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CRISES:
“Post Will Continue to Monitor the Situation”
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The night is filled with a constant cacophony of sounds: mostly chanting and the singing of hymns, but interspersed with screams of grief, prayers shouted from loudspeakers and barking dogs.
—U.S. Embassy, Port-au-Prince
January 16, 2010
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SOMETHING IS WRONG. IN SECONDS A CHARMING foreign boulevard goes from postcard perfect to a war scene. A peaceful protest turns ugly. Strikers block major roads and the smell of burning tires fills the air. The usual urban sound track judders to a halt amid gunshots, running footsteps, and the clang of hastily cranked shop shutters. The leaked cables from 2006 to 2010 included reporting on political crises including the assassination of Benazir Bhutto in Pakistan; coups in Thailand, Guinea, and Honduras; the Israel-Hezbollah-Lebanon war; and the Russia-Georgia war.
Sometimes Mother Nature delivers the disaster. The power fails and cell phones start dying. The hotel air conditioning stops working; so do the toilets. Water is no longer safe to drink. Rumors are everywhere, but facts are scarce. The years 2006–2010 saw major earthquakes in China, Italy, Chile, and Haiti; massive bushfires in Australia; floods in Jeddah; and a deadly cyclone in Burma. These equal opportunity calamities struck rich and poor countries alike, although poverty affected recovery rates.
More subtle but just as devastating are economic crises. In 2008 an unprecedented economic disaster unfolded on a global scale; millions of people lost their jobs, homes, pensions, or life savings. The reactions of their governments varied as they dealt with underlying structural weaknesses in their economies. In Europe, it brought about the near withdrawal of Greece from the eurozone—and the near joining of Iceland. Jobless rates in southern European countries approached 25 percent, and the debt-to-GDP ratio in Greece neared 150 percent. Debate over where to lay blame prompted nasty exchanges. While leaders fulminated, austerity measures led to widespread riots, strikes, and the fall of one government after another. Welcome to chaos, the frequent offspring of crises.
American diplomats have a responsibility to protect American citizens in a world full of unsafe places. Of course, the easiest way to protect them is to convince them to stay home. The State Department issues stern travel warnings for specific countries, instructing Americans to “reconsider their travel plans in light of current political tensions and the possibility of violence.” The U.S. government would like Americans to stay away from—at this writing—some thirty-seven countries. Some brook no argument: North Korea, Iran, and Syria. But other countries slapped with travel warnings have historical and complex American connections, such as Mexico, Israel, Colombia, El Salvador, and the Philippines. Americans live and work in these countries; many more have deep family ties to them. While the State Department hopes Americans will stay away, embassies deal with the inevitability that Americans will be there, all the same.
Americans are globe hoppers. They work in NGOs, church groups, charitable organizations, civil society, and for media outlets reporting on all of the above. They run everything from health clinics to banks to educational exchanges for students, professors, and entire universities. They are contractors and advisors, people with sought-after skills who are admired—and hired. American consular officers help their fellow citizens overseas in dozens of ways. They issue passports to newborns and help eighteen-year-olds register to vote. They handle the minor crisis of a backpacker who lost his passport in a local bar, but they also deal with citizens who are ill, injured, or dead. For the American community abroad, the embassy is a first responder.
American embassies are in a unique position to chronicle and analyze these crises, and sometimes to predict them. In a natural disaster such as the 2010 Haiti earthquake, cables read like chapters in a gripping narrative. Long after television reporters had left the scene, embassy officers chronicled the painstaking efforts to put Haiti back on its feet. The cables depict an embassy improvising through broken lines of communication and infrastructure, coordinating assistance and response, and displaying the professionalism of an experienced consular corps working flat out.
In many such situations it is Washington that has the global view—embassies might not be able to see beyond the haze of tear gas, smoke, or wreckage. In the global economic crisis, for instance, embassy roles were bound to be limited. Most focused on the value they could add by describing how events played out in their host country, knowing that their observations were only a small part of a complex picture. On the other hand, during more traditional crises, embassies knew they had the full attention of Washington—but for only a limited time. The Haiti earthquake was neither the first nor the last. It was preceded by quakes in Sichuan, China, and L’Aquila, Italy. It was followed a month later by a Chilean earthquake of an even greater magnitude, which in turn was followed, about a year later, by a massive earthquake and tsunami in Japan.
In the WikiLeaks cables, diplomats provide details that take readers beyond the headlines. They describe how Iceland’s economic pain came from the disarray of its officials, who seemed unable to summon the will to phone Washington. They illustrate how the unfathomable response of the military junta in Burma to Cyclone Nargis arose from a tradition in which omens matter, soothsayers are routinely consulted, and numerology governs decisions. Cables on Honduras describe a deeply polarized country’s efforts to address a coup that seemed to have an equally polarizing effect in Washington.
EMBASSY AT THE EPICENTER: THE HAITI EARTHQUAKE
The magnitude 7.0 earthquake struck at 4:43 p.m. on Tuesday, January 12, 2010, when the roads were busy, children had been dismissed from school, and shops were full of customers. Security camera footage of panicked guards in the National Palace gives some idea of the terror, while aftermath photos of dust rising from the gigantic white edifice, with its three domes either collapsed or at jarring angles, give an idea of its power. None of the fourteen government ministry buildings in Port-au-Prince was left intact.
Deputy Regional Security Officer Peter Kolshorn recounted in DipNote, the State Department’s official blog, how he raced to rescue embassy staff.
All I could see was dust and gasoline flowing down the road. The severity of the situation hit me when I walked down the street to an embassy housing complex and saw a car in the driveway . . . but no house. I looked over the edge of the ridge and saw the crumbled remains of the house and people buried in rubble. An embassy officer was buried up to her waist, face covered with dirt and blood and calling for help. To the left, a man tried to free himself from the rubble. Further to the left, an arm protruded from the wreckage. My head was spinning as I contemplated how to get them out.
Kolshorn described the indescribable:
I was nauseated from the gasoline fumes all over the street. The walking wounded appeared like shadows out of the dust. I made radio contact with my boss and asked for a vehicle to transport the injured . . . Information began to flow in, both from the embassy radio and people on the street: the National Palace, Hotel Montana, and the Caribbean Market had all collapsed; roads were impassable; and embassy employees were unaccounted for. It was a nightmare.
With no vehicle, Kolshorn improvised stretchers from ladders and metal gates.
The trek down the hill seemed to take forever, as we moved slowly to avoid the injured and dead who covered the road. Sounds of praying and screams of loss and pain filled the air. It was horrific. We heard the cries of children beneath the rubble; we stopped and with other survivors we managed to free one.
All told, it took Kolshorn seven hours to get to the road and reach transport, “a moment of elation in the nightmare . . . Then, the chaos really began back at the embassy.”1
The embassy unleashed a tour de force of reporting, sending 162 cables, the first one transmitted seventy-two hours after the earthquake and running until February 28 (the final day of the tranche of leaked cables). Still to come, months later, were a cholera outbreak and disputed presidential elections.
Many of the cables were situation reports, or sitrep cables, painstakingly detailing each damaged aspect of Haitian society: transport, including ports, airports, and roads; infrastructure, such as electricity and water; hospitals and clinics caring for the injured; and conversations with both Haitians and the international community on how to set up one of the most comprehensive recovery efforts ever attempted.
By any standard, Haiti is a special case. It usually ranks at the bottom of any development list in the Western Hemisphere, and the UN Development Programme (UNDP) ranks it at 166 out of the 187 countries it measures.2 It is often buffeted by natural disasters; it suffered four hurricanes in 2008. Even without disasters, nearly a fifth of its ten million people are considered “food insecure.” 3 Although it lies just seven hundred miles from the United States, the tragedy of its endemic poverty, corruption, and dysfunctional governments make it feel like another world. Haiti’s people have lived through decades of military interventions, dictatorships, and seemingly entrenched political instability. For years the United Nations has been in-country, helping to quell political violence and ensure stability. At the time of the earthquake, the UN Stabilization Mission in Haiti, known as MINUSTAH, was the most recent incarnation of the organization’s presence.
Sadly, MINUSTAH lost 101 people, including the secretary general’s special representative, his principal deputy, and scores of senior staff, when their headquarters at the Hotel Christophe crumbled. Tragedy touched the U.S. embassy as well. Cultural Affairs Officer Victoria DeLong was killed when her home collapsed. A total of 11 U.S. government workers, ranging from embassy local staff to Centers for Disease Control workers, died. In all, 104 Americans were killed out of a population of some 45,000 American citizens living and working in the country, some of whom carried both U.S. and Haitian nationality.
