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Iran’s Karla

January 04, 2020
Turning Points
Bloomberg

He was the mastermind of mayhem, spreading Iranian influence through violent militia groups from Iraq to Syria and Yemen. Qassem Soleimani, killed in a U.S. drone strike in Baghdad where the White House said he was plotting more attacks, was Iran's spymaster, one of its shrewdest military strategists and de facto foreign minister all rolled into one.

In a 2013 New Yorker profile, Dexter Filkins described Soleimani as "a Middle Eastern equivalent of Karla, the elusive Soviet master spy in John le Carre's novels," a figure who commanded both hatred and admiration among spies in the West. With his death, an economically struggling Iran has been dealt a devastating security blow.

This week in the New Economy

With the death of Soleimani (above center), a decade that began with the prospect of a partial U.S.-China trade truce is now haunted by the specter of another war in the Middle East.

Once again, the new economy is hostage to the violent politics of a region where the interests of the U.S., Russia and China all intersect, and frequently collide. Indeed, these military tensions could "nip any positive sentiment in the bud," write Enda Curran and Michelle Jamrisko. "A sustained rise in oil prices—futures in London and New York surged by more than 4% on the news—would hurt economies that rely on energy imports, and suppress consumer demand."

A "pivot" back to the Middle East?

Try as it might, the U.S. can't seem to extricate itself from a part of the world where it has poured blood and treasure for decades, even as the most potent rival it's ever faced, China, rapidly builds up its economic and military capabilities.

Remember President Barack Obama's much hyped "pivot" to Asia? Washington's strategic shift away from the battlefields of the Middle East and Central Asia to a part of the world that will drive the 21st century economy always seemed to lack conviction.

Of course, it didn't stop China from building a string of artificial islands (such as Fiery Cross Reef below) in the South China Sea under the very bows of warships from the U.S. Seventh Fleet, and then militarizing them with missile and radar installations, long airfields for transport planes and deep water harbors.

Now, U.S. President Donald Trump is escalating a standoff with the Middle East's aspiring regional hegemon.

For a long time, Trump couldn't decide whether a trade conflict with China would be useful for him going into the 2020 election year, allowing him to pose as a "wartime leader." In the end, he cast himself as a peacemaker on trade. Nobody knows where the Iran crisis will lead, and how it will impact the presidential vote come November. One thing seems clear, however: Even though China is critically dependent on Middle East oil flows, the U.S.-Iran flare-up will work to Beijing's advantage from a geopolitical perspective.

So much for "Phase One" 

With the Middle East a tinder box, markets won't be paying much attention to the "phase one" U.S.-China trade deal that Trump has said he will sign on Jan. 15.

Alas, prospects just dimmed even further for a "phase two" agreement covering the most contentious issues, like Chinese industrial subsidies, that Trump said he'll kick start with a visit to Beijing at some unspecified date. Iran will consume Trump's attention for the foreseeable future. Plus, North Korea is baring its nuclear fangs again.

Still, China doesn't have everything going its way. However much Trump's unorthodox diplomacy (in particular his disdain for many U.S. allies) may have damaged American standing in the world, China's miscues are on a different scale entirely.

This point is illustrated by a Pew survey that shows not a single country surveyed considers China a more reliable ally than the U.S., even if large numbers of people in some countries also consider Washington to be their biggest threat. China is rapidly amassing wealth and power. Global influence, though, is relative.

Climate suicide

Notwithstanding the perils of the Middle East, what will it take to convince politicians that the greatest long-term threat to the planet is climate change? You might think an epiphany would come when a country is being consumed by unprecedented, global warming-driven wildfires.

You would be wrong.

Australia Prime Minister Scott Morrison, a staunch defender of the climate change-inducing coal industry, went on vacation to Hawaii as swaths of New South Wales and Victoria went up in flames, and a humanitarian crisis loomed.

"Such are those who would open the gates of hell and lead a nation to commit climate suicide," writes the Australian novelist Richard Flanagan.

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