China’s economic growth over the last 30 years has astounded the world. Since 1978, under the tenure of Deng Xiaoping, China has embarked on a that enabled it to escape economic isolation. Beijing’s government has decollectivized agriculture and freed foreign exchange transactions in addition to allowing private entities to trade and permitting some foreign investment. Ever since, Beijing has dismissed Maoism and ushered in a new era of capitalism and market reforms, enjoying a sustainable growth rate year after year.

However, notwithstanding the achievements in terms of economic prowess, China seems to be stuck in what is called a “,” and its economy suffers from several shortcomings: high level of corporate debt, an over-reliance on export-driven manufacturing and a high degree of financial repression, to name but a few.

Where is China headed? Where will China’s economy be in 10 years? Is China going to be more integrated into the world economy, either in terms of international trade and investment, or will progress be reversed, especially in light of a trade war with the US and emerging markets’ volatility to a rising dollar?

The main assumption we have to make in order to tackle this question is that China’s economic policy revolves around a slow but steady approach to market-driven reforms. Its maintains the Chinese Communist Party’s (CCP) monopoly on political power while it pursues a more market-driven and services-oriented economic strategy. A tightly controlled political structure alongside a dynamic economy, where economic growth is the key feature that legitimizes political power, China’s approach to international trade and investment has several unique features that allow us to grasp the dynamics of change the country has undergone.

Lessons Learned

As far as economic international trade and investment are concerned, China’s interest groups . State-owned enterprises (SOEs) were making the decisions when China began opening up in 1979. At that time, all assets were state-owned, and officials were in charge of regulating — via the enterprises they controlled — corporate governance. Thus, Communist Party officials both deduced and aggregated interests over economic policy, which eventually resulted in bureaucrats having a lot of influence on all economic organized activity and a high stake in maintaining an open system. In addition, China has been developing a vast stock market for decades, which helps SOEs to obtain financing and contribute to state’s fiscal revenues.

China has learned from the failure of other communist states. While the USSR collapsed in 1991, and all its satellites were crumbling around it, shaken by the 1989 Tiananmen Square protests and squeezed by international sanctions, China decided to adjust its economic policy according to the external constrains of the systemic structure —��namely, to depoliticize macroeconomic policies and adjust them to the rule of basic economic equilibria: existence of budget constraints, fiscal and monetary responsibility, a system of market-clearing prices and inflation under check.

However, the greatest unknown factor is at home. In fact, the greatest risk for China would be the incapacity of the ruling class to manage the extraordinary economic, social, political, but also urban and environmental, transformations toward which the country is headed.

Therefore, with the support of the military and the bureaucracy, Deng committed to build a dynamic economy. For him, the only way to preserve the support for the Communist Party was to embark upon a process of that would change China’s economy and uplift the well-being at home and increase China’s international prestige and leverage abroad. Economic reforms ahead of political reforms — this assumption continues to be pressed into the Chinese policy-makers’ playbook.

Thus, in the coming years, it seems unlikely that this key feature of the CCP will fade away, especially because it provides the political power with leverage on decentralized economic activity. The party’s legitimacy is strengthened by the fact that the CCP becomes widely recognized for an , which in turn reinforces its grip on power and raises the cost of opposing it. In regard to this, the last political moves under seem to follow in Deng’s footsteps. Xi has been steadily consolidating his grip over the party as he pursues economic reforms aimed at increasing China’s domestic fortunes.

Capital Flows

Nevertheless, as far as capital inflows are concerned, China lags behind its peers. On the one hand, although it has implemented new inflow liberalization measures in 2016, its continues to be relatively closed. On the other hand, foreign investment is still restricted to the extent that intangible assets, such as human capital and management techniques for supply chains, are hard to absorb without a more liberalized foreign direct investment (FDI) and foreign portfolio investment (FPI) policy. In regard to this, China’s central bank is carefully loosening control on cross-border capital flows, while policy responses are taking into account domestic financial conditions and stability of the exchange rate.

It is difficult to predict what is going to happen in this regard, but it is likely that China will move forward carefully with an actual floating exchange rate, simultaneously eating into foreign reserves to curb high volatility in order to shore up financial stability. Plus, it is likely that Beijing will follow through with a controlled capital-account liberalization. Thus, China will continue to use what “countervailing monetary power”��— a string of measures that has helped Beijing (and other emerging markets such as Brazil and South Korea) to offset against the structural power of global markets. From countercyclical regulations to macro-prudential measures, China’s financial institutions will likely continue on the path of curbing the negative externalities of surge in capital inflow — especially in times of expansionary policy in the US and the EU — and capital flight.

In the coming years, all these measures would likely ease inward FDI, generating positive externalities and knowledge spillovers by importing foreign technology. This could create a situation where Beijing could set up an investment-friendly environment where forces of agglomeration, such as a world-class system of property rights, a sophisticated industrial base, vast labor markets, a high-skilled workforce and specialized service providers will lead China closer to its technological ambitions.

International Trade

As for trade, China remains a on the international stage. Plus, it has one of the highest national saving rates worldwide, known as the “.” The two factors are intrinsically correlated. On the one hand, high savings bring about excessive investment domestically, which in turn leads to supply dwarfing demand, low level of consumption, plus a risk of a credit-boom cycle and low growth of income. On the other hand, a high savings rate has engendered a “saving glut” abroad, with large global imbalances and low interest rates.

Nonetheless, current account surplus to GDP has been falling steadily since 2007. Amongst the main reasons have been a high import volume, more investment, nominal effective exchange rate appreciation, weak demand in major advanced economies and, more recently, a widening of the services deficit. These trends signal that China is opening its massive market to foreign products and services, getting rid of barriers and tariffs on imports. In addition, a current account surplus shrinking is the result of higher consumption by households. Even though remains very low compared to the global average, the rise of a sophisticated and vibrant keen on foreign goods and services could lead to a huge shift in the Chinese and world trade balance in the years ahead.

Another important sign that suggests a more “integrated” China is the exchange-rate regime. China’s yuan follows a band with a fixed floor and ceiling, inside which the exchange rate is allowed to float with respect to the US dollar and other currencies. Over the last decades, China has pursued a “” currency policy to keep the sales price of exports at a low level while maintaining a high level price of imports. This has brought about a low rate of consumption and an over-reliance on an export-driven economy.

Simultaneously, the Chinese authorities have also taken advantage of currency depreciation and FX intervention through open-market operations and other measures to respond to large capital outflows in 2015-16 that were putting depreciation pressures on the exchange rate. The bottom line is that China has been pursuing a “” market-oriented strategy to let its currency float, even in the light of domestic pressures.

In relation to this, the implementation of a proactive monetary policy — including interest rate cuts, open-market operations such as US Treasury securities purchase and stiff financial regulation — are a sign of Beijing’s determination to be integrated within the International Monetary Fund’s (SDR) basket of reserve currencies. This elite club of currencies confers members the right to purchase domestic currency in FX markets in order to maintain exchange rates. This move, coherent with market fundamentals, seems consistent with the idea that Beijing will be more and more integrated into the international trade and investment regime in the coming decade, and that will continue to shape its exchange rate policy.

Trade War

However, the current trade war with the US could end up hurting China’s economy. With regard to this, several forces come into play. Indirect or direct effects of higher tariffs and barriers might take their toll on international and domestic demand for services such as logistics and wholesale trade, and might also negatively affect business sentiment and investment as a whole.

In tackling this situation, the People’s Bank of China should undertake more aggressive accommodative monetary in order to support demand being hit and promote investment. This could also help to absorb the shocks of trade tariffs, with a declining exchange rate of the yuan that offsets the loss in export competitiveness.

Nevertheless, as a a more accommodative monetary policy could backfire. Not just in terms of downward pressure on the yuan, but also in spoiling Beijing’s attempts to fix macroeconomic imbalances with tighter regulations such as high level of corporate leverage, rapid build-up in debt, and credit distortions. Therefore, the only way out would be to resort to to support exporters and boost domestic demand, while in the meantime taking for granted a cheaper yuan.

The real dilemma for a more globalized China in the years ahead is the so-called��:��the impossibility to enjoy simultaneously an independent monetary policy, a liberalized capital account and a fixed exchange rate. Thus far, China’s trade-off has been a mixture of low interest rates, a loose monetary policy, a de jure monitored capital account liberalization and a currency-managed floating exchange rate. In the years to come, China will find it more desirable to move toward an independent monetary policy and pick one out of capital account openness and exchange rate flexibility. On the one hand, a floating exchange rate could help dampen shocks and address capital flow pressure, while cross-border capital flows regulation could be relaxed instead of being used as tool for macroeconomic policy adjustments.

A Convergence of Problems

In the next decade China will become increasingly more “globalized.” However, the integration into the world economy will not be as smooth as many scholars think. That’s why the rise of China poses quite a few problems. First of all, there’s an economic order problem. As perfectly addressed by , experts have to account for the issue of systemic flexibility and of China’s intentions. Cohen asserts that monetary systems don’t seem to lack flexibility to accommodate a newcomer, as demonstrated in the past. However, the question remains whether China will adjust to the status quo and abide by the laws or not.

Second is the question of democracy. In dealing with economic change, China is currently undergoing a process of convergence of problems: the challenge that globalization poses for national sovereignty, popular legitimacy, democracy and economic change. According to , this is the global dilemma that every economy faces when entering the global stage. Like in Mundell-Fleming’s trilemma, two out of three are permitted. Since the crackdown on the Tiananmen’s protests, China seems to have undermined the emergence of democracy, maintaining at the same time a national sovereignty in terms of leaving room for maneuver in capital-account liberalization and monetary policy.

However, an increasingly integrated economy engaged with the international standards might cause China to go easy on national sovereignty, which could eventually be downplayed as compliance with a range of transnational regulatory regimes. In regard to this, China in the coming years will likely be more locked in globalization and economic change than a decade ago. Think of the accession to the World Trade Organization in 2001 or joining SDR.��Beijing has thus decided to achieve economic integration through what the golden straitjacket: a tight control of the political structure of the society eschewing mass politics and democratic participation, where national sovereignty and economic change are maintained as the main driving forces.

