Egyptian President Hosni Mubarak in an address broadcast on state television Jan. 28 said that he has dissolved the government and will form a new government Jan. 29. In other words, Mubarak is not stepping down.

Changing the political face of the government is unlikely to pacify Egyptian protesters. Mubarak is undoubtedly the primary target of the demonstrations. The crisis in Egypt is thus far from over. The military still appears to be the main power broker in the country, and Mubarak’s fate is likely in the hands of his generals. Mubarak’s appeal to stay and the hours-long delay in making this speech could be a negotiated step between the two sides, but the potential for more direct and overt military intervention remains extremely high. Chief of Staff of the Armed Forces Lt. Gen. Sami Annan is expected to return to Cairo by Jan. 29 and next steps by the military are likely to be discussed then.

The announcement was strategically made in the middle of the night in Egypt to give time for troops to take position. The military’s interaction with the demonstrators will need to be watched closely. So far, the military has been able to move into the cities and has been welcomed by the protesters without employing the more heavy-handed tactics of the internal security forces. What order they imposed came not from violence but from the perception that they would enable the demonstrators to bring down Mubarak.

If the military is now physically backing the regime, confrontations between demonstrators (whose grievance is ultimately with Mubarak) and the military forces is likely to turn more violent in the hours ahead.

Read more at www.stratfor.com

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North Korea and South Korea exchanged artillery fire near their disputed border in the Yellow Sea/West Sea on Nov. 23. The incident raises several questions, not the least of which is whether Pyongyang is attempting to move the real “red line” for conventional weapons engagements, just as it has managed to move the limit of “acceptable” behavior regarding its nuclear program.

North Korea and South Korea exchanged artillery fire near the Northern Limit Line (NLL), their disputed western border in the Yellow Sea/West Sea on Nov. 23. The incident damaged as many as 100 homes and thus far has killed two South Korean soldiers with several others, including some civilians, wounded. The South Korean government convened an emergency Cabinet meeting soon after the incident and called for the prevention of escalation. It later warned of “stern retaliation” if North Korea launches additional attacks. Pyongyang responded by threatening to launch additional strikes, and accused South Korea and the United States of planning to invade North Korea, in reference to the joint Hoguk military exercises currently under way in different locations across South Korea.

The incident is the latest in a series of provocations by Pyongyang near the NLL this year following the sinking of the South Korean warship ChonAn in March. Over the past several years, the NLL has been a major hotspot. While most border incidents have been low-level skirmishes, such as the November 2009 naval episode, a steady escalation of hostilities culminated in the sinking of the ChonAn. The Nov. 23 attack on the South Korean island of Yeonpyeongdo represents another escalation; similar shellings in the past were for show and often merely involved shooting into the sea, but this attack targeted a military base. It also comes amid an atmosphere of higher tensions surrounding the revelation of active North Korean uranium enrichment facilities, South Korea’s disavowal of its Sunshine Policy of warming ties with the North and an ongoing power succession in Pyongyang.

Over the years, North Korea has slowly moved the “red line” regarding its missile program and nuclear development. It was always said that North Korea would never test a nuclear weapon because it would cross a line that the United States had set. Yet North Korea did test a nuclear weapon in October 2006, and then another in May 2009, without facing any dire consequences. This indicates that the red line for the nuclear program was either moved, or was rhetorical. The main question after the Nov. 23 attack is whether Pyongyang is attempting to move the red line for conventional attacks. If North Korea is attempting to raise the threshold for a response to such action, it could be playing a very dangerous game.

However, the threat North Korea’s nuclear program poses is more theoretical than the threat posed by conventional weapons engagements. Just as it seems that a North Korean nuclear test would not result in military action, the ChonAn sinking and the Nov. 23 attack seem to show that an “unprovoked” North Korean attack also will not lead to military retaliation. If this pattern holds, it means North Korea could decide to move from sea-based to land-based clashes, shell border positions across the Demilitarized Zone or take any number of other actions that certainly are not theoretical.

The questions STRATFOR is focusing on after the Nov. 23 attack are as follows:

Read more at www.stratfor.com

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The Defense Department also made clear that this incident did not pose a direct threat and was not the work of a foreign power. The U.S. government has said very little else about the incident, and it has neither increased threat levels nor issued warnings that would be expected if it was concerned with this incident.

There is an oft-repeated fear that a country like North Korea or Iran could sneak a nuclear device mounted on a missile into U.S. waters via cargo ships and then launch the missile into or over U.S. territory for a surprise nuclear or electromagnetic pulse strike. This is the doomsday scenario that comes to mind when hearing about a mysterious missile being launched off the coast of a major U.S. city, but the relaxed response from the Defense Department indicates that they knew all along that this incident was not such a scenario.

The U.S. operates constellations of satellites dedicated to detecting the slightest heat signature to be aware of any missile launch that may be happening that could affect the United States. It is thus odd that no one from the Navy or Defense Department has chosen to share more details to prevent a host of conspiracy theories and fear-mongering such an incident could spark. Given U.S. surveillance capabilities, it would seem that not only would the U.S. military know that there was a launch, it would know what it was, where it came from and whether it posed a threat.

Working with the knowledge we currently have, including the fact that the U.S. military conducts missile tests in this area on a regular basis, everything points to a missile launched by the United States. Still, why deny knowledge of something that appears to be a rather routine launch at a time when the president is out of the country? NORAD is expected to issue a statement on the incident in the coming hours, with which we expect this mystery to be cleared up.

See more at Stratfor.com

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Analysis

U.S. Democratic Senator Jim Webb, chairman of the East Asian and Pacific Affairs subcommittee on the Senate Foreign Relations Committee, released a statement on his website on Nov. 4, calling for the United States to reinforce its engagement with allies and partners in East Asia. U.S. moves in the region are a direct response to China’s emboldened foreign policy, including its “military aggression” toward neighbors over maritime territorial disputes. Webb also criticized China for manipulating its currency and subsidizing state-owned enterprises, calling for the United States to take concrete actions to punish China.

The statement is important because of Webb’s political position and, more important, the timing. Webb is a leading U.S. Democrat and a rising star in the party, a Vietnam War veteran who has specialized in East Asian affairs throughout his career and has extensive experience with the U.S. Navy and Marines. He often travels through East Asia and speaks out about U.S. interests in the region. For instance, Webb in 2009 visited Myanmar to free an imprisoned U.S. citizen, a trip that came after the United States opened a conversation with that reclusive state as part of its growing re-engagement with the Association of Southeast Asian Nations and the broader region. Webb’s comments therefore carry weight, and this particular statement was rather strident, emphasizing that U.S. involvement in the region is explicitly a means of counteracting China’s growing influence and that China’s economic disagreements with the United States deserve immediate punitive measures.

The timing is also important. Webb’s comments coincide with U.S. President Barack Obama’s embarking on a trip that will take him to India, Indonesia, South Korea and Japan. This itinerary emphasizes the United States’ strategy of firming up its relationship with allies and partners on China’s periphery, a strategy China sees as an inchoate “containment policy” along the lines of what the United States pulled against the Soviets. Washington has witnessed Beijing’s more strident tone on territorial disputes with Japan, Vietnam and India, and has offered to mediate these disputes in an international venue, whereas Beijing would prefer to handle the issues bilaterally, where its economic pull is most effective.

