The New World Order

History is a funny thing; although it is made at every instant we never quite feel ourselves caught in the maelstrom of historical currents. It is often only with hindsight that those events thought important are proven meaningless, and those meaningless, important. Yet every now and then certain things come to pass which make me wonder if the tapestry of history is changing patterns to form a new design in the evolution of mankind.

That is how I feel about these last days of 2016, which I believe have effectively marked the end of the United States of America as at the world’s Hegemon. While most Americans were sound asleep Vladimir Putin was busy hammering the last nail in its coffin. We should have seen it coming, it should be no surprise! We have been expecting this for years after all, and the steady degradation of American power has accelerated during the last few months. We have witnessed brazen acts by rival nations that they would never have dared commit in bygone times: from the aggressive militarization of the First Island Chain in the Pacific, to the attack of one of the most fundamental pillars of Western society (that of free and fair elections), and now the announcement of a cease-fire in Syria brokered by Russia and Turkey following Russia’s expeditionary intervention. While the last may not feel to many as an act that undermines American power, the fact that the United States was completely sidelined (oh, I am sure the Kremlin will magnanimously extend an invitation to any peace talks) in a conflict it actively involved itself within a region that it considers to be strategically important to its security demonstrates that the United States is now a power that can be sidelined by rivals of sufficient stature. 

Please, do not misunderstand me: the United States is and will remain the most powerful nation on the planet for the foreseeable future. 
We are however entering a new multipolar world and this will have tremendous consequences for the survival of Western society in the coming decades. I would argue that there are two requirements to have a multipolar world: the first is the existence of truly integrated global system and the second is the existence of nation-states with competing ideologies. In my view, the first Multipolar World spans the rough hundred years from the Congress of Vienna (1814) to the outbreak of the First World War in 1914. This period defined the ideological battle between competing groups whose composition would shift according three distinct but often overlapping interests: the first was the conflict between autocratic vs liberal forms of government, the second layer was the quest for spheres of economic dominance which eventually developed into imperialistic competition, and the third was distinctly ethno-nationalistic in nature and which would find its most aggressive and final expression in Japanese, Italian and German expansionism in the post-war period. The strain of this first multipolar system culminated in what I think we could all agree to accurately call “the 30 year shitstorm period” of 1914-1944. The devastation of the Second World War gave rise to a mostly bipolar world split between Capitalist and Marxism-Leninist ideologies. What we face today, I fear, is far more like the world pre-1914 and possibly leading us towards the same outcome but in a much more accelerated timeline. 

Our global international system has four competing ideologies vying for supremacy and which all seek the behavioral modification of the societies they come into contact with: Western liberal democracy, illiberal democracy, Islamic fundamentalism and good old fashioned Marxist dictatorships. In three of these cases they all closely align with ethno-national sentiment: Russia does not seek the reconstruction of the USSR but it does seek the consolidation of Russians -and to a larger extent all Slavs- under its leadership and its recognition as a global power. The PRC does not seek the annexation of neighboring countries but it does long for the reestablishment of tributary relationships acknowledging the preeminence of the Chinese nation (and thus by extent, of the Han). And while the Islamic faith spreads across all races, Islamists seek to unify the Ummah under a single caliphate that will either convert or exterminate the kuffar. All this while the global economic supremacy of the United States (which underpins the West’s ability to enforce the global rules of play) is being challenged by a military rival and while the EU’s economy continues to choke on its structural stagnation.

Twenty years ago it would have been impossible for any ideological rival to unilaterally assert its will over the strategic interests of the United States. The success of Russia’s intervention in Syria has now demonstrated this is no longer the case and that Russia, China, and Islamic elements of sufficient strength can shape their near-abroad in detriment of American or European policy. In 1996 the United States dispatched a carrier task-force to the straits of Taiwan to beat down Chinese aggressiveness with a simple show of force. Today, mathematical wargames simulations have shown that it would require roughly 20 wings (~2,000 aircraft) for the United States to achieve air supremacy over Taiwan in the event of a Chinese invasion. In other words, we’ve likely already lost the ability to prevent the PRC from forcing reunification or establishing military dominance within parts of the first island chain. 

In Europe, the Georgian and Ukrainian campaigns have demonstrated Moscow’s willingness to use force to pursue its objectives all under the passive watch of the European Union. There is no reason to believe Russia will refrain from using force in the future if it suits its interest, nor any reason to believe the European Union will do anything to stop it. 

