Transcripts For CSPAN2 Key Capitol Hill Hearings 20140623

Next, a constitution about the Global Economic outlook from the wall street journals annual cfo network conference. Panelists include the chair of the White House Council of economic advisers and the world banks chief economist. This is about 30 minutes. [applause] good morning, everyone. Thanks to you both for being here. During the session were going to ask for your participation on a couple of questions so, please, get ready for some morning calisthenics. Beyond the painful, long recovery theres increasing concern that the longterm growth rate is slower than we thought. It averaged about 3 , now the imf is out with a report that says it will be 3 , and thats down from the 2. 8 that they predicted just in april. Whats going on, and is our future a bit darker than we thought . Uhhuh. If you look at Economic Growth, we could look right where we are right at this moment, and we dont want to look in the Rearview Mirror at the First Quarter, we want to look at where things are now, and job growth has actually picked up. Were adding about 220 jobs a month. If we add jobs for the month of june, well have 52 consecutive months of private sector job growth, that would be the longest consecutive streak of private sector job growth weve seen in this country. But then you look forward. Theres two come components of growth. One is how much youre adding to your productivity, and the second is how much youre adding to the work force. The first started rising in the mid t 90s with the new economy, and its continuing strongly, and iathink theres n lot of technology and growth in our future. A half year before that was quite strong. All the indications are the Second Quarter is quite strong and that it was an aberration but an aberration that large will still take down your average growth rate looked at over the course of the whole year. Id like to ask you about emerging economies. I was talking to some cfos last night and emerging economy seems to be answer for growth. Now thats reverse almost completely. The world bank has a study out this is for the third year in row they will deliver to support the growth under 5 . What can be done to bring them on track and what do you predict . Disappointing. Disappointed by their own past performance. Below 5 , for. 8 is our figure. Thats in the global scenario, simply isnt enough. Among the big countries, china is still at over 7 . Again compared to what china used to do with great these are earlier, five, 6 is handsome growth. India is down below 5 compared with india was doing three or four years ago. But for. 8 is not bad. The one which gone down quite a bit but my own expectation is that the are sufficient deep underlying issues mainly to do with the labor market. It doesnt happen everyday so it never makes the headlines. But because of those reasons, a lot of the growth leadership, absolute levels of no comparison, a lot of the growth leadership within one or two years go back to the emerging economies, developing economies. In managing reform and be relatively better end up with organization. Before i go on i want to switch to our first question for the cfos. Wed like to know which country you think will deliver the biggest economic surprise over the next 12 months. One of the x. Factors in economy just over the past week now is the aspirin violence in iraq. What sort of impact do you think that could have on the u. S. Economy . Oil prices, as does the success of the shield them insulate us in ways that it would not have previously . If you look eight years ago we were importing 12 Million Barrels per day of oil. Weve got that down to 6 Million Barrels per day. Half of that reduction was extra production. We have discovered an increase our production of oil by as much in this country as iraq produces. And about half of that reduction, that import is due to reduced use in fuel efficiency. We are the most fuel inefficient people are so we are more insulated from Global Oil Prices than we were, but no one is fully insulated. Even if we didnt import any oil our price would still be determined on a Global Market and the Global Market could very much be a function of events around the world. We are in better shape than we wouldve been a decade ago to withstand an oil shock. Were a lot better shape than we were 30 or 40 years ago in terms of Oil Intensity of our overall economy. Theres no doubt the risk factor is when were taking very seriously. Are you doing any modeling in terms of how long it would take . We certainly monitor the situation in oil markets, and as the president said last week, we would look at a range of responses that we could potentially take if there was a disruption in oil prices. Does this change the export to bed at all in terms of natural gas . The expert our talk about building terminals two, three years from now. I dont think this changes that at all. We are still waiting for some answers. Mr. Basu users the Economic Advisor to indias government until 2012. The election there is incredible optimism now about india. Are people getting added themselves . What should companies be think of when theyre thinking of india . The optimism i think is right. You should not get ahead of yourself but optimism is nevertheless right. If you look at the last couple of years of the previous government, and i was actually in there, the reforms have slowed down. You seen from 20052008, india was growing at 9. 5 for anna. Through the downturn, the Global Financial crisis it kept up pretty well than the last two years has dropped and. There were also a slow down in reforms. There was an imminent election. There were corruption scandals breaking which was affecting the temperament endured in the country. There was a lot of just ordinary Civil Society very upset about this. So this election and there comes a burst of expectation, and if you look at the details, we do expect there will be some reforms that will come in. Now they dont have to think of the next election for another five years. So i actually expect given that couple of the fundamentals of the income, like the savings rate and investment rate, india now saves and invests the way countries used to do in the 70s and 80s when they were growing very fast. So those economies are very strong but if reforms get indirection, i think within a year, a year and have the growth in india should become very clearly spent and you think in the past few years have been a real disappointment. You were just unable to break disappointment but there are two things you look at. Indias growth is growing between 4. 86 . Which by any global standard since the whole world have slowed down massively, was not quite as better i kept saying in india, one of the best signs was on one Television Interview in india someone said mr. Basu, whats happening to the country . Its going to the dogs with india growing at 6 . I said this changes in yardstick. Heres the great hope for india, 6 is not treated as really disastrous for the economy. The Global Factors did better on the economy but no doubt the reforms was slow down and therein lies the main hope that her expectations are up once again. I like to ask you both away into the austerity to be. It was striking to see earlier this month, in the case of the uk the Christine Lagarde actually apologized for George Osborne for criticizing the uk austerity cuts saying the imf had gone too far. What lessons should we take from this . Is the uk going to emerge as a model for austerity cuts . Id love your thoughts on europe as well. I actually on balance, the austerity management, given that the world has changed over the last seven, eight years if you look at fiscal numbers, europe, the rich countries look much worse than emerging economies. Data being so, fiscal austerity is something they would have to go for. European countries in particular. The country is the design of austerity and i think most has to be on the design britain did right. It took harsh moves which did have a slow down effect but this year were expecting uk to grow at Something Like 3 which for a rich country is pretty good figure. And i think that the costs that were taken in austerity are beginning to pay dividends over the. On europe as a whole the euro eurozone had negative growth last you last year the world bank, only two regions of negative growth, eurozone and middle eastern and north africa. This year were expecting the eurozone to climb back into positive growth territory. There are some countries which havent done well. The netherlands, the First Quarter did not do well because it was too hot. But eurozone on the whole were expecting its going to cost 1 this year which given the performance of the eurozone in recent years is actually a very clear good sign that things are beginning to pick up. Mr. Furman, does the uk hold any lessons for the u. S. . I think you want to look back a little bit further and ask what countries are today compared to where they were prior to the crisis. The United States we attain its per capita gdp that it had reached in 2007, the end of 2007, within four and half years after the crisis ended. That was actually remarkably fast period after financial crisis the usually takes about eight years to get back to where you were before it begins and i think that was a combination of extraordinary fiscal and monetary financial housing across the board auto response. Europe isnt back yet. The uk isnt back yet. France isnt back yet. Most of europe is not back yet. Germany has, and i think that tells you to some degree about the difference in those policies. And the european economies are starting to strengthen. They are starting to in greece to increase their aggregate demand. Theres a lot of structural challenges Going Forward in terms of how theyre doing supervision but they still need that aggregate demand. They need that engine for growth. You are seeing some of that from the ecb, but there probably could be a role for fiscal policy as well. Lets see what you all thought of the Biggest Surprise in the coming months. 33 for india, very, very addressing. 16 for russia. I must say a question for either view, was speaking to the cfo last night who was worried because he had planned that was half built in russia and what to do. How does russia play into your thought about the Global Economy, and how significant of a shift do you think this is . Russia has great uncertainty goes along with all the difficulties of making a, forecast, theres the political uncertainty. Russia itself has cut its growth forecast for this year to 0. 