Unedited Transcript

Forty-ninth the Capitol Hill Conference Series on U.S. Middle East Policy

The Future of the Middle East:
Strategic Implications for the United States

Speakers:

F. Gregory Gause,
Political Science Professor, University Of Vermont

Fareed Mohamedi,
Partner, Head Of Markets And Country Strategies And Practice, PFC Energy

Afshin Molavi,
Fellow, New America Foundation

Wayne White,
Former Deputy Director, Near East And South Asia Office, INR, State Department

Anthony Cordesman,
Arleigh A. Burk Chair In Strategy, CSIS

Moderator/Discussant

Chas W. Freeman, Jr.,
President, Middle East Policy Council

Longworth Building, Room 1334
Washington, D.C.
June 26, 2007

Transcript by:
Federal News Service
Washington, DC


CHAS. W. FREEMAN, JR.: I would like to welcome you all here. I'm Chas Freeman, president of the Middle East Policy Council, which is a small impecunious, struggling organization, which will welcome your donations.

We do three things: We come up here on Capitol Hill to the heart of darkness and light a candle to enlighten its denizens by inviting intelligent, well-informed people to discuss politically incorrect subjects. Second, we publish a quarterly - Middle East Policy, which is the most-often cited in the field, both domestically and internationally. I commend it to your attention.

And, third, throughout the United States, we train high school teachers how to teach about Arab civilization and Islam. We have trained about 18,000 such teachers. We think we reach about 1.4 million kids a year with a fact or two that confuses them and complicates their minds in ways the public school system would not.

Now, to the subject at hand. The subject we are talking about today, which is the future of the Middle East and its implications for the United States, is a subject that wasn't of interest to many people not so long ago, but quite tragically, it's now become almost a national obsession in the United States.

The Middle East is frankly not a pretty picture for American foreign policy. On the other hand, our backing of Israel's efforts to pacify the Palestinians rather than to negotiate peace with them has discredited us as peacemakers without gaining the security for Israel. Our attempt to isolate the democratically elected Palestinian government has further discredited us as supporters of democratization in the region. Among other results, our policy has quite predictably left Hamas nowhere to go but deeper into the embrace of Iran.

It has also catalyzed armed conflict among Palestinians, partitioned the occupied territories, encouraged the Israeli effort to crush or starve the Gaza ghetto into submission, and very likely made the prospect of a just and lasting peace based on a two-state solution between Israelis and Palestinians more remote than ever. To Israel's north, our open encouragement of its war with Lebanon last summer succeeded in installing Hezbollah as the dominant political force in that country while cementing its ties to Iran.

Our recent efforts to block peace talks between Israel and Syria ensure a continued state of war between those two countries, continued proxy wars in Lebanon, continued Syrian alliance on Iran, and continued stalemate in U.S.-Syrian relations. But the best is yet to come. Further to the east and north, we are locked in a stalemate with Iran, which is building a nuclear deterrent against the attacks on it we and Israel now feel obliged to threaten in order to deter it from acquiring a deterrent. (Scattered laughter.)

Our relations with Turkey are unprecedently chilly and a war between Turks and Kurds in Iraq now seems quite possible. Meanwhile, the strategic ambush of Iraq continues to pin us down strategically to the benefit of al Qaeda and other enemies of the United States. Iraq itself is now a country occupied militarily by us and politically by Iran. Our transformation of diplomacy there, to borrow a phrase, has produced a catastrophic mixture of anarchy and gang warfare, mounting civilian casualties and collapsing infrastructure and an eruption of embittered Sunni refugees who are spreading to every corner of the mostly Sunni Arab world.

About the only way we've managed to unite Iraqis is in opposition to our plan to retain bases in Iraq from which to dominate the region for the long term. We have finally recognized, however, that Iraq requires a political, not a military solution, something our military were telling us from the outset. But in practice, we're still trying to impose a military solution on Iraq. Ironically, by doing so, in my view, we are actually precluding political solutions in Iraq, so we're caught in a feedback loop in which we have to put ever more troops into Iraq to counter the resistance that the troops we already have there have generated. We now face the prospect that bringing in more troops may simply generate more resistance.

The terms of domestic debate about Iraq in the United States have now shifted to one topic, and that is how to create conditions that will enable us to withdraw. When you look below the surface rhetoric, that is the topic that everybody is discussing. Many believe that we cannot withdraw without making the situation even worse, but that seems very unlikely to deter the American public from pulling the plug on this adventure. So this is not a pretty picture at all.

If I have misdescribed the situation, I will be duly corrected by the five brilliant panelists who are here as well as by members of the audience, who will have their chance to go at us after the opening presentations, which will be about 10 or 12 minutes each, subject to severe corporal punishment of anybody who goes over those limits.

We have a truly remarkable panel today. Normally we have four people. This time, we have five, which makes the corporal punishment of violators of the time limits even more important.

Greg Gause is a noted scholar of the Gulf based at the University of Vermont. I am not going to read the biographies which are on the back of the programs. Our panelists are all people who are I think very well known to anybody who follows the region. Greg, I think is going to talk about the GCC and the Gulf area and its reactions to all of the things that I mentioned, and some I probably forgot to mention.

Fareed Mohamedi, is with PFT Energy.

FAREED MOHAMEDI: PFC.

MR. FREEMAN: PFC Energy. He is an expert on energy matters, will talk about the implications of developments in the region on that front, I think.

Wayne White was a very noted analyst at the Intelligence and Research Bureau at the Department of State. He has emerged as a great resource for the public of the United States now that he has broken his cover and is out in the open. Wayne will talk about Iraq mainly.

Tony Cordesman is, I think, a national treasure. He is someone who has focused on issues of relevance to the matters we are discussing for much longer than he would probably like to admit, and he has been very prescient in his comments on the same. He will talk about the situation generally in the Levant, meaning Israel and adjacent areas.

So with this introduction, I would like to ask the first commentator/speaker, Greg Gause to take the floor. Afterwards, we will have, as I said, an ample period for question and comment. I would ask that you keep your questions pointed and your comments succinct, and that you tell us who you are even if you are positive we should all know who you are without your having to tell us.

Greg.

F. GREGORY GAUSE: Thank you very much, Mr. Ambassador. I was in fact assigned to talk about the GCC and just two days ago decided I wasn't going to do that. I'm more than happy to answer questions -

MR. FREEMAN: Okay. Shift happens, as they say.

MR. GAUSE: I'm quite struck by this concatenation of crises that Ambassador - oh, thanks, that Ambassador Freeman listed for us in his opening remarks. And I think that there is a tendency both here and in the region to see these as part of one crisis, right, that it is not an Iraq crisis and a Lebanon crisis, and a Palestine crisis; it's one crisis. It's a Middle East crisis. I cut out the headline from al Hayat two weeks ago, which was the day that the minarets in Samarra Golden Mosque, al Askari Mosque, were struck, that Walid Eido was killed in Beirut, and that Hamas-Fatah fighting really heated up.

And it was a banner headline that connected the three crises, and it said - youm fitna (ph) (in Arabic) - so we have a long day of civil conflict, but civil conflict doesn't really capture it - fitna is about the worst thing you can have in the Muslim world, Muslims fighting Muslims, general conflict - from Samara to Gaza passing through Beirut, right. So they thought it was one crisis.

People in the region think it's one crisis. Some of them think that it's a crisis that is united by the fact that Iran has its fingers in every one of those things. Other people in the region think it's a crisis that is united by the fact that we have our fingers in each of these things. I think that we should step back and try to think about this crisis in the Middle East is a broader crisis of authority, that it's heading the whole Muslim Middle East, right. Each of these three crises that we have talked about is a contest over the organizing principles of politics in the country. Of course it's a fight for power as well, right. Of course it's a fight for power, right. And the details in each case differ because of the particular histories in each place. But there is an underlying conflict in each case over how and to what extent Islam will define politics.

This regional crisis is not as violent elsewhere. It has been, but it's not as violent elsewhere as it is - has been in Palestine, in Lebanon, and in Iraq. But that doesn't make the crisis any less important in the places where it is less violent now. This crisis of authority is the defining context of political struggles across the Muslim world, particularly in the Middle East.

Now, this is not a binary conflict; it is not Islamists on one hand and secularists on the other hand, right. The Islamists are divided by sect and by strategy. The secularists are not really secularists, right. They don't want to separate religion from politics, at least in our sense, but they are not in favor of the complete Islamization of politics the way their opponents are. And these secularists are divided as well. There are authoritarian leaders. There are liberals who don't like authoritarian leaders, but see the alternative as worse and thus back the regimes. There are real democrats who are fed up with the regimes, don't particularly like the Islamists but think that they can deal with them and are willing to trust two alliances with moderate Islamists.

But this is the context of politics; it's the context in which al Qaeda has arisen and presented its challenge. It's the context of the electoral successes of Islamists across the region. It's the background of past civil conflicts in Algeria and Egypt in the 1990s, and Syria in the late '70s and early 1980s. And it's not always Islamists and opposition and the more secular forces in power. In Iran, it's the other way around. In Turkey, it's the other way around.

Now, I don't think that this crisis is best understood as a clash of civilizations. It's both a clash and a dialogue within a civilization, although it's linked to us in ways that I'll get to. It's also not best understood in a Bernard Lewis framework of a centuries'-long decline of Islam, what went wrong. This is a modern struggle about ideas and power in the context of independent states and it's fought with modern means of political mobilization.

Even those groups, those Salafi groups, that self-consciously look to the distant past for their models of how politics should work, these groups fight these battles with means that are more Leninist than medieval, right. They are modern groups even though they evoke a past as a model for their politics.

These ideas I think are wrong because they put too much emphasis on us, this clash of civilizations, what went wrong. They put too much emphasis on us, as opposed to the fight - the real fight within this civilization, and these binary models don't appreciate the differences among the players in the region. I also don't think that this conflict, this crisis of authority is best understood as a Sunni-Shi'a conflict. It manifests itself in sectarian ways in some places, but it's never been a clear binary division.

I mean, look at Iraq right now. Sure, sectarianism defines part of the political contest, but you have intra-Sunni and intra-Shi'a fights as well over power but also over ideas about what Iraq should look like. You know, who is going to win this crisis? Who is going to win this crisis of authority? It is not inevitable that the Islamists will win, though they are the best organized political force on the ground.

We must recall that the three crises that we have in front of us today are occurring in countries where the administrative state has been weak, either historically as in Lebanon or in Iraq and in the Palestinian territories because outside forces - us, in the case of Iraq, the Israelis, and the international community as a whole in the case of the Palestinian authority, have worked to weaken that administrative state.

But elsewhere in the region, the administrative state remains much stronger. The secular authoritarians in Egypt and Algeria won their civil wars in the '90s, as did the secular authoritarian regime in Syria in the early 1980s. The Saudis have been able to put down the al Qaeda threat to their regime. In Turkey, the administrative state, the army and the judiciary, are pushing back against justice and development. These states are not pushovers; they control resources, particularly in oil states. They have strong coercive apparatuses, and they have built patronage networks to give them a social base, and they have strong international support.

