Trump had criticized NATO even in his first term, and the prospect of him getting re-elected is making the European allies worried. Trump has consistently questioned NATO’s relevance, criticized member countries for not meeting defense spending commitments, and pushed for a more transactional approach to alliances.

This strategy could lead to several significant outcomes in terms of U.S. influence, its global standing, and its ability to manage rising geopolitical tensions, especially in the context of great power rivalry with China and Russia.

1. Erosion of U.S. Influence in Europe

Trump’s skeptical view of NATO could weaken transatlantic relations, leading to a reduced U.S. leadership role in Europe, think tanks such as Brooking Institutions and Council on Foreign Relations have written extensively on this. NATO is a cornerstone of American power projection in the region and beyond since the end of World War II. It has served not only as a military alliance but also as a vehicle for maintaining U.S. influence over European affairs. Trump’s criticism of the alliance as “obsolete” or overly reliant on American funding creates uncertainty within NATO and potentially undermines the unity and strategic coherence of the organization.

If Trump undermines NATO further, European countries may begin to pursue more independent security policies, potentially seeking alternative alliances or focus more on strengthening European Union defense capabilities. Such responses could diminish U.S. leverage in European geopolitical affairs, leading to greater fragmentation within the West and provide opportunities for Russia to exploit these divisions. Russia, already seeking to weaken NATO’s eastern flank, would likely see this as a strategic opportunity to reassert its influence over former Soviet states and weaken Western deterrence.

The erosion of U.S. influence in Europe would also undermine its ability to project power into regions like the Baltics, Eastern Europe, and even the Middle East and North Africa, where NATO missions have played a role in stabilizing conflict zones and countering terrorism.

2. Reduced Deterrence Against Russia

NATO serves as the primary bulwark against Russian aggression in Europe, particularly in Eastern Europe and the Baltics, where countries like Poland, Estonia, Latvia, and Lithuania depend on the alliance for security guarantees. Trump made a statement in February 2024, that if NATO countries do not raise their defense spending, he will allow Russia to ‘whatever the hell they want’. A farewell visit from President Biden to Europe did little to calm European anxiety regarding upcoming US Elections and what Trump might do if he is elected.

Trump’s reduction of focus on NATO could embolden Russia, as Moscow would see a weakened NATO as an opportunity to further destabilize Eastern Europe, whether through direct military action (as seen in Ukraine) or hybrid warfare tactics like cyberattacks, disinformation campaigns, and energy manipulation.

Russia has long viewed NATO expansion and U.S. military presence in Eastern Europe as a threat to its sphere of influence. If Trump were to further pull back from NATO or question the U.S. commitment to Article 5, the collective defense clause, it could undermine deterrence against Russian aggression. Eastern European countries, feeling less secure under the U.S. security umbrella, might either seek new alliances or pursue policies of appeasement towards Russia to safeguard their own security.

A weaker NATO would allow Russia to challenge U.S. influence more aggressively in Europe, possibly leading to increased Russian intervention in places like Ukraine, Georgia, and even the Balkans, where Russian-backed forces or political parties have significant influence.

3. Shift of U.S. Focus to Bilateral and Transactional Alliances

Under Trump, the U.S. could shift away from multilateral alliances like NATO and focus more on bilateral or ad-hoc agreements that are more transactional in nature. Trump has long favored a more “America First” approach, expecting allies to pay more for U.S. protection and to contribute more to shared defense goals. This approach could lead to a recalibration of U.S. alliances, with Washington seeking more cost-effective, flexible partnerships in regions it deems strategically important.

This shift would likely see the U.S. working more closely with countries like Poland, the U.K., or other European states that are willing to increase defense spending or pursue joint military projects on more favorable terms to the U.S. However, these ad-hoc alliances would lack the collective strength and unity that NATO provides, making U.S. power projection less consistent and reliable.

Moreover, Trump’s skepticism towards NATO could push European countries to seek greater autonomy, leading to the development of EU-led defense initiatives, which could dilute U.S. influence further. France has made a case for European defense force in the past as well. While European nations might still value U.S. support, they may increasingly turn towards France or Germany for leadership within Europe, weakening U.S. dominance over transatlantic security matters.

France has been one of the uneasy members of the alliance that had initially left NATO in 1958, on quarrels related to its unequal status vis-a-vis the special relationship of United States and the United Kingdom. Then president of France Charles De Gaulle sought to establish a tripartite commission which would put France on equal footing with United States and United Kingdom. It had also wanted to extend the geographic reach of NATO to include Algeria, where France needed NATO’s help in fighting an insurgency. Furthermore, France wanted maneuvering room to negotiate its own peace with communist Eastern European nations, independent of NATO-Warsaw rivalries. (Under Nicholas Sarkozy, France has returned as a member of NATO since April 2009.)

4. Impact on Power Projection in Asia and the Middle East

While Trump has largely focused his criticisms on NATO, any weakening of U.S. multilateral commitments could have ripple effects in other regions where American alliances are critical for power projection. In Asia, where the U.S. relies on a network of alliances to counter China’s growing influence, Trump’s de-emphasis on collective security arrangements could raise questions about the U.S. commitment to alliances like those with Japan, South Korea, Australia, and the Philippines. China could exploit any perception that the U.S. is retreating from multilateral alliances to assert more control over the South China Sea, expand its Belt and Road Initiative, and influence other Asian nations to align with Beijing.

Similarly, in the Middle East, U.S. power projection has often relied on partnerships with countries like Saudi Arabia, Israel, and the Gulf states, but these relationships have also been supported by broader international coalitions. Trump’s focus on more transactional, bilateral deals, such as a possible NATO-style nuclear security pact with Saudi Arabia, could strain multilateral efforts to address issues like Iranian influence, terrorism, or stability in the region.

5. China and Russia Taking Advantage of a U.S. Retreat

China and Russia would likely see Trump’s de-emphasis on NATO and broader multilateral commitments as a strategic opportunity to fill the vacuum left by a less engaged U.S. In Europe, Russia would see a weakened NATO as a chance to reassert its influence over its Near Abroad. In Asia, China would push to expand its influence in the South China Sea, assert more control over Taiwan, and strengthen its economic and military ties with Southeast Asian countries that might question U.S. reliability.

Both powers could also collaborate more closely to undermine U.S. influence in key regions, as seen through China and Russia’s growing cooperation in military, energy, and diplomatic matters. If the U.S. under Trump pulls back from its global commitments, China and Russia could further position themselves as alternative global powers, offering security and economic deals to countries wary of relying on a less predictable U.S. ally. Such as through BRICS conference, being held in Kazan, China and Russia will demonstrate the alternative to Western model exists, and also in the form of SCO.

