Bilderberg steering committee member and architect of a globalist order, Henry Kissinger, told Fox News on Wednesday the United States is responsible for arming ISIS.

Kissinger did not say the arming of the Islamic State was a deliberate process.

In March, Qasim al-Araji, the head of the Badr Organization in Iraq, told parliament he had evidence the U.S. has deliberately armed the Islamic Army, according to a report carried by the Arabic language Almasalah.

Iranian media and other sources have claimed on at least two occasions U.S. military aircraft dropped weapons in areas held by the Islamic State.

“The Iraqi intelligence sources reiterated that the US military planes have airdropped several aid cargoes for ISIL terrorists to help them resist the siege laid by the Iraqi army, security and popular forces,” Iraqi intelligence claimed in December.

“What is important is that the US sends these weapons to only those that cooperate with the Pentagon and this indicates that the US plays a role in arming the ISIL.”

In January Iraqi MP Majid al-Ghraoui said American aircraft delivered weapons and equipment to ISIS southeast of Tikrit, located in Salahuddin province.

The London-based organization Conflict Armament Research previously reported that ISIS fighters are using “significant quantities” of arms including M16 assault rifles marked “property of the US government.”

In June Aaron Klein, writing for WorldNetDaily, reported that members of ISIS were trained in 2012 by U.S. instructors working at a secret base in Jordan, according to informed Jordanian officials.

Kentucky Senator Rand Paul said last year ISIS was able to capture large areas of Iraq due to arms transfers from “moderates” in Syria fighting a proxy war against the government of Bashar al-Assad.

“I think we have to understand first how we got here,” he told CNN.

“I think one of the reasons why ISIS has been emboldened is because we have been arming their allies. We have been allied with ISIS in Syria.”

Kissinger Disagrees with Rand Paul on ISIS

Kissinger told Fox News he strongly disagrees with Rand Paul’s approach on ISIS.

In September Paul said US interventionist policies are responsible for the situation in the Middle East.

Paul said from the Senate floor there “were no WMDs” in Iraq and “that Hussein, Qadhafi, and Assad were not a threat to us. Doesn’t make them good, but they were not a threat to us.”

“Intervention created this chaos,” he added. “To those who wish unlimited intervention and boots on the ground everywhere, remember the smiling poses of politicians pontificating about so-called freedom fighters and heroes in Libya, in Syria, and in Iraq. Unaware that the so-called freedom fighters may well have been allied with kidnappers and are killers and jihadists.”

Obama Sends Hundreds of US Troops Into Iraq

Kissinger told Fox News that he opposes “boots on the ground” in Iraq and Syria to defeat ISIS. He said, however, the United States should send special forces to work with Sunni, Shia and Kurdish groups fighting against the terror organization and also provide intelligence and target spotters for the Iraqi military.

Obama has approved a plan to send an additional 450 U.S. troops to Iraq. Moreover, the administration has approved a plan to create a training base at al-Taqaddum in western Iraq between the key Anbar provincial cities of Ramadi and Fallujah which are currently under ISIS control.

“I don’t think it’s a new strategy … because we’re continuing to execute the strategy that we have,” U.S. Army Chief of Staff Gen. Ray Odierno told CBS News.

Las teorías expuestas en el libro El capital en el siglo XXI del economista francés Thomas Piketty han generado controversia y un debate que sigue abierto. Si aquellas se pueden aplicar a todas las regiones, países y sociedades del mundo por igual es parte también de esta discusión.

El economista francés Thomas Piketty ha generado un gran impacto en Estados Unidos y Europa con su crítica sobre las crecientes desigualdades en las sociedades contemporáneas. Aunque su bestseller, El capital en el siglo XXI, es una obra compleja con distintos puntos de vista, su idea central es que los grandes multimillonarios acumulan hoy tanta riqueza como lo hacían hace 100 años. El lento crecimiento económico, el frenazo demográfico y la liberalización de los flujos financieros han provocado que desde los años 80 los ricos hayan multiplicado fácilmente su capital, mientras que las clases medias -que dependen de los ingresos que obtienen por su trabajo- se han estancado. Pero, ¿se puede aplicar sus tesis al mundo en desarrollo? ¿Es realmente hoy el mundo tan desigual como lo era hace 100 años?

Si nos olvidamos de Washington y Bruselas, un primer vistazo a los países del Sur nos permitiría de hecho llegar a la conclusión contraria. Aunque las diferencias de renta parecen haber crecido en el interior de los países, lo cierto es que las diferencias entre países se han reducido considerablemente. El crecimiento económico en América Latina, África y Asia ha permitido a muchas naciones escapar de la pobreza y recortar las distancias con los países más ricos. Si entre 1900 y 1980 el 70-80% de la producción global de bienes y servicios estaba en Europa y América, para el año 2010 la cifra se había reducido al 50%. “Independientemente de la forma en que se mida, el mundo parece haber entrado claramente en una fase en la que los países ricos y pobres están convergiendo en ingresos”, reconoce el propio Piketty en el primer capítulo de su obra.

Esa reducción en las desigualdades globales ha estado liderada por naciones muy pobladas como China, India o Brasil. Según una investigación publicada en el National Bureau of Economic Research (NBER), estos tres países emergentes fueron los grandes causantes de que las diferencias en Producto Interior Bruto (PIB) per cápita entre el Norte y el Sur se redujeran en un 28% entre 1990 y 2009. Las diferencias no se limitan al ámbito económico: según el Programa de Naciones Unidas para el Desarrollo (PNUD), las naciones que más han mejorado en las últimas décadas su Índice de Desarrollo Humano (IDH) están en el Sur; entre ellas Chile, Argentina, Malasia, Túnez, Turquía, México, Argelia y Panamá.

Desde este punto de vista, y aunque permanecen las diferencias entre países ricos y pobres, el mundo nunca había sido tan igualitario desde la Revolución Industrial. Si en los años 80 las clases medias en Europa y Estados Unidos comenzaron a estancarse (al menos en comparación con los más ricos), lo cierto es que el resto del planeta ha vivido la mayor creación de clases medias de la historia. Según un estudio del Brookings Institute, el fenómeno tan sólo acaba de empezar: América Latina, África y Asia contaban en el año 2009 con 843 millones de personas dentro de las clases medias (los que disponen de entre 10 y 100 dólares al día,medidos en paridad de poder adquisitivo); una cifra que para el año 2020 se elevaría a 2.213 millones, sobre todo gracias al crecimiento en la región Asia-Pacífico.

Esto no quiere decir, sin embargo, que los países del Sur no tengan problemas de desigualdad. De hecho, lo paradójico es que muchas de las naciones que han recortado las distancias con el Norte lo han hecho a base de aumentar las diferencias entre ricos y pobres dentro de sus fronteras. Según los datos del Banco Mundial, China tenía en 1984 un índice de Gini de 27,7, mientras que en el año 2008 se había disparado hasta 42,6 (a mayor número, mayores desigualdades en las rentas de las familias); Sudáfrica, por su parte, pasó entre 1995 y 2009 de un índice de Gini de 56,6 a uno de 67,4.