Moreover, the comments come as Washington is threatening to take tougher actions on China’s undervalued — and very slowly appreciating — currency, which the United States claims is hindering the economic recovery. After the G-20 meeting in Seoul, where currency and trade imbalances will top the bill, the U.S. Treasury will decide whether to send a stark signal to Beijing by issuing a report that could officially label it a currency manipulator. Also, the U.S. Senate may vote on the Currency Reform for Fair Trade Act, which the House approved in September to China’s chagrin (and which would smooth the way for the U.S. administration to impose duties on China’s goods based on its currency regime). Lastly, in the coming months the U.S. Commerce Department will decide whether to punish China for subsidizing the production of green energy equipment.

Of course, the United States and China simultaneously are in the midst of deep negotiations on ways to cooperate economically and avoid an outright confrontation over the economic grievances. They have engineered something of a diplomatic detente since early September. The United States opened the path for several large Chinese investments into its energy and steel sector, cooperation between U.S. states and Chinese provinces has been enhanced, and statements were issued by the U.S. administration giving China a bit of leeway on its gradualist approach to reforming its currency, trade and industrial practices, and domestic consumption structure. The two sides are especially emphasizing the potential to cooperate ahead of Chinese President Hu Jintao’s visit to the United States in January.

But there are serious strains at work beneath the surface. China cannot compromise to external forces on its economic management, because to move too fast or too drastically risks upsetting a cart with an already overburdened structure. A deep disturbance could result in massive social unrest, and the Hu administration wants to finish its term smoothly and enable a stable power transition for the regime. Ultimately for China, domestic considerations trump international concerns. While destabilization in China would have negative consequences for the American and global economies, domestically the U.S. administration is having more and more trouble overlooking China’s mercantilist policies because of the weak state of the U.S. economy — and American moves to ease monetary policy for its economy’s sake pose a threat to China. Furthermore, China’s focus on military modernization, especially naval expansion, and its hard line on the South China Sea sovereignty disputes conflict with the U.S. grand strategic requirement to maintain naval supremacy over the world’s sea lanes.

Beijing is probing in its periphery and feeling out its new strengths, but it is not desirous of a head to head conflict with the world’s only superpower. Nevertheless, it is particularly anxious that in the future the United States will increase its aggressiveness regardless of any concessions that Beijing may offer, as the United States gains more freedom from its entanglements in the Mideast and South Asia and turns its attention to these unavoidable clashes of interest. If China views this as the U.S. trajectory, then it has no choice but to prepare for a collision, and preparation only exacerbates Washington’s suspicions. Thus beneath the two states’ ongoing management of the relationship within the normal range of vicissitudes, there is the apprehension that the relationship is not going to be as manageable in the future.

More at Stratfor.com

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The 2010 U.S. midterm elections were held, and the results were as expected: The Republicans took the House but did not take the Senate. The Democrats have such a small margin in the Senate, however, that they cannot impose cloture, which means the Republicans can block Obama administration initiatives in both houses of Congress. At the same time, the Republicans cannot override presidential vetoes alone, so they cannot legislate, either. The possible legislative outcomes are thus gridlock or significant compromises.

U.S. President Barack Obama hopes that the Republicans prove rigidly ideological. In 1994, after the Republicans won a similar victory over Bill Clinton, Newt Gingrich attempted to use the speakership to craft national policy. Clinton ran for re-election in 1996 against Gingrich rather than the actual Republican candidate, Bob Dole; Clinton made Gingrich the issue, and he won. Obama hopes for the same opportunity to recoup. The new speaker, John Boehner, already has indicated that he does not intend to play Gingrich but rather is prepared to find compromises. Since Tea Party members are not close to forming a majority of the Republican Party in the House, Boehner is likely to get his way.

Another way to look at this is that the United States remains a predominantly right-of-center country. Obama won a substantial victory in 2008, but he did not change the architecture of American politics. Almost 48 percent of voters voted against him. Though he won a larger percentage than anyone since Ronald Reagan, he was not even close to the magnitude of Reagan’s victory. Reagan transformed the way American politics worked. Obama did not. In spite of his supporters’ excitement, his election did not signify a permanent national shift to the left. His attempt to govern from the left accordingly brought a predictable result: The public took away his ability to legislate on domestic affairs. Instead, they moved the country to a position where no one can legislate anything beyond the most carefully negotiated and neutral legislation.

That leaves foreign policy. Last week, I speculated on what Obama might do in foreign affairs, exploring his options with regard to Iran. This week, I’d like to consider the opposite side of the coin, namely, how foreign governments view Obama after this defeat. Let’s begin by considering how he positioned himself during his campaign.

The most important thing about his campaign was the difference between what he said he would do and what his supporters heard him saying he would do. There were several major elements to his foreign policy. First, he campaigned intensely against the Bush policy in Iraq, arguing that it was the wrong war in the wrong place. Second, he argued that the important war was in Afghanistan, where he pledged to switch his attention to face the real challenge of al Qaeda. Third, he argued against Bush administration policy on detention, military tribunals and torture, in his view symbolized by the U.S. detention facility at Guantanamo Bay Naval Base.

In a fourth element, he argued that Bush had alienated the world by his unilateralism, by which he meant lack of consultation with allies — in particular the European allies who had been so important during the Cold War. Obama argued that global hostility toward the Bush administration arose from the Iraq war and the manner in which Bush waged the war on terror. He also made clear that the United States under Bush had an indifference to world opinion that cost it moral force. Obama wanted to change global perceptions of the United States as a unilateral global power to one that would participate as an equal partner with the rest of the world.

The Europeans were particularly jubilant at his election. They had in fact seen Bush as unwilling to take their counsel, and more to the point, as demanding that they participate in U.S. wars that they had no interest in participating in. The European view — or more precisely, the French and German view — was that allies should have a significant degree of control over what Americans do. Thus, the United States should not merely have consulted the Europeans, but should have shaped its policy with their wishes in mind. The Europeans saw Bush as bullying, unsophisticated and dangerous. Bush in turn saw allies’ unwillingness to share the burdens of a war as meaning they were not in fact allies. He considered so-called “Old Europe” as uncooperative and unwilling to repay past debts.

The Europeans’ pleasure in Obama’s election, however, represented a massive misunderstanding. Though they thought Obama would allow them a greater say in U.S. policy — and, above all, ask them for less — Obama in fact argued that the Europeans would be more likely to provide assistance to the United States if Washington was more collaborative with the Europeans.

Thus, in spite of the Nobel Peace Prize in the early days of the romance, the bloom wore off as the Europeans discovered that Obama was simply another U.S. president. More precisely, they learned that instead of being able to act according to his or her own wishes, circumstances constrain occupants of the U.S. presidency into acting like any other president would.

Campaign rhetoric notwithstanding, Obama’s position on Iraq consisted of slightly changing Bush’s withdrawal timetable. In Afghanistan, his strategy was to increase troop levels beyond what Bush would consider. Toward Iran, his policy has been the same as Bush’s: sanctions with a hint of something later.

