Month two

Big protests in Paris are Emmanuel Macron’s severest test yet

Putin couldn’t pass pension reform. Can France’s president do better?

The boulevards of the French capital were filled once again this week with banners and balloons, demonstrators, riot police and tear gas.

A transport strike against pension reform, which began on December 5th and continued throughout the Christmas holidays, has now entered its second month. This week lawyers, teachers, hospital workers and others joined the protests.

Railway workers have now been on strike for longer than during the protests of 1995, which forced a previous government, under Alain Juppé, to shelve its own pension reform. On one day in December, more people took to the streets than at any other time under Emmanuel Macron’s presidency.

How and when this conflict ends matters not only to the commuters struggling daily to reach the capital from remote Paris suburbs. It will also be the measure by which to judge Mr Macron’s claim to be able, unlike his predecessors, to “transform” France.

The French mandatory-pension system, made up of 42 different regimes, consumes 14% of GDP, nearly twice the oecd average. Once in their armchairs, the French receive, on average, 60% of pre-retirement earnings, compared with 49% in the oecd as a whole. Thanks to long life expectancy (now 80 for men, 86 for women), they then spend roughly a quarter of a century in retirement.

Those on “special regimes” retire earlier even than the legal minimum age of 62. Train drivers can stop at 50, a legacy of coal-shovelling times. Because today’s pensions are paid by charges on today’s workers, the system needs constant tweaking.

By 2025, according to the official pensions advisory council, the overall pensions deficit will be somewhere between €8bn and €17bn ($8.9bn-$19.7bn).

With just two years left before the next presidential campaign, and having narrowly survived the gilets jaunes (yellow jackets) protests against costly fuel, Mr Macron might have chosen a mere technical fix. A 0.7-percentage-point increase in pension charges, for instance, would close the financing gap by 2025.

But Mr Macron campaigned for the presidency in 2017 on a more radical promise. He vowed to reshape the labour, training and welfare systems so as to encourage job creation, adapt France for a “post-salary” era, ease mobility and protect people rather than jobs.

To this end, Mr Macron vowed in his manifesto to merge the 42 regimes into a single points-based system, with the same rules for all. This will spell the end of the special regimes, which Mr Juppé did not dare to do 25 years ago, as well as even out calculation rules that favour public-sector workers.

The plan, unveiled last month by Edouard Philippe, the prime minister and a former aide to Mr Juppé, will also introduce a minimum monthly pension of €1,000. Those earning over €120,000 a year will pay mandatory charges at a lower rate above that level, but these will only finance others’ pensions, not their own. The head of the employers’ federation, Geoffroy Roux de Bézieux, calls the new system “very redistributive”.

This is not, however, the way the unions see it. The Confédération Générale du Travail (cgt), with its history of la lutte des classes (class struggle), rejects out of hand the proposed new points-based system. It accuses Mr Macron, “a president of the ultra-rich”, of destroying the pension system.

On strike from day one, the cgt refuses to go back to work until the government abandons its plans. This week its members invaded the Paris office of BlackRock, an American asset manager, insisting (wrongly) that the lower pension charges on high salaries are Mr Macron’s secret gift to private pension providers.

Talks between unions and the government resumed on January 7th. Mr Macron says that he has no intention of shelving his reform. So no compromise will satisfy the cgt. Instead the government hopes to reach a deal with the more moderate Confédération Française Démocratique du Travail (cfdt), now the country’s biggest union.

Its leader, Laurent Berger, backs a points-based system. But he has taken part in the strikes because of the new “pivot age” of 64. Introduced by Mr Philippe last month, the idea is to build incentives around this age, to encourage the French to stay at work longer.

Were the government to drop this, in order to split the unions, it would look like a concession too far. At some point, the French will have to accept the need to work longer, if they are not to leave younger generations with an intolerable financial burden. As it is, Mr Philippe has already given way spectacularly to demands from those on special regimes.

He has promised dancers at the Paris Opera, whose regime dates back to 1698, that the points system will affect only new recruits. Prison wardens, air-traffic controllers, pilots, policemen and firefighters have all been promised exceptions. Even train drivers have been told that the rules will apply only to those born after 1985. Teachers, who are poorly paid in France, have been promised more money.

It may be, however, the only basis for compromise with the cfdt. “Economically the pivot age doesn’t make sense,” says Ludovic Subran, chief economist at Allianz, an insurer. “Under a points-based system you leave it to individuals to decide when they have accrued enough to retire.” Much will depend on the momentum over the next week or so. A big turnout was expected for a one-day protest on January 9th.

But overall participation in the strike by railway workers fell from 32% on December 6th to 6% on January 3rd, and among train drivers from 87% to 31%.

Although most polls show people support the strikes, for the first time, one poll has shown the number falling below 50%.

Yet most of the French are also still against the proposed new system.

Poor communication, flourishing conspiracy theories and hostility to the perennially haughty Mr Macron mean that, even now, few believe his claim that he is trying to preserve France’s pension system rather than destroy it.

China is taking its ideological fight abroad

The goal is to impose a heavy price on anyone who opposes the Communist party’s power

Jamil Anderlini

web_Chinese global threats
© Ingram Pinn/Financial Times

Of the official announcements posted on the website of China’s embassy in Sweden over the past year, nearly two thirds are vituperative attacks on individual Swedish journalists, politicians and other public figures.

“Some people in Sweden shouldn’t expect to feel at ease after hurting the feelings of the Chinese people and the interests of the Chinese side,” was one typical, mildly threatening, outburst.

The embassy in Sweden has been the most aggressive exemplar of China’s new “wolf-style diplomacy” over the past year or so. But it is far from the only one.

The key to understanding this belligerence lies in the policies and priorities that make up “Xi Jinping thought”. In numerous speeches and official documents, the Chinese president describes a bitter struggle between “socialism with Chinese characteristics” and “western anti-China forces” with their “extremely malicious” ideas of freedom, democracy and human rights.

In the 1950s, Nikita Khrushchev famously said the Soviet Union would “bury” western capitalist democracies. Since 2013 Mr Xi has put it this way: “Capitalism is inevitably dying and socialism is inevitably winning . . . This is an irreversible general trend in the development of history.”

This is more a struggle to perpetuate authoritarian rule in China than a pure ideological campaign like that of the cold war and it is primarily being waged on Chinese soil. But the fight is increasingly being exported, too, as Beijing strives to make the world safe for Chinese autocracy.

The goal is to impose as heavy a price as possible on anyone, anywhere who opposes the party’s power or objectives. Western liberal democracies are the main targets.

This overseas push began because the Chinese diaspora, estimated at about 60m people, has grown so much in recent years and is viewed as a potential threat to continued party rule in China. The history of revolution often runs through diaspora communities like the ones that nurtured Vladimir Lenin in Switzerland, Sun Yat-sen in Japan and Deng Xiaoping and Ho Chi Minh in Paris. But attempts to boost China’s influence and control of global narratives goes far beyond public diplomacy and reaches well outside the diaspora.

In November, Australia’s main spy agency said it was investigating “disturbing” allegations that Beijing had tried to install an agent in Australia’s federal parliament. The agent was found dead soon after he reported the plan and police have been unable to determine his cause of death.

In next-door New Zealand, some of the biggest donors to the main political parties are China-based businessmen with close ties to the Communist party. Campaign finance legislation rushed through parliament last month has done little to close off the loopholes that allow this kind of influence-buying.

Astonishingly, a man who spent at least 15 years working for China’s military intelligence apparatus remains an elected member of parliament, even after admitting he was ordered by the party to conceal his past on his New Zealand immigration application.

Tiny New Zealand may seem like a strange target for Communist party infiltration, but the country is attractive to Beijing as the soft underbelly of the “five eyes” intelligence sharing arrangement with Australia, Canada, the UK and, most importantly, the US. A senior intelligence official from one of these countries described New Zealand to the FT as “on the edge of viability as a member” of the grouping, because of its “supine” attitude to China and its “compromised political system”.

China is New Zealand’s biggest export destination. Presumably out of fear Beijing would respond with economic sanctions, Jacinda Ardern, New Zealand’s prime minister, has gone out of her way to avoid even mentioning the topic of Chinese political interference.

Australia’s response has been far more robust. China has threatened economic consequences for Australia’s impudence, although these have mostly proven hollow.

Even as some in Canberra fretted over the poor state of the relationship last year, Australian shipments to China rose to a record high, accounting for nearly 40 per cent of all exports. Political embargoes are often ineffective as they tend to hurt importers as much as exporters by raising prices and disrupting supply chains.

There are justified concerns in some countries about a rise in xenophobia and “reds under the bed” targeting of anyone who is ethnically Chinese. The world must guard against such racism, not least because it would be deeply perverse to punish the very people who have moved to western democracies to get away from a repressive system.

But ignoring China’s bullying behaviour would be an equally egregious form of racism towards ethnically Chinese compatriots since they are the primary targets of Beijing’s intimidation and overseas influence operations.

It would also be foolish. As the recently retired head of Australia’s main spy agency said in November, the Communist party has been very skilful at exploiting the openness of western democratic systems. The “effects might not present for decades and by that time it’s too late”, he said.

“You wake up one day and find decisions made in our country that are not in the interests of our country.”

Davos business leaders discover the value of workers

Talk of putting stakeholders first ignores mistrust among employees

Andrew Edgecliffe-Johnson

web_Davos stakeholder capitalism
© Ingram Pinn/Financial Times

Workers of the world, good news! You have been rebranded as “stakeholders” and your bosses have signed public letters saying that you now matter every bit as much to them as the shareholders on whose returns their bonuses are calculated.

If you had any lingering suspicions that the people who have staked more money than you will ever hold might still have the upper hand, let Davos 2020 dispel them. The theme of the World Economic Forum’s 50th annual meeting, taking place in the sparkling Alpine village this week, is “stakeholders for a cohesive and sustainable world”.

The executives in suits and snow boots will save all talk of buybacks and tax efficiencies until the next earnings call: this week is about a healthier planet, happier customers — and you.

On conference stages, in hotel meeting rooms and at pop-up hospitality venues on the Promenade, business leaders are busy discussing how to make work more inclusive, soothe politicians’ concerns about the gig economy and “upskill” you for whatever career curveballs the robots and artificial intelligence throw your way.

Five months after the Business Roundtable in Washington threw its weight behind an already-emerging shift in corporate priorities — away from equity holders and towards employees, consumers, suppliers, local communities and the environment — this is one item on the stakeholder capitalism agenda the upper echelons are rapidly embracing.

Two years ago, a Deloitte survey found just 12 per cent of top global executives thought they could play much of a role in educating and training their staff. Sharon Thorne, Deloitte’s global chair, says this year’s poll found more than 80 per cent claim to be creating a culture of life-long learning.

The only problem is that their staff don’t trust them to do so. Another survey, conducted across 28 countries by the PR company Edelman, found that less than one-third of people trust employers to retrain workers — or pay decent wages. Yet 83 per cent are worried about losing their jobs as companies turn to freelancers, automation or cheap foreign competition to boost shareholder returns.

“There is a ‘trust but verify’ mood among employees, who are saying ‘show me the training and show me the money’,” says Richard Edelman, the firm’s chief executive.

Showing employees more money sounds like one of the purpose/profit trade-offs that risk getting a CEO fired by the shareholders who still wield that power. Yet at private events in Davos this week, several executives insisted social pressure to pay a living wage and the rising cost of buying in new skills in a tight labour market were changing their calculations about such investments.

