The World Tribune


Still a dangerous world

By Frank Gaffney
SPECIAL TO WORLD TRIBUNE.COM

Courtesy of Blanchard Economic Research Unit

Monday, December 6, 1999

EDITOR'S NOTE: Blanchard and Company is pleased to publish the following guest article by Frank Gaffney of the Center for Security Policy, one of the most influential think-tanks in America today. Mr. Gaffney points out that despite the popular myth that the world is now a safe place with no threats to U.S. security and interests, several problems are festering around the globe that could disrupt international commerce and distort economic conditions. Few investors realize that these problems therefore pose a threat to the financial markets. Gold is the best form of financial insurance to protect your portfolio against the ravaging effects of international tensions. The timing of this article is especially appropriate in that, 20 years ago, two events pushed the price of gold up 128 percent in just 2 months: the Iranian hostage crisis and the Soviet invasion of Afghanistan. Those of you who thought that such episodes are impossible today may change your mind after reading Mr. Gaffney's article.

There is sometimes irresistible temptation in this post-Cold War world to believe that we have seen the last of international crises that can disrupt international commerce, distort economic conditions, or threaten other vital U.S. interests. After all, it is repeatedly said, the United States is the world's only remaining superpower. How could its security or equities possibly be jeopardized?

Unfortunately, the answer is: In lots of ways. In fact, there are myriad problems now festering around the world, any one of which could erupt with little warning. Should that happen, the effects could be dramatic and direct. Alternatively, they could be more subtle and indirect. But no one should be under any illusion: The probable inability of the United States-for all of its military might-to prevent, and possibly do much to contain, these effects could have far reaching strategic and economic consequences.

Consider an illustrative sampler of such incipient crises:

  • China's Communist government, wracked by a slowing economy and growing domestic political discontent is responding in a manner all too familiar to students of authoritarian regimes: It is cracking down on dissent, asserting greater state control over key parts of the economy and promoting xenophobic attitudes towards the outside world and acting externally in an increasingly assertive fashion. Of particular concern is Beijing's increasingly bellicose rhetoric and military posturing vis a vis Taiwan.

    Such behavior could have dire repercussions for the United States, which the Chinese consistently describe in propaganda designed for internal consumption as "the main enemy." In 1996, a top Chinese officer issued a thinly veiled threat to attack Los Angeles if the United States interfered with its efforts to bring Taiwan to heel. This year, a Communist Party newspaper warned that U.S. aircraft carriers could be attacked with nuclear weapons if they got in the way. The situation is ripe for miscalculation and possibly uncontrollable armed escalation.

  • Chinese foreign initiatives are contributing to the potential volatility of several other troubling situations. For example, China's provision of nuclear weapons and ballistic missile technology to Pakistan is feeding an arms race on the Asian sub-continent that is, at a minimum adding to the risks associated with the long-running Indo-Pakistani hostility. At worst, there is real danger that Beijing's reckless proliferation will contribute to the world's first nuclear conflict.

    North Korea is similarly benefiting from technical and financial assistance from China. Thanks in part to such assistance, Pyongyang is reportedly close to deploying a missile of sufficient range to be able to deliver a small nuclear weapon against U.S. territory. Since the United States currently has no deployed defense against even one such missile, this capability poses a danger of blackmail-or worse, attack-by one of the world's lunatic regimes. Indeed, mad as it may seem, the possibility that such a regime may decide to take hundreds of thousands of this country's or its allies' citizens down with it as North Korea collapses under the weight of its cratering economy and starving population cannot be precluded.

  • China has also taken steps to fill the vacuum of power being created as the United States completes its ill-advised withdrawal from the Panama Canal Zone. A Chinese company, Hutchinson Whampoa, with close links to the PRC's military and intelligence services has arranged to take over facilities at both ends of the canal, giving it a de facto ability-as well as a contractual right-to determine who can make use of this strategic waterway and when. Should American commerce, to say nothing of the U.S. Navy, be unable to transit the isthmus, the consequences could range from costly to disastrous.

  • The American surrender of its bases in Panama comes at a bad time for another reason as well: the democratic government in neighboring Colombia is in extremes, thanks to the combined assaults on its control of the country's territory and on its integrity, being mounted by revolutionary guerrillas and narco-traffickers. Efforts by the Colombian authorities to arrange a separate peace with the former so as to improve its ability to contend with the latter will, if successful, simply guarantee the future disintegration of the country, an intensification of the hemorrhage of drugs into the U.S. and the destabilization of much of the region. This prospect is sufficiently ominous that the Clinton administration may feel compelled not only to extend vastly greater financial and materiel assistance for Bogota but to dispatch American armed forces, initially for the purposes of an expanded military training program and, in due course, for combat in the Colombian jungles.