6. Weakened U.S. Global Leadership and Soft Power

NATO is not just a military alliance but also a symbol of U.S. leadership in the post-World War II liberal order. A retreat from NATO and multilateralism could weaken U.S. soft power globally, as countries increasingly view the U.S. as an unreliable partner. This would reduce America’s ability to lead on global issues, whether in addressing climate change, global health crises, or humanitarian interventions.

Weaker alliances would also mean that the U.S. has less diplomatic leverage in shaping the policies of its allies, making it harder to forge consensus on global challenges like counter-terrorism, cybersecurity, and non-proliferation. Meanwhile, China’s influence through initiatives like the Belt and Road, and Russia’s use of hybrid warfare, could rise, with both powers offering alternatives to a U.S.-led international order.

The post What Would Trump 2.0 Mean For The Future Of NATO? appeared first on Politact.

The Return of ‘Spheres of Influence’ Politics

Context

While there are different angles to interpret the fast-moving flux in the global political, economic and security situation, the great power rivalry perspective is clearly ascendant.

There is usually a period of calm when one power dominates or when there is stability in the balance of power equation. The rapid economic rise of China and infringement into the traditional American spheres of Influence, like Europe, has clearly been a cause of alarm. Moreover, Trump administration took certain actions that were seen as weakening the Western alliance – deemed essential to deal with emerging global rivals, to include Russia. Europe is critical to American power projection, and it was becoming progressively tied to Russia and China via trade. The present European energy dependence is a case point. Trumps admiration for Putin, and other authoritarian rulers, was seen as a vulnerability. Accompanied by his threats to NATO members to increase defense spending confused the Europeans on American reliability.

Under Biden, US is actively countering the expanding influence of China and Russia – and to reverse the Sino-Russian penetration in different regions. And one of the casualty of this reversal will be the phenomena known as globalization. Security concerns arising from aggressive Chinese posturing in the Indo-Pacific, events unfolding in Ukraine, and COVID-19 related supply chain disruptions have further weakened the case for globalization.

Additionally, these factors have helped eliminate American ambiguity on who is benefiting most from free trade presently. Going against laissez-faire principle is not an easy undertaking when the capitalist system is anchored around the very premise and has tremendously benefited the multinational corporations.

This context begs the question of what future security and trade system is the world shifting towards – and what phase of this transfer the present circumstances represent. It was WWI and II that moved the world to the nation-state system and the creation of United Nations. The answers are not readily available.

Analysis

New Cold War and Spheres of Influence

As these global rivalries escalate, they are being classified as related to the new Cold War. The previous one being between US dominated Western Sphere of Influence – with USSR mostly influencing Eastern Europe. China at that time was not as close of an ally of Russia as it is now.

The Sino-Soviet ties have had their ups and down historically. For example, during the Bolshevik revolution in 1917 Chinese Beiyang government had supported the Whites, like the West, and sent in forces to fight the Reds. Conversely, in 1923 Soviets provided support to groups opposing the Beiyang government. In 1949, with Soviet backed communists won the Chinese civil war leading to the creation of People’s Republic of China. Soviets and Chinese were even involved in a brief border conflict in 1969.

Irrespective, as the new Cold War gets underway, and no near-term Ukraine solution on the horizon, what will this emerging Cold War look like?

The first thing is obvious, the Spheres of Influence was the key character of the old Cold War – dividing the world into communist USSR and capitalist America. The Soviet system was associated with autocratic closed security states, with strict regulations controlling the lives of the citizens. On the contrary, the hallmark of Western democratic states was freedom of expression and trade that led to creativity, innovation, and greater economic prosperity. And these attributes ultimately became the reasons for the success of West against the closed Soviet system.

The new Cold War would likely create similar spheres of influence between US and China-Russia aligned states. While some would argue that this new Cold War is only between US and China. To understand these alignments – how the spheres of influence evolved after the Soviet Union collapsed need to be understood.

NATO’s Evolution

As Soviet Union dissolved during the period of 1988-1991, 15 Soviet republics opted for independence with the Baltic states leading. The former Eastern European states applied and became members of Western security alliance, NATO. A trajectory that has continued to this day – and one of the reasons for Ukraine conflict to erupt, which is also causing Finland and Sweden to move towards NATO.

Another element of this post-Soviet period was that Russia and China both adopted policies that has made Western system stronger, for example allowing foreign investments and free trade. But they did not embrace the democratic political system. So, while China and Russia benefited from free trade, their respective restricting political governance models remained in place. This has been a cause of continuous friction when it comes to for example, state controlling the currency values, protecting minorities and human rights etc.

Conclusion

Moving forward, the roles seem to be reversing. The US and West are shifting away from globalization and altering the supply chains that were created for maximum profitability. On the other hand, China is championing globalization. In May, Chinese Xi Jinping had urged the organization of emerging nations BRICS to, “reject Cold War mentality and bloc confrontation, and work together to build a global community of security for all”.

Two properties of the new supply chains are: they have to be from friendly nations and pose no economic and security implications for the dominant power of the alliance. In other words, the concept that evolved after WWII that economic interdependence can resolve security issues – is being put to rest.

While China has been attracting states through Belt and Road Initiative (BRI) and associated large infrastructure projects, the US, EU, and Japan have begun to counter with their own infrastructure projects. At the recently held G7 conference in Germany, President Biden announced US will help finance $200 billion from public and private sectors to counter Chinese projects.

The question then is how will the emerging respective spheres of influence be monitored and policed. The energy supply lines provide one example where sanctions are playing a critical role. In this, US using its influence in moving Europeans away from Russian energy dependence and building trade relations with China. Meanwhile, it is allowing India flexibility to acquire cheap energy from Russia, however, coercing weaker nations to stay away.

US is also resetting its ties with Saudi Arabia to use the enhance its energy leverage and to keep energy dependent states in-line. President Biden is scheduled to visit Saudi Arabia in July and ask for increase in oil production to compensate for Russian oil shortfall. He will also be attending the meeting of Gulf Cooperation Council. Meanwhile King Abdullah of Jordan has supported the idea of Middle East version of NATO. It’s not clear though what threat perception would the NATO of Middle East counter, Iran, Russia or China? Clearly, it cannot be Israel.

In other words, the balance of power tussles now involve use of economic influence to attract and discipline states. During the previous Cold War, USSR did not have the type of economic prowess that the US and West enjoyed, but in the emerging Cold War the case of China is different.

Thus, there will likely be a China-Russia dominated supply lines and economic zone and the US-Europe controlled one. Ultimately, China and Russia will likely use tactics similar to the West i.e., if the new Cold War persists and matures. The Domino Theory and the associated dynamics that were the underpinning of the old Cold War, will become relevant once more. This will fundamentally alter the way present global trade is conducted, and this will significantly impact the working of the UN Security Council.

