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Report 2 April 2009

International Economy International Economy


After eight years during which personal relationships and saber-rattling often substituted for diplomacy, this week the Obama Administration put the US back in the game.  The President’s first trip to Europe provided the stage for significant steps forward, and the use for smart power to hard-headed ends – from success at the G20 on additional funds to stop the economic crisis from spreading, to agreement with Russia to pursue a common agenda on nuclear proliferation, historic outreach to Iran, and an international conference to gain greater support for the mission in Afghanistan.  On all of these fronts the steps taken by the Obama administration this week were only the beginning.  But after eight years when the arts of diplomacy were mocked and derided, this week was a reminder of what real diplomacy looks like – a search for common ground with both allies and potential adversaries that begins with a firm grasp of core American interests and values – and adds a willingness to be concerned with the interests and priorities of others.

Obama administration pursues realistic approach to Russia based on mutual interests and makes important early headway on non-proliferation issues – while making clear US concerns on regional and human rights issues.  The joint statement issued after the meeting laid out a broad agenda and focused specifically on greater cooperation on issues of non-proliferation that included “negotiations to a draft a new arms control treaty that could slash the American and Russian strategic nuclear arsenals by about a third.”  The statement concluded, “In just a few months we have worked hard to establish a new tone in our relations. Now it is time to get down to business and translate our warm words into actual achievements of benefit to Russia, the United States, and all those around the world interested in peace and prosperity.” This cooperation can yield pragmatic benefits for both countries and, on questions of arms control, a significant boost for the Obama Administration in global public opinion, which has been waiting for such a step from the world’s two foremost nuclear powers.  But the Administration’s skepticism about Russian intentions was also on display, as the Washington Post reported:  “They emphasized that, unlike President George W. Bush -- who gushed that he had glimpsed Mr. Putin's soul during their first meeting -- Mr. Obama is not seeking to develop a personal relationship with the Russian leaders but rather one focused on concrete interests. Appropriately, Mr. Obama directly raised central U.S. concerns about Russia, his aides said, including its attempt to dominate the states around it -- and its worsening human rights record.”  [Joint Statement by U.S. President Barack Obama and Russian President Dmitry Medvedev, 4/01/09.  NY Times, 4/01/09.  Washington Post, 4/01/09]

G20 summit sets the framework for global reforms to help address the current financial crisis and ensure it does not happen again.  The G20 countries are expected to agree on a dramatic increase in IMF funds from the current level of $250 billion to $750 billion – significantly more than was originally expected for this Obama Administration priority item.  The IMF acts as the lender of last resort and plays a particularly crucial role during times of financial crisis.  The countries also agreed to $250 for trade finance to help stimulate the global trade.  Moreover, the summit participants also agreed on tighter rules for international financial regulation to prevent a repeat of the current crisis.  The countries also agreed to a firm stand against protectionism – hoping to stave off other problems which may exacerbate the crisis.  [USA Today, 4/2/09.  AP, 4/2/09.  Wall Street Journal, 4/2/09]

Before 72 countries at the Hague, Obama administration begins building international support for diplomatic and economic efforts in Afghanistan.  The US and UN coordinated to hold a one-day conference for 72 countries, seeking support for reconstruction “beyond the mainly Western countries that have troops there.” Bloomberg reports: “The new U.S. approach is not to badger European governments to send forces they don’t have, a senior U.S. official told reporters in Brussels yesterday. Instead, as shown by today’s “big tent” conference, the point is to encourage allies to do what they can…China offered $75 million over five years and Spain said it will consider pledging 120 million euros ($160 million) for 2010-12. The European Commission, donor of $2.1 billion to Afghanistan since 2002, said it will provide another 60 million euros for rural development and to help stage Afghan elections on Aug. 20.” [BBC 3/31/09. Bloomberg, 3/31/09]  

Administration used Afghanistan meeting to take another step in outreach to Iran, with positive near-term results as long-term strategy continues to evolve.  The New York Times reported: “[A] meeting Tuesday between Richard C. Holbrooke, a presidential envoy, and an Iranian diplomat marked the first face-to-face encounter between the Obama administration and the government of Iran.”  In response, the Iranian official pledged to increase Iran’s facilities for trans-shipping humanitarian aid into Afghanistan.  The Times went on to call the encounter “another step in the Obama administration’s policy of engagement. It is a tentative process, in which the White House makes symbolic gestures, like President Obama’s recent video greeting to the Iranian people and government for their New Year, while continuing to formulate its longer-term strategy.” [NY Times, 3/31/09. BBC, 3/31/09]

What We’re Reading

President Obama said that the U.S. economy alone can no longer be the only driver of global growth and encouraged other nations to “pick up the pace.”  

China pushes for a bigger role in reshaping the world’s economic system and vies to be the world’s leader in electric cars.

President Obama met his South Korean counterpart and discussed North Korea’s missile test.  North Korea appears to be fueling the rocket.

General David Petraeus said yesterday that American commanders requested another 10,000 troops for Afghanistan next year, but the request waits for President Obama’s final decision in the fall.  He also warned of the threat of militant extremists to Pakistan.

Defense Secretary Robert Gates rebuked Europe over its lack of action in the efforts in Afghanistan, saying that only Britain has attempted to make the case to voters that they need to send more troops to the region.

In an interview with the Financial Times, Gates also said he would be “surprised” if Israel pursued military action against Iran, that he was “nervous about too big an American footprint” in Afghanistan and said the Administration had satisfied all of General David McKiernan’s 2009 troop requests for the country.

Militants stormed a government building in Kandahar, killing 13. President Karzai’s brother escaped the attack.

Commentary of the Day

Andrew Bacevich says the U.S. should “save NATO” by withdrawing and letting Europe be responsible for its own defense.

B. R. Myers rethinks how the North Korea watchers analyze Kim Jong-il’s actions.

Nicholas Kristof looks at the impact of G-20 decisions and the global financial crisis on the world’s poor.

Roger Cohen looks at the future role of the United States in the global arena.

David Pilling examines China’s latest actions in the global economic crisis.