Can the 2018 Elections Truly Reshape Mexico?
On Sunday July 1st Mexican voters headed to the polling stations oh what has been the largest election in Mexican contemporary history: Over 3400 seats were out for grabs at local, state, and federal levels, including the president of the country and the whole Congress.
This election should also be remembered for other aspects equally pressing: Personal backbiting from all political parties, and the second one leaving 113 candidates from all political parties murdered prior to the Sunday elections. An unprecedented event yet unaddressed throughout the political campaigns by every candidate. Mexico is also has the lowest levels of faith in democracy.
An approximate of 62% of electorate turned out to vote in this past elections. While still a decent figure, it still shows that winners in recent elections have been unable to attract a significant number of the electorate in Mexico. The total of the nominal list for this 2018 election was 85, 953,712 million people; 63.45% of those turned out to cast their votes. (54, 537, 000 million people approximately) The virtual winner, Andrés Manuel López Obrador (AMLO) obtained 52.96% of the votes, which mean 28, 359,567 million people elected the future president of the country, not even a third of the total nominal list. This is a result that has been present in the last 4 presidential elections and that should not be dismissed at all.
What is evident though is that this result brought to the forefront of the political agenda that Mexican voters are so fed up with the ruling class that they have decided to take a chance the only option that was left trying. This, again, should not be taken lightly, the National Regeneration Movement (MORENA) and its candidate AMLO did not win supporters and votes because of his proposals for national policies. A large portion of the people that casted their vote for him did it as a punishment vote out of sweeping, profound frustration to the last 3 administrations.
AMLO’s victory ushers a four-year old party into the presidential seat with practically little governing experience and whose outsized leader has promised to radically and peacefully transform the country. Among his campaign promises are prevalence of the rule of law and democracy; rule with honesty and end privileges and immunities; decentralisation of ministries; fix the prices of agricultural products; deal with the energy crisis; eliminate corruption; fight insecurity and poverty; economic development controlled by the state; guaranteed jobs and access to free education to youngsters with a monthly stipend; paid apprenticeships to those currently not studying nor working; increase the pension of the elderly; guarantee 100% admission rates to university studies; and live humbly.
While on paper, these policies look certainly promising, AMLO has made seemingly contradictory statements throughout his political career and during his campaign. He has also steered clear of declaring a firm stance on many matters and avoided going into concrete ideas as to how he plans to achieve his campaign promises. While he has claimed to be in favour of transforming Mexico radically, his post-election speeches hint that he will hardly pursue a rapid and revolutionary upheaval to shock the system to the core. One of those contradictions is that whilst he has promised repeatedly that he will uproot corruption and live humbly, he has send signals he refers to everyone else but himself and his inner circle: He is backed by the multimillionaire Alfonso Romo; he postulated former mining union leader Napoléon Gómez Urrutia accused of stealing millions of pesos from workers to the Senate, and various family members of former Teacher’s Union Elba Esther Gordillo are among MORENA’s supporters.
While this is indeed a seismic change, it is still to early to brand it as the final step in the consolidation of Mexican democracy and the end of party rule as we know it, or at least the end of the Institutional Revolutionary Party (PRI). The same was argued after the elections of 2000 and 2006, and the party was able to canalise the errors of the back then incumbent administration. Secondly, MORENA as a political organisation, despite claiming it is not a political party, it resembles in every way one, and in many aspects emulates the practices of the former hegemonic PRI party: one man at the top – AMLO, and dubious, non- transparent practices to select their candidates to governmental positions. Thirdly, there is no real ideological party affiliation in Mexico – Majority of the Mexican electorate do not vote for concrete political parties ideologies, as the election of AMLO shows, they voted for him because there was nobody else they considered better to vote for. Lastly, the long-criticised clientelism, nepotism and opacity that characterised PRI for 71 years are present not only in the rest of the political organisations but in society as a whole. Many of MORENA members were previously affiliated to other political parties and decided to get on MORENA’s bandwagon in search of a governmental post they considered unattainable with their former political parties. The old authoritarian system has been preserved out of convenience and this is the main hurdle to overcome.
How will a Mexico ruled under AMLO look like? That is one of the most pressing questions in the immediate aftermath of the elections. There are still many open-ended questions as to which AMLO will govern: The pragmatist or the firebrand one. It is still up in the air whether some of the inconsistencies, incongruencies, flip flops, ironies, choice of candidates, and lack of clarity regarding his policies were an electoral tactic or a worrisome trait. It will not be until he takes office that we will be able to grasp a more granular understanding of his ruling style.