La globalización, que ha traído consigo un aumento de la inversión extranjera en losbpaíses en desarrollo y mayor libertad en el flujo de capitales, es uno de los factores que está detrás de esta historia de creación de riqueza y, al mismo tiempo, crecientes desigualdades. Thomas Piketty se ocupa, aunque de manera breve, de este tema en su libro, y llega a la conclusión de que también en los países del Sur (en su caso habla de Colombia, Sudáfrica, Indonesia, India, China y Argentina) el 1% más rico ha incrementado durante los últimos 30 años su porcentaje de la riqueza nacional. El ejemplo más claro son los nuevos súper ricos: si entre 1987 y 2009 las mayores fortunas del planeta eran japonesas o estadounidenses quien lidera la lista desde el año 2010 es el mexicano Carlos Slim. Una relación de nombres que que cada vez cuenta con más indios (Lakshmi Mittal), chinos (Wang Jianlin) o brasileños (Jorge Paulo Lemann).

Piketty centra su análisis en la evolución económica de países como Francia, Reino Unido y Estados Unidos pero algunas de sus tesis más importantes no encuentran acomodo cuando se aplican a estos países del Sur. Dentro de su argumentación, una de las teorías más importantes es que las desigualdades crecen cuando el rendimiento de capital (bienes inmuebles, acciones, intereses…) aumenta más rápido que el crecimiento del Producto Interior Bruto: es su famosa fórmula r > g. Su tesis funciona pero al aplicarla a los países desarrollados, que desde los años 80 tienen tasas de crecimiento económico bajas, no así cuando se aplica a los países de América Latina, Asia y África, que en algunos casos han mantenido cifras de crecimiento por encima del 5% o el 6%. “India y China son países que han tenido tasas de crecimiento económico muy alto, así que si utilizáramos la lógica de Piketty, entonces India y China no tendrían un problema de desigualdad tan grave como el de los países que crecen a ritmos más bajos”, explica el economista Mudit Kapoor, profesor asociado de la Indian School of Business. Ese, sin embargo, no parece ser el caso, y es precisamente en los países con mayor crecimiento, como China, donde más han crecido las desigualdades.

El libro de Piketty ha despertado de todas formas mucho interés en los países del Sur (se están preparando traducciones, entre otros idiomas, al chino), pero algunos economistas encuentran difícil su aplicación fuera de las economías desarrolladas. Thomas Piketty se centra sobre todo en las desigualdades entre los súper ricos y las clases medias (el famoso 99% del movimiento Occupy Wall Street) pero muchos países del Sur todavía tienen que enfrentarse a problemas de pobreza extrema, acceso a agua potable, educación y sanidad. En los países en vías de desarrollo, algunas de las desigualdades más importantes se centran en la brecha entre el mundo rural y el mundo urbano, entre el sector servicios y la agricultura o entre unas regiones y otras del país. El acceso a una educación de calidad, la corrupción de los gobernantes o la discriminación de la mujer son en ocasiones factores mucho más vitales para las naciones en vías de desarrollo que la riqueza acumulada por el 10% o el 1% más rico del país, que es la medida que Thomas Piketty utiliza de forma sistemática para hablar de desigualdades. El economista francés prácticamente no habla en su obra de acabar o reducir la pobreza extrema, pero para muchos gobernantes esa es la prioridad número uno a la hora de crear sociedades más justas.

Lo curioso del libro de Thomas Piketty es que algunos de los países que más analiza en su libro como Francia, Alemania o Suecia, se encuentran entre los más igualitarios del planeta. La excepción sería EE UU, el único país desarrollado que tiene niveles de desigualdad similares a los del Sur. Las desigualdades más grandes y escandalosas, aquellas donde se mezclan los niños que pasan hambre con los multimillonarios hombres de negocio, se encuentran en el Sur. Y es aquí donde menos convencen las teorías de Piketty.

The International Monetary Fund’s most recent World Economic Outlook (WEO) report (IMF 2015) confirms many economists’ continued low expectations for Brazil’s potential output and growth.

Although estimating potential growth is subject to well-known pitfalls, the importance of such estimates in the policymaking process requires them, however imperfect. As the recent WEO pointedly underscores, the economic definition of potential output requires a framework based on economic theory, not historical averages or econometric filters that characterize various measures of trend output. Typically, estimates of potential output are based on specifications for the country’s production function, including the physical capital stock, education and measures of human capital, demographics, the total labor force, and productivity, among other factors.

The economic definition of potential output also differs from the widely used concept of “sustainable” output. Potential output measures how much an economy can grow without igniting undue inflationary or deflationary pressures, while most uses of “sustainable” output refer to an economy’s capacity to grow while maintaining macroeconomic stability, more broadly defined. If a country is growing at or close to its potential rate due to rapid expansion in public sector credit and other stimulus policies while experiencing large capital inflows that appreciate the currency and keep inflation at bay, its growth may not be sustainable; once capital flows subside, macroeconomic imbalances will force a painful adjustment process. This is a simple but fairly accurate description of Brazil’s growth trajectory during much of the recent period (2004–15).

Although potential output estimates are subject to statistical and model uncertainty and may vary according to the applied methodology, they generally deliver qualitatively similar results when the time horizon used is broadly the same.

Table 1 shows that, in line with the WEO’s findings, different methodologies and specifications for the production function yield broadly similar results. However, the table also suggests that the starting point matters: If the analysis is undertaken during or shortly following a period of robust growth, estimates tend to be more favorable, whereas if it is done during harsher economic times, potential growth estimates may well suffer.¹ Although the Brazilian economy was already decelerating substantially between 2011 and 2013, average growth during the period was still above 3 percent. During the second half of 2014, and into the first quarter of 2015, growth stagnated on average—in the first three months of 2015, the economy contracted 0.9 percent on a cumulative basis.² These developments may have driven the IMF (2015) potential growth projection of 2.3 percent, in sharp contrast to the recent literature and to its own estimates made only two years ago.

Interestingly, potential output estimates by market participants suffer a similar bias. Figure 1 shows the evolution of median forecasts of real GDP growth four years ahead from the Central Bank of Brazil’s weeklyFocus Survey. Provided that analysts expect the output gap to close within a four-year time horizon, this measure may serve as a reasonable proxy for potential output projections. While projections for four years ahead remained close to 3 percent even late into 2014, they have since plummeted to only 2.3 percent in 2015, underscoring the impact of current conditions on medium-term market forecasts. In addition, the evolution of estimates during Brazil’s boom years—from 2003 to 2010—highlight the optimism bias identified by Ho and Mauro (2014): Estimates of potential output during this period reflected not the deep structural problems that have plagued the economy for years but a misguided perception that these problems would be resolved as long as growth could be sustained by substantial external windfalls.