Companies including Walmart and JPMorgan Chase have launched splashy reskilling initiatives as more businesses conclude they cannot rely on governments to provide workforces with the training they need. Such investments should generate a more lasting return than any share buyback. But so, too, will more modest investments in listening to what employees say about how companies measure up to their rhetoric.

Dan Schulman, CEO of PayPal, gave an example of what can be done on this front last year.

Having participated in previous Davos discussions about financial inclusion, he decided to find out more about the finances of his own hourly workers and call centre employees. He was shocked to discover that 60 per cent were struggling to make ends meet each month.

PayPal responded by raising wages, cutting the costs of health insurance, giving shares to all employees and offering them financial education. The moves came at an upfront cost, but Mr Schulman is confident that putting employees first will ultimately benefit his other stakeholders.

As the late Herb Kelleher, founder of Southwest Airlines, once put it: “A motivated employee treats the customer well . . . It’s not one of the enduring green mysteries of all time.”

Numerous studies show few things build consumers’ trust in business like treating employees decently. That should reassure investors that this change of focus can benefit them, too, over time. Business leaders who have been told they must treat a multiplicity of constituents as the equals of shareholders can struggle to set priorities.

But employees are those whose future they can most easily improve. Debates about inclusion and improving social mobility at events such as Davos can feel abstract, but paying your employees a living wage and convincing them that you are listening to them is not.

Yet too many at the top seem incurious about the realities of life for people lower down their org charts. YPO, a global network of 28,000 CEOs, found this month that less than 40 per cent of its members had ever measured employee trust within their businesses.

As they recalibrate their priorities, the executives in Davos need to reflect on whether they are putting as much effort into hearing their employees’ voices as they are into engaging with investors.

Then, after setting the world to rights this week, they can start turning their stakeholder pledges into action much closer to home.

Eurozone bankers launch fresh push against negative rates

Executives urge tax cuts and increased spending as favoured path to economic growth

David Crow in Davos

© FT montage

Eurozone bank executives have launched a fresh lobbying push to convince policymakers of the dangers of long-term negative interest rates, warning they will hurt savers and pensioners while fuelling price bubbles in riskier assets.

Bank chief executives have spent the past two years trying to force the European Central Bank to reverse its negative interest rates, which were first introduced in 2014. Other European central banks including Switzerland and Denmark also have negative rates.

Rates below zero have slashed the amount that the region’s lenders earn from bread-and-butter lending and crushed their profit margins.

But bankers’ entreaties have fallen on deaf ears, with policymakers concluding that the benefit to the eurozone economy outweighs the pain for lenders. One of Mario Draghi’s parting acts before standing down as ECB president last autumn was to tell banks to stop “being angry” about negative rates and instead focus on fixing their flawed business models.

Now European bankers are taking a different approach. In a series of private meetings with the region’s regulators and politicians at the World Economic Forum in Davos, bankers have warned of what they see as the broader perils of long-term negative interest rates, according to several people briefed on the discussions.

They pointed to data showing the impact of ultra-loose monetary policy is petering out and urged policymakers to cut taxes and increase spending to boost economic growth.

Ana Botin, executive chairman of Santander, the Spanish bank, praised Mr Draghi for “saving” the euro but said: “From here onwards it is critical to look at data and behaviours.”

“It seems in many [eurozone] countries the pros of negative rates don’t outweigh the cons,” Ms Botin said in an interview with the Financial Times. “People are not taking out more loans, and savers are understandably getting more worried about how they’re going to plan for the future.”

Ralph Hamers, chief executive of ING, the Netherlands-based bank, said that “no industry can live with raw materials that are more expensive than the price of finished goods”.

Mr Hamers also pointed to the impact on pensioners, some of whom are having to put more towards their retirement to offset the loss of income from bond yields — investments that have traditionally been used by fund managers to pay for future liabilities.

He added: “The industry is saying that [ultra-loose monetary policy] doesn’t work any more. It is so detrimental to savers’ confidence that it is having the reverse effect, and consumers are starting to save even more to make up for losses in their pensions.”

Two chief executives of large eurozone banks said they were also working on plans to pass the cost of negative rates on to a much larger chunk of retail savers, setting the stage for a political backlash that the banking industry hopes will lead to wider public awareness of the ECB’s policy.

So far the majority of banks have charged a fee only to corporate depositors and wealthy clients with balances over €1m, but the executives said this could be extended to all customers with more than €100,000, the limit for most deposit guarantee schemes in Europe.

Line chart of Central bank policy rates (%) showing The negative rates policy club

“The whole market is looking at this,” said one of the executives. “Over time, we need to decrease the threshold at which we charge.”

Thomas Jordan, head of the Swiss National Bank, on Thursday defended Switzerland’s five-year policy of negative interest rates and signalled a willingness to keep borrowing costs at minus 0.75 per cent or cut again if necessary. Switzerland needs negative interest rates, the central banker said on the sidelines of the Davos meeting.

But some bankers point to price bubbles in riskier assets such as equities and illiquid investments like private equity and privately held companies, which could tumble in value in the event of a recession.

“Fund managers . . . looking for yield have put their money to work into credit like commercial real estate and leveraged lending,” said Huw van Steenis, an executive at UBS and a former adviser to Mark Carney, the outgoing Bank of England governor.

David Solomon, chief executive of Goldman Sachs, cited the impact of negative rates in the eurozone and low rates in most other developed economies as a factor in the inflated, multibillion-dollar valuations that private companies such as WeWork have been able to attain.

“In an environment where for a long, sustainable period of time interest rates have been zero, and money has basically been free, it pushes people out [along] the risk curve,” he said. “One of the consequences of that is people chase growth, and people start to overvalue growth.”

Meanwhile, bank executives have also been lobbying politicians in countries with budget surpluses — most notably Germany — to loosen fiscal policy in the hope that more public spending and tax cuts will boost growth and inflation, paving the way for the ECB to start raising rates.

One chief executive involved in the effort said it was a “long game” designed to push policymakers to “reflate” the eurozone economy, noting that the ECB had “stopped listening” to complaints about bank profitability.

Jamie Dimon, the chief executive of JPMorgan, said he viewed negative rates with “trepidation”, describing them as “one of the great experiments of all time” and warning “we still don’t know the ultimate outcome”.

“I think it’s very hard for central banks to forever make up for bad policy elsewhere,” Mr Dimon said in an interview with CNBC. “That puts them in a trap. We’re a little bit in that trap today with rates so low around the world.”

Banks have also been supported in their effort by the US administration’s Davos delegation, which has also been urging European politicians to implement a fiscal stimulus.

Larry Kudlow, the White House’s top economic adviser, told a panel that Europe needed to cut taxes and regulation on business — in effect mimicking Donald Trump’s stimulus in the US — rather than keeping rates in negative territory.

“Negative rates are not a good idea, they are really bad for banks, and they are not good for savers,” Mr Kudlow told a panel this week, adding, jokingly, that Mr Trump disagreed with him because he would have benefited from ultra-low or negative rates when he was a real estate developer.

Additional reporting by Sarah Provan

Australia’s Infernal Denial

The greatest horror so far isn't the fires themselves—it's the response to them.

By Aaron Timms

It was in spring that the frightening laugh of the idiot arrived for Rimbaud. Australia’s own season in hell reached its pinnacle of stupidity a little later. Bushfires had broken out across the country’s eastern seaboard—where most of the population is clustered—in September. By October, still in the belly of the southern hemisphere’s spring season, fires to Sydney’s west and south blew out of control, and the cloak of a climate change–stained sky settled over the city.

Sitting in New York, I got regular updates from my brother, who relayed photos of Sydney’s ash-thick atmosphere and its effects on his otherwise robust physiology: the stinging eyes and burning lungs, the need to operate at half-speed in open air.

By the time I arrived back in Sydney, a few days before Christmas, the haze over the city had abated, but the smell of smoke as I exited the airport was both powerful and alarming—alarming because the climate had altered but people’s lives, apparently, had not.

Whether this displayed admirable human adaptability or meek acquiescence before an unconscionable new ecological reality, I couldn’t tell.

I grew up in Sydney and lived here for almost three decades before moving to the United States.

Nothing about this air, this fire season, was normal.

On the way out of the airport, I noticed an Australian flag flying at half-mast.

With a mawkishness that was only a little self-conscious, I took it as an omen for the country’s vital prospects.

In The Biggest Estate on Earth, his account of the sophisticated land-management systems indigenous Australians developed prior to the continent’s colonization by the British, historian Bill Gammage wrote about how Aborigines used fire “to shape the land. It was a major totem, a friend. Like songlines, fire unified Australia.”

Today fire has unified Australia once again but in shared suffering rather than as a tool for thecommon enjoyment of the land. In those first few days back, the stink of the country’s incinerating forests hit me every time I walked outside. The worst fires were hundreds of miles away. Death was in everyone’s nostrils.

To anyone still refusing to accept the connection between anthropogenic climate change and these unprecedented fires, the simple act of breathing offered a powerful rebuttal. But many in the nation’s conservative government remained unpersuaded—asif 2019 being the hottest and driest year on record had little to do with the readiness of the land to ignite.

On December 21, Michael McCormack, the acting prime minister, argued there was “a lot of hysteria about climate change” and that other factors were equally to blame for the bushfires: “There has been dry lightning strikes, there has been self-combusting piles of manure, there has been a lot of arsonists out there causing fire.” Self-combusting piles of manure: With that, Australia’s leaders called—quite literally—bullshit on the fires, and the curtain was raised on a two-week parade of political idiocy almost as monumental and catastrophic as the fires themselves. 

In the space of two weeks, Scott Morrison has laid out the emergency-response playbook for pat-earthers everywhere.

McCormack was acting as prime minister because the real prime minister, Scott Morrison, had skipped off on a family holiday to Hawaii just as the bushfires entered their most destructive phase. Canceling the holiday would have disappointed his daughters, Morrison explained; besides, his family had not enjoyed a vacation since May.

Meanwhile, vast swaths of the country’s southeast were going up in flames: While the prime minister was off doing shakas on the beaches of Hawaii, Australia endured its hottest day ever, with the average temperature across the entire continent, a land mass equivalent in size to the contiguous United States, reaching 41.9 degrees Celsius (107.4 degrees Fahrenheit). On his return, Morrison found a nation engulfed and a population enraged. His response was to carry on as if the fires were nothing out of the ordinary, a bit of summer heat like the heat of any other summer.

Among the many violent spectacles of this fire season—the thousands stranded on beaches and long stretches of country road stacked with torched cattle, the birds dropping dead in the middle of the day, the baby kangaroos immolated on farm fences, the fire tornadoes and bloody skies—perhaps the most hellish has been the march of the pyrocumulus clouds, the product of smoke plumes so big they can generate lightning that spreads fire even further. Just as these fires have created their own weather systems, so too Australia’s political leaders have created their own kind of reality to address the destruction.

First there was a studied prime ministerial silence. Then, on New Year’s Day, came a pantomime of normality: Morrison recorded a message in which he cheerily assured Australians that “we live in the most amazing country on earth.” Later that day, he hosted the cricket teams of Australia and New Zealand at his Sydney residence and posed, amid the smoke haze still choking the city, for a photo with the players.

Those fighting the fires, he said, would be “inspired by the great feats of our cricketers.” Children played in the background on grass turned as gray as a dead man’s teeth. By this point, the bushfires were so ferocious that many of them blew through containment lines built up through back-burning, forest-clearing, and other hazard-reduction methods: One firefighter witnessed a fire in an area that had burned only two weeks previously, but “the burnt leaves were burning again.”