AMLO will also have to rule a country mourning over 150,000 people murdered over the last 18 years and face a tightening grip over oil pipelines by criminal organisations as well as the uncontrolled spiral of violence in the country. His administration will coincide with the increasingly fragile and deteriorated relations with the United States, and many of AMLO’s proposals to deal with security may be further tied up by Trump, especially if he is unable to curb down insecurity in the short term. The Mexican government still relies on the US intelligence data to catch criminals. Mexico’s next president needs to fully understand the motivations behind Trump’s view of Mexico. For him it is a personal issue imbued by a political electoral dynamics crucial to mobilising his base. Arguing that the strategy should be to make Trump respect Mexico is not only a Panglossian attitude but it is doomed to failure. Both leaders stand today at crossroads and they can either be partners in success or accomplices in failure.
Of course, the “Unipolar Party” is over
On the right side of the Pacific, the U.S. media is eagerly asking as many scholars as possible whether the unipolar moment is over. On the left side of the Pacific, East Asian think tanks focused on questioning the sustainability of the U.S.-initiated Indo-Pacific Economic Framework (IPEF) during the APEC trade ministers’ meeting, indirectly confirming the end of the “unipolar moment”.
The post-World War II order, promoted by the United States through the creation of the Bretton Woods Agreements and various international economic and trade institutions such as the International Monetary Fund. This order was successful and won the Cold War, and the unipolar world also Get established. Until the US repudiates its past achievements, prioritizes protectionism, and declares that the new order is “America First,” the unipolar moment is doomed to an end.
The key to the success of the old order lies in “reciprocity”. Although the United States was the biggest beneficiary, countries that also benefited were willing to accept the creator as the biggest winner, which was the basis of the unipolar world. But today, the new dish served by the US is IPEF, a non-legally binding economic and trade “framework” implemented only by executive order, making it difficult for countries that once benefited from the old order to swallow.
To put it simply, the “reciprocity” with legal guarantees is sustainable, and the “framework” without legal binding is not sustainable. Therefore, the number of countries kneeling on one knee to the US is greatly decreasing.
The unipolar world is not only driven by economic and trade interests, but also by values that effectively whitewash abstract democratic freedoms, so that for at least a decade after the end of the Cold War, the world really thought it was the “end of history”.
But after two presidencies of Trump and Biden and seven years in power, the country that once admired the US has witnessed the great divide in Washington from the change in economic attitude. The unresolved partisanship has led to the incompatibility between the White House and Congress, and the “framework” is a product of skipping Congress, which may produce new changes at any time. This chaos has even weakened the soft power image of the US and created a negative perception of liberalism.
The Biden administration is trying its best to protect the domestic middle class, IT IS FINE, but at the expense of friends to approach that, well, you cannot ask everyone to continue to kneel on one knee. No market access, no legal safeguards, just like a party menu lacking meat and vegetables, certainly not enough to feed the guests.
Not only that, IPEF also requires members to open their markets and raise wages so that American goods can maintain their competitiveness. It’s as if guests have to dress up and bring their own rich meals to share with the host to ensure that the poor host is well fed. If the guests want to be fed, they have to join another party, hosted by a relatively generous China, which will also upset the US.
How can such a unipolar party be maintained?
Instead of seeing IPEF as economic cooperation, it should be seen as political cooperation because it has a strong political connotation of exclusivity. The US argument is, “My party food may be shabby, but China’s party food is poisoned, and it is better to be underfed than poisoned to death.
The guests who came to the American party after eating enough at the Chinese party were stunned, the corners of their mouths were still greasy from the last meal. The truth is, most guests would not have been able to dress up for the American party and share the beef stew they brought if they hadn’t eaten their fill at the Chinese party for over 20 years.
Of course, there are exceptions, such as Taiwan, which insists on staying on one knee, starving to serve their meal to their hosts – TSMC, the world-famous exclusive delicacy —- and Taiwan is not even allowed to participate in the IPEF.
The U.S. menu for Taiwan is the U.S.-Taiwan Initiative on 21st-Century Trade, and the menu is actually the same as the IPEF, with the difference that Taiwan is not allowed to participate in the party and can only eat in the servants’ room.
Taiwan’s ruling party boasted that the “Initiative” (Initiative) can greatly promote Taiwan-US economic and trade relations, and can “connect” with IPEF. It even hinted that it is a shortcut to join the CPTPP, and it is a ticket to the American Party. However, in general, the five issues that have been negotiated will help the US attract Taiwanese capital and increase employment in the US. and help the US have “long arm jurisdiction” over Taiwan regulations to protect US business interests, while the actual benefits to Taiwan are completely disproportionate.
The seven issues that have not yet entered the negotiations are even more severe for Taiwan. The main difficulty in the negotiations lies in the countervailing subsidies policy for state-owned enterprises, which is a “new order” in which the US attempts to reduce the competitiveness of other countries to the same level as the US, and is an issue that IPEF members strongly dislike.
