New US Presidency off to a Stumbling Start

Barack Obama has found little grace in his first fifty days in office, whether from remedies for the sagging economy, the turmoil in Pakistan, the hot nuclear potato in Iran or a fresh start in relations with Moscow.

But he has only reached the halfway mark in his first 100 days.

The US president marked Day 50 in the White House Tuesday, March 3, with a brave announcement: Now was a good time, he said, for investors with a “long term perspective” to buy stocks, because the nation's financial mess “is going to get cleared up.” But, he also warned that the alternative could produce a prolonged episode of economic stagnation that would contribute to further deterioration in the fiscal situation.

The markets were not immediately impressed.

Neither did they find in his low-key talks with UK prime minister Gordon Brown Tuesday, March 3 a fountain of creative ideas for stimulating the global economy ahead of the G-20 conference in London next month. At best, the two leaders were seen struggling with their own Wall Street and the City of London.

And while the UK premier wooed Washington, his finance secretary Alistair Darling commented in London that the UK government and regulators had “lots of lessons” to learn from the events that led to the economic crash and there was a need for ministers to show “humility.

This was a sly dig at Brown's performance during his eight years at the Treasury, bringing to light a serious rift at the top of the UK government, Washington's senior US partner in the effort to rehabilitate the global economy.

Stuttering repairs to the banking mechanisms

The day before, the Dow Jones plunged 300 points to its lowest point in twelve years – a slump of 25 percent since Obama took office.

Wednesday, after a five-day decline, stocks rallied in response to Washington's mortgage rescue plan to help millions of homeowners keep their homes. Stock markets in emerging economies also found confidence. Investors focused on Beijing after the Chinese government promised a larger stimulus plan.

However, the unemployment figures of the US private sector dipped in February with 697,000 job losses.

February saw more deterioration in economic activity, dampening prospects for quick recovery, the Federal Reserve reported in its Beige Book.

“Looking ahead… prospects for near-term improvement in economic conditions are poor, with a significant pickup not expected before late 2009 or early 2010,” said the report.

The wild fluctuations in these figures and forecasts contribute to the gloom.

Investors applaud Obama's efforts to build confidence in the only course open to him, but are losing faith in promises by politicians and economic pundits that after a bad 2009, 2010 should see the first signs of recovery. They are seen as palliatives to calm panic. Financial figures in the know say the economy will be lucky to turn the corner after 2011. In fact, Obama may still be haunted by recession when he runs for re-election in 2013.

With regard to the present, Merrill Lynch economist Sheryl King gave the president's stimulus package a low mark in a report published March 3.: …there is increasing concern that when the flow of public money subsides – beginning next year, when much of the stimulus package is spent – the economy still won't be strong enough to stand on its own.

“The stuttering attempts to repair the banking and lending mechanisms so far by the new administration suggest that by late 2010, the specter of a second dip into recession will be looming large.”

Those “stuttering attempts” were epitomized this week by the administration's third bailout of $30 billion for the insurance giant American International Group Inc (AIG) – each on different terms.

Lahore terror attack intrudes on economic exertions

That same day, a deadly terrorist attack in Lahore, Pakistan, harshly recalled the devastating Lashkar e-Taibe assault on Mumbai last November and its 170 deaths.

This time 14 gunmen, armed with a vicious assortment of grenades, rockets, RPGs, automatic rifles and a shoulder-borne missile, killed 6 policemen in an ambush of the Sri Lankan cricket team driving to Lahore stadium for a Test match against Pakistan. (See separate item in this issue)

They failed to take out the visiting team, although eight Sri Lankan cricketers were injured, only four months after Mumbai. But the two attacks formed a series in the sense that the terrorists managed to lay bare three vulnerable points in the war on terror Obama has inherited:

1. The Mumbai atrocity of last November 23 exposed the shocking weakness of India's counter-terror armed and security forces – notwithstanding the billions New Delhi has been pouring into building an armed force capable of taking on terrorists of the ilk of Taliban, al Qaeda and its offshoots.

Following their poor performance in that attack, India has hiked its outlay on defense by 24 percent to 1,417.03 billion rupees (29 billion U.S. dollars) with a pledge of additional funds if required for internal security.

Such forces take years to build and train.

2. Pakistan is in even worse shape.

For 25 minutes on March 3, 14 heavily-armed terrorists faced no resistance when they ran riot against the convoy carrying the Sri Lankan cricket team and got clean away without casualties. Taliban and al Qaeda may well boast that Islamabad has no force capable of curbing their freedom of action in any city of this nuclear-armed nation.

3. A single act of terror was enough to sabotage America's position in the Indian subcontinent and show up its latest drive, led by Obama's envoy Richard Holbrooke, to help India and Pakistan bury the hatchet for the sake of a joint effort to resolve the conflict in Afghanistan.

This act demonstrated that diplomacy is being pursued at the cost of a lowered guard against terrorists and Islamist extremists.