5 . I in fact forget what Bank Forecast for russia was but it is boldly just a less than that. With a big margin around that because also ordinary investment investigatory. So russia really i think we cant rely on that as a growth driver until the political situation calms down. Mr. Furman, and issued a little closer to home. Theres been a number of practice of tax and version, medtronic was just the latest. How concerned is the administration about the use of basically Tax Advantages and incidents that companies have to locate operations abroad . Do you think this is something that gives an impetus to some Corporate Tax or from . This is something that were concerned about, that we are looking hard at. We vetted proposal in our budget that would tighten up the rules on conversions but it would increase the share of ownership that would allow you to qualify for inversion. Some of the deals youve seen would qualify under that standard. Youd still be required to pay tax in the United States. But this is also part of a broader problem with the Corporate Tax code that is deeply broken, with the United States having the highest Corporate Tax rate in the oecd, with the United States having an International Tax system thats broken that both allow substantial base erosion and also greatly in defense of the completeness of our country. So ultimately the solution here is to reform our tax code. I certainly think thats the lesson that youve are from senator wyden. Youve heard it from senator hatch, from both sides of the aisle. I think thats a lesson i would love washington and congress to hear loud and clear, that this is an argument for reform our tax code. When we reform our tax code heart of that is about making america more competitive but we need to also come as part of that need to take measures to address this inversion issue. Do you think the increasing practice of it will drive the pressure up enough to trump something . Theres consensus that something is to be done sometime. I wouldve thought the fact that the United States became the world recordholder in Corporate Tax rate a little over two years ago would have just put a ticking clock on our efforts and increase the pressure. And i think this just adds to it. And i think the good news is theres an increased conversion of use. If you look at what chairman camp in the ways and Means Committee has put forward, there are issues with it but things we debate but has a lot in common in terms of a tax rate in mid to upper 20s that has president obama changing the rate. And so i think there is an increased agreement something that needs to be done. Theres an increased agreement about what is there needs to be done, and we now just need to go ahead and do it. Something the president would love to do. Weve gone an exceptionally long time in her discussion about the Global Economy without talking about china. Mr. Basu, you dont me earlier that you come up with some new data on the purchasing power parity index and when exactly china will overtake the u. S. Could you explain . The purchasing power parity, not mine, there were huge organizations the massive organizations that computes the. Its hosted by the world bank. So china, corrected gdp. Its known now its expected to overtake the us sometime this year. So my own competition was putting in the growth numbers, projecting forward and looking for the date. So i could i have a date which is just a fun figure, 29 september is the day on which the u. S. Economy will be overtaken by china. I should immediately tell you that as this number is mine so i havent talked about it as yet, but the overtaking is the biggest nowhere nearly as momentous as some Media Outlets have made it out to be. China is for time the population is expected to shrink per capita income. Also purchasing power, it means in chinese and by its goods more cheaply than you can buy American Goods within the u. S. But if you look at and the International Domain where youre in a third country having to go in there, they are the purchasing power parity is unimportant because you have to pay the countrys price. So its not as momentous but having said that its going to overtake on the 29th of september. Might earlier expectation was, i did a competition a few months ago, the second of november but after that we got the numbers in the use of growth in the past quarter have been going down. Lower growth across the area. Mr. Furman, whats the significance of this and how concerned is the administration about the sense that china is increasing protecting its own companies to . First of all, we should start monitoring gdp on a daily basis. I feel a little behind with our quarterly numbers. But as kaushik said, what matters in the International Arena is not that restaurant and haircuts are cheaper in china than there are in the United States. Its how much money can buy in terms of financial power, in terms of foreign aid, in terms of military power. And every one of those depends on the Market Exchange rate and measured on the Market Exchange rate, the United States is enormously much larger than china is. Plays a much larger role in the Global Economy. But china is playing a global role, and with that, that brings opportunity. It helps support u. S. Economic growth and growth in china stronger. That helps us your. It helps our exports. But it also great challenges and frictions, and thats something we are trying to engage with china and work our way through. Between the spine issues and a sense that theres favoritism to as louise, do you sense a shift in china of these. To the west . You know, you take Something Like the Exchange Rate and there has been increased number of concerns after the been some progress made in that area that some of that is slipping. Secretary lew went to china about a month ago to engage with the chinese on that issue. With a whole bunch of other issues that come with in the economic arena that were engaging with china on. A lot of them are in the interest of chinas economy. They need to rebalance, move away from a very heavily real estate, construction, credit, directed credit driven economic expansion to one thats more sustainable and more external imbalance. That would be in the interest of the United States as well. The World Economy more broadly. Second comment on china. The growth forecast is 6 . But there is a workaround that point forecast and for the recent that i think jeffrey which is alluding to. Jason. Over all that is just very large. Whats happening over the last six, seven months is each time chinas economy is slowing down theres a fresh set of stimulus of something coming in. A lot of it is taking the form of more debt. In the month of may itself there was effort, which is good for shortterm growth. It puts your data reconciling with your financial and borrowing burden, pushing them back a little bit more. When that adjustment comes there is a bit of a risk that china will find it very difficult to manage. Weve seen in the u. S. In 2008, and china may have to face up to that sometime in the coming year, couple of years, because of its growth of finest. I like to open it up for questions but before i do we want to throw a question to all of you on your ipads. We are asking where you think the u. S. Economy is going to head in the next 12 months. Less than 2. 5 , 2. 5three, three3. 5 , or the surprise, over 3. 5 for the optimistic. Does anyone have any questions to start us off . We have a few minutes. Spink youve got your response. Okay, you are fast. It looks like 2. 53 wins. Very interesting. And mr. Furman, how does that compare to what the president s advisers are our last forecast was finalized in november, published in february. Obviously one would update it in light of the events, but i dont think it would be too different from what the majority thinks. And that sound. Yes, please. Mr. Basu, please tell us who you are. Sure. I was with levi with cfo. Mr. Basu, question for you. Brazil has been a bit of head scratching in terms of growth. I love to hear your perspective on growth in brazil. And longerterm, your views on the potential of the african subcontinent. Brazils growth has been a disappointment and its going to remain less than 2. 5 2. 5 to tht important reforms, fiscal policy measures that brazil needs to take. There hope allies actually in africa. It starting on a low base but actually the continent of Southern Africa has done pretty well. Our expectation is about 4. 6 growth in south africa but if you take south africa out of it, big slowing growing region, the rest actually could grow over 6 . Buffer africa is doing very well. And even in terms of poverty which we track very closely, the last 10 years has been very good but there is one risk i should point you. Africa has been getting for its gdp base more foreign flows. Not in absolute terms but more flows that any comparable region. But a large part of it is from china. So theres one risk for africa is that you to get a slow down in china over the next one year, next two years, which is not impossible at all, thats going to hit africa very badly, and egypt. So african doing well, has been well over the last couple of years but there is that one bigger risk that is looming over africa. Any further questions . I have one, we havent spoken about japan. They are undergoing a lot of significant reforms there. Are you predicting that president opeval be successful . You know, if president a abe. A consumption tax increase, gave an interesting growth because people do it again before the increase in to buy up their kids. Youve got a shortterm bubble. What japan is talk about now is entering the Corporate Tax competition a little bit during that to get its growth back a. Our expectation for the official expectation is 1. 3 growth in the coming year for japan. Japan needs deeper structural reform. Jason for to overcome one of the great strengths of the u. S. Is through its policies in terms of labor. It manages to tap in a cheaper labor. But that is the policy i think Rich Companies when i said that labor underlies a lot of this problem. Rich countries given the nature of globalization has to increase in the devise methods of choosing the cheaper labor available. So japan has some deep reforms to undertake. Some of the shadow reforms have to do with Monetary Policy and fiscal policy has done well. Thats the reason why japan, after decades of nearly zero growth, is back to 1. 3 , 1. 5 . I have a question for mr. Furman from our ipads submission. What do you recommend be done for the Education System in the u. S. , particularly in the inner cities, to help create a growing middleclass and improve u. S. Competitiveness . I think this gets a little also to the income inequality question that seems to loom right now over politics. So, to start with the inequality part, theres a lot of debate, a lot of controversy over what their goals are in terms of inequality. I think theres no debate that we should have equality of opportunity as a basic bedrock principle. I think its impossible to look at Early Childhood education and say that we have equality of opportunity. So thats the first place to start, is high quality preschool for all. You look at the enrollment american fouryearolds in school and in preschool. It is, were 25th in the world. In the oecd i mean. Thats pathetic and we need to fix that, and the president has an initiative that we did exactly that, give high quality preschool to all americans. As we move on from there from k12, the Biggest Issue is just how we are dealing with educational standards and common core, is something that the vast bulk of states are doing, some encountering some unfortunate turbulence. But the bulk of states the governors of both Political Parties to the Business Committee are behind and its one of the most promising things in education reform. Then going beyond that the college has been really successful in bring more lowincome people into college. We have increase college enrollment. We have been as good at college completion, and together with that the combination of increased enrollment and some the challenges in completion some of the issues associated with this large increase in student debt. Some of that is a great thing. People going to college. Some of that is people will have a hard time on reaping. Using the languages go up in student debt while the content and every other form of student debt. The answer to that is fewer people in college. Its making sure higher quality, higher value added, and a focus on completion. So we need to do everything, prek, k12, college and training and beyond that. Lets take one more minute and answer this one additional question. Again for mr. Furman. What are the two other critical economic initiatives for the Obama Administration . Please