The Europeans quickly became disappointed in Obama, especially when he escalated the Afghan war and asked them to increase forces when they wanted to withdraw. Perhaps most telling was his speech to the Muslim world from Cairo, where he tried to reach out to, and create a new relationship with, Muslims. The problem with this approach was that that in the speech, Obama warned that the United States would not abandon Israel — the same stance other U.S. presidents had adopted. It is hard to know what Obama was thinking. Perhaps he thought that by having reached out to the Muslim world, they should in turn understand the American commitment to Israel. Instead, Muslims understood the speech as saying that while Obama was prepared to adopt a different tone with Muslims, the basic structure of American policy in the region would not be different.

In both the European and Muslim case, the same question must be asked: Why did Obama believe that he was changing relations when in fact his policies were not significantly different from Bush’s policies? The answer is that Obama seemed to believe the essential U.S. problem with the world was rhetorical. The United States had not carefully explained itself, and in not explaining itself, the United States appeared arrogant.

Obama seemed to believe that the policies did not matter as much as the sensibility that surrounded the policies. It was not so much that he believed he could be charming — although he seemed to believe that with reason — but rather that foreign policy is personal, built around trust and familiarity rather than around interests. The idea that nations weren’t designed to trust or like one another, but rather pursued their interests with impersonal force, was alien to him. And so he thought he could explain the United States to the Muslims without changing U.S. policy and win the day.

U.S. policies in the Middle East remain intact, Guantanamo is still open, and most of the policies Obama opposed in his campaign are still there, offending the world much as they did under Bush. Moreover, the U.S. relationship with China has worsened, and while the U.S. relationship with Russia has appeared to improve, this is mostly atmospherics. This is not to criticize Obama, as these are reasonable policies for an American to pursue. Still, the substantial change in America’s place in the world that Europeans and his supporters entertained has not materialized. That it couldn’t may be true, but the gulf between what Obama said and what has happened is so deep that it shapes global perceptions.

Having traveled a great deal in the last year and met a number of leaders and individuals with insight into the predominant thinking in their country, I can say with some confidence that the global perception of Obama today is as a leader given to rhetoric that doesn’t live up to its promise. It is not that anyone expected his rhetoric to live up to its promise, since no politician can pull that off, but that they see Obama as someone who thought rhetoric would change things. In that sense, he is seen as naive and, worse, as indecisive and unimaginative.

No one expected him to turn rhetoric into reality. But they did expect some significant shifts in foreign policy and a forceful presence in the world. Whatever the criticisms leveled against the United States, the expectation remains that the United States will remain at the center of events, acting decisively. This may be a contradiction in the global view of things, but it is the reality.

A foreign minister of a small — but not insignificant — country put it this way to me: Obama doesn’t seem to be there. By that he meant that Obama does not seem to occupy the American presidency and that the United States he governs does not seem like a force to be reckoned with. Decisions that other leaders wait for the United States to make don’t get made, the authority of U.S. emissaries is uncertain, the U.S. defense and state departments say different things, and serious issues are left unaddressed.

While it may seem an odd thing to say, it is true: The American president also presides over the world. U.S. power is such that there is an expectation that the president will attend to matters around the globe not out of charity, but because of American interest. The questions I have heard most often on many different issues are simple: What is the American position, what is the American interest, what will the Americans do? (As an American, I frequently find my hosts appointing me to be the representative of the United States.)

I have answered that the United States is off balance trying to place the U.S.-jihadist war in context, that it must be understood that the president is preoccupied but will attend to their region shortly. That is not a bad answer, since it is true. But the issue now is simple: Obama has spent two years on the trajectory in place when he was elected, having made few if any significant shifts. Inertia is not a bad thing in policy, as change for its own sake is dangerous. Yet a range of issues must be attended to, including China, Russia and the countries that border each of them.

Obama comes out of this election severely weakened domestically. If he continues his trajectory, the rest of the world will perceive him as a crippled president, something he needn’t be in foreign policy matters. Obama can no longer control Congress, but he still controls foreign policy. He could emerge from this defeat as a powerful foreign policy president, acting decisively in Afghanistan and beyond. It’s not a question of what he should do, but whether he will choose to act in a significant way at all.

This is Obama’s great test. Reagan accelerated his presence in the world after his defeat in 1982. It is an option, and the most important question is whether he takes it. We will know in a few months. If he doesn’t, global events will begin unfolding without recourse to the United States, and issues held in check will no longer remain quiet.

“The World Looks at Obama After the U.S. Midterm Election is republished with permission of STRATFOR.”

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Analysis

Abdel Hameed Shehadeh, a U.S. citizen arrested Oct. 22 in Honolulu, Hawaii, has been charged with providing false information to federal law enforcement authorities on matters involving international terrorism, according to a criminal complaint released Oct. 26 by the U.S. Attorney’s office in the Eastern District of New York. Shehadeh, a 21-year-old New York City native who moved to Hawaii in 2009, first came to the attention of the New York Police Department (NYPD) and the FBI in June 2008 when he bought a one-way airline ticket to Pakistan from New York (he later confessed he intended to join a militant group active in that country). He subsequently attempted to travel to Jordan, Somalia and Iraq for the same reason, but was never able to get past customs officials in the various destinations.

Shehadeh committed a number of operational security blunders that alerted authorities to mark him for investigation, such as purchasing one-way plane tickets, attempting to travel to countries with active militant groups, running jihadist websites, publicly promoting jihadist ideology and withholding documents from U.S. military recruiters whom he had approached about potentially enlisting. However, these sorts of mistakes by grassroots jihadists are nothing new, and often a lack of experience or militant tradecraft is one of the best assets for Western intelligence agencies hoping to foil their activities.

Prior to boarding his flight to Pakistan in 2008, NYPD and FBI investigators questioned Shehadeh but eventually allowed him to depart. Upon arriving in Pakistan, Shehadeh was stopped by immigration authorities and forced to return to the United States, either due to a tip-off or the general suspicion brought about by purchasing a one-way ticket. Further investigation revealed Shehadeh was running jihadist websites that posted messages from al Qaeda leaders, as well as his own messages and videos. He was likely already being monitored by the United States due to his Internet activity, and the ticket purchase probably instigated a full-scale investigation. He initially told investigators he was traveling to Pakistan to attend a madrassa, though he did not have one chosen. A month later he told investigators he was going to attend a university in Islamabad and to attend his friend’s wedding, though he was unable to name the friend. Later he admitted to authorities that his real intention was to connect with militant groups.

Shehadeh further drew the interest of authorities in October 2008 when he approached U.S. Army recruiters in New York City and again provided false information about his travels. He said his only foreign travel was to Israel and refused to produce his current passport, the reason given by the military when his attempt to enlist was later denied. According to the criminal complaint filed in New York’s Eastern District Court, his real intention was to desert once he was stationed overseas and join a militant group. Associates of Shehadeh who were witnesses in the investigation verified this claim.

He moved to Hawaii in 2009 and then bought tickets to fly to Mogadishu, home of al Shabaab, the Somali al Qaeda franchise. He was told by FBI agents at the time that he had been placed on the U.S. government’s “No-Fly” list and would not be allowed to depart for Mogadishu. He then approached FBI agents to try to persuade them to take him off the list in return for becoming an informant. The FBI allowed him to believe he had become an informant, though it did not extend to him any of the legal protections that come with the status and used the information he provided them to reveal his own activities, essentially extracting a confession.