The post Emerging Great-Power Rivalry; How Will The New Cold War Unfold As Ukraine Simmers? appeared first on Politact.

By Arif Ansar

Context

The international conferences where leading global thinkers and shapers gather to share insights on the present political, technological, and economic challenges, are crucial to observe. Their thoughts processes help to build a narrative and assist the rest to gauge the future direction.

The Davos World Economic Forum, held every year in late January, is just such a venue where political, intellectual, and corporate leaders share their knowledge. This year, it was reflective of the contradictions that the world presently confronts as it relates to the governance structures, the economic and political models, addressing climate change, and harnessing emerging technological advances in a mutually beneficial manner.

In some respects, these kinds of topics are lately been talked about at many other such conferences, but the irony in Davos could not have been starker this year – when the European Union and Europe itself is in the grips of Brexit related confusion. And when the strong influence behind globalization, represented by the US, is adrift, and under increasing nationalist and isolationist policies.

The hard debates took place at the various Davos forums on the corporate role in the present economic woes, and responsibility towards tacking inequality, fixing the climate, and creating more jobs as Artificial intelligence (AI) and Big Data alter how the business will be conducted in the future. The dilemma remains that under globalization, the nation-state model, and state sovereignty, takes more of a back seat – and this is exactly what has resulted in the populist responses such as ‘American First’ or ‘Brexit’.

1. Globalization and Reforms

Consider the statements of Angela Merkel, one of the Keynote speakers at the Davos this year. She emphasized Germany’s commitment to globalization and multilateralism, and reiterated the risks. “There is a new approach that we see in the world today, an approach that harbors doubts as to the validity of the international system,” she stated.

Indirectly countering Trump’s ‘America First’ mantra she added: “I think (that when it comes to) our national interests — I think we should always understand them in such a way that we always remember that others also have their own vested interests, factor them in, and then shape a win-win situation that will guide us in international politics.”

The Chinese perspective was reflected in one of the discussions titled ‘When Global Order Fails’ by Fang Xinghai, who is the Vice Chairman of China’s Securities Regulatory Commission. Xinghai commented that West should not make China a scapegoat for what is not working in the Western democratic system and that reforms were needed to fix those issues, which have nothing to do with China.

Commenting on why US worries about China, Xinghai replied that the US should be open in accepting polities that operate differently, because if they do not, it would mean excluding China, Russia, and pretty soon India as well. Adam Tooze, who is a historian from Columbia University, further elaborated the response. He pointed out to the evolution of Indian democracy under Prime Minister Modi, which does not resemble democratic norms especially when considering its Muslim population.

2. Emerging Technologies and Digital Consensus

The technological upheaval is another aspect of the global flux. Like globalization, the Internet and Internet of Things (IOT), Big Data and AI, work best when there are no hindrances in the way. However, this has great risks and fears associated with it, when knowledge and technology (automation) is replacing traditional sources of labor. It could become, if not already, a new factor that exasperates global inequality.

Quoting McKinsey’s Global Institute (MGI) report ‘Globalization in Transition’, the Managing Partner Kevin Sneader wrote on the company blog:

“…for the first time, the emerging markets now make 50 percent of the counterparts in global trade. While these markets are perhaps more optimistic about growth than many developed economies are, they face their own challenges as knowledge and technology replace labor as the critical sources of arbitrage in global value chains.”

Therefore, the globalists desire a new form of technological consensus to shape the digital future – that balances the state sovereignty with in the globalized structure. Or as Elizabeth Heineman writes in The Conversation:

“Merkel’s – and Europe’s – quandary is this: how to move forward in the digital age when Europe’s contribution is to seek balance between state power, individual rights and the dynamism of capitalism. Achieving that balance – achieving any balance – means slowing things down. It means philosophizing.” Achieving this equilibrium is what Angela Merkel terms Social Market Economy

The Japanese Prime Minister reflected his sentiments on the subject:

“I call on all of us to rebuild trust toward the system for international trade. That should be a system that is fair, transparent, and effective in protecting IP (intellectual property) and also in such areas as e-commerce and government procurement,” Abe stated in his speech.

While there are many international agreements to address security and trade related matters there are no such agreements when it comes to the digital world especially in the realm of Cyber threats, AI and Big Data etc. This is a cause of enormous concern for nations that are competing in these emerging technologies. 

3. Geopolitics and Economics

The tussles of the global balance of power between the emerging and established powers is obviously not just restricted to security affairs, it also includes trade and technology domains. The ongoing economic tensions between the US and China are having a ripple effect downstream with negative impact on globalization.

The primary concern being that by learning and tweaking the laissez-faire system, China is exploiting it and negatively impacting the American economic outlook, as it relates to protection of Intellectual Property and by forced Technology Transfers. Moreover, there is a pressure on China to address the trade imbalances by opening its market more. Obviously if the Chinese economy continues to strengthen at the cost of others, it will also reflect in its global defense posture and influence. 

The other Asian nations are increasingly concerned as US appears to be withdrawing from international regimes, and this they think would only benefit the Chinese. According to them, the best way for the US to address its apprehensions is by staying in the system and by negotiating. Moreover, the debates also continue on the best way to engage each other and address differences.

Multilateral approaches, as adopted by the US in the past, complicate the negotiations. Conversely, the Chinese have benefited by engaging in bilateral tracts, however, in bilateral negotiations the stronger party usually benefits. Nonetheless, US is increasingly moving towards adopting bilateral talks for engaging and negotiating.

Then there are concerns that a Cold War is developing between China and the US and what that would mean for the international system. Will this result in to a new alignment – with other nations being pushed in to one block or the other. A comparison is also being made with the nature of Cold War between the then Soviet Union and US. That Cold War was primarily in the defense and security realm, and not as much in trade, as is the case between US and China now. And just because of this difference, it may not mature in to a full fledge Cold War.

Many of the above dimensions were discussed in an event titled ‘The Geopolitical Agenda,’ moderated by Vali Nasr. The panel recognized that the Belt and Road Initiative (BRI) is changing the geopolitical landscape and in ten years the results will be obvious.

In this context, the Pathfinder and Dow Martin Groups held discussions related to the China-Pakistan Economic Corridor, moderated by the Chairman Pathfinder Group, Ikram Sehgal. The speakers, which included the Chief Minister of Baluchistan province Jam Kamal Khan, promoted investment opportunities in the mineral rich, and strategically located Baluchistan province of Pakistan. The province borders Iran and Afghanistan, where not only the Pakistan-India rivalry is playing out, but also the tussles of the global balance of power.