So the Islamists will not necessarily win this crisis of authority. So where does the foreign policy component come in? This crisis of authority does overlap with the current struggle for regional dominance because Iran supports Islamist groups, both Shi'a and Sunni, in an effort to extend its influence, and regimes in Egypt, in Jordan, in Lebanon, Fatah in the Palestinian territories, the Saudis, see these as threats to their own domestic stability because Iran supports a notion of politics that runs counter to the organizing principle of these regimes.

Sometimes Iran actively supports groups like Hezbollah and Hamas; sometimes it doesn't, but it supports an idea that cuts at the political legitimacy of these regimes. Iran also uses the Arab-Israeli conflict to bridge the sectarian and the national gap and to mobilize support against Arab governance. Last summer's Israel-Hezbollah crisis is a perfect example. This is why these more secular governments would like to see some progress on the Arab-Israeli front, to take this issue off the agenda so Iran cannot use it to mobilize support against it.

And this is where we come into the picture. These more secular regimes have tied themselves to us to some degree or another. They accept our view of how the Middle East should work. The Islamists on the other hand do not accept American foreign policy goals in the region. This is of course true of the Islamists who want to kill us, like al Qaeda, but it is equally true of the wide spectrum of Islamist organizations, from the radicals to the moderates; from the gradualists to the violent.

None of them accept our idea of what an equitable Arab-Israeli solution would look like. None of them like the idea of American military bases in the region. None of them accept that we should have the kind of influence in the Middle East that we want to have. So what is to be done?

Well, we have tried in the post-9/11 period policy of smashing authoritarians and encouraging popular participation. What we have gotten, as Ambassador Freeman said, is civil strife, and the gains of Islamists at the polls. Of course they have gained, right; they are the best-organized social forces in these countries. This should be a warning to us.

Our ability to affect this crisis - this crisis of authority in the region as a whole in predictable ways is extremely limited because it's not basically about us. So I would urge us to resist our impulse to immediately do something when things happen in the Middle East. The Hamas takeover of Gaza is not a threat to American interests. Israel and Egypt, they will handle it. We should resist the temptation to throw ourselves in the middle of this. In the largest sense, I think we should back off our democratization push, but I think we have already done that.

No, I'm not advocating that we turn back democratic advances when they happen. I don't think we should be supporting the Turkish military and elements of the Turkish administrative state in their effort to in effect cut out justice and development from power in Turkey. The justice and development government in Turkey has basically been cooperative with American foreign policy interests.

I think we should be concentrating more on traditional state-to-state issues of regional power, working to prevent the spread of Iranian influence through traditional diplomatic means, state craft, working to make sure our violent enemies, al Qaeda and its hilt don't gain anymore. And I think we should basically be looking to get out of Iraq. And the Arab-Israeli conflict is too complicated to solve in five seconds, so I'll leave that to questions.

MR. FREEMAN: Thank you very, very much. That was very stimulating and broad. I think we will find in the discussion that we come to two issues which I will try to frame now, and hope to hear you speak to them later. The first was epitomized by a remark from an Iranian with whom I spoke several months ago, who said that when the United States began its drive for democratization of the region, people in Iran had wondered whether we knew what we were doing, and now they know we didn't know what we were doing. Every democratic experiment worked for their advantage rather than to ours. Therefore they could understand, this man said, why we would have decided to abandon our drive for democratization. But, on reflection, Iran thought it was a pretty good idea, and was prepared to pick up where we left off.

And this brings me to the second point, which is whether Hamas does not represent more than a threat simply in the sense of being the first serious Sunni-Arab ally of Iran in the region, but also because it believes that it unites Islamism - political Islam - with democracy and a willingness to alternate in and out of power through elections in a way that ultimately threatens the legitimacy of the neighboring states - whether Egypt, where the Muslim Brotherhood, which is a parent of Hamas, or Saudi Arabia where Salafi Muslims, calling themselves Wahabis, have found it necessary to ally with the al Saud to achieve power.

What Hamas believes it is demonstrating is that you don't need to ally with a prince or a strongman or a dictator to pursue your political agenda; you can legitimize it directly at the polls. And therefore ruling families and existing power structures no longer have the essential utility in the eyes of Islamists that they may once have done. I think we will probably come to a discussion of this too, which, in a way, fits exactly, Greg, into your crisis-of-authority theme.

We now turn to Fareed Mohamedi for a discussion of what some of this confusing turmoil may mean for all of us at the gas pump.

FAREED MOHAMEDI: I want to talk about - I will talk about oil, but I won't talk about oil with the gas pump, and all of that. But I would like to actually talk about the economics, the economies of the Gulf, and I actually have become very optimistic about the economies of the Gulf and see them as potentially a way out of the whole region, that this is this sort of engine that could get us out from the mess that the whole Middle East faces, ultimately a development crisis that the region is facing.

My colleagues accuse me of - they say that my medications are working very well - (laughter) - and that they make me very happy and that I'm missing all of the doom-and-gloom in the region. I give you that; I can suggest those medications. (Laughter.) But bear with me a little bit.

I would like to also pick up on one other thing Greg said about state capacity. And I just read this book by Charles Tilly, Democracy, and I highly recommend it, and he basically puts state capacity on one side of the - on the Y axis and democracy on the X axis, and then he traces paths that states have taken. The basic line is that if you have weak capacity, you're not going to get democracy. Destroying states doesn't work. In fact, usually, it's the other way. Get up the side of state capacity and then you'll most likely get up more rapidly.

And I think towards Democracy, I highly recommend it, but I see that as what is happening in the Gulf. That is what makes me optimistic; it's not the buildings that are going up; it's not the snow slide, or whatever, the snow mountain in Dubai; it's the public-private partnerships that I think that the Gulf governments have discovered, and they, in a sense, discovered this 10 years ago in the crisis years of 1990 (?) to 1995 when Saudi Arabia effectively went bankrupt and the Gulf was in the doldrums of lower prices and all of that.

They have - in those days, they said, look - they looked over at Asia and said, we could have - there is a twofer in Asia; there is a model for us. We can have authoritarianism with market capitalism; we can have it both ways. And that is what the Asians have taught us - we have to get governance, right; we have to have a strong state; we have to invest in all of that. And we can harness private capital and the way the Saudi stations have done it is through with the multinational corporations coming in and they created a very nice sandbox for them to work in. And they thought that in a sense, this could be a model. To some extent Dubai is a pioneer on this front, but certainly all of the other Gulf countries have caught onto this. Clearly the Saudis have.

Then what was unprecedented about the last five years, which made me even more optimistic that this could then become a model for the rest of the region. And, again, here, I'm an economist and this could be a - I'm being a little bit of an economic determinist - and all that the bad stuff is going to continue to happen alongside of this possibly, and possibly the bad stuff could derail this, but this process I think is very important, and it is deepening. And that - the private sector has caught on, and in a sense, you have got a virtuous cycle in place where you have good public policy, private sector investment, good public policy encouraged by that, you see the opening of different sectors on many levels.

I was always very skeptical, for example, about Islamic banking. I always thought, ah, that's just merchant banking and they're calling it something else. Well, if you think about it all banking is just old stuff repackaged. I mean, either you get a rifle as in Michael Moore's film when you make a deposit or a teddy bear or a Koran. I mean it's - to a certain extent, it's pretty much selling money. But what I find very interesting about Islamic banking ties in with this public-private partnership was that - for example, the Central Bank of Bahrain created completely new banking regulations, completely new accounting standards, a completely new way of rating these Islamic banks, so suddenly you have development going on and not just another bank that is trying to get you to issue deposits, investing in a snow slide. And I think that's very important - the insurance industry.

The second element of this is that they have harnessed globalization. I mean, what is Dubai if not getting into create export and services. Similarly, the Gulf is getting tied in to Asian growth, to European/Western growth. And is exporting capital and is creating in a sense - it's not making Mickey Mouse watches and selling them all around the world, but they're getting into business services in other areas that are becoming the center of that.

Third, I think very importantly that harvest energy in a new way. But the old energy upstream investment, that's all going on. Saudi Arabia is going to expand its oil production capacity from 10 to 12.5 million. Qatar is going to be the new center of global gas. And the way that, in a sense, that will connect all these regional markets in gas. But I think there are two innovations that are going on in the energy area, which I think is adding to this. One is the national oil company's capacity has been enhanced. And as the most important institutions in these countries - remember I said you enhance state capacity you may get closer to your democracy and development. In the same sense here you enhance the most important institution in your country which is the national oil company you enhance state capacity. And there's a really interesting thing that are going on in that front.

And secondly, energy has become a place that the private sector is allowed to invest in and has become very much excited about that. So I think short of - and I'm getting the signals from Chas and I'd better not violate my rules - but the issue is that I think that this could spread both demonstration effect and financial effect, into rest of the Gulf. And you've started to see some of that in Egypt - Egypt grew 7 percent last year. North Africa - investments going into North Africa possibly spreading later on into the Levant, and you saw some of those impacts in Beirut before they decided to blow it up again.

And ultimately, 25 years from now, reconstruction funds for Iran and Iraq. I'm thinking about it in many - in the same way, that in 1975 if you sat in Singapore and you looked at the Southeast Asian region, you would never call it "the sexiest place to invest your money" as we do today. You had just had a massive massacre - I mean, the genocide in Cambodia, the Vietnam War, all of that, and today after all of that bloodletting and you have nothing of that scale in the Middle East. You see this public-private partnerships that came together to create one of the most dynamic economic centers of the world.

I think that the greatest danger to this is potentially an attack on Iran. I mean, I think - I see that as a disaster for the region, and that private capital that came in will run away. I mean that and because the Iranians will light up the Gulf, and they're not going to stand by and take it. So I think the source of the end of this is we might have to talk - what could bring this happy thought to an end is an attack on Iran.

MR. FREEMAN: You have two more minutes, if you wish.

MR. MOHAMEDI: That's okay.

MR. FREEMAN: Thank you very much. On Thursday, because I have to work to make a living rather than just have fun talking about the Middle East, which is such a joyous subject - on Thursday I was in Toronto at an airport hotel, meeting with various people with whom I'm trying to do business because, of course, they can't come here anymore, which raises an interesting question, Fareed, that we might get into.

Yesterday, Goldman Sachs issued a report - I believe it was yesterday - noting that the largest market capitalization now in the oil, energy sector is no longer in companies anchored in the OECD, but increasingly companies in Russia, China, Brazil, India - the so-called BRIC countries. I think Goldman Sachs invented that term, and therefore they love to examine it, or torture it, as the case might be. But the question really is then - yes, there's a boom going on. Yes, there is I think, ample grounds for optimism about what money can do if allowed to do it, but who's going to benefit? Are Americans going to benefit or is the benefit going to go elsewhere? And I hope we come to that question, because in the end national interest is the measure of all things, I think, in foreign policy, and we need to consider it.

We now have our mystery speaker - I inadvertently failed to mention Afshin Molavi, who has a record as a really brilliant journalist, and is the author of the very best book about travels in Iran and Iranian society. Afshin has metamorphosed from journalist to - what do you call yourself now? Pundit?

