A few weeks ago, folks were busy claiming that this financial crisis and the ensuing recession would mark the end of American hegemony. But, as the Washington Post points out in its editorial today, it is America’s enemies who look like they are going to be hardest hit by it. Those petro-states that have been buoyed up by the high-oil price, are in a far weaker position now oil is $65 a barrel. As the Post puts it:
“Unless oil prices quickly recover, Venezuela’s Hugo Chávez and Iran’s Mahmoud Ahmadinejad are likely to face even tougher domestic economic challenges in 2009 than the next U.S. president. According to independent estimates, both countries need an average oil price of up to $95 a barrel to fund the populist subsidies and social programs they have launched in recent years — not to mention billions of dollars in arms purchases from Russia. Venezuela has been furiously importing food to fill empty shop shelves, while Iran heavily subsidizes domestic fuel. Even if Mr. Chávez and Mr. Ahmadinejad manage to continue those politically sensitive programs, they may find it harder to sponsor foreign clients — from Hamas and Hezbollah in the Middle East to Cuba’s Castro brothers. Already Mr. Chávez has stiffed Nicaragua’s Daniel Ortega, to whom he had promised a $4 billion oil refinery.
Though somewhat less reliant on oil revenue, Russia may be even worse off, because of its dependence on foreign investment. The Russian stock market has dropped more than 70 percent since last spring, and Prime Minister Vladimir Putin has had to commit more than $200 billion of the country’s reserves to shore up banks. In the past several years, Mr. Putin has several times interrupted energy deliveries to European clients to make political points; he may have less financial leeway to wield that weapon in the future.”
When you consider the internal legitimacy problems the Chinese regime will face if as expected growth slows dramatically, then you see that oddly it is the US whose relative global power might be strengthened by this crisis.
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