The next day, when Morrison finally toured fire-devastated communities south of Sydney, the scale of the destruction—and the depth of people’s anger at him—was obvious. The most consistent message he heard from people on the front lines of the inferno that day was “Piss off.” Fronting the cameras after he’d run away from the heckles of one town’s inhabitants, Morrison looked genuinely bewildered. What I saw in his eyes was not sympathy or sadness but fear: fear at the full, murderous force of climate change and at the unvarnished fury of those left behind to battle it. Here was a man utterly unsuited to the challenge, with no idea what to do.

Within a day, that bewilderment was gone, replaced by a prime-ministerial horniness for the macho business of disaster recovery. First Morrison gave Australia what it really needed: an ad boasting of the government’s emergencyresponse. Next came some vague concessions to the idea that global warming was a factor in the fires, with the obligatory caveat that now was not the time to play politics.

Finally, the announcement of a 2 billion Australian dollar ($1.4 billion) bushfire recovery fund, with assistance from the Australian military. Morrison could present himself as the nation’s first responder in chief, a man of belated action, while avoiding the messy business of doing anything about the climate change that caused the fires. Short-term action has provided cover for long-term inaction.

Whatever it takes, whatever it costs, we will ensure the resilience and future of this country,” Morrison told the press earlier this week. Whatever it takes, that is, except the action most necessary: shifting Australia’s economy away from fossil fuels and providing global leadership on climate stabilization.

Denial, obfuscation, concession, inaction: In the space of two weeks, Scott Morrison has laid out the emergency-response playbook for pat-earthers everywhere. This is how we should expect conservatives to treat Patient Earth as the climate emergency worsens: as the site of successive wounds to be treated reactively and in isolation, rather than a sick organism in need of urgent, holistic preventive care. These isolated disaster-recovery efforts will continue until, guess what? It will be too late to do anything. And by then, the planet will be lost to us.

All the resources needed for a just transition to a low-carbon economy are staring Australia in the face. But so are the elements keeping the country inert, tied to a planet-wrecking prosperity.

I watched Australia burn from my parents’ house in leafy, untroubled inner Sydney, where I lay on my bed, each day, scrolling through never-ending social media catalogs of human and natural misery with the air conditioning turned down to 19 degrees C (66 degrees Fahrenheit). In this callous way, I contributed to the continuing emissions-borne destruction of the planet. On trips out of the house, I found myself getting pissy at friends, even my best and oldest ones, and becoming the type of too-good-for-it expat I’d always despised. Where was their rage? In the face of climate catastrophe, a smug liberal amiability reigned. A friend working in human rights told me he’d never heard of disillusioned intellectual historian Samuel Moyn or his social justice–oriented critique of the human rights movement.

Another friend, when I mentioned I was thinking of writing about EzraKlein’s forthcoming book on political polarization, questioned why I would ever “dunk” on Ezra, who “seems so nice” and has a “great podcast.” At a house party on New Year’s Eve, at which everyone seemed hungover and unhappy, someone told me that it would be wrong to cancel Sydney’s famous midnight fireworks, whatever the tastelessness of their spectacle in the middle of a national catastrophe, because “they contribute $100 million to the local economy.” Had people here always been this ignorant and unquestioning, or was I simply blinded in the past by affection for those close to me?

Contradiction and absurdity hauntmany countries in the climate change era, but each country has its own flavorof destructive denialism, and Australia is no exception. It’s long astonished and distressed me that a land with so much intelligence, energy, and wit—a place of such charm and easy charisma—could simultaneously be so unadventurous, self-satisfied, and lazy. Clive James, the Australian writer who recently died after a decades-long run as perhaps the English-speaking world’s sharpest and funniest critic, was also a climate change denier.

Paradoxes abound in Australia, especially when it comes to natural resources policy: The country is the largest net exporter of coal in the world but has massive reserves of lithium and solar energy potential, placing it among the prospective powerhouses of a global renewable energy future. Whatever the moral and ecological imperatives for climate change action in Australia today—and they are overwhelming—the economic case is also compelling. However good the country’s present is, the future could be so much better.

All the resources needed for a just transition to a low-carbon economy are staring Australia in the face. But so are the elements keeping the country inert, tied to a planet-wrecking prosperity: a conservative political establishment unconvinced by the need for decarbonization; powerful fossil fuel interests; and a News Corp–saturated media happy to push the poisonous lie that global warming is a libtard con. The country’s promise is vast, like its paralysis.
 Already the talk, even among the conservative grandees wheeled out to pay lip service to anthropogenic climate change, is of the role drought, fuel loads, and arsonists—anything but the changing climate—have played in stoking the fires. Former conservative Prime Minister John Howard said recently that the “quiet Australians”—those undemonstrative middle-class voters who delivered Morrison a surprise win in last May’s federal election, despite polls consistently favoring Labor—want “balance” in the “debate” about bushfire solutions. But the “quiet Australians” who pose the greatest danger to the country are not the ones voting for climate inactivists like Morrison out of ignorance or misinformation.

They are the Australians who should be loud but can’t be bothered to raise their voices—those who know better, who understand the consequences of doing nothing on climate change, but have succumbed to the apathy of prosperity and are content to let a vote for the Labor or Green parties, or the occasional spicy tweet, define the limit of their moral courage. (And to be clear, I count myself among this group: What have I contributed to efforts to combat climate change? To date, essentially nothing.)

Even with months left to run in the Australian summer, thingswill, of course, return to some semblance of what we used to call “normality”: The heat will relent; it will rain, although probably not enough; winter will come. Then, before long, another catastrophe will be upon us.

My hope, like the hope of many around me, is that thesefires will be a catalyst for Australians everywhere—to permanent climaterage, and to an unceasing commitment to rapid, equitable, planetwidedecarbonization. We are in the contest of our lives.

This moment in history is obviously an end. If we are industrious and lucky,it will be merely the end of the fossil fuel era, rather than of human civilization itself. Whether this moment also prefigures a beginning is up to us.

What’s happening to our Earth is not normal and not acceptable. But resisting the temptation to merely recalibrate and go on asbefore will not be easy.

By Monday of this week, as I came to start work on this piece, I pulled my laptop from its place on the desk in my room, where it had sat mostly undisturbed, near an open window, for days.

The laptop was covered in ash. Smoke from the fires was still in the air, but I couldn’t smell it anymore.

Aaron Timms is a writer living in New York.

TurkStream: A New Route to Europe for Russian Gas

By: GPF Staff


(click to enlarge


Earlier this week, Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan launched the TurkStream gas pipeline at a ceremony in Istanbul also attended by Serbian President Aleksander Vucic and Bulgarian Prime Minister Boyko Borisov.

TurkStream's two strings will deliver Russian gas to two different markets: the Turkish domestic market and countries in southeastern Europe. It will also enable Russia to reduce gas exports through Ukraine and compete with other projects like the Trans-Anatolian pipeline, which will bring Azerbaijani natural gas to Europe through Turkey.

Kyiv has said that it has already felt the impact of TurkStream; Russian gas exports destined for Bulgaria, for example, are now bypassing Ukraine and being delivered through Turkey. According to Ukrainian estimates, the pipeline will decrease gas transit through Ukraine by 15 billion cubic meters in 2020.

Still, Russia’s Gazprom won’t be able to fully realize the benefits of the new pipeline just yet. Exports through the first string will depend on Turkish demand, which may be limited by energy supplies from other sources like Azerbaijan.

And construction of some parts of the second string has been delayed. In addition, the project may be subject to U.S. sanctions, according to the 2020 defense budget passed by Congress last month.

Investors wonder if coronavirus will shatter extreme calm

Fears increase that deadly virus could hit global growth and prompt a surge in volatility

Peter Wells in New York

A medical staff member (C) wearing protective clothing to help stop the spread of a deadly virus which began in the city, walks at the Wuhan Red Cross Hospital in Wuhan on January 24, 2020. - Chinese authorities rapidly expanded a mammoth quarantine effort aimed at containing a deadly contagion on January 24 to 13 cities and a staggering 41 million people, as nervous residents were checked for fevers and the death toll climbed to 26. (Photo by Hector RETAMAL / AFP) (Photo by HECTOR RETAMAL/AFP via Getty Images)
A member of medical staff wears protective clothing at a hospital in Wuhan, China, as coronavirus fears grow © Hector Retamal/AFP/Getty

In February 2018, markets were struck by an outbreak of volatility that tore Wall Street down from record highs, prompting some to dub it a “virus.” Nearly two years later, and with US stocks again near a peak, investors are wondering whether an actual virus might bring back some more drama to markets.

Optimists may point to the relative resilience of the market’s “fear gauge”, the CBOE Volatility index — or the Vix — which reflects the cost of buying short-term options on the S&P 500. This year the index brushed off heightened tensions between the US and Iran. But the adverse effects of a global pandemic could have a bigger impact on one of the things that still manages to unsettle volatility indices — expectations of economic growth.

The swift de-escalation between Washington and Tehran allayed concerns about impacts on the global economy, through higher oil prices. That helped the Vix revert to a near-two-month low of 12 — well below its 10-year average of 17 — and set the stage for a series of record highs for US stocks in subsequent sessions.

That flare-up in the Middle East also failed to disturb a three-month run in which the closing price of the S&P 500 has moved less than 1 per cent in either direction. That is one of the longest such streaks of the past half-century.

Nor has the tranquillity been confined to equities. On Monday, the JPMorgan Global FX Volatility index hit a record low, while Bank of America’s index of Treasury volatility last week reached its lowest point in eight months. Investment-grade credit default swap spreads, meanwhile, which reflect perceived risks of higher-quality companies failing to pay their interest bills, narrowed to their tightest in years.

“If growth were to contract more substantially for some reason, whether because it’s fiscal policy not working or global tensions aren’t a chess game back and forth, I think you’ll have bigger moves,” said Kathryn Kaminski, chief research strategist at AlphaSimplex Group. “That’s what is driving everything.”

The coronavirus outbreak in China might just cause that contraction. The virus has spread to a number of Asian countries and resulted in one confirmed case on US soil. Analysts are already reflecting on the impact that the 2003 Sars epidemic had on economies in Asia, particularly in consumer spending.

Economists at Goldman Sachs say that negative impacts on growth and asset prices from viral outbreaks typically fade within a few months. But any hit to the economy is unlikely to be well received by investors at a time when they are positioned for growth to accelerate.

Equity fund flows, which tend to be closely tied to global growth, have ratcheted up strongly since the end of October. Investors have poured a combined $66bn into equity ETFs and mutual funds over the period, reversing outflows over the previous 10 months, according to Deutsche Bank.

Investors spent a good portion of 2019 worrying about the growth outlook, and particularly over the summer, when volatility touched some of its highest points for the year.

The market has since stepped back from the precipice. But analysts say there is a clash between the new-found optimism and the economic data, which are not exactly strong. “People are exposed to equities much more than is the historical norm and at a point when growth hasn’t really picked up yet,” said Parag Thatte, strategist at Deutsche Bank.

Another factor in the market’s muted reaction to recent geopolitical risks is the actions of central bankers. Their continued support through low interest rates and asset-purchasing programmes is seen as a primary reason why volatility has been crushed.

That is why hedge funds continue to bet the stock market will remain calm, according to net short positions on the Vix tracked by the Commodity Futures Trading Commission.

