As many of you know, for the past few months, I’ve been at Stanford as a Knight Fellow, researching foreign news and online content. This fellowship ends in June. I have decided to depart the Middle East then and head for Pakistan, where I will be working on a new blog project, InsurgencyWatch. You can read more about the idea behind the new site here. You can also catch its latest posts via the RSS feed to the right.

Back to Iraq will continue to exist, but mainly as an archive and republishing site for the new content on InsurgencyWatch. I hope you’ll all join me over at the new site, and we can make interesting things happen again in the field of foreign correspondence.

You can read the entire report, “Hard Lessons: The Iraq Reconstruction Experience” (and order a printed copy) here.

Many of you will remember I’ve been interested in pirates off of Africa since 2005. I even embedded with the Germans in 2007 on the FGS Bremen as they took part in CTF–150, designed to protect the sea lanes leading up to the Red Sea. Other embeds I pursued included the USS Stennis off the coast of Pakistan and the task force in the Persian Gulf charged with protecting Iraq’s two off-shore oil terminals.

It’s nice to see that something I’ve been trying to draw attention to is finally getting the press attention it deserves, given the threat piracy poses to trade and the tie-ins between global terrorism and non-state criminal organizations.

Stories:

• Piracy 2.0: Deadly and Dangerous
• Silent war against terror waged in dangerous waters
• Patrolling the world’s dire straits.pdf (PDF)

Stratfor has some quickie insight that I find plausible:

“… a Stratfor source in Hezbollah also noted recently that the Iranians, preferring to keep Hezbollah out of the fight, were concerned that other Sunni militants in Lebanon could decide to launch rockets against Israel and draw the group into war. The key thing to watch for now is whether this rocket attack is the first salvo, or if this is an isolated attack. If the rocket attacks continue, it is far more likely to be Hezbollah than some Sunni militants acting independently.” (Emphasis mine — CA)

Regardless of who fired those rockets, the risks of a new war on Israel’s northern front has just gone up dramatically — and I suspect that Israel won’t make the same mistakes in 2006.

UPDATE 0649 PST: Well, maybe not, as it turns out. Both Lebanon and Israel seem to be downplaying the event, with Palestinians in Lebanon getting the blame and being accused of trying to widen the conflict. Israel has opened the northern bomb shelters amid signs of de-escalation. Still, this bears watching.

“From an informed public standpoint, it’s alarming,” said Representative Kevin Brady, a Republican from the Houston area, who has seen The Houston Chronicle’s team in Washington drop to three people, from nine, in two years. “They’re letting go those with the most institutional knowledge, which helps reporters hold elected officials accountable.”

The papers are focusing on local news rather than on events “far away” in … Washington, D.C.

Look, I can almost understand the desire to cut back on foreign news. I don’t agree with it, but I can understand the thinking. But Washington? On a recent trip to Louisiana, family members were discussing Congressional legislation that might affect them and their mortgages. That was direct paycheck stuff and they definitely wanted to know about it. So for newspapers to cut back on Washington coverage at such a time… Well, it just shows the desperate straits the industry is in.

I’m here at Stanford giving some thought to how the industry can be triaged and transitioned to the new media future, but for the moment, we need to save what we can. Do your part. I know you’re mad at “the media” but letting newspapers go under won’t help. It will be much, much worse. So here’s a radical thought: if you want to hold the government accountable, buy a newspaper — an actual, printed copy. Subscribe to a paper, read it. Take some time and actually peruse the paper. Think of these small steps as a democracy bond purchase in a time of crisis. As Joseph Pulitzer once said, “Our Republic and its press will rise or fall together.”

The Shiite-led government of Prime Minister Nuri Kamal al-Maliki is squeezing out Kurdish units of the Iraqi Army from Mosul, sending the national police and army from Baghdad and trying to forge alliances with Sunni Arab hard-liners in the province, who have deep-seated feuds with the Kurdistan Regional Government led by Massoud Barzani.

