How strange, the way those red lines continue to retreat.  Once upon a time, the red line for Washington was “enrichment” of uranium. Now, it’s evidently an actual nuclear weapon that can be brandished. Keep in mind that, since 2005, Iranian Supreme Leader Ayatollah Khamenei has stressed that his country is not seeking to build a nuclear weapon. The most recent National Intelligence Estimate on Iran from the U.S. Intelligence Community has similarly stressed that Iran is not, in fact, developing a nuclear weapon (as opposed to the breakout capacity to build one someday).

What if, however, there is no “red line,” but something completely different? Call it the petrodollar line.

Banking on Sanctions?

Let’s start here: In December 2011, impervious to dire consequences for the global economy, the U.S. Congress — under all the usual pressures from the Israel lobby (not that it needs them) — foisted a mandatory sanctions package on the Obama administration (100 to 0 in the Senate and with only 12 “no” votes in the House). Starting in June, the U.S. will have to sanction any third-country banks and companies dealing with Iran’s Central Bank, which is meant to cripple that country’s oil sales.  (Congress did allow for some “exemptions.”)

The ultimate target? Regime change — what else? — in Tehran. The proverbial anonymous U.S. official admitted as much in the Washington Post, and that paper printed the comment.  (“The goal of the U.S. and other sanctions against Iran is regime collapse, a senior U.S. intelligence official said, offering the clearest indication yet that the Obama administration is at least as intent on unseating Iran’s government as it is on engaging with it.”) But oops! The newspaper then had to revise the passage to eliminate that embarrassingly on-target quote. Undoubtedly, this “red line” came too close to the truth for comfort.

Former chairman of the Joint Chiefs of Staff Admiral Mike Mullen believed that only a monster shock-and-awe-style event, totally humiliating the leadership in Tehran, would lead to genuine regime change — and he was hardly alone. Advocates of actions ranging from air strikes to invasion (whether by the U.S., Israel, or some combination of the two) have been legion in neocon Washington.  (See, for instance, the Brookings Institution’s 2009 report Which Path to Persia.)

Yet anyone remotely familiar with Iran knows that such an attack would rally the population behind Khamenei and the Revolutionary Guards.  In those circumstances, the deep aversion of many Iranians to the military dictatorship of the mullahtariat would matter little.

Besides, even the Iranian opposition supports a peaceful nuclear program.  It’s a matter of national pride.

Iranian intellectuals, far more familiar with Persian smoke and mirrors than ideologues in Washington, totally debunk any war scenarios.  They stress that the Tehran regime, adept in the arts of Persian shadow play, has no intention of provoking an attack that could lead to its obliteration. On their part, whether correctly or not, Tehran strategists assume that Washington will prove unable to launch yet one more war in the Greater Middle East, especially one that could lead to staggering collateral damage for the world economy.

In the meantime, Washington’s expectations that a harsh sanctions regime might make the Iranians give ground, if not go down, may prove to be a chimera.  Washington spin has been focused on the supposedly disastrous mega-devaluation of the Iranian currency, the rial, in the face of the new sanctions. Unfortunately for the fans of Iranian economic collapse, Professor Djavad Salehi-Isfahani has laid out in elaborate detail the long-term nature of this process, which Iranian economists have more than welcomed.  After all, it will boost Iran’s non-oil exports and help local industry in competition with cheap Chinese imports. In sum: a devalued rial stands a reasonable chance of actually reducing unemployment in Iran.

More Connected Than Google

Though few in the U.S. have noticed, Iran is not exactly “isolated,” though Washington might wish it.  Pakistani Prime Minister Yusuf Gilani has become a frequent flyer to Tehran. And he’s a Johnny-come-lately compared to Russia’s national security chief Nikolai Patrushev, who only recently warned the Israelis not to push the U.S. to attack Iran. Add in as well U.S. ally and Afghan President Hamid Karzai.  At a Loya Jirga (grand council) in late 2011, in front of 2,000 tribal leaders, he stressed that Kabul was planning to get even closer to Tehran.

On that crucial Eurasian chessboard, Pipelineistan, the Iran-Pakistan (IP) natural gas pipeline — much to Washington’s distress — is now a go. Pakistan badly needs energy and its leadership has clearly decided that it’s unwilling to wait forever and a day for Washington’s eternal pet project — the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline — to traverse Talibanistan.

Even Turkish Foreign Minister Ahmet Davutoglu recently visited Tehran, though his country’s relationship with Iran has grown ever edgier.  After all, energy overrules threats in the region. NATO member Turkey is already involved in covert ops in Syria, allied with hardcore fundamentalist Sunnis in Iraq, and — in a remarkable volte-face in the wake of the Arab Spring(s) — has traded in an Ankara-Tehran-Damascus axis for an Ankara-Riyadh-Doha one.  It is even planning on hosting components of Washington’s long-planned missile defense system, targeted at Iran.

All this from a country with a Davutoglu-coined foreign policy of “zero problems with our neighbors.”  Still, the needs of Pipelineistan do set the heart racing.  Turkey is desperate for access to Iran’s energy resources, and if Iranian natural gas ever reaches Western Europe — something the Europeans are desperately eager for — Turkey will be the privileged transit country.  Turkey’s leaders have already signaled their rejection of further U.S. sanctions against Iranian oil.

And speaking of connections, last week there was that spectacular diplomatic coup de théâtre, Iranian President Mahmoud Ahmadinejad’s Latin American tour. U.S. right-wingers may harp on a Tehran-Caracas axis of evil — supposedly promoting “terror” across Latin America as a springboard for future attacks on the northern superpower — but back in real life, another kind of truth lurks.  All these years later, Washington is still unable to digest the idea that it has lost control over, or even influence in, those two regional powers over which it once exercised unmitigated imperial hegemony.

Add to this the wall of mistrust that has only solidified since the 1979 Islamic revolution in Iran.  Mix in a new, mostly sovereign Latin America pushing for integration not only via leftwing governments in Venezuela, Bolivia and Ecuador but through regional powers Brazil and Argentina. Stir and you get photo ops like Ahmadinejad and Venezuelan President Hugo Chavez saluting Nicaraguan President Daniel Ortega.

Washington continues to push a vision of a world from which Iran has been radically disconnected.  State Department spokesperson Victoria Nuland is typical in saying recently, “Iran can remain in international isolation.”  As it happens, though, she needs to get her facts straight.

“Isolated” Iran has $4 billion in joint projects with Venezuela including, crucially, a bank (as with Ecuador, it has dozens of planned projects from building power plants to, once again, banking). That has led the Israel-first crowd in Washington to vociferously demand that sanctions be slapped on Venezuela.  Only problem: how would the U.S. pay for its crucial Venezuelan oil imports then?

Much was made in the U.S. press of the fact that Ahmadinejad did not visit Brazil on this jaunt through Latin America, but diplomatically Tehran and Brasilia remain in sync. When it comes to the nuclear dossier in particular, Brazil’s history leaves its leaders sympathetic.  After all, that country developed — and then dropped — a nuclear weapons program. In May 2010, Brazil and Turkey brokered a uranium-swap agreement for Iran that might have cleared the decks on the U.S.-Iranian nuclear imbroglio.  It was, however, immediately sabotaged by Washington. A key member of the BRICS, the club of top emerging economies, Brasilia is completely opposed to the U.S. sanctions/embargo strategy.

So Iran may be “isolated” from the United States and Western Europe, but from the BRICS to NAM (the 120 member countries of the Non-Aligned Movement), it has the majority of the global South on its side.  And then, of course, there are those staunch Washington allies, Japan and South Korea, now pleading for exemptions from the coming boycott/embargo of Iran’s Central Bank.

No wonder, because these unilateral U.S. sanctions are also aimed at Asia.  After all, China, India, Japan and South Korea, together, buy no less than 62 percent of Iran’s oil exports.

