The conflict in Syria has been underway for 18 months and is showing no signs of coming to an end.  As the situation devolves into a de facto civil war, other governments are trying to affect the outcome through various means.  Thus far, however, outside powers have been reluctant to directly intervene for fears of becoming mired in a broad sectarian conflict. 

Instead of using their own forces, outside powers, including Saudi Arabia, Turkey, Iran and the U.S., are relying on proxies, groups of non-aligned irregular forces that oppose or support the Assad regime.  These include Hezbollah, various jihadist groups, former Syrian soldiers and sectarian factions.  Involved states have been supplying lethal and non-lethal support as well as training and logistics.   

 

The problem of proxies is that they cannot always be controlled.  Most of the time, this means the proxy doesn’t do exactly what the sponsor would like.  At its worst, it creates a situation called “blowback,” which occurs when a former proxy turns on its sponsor.    

In this report, we will discuss the role of proxies and their use by governments, including a historical perspective of their positive and negative aspects.  A short discussion of the regional factors of the Syrian situation will follow, focusing primarily on Iran’s problem if the Assad regime is replaced by a Sunni-led government.  Interestingly enough, these regional factors also affect the proxy groups, making them more difficult for their sponsors to control.  This inability to control proxies increases the geopolitical volatility in the region.  As always, we will conclude with potential market ramifications.

Proxies

We define proxy groups as non-government organizations that can exercise power.  This power can include political, social, religious and mortal influence.  All these powers make a proxy useful to outside governments.  Not all proxies need the ability to deploy violent means but being unable to produce a mortal threat reduces its role in some conditions.  At the same time, proxies that are violent, in some situations, become a negative factor for an outside power.

Using proxies allows governments to shape outcomes in a region without becoming directly involved.  This tactic was common during the Cold War. The U.S. supported jihadist groups in Afghanistan to harass the Soviets.  The Soviets and the Cubans supported insurgencies in Latin America and Africa that were trying to undermine American influence.  Becoming directly involved in these situations increased the risk of a superpower confrontation that may have developed into a thermonuclear exchange.  Given that the stakes were high during the Cold War, sometimes proxy wars were the least risky way of impeding an enemy’s progress in a region. 

 

Often, outside powers will try to hide their ties to a proxy group, especially if the proxy is being used for violent means.  Iran is a master of this tactic.  Violent actions that help Iran are often done by groups that were previously unknown; these groups tend to disappear or merge into other established groups.  This tactic gives Iran plausible deniability and protects them from overt retaliation.  Interestingly enough, there is a downside to being this clever.  Sometimes bad things happen that help a state and it had nothing to do with it…simple serendipity.  However, because of previous hidden successes, the benefiting nation gets blamed anyway.  Israel and Iran are often held responsible for events for which they were not involved.

The downside of proxies is that outside powers usually don’t have direct control over these groups.  Instead, proxy groups usually have their own agendas.  As we noted recently (see WGR 8/6/2012, The Complicated Kurds), the Kurds have national aspirations.  Virtually every government in the Kurdish region has both suppressed and supported Kurdish groups in order to influence their neighbors.  Unfortunately for the Kurds, no regional power is interested in supporting their goal of a state; all are interested in using the Kurds to weaken the governments of their neighbors and strengthen their own.

As noted above, perhaps the worst case of blowback occurred with Osama bin Laden.  The U.S., Pakistan and Saudi Arabia all supported various sectarian groups in Afghanistan after the Soviets invaded in 1979.  These groups received arms, including man-deployed anti-aircraft missiles that severely restricted Soviet air operations.  Like the American experience in Vietnam, the Soviets eventually found themselves in a quagmire for which they could not easily escape.  On February 15, 1989, the last Red Army soldier left the country.

The Afghan war created several groups of battle-hardened, well-trained proxies with an intimate knowledge of how the American, Saudi and Pakistani intelligence apparatuses operated.  Osama bin Laden was able to organize many of these groups into al Qaeda.  One of the key elements of al Qaeda was selectivity.  Bin Laden was very aware that intelligence agencies try to penetrate proxy groups as a way of monitoring and controlling them.  Al Qaeda had a very strict vetting process, only accepting members who were reliable.  This process has proven to be both a strength and a weakness of the original al Qaeda.  Because al Qaeda was so difficult to penetrate, it was able to perpetrate the spectacular attacks of 9/11.  However, its selectivity made it difficult to add new members.  The 9/11 attacks eliminated several members as did the subsequent invasion of Afghanistan.  In a few years, the constant pressure from NATO troops in Afghanistan, drone attacks in Pakistan and the steady erosion of funding sources, along with the May 2011 assassination of Osama bin Laden, has rendered al Qaeda ineffective.  Although severely weakening the original al Qaeda is an achievement, it should never be forgotten that the blowback was 9/11 and it required a war and a decade of covert activity to mostly eliminate that threat.  Clearly, using proxies can have serious opportunity costs.

The Syrian Situation

We have examined the Syrian situation in previous reports (see WGR 6/18/2012, Syria: Descent into Civil War).   Throughout history, the region of Syria has been at the crossroads of the Middle East.  The people in the region have become adept at dealing with various empires that have traversed the area.  Currently, Syria is a key part of the “Shiite Arc,” a group of Shiite-dominated countries including Iran, Iraq, Syria and Lebanon.  With Iran as the dominant power, the clerical regime can project power across the entire region.

One of the critical mistakes of the Iraq War was America’s inability to build an Iraqi government that was friendly to U.S. interests.  Iraq has a Shiite majority and Iran has been able to successfully influence the leadership of the country.  For Iran, this is a double victory—not only has it eliminated an archenemy in Saddam Hussein (without firing a shot), but it also gained a friendly government.  Last week, the Obama administration chastised the Iraq government for allowing Iran to use Iraqi airspace to send military equipment to Syria. 