Conclusion

In many of the discussions referred above, the common worry remained how the US-China trade rivalry is going to unfold and how it will impact different businesses and free trade. However, one could see some confusion in grasping the connection between the economic and security domains.

The optimists thought that because the nature of competition is mainly economic, these differences could be managed. But they miss the point that is raising concern for the US: globalization has made China tremendously stronger very quickly, and this would also translate in to defense and technological wherewithal. After all, the nation-state system, and national interests, still exist and cannot be wished away. 

China preaches engagement and negotiations, and stands ready to address the trade imbalances and grievances, while admitting to the benefits of the liberal trade system. Will this be enough to save globalization remains to be seen. After all, trade wars are linked to the change in the global balance of power. What is particularly worrisome is that US no longer sees eye to eye on these matters with its traditional European allies. Moreover, the Europeans do not have consensus amongst themselves either. At no time since World War II, has the division between the globalists and the nationalists, so acute.

The post Davos 2019, EU, And US-China Trade War appeared first on Politact.

By Arif Ansar 

Context

The frame of reference used in an analysis tremendously influences the output, and in fact shapes it. Our vantage point is congruent with the theory that the events of Middle East are now superseding the political, security, and economic dynamics of South Asia, and are likely to become its major determinant. We are reaching a tipping point of this trajectory now. In other words, the opportunity to solve Afghanistan imbroglio and ease Pakistan-India tensions will now directly involve Iran and Saudi Arabia – and the dynamics of Middle East.

A different way to understand this predicament is to consider South Asia as another theater for the wider shift in the global balance of power that is not going in the favor of US – and drifting towards China and Russia, while the fate of Europe hangs in the balance. The European identity stands at the most crucial juncture of its history. Will it be able to carve out an independent posture and identity remains to be seen.

In previous articles we have explored how the US decision to move its embassy to Jerusalem was likely to impact the political and security situation of the Middle East. Now that this decision has been implemented, accompanied by the revoking of the Iran nuclear deal, we have entered a whole new era of international relations.

The American allies and adversaries alike are beginning to see the full manifestation of how the ‘America First’ doctrine looks like in reality. The foremost realization for American allies is that it’s not what America can do for them, but what these allies can deliver for the US to continue to receive the same level of economic and security assistance they had gotten used to.

This has come as a surprise for nations that form the core of the transatlantic alliance like France, Germany and the UK. And the shock and awe extends to the American establishment itself, which now stands at a crossroad.

Analysis

America First and American Establishment

While the American establishment for the most part still operates from the globalist and liberal frame of reference, the Unilateralist premise the Trump Administration has adopted is the antithesis to that. This has already caused a number of inter-institutional frictions, and several of their leaders were removed unceremoniously. Many think this outlook can cause a full fledge trade war with China and the allies.

For example, the American foreign and security policies are still emphasizing building strong international alliances. Withdrawal from trade agreements such as Trans-Pacific Partnership (TPP), Paris climate accord, and now the Iran nuclear deal, is undoing those alliances that US had built over decades with great effort. The re-imposition of trade sanctions on Iran has complicated economic affairs for many of its global allies. With the decision to move its embassy from Jerusalem, US has lost any semblance of neutrality in the Middle East Peace Process.

President Trump had also wanted cordial ties with Russia. However, this was not the assessment of the security institutions, which saw Putin increasingly meddling in the internal affairs of the US and acting against its global interests. Moreover, it has built strong strategic alliance with China and Iran. The investigation looking in to any direct collusion between Russia and Trump’s campaign team is still ongoing and looking ominous by the day.

Two critical dimensions are thus evolving simultaneously. The first one is will President Trump be able to align the establishment and bring consistency between his domestics and global outlook? Alternatively, increasing friction can further stimulate the impeachment process and attempts to revert to a more globalist approach. And even if this eventuality occurs, it’s not clear that if the world can be switched back easily?

Then there is the question of how will the increasingly insecure allies adapt to this flux in the US.

The first thing allies across the spectrum are going through is shock. How can this be happening? And now that ample time has passed to understand that their anxieties were not misplaced, serious thinking will be geared towards formulating a response.

European Allies

When it comes to the European allies, the first phase may be an introspection of how dependent they are on the US. Considering their present economic and security predicament, to what extent can they stand on their own on the world stage?

Once this period is over, it will likely move towards if you can’t beat them then join them mentality.

In parallel, an undercurrent will gain momentum emphasizing a respective Europe First or France First approach. The Nationalist forces have been resurgent across Europe too. This thinking will be accompanied by an evaluation of how Europe stands as individual nations, and collectively as EU, vis-à-vis those actors that US considers adversaries. Not to mention, the building resentment against the America First doctrine will help China and Russia to make inroads and begin to shake the trans-atlantic alliance. To some extent China has been well on its way to enhance its trade relations with Europe, while Russia exerts influence via the gas it supplies. China ranks as EU’s second biggest trading partner after the United States, while the EU is China’s biggest trading partner.

On the other hand, Trump administration would prefer the EU nations realize that they cannot face the global risks alone. Irrespective, in the absence of US support or withdrawal, the struggle would likely shift towards attempts to dominate Europe between France, Germany, UK, and Russia. After all these urges are what led to WWI and WWII – and US could not and will not allow an adversarial power to control Europe.

Equally, the European nations may start to chart an independent course overtime. How these nations deal with the Iranian sanctions will be a case in point. Threatened by American sanctions if their businesses continue with Iran, they might start developing an alternative financial system and in turn pose ominous risks for the US. Russia and China will be more than willing in this endeavor if matters deteriorate further. A major chunk of China’s oil imports come from Iran and trade between the two stands at 28 billion dollars.

Allies in the Middle East and South Asia

As previously discussed in this space, the forgoing of US neutrality in the Israeli-Palestinian conflict, and potentially in Kashmir in the future, will have grave consequences for the region. Some of them have already begun to manifest in the form of more aggressive Israeli behavior towards Syria, Iran, Hamas, and Hezbollah. In this it has the tangent support of Egypt, Saudi Arabia, and UAE. On the other hand, Turkey, Iran and Pakistan have come out strongly against the moving of the US embassy to Jerusalem. This has created an unprecedented fissure in the Islamic world.

Trump has pretty much applied the same formula on the Arab allies as it has now on the Europeans. Principally, if you need American security and economic assistance, then align your policies with that of the US. However, this cannot occur without significant short and long-term costs and consequences like the ones discussed above for Europe.

If the European nations, including Turkey and Pakistan, and other states of the region, start to ignore US sanctions, it could very well trigger the initiation of an alternative financial system spearheaded by Russia and China. The groundwork for such an alternative is already in the works under BRICS and the Chinese One Belt One Road (OBOR) plan.