With trademark Asian politesse, Japan’s Finance Minister Jun Azumi let Treasury Secretary Timothy Geithner know just what a problem Washington is creating for Tokyo, which relies on Iran for 10 percent of its oil needs.  It is pledging to at least modestly “reduce” that share “as soon as possible” in order to get a Washington exemption from those sanctions, but don’t hold your breath. South Korea has already announced that it will buy 10 percent of its oil needs from Iran in 2012.

Silk Road Redux

Most important of all, “isolated” Iran happens to be a supreme matter of national security for China, which has already rejected the latest Washington sanctions without a blink. Westerners seem to forget that the Middle Kingdom and Persia have been doing business for almost two millennia. (Does “Silk Road” ring a bell?)

The Chinese have already clinched a juicy deal for the development of Iran’s largest oil field, Yadavaran. There’s also the matter of the delivery of Caspian Sea oil from Iran through a pipeline stretching from Kazakhstan to Western China. In fact, Iran already supplies no less than 15 percent of China’s oil and natural gas. It is now more crucial to China, energy-wise, than the House of Saud is to the U.S., which imports 11 percent of its oil from Saudi Arabia.

In fact, China may be the true winner from Washington’s new sanctions, because it is likely to get its oil and gas at a lower price as the Iranians grow ever more dependent on the China market.  At this moment, in fact, the two countries are in the middle of a complex negotiation on the pricing of Iranian oil, and the Chinese have actually been ratcheting up the pressure by slightly cutting back on energy purchases.  But all this should be concluded by March, at least two months before the latest round of U.S. sanctions go into effect, according to experts in Beijing. In the end, the Chinese will certainly buy much more Iranian gas than oil, but Iran will still remain its third biggest oil supplier, right after Saudi Arabia and Angola.

As for other effects of the new sanctions on China, don’t count on them.  Chinese businesses in Iran are building cars, fiber optics networks and expanding the Tehran subway. Two-way trade is at $30 billion now and expected to hit $50 billion in 2015.  Chinese businesses will find a way around the banking problems the new sanctions impose.

Russia is, of course, another key supporter of “isolated” Iran.  It has opposed stronger sanctions either via the U.N. or through the Washington-approved package that targets Iran’s Central Bank. In fact, it favors a rollback of the existing U.N. sanctions and has also been at work on an alternative plan that could, at least theoretically, lead to a face-saving nuclear deal for everyone.

On the nuclear front, Tehran has expressed a willingness to compromise with Washington along the lines of the plan Brazil and Turkey suggested and Washington deep-sixed in 2010. Since it is now so much clearer that, for Washington — certainly for Congress — the nuclear issue is secondary to regime change, any new negotiations are bound to prove excruciatingly painful.

This is especially true now that the leaders of the European Union have managed to remove themselves from a future negotiating table by shooting themselves in their Ferragamo-clad feet.  In typical fashion, they have meekly followed Washington’s lead in implementing an Iranian oil embargo. As a senior EU official told National Iranian American Council President Trita Parsi, and as EU diplomats have assured me in no uncertain terms, they fear this might prove to be the last step short of outright war.

Meanwhile, a team of International Atomic Energy Agency inspectors has just visited Iran.  The IAEA is supervising all things nuclear in Iran, including its new uranium-enrichment plant at Fordow, near the holy city of Qom, with full production starting in June. The IAEA is positive: no bomb-making is involved.  Nonetheless, Washington (and the Israelis) continue to act as though it’s only a matter of time — and not much of it at that.

Follow the Money

That Iranian isolation theme only gets weaker when one learns that the country is dumping the dollarin its trade with Russia for rials and rubles — a similar move to ones already made in its trade with China and Japan.  As for India, an economic powerhouse in the neighborhood, its leaders also refuse to stop buying Iranian oil, a trade that, in the long run, is similarly unlikely to be conducted in dollars. India is already using the yuan with China, as Russia and China have been trading in rubles and yuan for more than a year, as Japan and China are promoting direct trading in yen and yuan.  As for Iran and China, all new trade and joint investments will be settled in yuan and rial.

Translation, if any was needed: in the near future, with the Europeans out of the mix, virtually none of Iran’s oil will be traded in dollars.

Moreover, three BRICS members (Russia, India and China) allied with Iran are major holders (and producers) of gold. Their complex trade ties won’t be affected by the whims of a U.S. Congress.  In fact, when the developing world looks at the profound crisis in the Atlanticist West, what they see is massive U.S. debt, the Fed printing money as if there’s no tomorrow, lots of “quantitative easing,” and of course the Eurozone shaking to its very foundations.

Follow the money. Leave aside, for the moment, the new sanctions on Iran’s Central Bank that will go into effect months from now, ignore Iranian threats to close the Strait of Hormuz (especially unlikely given that it’s the main way Iran gets its own oil to market), and perhaps one key reason the crisis in the Persian Gulf is mounting involves this move to torpedo the petrodollar as the all-purpose currency of exchange.

It’s been spearheaded by Iran and it’s bound to translate into an anxious Washington, facing down not only a regional power, but its major strategic competitors China and Russia.  No wonder all those carriers are heading for the Persian Gulf right now, though it’s the strangest of showdowns — a case of military power being deployed against economic power.

In this context, it’s worth remembering that in September 2000 Saddam Hussein abandoned the petrodollar as the currency of payment for Iraq’s oil, and moved to the euro. In March 2003, Iraq was invaded and the inevitable regime change occurred. Libya’s Muammar Gaddafi proposed a gold dinar both as Africa’s common currency and as the currency of payment for his country’s energy resources. Another intervention and another regime change followed.

Washington/NATO/Tel Aviv, however, offers a different narrative.  Iran’s “threats” are at the heart of the present crisis, even if these are, in fact, that country’s reaction to non-stop U.S./Israeli covert war and now, of course, economic war as well.  It’s those “threats,” so the story goes, that are leading to rising oil prices and so fueling the current recession, rather than Wall Street’s casino capitalism or massive U.S. and European debts. The cream of the 1 percent has nothing against high oil prices, not as long as Iran’s around to be the fall guy for popular anger.

As energy expert Michael Klare pointed out recently, we are now in a new geo-energy era certain to be extremely turbulent in the Persian Gulf and elsewhere.  But consider 2012 the start-up year as well for a possibly massive defection from the dollar as the global currency of choice. As perception is indeed reality, imagine the real world — mostly the global South — doing the necessary math and, little by little, beginning to do business in their own currencies and investing ever less of any surplus in U.S. Treasury bonds.

Of course, the U.S. can always count on the Gulf Cooperation Council (GCC) — Saudi Arabia, Qatar, Oman, Bahrain, Kuwait and the United Arab Emirates — which I prefer to call the Gulf Counterrevolution Club (just look at their performances during the Arab Spring). For all practical geopolitical purposes, the Gulf monarchies are a U.S. satrapy. Their decades-old promise to use only the petrodollar translates into them being an appendage of Pentagon power projection across the Middle East.  Centcom, after all, is based in Qatar; the U.S. Fifth Fleet is stationed in Bahrain. In fact, in the immensely energy-wealthy lands that we could label Greater Pipelineistan — and that the Pentagon used to call “the arc of instability” — extending through Iran all the way to Central Asia, the GCC remains key to a dwindling sense of U.S. hegemony.

If this were an economic rewrite of Edgar Allen Poe’s story, “The Pit and the Pendulum,” Iran would be but one cog in an infernal machine slowly shredding the dollar as the world’s reserve currency. Still, it’s the cog that Washington is now focused on.  They have regime change on the brain.  All that’s needed is a spark to start the fire (in — one hastens to add — all sorts of directions that are bound to catch Washington off guard).