In late 2017, such net short positions reached a record, and a couple of months later a bout of turmoil linked to the implosion of several Vix-linked funds triggered a rapid correction. Two months ago, net shorts on the Vix again hit a fresh record as hedge funds bet big against volatility returning — though positions have been trimmed since mid-November.

The problem with such complacent positioning is that when something does upset the market, the chance of a heavy sell-off is heightened. At a time when investors have not seen any significant daily swings since mid-October, when the US agreed a limited trade deal with China, anything really piercing the calm could prove a rude shock.

Central Banks Face a Year of Mounting Challenges

After committing to monetary-policy normalization in 2018, the US Federal Reserve and the European Central Bank spent the past year reversing course with further interest-rate cuts and liquidity injections. Yet, given mounting medium-term uncertainties, central bankers cannot assume calm conditions in 2020.

Mohamed A. El-Erian


SEATTLE – After a year that involved one of the biggest U-turns in recent monetary-policy history, central banks are now hoping for peace and quiet in 2020. This is particularly true for the European Central Bank and the US Federal Reserve, the world’s two most powerful monetary institutions.

But the realization of peace and quiet is increasingly out of their direct control; and their hopes would easily be dashed if markets were to succumb to any number of medium-term uncertainties, many of which extend well beyond economics and finance to the realms of geopolitics, institutions, and domestic social and political conditions.

Just over a year ago, the ECB and the Fed were on the path of gradually reducing their massively expanded balance sheets, and the Fed was increasing interest rates from levels first adopted in the midst of the global financial crisis. Both institutions were attempting to normalize their monetary policies after years of relying on ultra-low or negative interest rates and large-scale asset purchases.

The Fed had raised interest rates four times in 2018, signaled further hikes for 2019, and set the unwinding of its balance sheet on “autopilot.” And the ECB had ended its balance-sheet expansion and begun to steer away from further stimulus.

A year later, all of these measures have been reversed. Rather than hiking rates further, the Fed cut them three times in 2019. Instead of reducing its balance sheet, the Fed expanded it by a greater magnitude during the last four months of the year than at any comparable period since the crisis.

And far from signaling an eventual normalization of its rate structure, the Fed moved forcefully into a “lower-for-longer” paradigm. The ECB, too, pushed its interest-rate structure further into negative territory and restarted its asset-purchase program.

As a result, the Fed and the ECB cleared a path for many interest-rate cuts around the world, producing some of the most accommodative global monetary conditions on record.

This dramatic policy turnaround was particularly curious in two ways. First, it materialized despite growing discomfort – both within and outside central banks – about the collateral damage and unintended consequences of prolonged reliance on ultra-loose monetary policy.

If anything, this discomfort had grown throughout the year, owing to the negative impact of ultra-low and negative rates on economic dynamism and financial stability.

Second, the dramatic reversal was not a response to a collapse in global growth, let alone a recession. By most estimates, growth in 2019 was around 3% – compared to 3.6% the previous year – and many observers are expecting a quick rebound in 2020.

Rather than acting on clear economic signals, the major central banks once again succumbed to pressure from financial markets. Examples include the fourth quarter of 2018, when the Fed reacted to a sharp stock-market selloff that seemed to threaten the functioning of some markets around the world. Another occurred in September 2019, when the Fed responded to a sudden, unanticipated disruption in the wholesale funding (repo) market – a sophisticated and highly specialized market segment that involves close interaction between the Fed and the banking system.

This is not to suggest that central banks’ objectives weren’t at risk on each occasion. In both cases, generalized financial-market dislocations could have undermined economic growth and stable inflation, creating the conditions for an even more acute monetary-policy intervention down the road. That is why the Fed, in particular, couched its policy U-turn in terms of “insurance.”

But the challenges facing central bankers do not stop there. By allowing financial markets again to dictate monetary-policy changes, both the ECB and the Fed poured more fuel on a fire that has been raging for years. Financial markets have been driven from one record high to another, regardless of the underlying economic fundamentals, because traders and investors have been conditioned to believe that central banks are their BFFs (“best friends forever”).

Time and again, central banks have proved willing and able to step in to suppress volatility and keep prices of both stocks and bonds elevated. As a result, the right approach for investors has been to buy whenever the market dips, and to do so more and more rapidly.

Yet, given mounting medium-term uncertainties, central bankers cannot assume tranquil conditions in 2020. While ample and predictable liquidity can help calm markets, it does not remove existing barriers to sustained and inclusive growth.

The eurozone economy in particular is currently saddled with structural impediments that are eroding productivity growth. And there are deep long-term structural uncertainties stemming from climate change, technological disruptions, and demographic trends.

Moreover, around the world, there has been a generalized loss of trust in institutions and expert opinion, as well as a deep sense of marginalization and alienation among significant segments of society. Political polarization is more intense, and many democracies are undergoing uncertain transitions.

Also, although the trade tensions between the United States and China have been temporarily alleviated by a “phase one” deal, the underlying sources of conflict have hardly been resolved.

And the world is suddenly on tenterhooks as tensions between the US and Iran have escalated, with Iran vowing further retaliation for America’s targeted killing of Iran’s top military leader.

For long-term economic wellbeing and financial stability, this litany of uncertainties demands a policy response that extends well beyond central banks’ traditional remit. It calls for comprehensive multiyear engagement using structural, fiscal, and cross-border tools.

Without that, financial markets will continue to expect central-bank interventions that a growing body of evidence indicates are not just increasingly ineffective for the economy but also potentially counterproductive.

Whether or not central banks avoid the spotlight in 2020, they are likely to face even greater challenges to the political autonomy and policy credibility that are so crucial to their effectiveness.

Mohamed A. El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He is President Elect of Queens’ College (Cambridge University), senior adviser at Gramercy, and Part-time Practice Professor at the Wharton School at the University of Pennsylvania. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

Oil Producers Are Setting Billions of Dollars on Fire

Massive amounts of natural gas are being burned to make way for oil production. Unless the incentives are changed, the harmful practice will become even more common in the U.S.

By Spencer Jakab

A gas flare burns bright on land near Mentone, Texas, U.S., on Saturday, Aug. 31, 2019. Bronte Wittpenn/Bloomberg News

Relatively clean and flexible, natural gas has been described as “the champagne of hydrocarbons.” Lately, though, energy companies are treating it about as sparingly as a team that just won the World Series.

Tremendous quantities are intentionally burned off to make way for oil production. The problem is likely to get worse in the U.S., the number four flarer of gas behind Iran, Iraq and world-leader Russia.

It is more than an issue of waste: Flaring may be responsible for 1% of global greenhouse gas emissions according to Raymond James.

Even as more and more gas gets supercooled and shipped around the world in expensive, liquefied form, an estimated 5.1 trillion cubic feet of gas was flared world-wide in 2018, according to The World Bank—equivalent to the combined consumption of France, Germany and Belgium.

Why waste so much valuable fuel? Because it is often an unwanted byproduct of an oil well, and it isn’t worth enough to sell.

Geography determines whether it is worth something or not. For example, the big oil fields of eastern Siberia or Algeria’s Sahara desert are so far from end markets that the investment to process, gather and transport the associated gas produced would exceed its market value. In other cases, though, poor planning and regulation are as much to blame.

Riccardo Puliti,Global Director, Energy and Extractive Industries at The World Bank, notes that there is a “huge potential market” for gas in densely-populated Iraq, which is wracked by power shortages. The bank estimates that establishing a regulatory framework for selling the gas could bring $21 billion in investment to the country.

Unlike Iraq, the U.S. has a robust legal framework and enough natural gas pipelines to reach the moon. But America also has incredibly cheap gas, which encourages waste. Building more gas pipes to the Permian Basin, the center of America’s oil patch, is less of a priority than completing oil pipelines. Meanwhile, connecting them to outlying areas like the Bakken region in North Dakota is uneconomical at any price.

This results in some strange anomalies. Last year the price of gas at the Waha Hub in Texas reached negative four dollars per million British thermal units while gas in the other parts of the country was around $2.50/MMBtu. In other words, companies with natural gas on their hands in that region had to pay people to take it.

Prices would still be negative if the local regulator, the Railroad Commission of Texas, hadn’t greatly expanded the amount of gas that could be burned off. Last year a subsidiary of pipeline company Williams claimed in a lawsuit that the commission allowed a firm that could have used its pipelines to flare gas instead.

Geography causes the problem, but geology is making it worse. Shale oil wells have much steeper decline rates than conventional ones. This means that the volume of crude they produce after the first year drops sharply, but their associated gas volumes fall more gradually. The furious pace of drilling needed to keep shale oil production stable or rising results in more and more unwanted gas.

Burning gas releases carbon dioxide, but simply releasing it into the air would be worse because flammable methane is a far more potent greenhouse gas. Flaring produces other types of pollution too, says Audrey Mascarenhas, chief executive officer of Questor Technology. Questor produces machines that safely process over 99% of methane and volatile organic compounds at oil wells. It has been used widely in Colorado, which has stringent anti-flaring rules.

Even in less environmentally aware places, a lot of gas might be harnessed. For example, microturbines could generate electricity using waste gas for energy-intensive oil field equipment. Most creative are projects that use such power to run energy-intensive computers that do tasks like mining bitcoin or other calculations and then beam the results elsewhere by satellite.

“It’s easier to move data than a remote commodity,” explains Chase Lochmiller, co-founder of Crusoe Energy Systems, which runs several such computers.

Data may be the new oil, but such initiatives remain small. Proper incentives could tip the balance. For example, even as so much gas is being flared in the Permian, German utility RWE just christened a large solar facility there to help meet booming local electricity demand. While Texas is sunny, solar farms are made possible by subsidies.

So are even more expensive technologies like carbon sequestration—physically storing CO2.

Ms. Mascarenhas laments the fact that the cheapest solutions to mitigate global warming such as finding alternatives to flaring are mostly being ignored.

“We pick the hardest things first because they sound shiny and sexy.”

Few things irritate oilmen as much as taxes and red tape but, with enough gas being wasted to supply most of Western Europe, there is money to be made in finding uses for it. Forcing them to pay up for flaring gas and helping them profit from capturing it could help them do well while doing the earth a lot of good.

Mohammed bin Zayed’s Dark Vision of the Middle East’s Future

The enigmatic leader of the U.A.E. may soon emerge as the region’s most powerful figure. What does he really want?

By Robert F. Worth

Credit...Artwork by Alan Coulson

Richard Clarke was in Abu Dhabi one morning in 2013 when his phone lit up. “You busy?” a familiar voice said. It was a rhetorical question. The caller was Mohammed bin Zayed al-Nahyan, the ruler of the United Arab Emirates and one of the most powerful men on Earth.

“I’ll send a car,” he said, and hung up. Clarke, the former White House counterterrorism czar, was working as a consultant for M.B.Z. (as he’s mostly known outside his country) and had gotten used to impromptu calls like this. M.B.Z. rarely explained what he had in mind. Once, he took Clarke for an unexpected helicopter flight deep into the desert of the Empty Quarter and then landed by an artificial pond, scattering a herd of wild gazelles. Not far away, a group of German engineers was standing around, working on an experimental solar-powered water-desalination plant.

This time, Clarke got in the back of the car with no idea where he was heading. As they drove through a remote warehouse district, the thought crossed his mind that he was being kidnapped. Then the driver pulled up outside a building where Clarke heard popping sounds.