AFSHIN MOLAVI: I suppose, yes. Fellow.

MR. FREEMAN: Fellow. That's Washington-talk for pundit. So, Afshin, you're going to talk about Iran, I hope.

MR. MOLAVI: Right. Right. Well, since we are in the mood for shifting, and I will touch on a couple of things about what Fareed Mohamedi said because I think I am maybe on the same medication, because I have been spending a lot of time in the GCC recently, and I share Fareed's optimism. And would like note that in some respects we almost has two Middle Easts forming. When you look at the region today, you see, this sort of ark of crisis/instability - potential instability - from Egypt through Israel, Lebanon, Syria, Jordan, Iraq, Iran - Northern tier of countries in the region. And then, when you're in the GCC countries in particular, it's almost if you're in a different Middle East. Let me just give you an example.

I was in Muscat, Oman, a couple of years ago at the Chedi Hotel - a beautiful hotel which I recommend to all of you on your next trip to Muscat, Oman - and lying on the beach and I had a crisis of my own. I had run out of suntan lotion. So I went back to my room, and I turned on the television, and CNN International had a headline, you know, "Crisis in the Middle East." There was another bombing in Gaza. And, you know, it didn't feel like a crisis from Muscat, Oman, or in Dubai, where I was just earlier. In the height of the Israel-Lebanon war - Israel-Lebanon-Hezbollah war - Saudis more than 10 million of them were on a stock buying frenzy. It was the most highly anticipated initial public offering in Saudi Arabia, and half of Saudi Arabia's adult population bought stock in the King Abdullah Economic City - the MR project.

So you do almost have these two Middle Easts forming. And, what I would like to do is I will stick to my topic of Iran, and when we think about a U.S. retreat from Iraq a word that often comes up is "vacuum." And, a few words down from that word "vacuum" you often see the word "Iran" pop up as the potential for filling that vacuum. And it has also become fashionable to ask the question "who has won the two post-9/11 wars?" And the fashionable answer has become "Iran has won the two post-9/11 wars." And, to some extent, you can understand this response. I mean, the strategic climate has shifted in Iran's favor as a result of the two post-9/11 wars.

The perception of the Iranian power is on the rise, the Taliban with whom Iran - the Taliban was never a serious threat to the Iranian state, but the Taliban did - was a foe of Iran, and they did provide Saudi Arabia and Pakistan power on Iran's border in the East. Saddam Hussein's Iraq was contained, but Iran did not have nearly the kind of influence they had in Mesopotamia that they do today. So the strategic climate has shifted in their favor and - but I think we tend to go overboard to some extent in our assertions of Iranian power. Les Gelb at the Council on Foreign Relations said we attribute to Iran free power almost.

And when you look at Iran's economy, you look at the state of its oil industry, you look at its lack of economic integration with the world, it doesn't look like a very powerful state. So let me just go over some of these issues because I'd like to make an argument, to some extent puncturing the myth of Iranian power. Now, again, having said that the strategic climate has shifted in their favor, it is important to know that Iran's economy is in quite a bad shape. Iran experiences anything from 15 to 20 percent inflation, a widespread unemployment and underemployment, stagnant wages, President Mahmoud Ahmadinejad has been drawing down Iran's rainy day oil fund, there has been a massive amount of capital flight from Iran, particularly to Dubai, since Ahmadinejad has come into power.

When you look at - I did something yesterday. I sort of just poked around the web and looked at Iran by indexes, and I looked at the various indexes that are out there like, for example, the World Bank IFC doing business report, where Iran ranks very poorly at 119, just ahead of Albania and just behind Guatemala. Interestingly, when you look at the World Bank IFC doing business reports, the - in the Middle East region, the countries that come out looking very good are the GCC countries. Saudi Arabia ranks the highest in sort of measures of the ease of doing business, followed by Kuwait, Oman, and the UAE.

When you look at the World Economic Forum Global Competitiveness rankings, Iran ranks very poorly. The Heritage Foundation index of economic freedom - Iran again ranks very poorly. If you look at the - there's a wonderful website called Dinar Standard, I don't know if you've looked at it, but it looks at business in the Muslim world. And this is - it's a very - to have something called the "Top 100 Muslim World Companies." And when you look at that, you see some of these public-private partnerships that Fareed was talking about, doing very well. But you also see that the private sector of Iran of the top 100 there's only three Iranian private sector companies - sorry - three companies, Iranian companies, in the top 100, two of which are state-owned. Whereas you do see something - dozens of Turkish companies, and several Saudi companies, and several Malaysian companies. Take a look at the telecom's world. You find companies like Egypt's Orascom Telecom that are making regional waves and global waves.

When Saudi Arabia launched its recent GSM license, you saw major telecom providers around the region bidding for it - Iran was absent from the scene. And then, just when you look at the UN Human Development index, Iran again ranks poorly. Now, again - so these are sort of things that the world economic forum crowd likes to look at, but when we think about power, you think okay, oil and military. And in the case of Iran's oil, oil reserves are depleting fast. Iran is producing four million barrels per day. It exports two and a half because it uses 1.5 at home. As a result of lack of refinery, lack of investment in its oil infrastructure, Iran imports 40 percent of its gasoline needs. It has some of the cheapest gasoline in the world. And this - they've been talking about a gasoline rationing system for a long time. They still haven't been able to put that together.

Iran's oil minister notes that Iran needs $100 billion in investment to reach its target of five million barrels a day of production. Where they will get this investment? There's an Arabic saying -"Allahu `alam" - "Only God knows." And the Persian saying - (foreign phrase). There's very little in the way of investment moving to Iran as a result of a wide variety of things from sanctions - and oil industry analysts, consultants, people like Mehdi Varisi (ph) and Nasiv Orban (ph), they will tell you that many energy companies are willing to brave sanctions. But Iran is not providing them proper terms.

Now, in terms of the military, we have the expert on Iran's military here. I would highly recommend Anthony Cordesman's reports on Iran's military, particularly the report the Weakling or Hegemon, but just some of the - I think we do overplay, in a sense, Iran's military abilities as well. You've got about 1,600 mainly obsolete tanks. Iran's war planes are aging, and its most sophisticated weapons systems are its defensive ones. And so this is not a picture of a country that has done a great deal to maximize its power. So where does Iran derive some of the power that we're talking about?

I think, to some extent, it derives - they have a certain amount of spoiler power. Their influence, as Chas Freeman noted, with Hezbollah, their influence with Hamas, their influence in Iraq, influence in Afghanistan. Interestingly Iran has influence in places that we value in a sense. And so in a sense we had given them their power - because if Iran had militias in Central African Republic, or in Southern Philippines, perhaps we wouldn't be so worried about Iran's power.

And so I think, just to close, since I don't want corporal punishment, I think it is worth noting that we are, you know, experiencing this historic boom. Not in the Gulf - not only in the Gulf region, but there is even a new silk road that it's forming of trade between the Middle East and Asia. Iran likes to talk about itself as formulating independent foreign policy, but it's very much isolated from the region. Even if you compare Saudi Arabia's relations with China and Iran's relations with China, Saudi Arabia's relations with China seems to be more strategic, and China seems to view Saudi Arabia as more of a strategic partner, whereas Iran's relations with China are more mercantile, and we can get into that and talk about that to a great extent.

But in the midst of this historic Gulf boom, in the midst of this growing new Silk Road of trade and investment between the Middle East and Asia, Iran is to some extent the sick man of the new Silk Road. Its economy is diseased, somewhat sclerotic. And so we go back to the original question: who has won the two post-9/11 wars? Iran has won - I would argue - the two post-9/11 wars, but it's not necessarily from things of Iran's own doing. It has far more to do with what we have done in the region. Thank you.

MR. FREEMAN: Thank you very much. I think that is a useful reminder that by virtually any conventional measure, Iran is a weak state, and perhaps we should be more concerned about the prospect of Iranian failure than about the prospect of Iranian success. But the fact remains that, even if it's not an effective competitor with others in the region, or with us, all things being equal, we have made enough mistakes that it has been able to scavenge many advantages for itself. So I would agree with you that it is especially a scavenger in many respects, rather than a country that is on a roll.

We turn now to Wayne White who I believe is going to - I've been wrong about everybody so far, so I hesitate to predict this, but I think you're going to talk about Iraq, are you?

WAYNE WHITE: Yes. Absolutely.

MR. FREEMAN: Oh, good.

MR. WHITE: No problem. I'm going to be reading a lot in order not to go into sidebars, in order not to get nastygrams from Chas, or at least try to avoid them, and unfortunately I'm going to have to break with this optimistic theme that's been prevailing through the two talks sort of, and take us in another direction.

But quite seriously, back in April I did a week of seminars for award winning ROTC U.S. second lieutenants - the new second lieutenants from around the country down at VMI. And this is the eighth year I did this, and I did the Iraq seminar about 40 or 50 miles up the road from Virginia Tech. This year's seminar began two days after the Virginia Tech massacres. And I can remember driving down the Shenandoah Valley on the way from Pennsylvania on the way to VMI seeing weeping parents headed to Virginia Tech, and the national mourning, the president's visit, I heard the speech as I was driving down there, and the real shock in this country over that.

The next day or two days after the massacre, my seminars opened. And in that one day, Iraqis had almost 200 killed in suicide attacks. In one day, over six Virginia Techs. One fundamental basis of grief counseling is to tell someone who is intimately involved with a certain event that it is a one in 10 million occurrence. It will never happen again. Unfortunately, we can't tell that to Iraqis. After enduring six Virginia Techs the next day endured three more, and on, and on, and on. The fact is that we have perhaps 15 to 20 million Iraqis who either are now refugees outside or inside their country, displaced, or they're living in areas that are still very, very high risk in terms of violence, and I can assure you that all in need of grief counseling - they will probably never receive it.

I guess the key bottom line I'm driving here just to set the tone of this presentation, is that in all respects - put aside casualties, metrics, and all of that - we're dealing with a very much traumatized, shattered, and embittered society. And building anything in this environment is going to be terribly difficult. Only people having visited Iraq say what I did on my first time, back in 1981, can appreciate the sheer destruction that has taking place in the country, all the way down to the continued looting of Iraq's heritage at scores of historic sites throughout the country.

One of the big questions is, of course, right now can the Maliki government get its act together? The Alawi government didn't. The Jaafari government didn't. And we have to point out that like his predecessors, he presides over governmental shambles with a thick overlay of Shi'a militia influence, separatists, and insular Kurdish governments in the North and expanding into participation in Baghdad, local governments in large areas that is almost non-existent or disconnected from Baghdad, and tremendous corruption - even more so than under sanctions before. There should be no great expectations that he or the Iraqi parliament can get their act together or implement some of the sound policies or measures that they've been asked to produce in response to tremendous pressure from Washington.