Remember Operation Northwoods, that 1962 plan drafted by the Joint Chiefs of Staff to stage terror operations in the U.S. and blame them on Fidel Castro’s Cuba.  (President Kennedy shot the idea down.)  Or recall the Gulf of Tonkin incident in 1964, used by President Lyndon Johnson as a justification for widening the Vietnam War.  The U.S. accused North Vietnamese torpedo boats of unprovoked attacks on U.S. ships.  Later, it became clear that one of the attacks had never even happened and the president had lied about it.

It’s not at all far-fetched to imagine hardcore Full-Spectrum-Dominance practitioners inside the Pentagon riding a false-flag incident in the Persian Gulf to an attack on Iran (or simply using it to pressure Tehran into a fatal miscalculation).  Consider as well the new U.S. military strategy just unveiled by President Obama in which the focus of Washington’s attention is to move from two failed ground wars in the Greater Middle East to the Pacific (and so to China). Iran happens to be right in the middle, in Southwest Asia, with all that oil heading toward an energy-hungry modern Middle Kingdom over waters guarded by the U.S. Navy.

So yes, this larger-than-life psychodrama we call “Iran” may turn out to be as much about China and the U.S. dollar as it is about the politics of the Persian Gulf or Iran’s nonexistent bomb.  The question is: What rough beast, its hour come round at last, slouches towards Beijing to be born?

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No wonder Jim O’Neill, who coined the neologism BRIC and is now chairman of Goldman Sachs Asset Management, has been stressing that “the world is no longer dependent on the leadership of the U.S. and Europe.” After all, since 2007, China’s economy has grown by 45 percent, the American economy by less than 1 percent — figures startling enough to make anyone take back their predictions. American anxiety and puzzlement reached new heights when the latest International Monetary Fund projections indicated that, at least by certain measurements, the Chinese economy would overtake the U.S. by 2016. (Until recently, Goldman Sachs was pointing towards 2050 for that first-place exchange.)

Within the next 30 years, the top five will, according to Goldman Sachs, likely be China, the U.S., India, Brazil, and Mexico. Western Europe? Bye-bye!

A System Stripped to Its Essence

Increasing numbers of experts agree that Asia is now leading the way for the world, even as it lays bare glaring gaps in the West’s narrative of civilization. Yet to talk about “the decline of the West” is a dangerous proposition. A key historical reference is Oswald Spengler’s 1918 essay with that title. Spengler, a man of his times, thought that humanity functioned through unique cultural systems, and that Western ideas would not be pertinent for, or transferable to, other regions of the planet. (Tell that howler to the young Egyptians in Tahrir Square.)

Spengler, of course, captured the Western-dominated zeitgeist of another century. He saw cultures as living and dying organisms, each with a unique soul. The East or Orient was “magical,” while the West was “Faustian.” A reactionary misanthrope, he was convinced that the West had already reached the supreme status available to a democratic civilization — and so was destined to experience the “decline” of his title.

If you’re thinking that this sounds like an avant-la-lettre Huntingtonesque “clash of civilizations,” you can be excused, because that’s exactly what it was.

Speaking of civilizational clashes, did anyone notice that “maybe” in a recent Time cover story picking up on Spenglerian themes and headlined “The Decline and Fall of Europe (and Maybe the West)”? In our post-Spenglerian moment, the “West” is surely the United States, and how could that magazine get it so wrong? Maybe? After all, a Europe now in deep financial crisis will be “in decline” as long as it remains inextricably intertwined with and continues to defer to “the West” — that is, Washington — even as it witnesses the simultaneous economic ascent of what’s sometimes derisively referred to as “the South.”

Think of the present global capitalist moment not as a “clash,” but a “cash of civilizations.”

If Washington is now stunned and operating on autopilot, that’s in part because, historically speaking, its moment as the globe’s “sole superpower” or even “hyperpower” barely outlasted Andy Warhol’s notorious 15 minutes of fame — from the fall of the Berlin Wall and collapse of the Soviet Union to 9/11 and the Bush doctrine. The new American century was swiftly throttled in three hubris-filled stages: 9/11 (blowback); the invasion of Iraq (preemptive war); and the 2008 Wall Street meltdown (casino capitalism).

Meanwhile, one may argue that Europe still has its non-Western opportunities, that, in fact, the periphery increasingly dreams with European — not American — subtitles. The Arab Spring, for instance, was focused on European-style parliamentary democracies, not an American presidential system. In addition, however financially anxious it may be, Europe remains the world’s largest market. In an array of technological fields, it now rivals or outpaces the U.S., while regressive Persian Gulf monarchies splurge on euros (and prime real estate in Paris and London) to diversify their portfolios.

Yet, with “leaders” like the neo-Napoleonic Nicolas Sarkozy, David (of Arabia) Cameron, Silvio (“bunga bunga”) Berlusconi, and Angela (“Dear Prudence”) Merkel largely lacking imagination or striking competence, Europe certainly doesn’t need enemies. Decline or not, it might find a whole new lease on life by sidelining its Atlanticism and boldly betting on its Euro-Asian destiny. It could open up its societies, economies, and cultures to China, India, and Russia, while pushing southern Europe to connect far more deeply with a rising Turkey, the rest of the Middle East, Latin America, and Africa (and not via further NATO “humanitarian” bombings either).

Otherwise, the facts on the ground spell out something that goes well beyond the decline of the West: it’s the decline of a system in the West that, in these last years, is being stripped to its grim essence. Historian Eric Hobsbawm caught the mood of the moment when he wrote in his book “How to Change the World” that “the world transformed by capitalism,” which Karl Marx described in 1848 “in passages of dark, laconic eloquence is recognisably the world of the early twenty-first century.”

In a landscape in which politics is being reduced to a (broken) mirror reflecting finance, and in which producing and saving have been superseded by consuming, something systemic comes into view. As in the famous line of poet William Butler Yeats, “the center cannot hold” — and it won’t either.

If the West ceases to be the center, what exactly went wrong?

Are You With Me or Against Me?

It’s worth remembering that capitalism was “civilized” thanks to the unrelenting pressure of gritty working-class movements and the ever-present threat of strikes and even revolutions. The existence of the Soviet bloc, an alternate model of economic development (however warped), also helped. To counteract the USSR, Washington’s and Europe’s ruling groups had to buy the support of their masses in defending what no one blushed about calling “the Western way of life.” A complex social contract was forged, and it involved capital making concessions.

No more. Not in Washington, that’s obvious. And increasingly, not in Europe either. That system started breaking down as soon as — talk about total ideological triumph! — neoliberalism became the only show in town. There was a single superhighway from there and it swept the most fragile strands of the middle class directly into a new post-industrial proletariat, or simply into unemployable status.

If neoliberalism is the victor for now, it’s because no realist, alternative developmental model exists, and yet what it has won is ever more in question. Meanwhile, except in the Middle East, progressives the world over are paralyzed, as if expecting the old order to dissolve by itself. Unfortunately, history teaches us that, at similar crossroads in the past, you are as likely to find the grapes of wrath, right-wing populist-style, as anything else — or worse yet, outright fascism.

“The West against the rest” is a simplistic formula that doesn’t begin to describe such a world. Imagine instead, a planet in which “the rest” are trying to step beyond the West in a variety of ways, but also have absorbed that West in ways too deep to describe. Here’s the irony, then: Yes, the West will “decline,” Washington included, and still it will leave itself behind everywhere.

Sorry, Your Model Sucks

Suppose you’re a developing country, shopping in the developmental supermarket. You look at China and think you see something new — a consensus model that’s turning on the lights everywhere — or do you? After all, the Chinese version of an economic boom with no political freedom may not turn out to be much of a model for other countries to follow. In many ways, it may be more like an inapplicable lethal artifact, a cluster bomb made up of shards of the Western concept of modernity married to a Leninist-based formula where a single party controls personnel, propaganda, and — crucially — the People’s Liberation Army.

At the same time, this is a system evidently trying to prove that, even though the West unified the world — from neocolonialism to globalization — that shouldn’t imply it’s bound to rule forever in material or intellectual terms.

