An Impending Geopolitical Earthquake?

y José Miguel Alonso Trabanco

Global Research, February 21, 2009

The financial and economic turmoil the world is currently experiencing will certainly have many serious consequences beyond those fields. Indeed, its geopolitical fallout could be far more serious than commonly acknowledged and it is an element that cannot be neglected by neither statesmen nor analysts.

Some scholars frequently hold that politics and economics are somehow separate. Such view is profoundly mistaken because politics and economics are strongly interlinked. Actually, political power and economic wealth cultivate one another. Likewise, economic trouble, more often than not, tends to lead to political trouble and the reverse is equally true.

Therefore, it is fairly reasonable to assert that this financial crisis will have a major impact on the international system's balance of power. Some states (including Great Powers) could redefine their priorities. Other states are in a direr situation so they would have to make dramatic adjustments concerning their policies.

Take the case of the United States. Following the end of the Cold War, the US intended to establish a unipolar era in which its hegemonic position would remain unrivaled (the so called 'Project for a New American Century'). However, Washington has had to deal with several setbacks and challenges like the rise of other great powers (China and Russia), the proliferation of anti-American regimes (Iran, Venezuela) as well as Washington's military quagmires (Iraq and Afghanistan). Thus, the position of the US could be weakened as a result of the financial crisis.

It is unknown at this point if the Dollar hegemony will prevail and remain unscathed. The dollar can certainly survive but its position could be critically eroded. This is extremely important to bear in mind because the Dollar hegemony is one of the twin pillars of American power, the other one being military strength. The US Dollar's position as the top reserve currency is what has allowed the American economy to finance a huge trade deficit. A byproduct of that is the accumulation of the world's largest external debt, equivalent to almost 99.95% of America's GDP (!?).  That means it cannot be paid so, what will happen if suddenly America's creditors decide to collect at least a part of that debt? If the US refuses to pay, how will its debtors react?

Moreover, the financial and economic crisis might acutely restrict NATO's operational capabilities beyond its borders. The Atlantic alliance is currently contemplating an increased military presence in Afghanistan. It also seeks to advance further eastward into the Post-Soviet space. However, such agenda could be impeded by other concerns closer to home.

It turns out that several European States (some with both NATO and European Union membership) are already facing sociopolitical complications that have been triggered by their severe financial and economic difficulties (lack of credit, unemployment, currency depreciation, external debt, GDP negative growth). If their situation deteriorates further, an eventual deployment of NATO troops in one or more of its members' territory is not unconceivable at all. The official purpose would be the preservation of political stability. The unofficial (and real) goal would be to prevent NATO-friendly governments from collapsing. Iceland, Romania, Hungary, Greece, Poland and even Italy and France are in a particularly dire position. According to Der Spiegel, Britain itself (the very cradle of modern finance) is "on the brink of financial ruin".

This scenario can be dismissed as far-fetched but even the American financial sector is under critical circumstances. Like Russian Prime Minister Vladimir Putin recently remarked "… investment  banks, [once] the pride of Wall Street, have virtually ceased to exist. In just twelve months, the have posted losses exceeding the profits they made in the last 25 years…"

The Russian Federation itself is not immune. For instance, the Kremlin's plans to make Moscow an international financial center do not seem very likely now, due to the ruble's depreciation. In spite of that, the Russian government knows it has an important capability to maneuver through the crisis. Its main asset is the huge reserves of foreign currency (the third largest in the world) it has amassed during the last years. Plus, Russian energy and arms exports are a reliable source of income.

Other Post-Soviet States are in a more delicate position. For instance, Kyrgyzstan decided to close the Manas Air Force Base (operated by the US Air Force) in exchange for Russian financial and economic concessions, which means Moscow scored a most crucial geopolitical victory. This teaches a vital lesson: Financial means are very useful to accomplish geopolitical objectives. On the other hand, Ukraine's economy is rather fragile so Kiev it has been rumored that Kiev could even reconsider its foreign policy in exchange for financial assistance.

It has to be taken into account hat China possesses the world's largest reserves of foreign currency so Beijing is not entirely unprotected. However, as a result of the global crisis, the Chinese need to avoid potentially destabilizing political consequences derived from unemployment and overall economic slowdown. Some prominent members of Obama's administration intend to at least decrease the American trade deficit by pressuring Beijing to revaluate the Chinese yuan butChina obviously is unwilling to artificially restrict its exports. This disagreement must not be underestimated because it could fuel dangerous tensions between both great powers.

