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Transcript of Professor Michael Clarke's lecture 10th March 2008 to Global Security Forum

Professor Michael Clarke was appointed Director of the Royal United Services Institute for Defence and Security Studies (RUSI) in September 2007. He joined RUSI from King's College London, where he was Professor of Defence Studies from 1995 to 2007. He was also Deputy Vice Principal, and Director of Research Development. He founded the Centre for Defence Studies at Kings College.

It is a great pleasure to address Global Strategy Forum. I have been to a few meetings here myself and I know that this is a forum in which anything can be said. It is a place where lots of ideas can germinate and where frankness is valued and that is what I intend to honour. There are also members of the audience who know at least as much about national security strategies as I do and so I hope that my comments may act as a stimulus to their own questions and comments. The way I phrased this topic was 'British security problems, new environment, old problems' in the sense that it seems to me that we are facing new issues, but that we still have an awful lot of legacy issues which make it really quite difficult to achieve the policy coherence that we want to achieve. I thought what I would do today is say something about each side of that equation: 'new environment, old problems'.

On new environment, like all scholars of international politics, I spend quite a lot of time reading about the new security challenges and I think that we are all fairly familiar with what those security challenges are supposed to be. International crime is certainly a degree of challenge; terrorism, environmental stress, developmental issues, cyber threats are all challenges and sheer complexity is, to a degree, a new security problem. I do not intend to go through those things – we can talk about them by all means later on, but it seems to me that those are a given in any contemporary discussion of security problems. I would like to mention in passing the concept of securitisation, because I think it is quite interesting.

When we talk about securitisation, we are talking about what we choose to make into a security problem. I am a great believer in this case in what is known in our business as the Copenhagen School. This is based on the idea from the University of Copenhagen and some of the institutes in Copenhagen, that a security problem – and it is partly perceptual - is that which we say we have to address with extraordinary resources and extraordinary attention, so that we can get on with the rest of our lives.

In other words, unless we deal with 'that out there', we cannot live our lives normally.

So if 'that out there' is domination by a foreign power or if it is an environmental threat or if it is cyber terrorism or if it is terrorism – whatever it is, if we judge and our public judges, that it is stopping us from getting on with our normal lives, then we have to address it as a security problem. That is the securitisation of issues and I think that when we think about new security problems – crime and environmental issues and so on, that is what we are really doing. We are discussing the extent to which we need to take these as special issues, i.e. to what extent do we need to devote special resources, special attention, so that we can keep it over there or we can deal with it and get on with the rest of our lives? That is securitisation and there are lots of interesting arguments about this idea and I don't intend to go through them in this lecture. I am interested in deeper trends - not just the question of what we choose to securitise, but what else is happening in world politics that leads us to think that there is a new environment out there that we have to take seriously. In terms of deeper trends, I think that there are two or three things.

First of all - and this is fairly conventional, I think – our international institutions are uniquely weak at the moment, for all sorts of reasons connected with the end of the Cold War, globalisation and changing structures of power in world politics. We have a set of international institutions from the UN through to the World Trade Organisation through to NATO through to the EU, which are basically weak and which are in need of change or reform and in some cases, abolition. We cannot put our faith in institutional behaviour in the way that we could even twenty years ago. This is not surprising – when systems change, when great sea-changes take place in world politics, inevitably behaviour in institutions enters into a dynamic relationship.

After all, during the Cold War in the 1950s and 1960s, international politics moved really rather slowly because it was very institutionalised. It took years to get something argued through NATO, but when it was argued through, for example, the decision on flexible response, it was done. The change in NATO's strategy took four or five years to argue through, but when it was done, there was a new strategy in place. It took time because the institutions, as it were, conditioned political behaviour. But we are now in the reverse of that: political behaviour takes place for unilateral reasons, for balance of power reasons and the institutions are having to shape themselves around it, so there has been this reversal. This is a deep change in the environment, which is quite difficult for Britain, which has always been very committed to international institutions, to get used to.

The second bigger change is a weaker political consensus in the western world – a weaker political consensus about action, about values, about the threats to the system or to our security that we should take seriously. Again, it is easy to use the Cold War as the comparator, but even before the Cold War – if you think about the 1920s or 1930s or if you think about the late 19thcentury, I cannot think of a time in my understanding of international history over the last century and a half, when the major western countries were less consensual about what their security should be about. Now that may turn out to be a temporary phenomenon - it might just be the hiatus between two international orders, but we are stuck with it and I rather suspect that we might be stuck with it for quite a long time. I think that this second deeper trend is very disturbing to Britain, because we have always been, first of all, a leader of the consensus, then a shaper of the consensus, then a follower of the consensus. A consensus on values and ideas about the international political system is very important to us.