For its part, Europe is hawking a model of supra-national integration as a means of solving problems and conflicts from the Middle East to Africa. But any shopper can now see evidence of a European Union on the verge of cracking amid non-stop inter-European bickering that includes national revolts against the euro, discontent over NATO’s role as a global Robocop, and a style of ongoing European cultural arrogance that makes it incapable of recognizing, to take one example, why the Chinese model is so successful in Africa.

Or let’s say our shopper looks to the United States, that country still being, after all, the world’s number one economy, its dollar still the world’s reserve currency, and its military still number one in destructive power and still garrisoning much of the globe. That would indeed seem impressive, if it weren’t for the fact that Washington is visibly on the decline, oscillating wildly between a lame populism and a stale orthodoxy, and shilling for casino capitalism on a side street in its spare time. It’s a giant power enveloped in political and economic paralysis for all the world to see, and no less visibly incapable of coming up with an exit strategy.

Really, would you buy a model from any of them? In fact, where in a world in escalating disarray is anyone supposed to look these days when it comes to models?

One of the key reasons for the Arab Spring was out-of-control food prices, driven significantly by speculation. Protests and riots in Greece, Italy, Spain, France, Germany, Austria, and Turkey were direct consequences of the global recession. In Spain, nearly half of 16- to 29-year-olds — an overeducated “lost generation” — are now out of jobs, a European record.

That may be the worst in Europe, but in Britain, 20 percent of 16- to 24-year-olds are unemployed, about average for the rest of the European Union. In London, almost 25 percent of working-age people are unemployed. In France, 13.5 percent of the population is now officially poor — that is, living on less than $1,300 a month.

As many across Western Europe see it, the state has already breached the social contract. The indignados of Madrid have caught the spirit of the moment perfectly: “We’re not against the system, it’s the system that is against us.”

This spells out the essence of the abject failure of neoliberal capitalism, as David Harvey explained in his latest book, “The Enigma of Capital”. He makes clear how a political economy “of mass dispossession, of predatory practices to the point of daylight robbery, particularly of the poor and the vulnerable, the unsophisticated and the legally unprotected, has become the order of the day.”

Will Asia Save Global Capitalism?

Meanwhile Beijing is too busy remixing its destiny as the global Middle Kingdom — deploying engineers, architects, and infrastructure workers of the non-bombing variety from Canada to Brazil, Cuba to Angola — to be much distracted by the Atlanticist travails in MENA (aka the region that includes the Middle East and Northern Africa).

If the West is in trouble, global capitalism is being given a reprieve — how brief we don’t know — by the emergence of an Asian middle class, not only in China and India, but also in Indonesia (240 million people in boom mode) and Vietnam (85 million). I never cease to marvel when I compare the instant wonders and real-estate bubble of the present moment in Asia to my first experiences living there in 1994, when such countries were still in the “Asian tiger,” pre-1997-financial-crisis years.

In China alone 300 million people — “only” 23 percent of the total population — now live in medium-sized to major urban areas and enjoy what’s always called “disposable incomes.” They, in fact, constitute something like a nation unto themselves, an economy already two-thirds that of Germany’s.

The McKinsey Global Institute notes that the Chinese middle class now comprises 29 percent of the Middle Kingdom’s 190 million households, and will reach a staggering 75 percent of 372 million households by 2025 (if, of course, China’s capitalist experiment hasn’t gone off some cliff by then and its potential real-estate/finance bubble hasn’t popped and drowned the society).

In India, with its population of 1.2 billion, there are already, according to McKinsey, 15 million households with an annual income of up to $10,000; in five years, a projected 40 million households, or 200 million people, will be in that income range. And in India in 2011, as in China in 2001, the only way is up (again as long as that reprieve lasts).

Americans may find it surreal (or start packing their expat bags), but an annual income of less than $10,000 means a comfortable life in China or Indonesia, while in the United States, with a median household income of roughly $50,000, one is practically poor.

Nomura Securities predicts that in a mere three years, retail sales in China will overtake the U.S. and that, in this way, the Asian middle class may indeed “save” global capitalism for a time — but at a price so steep that Mother Nature is plotting some seriously catastrophic revenge in the form of what used to be called climate change and is now more vividly known simply as “weird weather.”

Back in the USA

Meanwhile, in the United States, Nobel Peace Prize laureate President Barack Obama continues to insist that we all live on an American planet, exceptionally so. If that line still resonates at home, though, it’s an ever harder sell in a world in which the first Chinese stealth fighter jet goes for a test spin while the American Secretary of Defense is visiting China. Or when the news agency Xinhua, echoing its master Beijing, fumes against the “irresponsible” Washington politicians who starred in the recent debt-ceiling circus, and points to the fragility of a system “saved ” from free fall by the Fed’s promise to shower free money on banks for at least two years.

Nor is Washington being exactly clever in confronting the leadership of its largest creditor, which holds $3.2 trillion in U.S. currency reserves, 40 percent of the global total, and is always puzzled by the continued lethal export of “democracy for dummies” from American shores to the Af-Pak war zones, Iraq, Libya, and other hot spots in the Greater Middle East. Beijing knows well that any further U.S.-generated turbulence in global capitalism could slash its exports, collapse its property bubble, and throw the Chinese working classes into a pretty hardcore revolutionary mode.

This means — despite rising voices of the Rick Perry/Michele Bachmann variety in the U.S. — that there’s no “evil” Chinese conspiracy against Washington or the West. In fact, behind China’s leap beyond Germany as the world’s top exporter and its designation as the factory of the world lies a significant amount of production that’s actually controlled by American, European, and Japanese companies. Again, the decline of the West, yes — but the West is already so deep in China that it’s not going away any time soon. Whoever rises or falls, there remains, as of this moment, only a one-stop-shopping developmental system in the world, fraying in the Atlantic, booming in the Pacific.

If any Washington hopes about “changing” China are a mirage, when it comes to capitalism’s global monopoly, who knows what reality may turn out to be?

Wasteland Redux

The proverbial bogeymen of our world — Osama, Saddam, Gaddafi, Ahmadinejad (how curious, all Muslims!) — are clearly meant to act like so many mini-black holes absorbing all our fears. But they won’t save the West from its decline, or the former sole superpower from its comeuppance.

Yale’s Paul Kennedy, that historian of decline, would undoubtedly remind us that history will sweep away American hegemony as surely as autumn replaces summer (as surely as European colonialism was swept away, NATO’s “humanitarian” wars notwithstanding). Already in 2002, in the run-up to the invasion of Iraq, world-system expert Immanuel Wallerstein was framing the debate this way in his book “The Decline of American Power”: the question wasn’t whether the United States was in decline, but if it could find a way to fall gracefully, without too much damage to itself or the world. The answer in the years since has been clear enough: no.

Who can doubt that, 10 years after the 9/11 attacks, the great global story of 2011 has been the Arab Spring, itself certainly a subplot in the decline of the West? As the West wallowed in a mire of fear, Islamophobia, financial and economic crisis, and even, in Britain, riots and looting, from Northern Africa to the Middle East, people risked their lives to have a crack at Western democracy.

Of course, that dream has been at least partially derailed, thanks to the medieval House of Saud and its Persian Gulf minions barging in with a ruthless strategy of counter-revolution, while NATO lent a helping hand by changing the narrative to a “humanitarian” bombing campaign meant to reassert Western greatness. As NATO’s secretary-general Anders Fogh Rasmussen put the matter bluntly, “If you’re not able to deploy troops beyond your borders, then you can’t exert influence internationally, and then that gap will be filled by emerging powers that don’t necessarily share your values and thinking.”

