I appreciate the regularity with which you and Dianne have been updating the blog. I continue to enjoy it.
My offering today is to take note of the tectonic shift in power relations between America and the rest of the world, most recently playing itself out in the recent Arab Summit.
Although lamentably – and predictably – the Arab Summit which concluded in Riyadh on March 30 received a paucity of media attention here in the states, it seems that the Arab states are beginning to perceive themselves differently. It strikes me that this development is not only being noticed in Washington and Tel Aviv, but it’s being noticed with concern. (This explains at least part of the reason for the lack of reportage in our media.)
The Arab Summit doesn’t appear to have been the usual flourish of bluster to which we’ve become accustomed. Because not only are changes evident in diplomatic circles, they are also evident on the ground.
First, the Saudi crown, traditionally a very close friend of – if not a surrogate for – the United States , spoke out unequivocally against American policy in Iraq . King Abdullah described the presence of foreign troops in Iraq as an “illegitimate occupation.” For a Saudi monarch to have made such a pronouncement even two years ago would have been unthinkable.
Second, Washington and Tel Aviv are finding themselves needing to deal with the Palestine question after UN Secretary-General Ban Ki-moon described the Arab proposals as “the basis” for a Middle East peace process. In other words, President Bush and his “road map” seem to be taking an ignominious back seat.
The Saudi plan calls for three things: (1) a land-for-peace deal wherein Arab states would formally recognize Israel and Israel would withdraw to its pre-1967 borders; (2) a yet-undefined “just solution” for Palestinian refugees; and (3) a Palestinian state with East Jerusalem as its capital.
By all appearances Washington is on the defensive, with Secretary of State Rice evidently trying to negotiate some way into the new landscape so as to save face not only for her boss’s legacy but her own as well. I read in the press this morning (March 31) that German Chancellor/EU President Merkel is on her way to the Mideast to hold talks with Jordan’s King Abdullah and then with Israeli Prime Minister Olmert and Palestinian President Abbas. Thus the EU may perceive an opportunity that apparently didn’t exist before. That Israeli PM Olmert is agreeing to the talks in the first place – in the wake of the Arab Summit, mind you – shows that Israel perceives itself as weakened.
Third and although not directly related to the Summit but increasingly evident nonetheless, is the petrodollar’s loosening of its stranglehold over Mideast oil resources. I noted in the Gulf Times (Dubai) this week that the CEO of the Dubai International Financial Centre [sic] said on March 25 that, according to the report, “more Gulf economies will move away from a dollar currency peg and shift foreign exchange reserves away from dollar to other currencies, including the Chinese yuan.”
The article went on to relate that the UAE central bank has adopted a policy to hold at least 10 percent of its reserves in euros. The same is apparently so for Kuwait , which has the region’s third-largest economy. Link Although the other states of the region have indicated their willingness to stay wedded to the dollar peg (with the exception of Iran which is openly hostile to it), one wonders how long the marriage will last.
Because the US Federal Reserve is inflating, or as it says, “monetizing” its way out of the $500 billion debt for the Iraq war (see my previous post in your blog), the greenback has hit the skids against every major world currency as well as gold. Eventually countries holding petrodollars -- and Saudi Arabia holds a ton due to the increase in the price of oil since 2001 – will decide that the interest Uncle Sam pays on his Treasury securities is an ill-bargain because the interest payments are being more than eaten away by inflation. Who wants money that’s losing its value?
The Arab League has apparently become cognizant of Washington ’s big dilemma: either the US will continue on the militant path it has followed since Bush became President or it must abdicate its position as the world’s New Rome. The Arab League – and apparently the EU for that matter – seems to be betting in favor of Washington ’s abdication. Bush, however, with his threatened veto of the supplemental budget, seems to be leaning in the other direction.