be specific to again, youve got a minute. Sure. Ill just, i will confine myself to one specific that begins with the letter i. I guess i will cheat. But Immigration Reform is number one as a Major Economic initiative. It would increase not just the growth of our labor force, but it would increase our innovativeness and entrepreneurial this as an economy rat raise what economiss call our total effective growth. It does a notch by bring high skilled people but also taking people who are undocumented in this country today, giving them a path to citizenship raises their certainty, increases their ability to invest in education or business. Number two is investing in americas infrastructure. And number three is where ill cheat and thats business tax reform. The three of those together would have a substantial effect both on our growth rate today but even more importantly over the medium and long run, expanding our investment in equipment. Our investments in people, and most importantly our over all knowledgebase. We will have to leave it there. Mr. Basu, mr. Furman, thank you very much. Rebecca, you also. Thank you. [applause] we are live now at the National Press club here in washington would be an American Task force on palestine this morning host a discussion on the situation in iraq and possible implications for the u. S. Interest in that region. Good morning, everybody. Welcome to the [inaudible]. We look forward to a lively discussion about the most topical subject. When we started preparing for the subject we had no idea how accelerated things would be on the ground. I thought at least i would tell you about the events of the last 24 hours where kerry is actually in baghdad as we speak after visiting cairo and amman and the, iraqi, iraqi forces have lost control over several border checkpoints with syria and one with jordan. The, the American General reported that the iraqi army is in shambles and can not stand up to face much more formidable isis. During the past couple of months the situation has become untenable, with ther rogues of the power of the Central Government in turkey in baghdad and the empowerment of the rebels both in syria and in iraq which have gathered together under the name of isis, Islamic State of iraq and syria. They have crossed the border recently and in no time at all they rolled over major cities including mosul, the second largest city in iraq. They have become an unstoppable force. Nothing could stop them and this needless to say generate ad great deal of interest in the region, in iraq and in the United States. This president of the United States, president obama, who is so averse to intervention, military intervention and foreign ventures has found it impossible to avoid iraq again after he was so happy to leave it. And thats why you have mr. Kerry there. Thats why you have forces, actual forces, experts in iraq to see how to mount what the president thinks is the major new threat to stability not in iraq but one that would spill over into the region including jordan. So something needs to be done. It has become clear that the government in iraq has failed on so many levels to hold together its own people because of sectarian policy that has become intolerable and even has been opposed by factions of shiites who are not, who are in power but not in favor of such a policy. Now iraq is important. Iraq is important not for just what happens in iraq, it is important for its impact on the region own and the superpower that is, that has been in charge of the region for a long time and now has been trying to engage obviously with a great deal of challenge. Should we be able to put iraq together then the region will avoid one of the major catastrophes that are in the waiting. In a confrontation between sectarian and religious factions across the middle east and beyond. Shia and sunni confrontations will last for decade, if not longer, if they actually ignite in iraq. They have started in syria and lebanon and other places but this megaconflict can only be allowed to become a define irof the coming decades if it is not checked in iraq. It is the challenge of this administration and the people in iraq and neighboring regions to act responsibly and to put together a new government that would allow a more fair and acceptable participation of all segments of society. We have put together for this event an Excellent Group of experts on the subject. I will introduce them one at a time as they speak. We have been very lucky to have them avail themself for us and grateful to all of you. Of i think i would start with john alderman. He is the Zbigniew Brzezinski chair at the middle east at csis. He has served in government at the state department in the past. Has been a very active member of the think Tank Community for the past decade at least in, in the middle east and has participated in policy making as well as commission, hamiltonbaker commission, to assess the previous problems with iraq. He speaks arabic. So dont say anything. He might hear you. And he is a national treasure, really, john. Honestly. We are very proud to have you here. So john, the way we structured this, well have every speaker will have ten minutes of presentation and will be asked a question after that. And then, after we go the rounds we will open it to questions and answers by the audience. We expect a lively conversation and im sure everybody is ready for tough questions. I will first invite you to make your remarks. Thank you. Thank you very much, ziad, for that warm introduction. I think the thing you forgot was friend. Ziad is an old friend. Ziad is the Genuine National treasure. I only thing i would say about the introduction because im sorry my parents werent here. My father would have loved it and i my mother wouldnt have believed it. I want to start by remembering somebody today, my colleague died yesterday. Fuad and i cotaught at csis several years, nothing more than iraq where we disagreed bitterly all the time, he was somebody who i valued for insite, the strength of his beliefs and his intellect which was never in question even for those who disagreed with him. That is especially fitting to talk about iraq today. And i think fuad and my thinking was starting to converge, which is the sense im getting smarter or he was coming around. I think americans are strange in the world and we have sort of two national charactertics the way we look at Foreign Policy one were inveterate optimizers. We always look for the best option. I think this sort of, the deep cultural side of our optimizing tendency is the popularity of consumer reports. We love ratings. We love seeing what is the best. I think we have approached iraq consistently looking for the best outcomes. We look for the Optimal Outcomes and the other piece of american, sort of psyche that feeds into iraq is the belief that every problem has a solution, right . The problem is just you work to get a solution and there are lots of possible solutions and because we like to optimize you look for the best solution. Then we move on because weve taken it from the to do pile and weve put it in the done pile. What strikes me as we look at what is happening in iraq is in both our belief that everything has a solution and there is a best solution, were very different from the other countries in the region because it seems to me that what he have seen in the last several weeks virtually all of iraqs neighbors have a continued struggle with isis or whatever you want to call it is in their interest. I think what is obvious for city where syria where the government of Bashar Alassad is fighting a extensional battle not against syrian citizens looking for selfgovernance but against a bunch of bloodthirsty jihadis who will take no quarter. They love changing the topic, putting focus not on syria civil war but a war of civilization against jihadis. The iranians see helpful way to take pressure off syria, b, as a way to make the government of iraq more reliant on iran than it already is and c, here is iran which is used to being considered a trouble maker in Global Affairs being perceived to have some solution they can offer the world. So the fact that there is a struggle actually helps the iranian. Gcc states actually think it is helpful to curb excesses of shia true number rack and having under pressure give sunnis a place at table. The kurds are happy to have the Central Government preoccupied with things in other parts of the country so they can consolidate control and theyre happy to have the peshmerga as a necessary element to help keep iraq together because it helps kurdish bargaining in all of this. I think maliki himself is not afraid to fight. If you remember back in 2008 with his charge of the knights campaign, American Military advisors thought he was nuts to go against militias in the south of iraq when he wasnt totally prepared and terribly risky. He thought it was good. Now that is a part of iraq most firmly under his centralized control. So he is not shying away from a fight. And it seems to me that if youre looking at this problem, which we all consider a serious problem, we have to consider the fact virtually every surrounding state, jordan i think being a notable exception, but all these people surrounding the conflict actually think the conflict is helpful in some way. Nobody wants dash to win which is also interesting but a lot of people want dash to fight. I think that makes this an especially difficult problem. Because if youre looking at it from an american diplomatic perspective, if what youre looking for is you want to fix the problem of iraq, then you start focusing on the need for iraq is an inclusive government and it has to be more democratic and you have to give sunnis a place at the table and Everything Else and i think it gets you into negotiations that all the combatants have an interest in avoiding because all the combatants think when you get to those negotiations, you want to be in the best position you can be. Now is not the time to do it. The time to be in those negotiations is after the fight has gone on for a while. So it seems to me that, where the orientation of american diplomacy has to be is towards the diplomacy of this, rather than immediate go into the politics of it because it feels to me like the politics of this, the inpersonal politics in iraq are not yet ripe for solution. Now there may be a different role for leadership of the shia community. There may be a different role for leadership of the national community. That will take time. Remember maliki, after the last election took nine months to put together a government. To my mind the important thing is what secretary kerry is doing now, i hope he is doing now, which is working with all of the antagonists, all external sponsors, persuading them that in fact it is not in anybodys interest that diaskh gets stronger. Foreign fighters, arab fight is and western fighters coming into this region are against peoples interest rather than in favor of them the u. S. States will act to protect its interest i think is the important element rather than what i fear some people want to do which is a, lets talk about using military instruments to keep diash from winning. And b, lets get a political solution. Seems both of those things put the cart before the horse. And what we have to do, we have to build a broader consensus for what it is were trying to do. I see from petes notes and unfair of me to look over at your notes, he is going to talk a little bit about the durability of diash and what happens. I think everybody is making a bet that they cant win. I think it is a dangerous bet because even if they dont win, sustaining that, embedding themselves