So let’s break the situation down as 2011 heads for winter. As far as MENA is concerned, NATO’s business is to keep the U.S. and Europe in the game, the BRICS members out of it, and the “natives” in their places. Meanwhile, in the Atlantic world, the middle classes barely hang on in quiet desperation, even as, in the Pacific, China booms, and globally the whole world holds its breath for the next economic shoe to drop in the West (and then the one after that).

Pity there’s no neo-T.S. Eliot to chronicle this shabby, neo-medievalist wasteland taking over the Atlanticist axis. When capitalism hits the intensive care unit, the ones who pay the hospital bill are always the most vulnerable — and the bill is invariably paid in blood.

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Pepe Escobar is the roving correspondent for Asia Times. His latest book is “Obama does Globalistan.”

It is, of course, impossible to say, especially since shadow play is the norm and the realities of rule are hard to discern. In a country where “politics” has for decades meant the army, it’s notable that the key actor supposedly coordinating the “transition to democracy” remains an appointee of Pharaoh Hosni Mubarak, Field Marshall Mohamed Hussein Tantawi from the Supreme Army Council. At least, popular pressure has forced Tantawi’s military junta to appoint a new transitional Prime Minister, the Tahrir-Square-friendly former transport minister Essam Sharaf.

Keep in mind that the hated emergency laws from the Mubarak era, part of what provoked the Egyptian uprising to begin with, are still in place and that the country’s intellectuals, its political parties, labor unions, and the media all fear a silent counterrevolution. At the same time, they almost uniformly insist that the Tahrir Square revolution will neither be hijacked nor rebranded by opportunists. As the ideological divide between liberalism, secularism, and Islamism disintegrated when the country’s psychological Wall of Fear came down, lawyers, doctors, textile workers — a range of the country’s civil society — remain clear on one thing: they will never settle for a theocracy or a military dictatorship. They want full democracy.

No wonder what that implies makes Western diplomatic circles tremble. An Egyptian army even remotely accountable to an elected civilian government will not, for instance, collaborate in the Israeli siege of Gaza’s Palestinians, or in CIA renditions of terror suspects to the country’s prisons, or blindly in that monstrous farce, the Israeli-Palestinian “peace process.”

Meanwhile, there are more pedestrian matters to deal with: How, for example, will the army-directed transition towards September elections make the economic numbers add up? In 2009, Egypt’s import bill was $56 billion, while the country’s exports only added up to $29 billion. Tourism, foreign aid, and borrowing helped fill the gap. The uprising sent tourism into a tailspin and who knows what kinds of aid and loans anyone will fork over in the months to come.

Meanwhile, the country will have to import no less than 10 million tons of wheat in 2011 at about $3.3 billion (if grain prices don’t continue to rise) to keep people at least half-fed. This is but a small part of Mubarak’s tawdry legacy, which includes 40 million Egyptians, almost half the population, living on less than $2 a day, and it’s not going to disappear overnight, if at all.

Hit by a rolling, largely peaceful revolution all across MENA (the newly popular acronym for the Middle East and Northern Africa), Washington and an aging Fortress Europe, filled with fear, wallow in a mire of perplexity. Even after the dust from those rebellious Northern African winds settles, it’s hardly a given that they will grasp just how all the cultural stereotypes used to explain the Middle East for decades also managed to vanish.

My favorite line of the Great Arab Revolt of 2011 is still Tunisian scholar Sarhan Dhouib’s: “These revolts are an answer to [George W.] Bush’s intent to democratize the Arab world with violence.” If “shock and awe” is now also an artifact of an ancient world, what’s next?

Models for Rent or Sale

On February 3rd, the Turkish Economic and Social Studies Foundation published a poll conducted in seven Arab countries and Iran. No less than 66% of respondents considered Turkey, not Iran, the ideal model for the Middle East. A media scrum from Le Monde to the Financial Times now evidently concurs. After all, Turkey is a functional democracy in a Muslim-majority country where the separation of mosque and state prevails.

That stellar Islamic scholar at Oxford, Tariq Ramadan, the grandson of Muslim Brotherhood founder Hassan al-Banna, also recently labeled the “Turkish way” as “a source of inspiration.” In late February, Turkish Foreign Minister Ahmet Davutoglu agreed, with a surfeit of modesty that barely covered the ambitions of the new Turkey, insisting that his country does not want to be a model for the region, “but we can be a source of inspiration.”

The Egyptian Marxist economist Samir Amin — widely respected across the developing world — suspects that, whatever the hopes of the Turks and others, including so many Egyptians, Washington has quite different ideas about Egypt’s destiny. It wants, he believes, not a Turkish model but a Pakistani one for that country: that is, the mix of an “Islamic power” with a military dictatorship. It won’t fly, Amin is convinced, because “the Egyptian people are now highly politicized.”

The process of true democratization that began back in the distant 1950s in Turkey proved to be a long road. Nonetheless, despite periodic military coups and the continuing political power of the Turkish army, elections were, and remain, free. The Justice and Development Party, or AKP, now at the Turkish helm, was founded in August 2001 by former members of the Refah Party, a much more conservative Islamic group with an ideology similar to that of today’s Muslim Brotherhood in Egypt.

As the AKP mellowed out, however, the pro-business, pro-European Union wing of the country’s Islamists mixed with various center-right politicians and, in 2002, the AKP finally took power in Ankara. Only then could they begin to slowly undermine the stranglehold of the traditional Istanbul-based secular Turkish elite and the military that had held power since the 1920s.

Yet the AKP did not dream of dismantling the secular system first installed by Turkey’s founding father Mustapha Kemal Ataturk in 1924. The Turkish civil code he instituted was inspired by Switzerland with citizenship based on secular law. While the country is predominantly Muslim, of course, its people simply would not welcome a system, as in Khomeinist Iran, that is guided by religion.

The AKP should be viewed as the equivalent of the Christian Democrats in Europe after the 1950s — dynamic, business-oriented conservatives with religious roots. In Egypt, the moderate wing of the Muslim Brotherhood has many similarities to the AKP and looks to it for inspiration. In the new Egypt, it will finally be a legitimate political party and most experts believe that it could garner 25% to 30% of the vote in the first election of the new era.

All Roads Lead to Tahrir

Turkish critics — usually from the Western-oriented technical and managerial caste — regularly accuse the democracy-meets-Islam Turkish model of being little more than a successful marketing ploy, or worse, a Middle Eastern version of Russia. After all, the army still wields disproportionate behind-the-scenes power as guarantor of the state’s secular framework. And the country’s Kurdish minority is not really integrated into the system (although in September 2010 Turkish voters approved constitutional changes that give greater rights to Christians and Kurds).

With its glorious Ottoman past, notes Orhan Pamuk, the 2006 winner of the Nobel Prize for Literature, Turkey was never colonized by a world power, and thus “‘veneration of Europe’ or ‘imitation of the West’ never had the humiliating connotations” described by Frantz Fanon or Edward Said for much of the rest of the Middle East and North Africa.

There are stark differences between Turkey’s road to a military-free democracy in 2002 and the littered path ahead for Egypt’s young demonstrators and nascent political parties. In Turkey the key actors were pro-business Islamists, conservatives, neo-liberals, and right-wing nationalists. In Egypt they are pro-labor Islamists, leftists, liberals, and left-wing nationalists.

The Tahrir Square revolution was essentially unleashed by two youth groups: the April 6 Youth Movement (which was geared towards solidarity with workers on strike), and We Are All Khaled Said (which mobilized against police brutality). Later, they would be joined by Muslim Brotherhood activists and — crucially — organized labor, the masses of workers (and the unemployed) who had suffered from years of the International Monetary Fund’s “structural adjustment” poison. (As late as April 2010, an IMF delegation visited Cairo and praised Mubarak’s “progress.”)