The main reason why the current ruling party in Taiwan accepts all the unreasonable demands of the United States is that the party advocates independence and is a natural target of liquidation after reunification with China. The need to seek political protection from the U.S. is also a demand of some IPEF members, but the difference between Taiwan and IPEF members is that the latter will seek a balance between the US and China, while the former is completely out of balance.
However, even if there are examples like Taiwan that put political considerations above economic considerations, the core problem remains: “initiatives” without legal regulation are unsustainable, empty promises, and the United States can change its mind at any time without being held accountable for breaking them.
The desire to “rebuild America” at the expense of the interests of friends runs counter to the reciprocity principle of the unipolar order, and almost all countries believe that whether the next U.S. ruling party is a Democrat or a Republican, Washington’s “New Order” course will not change, which clearly means that the “unipolar party” is over.
The point is not that the US wants to shift internal problems to the outside – they have always done that – but that countries around the world already have other options, namely the Chinese party, and even hope for a possible “Indian party”. Not only that, China, which insists on non-alignment, has no intention of replacing the United States to lead the world, but wants to promote a multipolar order, giving countries another option, the “autonomy” that the unipolar order lacks.
No matter how one interprets the latest G7 consensus, it is undeniable that the US has had to abandon its quest for a new bipolar Cold War, as it is no longer the only country capable of hosting a party, and the menu is getting shabbier and shabbier, while the guests have to fill their stomachs.
In fact, the United States also has to fill its stomach. According to the data released by the Fed, in 2022, only 63% of American adults will be able to immediately spend $400 to deal with emergencies, which is a drop of 5% from 68% in 2021, This background can explain why the “American Party” is so shabby. In the unipolar moment 30 years ago, the lives of blue-collar workers in the US were better than the elites in most countries.
American scholars know what the media wants to ask, but most are reluctant to risk their academic reputations by giving concise answers to a vague notion of “polarity”. However, they know very well that the world has changed dramatically, and the US must adapt to a new order that is no longer so “convenient”.
The process of forming a multi-polar order is bound to be chaotic, but instead of sticking to a party that cannot fill your stomach, it is better to open the door to another party. It is the general rule of history that a revolution occurs when there is not enough to eat.
Can the U.S. afford to lose the Middle East?
If a nation aspires to attain global power status, any location across the globe can assume strategic significance for that nation. Undoubtedly, at different historical junctures, Vietnam, Cuba, and other locations have garnered significant significance within the framework of United States’ interests. Nonetheless, following the culmination of the Second World War, Europe and the Middle East assumed a paramount position in American foreign policy.
The significance attributed to Europe stemmed from two primary factors. Firstly, Europe served as the domain wherein the United States fostered its closest alliances. Secondly, Europe confronted an imminent threat posed by the Soviet Union, which stood as a global adversary to American leadership. Had the United States not undertaken the defense of Europe through the establishment of military bases and other forms of support, Western and Southern European nations might have met the same fate as their Eastern European counterparts, potentially succumbing to becoming Soviet satellites.
The significance attributed to the Middle East also emerged as a paramount priority for the United States, driven by three key factors. The first factor pertained to the region’s abundant oil reserves. During the Cold War era, more than half of the world’s oil and gas resources were concentrated in the Persian Gulf, thus rendering the security and stability of Middle Eastern energy supplies critical for Western industries. Secondly, the establishment of a strategic buffer zone in the Middle East and the Islamic world aimed at containing the Soviet Union and impeding its access to warm sea routes played a crucial role in sustaining American global leadership. Lastly, the indispensable nature of the Middle East for the United States stemmed from the imperative of ensuring Israel’s security. These three strategic considerations have rendered Middle Eastern affairs the most prominent focal point of American foreign policy for several decades. Consequently, American policymakers have dedicated substantial energy and effort to managing relations with key Middle Eastern actors such as Lebanon, Iran, and Palestine.