In this new formulation, US-Indian strategic ties will be acutely tested. India is part of BRICS and the SCO, and also maintains close ties with both the US and Israel. Will India alienate its otherwise cordial economic relations with Iran? And if India does that, it will only move Iran closer to Pakistan, and possibly assist in Afghanistan as well.

The Chabahar port will be the other cost of the American sanctions that will test the Indian will. India has committed $500 million towards the construction of Chahbahar port. According to Indian Foreign Ministry, India-Iran trade for the fiscal year 2016-17 stood at $12.89bn. However, like on Jerusalem, a complete US turnaround on Kashmir could shift the tide in the US favor.

In the emerging formulation, Saudi Arabia and UAE will likely exert their influence to prevent Iran and Pakistan from moving closer, or for Pakistan to move ahead with the Iran-Pakistan Gas Pipeline. These nations could possibly put their support for Kashmir on the table – as the cost for Pakistan to stay away from Iran. In the short-term, after the moving of US embassy to Jerusalem and withdrawal from Iran nuclear deal, the region and Pakistan should expect a more brazen Indian behavior.

The post American Renunciation Of Iran Nuclear Deal; Implications For Europe, South Asia appeared first on Politact.

How Weak Countries Carrying Economic Significance Become Playground For Foreign Interests

Originally published on June 9, 2009 and being republished with additions. Another modification was made to this article on January 16, 2017.

It is important to understand the present day political, economic, and defense policies of various international actors with the appropriate historical context. After all, in the absence of this relativity, it would be difficult to give meaning to the unfolding events, and predict their future trajectory. Looking at the past often leads to the discovery of historical parallels and analogies making it easier to grasp contemporary paradoxes.

When exploring such parallels, the attempt should not be to spell out every minute detail of the relevance – but to witness the irony of how history repeats and provides continuity, irrespective of if we are aware are not. And then it is up to the intrigue and ingenuity of the reader to draw the necessary connections and lessons.

The Japanese Amau Doctrine provides such a parallel, to make sense of the present-day mega economic projects, such as the Trans Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), or the One Belt One Road (OBOR) initiative that China has unveiled. And to see how these projects are an example of the present global realignment and shift in the balance of power.

While Amau Doctrine was directed at a weaker China, it is China now that has emerging stronger and is attempting to shape the world affairs. An additional question that comes to mind is that how does the dynamics surrounding Amau Doctrine, described below, helps us understand the future of Europe and European Union, especially in the aftermath of Brexit, and the election of Donald Trump on a nationalist and a protectionist agenda.

The Amau Doctrine is the Japanese equivalent of America’s Monroe Doctrine (1823), which was designed to protect American interests in the Western Hemisphere. The premise of Amau, formulated around 1934, is that Japan reserves the right to act unilaterally in order “to preserve peace and order in East Asia.” The context was the depression of the 30s, when Japan lost a substantial amount of its trade as a result of international trade barriers. The Doctrine was chiefly intended to convert the then feeble China into a client state and to establish Japan as the dominant power in the Pacific while containing Russia, resurgent then as now. For Japan, China was the main source of raw materials, as well as possessing tremendous strategic importance in its struggle with Russia.

In the Amau Doctrine, Japan also declared that China does not have the right to seek foreign assistance or to resist Japan in establishing a new order under the aegis of an East Asian League and furthermore, that any third parties involved in China would have to consult Japan. Historians believe that between 1933 and 1937 two events occurred that made Japan nervous: first, the increased Soviet presence on the Manchukuoan frontier and second, the formation, in 1936, of an anti-Japanese alliance consisting of Chinese Nationalists and Communists, enjoying Soviet support.

In addition, the Amau Doctrine directly challenged the so-called Open Door policy, under which many other powers, including Britain and United States, enjoyed special economic privileges in China. Britain’s China Lobby formulated what was to become England’s China policy in the Far East, which was that the government would safeguard Britain’s economic interests in China, enter into cooperation and competition with Japan and try to establish a China-Japan Detente.

During the 30s, Britain and France wished above all to avoid confrontation with Germany, which lead them to be forbearing with Japan, even in the face of its aggression. Moreover, at a time of global depression many of the big powers wanted to refrain from actions that could injure trade relations with Japan. The latter allied itself with Nazi Germany in 1936, then in July of the following year invaded China. This was followed by the infamous ‘Rape of Nanking’ in December 1937, in which between 250,000 to 300,000 Chinese civilians were massacred by the Imperial Army of Japan. These memories linger and continue to have a negative effect on Sino-Japanese relations.

The American policy towards China was largely the work of the American Asian Association (AAA) and proved less successful in promoting the national interest in China compared to the one devised by its counterpart, Britain’s China Lobby. Historians maintain that another factor was that the United States carried on a relatively small amount of trade with China at the time, in contrast to Britain, which had large merchant and banking houses in Shanghai.

The story of Japan in the 1930’s is pertinent to the current economic crisis in a number of ways. First, its Amau Doctrine emerged in response to a global recession and is an example of how such a catastrophe can impact major players and influence their decision-making. Secondly, weak countries, in this case, China, possessing vast resources and strategic importance, can become the arena where international power struggles are played out.

The post The Relevance Of Japanese Amau Doctrine To Modern Day Mega Trade Pacts appeared first on Politact.

Context

The primary purpose of developing a forecast is to better plan. And at a more sophisticated level, to help shape a future that is conducive for ones interests. It’s an exercise to make a reasonable assessment of where matters might be heading. Smaller the variation between the trajectory of actual events, and the anticipated plan, greater the chances of success. Then there are risks, which if they were to come true, can seriously dent the expectations. Now a day, a term ‘black swan’ is more and more being used to conceptualize an unexpected and unprecedented event that can dramatically alter the present reality.

For instance, in the growing power tussles of the established and emerging powers, many nations are caught in a balancing act. While the present phase may be a transitory one, a single event could potentially end this stage and push different nations to chose between one or the other alignment. This is similar to how 9/11 dramatically altered international affairs. Anticipating what that incident could be, and how to pro-actively prevent such an eventuality, is critical.

While producing a forecast and a risk assessment, another important consideration to keep in perspective is the aspect of vantage point. Meaning, the future and the risks for one country are not the same as they may be for the other, just as is the case for individuals. Yes, there may be generalizations, but then there are always peculiarities as well. As a case in point, let’s take the example of campaign against extremism. The ramifications for the campaign that has been raging for about 13 years are different for the western nations than those regions that are inflicted by extremism.

Nonetheless, developing and understanding patterns and trends are an important ingredient and prerequisite for any forecast and plan.

