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From: rkurian1@vsnl.com Date: Tue Mar 22, 2005 Subject: Resurgent Russia challenges the US.. Resurgent Russia challenges US By Jephraim P Gundzik 03/21/05 "Asia Times" - - Washington's "war on terrorism" is designed to militarily establish United States economic and geopolitical hegemony on a global scale. Rather than subduing Russia, the "war on terrorism" is encouraging Moscow to strengthen its relations with Washington's prominent foes. The war is also supercharging Russia's economy. Over the next four years, Russia will increasingly challenge the foreign policy goals of the Bush administration. Dominating the world The Bush administration's stated aim for the "war on terrorism" is to eliminate the threat of terrorist strikes against the US. Rather than addressing the underlying cause of terrorism, namely unpopular US polices in the Middle East, the Bush administration opted to invade Afghanistan and Iraq in order to uproot international terrorism. International terrorism has been strengthened after three years of war as evidenced by the upsurge in terrorist strikes worldwide. In addition to rampant terrorism in Iraq, Israel and the Palestinian Territories, terrorist strikes have escalated across the Middle East, Africa and Asia. Terrorism has also impacted Europe. It is almost inconceivable that Pentagon and Bush administration planners overlooked the impact US military action in Afghanistan and Iraq would have on terrorism. Even government officials cannot be that ignorant. Cognizant of its impact on terrorism, it's safe to assume that the Bush administration had another motive for launching the "war on terrorism". This motive was most likely to establish US economic and geopolitical hegemony globally. Supporting this idea is Washington's strongly unilateralist foreign policy tilt. In addition to the invasion of Iraq, unilateralism has characterized US foreign policy action on issues ranging from international trade to the isolation of rogue regimes. No longer lying down Initially, Moscow supported Washington's "war on terrorism". However, the US invasion of Iraq changed this support into resistance, and later into active efforts to counterbalance the US. In the past two years both Washington and Moscow have sought to strengthen their influence in Central Asia and the Caucasus. Events surrounding the recent election in the Ukraine signal that the competition for influence between the US and Russia has increased. More significantly, Moscow is working diligently to strengthen its ties with Iran, Syria and China - countries that Washington considers to be adversaries. In addition to supplying Tehran with dual use nuclear technology, Russia is also selling Iran a broad array of conventional military equipment. Many believe that Moscow is also supplying Tehran with missile technology and equipment. Early this year, Israeli media reported that Russia had concluded a deal with Damascus to sell Syria sophisticated shoulder-fired and stationary missiles. Both Syria and Russia denied the existence of this deal. However, the benefits to both Moscow and Damascus from such a deal are unmistakable. Rapprochement between Moscow and Beijing in 2004 was an extremely significant geopolitical event that went largely unnoticed in the West. In addition to settling long-standing border disputes and deepening commercial ties, Russia and China agreed to hold joint military exercises in 2005. The last joint military exercises conducted by Russia and China occurred in 1958. Similar to closer relations with Syria and Iran, the newfound friendship between Moscow and Beijing has fostered Russia's sale of sophisticated military equipment to China. Interestingly, relations between Beijing and Tehran have also warmed recently. It appears clear that the Moscow-Beijing-Tehran axis is designed to counter US foreign policy in Eurasia, the Middle East and Asia. Russia's upper hand The Bush administration's "war on terrorism" has been a boon for Russia's economy. This war has contained global oil production growth thus driving international oil prices higher. Higher international oil prices have sharply increased Russia's oil and gas exports, which have fueled accelerated economic growth. In addition to oil and gas exports, the "war on terrorism" has also fed rapid growth of Russia's arms exports. In 2004, fuel and arms production directly accounted for about 30% of production-based gross domestic product (GDP), 65% of total exports and 50% of federal government tax revenue. The contribution of fuel and arms exports to expenditure-based GDP is much larger than their contribution to production-based GDP. In addition to accounting for the majority of domestic and foreign investment, tax revenue generated by fuel and arms production and exports have financed strong growth of wages and pension incomes, boosting private consumption. President George W Bush's reelection practically ensures that the "war on terrorism" will intensify over the next four years, sustaining strong economic growth in Russia. This will strengthen Moscow's ability to challenge the Bush administration's hegemonic intentions. The Kremlin's trump In 2005 Russia is likely to surpass Saudi Arabia as the world's largest oil exporter. This, combined with continued contraction of global oil stocks, gives Moscow enormous leverage over international oil prices. Russia could easily push the price of crude oil above US$100 per barrel by reducing oil production. No other oil-producing country, including Saudi Arabia, has sufficient spare production capacity to counter a production cut by Russia. By effectively controlling international oil prices, Russia could undermine US economic growth. More importantly, Russia could encourage the devaluation of the dollar by redenominating its substantial energy trade with Europe from dollars into euros. Redenomination, which is supported by both Russia and the European Union, would force Europe's central banks to rebalance their foreign exchange reserves in favor of the euro. Rather than establishing economic and geopolitical hegemony around the world, the "war on terrorism" is making the US increasingly vulnerable to a sharp economic recession delivered to Washington by Moscow. The Bush administration should consider this when formulating plans to expand US power into Russia's traditional sphere of influence or to undermine Iran's government. Without this consideration, Washington risks an economic war. ------------------------------------------------------------------ Jephraim P Gundzik is president of Condor Advisers, Inc. Condor Advisers provides emerging markets investment risk analysis to individuals and institutions globally. Please visit www.condoradvisers.com for further information. Copyright 2005, Jephraim P Gundzik |
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