A third deeper trend – and this really is the essence of the problem - is globalisation. We all talk about globalisation, we use it as a convenient short-hand for lots of different things and again, I do not propose to argue about the meaning of globalisation although we could have a very interesting talk about it, but my point is: globalisation is a phenomenon. It is a phenomenon – it is not a political system. It is, if you like, a fact of life. It is morally fairly neutral, in the sense that it is an economic, social and communications phenomenon. I always think that globalisation is a bit like a train leaving the station: if you get on the train, you will somehow benefit from globalisation in due course, but if you miss the train, you will never get on it and it is leaving the station – it is half-way down the platform and accelerating all the time. Globalisation is a fact of life – it does not carry any particular political principles within it. Now that is something that a lot of people would disagree with, but I would argue that that is the case. I would like to give you just one little vignette of globalisation which I think is important and interesting.

We always think of globalisation as a great leveller of cultures – we think of it as the homogenisation of culture, the McDonaldisation of world culture. We think of globalisation as a way in which cultures are somehow diminished, but it is important to remember too that the same forces of globalisation that give you McDonalds on every corner also give you the ability to connect with your own culture in whatever way you want to. You can go to immigrant communities anywhere in the world and find these communities reading their own newspapers, downloading their own material, looking at their own TV stations through satellite, picking up their mobile phone to ring their mother-in-law. They can live in a society in a way that they could not have done fifty years ago, even thirty years ago, without ever learning a word of that society's language. So it is the case that a Bengali family could live in Bradford quite happily and connect only to Bengali culture.

They would not have to even begin to integrate in the way that they would have had to a few years ago. In exactly the same way that an ex-pat British person could live in Saudi Arabia or Abu Dhabi and not learn a word of Arabic, or even be aware of Arabic culture around them. Globalisation gives you the ability to live in your little cyber-bubble and more than ever before, it seems to me, it gives you a choice of identity.

This is one of the interesting questions about globalisation – it allows people to chose to a degree, the identity that they want to adopt. And that is part of what I take to be the value-free basis of globalisation. It is not, despite a lot of writing to the contrary, a politically-loaded system. It is a phenomenon. Now what that particular point means is that the end of the Cold War and the phenomenon of globalisation has not been a victory for the liberal democracies. It was normal for us to say, 'Oh, great. The Cold War is over and we succeeded in exactly the way that we intended to succeed', and there is a degree of truth in that. The Cold War came to an end, exactly as Harriman and Kennan and some of the architects of containment had assumed that it should - by containment. The argument ran that by peaceful competition, we will out-produce the Soviets, we will out-consumer them. They will not be able to keep up and eventually people will see that they are better off in this sort of system. There was a big element of that, but ultimately, the triumph of containment was overlaid by globalisation, challenging the assumptions that we used to make in the 1990s, that 'okay, the Cold War is over, liberal democracy has triumphed and globalisation will make liberal democracy unstoppable'.

The Francis Fukuyama thesis, 'The End of History' was partly based on that and a great deal of writing in the 1990s was based on the inevitability of capitalist liberal democracy being unstoppable in world politics. That was a very persuasive thought, but here we are in 2008 and it is a less obvious thought now than it was then. Two of the great powers do not accept it: Russia and China are saying, quite seriously, quite deliberately, that liberal democratic capitalism is not the pre-requisite to economic development.

For quite different reasons, Putin's Russia and the Chinese leadership throughout three generations now have completely gone in a circle. China is a very good example of a country which has embarked on a great experiment, which is to say that 'we have found a model of economic development which is centrally led and consultative - it is not that we are just autocratic, we are consultative, but we are not democratic, because we are aware of what chaos democracies can bring'. They are aware of what happened in the Soviet Union, aware of what happened in Russia in the 1990s and they are looking for ways to avoid being outspent by the United States. For instance, the Chinese always say that militarily, they want to match the Americans, but they want to match them asymmetrically. They don't want to build a military machine the size of America, or they will fall into the Soviet trap of trying to outspend them militarily. What the Chinese are looking for is an asymmetric way of countering their view of America's threat to them in the future, without having to match all of their military hardware and they are very interested in asymmetric warfare – anti-satellite weapons, cyber war, information war, psychological war and so forth. They are very interested in ways of negating America's power without spending America's sorts of money. So in Russia, in China, in states in Africa, in some of the 'Stans in Central Asia, this liberal democratic wave is absolutely stoppable.