However, the greatest unknown factor is at home. In fact, the greatest risk for China would be the incapacity of the ruling class to manage the extraordinary economic, social, political, but also urban and environmental, transformations toward which the country is headed. This could eventually lead the Communist Party elite to give up on more economic integration and turn inward to maintain its draconian control over society. At that time, the world will understand in which direction China is going.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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On September 11, Russia launched one of the largest military exercises since 1981. Vostok 2018 (East 2018) took place in the Far East of Russia and on the Pacific Ocean. The drill involved 300,000 Russian servicemen, including 6,000 airborne troops, thousands of planes, drones and helicopters, 36,000 tanks, armored personnel carriers and other defense vehicles, plus around 80 ships and support vessels. Beyond the of manpower and the massive naval build-up by the Russian Federation, China also took part, sending 3,200 troops and 900 armored vehicles, plus a Mongolian mechanized infantry battalion.

Officially, Vostok 2018 was aimed to achieve several objectives, from checking combat readiness to deploying troops over long distances to testing and ameliorating command-and-control procedures, going through the enhancement of interoperability under a single command. But how should we interpret the impressive size of Russia’s mobilization and China’s participation?

Regarding the size of Russia’s mobilization, , first deputy chairman of the Defense and Security Committee of the Russian Federation’s Council, publicly stated that Vostok 2018 was meant “to cool down some hotheads.” In other words, the drills would be a response to “the unprecedented pressure that the US is exerting on Russia.” Klintsevich referred to the financial sanctions levied against Russia and the massive expansion that the United States is planning for its and to keep Russia and China in check. Notably, during the exercise, the two teams competed against each other to a conventional interstate war, as opposed to fighting an imaginary opponent.

That Vostok 2018 took place far from NATO’s borders is relatively unimportant. What matters is that this demonstration of military might has been noticed by NATO, which now knows that Russia is ready for a full-scale conflict. Russia’s 2014 annexation of Crimea and the war of attrition in eastern Ukraine, led by Russian-backed separatists and non-attributable hybrid forces, have heightened tensions with NATO. Plus, the memory of the 2008 between Georgia and the Russia-backed separatists in South Ossetia and Abkhazia is still vivid.

Simply put, with Vostok 2018 Russia is flexing its muscles, showcasing to both friends and foes its ability to manage logistics and command-and-control structures while conducting large-scale military operations at a high degree of coordination between land, sea and air forces.

Show of Strength

This show of strength was aimed first at the international public opinion, in a moment where changes in the balance of power on the global stage — namely, the of the Trump administration — would have increased the relative power of Moscow with regard to a perceived decline of the US-led liberal order. Think of the massive Russia military build-up in Syria to shore up Bashar al-Assad and help his regime to reverse the course of the Syrian Civil War.

In the face of a perceived Western reluctance to step in to stop the bloodbath, Putin doubled down and escalated the war. Indeed, Russia’s military role in Syria, still ongoing, consisted in a massive bombing campaign aimed at fighting ISIS. However, as have signaled, Russian airstrikes have reduced many highly-populated urban areas to rubble, with the use of cluster munitions and thermobaric bombs targeting hospitals, mosques and water plants, which resulted in a high death toll among civilians. Putin’s campaign was instead meant to a two-pronged strategy: to wipe out American-backed rebels in order to rescue long-term Kremlin protégé Assad and to reposition Russia as an irreplaceable partner for resolving the conflict in Syria.

Vostok 2018 testifies that we are going to witness an increasing economic, diplomatic, geopolitical and military alignment between Russia and China, at least as long as the two are united by a shared rivalry with the United States.

This demonstration of strength is embedded within a strategic thinking rooted and socialized in Russia’s strategic culture. Back in 1977, in a report for the US Air Force,�� that, in case of what was then the Soviet Union, the geographical uniqueness (sheer vastness of territory to defend, lengthy borders), political (non-liberal, autocratic system) and economic variables (a rentier-economy linked to the exploitation of natural resources) would reflect the uniqueness of unilateral military and strategic solutions compared to traditional and more cooperative and flexible Westernized doctrines. With regard to this, brinkmanship, and the tactic of outsmarting and deceiving one’s opponents, such as massive information warfare campaigns, still remain in the��playbook of .

As it often happens with Russia, military operations also speak to domestic public opinion. Indeed, Russia’s economy has been struggling to recover from a decline in investor confidence between 2015 and 2016. Besides low levels of economic diversification and thus low resilience to shocks, and high volatility of commodity prices took their toll on the Russian economy. In addition, a massive of the ruble has recently depreciated the currency, with .

Thus, in the wake of the recent caused by the sluggish economy and the raising of retirement age, Russia’s leadership needs to demonstrate that the extensive — and expensive — military modernization of the last years delivered some tangible results.

Enter China

Regarding China’s participation, simply stating that Vostok 2018 aimed at reducing China’s and Russia’s diplomatic isolation would be a euphemism. Rather, it demonstrates the steady strengthening of the Sino-Russian bilateral relationship. In accordance with the narrative used on , Chinese officials even referred to the joint drills as evidence of a “” between the two countries. Although this is more a diplomatic statement than an analytical account of the state of bilateral affairs, the economic and geopolitical trajectories of Russia and China are converging, and Vostok 2018 is both a symptom of this trend and a way of invigorating it.

Put simply, Russia and China chose to temporarily set their conflicting interests apart to handle a greater challenge: the United States. With Vostok 2018 and the decision to jointly develop new , Russia and China are signaling to each other and their competitors that, at least in the medium term, they will remain politically aligned and keep supporting each other on regional and global issues.

As for the economic momentum, China’s outlook is much better than Russia’s. However, the two countries are still . On the one hand, China desperately needs Russian oil and gas. On the other, Russia needs the revenues originated by the export of its raw materials. In 2014, the two countries concluded a worth roughly $400 billion. In addition, bilateral trade flows across their shared border have increased by since 2002.

While China inches closer to Russia, Beijing is at odds with the US as the two countries are locked in a trade war the consequences of which could spark a ripple effect on the global economy. The Trump White House is accusing China of such as industrial espionage, intellectual property theft and unfair competition resulting from adopting a dumping pricing policy and currency manipulation. A trade war could end up making China . Indeed, in its attempt to fix macroeconomic imbalances, such as an unchecked credit-fueled growth and consequent high corporate leverage ratio, the rise of US-China tensions might hold back investors and affect growth. In this sense, both Russia and China see sanctions and tariffs as the demonstration that the US-led free-trade regime operates on a logic of coercion where reluctant states are bullied into line by threat of exclusion from trade, credit and key political forums.

Nevertheless, as aspiring global powers, both Russia and China are trying to upgrade their roles on the global stage and carve out their respective spheres of influence, in the post-Soviet space and in the South China Sea. Although their aspirations clash with America’s model of a liberal international order, Russia and China propose the paradigm that is better suited to their national interests. As long as their territorial ambitions do not overlap, the two countries will support each other’s foreign policies and visions of the international order.

It must be noted that the participation of China in the Vostok 2018 drills does not necessarily mean that Russia and China will form a military alliance or develop a proper strategic partnership as a series of unsolved frictions still undermine mutual trust. First, Russia is exporting weapons to Vietnam, which is at odds with China over its South China Sea policy, and to India, one of China’s greatest regional competitors. Second, both Russia and China recently implemented massive programs of military modernization and are willing to expand their clout. Third, Russia’s economy is dwarfed by China’s, and far from gaining steam. From this perspective, Russia might have invited China to Vostok 2018 in order to mitigate the concerns caused by troop build-up along the Chinese border and to promote mutual trust amongst allies.

Vostok 2018 testifies that we are going to witness an increasing economic, diplomatic, geopolitical and military alignment between Russia and China, at least as long as the two are united by a shared rivalry with the United States.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Shaken by US President Donald Trump’s statements, ranging from accusing America’s European allies of their NATO membership to alleging , the Brussels summit was mostly focused on EU-NATO cooperation. Although Trump has labeled the European Union a��, mostly because of his vision of world trade as a zero-sum-game, his tirade against the low level of commitment by European allies is nothing new.

Indeed, though expressed in a characteristically bombastic way, Trump has again highlighted�������հ�’����main problem following the demise of the USSR — the lack of a common view on the scope of the alliance and the subsequent loss of centrality. If up until 1989 NATO was considered a collective security system aimed at deterring the threat of a Soviet invasion, ever since its collapse in 1991, the alliance has been struggling to recast its role in a way.

In regard to this, Trump’s words on the reluctance of European allies to bear the financial burden of NATO have uprooted long-standing concerns.

First is the issue of US military commitment to Europe. The reopening of the burden of sharing the cost was one of the flagship topics during Trump’s campaign over the last few years; rebuilding America from its foundation at home, with the implementation of tariffs and barriers on foreign-made products, and the improvement of the trade balance toward the allies (known as the ), goes hand in hand with the demand for stronger commitment on defense spending for NATO by the Europeans.

In Trump’s view, the US no longer needs to carry the lion’s share of EU defense, especially in light of the of security and defense procedures within the European Union. The , while most European countries within NATO do not live up to their commitment of 2% of GDP. Nevertheless, the idea of shifting US military posture in Europe is rooted in the past; other presidents, from Dwight Eisenhower to , have raised the issue of burden sharing.

Second, even though Russia’s annexation of Crimea in 2014 has breathed new life into the alliance, it has also become a bone of contention among member states. Yes, the��2014 and 2016 summits were aimed at reiterating the centrality of Article 5 (which states that an attack on a NATO member is an attack on all) and to establish the deployment of troops on the eastern and southern flank — the upon which the rotation of combat infantry brigades should counter any “offensive” Russian move. Nevertheless, it goes without saying that the build-up of Russian conventional forces is comparatively higher than NATO’s, which is years away from ensuring strategic parity in case of a Russian invasion along the eastern flank.

This reflects the idea that within NATO not all members share the same concern over Russia. Thus, France, Germany and Italy do not seem to look at Russia as a direct threat and are keen on engaging Moscow both with commercial relations and deterrence. For these countries, Russia is a significant economic partner both for imports of energy products and exports of mainly machinery and manufactured goods. By contrast, Estonia, Lithuania and Latvia’s view on Moscow is .

To sum up, while Trump’s bombastic request to increase overall defense spending to 4% has sparked a debate among the allies, it has focused the attention on the varying degrees of military commitment. At the end of the meeting, Trump reaffirmed��. However, as Obama began the withdrawal of from Germany, Trump will most likely . In regard to this, it seems that the US will continue the pivot to Asia and use its strategic forces to contain China, while maintaining a smaller presence of conventional forces (with high firepower capability) in Europe in order to hedge against Russia.