in that part of iraq longer period of time, is actually enduring threat to the interests not only of all the neighbors but all iraqis as well and seems to me the diplomatic task is to persuade people, partly through attraction and partly through coercion that we have to arrive at a different set of ambitions, that we have to sequence this in the right way. And that what we have to do longer term, get a political settle mane in iraq that addresses peoples concerns but in the near term we have to line up external sponsors of diash, external sponsors of this lines of conflict to diminish that and deal with that insurgency as we deal longer term with the problems of iraq. Thank you, jon. We have situation where this conflict is already part of a existing conflict between iran and shia in one side and arab state, significant state, the conflict in syria on the other. Dash is actually part syrian. Nobody knows how much syrian. Suppose you are kerry. What do you tell the saudis and the iranians to get this, to get this message that you were talking about . When you talk to them, can you bring them together at all on this . First they are very different conversations with the saudis and iranians. Not the same one. Not in the same room. Not only that, but they start from different premises. I think the iranians are waiting to be asked. The iranians, the iranians go around the world preoccupied with their prell tiff sense of weakness visavis the United States, right . First, second and third on their priority list of things to address and they are looking for ways to increase their relative left rang and one consequence leverage and one consequence of that i think they are willing to endure things that hurt them tactically because they think strategically holding the keys to a solution helps them in the long term and their strategic interest is how to deal with their weakness visavis the United States. So i think on the one hand with iranians, you, you dont want to come and give them a list of things you want to do and get into a bargaining situation, you do this, we do that because i think that it wont get you to a solution. I think the key to our problems with iranians, is highlighting the common interest and not make it seem like a concession but instead things we are doing in our common interest and were doing some things and youre doing some things. So i would be very careful in the iranian context not to get into a headtohead negotiation. I think with the saudis its really about a, reassuring them about our intentions in the region, reassuring them about our bottom line with shia influence protect sunni interests and other things and also having technical conversation about our understanding of the nature of dash and the foreign fighter problem and regional things. We are already working with the saudis on this and reportedly last six months the cooperation has gotten better with the cooperation of jihadis. One of the interesting things that the saudis have they have an incredible database of activist muslims who tend to go through mecca more than other people, right mohammed and others are support right get us analyst criminal on the same page. I think part of this is deepening that Technical Cooperation because ultimately there is a huge overlap between saudi interests and American Interests. Already a lot of that work is going on. I think it need to continue. Allow me to introduce our next speaker. Dr. Fighter mansour. I am reading his notes. He is a retired u. S. Army colonel who served two tours in iraq, the last one as executive officer to general David Petraeus at the time the commander of Multinational Force iraq. Peter is now a professor of military history at the ohio state university. He has authored two books on iraq, on iraq war, the most recent of which is, surge. I recommend it highly, my journey with general David Petraeus and the remaking of the iraqi war. A couple of things to add on peter. First that he went to west point. Graduated top of his class. We will remember that. Secondly he is reseparate contribute of most prestigious award presented by atfb a couple years ago. I remember it well. Peter . Well, thank you all for being here today. And appreciate the attendance. We have a lot to talk about and you know, i ziad, dr. Ziad and i were talking about breakfast and amazing how many iraq experts there are now that iraq has become news again but i do consider myself one having spent 28 years or 28 months of my life. Felt like 28 years. Felt like 28 years, two different tours. And some of you may not agree with what i have to say but thats fine because one of the great things ive discovered in my transition from 26 years in the military to now being an academic is no longer matters whether or not that im right because i have tenure. [laughter]. All right. So, im going to use the acronym,isil, the Islamic State of iraq and the levant. Why do you use that term . This organization has goals that expand beyond iraq and syria. They dont call themselves the Islamic State of is rack and syria. They call themselves the Islamic State of iran and alsham. Which contains, lebanon, syria, iraq and jordan. This group has broad ambitions which they recently started to obtain. What is ice sill . System 6 isil. Who comprises it . It has veneer of jihadists around the world and has a core of iraqi baathists, exarmy officers who went into the insurgency and went to the army after we debaathifieded iraq and created insurgency in my view and read all about that in my book, surge. They have been gathering strength in sanctuaries in syria aided by the civil war on going there. Most recently they have been joined by sunni tribes man from alanbar province and niniveh and other places in iraq, strikes men who once had very Firm Alliance with the United States in their battle es against al qaeda and iraq and previous manifestation of isil and now have turned against the Iraqi Government for its very sectarian and authoritarian policies. So this is an alliance of convenience at the moment between foreign jihadis, iraqi former Iraqi Army Officers and soldiers and local tribesmen and it is an alliance i dont believe will hold together in the long run. The only question is how much will they achieve before that alliance breaks down. So we have to ask ourselves, why was isils takeover of mosul and about more than a third of iraqi territory in the northern and western portions of the country, why was that so easy . And you have to go to the impact of Prime Minister nouriel malikis governing style. He succeeded fracturing the alliance we created with the surge, with iraqi tribes, the sunni tribes. The narrative back in the surge we created and iraqis helped create, everyone against al qaeda. They became everyones number one enemy. That alliance worked. Nouri almaliki, when the u. S. Forces departed in iraq in 2011 felt the war was won. He could now govern the way he saw fit and he saw fit to alienate large swaths of the iraqi people by attacking their politicians. By aglomerating power to himself, attacking their protest camps, by marginalizing all of their elites and by not giving them a fair share of power and resources of iraq and this has succeeded in alienated, alienating most of the Sunni Community and most of the Kurdish Community as well. The maliki did one other thing. He turned Iraqi Security forces police, army and i would add the courts as well to his personal militia. He got rid of a lot of Competent Army commanders, a lot of sunnis, marge alizeed a lot of kurdish leaders and he packed the military forces with leaders beholdenned to him politically and he created exactly what he wanted. A very politically reliable military force but also one that cant fight effectively. So when isil invaded the northern and western portions of iraq they didnt receive a lot of pushback from the local inhabitants who welcomed them for the most part or at least acquiesced and stood aside while they took over these cities and the iraqi army pretty much just dissolved and, and retreated out of those points because they were fighting for sunni areas and most of the commanders were shia and they were, the soldiers were fighting for these commanders who really are fairly corrupt, who dont care for them, and if youre a soldier and you have a choice between saving yourself and withdrawing from the battlefield or fighting for a corrupt commander who is only in it because of the political gains, youre not going to fight. So isil has taken over much of the sunni triangle that we heard about so much back in the early days of the war and they have reached as far as samarra and pa cuba and then falluja. That is about 40 miles away from baghdad in each of those locations. Isil seems like, you know, theyre a juggernaut right now. They seem on the march but they are hardly an unstoppable force. There is probably fewer than 10,000 committed fighters in their ranks. This is not an overly large number of they have to now control the territory that they have taken and that is going to take forces. So they cant put all of those fighters on the front lines. I think it is very unlikely that they could take baghdad a city of seven million inhabitants, tens of thousands of armed shia militiamen on the streets and iraqi army down there at least with more competent units and more incentive to fight for the city. I was in baghdad. I had a Brigade Combat Team of 3500 soldiers. Baghdad swallows up armies. It would swallow up isil as well. I agree with jon. We have time to get diplomacy and eventually the politics right. We should not provide some sort of kneejerk reaction thinking that baghdad is going to fall from a jihadist offensive. But i have to disagree with you on one thing. It doesnt mean that isil cant win. They can win. They can win by consolidating this proto state that they now have seized, spanning the syrian and iraqi border. That will give them a base from which to destablize the region, from which to launch attacks against europe and the United States if they wish. And to expand their own territory. Theyre now extremely wellfinanced. By all accounts they have seized half a billion dollars in assets from the mosul bank. So it is now the strongest and Richest Terrorist Group in the world. And one which controls territory. So the question is, can the Iraqi Security forces retake the ground lost . And the answer is, not without a lot of help. Now jon mentioned the charge of the knights. I was there when nouriel almaliki called general petraeus and ambassador ryan crocker to his office. That was on a thursday evening. They show up the next day and he said, im heading down to basra with four brigades on saturday. No coordination, because he didnt want us to tell him that was a bad idea. And the charge of the knights succeeded. Maliki succeeded clearing the them out of basra and sadr city and a march raw. It only succeeded because we supported it. Logistically it was failing. They had no fire support. They were on the verge of failing. That would have been disasterous for malik kim. He would have easily suffered a vote of no confidence in the council of representatives. He went down there to basra. He realized his political stake was on the line and went down to basra and moved his headquarters down there and commanded and controlled the way only an iraqi could, with four cell phones in front of him. General petraeus laid on advisors, air power, attack helicopters, drones, an airborne infantry battalion, logistics. It was that push from the Multinational Force in iraq that allowed the charge of the knights to succeed. Maliki is doing sort of the same thing. He has moved his headquarters up to samarra. That is the battlefield right now. The home of the golden dome mosque. The shrine, the fourth holiest shrine in shia islam. He will defend it but he doesnt have Multinational Force iraq to back him up anymore. So it is going to be a very dicey affair. 