The first sitrep from the embassy was grim.
We continue to experience severe aftershocks. It is estimated that half the embassy residences are structurally unsound and uninhabitable . . . Post continues attempting to contact the Government of Haiti Ministers, several of whom are reported injured by the Haitian press. The Ambassador has been unable to reach any GOH officials by phone . . . MINUSTAH’s response has admittedly been hampered by the fact that of the estimated 400 UN staff in the Hotel Christophe, approximately only 50 made it out.4
The embassy was quickly concerned about the absence of any police presence, particularly worrisome because as jails collapsed, almost all the prisoners escaped. Many police were killed, others were seeing to the needs of their families, still others had no means to get to work. Some worked in civilian clothes, their uniforms left in their destroyed homes. Police vehicles were useless without fuel. Communication was cut off because police stations had no electricity and could not keep phones or radios charged. Roving gangs looted with impunity and large numbers of people wandered the streets.
“Looters dragged a USAID contractor from his vehicle at gunpoint on January 13 as he was leaving the parliament, after spending hours digging out bodies, including two dead Senators, Michele Louis and Jacque Wilbert. Thieves shot his vehicle and pulled him out; he gave them his cash, then got back into his car and left the scene.” 5 Adding to the grimness, “the Petionville police station is also plagued by citizens who are depositing the corpses of victims on the property.” 6
Getting help into Haiti was a logistical hell. Flights could not land at the damaged airport for the first two days and were diverted to the Dominican Republic, Haiti’s neighbor on the shared island of Hispaniola, notwithstanding the fact that the only highway connecting the countries was too damaged for vehicles. Ships bringing in cargo could find no viable berths—many jetties lay underwater. There was no gas for vehicles, no service for cell phones, no electricity for lights, and people were increasingly desperate for food and water. Massive amounts of rubble and unburied cadavers hampered recovery efforts. A reporting officer described the street scene: “Damaged vehicles remain abandoned in the middle of the road, some with drivers and passengers still inside. An increasing number of bodies, many uncovered, line the streets and are beginning to decay.” 7
And a few hours later:
After nightfall, living in Port-au-Prince is an eerie and surreal experience. The city is mostly dark, with very few vehicles on the streets. The odor of decaying corpses is beginning to permeate the air. The night is filled with a constant cacophony of sounds: mostly chanting and the singing of hymns, but interspersed with screams of grief, prayers shouted from loudspeakers and barking dogs. After an aftershock occurs, the background noise increases in a wave of screams rising from the city.8
Secretary of State Clinton flew to Haiti at the request of President René Préval, arriving four days after the quake in a Coast Guard cargo plane; however, even she was not immune to the airport congestion. The embassy reported, “Préval cited the fact that the Secretary’s plane had to circle the airport and delay landing due to air traffic as an example of the lack of (aid) coordination.” Préval told Clinton that his only means of communicating with the prime minister and cabinet members was “by having them arrive at his residence by motorcycle.” 9
The secretary and her team set in motion the assistance and coordination that was to follow for months. While in agreement over most issues, Clinton noted that Préval and Prime Minister Jean-Max Bellerive were resistant to the idea of refugee camps to house the 1.5 million homeless, an idea for which there was no good alternative. She effectively made the decision for them. “We need to work to sell them on the idea,” the secretary told the embassy. “Haiti is still in shock, but now they can see and hear the response.” 10
By the end of the first week, signs of improvement began to emerge. U.S. government agencies are nothing if not specialized, and soon embassy sitreps evolved into detailed damage assessments of each sector of Haitian society, with a can-do strategy about how to get things up and running. The embassy’s Narcotics Affairs Section took on the police stations and prisons; U.S. Navy engineers focused on the ports; USAID’s Food for Peace, partnering with the UN’s World Food Programme (WFP), took on the task of delivering food to two million people. To illustrate the challenge, the embassy reported, “Due to inaccurate information, WFP transported commodities for 5,000 people, but 20,000 people arrived to collect food rations. To resolve the situation, WFP reduced the supply per person from 5 to 3 days.” 11
The embassy officers seemed eager to report glimpses of recovery; gradually the tenor of their reporting changed from horror to cautious optimism. Their cables tell Haiti’s story from many angles: from the shock of destruction to efforts to get organized to signs of new life and hope. For example, the roads got slightly better. A trip from the Dominican Republic, normally about an hour, had taken five hours post-earthquake, but was soon down to three. By day twelve the embassy reported fuel deliveries had restarted, bringing the mixed blessing of more vehicles on damaged and rubble-strewn roads with massive traffic jams and long delays. Banks and wire transfer companies began to disburse funds, and fruit and vegetable street vendors slowly returned.
Organizing health care for a vulnerable population was another huge undertaking. The USS Carl Vinson and the USNS Comfort arrived to offer 1,000 hospital beds, with 10 operating rooms, 24 surgeons, and 130 nursing staff on board. The ships were attached to a huge effort on land to assess local hospitals and clinics and supplement medical assistance, primary care, and disease prevention.
At its peak there were 67 international search-and-rescue teams, comprising 1,918 staff and 160 dogs. “Recent search and rescue operations in Haiti are unprecedented, resulting in the largest number of known rescues in an international response. To the surprise of many, live rescues were still conducted 11 days after the earthquake, far surpassing the expected 72-hour window of survival.” 12
Soon cables began focusing on a private sector eager to get back to work, especially the garment industry. Owners met to coordinate efforts to get factories up and running—their employment and foreign earnings were seen as a key aspect of recovery. About 30 to 40 percent of the country’s production capacity had been damaged.13
All too soon, on February 28, the WikiLeaks cables stop, long before Haiti had completed its path to recovery. Nonetheless, the intensity of embassy coverage offers a case study in the early stages of disaster recovery and a chance to deconstruct, step by step, the architecture of one of the most massive and complex recovery operations ever mounted. Readers see firsthand how embassies cope, improvise, and organize. The embassy reporters had the advantage of knowing the terrain, with many officers having worked other crises elsewhere. They reported on crucial but less newsworthy items, personalized the accounts, and guided the initial planning and relief efforts. The embassy was widely praised for the professionalism of its actions, but its reporting was also a tour de force.
In an interesting footnote, the death toll of the quake remains hotly disputed. The U.S. government and independent aid workers place the toll at anywhere from a low of 46,000 to 160,000. The Haitian government is accused of deliberately inflating the numbers from its initial count of 230,000 (widely seen as inflated and unsubstantiated) to 316,000 on the first anniversary of the quake as a means of getting more assistance.14 In contrast, the military government in Burma did exactly the opposite in the aftermath of Cyclone Nargis, essentially stopping the count at 138,000, for fear that acknowledging a higher number would lead to political instability.
In fact, they were right.
CYCLONE NARGIS AND THE WINDS OF CHANGE
Half a globe away from Haiti lies Burma, with a population of nearly fifty-four million, making it almost as populous as Italy, with a geographic size larger than France.15 Located on the Bay of Bengal, its neighbors include Bangladesh, India, China, Laos, and Thailand. Like Haiti, it also ranks low on the UN Development Programme’s scale, coming in at 148 out of 187. But in Burma’s case, the lack of development can be traced to the military junta that ran the country from 1962 to 2011, following a socialist one-party model with occasional periods of martial law to suppress protest and reform movements. Its most famous pro-democracy dissident, Aung San Suu Kyi, endured years of house arrest and harassment before her party, the National League for Democracy, won by-elections in 2012, which led to her gaining a seat in parliament. By late 2015, her party had won a majority of seats in parliament.
The United States imposed severe economic and investment sanctions on Burma in 1997 through the Office of Foreign Assets Control. Subsequent reviews reinforced and expanded prohibitions on importation of products of Burmese origin or on any sort of U.S. investment in Burma. Other countries and organizations, including the European Union (EU), imposed similar sanctions. Burma ended decades of isolation with a visit from Secretary of State Clinton in December 2011, which in turn led to the gradual lifting of some sanctions and additional meetings between Burmese president Thein Sein and President Obama in 2012 and 2013.
The country’s size and geopolitical significance give added meaning to the story of Burma’s cyclone—a remarkable tale of destruction and transformation. The cyclone also offers proof that military juntas can be undone by their own bad habits—crony capitalism, corruption, and the isolation that comes from not being answerable to an electorate. Cyclone Nargis killed tens of thousands of people, but it was the disarray it wrought among the ruling generals, exposed as uncaring, incompetent, and paranoid, that helped to spell the regime’s end.