He went inside and saw a group of young women in military uniforms, firing pistols at targets. Seated not far away was M.B.Z., in his white tunic and ear-protection muffs, alongside his wife and an empty third chair reserved for Clarke. During a lull in the shooting, M.B.Z. introduced the women, who were all his daughters and nieces. “I’m starting a draft,” M.B.Z. said. “I want everyone in the country to feel like they’re responsible. A lot of them are fat and lazy.” To stimulate the draft, he said, he would begin with all the young people in his own family.

M.B.Z.’s draft was part of a grand nation-building effort at home and abroad, one that would require more soldiers and have repercussions for the entire Middle East. Since its founding in 1971, the United Arab Emirates — a federation of oil-rich sheikhdoms on the north Arabian coast — has mostly stayed out of the Arab world’s many conflicts. It became the region’s economic marvel, a desert Xanadu of gleaming skyscrapers, endless malls and marble-floored airports. But by 2013, M.B.Z. was deeply worried about the future.

The Arab Spring uprisings had toppled several autocrats, and political Islamists were rising to fill the vacuum. The Muslim Brotherhood — the region’s foremost Islamic party, founded in 1928 — and its affiliates had won elections in Egypt and Tunisia, and jihadist militias were running rampant in Libya. In Syria, the rebellion against Bashar al-Assad was also falling into the hands of Islamist militias. ISIS was on the rise, and in less than a year would sweep across the Iraqi border and seize a territory the size of Britain.

At the same time, M.B.Z. watched in dismay as armies mobilized on the other side of the region’s great sectarian divide. Shiite militias loyal to the Iranian spymaster Qassim Suleimani — who was killed earlier this month in an American drone strike — exploited the post-2011 vacuum to spread their theocratic influence over Syria, Iraq and Yemen. It was a recipe for apocalyptic violence, and the regional powers were doing little to stop it. Turkey was vehemently cheering its own favored Islamists on and backing some of them with weapons. So was Qatar, the U.A.E.’s oil-rich neighbor in the Persian Gulf.

The Saudis were ambivalent, hampered by an elderly and ailing monarch. Even the United States — which M.B.Z. had always regarded as his chief ally — seemed to regard the Muslim Brotherhood as an unsavory but inevitable byproduct of democracy in action. M.B.Z. repeatedly warned Barack Obama in phone conversations about the dangers he saw. The American president was sympathetic, former White House officials told me, but seemed intent on getting out of the Middle East, not wading back in.

By the time he invited Clarke to his family’s firing range, M.B.Z. had already hatched an immensely ambitious plan to reshape the region’s future. He would soon enlist as an ally Mohammed bin Salman, the young Saudi crown prince known as M.B.S., who in many ways is M.B.Z.’s protégé. Together, they helped the Egyptian military depose that country’s elected Islamist president in 2013. In Libya in 2015, M.B.Z. stepped into the civil war, defying a United Nations embargo and American diplomats.

He fought the Shabab militia in Somalia, leveraging his country’s commercial ports to become a power broker in the Horn of Africa. He joined the Saudi war in Yemen to battle the Iran-backed Houthi militia. In 2017, he broke an old tradition by orchestrating an aggressive embargo against his Persian Gulf neighbor Qatar. All of this was aimed at thwarting what he saw as a looming Islamist menace.

M.B.Z. makes little distinction among Islamist groups, insisting that they all share the same goal: some version of a caliphate with the Quran in place of a constitution. He seems to believe that the Middle East’s only choices are a more repressive order or a total catastrophe. It is a Hobbesian forecast, and doubtless a self-serving one. But the experience of the past few years has led some veteran observers to respect M.B.Z.’s intuitions about the dangers of political Islam writ large. “I was skeptical at first,” says Brett McGurk, a former United States official who spent years working in the Middle East for three administrations and knows M.B.Z. well. “It seemed extreme. But I’ve come to the conclusion that he was often more right than wrong.”

M.B.Z. has put many of his resources into what could be called a counterjihad, and they are formidable. Despite his country’s small size (there are fewer than a million Emirati citizens), he oversees more than $1.3 trillion in sovereign wealth funds, and commands a military that is better equipped and trained than any in the region apart from Israel. On the domestic front, he has cracked down hard on the Brotherhood and built a hypermodern surveillance state where everyone is monitored for the slightest whiff of Islamist leanings.

M.B.Z.’s leading role in this ongoing counterrevolution, as a sort of latter-day Metternich, has changed his country’s reputation. The Pentagon still regards him as a loyal and capable ally; during one visit to Abu Dhabi last May, I sat in the audience as Jim Mattis, the former secretary of defense, addressed a crowd of Emirati and foreign dignitaries and compared the Emirates to both Athens and Sparta.

But some Obama officials came to see him as a dangerous rogue actor. By the time Donald Trump was elected — offering him a more pliant partner — M.B.Z. was drawing criticism from human rights groups and diplomats for his military’s role in Yemen and Libya. Even some of M.B.Z.’s admirers in diplomatic circles say that he can be too absolutist and that he has waded too deep into conflicts whose outcomes he cannot control.

Yet M.B.Z. remains a rare figure in the Middle East: a shrewd, secular-leaning leader with a blueprint of sorts for the region’s future and the resources to implement it. For all his flaws, the alternatives look increasingly grim. The American drone strike that killed Suleimani and his top Iraqi ally, coming on the heels of a tense standoff at the United States Embassy in Baghdad, has pushed the region closer to war, with Iran's supreme leader issuing dire-sounding threats of retaliation.

It is too soon to know how Tehran will react, but M.B.Z. is likely to be a key player in whatever unfolds next. Despite his reputation as an Iran hawk, he has made several quiet diplomatic gestures in recent months and reportedly has a back channel to communicate with Iran’s leadership.

These departures from Trump’s “maximum pressure” campaign have underscored his new willingness to steer an independent course. The same man who privately criticized Obama for appeasing Iran now appears to be worried that Trump will stumble into war. M.B.Z. may be uniquely well placed to avert a conflict in which his country — which sits just across the Persian Gulf from Iran — could be one of the first targets.

M.B.Z., 58, has been the U.A.E.’s leading figure for over a decade (his older brother Khalifa, who suffered a stroke in 2014, remains the titular president) and has been shaping its policies — in education, finance and culture as well as foreign policy — for even longer. Yet he has made few state visits and has never attended a United Nations assembly. He doesn’t do Davos. He rarely gives speeches and doesn’t talk to journalists. He has a lower profile than the ruler of Dubai, Mohammed bin Rashid al-Maktoum, his subordinate in the Emirati federation. “He doesn’t want to be in the photo,” one of his oldest friends told me.

It took me nearly a year to arrange an interview. During that time, I went through a series of meetings with his surrogates in New York, Washington, London and Abu Dhabi — a sort of vetting process, which I seem to have survived mostly because I had spent years reporting on the gulf region. He had never given an on-record interview to a Western journalist, but the timing was lucky: My efforts coincided with a push by his inner circle to be more open and transparent. Still, even after our conversation, his advisers were extremely cagey about what could be quoted, fearing his words would be twisted and misused by his enemies.

The first time I saw M.B.Z., last May, he was at his evening majlis, a central ritual of Emirati social and political life. It was in a vast reception hall in Abu Dhabi, and I was surrounded by hundreds of fasting Muslims. It was over 100 degrees outside, but this palatial room, with its 50-foot ceilings and rows of immense chandeliers, was air-conditioned to a clammy-palms chill, like almost every other building in the U.A.E. It was strange to be surrounded by so many Emiratis, who form a small minority of the country’s population.

I’ve been visiting the U.A.E. for many years, and have come to think of rootlessness as one of the country’s defining features. Even when the streets are packed, almost everyone you see in Dubai or Abu Dhabi — a Benetton crowd of faces from everywhere on Earth — comes from somewhere else. When you ask them about their lives, they almost invariably mention how grateful they are to be in the U.A.E., sending cash home to their families in Kerala or Nairobi or Kuala Lumpur.

Mohammed bin Zayed al-Nahyan, ruler of the United Arab Emirates, with President Vladimir Putin of Russia in 2019.Credit...Mikhail Metzel/TASS, via Getty Images

The majlis I attended was the prelude to an iftar, the ritual evening breaking of the fast during the holy month of Ramadan. M.B.Z. was deep in conversation with a visiting African dignitary seated to his left. On his right was Mohammed bin Rashid. Later, I watched M.B.Z. get up and work the room like a Chicago pol — greeting new arrivals, making introductions, laughing, hugging old friends.

He hosts a separate weekly majlis at which any Emirati citizen may apply to appear, often to voice grievances or ask for help. These regular gatherings serve an important purpose, allowing M.B.Z. and his peers to get feedback from businessmen, tribal leaders and other constituencies. Emiratis often tell you, with perfect sincerity, that this is their own indigenous answer to democracy.

As we filed into a huge, high-ceilinged hall piled with food and drink, I stationed myself back near the corner. Then I felt a tap on my shoulder and heard a voice behind me: “Come on, guys, let’s eat.”

M.B.Z.’s advisers had been telling me for months about his love for going off-script. He drives around Abu Dhabi at the wheel of his white Nissan Patrol and shows up unannounced in local restaurants. A fitness enthusiast, he often conducts meetings during long walks, occasionally jotting notes on his hand. He is scrupulously punctual and always well briefed, but he loves to surprise Western diplomats by flouting princely decorum. One former diplomat told me he was waiting for his car in Abu Dhabi on a foggy evening when a helicopter emerged out of the mist and landed nearby.

Out of the pilot’s seat stepped M.B.Z., who trained as a flyer in the 1970s. The official complained that it was much too foggy for a safe flight. “Shut up and get in,” M.B.Z. said with a grin. They then flew to Dubai, staying just above the power lines. Another time, M.B.Z. was driving a former United States ambassador through town when the ambassador noted the absence of any security guards. “Don’t worry,” M.B.Z. said. “Look at the floor beneath your seat.” The ambassador was startled to discover an automatic weapon folded up under the carpet.

M.B.Z. led me to his table and seated me directly to his left, across from several of his brothers and a visiting Asian head of state. At M.B.Z.’s insistence, I dug into the hummus and lamb, and soon he was interviewing me about my old life as a journalist in Lebanon. In person, M.B.Z. speaks deliberately and quietly, lapsing now and then into a crooked grin that conveys a surprising impression of shyness. He has a prominent nose and slightly hooded eyes, partly concealed when I met him by a pair of clunky black-plastic glasses. He speaks fluent English with a faint British accent and an American vocabulary.

He doesn’t bother with small talk; when I met him in June for a formal interview, he had barely said hello when he began telling me about his government’s latest moves in Yemen. We were sitting in the atrium of the Emirates Palace hotel, a marble-floored monument to Persian Gulf excess. True to form, he showed up with only a couple of security men and an adviser. He went on to talk for an hour about his views on Islamism, his upbringing, his political priorities and his father’s legacy. He seemed to enjoy telling stories, but all of them were calculated to make a point. It is no accident that people often said the same things about his father, Zayed bin Sultan al-Nahyan, who founded the U.A.E. 49 years ago.

Here is a story M.B.Z. told me:

Sometime in the 1980s, when he was a young military officer, he went on a holiday trip to the grasslands of Tanzania, and on his return to Abu Dhabi, he went to see his father. The two men sat cross-legged on the floor in the traditional style, with M.B.Z. serving his father coffee. Zayed asked his son for details about everything he’d seen: the wildlife, the Masai people and their customs, the extent of poverty in the country. After hearing it all, he asked M.B.Z. what he had done to help the people he’d encountered. In response, M.B.Z. shrugged and said the people he met were not Muslims. His father’s reaction was sudden and indelible.