25 of the army by recent reports is combat ineffective. And he has no tribal support the way we had tribal support in 2007 and 2008. So, what can we do about it . Well, first i agree with jon, we shouldnt do anything about it militarily until there is a diplomatic and a political solution. Us air power which everyone in this town seems to talk about as some sort of strategic panacea to everything will not succeed without significant help to regenerate combat power in the iraqi army. You can not destroy these forces in isil because theyre integrated now among the populations of these cities with air power alone. Youre not even going to be able to target them effectively, not without killing a lot of civilians along the way, thereby alienating very people you need to bring over to your side to win this conflict. So, i believe that what needs to happen is we need to get the diplomacy right and the politics right and that means an Iraqi Government that is more inclusive, more legitimate and that has the support of all sects and factions in the country and he can reknit that alliance so successful defeating al qaeda in iraq the first time around in the surge of 2007 and 2008. If you can do that, defeating isil manies a much, much easier prospect albeit one that will still require a lot of bloody ground combat. And i will end there. Thank you very much, peter. You have participated fully in the surge as you just said in 20078 and that was a comprehensive program, a multi, facetted, multifaceted program. A fundamental part of that was the encouraging the tribes and tribal leaders and the sunnis at that to be part of the struggle against the terrorists. Now do you see, now having described the army as incapable now in the present situation to deal with this, do you see a role for something similar both on the sunni and on the shiite side to kind of be part of the participation against the fight against isis . Well this is exactly the way ahead. If you can get a government that the sunni tribes and the shiite tribes, as you noted can support, then you can reknit this alliance that was so successful during the surge. You can bring them back into acord with back dad and the government and defeating the veneer of foreign jihadis in the ranks, that becomes a much easier task. And i might add it would be a good time for the Iraqi Government to think about reconciliation with the baathist portion of isil. That if you could maybe think of a way of having them buy into the government in baghdad, perhaps some sort of federal structure for the sunni areas of northern and western iraq but within a broader iraqi state, this again, general petraeus used to say that you cant kill your way to victory in these kind of conflicts. You want to reduce your list of enemies so you fight as few people as possible and what you want to end up with is what we had during the surge, what you want to end up with now, everyone against the foreign jihadis because that is the element that is truly, truly dangerous to u. S. And worldwide security in this situation. Thank you. Our third speaker is mr. Masinal shakir leader after economic think tank, advisor to the Iraqi National congress. Between 2005 and 2007 he served aspects Economic Advisor to Prime Ministers office and prior to that he was an active member of the iraqi prodemocracy Movement Since 1992. He lives in baghdad and happens to be visiting to our good fortune has managed several corporations in iraq and california including motorola in baghdad and most recently icm corporation. Holeds a bachelors degree in electronic engineering and an mba. Welcome. Thank you very much. Thank you, doctor, and im actually very honored to be with such fine gentlemen on the same panel. First of all with the passing of dr. Fuad, he happens to be a friend of mine also. We are actually closer politically as he is another member the prodemocracy movement in the middle east. We worked together, 15, 20 years ago. May god bless his soul, dr. Ajami. For the National Press club i wish to inform you, almost 50 years ago, my father, my late father, who was a diplomat here in washington, he was the first iraqi diplomat in the world that came out in the support of the change in iraq in 1958. So on july 14th, 1958, he was in this club announcing his support to the change in baghdad. So i would like to follow in his footsteps, being the second member the family in the National Press club. Im glad i didnt write my notes here so i kept my notes in my mind. There are a lot of things to talk about in the middle east. Obviously especially iraq. The iraq crisis is such a major thing that we have, as you can see, there is a huge amount of press coverage, including cspan, including satellite channels from the middle east as well as the iraqi channel, the National Iraqi channel is over here also. Im glad there is interest in iraq and unfortunately there is continuous interest in iraq in the negative manner. I wish there would be interest in iraq with its Economic Growth or its people or the tourism in iraq but unfortunately iraq always comes to the agenda and comes up as a higher priority when it comes to death and killing and we have organizations that keep changing names, you know they start with, the in the past iraqis were fighting debaathification as the menace and then the change became al qaeda. Now we have, we cant even agree on the term, some call it, isil and isis. Actually alarm bells went up in kuwait and they call i had, is i. Q. Iraq state of iraq and kuwait. So the alarm bells are everywhere in the in middle east. This organization is knot there to provide prosperity for the people. Im not a military person. Im an economist and engineer and a businessman. So i can not really comment on what is going on but what i hear and unfortunately im hearing almost the same thing i heard back in 2003 where the government officially, you know, iraqi channel broadcast this morning that the government tactically withdrew from anbar today. Why would they tactically withdraw from the borders with syria and jordan . Nobody would tactically abandon their post with their neighbors because these are, syria is the neighbor where isis or isil or whatever is coming in and out. So that is a very poor and very bad strategy to allow even more members to come into iraq and more hardware, military hardware that the United States was, were grateful for the United States to help us with all this hardware, military hardware, to make its way back to syria. So to open this channel, a fighters, then, weaponry out, is not the right dark call strategy that tactical strategy that the Iraqi Government should doing. Going back to the economy i look at things from an economic standpoint. Of course everybody is reporting this as being a sunni, shia, iranian, sauddy, i dont know if it is syrian, yeah it makes sense from looking at it from washington or from london, makes sense we can easily say there is a black or a white. Whichever is black or white, sunnis and shia. I look at from different term. Maliki government was a friend of the west. Change in iraq was assisted from the by the west. It is not in my point of view a sunnishia challenge. What i look at it as the change in the Economic Strategy of the Iraqi Government that took place in 2010. Yes, maliki did not win election in 2006. He was assisted by our friends in the United States to become Prime Minister in 2006. In 2010 he managed to stay in power not winning most number of seats, 89 seats as opposed to 90 seats as opposed to dr. Alawi. Still managed to stay in power. That day was a major change in the iraqi strategy. What we were doing in iraq since 2003 and i was participant in that as an Economic Advisor with the jafri government, maliki government and i even assisted dr. Chalabi. Deputy Prime Minister and head of the Economic Committee within the Prime Ministers office. What we were doing is changing the central economic, lets call it the central economy into a free market economy. That actually worked. With the formation of the tbi bank, trade bank of iraq, iraq was actually issuing letters of credit, which was honored by Western Banks and iraq was gradually going away from what actually happened in 1958, what my father actually approved of, the biggest demise in the iraqi economy was in 1958, when we changed from a free economy into very centralized economy which continued from 19578 until 2003 and we actually managed to change it into a free economy but in 2010 this is the big setback, is that the government started going back into the central economy. And most of you actually know that it is much easier to manage your population when you have a central economy because the Central Government will issue, will give jobs. They can hand out pieces of land. They can actually give you a contract. The power is where the buck is as it is said in the United States or where the dinar is, this is where the power is. When you have a Central Government the central Prime Minister or the president becomes the authority within that country. We fought that in 2003 of what saddam has done which was obviously a central economy. Maliki unfortunately is taking us back to the central economy. That is really the core of the problem. When you do a root cause analysis to all the problems of iraq, whether you want to call it sunnishia, whether you want to call it arabkurds, the kurds successfully, iraqis, i would call them the iraqis. They happen to be my iraqi brothers who live there and happen to be kurds and they happen to be arabic. The iraqis in Northern Iraq succeeded by implementing a free market economy. Any of you have been there can witness that for themselves. My daughter mia was with me and she witnessed how successful that country was, that part of the country was. So iraq can be successful and we have models for success in asmia. There are prove veries in southern iraq have economy in southern province. They have honest and ethical governor who succeeded turning his province into a success. The problem is, with the economy. It is not with the sunni and shia. The gulf states in kuwait or saudi arabia or qatar are not against shia as most people would like to think. No, they are against the central economy that maliki put together and he is handing out, he is handing out jobs. He is handing out Financial Assistance to some tribes but not giving it to other tribes. Iran is a shiite government. Nobody is sanctioning iran because it is shia. It is not shiasunni thing. We had for the go to the oil and gas, hydrocarbon law, maliki approved, worked with the kurds and shia in basra and sunnis in anbar and approved this hydrocarbon law, we wouldnt have a problem with exporting oil out of ports in turkey. Now there are tankers that are filling up with iraqi oil, exported from the krg, Kurdish Regional government, but that is the effect. The cause was not approving the hydrocarbon law. Again it is a economic problem. The, you know the sunnis in anbar or ninevah they were barred from major jobs they used have in the past. Why were they . Whether it was debaathification or not debaathification, if they were not criminals, why would you be barred from a job . Why would a shia be barred from a job whether he was a baathist or not . That is the economic underlying cause that brought us to this problem today. But what happened is obviously the sunnis and anbar and saladin wanted some assistance to help them fight for their rights. So we have