I’ve long stressed the importance of geopolitical issues and the role they play in shaping the investment environment. As the world becomes a more complex place, global political developments are becoming increasingly important in the investment decision process.

I've established Geopolitics & Investing to supplement another product--my global advisory, Silk Road Investor--to assist investors in identifying investment trends that stem from developments in the geopolitical arena and to offer actionable investment advice. The following is an excerpt from the report.

The Eagle

It’s clear that the US’ main “problems” in its efforts to establish a solid presence in Central Asia will be Russia and China. And although a first look at the situation may cause some worry, there are ways--via concessions, of course--for all three powers to coexist in the region.

It’s also quite obvious and troubling that Beijing, Moscow and Washington are once again using Central Asia as their game board in a region rarely neglected by the world's great powers. Today, Washington approaches each state bilaterally, offering incentives to support the operations in Afghanistan while undermining the consensus aimed for by the Shanghai Cooperation Organization (China, Russia, Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan).

China and Russia are acting together, offering blanket support for the current regimes and implicitly calling attention to US-led efforts to undermine their governments. The Central Asian states will continue to swing their support from China and Russia to the US and back again, so long as they keep their hold on power.

When it comes to Central Asia, the US must concentrate on Russia. As Russia is re-emerging as a regional power (its superpower status long gone), it’s understandable that US foreign policy-makers and defense planners are once again paying attention to the old rival. The current situation is quite different from that of the 20th century, though it seems many players in both camps refuse to face the new realities.

In an article published in the Financial Times in early April, Dimitri Simes--president of the Nixon Center in Washington, DC--made the argument that the US needs to decide on the kind of cooperation it wants to have with Russia.

The idea, though it seems to escape policy-makers in the US capital, is fairly simple: Although Russia has shown signs that it’s prepared to pay a price to accommodate US concerns, for example, regarding the Iran issue, reciprocity from the US hasn’t been there. Instead, policy circles in the US have advocated a “selective cooperation” approach.

As Simes argues, “proponents of an ‘a la carte’ partnership expect Moscow to fully support Washington on an issue of grave importance to the US, while believing that the US can, at no cost, pursue policies that Russia perceives to be hostile to its interests in the post-Soviet space.”

The situation Simes describes is of paramount importance since President Putin’s policy has been in the direction of aligning Russian actions with those of the US and the EU; Putin has also made clear that he won’t tolerate foreign actions intended to discredit his policies.

In addition, and before the US decided to give negotiations with Iran a chance, seasoned US political observers like former US National Security Adviser Brent Scowcroft have noted that “to deter Iran, it is essential that there be a united front between the US, the European Union, Russia and China to prevent Iran from exploiting any differences or finding any sort of wiggle room that would allow it to continue with its program.”

It’s possible to make a case that foreign policies based on realistic expectations and true cooperation between the sole superpower and regional powers (Russia, China, etc.) can benefit all and allow smoother solutions to problems, provided that this is what the parties involved are interested in.

In that respect--and given Secretary of State Condoleezza Rice’s new foreign policy directions--it’s conceivable that a slow change may be underway, one that will see the US shift from the dangerous and unsuccessful path of unilateral/hegemonic assertion of power to a more multilateral one.

It’s obvious to even novice observers that since last year, when Rice became Secretary of State, she’s tried to implement a realist vision in foreign relations based on classical balance of power. In a Jan. 18, 2006, speech at Georgetown University, Secretary Rice noted:

America needs equally bold diplomacy, a diplomacy that not only reports about the world as it is, but seeks to change the world itself. I and others have called this mission "transformational diplomacy." And today I want to explain what it is in principle and how we are advancing it in practice.

So, I would define the objective of transformational diplomacy this way: to work with our many partners around the world, to build and sustain democratic, well-governed states that will respond to the needs of their people and conduct themselves responsibly in the international system. Let me be clear, transformational diplomacy is rooted in partnership; not in paternalism. In doing things with people, not for them; we seek to use America's diplomatic power to help foreign citizens better their own lives and to build their own nations and to transform their own futures.

Against the backdrop of an ever-bloodier conflict in Iraq, American foreign policy is moving in a dangerous direction toward empire. Worrisome imperial trends are apparent in the Bush administration’s National Security Strategy. That document pledges to maintain America’s military dominance in the world, and it does so in a way that encourages other nations to form countervailing coalitions and alliances. We can expect, and are seeing now, multiple balances of power forming against us. People resent and resist domination, no matter how benign.

© 2006 Yiannis G. Mostrous
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