War and Its Impact on Foreign Policy
Dr. Yezid Sayigh

In order to understand how conflict and war preparations relate to foreign policy, the following points need to be understood:

Understanding the State

States are often seen as single, rational actors, as if embodied with human characteristics. Yet, in reality, states are an amorphous bundle of different practices and agencies, operating on many levels, including the domestic economy, social services, and domestic politics. States are two-faced, with external and internal (domestic) dimensions, both balancing and affecting each other. There are both high and low politics, and states operate by looking inside and outside and then balancing between the costs.


Role of Society

State-society relations are crucial in that they affect policy through the allocation of funds or capital. Within the states, there are many interest groups that affect and are in turn affected by foreign policy. Furthermore, many have the power to deny resources. There is always some sort of bargaining between the society and the state, and this bargaining continually redefines state interests. Thus, the notion of bargaining is crucial to understanding foreign policy.

Capital and Capital Flows

The conducting of foreign policy and war also have to be understood within the framework of capital - whose availability can either restrain or enhance state capability. All tasks undertaken by the state require capital - education, social services, etc. - and providing these services is what gives credibility to the state.

States face a three dimensional dilemma: they need to provide defense, development and stability, all of which require capital allocation. The dilemma is where to find the resources to provide them. According to Michael Barrett, there are three possible strategies for the state:

Accommodation: In trying to find more capital, the state makes small, incremental changes, so as to keep the system going.
Restructuring: To find or create resources, the state makes major changes in the social structure (e.g., high taxes, cut in subsidies).
International resources: The state turns to external sources of capital so as to maintain the social structure and avoid restructuring the domestic economy.

Case Study: Egypt

Egypt after 1952:
Abdul Nasser and the Free Officers Movement had been concerned mainly with fighting colonialism and striking at any local groups that would align themselves with the British, e.g., the landowners. The new government focused on land reform, i.e., destroying land as a power base and redistributing it to poor peasants. It shifted capital and resources to industry and businesses, focusing on a restructuring process to create internal resources. This period marked the beginning of an economic restructuring for domestic purposes - to provide stability and create a power base for the state.

1956-57:
The Cold War brought a new dynamic into the region and Abdul Nasser became the Arab hero, epitomizing Arab leadership and promoting the notion of Arab unity. A new economic burden arose at this time - arms purchases - while domestic capital sources died down. In 1957, the government took steps towards Egyptianizing banking and capital sources. It also targeted foreign capital because it was not being directed towards areas of its own choice.

This nationalization came late and was a direct result of domestic and foreign pressures. In Egypt, as was the case in many Third World countries, economic nationalization occurred not according to some economic blueprint, but because of domestic and foreign pressures.

Early 60s:
Contrary to government assumptions, the economy failed to attract domestic private sector investment and development plans were falling behind. Saudi Arabia became an important investor in the Egyptian economy and industrial sector. Egypt was also receiving aid from both the US (in wheat) and the USSR (financial), using its growing role as regional leader for leverage. In 1961 and 1962, the government issued socialist decrees, nationalizing all economic sectors - banking, financial services, import/export, industry, etc.
1963:
Egypt’s involvement in the Yemeni civil war drained its already strained economic resources. This period also saw a deepening of ties with the USSR, a growing source of financial and military aid.

Mid 60s:
The overall situation surrounding Egypt was that of major economic changes in the midst of both an Arab-Israeli and Cold War conflict.

1966:
This year marked a turning point in regional dynamics. The US suspended wheat aid to Egypt, which it saw as a Soviet stooge, and established its strategic relationship with Israel. Egypt was affected by a climate of siege - on its regional, economic and international levels - as the Israelis were settling in the Negev and the Americans were trying to bring down Abdul Nasser.

1967:
The defeat in the war discredited the government and raised questions of the legitimacy of the state. Attention was now turned to reconstruction of the armed forces and regaining the Sinai. The government was faced with the challenge of raising capital for such expenditures while continuing its domestic economic investments and provisions. Such costs could not be imposed on the poor.

Consequences of 1967:

Egypt’s perception of the conflict became clear and it recognized that Israel was now a regional fact. It also recognized UN Resolutions 242 and 338 - coexistence with Israel.
Egypt accepted that its adventures - i.e., the Yemen and 1967 wars - had proven costly and disastrous.
Egypt now aimed to eliminate Arab rivalry and interference and establish good relations.

Post-67:
Egypt was led by a new Abdul Nasser, who established warm relations with King Hussein, and improved those with Saudi Arabia and Kuwait. In return, he began to receive aid for his war effort.

The importance of the connection between domestic resource availability and international policy now becomes clear. The more important a state’s role internationally, the more it can attain international capital and aid. Here was an example of the notion of influence - the dynamics of the patron/client relationship. The question was - who relied on whom? The ongoing war with Israel, which was receiving huge amounts of US aid, was one of attrition, and Egypt needed resources. It realized that by improving relations with the USSR, it could obtain more aid. Abdul Nasser, using the excuse of an Israeli threat, forced the USSR to escalate its commitments and used Soviet foreign investment for his own purposes. He thus forced domestic economic costs upon an external/ international source. At the same time, he relaxed state controls on the economy, making subtle changes in the political and economic structures.

1970:
Sadat took over following Abdul Nasser’s death in 1970, bringing with him an entirely different perspective of how things should operate. He believed that development needed more money and a restructuring process.

1970s onwards:
Sadat succeeded in developing friendlier ties with Saudi Arabia and entered a Saudi-Egyptian-Syrian alliance. Egypt entered a friendship treaty with the Soviets in 1971 to ensure the flow of military aid, only to expel the Soviet experts working in Egypt in 1972 (he no longer wanted war anyway). The 1973 war resulted in the revival of the peace process, which made possible a new economic alignment for Egypt, with new foreign sources of capital. Egypt embarked on a new domestic restructuring - a process of liberalization, which included the lifting of subsidies and increased privatization. Sadat wanted to change the domestic economy and social alliances, and he used foreign policy as the tool. Egypt adopted a pro-Western stance in its Cold War politics and turned to the US for aid.

1990 onwards:
The end of the Cold War marked a shift in Egypt’s foreign policy situation, and the game came to an end. Egypt’s opportunities and options changed. The Gulf War gave Egypt a special role, namely that of gathering the Arab coalition, and its loan debt was written off in return. To gain economic assistance (loans, debt rescheduling, aid, etc.), Egypt used the war to reassert its continued importance as a regional leader.

Egypt faces challenges in its foreign policy, as there is a limit to its role and its rewards. Moreover, Egypt is tied into a wider system and it has to take regional dynamics, such as increased economic integration, into consideration. Egypt still faces economic problems. It needs to raise capital to increase the number of development and infrastructure projects. It also needs to find a balance in its domestic economy, taking on less of the burden and liberalizing the economy.

Case Study: Iraq

Background:
Unlike Egypt, Iraq had been a country with massive oil wealth and did not need to produce a domestic economy. By using its oil revenues and taking out loans, the government was able to subsidize domestic industries, such as farming, so that the population did not have to carry the burden of the wars. Education, health care and other services were all free.

1988:
Iraq faced a debt of US$80 billion and a myriad of problems, including a bankrupt economy and the need for restructuring. The end of the Iran-Iraq War saw the return of half a million men, all of them seeking employment.

The government then tried to reestablish its strategic regional position in order to reduce its debt burden. It embarked on a massive privatization and economic restructuring program, which led to increased social tension.

1990:
Iraq entered the Gulf War in order to enhance its regional role.