China represents an enormous opportunity to a number of leaderships in Africa because in a sense, China is saying that 'you don't have to be kicked around by the IMF, you don't have to be lectured to by western powers and have aid made conditional. We will give you this, we will give you that, no questions asked. And in any case, we offer an alternative model.' That is a very attractive option to a lot of African governments and some Asian governments who have been lectured to, for very good reasons, by western powers. So, the basic point is that with all of the new security issues that we are aware of, there are some deeper structural trends taking place. And there is one book, which I just wanted to point out to you, partly in fun actually, as this is an informal group, but also because it is a book that I am very fond of at the moment, because it is so outrageous. Walter Russell Mead's 'God and Gold' came out last year in the States and it is subtitled 'Britain, America and the Making of the Modern World'. Mead of course, is the Chairman of the Council on Foreign Relations - a crusty, old East Coast American conservative, but it is a brilliant book and it is well worth a read. It is outrageous in the right sense of the term – it is outrageous, because it outrages everyone but Britain and America.

There are two basic ideas in this book and let me just give them to you in essence from the introduction. Mead says, 'since the Glorious Revolution of 1688 that established Parliamentary and Protestant rule in Britain, the Anglo-Americans have been on the winning side in every major international conflict'. Right: the Anglo Americans have been on the winning side in every major international conflict: the War of the League of Augsburg, the War of the Spanish Succession, the War of the Austrian Succession, the Seven Years War, the American Revolution – Britain lost, but American won-, the French Revolutionary Wars, the Napoleonic Wars, World War I, World War II and the Cold War. These are the wars that made the western world. And either the British or the Americans or both – together they won every one of them. More than 300 hundred years of unbroken victory in major wars with great powers - it begins to look almost like a pattern. And what he says is this: that essentially this dominance was based on three sets of initials – UP, UK, US. United Provinces, United Kingdom, United States.

The maritime empires, he says, basically made the rules. The great land empires – the French Revolutionary empire, the Russian empire, those great land empires did not make the rules. And this is his second point, which is also very outrageous. His second observation is about Anglo-American power is that as their power has grown, the Anglo-Americans have more and more often been dead wrong about what their growing power and their military victories mean for the world. What he is really saying is that the British and Americans kept winning wars, but they did not know why. In other words, they have this very Anglo-Saxon view that 'if only we can win this war, then everything will somehow be fine. If we just win the First World War, just get rid of this German militarism, everything will be fine. Or if we can win the Second World War and get rid of fascism, if we can just win this war against fascism, then we can settle down. Or if we win the Cold War, we can settle down, once the Communist government is gone. And once we have beaten the terrorists, we'll get back to...something'. What? We don't know. And this is one thing that he is getting at: that we do not really know what we stand for. We have had the effect, somewhat against our better judgement sometimes, of making the international system, and that international system is now changing. That is what he is getting at. And I think it is a very fair question. If you are French, if you are Arabic, if you are East Asian, you might say, 'What has all this 300 years of military dominance, what has it been for - so that in freedom, you people can watch rubbish TV and eat junk food? Is that what western freedom is actually all about, the sort of boorish peasant behaviour of Anglo-American societies? Is there not something greater in essence here?' And it is a fair question: for what purposes has this international system had its rules created, other than in favour of our commerce? Our commerce is somehow vulgar and our commerce does not lead to any higher purpose.

I have got my own answer to that question, but it is a fair question. Now the reason I mention this, is that it seems to me that here is one conservative American essentially worrying about the fact that the present international system, 300 years old, rules made by the maritime empires, is somehow at an end. And unless the Anglosphere, as he calls it, unless this rather dominant Anglosphere knows what it stands for, then it will not be capable of exerting any real influence on the re-making of the rules which is taking place now. So that takes me to the second issue, which is British security policy itself: new environment, old problems. Somehow, British security policy, i.e. defence policy, foreign policy, aid policy, internal, justice, Home Office and so on, has got to navigate its way through all of this.

After all, the British economy is still a very large economy. It has enjoyed 15 years of consecutive economic growth, employment for 29 million people; and its growth in the first half of 2007 was 3.25%. It is going to be less subsequently. But what we have got in this UK economy and society is a highly globalised society. One thing that Britain is good at is understanding the implications of globalisation. We accept the multiculturalism that globalisation may imply, we accept the economic disruption that globalisation may imply. In a sense, I suspect that we are a cork on the international tide: when the world economy does well, we do pretty well, but when the world economy goes into anything near a recession, we feel it more severely. We are more dependent on the international system than many of our partners, both economically and, I suspect, socially.