It is yet too early to accurately predict the full consequences of the world financial crisis. Nevertheless, it seems that it will spark some unforeseen geopolitical readjustments. The financial system is approaching a most critical turning point and so is the international balance of power.

José Miguel Alonso Trabanco is an  independent writer based in Mexico specialising in geopoltiucal and military affairs. He has a degree in International Relations from the Monterrey Institute of Technology and Higher Studies, Mexico City. His focus is on contemporary and historic geopolitics, the world's balance of power, the international system's architecture and the emergence of new powers.

Is the ‘New World Order’ Changing Yet Again?

Shahid R. Siddiqi Foreign Policy Journal Sunday, Dec 28, 2008

Upon the demise of Soviet Union 18 years ago, U.S. President George H.W. Bush announced the emergence of a New World Order. He called it a path to peace in these words: “A hundred generations have searched for this elusive path to peace, while a thousand wars raged across the span of human endeavor”. And he claimed that under this new world order “the rule of law supplants the rule of the jungle, a world in which nations recognize the shared responsibility for freedom and justice, a world where the strong respect the rights of the weak.”

But he was to soon prove his pious pronouncements to be mere rhetoric, a deception. Calling it an action to punish Saddam Hussain for invading Kuwait, an act that he had initially condoned, and in collusion with his European allies he went out to pound a hapless Iraqi army, in the process testing out his new weapon systems on live targets and offloading redundant ammunition on Iraqi positions, all at the cost of the frightened Arabs. The world got a preview of the rise of a “unipolar world” to be ruthlessly controlled and steered by an imperialist America to serve its own ends.

Avoiding war mongering, President Clinton cleverly focused on rebuilding the shattered economy that had cost George H.W. Bush his job. His success at creating a domineering American position with a strong economy under his belt and substantial international goodwill - thanks to his policy of multilateralism, he convinced the world that the “New American Century” was at hand. But by 2008 the picture had drastically changed. America was gasping for breath. It was sinking deeper into the hole it found itself in. Having exercised undisputed political, economic and military power in the twentieth century, it was now in the throes of decline, its fall from power imminent.

In 2000 the American people blundered by electing George W. Bush. This not only adversely impacted their fortunes but also those of the people of the world. Carrying an agenda of remodeling the world to suit their myopic designs, egged on by the war machine to use aggression as a tool, 9/11 providing the pretext, pushing the policy of unilateralism and displaying the arrogance of a ruffian, President Bush and his coterie of neo-cons ventured out on a mission that would ultimately prove self-destructive.

Defying the will of the international community, throwing the rule of international law out of the window, G.W. Bush attacked Afghanistan to wipe out Al-Qaeda (that many suspect does not exist) and then Iraq that had not even provoked any one, listing North Korea and Iran as the next battle grounds. Justifications for attack were drummed up and people and governments were manipulated, bullied and coerced to fall in line. NATO was turned into an aggressive military alliance, provoking Russia and laying ground for another Cold War.

All this was done for “good causes”, people of the world were told. It was necessary to “rid the world of terrorism”, to “liberate people from tyranny”, to destroy “the axis of evil” and to eliminate threats to the security of the West. The real agenda was, however, different. They were out to demolish unfriendly regimes under the garb of “ushering in democracy”, splinter and remap the Muslim world, crush Islamic groups opposed to US policies, grab energy resources, extend hegemony into former Warsaw Pact countries and Soviet Republics, promote the interests of American military industrial complex that thrives on war, terrorize the world into submission and financially gain from the resulting chaos. Like a drunken cowboy, America was wildly shooting off the hip – totally out of control.

These actions brought nothing but ruin to America. The whimsical 3-trillion dollar war in Iraq and the failed “’war on terror” in Afghanistan, both executed on credit, broke the back of US economy (military spending increased by 60%, excluding war expenditure), compromised its standing as world power, exposed the limitations of its military strength once again, earned universal scorn for its policies of unilateralism, subversion, regime change and human rights violations, caused a steep rise in anti-Americanism in the Muslim world and strengthened the Jihadi resolve to defeat American imperialism. But this was not all.