In fact, just as my favorite scene in David Lean's Oscar-winning classic 1962, Lawrence of Arabia, where you have the famous tribal sheik played by Anthony Quinn, who - exactly - who's told that Aquba must be taken and who's going to take it? It's cause is for the Arabs. Questions: what Are the Arabs? All I know are tribes. And what we're confronted with often are Iraqi politicians who beat their breast in public about the Iraqi cause and the Iraqi this and the Iraqi that, and then they go back in their smoke-filled rooms and act as Shi'a, act as Sunni, act as people who relate more to their own tribes or cities than they do to the central government. Iraqi identity at the present time is very much challenged inside of Iraq, part of a greater problem.

Turning to the current surge, it should come as no surprise it has been slower than hoped in producing results, and results that are generally uneven or far less complete at this stage. As Chas knows, I was asked to draw up a surge proposal for the Iraq Study Group, as one of its experts, linked to a full withdrawal starting one year after the surge if the surge was not successful. That surge plan called for a minimum of 64,000 or more troops. That would give us, quote, unquote -

MR. FREEMAN: By which you meant combat troops, not logistical support troops.

MR. WHITE: Combat troops. Exactly. Even more if you're considering others. And we still rated that - I coordinated this with someone who was in - working with our military out in Baghdad. I gave it a substantially less than a 50/50 chance of success, and at great cost in American lives and treasure. So you can imagine what I think of a surge originally proposed at 21,500 and now just under 30,000. I don't think it has much of a chance for success at all.

And regarding the surge, there are surprises that should be no surprises at this point. Every single time there has been a major effort to stabilize the greater Baghdad area, the insurgents have cleverly shifted much of their activity to areas North and South of the capital, primarily to the North. Another non-surprise is the disappointing performance on the part of Iraqi security forces. Yes, as always they're doing a bit better than before, but far below expectations. And their main problem isn't training. It's far deeper. It's something we've discussed before on the political side. It's loyalty - very basic loyalty.

First, who can expect Iraqi soldiers to police or to lay down their lives for an iffy government sheltered under American protection in the Green Zone, very little authority extending beyond? Many soldiers have much older, more dominant loyalties in any case, whether their ethno-sectarian communities, even militias or Kurdish Peshmerga. And these soldiers often speak openly about such alternative loyalties. And who can blame them? In the chaos that is present-day Iraq, they need an anchor in their own personal world, and one they can truly rely on. And that is not yet the government in Baghdad.

Meanwhile, here in the States, domestic poll numbers make the issue of whether we will departing within the next two years or next two years moot. At least I think so. In fact, the more the formulation of a clear exit strategy is postponed, the greater risk of a less gradual and orderly departure down the road. Indeed, the good news from al Anbar about Sunni Arabs and insurgents finally going after al Qaeda in Iraq elements and other Jihadists in their midst must not be taken as meaning we should stay. It should be rather a very timely gift with respect to our ability to conduct a more orderly and peaceful withdrawal. In this, I'm very encouraged. But every strategy - I emphasize - at this stage must be an exist strategy, and we must make that clear to all concerned inside and outside Iraq.

If Sunni Arabs ever manage to deal a serious blow to the Jihadists in their midst, the next option on their agenda would likely be ending the occupation - in other words turning against us once again. And something should be made crystal clear: critics of the war and declining American domestic support for it that I've already mentioned are not to blame for the failures in Iraq. Four years of failure on the ground in Iraq, and efforts to cover up the full extent of that failure, are responsible for the declining support here at home. Let's not put the cart before the horse.

Another common theme that is - is that those advocating withdrawal just don't understand the serious consequences of doing so. Unfortunately most of us old Middle East hands understand all too well some of the consequences. But many critics of the critics are making a potentially even more dangerously assumption. Given the way things have been going, we could remain three, four, or who knows how many more years in Iraq, losing as many as several thousand more dead, many thousands more terribly maimed, spending $400 to $500 billion more dollars, and still incur those same consequences after leaving.

Some might say leaving is the worst possible option with respect to the current situation in Iraq. But to paraphrase Churchill's statement about democracy - his famous comment that democracy is the worst form of government, except for all the others - I posit that withdrawal from Iraq is the worst possible option, except for all the others. Thank you.

MR. FREEMAN: Thank you very much. We will, I think, have to come back to this question of what happens if the American people do pull the plug on this adventure, as I believe they are steeling themselves to do, quite regardless of the consequences in Iraq and for the region. What happens in Iraq and in the region thereafter? And we also need to contemplate, I think, what happens in the United States politically, thereafter.

There's been much made of the analogy of Vietnam. I think the correct analogy is the Soviet experience in Afghanistan or the French experience in Algeria. And I can already see people preparing the case for the theory that we would have won had the Left not stabbed the enterprise in the back. This war, in other words, in addition to diminishing our influence globally, and shattering it in the region, has the potential to be the most divisive event in our history. I am not encouraged in this regard, I must say, as we turn to our military expert on the panel, by the fact that professional military men have found it necessary to break with those under whose civilian authority they previously served uncomplainingly to voice criticism of policy.

On the one hand, one can have respect for their courage in criticizing the commander-in-chief. On the other hand, the implications of a military that feels free to break with its civilian commander are not pleasant to contemplate.

We turn now to Tony Cordesman. I should note, by the way, that although I mentioned Afghanistan just now, we have not spoken of Afghanistan, which began as a punitive expedition and became an occupation against rising resistance and which has as its principal achievement today making Afghanistan safe for poppy cultivation and out-competing everyone else, including Myanmar, as the supplier of heroin to the world. I'm sure Tony will, because he thinks comprehensively, mention Afghanistan. He said he was going talk about the Levant. I don't know whether he will or won't. But in any event, Tony's always very, very stimulating to hear.

Tony, please.

ANTHONY CORDESMAN: First let me stimulate people by saying I do not really associate myself with many of Chas' op-ed pieces in introducing us. I think that frankly we have made mistakes. We've made mistakes always in the Middle East. The problem, however, is not American foreign policy. The Middle East is perfectly capable of making plenty of mistakes on its own without any outside help, and regularly does so.

But I was not asked to talk about the Levant. I think that got changed. What I was asked to do is to talk about what the U.S. strategic role should be in the Middle East and particularly what military changes are needed. And we do have five issues key issues we have to deal with one way or another. We do have to adjust our military posture in Iraq, and when we do that we have to adjust it in the Gulf as a whole. Iran is not a strong conventional power, but it is creating a very significant capability to produce nuclear weapons. It is deeply engaged in producing long range missiles. It is strengthening its asymmetric warfare capabilities, and it is increasing its use of proxies outside Iran.

We are dealing with a war in Afghanistan. I think that has turned out to be a much more complex exercise than we planned not because we're occupying it, but because we are involved not in counterinsurgency or counterterrorism but on nation-building, and that is a task which takes some 10 to 15 years if you wish to be successful and if you can be successful. And these are assumptions Americans find very difficult to deal with.

We like to define wars in ways where they are simple, quick, and easy to deal with and that is the solution Americans tend to choose when they are wrong. You have a reality that there is virtually no near-term prospect of significant progress in any aspect for the Arab-Israeli peace process and you have to deal with the security and military and eight dimensions of that reality. And then finally, you have to deal with the realities of neo-Salafi Islamic extremism, the Sunni and Shiite issues as they spill over into our security interests, the kind Greg touched on briefly. And here I think we need to remember that these problems are endemic to the region. They will spill over to us, and they are going to occur almost regardless of what happens in Iraq and Afghanistan because they are deep, endemic problems throughout the region, as Greg said.

Now, how do you adjust your posture? I think we need to be very careful in Iraq. You heard a very good description of the problems there, but it isn't a matter of staying the course or leaving. One way or another, we have to figure out how we phase out of Iraq and what the consequences of doing so are. We have to figure out how we're going to treat the Kurds and the whole problem between the Kurds, the Arabs, and Turkey. I am not personally deeply committed to the Kurds, but very few people as yet are willing to walk away from them if they don't serve our strategic interests, yet even fewer are willing to discuss what the consequences are of actually aiding them. I think you have to leave in ways which very clearly do not aid the Shiite government in power today at the expense of Sunnis. You have to find a balance that reassures our Sunni allies, and do so in as little provocative way as possible.

If you have an all out bloodbath, and I do not predict that, you do have to consider what kind of buffers you might or might not have to establish. It's easy to talk about leaving a civil war behind, but as Rwanda and other cases have shown, if it actually happens, it's a lot harder to leave.

One way or another we are going to have to adjust our overall posture in the process in the Gulf and to very quickly point out a few things we'll have to deal with.

We're not going to have a grand bargain with Iran. Iran is not misunderstood. It's understood all too well. We're going to have serious problems not with some superpower, but simply with Iranian opportunism, Iranian operations at the margin. They are not some kind of major conventional threat, but the sheer scale of the Iranian nuclear and missile effort is something people have to take very seriously. You have to deal with the reality that the GCC is not effective, will not be, and is incapable of becoming a useful security structure, a message you will get from virtually any senior defense official who is in the Gulf when you talk to them.

You are not going to shift the burden to NATO or other countries. I've been listening to out-of-area ideas since the mid-'60s; so far we have produced rhetoric, and an intellectual vacuum and posturing. It hasn't helped. And above all, we need to understand that a lot of the progress in counterterrorism in this region comes from quiet, covert cooperation on a bilateral level. It is absolutely critical to maintain the access and the capability to do that and not posture about how to do it.

I think one key message I would give here, when you leave, you'd better have consulted all of the Gulf countries that are friendly to us beforehand. You'd better have discussed what your aid and cooperation options are. You had better go and you had better listen to them and take what they say seriously, rather than going out to lecture rather than consult.

In terms of Iranian proliferation and asymmetric capabilities, let me make a few unpopular points. It is perfectly credible to exercise a military option, and it does no one any good to say you can't do it. The problem lies in the consequences of doing it and the political and strategic impact. It is also premature to attack a country whose forces are not ready and which has not invested in its facilities if you're going to do it at all. So this is a decision we can defer.

What we can't defer is the option of talking to people in the Gulf about how best to contain this effort, how to find alternatives to a military option, whether it's missile defense, whether it's extended deterrence. And these are signals we need to send to Iran. I think we need to work with the Gulf states in checking Iran's ability to use asymmetric weapons, which involves passive as well as active defense, and we need to maintain a very strong and significant air and naval capability in the Gulf as a deterrent, one which is carefully structured in the way it acts and exercises to send the right signals to Iran and our allies in the Gulf, not provocative ones.

In Afghanistan, the message that you get from people like General Eikenberry and Ambassador Newman is you need a five to 10-year campaign, and it has to be centered around to improve governance and aid, not merely a military option. That's a message which is to some extent one in the new aid request, but we seem so far incapable on a bipartisan basis of caring what our longer term policies and postures in the region are.

In the Arab-Israeli area, let me just say I don't think that you are going to move away from aid to Egypt and Israel. Preserving Israel's conventional edge is the best way to limit its military problems, and indeed actions. You are not going to succeed in military assistance to Lebanon. It is incapable of creating effective military forces, given its confessional divisions, but you cannot avoid military assistance in trying. You do need very much to consider what you do in terms of strengthening Jordan and Egypt, and somebody needs to look very, very hard at the post-Mubarak nature of Egypt, which as a strategic and military problem is one that you simply cannot defer while talking about political solutions you're not going to achieve.

