Anders Fogh Rasmussen, until recently the civilian head of the North Atlantic Treaty Organisation in Brussels, has been at the centre of global events.
As prime minister of Denmark, he supported the 2003 invasion of Iraq. As Nato’s secretary-general from 2009 until September 30, 2014, he oversaw the alliance’s operations in Afghanistan and Libya and also incorporated new treaty members from central Europe. He now runs a consultancy.
Rasmussen sat down with FinanceAsia on the sidelines of Credit Suisse’s annual Asia investment conference in Hong Kong.
It’s been a pretty rough couple of years, given Ukraine, Isis and other destabilising threats. Yet financial markets have been enjoying rallies, perhaps thanks to easy monetary policy. Have investors been complacent?
Financial markets shouldn’t panic over these things. We are living in a period of instability, conflict, crisis, and terrorism. The big picture as I see it, [is that] we are living in an era of change, brought about in part because of the information revolution. People everywhere can see through social media the living conditions in other countries; people living in dictatorships can see how people live in free societies.
This is a long-term trend, we will live in this world for a long time. It throws up these wild cards – the Middle East, Ukraine, the South China Sea, North Korea – but if China and the US can enter peaceful, constructive cooperation, then those two can keep these wild cards at bay. Financial markets should be aware of geopolitical risks but, from a long-term perspective, I see these developments as positive.
Defence budgets continue to be cut in the West, especially in Europe. How robust is Nato given this fiscal situation?
There have been budget cuts in recent years due to the economic crisis. That’s not a sustainable situation. In the last five years, Russia has increased its defence investment by 50%, while Nato allies have on average cut theirs by 20%. Given the Russian aggression in Ukraine, this trend is not sustainable. We can’t take peace and stability for granted.
You have said you’ve left Nato in better shape than when you found it. But is that true, given these cuts – which continue to deepen? Is there still political will to support a strong military in the West?
Last year all of the allies agreed to spend a minimum of 2% of GDP on military spending over the next 10 years. I think 2015 will represent a low point for investing in defence. It won’t be easy. It’s important for all allies to put their fiscal houses in order. But Russia’s aggression in Ukraine has been a wake-up call. And we have seen some allies in Eastern Europe already taking action in terms of increasing their spending on defence.
Given the fall in the price of oil, plus the impact of Western financial sanctions, how sustainable is Russia’s own increase in defence spending?
It’s a good question, whether Russia can fulfil its own ambitions regarding defence budgets. The decline in oil prices will have a negative effect on Russia’s future investment in defence. When Russia prepared its first budget for 2015, oil was around $100/barrel. Today it’s half that amount.
But it is still a fact that Russia has already comprehensively modernised its military over the past five or six years. When Russia attacked Georgia in 2008, we witnessed an old-fashioned military. But in Ukraine, we have seen a modern military that can operate very fast and with sophistication. Nato must adapt to that reality.
How vulnerable are commitments to Nato if there is a political crisis in Europe? For example, a messy Greek exit from the eurozone, or a British withdrawal from the European Union, or if a right-wing party such as France’s National Front takes power.
There is a security aspect to the eurozone crisis. To be blunt, you can’t be safe if you’re broke. Sound fiscal policy is also sound security policy. There is a direct link between fiscal strength and the ability to investment in defence and security. The eurozone crisis has had a negative impact on defence spending but we also saw declining defence budgets before the financial crisis. European countries have harvested the peace dividend following the Cold War.
But I’m speaking of the political vision, the symbol of the EU or the eurozone as a political block. If Greek leaves the currency union or the far right takes power in France, what would that say about a united European alliance in security matters?
The reason why the Soviet Union and communism [in Europe] collapsed was not only because of Western military strength, but was a result of superiority when it came to our social model. The people of Eastern Europe and the Soviet Union saw the strength of our liberal democracy and liberal economic system with their own eyes. If today the West cannot demonstrate or tell the world about its story, which is positive and good, then we weaken our role as an attractive model. The Cold War – I don’t hesitate to call it a victory, we won the Cold War because of the superiority of our social model. It is important today to consolidate our economies and produce positive results that can serve as a model for other nations.
Today Asian countries such as China or Singapore also serve as a model. Many in Asia view the US model of laissez-faire financial markets critically in light of the 2008 financial crisis. So there is a competition when it comes to social models, even if it isn’t as crude as during the Cold War. Does that have a security dimension?
Yes and no. No, because there is not a direct link between Asian societal systems and security threats. Singapore doesn’t constitute a threat towards anybody. But Russia is an opposite example, which is why I say Yes. It offers an autocratic, illiberal system whose leadership takes decisions that constitute a threat toward the rest of the world; we’ve seen that materialise in Ukraine.
OK – but I don’t think anyone is looking to Russia for ideas on how to run a country. They do look to China.
I do believe that, gradually, its economic liberalisation will be followed by more political liberty. It will be a slow, cautious, controlled process but it will prove irreversible. I believe China will engage positively in a peaceful spirit of global cooperation. We will see China’s peaceful rise in coordination with the United States. Given a still-strong – or even stronger – US, China will choose constructive collaboration. I think we will see these two leading powers work hand in hand. Yes, you see an assertive attitude in China today, in its territorial disputes and its military build-up. But the bottom line is that China realises its continued economic growth requires constructive engagement.