to, as iraqis we have to distinguish between the needs of iraqi people, whether they were kurds, sunnis or shia. The needs of iraqi people and problems they are facing today, and i call it economic problems because we have six Million People under poverty line. While we have maybe a handful of people who are not millionaires or billionaire. The gap between the rich and the poor is widening. That is an economic problem that were paying for now in a military terms. Now we have to ask our friends in the United States and our friends in iran and our friend in the region to help us fight isil or isis or whatever they want to call them. The problem is economic, gentlemen, ladies. This is what i like to underline. Therefore, no matter what we do militarily with the continue wages of the current government in baghdad and policies they have we will never fix the problem. I say we in the prodemocracy movement before 2003 we called for the federalization of iraq. Today, iraq is the only country in the world that has three provinces that are federal and 15 provinces that are central. There is no government in the world, country in the world, the United States is 100 federal, all 50 states are federal. Other countries are central. Why would iraq be only country with three provinces federal and 15 central . That is the core of the problem. Had we federalized the entire country and anbar would be a province, basra would have been a province, we wouldnt have problems we are fighting today. Hydrocarbon law was cause and effect. Everything you look at today has an economic underlying problem we could have fixed four or five years ago. Thank you. Thank you very much. Yes, everybody in this country understand the economy stupid, argument. So i think this there is resonance here. But the question to you, and i would like for you to explain to us, at least, that is not what is used to encourage the people to fight, to kill, get killed and sacrifice to start wars and maintain wars. We have an actual sectarian divide on the ground amongst the people. Would you like to give us a sense of how many people who, within the Sunni Community or the Shiite Community are really committed to an antagonistic program of other where racism is on the rise or on the wane or people see through it or will be useful to any demagogue to use it and keep this struggle going . Well, economists make very poor generals and they can not provide motivation for soldiers to move. Economists can give numbers and that pretty much all we can do. The politicians can use the economist numbers and turn it into a political game. The Sunni Community is, i actually prefer to call them the Iraqi Community because i am part of the Iraqi Community just as shia is part of the Iraqi Community. Theyre suffering. The shias are suffering. The kurds are suffering. There is a lot of suffering in iraq going on. The sunnis, because they live in the city of mosul, which happens to be a very short drive to the syrian border, has an advantage over a cities lets say in samarra, which is hundreds of miles away from syria. So that advantage being geographically close to syria where the key events of a civil war going over there has been used to assist them to make a change. I have friends in mosul. I have a lot of friends in mosul actually and i talk to them very regularly. Believe it or not in the first few days of the occupation lets call it of most all by isis, or isil, they were very happy. They were very happy because they did not like to be part of a maliki government which is sectarian government. They did not want to be part of a sectarian they thought isil came to liberate them. They used word liberation. Shortly few days later he received different report. Isil is not to liberate them, ban women from walk negotiate streets. There ban them eating cucumbers and tomato together. They band them from not wearing hijabs. They banned them from their rights. Not that it means they will go back to maliki and say were sorry. No, they still have problems with the Central Government but what they realize that isil is not there to help the quote, unquote, bath elements or sunni elements in mosul. They are there to take iraq back 1400 years ago. They took parts of syria in 1400 years ago and they plan to take levant as you clearly stated up to kuwait back 1400 years ago. Theyre enemies of civilization. Theyre enemies of progress. It is not a sunnishia thing. Believe it or not there are shia elements that support going back 1400 years ago. And im sure within christian sect like to go back, i dont want to names, but parts of eastern provinces of United States like to still go on cartwheels and go back some 2,000 years ago. So there is idea of going back that many years is not afternoon sunni thing or a shia thing. Im sure there is jewish people who would also like to go back 3,000 years ago. Okay. Great. Thank you so much. Yes. I think the point you make about the centrality of economics is important but i think the distinction between politics and economics is a little bit troubling. Seems to me that politics is ultimately about the distribution of resources at its core. People talk about how war is politics by other means. But politics is economics by other means. I think this is fairly universal. The fact that anybody trying to build a political network, tries to build Patronage Networks and rewarding people that support you at the expense of people who dont support you. And the fact this is seen, loyalty is seen in sectarian terms is not unique to iraq. It can be seen in tribal terms. If you go through the the middle east it seems to me this problem of governments seeking to use the economics to solidify political control goes far beyond iraq. And attacking that problem is not an iraqi specific problem but a broader problem of governance in the middle east which extend from morocco in the west to iran in the east and probably continues, but my responsibility end with iran. So everybody else has their own problems. But it does seem to me that there is something much more universal about the use of economics as a Political Tool that we shouldnt lose sight of talking about iraq. It doesnt make iraq distinctive. It makes iraq more similar toward places. You want to Say Something first, peter, because i have a generic question that touches on this . Is it possible to isolate a country in the middle east and solve its problem alone, iraq or syria or the arabisraeli issue . Or are we dealing with Border Crossing issues, Border Crossing issues like extremism, like terrorism, like corruption, like poor governance, across the region that have to be thought of as a regional issue and part of a kind of a master, comprehensive strategy like the surge to deal with all these things where every country kind of fits in, in a future middle east that you hope to get, if you have a more rational policy or strategy . Anybody can. I will take a swing at that. Then im going to dovetail to what has been said. This has to be a regional strategy, that the Obama Administration comes up with. You can not deal with iraq alone, syria alone, lebanon, alone, israel and palestine alone. It is one region. What happens in one part of the region affects the other part as weve recently seen. What affects, you know, we can not contain what is going on in syria to syria. And i think, unless we have a regional strategy, were doomed to disappointment in whatever we attempt. I just want to make one point about the iraqi people. And that this is, what this is all about. This is about in my view political elites in iraq using religion and fear to maintain control over the iraqi people. We have people in the United States who say, well, iraqs not a real nation anyway. Its, always been three different parts and we hear Vice President biden, oh, it should be divided up. I didnt hear a single iraqi i met say that iraq should be divided up into three separate states. They all believe that they were iraqis. 40 of iraqis are from mixed sunni shia marriages. That doesnt sound like a place that is highly sectarian from me. It is political elites in iraq that have created that narrative and using it for their own purposes. Many of these elites who spent the years under Saddam Hussein as expatriates, plotting their revenge. And this is what has got to stop and this is why there needs to be a new political compact in baghdad, one that takes the common iraqis into account and not just the folks at the top of the spectrum of power and resources. So, i would, stop there and let my comrades have a shot at it. Seems to me that while most countries in the middle east have some International Aspect to their domestic role, the interesting question is why iraq is so susceptible to the influence of outside ply players . It has something to do with the fact that iraq is an economic player in the region. It has something to do with the insecurity of the gcc states, both iraq especially with regard to kuwait but the sense of a need for a buffer with iran. Irans desire to get influence over iraq as a way to meet its own regional ambitions. There is something particularly international about iraq which i think is both illuminating about the situation in iraq but also helps us think more strategically about how a solution to iraq, really as pete suggests, has to fundamentally have a regional, diplomatic component in addition to a domestic political component. Thank you. Again going back to looking at the matter from pan economic standpoint and lets picture this picture in 2003. Had iraq opened up itself to the entire region, opened itself economically to iran, to turkey, to saudi arabia, to qatar, to kuwait, had we had this openness economically we probably would have witnessed a company with very strong and very experienced gas installations come to anbar. Anbar happens to be one of the biggest areas in iraq with gas exploration. They could have built facilities in anbar. We could have probably witnessed Saudi Companies build a huge petrochemical plant in mosul. We would have built the country economically. Iran could have built five star hotels. Turkey, is in kirkuk itself. Had we opened ourself economically, iraqis would not have been fighting. They would have been working. They would have had jobs. They would have been working in factories. They would have improved themselves. And we would have built the middle class again. Iraq, ladies and gentlemen, does not have a middle class. We have the elites as you clearly explained and i state theyre not millionaires anymore. They are billionaires. The iraqi elite is billionaires. And the poor is six million under the move vert line. Poverty line. This is what we have. Its a Major Economic problem. The billionaires are not shia. Theyre shiites, sunnis and kurds. Six million below the poverty line is shiites, sunnis and kurds. It is a economic problem. Thank you very much. Well, this is the time to open it up to you, the audience and i will take you in order. Please ask you to identify yourselves and ask questions. Comments are very attractive and sexy but there is really no time for comments. Well start with you, please. Put a question mark after your comment. Yes. Good morning. Im with the voice of america kurdish service. I have no comment but i have a general question. Everybody talking about putting pressure on the mr. Maliki to have a more inclusive government. I was just wondering, what kind of pressure is in fact on mr. Maliki to have kurd, and sunnis, to have more say in the future government . And also, i was wondering what about the kurds . What are their ambitions . Is there any way that some people say, there is no way that iraq goes back to, before mosul, lets