| 7 | Norwegian | 46 |
| 8 | airberlin | 53 |
| 9 | Finnair | 55 |
| 10 | Lufthansa Flying Segments | 58 |
| 11 | Aer Lingus | 67 |
| 12 | British Airways | 68 |
| 13 | TAP Portugal | 76 |
| 14 | Flybe | 80 |
| 15 | IAG | 82 |
| 16 | Lufthansa Group | 84 |
| 17 | Air France-KLM Group | 96 |
| 18 | Iberia | 101 |
| 19 | SAS Group | 102 |
If you have ever flown with Air France you would know that the average airport check-in time is 10-15 minutes. Sometimes even longer. The uniformed person behind the counter furiously types things only to surface briefly to ask you some inane questions. Then they are gone again, typing away. All that time, you are there thinking why is this taking so long. It is one passenger, one seat. What is the big deal?
Wasting your time is not important from the corporate perspective. But the problem is that, at that pace, the company has to deploy more counter agents if they hope to check-in a 300-passenger flight within two hours.
The same goes for their Web site. It is not well designed. It is not easy to reserve a ticket. And check-ins are a pain. The system crashes all the time. It loses your frequent flyer information sporadically. And infuriatingly, sometimes it refuses to check you in for no apparent reason. In such situations, you have to call a live agent and explain your predicament. And more often than not they cannot help you, as the company has given them no authority to fix things. So you need to call someone else or go to the airport and extend your time at the counter.
The software system behind the Web site and the airport check-in process is simply archaic. Let me explain with an example: Recently, I tried to upgrade an economy ticket to business by paying the difference myself. No frequent flyer miles, just straight credit card transaction, nothing complicated. I couldn't do it on the Web site. I called their number, they told me that it couldn't be done on the phone. I had to go to the main Air France agency at Invalides in Paris. It took 45 minutes to complete the transaction and three agents had to get involved and several calls had to be made.
While sitting there helplessly, I glanced at their in-house screen and it looked like a combination of UNIX and OS2. The agent who was trying to help me kept repeating to herself the key combinations she was supposed to remember for various transactions. To scroll a three page document took her 20 seconds as she had to place her finger on the down arrow key to move the cursor line by line for three pages. It was unbelievable.
Inside the airplanes, it is the same situation. On a recent flight to New York, I was seated in the upper cabin of an Airbus 380. There were only two flight attendants for the entire upper deck. Clearly, labor cost reductions in action. As a result, even though they skipped a number of steps (like offering refreshments before the meal), the whole process took too long and at the end, the attendants were exhausted (I caught one of them napping sitting upright on a stool) and the passengers were unhappy.
Ground services are equally dismal. When you land in Paris, it takes 30 minutes or more for your luggage to arrive. Fortunately for Air France, French border police are set up in such a way that there are rarely more than two agents available for passport control, so the actual waiting time for your suitcase (i.e. by the conveyor belt) is ten to fifteen minutes.
You might think that these are not significant issues (if you are French you might think that this is the best there is) but each of these instances illustrate lack of productivity enhancing tools, techniques and training.
In contrast, let's take a look at that other airline. From the above table you already know that they are the most productive full service airline in Europe. There is a reason for that.
With Turkish Airlines, airport check-ins rarely take more than two minutes (I mean your time at the counter) as they allow all passengers to check-in at the same row of counters, regardless of their flights. They have a state of the art logistics system behind it and it sorts out luggage and destination. Which means that 15-20 counters could check-in the passengers of multiple planes leaving within a five-hour window.
Turkish Airlines Web site won several awards. It is well designed. It is fast. It almost never crashes. It retains your information, including previous multiple searches without you making an effort. It makes price comparisons easy and it gives you the option to reserve a ticket without actually buying it (almost no airline allows this anymore).
Online check-ins are a breeze and the system is advanced enough to let you get your boarding pass in your smart phone (iOS or Android). And you can use it to board the plane by simply showing the screen to the screen reader at the gate. (My French friends shrieked with horror when they heard that notion).
In the planes, the service proceeds at a much faster rate even though they offer you more choices. Flight attendants seem happy to be there. They encourage you to ask for stuff and bring those items to you with a smile.
When you land, your suitcase will be on the conveyor belt within exactly fifteen minutes of landing because the subcontractor who handles luggage will not get paid if they arrive one minute later. I am told that it is in their contract. So when you pass the border police, your suitcase is there waiting for you.
That is the productivity part.
While the company became the fourth largest airline in the process, with 234 destinations in 103 countries, thanks to its high productivity, its cost profile is closer to Low Cost Airlines, as mentioned above. Interestingly, the company is employing some of those expensive labor elements from European airlines with no apparent ill effects:
The airline company currently employs 357 foreign pilots out of which 53 of them are Greek, 43 Spanish and 42 Italian.
They are followed by 27 German, 17 English, 16 Austrian and 14 French pilots.The other explanation I will offer is related to the Experience Economy.
Commoditization of Goods and Services
A product or a service becomes commoditized when they begin to be mass produced, contain no real distinguishing features from similar products and compete mainly on the basis of price. Since the Industrial Revolution countless segments of goods and services market became commoditized. What Henry Ford did to manufacturing, Ray Croc did to food. And with the massive corporate move to China in the last three decades, we can confidently maintain that most things we consume nowadays have been commoditized.