Taliban and al Qaeda do not need to own up to complicity in the Lahore attack, in order to exploit the incident as evidence that they can get away with stepping up the violence against US allies, without Washington abandoning the Afghanistan truce negotiations brokered by Saudi Arabia.

They have also discovered that forging ceasefire deals with regional Pakistan commanders, in return for the imposition of Muslim law (as in Bojour and Swat), is no impediment to their violent attempts to overthrow the Kabul and Islamabad governments and attack India.

Tehran turns thumbs down on dialogue

President Obama's overtures for dialogue with Tehran were dismissed publicly and insultingly by Iran's highest authority. Supreme ruler Ayatollah Ali Khamenei, addressing a conference on the Palestinians in Tehran, Wednesday, March 4, accused President Obama of pursuing the same “wrong path” as his predecessor George W. Bush in supporting Israel – whom he called “a cancerous tumor.”

The ayatollah therefore failed to see the change promised in Washington.

This brutal rejection came in the wake of conflicting statements from top US officials on the state of Iran's nuclear program, a lack of clarity about the goals Obama sought from diplomatic engagement with Tehran and dithering over the directions sought in future US-Iranian relations in the event of a successful outcome of dialogue.

Washington's venture into Hollywood diplomacy was symptomatic of this confusion.

The film actress Annette Bening, AMPAS president Sid Ganis and his predecessor Frank Pierson arrived in Tehran on Saturday, Feb. 28 for a mission meant to mirror President Richard Nixon's ping-pong diplomacy that opened the door to China. Bening, her hair covered politely in a headscarf, said “We hope we can be a bridge to open a dialogue between the two countries.

The event was reported only by debkafile – see HOT POINTS below – but failed to make the US media. DEBKA-Net-Weekly's Washington sources disclose that the Motion Pictures Academy's delegation was caught in the arguments in Washington over its goals. Although briefed by State Department Iranian experts in advance, the peace messengers from Hollywood were left dangling without follow-up guidance.

They therefore filled in the days until their departure on Friday, March 6, by working with Iranian film personalities.

At first, the Iranians welcomed the arrivals but, when their guests failed to deliver any substantial diplomatic messages, they turned nasty and demanded that Hollywood apologize for years of insults to the Islamic Republic. The Hollywood mission was criticized in Washington as a missed opportunity.

Muellen and Gates spar in public

In contrast to the low-profile Hollywood initiative, the controversy in Washington over the state of the Iranian nuclear program made waves far and wide.

On March 1, Adm. Michael Mullen, Chairman of the US Chiefs of Staff, stated to CNN: “Iran likely has enough nuclear fuel stockpiled to make a bomb. We think they do, quite frankly,” he said. “And Iran having nuclear weapons, I've believed for a long time, is a very bad outcome – for the region and for the world.”

Later than day, defense secretary Robert Gates contradicted him, stating to NBC: “They're not close to a stockpile, they're not close to a weapon at this point, and so there is some time.”

America's top soldier was indicating the window of opportunity for the president's proposed dialogue with Tehran was either closed or nearly so, while Gates was saying there was still enough time for negotiations.

DEBKA-Net-Weekly's sources report that both Tehran and Moscow watch the new administration's every word and deed on the lookout for advantages before charting their next steps.

The impression gained in both capitals is of hesitancy, groping for direction and political inexperience. They reckon that Obama administration needs several months to get into stride for coherent policy-making.

A diplomatic goof on a highly-charged issue

The new US president's first approach to Moscow also ran into crossed wires on the most highly-charged issue of US-Russian relations, the deployment of US missile interceptors and radar in Poland and the Czech Republic.

It started with a report in the Russian media that Barack Obama had sent a letter to their president offering to drop Washington's plans for a missile shield in East Europe if Moscow helped in the effort to halt Iran's nuclear program.

Prime minister Vladimir Putin then stepped in with cautious advice to Medvedev to back away from any definite disclosure and tone the issue down.

Sunday, March 1, the Russian president Dmitry Medvedev accordingly told Spanish media: “We have received signals from our American colleagues. I expect those signals will turn into specific proposals. I hope to discuss the issue, which is extremely important for Europe, with President Barack Obama in London.”

They are due to meet for the first time in the British capital on April 2 at the G20 summit of world leaders to address the financial crisis.

A few hours later, the White House parried press questions by denying the letter and correcting the original disclosure, explaining that Washington had told Moscow that Russian help in resolving Iran's nuclear program would make the US missile shield plans for Europe unnecessary.

But the damage was done owing to the unfortunate phrasing of a presidential aide.

Tehran officials rubbed their hands in glee at the sight of a potential US-Russian deal to spike their nuclear program being shot down before it was launched.

Polish and Czech leaders began to wonder if the Obama administration was preparing to renege on its promises to stand by them in a potential confrontation with Moscow. A negative message winged from Washington to Ukraine, the Caucasian and Central Asia.