The revolution in Tahrir Square made the necessary connections in a deeply comprehensible way. It managed to go to the heart of the matter, linking miserable wages, mass unemployment, and increasing poverty to the ways in which Mubarak’s cronies (and also the military establishment) enriched themselves. Sooner or later, in any showdown to come, the way the military controls so much of the economy will be an unavoidable topic — the way, for instance, army-owned companies continue to make a killing in the water, olive oil, cement, construction, hotel, and oil industries, or the way the military has come to own significant tracts of land in the Nile Delta and on the Red Sea, “gifts” for guaranteeing regime stability.

It’s not surprising that key sectors in the West are pushing for a “safe” Turkish model for Egypt. Yet, given the country’s immiseration, it’s unlikely that young protesters and their working class supporters will be appeased even by the possibility of a Turkish-style, neoliberal, Islamo-democratic system. What this leftist/liberal/Islamist coalition is fighting for is a labor-friendly, independent, truly sovereign democracy. It doesn’t take a PhD. from the London School of Economics, like the one bought by Saif al-Islam al-Gaddafi, to see how cataclysmic this newly independent outlook could be for the current status quo.

Mirror, Mirror on the Wall

Don’t misunderstand: Whether the Tahrir Square activists want to reproduce the Turkish system in Egypt or not, Turkey itself is immensely popular there, as it increasingly is in the wider Arab world. That offers Ankara’s politicians the perfect scenario for consolidating the country’s regional leadership role, distinctly on the rise since, in 2003, its leaders established their independence by rebuffing George W. Bush’s desire to use Turkish territory in his invasion of Iraq.

That popularity was only heightened after eight of the nine victims shot by Israeli commandos in the Gaza freedom flotilla fiasco turned out to be Turks. When Prime Minister Recep Tayyip Erdogan vociferously condemned Israel for its “bloody massacre,” he instantly became the “King of Gaza.” When Mubarak finally responded to the Tahrir Square demonstrations by announcing that he would not run again for president in 2011, President Obama didn’t say much, and former British Prime Minister Tony Blair urged Egypt not to “rush towards elections.” As for Erdogan, he virtually ordered Mubarak to step down, live on al-Jazeera for the whole Muslim world to see.

While Washington fiddled with embracing the wrong side of history, however reluctantly and chaotically, in the company of those staunch Mubarak defenders Israel and Saudi Arabia, Erdogan — with a canny assessment of regional politics — preferred to back Egyptians attempting to chart their own destiny. And it paid off.

The point is not that America is now “losing” Turkey, nor that, as some critics have charged, Erdogan is dreaming of becoming a neo-Ottoman Caliph (whatever that might mean). What must be understood here is a new Turkish concept: strategic depth. For that we need to turn to a book, Stratejik Derinlik: Turkiye’nin Uluslararasi Konumu (Strategic Depth: Turkey’s International Position), published in Istanbul in 2001 by Ahmet Davutoglu, then a professor of international relations at the University of Marmara, now Turkey’s Foreign Minister.

In that book, Davutoglu looked into a future that seems ever closer to now and placed Turkey at the center of three concentric circles: 1) the Balkans, the Black Sea basin, and the Caucasus; 2) the Middle East and the Eastern Mediterranean; 3) the Persian Gulf, Africa, and Central Asia. When it came to future areas of influence, even in 2001 he believed that Turkey could potentially claim no less than eight: the Balkans, the Black Sea, the Caucasus, the Caspian, Turkic Central Asia, the Persian Gulf, the Middle East and the Mediterranean. Today, he is a key player, and in many of those same areas of potential influence, people are indeed looking to Turkey. It’s a remarkable moment for Davutoglu, who remains convinced that Ankara will be a force to reckon with in the Middle East. As he puts it, simply enough, “This is our home.”

Take the idea of Turkey’s “strategic depth” and combine it with the Great Arab Revolt of 2011 and you understand why Erdogan has launched a bid not just to make the Turkish model the Egyptian one or even the Middle Eastern one, but to upstage Egypt as the future mediator between the region and the West. That Erdogan and Davutoglu were heading in this direction has been clear enough from the way, in the past few years, they have tried to insert themselves as mediators between Syria and Israel and have launched a complex political, diplomatic, and economic opening towards Iran.

And speaking of historical ironies, just as Iran’s fundamentalist leaders were watching an Egyptian regime deeply hostile to them go down, protests by the Iranian Green Movement suddenly began to rock Tehran again — during a visit by none other than Turkish President Abdullah Gul. The protests were handled with what amounted to a velvet glove (by Tehran’s standards) because the military dictatorship of the mullahtariat found itself in a potentially losing competition with its Turkish ally to become the number one inspirational source for Arab mass movements.

Java: Democracy with Your Coffee?

If Egyptians want lessons in the establishment of democracy, Turkey is hardly the only place to turn to for inspiration. They could, for example, look to Latin America. For the first time in over 500 years, South America is fully democratic. As in Egypt, so in many Latin American countries in the Cold War era, dictatorships were the order of the day and militaries ruled. In Brazil, for instance, the “slow, gradual, and secure” political opening that left a military dictatorship behind took practically a decade.

That implies a lot of patience. The same applies to another model: Indonesia. There, in 1998, Suharto, an aging U.S.-backed dictator 32 years in power, finally resigned only a few days after returning from a visit to, of all places, Cairo. Indonesia then looked a lot like Egypt in February 2011: a Western-friendly, predominantly Muslim nation, impoverished and fed up with a mega-corrupt military dictator who crushed leftist intellectuals as well as political Islam.

Thirteen years later, Indonesia is the world’s third largest democracy and the freest in Southeast Asia, with a secular government, a booming economy, and the military out of politics.

I still have vivid memories of riding a bike one day in May 1998 across the Indonesian capital, Jakarta, while it was literally on fire, rage exploding in endless columns of smoke. Washington did not intervene then, nor did China, nor the 10-member Association of Southeast Asian Nations. Indonesians did it for themselves. The transition followed an existing, if previously largely ignored, constitution. (In Egypt, the constitution now must be amended via a referendum.)

True, Indonesians had to live for a while with Suharto’s handpicked vice president, the affable B.J. Habibie (so unlike Mubarak’s handpicked successor the sinister Omar “Sheikh al-Torture” Suleiman). It took a year to organize new elections, amend electoral laws, and get rid of appointed seats in Parliament. It took six years for the first direct presidential election. And yes, corruption is still a huge problem, and wealth and the right connections go a long way (as is true, some would say, in the U.S.). But today, the rule of law prevails.

An “Islamic state” never had a chance. Today, only 25% of Indonesians vote for Islamic parties, while the well-organized Prosperous Justice Party, an ideological descendant of the Muslim Brotherhood, but now officially open to non-Muslims, holds only four out of 37 seats in the cabinet of President Yudhoyono, and expects to win no more than 10% of the vote in the 2014 elections.

While Indonesia remains close to the U.S. and is heavily courted by Washington as a counterweight to China, Brazil under the presidency of immensely popular Luis Ignacio “Lula” da Silva charted a far more independent path for itself and, by example, much of Latin America. This process took almost a decade and future historians may see it as at least as significant as the fall of the Berlin Wall.

In Eastern Europe, 1989 could be seen, in part, as a chain of rebellions by people yearning to get access to the global market. The Great Arab Revolt, on the other hand, has been an uprising in significant part against the dictatorship of that same market. Protestors from Tunisia to Bahrain are striking out in favor of social inclusion and new, better social and economic contracts. No wonder this staggering, ongoing upheaval is regarded across Latin America with tremendous empathy and with the feeling that “We did it, and now they’re doing it.”

The future is, of course, unknown, but perhaps a decade or two from now, we’ll be able to say that the Egyptians and other Arab peoples struck out not on the Turkish model, nor even the Brazilian or Indonesian ones, but onto a set of new paths. Perhaps the future from Cairo to Tunis, Benghazi to Manama, Algiers to (Allah willing) a post-House of Saud Saudi Arabia will involve inventing a new political culture and the new economic contracts that would go with it, ones that will be indigenous and, hopefully, democratic in new and surprising ways.