Thus, Europe must come to terms with it. This means that European countries have to continue to pursue their structural integration at the armed forces level in terms of harmonization of equipment procurement, research, funding and logistics. Aside of the Permanent Structured Cooperation framework, which is��part of the European Union’s Security and Defense Policy, nine European states have signed off on establishing a European military force for rapid deployment in times of crisis, a project aimed at strengthening and reinforcing readiness of forces.

However, European countries are far from having political will to pursue this path. In security and defense matters, cooperation between states is and could put national interests at stake. With regard to this, who could rule out that a complete withdrawal of US forces may not trigger an arms race and, in the worst case scenario, enhance nuclear proliferation among major states, especially France and Germany? Nobody, except the United States. That is why allies remain bound to a vision where US armed forces are hosted on their soil, which ultimately means that Washington����and will thus intervene in the worst case scenario.

What is likely to happen is that the alliance is not going to be dismantled anytime soon. On the one hand, European countries will struggle to form a real European army with good results in terms of operational capability, while they will modestly increase their defense expenditures to accommodate US requests. On the other hand, Trump will follow through on Obama’s policy of disengagement from Europe while, at the same time, he will maintain fewer conventional forces on European soil aimed at continuing to carry out operations in closer proximity, such as the Middle East and North Africa.

*[Updated: July 19, 2018, at 17:48 GMT.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Italy is the third largest economy in the eurozone, and its nominal GDP represents the 12th��largest in the world. However, Italy’s economy is smaller than it was in 2008 and is still grappling with many shortcomings that drag down its capability. Regardless what coalition or party will run the , Italy has to implement reforms aimed at reviving productivity, downsizing public sector inefficiency and eventually reducing its debt to GDP ratio. Simultaneously, regulatory reform and competition policy are a sine qua non to shift resources away from non-productive sectors and drive investment toward more dynamic and high value-added areas.

Different variables come into play when explaining total factor productivity (TFP). First, the driving force behind TFP is the investment in and knowledge.��It is statistically demonstrated that the value added by work input raises according to the skills incorporated within the workforce; the more educated and high-skilled the workforce, the higher the productivity and the value added to the final output.��As Enrico Moretti argues in his book, , intangible assets such as ingenuity and adroitness of human capital lead a country to move toward its technological frontier.

Econometricians and statisticians have how, in developed economies, “the organizational complements to firms’ installed computer-skills, organizational structures and processes, culture, and other factors”��raise or decrease productivity, accordingly. With this respect, Italy lags behind its European and global peers. In terms of European and global education standards, Italian students rank ; in addition, graduate-student rate among 25 to 64-year-olds is around 17%, compared to Germany’s 27%, 32% in France and 44% in the US. Here the problem lies in low levels of spending on tertiary education and in money being wasted in the allocation of resources.

The second driver of growth and TFP is saving and investment in capital stock. Alongside human capital, an�� in capital deepening, namely the growth in the physical quantity of capital available for a single worker, is strongly correlated with total factor productivity growth.��As shown by Luigi Zingales and Bruno Pellegrino in their study of Italy’s , “poorer management practices are the cause of this disadvantage, raising the possibility that the Italian disease is just an extreme form of a��European disease.” With regards to this, capital accumulation and investment rates in Italy are falling behind, due to specific features of the country’s business ecosystem. It is weighed down by small and medium-sized enterprises that rely on familial networks and cronyism, firms that are resistant to new technology, narrow mindedness and low levels of meritocracy among��, plus a high corporate tax rate, all of which inhibit entrepreneurship and investment.

The third and last factor is innovation. Innovation rests on uncertainty, human creativity and chance. It concerns product and process innovation, and implies the adoption of disruptive technologies, new methods and procedures that increase the value and the quantities of the final output. All other inputs being equal (capital and work), technological breakthroughs that stem from innovation incorporated within the work process improve quality, reduce marginal costs and have positive effects on productivity. R&D spending and investment in frontier research opportunities by venture-capital firms are the . With regards to this, Italy has gone through a negative rate of growth since 1995. To make matters worse, TFP has dropped by 0.6% on average. Again, the research carried out by Zingales and Pellegrino finds a robust correlation between low levels of technological innovation and a failure to “take full advantage of the ICT revolution.”

Public Sector Woes

Italy has a long history of public intervention in the economy. In one of the most comprehensive and detailed of Italian economy, Fabrizio Barca stressed two features of local capitalism: the presence of lobbies and corporations and the “role of the Entrepreneurial State.” Italy’s entrepreneurial mindset continues to heavily leverage on corporatist benefits and rent-seeking behavior guaranteed by vested interests, where competition and the market economy are portrayed as an absolute evil, while protectionist measures are implemented to secure special interests to the detriment of collective economic growth.

Trade unions play their role in this dismal situation, seen mostly as an expression of the interests of . Plus, they are bound to the concept of collective and national bargaining typical of the industrial-manufacturing period, made up of mass production and assembly lines and anchored to a militant vision of limited labor mobility, preference for lifetime employment and .

With regard to the bargaining power of lobbies and their vested interests, the Alitalia case provides an apt example. The national airline that recently filed for bankruptcy — it has done so already in 2008 and seen a number of public recapitalizations over the last 30 years worth €7 billion ($8.7 billion) —��has been bailed out many times without incurring any corporate restructuring program aimed at modernizing it. Several attempts made by foreign companies and private equity firms to take over Alitalia were . In addition, unions and the company’s management have always relied on government promises to come to rescue the “national pride” embodied by��the airline, regardless of the burden on taxpayers, all of this following the logic that the liberalization of the airline would break electoral consensus for the government and would job security.

This last example highlights the second feature of Italy’s economy brought up by Barca, namely the role of state as . The Italian entrepreneurial state has often leveraged on the use of public debt to allocate resources and achieve consensus��in a typical — quid pro quo —policy. Over the last 40 years, especially in the 1970s and 1980s, Italy’s current account has run on a large deficit, above all in order to pay for a , and a massive amount of debt has run up to the of future generations. With regard to this, it was in the aftermath of the crisis of 1992 and, above all, after the debt reduction reforms needed to meet the criteria to enter the Economic and Monetary Union, that Italy began to adjust its macroeconomic imbalances in the current account, especially in the field of pension reform.

However, Prime Minister Matteo Renzi’s flagship income-tax cut has been labeled as one amongst the last measures that fall within the do ut des policy. Notwithstanding that public intervention is always portrayed as a tool to fix imbalances, it’s mostly driven by political interests that eventually contribute to misallocation of resources, creating inefficiency and, last but not least, increasing ethical problems, with little regard for collective interests and economic growth. Indeed, many authors have criticized Renzi’s ��“aimed at giving those earning €8,000-26,000 a year a tax cut worth €80 per month” since it would not lower the debt to GDP ratio but merely create a .

Flawed Measures

The measures taken thus far to improve Italy’s economic performances are flawed. Renzi’s government has implemented the Jobs Act, aimed at bringing the Italian labor market closer to the labor to improve the entry and exit flexibility, enhance labor reallocation, reduce duality and promote stable open-ended employment. However, distortions continue to exist in the job market in terms of highly centralized wage bargaining structure and severe restrictions on dismissals (especially in the public sector), high taxes, skills mismatches between graduates and over-45s and poor governance of youth apprenticeship programs.

In addition, Italy still faces major structural issues that drag down economic performances and decrease productivity, such as a gargantuan public debt, its political use of vested interests and rent-seeking mentality by lobbies and corporations, not to mention an unsustainable pension system that continues to transfer present wealth to the elderly at the expense of today’s youth. All these factors taken together result in reduced economic efficiency through poor allocation of resources and low growth levels for the entire economy. For Italy to continue on a long-term path of growth and to avert a debt burden that could eventually result in a ��in light of a tapering of the quantitative easing program implemented by European Central Bank, it has to follow through with its homework and adopt restorative measures.

First and foremost, more strategic investment in schools and universities, with a particular focus on the quality and high standards of teachers and academics, is imperative. Indeed, investment in human capital is the best predictor for economic growth in terms of high salaries both for individuals and communities. As compellingly demonstrated by the findings of Moretti’s research, investment in human capital does not only��raise return on the skilled workers and productivity, but it raises income for the low-skilled workers as well thanks to — better technology and .

Second, Italy has to turn its public sector upside down and continue on the path of Fornero’s pension reform. Simply put, spending needs to be cut by 5% to 10%, the sprawling bureaucracy and share of pension expenditures have to be reduced alongside enforcing rules to eliminate corruption in public office. In addition, Italy should shift expenditure away from public consumption and drive toward public investment. Plus, Italy has to comply with and implement the�� designed to open up competition within the service sector and to break up monopolies. This is the only way to root out longstanding inefficiencies that continue to slow down the implementation of reforms, deter investment and create scope for rent-seeking.

Last, in order to create a business ecosystem that encourages and rewards innovation, Italy has to cut taxes to support employment while switching subsidies from unproductive jobs and areas of backwardness to ecological niches of excellence. At the same time, it has to give more support to re-training of the unemployed. If these reforms are implemented, Italy may be set on its way to recovery from being the sick man of Europe.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Today, many scholars and political scientists contend that America’s economic and military leadership is being worn away. The current assertion is that the apparent decline of the United States is mainly due to globalization: Over the past few decades, the integration of economies and the consequential diffusion of technology have led many developing countries to experience rates of economic growth that has consequences for the distribution of relative power among nations.

Those who advocate this position argue that the US is no longer efficient at sustaining its hegemonic roles. In addition, the proponents of this worldview claim that the global distribution of power is on the cusp of a massive adjustment. For them, the power is going to shift toward China in the next 50 years. According to this position, the People’s Republic of China is undertaking significant reforms (in the economic, banking and military sectors) that eventually will lead it to overtaking the United States as the foremost global power. These scholars argue that, judging by economic indicators such as the GDP, China no longer lags behind the US. Furthermore, China is accumulating military power through the modernization of its army, which eventually will reduce the advantages the US currently possesses.

However, the claim that China is going to trump the US as the main economic and military power is flawed. Distribution of power is not abruptly shifting toward China to the detriment of the US, and the latter currently enjoys enormous advantages in terms of technology, military and economy.

For example, China’s growth rates in terms of GDP (the purchase power parity, or PPP, for the World Bank) are above average because its departing point was at a low level. Economists explain the advancement of poor countries through several models, the most famous being the Solow-Swan. This growth model is built upon the concept of diminishing returns to illustrate the convergence of poor countries’ income levels with the income levels of rich countries. In brief, given the slow pace of diminishing returns, developing countries tend to catch up with rich countries through a process called “.”