The cyclone, a rare low-altitude storm with 120-mph winds, was the worst natural disaster in Burma’s history. It made landfall overnight on May 2–3, 2008, and sent a storm surge up the densely populated Irrawaddy River Delta. Nargis arrived a week before a previously scheduled national referendum on a new constitution, to which pro-democracy activists were urging a “no” vote.
The embassy reporting was prescient. Days before the cyclone touched land, U.S. diplomats had warned, “The GOB [government of Burma] has traditionally turned down international assistance, as it did after the 2004 tsunami . . . the regime may be especially averse to assistance at what they consider a politically sensitive time.” 16 And in its first report following the disaster, on May 5, the embassy again emphasized that the scale of U.S. assistance would depend on the willingness of Burmese government authorities to accept it.17 Later that day, the embassy’s chief of mission exercised disaster assistance authority, declaring that “the disaster is beyond the capability of the host government to respond, and is of sufficient magnitude to warrant U.S. government assistance, and that it is in the best interest of the U.S. government to respond.” 18 Those criteria are required under U.S. law to set up a formal disaster relief operation.
Subsequent cables depict an exasperating fight with the government. The junta leaders, perhaps revealing their naiveté about the strategic and technical elements of a massive assistance operation, were reluctant to allow commodities, aid workers, and aid assessors to enter the country. Burmese recalcitrance frustrated the efforts of the entire international community. The generals, hunkered down in their newly built capital of Nay Pyi Taw, two hundred miles north of the hard-hit Delta region, seemed unaware of the scale of the disaster. According to the embassy, this was because no mid-level underlings had the courage to inform them. Old and out of touch, the generals believed humanitarian assistance could be confined to deliveries of bottled water at the airport; they had no idea of the sophistication and coordination a modern humanitarian aid operation requires. The generals resisted any notion of the need for aid workers on the ground, confident they could handle the complexities of distribution. When they could not, they gave their people a new reason to wish for their removal. With each passing day, lives were needlessly lost. The discovery that those who ruled were incapable of caring for their people opened new avenues for pro-democracy activists.
A few days following the cyclone, the embassy warned that although Burma had requested international assistance, it was not yet ready to permit entry of either UN or U.S. government assessment teams, “so they should not make any travel plans.” 19 This soon became a refrain, as the embassy described the extensive damage and the many signs that Burma’s leaders were in denial. Despite the destruction of the Irrawaddy Delta, including the collapse of 95 percent of the buildings, “the Minister of Social Welfare asserted Rangoon [also known as Yangon, the former capital, and still the country’s commercial center and most populous city] was ‘not severely hurt; not very big damage.’” 20
The embassy immediately saw the political implications of the cyclone, noting that the regime was determined to continue with the constitutional referendum on May 10, a week after the cyclone hit, albeit with at least a third of Burma’s population unable to vote. “This unprecedented humanitarian disaster has knocked both the regime and the pro-democracy opposition off their game. Both are grappling to respond. While the regime continues to make claims of recovery that people know are untrue, and to dismiss the need for international expertise to provide humanitarian relief, the generals may have to reverse course in order to assure their own survival.” 21
The embassy, still located in Rangoon, offered details of the immediate challenge of a massive cleanup. The government relied on army personnel but left them woefully ill equipped. “They can be seen around town trying to dismantle fallen trees with little more than knives and brooms.” 22 The embassy was also affected, reporting rather quaintly, “We received one chainsaw from Bangkok today and we will receive 4 more chainsaws within one or two days. Post has requested 2000 MREs [meals ready to eat], and Embassy Bangkok will send us batteries.” 23
The storm’s destruction had huge economic implications for the Delta region, Burma’s outlet for export earnings. It sank eighty registered ships in the Rangoon River, cutting off access to the port and oil refinery. A refinery business source told the embassy that the government’s practice was to clear sunken ships with divers who “use saws and machetes to cut the ships into pieces. This can take up to six months for one ship.” 24
But the humanitarian catastrophe was of primary concern. “UN local staff in Labutta reported a make-shift camp of 100,000 people has been set up with nothing to eat or drink. Corpses are floating everywhere, contaminating local waterways that people use for drinking water because they have nothing else.” 25 Two weeks later, the embassy’s concern mounted. “The GOB has yet to come to terms with the fact that it does not have the capacity to respond to this disaster . . . Relief supplies to date have not reached most of the victims in the region two weeks after Cyclone Nargis slammed into the Delta.” 26
Soon the focus shifted to the prolonged delays in issuing visas for international relief workers. The embassy quoted sources saying that no high-level government officials dared to describe the full scope of the disaster to the seventy-five-year-old senior general, Than Shwe.
Unpleasant pictures in the media reportedly make the Senior General retreat even further into isolation. According to our contacts, Than Shwe is above all concerned with saving face and holding onto power.
. . . Meanwhile PM Thein Sein and the eight ministers on the national rescue committee reportedly have become more desperate. Sources told us Thein Sein expressed fear to [the third-ranking general] that 60,000 had lost their lives already and up to 300,000 could, if water, food and medicine were not delivered quickly.
. . . Than Shwe’s isolation and paranoia know no bounds. All fingers point to him as the obstacle to delivering the humanitarian assistance the Burmese so desperately need, just like he is the obstacle to an inclusive political dialogue. Our many contacts are visibly distraught as they watch Burma’s humanitarian catastrophe worsen by the day because of the intransigence of Than Shwe. The question is who is brave enough to shunt Than Shwe aside? Most Burmese tell us no one. Other senior officials may passively sit while thousands needlessly die rather than challenge Than Shwe.27
The international relief community was equally exasperated. Assistance teams languished without visas for weeks, and the Burmese government actually turned away sixty-two medics who arrived on a chartered relief flight from Bangladesh. The UN’s World Food Programme suspended relief shipments to Burma after the regime refused to release supplies from one of its flights.28
Then, suddenly, the picture changed. A U.S. C-130 relief flight, accompanied by Pacific Command’s Admiral Timothy Keating, USAID administrator Henrietta Fore, and other American officials, was allowed to land on May 13. It was quickly followed by two more flights the following day and five the day after. In an understated description of behind-the-scenes diplomacy, the embassy wrote, “On May 11, the Chargé met with the Chinese Ambassador to discuss the possibility that Burmese authorities may object to Admiral Keating’s presence on the C-130. After further discussion, the Burmese authorities agreed not to object to the admiral’s visit.” 29
The rarity of the chargé’s meeting suggests the extent of Chinese alarm over Burma’s resistance to aid—and the fact that many of China’s investment projects may have been suffering. “The opaque nature of China’s economic involvement in Burma is compounded by the reclusive nature of the PRC diplomatic presence here. The Chinese embassy regularly rebuffs requests for meetings and information from the Rangoon-based diplomatic community.” 30 The embassy was keenly aware of Chinese economic influence in Burma. An economic cable noted that Chinese investment had increased dramatically over the past decade, visible in hydropower, oil, gas, mining, and construction projects. Officially, China was Burma’s third-largest trading partner, after Thailand and Singapore, but embassy sources speculated that unofficial trade might be ten to twenty times the official trade value.
Once on the ground, the delicate conversations between the U.S. delegation and the Burmese went nowhere. “The meeting went as we expected. The Burmese delegation, which did not include anyone with decision-making authority, was pleasant and cordial, but made no firm commitment to accept U.S. assistance beyond relief supplies flown into Rangoon. . . . If it was not clear before, it is now: the Burmese Government, at this time, welcomes the donation of commodities to assist with cyclone relief and only that.” 31
On the other hand, the visit received an unprecedented amount of government-controlled news coverage, including nearly seven minutes on national television and pages of newspaper photos. “To most ordinary Burmese, the positive coverage of the deliveries of U.S. humanitarian aid was extraordinary . . . a real breakthrough. Today in Burma, where we have been unable to place even the most innocuous press release . . . we are enjoying the most positive attention we have ever received.” 32
In later analytical reporting, the embassy revealed that the senior generals believed the United States was about to launch an invasion. It was inconceivable to them that a U.S. naval carrier could sail near Burmese territorial waters with no motive other than logistical support for humanitarian efforts. The chargé wrote, “While it would also be nice to think that our Nargis assistance had positively changed minds, it appears more likely that fear of a U.S. invasion prompted the opening . . . The fear of invasion was real, according to a variety of our contacts in the regime.” 33 Pro-democracy activists agreed, telling embassy officials later that the regime understood military might, “and only the presence of U.S. military ships had forced the generals to allow relief workers access to the post-Nargis Delta.” 34
Willingness to accept aid did not last long. Despite a call from UN Secretary-General Ban Ki-moon urging immediate issuance of visas to UN aid workers, Than Shwe was unresponsive. The embassy noted that the UN humanitarian assistance coordinator was not allowed to enter the country until May 18 and made no progress in obtaining permission for his international staff to visit the field. Other reputable international bodies, such as the Emergency Rapid Assessment Team of the Association of Southeast Asian Nations (ASEAN), of which Burma is a member, were also denied permission to visit the field, as was the European Union’s commissioner for development and humanitarian aid.
