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Reform at the IMF
And a lesson for the United Nations
washingtonpost- Editorial Saturday, September 2, 2006 

FROM MEXICO to East Asia to Russia and Argentina, the years from 1995 to 2001 were marked by financial crises. The past half decade has been quiet, leaving the International Monetary Fund, the chief cop when trouble strikes, with nothing left to fret about except its own identity crisis. The IMF's leadership is responding by updating its structure and mission. The Bush administration, which has often acted clumsily in its dealings with multilateral institutions, has played a key role in supporting this rejuvenation.

The most concrete sign of progress came on Thursday, when the IMF's board agreed to allow China, South Korea, Turkey and Mexico to increase their financial support for the fund in exchange for a slightly larger voice in its policies and lending. This is the sort of reform that's needed at the U.N. Security Council, too: To be legitimate, multilateral institutions must reflect the global distribution of power as it is now, not as it was when these institutions were set up more than half a century ago. The IMF's board also declared an intention to increase the say of other countries whose economic weight has grown. Other countries will lose clout, though there will be special provisions to prevent Africa's small voice from becoming even smaller.

Meanwhile the IMF is rethinking how it can be useful. Most of its energy goes into analyzing the economic conditions of each member country. When those members are in crisis and need to borrow from the IMF, this is essential: The IMF needs to understand its clients to design the economic prescriptions that go along with its lending. But when a country is not in crisis, its finance minister is unlikely to believe that a team of visitors from Washington understands his economy better than he does. So the IMF needs to stake its claim to relevance by making the most of its international expertise. If a government is grappling with the design of its value-added tax, the IMF can play up its knowledge of VAT reform in other countries.

The IMF also aims to become a broker of solutions to cross-border financial problems. Currently, the world's trade and capital flows are unbalanced: The United States runs a huge trade deficit and depends on correspondingly huge infusions of foreign lending, while East Asia and the oil states have trade and capital surpluses. The annual Group of Eight summits are not the right place to defuse this time bomb, since big-surplus countries such as China and Saudi Arabia are not G-8 members, but the IMF is starting to convene meetings with the key players. The idea is to forge a common understanding of the policies that each country must pursue to unwind global imbalances without precipitating a crisis.

The IMF is not out of the woods: In the absence of crises it is lending less, which puts a strain on its budget. But the IMF is worth preserving, even if perhaps in a new form. The world has few competent global institutions that can help manage global problems, and it would be careless to lose one of them. The Bush administration, which took a confrontational line toward the IMF during its first term, is right to support pragmatic modernization now. Next it must extend this approach to reform of the United Nations

INTERVIEW: PETER MANDELSON 
‘India must move on opening trade in services and non-agri goods’ 
Posted online: Thursday, September 08, 2005 at 0007 hours IST 

European Union trade commissioner Peter Mandelson admits there are several trade difficulties between India and the EU. Bilateral trade can jump significantly from the current levels, he told FE, answering a questionnaire mailed to him. “India must, however, reduce its tariff and non-tariff barriers,” he said. Excerpts:

What does the EU intend to do to increase trade with India?

The EU continues to be India’s largest trading partner and accounts for almost a quarter of India’s exports and imports. Bilateral trade is growing at a healthy rate, increasing by 17% during 2004. However, we can do better since current levels are clearly below potential. The EU-India Action Plan, adopted at the Summit, sets out an ambitious and forward-looking agenda with concrete actions aimed at enhancing trade and investment flows.

There is no reason why trade with India should not be bigger in view of India’s potential. However, this would only be possible if India is ready to open further its market to trade and investment. India has benefited greatly from the liberalisation reforms to date, but would only become a top economic powerhouse if the current barriers to trade and investment fall further. There are a number of pending disputes with India at the WTO. 
Will you be taking a different line from your predecessor in resolving these? 

Our overarching aim has always been to resolve trade problems in an amicable manner, be it under the auspices of the WTO or at a bilateral level, and we will continue to do so. Although we’re witnessing a healthy growth in EU-India trade, there are a number of trade difficulties between us and removing them would give trade and investment a further boost. I am keen to resolve these issues with my Indian counterparts and I know how keen the government of India is—progressively and steadily—to reduce tariff and non-tariff barriers that stand in the way of India’s integration in the global economy. The US and EU have linked cutting export subsidies to increased market access by the developing world. 

What kind of quid pro quo do you propose here? 