Instead of being charged with aiding or joining a terrorist group — despite his attempts, Shehadeh failed to do either — he was arrested and charged with providing false information to authorities. Shehadeh showed his inexperience and lack of training by pursuing jihadist groups in a way that would alert authorities. Indeed, these easily identifiable operational security failures are one reason why jihadist leaders advise potential Western recruits to be cautious traveling to training camps.

If it is likely they will be picked up or stopped by authorities, recruits are encouraged by their jihadist mentors to carry out simple attacks in their home countries. So far, such public advice has failed to sway its audience, as multiple U.S. citizens have been arrested before they could reach training camps abroad, such as Zachary Chesser, Mohamed Mahmood Alessa, Carlos Eduardo Almonte, Shaker Masri and Sascha Boettcher. In fact, Shehadeh had tried to contact Yemeni-born radical cleric Anwar al-Awlaki, who previously had advised Maj. Nidal Hasan to carry out an armed assault at Fort Hood, but Shehadeh did not heed this type of advice. The combination of U.S. intelligence and law enforcement limiting Shehadeh’s ability to meet up with experienced jihadists to pick up the technical knowledge and skills needed to conduct a terrorist attack, along with his own operational blunders and his intent failing to match his ability, prevented this case from materializing into anything dangerous.

Read More at Stratfor.com

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Since publishing the report, we have been deluged by interview requests regarding the case. Numerous media outlets have interviewed Fred Burton and myself regarding the Falcon Lake case. During the course of talking with reporters and customers, it became obvious to us that a solid understanding of the context within which Hartley’s killing occurred was lacking in media discussions of the case. Viewing the murder as part of the bigger picture of what is occurring in Mexico makes it far easier to understand not only why David Hartley was killed, but why his body will likely never be found — and why his killers probably will not be held accountable for their actions, at least in the context of the judicial system.

In STRATFOR’s annual Mexican cartel report published in December 2009, we noted the growing fracture between the Gulf cartel and its former enforcement arm, Los Zetas, which had become an independent drug trafficking organization. We noted that Los Zetas were becoming increasingly aggressive and that the Gulf cartel was struggling to fend off these advances. In fact, it looked as if Los Zetas were about to swallow up the Gulf cartel.

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What had been a tense standoff between the two cartels erupted into open warfare in January when Zeta leader Sergio “El Concord 3” Mendoza Pena died in an altercation between Mendoza and a group of men reporting to Gulf cartel No. 2 leader Eduardo “El Coss” Costilla Sanchez. After learning of Mendoza’s death, Los Zetas No. 2 Miguel “Z-40” Trevino Morales gave Costilla an ultimatum to hand over those responsible for Mendoza’s death by Jan. 25. When the deadline passed without his demand being met, Trevino ordered the kidnapping of 16 known Gulf cartel members in the Ciudad Miguel Aleman area as retaliation. The war was on.

Fearing the might of Los Zetas, the Gulf cartel reached out to their longtime enemies, the Sinaloa federation, and asked for their assistance in dealing with Los Zetas. The leader of the Sinaloa federation, Joaquin “El Chapo” Guzman Loera, has no love for Los Zetas, who as the former military arm of the Gulf cartel engaged in many brutal battles with Guzman’s forces. Together with another enemy of Los Zetas, La Familia Michoacana (LFM), Guzman joined forces with the Gulf cartel to form an organization known as the New Federation. The stated goals of the New Federation were to destroy Los Zetas, along with the remnants of the Vicente Carrillo Fuentes (VCF) organization, aka the Juarez cartel. A move by the New Federation to destroy the remnants of the Arellano Felix Organization (aka the Tijuana cartel), now very weak, would allow the organization to dominate Mexican drug smuggling routes into the United States. If this New Federation consolidation were to occur (it has not happened yet), it would also likely result in a dramatic decrease in violence in the long term. But the VCF and Los Zetas have not yet been vanquished. This means that while the New Federation clearly has been able to gain the upper hand over the past several months, both Los Zetas and the VCF continue a desperate fight for survival and turf that in the short term means the level of violence will remain high.

The emergence of the New Federation was accompanied by the collapse of the Beltran Leyva Organization, a group formerly allied with the Sinaloa federation that broke away from Sinaloa and allied with Los Zetas and the VCF to fight against El Chapo and his allies. As these two developments played out over the first quarter of 2010, we found them to be so significant that we felt compelled to publish an update to STRATFOR’s annual cartel report in May to document the changes.

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Since January, the Zetas have suffered significant organizational and territorial losses. By May 2010, Los Zetas reportedly had lost control of the strategic (and very lucrative) border crossing of Reynosa, Tamaulipas state, to the New Federation and had been forced to retreat north toward Nuevo Laredo and west toward the transportation hub of Monterrey, the capital of Nuevo Leon state and Mexico’s third-largest city.

Significant incidents involving the Los Zetas organization since January 2010 include the following:

Jan. 18: Sergio “El Concord 3” Mendoza Pena killed by Gulf cartel, leading to rupture in Gulf/Zeta relationship. March 16: Jose “El Cuervo” Antonio Estrada Sanchez, Zeta leader of the Tabasco plaza, or port of entry for contraband, arrested. March 29: Erick “El Motokles” Alejandro Martinez Lopez, Zeta leader in Quintana Roo state, arrested. March 30: Roberto “El Beto” Rivero Arana, nephew of Zeta leader Heriberto “El Lazca” Lazcano Lazcano and reportedly in line to be the new Tabasco plaza leader, arrested in Tabasco. April: Twenty-five law enforcement officials in Nuevo Leon killed by the New Federation for allegedly cooperating with Los Zetas. May 12: Los Zetas ranch/training facility near Higueras, Nuevo Leon state, seized along with huge weapons cache. May 30: Hipolito Bonilla Cespedes, Lazcano’s accountant, arrested in Monterrey. June 9: Hector “El Tori” Raul Luna Luna, Monterrey Zeta leader, arrested. June 24: Manuel Antele Velasco, Puebla state Zeta leader, arrested. July 7: Esteban “El Chachis” Luna Luna, Monterrey Zeta leader, arrested. Aug. 14: “El Sonrics,” Monterrey Zeta leader, killed by military. Aug. 24: Discovery of 72 dead migrants killed by Los Zetas near San Fernando, Tamaulipas. Aug. 29: Juan “El Billy” Francisco Zapata Gallego, Zeta leader in Monterrey, arrested. Sept. 3: Twenty-seven Los Zetas die in firefight with military in Ciudad Mier, Tamaulipas. Sept. 26: Jose Angel “El Pelon” Fernandez de Lara Diaz, Zeta leader in Quintana Roo state hand-picked by Lazcano in June, arrested. Sept. 30: Gunmen linked to Los Zetas shoot and kill American David Hartley. Oct. 6: Jose Raymundo Lopez Arellano, local Zeta leader in San Nicolas de las Garza, Nuevo Leon (Monterrey metro area), arrested. Oct. 9: Seiky “Comandante Sierra” Ogata Gonzalez, Zeta leader in Tabasco, arrested.

All of these recent losses by Los Zetas must be considered part of a longer timeline. As early as 2007, STRATFOR began to discuss the toll that the cartel wars were taking on the enforcement arms of the various cartel groups, such as Los Zetas. The life of a cartel enforcer is often quite brutal and short: Enforcers constantly are in danger of being killed or arrested. In 2007, we noted how Los Zetas were looking to bring in fresh muscle to bolster their ranks, to include other former members of the Mexican military and police, former Guatemalan special operations forces (known as Kaibiles), and even members of street gangs like Mara Salvatrucha, aka MS-13. These young street gang recruits frequently are referred to as “Zetitas” or little Zetas.