Heightened access to modern technologies and new modes of production, consequent increases in labor supply — a higher level of productivity (namely, technological progress) within the labor force — and capital foster long-term economic growth. Thus, China has been and is able “.”

Another example is that the single analysis of GDP presents a static view of China’s economy. Such investigations merge size (population, GDP, energy consumption) with power and, by doing so, misrepresent the capabilities of a large but underdeveloped country like China. Nevertheless, upon closer investigation, the fact that GDP does not reflect the size of a country’s power is revealed.

defines national power as “a country’s ability to dominate the cycles of economic innovation at a given point in time and, thereafter to utilize the fruits of this domination to produce effective military capabilities.” Likewise, in his��, Klaus Knorr argues that what makes a difference for national power is the “surplus wealth” of a country, namely the capacity to extract the surplus for military purposes. Therefore, relative power of a country rests on its stage of economic growth, computed in relation to income per capita. The latter represents a valuable system to assess the capability of any country to obtain cash from ordinary citizens to meet expenditure for new weaponry, foreign aid and so on. Yet China, because of its relatively low per capita income, falls short in disposable surplus wealth with respect to the US. By contrast, its GDP is merely a measure of production that does not consider the size of its domestic market and, thus, the level of per-capita income of the country.

Innovation and Ingenuity

Another widely used tool for measuring economic prowess is the percentage of . FDI is an investment made by a foreign company or individual in another country by means of setting business operations or purchasing business assets (via ownership or stocks). These entirely foreign-held businesses represent 70% of FDI in China and are currently seen as an important tool for the transfer of technology, contributing relatively more to growth than domestic investment.

However, wholly foreign-owned enterprises have no general obligation to transfer technology to local partners. What is more, FDI counts on a certain threshold of human capital stock to absorb advanced-technology transfers. Although China possesses an immense supply of cheap and medium-skilled labor, the learning curve and barriers to entry for harnessing and absorbing certain technologies are very steep.

A source of measuring the power of a country is also its ability to innovate, which rests on the adroitness to create new methods of production and new products. Human capital is the key component in the economy of innovation and knowledge. To put it simply, are the essential input.

In the field of innovation, China currently falls short of the United States for several reasons. China’s human capital tends to be downstream-oriented and consequently lacks upstream abilities. As pointed out by various scholars, over the last 50 years, Beijing has been able “.” This has benefited enterprises that depend on settled technologies and machinery such as tankers and shipping equipment.

Yet China seems to be in short supply of the so-called upstream competence. These qualities depend on skills to advance comprehensive understandings of global supply chains of customers’ requirements by creating high-value added goods that integrate new technologies. These include harnessing software development and efficiently managing global supply chains.

Therefore, China is not shifting “” in the past. Also, China currently fails in turning its economic power into a credible and attractive hub for innovation and entrepreneurship on a global scale. America’s edge over China lies in its innovation-friendly environment, resulting in .”

Intangible Assets

The major components that enable a country to lead in cutting-edge technology depend on intangible assets, most notably what economists call the forces of agglomeration: systems of property rights and a sophisticated industrial base, full labor markets, an efficient judicial system and flexible organizations, presence of specialized service providers, knowledge spillover and trust embedded within society. Many authors have contended that open societies, like the US, benefit from these trends vis-à-vis their authoritarian counterparts.

As states, “openness is a measure of the extent to which a nation is in harmony with the crosscurrents of globalization — the processes by which people, ideas, information, goods, and services cross international borders at unprecedented speed.” As far as innovation is concerned, this means that it is not what a country can produce, and at what pace, but the underlying ecosystem that tie physical goods to networks, research clusters and command centers. Such ingredients — property rights, social networks, capital markets — constitute the supporting infrastructure and the capacity to absorb that are needed to integrate innovation into an effective and coherent entity.

China has clearly been exceptionally gifted at managing low- and medium-cost technologies ever since globalization has contributed to the spread of technology. However, as the economic return on human capital and innovation have also grown accordingly, China continues to rely heavily on top-down policies for research and education without tackling its shortage of social capital and institutions that could encourage innovation and entrepreneurship and empower an investment-friendly environment.

Arms Race

This situation seems particularly true when the military power of China is gauged and compared to the US. The rise of quality (in terms of human capital, ingenuity and skills, embedded in a sophisticated ecological system) as the predominant character in military technology has finally made obsolete and illogical the current systems of calculating relative military power. Therefore, a technological edge has come to matter most rather than possessing large forces.

Despite China having undertaken a process of military modernization for decades — it has abandoned compulsory military service and has shrunk its large forces, alongside a tenfold increase in defense spending — the US holds a major advantage in terms of the technological base for the construction and maintenance of sophisticated and advanced weapon systems. Development, as well as integration, of military technology into military forces is a process that takes place in the long run in the broader context of defense science, technology and industrial base of a country.

Advances in defense innovation are affected by several determinants that span from distinctive national styles — design philosophy, political assumptions of the élite and leadership support — and trade-offs between designers and military. Additionally, another variable to consider is the interaction within the industrial-military complex, such as the growing sway of defense conglomerates, research and development (R&D) base for innovation and civil-military integration.

Nevertheless, a major stumbling block for manufacturing and maintaining cutting-edge military technology rests on the ability to��mobilize of organizational capital. These constraints are widely known as “” — namely, the idea that any innovation generally demands organizational and infrastructural support.

Over the last 30 years, China has allocated a large amount of financial resources to become a frontrunner in military technology. Beijing has put in place sweeping reforms aiming at converting its defense, science and industrial ecosystems from state-run into a market-driven systems that would allow technological innovation to thrive and spread. Therefore, Beijing has implemented some restructuring to fully embrace a��, namely the creation of a global supply chain in development, manufacturing and marketing of weaponry.

Moreover, its research, development and acquisition system (RDA) has undergone major organizational and regulatory reforms. In addition, the defense industry has witnessed a deepening cooperation and coordination between the People’s Liberation Army (PLA), civilian defense industry officials and science and technology experts. However, both RDA and the defense industry are struggling with the classical problems of a transition from central planning to a market-based system: sprawling bureaucracy, compartmentalization, lack of accountability and activity-management rather than performance-based policy.

Ultimately, military production heavily depends on a civilian technology base and its effectiveness turns on particularly on advances in commercial technology — microelectronics, computers, biotechnology, chemicals — that finally spill over into the military realm. Therefore, China’s future capabilities to outproduce the United States in advanced weaponry rests on its ability to develop a groundbreaking industrial ecosystem that integrates commercial and military technology.

Such an ecosystem incorporates platforms that tie together defense science and technology-related infrastructure, services and resources that serve as the primary means for defense innovation. In this field, the US has taken a bottom-up approach that has brought about a bigger and better integration of military and civilian sectors to help further advance the innovation process and develop the aforementioned platforms. So much so that in the US, private firms and corporations steadily continue integration of commercial technology into military capability. In this sense, the commercial applications of certain technology, such as civilian satellites or biotechnology, have benefited from the openness of the market and have engendered the process of trade-offs and interactions that enable clusters of innovation to thrive.

China’s outlook for developing and manufacturing advanced conventional weaponry seems more comparable to South Korea or Taiwan in the 1970s rather than the one of the US at the present time.

Significantly, innovation in military realm can stress hardware (technology) in addition to practices (such as doctrine or operational art) and software (organizational change). asserts that the “China’s military innovation programs have been more technologically that doctrinally or organizationally focused.” Because of the absorption of already existing foreign-derived technology, China succeeded in the first stages of technological development of military knowhow as well as in the following ones: creative imitation and creative adaptation.

Given better innovation capability facilities, equipment and human resources, from the 1990s onward China began to reverse-engineer several Russian weapons systems, primarily in the field of aviation. Beijing absorbed and mastered the technology and knowhow that Russia handed over and, at the same time, updated the acquired technology through indigenously-developed systems that tailor Chinese technological capabilities.

Falling Short

To put it simply, China’s key element innovation strategy (zizhu chuangxin) smoothly proceeded along small-scale and incremental advances of foreign-acquired technologies, as well as limited updating of an existing indigenously- developed system. When it comes to more sophisticated innovation, however, China’s organizational and doctrinal changes do not always maintain the pace of technological advances. Especially, it is pivotal to consider the way “hard capabilities” — such as input and infrastructural basis, as well as development facilities, laboratories, research institutes, universities, human capital, access to foreign market technology, manufacturing capabilities — are tied together to bring about disruptive and radical breakthrough in both new component technology and architecture.

China is currently displaying its skills in developing asymmetric doctrine and capabilities such as anti-ship ballistic missiles and cyber warfare, especially through the integration of organizational structures, doctrinal process and technology.

However, China falls short in comparison of the US in mastering radical innovation. Drawing on business literature insights, a large number of studies contends that the US takes advantage of what in marketing is known as��. Indeed, it is crucial to consider strategy and population ecology applied to organizations (in this case, countries like China and the US). Strategy refers to the links between survival, financial strength and the timing of firms’ entry into the marketplace, while population ecology takes into account the population density of firms at the time of their founding and the size and growth of the markets they address in appraising the survivability of organizations.

This metaphor helps to understand how the US, by exploiting some initial asymmetry, gained advantage in terms of leadership in technology and pre-emption in the acquisition of scarce assets while capitalizing on switching costs. Therefore, America’s edge lies in its broad-based, world-class R&D capabilities and personnel along with deep financial resources and the nature of its integration into the global economy and technological order.

By way of example, we can consider the ability of China of mastering stealth-technology. Despite claims that Beijing has the ability to harness such technology with its J-20 fighter jets, the stealth of the aircraft has been��,��as well as its maneuverability, electronics and communications systems. At the bottom of this lies the fact that being a second-mover in such technology presents a major difficulty.

The US, on the other hand, possesses tactical, organizational and operational concepts to master such technology, not to mention advanced communications systems, command and control infrastructures and skilled personnel to operate this platform. Overall, alongside suffering from poor infrastructure, heavy reliance on foreign technology and lack of top-notch R&D capabilities, China��, investments, as well as bloated bureaucracy and ossified organizations. Therefore, the prospects of narrowing the gaps are few and the US should maintain its leadership status for a long time to come.

China’s outlook for developing and manufacturing advanced conventional weaponry seems more comparable to South Korea or Taiwan in the 1970s rather than the one of the US at the present time. Accordingly, while the United States occupies the upper tier in the global defense industry, China currently languishes in the lower parts of the second tier, with .

