Refusing Shareholders

Nikolas Gvosdev

"Foreign policy is the art of transforming power into consensus," former Secretary of State Henry Kissinger said earlier this week during his remarks accepting the Distinguished Service Award at the annual dinner of The Nixon Center.

Or, as my assistant editor Cole Bucy observed, the skillful use of power creates consensus which acts as a "force multiplier", amplifying the initial outlay of military or economic power.

It's a skill the United States needs more practice in, as the Iraqi contracts/debt relief flub of last week demonstrates.  While emissaries of the administration are dispatched to foreign capitals to drum up more support for Iraqi reconstruction (additional aid, debt forgiveness), other spokesmen are announcing that bids for Iraqi reconstruction will only be solicited from Coalition countries.

It appears that France and Germany have agreed with the proposition advanced by former Secretary of State James Baker that there should be a substantial restructuring of Iraq's $120 billion debt in the 2004 Paris Club negotiations, with perhaps a large portion being simply written off.  Yet, statements coming out of Paris and Berlin still indicate that for this to happen, the U.S. will need to engage in quid pro quo diplomacy.  Germany wants the issue of bidding for Iraqi reconstruction contracts reopened; France will be prepared to make major concessions on the debt only when there is an Iraqi sovereign government in place.

France, Germany and Russia all have a sovereign right to have debts repaid to their governments and firms for services rendered (just as the United States and Germany, among others, encouraged the post-Soviet successor state of the Russian Federation to assume all of the USSR's obligations).  The United States has a sovereign right to determine how its tax dollars are spent.  These sovereign rights do not need to be zero-sum operations.

One would assume that a simple quid pro quo approach would work best.  So, why make this process harder than it has to be?

Writing in the Los Angeles Times (December 16, 2003),  Evelyn Iritani reports:

"The European Commission, which called the Iraq bid decision "ill-thought-out," is considering filing a complaint with the World Trade Organization in Geneva. Under the WTO procurement pact for which the U.S. heavily lobbied, governments in most cases must open their purchasing processes to international competition and treat domestic and foreign firms equally. The contrast between the Bush administration's free-trade rhetoric and its Iraq bid policy is fueling perceptions that the U.S. is an unreliable partner willing to undermine its international obligations. And the mushrooming ill will could lead to retaliation against U.S. firms abroad and make it tougher to resolve thorny trade disputes."

Diplomacy is supposed to assuage these problems.  And the U.S. could make a very strong argument that Iraq policy will be determined only by those countries willing to assume the risk--if--and here is the critical if--the United States and its coalition partners are willing to assume all of the costs as well. 

It's a simple equation.  Tell Russia, France, Germany and the others: forgive Iraqi debt--become an honorary member of the Coalition, with all the rights and privileges.  If we don't want to do that, then make it clear that Iraqi reconstruction efforts and debt repayments are separate issues--and that a reconstructed Iraq will need to honor its obligations and work out a repayment schedule.

But let's get a consensus in place that enhances U.S. power and does not detract from it.

I close with an observation I made back in September that is still valid today:

"Foreign policy need not become an “Oriental bazaar” . . . but the rules of the marketplace apply no less to the conduct of international affairs as they do to business transactions. The United States may believe that its causes are just, but it must provide incentives nonetheless for its partners to join in shared enterprises. If other states are invested in continued American leadership of the international system, it becomes their own national interest to have that leadership be successful. If the United States fails to make other countries shareholders, however, not only will its leadership appear bankrupt, it will become increasingly difficult to secure its vital interests. This is no way to run a profitable international order."

Nikolas K. Gvosdev is editor of In the National Interest.