All three actors are busy acquiring or already control resources crucial to the West’s economic infrastructure which they do not and will not hesitate to use to exert pressure on behalf of their interests – think of China’s retaliatory withholding of rare earth minerals necessary for high-tech goods or Russia’s use of the energy weapon during the Crimean intervention. The third uses a more insidious tactic: it coopts Europe’s liberal civic structure to force society to modify its behavior to suit its needs. In essence, Islamic fundamentalists have become masters of Social Engineering and adepts at utilizing the human capital at their disposal to destroy us from within. 

Finally, although we still hold an edge in military hardware, our rivals’ ability to wage asymmetrical warfare has far surpassed our ability to counter it, which, as proven by recent events, can quickly level the playing field and transform the puppeteer into the puppet. 

All this means that the United States and the European Union are no longer able to guarantee global compliance with the order that has underpinned the relative stability and prosperity of the post-war period. Slowly but surely the international system that we know today will degrade to be transformed into one partitioned among very distinct socio-economic models vying for strategic assets and resources against each other, with the rules-of-play being regulated not by international law, but by each nation’s ability to project power regionally relative to its rivals, and its capacity to coerce, seduce or transform a given population.

The current state of affairs was certainly not foreordained. We have arrived here in part because of 12 years of failed Euro-American foreign policy.  In part some of the elements contributing to our relative decline stem from purely economical factors and cannot be fully avoided, while some others of our own making are socio-political in nature and have contributed to weakening the state of our civilization. 

Although I could go on -and this is after all just a blog entry not a doctoral dissertation- the prognosis in my mind is clear: I believe the degradation of the current paradigm will ultimately generate too much strain on the world-system to maintain long-term stability.  Throughout this period there will inevitably be an internal collapse of any of the models leading to further instability or  a violent lash-out of historic dimensions, probably ignited by some innocuous event and one side’s miscalculations. After all who in 1914 would have predicted that a single bullet would set-off four years of global war? The drastic remaking of the geopolitical landscape means that during the next two decades the West will face increasing pressure on its borders and from within, both of which it may be unable to contain simultaneously

We Westerners often assume our system to be superior, and thus, both invulnerable and impregnable. Yet our hubris is our downfall: we should keep in mind that in no way can the survival of any of social system (and certainly not western liberal democracy) be guaranteed. The end result of our self-inflicted weakness (for it is self-inflicted indeed!) could be a drastic transformation of our liberal,secular, and democratic society akin to the agonizing transformation of the Roman Empire from world power to a religious backwater run by Germanic barbarians. 

Forecastonomics 101 (Or What is In Store for 2013)

Another year is coming to an end and as we do every time  this happens (which is roughly once a year) many of us are trying to look around the corner to take a peek at what is ahead. Economics, is of course, no exception; after four years of the greatest economic crisis in over eighty years we're all about ready to turn the page, hoping that 2013 will bring better times for all. Will this be the year where the United States will recover and drive global growth once more? Will China continue growing at high rates or will it crash and burn among the bursting of a real estate bubble, bad loans and rising pollution? Will Argentina sink again into economic and social crisis? And more importantly: will Angie Merkel and Frankie Hollande consummate their fiery passion for each other and save the European family?

As with all serious economic forecasts, mine is based on the scientific reading of  my morning coffee and the stains of last night's Mongolian beef on myr rice bowl - thus if by the end of 2013 my predictions turned out to be wrong, that is probably because the Indian cook at the Chinese place in the Irishest part of Boston was off his game. Not me (remember, economists are never wrong).

So here are my little predictions for the economies I follow.

Argentina

The prognosis for the Argentine economy is grim. The so called 'model' built on subsidized consumption and an artificial trade surplus is spent: the government is out of cash, inflation is rampant, investment is fleeing the country and unemployment is probably rising far faster than the government-doctored figures will admit. The structural imbalances have become so great that it will take years to rectify the economy.