In 1999, two management consultants by the name of Joseph Pine and James Gilmore published a book called the Experience Economy. Their main argument was that unless you change your product or service to convey a specific experience to the client and immerse them in it, sooner or later your offering will become commoditized. And somebody will offer it at a lower price point and destroy your margins. If you are curious but do not wish to read about it, here is a short video clip summarizing their argument.
What they mean is better understood through a couple of example.
As you know, coffee beans are fairly cheap. The amount of beans for a cup of coffee is not worth more than 2-3 cents. If you get a cup of coffee in a gas station or a diner, it will never be priced for more 50 cents as it has no distinguishing features. But if you offer it in a specific environment like Starbucks, customers would be willing to pay $2-3 without blinking.
That's because Starbucks is more than a place you buy a cup of coffee, it is a designed experience. It has its own lingo, like Tall, Grande and Venti (which is a made up word, btw), its own interior design and color scheme; it suggests a certain lifestyle blending youthful intellectualism with refined taste and care for the environment. Those elements are insinuated by laptop carrying young clients, free Wi Fi, specially selected music you can download on the spot and signs to let you know that everything you consume comes from a Fair Trade source. There is a barista skillfully making your coffee to your exact speciications.
So having an espresso there is almost an immersion into a distinct culture.
Or they say, look at Apple, its stores and its products. Whereas all the brick and mortar computer stores went belly up (apparently because of low cost competition from Amazon and the likes), Apple stores are thriving. That's because, the authors argue, they offer you more than a product, they offer you an experience. They say that the store environment has been designed to give you the impression of a high end boutique hotel's lobby or bar. Salespeople are not salespeople. They are knowledgeable geeks walking around not pushing products. They are young and happy and pleasantly geeky. They can sell you stuff without taking you to a cash register: their iPhones will process credit cards and will email you your invoice.
Apple products also evoke a strong feeling. Most Apple computers are more expensive than PCs and in terms of specs, they are not as advanced. But they command a significant premium over those grey and black boxes. This is not just because Apple hardware is well designed but it is especially because their use provides the customer with a very special experience.
The point is that unless you redesign your product and service and turn it into a whole new experience, you will end up competing on the basis of price. And sooner or later your margins will erode and you will no longer be profitable.
Let's take a look at what Air France did when Low Cost Airlines commoditized air travel.
They tried cutting their cost by copying the Low Cost tactics. The first thing was to reduce the cost of food and beverages. Now in most short-haul destinations (in Economy) Air France will give you a stale sandwich in a Saran-wrap and water. In long-haul flights, it will offer two equally inedible choices, usually a piece of chicken or some soggy pasta.
This is from the national airline of a country famous for its refined cuisine.
Their in-flight entertainment is dismal. The screens are low resolution and they have terrible viewing angle: if the person in front of you moves slightly your movie becomes invisible.
The seats are cramped as their fleet mainly consists of ageing planes. Even in Business Class they are superseded by most other airlines in the world (their First Class is actually very good but for the price of a small car it should be).
Lately, they have been piloting a new idea: introducing a Low Cost alternative without creating a new brand: they now have flights out of Orly with no Business class and where checked-in luggage is an extra. The seat do not recline and the food is not part of the category of comestible things.
The Air France lounges for Business Class passengers are mediocre. While most of them are reasonably airy, the seating design is awkward, the service is lacking and the food is utterly unappetizing.
When you look at the other airline, things are much different.
In short haul flights (3-4 hours) in Economy class, they offer a choice of two hot meals and in most cases they are both quite good. Their menus have been created by famous Turkish chefs and they use their names to emphasize that even in in the back of the plane things are different.
In long flights, they have actual chefs in the plane with full kitchen outfits, going around in all cabins to check if people are happy with their meal. I went to Hong Kong with them and on the way in I was in Economy and on the way out I was in Premium (the class between Economy and Business) and in both cases, I was offered several choices, a chef asked my opinion about the food, flight attendants were happy to give me more wine with my meal. I felt like I was in a decent restaurant. I would take their Premium over Air France's Business class any day.
The seats were large and comfortable, they reclined quite well and the entertainment system was top-notch. The screens were high resolution and the programming was extensive. Film start times were fast and the sound was decent.
Finally, their lounge in Istanbul is simply spectacular and it is the embodiment of the Experience Economy concept.
It is immense but it is subtly divided using sphere-like structures. It has several live cooking areas, like a pizza oven, a kebab pit, a large pastry island, a salad bar and a huge buffet with various Turkish specialties.
In each case, there are chefs, rolling dough, barbecuing food and generally putting on a show.There are fresh fruits everywhere, self-service drink carts with a large selection wine and alcohols.
There is movie theater, a flat panel TV wall with 9 screens, a billiard hall, a free locker for your hand luggage.
Google it and the first page will have several people claiming that it is the best lounge in the world.
Basically, the lounge exemplifies everything that Pine and Gilmore recommended that you do if you wish to de-commoditize your business. The whole strategy works.
Besides remaining profitable and expanding rapidly there is also this:
Turkish Airlines has thrice won the Skytrax awards for Europe's Best Airline, Southern Europe's Best Airline, and the World's Best Premium Economy Class Airline Seat for three consecutive years in 2011, 2012 and 2013.
Additionally, Turkish Airlines has been selected the Airline of the Year by Air Transport News at the 2013 Air Transport News Awards Ceremony.Next time you hear some company executives complain about their labor cost being too high, tell them to work on their productivity and to de-commoditize their business.
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