Nevertheless, according to , “pockets of respectability exist in some areas, such as short-range ballistic missiles, anti-shipping cruise missiles” and cyber warfare. However, a coherent and comprehensive assessment of China’s asymmetric capabilities must consider every aspect of Beijing’s strategy and must not exaggerate the threat posed to the United States. An across-the-board investigation must highlight the strength and weaknesses of the key trends in China’s economic prowess and innovation, as well as the integration of commercial technology into the military field and the ecosystem challenge posed by innovation at organizational and financial levels.

*[This article is based on an earlier paper written by the author for , Washington, DC.]

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Founded shortly after World War II, the main role of the North Atlantic Treaty Organization (NATO) was to in front of what was considered a tangible threat of a Soviet invasion.

In the aftermath of the Cold War, for many scholars of international relations, NATO no longer had any reason to exist. As it was structured on a specific reaction to a threat that had vanished, many observers posited its ending as a collective security system. On the one hand, some accomplished realist scholars contended that the alliance would lose centrality and that all states would . On the other hand, many constructivist and institutional liberals maintained that NATO would shift its aim toward cooperation in Europe and

In 2016, we can see that the predictions of both schools were ill-founded.

A NEW ALLIANCE FOR A NEW ERA OF INSTABILITY

Following the Cold War, the main commitment of the United States was to give centrality to the alliance—excluding the reckless Middle East policy of President George W. Bush—and to take advantage of a collective security system as a tool for reproducing its global hegemony.

Reframing the alliance’s centrality implied enlarging the tasks of the organization. This perspective no longer included just collective defense as the main target, but an extension of its umbrella security eastward and the strengthening of democratic processes in the former Soviet republics and the Balkans.

NATO significantly revisited its role within an entirely different security environment compared with that of the Cold War. The alliance, as with big corporations, , understanding and adapting its organizational dynamics to the ever-shifting surrounding security “ecosystem.” As a complex system—like cells, a firm or a nation-state—NATO responded to the increasing complexity of the New World by adding hierarchical levels to better manage the relationships among its members.

The postmodern world, involving the demise of the ideological confrontation between the two blocs, has witnessed the dispersal of control over organized violence to many forms of hybrid and non-state actors. The shift to a post-Westphalian international order—in which economic flows have created supra-state and fragmented sovereignties and jurisdictions across and within states—has worked as a facilitator for organized crime and terrorists to thrive steadily, as well.

This new era of instability, the surfacing of new actors and dynamics, and the widening of threats have driven NATO to broaden its security agenda and adjust its structure. That was put in place within a combined joint task force and an integrated command structure based on collective practices and procedures.

Today, NATO confronts threats encompassing cyber-defense, energy supplies, terrorism and counter-piracy, human trafficking in the Mediterranean Sea, the fight against the spread of weapons of mass destruction, and it provides operations of peacekeeping.

A LOST CENTRALITY

Over the years, NATO has extended the range and scope of its operations. At the same time, the alliance has begun a project of cooperation and partnership with non-member states. It must be taken into account that, notwithstanding the attempts of rebuilding a post-Cold War centrality for the organization, Europe seemed to be of an alliance linked to a pre-Cold War world.

The acceleration of the integration processes within the European Union (EU) on security and defense, as well as the military expenditures that did not meet NATO’s 2% target, proved the “” of Europe. This fact upset the US and led to increased tensions among allies. Moreover, the US-led wars in Afghanistan and Iraq, and the air campaign in Libya against Colonel Muammar Qaddafi, all without a credible exit strategy, added fuel to the fire and NATO was then relegated to the role of a supporting actor.

REFOCUSING

However, the Russian annexation of Crimea breathed new life into the alliance. The actions of the Russian Federation in 2014 revived the dormant tensions due to the expansion of NATO to the East, and it once again refocused the attention of the alliance on the European continent. Despite the alliance entering a partnership with Russia called the “” in 2002, which included training, cooperation on military and security, anti-terrorism operations and joint exercises, the eastward enlargement has always been a point of concern for Moscow.

The war between Georgia and separatists in South Ossetia and Abkhazia in 2008 further strained relations between NATO and Russia, and was interpreted by the West as a Russian endeavor to weaken the post-Cold War order through an illegal and illegitimate redefinition of the post-Soviet republics’ borders. It was seen as a shrewd attempt by the Kremlin to thwart Georgia’s plan to join NATO, since the alliance, as per its statute, could not accept states with territorial problems with its neighbors.

But it was precisely by the time Russia seized Crimea in 2014, after the ouster of the pro-Russia government in Ukraine, that dialogue between NATO and the Russians ended permanently.

2016 NATO SUMMIT IN WARSAW

, leaders of the European Union and countries belonging to NATO gathered in Warsaw, Poland, to set conditions for a long-term strategic partnership, especially in the face of Russian foreign policy toward the West, international terrorism and the United Kingdom’s exit from the EU.

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Many assessed the Warsaw Summit as the most important after the Cold War. First and foremost, world leaders overtly restated the , upon which every armed attack on a NATO member has to be considered as an attack on the entire alliance. NATO took this step to reassure countries on the eastern flank that look upon Russia’s moves with great concern and see themselves as the first possible targets if Moscow retaliates on Europe.

The Russian military exercises along the border with the Baltic republics are just one example of the frosty ties between Russia and NATO. In one recent case, Russia in Norway, Finland, Sweden and Denmark by deploying 33,000 soldiers with known as “flying dark.”

To address these threats properly, the alliance decided to “scale down” the agreement signed with Russia in 1997. According to the Kremlin, the security environment east of Germany has to be marked to the status quo, with no combat troops deployed permanently unless there is a change “in the security environment that could affect any member of the alliance.”

In NATO’s view, the deployment of combat troops “on a temporary basis” and their rotation in high-risk countries—Poland, Estonia, Lithuania and Latvia—should provide some degree of deterrence to counter Russia. Canada, the United States, Germany and the United Kingdom have pledged to deploy troops in what is called the “.” However, it is worth noting that these infantry brigades are years away from ensuring strategic parity with Russian forces, despite US President Barack Obama’s decision to strengthen the American contingent stationed in Poland.

In addition, formal talks in Warsaw were resumed with countries outside the alliance, such as , who are threatened by . These countries have called for greater cooperation and a common line of defense in the region, where competition for the exploitation of natural resources has stirred up. Moscow has already carried out military drills and built up a huge 14,000 square-meter military base. The outcome of these actions could push non-member countries to apply for NATO membership.

In Warsaw, NATO allies also discussed one of the main points of contention with Moscow: the disposal of the missile shield AEGIS in the heart of Europe. The is the land-based component of a sea-based radar system (BMD). It is designed to intercept medium- and long-range ballistic missiles.

For NATO, the current anti-missile shield is part of a collective defense against threats posed by , which is capable of striking Europe. For Russia, the AEGIS system would be capable of launching cruise missiles and could tip the balance of power toward NATO, thus threatening Russian superiority in the region.

While NATO has set the implementation of the European Phased Adaptive Approach (EPAA) protocol, which involves a capacity of defense against continental ballistic missiles, no matter what the Kremlin says. In fact, Russian missile superiority is ensured by the deployment of a sophisticated anti-air and anti-ship defense system called .

At the Warsaw Summit, NATO formally recognized cyberspace as the “fifth domain” for military operation and discussed a new strategy with the EU to tackle a “.” To counter these threats, NATO has acknowledged that sharing data about information technology amongst allies is pivotal.

In addition, NATO Secretary General Jens Stoltenberg has stressed how the alliance is further developing significant against cyber vulnerabilities in order to secure cyberspace computer networks from external attacks and backdoor proxies. By way of example, in April, 26 NATO members were involved in , the biggest and most advanced international live-fire cyber defense in the world to date.

EUROPE, NATO AND RUSSIA AT A CROSSROADS

As previously mentioned, the lost centrality and legitimacy of NATO was somewhat restored by the aggressive stance of Russia on the eastern flank. Redefinitions of borders and undeniable violations of the international community’s shared norms has spread the image of Russia as a nation-state that is .

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Since 2010, Russia has deliberately demonstrated its leadership at the international level and cemented its hegemony at the regional level. Russia’s foreign policy could be well explained as the byproduct of an interaction between the domestic plight—a shattered economy due to fluctuations in basic commodities prices, a weak currency, crony capitalism and idiosyncrasies of the ruling elite translated in foreign policy—and the surrounding states’ system involving dissatisfaction with the status quo and external constraints. Therefore, growing external nationalism is seen as a way to appease domestic opinion, strengthening it against the alleged invasion of Western values.

The of Russia clearly points out the modernization of armaments as a means of ensuring Russia’s superpower status—construction of a new stealth bomber, increase in cyber-warfare platforms and a renewal of the submarines fleet—as a result of what the Kremlin perceives as the decline of the US-led liberal order. In 2015, according to the , Russia’s military spending increased by 7.5%.

At the same time, many American analysts and former NATO generals are using saber-rattling tones and/or are pushing NATO to , showing the need for greater potential and integration of anti-missile systems in the medium and long term, as well as for acquisition of cutting-edge military technology in order to be responsive to Russia’s threats. In the eyes of the United States, the Kremlin’s development of A2AD systems (and China’s actions in the Asia Pacific) poses a threat to its position and, moreover, puts European security at stake. This is why NATO requires Europe to take a clear stand.

However, in what direction is Europe now headed? Some countries seem keen to move toward Washington’s recommendations—at least on the procurement level. Overall, the particular interest seems to gain the upper hand of what is labeled as “collective.” NATO appears internally at odds between western and eastern countries. The camps are split into those who want to restore business ties with Moscow—dismantling hard-hitting sanctions regime and appeasing Russia—and those who are fearful of the Russians and want greater deterrence toward the Kremlin.

Here there two issues at hand.

The first is structure-related. Cooperation among states—on defense and security foremost—, mainly because it is constrained by the ruling logic of security competition. Cooperation is necessary but is also risky and complicated. States are more likely to provide for their own security first, since sharing information and data with others could put national interests in jeopardy

The second issue is that Russia has been able to “wear down” the already-fleeting political will of NATO. Moscow has taken advantage of division within the NATO-EU relationship, sowing political divisions in order to box in the alliance.

POWER POLITICS

To sum up, confidence-building instruments—such as high-level talks between officials of the EU, NATO and Russia—are mandatory to stop what appears to be a new arms race at the core of Europe, which could prove to be suicidal.