It is because of its own significant domestic agricultural reforms that the EU has been able to move forward in agriculture. The EU has clearly stated that it is willing to move on all pillars of the agricultural negotiations. However, the EU believes that others should also move in parallel not only within agriculture but also in other areas as well so that we have a balanced outcome for all. The round urgently needs to make progress towards the Hong Kong ministerial in December. That progress will depend on our ability to create an agreement that meets the needs of developing countries. 

Developed countries will have to open their markets in agricultural products. But advanced developing countries will have to move on opening trade in services and non-agricultural goods. With India’s leadership comes responsibilities to help make this happen. 

Will the coming together of the ’Quint’ make a difference to the final outcome? 

We are attempting to build a consensus on the various complex issues facing member-countries. Eventually, the deal will have to be signed by all members. Clearly, the outcome of talks will hinge on the ability of members coming to a consensus on all the vexed issues. 

Will the outcome of the dispute over the Airus deal have a bearing on the EU’s position at the WTO talks vis-à-vis India? 

There is no link of the Airbus deal to the WTO talks. 

In services negotiations, Mode 4 access has been a major demand from India that the EU countries have consistently denied. Is there any likelihood of progress here? 

The EU has been extremely sensitive to this demand from the developing world and has made a real market opening effort on the movement of natural persons for the benefit of countries like India. Our revised GATS offer has, indeed, improved this further, notably by extending these commitments to the new EU member-states..

Bird flu could shrink world GDP 12.5% 
RAVI KRISHNAN 
Posted online: Sunday, February 19, 2006 at 0041 hours IST 

NEW DELHI, FEB 18: As avian influenza spreads across Northern Africa and Europe, a new study released by Sydney-based Lowy Institute estimates potential global economic losses of $4.4 trillion. This tallies with 142 million mortality figure estimated by the World Health Organization earlier last year. 

According to the study done by the Australian National University, even a mild outbreak could kill 1.4 million people and $330 billion all over the world. Warwick McKibbin, who headed the project, modelled it on the SARS outbreak which cost the global economy $40 billion. 

The South-East Asian economy would be the worst hit by the flu. In the worst-case scenario, the GDP of Hong Kong could be halved, while that of the Philippines and Indonesia would reduce by a third and fifth, respectively. This collapse of economic activity in Asia, according to the study, would induce a global flight of capital to relatively safer economies of North America and Europe. 

Economic activity would be affected by four factors —shock to the labour force due to deaths and morbidity leading to absenteeism and declining production; additional supply shocks as costs increase across the board; reduction in demand; and risk premium shocks. Each of the four scenarios is modelled on previous cases.The “mild” scenario is based on the 1968-69 Hong Kong flu, “moderate” is similar to the 1957 Asian flu, “severe” is modelled on the 1918-19 Spanish flu, while “ultra” is worse than the Spanish flu outbreak.

Europe's defence industry 
Taking aim, again

Mar 3rd 2005 | LONDON AND PARIS 
From The Economist print edition

Six years after the last wave of consolidation, Europe's defence companies are looking at merger targets again

BACK in the early 1990s, when America cut defence spending at the end of the cold war, rationalisation of its defence industry proved relatively easy. The Pentagon gathered industry chiefs for a “last supper”, as it was later called, and within a few years 15 defence contractors had shrunk through mergers to five. Europe found such a big consolidation tougher, because politics got in the way. But a few stealthy mergers went ahead, and now another effort could be getting underway.

The last time around Europe was left with minnows compared with America's defence giants. Europe's leading defence aerospace company, EADS, has only attained the size of Lockheed Martin and Boeing by virtue of the runaway success of its civilian Airbus passenger jets (see chart). Even a gigantic £13 billion ($25 billion) in-flight refuelling contract for Britain's RAF, won this week by EADS (plus firms such as Cobham and Rolls-Royce in a consortium), is using converted Airbus A330 widebody jets. They will be fitted with nozzles to become petrol stations in the sky, when needed, and at other times they will be leased as civilian passenger jets (the petrol tanks are in the huge wings).

An Anglo-German marriage of British Aerospace (now BAE Systems) and Daimler-Benz's DASA collapsed acrimoniously when the British jilted DASA at the altar and ran off in a tie-up with GEC-Marconi, in a thoroughly British deal. Furious, the Germans quickly found consolation in the arms of Aerospatiale Matra, a partly privatised French group. Thus was born EADS, which is owned 30% by the French (half shares each to the government and the Lagardère conglomerate), 30% by DaimlerChrysler and 6% by SEPI, the Spanish government's industrial holding company. The remaining 34% is publicly traded.