The US is the status quo power but it can’t just say to China, do it our way. There has to be some give and take, some accommodation. How does the US and the West do that?
The West needs to reform its existing structures, such as the IMF and the World Bank. That means including China and other emerging powers in multilateral agreements. In concrete terms, the Trans Pacific Partnership [a US-led free trade zone being negotiated with Pacific Rim nations] should also include China, down the road. I hope China could be part of that.
In other words, to ensure China and other emerging powers work within the international order, created by US leadership after World War II, that order must be reformed. I welcome the news that the US will now engage cooperatively with the Asian Infrastructure Investment Bank that China is in the process of establishing. It’s important to ensure coordination between this and existing structures, such as co-financing deals and holding each to high standards in lending and borrowing.
But, in exchange, China should recognise the US does have a role to play in the Asia-Pacific region. It should not consider increased US engagement as containment. The US does have security obligations regarding Japan and South Korea, just to name two. And China must also respect international law to resolve territorial disputes.
It seems that the biggest obstacle to such things is the Republican Party in the US, which won’t ratify the United Nations Law of the Seas and has blocked IMF reforms. To what extent does political gridlock in the US threaten global security?
Without intervening in US domestic politics, and as the former secretary-general of Nato, I’d like to see more bipartisan cooperation in Congress. The strength of the US is based on bipartisan agreements on the cornerstones of foreign policy decisions. It weakens the US if there is a perception among friends or foes that the President and Congress can’t agree on critical security issues. We need determined American global leadership. If there is a perception of a US retreat, terrorists and tyrants will advance.
Is there such a perception?
Well, the best way to counter such a perception is to demonstrate unity and cohesion within the American political leadership, and to take concrete actions abroad to demonstrate that commitment. I appreciate that the US was first to act after Russia’s aggression in Ukraine by providing aircraft to reinforce patrols of Nato airspace over the Baltics. It was the first to reinforce maritime assets in the Baltic Sea and to introduce land-based military exercises in the Baltics and Poland. This was highly appreciated in Europe.
Afghanistan was Nato’s first major ‘out of area’ operation. Now it’s about to end. What’s your assessment?
We achieved our goal, which was to prevent Afghanistan from becoming a safe haven for terrorists. But it’s still not a rosy picture. There are still security challenges. We have spent a lot of time and effort on building Afghanistan’s own security forces. They now have 350,000 soldiers and police. Now it’s time for Afghanis to do their part of the job.
Can they succeed?
Yeah, I think so. We will still see the Taliban in operation. There will still be terrorist groups killing innocent civilians. But the Afghan security forces have demonstrated they have the capability. They will need some assistance. Nato has just established a training mission, and the US will maintain a robust counter-terrorism unit there.
Will Afghanistan be the last ‘out of area’ mission for Nato?
I don’t think so. On the contrary, I can envisage future missions. You must be ready for the unexpected. When I began my role as secretary-general, I would have never thought we’d be active in Libya. Yet we managed an air campaign to implement a UN mandate for the protection of civilians. Our core mission is the territorial defence of the allies, but today such a defence can often mean starting out of area, such as in Afghanistan.
You led Denmark into war against Iraq in 2003. With hindsight, was that invasion a good idea?
It was justified. Denmark’s argument for joining the coalition against Saddam Hussein was that Saddam didn’t comply with the UN Security Council resolutions. There was a clear UN platform for that military operation. Saddam was a threat to the region as well as to his own people. He disappeared, and a democracy was introduced to Iraq. The problem is [Nouri al-] Maliki, who as prime minister pursued sectarian politics. That is what paved the way for Sunni extremism, which ultimately led them to form Isil [Isis]. Isil isn’t due to the invasion but to the wrong policies conducted by the Maliki government.
As countries rely more on financial sanctions – as with Russia, or Iran – are multinationals at greater risk? Is globalisation being partitioned and rolled back?
The dominant trend is for more free trade. It’s in China’s interest to maintain the global free trade system. I hope to see it join the TPP. And the US has ongoing negotiations with Europe for a wider free trade zone. That’s the trend, despite the occasional restrictions you see, such as the West’s dealings with Russia, but while Russia becomes more isolated, the rest of the world continues to integrate.
Is there a risk of open military conflict between the West and Russia?
There is no imminent risk. There is a potential risk, were Russia to attack a Nato ally. That would immediately lead to a military response. But that’s why I don’t think Russia would try. But Russia will try to intimidate Nato allies, as it has attempted with the Baltic states. The best way to prevent this Cold War – and we are in a Cold War – from getting hot is to ensure effective deterrence.
How do we end this Cold War? Is there a path that stops Russia decline and puts it on a happier footing, so its leadership doesn’t need to resort to threats and macho posturing?
Unfortunately I think this situation will last for a long time, perhaps even decades. The most effective solution is to demonstrate the superiority of our social model – to show people in Russia, and elsewhere, that our model produces the best outcome economically, socially, culturally. Our model can best enable people to fulfil their aspirations.
