STRATFOR -- Geopolitical Diary:
There are bad days and there are good days. On bad days, events hurl the world into chaos as vicissitudes rip apart the conventions underpinning the international system. On these days, forecasting can often be a near-impossibility. No one with a functional mind seriously contends that Sept. 11, 2001, was anything but a bad day.
On good days, a nation launches itself into a new stage in its relations with the world, redefining how the world thinks, acts and evaluates itself. In such days as "history is made," the waters are clear and crisp and the subsequent forecasting flows like rain from a thundercloud. The fall of the Berlin Wall and the beginning of the 1998 Asian financial crisis are prime examples. In each case, while the tactical details were murky, the overall path of global development was made fairly clear. And then there are days like today. Today there were a number of "maybes," events that could prove pivotal, events that tax the mind and provoke deep thoughts and excited, bitter arguments.
Today was full of possibilities and questions that Stratfor will be endeavoring to extrapolate and answer in the days and weeks ahead. Today marked the second day of the second -- now annual -- U.S.-Russian energy summit. U.S. businesspeople and government officials met with their Russian counterparts in St. Petersburg. Had a deal -- or several deals -- been struck, we would have a better idea of where the U.S.-Russian relationship is going. As it stands, the hints and rumors are perhaps even more interesting than any finalized deal. The two primary deals being discussed behind half-closed doors involve massive potential U.S. investments into the Russian energy industry.
One would see a U.S. supermajor -- ExxonMobil or ChevronTexaco -- purchase a 25 percent stake in Russian energy major Yukos-Sibneft with an option to later buy up to 50 percent. The other potential deal would involve a multibillion-dollar investment of U.S. capital into the Russian natural gas industry to finance the development of liquefied natural gas terminals that would service the U.S. market. Both deals are merely speculative at this juncture, but the point is that the U.S.-Russian relationship -- regardless of what nationalists on either side of the former Iron Curtain say -- is now one of a de facto alliance. Both deals, if implemented, would be long term and high dollar. Rivals simply do not engage in that sort of relationship. The question now is how will a relationship -- still driven by strategic competition and the war drum rhetoric of domestic election campaigns on both sides -- develop in the months ahead. The possibilities are staggering.
The next issue is as perplexing as it is amusing. From their summit in Dubai, the finance ministers of the Group of Seven issued a joint statement pledging that they would work to ensure that no country would allow anything but market forces to affect the values of their currencies. We read the statement with a quiet smile, but even we were surprised when later in the day Japan resumed printing yen by the billion to push their currency back down. For Japan the issue is flatly one of survival. Today the yen strengthened past the level of 111 to the U.S. dollar, the highest the yen has been in four years. This also is not a surprise. Japan runs a massive trade surplus, which consistently sends hard currency flooding back into the country and produces a strong yen. Unfortunately, since most of the Japanese economy -- to put it mildly -- is dead in the water, the country now is utterly dependent upon keeping those exports flowing. Unfortunately for Japan, the rising yen undermines the success of exports in foreign markets. To strengthen the export flow, the government has decided to artificially depress the yen. So on second thought, even the timing of the Japanese action isn't much of a surprise. The Japanese government faces parliamentary elections in October and the Japanese "recovery" -- a world we whisper with considerable reservation -- is wholly dependent upon a weak yen. What is sharply disturbing is that the world is fully aware that Japan is dysfunctional. Today Japan got a new finance minister to replace his ailing -- and rather incompetent -- predecessor. The net effect will be no change in the slowly degenerating policies of the past 20 years. Washington knows this, the G7 knows this, Japan's neighbors know this. What we find fascinating is just how little anyone is preparing for the inevitable Japanese collapse. Tokyo already has made it clear that the G7 economic edicts -- such as they are -- hold no sway in Japan. How long before Tokyo begins to dismiss more formal expressions of international intent in the name of national survival?
Across Eurasia in Iraq, the Coalition Provisional Authority (CPA), via Iraqi Finance Minister Kamel al Keylani, adopted a set of policies on Sept. 21 that formally throws open the entire Iraqi economy to foreign investment and potential ownership, with one exception: any extractive industries such as oil. In economic theory, the move is a wise one. Such policies should jumpstart foreign investment while lessening the belief locally that the war was about oil. But so far, the CPA has yet to frame just how the investment will be funneled or managed. We'll give it an "A" for theory; the grade for implementation will be reserved for next semester.
Finally, there are the French. Ever since the United States clinched a compensation deal with the Libyans a few weeks ago to lift U.N. sanctions against Tripoli, Paris has been lobbying anyone who will listen to delay the vote. The sanctions were punishment for Libya's role in the 1988 Lockerbie bombing; it turns out that the French already had negotiated a much inferior compensation agreement for a separate terrorist act. When Paris saw the deal Tripoli got out of Washington, it wanted better terms and so stalled the U.N. Security Council vote. The patience of the other council members wore out today and France -- unwilling to rupture further its relations with the Arab world -- abstained instead of casting its veto. Paris claims that it has reached a deal with Libya on a new compensation package to replace the previous, unsatisfactory one. In Paris they call this discretion; in Washington it is called caving. The bottom line is that Paris now fully realizes that its fruitless stance on the Iraq war has resulted in the across-the-board reduction of its diplomatic stature. For France, where it has always "mattered to matter," this loss is felt particularly keenly. The question is now how President Jacques Chirac will react? At first glance it looks like capitulation. Chirac said today that his country would not veto the developing U.S.-authored resolution on Iraq. But it would be foolish to write off the French ability to chart an independent course.
FP........................................................
AI