Indeed, the Burmese regime continued to ignore reality. Subsequent cables document how the on-again, off-again approach to visas became a pattern, with international aid workers almost as desperate to get in as the people they hoped to reach. “As we have seen too often, the GOB will make a concession and then start backtracking . . . The senior generals cannot resist micromanaging everything.” 35
The consequences came home to roost at an international donor conference staged three weeks after the cyclone hit. “The regime’s hope for a cash-rich pledging conference fell flat as donors held on to their checkbooks . . . GOB hoped the conference would net billions of dollars to rebuild the ravaged delta. Donors instead chose to remind the generals that there is no free lunch.” 36 Despite the regime’s disappointment, the embassy doubted that the donors’ scolding would change the regime’s behavior.
To understand the intellectual distance Burma’s leaders had to travel, a cable discussing prospects for the International Committee of the Red Cross to work in Burma noted that it took nine months for Burmese officials to hold a substantive discussion with the organization, which they viewed as “toxic.” 37 Burmese journalists were jailed for reporting on Nargis victims who dared to complain about the regime’s slow response.38 The regime continued to toy with aid workers’ visas, delaying renewal for the directors of CARE, Pact, and Save the Children, while denying renewal for two senior UN officials, a WHO epidemiologist and the UNDP country representative.39 Driving home the point, the embassy wrote that, as further proof of the regime’s paranoia, “the Orwellian-sounding Cartoon Exhibition Supervisory Committee” had pulled four cartoons from an exhibition to raise funds for cyclone victims.40
Yet the embassy reporting offers evidence that the cyclone led, at least indirectly, to profound changes. Diplomatic colleagues suggested that the continuing international humanitarian presence had opened a small political space in the country as local NGOs got involved in the distribution of humanitarian aid.41 The embassy agreed, reporting, “Relationships between villagers and local authorities are changing and villagers are taking actions to ensure the aid is distributed transparently and evenly.” The continuing international relief effort “has the potential to move Burma towards democratic change by instilling participatory decision making and notions of accountability at a grass-roots level. The regime has opened opportunities to work with Burmese civil society to an unprecedented degree.” A World Bank expert in social impact analysis noted people were beginning to hold their leaders accountable. Civil society was starting to expand.42
The cyclone brought changes in Washington, too. Embassy reporting and increased international attention on Burma raised awareness of a long-stagnant diplomatic relationship, possibly creating room for new thinking. Half a year after the cyclone, Secretary of State Clinton ordered a policy review. By August, Senator Jim Webb (D-VA) made the first congressional visit to Burma since Senator John Kerry had visited in 1999. The following month, Clinton announced changes in the United States’ Burma policy at the UN, saying that “engagement versus sanctions is a false choice.” She was the first secretary of state to visit Burma in more than fifty years. She wrote enthusiastically about her growing relationship with pro-democracy activist and Nobel laureate Aung San Suu Kyi and her frustration over the country’s hesitant progress toward democracy, noting, “It is sometimes hard to resist getting breathless about Burma.” 43
LET’S CALL IT A COUP: THE CASE OF HONDURAS
Latin America has such a sorry legacy of overthrown governments that one assumes every embassy must have an In Case of a Coup handbook. There are certain depressingly familiar triggers. Presidents chafe at term limits or refuse to accept election results; constitutions are capriciously changed; and the roles of the executive, legislative, and judicial bodies and, above all, the military become jumbled. Neighboring countries have the bad habit of harboring fugitive leaders who never seem to face justice. Those same neighbors nonetheless vote to expel the offending country from regional organizations and self-righteously recall their ambassadors.
The Honduran coup of June 28, 2009, was a six-month diplomatic odyssey, with elements of both drama and farce: a president whisked out of the country in the dead of night in his pajamas, a forged letter of resignation, and plenty of double-talk—not all of it from Honduras—about how the coup had actually preserved democracy. Unlike natural disasters, in which the U.S. goal is to minimize death and suffering in a country and help it rebuild, political crises require a broader range of solutions. Frequently the U.S. has its own favored outcome, a factor that had huge implications in Honduras.
The immediate events of the day in question are the only uncontested aspect. At 2:30 a.m. on Sunday, June 28, 2009, Honduran president Manuel Zelaya, in office since January 2006, was hustled out of bed by the military and forcibly flown to Costa Rica. The pajama detail became such a consistent part of the narrative that when Zelaya later met Secretary of State Clinton, he joked that as a result of the Honduran coup all Latin American presidents had learned to sleep with their clothes on and their bags packed.44
Zelaya was replaced by Roberto Micheletti, the president of the Honduran National Congress and next in the line of succession. Micheletti, who served from June 28, 2009, through January 27, 2010, was cold-shouldered by the United States and most other nations and international organizations as a de facto president who had deposed a democratically elected one. However, the back story and cast of characters are important. The left-wing Zelaya had outraged Honduran conservatives by forging alliances with Raúl Castro of Cuba, Hugo Chávez of Venezuela, and Daniel Ortega of Nicaragua. He raised suspicions when he called for a poll to gauge public interest in his plan to change the constitution, a change that would allow presidents to serve two terms. Critics saw this as a means of unlawfully remaining in power. The Supreme Court upheld a lower court ruling blocking the referendum, and the Honduran Congress, attorney general, and human rights ombudsman all agreed that Zelaya had violated the law. Nonetheless, Zelaya pushed on with his plan for a June 28 poll that would in turn authorize a full referendum and requested that the military prepare ballot boxes. The ranking general refused and Zelaya fired him, which led to the resignations of the defense minister and several other officials. Both the high court and the Congress ruled that the firing was unlawful, triggering the crisis that led to the coup.
The trail of U.S. embassy cables reveals a remarkable behind-the-scenes effort to get Zelaya reinstated, an effort that cost the United States some diplomatic capital along with the ire of conservatives back home, who argued that the coup came in the nick of time to rescue Honduras from Venezuela’s path. The cables also reveal the limits of even the most intense U.S. pressure, as one initiative after another failed to accomplish the Obama administration’s stated goal of returning Zelaya to office.
The deposed president embarked on peregrinations worthy of a deposed monarch, hobnobbing with anyone who would give him a platform from which to rally supporters. Zelaya gained more prominence as a deposed president than he had ever achieved while in office. Consider this portion of his exhausting itinerary: After being summarily deposed on June 28, he landed in Costa Rica but moved on to Nicaragua a few hours later to represent Honduras at a regional meeting; he then flew to New York to make a speech before the UN on June 30. On July 5, he tried to land in Honduras aboard a Venezuelan aircraft while twelve thousand supporters swamped the airport. His plane circled, but the sight of military vehicles on the tarmac dissuaded him from landing.45 He ended up back in Nicaragua and later El Salvador, where he was joined in a press conference by the secretary general of the Organization of American States (OAS) and the presidents of El Salvador, Argentina, Ecuador, and Paraguay.46 He met Secretary of State Clinton in Washington on July 7, who persuaded him to work with the mediation of Óscar Arias Sánchez, the Costa Rican president and recipient of the Nobel Peace Prize in 1987.47
Zelaya stayed for a time in Managua and then staked out a spot on the Nicaraguan side of a border town. He finally snuck back into his own country on September 20 and holed up in the Brazilian embassy, where his entourage created chaos for his hosts. In the aftermath of U.S.-brokered elections, which he advised his followers to boycott, Zelaya made an unsuccessful attempt to flee to Mexico on December 9 and was finally granted safe passage to the Dominican Republic on January 27, the day of the inauguration of the next Honduran president, conservative Porfirio Lobo Sosa. Throughout this period, his supporters protested at rallies that sometimes turned violent, leading to injuries and some deaths, and sparking fears of descent into civil war.