EADS already represents quite a consolidation for Europe in that it is now a tri-national company. Other mergers include Thales, a French defence-electronics company that became Franco-British after buying Racal. It now has 11,000 employees in Britain and wins local contracts. Britain's Ministry of Defence has fostered Thales to provide competition to BAE Systems, with which it has rowed for years about cost over-runs and contract delays. Thales already makes 10% of its sales in Britain and that could grow. It will design new aircraft carriers for both France and Britain, and the company is a member of the group that won this week's RAF deal.

Another quiet move towards consolidation is represented by Italy's Finmeccanica, which in five years has gone from being a state-owned financial-holding company to a mostly-privatised industrial group concentrating on aerospace and defence. Since it bought Westland helicopters from Britain's GKN late last year, Finmeccanica has become an Italo-British group, with some 10,000 employees in Britain. In January it bought part of BAE Systems's defence communications and avionics businesses. Then there is the €4.9 billion ($6.4 billion) merger of two French defence aerospace companies, SNECMA (which makes jet engines) and SAGEM, an electronics group, though this is a combination pushed by the government as part of its privatisation programme and makes little industrial sense.

Europe's defence companies need to get bigger. The five leaders still fight over military budgets that add up to less than half the $150 billion or so that America spends on new equipment (mostly in defence aerospace) each year. 

To get more scale and satisfy jealous national governments, who want defence spending to create jobs at home, Europe has turned to joint ventures, such as the consortium that makes the Typhoon, which started life as the Eurofighter plane. This brings together BAE Systems, EADS and Finmeccanica, but excludes the French who insist on plugging on with their own Mirage and Rafale fighters. The other notable tri-national joint-venture is the MBDA missiles company, which brings together BAE Systems, EADS and Finmeccanica.

Now there is a flurry of interest in further mergers. Impatient at its slow progress in defence, EADS bosses (encouraged by the French government) wanted late last year to buy Thales, a quoted company which is owned 31% by the French government and 9% by Alcatel, a struggling French telecoms-equipment firm in need of money. For the government, this would have had the distinct advantage of turning EADS into a more French company than the Franco-German partnership it has been since its creation. But Thales's boss, Denis Ranque, was less than keen. And DaimlerChrysler, as an EADS shareholder, was opposed to buying a French company. EADS plus Thales would have been bigger than Boeing.

The latest buzz is that Thales and Finmeccanica might merge to become the biggest defence-electronics combine in Europe, and a big force overseas. But because the French and Italian governments still own around 30% of each firm, their approval would be necessary. Given the Paris preference for a grand Frenchification of EADS through a takeover of Thales, its permission seems unlikely—even if the Italians warm to a deal. 

Meanwhile, EADS could become more French in another way. Noël Forgeard, boss of Airbus, which provides the bulk of EADS's sales and virtually all of its profit, is to become co-chief executive of EADS alongside a German, Tom Enders. But Mr Forgeard, who wanted to become sole CEO, is manoeuvring to keep oversight of Airbus, thus making him a much more powerful figure than Mr Enders, and cementing French influence in the company.

DaimlerChrysler could insist on the French government selling its EADS shareholding to counter French influence. Indeed, the whole shareholding structure of EADS looks unstable. The Lagardère group is due to sell its holding within a few years to concentrate on media. DaimlerChrysler is likely to sell its 30% stake sooner or later to concentrate on its car businesses. Tellingly, Arnaud Lagardère, boss of the eponymous group, has joined the board of DaimlerChrysler, adding fuel to rumours of a co-ordinated sell-off by EADS's big shareholders. 

Adding to the prospect of wholesale change is the probability that BAE Systems will sell its one-fifth stake in Airbus (EADS owns the other 80%) in order to finance a big acquisition in America. BAE Systems is growing fast on the other side of the Atlantic; it has sales of $5.6 billion and 25,000 employees there. Last year it bought another five small American companies, even as it sells European assets, such as its half stake in Saab Aircraft and a joint-venture with Finmeccanica. It is also a big partner of Lockheed Martin in the F-35, a joint strike fighter and the world's biggest military project with potential sales of $200 billion. Having turned its back on a big European merger last time, BAE Systems seems determined to sit out the continental skirmish once again.

IMF slashes eurozone growth forecasts
By Ralph Atkins and Mark Schieritz in Frankfurt, Chris Giles in London and Reuters 
Published: March 1 2005 19:46 | Last updated: March 1 2005 19:46

The International Monetary Fund has slashed growth forecasts for the eurozone, and particularly Germany, according to draft figures obtained by Financial Times Deutschland, the FT's German sister paper.

The eurozone's economy will grow this year by 1.6 per cent, down from the 2.2 per cent forecast by the IMF late last year. Germany's economy will grow by only 0.8 per cent, down from 1.8 per cent forecast earlier. 