The profound ramifications of the Iraq War and subsequent Afghan retreat following the traumatic events of 9/11 have significantly undermined the self-assurance of the United States as a superpower, fostering a surge in isolationist inclinations within the corridors of power in Washington, D.C. The perception of American global leadership also suffered from the notion that the country, which reached its apex in the 2010s, was in a state of decline, further exacerbating its negative impact. Consequently, the United States began perceiving itself as considerably weaker than its actual capabilities. The Trump era further solidified the notion that America had transitioned into an ordinary power, leading to the prevailing belief that maintaining a widespread military presence worldwide was wasteful. President Trump, operating under the paradigm of running the state akin to a corporation, argued that the allies of the United States were enfeebling the country by burdening it with the majority of defense expenditures. He particularly singled out Germany and Japan, urging them and others to assume responsibility and augment their defense budgets to at least 2 percent of their respective GDPs.(1)
Within academic and think tank circles, a prevailing notion emerged regarding the unnecessary expenditure of energy and resources by the United States in the Middle East. Questions arose regarding the purpose and reason of American soldiers sacrificing their lives in the quagmire of the Middle East. The significant financial losses incurred by America in the region also came under scrutiny. Despite the assumption that the inauguration of Joe Biden as President on January 20, 2021 marked the end of the Trump era, many of Trump’s perspectives persisted and gained influence within American discourse, permeating various domains. One such idea entailed the diminishing power of American global leadership, suggesting that it would no longer suffice to extend its influence over every region
CHINA: RISE OF DRAGON
The perception of inadequacy regarding the capacity of American power to extend influence across all regions was primarily bolstered by the unprecedented economic ascent of China, which stands as the most significant contributing factor in history. Over a span of 23 years, China’s GDP surged from a mere 1.2 trillion dollars in 2000 to approximately 20 trillion dollars, marking a remarkable sixteen-fold increase. In contrast, the US GDP only grew 2.6 times during the same period, reaching 26.8 trillion dollars. In 2000, the US economy surpassed the Chinese economy by a factor of 8.5. However, as of 2023, the US economy stands at a mere 1.3 times the size of its Chinese counterpart. Economists assert that if this trajectory persists, it is merely a matter of time until China surpasses the United States as the world’s largest economy. The disconcerting transformation evident in GDP figures is not the sole cause for concern, as alarming data pertaining to US leadership emanates from nearly every sphere of the economy. During the pandemic period, a discernible weakening in the hegemony of the US dollar, which represents a paramount source of American power, became evident as its share among world reserve currencies dwindled to 59 percent by 2023. Notably, the process of dedollarization has favored China’s currency, the yuan, as the primary beneficiary. China’s influence now extends across diverse regions, from Brazil to the depths of Africa, challenging the United States at every turn. China engages in treaty negotiations, fosters reconciliation between previously hostile nations, and most significantly, conducts extensive trade with nations across the globe. Presently, there are only a handful of countries that do not count China as their largest trading partner. The growth in China is not limited to its economic and trade prowess; its military and defense capabilities are also expanding. China presently ranks as the second-largest country in terms of defense expenditure globally, with a defense budget surpassing the combined defense budgets of Britain, Germany, France, and Japan. These figures raise concerns for the United States, given the realization that no nation would allocate nearly $300 trillion towards armaments solely for the protection of its trade interests.
UKRAINE WAR AND RISE OF THE AMERICAN SENSE OF INADEQUACY
Amidst mounting concerns surrounding American global leadership, the eruption of the Ukraine War in February 2002 rendered the European continent a battleground once again. Despite the passage of a year, neither party involved in the conflict in Ukraine managed to achieve a decisive advantage. This prolonged stalemate has led experts to express concerns regarding the potential protraction of the war, with apprehensions mounting over the prospect of its spillover into other European nations. Throughout this period, the United States extended considerable support to Ukraine, offering military aid amounting to tens of billions of dollars, establishing itself as Ukraine’s primary benefactor. While there appears to be no significant opposition within America to this support provided to Ukraine, numerous experts in the field of International Relations argue that as the Chinese dragon strengthens its presence in the Asia-Pacific region, it would be ill-advised to unnecessarily fragment American power between engagements in Ukraine or the Middle East with Asia-Pacific. For instance, according to John Mearsheimer, a professor of political science at the University of Chicago, the United States should refrain from depleting its power in the Ukraine War or any other conflict, urging a swift shift in focus towards China. (2)
In alignment with Mearsheimer, Elbridge A. Colby, a former US Assistant Secretary of Defense, the contention arises that the United States lacks sufficient and appropriate military capabilities to effectively address all the threats that impinge upon its interests. Colby asserts that it is imperative for America to prioritize the mitigation of the China-induced threat within the Asian region. According to Colby, Asia stands as the “decisive theater” on a global scale, with China indisputably representing the preeminent formidable state worldwide. (3)
In conclusion, Republican politicians and realist political scientists posit that the United States has experienced a decline in energy and power due to its entanglement in Europe’s inefficient rivalries, exemplified by the ongoing Ukraine War. In contrast, they argue that China is poised to exceed the United States in the global leadership competition. Henry Kissinger, the former Secretary of State, coined the term “the necessity for choice” to describe such circumstances, emphasizing the importance for decision-makers to prioritize based on their country’s strength. (Henry Kissinger, Diplomacy, 1994). Under these circumstances, what type of regional emphasis should the United States prioritize? Would traditional focal points of American foreign policy, namely Europe and the Middle East, now take a backseat in this regard?