Another essential distinction is the difference between local change brought upon by regional and global flux. Most often than not, global patterns are forcing a local response. Before formulating an appropriate tactical, strategic or policy level response, and for the sake of the success of the reply, it is vital to identify and understand the dynamics of global change first.

With this context, PoliTact has been working on identifying the most significant political, economic, and security patterns, from the vantage point of South Asia and Middle East. As oppose to listing them as the top ten risks or trends, as is fashionable these days, we have chosen a format that depicts how the political, economic, security and technology patterns are inter-linked. We have done so with an attempt to minimize rampant confusion and to enhance a conceptualization that helps to understand the confusion the world is presently experiencing.

The most important trend the nations of the region would have to grapple with is the changing nature of the world order.

Analysis
Nation-State Structure

While the world is organized politically in to an often arbitrary nation-state structure, there are a number of forces that are acting for and against this architecture. The campaign against terror with the associate phenomenon of non-state actors, climate change, disease, and technological advancements – particularly in the realm of communication technologies and social media, are all maneuvering against preserving the sanctity of the state, as we know it.

These man-made and other forces of nature are also hastening what has come to be known as the phenomenon of globalization, and making governance difficult. Equally, the communication revolution and social media has increased awareness and global consciousness for issues that transcend national borders and national identity. Then there are vested interests that have been over employed at the expense of the common people while putting the very social contract at jeopardy. The reaction can be seen in the form of movements such as the Arab Spring and Occupy Wall Street.

At another level, and more seriously, a crisis of identity is brewing. National identity is increasingly in friction with the economic necessities represented by the forces of globalization, which in turn are being challenged by the national security pressures of a state. Economic aspirations now stand face to face with security concerns in many parts of the world, and the individual identity hangs in balance between the national, global, religious, and ethnic loyalties. The forces of religion and globalization are both acting against the nation-state structure and are often perceived as exploitive. Recent events in India, Russia, and even Europe, suggests that the separation of religion/church and state may not be a done deal after all.

The European Union Model

The European Union was taken by many as the natural evolution of the nation-state structure, where states willing give up some of the sovereignty for the larger benefits derived from growing trade. However, the recent economic crises especially related to the banking and housing sectors, and tensions over Ukraine, are testing this model. The election results in Greece have once again revived thorny issues with in the EU.

This also remains a dilemma when it comes to Pakistan-India ties. The theory stipulates that increasing trade between nations leads to lessening of mistrust, while at the same time tying their fates to a shared future. This is not how the European Union appears to be evolving. The revisionist and nationalistic tendencies are reemerging.

In the long run, if economic circumstances worsen and security concerns rise, growing interconnectedness can create dependencies that could be extremely risky, as far as the sovereignty of a nation, are concerned. This is especially true if interconnectedness is exploited for political and security ends, as is when sanctions are imposed, witnessed recently in the case of Iran and Russia.

These concerns have posed a major roadblock in promoting trade between Central Asia, Afghanistan, Pakistan, and India, as part of the New Silk Road vision.

TTP and TTIP

In additional to the European Union Model, the Trans Pacific Partnership (TPP) and Trans Atlantic Trade and Investment Partnership (TTIP), which the US is trying to finalize, will also provide important lessons.

The TPP will include 792 million people, makes up 40 percent of the world economy, and is perceived by China as a way to economically contain it. While the TTP excludes China, the nations regional approach to developing trade agreements, is seen as a way to keep US out from the region. At stake are the principles of bilateralism and regionalism versus multilateralism propagated by WTO.

Conclusion

The interplay of political, economic, security, and technology trends, and the forces of nature and globalization, are creating unique sets of pressures and vulnerabilities for the nation-state structure.

While the future model is still in evolution, the identity crisis that has ensued is creating multifaceted outcomes that need to be understood before policies and plans are put in place to address the challenges.

The larger trends are working across states and the response would also have to be coordinated and multilateral, which is difficult under the nation-state structure and the UN system (UN Security Council). Forming alliances is not easy in the absence of shared interests and values. What is occurring more and more is the configuration of coalitions around major crises and conflicts.

Then there is the issue of how the benefits and loses will be spread out in a globalized world, which depends on what one produces, and is also tied to how the value of those assets is determined. Consider the recent drop in oil prices, which has suddenly thrown the economies of Russia, Iran, and others, in to turmoil.

The global transition is by no means over, what’s critical is to spot what is emerging early and to be able to adapt quickly. The nation-state structure was suitable for an environment that is changing fast. The challenge now is to organize in a way that helps to deal with the future trends. And for this alliances and multilateralism are better suited than simple bilateralism. The complication being: aligning bilateral with multilateral approaches is a complicated task.

The post Organizing For The Future World; The Crisis Of Identity And Nation State appeared first on Politact.

Context

President Obama’s trip to the Middle East came at an interesting juncture. Netanyahu just appointed a new cabinet and Obama himself started his second term in January. According to most experts, the visit provided a good opportunity for both leaders to reset their ties that had not been so cordial lately.

However, the issues that have caused tension between their ties remain. While there was no breakthrough on the Israeli-Palestinian conflict during the visit, surprisingly, Netanyahu offered the apology Turkey had demanded of Israel for the Mavi Marmara incident in 2010. The development was a result of consistent American behind the scenes diplomacy and is indicative of the approach the US may have adopted towards the solution for the Israeli-Palestinian conflict.

Analysis

US And Political Approach To Conflicts

From the get-go, President Obama has displayed signs his second term is not going to be the same as the previous one. Fiscal pressures are driving some of these changes, but others have to do with attempts to create a legacy and the absence of the pressures connected with reelection.

The selection of John Kerry as the Secretary of Sate and Chuck Hagel as the Secretary of Defense is reflective of the sea change in the future direction of US policy. This transformation is a direct result of the long drawn out preoccupation with the global war on terror. While immediately after 9/11, the country was driven by vengeance and military operations. More than a decade later, a more realistic assessment of what the threats are and what can be done about them, is settling in. A recent report from the President’s Intelligence Advisory Board has reportedly warned that excessive focus on Al Qaeda has created blind spots for the country.

In this context, the shift towards political approach comes across to many as being compromising or giving in. The reality is different. When one talks of political emphasis, it does not necessarily mean giving up the national interests. It just stresses on diplomacy, as oppose to military means, in achieving those interests. In some instances, however, fiscal restraints are forcing the prioritization of the security threats and interests.

US-Israel Ties

The new approach was amply on display during President Obama’s Middle East trip, in how his administration is approaching the Iran crisis, Syria, and the Israel-Palestinian conflict. While Israel has consistently pressured the US to take a military route towards Iran, US has wanted more time for diplomacy and sanctions to work. Both countries have differed on the time factor; specifically on the question of how long does Iran have before it acquires nuclear weapons.