The Kurds are resisting, underscoring yet again the depth of ethnic and sectarian divisions here and the difficulty of creating a united Iraq even when overall violence is down. Tension has risen to the point that last week American commanders held a series of emergency meetings with the Iraqi government and Kurdish officials, seeking to head off violence essentially between factions of the Iraqi government.

“It’s the perfect storm against the old festering background,” warned Brig. Gen. Raymond A. Thomas III, who oversees Nineveh and Kirkuk Provinces and the Kurdish region.

Worry is so high that the American military has already settled on a policy that may set a precedent, as the United States slowly withdraws to allow Iraqis to settle their own problems. If the Kurds and Iraqi government forces fight, the American military will “step aside,” General Thomas said, rather than “have United States servicemen get killed trying to play peacemaker.”

Many observers have assumed the flashpoint for an Arab-Kurdish war over Iraq’s northern regions would be sparked by unrest in Kirkurk. But perhaps Mosul is the real problem.

Actually, it seems the entire border zone of the Kurdish region is a problem, with intense personal animosity between Barzani and Maliki. There have been armed stand-offs between the Kurdish pesh merga and Iraqi Army units in Diyala, and Barzani has referred to the Iraqi prime minister as a new Saddam Hussein. It doesn’t help that Maliki is allying himself with Arabs from Mosul who have deep ties to the former regime, including the former general who led the invasion of Kuwait. He’s also been trying to purge the Army up there of its Kurdish leadership causing some officers to announce that their loyalty is to Kurdistan and not Iraq.

If tensions do erupt up north, things could get worse all over. First of all, it would renew questions of why the Americans are in Iraq if they’re not going to stop their two biggest allies from going at each other. Secondly, it could create a security vacuum that foreign fighters could exploit to start entering Iraq in larger numbers again. The exodus of Christians could worsen. And of course, the price of oil could start to creep up.

All in all, not a good sign and a reminder that Iraq ain’t over yet.

My project here is to look at a way to scale the Back to Iraq model up to an institutional level. Perhaps it won’t work; perhaps what’s needed is a networked system of correspondents in conflict zones around the world supported by subscriptions, donations, licensing fees and advertising. Whatever. I’m here for a year to try to figure it out. being close to Silicon Valley and all those venture capitalists probably doesn’t hurt. Oh, and I’m going to learn how to play the guitar.

But that doesn’t mean I’m abandoning commentary and analysis of Iraq. I’m still deeply attached to the place and, yes, hope one day to go back. Even as Western media organizations are dialing back their coverage. (Mind you, I think this is a trough in the staffing and coverage, coming as it does in the closing weeks of the presidential campaign. While the economy will continue to dominate the news, by spring of next year I suspect Iraq will once again be on America’s radar as military pullouts commence.)

So I will endeavor to share some of the interesting things here at Stanford — many of my coursework and research is directly tied to the Middle East, terrorism, the usual areas of interest — and also look at developments in the war. It’s not over yet, folks. And neither is B2I.

The finance ministers of the G-7 countries are meeting in Washington. The first announcements on the meetings will come this weekend. It is not too extreme to say that the outcome of these meetings could redefine how the financial markets work, certainly for months and perhaps for a generation. The Americans are arguing that the regime of intervention and bailouts be allowed to continue. Others, like the British, are arguing for what in effect would be the nationalization of financial markets on a global scale. It is not clear what will be decided, but it is clear that this meeting matters.

The meetings will extend through the weekend to include members of the G-20 countries, which together account for about 90 percent of the global economy. This meeting was called because previous steps have not freed up lending between financial institutions, and the financial problem has increasingly become an economic one, affecting production and consumption in the global economy. The political leadership of these countries is under extreme pressure from the public to do something to solve — or at least alleviate — the problem.

Underlying this political pressure is a sense that the financial class, people who run global financial institutions, have failed to behave responsibly and effectively, and have therefore lost their legitimacy. The expectation, reasonable or not, is that the political system will now supplant these managers and impose at least a temporary solution. The finance ministers therefore have a political mandate, almost global in scope, to act decisively. The question is what they will do?