If the United States diverts a portion of its influence from Europe towards the Asia-Pacific region, it is conceivable that US allies and partners such as Britain, Germany, and France could fill the resultant power vacuum in Europe. However, can a similar scenario be anticipated for the Middle East? However, in the event that the United States withdraws from the region, would American allies and partners regain dominance in the Middle East?
THE MIDDLE EAST: NO LONGER IMPORTANT TO AMERICA?
According to Ambassador Martin Indyk, a member of the Council on Foreign Relations, the United States has unnecessarily suffered huge and unnecessary losses in the Middle East. In his article featured in the Wall Street Journal, Indyk asserts that the objectives set by the United States in the Cold War era no longer hold relevance in the present day. For example he contends that the United States’ dependence on Middle Eastern oil has reached its conclusion, and emphasizes that Israel has achieved a level of capability to ensure its own security. (4)
According to Indyk, neither the Palestine problem nor Syria should be the problem of the Americans anymore. “After the sacrifice of so many American lives, the waste of so much energy and money in quixotic efforts that ended up doing more harm than good, it is time for the U.S. to find a way to escape the costly, demoralizing cycle of crusades and retreats,” Indyk says.
According to Indyk, both the Palestinian issue and Syria should no longer be the concerns of the United States. Indyk argues that after the significant sacrifice of American lives and the squandering of substantial resources and efforts in misguided endeavors that ultimately resulted in more harm than good, it is imperative for the U.S. to seek a means to extricate itself from the costly and demoralizing cycle of crusades and withdrawals.
Indyk‘s perspective finds resonance among others who share similar viewpoints. They posit that the Middle East no longer holds paramount importance for the United States, and that the American economy is no longer reliant on oil from the Persian Gulf. Even among a diminishing minority in Washington who continue to emphasize the significance of the Middle East, the prospect of ceaseless Arab disputes, Arab-Israeli conflicts, and conflict-ridden regions such as Lebanon, Syria, Libya, and Iraq evoke aversion and reluctance. Numerous political analysts and scholars now grapple with comprehending the purpose of America’s presence in the Middle East.
The distressing failures in Iraq and Afghanistan loom large in the minds of policymakers in Congress and the White House. These unnecessary wars resulted in the loss of thousands of American lives and the expenditure of trillions of dollars, yielding minimal returns for such sacrifices. Moreover, these endeavors failed to contribute positively to the region, leaving behind a trail of hundreds of thousands of casualties and devastated cities.
It can be said that the trend that the Middle East is not a priority for America started in the Obama era, accelerated during the Trump presidency, and became clearer in the emerging Biden Doctrine. (5)
In recent months, there has been a growing chorus advocating for the United States to disengage from the Middle East, with some experts asserting that this withdrawal has already been accomplished. The Newsweek news magazine, in its commentary on March 5, 2023, went so far as to proclaim that the American century in the Middle East has come to an end and that the United States has exited the region. (6) The question arises: has the United States truly departed from the Middle East? As the United States seeks to rebuild its global leadership, has it relinquished the Middle East to concentrate its power exclusively on Asia, particularly China? Can one effectively assume the role of a global leader without exerting dominance in the Middle East? This essay aims to explore these inquiries and provide insights.
THE MIDDLE EAST OR THE CENTER OF THE WORLD
To address the question of whether the United States should withdraw from the Middle East, it is imperative to first examine the region’s strategic and economic significance. In a historical context, it is noteworthy to mention that astronomer Charles Piazzi Smyth suggested in 1864 that the Great Pyramid of Giza (30°00′N 31°00′E) in Egypt represented the center of the world based on his calculations of the Earth’s landmass. However, in 1973, physicist Andrew J. Woods utilized a digital global map and employed mainframe systems to determine coordinates, concluding that the center of the world was located at 39°00′N 34°00′E, near the district of Kırşehir and Seyfe Village in present-day Turkey, approximately 1,800 km north of Giza. Alternatively, there exists another perspective proposing that Mecca, which holds symbolic importance as a religious site, is considered the center of the world, akin to the significance attributed to the Earth’s two poles.
The precise identification of a geographically central town or village remains uncertain; however, upon examining the world map, it becomes apparent that the region commonly referred to as the Middle East occupies a prominent position at the global center. It serves as the converging point, or even collision point, of three ‘old’ continents: Asia, Europe, and Africa. Egypt represents the junction of Africa and Asia, with a portion of its territory situated in Asia and the remaining part in Africa. Observing the Sinai Peninsula on a map, one might perceive it as a piece of land that Asia and Africa have claimed for themselves, unable to share it. Similarly, the continents of Asia and Europe intersect through the nation of Turkey, where the Thrace region lies within Europe while the Anatolian lands extend into Asia. Spanning across Istanbul, one of the world’s most densely populated cities, the Bosphorus strait bisects the city into distinct European and Asian sectors. There is no other city in the world on two separate continents.Given the geostrategic significance of the Middle East, it becomes readily apparent why numerous major powers throughout history, ranging from the Hittites aspiring to exert dominance across Asia, Africa, and Europe, to the ancient Greeks, Pharaonic Egypt, and the Roman Empire, sought to seize control of this region.Historical evidence demonstrates the formidable challenge faced by a state aspiring to achieve and sustain “superpower” status in the absence of a dominant position in the Middle East region.