Where does this leave us? Global growth is currently mired in uncertainty. As recent IMF research shows, the financial crisis had a substantial and lasting effect on potential growth across the globe. While it may be reasonable to assume that potential growth is destined to disappoint both in advanced and emerging economies, the psychological discomfort generated by any incoming conflicting information should not sway estimates. The case of Brazil shows just how much the constant struggle to reduce mental stress from clashes between beliefs and information can set policies on a very painful path.

Cabe señalar que los gobiernos “petistas” habían logrado articular un proyecto reformista que combinaba una ortodoxia macroeconómica con un conjunto de políticas activas (fuerte papel del Estado) tendientes a lograr una redistribución de la riqueza y así beneficiar a los sectores históricamente postergados de Brasil. Ese programa de gobierno apuntalado por el carisma personal de Luiz Inacio Lulada Silva y por un contexto económico favorable logró articular las demandas del “PT de base” con los intereses de los principales sectores económicos. Sin embargo, a partir de 2013 —en el marco de una economía estancada y ante la sofisticación de las demandas de la nueva clase media, cuyas manifestaciones tiñeron el espacio público— el “modelo lulista” se desvaneció por los aires, producto de la falta de carisma de la presidenta Rousseff y como consecuencia de los escandalosos hechos de corrupción.

Así, en el último año el eje del debate público dejó de estar asociado a demandas y reivindicaciones del “progresismo” pasando a estar hegemonizado por conceptos y premisas liberales. En otras palabras, el gobierno de Rousseff decidió hacer suya las exigencias de la oposición para intentar conseguir un mayor consenso en sus políticas en lugar de refugiarse y ampararse en el núcleo duro del PT. Para dar algunos ejemplo: la idea de “políticas sociales activas” dio paso a la “eficiencia del gasto público”; de ponderar el “fortalecimiento de los derechos de los trabajadores” a debatir la “tercerización laboral”; de celebrar el “rol protagónico del Banco Nacional de Desarrollo Económico y Social (BNDES) a exigir el financiamiento privado para la economía”; de sentir “orgullo por la Petrobras estatal” a demandar que la empresa no tenga ninguna injerencia “gubernamental”.

Ahora bien, es importante resaltar que el fenómeno descrito ha comenzado a impactar en la formulación de la estrategia internacional de Brasil. En los últimos años se observa un importante ajuste (alteraciones parciales en el comportamiento que, sin embargo, no implican un realineamiento básico) en la política exterior. Hay que recordar que los gobiernos de Lula se caracterizaron por una visión reformista de algunos aspectos del orden internacional liberal sustentada en la conformación de un “polo de poder” sudamericano extensible hacia el “sur periférico”. Según esa visión, Brasil estaba en condiciones de jugar un papel más activo en el escenario internacional contribuyendo a la democratización de las relaciones internacionales, entendida como la construcción de un orden multipolar que reflejase con más fidelidad la nueva distribución del poder en el sistema. Para dicho fin, el andamiaje institucional liberal vigente era un impedimento si se pretendía evitar la cristalización de las relaciones de poder.

Con el primer gobierno de Rousseff la fuerte “politización” de la política exterior fue perdiendo intensidad en el marco de un paulatino desplazamiento de las ideas del PT sobre los asuntos internacionales (visible, por ejemplo, en el menor activismo de Marco Aurelio García). Así, la centralidad diplomática volvió a estar focalizada en la inserción económica de Brasil en un momento de crisis del aparato productivo nacional y de auge de las ideas liberales como respuesta a las dificultades de la economía brasileña.

Por su parte, la reciente decisión de profundizar el involucramiento con la Organización para la Cooperación y el Desarrollo Económicos (OCDE) al negociar un Acuerdo Marco de Cooperación tiene un impacto simbólico importante dado que dicha institución representa el statu quo liberal en el sistema internacional. Por último, existe la intención por parte de Itamaraty de reencauzar el vínculo con Estados Unidos dejando los recelos estratégicos a un lado (agudizados por el espionaje de 2013). La una nueva estrategia intenta promover al país en los círculos de decisión y en los principales think tank de Washington. Por ejemplo, en 2014 el Center for Strategic & International Studies (CSIS) firmó una asociación con la Agencia Brasileña de Promoción de Exportaciones e Inversiones (APEX).

En definitiva, las mutaciones políticas que se gestan al interior de Brasil comienzan a constreñir las opciones en materia externa. Si hasta hace unos años la política exterior de la potencia sudamericana tenía como claro norte alterar y modificar algunas reglas y prácticas del orden internacional como principal estrategia para acumular poder y ascender en la jerarquía internacional, hoy las opciones parecen complejizarse. La actual hoja de ruta parece marcar un giro hacia el sendero “liberal” diseñado por el club de los poderosos

Los (as), interesados (as) en ser investigadores para el Centro Argentino de Estudios Internacionales, escribir a membresias.caei@gmail.com, indicando para ser parte del Observatorio Perú.

http://www.caei.com.ar/

As major powers increasingly rely on digital networks for critical services, the number of plausible network attacks, accidents, or failures that could trigger or exacerbate an international crisis will increase. The likelihood and severity of such a destabilizing event will also grow as long as norms of appropriate behavior in cyberspace are underdeveloped, timely and convincing attribution of attacks remains difficult, and the number of cyber-capable actors increases. Preparing for or responding to such a crisis is complicated by ambiguity in cyberspace, primarily regarding responsibility and intent. Ambiguity about who is responsible for a cyberattack exacerbates the risk that countries amid a geopolitical crisis will misattribute an attack, unduly retaliate or expand a crisis, or be unable to attribute an attack at all, thereby preventing or delaying a response and weakening their deterrence and credibility. Ambiguity of what is intended complicates a country’s ability to distinguish between espionage operations and activity conducted in preparation for a cyberattack. The United States has strategic interests in preventing and mitigating these risks, given its commitment to global security and overwhelming dependence on networked systems for national security missions, commerce, health care, and critical infrastructure. The longer it takes to implement preventive and mitigating steps, the greater the likelihood of unnecessary military conflict in and outside of the cyber domain.