That question then divides further into two parts. The first is whether they will try to craft a single, global, integrated solution. The second is the degree to which they will take control of the financial system — and inter-financial institution lending in particular. (A primary reason for the credit crunch is that banks are currently afraid to lend — even to each other.) Thus far, attempts at solutions on the whole have been national rather than international. In addition, they have been built around incentivizing certain action and increasing the available money in the system.

So far, this hasn’t worked. The first problem is that financial institutions have not increased interbank lending significantly because they are concerned about the unknowns in the borrower’s balance sheet, and about the borrowers’ ability to repay the loans. With even large institutions failing, the fear is that other institutions will fail, but since the identity of the ones that will fail is unknown, lending on any terms — with or without government money — is imprudent. There is more lending to non-financial corporations than to financial ones because fewer unknowns are involved. Therefore, in the United States, infusions and promises of infusion of funds have not solved the basic problem: the uncertain solvency of the borrower.

The second problem is the international character of the crisis. An example from the Icelandic meltdown is relevant. The government of Iceland promised to repay Icelandic depositors in the island country’s failed banks. They did not extend the guarantee to non-Icelandic depositors. Partly they simply didn’t have the cash, but partly the view has been that taking care of one’s own takes priority. Countries do not want to bail out foreigners, and different governments do not want to assume the liabilities of other nations. The nature of political solutions is always that politicians respond to their own constituencies, not to people who can’t vote for them.

This weekend some basic decisions have to be made. The first is whether to give the bailouts time to work, to increase the packages or to accept that they have failed and move to the next step. The next step is for governments and central banks to take over decision making from financial institutions, and cause them to lend. This can be done in one of two ways. The first is to guarantee the loans made between financial institutions so that solvency is not an issue and risk is eliminated. The second is to directly take over the lending process, with the state dictating how much is lent to whom. In a real sense, the distinction between the two is not as significant as it appears. The market is abolished and wealth is distributed through mechanisms created by the state, with risk eliminated from the system, or more precisely, transferred from the lender to the taxing authority of the state.

The more complex issue is how to manage this on an international scale. For example, American banks lend to European banks. If the United States comes up with a plan which guarantees loans to U.S. banks but not European banks, and Europeans lend to Europe and not the United States, the integration of the global economy will very quickly shatter, leading to significant limitations on international trade, currency convertibility and so on. You will nationalize economies that can’t stand being purely national.

At the same time, there is no global mechanism for managing radical solutions. In taking over lending or guarantees, the administrative structure is everything. Managing the interbank-lending of the global economy is something for which there is no institution. And even with coordination, finance ministries and central banks would find it difficult to bear the burden — not to mention managing the system’s Herculean size and labyrinthine complexity. But if the G-7 in effect nationalize global financial systems and do it without international understandings and coordination, the consequences will be immediate and serious.

The G-7 is looking hard for a solution that will not require this level of intrusion, both because they don’t want to abolish markets even temporarily, and more important, because they have no idea how to manage this on a global scale. They very much want to have the problem solved with liquidity injections and bailouts. Their inclination is to give the current regime some more time. The problem is that the global equity markets are destroying value at extremely high rates and declines are approaching historic levels.

In other words, a crisis in the financial system is becoming an economic problem — and that means public pressure will surge, not decline. Therefore, it is plausible that they might choose to ask for what FDR did in 1933, a bank holiday, which in this case would be the suspension of trading on equity markets globally for several days while administrative solutions are reached. We have no information whatsoever that they are thinking of this, but in starting to grapple with a problem of this magnitude — and searching for solutions on this scale — it is totally understandable that they might like to buy some time.

It is not clear what they will decide. Fundamental issues to watch for are whether they move from manipulating markets through government intrusions that leave the markets fundamentally free, or do they abandon free markets at least temporarily.

Another such issue is whether they can find a way to do this globally or whether it will be done nationally. If they do go international and suspending markets, the question is how they will unwind this situation. It will be easier to start this than to end it and state-controlled markets are usually not very attractive in the long run. But then again, neither is where we are now.

Reprinted with the permission of Stratfor.