Zelaya was a controversial figure from the outset of his presidency, clashing with Honduran conservatives and media over his populist policies, even before he launched his plan for a constituent assembly to draft a new constitution. Clinton described him as “a throwback to the caricature of a Central American strongman, with his white cowboy hat, dark black mustache, and fondness for Hugo Chávez and Fidel Castro.” 48 Many American conservatives applauded the coup. They saw Zelaya as the most recent in a disturbing trend of left-wing Latin American leaders: Lula da Silva in Brazil, Daniel Ortega in Nicaragua, Rafael Correa in Ecuador, Evo Morales in Bolivia, and of course Hugo Chávez in Venezuela. They also saw Chávez’s hands (and money, and mischief) all over Zelaya. Venezuela had reportedly printed the ballots that would have been used for the referendum. The embassy reported that Chávez was so eager to see Zelaya restored to office that he arranged for food, weapons, and supplies to be brought into Honduras from Nicaragua for the use of Zelaya’s supporters, leading many Hondurans to believe that “Zelaya is planning to return to retake the presidency violently, and with Venezuelan support.” 49
The embassy reported that the coup divided the Honduran public almost evenly. The opposition insisted the action was in defense of democracy against a would-be dictator. The Supreme Court president and the human rights commissioner both spoke in favor of the coup, as did members of Congress from the opposition and Zelaya’s own party. The Roman Catholic archbishop of Honduras, Cardinal Oscar Andrew Rodriguez, endorsed the coup on live television and implored Zelaya not to return for the good of the country.50
The coup also divided opinion outside Honduras. The majority of the international community was unswayed by pro-coup arguments. The UN called for Zelaya’s immediate and unconditional restoration. Faced with an ultimatum from the OAS to restore Zelaya, de facto President Micheletti withdrew from the group (a move of dubious legality) on July 2. The European Union recalled its ambassadors, and both the Inter-American Development Bank and the World Bank “paused” their loans to the country. The embassy reported that virtually all Honduran political and personal contacts “displayed a high degree of naiveté over how the coup would be perceived by the international community.” 51
Nowhere did the quarrel play out more erratically than in the United States, where gyrating opinions on the coup illustrated the disparate perceptions among Washington, the embassy, and the American body politic. Conservatives charged that the State Department mishandled it from the start; liberals said that Clinton’s efforts to restore constitutional order, many of which are documented in the WikiLeaks cables, resulted in a tainted new government, a horrific upswing in human rights violence, and deeper poverty for an already impoverished nation. Honduran coup supporters were heartened by comments from prominent U.S. Republicans and the editorial pages of the Wall Street Journal, which declared the coup “strangely, well, democratic,” giving Hondurans hope that the U.S. government might interpret the crisis as something more benign than a true coup.52 Their hopes were short-lived.
Was it a coup? President Obama was pretty clear, saying on June 29 that “the coup was not legal” and could “set a terrible precedent.” Clinton was more nuanced, saying the situation “had evolved into a coup,” but that the United States was “withholding any formal legal determination.” Clearly playing for time, she added, “We’re assessing what the final outcome of these actions will be. Much of our assistance is conditioned on the integrity of the democratic system. But if we are able to get to a status quo that returned to the rule of law and constitutional order within a relatively short period of time, I think that would be a good outcome.” 53
American political commentators seized on Honduras as the first real test for Obama and Clinton’s foreign policy. The theme of the Obama administration siding with Latin American leftists like Zelaya was picked up by the right. Commentator Mary Anastasia O’Grady wrote that Hondurans were being “pressured to restore the authoritarian Mr. Zelaya by the likes of Fidel Castro, Daniel Ortega, [and] Hillary Clinton.” 54 The New Republic said Clinton’s Honduras policy was “a mistake in search of a rationale.” 55
Writers on the left were not much kinder. Mark Weisbrot of the Center for Economic and Policy Research railed against what he saw as conflicting statements from the White House and the State Department and assailed the department’s neutrality in its reply to a query from Senator Richard Lugar, which he said appeared to blame Zelaya for the coup.56 Reuters wrote that the Honduran crisis had divided Washington. “Earlier this month, 16 Democratic Congressmen wrote to Obama urging him to freeze the assets of coup leaders. But a group of Republican senators has sought to hold up confirmation of State Department appointments due to the administration’s support for Zelaya, an ally of Venezuela’s leftist president Hugo Chávez.” 57 Despite the Republican encouragement, Hondurans were caught off guard by the mixed reaction in the United States, and the embassy reported, “They have expressed surprise and dismay at the USG response, stating that they feel abandoned by the USG.” 58
The leaked cables reveal that the embassy played an enormous role throughout the crisis, maintaining a frenetic rate of activity as it dealt with realities on the ground as well as in Washington. The embassy was deluged with so many congressional visits in the six months between the coup and the inauguration of Lobo that the New York Times noted, “The situation wasn’t helped by Republican members of the United States Congress who traveled earlier to Tegucigalpa to cheer on the coup makers (they appear far more concerned about Mr. Zelaya’s cozy relations with Venezuela’s Hugo Chávez than democracy).” 59 Embassy cables reveal that the ambassador complained to Óscar Arias about how a congressional delegation led by Connie Mack (R-FL) had attended a high-profile meeting with de facto President Micheletti, which “had not been helpful to our efforts to find a democratic and constitutional solution to the crisis, since it gave Micheletti the hope to hang tough and not negotiate on the issue of the quick return of President Zelaya.” 60
A key actor in the crisis was Ambassador Hugo Llorens, an experienced career foreign service officer in charge of an embassy of 450 staff from fourteen U.S. government agencies, 180 Peace Corps volunteers, and at least indirectly responsible for 500 U.S. military personnel at Soto Cano Air Base. (Its presence made it unlikely from the start that the United States would ever completely abandon Honduras.) His embassy’s prolific coverage of the coup and documentation of efforts to restore democracy offers a day-by-day (and sometimes hour-by-hour) description of U.S. diplomacy. His embassy wrote seventy sitreps and many additional cables providing context on human rights, media, political personalities, and ongoing negotiations, totaling more than eight hundred cables in the five months between the June 28 coup and the election on November 29 of a new president.
Llorens’s involvement raises questions as to whether the United States crossed the line from helpful neighbor to agenda-laden interloper. Was the considerable coercion the United States exercised justified? Was the stated U.S. aim of restoring Zelaya to office ever feasible or worthwhile?
The embassy played hardball from the start. At a press conference outside the embassy on the day of the coup, the ambassador condemned it. The first embassy report described the mood in grim terms. Broadcast news was abruptly cut off the air; Internet and landlines were down; there were curfews, arrests, and tear gas. “Black smoke was seen rising from the area around the presidential palace around 8:30, apparently from burning tires. One source at a nearby hotel reported seeing a car burning. A military helicopter has been circling low around the area.” 61
The following day, the embassy reported it was maintaining a no-contact policy with Micheletti and his de facto regime, noting that since the U.S. government did not recognize the regime, the embassy would not send diplomatic notes until further notice.62 By July 8, the embassy announced that a substantial amount of U.S. foreign assistance to Honduras had been suspended, and that much more was under review.” 63
One of the only ambassadors left in the country, Llorens would later call the experience one of the most challenging he had ever faced. The United States could have recalled him, leaving the running of the embassy to a chargé, but would have lost the opportunity to work through the crisis alongside the Hondurans and influence the outcome. The leaked cables suggest that having an ambassador present was an advantage. The intensity of his engagement was remarkable.
The ambassador reported that he spoke with Zelaya “on a daily basis to counter the influence of these radical elements and balance the President’s [Zelaya’s] perspective.” 64 The cables showed he was speaking with Costa Rican mediator Arias almost as frequently, and with members of the entire Honduran political spectrum. He took plenty of criticism for his role. Senator Jim DeMint (R-SC) said he was “the only one in Honduras who thinks there was a coup.” 65 Juan Carlos Hidalgo of the Cato Institute called him a “proconsul.”
Latin American coups have a way of becoming personal. Llorens housed one of Zelaya’s adult children and his family and repeatedly offered safe harbor to Zelaya’s wife. On July 1 he sent the defense attaché with three vehicles to her country home to bring her and eight family members to the capital. They spent a night at the ambassador’s residence, then moved on to a family home. Weeks later he invited them all to dinner.66 Sadly, none of this solicitude would prevent Zelaya from turning on him months later.