1. Argentina should still have enough funds to make good on its upcoming obligations in 2013 so I do not see a repeat of the 2001 national default. However, the possibility is still there and it is possible for some of the provincial governments to default.
2. The imbalances in the energy sector are unlikely to be corrected in the short term, this will lead to generalized power outages and thus a reduction in production, investment, GDP growth and contribute to an increase in unemployment
3. Unless the forex restrictions currently in place are lifted or eased, the construction industry will grind to a stand-still next year causing a substantial spike in unemployment.
4. Argentine banks will continue to see high-levels of capital flight. Given the Argentinean psyche, it is very likely that we will see a bank run in the event of a deep recession. This continual flight of capital is leaving local banks ill-prepared in this eventuality.
5. Inflation will remain above 25% 
6. Argentina still relies heavily on the income generated by its exports of soy beans and derivatives. Any further downward fluctuation of the price of this commodity could send the economy reeling (at the same time, a currently unlikely increase in price could be the Government K's only path to salvation)  
7. In the best case scenario, I believe Argentina would grow only at about 0.5%-1%. I am however highly skeptical of this and believe that it is far more likely to enter into a deep recession with negative growth of -2% to -4%. 
8. The official INDEC-approved unemployment number is likely to reach 10% of  the EAP. My estimate is that the real unofficial unemployment rate will be of about 14% by year-end.

China

There is now a fairly wide consensus about China's need to re-balance its economy from an export oriented machine to one based on domestic consumption. This transition would likely imply the need to enact politically costly decisions and tolerate far slower growth rates than the ones set forth in five year plan (7%) - with a brand new leadership taking the helm of the country next year, this is unlikely to happen.

1. The government will stimulate the economy to achieve its target growth rate by pumping money into it, promoting key infrastructure projects and cheap credit for companies
2. The toxic combination of cheap credit, SOE and state pressure to expand to maintain its high-speed growth will likely lead to an increase in corporate debt. According to a study by Dragonomics combined corporate and public debt amounts to close to 206% of GDP. I believe that given the situation corporate debt is likely to expand by 15% to 20% in 2012 alone (the majority of which would be in the form of non-performing loans).
3. The same will likely hold true for the national debt, yet the PRC's opaque numbers makes it very difficult to accurately estimate the true size of Beijing's obligations.
4. There won't be a real-estate cash (yet). Throughout 2012 the Chinese government took a series of steps to cool down the rapidly inflating bubble. However, considering the impact that housing has on the overall economy I believe the government will need to release some of the restrictions currently in place to stimulate the economy and achieve its target growth.
5. Thus I do not believe that we will see a sharp deceleration of the Chinese economy; I think it is likely that GDP will grow 7% in 2013. However, this will only contribute to exacerbate the imbalances within the economy, and China could wake up with a nasty hangover as early as mid 2014.

Europe

Who knows really? I do not believe that European leaders themselves have any idea what to do with their own countries, let alone with the Union. The only thing I am pretty certain about is that the EU will see very little (if any growth) and a continued transfer of money from the core to the periphery. We are unlikely to see solid growth coming from the Eurozone unless there is i) unequivocal movement towards a unified fiscal policy enforced by a supra-national body ii) ease of labor regulations iii) the elimination of subsidies to certain 'national champions' that are increasingly inefficient.  I believe we will all agree any of this is unlikely to happen. 

1. The Spanish sangria will continue at a good pace. 
2. Greece will remain in the Euro and will ask for more money from the EU that it will probably spend on ouzo. If you want to understand how the Greek economy works,  I suggest your watch Zorba the Greek (or read it). It will explain it all far better than any economy textbook.  
3. Francois Hollande and his Gauche Caviar will run what is left of the French economy to the ground. He will do so by pressing on with his tax increases which will eventually weight heavier on the middle-class as well as by scaring away investors and pushing through inefficient and populist industrial policies.  
4. Germany will narrowly avoid a recession with an anemic GDP growth performance.
5. The Belgians will eat frites.

United States

I am fairly optimistic about the prospects of the US economy. Of course, the country is now hanging on the edge of the fiscal cliff and at the mercy of the bickering maniacs in D.C.. If they can't reach a deal in the four days before New Year all bets are off.

