“The United States is not trying to poach Russia’s allies in Central Asia,” said US secretary of state Condoleezza Rice on Oct. 5 during a visit to Kazakhstan. Washington was not trying to take allies away from Russia – nor did she recognize a special Russian “sphere of influence” in the region. “We don’t see any of this as a zero-sum game,” she said.

The importance of this comment was that it was the closest Washington has come to admitting it was pulling out of the contest with Moscow spawned by the Georgian conflict three months ago.

This American fadeout however also affects its presence in other contentious world regions like the Persian Gulf, the Middle East, Afghanistan and Pakistan, S. America and so on. In ordinary times, diminished American activity would be attributed to the twilight of one presidency in the interim before the vibrancy of a new White House tenant.

But this time, global financial mayhem has left the world groping in the dark for a clue to illuminate tomorrow. The next US president will face new and unpredictable situations that cut deep into America’s political, military and strategic standing. He will have to learn to steer the new interaction between economic policies and external relations and conflicts.

To gain lost strategic ground even in part, the US will first have to recover its economic equilibrium, upset by two unforeseen manifestations: Economic globalism and the electronic-digital revolution have morphed from cornucopias of progress and prosperity to conduits for disseminating crises with equal efficiency.

And, secondly, continents and nations are going their own way, addressing their troubles and seeking cures without reference to the United States. French president Nicolas Sarkozy, for instance, avoided mentioning America in speech after speech the week long as self-appointed defender of Europe from the insidious financial blight.

British premier Gordon Brown pointed an accusatory finger at Washington and New York as the guilty parties in the crisis.

Moscow, which has not for a moment halted its military provocations of Washington, is coming round to the conviction that state regulation of market forces, abandoned when the Soviet empire collapsed in the early 1990s, is the right way, compared with the American free market culture which has brought the world to catastrophe.

Beijing, just three months after flaunting its admission to the worldwide global village during its successful Olympic event, is now congratulating itself on applying the brakes to market freedoms and refraining from expanding the Western financial enclaves of Hong Kong and Shanghai. This said, reports leaking from the Communist Party policy conference held on Oct. 12,indicate that the West’s financial crisis is reverberating in the highest echelons of the Chinese government, derailing, if only momentarily, its plans to stabilize the widening financial gap visa-vi its rural population (the ongoing rural-urban dilemma).

In the Arab Middle East, there is frank talk of the need to break away from the American economy and establishing an international Islamic financial system.

Iran’s leaders gloat over the Western economic meltdown as indicating the end of capitalism, the failure of liberal democracy and divine punishment, marking the superiority of the Islamic republic's political model.

Jihadist groups, from al Qaeda to Hizballah and Hamas, see Allah’s long arm behind the “American meltdown.”

They pray for the crisis to reach a point where American legions in Iraq, the Gulf, the Middle East and Afghanistan are cut off from their country and have no money to buy food and fuel.

The mood prevailing in radical Muslim circles is particularly dangerous because they are prone to taking advantage of infidel weaknesses and working themselves up to large-scale terrorism, wars or revolutions against pro-Western governments.

The incoming US president may find two major confrontations waiting for him next January:

One possibility is an Israel-Iran war, which military experts estimate, may or may not be kicked off by an Israeli strike against Iran’s nuclear installations. The blaze may start, for instance, in volatile Lebanon, for which two Arab rivals are competing (see the separate article in this issue), and spread out to other parts of the Middle East, bringing Iran and Hizballah into the fray against Israel.

An Israeli-Iranian war might eventuate as the result rather than the cause of the conflict – and it will not be short. Pakistan too is increasingly threatened by a spillover of the Afghan War. The longer US troops remain in Afghanistan, the greater the danger of their being sucked into a Pakistan war which could be longer and more costly than the conflict in Iraq.

Pakistan furthermore also, suffers from the global drying-up of credit and asked for an urgent and immediate loan from The World Bank. Pakistan maintains a high national debt — currently about 56.9 percent of gross domestic product (GDP) — as well as a high budget deficit, estimated at 7.4 percent of GDP for the 2008 fiscal year (which ran from July 1, 2007 to June 30, 2008). Most of the government’s budget goes toward interest payments, defense and subsidies. 2008, the government’s total subsidy bill was about 2.6 times higher than budgeted; subsidies on fuel and power amounted to 2.9 percent of GDP, and food subsidies (primarily wheat) were about 0.5 percent of GDP.

And in regards to a visit from President Asif Ali Zardari to China in a few days, one of the questions being asked is  how important Chinese relations with Pakistan are, compared to for example how serious the United States is in dealing with Pakistan.

This while the head of Russia’s Security Council, Nikolai Patrushev, is set to arrive in Venezuela on Oct. 16 as part of his Latin American tour. Patrushev is expected to discuss intelligence and security cooperation with Venezuela, as he has with Argentina and Ecuador.

Russia already has a close relationship with Venezuelan President Hugo Chavez, whose dealings with the FARC have been less than hostile over the years. With Ecuador as an ally, Russia will have effectively secured access to Colombia’s two main borders. And should Russia be interested, funding a terrorist organization operating in the United States’ closest ally in the region would be a cheap and easy way to really bog the United States down in Latin America.

As for the widening financial crises the focus is on Europe today where following the troubles with Iceland, Hungary, Ukraine and the Baltics could be next. Particularly in the case of Hungary however,this in turn could have a domino effect on Austrian banks followed by Switzerland.

Expect broad and deep bailouts as the days progress and the Europeans begin to realize that their crisis is far worse than what the Americans have suffered. These are trying times for the eurozone specifically and the European Union in general, as neither grouping holds all the tools necessary to deal with the problems. The mess of overlapping competencies between the eurozone, European Union and individual member states is hampering efforts to deal with what is evolving into a much more serious crisis.

But also Moscow found itself more vulnerable to the global financial shock than it expected, and most of the oligarchs have seen a very large portion of their wealth simply evaporate — both for purely financial reasons and because of the Kremlin’s rising power over the economy. For the Kremlin, this is as much an opportunity as a threat, as it allows the state to recoup control over broad swathes of the economic system. Next week is Russian President Dmitri Medvedev’s first state-of-the-nation address, and in it he will set the tone for how Russia will deal with the financial unknowns plaguing it and define whether Russia will continue pushing against the West or batten down and try and ride out the storm. This is also an opportunity for Medvedev to either give his presidency its defining moment or slip further into the shadow of Prime Minister Vladimir Putin.

In less than three months the Gulf Arab states have gone from earning more than $2 billion a day to just under $1 billion. They are still fabulously wealthy by any definition, possessing a collection of national funds that dwarf even the Chinese. But they are getting a bit nervous. The United States is otherwise occupied and they have issues of critical concern involving the ongoing political machination between Lebanon, Syria, Iraq and Iran.

However no region is more dependent upon imported capital and commodities exports than Latin America at the moment, so no region stands to suffer more. We’re not yet to crunch time, but gone are the days when these states can delude themselves into thinking that they have broken away from global economic trends. That will sober many local leaders, and force others to seek new friends.


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