NATO and the EU have also reached a tipping point. The US and the European Union are bound by shared values and deep historic ties, and have pledged to defend one another. NATO has safeguarded peace across Europe over the last 60 years, mostly due to the balance-of-power with the Soviet Union. Those who say otherwise should check any books of strategy. Through NATO, American and European leaders have promoted .

Nevertheless, the lack of common perspective and the national interests of states have driven NATO to recast its role, and it has given the EU more leverage on shaping policies of the alliance in the future. Think of the possibility to use NATO to build humanitarian corridors and manage migration flows in the Mediterranean Sea. In the long run, this is the only feasible way .

Russia and NATO are at a crossroads. And Europe as a whole could pay the steepest price of the great power politics of this century.

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The terrorist attacks in March carried out by the Islamic State (IS) in Belgium brought about an enormously emotional response. Mainstream media went into overdrive covering the Brussels attack in a breathless attempt to broadcast the outbreak of violence, while politicians kept butting heads over what to do next. At the same time, many pundits took to the stage saber-rattling against IS in Syria and Iraq, while others argued that a massive military intervention would be detrimental and would just enhance the outreach of the so-called caliphate.

However, notwithstanding the paranoid reactions of many, a thorough assessment of the threat posed by IS to the West is far from conclusive. Especially in this moment of fear and knee-jerk reactions, a sober and balanced breakdown of the IS phenomenon is needed.

New Kind of War

The first issue that needs addressing is: Who are the people that carried out such the attack on Brussels, and what is their strategy?

In order to tackle these questions, terrorism as a phenomenon needs to be framed within a historical context that takes into account the widespread change which occurred after the Cold War.

The Cold War saw a dramatic decrease in the number of violent interstate conflicts. At the same time, the postmodern era witnessed a dispersal of control over organized violence to many forms of non-state actors that could hardly be held accountable for their actions. Indeed, while modern wars were fought by formally organized, hierarchical��armed forces between nations, postmodern wars are fought by a disparate range of forces across and within states’ borders without a formal declaration of war.

In addition, while once military forces counted on state-based production and a state-run process of bureaucratization, nowadays the main actors of conflict rely on global, informal networks or private production for drawing material sustenance. Drug-smuggling, human-trafficking, hostage-taking for ransom, money-laundering, plunder and theft take place on a daily basis in the war-making economy.

This new form of unleashing war is the result of globalization. With its advancement in the field of information technology, communication and transportation, globalization has resulted in the loss of sovereignty by the state, and it has worked as a facilitator and motivator for the��—corporations, ideological movements, environmental and human rights organizations, and terrorist networks and organized crime syndicates.

As a result, these new types of conflict perpetrated by non-state actors��are labeled with different names, but it is widely known as��. This kind of war-making deviates from the norm. It is defined as a military strategy in which combatants employ a multilayered mix of military and non-military tactics in order to affect a counterbalancing force exploiting vulnerabilities to negate the superior conventional strength of adversaries. These actors know very well how to use their strengths such as����against the weaknesses of a more powerful adversary.

Here is where IS becomes particularly relevant. Despite the fact that many commentators depict IS as a collection of irrational and fanatical “actors,” the endorsement of asymmetric tactics—such suicide terrorism—is far from a new military instrument and, moreover, has a strategy and logic of its own.

Several scholars have dealt with this issue using scientific methods—quantification, game-theory, cost-benefit analysis, focus on human capital and environment—and have��. In pursuing their interests, terrorists are rational utility maximizers. This means they are strategic actors who undertake highly rational and carefully designed plans to achieve political and secular goals—such as control over resources and territory—despite the fact that they look and operate much differently than a conventional state adversary.

Cyberspace as Realm of War

As Carl Von Clausewitz��, war always reflects the era in which it occurs. Nowadays, asymmetric warfare and its own unique politico-cultural form of organized violence are a byproduct of modernity.

Along with integrating a combination of capabilities, such as conventional and non-conventional weaponry use (mostly low-tech and hand-made),��. Think about the����around the world that have been used to camouflage the instigators and perpetrators of attacks—so as to sow seeds of confusion and provoke doubt in the minds of the public and in those charged with counterterrorism.

Irregular actors, such IS,����and as an instrument to reduce or eliminate the technological advantage of modern states. While democracies are well-equipped to fight conventional actors, modern states have to resort to specific strategies of emergency and exception against these hybrid actors—including extensive mass surveillance, targeted assassinations, invalidation of habeas corpus—that,��.

Thus, hybrid actors are able to level off their asymmetry of forces, for instance, playing on the sensitivity of public opinion of a democratic state to its own casualties or to the attrition of fighting without calling off security concerns and freedoms (of movement, speech and so on). In the long run, the recourse to non-democratic practices by modern states to fight terrorism is��.

WHERE THE ISLAMIC STATE COMES FROM

Since the end of Cold War, ideological conflicts have diminished accordingly. However, ideology still holds a powerful appeal, especially in some Muslim communities. The rise of fundamentalist ideologies in Middle Eastern countries must be attributed����such as high youth unemployment, a downbeat perception of future economic opportunities, oppressive leaderships and corruption.

In addition, as far as external factors are concerned, the breakdown of colonial borders imposed at the end of the First World War following the Afghanistan and Iraq wars disrupted the balance of power among nations, sects and tribes, and led to the current situation of instability.

With the attacks in Paris and Brussels, IS aimed to steal the spotlight. As previously outlined, it considers information warfare as a key point to its own strategy.

In the backdrop, another external factor is the clash for regional dominance between Iran and Saudi Arabia. In order to counter the rise of Tehran, Saudi Arabia and other Gulf Arab powers have����the ascension of jihadist groups as proxies for their own interests.

To make matters worse, the 2010-11 Arab Spring uprisings that swept across the region further exacerbated tensions that��resulted in civil and sectarian insurgencies in Syria, Libya and Yemen, and in the ascension of IS.

Such a group was able to flourish within a political vacuum. Along with proving itself as a well-armed and disciplined force in comparison to many others in the region, IS demonstrated a great adroitness in becoming a quasi-state.��The , but a religious group with carefully considered beliefs that holds a complex top-down structure of power built on a propagation of violence and the exploitation of a transnational criminal network.

The Islamic State is highly effective at exploiting social media for information warfare. Notwithstanding the airstrike campaign aimed at degrading and destroying it, the group pursues an����in order to recruit new militants and counter Western media.

Related to this last point,����communities—in the gloomy suburbs of a Western megalopolis with narrowness of future economic opportunities. These “new terrorists” are and detached from wider society,��and who could find a way of life through new forms of sophisticated recruitment campaigns and social media imbued with extreme religious expressions.

These self-recruited individuals—the so-called lone wolves—are drawn to the idea of joining the battle that is just a click away. They are not supported or financed by larger organizations, and their tactics mostly consist of low-tech attacks on soft targets.

Concerns have also increased over the potential return of foreign fighters from Syria and Iraq to their home countries in Europe or the United States who could potentially participate in or support terrorist attacks from within. However, over the last decade, most —notably in the Middle East. The perception of the enemy within has been blown out of proportion by the media and the internet, which��has provided terrorists with new capabilities to reach across time and space and “spectacularize” their attacks, creating vulnerability in a state-based system where control of information equals power.��

ADDRESSING TERRORISM

Many have contended that the main goal of the Islamic State is political: to revive the caliphate and reunite the Muslim umma (community) around it. Leading scholars explain that an organization chooses terrorism by making a����in order to promote values and preferences. In doing so, IS would have renewed tactics such beheadings, crucifixions and slavery, as well as attacks at the core of the Western world, in order to usher in a world without infidels.

Many others maintain that, as IS-held territory in Iraq and Syria is shrinking, the group has gone global in a desperate attempt��to instill fear and anxiety and, ultimately, disarticulate society among the target population. This would be central to what IS aims to achieve since, after all, it is an immediate goal of most terrorist groups��.

In order to tackle these questions, terrorism as a phenomenon needs to be framed within a historical context that takes into account the widespread change which occurred after the Cold War.

With the attacks in Paris and Brussels, IS aimed to steal the spotlight. As previously outlined, it considers information warfare as a key point to its own strategy. The group seems to have understood well how the control of massive flows of information became a form of power and exploits it accordingly. Therefore, in one of the most delicate moments in European Union (EU) history—the ongoing refugees crisis, a potential Brexit looming—the Islamic State seized the moment to further its narrative of civilizational war between Islam and the West.

The narrative, in turn, is further heightened by some far-right European leaders. IS has been able to deal a blow to the already-fragile architecture of the EU, which is now more fragmented than ever before—the Schengen agreement is now called into question, and steps bucking the trend of democratic properties are under way in several European states.

As long as dissatisfaction and grievances pile up in the Middle East, due to domestic and external factors—such as stagnant economies, political corruption and a lack of opportunities for youth, along with the failures to stabilize both Afghanistan and Iraq, a final solution for the burning issue of Palestine, and a real end to wars in Syria and Iraq—groups like IS could flourish, and ideological and religious wars are likely to be a major feature of future conflicts.

Military solutions are not the only way out. For that matter, following the path of targeted killing with the use of drones����within fragile states with weak governments, unless the conditions in which terrorism proliferates are addressed properly.

Thus, to better tackle this issue—alongside intelligence measures, sharing information and greater cooperation among security services, law enforcement and the so-called homeland security strategy—a real manner of effectively engaging with youth in the ostracized Muslim suburbs in Europe and beyond��is a vital component of any future strategic approach for stemming terrorism. Arab countries, as well as the EU and the US, should focus on dissatisfaction and mistrust that ease the recruitment of prospective terrorists and��.

The threat posed by terrorist groups should not be overrated. At this point, the narrative carried by the mainstream plays along with this misrepresentation. As previously pointed out, mainstream media and information technologies hype up the terrorist threat, which plays into the hands of groups like the Islamic State.

To put it simply, we are more likely to be��.��The media, then, should play their role in properly assessing the threat of terrorism—and so too should politicians. Without plunging into hysteria and calling for more government intervention into citizens’ lives, they should remember that the danger of terrorism is relatively small. Politicians should clarify that the likelihood of such attacks is not zero, but that absolute security is not possible.

A sober assessment of the terrorism phenomenon is necessary but also essential in order not to fall into the trap of a “culture clash” that IS and some far-right politicians stir up. The main step toward conceptualizing responses to and understanding terrorism is essential to navigating the complexity of the multifaceted world we are living in.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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We have all known since her husband Bill ran for president in 1992 against George H.W. Bush. After becoming a public figure, she carved out her own political career that saw her go from first lady to��, winning the New York seat in the Senate in 2000.