1. 2011 and 2012 were years of uncertainty. There are very high levels of pent-up demand on the corporate and household sides. With the government no longer being able to kick the can forward (but again, we will see what they do in the next few days) this demand will be released in the economy in the manner of productive and infrastructure investment and household consumption.
2. Consumer debt deleveraging has continued at a good pace throughout 2012. Although the average American consumer seems to have learned his/her lesson and he/she still has to bring down the overall household debt to lower levels, they are likely to have a higher propensity to consume next year.
3. American businesses have reached the limit of productivity with their existing workforce and will have no choice but to start hiring more workers. I believe that with the uncertainty of 2012 behind them we will see a high uptick in the employment rate.
4. The housing market is making a comeback. Real estate prices increased 3% this year and will likely increase an additional 3% in 2013. Although this is a modest increase, it will go a long way to improve consumer confidence and spending. 
5. The increase in the value of properties will also give a modest contribution to employment as the construction industry becomes active once more 
6. American companies seem to be healthier than ever. US businesses have gone through a four year-long transition, shedding bad products, excess capacity, unproductive practices and outmoded consumer tastes. For the most part, this transition is almost over and they have emerged stronger and leaner than they were at the onset of the financial crisis. Even GM, the poster child for all that was wrong is now in a position to shed the government's grip and buy back its common stock held by the Treasury. Four years ago, not many people believed that would ever happen let alone that they would be able to invest U$7.3 billion in the United States.  
7. I am so optimistic in fact, that if D.C. gets its act together I believe the US economy will grow well above 3% next year with unemployment decreasing to 7.0%

The Developmental Implications of China's Security Aparatus

In the 1980's the United States and the Soviet Union were still vying for global dominance. Although the USSR would eventually collapse under its own weight, it is hard to ignore the implications that attempting to maintain military parity with the United States had on pressuring and further destabilizing its command economy. This is well documented and I won't go over it in detail but for the benefit of readers (whatever few I have) that are not familiar with the topic the United States forced the USSR to undertake an expensive arms build-up: from 1980 to 1989 American defense spending almost doubled from U$134 to U$253 billion, or roughly 7% of its GDP (by comparison the DOD's budget for 2012 is U$707 billion or 4.7% of GDP). Due to the dynamics of Soviet-American competition this pushed the smaller Soviet economy to increase its defense expenditures from 22% to 27% with disastrous consequences.

Now, I am not claiming that 21st century China is anything like the USSR of the 80's, but I do believe that we are now entering a new era of geopolitical rivalry between two competing powers with underlying mechanisms similar to that of the Cold War. I am furthermore convinced that the dynamics of the (domestic) security and military rivalry between these two powers will have an adverse effect on the proper development of the Chinese economy. I base this assertion on the following four points:

1. The People's Republic of China will want to assert its dominance in the Asia-Pacific region, which will require additional (and costly) development of its military muscle and power projection capabilities primarily through the expensive deployment of carrier strike groups and stealth technology.
2. The People's Liberation Army will want to achieve military parity with the United States sometime in the 2030's.
3. There is unlikely to be any form of political reform in the foreseeable future and the CCP will need to maintain a large security apparatus to retain control of power and stability within the country. The corollary to this is that any decrease in domestic policing will lead to temporary instability and a drastic reduction of economic growth.
4. China desperately needs to reform its economy from an export driven economy to one based on domestic consumption. In order for this to happen there needs to be a drastic transfer of wealth to the households primarily through increased governmental spending to its social safety net, retirement pensions and health-care system.       

Each of the above points could be discussed, detailed and dissected for hours but it is not my intention to embark on an extensive exposé at the moment. I would however like to focus on the first three points primarily from an economic perspective. I have yet to crunch the numbers in detail, and anybody familiar with the matter knows that the PRC's defense budget can be as opaque to understand as a Party congress speech given after a bottle of moutai.  That being said, China will officially spend ￥607 billion (U$97billion at today's exchange rate), representing 1.2% of its GDP. More importantly however, is the fact that the YoY increases for the PLA have been substantially higher than the GDP growth rate, meaning that expenditures for the military are increasing faster than for other sectors and consuming a larger part of national wealth. From 2011 to 2012 military expenditures increased by 11% while they grew by 16.2% a year from 1998 to 2009. Given points 1 and 2 above, the rate of expenditure increase for the military is likely to remain above that of GDP growth until parity is reached with the United States. This tendency is likely to remain so despite growth rates falling far under the magic 8% figure.