The Contingencies

Cyberattacks are increasing in frequency, scale, sophistication, and severity of impact, including their capacity for physical destruction. China, Iran, North Korea, and Russia have demonstrated an ability to conduct destabilizing cyber activity. Such actions—whether for destructive purposes, intelligence collection, or economic espionage—are designed to evade network defenses and can involve various means of deception to thwart attribution. Recent incidents have shown that U.S. adversaries can no longer assume they will be able to conceal their identities in cyberspace, but cybersecurity experts still lack agreed-upon standards for attribution; evidence for a credible and convincing attribution can take a long time to compile; and malicious actors continue to develop new means of obscuring responsibility. Moreover, unlike many cyber operations designed to exfiltrate large amounts of data, destructive cyberattacks can be made to operate with limited communication between the malware and controller, offering fewer forensic details to establish responsibility. Even when an attacker can be identified, public attribution will remain as much a political challenge as a technical one, given that competing allegations of responsibility will likely follow any public accusation. Without corroborating signals or human intelligence—which, if it exists, officials may be reluctant or slow to disclose—computer forensic data may be incomplete or too ambiguous to convince a skeptical public. Should a major cyberattack occur over the next twelve to eighteen months, or even beyond that period if sufficient preventive and mitigating steps are not taken, public pressure to respond could outpace the time needed to credibly attribute responsibility and, if desired, build an effective coalition to support a response. Over the same time period, ambiguity regarding the intent of cyber operations will also remain a challenge, leaving policymakers uncertain about whether malware discovered on a sensitive system is designed for espionage or as a beachhead for a future attack.

The United States could face several plausible crises over the next twelve to eighteen months that would be complicated by the risks of ambiguity in cyberspace. These include destructive insider threats, remote cyber operations that threaten trust in financial institutions, and cyberattacks by foreign nations or nonstate groups against critical infrastructure systems that cause widespread panic and loss of life, or similar attacks against a U.S. ally. National Security Agency (NSA) Director Admiral Michael Rogers warned in late 2014 that he expects U.S. critical infrastructure—assets essential to the function of a society and economy, such as water supply systems, electric grids, and transportation systems—to be attacked, noting that multiple foreign nations and groups already possess the ability to shut down a U.S. power grid and several others are investing in the capability. Attacks like the publicly unattributed January 2015 cyberattack that severely damaged a German steel mill suggest the ability to bring about physical destruction through cyber means may be proliferating quickly. Of particular concern would be the proliferation of these capabilities among terrorist groups, which currently possess limited technical skills but destructive intent. As the number of cyber-capable adversaries grows, so too does the number of critical targets, especially as industrial control systems move to web-based interfaces and more common operating systems and networking protocols.

The implications of any crisis will depend on the current geopolitical context; the type of networks that fail; and the extent of economic damage, physical destruction, or human costs that result directly from network failure or its cascading effects on public health, communication and financial networks, and the economy. A successful cyberattack against one or more critical infrastructure systems could endanger thousands of lives, halt essential services, and cripple the U.S. economy for years. Two plausible factors that could exacerbate such a crisis are intentional and inadvertent ambiguity.

Intentional Ambiguity

Over the past two years, Iran and North Korea have appeared most willing to conduct destructive and disruptive cyberattacks against U.S. and foreign targets while attempting to conceal responsibility. Tactics have included data wipes, destruction of computer hardware, and denial-of-service attacks. Russia and China have exhibited some of the most advanced capabilities, and actors in both countries have been linked to disruptive attacks during regional tensions. Actors in South Asia and the Middle East have also conducted operations in regional conflicts that could quickly entangle U.S. interests. During a crisis involving the United States or an ally, any one of these countries could conduct cyber operations that risk further destabilization. As the rate of operations grows, so too could the challenge of attribution, with each incident exposing tools and techniques that can be repurposed.

Cyber activities that could not be promptly attributed have already appeared in several conflicts. Though most have rarely elevated beyond nuisance, others have caused significant damage or threatened escalation. In 2008, Russia-based actors launched a wave of attacks against Georgian targets, and similar malware appeared in operations against Ukraine in 2014. Japanese networks are frequently targeted, including during heightened Sino-Japanese territorial tensions and sensitive anniversaries, with origins reportedly traced to China. North Korean cyber actors are suspected of having conducted destructive operations that compromised South Korea’s national identification system—damage that may cost more than $1 billion and over a decade to repair. In 2014, U.S. officials blamed North Korea for destructive attacks against Sony Pictures Entertainment, an American subsidiary of the Japanese company Sony. North Korean officials deny the country’s role in these attacks and will likely seek to similarly obscure their hand in attacks during future crises to deter or delay a potential American or South Korean response.

U.S. officials suspect Iran’s involvement in a 2012 cyberattack against two energy firms, one in Saudi Arabia and another in Qatar, that destroyed data and crippled thirty thousand computers, possibly in retaliation for alleged U.S. cyber operations, and to demonstrate an ability to conduct similar attacks against U.S. targets. U.S. financial firms subsequently suffered tens of millions of dollars in losses resulting from Iranian denial-of-service attacks launched in retaliation for economic sanctions. In 2014, Iran became the first country to carry out a destructive cyberattack on U.S. soil when it damaged the network of Las Vegas Sands after its chairman advocated a nuclear strike against the country.

Inadvertent Ambiguity

Due to the difficulty of determining whether certain activity is intended for espionage or preparation for an attack, cyber operations run the risk of triggering unintended escalation. Espionage malware that could be reprogrammed to gain control of networks, such as BlackEnergy, which has been discovered on critical infrastructure networks, may be viewed by victims as one update away from becoming an attack tool capable of crippling energy supplies, water-distribution and -filtration systems, or financial transactions. Security scans of networks intensified amid heightened geopolitical tensions could reveal such malware and prompt fears of an imminent attack, even if the malware was implanted for espionage purposes long before the crisis began. The difficulty of predicting a cyber operation’s effects and the interdependency of networked systems increase the risks that an operation will inadvertently spill over onto sensitive systems or cause unintended effects.

One example of ambiguity and the risk of misperception is the 2010 discovery on Nasdaq servers of malware similar to a cyber tool reportedly developed by Russia’s Federal Security Service. Initial assessments maintained that the malware was capable of wiping out the entire stock exchange. Only later was it shown to be less destructive, according to media accounts. Such ambiguities during periods of heightened geopolitical tensions pose significant escalatory risks. Information security experts have raised similar concerns about other Russia-linked activity and questioned whether aspects of the activity are intended to insert offensive capabilities into critical infrastructure systems for future use.

Ambiguity also arises in the case of “worms”—self-replicating malware that seeks out other computers to infect. Worms can spread so pervasively that their origin and intent can be difficult to infer from known victims. One worm, Conficker, spread to millions of computers and disrupted military communications in several European countries. Its creator and purpose remain unknown.

Warning Indicators

Indicators of activity with the potential to create or exacerbate an international political crisis include leadership statements of an intent to conduct or permit computer network operations against foreign networks; evidence of that intent, including research and development, budgetary allocations, or organizational changes, such as the creation of offensive cyber forces; the express or tacit acceptance of parastatal hackers; and a demonstrated capability to conduct computer network operations, including cyber-espionage and cyber operations against domestic targets.