Such replacements come with a price, however. The original Los Zetas were defectors from Mexico’s Special Forces Airmobile Group (known by the Spanish acronym GAFE), and as such were very well-trained and well-disciplined. As evidenced from the paramilitary training camps uncovered in Mexico and Guatemala, and the fact that Los Zetas reportedly have hired military instructors from a variety of countries (including Americans, Israelis, and some Europeans), the organization has attempted to train their new recruits. But the new generations of Zetas and Zetitas are simply not as well-trained or well-disciplined as the original Zetas. This basic level of training for new recruits has also suffered in recent months as the group has been under tremendous pressure to replace members who have been killed while some of its training facilities have been seized by the authorities. This means the organization has been compelled to use enforcers with very little training who are far less tactically adept than their Zeta masters. They are little more than thugs with guns.

And this brings us back to the Hartley case. Intelligence reports we received indicate that a group of poorly trained Zeta enforcers working to keep the Falcon Lake smuggling corridor safe from encroachment by the Gulf cartel and their New Federation partners killed David Hartley. When viewed within the analytical framework of what has happened to the Zetas over the past year, the intelligence fit. It makes sense to us that the Zetas would be employing poorly trained individuals for such duties, that those performing those duties would be jumpy and that these gunmen likely did kill Hartley without orders from the Zeta hierarchy.

Although some media outlets have portrayed the murder of an American citizen by a Mexican cartel organization as an unusual event, it is really quite common. In fact, 79 American citizens officially were reported murdered in Mexico in 2009, according to U.S. State Department figures, and the State Department notes that there were probably other cases that went unreported. For 2010, the State Department reports 48 American citizens have been murdered in Mexico through June 10. Our research has uncovered at least another six reported deaths since June 10 (including David Hartley), so unofficially the number of American citizens reported murdered in Mexico is approximately 54 for the year to date. While many of the Americans murdered in Mexico are undoubtedly involved in some way with the drug trade, others have no apparent link.

Two of the American citizens murdered in Mexico in 2010 were Lesley Enriquez, an employee of the U.S. consulate in Juarez, and her husband, Arthur Redelfs, a detention officer at the El Paso County Jail. Still, with more than 9,100 murders from cartel violence to date this year in Mexico, the 54 American murder victims comprise only a small percentage of the overall body count. Because of this, some of our contacts in the Mexican government are having a hard time understanding why the Hartley murder has elicited such an intense media reaction in the United States, which in turn resulted in diplomatic pressure on Mexican authorities from the U.S. government. At the same time Mexico is being pressured by the U.S. government about the death of one American citizen, it is also are trying to come to grips with the fact that the lead Mexican investigator in the case was kidnapped and beheaded. This turn of events provides a fairly good illustration of the security environment in Mexico today.

It must also be recognized that any attempt to quantify the death toll in the Mexican cartel wars is quickly complicated by the fact that the cartels have gotten very good at disposing of bodies. Many victims simply disappear, and their murders are never confirmed. For example, in December 2008, American anti-kidnapping consultant Felix Batista disappeared from a meeting at a restaurant in Saltillo, Coahuila state. Batista reportedly was murdered, but no trace of his body was ever found. In addition to dumping bodies in mass graves, using wood chippers or feeding them to vultures, Mexican cartels also have developed innovative ways to dispose of their victims’ corpses. Santiago “El Pozolero” Meza Lopez, a Tijuana cartel enforcer arrested in January 2009, admitted to Mexican authorities that he was responsible for dissolving at least 300 bodies in sodium hydroxide, a process known as making “guiso,” Spanish for “stew.” The cartels can either dispose of a body or mutilate it and leave it to be found, depending on the specific message they wish to send.

Given the well-honed ability of the cartels to dispose of bodies and the fact that Los Zetas reportedly went into damage-control mode following David Hartley’s shooting, it was not at all surprising to receive a report indicating that that the gunmen who killed Hartley reportedly disposed of the body to destroy any potential evidence. We also received reports that Los Zetas No. 2 man, Miguel “Z-40” Trevino Morales, was angry about the murder of Hartley by poorly disciplined Zeta gunmen acting without permission, and is very unhappy with the attention the case has focused on his organization and their smuggling route through Falcon Lake.

While under heavy pressure from the New Federation and the Mexican government, which Los Zetas claim is helping the New Federation against them, the last thing Los Zetas needed was heavy pressure from the U.S. government. This might result in police operations to capture Zeta members and interference with the group’s smuggling activities.

In addition to the loss of personnel on the battlefield, Los Zetas also have lost control of valuable smuggling corridors like Reynosa. This means that any remaining corridors they control are even more important to the group and its ability to make money, which is needed to buy guns and hire and train new gunmen to protect the group against outside pressure by the New Federation and the Mexican government. Intensive law enforcement operations looking for Hartley’s body effectively shut down the Falcon Lake corridor. Due to the losses suffered by the organization from this chain of events, it is not surprising that we have received reports that Trevino wants to execute the gunmen who killed Hartley. This means that the shooters in all likelihood never will be found by authorities, much less arrested or brought before a court of law.

As organizations such as the VCF and Los Zetas become increasingly desperate in the face of attacks against them by their New Federation enemies and the Mexican government, they will likely become even more paranoid — and more dangerous to those not directly involved in the Mexican cartel wars. As this occurs, there will almost certainly be more cases of innocents caught in the wrong place at the wrong time.

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Chinese control of the base of the REE supply chain has increasingly made China the go-to location for the intermediate goods made from REE. In time, China hopes to extend production into the final products as well. As new REE supplies cannot be brought online overnight, the Chinese will enjoy a powerful position in the short term. The Chinese Ministry of Commerce reports that China has ratcheted down REE export quotas by an average of 12 percent per year over the past five years, further leveraging this position. Reflecting that and the current China-Japan spat, the average price for REE has tripled in the year to date.

Rare earth elements are not as rare as their name suggests, however. Before the Chinese began a dedicated effort to mass-produce REE in 1979, there were several major suppliers. Pre-China, the United States was the largest producer. Appreciable amounts of REE were also produced in Australia, Brazil, India, Malaysia and Russia. Any sort of real monopoly on REE, therefore, is not sustainable in the long-run. But before one can understand the future of the REE industry, one must first understand the past.

The story of REE is not the story of cheap Chinese labor driving the global textile industry into the ground. Instead, it is a much more familiar story (from STRATFOR’s view) of the Chinese financial system having a global impact.

Unlike Western financial systems, where banks grant loans based on the likelihood that the loans will be repaid, the primary goal of loans in China is promoting social stability through full employment. As such, the REE industry — like many other heavy or extractive industries — was targeted with massive levels of subsidized loans in the mid-1980s. At the same time, local governments obtained more flexibility in encouraging growth. The result was a proliferation of small mining concerns specializing in REE. Production rates increased by an annual average of 40 percent in the 1980s. They doubled in the first half of the 1990s, and then doubled again with a big increase in output just as the world tipped into recession in 2000. Prices predictably plunged, by an average of 95 percent compared to their pre-China averages.