capture. Thank you. Let me take the second question first. The kurds as you know have seized the oilrich city of kirkuk which they believe is central to their identity and to their economic future. They will never give it up. It will be kurdish for the foreseeable future. Any, the kurds have a lot of votes in the council of representatives. Any government that wants to form with their votes is going to have to give them kirkuk. I think what weve seen here is an expansion of the green line south and one that will have Lasting Impact on iraq. And perhaps, Lasting Impact on a nascent kurdish state. That remains to be seen. As far as pressure on maliki, i personally dont believe a viable iraqi ghost can being formed with maliki as Prime Minister. He is toxic to a lot of sects and ethnicities and parties and factions within the country. He is seen as the central part of the problem and so, for me it would be very difficult to imagine a government that is inclusive and gets buyin from all of those groups with him in charge. But, you know, what can the United States do about it . You know, we cant tell the iraqis who to select as their next Prime Minister. All we can do is cajole and encourage and work as an intermediary between the various parties. When the division of iraqi army comes to save kirkuk from the isil or isis, that is saving a city and not occupying a city. So i know people are saying that the kurds occupied kirkuk. The kurds are iraqis and kirkuk iraqi. You know, i am very extremely disappointed that the iraqis did not fire one bullet to stop isis from occupying mosul, and im proud that the peshmerga saved kirkuk from isis. Its worth pointing out the Public Opinion polls in kurdistan about their intentions for their future. Just to be clear about whats going on. [laughter] hi. Finish. [inaudible conversations] [inaudible] i [inaudible] so are they all under maliki . Are they all under iranian influence, or there officials within that community, and if so, can some of these be reached to use that political moment where we can find [inaudible] want me to try . Yes, please. Yeah. Im not the spokesman of the shia community, i am an iraqi who happens to be shia. Im an iraqi first who happens to be an arab shia. Of course, just like any nation, are all the catholics in the United States democrat, or are they all republican . Of course not. They are moderate, there are extremists, there are secular shia. Believe it or not, i mean, today is what, monday . Last friday, just a couple of days ago, during the friday prayers the spokesman of our ayatollah, the high cleric, has stated very clearly that it is time to form a new the keyword is new to form a new government in iraq that represent all iraqis. He didnt say i want it to represent shias, he didnt say i want it to represent arabs. The cleric has stated that it has to represent all the iraqis. So when sistani gives this order plus we have most of the [inaudible] theyre very moderate compared to the extremism that were seeing from the state of [inaudible] so, yes, of course, the shias have and some people claim that there is another sect of islam, alawite. But in the west its easier to lump it together. Theres shia, theres sunni and nothing else. I mean, as you know, there are any number of parties with different leaders, with different senses of interest, with different strategies Going Forward. Maliki has been able to portray himself as the leader of the shia community, and in doing so and this goes to petes point it serves his interest to have the shia under threat from sunnis because that helps keep, helps keep shia from defecting. And i think what we all would like to see in iraq is an environment where there is less sectarian solidarity. One of the things i got very alarmed by under the Bush Administration in about 20042005 was the desire to try to create sectarian solidarity as a way to put this together. So i think the Bush Administration wanted a unified shia bloc and unified kurdish bloc. Because then you bring the three pieces together. The problem that i have long been concerned about in iraq is you cant make a mosaic with three pieces, and you cant make a coalition where 95 of the people are in government and 5 are in the opposition because there arent enough resources to go around. What you really want is a dynamic environment where people feel, well, not in this government, but i can be in the next one. And people have to work to hold coalitions. You want narrow coalitions where people pounce in and out. It bounce in and out. It seems to me youre in an environment if i dont win now, not only am i out, but my children and grandchildren will never have access to anything. And that increases the stakes, it increases the violence, and it seems to me that what your question gets at is precisely the weakness of the way the Bush Administration approached this. By trying to promote shia solidarity, it actually made sunnis feel as sunnis have felt for the last ten years on and off that there is no future for them and their families and their children and their descendants and, therefore, they have no stake in making this work Going Forward. Do you care to address that . No, im good. No, okay. Yes, sir, in the back. Yes. Thank you so much. Good morning. All of us are against terrorists, all the people, all the countries in the middle east. My question, my question terrorists now in syria and iraq and in jordan, why hasnt u. S. Tried seriously to establish alliances between syria, iraq, jordan with u. S. Against terrorists . [inaudible conversations] first. Second what is your name, please . Enter my name [inaudible] this is first. Second, we know the crime of terrorists of september 11. The people september 11 was caused by [inaudible] terrorist organization. When will u. S. Start with them to fund and to [inaudible] in the middle east or in iraq and syria . Thank you. If america did that, we will reach to a stable, a stable germany and middle east. Germany and middle east is iraq. And, and american say its different from current countries which surrounded iraq and their interests thank you. It is American Interest to reach, to achieve stability in iraq. But countries surrounded iraq, they dont want to reach this goal, and thank you so much. Thank you. Great question mark. [laughter] can i address the first part of your question . Because i think its an important issue. But im no, i know, but now im going to talk. You talked about why the u. S. Doesnt create an alliance with syria and other countries against terrorism. One of the things i have done in my ramblings around the world is ive spoken to government leaders, and ive raised this question is Bashar Al Assad in about 2007. Because there was an effort underway to try to reverse the hostile relationships between the u. S. And syria, and it seemed to me that there was actual ample common ground. As you probably know, Bashar Al Assad used to facilitate jihadis traveling through syria to iraq. The bus used to leave from a block away from the american embassy, and the syrians thought that this was a way for them to enhance their leverage visavis the United States. Because it made the u. S. Need something from syria, and syria like i said about iran was preoccupied with the fact that it was weak visavis the United States. So i asked Bashar Al Assad directly whether there might not be an opportunity to reverse his hostile relations with the United States not by waiting for the United States to ask for things and then to bargain about you do this, and well do that, and well stop the buses and give you information, but to offer as a free will gesture. So syria was not just the problem, but syria was part of the solution. And one of his friends who i periodically get strange emails from these days, one of his friends said, you know, syria can be a solution provider. And i put this to him that one of your friends said syria can be a solution provider. What do you think of that . And he, his reaction was to be totally transactional and to say if we were to give something to the United States, that would be conceding something. We dont have extra things to concede and, therefore, we will only give if we get, and we will only give if we know we get in advance, and thats the way this is going to go. Thats, that was my experience with the president of syria, trying to take that approach. I agree that there are common interests in the region fighting terrorists. I also agree there are differing definitions of whos a terrorist. And there are people who think, well, its not that were really supporting them, were just turning the other way while other people support them. Were not as aggressive going after financing as we need to be, not quite support certainly, i think, in many cases official support, but unofficial acceptance that there will be some leakage, and that fits the strategic interests. I think one of the things thats important, and i tried to make this clear in the earlier dependents, is we have to be successful comments, is we have to be successful diplomatically moving countries away from the idea that, actually, a little bit of terrorism helps their strategic interests. Because i dont think a little bit of terrorism helps anybodys strategic interests. One of the lessons you may draw from syria is that a little bit of terrorism in the 2000s creating the Jihadi Networks that used to transit to syria to the doing of the to to the delight of the assad government, are the same networks that have created this ongoing insurgency in syria which is taking syrian soldier cans lives, and that in itself may be a way to persuade governments to work with us to try to starve these institutions of funding of Logistical Support and to get to a point where there are negotiations, peaceful negotiations between governments in rooms and not attacks that attempt to terrorize civilian populations as a way of leveraging organizations powers and reach. Yes, sir. Oh, im sorry. Were not done. Thats okay. No, no, no, i will [laughter] i echo jons comments almost 100 what i was going to say, but i will just add a couple things, and that is from my time in iraq with general petraeus, he created an interagency within the u. S. Government effort to reach out to source countries to stop the jihadi flow into iraq. And with varying degrees of success. But its interesting how these countries that spawn jihadis think that they can do it without any sort of pushback, that it wont come back to rebound against them. Syrias one example. The other example is the number one source of jihadis, suicide bombers flowing to iraq during the iraq war, Eastern Libya near the city of benghazi. Sound familiar . So the idea that various states can somehow encourage these folks to go wage war against the west and that it wont hurt them is one that they need to come to grips with, or the entire region will go up in flames. And as, you know, why dont we form alliances to, with these nations to combat terrorism, i recall general petraeus trip once to a state that will remain nameless, but its very close to iraq. [laughter] and he was having dinner with some very highlevel people in that place, and they said and he said can you help me, you know, stop the flow of suicide bombers into iraq, and they said, well, first you need to apologize, United States needs to apologize for invading iraq in the first place. And he said, i apologize. Now what do we do . [laughter] and there was just silence from the other end of the table. Thats pretty good. Yes, sir. [inaudible] used to be mike springman. My question is wouldnt you agree really that the problem with iraq is not religious, is not economics, but rather is terrorist . The