Tactical warning indicators resemble traditional conflicts, such as changes in the alert status of military units and an increase in crisis-related rhetoric. Indicators unique to cyber operations include increased efforts to probe foreign networks and an uptick of activity in online hacker forums discussing foreign targets and tools, techniques, and procedures appropriate for operations against them.

Implications for U.S. Interests

First, cyberattacks will eventually be part of every nation’s military strategy. The United States depends on information communications technologies for critical military and civilian services far more than its strategic rivals or potential adversaries. U.S. officials have noted an increase in computer network operations targeting state, local, and privately operated critical infrastructure­­, some of which have the potential to cause considerable harm to operations, assets, and personnel.

Second, ambiguity in cyberspace elevates the risk that a significant cyber event amid a geopolitical crisis will be misattributed or misperceived, prompting a disproportionate response or unnecessary expansion of the conflict. Such an escalation would impair the United States’ prominent role and interest in global security and its commitment to international law.

Third, U.S. officials’ ability to respond swiftly and effectively to cyberattacks is complicated by the difficulty of timely public attribution and ambiguity over what type of cyberattack would trigger a right to self-defense or security commitments to strategic partners. A failure to confidently attribute an attack or determine whether such activity constituted an attack could limit U.S. response options. Such confusion, uncertainty, and delay could weaken deterrence and the credibility of U.S. assurances, trigger a misperception of U.S. commitment, and undermine a U.S.-led coalition.

Preventive Options

Unilateral and bilateral steps offer the most immediate path for preventing and mitigating risks of ambiguity. Diverse interests and challenges that inhibit verification limit the likelihood and effectiveness of a comprehensive international agreement in the near term. The United States has two broad sets of policy options.

The United States could enhance deterrence by strengthening defenses, building and supporting more resilient networks, and bolstering the capacity and credibility of U.S. retaliatory threats.

• Improve cyber defenses, elevate the role of the private sector, and support research.Government agencies and the private sector, which owns and operates the majority of critical networks on which the United States relies, should be encouraged to build and operate better defenses. Congress has considered several competing pieces of legislation to establish a legal framework that would encourage sharing of best practices and vulnerabilities between the public and private sectors. The disclosure of significant cybersecurity failures would expand awareness of threats and successful defenses, reduce duplicative efforts, improve the quality of cybersecurity products, and support market mechanisms to develop network security, such as the cybersecurity insurance market.
• Intensify testing of national cyber defenses. The Department of Homeland Security, the intelligence community, and relevant state, local, and private actors could expand national training exercises to clarify responsibilities and demonstrate capabilities, such as the CyberStorm series. Cyber exercises can showcase resiliency and improve incident response, and should include disaster-response operators to simulate health and safety issues that could accompany a major attack.
• Improve real and perceived attribution. A credible retaliatory threat will depend on perceptions of U.S. attribution capabilities. To showcase this capability, U.S. officials could expand intelligence collection against potential adversary cyber programs and increase public or government-to-government disclosures of intrusions. Intelligence, defense, and law enforcement officials could develop standards of attribution confidence that can be used to recommend levers of national power, including judicial, economic, diplomatic, intelligence, and military tools, as well as network actions, such as slowing or blocking Internet traffic to and from U.S. and allied networks. Modeled on legal burdens of proof, these standards could shorten the time it takes for U.S. agencies to recommend response options. U.S. officials could also support efforts to reduce anonymity on the Internet, including adjustments to the design, distribution, and authentication of Internet protocol (IP) addresses, but such reforms would come at too great a cost to free expression.
• Clearly define and enhance the role of the Cyber Threat Intelligence Integration Center (CTIIC) to ensure effective planning, coordination, and assignment of cyber operations. Congress can enhance U.S. cyber posture by codifying CTIIC’s role in integrating intelligence for the director of national intelligence and serving as an interagency forum to coordinate roles and responsibilities. The special assistant to the president and cybersecurity coordinator essentially serves as an interagency coordinator, but his or her portfolio is expansive and staff is small. An enhanced CTIIC, on the other hand, could ensure united efforts and report operational issues directly to the White House; these measures could improve operational awareness and guard against inadvertent escalation.
• Promote greater public clarity on U.S. cyber strategy and doctrine. Uncertainty over what amounts to a use of force in cyberspace can weaken deterrence if potential adversaries misperceive thresholds for retaliation. National security officials can reduce risks of miscalculation by more clearly defining how the United States perceives “use of force,” “armed attacks,” “aggression,” and activity below those thresholds. Some uncertainty is unavoidable to ensure flexibility in the context of an attack, but more clarity would promote stability by shaping expectations of behavior.
• Make good on (and use of) retaliatory threats. U.S. deterrence rests on credible assurances that the United States will retaliate strongly against perpetrators—both in and outside of cyberspace. When responsibility can be established, the White House could inflict costs on the offender that also have a deterrent effect on other potential adversaries. This could include an expanded offensive cyber capacity that provides policymakers with a wider range of options, but because operations in cyberspace may be noticed only by adversary network operators, they will likely have greater effect as part of a broader campaign that includes responses outside of the cyber domain, including use of the recently announced sanctioning authority targeting malicious cyber actors.

The United States could establish responsible cyber precedents and norms.

• Intensify ongoing diplomatic efforts to promote the development of shared norms and expectations. Consensus on controversial issues relating to how international law applies to state behavior in cyberspace is unlikely in the near term. The diversity of national interests and verification challenges makes efforts to build cyber norms through formal treaties especially challenging. Given the risk of inaccurate attribution in cyberspace, however, countries should recognize a high threshold for what merits a forceful retaliation and remain mindful that the benefits of international communications technology come with vulnerabilities and defensive burdens. U.S. efforts to build such a shared understanding could include operational restraint; continued diplomatic work in the UN Group of Governmental Experts on international information security; confidence-building measures, such as joint cyber exercises that standardize bilateral attribution, mitigation, and data-sharing procedures; and the expansion of bilateral consultative mechanisms.
• Further clarify roles and responsibilities in the cyber domain. Congress could take several steps to elevate the role of diplomacy in U.S. cyber policy, better integrate cyber capabilities into military strategy and doctrine, ensure effective oversight, and signal the important distinction between cyber espionage and other types of cyber operations. These steps include establishing an assistant secretary of state for Internet and cyberspace affairs and ending the current policy that places a single official in charge of both the NSA and U.S. Cyber Command. A reallocation of responsibilities would further distinguish Title 10 (national defense) and Title 50 (covert) operations and help generate precedents of responsible state practice for each.
• Enhance support for foreign efforts to combat cybercrime. International cooperation is essential to combat illicit cyber activity from nonstate actors, such as terrorist networks, criminal groups, and patriotic hackers. Greater resources for international programs of the Department of Justice (DOJ) and streamlining how foreign officials receive DOJ assistance in cyber investigations would reinforce the norm of mutual assistance and pressure foreign governments to do likewise.