Most of these Chinese firms rarely turned a profit. Some industry analysts maintain that for a good portion of the 2000s, most of them never even recovered their operating costs. At the same time, an illegal REE mining industry ran rampant, earning meager profits by disregarding worker safety and the environment and ruthlessly undercutting competing prices. With an endless supply of below-market loans, it did not matter if the legitimate mining concerns were financially viable. It was in the environment of continued Chinese production despite massive losses that nearly every other REE producer in the world closed down — and that the information technology revolution took root.

In fact, if not for China’s massive overproduction, the technological revolution of the past 15 years would not have looked the same. In all likelihood, it would have been slowed considerably.

Before 1995, the primary uses for REE were in the manufacture of cathode ray tubes (primarily used in television sets before the onset of plasma and LCD screens) and as catalysts in the refining industry and in catalytic converters (a device used in cars to limit exhaust pollution). Their unique properties have since made them the components of choice for wind turbines, hybrid cars, laptop computers, cameras, cellular phones and a host of other items synonymous with modern life. Chinese overproduction in the 2000s — and the price collapses that accompanied that overproduction until just this year — allowed such devices to go mainstream.

With numerous large REE deposits outside China, the long-term sustainability of a monopoly is questionable at best. This does not mean China will not create some destabilizing effects in the medium term as it attempts to leverage the current imbalance to its benefit, however. That its prolific, financially profitless and environmentally destructive production of REE has largely benefited foreign economies is not lost on China, so it is pushing a number of measures to alter this dynamic. On the supply side, China continues to curb output from small, unregulated mining outfits and to consolidate production into large, state-controlled enterprises, all while ratcheting down export quotas. On the demand side, Chinese industry’s gradual movement up the supply chain toward more value-added goods means more demand will be sequestered in the domestic economy. In fact, in the years just before the financial crisis and accompanying recession, global demand outpaced China’s ability (or willingness) to supply the market, resulting in bouts of price volatility. As the economic recovery proceeds, it is no stretch to envision outright gaps in exports from China within two to five years, even without the kinds of political complications the REE market has suffered in recent days.

Many states already have REE-specific facilities in place able to restart mining in response to this year’s price surge.

The premier Australian REE facility at Mount Weld plans to ramp up to 19,000 metric tons of rare earth oxides by the end of 2011. The top American site — Mountain Pass in California — aims to produce a similar amount by the end of 2012. Those two sites will then collectively be producing 25-30 percent of global demand.

Before China burst on the scene, most REE production was not from REE-specific mines. REE are often found co-mingled not simply with each other, but in the ores extracted for the production of aluminum, titanium, uranium and thorium. As China drove prices down, however, most of these facilities ceased extracting the difficult-to-separate REE. There is nothing other than economics stopping these facilities from re-engaging in REE production, although it will take at least a couple of years for such sites to hit their stride. Such locations include sites in Kazakhstan, Russia, Mongolia, India and South Africa as well as promising undeveloped sites in Vietnam, Canada (Thor Lake) and Greenland (Kvanefjeld). And while few have been exploring for new deposits since the 1970s given the lack of an economic incentive, higher prices will spark a burst of exploration.

Getting from here to there is harder than it sounds, however. Capital to fuel development will certainly be available as prices continue to rise, but opening a new mine requires overcoming some significant hurdles. Regardless of jurisdiction, a company needs to secure the lease (usually from the central government) and obtain a considerable variety of permits, not the least of which is for handling and storing the toxic — and in the case of REE, radioactive — waste from the mine. Even if the governments involved want to streamline things, vested interests such as the environmental lobby and indigenous groups appear at every stage of the permit process to fight, lobby and sue to delay work. And depending on the local government, successfully mining a deposit could involve a considerable amount of political uncertainty, bribe paying or harassment. Only after clearing these hurdles can the real work of building infrastructure, sourcing inputs like electricity and water, and actually digging up rocks begin — itself a herculean task.

Another complication is the fact that many of the best prospects are in jurisdictions undergoing significant changes. In the United States, activists are working to reform the federal mining law dating to 1872, which has ensured that U.S. jurisdictions remain among the most attractive mining destinations in the world. Initiatives like the Hardrock Mining and Reclamation Act of 2007 would drastically constrain mineral companies and increase project costs across the board. In Australia, ongoing negotiations over the implementation of a so-called “super tax” has dampened enthusiasm in one of the world’s premier mining jurisdictions and home to Lynas Corporation’s Mount Weld project. The tax, which sought to impose a 40 percent tax on mining profits, has since been watered down, but the debacle has left a discernable mark on the country’s resource extraction industry. And for an industry that is positively allergic to uncertainty, events like the BP oil spill in the Gulf of Mexico and the Chilean mine collapse only portend tighter regulation worldwide.

Re-opening an existing mine is somewhat easier since some infrastructure remains in place, and the local community is accustomed to having a mine. Old equipment may need to be brought up to specificiations, and the regulatory questions will still affect how miners and bankers view the project’s profitability, but the figuring margins are simpler when the basic geology and engineering already have been done.

Unfortunately, there is more to building a new REE supply chain than simply obtaining new sources of ore. A complex procedure known as beneficiation must be used to separate the chemically similar rare earth metals from the rest of the ore it was mined with. Beneficiation proceeds through a physical and then chemical route. The latter differs greatly from site to site, as the composition of the ore is deposit-specific and factors into the choice of what must be very precise reaction conditions such as temperature, pH and reagents used. The specificity and complexity of the process make it expensive, while the radioactivity of some ores and the common use of chemicals such as hydrochloric and sulfuric acid invariably leave an environmental footprint. (One reason the Chinese produced so much so fast is that they did not mind a very large environmental footprint.) The chemical similarity among the REE that was useful to this point now becomes a nuisance, as the following purification stage — the details of which we will leave out to avoid a painfully long chemistry lecture — requires the isolation of individual REE. This stage is characterized by extraordinary complexity and cost as well.

At this point, one still does not have the REE metal, but instead an oxide compound. The oxide must now be converted into the REE’s metallic form. Although some pure metals are created in Japan, China dominates this part of the supply chain as well.

In any other industry, this refining/purification process would be a concern that investors and researchers would constantly be tackling, but there has been no need, as Chinese overproduction removed all economic incentive from REE production research for the past 20 years (and concentrated all of the pollution in remote parts of China). So any new producer/refiner beginning operations today is in essence using technology that has not experienced the degree of technological advances that other commodities industries have in the past 25-30 years. It is this refining/purification process rather than the mining itself that is likely to be the biggest single bottleneck in re-establishing the global REE supply chain. It is also the one step in the process where the Chinese hold a very clear competitive advantage. Since the final tooling for intermediate parts has such a high value added, and since most intermediate components must be custom-made for the final product, whoever controls the actual purification of the metals themselves forms the base of that particular chain of production. Should the Chinese choose to hold that knowledge as part of a means of capturing a larger portion of the global supply chain, they certainly have the power to do so. And this means that short of some significant breakthroughs, the Chinese will certainly hold the core of the REE industry for at least the next two to three — and probably four to five — years.