At a deeper level, facts on the ground give more credence to the scenario that the US is working on a fundamental change in the landscape of Middle East. The essential elements of this alteration first involve regime change in Syria, causing further isolation of its key ally, Iran. By default, this transformation will also weaken Hezbollah and Hamas that have supported military solution to the Israel-Palestinian conflict and question the very existence of Israel.

Where Does Turkey Figure In?

While the Gulf monarchs are apparently on board with this vision, Mavi Marmara incident had put a dent in the Turkey-Israel relations, which also complicated NATO and Israeli coordination. These tensions made it difficult to jointly deal with the situation in Syria and the risk posed by its chemical weapons. Not only that, as recently pointed out by PoliTact, because of Israeli actions, the US and Turkey relations were also deteriorating to such an extent that PM Erdogan commented on January 25th, “If we get into the SCO, we will say goodbye to the EU. The SCO is better — much more powerful. Pakistan wants in, India wants in as well. If the SCO wants us, we will become members of this organization.”

In essence, Turkey is critical for the above-mentioned soft solution to work in the Middle East. The announcement of rapprochement between Israel and Turkey during President Obama’s visit shows where the emphasis of the American approach lies. Moreover, it also requires Israel’s acquiescence to not strike Iran, which it has complied with despite the bellicose rhetoric.

The Russian Factor

Another key component of this solution involves Russian agreement, a key player in the Middle East. And, US has given a big indication of how it intends to achieve that; by dramatically announcing it is giving up the European component of its Missile Defense System. This was one of the key challenges in the way of US-Russia reset. While the enormous decision was met by a measured initial Russian response, it could change the nation’s posture towards both Syria and Iran.

On the other hand, Iran is not sitting around and waiting. It has moved its own diplomacy in high gear. For example, Iranian President Ahmadinejad made a historic visit to Egypt in February, which was the first since the 1979 Iranian revolution. Despites sanctions, Iran also offered aid to Egypt.

“I have said previously that we can offer a big credit line to the Egyptian brothers, and many services,” Ahmadinejad stated in an interview to al-Ahram.

The visit was watched with extreme interest in the Arab and Western world. Iran is also improving its economic ties with Pakistan. Agreement on the Pakistan-Iran gas pipeline project and the decision to develop a refinery at the Gwadar port goes along these lines.

Israeli apology to Turkey will move the country in the same pool as other Gulf nations. With the change in the political landscape of Middle East, as discussed above, the resolution of the Israeli-Palestine conflict will become much easier and without the need for military intervention. If the Russian’s decide to cooperate more on Syria and Iran, this will only increase the pressure on China. This is perhaps is the reason why the new Chinese President Xi Jinping decided to go to Russia on his very first visit abroad.

The post Obama’s Trip to Israel And Turkish Apology appeared first on Politact.

Context

While US-Turkish relations are usually quite unblemished, recent events have caused them to score a little. One of the incidents responsible for this was the criticism of Turkish judicial system by no other than the US ambassador to Turkey Francis Ricciardone. His comments brought strong criticism from Turkish politicians and officials.

It’s too early to tell if it’s just a temporary dip, nonetheless, there are indications that Turkey is not about to limit itself to the confines of its European dream. Caught in the midst of economic recession, the European Union no longer projects the same appeal as it may have in the past. This perhaps is the reason why the new US Secretary of State John Kerry has decided to make Turkey the first foreign destination he is planning to visit.

How this plays out, in the long run, will have implications for not only the US- Turkey ties but also the direction of relations between the West and the Islamic world.

Analysis

The Israeli Factor

The tensions between US and Turkey have a lot to do with Israeli role in the region. Ramifications of the Israeli attack on Gaza freedom flotilla in 2010 are playing out to this day. In retaliation for the attack, Turkey had suspended its defense ties with Israel. The stress between Turkey and Israel complicated Israeli dealings with NATO and that in turn also impacted the Turkish-US ties.

This year on Jan 30th, Israel conducted an air strike near Damascus, reportedly to prevent lethal weapons from getting into the hands of Hezbollah. Israeli intervention has started off another round of heated condemnation, especially from Turkey, Russia and Iran.

“We cannot regard a violation of air space as acceptable. What Israel does is completely against international law… it is beyond condemnation,” Erdogan commented.

On the other hand, Russia Foreign Ministry stated: “If this information is confirmed, then we are dealing with unprovoked strikes against targets located on the territory of a sovereign state, which brazenly infringes on the UN Charter and is unacceptable, no matter the motive used for its justification.”

Meanwhile, an official from the Iran’s foreign ministry warned of “grave consequences.” Only a few days earlier, an adviser to Iran’s Supreme Leader Ayatollah Ali Khamenei had stated, “an attack on Syria would be considered an attack on Iran and Iran’s allies.”

An Israeli strike on Syria not only tested the Syrian response but also that of Iran and projects the message that it will act to protect its interests with or without the consent of regional or International powers. It’s puzzling to see Israel acting with impunity in the case of Syria when Turkey itself is the most vivid supporter of the revolution that has unfolded there.

The Turkish Posture

On the other hand, the Turkish behavior is no less perplexing. The country is aiding and abetting the opposition in Syria with assistance from Gulf and NATO states but when Israel acts to protect its interests, Turkey has reacted harshly. This is mostly because the country is increasingly caught in a balancing act, a predicament similar to many other Muslim states, like Pakistan. Turkey is supporting NATO in the war against terror and also receives foreign assistance in conducting operations against the Kurd (PKK) insurgency. This is one of the reasons the country is extremely cautious about its image in the Islamic world.

Turkey had previously agreed to place critical components for NATO’s missile defense system on its soil, to the displeasure of both Iran and Russia. This step greatly unnerved the Russians and forced it to take counter steps of its own, such as the placement of S-400 anti-aircraft missile system in its southern region. As the Syrian crisis has gradually worsened, Turkey asked for NATO’s assistance in protecting against potential missile strikes. NATO agreed by providing the Patriot system, which is now operational along its border with Syria. However, the Russians think the deployment of Patriot system is in preparation for an attack on Iran.

Ankara’s contradictory behavior reflects on the challenges faced by the country. On the one hand it’s a member of NATO and on the other hand, it aspires to champion the causes of Islam. Turkey recognizes the negative perceptions created by these dual pressures that if no managed well, can ultimately cause a similar loss of public credibility that the Arabs are facing.

The American Position

This context helps to put in perspective the comments made by Turkish Prime Minister Recep Tayyip Erdogan on Jan 25: “If we get into the SCO, we will say goodbye to the EU. The SCO is better — much more powerful. Pakistan wants in, India wants in as well. If the SCO wants us, we will become members of this organization.”
The comparison with Pakistan was indeed intriguing as it too is tiptoeing between NATO on the one hand and SCO on the other.
Asked about the Turkish statement in the daily press briefing, the US State Department spokesperson stated, “I didn’t see that comment by Erdoğan. Obviously, it would be interesting, given the fact that Turkey’s also a NATO member. We’ll have to see how that goes.”