So if the system really is changing, if our international institutions are not very good, if the rules are being made elsewhere, if there is a deep underlying change in the nature of international society, how do we, as a very open, globalised, dependent society, cope with that? I think our problems fall into four and let me just mention these four things briefly and they will then be points for discussion. They are really four dimensions of the same issue. I raise these four, partly as a result of conversations with colleagues, but also as a result of hanging round the 'bazaars of Whitehall' for the last twenty years or so.

The first problem is that we are quite good at co-ordination but we are not so sure about the need for the re-definition of our security. That is, faced with these new security problems – crime, environment, etc., of course we say, 'yes, we have got to co-ordinate, we have got to bring Whitehall together' and by and large, we are really quite good at that. But there is a real resistance to saying, 'well, how far do we have to go to re-define our security? Perhaps it is just a traditional problem –we just need to co-ordinate better?' Now maybe that is true, but the question, it seems to me, needs to be put much more overtly. And the National Security Strategy, which I guess everyone here is aware of, is, in essence, an attempt to try to re-conceptualise or to conceptualise in a modern way, what our task is. We know that it was due to come out before Christmas. It has not yet appeared and we know that it is subject to discussion in Whitehall. When it does appear, it will be a very interesting document, because I think it is an attempt, at least at the top level to say, 'let us address the question of whether we need to re-define our security'.

But, to my knowledge, this will be the first real attempt to ask that question, and whether it is asked successfully or not, will be a very interesting point. That is the first issue. Co-ordination: yes, but we often allow co-ordination to get in the way of real definitions. Sometimes I think British policy is beautifully co-ordinated, but just incoherent. Co-ordination itself is the policy sometimes – as long as we can get all of our ducks in a row, we think that is okay – we go to the ministerial meeting with that as our position. That is not the same as having a strategy, working out how to do it and then deciding who should line up and in what order.

The second point is really another dimension of the first: the Whitehall bureaucratic cycle, as I call it, is not conducive even to deep co-ordination at the moment. It seems to me that we are worse in the UK than we were even five or six years ago at things like the comprehensive approach, as we now call it. I have sat and heard Foreign Office officials in private meetings when I talk about this say, 'oh, no, no, you are wrong. Look at what we have achieved in Afghanistan, we have just got this and we have just got that and we have been able to get NGOs on board and we have co-ordinated DFID and the Foreign Office and the military and really, we are very pleased about it.' And I say, 'yes, absolutely right and I am pleased too. So we are back to where we were in 1999 in Kosovo. We have got back to square one.'
Now, to be fair, Kosovo was a small case, and Afghanistan is a very big case that came off the back of a different thing. Kosovo was always going to be a complex emergency, while Afghanistan started as a more conventional counter-insurgency guerrilla war and has come from different antecedents.

But the fact is, all of those lessons which were painfully learned in the 1990s in Bosnia and Kosovo and Albania and East Timor and so on, those lessons which were all there, were somehow submerged when we went to the bigger cases of Iraq and Afghanistan. And with progress and a great deal of determination and commitment, in those bigger cases, we are now back to where we were conceptually about ten years ago. And it seems to me that this is a very interesting and indicative symptom of the problem that we face - namely, that in the third term of a government, a government that is under pressure, which may or may not win the next election, which is more and more neuralgic about headlines, as governments in third terms tend to be, with a tight spending round and the economy not necessarily going into a sixteenth consecutive year of growth, all those elements create a sort of bureaucratic cycle in Whitehall, which takes a lot of inventiveness out of the system.

This cycle removes a lot of give and take, it makes bureaucrats retrench and it make people – I was going to say short-sighted, but it makes them lower their horizons. It is much more difficult to get Whitehall buy-in in this phase that it was five or six years ago and there was certainly a lot of Whitehall buy-in in 1997, 1998 and 1999. The incoming Labour government was determined to change things and quite a lot of things did change in Whitehall in all sorts of quite good ways. That is not the case now. So this sort of retrenchment, I think, has got to be taken seriously. The bureaucratic cycle just does not go with grain at the moment.

A third old problem is the old chestnut of resources and commitments. It is not just budgetary issues. Of course, budgetary issues are pretty severe at the moment and we are used to those. Defence is feeling very hard-done-to at the moment, but so are other areas of public expenditure in relation to external affairs. The most relaxed is DFID, who have a pretty big budget for the sort of things that they are doing and it seems to me that DFID, despite all the problems that that department raises, has done a pretty good job. People get very annoyed with it in Whitehall, but in the rest of the world it has done a lot more than the old ODA was able to do with smaller resources and so on. So budget issues are there, but it is not only that: I think that we have got a bigger issue on resources and commitments. It comes back to something that we have been talking about in RUSI recently, which is that during the Cold War, defence always made the very sensible assumption that we prepare for major war. Of course we did: we prepared for major war in Europe, with total mobilisation. The view was that if you prepare for big wars, then you can do everything else. You can do the smaller things if you can do the big thing. And during the Cold War, that had to be the assumption – it made no sense to make any other assumption. But of course, that assumption has persisted now for some time, for the seventeen odd years since the end of the Cold War and one wonders about the big war assumption.