Eight years later, Clinton announced her candidacy for the 2008 presidential campaign, but was defeated in the Democratic primaries by then-Illinois Senator Barack Obama. The latter appointed her��, a position she held from 2009 to 2013 in one of the most critical periods of history.

Clinton is widely thought of as the pragmatic candidate for the Democratic Party whose����on certain topics draws her closer to some in the Republican Party. She supported the invasion of Afghanistan and Iraq, and actively endorsed the NATO-led intervention in Libya in 2011.

Many of her critics disparagingly argue that she has always been part of the��. Of course, she has. At the beginning, she was clearly facilitated by President Bill Clinton’s role and capitalized on his office as a springboard for��. But��Hillary succeeded thanks to��—President Obama once called her “wicked smart”—reinventing herself from time to time.

Think about��, which led to prison overcrowding and disproportionately affected African Americans, who face the highest rate of incarceration in the US. Now, she positions herself as a champion for black rights and��. Or consider her lobbying hard in favor of her husband’s 1996�� that gutted social services and had��, especially women and children. Now, she is an��.

A Step to the Left

Vermont Senator made his way through the US political , until turning to the Democratic Party in 2015. At the beginning of his political career, he was elected mayor of Burlington, Vermont’s most populous city, three consecutive times. After that, he was elected to the House of Representatives in 1991, where he served for 16 years, followed by election to the Senate in 2006.

During his career, Sanders has stood out to be a strong advocate of����like income inequality, LGBT rights, racial discrimination and bank accountability. He was also an outspoken opponent of US wars in Iraq��and��voted against the use of force in that country in both 1991 and 2003.

Bernie Sanders © Shutterstock

Sanders has brought a breath of fresh air to the US presidential primaries. He is positioning himself as the anti-establishment candidate that Clinton represents. He threw down the gauntlet against the foreign policy��. By the same token, he is refocusing US foreign policy into a domestic issue. More than once, Sanders has advocated cutting down on defense spending in order to divert money to the public sector. His politics has always been driven by interest in economic inequality and wealth redistribution, as well as corporations and Wall Street’s stranglehold on politics in the United States. To Sanders, foreign policy is��.

However, the claims that Sanders espouses a socialist foreign policy are not supported by facts. For instance, even though he spoke out against deploying American troops on the ground in Iraq and arming Syrian rebels, Sanders supports the US bombing campaign against the Islamic State (IS). Even so, he is depicted by mainstream as pacifist and isolationist. If opposing regime change is enough to be called isolationist, then Sanders is one.

He can��also be seen as an isolationist if this��means insisting that America stops being the world’s policeman. Yet it is worth pointing out that Sanders,��, voted for a resolution supporting the air campaign in former Yugoslavia. Sanders actively supported the bombing of Afghanistan in 2001 and the Obama administration’s drone strikes policy. Bernie “the socialist” has not veered far from the Democratic����during his tenure,��displaying a deep streak of realism.

Sanders’ attitude on the Israeli-Palestinian conflict bears more of a��resemblance with��. He supports a two-state solution, while being an advocate of Israel and its security concerns and actively calls on the Palestinians to����to end terrorism against Israel and recognize its right to exist. Sanders’ posture over the Israel-Palestine question, despite added grievances toward him from the left of the Democratic Party, seems likely to tilt him more toward Tel Aviv than Obama.

During the 2014 Gaza War, Sanders excused Israeli actions—though calling them heavy-handed. Nevertheless, in 2015, Sanders decided to����in the US Congress, which was orchestrated in an attempt to derail the nuclear deal between the P5+1 and Iran.

Overall, we could try to frame Sanders’ position within a political realism attitude of restraining American forces abroad. The distinction between interests and vital interests, and the need to align the instruments of power with the intensity of those interests, led Sanders to vote against the invasion of Iraq in 2002, while judiciously supporting the war in Afghanistan in 2001 and the intervention in the Balkans in the 1990s.

Sanders advocates more commitment to diplomacy in order to avoid war and military action, and he endorses a great power cooperation within global institutions and international law. He is closer to the post-hegemonic vision of several scholars: He����that the US should forgo its dominant role, as the world has changed from the 1990, and share powers with responsible rising hegemons.

Setting Foreign Policy Aside

However, despite the fact that Sanders was able to lay down the line on domestic issues, turning the debate to topics such economic inequality and the shrinking of the middle-class, he abandoned—at least at the beginning—a likely and��, namely her hawkish posture on US foreign policy.

Unlike Hillary Clinton, Bernie Sanders is much more similar to Obama. He did not support the catastrophic war in Iraq, and he is highly skeptical over the use of military force “whenever and wherever” American interests are at stake.

Sanders has put himself in an awkward position more than once. When asked about IS, he����the Hashemite Kingdom of Jordan as a moderate Muslim country and then labeled King Abdullah (firstly����him) as a hero for having called upon a regional Muslim coalition to defeat the Islamic State.

That was a huge gaffe. First, in terms of coalition airstrikes against IS, the role of Jordan was��. The kingdom escalated airstrikes in response to the execution of one of its pilots by IS, but a few months later, US Secretary of Defense Ash Carter��. Also, hearing a self-declared socialist call a ruler of an absolute monarchy with limited tolerance for dissent and restricted freedom of expression a hero was an awkward step.

This is just one example, but it is paradigmatic of Sanders’ starting��: He broadly let Clinton handle the topic and has played along with his rival’s narrative thus far.

On US foreign policy, Clinton has been considered overwhelmingly superior in comparison to Sanders. As former secretary of state, she is a safe bet. Unlike Clinton, whose campaign team is filled with several hundred foreign policy advisers,��—until recently. Hiring several experienced foreign policy advisers is a must.

In the most recent Democrat debates, Sanders appeared more comfortable and unabashed in handling foreign policy issues. Bernie fired back criticism about his alleged inexperience and attacked Hillary. In fact, although he was depicted as a lightweight in US foreign policy and was frequently labeled a beginner, he has had a long tenure in the House of Representatives and Senate, which gives him more foreign policy experience than����by the time they ran for office.

When Clinton went on the attack against Sanders,��, he��struck back at her continuous approval of Henry Kissinger—“one of the most destructive secretaries of state in the modern history of this country,” according to Bernie. When Clinton came out criticizing Sanders for his words about Iran (“a huge step forward for warming ties with a powerful country”), he criticized her support for regime change and hawkish posturing. (Throughout her time in office, Clinton actively backed the United Nations resolution that led to airstrikes��,��and she supported the ��Iraq War but later.)

Clinton is a����of the use of military force whenever and wherever American interests are at stake. With Hillary in office, US foreign policy is likely to be similar to that of the��Obama administration, but more hawkish. She is on the Democrat’s right-wing and believes in a government approach to world affairs that is committed to the��,��where the US is��entitled to global leadership and is��vital to maintaining the stability of order.

Having��served in the Obama administration for four years, she��harshly criticized��“”��foreign policy approach, arguing that the US should strike a better balance between overreaching overseas and being so restrained that conflict can spiral out of control.

Hillary Clinton © Shutterstock

Unlike Hillary Clinton, Bernie Sanders is much more similar to Obama. He did not support the catastrophic war in Iraq, and he is highly skeptical over the use of military force “whenever and wherever” American interests are at stake. This position reflects the main concern of Sanders: that the real threats to the US are at home.

Indeed, without concerted efforts within international law to address the problems of the world properly, America will never be able to rebuild its strength at home—namely a growing economy and the resilience of its��founding values. As emphasized, Sanders is not a pacifist, nor an isolationist. He is a����whose rejection of deploying��US troops across the globe��is well-grounded in history and logic.

Sober Realism

First, US foreign policy is not going to take center stage. Despite a year of turmoil and new threats abroad, Americans are overwhelmingly focused on domestic policy issues. Clinton and Sanders follow suit. They are more concerned about state of the economy and unemployment, as well as the health care system and college tuition.

This could play in Sanders’ favor, considering his����as honest and less embedded with the establishment, while Clinton is often associated with untrustworthiness of the����and��.

Second, it is time for Hillary Clinton to take seriously the threat posed by Bernie Sanders. She should stop her “” tactics, which already proved unsuccessful in 2008 against Obama. Her “warlike” posture is carefully thought out for drawing support from undecided voters, especially from white Anglo-Saxon Protestants and dithering Republicans.

But America has changed, and so have the��.����and the impact of black and Hispanic voters tilt the balance of power toward the more democratic candidate. For now, Clinton has more support among African American and Hispanic communities than Sanders, but she must not this take for granted.

Clinton should do more than keep on insisting��that she is used to the nitty-gritty of politics or that she has a long story of support for women and children’s empowerment. The distrust of Hillary Clinton is due to her double-faced attitude over the years. On the one hand, she earned��, while on the other she asserts����on the financial sector.����have raised money for her campaign, while she positions herself as the

An obvious discrepancy between words and deeds can be costly. What sets Bernie Sanders apart in this political contest is that he seems to have stuck to his principled stance throughout his political career. Whether this will be enough to win him the Democratic Party nomination remains to be seen. With Hillary Clinton, we know fully well that she is capable of��changing her colors any time��it suits her.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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When��Jason Rezaian, The Washington Post’s��bureau chief in Tehran, was arrested in July 2014 in Iran, the motivations for his imprisonment were unclear.

Iranian security forces stormed his Tehran residence and confiscated laptops, mobile devices and notes. They also arrested his wife, Yeganeh Salehi, a journalist at��The National. Shortly afterward, Rezaian was charged with espionage. While Salehi was released on bail after a few months, Rezaian remained in custody at Evin Prison, which is well-known for housing political prisoners and intellectuals.

The trials were closed-door and went on for nine months. After, Rezaian was finally����and other serious crimes according to Iranian law, such as “collaborating with hostile governments” and “propaganda against the establishment.” Iranian authorities also accused Rezaian of “collecting classified information.” According to the indictment, he regularly wrote to US President Barack Obama, which proved his alleged contact with the “hostile government.”

As the trials were behind closed doors, there is still uncertainty on whether Rezaian’s imprisonment was intended to be used as a bargaining chip during the . What we do know is that on the US side, Obama used the talks well to release Rezaian and the other prisoners.