  • The People's Republic of China is also one of the principal sources of concern about a new and largely unappreciated penetration of the U.S. economy. Chinese government and government-associated entities are increasingly turning to the American capital markets as a means of securing, on a largely non-transparent and completely undisciplined basis, billions of dollars in hard currency. Some of the companies involved have been tied to Chinese drug smuggling, gun-running, technology theft, espionage, and hostile military activities.

    The danger that U.S. pension funds, mutual funds, life insurance companies, corporate portfolios and private investors could, unwittingly, be providing critical financial wherewithal to such operations-many of which are directly inimical to American security and interests-has prompted two blue-ribbon commissions in the past few months to raise an alarm about this activity. Legislation has been introduced in Congress that is intended to ensure greater disclosure and due diligence with respect to such fundraising initiatives. Should such non-intrusive measures fail to be implemented or to prevent abuse of the U.S. capital markets, public outrage over this dangerous practice could create an irresistible popular demand for more restrictive responses.

  • Last but not least, the Middle East remains ripe for conflict-either of the Arab-Israeli variety or between Arab (or at least Islamic) states. With respect to the former, conventional wisdom has it that the danger of yet another war between the Jewish state and her neighbors has been irreversibly mitigated by the recent Israeli elections and the Barak government's agreement with the Palestinians. Unfortunately, there are important, if all-too-frequently overlooked, indications that such conventional wisdom may be wrong.

    For example, in speeches delivered in Arabic, Yasser Arafat continues to encourage his people to believe that the long-standing goal of liberating all of "Palestine" remains unchanged. He talks of "jihad" (holy war), to ensure the "flag of Palestine will fly over the mosques and churches of Jerusalem." Such comments suggest no genuine conversion on his part to the path of peaceful coexistence. Further territorial concessions by Israel may, therefore, simply give rise to a threatening Palestinian state able to interfere with Israel's water supply, use of its airspace, and the security of its borders, territory, and population.

    Given Syrian dictator Hafez Assad's past history of duplicity and violated agreements, moreover, hopes for a "breakthrough" on that front seem at least as likely to prove misplaced. If Israel discovers this reality only after it has surrendered the strategic Golan Heights, it could find itself facing a renewed, possibly mortal peril from Syria-this time able to utilize not only its vast conventional arsenal and weapons of mass destruction to inflict huge damage on the Jewish state but military cooperation with an organized and armed Palestinian force in Israel's rear.

    The prospects for peace in the volatile Middle East are made worse still by the steps being taken by Iran and Iraq-two avowed enemies of Israel that have also gone to war with each other and with fellow Islamic states in the region-to arm themselves with chemical, biological, and even nuclear arms and the means to deliver them over ever longer distances. Should such weapons be loosed, there is no telling what the impact could be. But it is a safe bet that it will entail at least temporary disruptions in the flow of oil and commerce through the Persian Gulf.

    With considerable luck, none of these or various other potential flashpoints will metastasize in the next few years. Betting on luck, however, is neither a sound approach to national security policy-making nor to investment strategies.

    Frank Gaffney is the founder and director of the Center for Security Policy in Washington, D.C., a not-for-profit, non-partisan educational corporation. The Center has been internationally recognized as a resource for timely, informed and penetrating analysis of foreign and defense policy matters. Mr. Gaffney is a columnist for the Washington Times and a monthly contributor to Defense News. In addition, his op.ed. articles also appear periodically in The Wall Street Journal, USA Today, The Washington Post and other leading publications including, The New York Times, The Christian Science Monitor, The Los Angeles Times, The New Republic and Newsday. From August 1983 until November 1987, Mr. Gaffney was the Deputy Assistant Secretary of Defense for Nuclear Forces and Arms Control Policy. In April 1987, Mr. Gaffney was nominated by President Reagan to become the Assistant Secretary of Defense for International Security Policy, the senior position in the Defense Department with responsibility for policies involving nuclear forces, arms control and U.S.-European defense relations. Mr. Gaffney holds a Master of Arts degree in International Studies from the Johns Hopkins University School of Advanced International Studies and a Bachelor of Science in Foreign Service from the Georgetown University School of Foreign Service.

For more information on the Center for Security Policy, visit their web site at www.security-policy.org or call them at (202) 835-9077. For more information on the Center via mail, write:

Center for Security Policy 1920 L Street NW, Suite 210 Washington, D.C., 20036.

Visit the

Blanchard Economic Research Unit
at http://www.marketalert.net.

Monday, December 6, 1999


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