Remember too that the big war assumption is also an automatic vote in favour of big ticket items, of the most major air, land and maritime systems. It raises the question as to whether, in lesser operations, adapting the big war machine to smaller events, really is the most economic and cost-effective way of doing it. The Ministry of Defence has tried to turn the equation around a little bit by saying that, 'well, we don't now plan at army group or divisional level, we plan at brigade level, which is roughly 5,000 and we plan to be able to deploy brigades - which is about right for the sort of thing that the army and the forces find themselves doing - and we plan in such a way that we can put the brigades together, if we ever need to go back to the big level.' It is easy to say, but it does not quite work that way and it seems to me that we have got a bit of a mismatch between the structures on paper of battle groups and brigades and the equipment programme – what it is that we are bringing on-stream.

We had a very good meeting in RUSI last week, and I will simply pay tribute to Hew Strachan, who made some very good points about our counter-insurgency strategy. He said that what we really need for counter-insurgency is much more attention to information operations and he is absolutely right in that: we regard them as an extra to real kinetic operations, real fighting, but they are not, they are fundamental to it. We need much more understanding of what an insurgency is about, and something he did not say, but I do, is that the target is not the insurgents, it is the insurgency.

The target is not the people who are carrying the guns, the target is the phenomenon of the insurgency itself. That is fundamental and it requires a much, much better balance of resources than we have given it. I guess what it all comes down to, and I do pay tribute to Hew Strachan for this point – I think he expressed it very well – is that when we talk about counter-insurgency and what the forces really do, we concentrate all the time on tactics – if we only get our tactics right, we will be okay. But we do not think enough about what it is the insurgency is trying to achieve, what we can do to counter that; and what it is all about. It is not just tactics: there is a much more of political analysis act that should be involved in the process.

And the final point, the final problem, is finding flexibility, without which we are left somewhat stranded in this new world. It is perhaps an inevitable problem for us to get the right balance between our transatlantic commitments and our European destiny, whatever that might be. On the one hand, it is clear that US long-term interests in the world are shifting. The old Atlantic Alliance, the sort of thing that Mead is talking about, the Anglosphere – that is changing. It is bound to change. It does not mean to say that it has disappeared, but it is changing and so we have to accept that, in the long term, US interests are likely to change and we have to think that through.

On the other hand, we have a European Union of 27 countries and 490 million people, producing 25% of global GDP. We cannot regard that as somehow trivial. If those 27 countries and 490 million people do not count as some sort of actor in the world, then it would be very curious. Sooner or later, that grouping or that concentration of economic and social power has got to find more expression than it has found so far. I think that is what any political analyst would say, regardless of whether we like it or not. That balance is very difficult and I think that Britain has been in a very confused state of mind. Again, let me just give you my view running round the bazaars of Whitehall as to how this plays out. If you go to the Foreign Office and talk to Foreign Office officials, I think they are very comfortable in a way they never were ten or fifteen years ago with the idea that US interests are changing and that we have got to think much more flexibly about how the transatlantic relationship can be re-interpreted, what we can do for it; and how we can re-negotiate it from our own point of view.

If you go to the political side of the Ministry of Defence, policy planning and so on, you find something similar – more nuanced, but something similar. You go to the armed forces and they hide under the table. The idea of not being close to the Americans is anathema to the armed forces, because they say, 'well, you know, look at the intelligence-sharing, look at the nuclear sharing, look at the friendship between our forces, look at how well we get on', and that is all true. But what the military sees is what they would lose in a fracture of that practical relationship. They are not convinced that there would be much to gain from accepting a change in the transatlantic relationship. And I see that all the time in Whitehall. When people say, 'how does Whitehall feel about it?' I always say, rather like the States in this case, it depends who you talk to. I use that only as a vignette of the wider questions and in some cases, confusions, in our society. I have got my own views as to how we might resolve that, but I will keep those to myself until question time.Ultimately it seems to me that this is a very, very interesting time to be studying British security policy. It is a miserable time to be making it, an absolutely miserable time to be a policy-maker, but it is a great time to be an analyst since this is the transition between two international systems. And whereas the old system was one that played to Britain's strengths – the Cold War was really very good for Britain: it played to our strengths and it made us more important than we might otherwise have been, the international system of the 21stcentury does not naturally play to our strengths and I think that we will have to look much harder for those areas of strength than hitherto in order to exploit them. There are plenty of things there and I come back to the way in which we interpret being an actor which can cope with globalisation. For me, that becomes the pillar upon which I would like to explore the sorts of strengths that we might have to offer.