Mitigating Options

• Establish or use a crisis-management group with allies and countries hosting affected networks. The same elements of ambiguity that can trigger a crisis can also exacerbate one. Because defensive cyber operations, which may be appropriate during an ongoing attack, can involve activity on information networks located in other countries and appear offensive in nature, the public or private messaging of a U.S. response will be vital to prevent crisis escalation or expansion. Such crisis-management groups should include top national security and diplomatic officials, and cyber officials from other countries’ computer emergency response teams, to build a foundation of familiarity and trust among relevant actors that would be called on in the wake of a major attack.
• Work with potential adversaries to prevent misperception of U.S. cyber activity. Given varying structures of cyber forces within the security agencies of potential adversaries, a U.S. signal sent by cyber means during a crisis may not reach national leaders. U.S. national security officials could establish or expand bilateral crisis-communication channels with foreign counterparts to issue warnings, request assistance, or open a dialogue about state involvement in a perceived attack.
• Pressure states unwilling to stop or support investigations of cyberattacks. In cases where the United States cannot attribute a cyberattack, it has levers short of force both in and outside of the cyber domain. Countries whose networks are used in a multistage attack could be given notice that a failure to stop it or to support an investigation is a breach of state responsibility that could result in adjustments to network traffic, diplomatic condemnation, or other sanctions. Such threats increase incentives to conduct cooperative forensics, develop mitigation measures, and make their information infrastructure a less attractive path for hostile computer network operations.

Recommendations

Prospects for a comprehensive international solution to the risks posed by ambiguity in cyberspace are limited at this time, and some technical fixes that would aid attribution by limiting anonymity online would come with too great a social cost. Instead, a strategy that focuses on fortifying U.S. networks, building a more credible deterrent, and demonstrating responsible state practice offers the best path forward.

The United States should improve the security and resilience of its networks and fortify the credibility of retaliatory capacity.

• Congress should pass legislation that facilitates real-time information sharing within and between the private and public sectors. Implementation of this information-sharing program is expected to cost $20 million over five years, according to the Congressional Budget Office.
• Congress should build on the February 2015 executive order designed to promote information sharing among private actors by offering tax incentives or grants to companies that join and support the work of information-sharing and analysis organizations—sector- or region-specific hubs that facilitate the exchange of cyber-threat data and cybersecurity best practices.
• Congress should help reduce critical vulnerabilities by expanding support for the new National Cybersecurity Federally Funded Research and Development Center (FFRDC); creating or incentivizing bug bounty programs for critical systems; adjusting criminal and civil laws, such as the Digital Millennium Copyright Act and the Computer Fraud and Abuse Act, to enable and encourage responsible security research; and mandating robust cybersecurity requirements as a condition for federal-procurement eligibility to drive the commercial market for secure products.
• The Department of Defense (DOD) should expand efforts to improve cyber defense capabilities, information-assurance responsibilities, and research and development. DOD officials estimate this to cost $5.5 billion annually. Joint training exercises in the combatant commands ($456 million requested by DOD for 2016) should include cyber threats that could impede global access and operations to improve DOD mission resilience, support the development of best practices to share with critical infrastructure operators, and generate data to help avoid costly adjustments to hardware, firmware, and other fixes in later development stages.
• The Office of the Director of National Intelligence (ODNI) should expand signals and human intelligence collection against potential adversary cyber programs, as well as accelerate the intelligence community’s production and release of actionable cybersecurity information to vital information network and critical infrastructure operators. U.S. intelligence officials should also identify, in advance, types of classified data that could be shared publicly in the event of an incident to avoid a lengthy interagency declassification process that would delay a timely public attribution.
• When possible and appropriate, DOD officials should highlight U.S. involvement in offensive cyber operations against states, terrorist groups, and other illicit actors to fortify the credibility of U.S. retaliatory capacity among potential adversaries. Greater transparency into offensive cyber operations, as well as the doctrine underlying them, would also reinforce emerging norms in cyberspace by demonstrating responsible state practice and supporting U.S. efforts to overcome the skepticism of its commitments to shared interests and values in cyberspace that emerged in the wake of unauthorized disclosures of U.S. cyber activity.

The United States should elevate diplomacy, clarify doctrine, and ensure clarity between intelligence and military cyber operations.

• Congress should create a Department of State (DOS) Bureau of Internet and Cyberspace Affairs to demonstrate that the United States gives as much attention to diplomatic policy options as it does military ones. The bureau should retain a direct reporting line to the secretary for threats, operations, and related strategic considerations. Congress should also make the NSA director a Senate-confirmed position eligible for civilians. Missions other than intelligence should be shifted to other appropriate entities, including U.S. Cyber Command and the combatant commands.
• ODNI should more frequently review intelligence priorities, operations, and targets to prevent unintended escalatory cyber events. The reviews should also clarify the chain of command and congressional oversight of Title 10 and Title 50 cyber operations. The director of CTIIC should facilitate reviews and broaden operational awareness among national security officials.
• DOD should further clarify doctrine related to cyber-effects operations to provide greater transparency into U.S. operations, reduce risks of miscalculation, and clarify response options.

The United States should intensify diplomacy in concert with like-minded nations to promote the development of shared norms and expectations of appropriate behavior in cyberspace.

• DOS should expand formal dialogues with partners and potential adversaries to share views on appropriate behavior in cyberspace, including prohibitions against operations that damage critical infrastructure or computer emergency-response agencies, as well as affirmative norms, such as mutual assistance in investigations or efforts to counter ongoing attacks.
• The White House should publicly outline for less cooperative states the possible range of political-economic levers, including adjustments to network traffic, criminal sanctions, diplomatic condemnation, and U.S. Treasury actions that the United States could use to hold countries accountable for failing to stop harmful activity conducted from or through their networks.

The United States should improve responsiveness to foreign requests for assistance in cyber investigations.

• Congress should increase support for the DOJ’s Computer Crime and Intellectual Property Section, National Security Division, Office of International Assistance, and Federal Bureau of Investigation to bolster prosecutorial efforts and keep pace with the growing number of foreign requests for support. DOJ estimates this to cost $722 million.
• Congress should support DOJ efforts to provide prompt support to cyber investigations including creating an online system to process requests. DOJ estimates this to cost $24.1 million.

Conclusion

Attacks against the diverse and growing number of vulnerabilities on critical U.S. networks will pose a significant risk of triggering or aggravating a crisis for years to come. Though the cyber threat cannot be eliminated, implementing the recommendations above would put the United States on a course to better manage its risks and promote stability. The United States should act now to enhance its cyber defense and deterrence, support the growth of shared norms, and improve the processes through which attacks are mitigated and investigated. The longer the United States delays taking these steps, the harder it will be to prevent and mitigate a crisis. Deterrence failures and misperceptions occur routinely in international relations, but a renewed focus now would significantly reduce the risk of an unnecessary crisis or escalation.