“He clutched my arm, and looked into my eyes very harshly,” M.B.Z. told me. “He said, ‘We are all God’s children.’ ”

M.B.Z. says his father’s pluralist instincts are at the root of his own anti-Islamist campaign. Zayed, who died in 2004 at age 86, mixed traditional Bedouin attitudes with a rare liberal-mindedness. Emiratis are deeply religious, but the country’s position on an ancient shipping lane has bred a style of Islam that is relatively cosmopolitan and tolerant. In fact, Zayed’s unusual openness is what elevated him to power and helped set the U.A.E. on a different course from its neighbors.

The British installed him as ruler in 1966 — at the request of leading Abu Dhabi families — because they were fed up with his brother Shakhbut, who had been xenophobic and averse to development. The Emirates were desperately poor then, and even the richest families lived in mud-brick huts.

There was almost no Western medicine available in the 1960s, and most of the population was illiterate; as many as half of all babies and a third of mothers died in childbirth. Even today, middle-aged people tell stories of how their parents would cut a gash in a camel’s neck and force them to drink the blood to avoid dying of thirst.

Zayed insisted on universal education for women at a time when female illiteracy was almost 100 percent. He allowed Christians to build churches in Abu Dhabi, flouting the common Muslim belief that no other religion should establish a presence on the Arabian Peninsula. In the late 1950s, a family of American missionaries built a hospital in the city of Al Ain, and it was there that an American woman doctor delivered Zayed’s third son, Mohammed.

As M.B.Z. grew up, his country was being catapulted from poverty into unimaginable wealth by the discovery of oil. At the same time, political Islam was becoming his generation’s great rallying cry. When M.B.Z. was about 14, his father sent him to school in Morocco. Zayed seems to have intended this to be a toughening experience; he gave his son a passport showing a different last name, so that he wouldn’t be treated like royalty. M.B.Z. lived simply in Morocco, and spent several months working as a waiter in a local restaurant. He made his own meals and did his own laundry, and was often lonely.

“There’d be a bowl of tabbouleh in the fridge, and I’d keep eating from it day after day until a kind of fungus formed on the top,” M.B.Z. told me. He later spent a summer at Gordonstoun, the Scottish boarding school where generations of British royals and other titled elites have sent their children to endure cold showers and hazing rituals. Prince Charles famously hated the place, but M.B.Z. told me he enjoyed his time there. He went on to spend a year at Sandhurst, the British military academy.

Unbeknown to his father, M.B.Z. was under the sway of Islamist thinking throughout these years. Zayed seems to have inadvertently facilitated his son’s indoctrination by putting an Egyptian Islamist named Izzedine Ibrahim in charge of his education. Zayed knew about Ibrahim’s Brotherhood affiliation, but didn’t yet consider the organization a threat.

M.B.Z. turned 18 in 1979, the year the Soviet Union invaded Afghanistan. As the Afghan mujahedeen began a heroic resistance, young Muslims from around the world streamed to Peshawar to join them. At the same time, popular demonstrations toppled the shah of Iran, and Ayatollah Khomeini returned to his homeland to lead the revolution. For many people, a thrilling idea bound these events: The region’s Western-backed puppets had failed, and now Islam would provide the guidebook for a better, more authentic society.

But M.B.Z. was born with another, opposing legacy: clan loyalty. His famous father was the embodiment of the traditional “feudal” dynasties that Brotherhood ideologues used to rail against. His mother, Fatima, was Zayed’s third and favorite wife, and her shrewdness and determination helped elevate her six sons over Zayed’s other male children. They are intensely loyal to one another and to her.

In the late 1960s, when they were children, Fatima told her boys about the al-Nahyan family’s long history of internecine violence, which rose to a crescendo in the 1920s with a series of brother-on-brother murders that saw power change hands three times within seven years. She made them all swear a vow never to overthrow or act against one another, a former British intelligence officer told me. M.B.Z. still talks to his mother almost every day.

Only after M.B.Z. returned to Abu Dhabi in the early 1980s did he recognize that the ideas promoted by the Brotherhood were incompatible with his own emerging role as an heir to power. M.B.Z. did not say whether he thought about the corollary of his choice: that for ordinary Emiratis, the Brotherhood’s appeal must have been even stronger.

In 1991, as George H.W. Bush assembled a coalition to push Saddam Hussein out of Kuwait, the Pentagon was impressed by Zayed’s eagerness to take part. Afterward, American military leaders began cultivating M.B.Z., who became a military officer and had begun to emerge as the most ambitious and competent of Zayed’s children. “He was a natural, up-and-coming,” I was told by Bruce Riedel, a former C.I.A. officer who is now an analyst at the Brookings Institution. “He was going to run the country. The U.S. set on a path of wooing and grooming him.”

In 1995, Riedel told me, Secretary of Defense William Perry invited M.B.Z. to the Pentagon. To make the experience more memorable, he also flew him down to Camp Lejeune and arranged for him to attend a military exercise in which Marines landed on the North Carolina shore — a simulation of an amphibious attack in Iran or Iraq. “We used to say in the Pentagon, the objective was to get M.B.Z. addicted to aerospace magazines so he’d buy everything we produced,” Riedel said.

The seduction appears to have worked. The U.A.E. has spent billions on American jets and weapons systems, and visitors to M.B.Z.’s office say they still see stacks of military magazines there. In the early 1990s, M.B.Z. told Richard Clarke, then an assistant secretary of state, that he wanted to buy the F-16 fighter jet. Clarke replied that he must mean the F-16A, the model the Pentagon sold to American allies.

M.B.Z. said no, he wanted a newer model he’d read about in Aviation Week, with an advanced radar-and-weapons system. Clarke told him that that model didn’t exist yet; the military hadn’t done the necessary research and development. M.B.Z. said he would pay for the R. & D. himself.

The subsequent negotiations went on for years, and though M.B.Z.’s hardball tactics angered some Pentagon brass, “he ended up with a better F-16 than the U.S. Air Force had,” Clarke says. In the decades to come, M.B.Z. would make clear that if the United States military refused to accommodate him, he would be perfectly happy to shop elsewhere — even in China, which has sold inexpensive drones to the Emirati military in recent years. Still, the United States remained his most important relationship by far.

On Sept. 11, 2001, M.B.Z. was in northern Scotland, enjoying the last morning of a weeklong rabbit-hunting excursion with his friend King Abdullah II of Jordan. He said his goodbyes and boarded a private plane to London, arriving just after lunch. He hadn’t even left the plane when an Egyptian member of his entourage came running out from the terminal and climbed onboard, according to an official who was present. “New York is burning!” the man shouted.

M.B.Z. had heard nothing of the day’s events, and when he did he was furious. “What are you saying?” he asked the man. “New York is the center of the world — look how vulnerable we are.” M.B.Z. tried to reach his father, but was unable to get through. He did manage to get Clarke, who was then working on counterterrorism in the White House. It was the only call Clarke took that morning from outside the government. “Carte blanche — just tell me what to do,” he recalled M.B.Z. telling him.

By the time M.B.Z. arrived back in Abu Dhabi, later that day, he knew that two Emiratis were among the 19 hijackers.

The Sept. 11 attacks were a life-changing moment for M.B.Z., unmasking both the depth of the Islamist menace and the Arab world’s state of denial about it. That October, M.B.Z. told me, he listened in amazement as an Arab head of state, meeting with his father on a visit to Abu Dhabi, dismissed the attacks as an inside job involving the C.I.A. or the Mossad.

After the head of state left, Zayed turned to M.B.Z., who had been there for the meeting, and asked what he thought. “Dad,” M.B.Z. recalled telling his father, “we have evidence.” That fall, the Emirati security services arrested about 200 Emiratis and about 1,600 foreigners who were planning to go to Afghanistan and join Al Qaeda, including three or four who were committed to becoming suicide bombers.

That same autumn, M.B.Z. had another conversation with his father that would affect the way he thought about political Islam. The encounter began, M.B.Z. told me, when he entered his father’s office with a momentous piece of news: The Americans were sending troops to Afghanistan. Zayed said he wanted Emirati troops to join them. M.B.Z., who was commanding the armed forces by this time, was not prepared for this. Taking an active role in the American campaign would raise sensitive issues, given that some were calling it a war against Islam.

Sensing his son’s unease at the prospect of committing troops, Zayed said: “Tell me, do you think I’m doing this for Bush?” M.B.Z. said yes. “That’s 5 percent of it,” Zayed said. “Do you think I’m doing this to keep bin Laden away?” M.B.Z. nodded. “That’s another 5 percent.”

M.B.Z., a little baffled, asked his father to explain. “You’ve read the Quran and the Hadith, the sayings of the Prophet,” Zayed said. “And you like them?” Of course, his son replied. Zayed then said: “Mohammed, do you think this guy bin Laden running around Afghanistan is doing what the Prophet wanted us to do?” Not at all, M.B.Z. said. His father then told him emphatically: “You’re right. Our religion is being hijacked.” M.B.Z. didn't have to add that there was another reason to fight Al Qaeda — it was a threat to their own family’s authority.

Soon after the Sept. 11 attacks, M.B.Z. undertook a bottom-up review of all his country’s vulnerabilities to terrorist attacks. “I believe 9/11 made him look internally to re-evaluate key sectors from education to finance,” says Marcelle Wahba, who arrived as the new United States ambassador in October of that year.

“They went through it all very systematically.” He formed a team, including his brothers and top advisers, and they worked relentlessly to patch the holes, according to Wahba. They set out to register all the hawala shops, the informal money-transfer system that has often been used by terrorists. They put transponders on dhows that plied the gulf.

They began looking for ways to better monitor the U.A.E.’s sprawling trade and finance networks. Much of this was aimed at deterring terrorists transiting the Emirates, but the risk of attacks inside the country was also real. In the following years, U.A.E. authorities foiled a string of terrorist plots by jihadi groups, including a 2005 plan for a triple car-bombing attack against a five-star hotel.

At the same time, M.B.Z. mounted a broader assault on Islamist ideology. Many of the U.A.E.’s Islamists belonged to Islah, a group founded in the 1970s that was the local equivalent of the Muslim Brotherhood. They included thousands of foreigners, mostly from Egypt, who had been welcomed decades earlier to fill the U.A.E.’s need for educated professionals and bureaucrats. The country’s ruling families had initially given their blessing to Islah, which they saw as a benignly pious group. By the 1990s, Islamists had made the education and judicial ministries into a “state within a state,” according to the Emirati journalist Sultan al Qassemi, deciding how scholarships were handed out and pushing the courts in a more religious direction.

M.B.Z. authorized the firing of Islamist teachers and a sweeping rewrite of the country’s textbooks. Most of the Emiratis I know can tell shocking stories about elementary schoolteachers who casually told them about the glories of violent jihad and the depravity of kuffar, or infidels. The textbooks, written by Brotherhood members, sprinkled zealotry even into subjects like history and math: “If you kill three Jewish settlers and spare two, what is the sum?”