 

Transcript of lecture given by Ambassador David Satterfield 21stJanuary 2008 to the Global Security Forum

Ambassador David M. Satterfield became Senior Advisor to the Secretary of State and Coordinator for Iraq in August 2006, following his service as Deputy Chief of Mission at Embassy Baghdad from May 2005 until July 2006. Prior to Iraq, he was Principal Deputy Assistant Secretary for the Bureau of Near Eastern Affairs from June 2004 until May 2005 and Deputy Assistant Secretary for the previous three years. He was Ambassador to Lebanon from September 1998 to June 2001. He entered the Foreign Service in 1980, and has served overseas in Jeddah, Tunis, Beirut, and Damascus.

What I would like to do is to give you an assessment of where Iraq stands today, discuss a bit how we see the way forward for US policy in Iraq, what our expectations are for this year and then invite your questions or comments.

If we look at Iraq in January 2008 and contrast it with the situation in January 2007, two areas of very significant progress come immediately to sight. On the security side, by any metric used whatsoever to measure progress, more people, more citizens of Iraq in more places in Iraq enjoy better security – not perfect security but better security - than at any time since the terrible outbreak of sectarian violence inspired by Al Qaeda's bombing of the Golden Mosque in February 2006.What are reasons for this significant improvement?

They are the conjunction of a number of things: it is the surge of US forces – five brigades to Iraq commencing in December 2006 and the application of those forces and existing forces in Iraq in a better, more co-ordinated, more strategic fashion to areas which had been plagued by sectarian violence in and around Baghdad as well as other critical focal points; it is the better capacity and capabilities of the Iraqi security forces, principally the Iraqi army, to take up the fight both in direct partnership with coalition and US forces as well as increasingly in a more independent manner; it is the so-called Anbar Awakening, which is a process that has now spread well beyond Anbar province, in which Sunni elements, both tribal and non tribal, many of whom had been engaged in violence against coalition forces, against Iraqi security forces, against elements of the Iraqi state, over the course of 2007 changed their fight to direct it against Al Qaeda – that has had a significant and ongoing impact.

And finally it is the fragmentation – I don't say disintegration because it remains a formidable element in force - but the fragmentation of the Jaish al-Mahdi and with it, the increasing coming out of the fight or more effective confrontation of those Shi'a death squads, Shi'a militias largely drawn from the Jaish al-Mahdi elements, which had been engaged in violence and which were serving as an accelerant of Sunni counter-violence. All of these elements together have produced what we see today, whether we look at civilian casualties, at security force casualties, or most recently and encouragingly, even the casualties our own forces are taking in Iraq, the numbers are down, they are down progressively.

It has been a continuing slope beginning in late December 2006 and continuing very much through 2007.The other area where progress has been made is on the economic side. The Iraqi government which had, through 2006, been largely incapable of executing a capital infrastructure budget despite its considerable reservoirs of revenues, its current account surplus being in the ten billion plus range, has now moved to a much better record of performance. Obligations and commitments of central government funds have improved dramatically over 2006. What is critical now is that beyond obligation and commitment of funds, actual expenditures move on the ground, that is, translation of obligations into actual projects that are of benefit to the Iraqi people. We have worked hard and long with the Iraqi ministries concerned to develop an execution capability. This is absolutely essential and I will give you a real world example of where it comes into the fight, into the security situation. As security stabilised in Anbar Province, the most violent of all of the so-called kinetic areas of Iraq, provincial government, which we and others in the coalition had been working with, even when it was exile in Baghdad, returned to Anbar, as did local governance outside the capital of the province and when they returned, they brought with them a carefully-crafted list of development projects and needs.

Because the central government was better prepared to provide funding, to execute funding for the provinces as well as for central government ministerial functions, they were able to respond quite quickly to Anbar's need for funding. Now the challenge is on the local governance structures in Anbar to actually take that money and to apply it to the projects they had identified on the ground.

But there is a very positive synergy here between efforts to strengthen central government economic capacity and local government and its capacity to develop project priorities and then to implement those projects. So, a good record, a quite strikingly positive record on security and an improving record on economic performance, the lagging indicator, as economists would say. In all of this is the national political process, particularly the national dialogue which must contribute over time to the advancement of national reconciliation.

