Trump’s new security team
Gen Flynn and Gen Mattis make a fiery and intriguing cocktail
I have resisted commenting on Mr Trump’s election victory until now, because I wanted to let the dust settle and see whom he appointed as National Security Advisor and Defense Secretary. With General (Rtd) Michael Flynn and General (Rtd) James Mattis now confirmed respectively (pending Congressional approval for Mattis), today I take a look at what these appointments signal for foreign policy, and therefore the defence industry, during Mr Trump’s tenure as President of the United States.
The market reaction to Mr Trump’s victory has been unilaterally positive for defence stocks. Lockheed Martin is up 12% since polling day, BAE Systems 9%, and their peers have performed similarly. This positivity seems to stem from his hardline stance on foreign policy during his election campaign. The media reaction to the appointments of Flynn and Mattis, two straight talking military veterans of Iraq and Afghanistan, seems to have deepened public belief that the Trump administration will take an aggressive stance on terrorism in order to protect the USA.
I concur that Mattis and Flynn’s appointments suggest President Elect Trump is going to pursue a pugnacious foreign policy. However, I challenge the consensual view that the new approach will lack cultural sensitivity and turn to military might before diplomacy. The careers of Mattis and Flynn thus far suggest this will be far from the case.
Both were known as ‘thinking generals’ and both authored seminal works during the Counter-Insurgency (COIN) campaigns of Iraq and Afghanistan. Gen Mattis co-authored the now famous 2007 COIN manual with Gen Petraeus which cautioned restraint and discrimination in lethal force. The manual was the ‘go to’ text for every military officer of my generation. Its basic precepts of COIN give some interesting insight into how Gen Mattis may approach his task as Secretary of Defense:
1. Some of the best weapons do not shoot
2. Sometimes the more you protect your force, the less secure you may be
3. The hosts doing something tolerably is often better than foreigners doing it well
4. Sometimes the more force is used, the less effective it is
5. Sometimes doing nothing is the best reaction
In 2010 Gen Flynn authored the paper ‘Fixing Intel’ when he was Head of Intelligence in Afghanistan. It was responsible for a huge shake up in the way military intelligence operated, urging a population centric approach to gathering information and targeting. He described the Afghan population (which is overwhelmingly Muslim) as “the people we are trying to protect and persuade”. I was serving as an Intelligence Officer in Afghanistan at the time and Flynn’s message came through loud and clear. We were to stop using remote force as the default setting, and instead get out amongst the people to find out what needed to be done and how it could be achieved. If Trump’s administration truly applies this tenet to its foreign policy, the results could be fascinating.
Both men have clashed with the Obama administration over its strategy on the Middle East. Gen Mattis retired five months early when leading US Central Command (CENTCOM), reportedly because President Obama did not agree with his assertion that the Syrian civil war provided the US with an opportunity to depose the Syrian President and Iranian ally, Bashar al-Assad, thus dealing Iran its biggest strategic setback in twenty five years. Gen Flynn was dismissed as Director of the Defense Intelligence Agency in 2014. He has maintained he was forced out of the role for refusing to tow the Obama administration’s line that Al-Qaeda was in retreat.
Change is therefore inevitably afoot on a strategic and practical level for the military and the defence industry. Both men cite Islamic terrorism as the number one threat against the US. Flynn has called for the US military to be more aggressive, however Gen Mattis has advocated a softer approach. He wants to place regional Muslim countries into a leading role, which puts him slightly at odds with Mr Trump’s tendency to denounce all of Islam as synonymous with terrorism. Gen Mattis also favors arming Syrian rebels to fight against Assad, something Trump has signaled he considers a distraction from fighting Isis.
Gen Flynn thinks the Iranian nuclear deal should be renegotiated. Gen Mattis has not been that explicit but describes Iran as a “special case that must be dealt with as a threat to regional stability.”
Where they differ most is over Russia. Gen Mattis has criticised the “unfortunate and dangerous mode the Russian leadership has slipped into”. He has also warned other NATO allies against accommodating “Russian violations of international law”. Gen Flynn however thinks the USA should work more closely with Moscow. He regularly appears on RT, the Russian owned state television channel, and once attended an RT gala, sitting two seats away from President Putin. He claims to see no difference between RT and US news organisations such as CNN.
I am excited that the appointment of Gen Flynn and Gen Mattis may bring some much needed clarity to what or who is the ‘enemy’ when fighting Islamic terrorism. It is a notoriously complicated issue and one that successive US administrations (and UK Governments for that matter) have shied away from discussing with the public. In Gen Flynn’s recent book he wrote:
“This administration has forbidden us to describe our enemies properly and clearly; they are Radical Islamists. They are not alone, and are allied with countries and groups who, though not religious fanatics, share their hatred of the West, particularly the United States and Israel.”
Interestingly Gen Mattis was Supreme Allied Commander of transformation for NATO 2007 – 2010. He job was to focus on improving military effectiveness of allies. Therefore whilst Mr Trump has previously been scathing of NATO and critical of smaller nations for not spending enough, Gen Mattis is likely to be a supporter of the organization and is already well versed about what is realistic to expect in terms of contributions from the other nations.
On a practical level I expect them to adopt a no nonsense approach which will not be to the liking of everyone, particularly those used to a more civilian style of working. It is likely they will get tough on the defence industry, ensuring that equipment is fit for purpose and delivered on time. This will be set against a backdrop of what is expected to be more a more certain budgetary environment. The House and Senate are both under Republican control, ending the impasse of the last administration and making a repeal of the Sequester legislation highly likely.
The personalities of President Elect Trump, Gen Mattis and Gen Flynn make for an intriguing cocktail. The hope is that Mattis, who is known as an exceptional leader can bureaucratically moderate Trump and neutralize some of Gen Flynn’s more controversial ideas (particularly on Russia). For example, Mattis is known to be against torture, and reports suggest he has already convinced Mr Trump round to his way of thinking, claiming to be able to get better results with “a packet of cigarettes and a couple of beers”.
The general public seems disbelieving that putting military men in charge of national security and defense policy will lead to anything but a more active military, however Gen Mattis and Gen Flynn’s scholarly work suggests this may be the case. I believe that one of the main reasons the military conflicts Iraq and Afghanistan escalated and went so badly wrong is because the civilian politicians were faced with a problem they did not know how to solve and so they asked their military commanders to come up with a solution. The Generals, in true military fashion, tried to oblige and did the best it could without any real mission. By putting Generals in charge of the entire outfit, they will know its limitations and hopefully adhere to Clausewitz’ principle that “war is a continuation of policy with other means.”
The final ingredient to the cocktail will be revealed when Mr Trump announced his Secretary of State. The front runners currently seem to be Rudy Giuliani, former Mayor of New York, and Gen (Rtd) David Petraeus, Gen Mattis’ co-author of the COIN manual and former Head of the CIA. Either man would be a fiery and strong addition to the mix.
Disclaimer - Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This document may contain materials from third parties, which are supplied by companies that are not affiliated with Edison Investment Research. Edison Investment Research has not been involved in the preparation, adoption or editing of such third-party materials and does not explicitly or implicitly endorse or approve such content. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of publication and is subject to change without notice. While based on sources believed reliable, we do not represent this material as accurate or complete. Any views or opinions expressed may not reflect those of the firm as a whole. Edison Investment Research does not engage in investment banking, market making or asset management activities of any securities. The material has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.