The Middle East region serves as a vital nexus, connecting not only continents but also the world’s most significant waterways and seas. Positioned amidst the Atlantic Ocean, the Mediterranean Sea, and the Indian Ocean, it encompasses a strategic location. The region is intersected by critical maritime passages and bodies of water including the Red Sea, Gulf of Aden, Persian Gulf, Arabian Sea, Gulf of Oman, Turkish Straits, Aegean Sea, and Black Sea, scattered throughout its expanse. These waterways hold immense importance for global maritime trade and military operations.
The Middle East occupies a central position in the world, encompassing not only its geographical significance but also its profound cultural and historical influence. While other regions were still inhabited by cave-dwelling societies, it was in the Middle East where the Sumerians made notable advancements, such as the development of writing, the introduction of the calendar system, and the initiation of foundational mathematical calculations. As the birthplace of humanity’s earliest civilizations, including the Assyrians, Babylonians, Akkadians, ancient Egyptians, and Hittites, the Middle East stands as the cradle of human civilization.
Furthermore, it is within the Middle East that the three prominent monotheistic faiths—Judaism, Christianity, and Islam—found their origins and thrived. This region bears immense importance as the spiritual birthplace and focal point of these religious traditions. Revered cities like Mecca, Medina, Jerusalem, and Ephesus persistently attract countless devoted pilgrims, serving as profound hubs of religious reverence and cultural legacy.
To sum up, given the geostrategic and cultural significance it embodies, it would not be an overstatement to assert that sustained global leadership is unattainable for any power that fails to exert dominance over the Middle East region in the long term.
CENTER OF OIL AND PETRO-DOLLARS
Following the discovery of oil in the early 20th century, the Middle East gained increased significance for major global powers. Notably, oil production commenced in substantial reserves in Iran in 1908, followed by Iraq in the 1920s, and Saudi Arabia and Kuwait in the 1930s. As the prominence of the oil-based industry grew, industrialized nations became heavily reliant on Middle Eastern oil. The escalating utilization of natural gas for residential heating and electricity generation further solidified the West’s indispensable dependence on the region. While oil initially served as fuel, its applications in modern society have expanded significantly over time. Petrochemicals, encompassing plastics, synthetic fibers, rubber, solvents, paints, detergents, fertilizers, and pharmaceuticals, as well as lubricants, asphalt, bitumen, and other petroleum-derived products, permeated various aspects of daily life. Presently, petroleum products find widespread utilization, spanning from cosmetics to automobile components.
The possession of this invaluable resource naturally enriched the countries of the Middle East. Nevertheless, during the initial years, Arab nations grappled with the question of how to manage their newfound petrodollars and opted to deposit their earnings in Western banks. The West, in turn, purchased oil with dollars, while Arab and Iranian nations, who exchanged oil for dollars, deposited their funds in Western banks or imported consumer goods from Western nations. Ultimately, both money and oil predominantly resided in the hands of the West. Following bitter experiences, this arrangement underwent a transformation, leading Arab nations to diversify their sources of income. Presently, oil-rich Arab countries own numerous Western companies. Moreover, wealthy individuals from Arab nations, bolstered by petrodollars, have invested in symbols of Western culture such as sports clubs like PSG and Manchester City. Gulf states such as Qatar, United Arab Emirates and Kuwait have also effectively succeeded in attracting the world’s wealthy to the region by constructing entertainment and grandiose shopping centers in the world’s tallest buildings next to oil wells…
In summary, as a result of capital accumulation derived from oil and gas exports, numerous Middle Eastern nations have emerged as significant importers and foreign investors on the global stage. The Arabian Peninsula accommodates nearly 20 sovereign wealth funds (SWFs), responsible for overseeing approximately $3.7 trillion in assets, which accounts for roughly one-third of the total state fund assets globally. For instance, the Kuwait Investment Authority stands as the sixth largest government investor worldwide, managing assets worth $769 billion as of 2022. As a result, Arab funds and investors represent coveted capital owners that each country seeks to attract to its domestic market. Similarly, the commercial cities of the Gulf have assumed a pivotal role in the global economy. Consequently, it becomes evident that any global power incapable of exerting influence in the Middle East would be excluded from highly consequential economic opportunities.
LAND OF TERROR OR OPPORTUNITIES?