When Ambassador Crocker, when General Petraeus spoke in September to the American Congress, they talked about practical accommodations, practical arrangements taking place on the ground that substituted to an extent for a still-absent process of national dialogue, national reconciliation and they spoke quite accurately to that positive phenomenon. But the absence of progress on the national political front, the absence of significant progress in beginning the process and I speak carefully of beginning the process, because Iraq frankly is in a state of revolutionary transformation and revolutions do not tend to run on neat timetable, according to power points or neat matrices, however carefully we may all construct them.

But a beginning of the process that leads to true national reconciliation, a definition of what it means to be an Iraqi, of what Iraq means, must move forward and it cannot be based solely on pragmatic or practical accommodations at local levels, however useful. So we have placed our focus in the latter part of 2007 and our focus will certainly be there during the course of 2008 on helping to move the government - and by government I mean all of the political structures that comprise the so-called three plus one: the Iraqi Presidency, the Kurdish President, the Shi'a Vice President, Adel Abdul-Mahdi, the Sunni Vice President, Tariq al-Hashimi, with the partnership of Prime Minister Maliki; and then the group of five, those aforementioned four plus Massoud Barzani, the President of Kurdish Regional Government - into more effective, more collaborative, more collegial work, to try to form a centre of political mass – not a consensus, but a centre of political mass, because there will always be those whose views take them outside that centre.

But a centre which is capable of translating itself into effective parliamentary action, to the passage of key legislation, to the advancement of the building blocks that over time, should be, can be, must be the foundation of national reconciliation. I am cautiously, guardedly more optimistic today than I would have been in speaking to you perhaps 90 days ago, 120 days ago on the prospects for this process. It is a slow grinding effort to focus the attention of all Iraq's elites not on their particularist, partisan agendas, but on a forming national agenda, but progress there has been. In December the Iraqi Council of Representatives, which is very much in the end responsive to the directions of the key particular blocs and their leaderships, moved on a pensions law which contained quite dramatic reintegration of elements of the Sunni community who had been stripped of benefits by the initial actions of Iraq's de-Ba'athification laws. A 2008 budget, which we expect will pass any day now, was also devised and agreed upon in December. It is quite an extraordinary document - it is very much a national budget. It includes significantly increased funding for Iraq's own security obligations, it contains dramatically increased funding for capital investment, as well as for provincial governments.

All of these are positive developments and it was an Iraqi product. They developed it, they debated it, they will execute it. But more is needed. This month, the Iraqi Council of Representatives, after a leadership agreement, passed the De-Ba'athification Reform Law. It is not the perfect law in that it does not reflect the maximum desires of all who were involved in its passage. Very few pieces of legislation in any parliamentary process are perfect by that definition. What it does represent is a significant and positive compromise, a reflection of a significant centre, Sunni, Shi'a and Kurd, which now needs to be implemented in the spirit in which it was ostensibly passed, one of reconciliation and unification rather than further division and exclusion. We think this a very positive step forward and we will welcome its expected passage or ratification through the Presidency Council in the days ahead. The next items on Iraq's leadership agenda are the passage of the Provincial Powers Law. Now this is not simply a normal piece of legislation. It is the beginning of the definition of what a federal structure means in Iraq, of what the relationship between centre and periphery is to be. It is not, cannot and should not be, an attempt at defining for all time what that structure is. In the United States and other countries with a federal system, there is a constant process of evolution - as circumstances change, the direction, the structures of a federal system change with them. But what is needed in Iraq today is a foundation. It is a balance struck which is right as right as can be gotten for today. And as Iraq changes over the years ahead, these structures should change with them. But the absence of an agreement for now on what are to be the practical relationships between the centre and provinces and regions is a glaring one and it affects other critical developments, to wit the passage of a Provincial Election Law.

Iraq's provincial governments are distorted and imbalanced by two critical factors: first the boycott of Sunnis from the process when the initial elections were held for local government; and secondly, the positive changes that have taken place in Iraq, not just in Sunni communities, but also in other areas since 2005. There is a demand at the popular level for rectification of these imbalances. There is a demand for a more direct relationship between elector and elected official, which a national closed list, in which people vote for symbols or numbers, cannot provide. And so a good progressive electoral law, which moves in the direction of an open list, in which voters identify with specific representatives, is something which we believe needs to be done and for which there is a very significant popular demand. Now, elections themselves must occur before the end of the year to stabilise the situation, to rectify the current imbalances on the ground, that too will be a challenge for Iraq's government, but a challenge that we believe can and should be made.

