Who’s Coming for Dinar?

Image courtesy of pexels.com / CC0

On March 6, 2017, President Donald J. Trump announced his revised travel ban, to much continued consternation. Notable among the changes was the removal of Iraq as one of the seven predominately Muslim countries whose citizens were temporarily barred from entering the U.S. The New York Times reported that the decision to remove Iraq from Trump’s travel ban list came from Defense Secretary Jim Mattis, who cited concerns that the ban may interfere with coordinated efforts to combat the Islamic State, colloquially known as ISIS. This revision was meant to update Trump’s initial executive order which was signed in January of 2017.

Iraq’s removal from the ban comes at a near perfect time, as the country is poised to experience significant economic growth from a wave of foreign investment by companies interested in profiting from Iraqi infrastructure projects. Trump’s removal of Iraq on the second iteration of his travel ban also comes after a number of public and private high level meetings with major U.S. business leaders. Companies represented across multiple meetings and working groups included Dell, 3M, Merck, Emerson Electric, General Dynamics, Altec, Dow Chemicals, United Technologies, Caterpillar, Corning, Nuclear Corp., Lockheed Martin, GE, Walt Disney, and Wal-Mart, among others.

An excerpt from the U.S. Export website managed by the U.S. Department of Commerce, courtesy of Export.gov

The value of foreign investment in Iraq, which was almost non-existent before 2003, has increased tremendously over the last decade. A number of major companies both from the U.S. and elsewhere have inked lucrative deals to the tune of billions of dollars, with energy, military, and industrial companies in particular reaping some of the highest rewards.

Iraqi foreign direct investment, net inflows (BoP, current US$), courtesy of Indexmundi.com.

In December 2016, Boeing confirmed a commercial airplane deal with Iraq worth a reported $16.6 billion. GE has also been pouring resources into Iraq, announcing two new deals in the last six months worth $520 million and $1.6 billion each, for energy infrastructure projects. General Dynamics, not be left out, and who has been earning big from DoD contracts in Iraq for decades, reported a deal in November 2016 worth $65 million for tanks and other vehicle support.

At this point, it is worth noting that Defense Secretary Jim Mattis sat on the Board of Directors for General Dynamics immediately after retiring from military service in 2013. And, the CEO’s of both GE and Boeing, who garnered some negative ire from Trump at the start of his presidency, have managed to increase their presence and influence in the White House today. This begs the question:

Is Iraq’s removal from President Trump’s amended travel ban the result of private sector pressure?

Image courtesy of pixabay.com / CC0

Where the international political economy was heavily invested in BRIC countries during previous decades, a shift to what they now call 3G countries has begun. BRIC, an acronym for Brazil, Russia, India, and China, refers to a block of “secondary” states with fast moving economies, generally functioning governments, and industrial growth potential. In 2010 the acronym was shifted to BRICS with the official inclusion of South Africa. Mexico and South Korea have been thought of as BRICS states by many, but are not officially considered part of the club. There are other fun acronyms and goofy names that exist in international affairs like Next Eleven, CIVETS, and MINT, but BRICS has managed to outshine them all.

3G countries, short for Global Growth Generators, represent the new era of political interest and financial growth, and are the likely targets of significant private sector investment in the coming decades. The 3G club includes Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka, and Vietnam. Only two of the BRICS made it to 3G status, China and India, while Brazil and Russia don’t seem to offer the same growth potential based on the new 3G index. Interestingly enough, they are also two countries who increasingly chilled the Obama administration, opting to pursue further development as leaders in their respective regions, rather than pandering to U.S.-centric issues.

Map highlighting 3G countries as of March 2017, created by C. Raymond Cruz using MapChart / CC0

When mapped out, the idea behind 3G countries, and some of their appeal, starts to become more obvious. The focus is now entirely in Asia and Africa, specifically in countries with poor or lackluster infrastructure to support growing populations. These are also states whom are usually aligned with, or at least centrist toward, U.S. policies and ambitions. China is the obvious elephant in the room in this regard, but, China has been amicable to U.S. businesses profiting in the Chinese market for years with little complaint. This is mostly due to the mutual benefits China and the U.S. receive, but maybe also because it becomes easier to steal intellectual property when its all being stored in your back yard.

The critical aspects of 3G countries are three fold.

First, they represent major profitability for long-term multinational investment across multiple infrastructure sectors (particularly energy, military, and industrial sectors). Second, they offer at least marginal political stability and potentially safe conditions to follow through on that investment, with the hope that increased infrastructure offers increased stability. And finally, they provide affordable markets (ie cheap) for labor, supply, and material.

Another interesting aspect of 3G countries relates to the idea of an economic center of gravity. When measuring the reach and impact of world markets, one can start to map out where the major economic spheres of influence occur. As seen in the map below, a slow moving shift toward the east has been ongoing since the 1980’s, and it’s projected that global economic influence will favor eastern markets rather than western ones by 2050. U.S. investment in eastern markets, shadowing this shift, will be critical if the U.S. wants to maintain even reasonable degrees of economic influence.

This brings us back to Iraq, and their serendipitous removal from the amended travel ban. It’s probable that U.S. companies see Iraq not only as a potential cash cow, but as a gateway to eastern markets already dominated by strong regional players. China’s “One Belt, One Road” strategy, which is nearly identical, save for going in the opposite direction, outlines plans to increase Chinese multinational investment across key land and maritime regions stretching through Eurasia. If successful, it would not only increase China’s waning position in global political affairs, but chill western influence from the U.S. and Western Europe into eastern markets.

Clearly Iraq’s presence on the 3G index is critical for both it’s own growth, as well as U.S. private sector companies. Nearly every U.S. government website with a page on Iraq is overtly advertising the profits to be made by infrastructure investment in the country, despite the hazards that may exist.

President Trump’s beliefs and personal politics, which likely inspired his travel ban in the first place, were effectively shelved for the sake of private sector growth in foreign markets, a concept that will not provide a significant return on investment for U.S. jobs or local economies.

This is not to say that the President’s choice was inherently wrong, but rather illustrates that he is making significant decisions without any consideration for the potential impact, and may be wholly unaware of even the basic concepts of international relations, economics, or market growth, the three biggest things in which any modern multinational CEO would likely be educated.

It would be reasonable to say that Iraq dodged a proverbial bullet on this one, but it is much more accurate to say that Trump did.

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Computers, Culture, Crime, and occasionally Cake.

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C. Raymond Cruz

C. Raymond Cruz

Computers, Culture, Crime, and occasionally Cake.

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