The fall of the Assad government would be a severe blow to the Iranians.  The Shiite Arc would be broken if an unfriendly government were to take control.  In addition, its interests in Lebanon, mainly Hezbollah, would be isolated and vulnerable. 

For the U.S. and the Sunni powers in the region, seeing Assad go and installing a Sunni-friendly government in Syria would be a major coup.  Not only would the Shiite Arc be broken, but Hezbollah could be defanged.  Removing Assad would end a series of Iranian victories and weaken its ability to project power. 

Although the Sunni powers and the U.S. would like to see Assad removed from power, none are anxious to put their own troops in harm’s way.  The experience in Libya shows the limits of outside intervention.  Moammar Qadhafi was universally disliked.  Most religious leaders in the region were uncomfortable with his socialist leanings.  He reportedly hatched assassination schemes against the Persian Gulf Kingdom leaders. Most of the European nations opposed him after the Lockerbie bombing and several terrorist attacks on the Continent.  African leaders resented him for his arrogant attempts to dominate regional bodies and his interference in the internal affairs of several central African nations.  Even with a leader who had few allies, the Western intervention to remove Qadhafi was difficult and the country still does not have a stable government. 

In the case of Syria, who has allies, an outside military intervention by Sunni alliance has the potential to touch off a regional war.  Hence the decision for the powers allied against the Shiite Arc to rely on proxies.  Turkey and the Gulf Kingdoms have been supplying the Free Syrian Army (FSA), an umbrella group of rebels who are trying to oust the Assad government.  Many of the FSA are former Syrian soldiers; the FSA is dominated by Sunnis, who are the majority in Syria.  The Sunnis have been dominated by the Alawites (an offshoot of Shiism) since colonial times. 

However, the conflict is also attracting assorted jihadist groups who tend to thrive in regions where state order is crumbling.  Although it hasn’t been officially confirmed, there are rumors that these jihadist groups have Saudi support.  While possible, the reports could also be designed to undermine the Saudis, as it would raise fears among Western states that a repeat of the al Qaeda situation could be a side effect. 

At the same time, Iran does not want to move troops into Syria for fear it would invite a similar response from Turkey and perhaps the U.S.  Thus, it wants to fight the potential loss of influence in Syria via proxies as well.  Recent comments from Iran suggest that the Mullahs have concluded that Assad probably won’t survive.  Thus, Iran is more interested in getting a place at the negotiating table for the post-Assad period. 

To encourage those allied against it to include Iran in the negotiations, Iran must show that it still has influence.  It has two ways of doing so.  First, it can raise pressure in Lebanon through its proxy, Hezbollah.  Second, it can support Shiite groups in eastern Saudi Arabia and Bahrain to foment unrest, putting pressure on those governments to allow Iran a voice in Syria.

So far, Hezbollah has proven to be reluctant to play its role.  Hezbollah has evolved into perhaps the most powerful political entity in Lebanon.  Not only is it probably more powerful than the Lebanese Army, it operates a broad social network in the country.  Assad is becoming an embarrassment to Hezbollah.  He is killing his own people; in the early days of the unrest, what was going on in Syria wasn’t remarkably different than what was occurring in the rest of the Middle East.  The Arab Spring had come to Syria.  By completely mishandling the situation, Assad has turned a protest movement into a civil war.  Hezbollah likes to put itself on the side of the oppressed—supporting Assad is uncomfortable for them. 

In addition, Hezbollah is facing election in the next year.  It would prefer stability to chaos, with the assumption that it will fare better with good government and peace instead of a conflict. 

For Iran, Hezbollah’s reluctance exhibits the problem of proxies (not to mention the outright opposition of Hamas to Assad; Hamas had been receiving support from Iran).  Proxy groups have their own interests and sometimes they conflict with the sponsor nation.  Hezbollah does not want to see its supply lines broken by a Sunni government in Syria.  At the same time, it is becoming powerful enough in its own right to probably establish itself as a political entity in Lebanon.  The fact that Israel and Syria, though enemies, were able to live in relative peace from the 1970s suggests that Israel and Hezbollah could likely reach an accommodation.  Iran knows this but may not have too many levers to force Hezbollah to do its bidding.

This leaves Iran with bringing unrest to its Gulf neighbors.  Although possible, these nations have sophisticated internal security bodies that will likely be able to quash such attempts.  Unless Iran wants to up the ante by boosting Iranian Republican Guard operatives into these Kingdoms, its ability to force these Kingdoms to support Iranian efforts to achieve negotiating status on Syria is limited. 

Ramifications

Overall, proxies are useful tools but they are less than perfect.  Proxies’ predilections to follow an independent route or even worse, the potential for blowback, increase the risk of engaging such groups.  Nations engage the use of proxies when other forms of intervention are too risky.  For example, if the U.S. had directly intervened in Afghanistan, it might have precipitated WWIII; clearly, Afghanistan wasn’t worth that risk.  As Zbigniew Brzezinski, President Carter’s National Security Director, noted, the Afghan War did contribute to the fall of the Soviet Union; unfortunately, we didn’t realize that the cost would be felt over a decade later in the form of the 9/11 attacks.  Given what we know now, it is unclear if any American president would have supported the covert plan to arm jihadists; but given what was known at the time, it seemed like a reasonable risk.

In the current situation, the more desperate Iran becomes the more likely it is to foment unrest in Saudi Arabia.  Thus, as we have been saying for some time, holding long oil positions as a hedge to such events is a prudent course of action for the near term. 

Bill O’Grady                  

September 10, 2012

 

 

This report was prepared by Bill O’Grady of Confluence Investment Management LLC and reflects the current opinions of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

 

 

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