In addition to near-daily sitreps, embassy officers frequently returned to the theme of the illegality of the coup, concluding in one cable, “We believe the military and the Congress conspired in the coup . . . the actions taken to remove the president were patently illegal.” 67 Another cable offered a Who’s Who of the Honduran coup, profiling the key actors. The pivotal cable, “Open and Shut: The Case of the Honduran Coup,” considered every legal argument and concluded that it was indeed a coup.68
The embassy and the State Department had a vested interest in proving that a coup had occurred. This allowed them to impose a range of sanctions and exert leverage against Honduras, ranging from cutting off significant aid to canceling military exercises and revoking visas of de facto regime members. The heft of U.S. involvement in Honduras gave it far more leverage than more symbolic cut-offs by the EU and other nations. Had the Obama administration determined there was no coup, none of these actions would have been available. They also chose the mediator. No one doubts Arias’s stature, but the initiative to ask him to mediate was Clinton’s.
The cables take for granted that Honduras’s political environment was worse off for having undergone a coup. The fact that some polls indicated a majority of Hondurans supported the coup was distressing to the embassy, which insisted nonetheless that the coup was a setback to Honduran democracy.
Talks under Arias began in Costa Rica on July 9, and the embassy shifted gears from worrying about the legality of the coup to expressing frustration over intransigence from Micheletti and his team. The cables make clear that Arias saw the ambassador as a key partner. For example, he called Llorens on July 13 to see if Llorens had been able to “soften the position of the de facto regime.” 69 In response, the embassy launched what it called “a full court press to get Micheletti to reinstate Zelaya.”70 In fact, a key part of what became known as the San Jose Accords was Zelaya’s reinstatement—something which never happened. Arias and the ambassador spoke six more times before the end of July. Despite a phone call from Secretary of State Clinton, Micheletti balked at signing any accord, and by late July Zelaya told the ambassador the Arias talks were a failure.
What to do? The ambassador and Arias conferred, and Llorens noted that the United States continued to “pause” economic assistance and had completely suspended military aid. The next step was to pressure regime officials by withdrawing their diplomatic visas, a step urged by both Arias and Zelaya. In fact, visa revocations had begun on July 28 with the top four Micheletti officials. Another round of revocations targeting more Micheletti associates came on September 10; they continued throughout the fall and into the new year.
The embassy also put pressure on Zelaya. The ambassador described to Arias a meeting he had with Zelaya in Managua in which he urged him “to put on his presidential suit,” take the diplomatic offensive, and work for a diplomatic solution on the basis of the Arias plan. He told Zelaya that his activities on the Nicaraguan-Honduran border had earned him bad press coverage. His opponents had labeled him a radical and reinforced the perception of his close ties to Venezuelan president Hugo Chávez.71 It is unusual for an ambassador to speak this sternly to a head of state, even one who has been deposed.
A few weeks later the ambassador and Arias were again sharing concerns—this time about Micheletti’s intransigence. Arias worried that the regime was seeking to stall and delay and did not seem fully committed to reaching a deal. He suggested that the United States needed to increase the pressure on the business community and “consider taking away their visas and possibly freezing their bank accounts.” 72
On August 26, the embassy did something unprecedented. It stopped issuing U.S. travel visas to everyone in Honduras, with the exception of those seeking emergency care or permanent immigrants. This action took the conflict—and U.S. pressure for a resolution—to all Hondurans. Grandmothers hoping to attend weddings, students hoping to study at U.S. universities, and families hoping for a trip to Disney World were now out of luck.
Even that drastic step produced few concrete results. Zelaya roiled the country anew with his return to Honduras on September 20. When he took sanctuary at the Brazilian embassy, Micheletti’s team beefed up security, worried that Zelaya’s supporters would reinstate him by force. Ignoring international law governing the sanctity of embassies, the de facto regime turned off the Brazilian embassy’s water and electricity and surrounded the compound with security forces who assaulted people. The U.S. embassy had to step in and convince the regime to restore services and stand down. The Brazilian chargé described in graphic terms to his American colleagues what it’s like when a political refugee shows up at your embassy. He described the situation inside as tense, with Zelaya and one hundred and fifty supporters occupying most of the compound and running a well-organized political operation despite outside efforts to jam communications, and despite appeals from the Brazilian foreign minister to Zelaya to maintain a low profile.73
After a month of this, Washington dispatched the heavyweight team of Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon, Principal Deputy Assistant Secretary of State Craig Kelly, and National Security Council Senior Director for Western Hemisphere Affairs Daniel Restrepo. After exhaustive talks, the delegation obtained agreement from Zelaya and Micheletti to resume stalled negotiations, which culminated in the signing on October 29 of the Tegucigalpa/San Jose Agreement, which would have restored Zelaya and allowed him to finish out his term.74 The cable triumphantly describes it as “an historical reversal of a Latin American coup through peaceful negotiation. Work remains to implement the accord, but we believe the political will exists to do so.” This assessment turned out to be wildly optimistic. The embassy also announced that in a gesture of support for the agreement, it would reopen its nonimmigrant visa section.
Less than two weeks later, Craig Kelly was back in town, trying to put implementation back on track.75 It was clear that Micheletti was simply playing out the clock until the election. Kelly met with Zelaya (but according to the reporting cable not with Micheletti), and Zelaya maintained the upcoming election would not be valid without his reinstatement and declared he would call for a boycott. Kelly was back in town a third time a week later, and a more realistic Zelaya admitted there was no chance for his reinstatement before the elections. Kelly also met with business leaders close to Micheletti and urged them to pass on the message that he should step down. In this at least, the United States was compelling, and Micheletti agreed to take a “leave of absence” on the eve of the elections.
The prolonged and unresolved governance situation made for an uneasy election. Turnout was disputed, but it was probably between 45 and 50 percent. The embassy reported that “November 29 was a great day for Honduran democracy and the Honduran people displayed great civic commitment in expressing their will in the ballot box.” 76 In fact, few international observers saw this as a full return to democracy, largely because nothing about the coup had been resolved, rendering elections somewhat meaningless. The conservative candidate won, 56 to 36 percent. Even here, the country felt the weight of the embassy when the Supreme Electoral Tribunal (STE) results were delayed by the losing party, which had expressed concern that the preliminary results were not tallied correctly. “The Ambassador spoke to STE President and told him that in the interest of the country and of transparency to issue the results. He then called the losing candidate and urged him to drop his objection given the wide margin of his loss.” 77
This micromanagement of the election process suggests intervention can become a habit, and that by election day, the previous months of intense focus had so fixated the embassy on removing Micheletti that it was inconceivable to leave it to the Hondurans to muddle along on their own, or to accept anything less than a clear-cut outcome. Despite the celebratory tone of the cables, the United States won nothing. Zelaya was never restored to the presidency. Defiant to the end, Micheletti did not actually leave office until January 21, when he declared another leave of absence, this time for good.
The crisis ended with a whimper. Former president Zelaya flew off to the Dominican Republic the same day President Porfirio Lobo was inaugurated. Very few foreign presidents showed up for his inauguration. Even stalwart Arias demurred; he was disappointed that Lobo had not done more to get Micheletti to step down sooner. The rest of the world looked with suspicion on the election process; the U.S. view of it as relatively free and fair was not widely shared. Lobo inherited a country distracted by a climate of lawlessness that gave it the highest murder rate in the world. Human rights had grievously deteriorated. Honduras faced a long, slow path emerging from international isolation, and the country has yet to emerge from political polarization. The question remains whether the embassy’s energetic involvement in the coup aftermath ultimately served Honduran interests.
ICELAND’S OLD TESTAMENT ECONOMICS
To paraphrase Tolstoy, all prosperous countries are alike. But in the global financial crisis of 2008, each country pursued its own unhappy route to bankruptcy. The crisis affected so many individuals, industries, and countries that were it not for the fact that it was bloodless, it would easily dwarf all the political and natural disasters of this era combined. Ordinary people lost their jobs, their homes, and their pensions. Decades-old financial institutions evaporated overnight. Countries didn’t know what to do.