Gloom about the outlook for continental Europe's economy intensified yesterday as German unemployment soared to a postwar record and other data pointed to still-sluggish industrial growth in the months ahead. 

The data set back hopes of an improvement in the eurozone's economic performance this year even though the rise in the headline German unemploy-ment figures to anunadjusted 5.22m in February was partly the resultof labour market reformsintroduced by Chancellor Gerhard Schröder's government.

The eurozone purchasing managers' index for February, regarded as a good forward-looking indicator, again pointed to only modest growth in industrial production. The figure of 51.9 “remained well down on that seen throughout much of last year,” according to NTC Research, which compiles the figures.

Economists blame the deterioration in the outlook on high oil prices, the strength of the euro, and the vulnerability of the eurozone to a slowdown in the rest of the world.

The sluggish growth will almost certainly persuade the European Central Bank to keep interest rates at 2 per cent for some months despite rises in the UK and the US. But the ECB will be comforted by an improvement in the inflation outlook.

A first official estimate of eurozone inflation in February of 2 per cent represented yesterday an increase after January's revised 1.9 per cent, but ECB forecasts this week are expected to project inflation this year falling within its price stability definition of “below but close” to 2 per cent.

Earlier on Tuesday the new head of the German government's council of economic advisers, Bert Ruerup, said he expected growth of 1 per cent this year, down from the council's earlier forecast of 1.4 per cent.

Asked if he would follow Mr Ruerup's lead, Wolfgang Clement, German economy minister, ruled out reducing the government's growth prediction of 1.6 per cent for 2005.

The latest official IMF growth predictions will be presented at the Fund's spring convention in mid-April.

Economic confidence in the EU has slumped to its lowest levels since last year's Madrid bomb attacks, although the UK and new EU member states stand out as bright spots, according to the European Commission.

The declines in the Commission's economic sentiment indices for February, released earlier this week, suggested that the unexpectedly sluggish growth experienced in continental Europe last year is continuing well into 2005.

Confidence surveys earlier this year had pointed to a marked increase in optimism.

The oil factor in Bush's 'war on tyranny'
By F William Engdahl

In recent public speeches, President George W Bush and others in the US administration, including Secretary of State Condoleezza Rice, have begun to make a significant shift in the rhetoric of war. A new "war on tyranny" is being groomed to replace the outmoded "war on terror". Far from being a semantic nuance, the shift is highly revealing of the next phase of Washington's global agenda.

In his January 20 inaugural speech, Bush declared, "It is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world" (author's emphasis). Bush repeated the last formulation, "ending tyranny in our world", in the State of the Union address. In 1917 it was a "war to make the world safe for democracy", and in 1941 it was a "war to end all wars".

The use of tyranny as justification for US military intervention marks a dramatic new step in Washington's quest for global domination. "Washington", of course, today is shorthand for the policy domination by a private group of military and energy conglomerates, from Halliburton to McDonnell Douglas, from Bechtel to ExxonMobil and ChevronTexaco, not unlike that foreseen in president Dwight Eisenhower's 1961 speech warning of excessive control of government by a military-industrial complex.

Congress declared World War II after an aggressive Japanese attack on the US fleet at Pearl Harbor, Hawaii. While Washington stretched the limits of deception and fakery in Vietnam and elsewhere to justify its wars, up to now it has always at least justified the effort with the claim that another power had initiated aggression or hostile military acts against the United States of America. Tyranny has to do with the internal affairs of a nation: it has to do with how a leader and a people interact, not with its foreign policy. It has nothing to do with aggression against the United States or others.

Historically Washington has had no problem befriending some of the world's all-time tyrants, as long as they were "pro-Washington" tyrants, such as the military dictatorship of President General Pervez Musharraf in Pakistan, a paragon of oppression. We might name other befriended tyrants - Ilham Aliyev's Azerbaijan, or Islam Karimov's Uzbekistan, or the al-Sabahs' Kuwait, or Oman. Maybe Morocco, or Alvaro Uribe's Colombia. There is a long list of pro-Washington tyrants.

For obvious reasons, Washington is unlikely to turn against its "friends". The new anti-tyranny crusade would seem, then, to be directed against "anti-American" tyrants. The question is, which tyrants are on the radar screen for the Pentagon's awesome arsenal of smart bombs and covert-operations commandos? Rice dropped a hint in her Senate Foreign Relations Committee testimony two days prior to the Bush inauguration. The White House, of course, cleared her speech first.