Luckily, at this point the picture brightens somewhat for those in need of rare earths. Once the REE have been separated from the ore and from each other and refined into metallic form, they still need to be fashioned into components and incorporated into intermediate products. Here, global industry is far more independent. Such fashioning industries require the most skill and capital, so as one might expect, these facilities were the last stage of the REE supply chain to feel competitive pressure from China. While some have closed or relocated with their talent to China, many component fabrication facilities still exist, most in Japan, many in the United States, and others scattered around Europe.

All told, a complete regeneration of the non-Chinese REE system will probably take the better part of the decade. And because most REE are found co-mingled, there is not much industry can do to fast-track any particular mineral that might be needed in higher volumes. And this means many industries are in a race against time to see if alternative REE supplies can be established before too much economic damage occurs.

Everyone who uses REE — which is to say, pretty much everyone — is going to feel a pinch as REE rapidly rise in value back toward their pre-Chinese prices. But some industries are bound to feel less a pinch than a death grip. REE applications broadly fall into six different categories, with the first being the least impacted by price increases and the sixth being the most impacted.

The first category consists of cerium users. Cerium is the most common REE and the most critical for refining and catalytic converters. As the average global crude oil gets heavier, cerium is needed more and more to “crack” the oil to make usable products. As clean air requirements tighten globally, automobile manufacturers need more cerium to ensure cars run as cleanly as possible. Cerium thus remains in high demand.

Luckily for cerium users, the steady phasing-out of cathode ray tubes means that supplies rapidly are being freed up for other applications. Between the sudden demand drop and ongoing REE production in China, there are actually substantial cerium stockpiles globally. This means that cerium users are not likely to face serious price increases even though their REE has the most inelastic demand. Petroleum and automotive companies use the most cerium, which also is used for polishing agents for glass and semiconductor chips, ultraviolet ray-proof glass, self-cleaning ovens, and some steel alloys.

The second category comprises non-cerium goods with inelastic demand. This includes items that will be built regardless of cost, either because they are irreplaceable or because they are luxury items. This list includes satellites, which use yttrium in their communications systems; europium, used in LED screens in TVs; lanthanum, used for fish-eye lenses in iPhones; scandium, used for lighting systems in movie studios; and neodymium and gadolinium, indispensable for MRIs. These are all items that people — in particular Americans — would not stop purchasing without a large increase in prices. Luckily, while REE are critical to these devices, they make up a rather small proportion of their total cost. So while the world will certainly see REE price increases, those price increases are unlikely to affect the luxury market.

The third category comprises defense goods. Somewhat similar to luxury goods in terms of how REE demand and prices will affect them, demand for defense goods is extremely unlikely to shift due to something as minor as a simple price increase. Military technology that uses REE — ranging from the samarium in the guidance module in joint-direct attack munition kits to the yttrium used in the “magic lantern” that locates subsea mines — is going to be in demand regardless of price. Demand for urgently needed military technology is quite inelastic regardless of price in the short run, and militaries — in particular the American military — have robust budgets that dwarf the additional costs of components whose contribution to the final cost is negligible. The only reason STRATFOR places defense uses as likely to suffer a greater impact than luxury goods is that China itself is aiming to be a producer of luxury goods, so such products will most likely have a Chinese supply chain. By contrast, few militaries in the world with the high-end capabilities likely to be impacted by REE prices are interested in purchasing military technologies from China, so there will be a large constituency pushing for alternative production of REE as well as a large market for alternative products. This could turn out to be a boon for the American industry: Anyone seeking to increase REE production is going to find a friend in the Pentagon, and no one can lobby Congress quite like the military.

The fourth category comprises goods in which REE are a critical component and a significant price impact but that are made by industries with a long habit of adapting to adverse price shifts. A case in point is the Japanese auto industry. There is a long list of vehicle systems that the Japanese have adapted over the years as the price of various inputs has skyrocketed. In 2000, the Russian government banded together the country’s disparate platinum group metals (such as palladium and platinum, critical in the manufacture of catalytic converters) exports into a single government-controlled cartel. Platinum group metal prices subsequently skyrocketed. By March 2001, Honda had announced a new advance that reduced the need for palladium by roughly half. Platinum group metal prices subsequently plummeted.

In anticipation of this type of disruption, the Japanese have been developing substitutes to REE. Presently, the Toyota Prius uses roughly one kilogram of neodymium. At pre-2010 spike prices, that neodymium used in one Prius cost $20, a marginal impact on the Prius’ sticker price. Should prices rebound to pre-China levels, however, the average Prius buyer would notice a roughly $450-price hike due to magnetic components alone. One week into the China-Japan REE spat, government-funded researchers announced a magnet system design that can completely replace the neodymium used in the Prius.

This hardly solves the problem overnight; it will take months or years to retool Toyota’s factories for the new technology. Still, consumers of REE are going to find ways of lessening their use of REE. The information technology revolution has proceeded unabated since 2000 in part because REE have been one-tenth to one-twentieth of their previous prices. Absent any serious price pressures, industries have had no need to invest in finding means of cutting inputs or finding substitutes. (REE are so abundant that in China they are used in fertilizers and road-building materials.)

The shift in prices could well give a much-needed boost to non-REE dependent technologies hampered by relatively inexpensive REEs. For example, the REE lanthanum is a leading component in the Prius’ nickel metal-hydride battery system. (The Prius uses ten kilograms of lanthanum). Toyota has been edging toward replacing the nickel-hydride system with REE-free lithium-ion batteries, but has demurred due to the low price of lanthanum. Increase that cost by a factor of 20, or even the factor of three seen in recent months — and add in the threat of a full cutoff — and Toyota’s board is likely to come to a different conclusion.

Computer hard drives may fall into a similar category. A major cause of the increased demand for REE has been the demand for neodymium in particular and a specific intermediate product made from it, the neodymium-iron-boron magnet (which also uses some dysprosium). The magnets are a critical component in hard drives, particularly for laptops. But like lithium-ion batteries, a new technology is gaining market share: solid-state hard drives. Currently, the consumer’s cost difference between the two is a factor of four, but sustained price hikes in the cost of neodymium and NdFeB magnets could cause demand to plummet.

The fifth category comprises goods where the laws of supply and demand are likely to reshape the industries in question. These are goods where price is most certainly an issue, and where consumers will simply balk should the bottom line change too much. Compact fluorescent light bulbs that use phosphors heavy in terbium, LED display screens that use europium and various medical techniques that use erbium lasers all fall into this category. None of these industries will disappear, but they are extremely likely to see far lower sales as none of these products are economically indispensable and all have various product substitutes.

The sixth category comprises goods for which there are very low ore and metal stockpiles with demand that is both high and rising rapidly, and for which it will take the longest to set up an alternate supply chain. The vast majority of these industries depend on the same type of neodymium magnets used in hard drives, but do not have an obvious replacement technology. These magnets are a critical component in the miniaturization (and convergence) of electronic devices such as cellular phones, MP3 players, computers and cameras. They are also central to the power exchange relays for electricity-generating wind turbines used in today’s wind farms.

But even within this category, not all products will be impacted similarly. Many of the miniaturized electronic consumer goods manufacturers will face growing pains as they find their supply chain increasingly concentrated in China. But cheaper production costs could offset rising materials costs, and technological innovation will also help lessen the impact. Alternative energy is not likely to be as lucky. Neodymium magnets are critical to windmill turbines, one of the specific areas the Chinese hope to dominate. Each 1-megawatt windmill uses roughly a metric ton of NdFeB magnets.