Finally, just one comment about neo-Salafi extremism. It isn't going to be halted regardless of what happens in Iraq, Chechnya, or Afghanistan. The best approach to dealing with it is, as I've said, regionally. Cooperation and counterterrorism, that is bilateral. Anyone who seriously works this issue knows it's fine to have meetings about international institutions, but like most dialogue in the Middle East it is essentially purposeless in terms of altering the end game. Talk doesn't produce results. The key problem we face is if you are going to batch this with economic and political reform, with real change, you have to have country teams on the U.S. that are capable of doing so. You need to have patience. You need to have expert dialogue with both governments and reformers in these countries, and it must be done, again, on a bilateral basis.

One final comment here, we keep confusing democracy with political legitimacy. To me, the quality of governance, as was pointed out by another panelist, is far more important, so is economic development, pushing people to progress in human rights, in the rule of law, and moving towards something that can create sound, meaningful political parties.

Let me note that the classic example of democracy, Athens, had about six good years as a democracy and about 150 of being either oppressive, incompetent, or self-destructive. As the classic example, I can't think of a more dismal one to bear in mind. We are not a democracy. We're a republic with checks, balances, mature public political parties, and all the other elements. And I would hope that the next administration will bear that in mind.

MR. FREEMAN: Thank you very much. Two themes in your remarks really strike home. One is your essential agreement with His Royal Highness Prince Turki al-Faisal, who said that the United States went into Iraq without consulting with the region, and it should not leave without consulting with the region. And this is the case, obviously, because when Iraq is over, however it ends, we will still be in the position - the ironic position - of defending the world's access to energy without the support of the world. What we are defending is not an American interest. It is a global interest that we have assumed the responsibility for protecting, and that in turn will require consultation, as you said, with the countries in the Gulf which are the major source of the world's future energy, as well as a significant part of the current supply.

And here I think it is worth noting the difficulties that our Africa Command is having in finding a welcome in Arab North Africa. The quality of relationships, the sense of confidence or the lack of it in our intentions and our wisdom, and our staying power all have a great deal to do with what we are able to do and who will support it.

We now turn to the question/comment free-for-all. We've got an hour and a quarter and we have panelists up here who are omnicompetent, as they demonstrated by talking about everything except what they were supposed to. So they will want to comment on many of the different issues that you raise. I invite you to do so. Do we have a microphone for the questions and comments? If we don't - use that - well, I don't - what I will have to do then is try to repeat the questions so that your brilliant thoughts or insights or pointed remarks get into the record. Yes, in the back, sir? Tell us who you are, please.

Mustafa Malik (ph).

Q: (Off mike.)

MR. FREEMAN: Greg, I'm going to let you start and summarize the question.

MR. GAUSE: Sure, pardon me. This larger question of the return of religion as a - in a political context to frame politics is, as you point out, much larger than simply the Muslim world. It's happened in the Hindu world. It's happened here in the United States to some extent. Gilles Kepel, who is I think one of the best analysts of Muslim politics, French scholar - I think it was Gilles who wrote a book called "La Revanche de Dieu, The Revenge of God" and I think that rather than seeing kind of secular nationalism as the North, I think we should see that as an inherited notion from the former colonial powers that dissipated as the colonial powers' influence waned. That doesn't mean that people aren't attached to their country and I think the most significant religious-political organization whether in the Islamic world or other are the ones that can marry up Islamic themes - I'll talk about the Middle East because that's what I know about - Islamic themes with national agenda.

That's why Hamas, I think it's been so successful so far, right? It marries up the national esteem of fighting the Israelis with an Islamic vocabulary and context. Hezbollah in Lebanon consistently puts forward its program as a national Lebanese program, not as a sectarian party, although they act that way obviously in the struggle for power, right? Islamist groups do the best when they can marry up nationalist goals in an Islamic context.

Let me say something about foreign workers. I think that the foreign workers situation in the Gulf, and Fareed can certainly chip in on this because he knows more about it than I do, is an important social issue but not an important political issue. It's an important social issue in that - in places like the UAE, you rightly point out, Arabs are a tiny minority, right? Now, how can you be an Arab country, which is what you portray yourself as, and have Arabs being a tiny minority when Arab children are not learning Arabic because their nannies speak English or some other language. That's an important social issue and the treatment of these workers is an important social issue, an important economic issue, right? To the extent that these economies are going to integrate more and more into the global economy, they're going to have to accept some minimum standards of worker rights.

However, politically, these foreign workers are think are absolutely irrelevant. Why? Because they can be sent home in a nanosecond, even if they've never been to home, as you rightly point out many of them born there, the second generation. They can be sent home in a nanosecond and the global labor market being one it is, they can be replaced relatively easily. There were two foreign labor groups that were considered to be really politically important in the Arabian Peninsula: Palestinians in Kuwait and Yemenis in Saudi Arabia. They were very large communities. They spoke Arabic, right? They're integrated into these societies culturally in ways that foreign workers from South Asia and Southeast Asia cannot be. And what happened after the Gulf War of 1990-91? The Yemenis were kicked out of Saudi Arabia and the Palestinians were kicked out of Kuwait and nothing happened. If you can kick out Yemenis from Saudi Arabia and kick out Palestinians from Kuwait, you can kick out South Asians from the UAE.

MR. FREEMAN: I think probably, Fareed, you may want to comment on this as someone who lived in the region but is not Arab.

MR. MOHAMEDI: I'm actually of Indian origin. It's funny - I think Greg is absolutely right in terms of the political and the dichotomy between the political and the social issue, but there's one thing that I just sort of - it just dawned on me the other day. We were at the World Economic Forum, the Middle East meeting in Amman, actually on the Dead Sea. And the government of Bahrain had organized a lunch and they had some speakers and theme was about corporate reputation. And it's a very sort of typical world economic forum thing where they bring in something from the outside and they want to make everyone look the same. Every region must look like and discuss the same issues.

And I could see that all the corporations that were the Gulf corporations and the Middle East corporations that were there didn't know what to talk about. It is a very good thing for Shell to talk about corporate governance and for - (unintelligible) - to talk about. I just though I'd make a little bit of troubles for the whole lunch and I raised the issue of workers right and the Human Rights Report that had come out in all of that. And it dawned on me when I started to stir up the pot - I got a lot of defensiveness - that actually, as this region globalizes, that corporate reputation along that line will become an issue. So it's not - I agree with you on the social and political. It's not important. But on the corporate level, it may start coming and then you wouldn't want to buy or whatever - Dubai doesn't want to look like it's exploiting little boys, as camel jockeys and it wants to clean that up because it doesn't want to spoil its Dubai inc. reputation. I think that's one element that it's coming into.

When you think about concentration of wealth, of course, I absolutely agree it's one of the worst - worst distributed regions in terms of income distribution and all of that - family ownership. But there're two things that are happening that I think that are causing some change. One is if you want to scale - I always thought into this scale in the region in terms of capital employed projects - you need to bring in lots of investors, okay? If you want to play the mega-game, you got to break up this whole system. The families themselves cannot just run it, and so the capital markets are being used as a means to open up.

And I think that's bringing in - now, once you bring in a million investors that's faceless, they removed, its arm's length, you need better regulations, and it just so happens and I'm drawing on an idea that my friend - (unintelligible) - always talks about and that is this sort of dichotomy - this division between technocrats, royals, and merchants in the Gulf in a sense, where the technocrats look very suspiciously at both the royals and the merchants. And in fact have played a role, for example where they kept the royals and the corruption out to a certain extent, out of the public business area and in areas where they have come in, they've destroyed it. KBC and the whole oil sector disaster that's taken place in Kuwait in sharp contrast to how well they've managed the national oil company of Saudi Arabia. If you look at Aramco, that's not one royal in Aramco. And so I think that the technocrats, as long as they are allowed to maintain a certain regulatory role and the scale of large number of investors coming in, you will get some level of opening up of the economic landscape, and you will get less dominance by the big families.

MR. MOLAVI: Just to add on a micro level to what Fareed was saying, I have done some reporting on labor issues in the United Arab Emirates and one of the things I found that was striking is when I went to some of these labor camps, there was one group that I met that had not been paid in several months and they were the epitome of what the Human Rights Watch called the less than human working conditions that they were living in. And as I probed further, I asked them what is their recourse and they said well, the company that we are working for was a Sharjah (ph) based company. And so what we were trying is get the case transferred to Dubai - the Dubai courts. And I asked them why and they said because we think would get a - have a better chance of getting a fair hearing in the Dubai courts than in the Sharjah courts. And it goes back to what Fareed was saying that Dubai, as this sort of - in this triumph of globalization, in one sense it's not necessarily for the love of the workers or the laborers that they have taken steps to improve working conditions, but it is because of corporate reputation.

But your other point about the disparities in wealth, a lot of people talk about this Shia-Sunnis divide in the region. I think there's actually another divide that we need to worry about which is what you brought up, which is more of a populist versus plutocrat divide. And if you look at the Islamist discourse and from the Muslim brotherhood, the justice and development, from Tunisia, to Algeria, to Morocco, they're often weaving these narratives of economic discontent in their discourse and doing it quite skillfully. And I would go to Muslim Brotherhood rallies in Egypt and there would be chanting against the price - rising prices. And so this divide I think is one that we need to watch out for very closely and it's the Islamist groups that are skillfully exploiting it.

Q: (Off mike.)

MR. FREEMAN: What options do you see for CENTCOM?

MR. CORDESMAN: First, I think you're asking the wrong question because the problems aren't in CENTCOM, the problems are in the way that the dialogue has been handled at the top of the administration with the individual countries. One thing I think is needed is to restore the kind of engagement strategy with the individual Gulf militaries that were pursued by CENTCOM. That has, in many ways, has been given a much lower priority. And when I say engagement, CENTCOM people need to talk to people in the field. We need to bring people back from the Gulf militaries. We need to be much more concerned about the volume of training of Gulf military in the United States. We need to step up exercises rather than simply focus on our immediate military needs.

I think that we, frankly, have also not as a country - and this is not something you can blame on CENTCOM - quite figured out that we are no longer trying to sell the equipment for conventional warfare and train people in conventional warfare. These are still issues in the Gulf and the countries involved are going to insist on prestige and large conventional forces, but we need to do as much as possible to train them in counterterrorism operations, in dealing with asymmetric warfare and think much more about protection. And I think CENTCOM has to be capable of addressing the issue of proliferation not simply by having background briefings on weapons of mass destruction followed by technical briefings on ballistic missile defense or systems that don't yet exist or which we are not yet prepared to provide systems for.

All of these are areas where we can do more, but when you talk about what really needs to be done, you need to have a set of choices at the level of the National Security Council, the presidency, as was pointed out by Chas and Ambassador Turki (ph), but I think it's a message you get generally. You need to have a meaningful strategic dialogue and some of that has the institutions and we've created new ways of talking to Saudi Arabia or old ways have been revitalized.

I'd also have to say that you cannot end up sending mixed signals. You can't have one set of signals coming from the U.S., another military in the joint staff, another coming from whatever operational command is in the area, from CENTCOM, from the vice president's office, from the national security advisor. There has to be some unity of purpose and that has been sadly lacking.