A Case of Uncertainty

In 2014, The��Washington Post��was caught off guard and reported the news of the journalist’s arrest just after two days. In fact, Rezaian’s arrest and custody were not disclosed immediately, nor were his whereabouts or welfare. Iranian authorities cast a shadow over the case of the American journalist, putting forward alleged security concerns. In addition, the arrest took place while both Rezaian and his wife had official work permits from Iranian President Hassan Rouhani’s Guidance Ministry and were apparently����by the law.

Rezaian holds dual citizenship, both Iranian and American. His father was born in Tehran and migrated to the US in 1959. He became an Iran correspondent for The��Washington Post��in 2012, but was based in the Persian Gulf country mainly since 2008. Rezaian’s main task was to cover news from Iran, writing about international politics and nuclear negotiations. Moreover, Rezaian offered a compelling insight into daily life in Tehran and telling portraits of the changes unfolding in Iranian society. He was also well-aware of the potential power of the country, so much so that he tried to get in touch with President Obama to offer his assistance in��.

In the aftermath of Rezaian’s arrest, most journalism associations .��The��New York-based��Committee to Protect Journalists��issued a statement asking for the immediate acquittal from all the charges and quick release;��Reporters without Borders��and The��Post��did the same. The world of journalism stood up for the release of Rezaian, giving support to his family and putting pressure on the US government to do its best to bring him back safe. Simultaneously, journalism associations contributed to sensitize public opinion, while politicians tried to keep their attention focused on the case.

Ever since Rezaian was taken into custody, negotiating the release of the journalist was a complicated matter. In fact, the US and Iran do not have formal diplomatic relations and, therefore, they had to settle this question off-the-record. Even so, and in spite of several requests by US Secretary of State John Kerry via the Swiss Embassy, acting as the US protecting-power in Iran, America was repeatedly����by the authorities of the Islamic Republic.

In the meantime, the US and Iran were in the middle of taxing negotiations over the nuclear program of Tehran. Many pundits have contended that the arrest of Rezaian and his wife was an effort by Iran’s hard-liners to torpedo the ongoing nuclear negotiations and discredit the moderate leadership of President Rouhani. As moderates gained more power since Rouhani took office in 2013, hard-liners, who hold massive influence in security forces and parts of the judiciary, tried to steer the deal in their favor, exerting as much leverage as possible.

In the US, those who were against the deal, especially the Republican Party, used Rezaian’s arrest as an instrument to continue their political struggle against the Obama administration. If Iranian moderates are not even able to free a journalist, they said, how could they persuade Ayatollah Ali Khamenei to dismantle the nuclear program?

Entering the Nuclear Talks

Secret talks between Obama administration officials and their Iranian counterpart had been going on since��. Back-channel meetings were held at Geneva, Switzerland. Brett McGurk, special presidential envoy and top US State Department official, was appointed for brokering the release of Rezaian and other Americans detained in Iran. McGurk found he was dealing with a bunch of men from the security apparatus who had never negotiated with Americans and barely spoke English, namely the toughest side of the most conservative party in Iran.

Iranian officials showed stubbornness and seemed firm in their demands, which consisted of the release of about 40 Iranians, mostly charged with��“supporting terrorists groups.” They were held in captivity not just in the US, but elsewhere, in exchange for four Americans. Along with Rezaian, included��Amir Hekmati, a former marine seized in 2011, and Saeed Abedini, a Christian pastor. Furthermore, Americans bargained for the release of Nosratollah Khosravi, a mystery man whose imprisonment in Iran had��. McGurk and other diplomats quickly turned down the radical claims of Tehran and walked out with anger, however, they took home the idea of the swap as feasible.

Donald Trump, a leader in the Republican national polls, told the press that while the US got four hostages back, Iran had seven people along with��$150 billion. He also fiercely decried the nuclear deal with Tehran, telling the press that, if he is elected president, he will get rid of it.

The negotiations dragged on for 14 months with monthly meetings, while both sides were grappling with internal divisions. On the Iranian side, changes in attitude reflected the internal rivalry between the political factions at home: moderates willing to strike a deal and hard-liners poised to disrupt any kind of openness to US demands. On the American side, rifts were deep too. Some in the Obama administration were not keen to trade innocent Americans, jailed just for political gain and charged with bogus allegations, for Iranians indicted or convicted with��. The talks were also affected by mutual mistrust and bitterness, with the Iranians coming out with past resentments like the CIA-backed coup d’état in 1953 and US support for Iraq in its����in the 1980s.

Even though the exact connection between the nuclear deal and the prisoner swap is unknown, Iranian posture seemed to change after the nuclear agreement was stricken in July 2015. Thereafter, Iran softened its stance and agreed to reach an accommodation, coming up with less drastic claims and behaving with more self-restraint. It sounded like Iran’s hard-liners wanted to keep prisoners as bargaining chips until the sanctions had been lifted. Or, maybe, the US and Iran bargained the swap as a tangential path on the nuclear deal.

Yet the nuclear deal gave hope for the release of Rezaian and other prisoners, even though it took time to reach a breakthrough. Ebb and flow went on in the prisoner negotiations until ten American sailors who strayed into Iranian territory in the Persian Gulf were��. As a result, both Iranian and American officials were stuck in a pretty bad fix. Obama stated that he would not be able to lift sanctions as long as the sailors had been in custody. As a matter of fact, the hotline between US Secretary of State John Kerry and Iranian Foreign Minister Javad Zarif sorted out this difficult situation, and the sailors were released the following morning. This move gave the US the signal that Iran genuinely wanted to cut both deals.

While was round the corner and Iranians were making progress in dismantling their nuclear program earlier than scheduled, President Obama gave a go-ahead to closely examine a list of 19 names that Iranian officials handed in. Most of them were��.

Barack Obama and John Kerry / Flickr

The two sides decided to announce the prisoner swap on the same day of the Implementation Day on January 16. Despite the fact that Iranians and Americans declared that the timing was not premeditated, eventually it seemed that the build-up of mutual trust made both actors decide not to sweep this longstanding problem under the rug any longer. At the same time, it was also Implementation Day that fostered the two parties to fix this matter once and for all.

In the end, Iran freed four Americans (the fifth was not involved in the agreement on the swap) in exchange for seven Iranians. As a response, the US agreed to abandon efforts to prosecute 14 others Iranians, who were charged with sanctions violation.

From Behind Closed Doors to Washington

With the underway, the prisoner swap and the nuclear deal heavily affected the debate. Republicans, on the one hand, celebrated the release of American hostages and, on the other hand, they slammed harshly the way negotiations were conducted and kept on adopting saber-rattling tones over Iran. Senator Ted Cruz, who is also a Republican presidential candidate,��said that��every bad actor “ … if they want terrorists out of jail” because Obama is in the “let’s-make-a-deal-business.”

Senator Marco Rubio, another Republican presidential candidate, was on the same wavelength. He held the view that the Obama-promoted prisoner swap created a precedent for “rogue states” and . Donald Trump, a leader in the Republican national polls, told the press that while the US got four hostages back, Iran had seven people along with��. He also fiercely decried the nuclear deal with Tehran, telling the press that, if he is elected president, he will get rid of it. Senator Rand Paul was the only GOP candidate who took a measured tone.�� “a hopeful sign about the agreement and a sign that we need to continue to try to see if negotiations will work.”

In the Democratic platform, tones were not as severe as in the Republican one. The most surprising, and hawkish, posture was the one of Hillary Clinton. She first praised the swap and the Iran deal, but suddenly called for fresh sanctions against Tehran due to its ballistic missile program. She also stressed that, if she is elected president, she will take on Iran��with “” attitude.

The swap then played into the hands of Bernie Sanders. He first maintained that the deal would not happen had Hillary Clinton been president—a gentle hint to the Democratic debate in 2008, when she was asked, “would you sit down and talk to the Iranians?” and she replied, “No.” Then Sanders applauded the release of prisoners and called the Iran deal “a huge step forward with a powerful country.”

… Obama understood that the payoffs of engaging diplomatically with Tehran could bolster Washington’s leverage on its allies …

Obama praised the power of diplomacy that cut off “every single path that Iran could have used to build a bomb” and quoted the example of Franklin Roosevelt, John Kennedy and Ronald Reagan who “have never been afraid to pursue diplomacy with our adversaries.”

Obama’s Diplomatic Leverage: Engaging With Iran

The nuclear deal, along with the Cuba overture, will be Barack Obama’s legacy for the years ahead. He was able to pursue painstaking and careful diplomacy and to engage the enemies of the US in back-channel and secret meetings.

Obama and Kerry’s stance on Iran could be framed into a tradition of aggressive American diplomacy well-practiced in the past by Richard Nixon and Henry Kissinger in their opening to China, or by James Baker and George H.W. Bush just before the Gulf War in 1990-91. As Nixon understood that engaging China would be useful for the US in order to deal with a great power on the rise, in this case Obama went forward on a path of outreach to Iran—tenacious and adamant to find a clear solution to Tehran’s nuclear program.

Even though Obama’s policy toward Iran irritated some longtime allies, such as Israel or Saudi Arabia, and could have backfired at the national level, the US president stubbornly went on. He understood that a better relationship with Iran would be an asset for the US. As a matter of fact, with 80 million potential new consumers, a worldly and well-educated urban middle-class, a participatory political system and dynamic younger generations eager to engage with the world, Iran could become an important player for America in the Middle East.

At the same time, Obama understood that the payoffs of engaging diplomatically with Tehran could bolster Washington’s leverage on its allies, while��encouraging Iran to play a more constructive regional role. Ultimately, the move could serve the core strategic interest of America in the Middle East, namely preserving the balance of power.

In this opening to Iran, the US has not been alone. France, Britain, Germany, China and Russia have invited the Iranians to take part in talks over Syria to test whether further conversations are possible. Obama knows that Iran is not going to change overnight, and his adversaries will portray the release of Rezaian and others, as well as the Iran deal, as a capitulation for his administration in order to boost their own political agenda. Criticisms notwithstanding, the president followed through with his plan to ease the tensions with Tehran—well-aware that the advantages of engaging Iran markedly outweigh the drawback in the long-term.

Yet what matters most to Obama is not related to Iran’s constraints to its nuclear program, much less how politicians will depict the prisoner swap. What matters to President Obama is handling the political role of Tehran and its society in the years to come.

It will not be simple, but building confidence between adversaries is the first and most crucial step. That is what Rezaian was doing in Iran as a journalist: to build mutual trust.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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We bring you perspectives from around the world. Help us to inform and educate. Your����is tax-deductible. Join over 400 people to become a donor or you could choose to be a��.

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