In addition, the internal security apparatus necessary to maintain control over the country has now outstripped the military budget for the second year in a row: internal security represents a budget item of ￥701billion (U$112 billion at today's exchange rate) or 1.6% of GDP. Just like for PLA expenditures  the growth rate has been higher than that of the economy. Ensuring domestic stability is seen as a key pillar to the sustainability of growth; there are substantial fears (whether these are grounded or not is not for me to discuss) that any relaxation of domestic controls will jeopardize national unity and governance and thus lead to a drastic slowdown of economic expansion. Any substantial slowdown of the Chinese economy is meant to foster unrest in key areas, leading to a further increase in relative spending all within a context of slowing growth.  In addition, vested interests within the security apparatus itself would certainly make it very difficult to roll back this trend.

Therefore by combining these two trends, we can see that the overall cost evolution of the Chinese security and defense apparatus will have a substantial impact on the government's bottom line. This is of particular interest  since as mentioned in Point 4 the PRC desperately needs to devote increased governmental resources to foster a change in its economic structure, primarily through increased government spending vis-a-vis so called safety nets. There is almost universal agreement, even it seems within the CCP, that without reform Chinese economic expansion will likely run out of steam within this decade and become increasingly unstable (and back to Point 3). Even without this reform, Chinese welfare costs are set to escalate quickly by 2020 and beyond as the PRC faces the greatest retirement wave ever seen, placing further strain on the national budget. According to the official statistics and The Economist debt clock, public debt as percentage of GDP is only 16.5%. This is however due to "different" accounting practices: it is estimated that the  actual debt as percentage of GDP is closer to 45% and growing rapidly. It is only to be expected that the drastic increase in retirees and ageing population will further exacerbate this trend. It is ironic that we can actually see the effects that high military spending combined with expensive (albeit inefficient) social welfare programs can have on a nation's budget and economic prospects by looking at the United States; but the USA is a far more mature economy and society with an expanding population.

I do not believe that the situation I am describing for the PRC bares a resemblance to that of the late Soviet Union, but the comparison does give us some insights as to the implications of pursuing an expansionary security policy while forgoing social (and ultimately economic) advancement. I do not mean to advance that the PLA and the PSB are about to bankrupt the nation, but I do contend that within this case and given limited budgetary resources, it is the defense and security forces that will be given preference to the detriment of economic and social development. The long-term implications for this, as noted above, would not only be a sub-par development of the population's welfare but a drastic slowdown in Chinese growth rates below the 7%-8% that many economists are still predicting will take place during this decade.

One obvious solution that would enable the PRC to maintain high rates of military and security expenditure growth while achieving the financing for the enactment of the expensive social reforms needed, is a substantial increase in the level of public debt - and if that were to be the case, I believe that China could very well be in the same dire straits that Japan or Western Europe are nowadays within the next 20 to 30 years.   

     

El 1% de Pluna

"Es probable que menos del 1% de la gente viaje con cierta regularidad en aviones. Es un problema que no existe para la inmensa mayoría de la gente, salvo alguna vez en alguna circunstancia y no más." 

Sr. Presidente,

Me gustaria aclararle que tan solo en el ultimo año Pluna transporto a un millón y medio de pasajeros. Si no me equivoco, eso equivale mas o menos al 46% de la población del Uruguay.  Si bien no tengo los datos exactos podemos asumir un numero conservador sobre cuantos de esos pasajeros fueron uruguayos, ya que dudo mucho que el 100% de los pasajeros de la ex-Pluna hayan sido solo  de origen extranjero.

Podemos ademas asumir que la mayor parte de los uruguayos, al tener la opción de viajar en la región lo harían  a través de una linea de bandera nacional. Convengamos entonces que un 25% de los pasajeros de Pluna son o uruguayos o residentes en el Uruguay? Eso nos da que mas o menos el 10% de la población del Uruguay viajo por Pluna en el correr del año. Eso es un tanto mas que su 1%; sorprende que usted no tenga conocimiento de estos números ya que supuse que al tomar la decisión de liquidar la empresa usted se habría educado sobre el tema como corresponde.

Me gustaría ademas hacerle notar que según las propias estadísticas de la dirección nacional de migraciones solo en el 2011 ingresaron por Carrasco 365 032 compatriotas o sea el 11.1% de la población del Urugay se subió a un avión en el correr del ultimo año - asumo que se fueron en avión  ya que dudo mucho que Carrasco tenga un punto de amarre.