And finally, in terms of posture, let me just say we had a pretty good posture in the Gulf before the Iraq war started. We have strikingly increased some aspects of our capabilities to rapidly deploy and operate from over the horizon, particularly the - (unintelligible) - air force base, and all of the new technologies and systems there. And so mixing both the return to the basing and postures that we had before the Iraq war, and taking advantages in some very striking improvements in long-range strike technology battle management are obvious measures to move forward.

MR. WHITE: Yes, I would second pretty much what Tony said, but we have to just keep in mind that this is all scenario based. If we were to exercise the military option against Iran, which we used terms like military option, surgical strike, et cetera, which don't really apply to it because much of what we know about the planning from a few leaks last year suggest a very robust campaign about Iran to knock out Iran's ability to counterattack in the Gulf. That involves missiles, anti-ship missiles, submarines, asymmetric swarming fleet capability, all kinds of things like that into much of the air force. It would be a really war with Iran.

And I think the kind of things that Tony's talking about and they're very important, can only happen if you don't do that. To the extent that you adopt a containment strategy, to the extent that you provide - try to provide assurances to states on the other side of the Gulf, and to the extent you assume by doing so that the real reason, as Chas said, that Iran is going for - and I believe she is - a nuclear capability is for deterrence, not in order to initiate action. And all this, too much - far too much - attention has been given to the statements of President Ahmadinejad. In fact, I constantly see, even people positing President Bush to President Ahmadinejad when the fit is wrong. Bush holds about the power of the Supreme Leader Khamenei, not the much weakened powers of the president.

But in any case, if war is initiated, it could start a massive open-ended mess in the Gulf that's going to have deep economic ramifications along with military and political, which is incompatible with what the United States needs to do after in some way exiting from Iraq, even to just simply restore the readiness of our own forces. I think containment is the way to go to the point where you can achieve even strategic engagement and combine that with containment, which is more - a more enlightened way of pursuing this strategy all to the better. But all, everything that Tony hinges on is basically - is basically posited on we're not attacking Iran.

MR. FREEMAN: Containment was conceived by George Kennan as a strategy for dealing with a country that had, in his view, a severely deformed and potentially very ineffectual system. Basically the idea was to let the Soviet Union stew in its own juice until it fell apart, which it ultimately did. It's not a bad formula for dealing with the essentially failed and failing system in Iran.

I want to make one further comment, however, and that is that one lesson that might, I think, usefully be drawn from our misadventure in Iraq is that before we posit that a country in a region abroad is a grave menace to its neighbors requiring urgent redress, as we did with Iraq, perhaps we should ask the neighbors whether indeed they see it that way. Nobody saw Iraq in that manner other than we in 2003 and we are 8,000 miles away. So in the case of Iran, the same logic I think ought to apply.

Going back to Tony's points, the prerequisite for cooperation on a regional level militarily is some sort of common threat perception. And that means that you have to talk to people and exchange ideas and take seriously the concerns that they have as well as trying to persuade them of yours.

We face a dilemma in the Gulf, which I think will be readily apparent as we attempt the reconfiguration of forces following our withdrawal from Iraq under whatever circumstances that occurs; namely, to a considerable extent, our presence is regarded as the threat generator because the threat is not external but internal. It is a threat from people who regard our supportive relationship with regimes in the region as something to be swept aside, and therefore us as someone to be - as people to be attacked in the interest of driving us from the region.

Since this is the case, any government contemplating additional force presence from the United States on its territory needs to carefully balance risks and benefits. And it's not a foregone conclusion that the result of that sort of analysis in this century will be the same as it was at the last part of the last century. So I think we face many reasons to do what Tony has been urging us to do, which is to elevate and deepen the dialogue with the countries in the region. If we don't, I don't think we can assume we have a free hand to do what we consider to be militarily essential.

Please, go ahead.

MR. CORDESMAN: I'd like to follow up on two areas. One, I do think if you go out to the Gulf and you talk to the people who are at very senior levels within the military and within a defense ministries and royal families, you will fear in private what none will say in public, which is a very much perceive not today a threat from Iran, but an emerging threat from Iran.

I don't agree that Iran has created this force as a deterrent. I think from the Shah on - and there has been some degree of consistency here - it is seen it in terms of leverage, not to conduct the nuclear war, but to achieve political power and political influence. I also think that one aspect of this debate over what Iran is doing has not been helped by the fact we have so many people in the Gulf and to some extent the United States whose background may be that they read a great deal about strategic analysis, but they've never looked at an overhead photo or actually measured the scale of the facilities involved. And we are talking not about a small effort. We are talking about, depending on how you count them, some 18 to 23 complexes which are associated with the nuclear program. We're talking about technology efforts which affect every major component of a fission weapon and which in many cases have no meaningful civil side. And we are talking about putting equally large resources into the production and development of long range missiles.

And the more you look at what they are doing, the more you see this as a central focus of Iran's ambitions, which I do not believe are to get into a nuclear exchange which would about their suicidal desires would have been with the Soviet Union. But let me also say that when you look at the history of things, it took Europe a little over 4,000 years to finally get out of an arms race without going to war. I'm not sure Iran is as reassuring.

MR. FREEMAN: Wayne, do you want to make a -

MR. WHITE: I just wanted to make a comment with regard to containment, which could be misinterpreted. I think very much what Tony brought up earlier strategic involvement is a better term. In other words, containment with respect to Iran would mean taking action multilaterally in order to curb active Iranian behavior which is a threat to the region, such as its support for terrorism or some such thing. Not containment, squeezing, and laying on sanctions and another level of sanctions in order to prevent a nuclear program from advancing that's going to probably advance in any case. Or more to the point, regime change efforts, efforts to destabilize Iran by activating minorities, et cetera, radio broadcasts.

A lot of this, as we know, very recently has actually helped discredit many of the people fighting for reform inside of Iran. If we want to look at that sort of involvement, there is a case study that's relevant - nothing's perfect, but the Cuban case study comes to mind very readily. Just under 50 years of that sort of effort against - directed at Cuba and directed at the Castro regime and instead of making meaningful progress, instead we have a Cuban leader who'll probably die of old age in the course of this process. And so this is not what is to be repeated in the case of Iran.

MR. FREEMAN: I would - I would like to make two very brief comments. First, in the case of Cuba and containment, the United States had four objectives with respect to Cuba, first to deny it to our Soviet strategic adversaries as a base; second to persuade it to halt the export of the revolution to neighboring countries and to Africa; third, to encourage Cuba to develop a society that was sufficiently decent that its people would not feel obliged to flee to Florida; and fourth, ultimately to unravel some of the problems caused by the revolution - property claims and other issues which continue to disturb people involved or their descendants.

The first two objectives, strategic denial and halting the export of revolution, very appropriately called for efforts to isolate Cuba. Remarkably, those efforts succeeded. Cuba is not a base for the Soviet Union, which indeed doesn't exist anymore, nor has it become a base for any other external power in the hemisphere against us. Cuba no longer exports revolution. It exports medical services. So we won.

The last two objectives which have to do with changing the character of the regime, encouraging a more decent form of government and society, and resolving the issues of property claims and the like require engagement and contact. Therefore, in this context, a policy of ostracism is simply lunatic and counterproductive. The point I'm making is that there are elements of containment that may be very appropriate under some circumstances, but you must always consider what is you're trying to do. I think Wayne's distinctions in that regard are exactly right.

I will not make a second comment because I think we need to move on and, Bob, tell us who you are.

Q: (Off mike.)

MR. FREEMAN: Well, the question, I suppose, is as we thrash around in Iraq looking for some exit from it and debate and discuss here what sort of exit we should make, what are the Arabs doing to protect their own interest if anything? And that is a very good question and I will turn to Greg first and then we'll have other comments.

MR. GAUSE: I'll just say a few words about where I think the Saudis are on this. I think from most of the past four years, the Saudis have been largely paralyzed on Iraq policy. They've been caught between a fear of Iranian-supported elements and not wanting to support a government that they see as an Iranian agent, but also the fear of al Qaeda elements on the Sunni insurgency side and the basic desire of the Saudis not to support a group or groups in the Sunni insurgency that are killing Americans. They still value their relationship with us and they don't want this kind of thing - they didn't want to deal with this and so they were largely paralyzed and they didn't have a very active policy on Iraq, it seemed to me.

I think that might be changing. I think that they've come to the conclusion, as many people at this table have, that if we're not leaving, we're going to be changing our configuration in Iraq very, very soon. And I think that you're seeing a couple of things. On the rhetorical level you saw the king at the summit term the occupation of Iraq illegitimate for first time and we're starting to get some signals, as Mr. Dreyfus I think - probably relying on some of your reporting on this - that the Saudis are taking a more active role encouraging an alternative to the Maliki government. They refused to receive Maliki on his tour before he went to the summit. There seemed to be indication that they would like to help Allawi put together some kind of anti-Maliki government that would include the Sadrists and Fadillah and people like this.

Now, whether they can pull this off, I think is very, very doubtful given the fact that the United States has basically said Maliki's our guy and we don't think any change is particularly beneficial. But it does seem to me that the Saudis are reactivating on the political level efforts to find alternatives.

We've also seen, of course, in the last six months, more so than in previous periods splits in the Sunni insurgency, people turning against al Qaeda. This is not just tribal forces, but also Sunni insurgent groups like the Islamic Army in Iraq and the 1920 Brigades. I have absolutely no evidence that the Saudis were involved in this, but it also wouldn't surprise me if there were some effort by the Saudis to encourage this kind of thing as a way to, as it were, make from their perspective a clean Sunni insurgency that when Americans withdraws or reconfigures can act as a Saudi ally in affecting the course of politics in Iraq. Now, that's just not facts, that's just speculation because I don't have evidence on it, but it'd certainly be consistent with the way the Saudis have acted in other civil conflicts.

MR. CORDESMAN: I think that first you probably are beginning to see private money, particularly - I know this is the case in the UAE - moving into the Sunni hands. It's always very difficult -

MR. FREEMAN: Iraqi Sunnis.

MR. CORDESMAN: Iraqi Sunni hands. How much of it? Who's giving it is anybody gives? But one thing is fairly clear. We have not found any tribal grouping as yet that we have been working with or know about in Iraq which shows significant amounts of major new money, new arms that we have not provided. To the extent these groups have improved their capabilities, they have come very recently in terms of transfers which the U.S. has made - since the developments in Anbar - a significant issue.

Now, one thing that that is doing is I think shifting the impression people had at the start of the year in the Southern Gulf that the United States had effectively tilted to the Shiite government at the expense of the Sunnis. One thing it also has do is take an already heavily armed group of people and better trained and organized them, effectively substitute them in a number of areas for the regular police, which have generally failed, and leave a legacy, depending on how this plays out where they're going to be stronger than they otherwise would have been.

We also have the fact that, as Dave mentioned, you've got a serious problem within the Iraqi forces, and looking at some of what's happening I suspect that the end result for Saudi Arabia and a number of others is going to be that they know where the proxies are now. And those proxies are going to potentially be considerably stronger six months from now than they are now. Are they showing any visible signs of doing it? No.