For green energy enthusiasts, this is a double bind. First, green power must compete economically with fossil fuels — meaning rather small cost increases in capital outlays could be a deal breaker. Second, the only way to get around the price problem is to advocate greater neodymium production. And that means either tolerating the high-pollution techniques used in China, or encouraging the development of a not-particularly-green mining industry in the West.

Read more: China and the Future of Rare Earth Elements | STRATFOR

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The cover of the second issue of Inspire, al Qaeda in the Arabian Peninsula’s English-language magazine

In the second issue of its publication Inspire, released Oct. 12, al Qaeda in the Arabian Peninsula once again attempts to draw in Western, English-speaking recruits. The publication again reveals the group’s devotion to more cellular, grassroots and unsophisticated operational activity, a far cry from the more top-down, complicated attacks formerly favored by al Qaeda.

Analysis

Al-Malahim media, the propaganda wing of al Qaeda in the Arabian Peninsula (AQAP), released the second edition of Inspire, its online English-language jihad magazine, to a number of jihadist web forums Oct. 12. The 74-page publication, released to coincide with the 10th anniversary of the attack on the USS Cole, mirrored the first with its slick editing and calls for jihad against the West.

In this second issue of Inspire, AQAP expands on its vision for the future of the jihadist struggle. This vision is heavily reliant on unsophisticated, practical grassroots terror attacks that emphasize innovative planning. AQAP’s continued ability to publish such jihadist writings and operational advice in a slick, English-language product serves to emphasize the changing complexion of the jihadist threat, highlighting how AQAP has assumed a more prominent leadership role on both the physical and ideological battlefields.

As with the first issue, a number of well-known wanted militants affiliated with AQAP and the al Qaeda core contributed pieces, including Anwar al-Awlaki, Samir Khan and Adam Gadahn, all American citizens, as well as al Qaeda leaders Osama bin Laden and Ayman al-Zawahiri and the Syrian jihadist strategist Abu Musab al-Suri. The articles penned by Gaadahn, al-Zawahiri, al-Suri and bin Laden were older. The appearance of an article bearing Khan’s byline stood out because many analysts, including those at STRATFOR, believe that Inspire is most likely his handiwork, though he was not given credit for either edition of the magazine.

The magazine also carries an explanation and photos of the “Operation in Abyan,” a reference to the military assault on the group in Loder in Yemen’s southern Abyan province in August. At the beginning of the articles, the authors indirectly appeal to the Yemeni soldiers fighting in the south, saying they are acting as agents of America and therefore traitors to Islam. The militants also reference the CIA’s assessment of AQAP that the group has become the most dangerous of the al Qaeda regional franchises, adding “this is just the beginning. You haven’t seen anything yet.”

The second edition of Inspire also demonstrates AQAP’s continued focus on simple attacks and “grassroots” jihad, also made quite clear in the jihadist publication Echo of Battle and the first edition of Inspire released in July 2010. Indeed, the second edition of the magazine quite clearly continues to separate the group’s terrorist and military theology from al Qaeda’s original operational model that involved more complex, sensational strikes directed by top-tier al Qaeda leadership.

To demonstrate this, they provide an article from al-Suri, the Syrian jihadist strategist and military theorist constantly cited by jihadists for his theories on individual and/or cell terrorism. Citing al-Suri’s guidance on “The School of Individual Jihad and Small Cells,” the authors strongly focus on the importance of individual operations and initiatives that have been successful throughout Islamic history. “It is no longer possible to operate by the methods of the old model, through the ‘secret-regional hierarchical’ organizations, especially after the September 11th events and the onset of the American campaigns, where the great majority of the existing secret organizations were destroyed, and the conditions made it impossible and futile to establish other secret organizations after the model.” According to the magazine, these “Lone Wolf” acts have led to military, security, political and educational “successes” for the jihad, in that they have forced target states to amend their security protocols and induce panic in their countries. They also claim such operatives are impossible for intelligence agencies in the West to stop.

In the second edition of the feature on “Open Source Jihad,” described as a “resource manual for those who loathe the tyrants,” they include advice on simple attacks and security techniques. Yahya Ibrahim, a militant who penned an article in the first edition of Inspire and who shares the same name with a radical Canadian-born Muslim scholar, authored an article entitled “The Ultimate Mowing Machine.” This article, which featured a photo of a four-wheel pickup truck, recommends that those seeking to conduct individual, simple attacks weld thick blades to the front of a truck and drive it into a crowd. Ibrahim goes on to suggest that the militants carry firearms with them to finish the job and that they should consider it a “martyrdom operation,” as it would be very difficult to escape after such an attack.

Ibrahim also notes that in addition to the option of mowing down civilians with a high-powered pickup truck, militants can and should choose the “firearm option” used by Nidal Hassan in his October 2009 attack at a Texas Army base and by Abdulhakim Mujahid Muhammad in his June 2009 armed assault against a military recruiting station in Little Rock, Ark. This is possibly the first mention of Muhammad by AQAP, lending credence to his admission that he acted on behalf of the Yemeni al Qaeda node. For this, Ibrahim claims, one should: “Choose the best location. A random hit at a crowded restaurant in Washington, D.C., at lunch hour for example might end up knocking out a few government employees. Targeting such employees is paramount and the location would also give the operation additional media attention.” Moreover, Ibrahim claims the “shooting option” has many advantages because no one else is involved, which “eliminates the chances of the Feds catching wind of what’s going on.” Plus, it “demands the least preparation. All you need is the weapon, ammunition, and site surveillance.”

Ibrahim also briefly mentions that those with chemistry backgrounds should construct weapons of mass destruction, including poisonous gasses such as nerve agents and biological agents like Clostridium botulinum to create botulinum toxin. Those with less experience, he said, should choose poisons like ricin or cyanide.

Ibrahim sums up AQAP’s attack methodology by saying that the best operation is “to come up with an innovative idea that the authorities have not yet turned their attention to, and that leads to maximum casualties or – equally important – maximum economic losses.” Of all of these methods, the “shooting option” has proved the most lethal, and frequently has gone undetected until it was too late. As the article’s author rightly characterizes, firearm attacks are relatively easy to conduct, as they demand little training or materiel. If a militant is disciplined enough to exercise extreme silence about his operation and acts alone, the chances of the attack being caught in the planning stages decrease considerably.

In another intriguing article in this edition of Inspire, this one entitled “The New Mardin Declaration,” al-Awlaki attacked a fatwa issued last March by a group of international Islamic scholars condemning jihadist ideology. After a conference in Mardin, Turkey, the scholars attacked the views espoused by well-known Islamic scholar Ibn Taymiyyah around AD 1300 on the obligation to expel invaders in Muslim lands. Al-Awlaki’s response underscores the sensitivity that jihadists have to assaults conducted against their theology on what STRATFOR refers to as the ideological battlefield. Successes on this front could translate into more recruits willing to do AQAP’s bidding in their Western country of origin.

Read more: Al Qaeda in the Arabian Peninsula’s New Issue | STRATFOR

The post How to Mow Down Innocents With Pickup Trucks, and Other Quick Tips From the New Issue of al Qaeda’s Magazine appeared first on The Faster Times.