The number of UN peacekeepers is at a record high, with nearly 110,000 uniformed deployed “blue helmets” worldwide, most of them in Africa. But the status quo is “untenable,” warns Paul D. Williams, author and associate professor of international affairs at George Washington University, in a new Council Special Report, Enhancing U.S. Support for Peace Operations in Africa.Unrealistic mandates, unsustainable supplies of personnel, hostile host governments, and mission creep have undermined peace operations, Williams writes. “Given the growing interest in fostering a stable and prosperous Africa, the United States should wield its political influence to address these challenges.”

In advance of the release of recommendations from the UN High-Level Independent Panel on Peace Operations later this month, the report from CFR’s Center for Preventive Action identifies four main areas that would benefit from changes in U.S. policy:

Personnel: With only forty-two uniformed U.S. personnel in UN peacekeeping missions in Africa, Washington’s “limited deployments” not only impede U.S. government awareness of the continent’s unstable areas, but undermine its attempts to lead on this issue, Williams notes. Increasing the number of U.S. blue helmets in combat service and support roles would boost American leadership credentials and help to “build a cadre of troops with distinct working knowledge of the UN peacekeeping system” and provide “firsthand knowledge of operational realities in African crisis zones.” Furthermore, “deployment would demonstrate Washington’s commitment to the idea that UN peacekeeping is a global responsibility.”

Finance: “The United States is the single largest financial supporter of UN and African peace operations in Africa,” with voluntary contributions to the African Union (AU) and direct support to countries involved in peace operations. Although international treaty obligations mandate contributions, a 1994 congressional cap on financial support makes it difficult for any administration to pay its dues in full and on time. “The cap,” Williams argues, “is shortsighted, counterproductive, and breaches U.S. obligations under the UN charter.” Williams recommends removing the cap, clearing “the backlog of arrears,” and establishing a new, predictable funding mechanism that supports the AU directly—an equivalent to the European Union’s African Peace Facility, which provides financial support for the EU’s joint strategy with the AU.

Assistance: The United States has trained over 250,000 African peacekeepers and provided nearly $1 billion to support peacekeeping activities. However, these programs provide a “broad rather than deep approach to training African peacekeepers” and “have trouble encouraging African contributors to become self-sufficient.” In addition, Williams maintains that the focus of U.S. assistance programs “should shift from training and equipping peacekeepers to building sustainable national peacekeeping institutions.”

Policy: Because the last presidential policy directive was written over two decades ago, Williams urges Washington to adopt a new directive that outlines the administration’s strategic approach to peace operations in a single document. “Without a clear intellectual foundation, U.S. policy on peace operations will continue to lurch from crisis to crisis in an ad hoc manner,” he points out.

Rather than working with individual countries—some with poor governance records—Williams suggests increasing the number of U.S. personnel deployed to the U.S. Mission to the AU, which would strengthen the AU and help to “assess, plan, manage, and evaluate missions.”

Territorial disputes in the South China Sea continue to be a source of tension and potential conflict between China and other countries in the region. Though the United States takes no position on sovereignty claims in the South China Sea—including those of its ally, the Philippines—it is deeply interested in maintaining maritime security, upholding freedom of navigation, and ensuring that disputes are settled peacefully. For these reasons, a 2012 Council on Foreign Relations (CFR) Contingency Planning Memorandum, “Armed Clash in the South China Sea,” argued that the United States should help lower the risk of conflict in the region, including the potential for dangerous military incidents involving U.S. and Chinese military forces.

New Concerns

Beijing’s intention to exert greater control over the South China Sea appears undiminished. In 2012, China forcibly seized control of the previously unoccupied Scarborough Reef during a standoff with Philippine maritime vessels, despite agreeing to a mutual withdrawal brokered by Washington. China has seemingly been emboldened by this easy, cost-free conquest: it has since begun construction of artificial islands in the Spratly archipelago that will enable it to extend the range of the Chinese navy, air force, coast guard, and fishing fleets in just a few years. Once sufficient capabilities are in place for round-the-clock maritime and air presence over the South China Sea, Beijing is likely to declare an air defense identification zone (ADIZ), similar to the ADIZ it declared over the East China Sea in November 2013. The scale and pace of China’s dredging activity has alarmed rival claimants Vietnam, the Philippines, Malaysia, Brunei, and Taiwan.

The dispute between China and the Philippines over the Second Thomas Shoal deserves immediate attention. Since 1999, a small contingent of Philippine marines has been deployed on a vessel that Manila beached on the submerged reef. In 2014, Chinese coast guard ships attempted unsuccessfully to block delivery of food, water, and fresh troops to the military outpost. The condition of the beached ship is rapidly deteriorating and it is expected to slide into the sea in a matter of months unless it is reinforced. This situation could lead to another confrontation between Chinese and Philippine forces should Beijing decide to seize the shoal. The U.S.-Philippines mutual defense treaty could be invoked if, for example, a Philippine naval or coast guard vessel is attacked, a Philippine military aircraft is shot down, or members of the Philippine armed forces are injured.

A military clash between China and Vietnam is also a concern. In May 2014, China deployed a deep-sea oil rig in Vietnam’s two hundred–nautical mile exclusive economic zone (EEZ), leading to a seventy-three-day crisis in which Chinese and Vietnamese ships rammed each other repeatedly before the rig was withdrawn. Although Vietnam’s military capabilities are dwarfed by China’s, Hanoi is nevertheless determined to defend its maritime rights. Worries persist in Hanoi that Beijing could deploy the oil rig to contested waters again, risking military confrontation. Similar clashes could take place in the nine oil blocks along the coast of Vietnam, for which China National Offshore Oil Corporation (CNOOC) invited foreign companies in 2012 to seek oil exploration bids, or near the Vietnamese-occupied Vanguard Bank.

In addition, the risk of a dangerous incident involving U.S. and Chinese forces within China’s EEZ remains a concern given the possibility of military escalation. Following several dangerous near-misses—notably in December 2013 involving a Chinese amphibious dock ship and a U.S. guided-missile cruiser and in August 2014 involving a Chinese fighter aircraft and a U.S. surveillance plane—the U.S. and Chinese militaries struck a groundbreaking deal on rules of behavior for safe military encounters between surface naval ships at sea. Such confidence-building measures may help reduce the potential for accidents in the future. However, individual commanders may still display aggressive behavior that could have dire consequences.

Policy Implications

U.S. interests in the South China Sea include freedom of navigation, unimpeded passage for commercial shipping, and peaceful resolution of territorial disputes according to international law. Failure to respond to Chinese coercion or use of force could damage U.S. credibility, not only in Southeast Asia, but also in Japan, where anxiety about intensified activity by Chinese military and paramilitary forces is growing. Conflict in the South China Sea would put at risk the more than $5 trillion in trade that passes through those strategic waters annually. Also at stake is the U.S. relationship with China, including Washington’s efforts to gain greater cooperation from Beijing on global issues such as combatting terrorism, dealing with epidemics, confronting climate change, securing a deal on Iran’s nuclear program, and persuading North Korea to relinquish its nuclear weapons.