I would say that there is certainly on the part of Saudi Arabia another set of actions. It is still linked to us, but it also is looking at Europe, elsewhere, being concerned about what's going to happen if we leave the Gulf and that's in dealing with its neighbor to the north rather than what happens in Iraq. But quite frankly until we see somebody with real money and real weapons; that is, somebody other than us and it isn't as if we didn't know what was happening in each of these movements, but we can't say there's a lot of Sunni activity that's on the ground.

MR. FREEMAN: I'm going to ask Afshin to make a comment, but since we're talking about Saudi Arabia I will make two very brief observations.

The first is that the United States has now through the errors of judgment and commission and omission that we have carried out in the region sufficiently threatened Saudi interests that we have jolted them out of their traditional diplomatic torpor. Saudi activism was previously an oxymoron, but it is a reality now. You see this not only in the engagement with Iran - very active engagement on regional issues, including Lebanon, the programs of support for Sunni forces in Lebanon and the effort to prevent civil strife there from spilling over that the Saudis have conducted, the Mecca meeting and the effort to deal with Hamas and with Palestinians in ways that both flank Iran and I would argue cope with this threat of democratic legitimation of Islamism that has nearly arisen and interesting initiatives towards Syria as well. So Saudi diplomatic activism is one response to the situation. It is not military, but it has transformed the region because now Saudi Arabia and Iran in many ways are the principal diplomatic actors there, not the United States.

Second, in response to 9/11 and the subsequent efforts by al Qaeda inside Saudi Arabia to destabilize the kingdom, King Abdullah has launched a truly remarkable, even revolutionary, reform effort which has brought the Shi'a into national dialogue and some measure of association with the power structure, which has opened the kingdom economically through the membership in the WTO, and which is now empowering women in very important ways and reforming the educational system to emphasize science and technology rather than traditional religious instruction. There're many things going on beyond that, but the interesting thing is that it is a domestic response to the change in the region that should not be overlooked.

Afshin?

MR. MOLAVI: I used to - before I talk about Iran's posture, I just want to underscore that point. The popularity of King Abdullah in Saudi Arabia is striking. When I was last there - and just give you one example. When I was in Qatif, in the Eastern province in Saudi Arabia, speaking with the Shi'a of the Eastern province, over and over again I did hear people say to me that King Abdullah has reached out to the Shi'a minority more so than any other king in Saudi history. And I think that's particularly critical at this moment.

And I won't add to what Chas Freeman has said because he did lay out some of the reform that are taking place, but when we think about what Saudi Arabia thinks about Iran, obviously Prince Saud Al-Faisal expressed his frustration at the Council on Foreign Relations a couple of years ago in which he said that the United States essentially handed Iraq over to Iran by engaging in this war. When you think about Iran's position, Iran exerts both soft power and hard power in Iraq, and Iran also has somewhat of a structural contradiction in its policy and some might call it - and almost necessary schizophrenia because on the one hand they do support the government of Nouri Al-Maliki. On the other hand, they don't want to see a resounding success that shines well for America because America's also supporting the government of Nouri Al-Maliki. So one of the things that people often talk about, and Iranian officials will even talk about this, is a certain amount of managed chaos, managed instability in both Iraq and Afghanistan.

And the other thing to note is that this should not surprise us that Iran is seeking influence in Iraq. Persians have often sought - (inaudible). This is historical and it should not surprise us given the fact that Iran did fight a brutal eight-year war with Iraq, and now its allies, many of which where incubated in Iran, including the Supreme Council for Islamic Revolution in Iraq which was incubated in Iran in 1982, have significant positions of influence in Iraq.

And the last point is that when Iran exerts its power in Iraq, in Lebanon, and other places, we sometimes describe them as a Shi'a sectarian power, but I think nothing could be further from the truth. Iran views itself as a Panislamic power and it turns that here in Iraq it is Shi'a groups that allow Iran to expand its power and exert its power, but Iran would have no problem providing support and assistance to Sunni groups as well and across the theater. And from Ayatollah Khomeini to Ayatollah Khamenei today, Iran and the political leadership of Iran does not use sectarian language. The language is often anti-imperialist, anti-American, anti-Israel, but they rarely do use sectarian language.

MR. WHITE: Yes, I'd like to reinforce a point I think actually Greg made, and that is that when we we're asked about what the surrounding states are doing, in particular I would talk about Saudi Arabia, Jordan, which we haven't mentioned - very, very frightened of a civil war scenario, particularly one in which Sunni Arabs would do poorly, dumping millions of refugees into Jordan. And also we haven't mentioned Turkey.

MR. FREEMAN: More refugees into Jordan.

MR. WHITE: More, that's what I - yeah. And Turkey as well, that is extremely concerned about suggestions that the U.S. might pull out of the Arab portions of Iraq that retain bases in Kurdistan, which some people have been trying to sell as some way in which the U.S. could actually keep better control over the situation in the north. But traditionally looking at the way that might play out is, I think, what the Turks fear most, and that is with the United States embedded inside of the Kurdish areas of Iraq, the Kurds would think that they could actually get away with a bit more because the United States would need them, and therefore cracking down on the PKK and taking other measures, not moving any closer to anything like independence could actually be jeopardized by a U.S. presence in Iraq but - or in Kurdistan in Iraq and not the rest.

The thing that is most striking about recent behavior is that up until recently, most governments, with the exception of Iran, have been very much just hoping the United States would stay - just hoping no matter what happens there that as long as the United States stays it's an American problem. It's not something that's going to spill over into their areas. The most striking example of this would be the massive defensive barrier that the Saudis have been building along their border, almost as if one could wall in the Iraqi problem.

And they're coming to the conclusion now, as has been mentioned, that that doesn't work anymore - that the United States, despite what it says in some contexts, will be leaving one way or another not in the long term, but probably in the short term, and we talk about the next two years or so, and they have to begin thinking about what they're doing, and we're beginning to see some of that.

Some of it's positive - more positive engagement. In other cases we're seeing a more negative side to it; for example, on the Turkish front where we see the Turks very roundly threatening military intervention in Kurdistan. But one thing I guess we should keep in mind is they mean it. And they're beginning to get out of that position where it's an American problem into the realization that it is becoming increasingly our problem and we need to be doing some real thinking about that.

Q: (Off mike.)

MR. FREEMAN: The question is in brief whether there is a role for public diplomacy and I think Tony wants to comment. I served twice with the USIS, the U.S. Information Service, once in Washington, once abroad. And I think your experience, Tom, is typical. That is, the participants generally get a great deal more out of the experience in terms of their understanding of foreign realities than they are able to impart to the locals, and that's good. We need that feedback. And being in the position for a short time as you were of a quasi-official, you probably were subjected to diatribes that when you were not a quasi-official you didn't hear. Welcome to the club. (Laughter.)

Q: (Off mike.)

MR. FREEMAN: Well, then you saw the hermetically sealed version of diplomacy epitomized by the Green Zone, in which American diplomats are accredited not to Iraq but to the Green Zone, which is an enclave inside another country which they seldom visit because it's politically under Iranian occupation.

Tony?

MR. CORDESMAN: I think it's really time to be very blunt about this. First we had the advertising lunatic, then we had the woman who didn't want the job, and then we ad the Texas political hack. What is totally dismaying is that when you define public diplomacy as preaching an ideological line from the United States that nobody cares about, throwing large amounts of money into TV and radio stations, and putting people into the field who can't say anything meaningful, the answer is, no, public diplomacy doesn't serve any purpose. It also is not reassuring when you talk about the history of public diplomacy as conducted from Washington as distinguished from national missions - from country teams.

I was at a meeting, and I won't cite the think tank, but they brought together a group of people to try to advise on the future of public diplomacy, and we got into this and one of the key points that was raised was what we really needed to do is to explain ourselves better to the Europeans. (Laughter.) And I was thinking, you know, I now know the names of 12 people who should never be employed by the United States government or anyone else. (Laughter.)

The honest truth is, if you could open up the embassies and bring in people to talk frankly not to the people who agree with them, but when I go to Saudi, Arabia I go out to universities where people don't always master English, but they sure don't agree with the United States, that's one key. It's equally a key, however, to think about what is it you're trying to do. You turned the country teams into people who simply report back to Washington from within a fortress.

The tours are too short, they're unaccompanied, too many people basically don't take risks. I knew one embassy economics officer who basically was doing absolutely nothing but reporting back what was being said by a local bank and basically never got out of the embassy compound. I've known others that are very different. But you need to reassess the role of the country team, how you use people in individual countries, stop this idea of a broad regional dialogue and talk people-to-people in practical terms.

The other thing in public diplomacy is you get immense benefits if you pick the right people that come from the country to here, and that doesn't mean ones who agree with you. Those programs really do pay off.

And now I come to the key "but," and it's a point Greg talked about. If what you are trying to do is take in any of these countries the argument over the future of Islam or Islamic extremism or any of these issues, and you assume that the United States can intervene meaningfully in this dialogue, do me a favor, jump off a bridge, shoot yourself, do something else constructive. (Laughter.) Because the key aspect of this aspect of public diplomacy can only be done by Islamic governments, Islamic scholars, Islamic figures, and the idea we somehow can do that as crusaders and occupiers is ridiculous. And I do have to say that to go back to the mad advertising lady, the person who didn't want the job and the Texas political hack, what they all have in common is the sheer pointlessness of the major focus of their activity.

MR. FREEMAN: Two comments, Tom. One, private diplomacy is a prerequisite for public diplomacy. If you're not doing private diplomacy, you don't really have much useful to talk about in public. And second, I agree completely with Tony that country teams meeting in bubbles to talk to each other is a form of perversion unique to the government that resembles onanism, not diplomacy. (Laughter.)

MR. MOLAVI: Just a brief anecdote on public diplomacy in Saudi Arabia. You really the Karen Hughes visit, you know, when she was using her own walking-around money, and when she went to that elite girls high school and she mentioned about that women ought to drive, and she was rebuffed by several people in that high school saying, well, we're perfectly happy. We have our drivers and we have our chauffeurs. And this is an example of, in my view, talking to the wrong people. And, you know, you had the hermetically sealed one. Chas Freeman talked about, you know, you go and get the diatribes, and Karen Hughes got the diatribe.

But what was interesting is a few days later I was in the offices of the Arab News, which is the leading English language daily, talking to some of the women who worked in the Arab News, mostly middle-class Saudi women, who were quite frustrated with the fact that those women said that publicly to Karen Hughes because they actually wanted to drive. And they thought it was a strain on their finances that they have to hire a chauffeur. And so it is - if we're not doing it right, I tend to agree that it's not serving anyone's purpose. I think -

MR. FREEMAN: In the interest of full disclosure, I have long planned - when women in Saudi Arabia are allowed to drive, which I think they will be - to get the contract to build the separate road system that will be necessary for this. (Laughter.)

Greg?

MR. GAUSE: Yeah. I think Saudi women want to drive. They don't want Americans telling them about it.