Which brings us back to Turkey. It’s perfectly feasible that Islam will be one of the building blocks of something entirely new, something no one today has a clue about, something that will resemble what was, in Europe, the separation between politics and religion. In the spirit of May 1968, perhaps we can even picture an Arab Banksy plastering a stencil across all Arab capitals: Imagination in Power!

Pepe Escobar is the roving correspondent for Asia Times. His latest book is Obama does Globalistan (Nimble Books, 2009). He may be reached at pepeasia@yahoo.com.

The bottom line is that, by 2013, Shanghai, Guangzhou, and Hong Kong will be cruising to ever more dizzying economic heights courtesy of natural gas supplied by the 1,833-kilometer-long Central Asia Pipeline, then projected to be operating at full capacity. And to think that, in a few more years, China’s big cities will undoubtedly also be getting a taste of Iraq’s fabulous, barely tapped oil reserves, conservatively estimated at 115 billion barrels, but possibly closer to 143 billion barrels, which would put it ahead of Iran. When the Bush administration’s armchair generals launched their Global War on Terror, this was not exactly what they had in mind. 

China’s economy is thirsty, and so it’s drinking deeper and planning deeper yet. It craves Iraq’s oil and Turkmenistan’s natural gas, as well as oil from Kazakhstan. Yet instead of spending more than a trillion dollars on an illegal war in Iraq or setting up military bases all over the Greater Middle East and Central Asia, China used its state oil companies to get some of the energy it needed simply by bidding for it in a perfectly legal Iraqi oil auction.

Meanwhile, in the New Great Game in Eurasia, China had the good sense not to send a soldier anywhere or get bogged down in an infinite quagmire in Afghanistan. Instead, the Chinese simply made a direct commercial deal with Turkmenistan and, profiting from that country’s disagreements with Moscow, built itself a pipeline which will provide much of the natural gas it needs.

No wonder the Obama administration’s Eurasian energy czar Richard Morningstar was forced to admit at a congressional hearing that the U.S. simply cannot compete with China when it comes to Central Asia’s energy wealth. If only he had delivered the same message to the Pentagon.

That Iranian Equation

In Beijing, they take the matter of diversifying oil supplies very, very seriously. When oil reached $150 a barrel in 2008 — before the U.S.-unleashed global financial meltdown hit — Chinese state media had taken to calling foreign Big Oil “international petroleum crocodiles,” with the implication that the West’s hidden agenda was ultimately to stop China’s relentless development dead in its tracks.

Twenty-eight percent of what’s left of the world’s proven oil reserves are in the Arab world. China could easily gobble it all up. Few may know that China itself is actually the world’s fifth largest oil producer, at 3.7 million barrels per day (bpd), just below Iran and slightly above Mexico. In 1980, China consumed only 3% of the world’s oil. Now, its take is around 10%, making it the planet’s second largest consumer. It has already surpassed Japan in that category, even if it’s still way behind the U.S., which eats up 27% of global oil each year. According to the International Energy Agency (IEA), China will account for over 40% of the increase in global oil demand until 2030. And that’s assuming China will grow at “only” a 6% annual rate which, based on present growth, seems unlikely.

Saudi Arabia controls 13% of world oil production. At the moment, it is the only swing producer — one, that is, that can move the amount of oil being pumped up or down at will — capable of substantially increasing output. It’s no accident, then, that, pumping 500,000 bpd, it has become one of Beijing’s major oil suppliers.  The top three, according to China’s Ministry of Commerce, are Saudi Arabia, Iran, and Angola. By 2013-2014, if all goes well, the Chinese expect to add Iraq to that list in a big way, but first that troubled country’s oil production needs to start cranking up. In the meantime, it’s the Iranian part of the Eurasian energy equation that’s really nerve-racking for China’s leaders.

Chinese companies have invested a staggering $120 billion in Iran’s energy sector over the past five years. Already Iran is China’s number two oil supplier, accounting for up to 14% of its imports; and the Chinese energy giant Sinopec has committed an additional $6.5 billion to building oil refineries there. Due to harsh U.N.-imposed and American sanctions and years of economic mismanagement, however, the country lacks the high-tech know-how to provide for itself, and its industrial structure is in a shambles. The head of the National Iranian Oil Company, Ahmad Ghalebani, has publicly admitted that machinery and parts used in Iran’s oil production still have to be imported from China.

Sanctions can be a killer, slowing investment, increasing the cost of trade by over 20%, and severely constricting Tehran’s ability to borrow in global markets. Nonetheless, trade between China and Iran grew by 35% in 2009 to $27 billion. So while the West has been slamming Iran with sanctions, embargos, and blockades, Iran has been slowly evolving as a crucial trade corridor for China — as well as Russia and energy-poor India. Unlike the West, they are all investing like crazy there because it’s easy to get concessions from the government; it’s easy and relatively cheap to build infrastructure; and being on the inside when it comes to Iranian energy reserves is a necessity for any country that wants to be a crucial player in Pipelineistan, that contested chessboard of crucial energy pipelines over which much of the New Great Game in Eurasia takes place. Undoubtedly, the leaders of all three countries are offering thanks to whatever gods they care to worship that Washington continues to make it so easy (and lucrative) for them.

Few in the U.S. may know that last year Saudi Arabia — now (re)arming to the teeth, courtesy of Washington, and little short of paranoid about the Iranian nuclear program — offered to supply the Chinese with the same amount of oil the country currently imports from Iran at a much cheaper price. But Beijing, for whom Iran is a key long-term strategic ally, scotched the deal.

As if Iran’s structural problems weren’t enough, the country has done little to diversify its economy beyond oil and natural gas exports in the past 30 years; inflation’s running at more than 20%; unemployment at more than 20%; and young, well educated people are fleeing abroad, a major brain drain for that embattled land. And don’t think that’s the end of its litany of problems. It would like to be a full member of the Shanghai Cooperation Organization (SCO) — the multi-layered economic/military cooperation union that is a sort of Asian response to NATO — but is only an official SCO observer because the group does not admit any country under U.N. sanctions.  Tehran, in other words, would like some great power protection against the possibility of an attack from the U.S. or Israel.  As much as Iran may be on the verge of becoming a far more influential player in the Central Asian energy game thanks to Russian and Chinese investment, it’s extremely unlikely that either of those countries would actually risk war against the U.S. to “save” the Iranian regime. 

The Great Escape

From Beijing’s point of view, the title of the movie version of the intractable U.S. v. Iran conflict and a simmering U.S. v. China strategic competition in Pipelineistan could be: “Escape from Hormuz and Malacca.”

The Strait of Hormuz is the definition of a potential strategic bottleneck. It is, after all, the only entryway to the Persian Gulf and through it now flow roughly 20% of China’s oil imports. At its narrowest, it is only 36 kilometers wide, with Iran to the north and Oman to the south. China’s leaders fret about the constant presence of U.S. aircraft carrier battle groups on station and patrolling nearby.

With Singapore to the North and Indonesia to the south, the Strait of Malacca is another potential bottleneck if ever there was one — and through it flow as much as 80% of China’s oil imports. At its narrowest, it is only 54 kilometers wide and like the Strait of Hormuz, its security is also of the made-in-USA variety. In a future face-off with Washington, both straits could quickly be closed or controlled by the U.S. Navy.

Hence, China’s increasing emphasis on developing a land-based Central Asian energy strategy could be summed up as: bye-bye, Hormuz! Bye-bye, Malacca! And a hearty welcome to a pipeline-driven new Silk Road from the Caspian Sea to China’s Far West in Xinjiang.

Kazakhstan has 3% of the world’s proven oil reserves, but its largest oil fields are not far from the Chinese border. China sees that country as a key alternative oil supplier via future pipelines that would link the Kazakh oil fields to Chinese oil refineries in its far west. In fact, China’s first transnational Pipelineistan adventure is already in place: the 2005 China-Kazakhstan oil project, financed by Chinese energy giant CNPC.