Iran laughed off the American threats of invasion knowing its incapability to open the third front. European allies began dissociating from US adventurism and refused to follow Bush policies that ran counter to their economic and security interests. Germany, France, Spain and Italy, among others, scuttled Bush’s efforts to induct Ukraine and Georgia into US led NATO, signaling policy differences. EU refused to participate in troop surge in Afghanistan and brushed aside Bush’s call for sanctions against Russia for counterattacking Georgia. Russia, feeling threatened by intrusive US moves in Eastern Europe, the Caucuses and Central Asia - areas critical to its security, responded aggressively on the issue of Georgia and anti-missile sites in Poland and the Czech Republic.

The neo-cons proved to be out touch with reality. They refused to see that there was a new world out there which could neither be reshaped nor controlled by the use of brute military might. They shunned multilateralism and refused to resort to a combination of intellectual, political and military strengths. They ignored the fact that political and military power is the extension of economic and financial strength, forgetting that just about 15 years back the Soviet Union had collapsed for this very reason - it was politically and militarily a “first world” power but a “third world” economy. It simply could not sustain itself.

Domestically, the economic and fiscal picture turned bleak, severely restraining America’s ability to assert itself externally. National debt approached ten trillion dollars and next year’s federal budget is projected to run in deficit of 1.2 to 2 trillion-dollars. Collapse of speculative financial markets caused American economic meltdown that also crushed many world economies. The dollar is under threat of being replaced as international currency for oil trade and as world’s reserve currency. Some even speculate a US default on its debt by 2009 that may force it to revalue the dollar, sending a wave of fear among foreign investors, causing a liquidity crunch. In short, America faces the biggest financial challenge since the Great Depression.

The collapse of neo-con doctrine caused Bush to retreat. He was forced to come to terms with those he called the “axis of evil”. He negotiated with North Korea, in a reversal of policy on Iraq he signed a troop withdrawal agreement, he struggled to come to a tacit understanding with Iran and, as reports indicate, he has signaled opening of a dialogue with his most rabid adversary - the Taliban. Failure written large on its face, America has lost its moral authority and influence as a super power, with the diminishing limits of American power plainly visible.

A nervous nation scrambled to change guard, but was eight years too late. The havoc wrought by Bush administration had prematurely triggered the beginning of the end of America’s era as the sole and mighty super power. The grossly unjust and archaic economic, political and military “uni-polar” world order, or the “New World Order” as George H.W. Bush had called it, collapsed just 18 years after it was born and which Vladimir Putin described in these words: “It refers to one type of situation, one center of authority, one center of force, one center of decision making. It is a world in which there is one Master, one Sovereign. This is pernicious…. unacceptable …. impossible.”

President-elect Obama brings an end to a long national nightmare called the Bush administration, but faces an uphill task. He inherits a mess of un-surmountable proportions, including two wars that are going nowhere, a military budget almost equal to the world’s combined military budget and increasing, severely curtailed financial resources, social programs in tatters and the economy in deep recession. He is going to preside over a country that goes hat in hand to its creditors asking for money to fuel its hubris.

Externally, he faces an international community irate with the misuse of American power and happy to see it lose its monopoly. There are no easy solutions in sight to the crises that the US imperialism has created for itself and for others. His commitment to “change” would be a tall order. By the time he gets even close to shutting the Pandora’s box that Bush had opened, set his house in order, curb the establishment’s urge for futile self destructive wars and substantially reduce military spending, put the economy back on track and establish America’s soft international image, political realities around the globe would have substantially changed. Far reaching geopolitical developments would have given rise to a new power-paradigm.

World’s economic epicenter has shifted to Asia. Emerging economies are poised to play a greater role in world affairs. An economically strong China is positioning itself as one of the future super powers. Resurgent Russia is beginning to reassert itself. Western Europe, secure from Soviet threat, recovered from its back-breaking wars and wary of American arrogance, is breaking free of American protectionism.

A “New Multi-polar World Order” is now emerging that is likely to create a balance of power with a hope for stability. Some even prefer to call it the Real World Order in which the US will no more be able to control the international agenda. Smaller countries of Asia that bore the brunt of America’s aggressive policies are taking a sigh of relief at the demise of American imperialism, remaining skeptical of the shape of things to come.

But despite all of its troubles, America cannot be written off, not completely, not yet. Although its power has prematurely reached its limits and will likely decline, America remains for now the biggest military power and the biggest economy, though not strong enough to wage wars. The US National Intelligence Council in its report “Global Trends 2025” also admits that the US will remain the most powerful yet less dominant country in years to come. The new administration will therefore have to accept America as one of the great powers, as opposed to being the only power center that it was, and transit from the mindset of arrogance to that of humility that Obama has promised.