Emirati high schools now offer ethics courses that are independent of religious study — something that would have been unthinkable not long ago. M.B.Z. has made other quiet efforts to push religion into the private realm. He has given a platform to respected religious scholars who took a quietist approach, including a number of prominent Sufis like Ali al-Jifri, Aref Ali Nayed, Hamza Yusuf and Abdallah bin Bayyah, the renowned Mauritanian Sufi scholar who now chairs an Emirati council that oversees religious rulings. The U.A.E. also began exporting its own brand of Islam via training programs for imams abroad, including thousands of Afghans.

Most Islah members were concentrated in the northern emirates, especially Ras al Khaimah, just over an hour’s drive north from Dubai. It is less dense than the wealthier cities to the south, with fewer skyscrapers and malls, and it is a little shabbier. In a sense, Islah was expressing its disapproval of the hypercapitalist culture being spawned in the U.A.E.’s biggest cities. Many of its public statements were protests against the bars and prostitution that served the U.A.E.’s growing foreign population. Its spokesmen eventually began promoting democracy and human rights, though those may have been at least partly a convenient way to draw Western sympathy to their cause.

Arabists and diplomats in the West have mostly taken the view that Islamists of this kind should be tolerated, and that their views are likely to be softened over time by their integration into electoral politics. The Tunisian Ennahda movement is often held up as an example of what may happen when Islamists are given a chance to evolve in a more progressive direction. Ennahda, which emerged from the Muslim Brotherhood, has shared power with a secular party, and its leader has suggested that it is less an Islamist party than an Arab variant on European parties like the Christian Democrats.

M.B.Z. did engage in a dialogue of sorts with the U.A.E.’s Islamists, and he claims the experience proved they could not be trusted. After the Sept. 11 attacks, he began meeting with members of Islah and urging them to return to the fold. Initially, he offered them a deal: Stay away from politics and they could maintain their charitable work. They responded with lists of demands.

The attempts at outreach came to an end after a tense meeting in 2003, and M.B.Z.’s attitude appears to have hardened. He told a visiting United States delegation in 2004 that “we are having a culture war with the Muslim Brotherhood in this country,” according to a cable made public by WikiLeaks. One of M.B.Z.’s own sons started to fall under the spell of Islamist thinking, he told a group of visiting diplomats in 2009. He responded by employing a tactic his own father had used: sending his son to Ethiopia with the Red Cross to appreciate the moral worthiness of non-Muslims.

Even as he cracked down on the Brotherhood, M.B.Z. was working on a far more ambitious project: building a state that would show up the entire Islamist movement by succeeding where it had failed. Instead of an illiberal democracy — like Turkey’s — he would build its opposite, a socially liberal autocracy, much as Lee Kuan Yew did in Singapore in the 1960s and ’70s. He began with Abu Dhabi’s Civil Service, which was afflicted with many of the same ills as those of other Arab countries: bloat and inefficiency, with connections and family reputation playing a bigger role in hiring than merit. These features were partly a legacy of the Egyptian strongman Gamal Abdel Nasser, who built a dysfunctional prototype in the 1950s that was copied everywhere.

M.B.Z. deployed a group of young, talented people and authorized them to smash up the bureaucracy. Over the next few years, they fired tens of thousands of employees and reassigned many others, streamlining the state. Between 2005 and 2008, the Abu Dhabi government went from 64,000 people to just 7,000. At the same time, he began harnessing Abu Dhabi’s vast capital reserves to build up a non-oil economy. Using a new sovereign wealth fund called Mubadala, he attracted new industries, creating job opportunities that would help train the local population. He honed his progressive image by including women in his cabinet. Mubadala created an aerospace-and-aviation hub in Al Ain where 86 percent of the workers are women.

At times, he seems to want to change Emiratis themselves, to make his people more disciplined, more rational, more self-reliant. “Ever shake hands with an Emirati?” one former diplomat heard him say. “It’s a weak hand — they look away. I’m trying to teach people to look you in the eye and give you a firm hand.”

He made jujitsu compulsory in schools. In 2014 he established the military draft, forcing young Emiratis — who are granted free housing, education and health care — to endure a year of boot camp and hard work. M.B.Z. made sure they took it seriously. Soon after the draft started, a few hundred eligible young men failed to register. M.B.Z. had them brought to him and “spent an hour excoriating them about what his father did, building the country and so on,” I was told by one former diplomat. “They all went to jail for 30 days.” (An Emirati spokesman disputed this account.)

When I first started visiting the U.A.E., in 2007, I heard a lot of fretting about the social consequences of the country’s sudden vault from poverty to vast wealth: listlessness, depression, isolation and dislocation. On my most recent visit, I heard at least a dozen stories about young couch potatoes who returned from boot camp sober and lean, suddenly willing to do their own laundry and dishes.

The draft has also brought together people from different emirates and social classes in a way that rarely happened in the past. The Yemen war has wreaked horrors on that country, but it appears to have had an annealing effect on Emirati society. More than 100 Emiratis have been killed in the fighting, and while that is tiny compared with the appalling toll of Yemeni dead, it is in human terms by far the costliest war the U.A.E. has ever fought.

It probably helps that M.B.Z. and most of the rulers of the other six emirates had sons or nephews on the front lines, some of whom were seriously injured. I briefly met Zayed bin Hamdan, M.B.Z.’s nephew and son-in-law, who uses a wheelchair after his spine was damaged in a helicopter crash in Yemen in 2017.

In 2009, M.B.Z. made a decision that would vastly augment his ability to project power beyond his borders. He invited Maj. Gen. Michael Hindmarsh, the retired former head of Australia’s Special Operations Command, to help reorganize the Emirati military. Early on, M.B.Z. asked Hindmarsh to help him find an Emirati officer to lead the reboot of the country’s elite units. But M.B.Z. seems to have taken a liking to Hindmarsh, a lanky man with a deeply lined face and a relaxed, frank manner, and ended up choosing him for the job.

Putting a non-Arab in charge of the military’s crown jewel would be unimaginable in any other Middle Eastern country. But by 2009, M.B.Z. had a firm grip on the state. The global financial crisis had hurt the other six emirates — especially Dubai — and they had lost some of their autonomy to Abu Dhabi, by far the largest and richest member of the federation.

M.B.Z. gave Hindmarsh (who calls him “the Boss”) his full backing and all the money he needed. Hindmarsh, who had gotten used to bureaucratic obstacles during his decades in the Australian Army, was delighted. The U.A.E. has kept Hindmarsh’s role quiet, in deference to Arab sensitivities, but he remains in the job, and his work has been essential in making the Emirati special forces among the best in the world.

M.B.Z. was deeply unnerved by the Bush administration’s talk of democracy-promotion and by its consequences, including the creation of sectarian political parties in Iraq and the electoral triumph of Hamas in Gaza. In 2009, M.B.Z. detected a freedom agenda in Obama’s landmark Cairo speech, with its call for a “new beginning between the United States and Muslims around the world.” He told a United States diplomat afterward that he feared the speech “raises the bar of expectations in the Arab world.”

Then came the Arab Spring. The United States had supported the Egyptian president, Hosni Mubarak, and autocrats like him for decades, and had treated the Brotherhood as dangerous fanatics. Yet when the Brotherhood’s Mohammed Morsi was elected president of Egypt in 2012, the Obama administration accepted the result. M.B.Z. did not. By early 2013, the U.A.E. was backing Tamarod, the swelling popular movement against Morsi. Vast demonstrations against Morsi took place on June 30, followed by his ouster by the military on July 3, which brought Abdel Fattah el-Sisi, the military chief, to power.

The U.A.E. and its gulf allies instantly pledged billions of dollars in support to the new government. Emirati officials have maintained a discreet silence about their role, but all the diplomats I spoke with believe the U.A.E. approached Sisi and outlined the terms of their financial support before Morsi’s overthrow. “I think there’s every reason to believe he staged a coup,” I was told by one former diplomat. “For a tiny country in the Persian Gulf to overthrow the ruler of Egypt and put their guy in, that’s a big achievement.”

M.B.Z. may have prevented Egypt from becoming an Islamic theocracy — that, at any rate, is how he sees it. But Sisi’s own ruthlessness became apparent almost instantly. (It is safe to assume that this doesn’t bother M.B.Z. much, if at all.) In mid-August of 2013, the Egyptian military gunned down about a thousand people in two pro-Brotherhood protest encampments in Cairo, according to Human Rights Watch.

Around the same time, the government began cracking down on secular dissidents too, and in many ways Sisi has been more autocratic than Mubarak was. The takeover in Egypt raised tensions between the U.A.E. and the United States, which danced clumsily between censuring Sisi as an undemocratic strongman and quietly continuing some cooperation. (Trump would later offer a much more unqualified embrace, joking that Sisi was “my favorite dictator.”)

Soon after Sisi took power, in October 2013, M.B.Z. was watching CNN when he learned for the first time that the United States had been secretly negotiating a nuclear deal with Iran. His American friends had told him nothing. “It was a big blow,” one of M.B.Z.’s senior advisers told me. It wasn’t so much that he opposed the idea of negotiating with Iran (the U.A.E. eventually endorsed the preliminary nuclear deal, which was formalized that November).

Instead, M.B.Z. was staggered that Obama had not bothered to consult or even inform a longtime ally about such an important deal — and one that was being negotiated right next door, in Oman. The U.A.E. had a lot at stake, having forced Dubai traders to give up their lucrative business with Iran to comply with the sanctions. “His Highness felt that the U.A.E. had made sacrifices and then been excluded,” the senior adviser said.

Together, the Egyptian tumult and the Iran talks formed a kind of watershed in M.B.Z.’s relations with the United States. The shift was not immediately apparent; he continued talking to Obama regularly and offered him advice. He warned him that the proposed remedy in Syria — Islamist rebels — could be worse than the disease (Assad’s tyranny). He also urged Obama to talk to the Russians about working together on Syria, a coldly realistic suggestion that might have ended the war faster, albeit by foreclosing the opposition’s hope of victory.

But beneath the veneer of routine consultations, M.B.Z.’s feelings about Obama had changed. The relationship eventually turned toxic, with M.B.Z. trash-talking the administration to visitors, former administration officials told me. Obama also made dismissive comments in a 2016 interview in The Atlantic, describing the gulf’s rulers as “free riders” who “do not have the ability to put out the flames on their own” and expect the United States to rescue them.

The final straw came a month after the election of Donald Trump, when M.B.Z. flew to New York to meet the president-elect’s team, canceling a parting lunch with Obama. Soon afterward, M.B.Z. hosted a Russian middleman at an Emirati-owned resort in the Seychelles with Erik Prince, the Blackwater founder — an encounter that put them in the sights of Robert Mueller’s investigation of the Trump administration’s ties to Russia. The meetings, mentioned briefly in the Mueller report, do not seem to have involved any Trump-related collusion. But even if he wasn’t colluding with Russians, M.B.Z.’s attitude toward his American patrons seems to have changed. He had plans of his own, and would no longer wait for their approval.

The overthrow of Morsi was the first great success of M.B.Z.’s counterrevolutionary campaign, and it seems to have supercharged his confidence about what could be done without American constraints. His attention soon turned to Libya, where jihadists were running rampant. He began providing military support to the renegade former general Khalifa Haftar, an autocrat who shared M.B.Z.’s feelings about Islamists. At a Camp David summit in May, 2015, Obama tacitly scolded M.B.Z. and the emir of Qatar for waging proxy war in support of their rival militias. But by the end of 2016, the U.A.E. had set up a secret air base in eastern Libya, from which drones and aircraft bombed Haftar’s rivals in Benghazi.