Y por mas que solo seal el 1% que viaja, los costos de su barbarie e improvisación administrativa la pagamos el 100% de los uruguayos. Los U$13,6 millones que habrá que poner para recuperar algo que, de hecho, nunca se vendió ya que el famoso caballero a la derecha nunca puso un peso, saldrán de los bolsillos de todos los contribuyentes.

Why The Americas Will Power The Future

<This post was originally intended to be on-line on September 2011 as the Lybian Revolution was drawing to a close>


With the unrest in Libya coming to an end markets are wondering how long it will take for the country to resume oil production at full capacity. The northern African country boasts the largest reserves in Africa and one of the largest among Arab countries, a region that has dominated global oil output for decades. But rising oil prices, continued instability in the Middle-East and technological developments are driving the exploration of new oil fields and allowing the exploitation of non-conventional sources threatening the almost complete hegemony of the Arab countries. 


In 2006 Brazil announced one of the largest discoveries in the last 30 years in the Santos Basin. The original estimates for its reserves have been washed aside by ever increasing figures: although the official (conservative) estimates are currently at about 50 billion barrels (which would make it the tenth largest in the world), many experts suggest the real figure is more than double that: 123 billion barrels. In 2009 Dilma Rousseff herself publicly stated that the Tupi might hold up to 100 billion barrels, which would make it third only to Saudi Arabia and Iran. 


The much disputed region of the Falklands has also been the center of renewed interest: with an estimated 60 billion barrels in reserve it can potentially become a larger producer than Lybia. 


And then there's Canda. Oh, Canada!  Canada, which has almost no oil - at least not in the traditional sense. What it does have though, are tar sands. And lots of it. Tar sands, or more correctly bitumen sands, is a mixture of heavy oil mixed, sand, clay and bitumen. Until recently, the extraction of oil from this asphalt-like substance was financially impossible and therefore largely ignored. But the depletion of conventional resources and the rise in prices has made the extraction commercially viable. Many countries have tar sands, but none have them in the scale that Canada has. How much oil is that exactly? 178 billion barrels, making it the second largest reserve in the world. 


But the fun doesn't stop there. Oh no...that is only what is recoverable with today's technology. Of course, as technology develops and facilitates the extraction process while driving costs down, the total amount that can be used is bound to increase. And by an exponential figure it turns out: the CEO of Shell Canada stated in an interview there might be as much as a 2 trillion barrels.   


There also the developments in the United States where advances in fracking technology are allowing for the developments of new oil deposits. The Bakken formation in North Dakota holds an estimated 4 billion barrels of recoverable oil, with potential for total reserves of between 18 to 24 billion barrels. 


Peak oil? I don't think so.


Yet we are living in a time of change as we realize the toll of our oil addiction on the environment, and nowhere has this dependence been more obvious than in our reliance on motor vehicles. The paradigm shift we are undertaking, from combustion engines to electric power centers on core piece of technology: the Lithium-ion battery. Li-ion batteries not only power your car: they power your cellphone, your camera, your iPod...Although they still account for a small amount of total portable power consumption, this is bound to increase over time - they already account for 65% of secondary and 30% of primary  batteries in Japan alone. And where does the majority of Lithium come from? Latin America: Chile, Argentina and Bolivia control up to 85% of total reserves (Argentina 10%, Chile 25% and Bolivia well over half of the world's total  deposits). 


The consumption of lithium for power generation doesn't stop there: lithium is a key component for all planned nuclear fusion reactors that will one day power our cities. The main reactor types being designed today (the Magnetic Confinment Fusion and the Inertial Confinement Fusion reactors) will require a special material called tritium as part of its fuel. The problem is that tritium is not very common on earth so scientists must artificially produce it from -you guessed it- lithium.


Nevertheless, with the commercial usage of fusion reactors still quite a few decades away, and non-withstanding Fukushima, the wider consensus is that the expansion of nuclear energy as part of our energy matrix is the only alternative to meet our ever growing power demand. Although lithium is also partly used in fission reactors, we all know that uranium is their primary fuel. Australia boasts by far the largest deposits, yet Canada is estimated to have the third largest reserves after Kazakhstan. Combined with Brazil and the United States, these American countries represent a quarter of global reserves. 


As this silent revolution unfolds, it will undoubtedly shift back some of the power that  has migrated Eastwards back to the Western hemisphere and could have severe consequences for the stability and development of the Middle-East; for which the Arab nations are ill prepared.