Hydrocarbons.

Not least, because I list it last, is the need for a modern, national Hydrocarbons Law. The people of Iraq will never be able to benefit to the maximum extent possible, from petroleum which provides now some 94% of their national revenues, in the absence of a progressive, national Hydrocarbon Law. It is very important that Iraq gets this law right. There are debates ongoing between those who would take Iraq in the direction of a quite liberal production-sharing arrangement-based law; and those who would hold to a classic statist dirigiste structure, in which all resources were held tightly within the central government. A balance here needs to be struck. Iraq is not alone in confronting this debate.

But the benefits of a progressive law have been demonstrated around the world and we believe would certainly be demonstrated in Iraq as well. My colleague, the Under Secretary of State for Economic Affairs, is in Iraq now. He is focusing his mission on working with the Kurdish Regional Government and with the government of Iraq, the central government, in trying to devise a way forward on Hydrocarbons. This is an essential next step for Iraq. We are very concerned at unilateral actions by the Kurdish Regional Government in offering contracts outside the presence of a national law. We do not believe that is a road down which the Kurdish Regional Government either ought to go or if pressed on, will benefit that government. Major companies will only do business in the context of a national law, not an independent, unilateral set of structures offered by one of Iraq's regions. So this is an important priority.

Finally, on the level of our bilateral US-Iraqi relationship, at the concluding part of last year, we negotiated with the government of Iraq a declaration of principles that laid out goals for both of our countries to be fulfilled in the course of 2008 that will establish a sovereign state to sovereign state relationship between our two countries and will provide a basis for the presence of US forces, for the presence of the multinational force beyond the anticipated and hoped-for termination of the Chapter VII mandate under which those forces operate today, no later than December 31stof this year. This is a significant challenge, but it is an important challenge. It is a step towards Iraq's full assumption of responsibility and sovereignty beyond the nominal to the realm of the real. We look forward to starting these negotiations next month. They will take place on several different levels. We will be negotiating security arrangements, a status of forces agreement. We will also be negotiating arrangements on the scientific, cultural, social and economics side, as well as a political relationship which we believe will serve both of our countries beyond 2008. These arrangements will be either paralleled by, we anticipate, or can be joined in by, other coalition partners.

But this is a process absolutely essential for the future of Iraq. It is part of the definition of what Iraq will be, the nature of how its security will be assured over the years – plural – to come because we are speaking here of a long-term commitment and the long-term relationship. My last note will be on Iraq's neighbours. It is in our view, extremely important and I think this is a view shared by the United Kingdom, that Iraq's neighbours play a part in the securing and stabilisation of an Iraq which ultimately can become a source of peace for the region and not a source of division and violence. It is not appropriate, it is not helpful that the largest diplomatic presence in Iraq is that of the government of Iran and that Arab Governments, those of Iraq's neighbours and others in the region, are almost entirely absent. Iraq must not become, should not become, a confrontation point for Arabs and Persians or for Shi'a and Sunni. It should become what we hope that it is – a nation sovereign unto itself, not a pawn in other broader regional or extra-regional challenges. But for this to become Iraq's true future, Iraq's neighbours must play their part, all of them. We look forward to a constructive, co-operative engagement by, and physical diplomatic presence of, Iraq's Arab neighbours and others in the region. With respect to the government of Iran, Iran continues its lethal support through training, through equipment, of the most violent, the most radical groups in Iraq's Shi'a community. That must stop.

We are prepared for discussions, along with the government of Iraq in Baghdad, with the Government of Iran at any time that the government of Iran indicates its willingness to do so. For the last two months that offer has been pending, the government of Iran has not responded. But we will remain ready for those discussions. We would hope that Iran too can become a positive force in and with respect to Iraq. But that has not been the conduct of the Iranian government since 2003. One always hopes that change here is possible. We are cautiously optimistic about the future of Iraq. We do not understate or minimise the challenges today and the challenges that will be ahead. But we see progress and progress should be acknowledged where it exists. Where the challenges remain, we see the possibility of successfully addressing those challenges.

We want this Government of Iraq to succeed, but for that to happen it must govern more effectively and it must govern in a national manner. That would continue to be our message as we press ahead.

By Dr Liam Fox MP, Shadow Secretary of State for Defence

As we sit comfortably here in Washington today, young men and women in NATO forces across Afghanistan are fighting, perhaps being injured or even dying. They are committed to a struggle that ensures the security we enjoy back home and the improvement of the average Afghan's life. Their success or failure in this far away place may also be part of a struggle for the future of the NATO alliance itself.

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