“Global” was an appropriate modifier for the crisis. One of the players needing rescue was Citigroup—an institution with more than 300,000 employees in more than 100 countries that handled $2 trillion of the world’s payments every day. Another, AIG, had 74 million policyholders in 130 countries.78 Suddenly these behemoths and many others, such as Bank of America, Chase, Merrill Lynch, Morgan Stanley, Bear Stearns, and Lehman Brothers, were being called financial death stars. Former Treasury secretary Timothy Geithner described what happened succinctly: “Borrowers took too many risks, creditors and investors were way too willing to finance those risks, the government failed to rein in those risks, and then was unable to act quickly or forcefully enough when panic hit.” 79
In the week of October 6, 2008, a distracted Washington watched the stock market tank in its worst week since 1933. The market dropped 50 percent from its 2007 peak. Deciding who to blame was a question for politicians rather than economists. Geithner used the phrase “Old Testament justice” to describe a strong public sentiment that the bankers who drove the system into the ground should be punished, not bailed out. Geithner, on the contrary, believed in government intervention. He argued that all financial crises are essentially about confidence, and while restoring confidence might have little to do with justice, the approach leaves everyone better off.
The crisis also wreaked havoc in Europe, where economies both in and outside the European Union are tightly linked. Europeans are in the habit of talking to one another, and there are plenty of mechanisms for high-level meetings and coordination. But what about the periphery—countries that are not members of the G-20 or the EU but were reeling from financial disaster all the same? These smaller ponds, in which U.S. embassies were major players, offered economic officers extraordinary access to finance ministers and other fiscal policymakers. Embassy economics officers have a wide range of contacts, since they handle not only routine economic policy issues but also scientific issues such as energy, global warming, climate change, and environmental sustainability.
For an economics officer in 2008, almost no place in Europe was smaller or more interesting than Iceland. Its version of the global financial crisis was a strange mixture of incompetence, comeuppance, naiveté, and defiance, with a good measure of Cold War politics thrown in. Geithner’s Old Testament justice had a different meaning in a country that managed to be furious at Russia, Britain, and America all at once.
Iceland Gets “the Middle Finger”
The most oft-repeated slogan of this period, “too big to fail,” certainly didn’t apply to Iceland. With a population of 320,000, Iceland is barely large enough to be a city, let alone a country. Its GDP of $13.6 billion puts it on a par with retailers like Best Buy. It only became an independent country in 1944, and it’s often said that everyone knows everyone. In 2007 Iceland topped the UN charts as the best country to live in in the world—a status that vanished in the space of a week.
Embassies reflect the scale of the countries in which they work, and one remarkable aspect of the reporting from the small staff at Embassy Reykjavik is its thoroughness. In the run-up to the financial crisis, the embassy had been preoccupied with local reaction to a U.S. decision to close Naval Air Station Keflavik in 2006. Iceland, which has no military forces, was a charter member of NATO, largely because its location provided an excellent refueling point for bombers. This made it a pressure point in the Cold War, and the Soviet Union built a massive embassy in Reykjavik, widely assumed to be a listening post. The embassy description of the espionage atmosphere reads like a version of Spy vs. Spy. “It is believed that the Chinese are continuing to utilize their technical and humint [human intelligence] capabilities to conduct industrial espionage. It is also believed that the Russians are monitoring the Chinese actions. The current Russian DCM [deputy chief of mission] in Iceland is considered to be a China expert. The current Chinese ambassador to Iceland is a known U.S. expert. It is unknown if there is any targeting of the mission or any of its employees by the Russians or Chinese.” 80
Despite persistent Russian overtures, Iceland firmly planted itself in the West, but with some significant boundaries. Like Norway, Iceland resisted joining the European Union (although it is a member of the European Economic Area and the European Free Trade Association) largely because it wanted an unfettered hand running its fisheries industry. Icelandic ambivalence about EU membership continued through its financial crisis, when it began the formal entry process at its height, only to draw back in late 2013.
As is often the case, heady days preceded the economic fall. Egalitarian Iceland found itself transformed by a new class of billionaires and the attendant trappings: fancy cars, parties, yachts, and posh apartments in London and Manhattan. Iceland’s high interest rates attracted “hot” money from everywhere, bloating its banking sector to unsustainable levels. Ordinary Icelanders found they could get cheap loans in other currencies, allowing them to finance homes, cars, and vacations in yen, dollars, or pounds. Big-thinking entrepreneurs borrowed foreign currency to buy European boutiques, Eastern European telecommunication companies, a Danish airline, and—for more than $100 million—the West Ham United soccer team. “For the first time, one could have a career in Iceland as a bodyguard.” 81
As early as April 2006, the embassy reported that credit rating agencies and international financial firms had released “a torrent of reports raising questions about the state of the Icelandic economy and stability of Iceland’s major banks. This public doubt about solvency caused a marked drop in the value of the Icelandic krona and of shares on the Icelandic stock exchange.” The embassy warned that rating agency Fitch had raised concerns in February, followed by Moody’s and Standard & Poor’s. “The various reports run the gamut from concluding that the Icelandic financial sky is falling to the view that despite a few economic indicators being out of balance, the Icelandic economy is sound and the negative prognostications wildly exaggerated.” 82
The cable laid out the facts: Iceland carried a large current account deficit, high inflation, high personal indebtedness, and high levels of short-term foreign debt carried by Iceland’s three major banks. But the embassy wasn’t certain any of these risky practices were fatal. It argued that much of the debt was caused by three huge capital investments—two aluminum smelter projects and a massive hydroelectric power plant, developments that would on the whole be good for Iceland.
Fourteen months later, in a June 2007 scene setter for visiting Under Secretary Nicholas Burns, the embassy swung into cheerleading mode. “You’ll see ample evidence of a continuing economic boom in Reykjavik, thanks to utilization of fish and energy resources and leveraging of assets to invest abroad. The Viking spirit of risk taking, acquisition, and swift decisiveness have all helped multiply Icelandic holdings in Europe.” 83 This tendency to equate national character with economic success and failure would appear again in embassy financial reporting from Greece, Spain, and Italy, when Germans, among others, blamed the economic collapse on their colleagues’ character traits.
Icelanders themselves were happy to capitalize on their Viking reputation when it suited their narrative. The country’s president described Iceland’s new generation of investors as “having qualities we have inherited from our ancestors,” and said that “those who venture out into unknown territory deserve our honor.” 84 Prime Minister Sigmundur Davíð Gunnlaugsson, whose term followed the worst of the crisis, said, “Icelanders, as descendants of the Vikings, are highly individualistic and have difficulty putting up with authorities, let alone oppression.” 85 This streak of independence (some might say stubbornness) made it difficult for Icelanders to deal effectively with the international financial community, as the embassy noted.
Six months before the crisis broke, the embassy warned Washington that Iceland’s economy had “gone wobbly,” with currency depreciating to near record lows and price hikes of 10 percent in a country in which most consumer goods are imported. The central bank’s prime interest rate rose to 15 percent. The prime minister unhelpfully blamed foreign investors and said Iceland would consider “setting a bear trap” to punish them.86 The casting about for a scapegoat would become a constant theme as the crisis worsened week by week.
By the end of September 2008, the post reported that the Icelandic krona’s value had fallen almost 50 percent since the start of the year; inflation had reached 14.5 percent, and Icelanders were clamoring to adopt the euro. The government, seemingly for lack of any better ideas, bought 75 percent of the shares of Iceland’s third-largest bank. “This is the first significant government intervention for the Icelandic economy during the recent crisis and comes after a week of harsh criticism for perceived inaction—in particular, for not managing to include Iceland in the 24 September exchange agreement between the U.S. Federal Reserve and the central banks of other Nordic countries.” 87 The Fed had made $30 billion available to Denmark, Sweden, Norway, and Australia to ease money markets and improve global liquidity.
By October 7, it was clear that the government intervention was too little too late. A team from the International Monetary Fund (IMF) arrived at the invitation of the prime minister, who somberly addressed the nation on television about a series of emergency actions. The embassy duly noted that “he closed his address with ‘God Bless Iceland,’ a phrase rarely used by politicians here.” 88
At this point Russia injected an interesting East-West gambit into the mix, offering a €4 billion loan. The embassy reported that officials angrily said Iceland had no choice but to turn to Russia. They claimed their “friends” in the West had let the country down. Acting Foreign Minister Össur Skarphédinsson took off the gloves in a morning radio interview. “He said it hurt, and added that after about 50 years of a special relationship with the U.S., the only thing Iceland got now was the middle finger.” 89 The chairman of the opposition Progressive party piled on, saying President Bush did not turn out to be a friend when needed, and asked Parliament to send Russian president Putin a thank-you note.