United States, britain and some of the most repressive goths in the region such as israel, saudi arabia and qatar have an Army Recruiting and financing and training people, the arab afghan legion, if you will, that was sent to the balkans, to syria, and be now theyre back in iraq. They had death squads with negro negroponte as ambassador back around 2005. They add the at the they at the time started recruiting their own commandos and militias, and we are now reaping what we have sown. And everybody is raising their hands and instead of saying get the hell out of iraq, saying we want to send more people in, we want to bomb more countries, we want to bomb more groups that we dont like. Thank you. Pete, i think you are a good candidate for the answer. [laughter] well, i would add to that list a really wonderful piece by ali [inaudible] who was a special assistant to ryan crocker during the surge in tom ricks blog, the best defense, and he says who do you want to bomb . And he has a menu of all the various groups in iraq who are fighting, and there were plenty of those that youve mentioned, and then there were plenty of shia militias as well. And he listed all their various crimes and various terrorist proclivities as well. The fact is that iraq is filled with people who want to do each other harm, and its not just on one side of the conflict. And the only way to solve this is to empower the people of iraq who are suffering so much with a government worthy of their support and, therefore or, a government worthy of our support. And then we can fight terrorism from whatever source it comes from, whether its from saudi arabia or from iran or from wherever else in the world. Jon, do you, would you like to answer the question or the implications of the question that the United States created terrorism . Let me, let me recount a story. I joined the state department in october 2001. I was on a council on Foreign Relations fellow. Dave wurmser who at that time was working in the state department over at the pentagon was one of the people who drove the plans for the iraq war. And dave was at aei before, and he thought of himself as a real conceptual thinker, and he had a whole approach to dealing with 9 11. And that was that we had made a mistake in all of our intelligence analysis because what we had done was we kept relying on the preponderance of evidence connecting things and people. And what we needed to do was to reorient the way we did intelligence, to reorient the way we thought about things. Is there a plausible connection between individuals and groups . And, therefore, you dont have to talk about proving that things are connected, you just have to show that somebody from here met somebody from there, and somebody from there and then from that because, as he argued, the stakes are so high you can impute drivers to things without proving there are drivers. I dont disagree that the u. S. And other countries have been involved supporting bad guys for tactical reasons, and that dates back to the cold war as you suggest. Does that mean that the u. S. Is the principal driver behind the idea of jihad . I dont think you could argue the u. S. Is the principal driver behind the idea of jihad. The u. S. Has supported groups that were involved in furthering the idea of jihad in afghanistan in the 1980s as were the saudis, as were a whole host of others. That whole idea had something to do with the mixing of the Muslim Brotherhood with salafi clerics in saudi arabia in the 1950s and 60s. Does that mean that because the Muslim Brotherhood was a reaction to the British Occupation of egypt when it was created in 1928 that the british are somehow involved iny in jihad . I mean, we can go back and back and back, but it seems to me that the fundamental problem is, as pete has suggested, you have a country with lots of people who dont need outside encouragement to want to fight other people in their own country in a battle for control, influence, resources. And the answer is not that outsiders can solve this problem, but that outsiders need create the conditions under which people on the inside of iraq can solve the problems. One of the things i find serve wonderfully ironic about the complaints ive heard from egyptians about u. S. Policy toward egypt over the last three years, the u. S. Is too interventionist in egyptian politics, right . And you didnt force morsi from power, and youre not helping cece stay in power. But stay out of our politics. [laughter] and there is this irony. We can play, we play a small role. We can play a small role, we can be catalysts for things. But i think to argue that we are the drivers of jihad, that we are the drivers of extremism in iraq, to me, given the whole host of factors involved, given the stakes that people feel every single day versus the extent to which americans dont really have to live with the consequences, i think the responsibility has to be 95 on the people who are living this every day and 5 on the outsiders who are trying, sometimes for good reasons, sometimes for selfinterested reasons to affect outcomes. Let me get ryan to answer this question. Im not an expert on terrorism. But believe it or not, in 1991 during george bush the first presidency when we, and i prefer to call it the iraqi prodemocracy movement rather than the iraqi opposition, we could not meet with the United States government because we were all classified as terrorists. So, i mean, and we go back to saying one groups Freedom Fighter is another groups terrorist. Is fidel castro a Freedom Fighter or a terrorist . And the list goes on. Personally, within my own mind, i can clearly distinguish a terrorist from a Freedom Fighter but, unfortunately, its not clear with other people. A person who slashes the neck of his opponent is a terrorist, i dont care what race or religion he is. The a person who fights to liberate his land, this is a Freedom Fighter. But then there are gray areas between the two. And then just one comment. I remember about six or seven years ago i was in jerusalem, and is one of these minivans that takes people from place to place had a sticker in the window with the slogan of the state of New Hampshire of live free or die which in that moment was a rather arresting image to see. Terrorist to Freedom Fighter. Good morning. My name is mohamed, and i can call myself an iraqi expert. Im an iraqi, and im one of the rebels in 1991 who rose up against saddam. Theres a fact, it seems that everybody not only in the room is missing which is, basically, everybody thinks that the root problem is within the grassroots among shia and sunni. The fact is, not. Thank god its not. Thank god its still not, but the fact is the sectarian divide exists mostly within the Political Class and especially the ruling class. And the proof of that is that the iraqis have adopted, absorbed democracy in the changing iraq in accepting new iraq, and the fact is the Regional Fact of it or influence, the regional influence is still so backward to the point theyre fighting it so that it wont spread around to their own countries. So i believe i think this will address the gentlemans question and the gentlemans point, thanks. Thank you. I think this was mentioned by i think we all agree. All of you. Yeah. So everybodys in agreement. Were in violent agreement with you. I cant help it. I came in late. [laughter] just a quick comment for the doctor, just a quick comment for mohamed who happens to be a friend of mine and who happens to be from the province of basra. Thank you for providing 94 of the iraqi budget where all the oil comes from. [laughter] not getting any. Okay. Thank you. Im [inaudible] with the freedom institute. I have two questions for colonel man soar, theyre mansoor, both regarding why the iraqi troops didnt succeed in defending mosul. You gave some really good points, but there were two points you did not mention, and i would like to know when you agree or whether you agree or disagree and consider them important or not important. In one newspaper report i saw anonymous military personnel saying the troops who were in that part of iraq who had been trained by the americans had been trained to fight against terrorism, not to fight against the kind of invasion that they were confronted with. The other point is that when the isil came into the area, i understand they announced on loud speakers everyone, all civilians should stay in their homes because were not after the civilians, were after the soldiers. That would have provided a great incentive for the soldiers to take off their uniforms and pretend to be civil yaps. Id like your comment on these two factors and decide whether theyre significant. The second one is true because ive heard the same from my sources on the ground in mow is suggest that, in fact, isil came in and said were not here to harm civilians, stay in your homes, and the governor of mosul right now is an exiraqi army officer, not a foreign jihadi. Theyve moved on to fight be further south to fight further south. So i agree with how on that, thats probably correct, and that did give the soldiers the opportunity to shed their uniforms. But on what they were trained to do by americans, i would say that we had, by the time we had left had trained the iraqi army fairly competently up through company and battalion level. That is, company may be 200 soldiers, battalion may be 6700. Larger formations take long or time to train, and when we withdrew our forces at the end of 2011 by mutual consent, we stopped that Nascent Development of the iraqi army into an army that could defend the state. And this was by mutual agreement. We can point fingers at whos to blame, we can talk about that here if you want with, but the fact is when the american advisory effort ended, there budget any effort there wasnt any effort by another entity to pick up the role. And so the development of the iraqi army was arrested at that point. But the major problem i played football in high school, and, you know, my coaches always said you cant coach desire, right . You cant make someone want to fight. Theyve got to want it because of, you know, they feel strongly about the soldiers around them, about their commander, about their country, about something. And and these soldiers simply didnt have anything to fight for. Their commanders were corrupt, their country was, their government was one that by and large they didnt believe in, and they were fighting for mosul, a city that, obviously, they didnt feel strongly about protecting, or in some cases might have felt better than better about isil than their own government. So this is a real problem. This is why this proto state thats been created is going to take a long time to chip away at it unless you get the people on the ground to want to egypt isil from among to eject isil from among themselves. Its going to be there, and its going to be a sore in this region not just for days and weeks and months, but years. And that is a problem for the west. Can i do a follow up . Yes, you can. Just a followup answer is that, you know, the United States trained the iraqi army and generals to fight wars. They didnt train them to be ethical, you know . The corruption is, actually, very, very high. There is a report of about 40 of the lets call them the soldiers or the officers within the iraqi army are called phantom. In other words, they receive salaries, but they do not report to work. So iraq pays 1. 1 million persons salaries, but 40 of them do not exist. How can you fight a war with, you know, phantom soldiers . And. And the pay goes into the pockets of commanders. I do want to interject one thing. We actually did train ethics, and we trained obedience to ci