Presently, if an average American or English individual were to be queried regarding their perceptions of the Middle East, their associations may encompass terms such as “terrorism” or “conflict,” portraying the region as a domain inhabited by adversarial forces. Nevertheless, over the course of the 20th century, the Middle East has significantly contributed to the economic and security realms of Western nations. Every impartial and non-ideological assessment unequivocally acknowledges that the Middle East has undergone a transformation, emerging as a region that mitigates the burdens on the United States and Europe, instead of serving as an additional source of obstacles or challenges across diverse domains. I do not find it realistic that the U.S.’s regional interests during the Cold War years are no longer valid in the new world order. If the U.S. still claims global leadership, it has and always will have vital interests in the Middle East.
Following the 9/11 attacks, President George Bush issued a cautionary statement that “America is addicted to oil” and advocated for a substantial reduction in imports from the Middle East. Since then, there has been a significant decline in U.S. imports from the Middle East; however, a complete reset has not been achieved. Nevertheless, refraining from importing oil specifically from Middle Eastern countries does not imply a lack of dependence on Middle Eastern oil. Irrespective of the source of oil procurement, oil carries a price like any other commodity, with oil prices predominantly influenced by the Organization of the Petroleum Exporting Countries (OPEC), comprising primarily Middle Eastern nations. Consequently, all nations worldwide, regardless of whether they import oil from the Middle East or elsewhere, remain reliant on the Middle East for oil, and this scenario shows no signs of imminent alteration. In fact, the U.S. President, seeking to curb escalating oil prices resulting from the Ukraine War, appealed to Arab states, particularly Saudi Arabia as the largest global oil producer. However, the Arab oil producers did not heed these requests, and oil prices soared once they collaborated with Russia. The surge in oil prices impacts every facet of the economy, given that oil serves as a fundamental raw material for numerous end products and constitutes a substantial portion of transportation and distribution costs. High oil prices have been one of the main contributing factors to the global inflation observed in recent years.
IS THERE A GLOBAL LEADERSHIP POSSIBLE WITHOUT THE MIDDLE EAST?
For a state to uphold its claim to global leadership, it will face significant challenges if it fails to establish a presence in the Middle East, given the region’s strategic location, abundant natural resources, and financial power. Moreover, a global power that attains influence over the Middle East does not merely shoulder new burdens, but rather discovers numerous sources of material and spiritual power that augment its influence in the region. The intentional or inadvertent creation of a substantial power vacuum by the United States in the Middle East has been recognized by China, which has discerned the region’s importance and fertility in global competition.
When China hosted the inaugural Sino-Arab Summit with Arab states in December 2022, the international media primarily emphasized the political aspect of the event. Similarly, when China successfully brokered reconciliation between long-standing rivals Iran and Saudi Arabia in February 2023, global public opinion centered on China’s potential political and military objectives in the Middle East. While it would be incorrect to assert that China’s new policies toward the Middle East lack political motivations, Beijing’s primary objectives for engaging with the region are driven by economic interests and energy security, rather than purely political ambitions. China’s annual crude oil imports from Middle Eastern countries exceed $170 billion, with Saudi Arabia alone exporting approximately $65 billion worth of crude oil to China in 2022. If China intends to sustain its economic growth, establishing a presence in the Middle East becomes imperative.(7)
Furthermore, the combined GDP of Middle Eastern countries surpasses $5 trillion, exceeding the combining GDP of both Japan and Germany. In essence, the Middle East region represents a prosperous market for Chinese goods. Notably, oil and natural gas-rich nations within the region possess investment funds worth trillions of dollars, as well as companies capable of making foreign investments. For instance, Saudi Arabia’s Aramco, a prominent petrochemical giant, has invested over $10 billion in refinery projects in China and is engaged in ongoing negotiations for further investments. As China currently serves as the Middle East’s largest trading partner, it aims to expand its sales to the region, increase oil purchases, and attract the trillions of dollars amassed within the region, which predominantly flow to Western markets, to the mainland Chinese economy.
In summary, China views the Middle East through an economic lens rather than a political one, offering a cooperative approach that benefits all participating nations. Unlike US-Middle East relations, this cooperation does not entail mutual political expectations between the involved parties.
Middle Eastern countries are presently content with China’s interest in the region, as it presents an alternative power capable of balancing Western policies in favor of local powers. Leveraging the global competition between China and the United States, local states will strive to assert their desires upon the major powers.
In order for the United States to uphold its position of global leadership, it appears impracticable to relinquish the Middle East to its adversaries. This is because the power that exercises dominance in the Middle East not only enhances its own power but also assumes a decisive role in global economies. It is evident that the United States has encountered a crisis of self-confidence in the region following its setbacks in Iraq and Afghanistan. Nevertheless, what is expected from the United States is not to repeat the mistakes of its past experiences in Iraq and Afghanistan, but rather to approach the region by assimilating lessons from those failures.
