There is a lot of talk in Washington these days
about "containment." Foreign policy pundits insist that the U.S. must
contain Iran, whose rise as a political-military power poses a threat to Western
strategic and economic interests in the Persian Gulf region.
At the same time, economic experts maintain that the U.S. should contain its
mounting financial crisis, which first raised its ugly head in the obscure sub-prime
mortgage market and now seems to be having a devastating effect on the entire
economy, and perhaps across the global financial system.
So Washington has been doing a lot of "containing" in both the foreign
policy and economic arenas this year. In the Middle East, the Bush administration
has been trying to reassert U.S. power in the region by:
- Increasing the number of U.S. troops in Iraq to 160,000 while providing
support to the Shi'ite-controlled government and to Sunni forces.
- Isolating Syria and Lebanon's Hezbollah.
- Re-energizing the Israel-Palestine peace process.
- Imposing economic and diplomatic sanctions on Iran.
The result of the grand U.S. strategic designs in the Middle East? The anti-American
and sectarian violence continues in Iraq, and there has been no progress toward
political reconciliation between the Shi'ites and Sunnis in the country.
Pressure from Syria and Hezbollah is preventing the election of a new president
in Lebanon. The peace process is stalled, and Israelis and Palestinians are
continuing to kill each other. And to dramatize the scale of American failures,
Iran's anti-American President Mahmoud Ahmadinejad has been received on a red
carpet in Baghdad, while Saudi Arabia and Egypt have been strengthening ties
with Iran, getting closer to Syria, and negotiating with Hamas.
On the economic front, the Federal Reserve has been leading the way, and the
administration and Congress have been protecting the rear. They are slashing
interest rates again and again and again. They are promoting new plans to stimulate
the economy and assist those who are finding it more and more difficult to finance
their mortgages, make payments on their credit cards, and even fill their car's
And then there have been several "creative" efforts by the Fed to
provide new sources of liquidity for troubled American banks.
But coming up with new fiscal rescue plans by the federal government
paid by the same American taxpayer who is enduring the current economic pains
and printing more and more money do not seem to provide the needed "containment."
Instead, they are igniting inflationary pressures and putting more downward
pressure on the U.S. dollar, whose value has been declining as investors have
been pulling money out of the U.S.
And there are no signs that the banks and the other financial institutions
are ready to provide new credit to business and consumers. If anything, they
seem to be in panic.
Indeed, if the visit by President Ahmadinejad to Iraq made it clear that America
is failing to secure its position in the Middle East, last week's emergency
rescue of Bear Stearns, one of Wall Street's respected financial institutions,
by J.P. Morgan and the Federal Reserve demonstrated that the credit crisis is
spreading to the broader economy and could threaten the U.S. financial system.
Last Friday, Bear Stearns' stock was worth $30 a share. By Monday, rival bank
J.P. Morgan Chase reached a deal to buy the troubled firm for $236 million,
or just $2 a share.
And there is a point the Arab oil fields in which America's strategic
woes in the Middle East are intersecting with its growing economic problems.
Hence the humiliating images of President George W. Bush and now Vice
President Dick Cheney, who is in the Middle East pleading with the Arab
oil sheiks to please try to keep those energy prices down.
But the oil producers in the Middle East whose economies are suffering
from inflation because of the weak U.S. dollar to which their currencies are
tied while their sovereign wealth funds have been keeping alive several distressed
U.S. financial institutions are reminding their American guests that
the resurgence of Iran is the direct result of the U.S. ousting of Saddam Hussein
in Iraq. And its current economic problems are the outcome of the mismanagement
of U.S. monetary and fiscal policies.
This reality also reveals the constraints operating on the dual American containment
policies in the Middle East and the financial markets. Officials in Washington
are aware that the threat of using American military force against Iran is not
credible under the current tight economic conditions, in particular, rising
energy prices. But the continuing costly U.S. military intervention in the Middle
East also makes it difficult to put America's economic house in order.
It is clear therefore that the next U.S. president will have to find a way
to go beyond military surges and economic bailouts, which tend to be both expansive
and futile, and readjust U.S. global strategy and economic policies in accordance
with the changing realities of American power.
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