All of this was in violation of a U.N. weapons embargo, and it irritated Washington. Thousands have been killed in the Libyan fighting, and Haftar’s effort to capture Tripoli has not succeeded. One former United States diplomat who admires M.B.Z. told me that his handling of the Libya mess underscored the danger of overreach. “They are looking to stage-manage and cleave out the parties they don’t like,” she said of the U.A.E. “They will learn they can’t do that.” She added: “You may stir a pot that boils over because of your meddling.”

As he pulled away from the Obama administration, M.B.Z. was acquiring a powerful ally: Mohammed bin Salman, the Saudi crown prince. The alliance may seem natural to outsiders — two gulf autocrats with similar initials — but the bond papered over a historic rift. The Saudis, as the slain Saudi journalist Jamal Khashoggi liked to say, are “the mother and the father of political Islam.” M.B.Z. would agree. The Saudi state is rooted in an 18th-century pact between its rulers and a hard-line strain of Islam known as Wahhabism. It is a formula for state-sponsored extremism that makes the Muslim Brotherhood look mild.

M.B.Z. grew up in a time when most Emiratis felt threatened by their big desert neighbor; there were armed clashes on the border as recently as the 1950s. In 2005, M.B.Z. told a United States ambassador, James Jeffrey, that his biggest concern was Wahhabism, according to a cable made public by WikiLeaks. He saw the Saudi royal family as feckless, but feared that the alternative in such a deeply conservative society could be an ISIS-style Wahhabi theocracy. “Anybody who replaced the Al Saud would be a nightmare,” Jeffrey remembered him saying. “We have to help them help themselves.”

M.B.Z. soon latched onto his Saudi counterpart — who was eager for big reforms — as the key to loosening Saudi Arabia’s ties to radical Islam. He appears to have been something of a mentor to the younger man, and he encouraged the Obama administration to support him. But he doesn’t seem to have any sort of brake on M.B.S.’s worst impulses. When the Saudis led a military campaign against the Iran-allied Houthi fighters in Yemen in March 2015 — with the U.A.E. as their lead partner — many expected it to last a few months at most.

Instead, it has lasted nearly five years, becoming a catastrophe that shocked the conscience of the world. Ancient buildings have been smashed to rubble, thousands of civilians have been killed and Yemen — already the Arab world’s poorest country — has suffered terrible outbreaks of famine and disease. The war’s ostensible goal of uprooting the Iran-backed Houthi government is more distant than ever.

The U.A.E. has a share of responsibility for this immense tragedy, though it did not carry out the bombings that wreaked so much destruction on northern Yemen. M.B.Z. confined his country’s role to the south, where he tried unsuccessfully to broker political deals to end the war, and relied on Hindmarsh’s commando units to train local forces. One former high-ranking American military official told me that 95 to 100 percent of the military success in the war was due to the Emiratis.

When M.B.Z. announced a withdrawal from Yemen in June, he made clear that his new partnership with Saudi Arabia had limits. He also began charting a more diplomatic course with Iran. After a series of attacks on shipping in the Persian Gulf and the downing of an American drone, Trump threatened fire and fury that same month and then abruptly backed down.

M.B.Z. appears to have sensed that Tehran was starting to see Trump as a paper tiger — leaving the U.A.E. dangerously exposed to further Iranian aggression. Soon afterward, the U.A.E. issued conciliatory statements and sent a delegation to Iran in late July. That pattern of outreach and dialogue may be essential in the wake of the Suleimani assassination, as Iran’s neighbors struggle to avert a war.

The diplomatic gestures in July were hailed by some of M.B.Z.’s critics as signs of an unexpected flexibility, or even of “retrenchment.” Yet at times M.B.Z. can be as rigid and ideological as his enemies. The embargo of Qatar, begun in June 2017, has grown personal, with the two sides waging nasty campaigns of media vilification, and has even led to proxy skirmishes in Somalia.

The rift undermines M.B.Z.’s ostensible goal of maintaining a united front against Iranian subversion in the region. If they do not find a way to resolve it, “someone’s going to drive a tractor-trailer right through that gap,” I was told by a former high-ranking United States military official. At its worst, the feud with Qatar has cast M.B.Z.’s whole campaign against political Islam in a vengeful light, as if he were more keen on humiliating his rivals than anything else.

A large bronze sculpture stands outside M.B.Z.’s main office in Abu Dhabi, spelling out the word “tolerance” in English letters. The U.A.E. goes to enormous lengths to advertise its commitment to pluralism. In 2016, the government created a Ministry of Tolerance, and 2019 was branded the Year of Tolerance, kicked off in February by a much-heralded visit from Pope Francis, the first time a pontiff has set foot on the Arabian Peninsula. But the tolerance does not extend to Islamists or anyone who expresses sympathy for them. The U.A.E. has cracked down much harder on Islamists since 2011, arresting and incarcerating them en masse, on thin pretexts.

There is an unmistakable chill in the air, an intolerance for fellow travelers reminiscent of the Cold War. In 2012, the Emirati authorities shuttered the Dubai offices of the United States-based National Democratic Institute and other foreign foundations that supported democratic institutions. In 2014, the government officially designated the Brotherhood a terrorist group. It has prosecuted at least one lawyer who defended Islamists and even, in some cases, secular critics of the government.

Most Emiratis who discussed M.B.Z.’s crackdown on the Brotherhood with me did so only on condition of anonymity and using encrypted apps. Unlike in the West, private cameras in the U.A.E. can be co-opted by the government, giving the authorities extraordinary surveillance over what goes on everywhere in the country.

A widely adopted message app introduced in the U.A.E. last year, ToTok, was recently unmasked as a spying tool for Emirati intelligence. Officials in the U.A.E. are quick to defend these tactics; a single terrorist bomb or Iranian missile could send the expats fleeing and do immense harm to the country’s role as a safe trade and transport hub. A militant apparently inspired by ISIS stabbed a teacher to death in Abu Dhabi in 2014, underscoring the danger.

But the U.A.E. is not just looking for terrorists. It has developed an increasingly aggressive cyberintelligence program called Project Raven, built in part by former American intelligence operatives, that appears to be aimed in part at political rivals. Project Raven’s targets have included at least four Western journalists, including three Americans, according to a Reuters investigation published last year.

Messages on social media warn that expressing support for Qatar is a criminal offense punishable with fines or even jail time. “It’s a fact of life that today it’s very difficult to air criticisms, to talk frankly,” I was told by Abdulkhaleq Abdulla, a prominent Emirati political scientist who has been detained for voicing criticism of the government. He added that this was true across the Arab world.

In the Emirates, much of the censorship is self-imposed, with younger people absorbing a sense that they must be more vigilant against the country’s external enemies. One man in his 20s told me he wondered whether the Muslim Brotherhood threat had been exaggerated to help strengthen the state — a suspicion he would never dare to voice in public.

This may be the central enigma of M.B.Z.’s tenure: He is a socially liberal autocrat, and his country looks different depending on where you stand. Weighed against the standards of Western human rights groups, the U.A.E. can easily look like a hyper-capitalist slave colony whose leader wants to crush all dissent. When you compare it with Syria or Egypt, the U.A.E. is almost a model of enlightened liberalism.

Arab young people mostly seem to take the latter view. Surveys have shown that most young Arabs would rather live there than anywhere else — including the United States or Canada. In part, this is because mournful nostalgia is almost a way of life in Egypt and Iraq, while people in the U.A.E. talk far more about the future. That this is a talking point for the U.A.E.’s publicists does not make it any less true.

Foreign diplomats have occasionally confronted M.B.Z. about his country’s lack of democracy, and he has responded by saying something along the lines of “This isn’t California”: Lack of education and the prevalence of backward religious attitudes make autocracy necessary, he insists. But if he succeeds in his mission to educate the populace and eradicate political Islam, the al-Nahyan family may eventually have more trouble justifying its role as a virtual monarchy.

“You cannot import a ready-made process from abroad,” I was told by Zaki Nusseibeh, who served as a translator and adviser to M.B.Z.’s father for decades. “But yes, we need to start involving young people more in decision-making.” On the two-hour drive from Abu Dhabi to Nusseibeh’s home in Al Ain, in the country’s conservative heartland, I passed immense, upscale housing blocks built by the state for Emiratis, who tend to seclude themselves from the gleaming towers of the city. It was a vivid reminder of the al-Nahyans’ tacit deal with their people: safety and prosperity in exchange for quiescence.

Nusseibeh, a slim, bald man of 73 with alert eyes and a professorial air, is a kind of cultural ambassador for the U.A.E., where he has lived since he arrived five decades ago from the West Bank. His house is a museum of sorts, with books in Arabic, English and French stacked ceiling-high and a whole tower of CDs devoted to the work of Richard Wagner (a framed photograph at the bottom shows Nusseibeh with the composer’s descendant, Cosima Wagner). Paintings and sculptures fill almost every available space, most of them by Arab or Iranian artists.

The important work, Nusseibeh said, is still about building institutions and protecting against external threats, and that requires stable leadership. We were back to the Islamist menace.

“The last 50 years were foundational,” he said. “The next 50 — how do we move this to a new, global level? The challenge becomes more existential. We have to inoculate people against what is happening.”

One morning in June, I got a taxi from my hotel to the Louvre Abu Dhabi, M.B.Z.’s madly ambitious, billion-dollar monument to “art and civilization.” It was unbearably hot and humid out, and as we drove past the corniche — a beautifully landscaped mile-long stretch of waterfront — I didn’t see a single human being. As we crossed the bridge onto Saadiyat Island, I could see the museum looming in the distance like a vast metallic tortoise. Its steel dome, which is as heavy as the Eiffel Tower, is a weave of strands designed to act like a palm grove, allowing tiny shards of sunlight onto the grounds below.

When we arrived, I got out and suffered my unavoidable minute-long exposure to nature, and then returned indoors to the controlled world of M.B.Z.’s visions. It was easy to imagine him striding confidently around the building site a decade earlier, pointing his index finger like a magician: I want walkways here. Let’s keep the natural coastline there. Let’s put hotels there, with a view of the museum. That, in fact, is more or less what happened, as I learned from the man who ran the project for him.

Inside, I goggled alongside the tourists at classic works of Western art sitting alongside Chinese and Indian and Arab masterpieces. The museum’s guiding concept reflects the U.A.E.’s own multicultural ethos, a mash-up of global high culture. It has been derided by some critics, including many in France, as a lavish purchase of a European brand for the benefit of a global leisure class. But M.B.Z.’s main goal for the museum, one of his advisers told me, was to educate the local population, not attract tourists.

As I strolled past a Roman sculpture, a group of Emirati schoolchildren in green shirts trickled in and sat on the floor around me. After a few minutes of sketching, their teachers led them toward the Universal Religions gallery, the museum’s centerpiece. I followed behind and listened as one of the teachers led a Q. and A.

“You all know about the Quran,” he said. “But who can tell me what the Christian holy book is?” Several children shouted the answer. “Very good! What about the Jewish holy book? And for Hindus?” More high-pitched answers. At last came the clincher. “Sheikh Zayed wanted this to be a universal museum, and he had the idea to put all the holy books in one place, so people could see what their religions had in common, and perhaps that way they’d be a bit nicer to each other.”

As the children got up and filed into the next room, it struck me that the teacher’s lecture contained a revealing false note. Sheikh Zayed wasn’t the one who conjured up this museum, with its grand ambition to smash Islamic certainties and turn Bedouins into citizens of the world. M.B.Z. was hiding in his father’s shadow, absent and omnipotent at the same time.