I mean I think that's the bottom line. I think the best public diplomacy thing that's happened on the U.S.-Saudi side in the last couple years has been the commitment at the top in Saudi, Arabia to start sending more students back to the United States. Saudis in the '70s, '60s, sent lots of students to the - as a percentage sent a huge number of their university students to the United States. And when they built their own university systems, they started keeping them at home. Post-9/11 of course it became very difficult for Saudis to travel in the United States, and there were horror stories, some of them exaggerated, some of them true, about what happened to them here, what happened to them at immigration and customs. But there's a commitment on the top to get more Saudi students to the United States. Does that mean they all come home pro-American? No, obviously not. But they do come home with some better understanding of us.

Now, the Saudis of course are never going to do that the other way around. I mean it's still incredibly difficult for Americans to go to Saudi, Arabia. It's incredibly difficult. You know, I can go and give lectures in any Gulf university basically, just by the permission of the chair of the department. Not in Saudi Arabia, all right. To this day - I mean, it's changing but it's - the Saudis are still incredibly closed on that side. And I think one of the reasons that, Tom, folks who go out on these embassy junkets, and I've used the taxpayers dollars on a couple of those myself, one of the reasons they don't get better interaction is not the embassy side, which has its own problems, but it's the Saudi side, which is still extremely fearful about this kind of open exchange.

MR. FREEMAN: Bruce Laingen, who was incubated in Iran some time ago, has a comment or a question.

Q: Yes. Some of us up in the cheaper seats in the balcony feel we've been incubated up here. (Laughter.) You've ignored us, Chas. I wanted to ask about local medial reports about an increasing crackdown culturally on the streets of Tehran and possibly otherwise. And I'd welcome hearing from -

MR. FREEMAN: Afshin.

Q: - Afshin Molavi or others on the panel something about the stability of that regime in Tehran. Are we supposed to worry about it? Are they afraid of the cultural revolution? Or should we all relax?

MR. MOLAVI: Okay. It's a very important point. And I think it is worth noting that the crackdown that Ambassador Langon talks about has included some of our beloved colleagues, including Haleh Esfandiari, the director of Woodrow Wilson International Center for Scholars, and - (unintelligible) - and others. And there is a very serious crackdown taking place over the past few months. Something like 150,000 people have been swept up, mostly taken to short-term detention and released. But there have been these horrendous images of young people dragged from parties and other such places and they've had bathroom devices put in their mouth. They've had bloody faces.

And these images, in a sense - what was striking about it is that they were allowing people to take pictures. They knew it would appear on Persian YouTube and on the Persian blogosphere, which is very - Iran has some of the - Persian is the fourth most commonly used language in the blogosphere. There's something like 75,000 Persian blogs. And so Ahmadinejad and the group around him would like to see a purifying of the Iranian revolution. They would like to go back to the years of 1979, and they are flexing their muscles in that way.

The question is, is this a stable regime? I think there are - it's an underperforming regime certainly. But with the oil prices being what they are the president does have a significant amount of resources at his disposal to deliver patronage to his key constituents. His key constituents in the security services, and particularly in the militia, are willing to support and are willing to crack heads. And so I think the regime remains essentially stable.

What Wayne White said as well about President Ahmadinejad is not the most powerful individual in Iran, but he does - he's not without power either. And particularly when you have a supreme leader, Ayatollah Khamenei, who is notoriously indecisive, and he will allow the factions to fight each other. He will allow it to play out, and he won't step in until he feels that there is a serious threat to the state. But right now I see the regime as essentially stable, and there is no velvet revolution coming, which makes the detention of people like Haleh Esfandiari and - (unintelligible) - even more reprehensible than it possibly could be.

MR. FREEMAN: If you want to comment, Fareed.

MR. MOHAMEDI: I'll make a comment on the oil sector and -

MR. FREEMAN: I'm not sure that works.

MR. MOHAMEDI: Oh, okay. We did a - the PFC did a study a couple of - six months ago on the oil sector and we examined all the fields and the data coming out of it. And basically the conclusion was that the sector is in deep trouble, and that you could see catastrophic declines in oil production in the next few years. Disorganization, lack of investment, technology restriction, are having a real impact on the sector, and also political disorganization and getting the political hacks in - (unintelligible) - and all of that. So that's I think an Achilles' heel for the administration, for Ahmadinejad and the Islamic government.

The other thing is that I think U.S. Treasury's attempts at pinpricks, but still important pinpricks in terms of stopping the use of certain banks or putting pressure on western banks now that it's spreading to Japanese banks and other countries is having an impact on trade relations, finance. You know, the UAE is getting very worried about the sanctions issue because of the trade there, and they're coming under pressure. So I think the combination of sort of oil sector collapsing and these disruptive trade relations I think will have an economic impact and higher oil prices will not be able to offset that, especially if your oil volumes crash.

MR. MOLAVI: Right. And the joke is that Dubai is the best city in Iran. (Laughter.)

MR. FREEMAN: Tony.

MR. CORDESMAN: I think to put this in perspective, even toward the end of the Khatami era, when you talk to Iranians at meetings outside the United States, ones that have participated particularly in dialogue on nuclear or security issues or even on dialogue with the United States, you begin to get warnings from them that it was harder and harder to talk, to leave Iran, that it was more and more a problem of their being suspected.

What you were seeing really towards the end of 2006, quite aside from Americans being arrested, were crackdowns on Iranians in terms of travel, increasing pressure on them as to what could be said, more monitoring when you went to meetings. All of us which were in even places like Japan - all of a sudden there'd be three Iranian officials for every supposed Iranian scholar, which is not the most reassuring sign of intellectual tolerance in the world.

I think what you also see is a certain hardening in the security services. You know, whatever is happening between the president and the leader, one real question is to what extent do the various groups within Iranian intelligence and the security structure begin to crack down on individuals? That, again, began I think to tighten significantly toward the fall of last year and has continued. And it has played out to some extent in public, but without getting into any names, Iranians I have known since I served in Iran, or their sons at this point, since that was back in the early '70s, are certainly finding it much more difficult and more dangerous to communicate with me than it was even six to eight months ago. I don't want to generalize too much from a personal case, but I think it is disturbing to see what's happening in Iran, and Khatami is beginning to look a little like a Prague Spring.

Q: Hey, Chas?

MR. FREEMAN: Yes.

Q: Up here.

MR. FREEMAN: Yes.

Q: I just want to add a personal commercial. One of the problems is we don't have a clue really what's going on inside Iran because we're not there.

MR. FREEMAN: Well, the question arises, going back to Tom Lippman's (sp) comment whether if we were there locked in the fortress we would know a great deal more than we know by not being there. And this, I am sorry to say, is a tragic consequence of the spineless capitulation of the diplomatic service to our security advisors who have reversed the normal pattern.

When I was, many years ago - a hundred years ago, during the Qing Dynasty - in charge of the embassy in Beijing, every afternoon I would go through the embassy sections and if I saw anyone reading a newspaper or sitting there drinking something or other and talking to each other, I would ask them why they had failed to make an appointment outside the building and tell them to go sit in the park and talk with someone instead of doing what they could do equally well in Washington, D.C. The question is, what is the value added? And in this regard, I have great respect for Ryan Crocker and his professionalism, but his recent memorandum saying that he couldn't get anything done despite all the people he had and he needed more people to do nothing inside the Green Zone left me a little cold.

So I think we have the very last question or comment from the young lady in the salmon shirt. Michelle, tell us who you are.

Q: Michelle Steinberg from EIR Magazine online. I think I'll first direct it to Mr. White. It's about the Iraq Study Group and Palestine. I kind of feel like in Washington you can't speak about the Palestinians in polite company, but I'll do it anyway. I recently interviewed a brilliant, I claim he was a brilliant, Palestinian geologist on the water issue and also heard Ambassador Said speak about the rejection of many overtures for peace including Palestinians that - (inaudible) - Mecca agreement and Syrian overtures. Why did the Iraq Study Group focus on the necessity to solve the Palestinian Israeli problem? Is that really what our foreign policy establishment believes? Can the panel give me some insight on that?

MR. FREEMAN: Wayne, you want to start off?

MR. WHITE: Well, I think that's clearly what the foreign policy establishment believes is a major problem in the region, and one that we can't forget about in any context. Going back to the extent to which Greg was emphasizing, everything is part of the same latticework of problems in this region. And one of the reasons why there were high levels of anti-Americanism in Iraq, aside from sanctions and the '91 war was, of course, the ongoing Israeli-Palestinian impasse and American support essentially for Israel. And, yes, I think there's a recognition across the board in the United States that it's a serious problem. The serious issue is, there is no recognition across the board or consensus as to how to go about solving it in a more creative way.

MR. FREEMAN: I think having also served with Wayne in an advisory capacity on the Iraq Study Group, I would comment also that although it may not be polite to say so and certainly one doesn't in polite company in Washington, the fact is that Arab willingness to cooperate with the United States on a wide range of issues, not just on an honorable and the least destructive possible extrication of the United States from Iraq, but on many other issues, is conditioned by their view of our sincerity or the lack of it in trying to fund a just peace in the Holy Land. And there has been no peace process for six years anyway.

Therefore, instead, we have turned to supporting Israeli unilateralism. We have thereby empowered Islamist unilateralists who match Israeli unilateralists. I would argue nobody is better off, but certainly this has deepened anti-Americanism in the Arab world.

The second point is that the Arabs are a fifth of the Islamic world, but they are in some respects a decisively influential fifth. The holy places are on their territory. It is their language that is the language of the call to prayer. And to some extent when Arabs are injured, as they feel they have been in this case, all Muslims feel the blow. So our ability to conduct our foreign policy in many places where we have interests that are not connected directly with the Middle East, for example, in Indonesia, Malaysia, is affected by how we handle this issue of peace between Israelis and Palestinians.

And finally, I'd note, just to buttress a point that Wayne made, that anti-Americanism was once a subject of intellectual inquiry and emotional distaste. It is now sometimes fatal because when it takes the form of terrorist action against Americans it is no longer an abstraction, it is something very concrete that directly threatens us, and I would argue, our way of life, which has not prospered since 9/11 in many respects.

So the reason for the Iraq study group suggesting that this topic needed to be addressed was not the belief that if it were this would lead Iraqis to love Americans or to lay down their arms and cease to harm us or each other. It was the thought that this issue is very central to the question of American influence, American standing, American credibility, and the willingness of other countries to cooperate with Americans on a wide range of issues. So I didn't find the recommendation mysterious in the least. I think it was a wise one and remains a wise one.

This issue of peace between Israelis and Palestinians, in the interest of both and in the interest of the United States, needs to be addressed, not neglected and not subjected to the sorts of charades that frankly have, in my view, characterized our recent approach.

We have now come to the end of our time and Tony Cordesman's about to strike me, so rather than speak and be subjected to corporal punishment from him, I will declare this meeting adjourned with my very profound thanks to five really brilliant panelists. We had a discussion that ranged all over the place. I'm not sure quite what it means, but it was very informative and stimulating. And only Bruce Laingen went to sleep as far as I can tell, so thank you very much. (Applause.)

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