Economic Geopolitics

The presidency of George Bush Junior was plagued by the United States need to dominate the Oil industry.  As much of the world’s oil reserves are in Islamic Countries, this made the United States extremely unpopular in those countries.

President Obama obviously wants to be remembered as an extremely popular President.  He is mending bridges.  His team of advisers have a new agenda, and that appears to be to use dialogue rather than arms.

Obama’s recent trip to Europe was the showcase for the new diplomacy.  The G20 Summit was hailed as a success.  The Germans, however, played the trump card by effectively organising a large IMF Fund to bail out some poor European countries.  Germany is the world’s largest trading country.  It led the way trade wise, with several of the former Soviet Bloc of countries, as they developed a more free market approach after years of state control.  However their economies have really suffered over the past couple of years, which is having a devastating effect on the German economy.  Simply, if these countries have no money, Germany cannot trade with them!  With the IMF bail out, Germany will be the winner as trade will be restored.  Russia also is a winner as it supplies a lot of resources especially gas and oil to Germany.

Turkey is at the crossroads between Europe and the Middle East.  It has long had a large trading economy and wants to join the European Economic Union.  But it is the odd country out, as the predominant religion is Islam.  Europe has always been divided by religion with deep divides between the largely Catholic southern countries and the largely Protestant northern countries.  Turkey is a key member of NATO.  It is also a key country for the United States, as they have major military bases from which they launched their wars against Iraq.  Obama has given his support to Turkey having the top military positions in NATO.

At the NATO meeting, the United States wanted a substantial commitment for additional forces to go to Afghanistan.  However the Europeans, including Germany declined.   Instead, they designated a token force of 5,000, most of whom are scheduled to be in Afghanistan only until the August elections there, and few of whom actually would be engaged in combat operations.  This is far below what Obama had been hoping for when he began his presidency.  Perhaps it is no surprise that US Secretary of State, Hillary Clinton, was so friendly towards our Foreign Minister Murray McCully within hours of Obama’s NATO setback on Afghanistan.  Additional New Zealand troops will be significant!

A strong Turkey supported by the United States opens up the oil industry and provides alternatives to the Russian controlled gas industry which currently supplies much of Europe’s needs.  New oil and gas pipeline routes will become more viable.  But most importantly it will reduce the reliance on Russian energy sources.  Over the past few years, we have seen how Russia has turned off gas supplies as they try and gain some control of independent states of their former empire, most of whom now want to become members of the European Union and NATO.

So President Obama’s first real foray into Europe was a mixture of success.  The outcome of the G20 meeting in terms of the IMF Funding was an economic failure for the US and a big win for Germany.  Getting Turkey to the top controlling positions on NATO will most likely have positive economic spin off for the US when it comes to energy supplies and strategic military bases.  The failure to obtain a large NATO commitment to Afghanistan was a failure as it means the US will have to fund the war efforts for much longer than they would have liked, so it is a real cost to their economy.  It also means that New Zealand may have to play an increased military role, probably as a means of increasing our trade.  But that is what Geopolitics and Economics is all about.