Much more is to come, and Chinese leaders expect energy-rich Russia to play a significant part in China’s escape-hatch planning as well. Strategically, this represents a crucial step in regional energy integration, tightening the Russia/China partnership inside the SCO as well as at the U.N. Security Council.

When it comes to oil, the name of the game is the immense Eastern Siberia-Pacific Ocean (ESPO) pipeline. Last August, a 4,000-kilometer-long Russian section from Taishet in eastern Siberia to Nakhodka, still inside Russian territory, was begun. Russian Premier Vladimir Putin hailed ESPO as “a really comprehensive project that has strengthened our energy cooperation.”  And in late September, the Russians and the Chinese inaugurated a 999-kilometer-long pipeline from Skovorodino in Russia’s Amur region to the petrochemical hub Daqing in northeast China.

Russia is currently delivering up to 130 million tons of Russian oil a year to Europe. Soon, no less than 50 million tons may be heading to China and the Pacific region as well. 

There are, however, hidden tensions between the Russians and the Chinese when it comes to energy matters. The Russian leadership is understandably wary of China’s startling strides in Central Asia, the former Soviet Union’s former “near abroad.” After all, as the Chinese have been doing in Africa in their search for energy, in Central Asia, too, the Chinese are building railways and introducing high-tech trains, among other modern wonders, in exchange for oil and gas concessions.

Despite the simmering tensions between China, Russia, and the U.S., it’s too early to be sure just who is likely to emerge as the victor in the new Great Game in Central Asia, but one thing is clear enough. The Central Asian “stans” are becoming ever more powerful poker players in their own right as Russia tries not to lose its hegemony there, Washington places all its chips on pipelines meant to bypass Russia (including the Baku-Tbilisi-Ceyhan (BTC) pipeline that pumps oil from Azerbaijan to Turkey via Georgia) and China antes up big time for its Central Asian future. Whoever loses, this is a game that the “stans” cannot but profit from.

Recently, our man Gurbanguly, the Turkmen leader, chose China as his go-to country for an extra $4.18 billion loan for the development of South Yolotan, his country’s largest gas field. (The Chinese had already shelled out $3 billion to help develop it.) Energy bureaucrats in Brussels were devastated.  With estimated reserves of up to 14 trillion cubic meters of natural gas, the field has the potential to flood the energy-starved European Union with gas for more than 20 years. Goodbye to all that?

In 2009, Turkmenistan’s proven gas reserves were estimated at a staggering 8.1 trillion cubic meters, fourth largest in the world after Russia, Iran, and Qatar. Not surprisingly, from the point of view of Ashgabat, the country’s capital, it invariably seems to be raining gas. Nonetheless, experts doubt that the landlocked, idiosyncratic Central Asian republic actually has enough blue gold to supply Russia (which absorbed 70% of Turkmenistan’s supply before the pipeline to China opened), China, Western Europe and Iran, all at the same time. 

Currently, Turkmenistan sells its gas to: China via the world’s largest gas pipeline, 7,000 kilometers long and designed for a capacity of 40 billion cubic meters per year, Russia (10 billion cubic meters per year, down from 30 billion per year until 2008), and Iran (14 billion cubic meters per year). Iranian President Mahmoud Ahmadinejad always gets a red-carpet welcome from Gurbanguly, and the Russian energy giant Gazprom, thanks to an improved pricing policy, is treated as a preferred customer. 

At present, however, the Chinese are atop the heap, and more generally, whatever happens, there can be little question that Central Asia will be China’s major foreign supplier of natural gas. On the other hand, the fact that Turkmenistan has, in practice, committed its entire future gas exports to China, Russia, and Iran means the virtual death of various trans-Caspian Sea pipeline plans long favored by Washington and the European Union.

IPI vs. TAPI All Over Again

On the oil front, even if all the “stans” sold China every barrel of oil they currently pump, less than half of China’s daily import needs would be met. Ultimately, only the Middle East can quench China’s thirst for oil. According to the International Energy Agency, China’s overall oil needs will rise to 11.3 million barrels per day by 2015, even with domestic production peaking at 4.0 million bpd. Compare that to what some of China’s alternative suppliers are now producing: Angola, 1.4 million bpd; Kazakhstan, 1.4 million as well; and Sudan, 400,000.

On the other hand, Saudi Arabia produces 10.9 million bpd, Iran around 4.0 million, the United Arab Emirates (UAE) 3.0 million, Kuwait 2.7 million — and then there’s Iraq, presently at 2.5 million and likely to reach at least 4.0 million by 2015. Still, Beijing has yet to be fully convinced that this is a safe supply, especially given all those U.S. “forward operating sites” in the UAE, Bahrain, Kuwait, Qatar, and Oman, plus those roaming naval battle groups in the Persian Gulf.

On the gas front, China definitely counts on a South Asian game changer. Beijing has already spent $200 million on the first phase in the construction of a deepwater port at Gwadar in Pakistan’s Balochistan Province. It wanted, and got from Islamabad, “sovereign guarantees to the port’s facilities.” Gwadar is only 400 kilometers from Hormuz. With Gwadar, the Chinese Navy would have a homeport that would easily allow it to monitor traffic in the strait and someday perhaps even thwart the U.S. Navy’s expansionist designs in the Indian Ocean.

But Gwadar has another infinitely juicier future role. It could prove the pivot in a competition between two long-discussed pipelines: TAPI and IPI. TAPI stands for the Turkmenistan-Afghanistan-Pakistan-India pipeline, which can never be built as long as U.S. and NATO occupation forces are fighting the resistance umbrella conveniently labeled “Taliban” in Afghanistan. IPI, however, is the Iran-Pakistan-India pipeline, also known as the “peace pipeline” (which, of course, would make TAPI the “war pipeline”). To Washington’s immeasurable distress, last June, Iran and Pakistan finally closed the deal to build the “IP” part of IPI, with Pakistan assuring Iran that either India or China could later be brought into the project.

Whether it’s IP, IPI, or IPC, Gwadar will be a key node. If, under pressure from Washington, which treats Tehran like the plague, India is forced to pull out of the project, China already has made it clear that it wants in. The Chinese would then build a Pipelineistan link from Gwadar along the Karakorum highway in Pakistan to China via the Khunjerab Pass — another overland corridor that would prove immune to U.S. interference. It would have the added benefit of radically cutting down the 20,000-kilometer-long tanker route around the southern rim of Asia.

Arguably, for the Indians it would be a strategically sound move to align with IPI, trumping a deep suspicion that the Chinese will move to outflank them in the search for foreign energy with a “string of pearls” strategy: the setting up of a series of “home ports” along its key oil supply routes from Pakistan to Myanmar. In that case, Gwadar would no longer simply be a “Chinese” port.

As for Washington, it still believes that if TAPI is built, it will help keep India from fully breaking the U.S.-enforced embargo on Iran. Energy-starved Pakistan obviously prefers its “all-weather” ally China, which might commit itself to building all sorts of energy infrastructure within that flood-devastated country. In a nutshell, if the unprecedented energy cooperation between Iran, Pakistan, and China goes forward, it will signal a major defeat for Washington in the New Great Game in Eurasia, with enormous geopolitical and geo-economic repercussions.

For the moment, Beijing’s strategic priority has been to carefully develop a remarkably diverse set of energy-suppliers — a flow of energy that covers Russia, the South China Sea, Central Asia, the East China Sea, the Middle East, Africa, and South America. (China’s forays into Africa and South America will be dealt with in a future installment of our TomDispatch tour of the globe’s energy hotspots.)  If China has so far proven masterly in the way it has played its cards in its Pipelineistan “war”, the U.S. hand — bypass Russia, elbow out China, isolate Iran — may soon be called for what it is: a bluff.