Recommendations

Although China may have moderated some of its intimidation tactics for now, it continues to seek greater control over the sea and airspace in the South China Sea. Moreover, various attempts to persuade China, along with the other claimants, to freeze destabilizing behavior such as land reclamation have not succeeded. Beijing continues to drag its feet on negotiating a binding code of conduct (CoC) with the Association of Southeast Asian Nations (ASEAN) and has rejected Manila’s attempt to resolve its territorial dispute through arbitration under the United Nations Convention on the Law of the Sea (UNCLOS). Halting Chinese land reclamation activities may not be possible, but the United States can press China to be transparent about its intentions and urge other nations to do the same. While remaining neutral on sovereignty disputes, the United States should encourage all parties to pursue their claims peacefully and in accordance with international law. The United States should also press China to accept constraints on its behavior in a CoC and dissuade China from taking actions that increase the risk of conflict. Several of the recommendations in CFR’s 2012 analysis of potential conflict in the South China Sea remain to be implemented; in particular, the United States should ratify UNCLOS. In addition, the United States should take the following steps:

• In the absence of progress between China and ASEAN on a binding CoC to avert crises in the South China Sea, the United States should encourage ASEAN to develop its own draft CoC containing risk-reduction measures and a dispute-resolution mechanism. The United States should then work with ASEAN to convince Beijing to sign and implement it.
• The United States should continue to help the Philippines and Vietnam enhance their maritime policing and security capabilities, for example through better surveillance systems, so they can deter and respond to China entering the water and airspace in their EEZs with impunity. Similar assistance should be extended to Malaysia if requested.
• The United States should be prepared to respond to future Chinese coercive acts including using U.S. naval forces to deter China’s continuing use of “white hulled” paramilitary vessels. Other responses, such as imposing economic sanctions on Chinese energy companies should they drill in contested waters, are also conceivable but should not be specified in advance.
• The United States should state clearly and publicly that a declaration of an ADIZ by Beijing over the South China Sea would be destabilizing and would not be recognized by Washington.
• To further reduce the risk of an accident between U.S. and Chinese forces, the two militaries should implement their joint commitment to conclude an agreement on air-to-air encounters by the end of the year.

I can’t help but admire the Middle East’s resiliency. In the midst of rising conflict and slowing global demand, entrepreneurs and companies alike are transforming their economies and laying the groundwork for sustained stability and development.

Critical to this continued progress, though, is building a solid foundation of infrastructure. The right set of infrastructure investments – especially in power, water, health and transportation – will accelerate sustained and inclusive growth in the region, creating the conditions for peace and stability.

Just before arriving in Jordan for the World Economic Forum’s meeting, I was in the United Arab Emirates, Turkey, Pakistan and Egypt. The region is brimming with young workers. In Egypt, the median age of the country’s 85 million citizens is just over 25 years, and they need new jobs in factories demanding ever more energy. But Egypt’s demand for resources like electricity and water is already outstripping supply, and the government is seeking fast ways to boost it.

That’s why the need for investment in sectors like electricity and other forms of energy provision, such as petrochemical plants, is greater than ever. MENA’s population is projected to increase by more than 40% over the next few decades, and industrial demand is growing alongside it. The region will need to invest over $100 billion a year to maintain existing and create new infrastructure to serve the growing communities and cities across the region. And as we learned from the Arab Spring, these populations will hold their governments accountable to deliver it.

Oil exporters in particular have filled this need by supplying public financing that has largely been supported by natural resource revenues. But these revenues have been hit hard by volatile oil prices, alongside weaker growth in export markets such as the Eurozone and China. For a number of MENAT (Middle East, North Africa and Turkey) oil exporters, these trends create significant pressures to carefully consider their investment strategies and plans for the long term.

Fiscal reform to rationalize public expenditures can help ensure government’s deploy sufficient resources for infrastructure. But unlocking and unleashing additional sources of capital will be critical to filling this gap. Global institutional and equity investors like pension funds, insurers, sovereign wealth funds and endowments hold trillions of dollars in assets. There are a number of ways MENAT countries can make infrastructure projects more attractive and feasible. Here are just three of them.

Provide risk guarantees

Political stability, institutional quality and rule of law all affect how investors assess whether a project is commercially viable. In many markets in MENAT, perception of risk is high and confidence in institutions is low. Governments can help mitigate this by providing clear legal and regulatory frameworks to protect private investment, including sovereign guarantees, political risk insurance and transparent procurement practices.

In Iraq, for example, falling oil prices and the cost of military action have significantly curtailed the government’s ability to build power plants itself.  Iraq has therefore undertaken an ambitious programme to develop energy infrastructure via independent power producers. Despite the political and security risks, developers and investors are interested.

The major challenge is financing, where the lack of a sovereign guarantee for the debt these projects must take on is proving a significant challenge. Mitigating and sharing some of these risks through government-backed guarantees can deepen investor confidence. Moreover, with the long time horizons often involved in the development of infrastructure projects, investors must be assured that these guarantees are transferrable if ownership is transferred, to attract their interest.

Develop local capital markets

Strong local capital markets bring a number of benefits to borrowers and investors. They shield them from volatility and crises in other parts of the world, and often protect them from foreign exchange risk by allowing them to borrow in  local currency. They can be a critical tool for mobilizing funds to finance infrastructure projects.

MENAT, however, still largely relies on foreign capital, particularly multilaterals and export credit agencies. These actors will continue to remain important. But when local markets are strong, risk can be more effectively shared between international and local investors, making it more likely for private actors to jump in and spread project funding across a number of instruments. Morocco opened its electricity sector to private investment about 15 years ago and private capital now builds most power generation facilities in the country. This is more cost-effective for the government, and results in the addition of far more capacity than would otherwise be possible.

Build capacity and skills

Infrastructure investments involve complex legal and financial arrangements, but many of the region’s economies lack the expertise to plan, execute, maintain and regulate infrastructure operations. Meanwhile, potential investors often lack local knowledge to accurately assess the risk profile of investment opportunities. Both these skill sets need to be further developed to build a pipeline of projects.

MENA governments can partner with international financial institutions and private entities to build these capabilities. In Turkey, GE has worked with customers and the national government to develop hospitals using a public-private partnership model. These projects are now beginning to move into the construction phase.

Each of these steps requires increased cooperation and trust between the private and public sectors. Governments and companies must work together to attract investment in both the equipment to power MENAT’s communities and cities, and in the people that are building a sustainable, stable and prosperous future for the region.