In his book titled “Grand Delusion” (Penguin, 2023), Steven Simon elucidates why America has sustained losses in the Middle East over a span of four decades. He identifies the crucial factor as Americans’ lack of comprehension regarding the region. If Washington desires to secure success in the Middle East, it must abandon its unilateral impositions and instead prioritize listening to its allies in the region.
(1) “President Trump Reportedly Wants Allies to Pay Full Cost of Hosting U.S. Troops Abroad ‘Plus 50%’”, Time, 8 MArch 2019.
(2) Steve Kraske, Zach Wilson, “Why one political scientist says the U.S. should focus on China instead of Russia’s war in Ukraine”, NPR, February 22, 2023, https://www.kcur.org/podcast/up–to–date/2023-02-22/why–one–political–scientists–says–the–u–s–should–focus–on–china–instead–of–russias–war–in–ukraine
(3) Elbridge A. Colby, “The U.S. Must Support Ukraine, But China Must Be Our Priority”, Time, 27 February 2022; Elbridge A. Colby and Alex Velez-Green, “To Avert War with China, the U.S. Must Pprioritize Taiwan over Ukraine”, The Washington Post, May 18, 2023.
(4) Martin Indyk, “The Middle East Isn’t Worth It Anymore”, Wall Street Journal, 18 January 2020.
(5) Jonathan Panikoff, “Shifting Priorities: The US and the Middle East in a Multipolar World”, The Atlantic Council, 12 July 2022.
(6) Tom O’Conner, “The End of the American Century Begins in the Middle East,” The Newsweek, 3 May 2023.
For U.S. politicians, a free Honduras should be a bipartisan priority
Since Xiomara Castro was sworn into office as Honduras’ first female president, she has chosen to align the country with backward regimes such as Cuba and China. At the same time, she appears to be moving away from trade partnerships with forward-thinking countries like the US and Taiwan.
If Castro is successful, it would be an unmitigated disaster for Honduras and the entire free world, reversing decades of economic and social progress that the country has made.
It would also be a hammer blow for the US, both politically and economically. After all, America is Honduras’ biggest trading partner, accounting for $5.2 billion in exports and $6.4bn in imports in 2021, while it also provides a host of much-needed educational opportunities.
In addition, it would play right into China’s hands as the global superpower strives to broaden its geographic footprint and influence. Were Castro to get her way, it would also undoubtedly result in a mass exodus of Honduran migrants, who would head straight for the US border in search of a better life.
US should support a free Honduras
The only way to stop Honduras from going down the same path as some of its neighbors is for the US Republicans and Democrats to join forces to defend the country’s freedom. Only the newly-elected speaker of the House of Representatives, Kevin McCarthy, has the power and drive to bring the two sides together to save the Honduran people from their perilous plight
Only through public diplomacy can the US Government alter Honduras’ economic course for the better. But it needs to make sure that it works alongside and cooperatively with President Castro. A recent letter from Senator Elizabeth Warren and more than 30 anti-trade Democrats urging the U.S. Government to intervene against fellow Americans in a case brought against Honduras by American firm Honduras Prospera has only served to worsen the ongoing dispute.
Castro has already taken steps to shut down foreign investment in Zones for Employment and Economic Development (ZEDEs), signing a measure to repeal the legislation governing them. The direct result has been to economically disenfranchise hundreds of thousands of hard-working Hondurans and, in effect, stall the economy.
The fact of the matter is that ZEDEs will raise the country’s gross domestic product (GDP) per capita to $36,000 by 2050. That’s more than 10 times above the current GDP of $2,772.
ZEDEs are already having a big impact on Honduras’ economy, driving GDP per capita growth by 17% between 2020 and 2021. A shining example of this is Prospera, a ZEDE on the island of Roatan, which has attracted almost $100 million in US private investment, with that figure expected to reach $500m by 2025.
The bottom line is that free trade zones are key to attracting foreign investment, and creating jobs and prosperity in developing countries such as Honduras. This investment is vital to kick-start a flagging economy that is still getting over the cost of the Covid-19 pandemic.
Castro’s plans to close ZEDEs are ill-conceived and, if followed through with, they will cause untold damage to both the economy and jobs. They will also scare off any potential long-term investors looking for a stable environment in which to do business that abides by the rule of law.
Honduras’ future is in the balance. It can’t afford to make the same mistakes as its Latin American counterparts Venezuela and Bolivia, both of which are now mired in poverty and corruption after decades of mismanagement by the government.
ZEDEs represent a unique opportunity to lift millions of Hondurans out of poverty. Shutting them down will only put their workers back to square one, at the worst possible time, with the world facing 40-year record inflation and a deep cost of living crisis.
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