The US interests are best served by Turkey’s continued orientation towards Europe and it has persistently strived to persuade other Europeans to drop their objections. The possible loss of Turkish motivation in this respect is something the West and the US can hardly afford at this juncture. Nonetheless, the foreign policy of Turkey appears to be going through a fundamental transformation.

The post The Shape Of US-Turkey Ties, Europe, And SCO appeared first on Politact.

Context

The EU came into being at a time in history when liberal political theory — of cooperation between states being not only possible but preferable, of minimizing the role of government, of the prevalence of private over public property — was fast gaining tract. This was against the backdrop of the aftermath of World War II, when the predominant problem in governments and theorists’ minds was how to avoid such an atrocity in history again. At the time, as PoliTact has previously noted, interdependence between states was thought of as a sure means to curb, if not cure, war between states and at the same time bring about great economic prosperity. However, the present ground reality appears be shifting dramatically with serious consequences for the future of EU.

Analysis

The formation of the European Union (EU) was predicated on liberal economic theory of free-trade and economic cooperation. It had its genesis in the 1951 treaty of Paris and the 1957 treaty of Rome, which established the European Coal and Steel Community (ECSC) and the European Economic Community (ECC) respectively.

The six founding members, Germany, France, Belgium, Italy, The Netherlands and Luxemburg shared not only a geographical proximity, comprising a core group of states from Western Continental Europe but also a great deal of ideological and cultural similarities and shared history that helped make the budding EU a success.

The EU came into being at a time in history when liberal political theory — of cooperation between states being not only possible but preferable, of minimizing the role of government, of the prevalence of private over public property — was fast gaining tract. This was against the backdrop of the aftermath of World War II, when the predominant problem in governments and theorists’ minds was how to avoid such an atrocity in history again. At the time, as PoliTact has previously noted, interdependence between states was thought of as a sure means to curb, if not cure, war between states and at the same time bring about great economic prosperity.

Whether it was the increased cooperation, or the economic boom from post-war reconstruction, the budding EU was very successful, and other neighboring states wanted a piece of the prosperity pie. By the time the first new members were admitted in 1973, the ideological backdrop for the EU had changed significantly, and money and economy were driving forces behind nation states applying for EU membership. It is arguable that of the original members, Germany remained more steadfastly attached to the original ideology that governed the EU than any other member state, having perhaps a more acute national memory of the war.

Cut to the modern day, and the EU has expanded to include 27 member states, 17 of which use the Euro currency. The 2008 global financial crisis (GFC) affected countries all around the world, but it has had a more profound systemic impact in the EU, because it has exposed fissures in the fabric of the EU itself.

The most prominent issue facing the EU at present is the situation in Greece. Because of the degree of interconnection between the economies of EU, and particularly Eurozone states, a Greek default will trigger financial collapses elsewhere, with the other countries most at risk being Portugal, Italy, Spain and even France. However, ejecting Greece from the Eurozone, while an attractive option from a distance, is not really viable unless the EU has a vast sum of money to cover the Greek debt held in European banks, as well as the possibility that Italy would default shortly after and need a large bailout package.

There is no real option presenting itself for Greece to recover on its own, and another bailout will not really solve the problem unless there is a significant amount of Greek debt simply forgiven. Furthermore, bailouts are politically very unpopular in the donor countries, especially given that the donor countries, namely France and Germany, are not sailing tight ships themselves. This second bailout packaged that is currently being finalized between the EU, IMF and European Central Bank appears to be premised on a hope that it can hold Greek default off long enough for the general state of the world economy to improve and carry Greece with it.

The German reaction to the Greek problems is very telling about the ideological and cultural schism within the EU, both at a public and administrative level. While all governments to some extent presented a kind of willful ignorance regarding the initial GFC and the extent to which the banking system had gone wrong, very broadly speaking, the Germans have maintained a faith in their government and civil service to be transparent, rational and objective.

This is a cornerstone of Germanic perception regarding government, which hails from the strong current of liberal ideology that went into the formation of the EU. To a certain extent the founding members of the EU all shared these values, and the population and the government worked in accordance with the notion that an objective, rational administration would make objective, rational decisions.

In contrast, the citizens of modern Greece, and many other peripheral European nations, have never held out much faith in their governments. The governments in these countries did a fine job of playing the objective civil servant, and espousing the kinds of values the held currency in the EU, but to the population a civil servant was self-serving, first and foremost. And the bleak reality for Greece is that by and large the public perception was right.

The reason this schism in public perception and administrative capacity is important is that it exposes the weakness in the theory upon which the EU has its foundation. This is reflected with the rise in Nationalist sentiment that has been felt in Europe over the last few months, which has in fact been brewing for some time now. Cooperation between nations is possible, and maybe preferable, but it is predicated on mutual benefit. Once mutual benefit is out of the equation, it is natural for states to want to protect their own interests.

However, the level of interdependence within the EU is such that “cutting off the dead limb” so to speak is not an option. And while Greece is a major focal point for the EU financial crisis, it is not the only EU country in danger by a long shot. Belgium is in serious trouble with the collapse of state-lending bank Dexia on the horizon. Belgium got itself out of trouble in the GFC by borrowing from Dexia, but now the government-less country is looking at a bleak horizon as there is nowhere left to go to band-aid increasing debt. With Moody’s downgrading credit ratings in Spain and Portugal, the sovereign debt crisis is quickly setting up a series of dominoes ready to fall.

The reality is that the illusion of a shared system of values – political and economical, and ideological – that held the EU together has fractured, yet these countries are still bound together, their fate intertwined because of their level of interdependence.

The post The Future Of European Union appeared first on Politact.

The financial rating agency Moody, has downgraded the credit ratings of 12 UK financial firms. Financial organizations such as Llyods, TSB, RBS, Nationwide and Santander UK were among those downgraded with shares in RBS and Lloyds down by 3.7% and 2.7% respectively making them FTSE’s 100’s biggest fallers. Seven UK building societies and nine Portuguese banks also faced cuts in their ratings.

Moody’s ratings are based on its reassessment of the support environment in the UK, with the company believing the government to be less likely to support firms seen as “too big to fail.” Analysts have however warned the report should not be taken out of proportion. Max King, a portfolio manager at Investec Asset Management, said: “People are getting a little paranoid about the UK banking sector.

The post Moody Downgrades Rating Of UK Financial Firms appeared first on Politact.