Why did Iceland feel America had let it down? Could it be, the embassy wondered, because they actually had not called Washington? It reported, “Despite public assertions that some of Iceland’s friends had failed to provide help, the Embassy does not believe the Icelanders have adequately checked out all possibilities of cooperation with U.S. entities. We urged Iceland representatives to reach out to U.S. authorities immediately so that ‘our friends said no’ means they really asked the right questions.” 90
The embassy, clearly irked by the “middle finger” quote, worked overtime to resolve the question of why Iceland felt abandoned. In a separate cable the same day, the embassy reported that it was trying to determine “with whom the Icelanders spoke in the U.S. and supposedly approached for help in their ongoing financial crisis.” It turned out that, apart from earlier talks with the New York Fed, no one in Iceland’s government had spoken to any U.S. official for more than a week! Worse still, the embassy’s source, a senior Central Bank official, said that the Central Bank had not spoken with anyone at the U.S. Treasury Department other than the Iceland desk officer. 91
The embassy went to work. Here was a country in over its head, which did not have the right phone numbers and had not sorted out how to work through a global financial crisis with U.S. financial institutions. The next day the embassy reported it had brokered a deal with the minister of finance, who was on a plane to Washington. “Post persuaded the Minister to agree to meet with senior Treasury officials while in the U.S. . . . We would hope this meeting will help Icelanders think through the present crisis and move from a stopgap reactive approach . . . It should also make clear to them how the U.S. can and cannot be of assistance and point them in the direction of other options.” 92
The United States was not the only country dealing with Icelandic ire. The embassy reported that Icelandic officials were “infuriated” with Britain after a nasty spat over the fate of unsecured deposits in Ice-Save accounts. These high-interest savings accounts had attracted large numbers of depositors from the UK and the Netherlands, but Iceland was no longer able to guarantee the deposits. “The British apparently invoked anti-terrorism laws created in the aftermath of 9/11 to freeze Icelandic assets in the U.K. Relations are under strain following U.K. Chancellor Darling’s announcement that he seized the U.K. assets of Icelandic banks, and the media reported that the PM Brown wants to sue the Icelandic government to refund British depositors.” 93
It would be hard to overstate Iceland’s wrath. The Ministry of Foreign Affairs external trade director told the embassy that if Britain had pulled a stunt like this with France, “a war would have broken out by now.” The Iceland media created an online petition, “Icelanders are not Terrorists,” which collected more than eighty thousand photos and signatures—about 25 percent of the population—to send to British Prime Minister Gordon Brown.94 Things got even nastier a week later when Iceland Central Bank governor Davíð Oddsson opened his meeting with U.S. Treasury officials by comparing Gordon Brown’s actions to Mussolini’s.95 Graffiti around Reykjavik depicted Brown with a Hitler mustache.
The embassy busily laid conduits for more communication. By October 20, it reported that the Iceland foreign minister would be calling Secretary of State Clinton to ask for a U.S. contribution of $10 billion as part of the foreign loans needed to get through the crisis. On October 24, the embassy reported that the Icelandic Central Bank had gone to the New York Fed asking for a $1 billion loan or a currency swap.
Icelanders themselves were not always on the same page. Oddsson, a Thatcherite free marketeer who privatized many of Iceland’s state-run industries during his earlier stint as prime minister, was rumored to be behind the Russian loan. He fought hard against an IMF deal (and stubbornly defended the krona and resisted EU membership), but the embassy reported that bankers and private sector businesspeople were imploring their embassy contacts to convince the Icelandic government to take the IMF loan. (In fact, an agreement was reached on October 27.) The embassy commented, “The Government of Iceland is obviously struggling with problems of coordination and turf in dealing with the financial crisis. Away for the first couple of weeks of the turmoil (due to brain surgery) the Foreign Minister is attempting to reassert her normal role in foreign affairs. The Central Bank, however, is guarding its perceived prerogatives closely—and, judging from the events of the last few weeks, unwisely.96
Iceland’s strategic location may have been its strongest card. The idea of a Russian loan got the attention of the international community, with reporters asking uncomfortable questions about what Iceland had offered in exchange—landing or refueling rights at Keflavik, or special exploration rights to gas and petroleum fields? The embassy became suspicious after things went quiet and wondered if the Russian loan offer had ever existed. Officers asked around, noting that the Ministry of Foreign Affairs and other official sources had no knowledge of any loan discussions with Russia. One senior MFA source blamed the whole business on “Central Bank shenanigans,” saying not even the prime minister had known about any loan discussions at first. Officers hypothesized that Iceland was less interesting to Russia after it failed in its bid to gain a nonpermanent UN Security Council seat in October 2008 or that Russia’s own financial difficulties had become a factor. Or that perhaps
Moscow was never serious about the loan and offered it only as a public relations stunt to boost Russia’s image and discomfit the West. (If so, this tactic has not worked all that well: Icelandic polls taken in October 2006 and October 2008 show the same 39 percent of the population favorably disposed towards Russia, though the negatives in 2008 are slightly higher.) . . . In public officials insist the deal is still on the table, in private sources tell us the deal is on the back burner and they want it to stay there . . . [Icelanders] don’t like the Russian presence in the North Atlantic and don’t want to encourage it.97
The embassy also lobbied on Iceland’s behalf, making the case that the United States should lend $1 billion of $4 billion required to conclude the proposed IMF loan. The embassy played the Russian card, arguing that Iceland was important to U.S. security; that it was well positioned in the High North, where melting Arctic ice meant increased competition for gas, petroleum, and trade routes; and above all, that it was a friend of the United States. This cable in particular showed that it was impossible to live and work alongside Icelanders and remain unaffected by their plight. The embassy made an unusually emotional appeal.
Iceland is reaching out with increasing desperation to any available source of help as it confronts one of the most trying crises in its history. Assistance from the U.S. at this crucial time would be a prudent investment in our own national security and economic well-being. The Icelanders take fierce pride in their flawless history of paying back their debts. Whatever the financial turmoil and uncertainty of the moment, it’s a good bet that this economy of highly-educated, imaginative, and sophisticated people will take off again. And when it does, and when the competition in the High North really gets underway, it may be more important than we can yet suppose to have the Icelanders remember us as the kind of friend who stands by in fair weather and foul.98
Iceland did take off again. The country repaid the IMF loan early, became a talked-about success story, and by 2014 even climbed back up on the UNDP index to fourteenth place (but not to its prior rank in 2007 of first place). Unemployment eased to 3.5 percent and growth reached nearly 3 percent. Nonetheless, repeated attempts to get an IceSave bill to refund overseas depositors through Parliament or public referenda provoked virulent public resistance, ultimately leading to the prime minister’s populist remarks mentioned above.
One of the stranger aspects of the Icelandic crisis was the role of serious illness. As the embassy reported, in October 2008 Foreign Minister Ingibjörg Gísladóttir was away in New York, being treated for a brain tumor. In addition, her deputy, Gretar Mar Sigurdsson, was suffering from colon cancer. And Prime Minister Geir Haarde told the nation on January 23, 2009, that he would resign for treatment for esophageal cancer. That’s a lot of leadership distracted by life-threatening illnesses.
Icelanders who felt spurned by foreigners might have been glad to see nature come unexpectedly to their aid. One of Iceland’s many volcanos, Eyjafjallajökull, began rumbling on March 20. By April 14 it sent up a massive cloud of ash that covered much of northern Europe and disrupted air traffic for weeks. No doubt many in Iceland found the symbolism satisfyingly appropriate.
CRISIS DIPLOMACY
Diplomats rarely get the luxury of working to a schedule. The more fragile the country, the more likely long-term work plans will be interrupted by major events. These four crises give an indication of the range of problems the U.S. government and its diplomats confront at any one time. They do not happen sequentially. While the embassy staff in Port-au-Prince was consumed with the earthquake, their colleagues in Washington were providing diplomatic backup but simultaneously dealing with wars in Iraq and Afghanistan, not to mention problems elsewhere.
In Haiti, the reporting characterized the enormity of the challenges and portrayed an embassy at its heroic best, well supported by Washington in the early weeks of what became a prolonged crisis. In Burma, the embassy leveraged chaos from a natural disaster to support a small political opening for the dissident community and became instrumental in urging a new administration in Washington to review its policy toward the country. In Honduras, the embassy saw its role as highly principled, standing firm against a coup no matter the consequences, despite navigating around congressional ideological haymakers with different views. And in Iceland, the embassy’s traditional work of connecting foreign government officials with the right people in Washington suddenly became a crucially important effort that helped Iceland find its path toward financial recovery.