Target some tyrannies, nurture others
Rice hinted at Washington's target list of tyrants amid an otherwise bland statement in her Senate testimony. She declared, "in our world there remain outposts of tyranny ... in Cuba, and Burma and North Korea, and Iran and Belarus, and Zimbabwe". Aside from the fact that the designated secretary of state did not bother to refer to "Burma" under its present name, Myanmar, the list is an indication of the next phase in Washington's strategy of preemptive wars for its global domination strategy.

As reckless as this seems given the Iraq quagmire, the fact that little open debate on such a broadened war has yet taken place indicates how extensive the consensus is within the Washington establishment for the war policy. According to the January 24 New Yorker report from Seymour Hersh, Washington already approved a war plan for the coming four years of Bush II, which targets 10 countries from the Middle East to East Asia. The Rice statement gives a clue to six of the 10. She also suggested Venezuela is high on the non-public target list.

Pentagon Special Forces units are reported already active inside Iran, according to the Hersh report, preparing details of key military and nuclear sites for presumable future bomb hits. At the highest levels, France, Germany and the European Union are well aware of the US agenda for Iran, on the nuclear issue, which explains the frantic EU diplomatic forays with Iran.

The US president declared in his State of the Union speech that Iran was "the world's primary state sponsor of terror". Congress is falling in line as usual, beginning to sound war drums on Iran. Testimony to the Israeli Knesset by the Mossad chief recently, reported in the Jerusalem Post, estimated that by the end of 2005 Iran's nuclear-weapons program would be "unstoppable". This suggests strong pressure from Israel on Washington to "stop" Iran this year.

According also to former US Central Intelligence Agency (CIA) official Vince Cannistraro, Defense Secretary Donald Rumsfeld's new war agenda includes a list of 10 priority countries. In addition to Iran, it includes Syria, Sudan, Algeria, Yemen and Malaysia. According to a report in the January 23 Washington Post, General Richard Myers, chairman of the Joint Chiefs of Staff (JCS), also has a list of what the Pentagon calls "emerging targets" for preemptive war, which includes Somalia, Yemen, Indonesia, the Philippines and Georgia, a list he has sent to Rumsfeld.

While Georgia may now be considered under de facto North Atlantic Treaty Organization (NATO) or US control since the election of President Mikheil Saakashvili, the other states are highly suggestive of the overall US agenda for the new "war on tyranny". If we add Syria, Sudan, Algeria and Malaysia, as well as Rice's list of Cuba, Belarus, Myanmar and Zimbabwe, to the JCS list of Somalia, Yemen, Indonesia and the Philippines, we have some 12 potential targets for either Pentagon covert destabilization or direct military intervention, surgical or broader. And, of course, North Korea, which seems to serve as a useful permanent friction point to justify US military presence in the strategic region between China and Japan. Whether it is 10 or 12 targets, the direction is clear.

What is striking is just how directly this list of US "emerging target" countries, "outposts of tyranny", maps on to the strategic goal of total global energy control, which is clearly the central strategic focus of the Bush-Cheney administration.

General Norman Schwarzkopf, who led the 1991 attack on Iraq, told the US Congress in 1990: "Middle East oil is the West's lifeblood. It fuels us today, and being 77% of the free world's proven oil reserves, is going to fuel us when the rest of the world runs dry." He was talking about what some geologists call peak oil, the end of the era of cheap oil, without drawing undue attention to the fact.

That was in 1990. Today, with US troops preparing a semi-permanent stay in Iraq and moves to control global oil and energy chokepoints, the situation is far more advanced. China and India have rapidly emerged as major oil-import economies at a time when existing sources of the West's oil, from the North Sea to Alaska and beyond, are in significant decline. Here we have a pre-programmed scenario for future resource conflict on a global scale.

Oil geopolitics and the 'war on tyranny'
Cuba as a "tyranny target" is a surrogate for Hugo Chavez' Venezuela, which is strongly supported by Russian President Vladimir Putin, via Cuba, and now by China. Rice explicitly mentioned the close ties between Cuban President Fidel Castro and Chavez. After a failed CIA putsch attempt early in the Bush tenure, Washington is clearly trying to keep a lower profile in Caracas. The goal remains regime change of the recalcitrant Chavez, whose most recent affront to Washington was his latest visit to China, where he signed a major bilateral energy deal. Chavez also had the gall to announce plans to divert oil sales away from the United States to China and sell its US refineries. Part of the China deal would involve a new pipeline to a port on Colombia's coast, which avoids US control of the Panama Canal. Rice told the Senate that Cuba was an "outpost of tyranny" and in the same breath labeled Venezuela a "regional troublemaker".

Indonesia, with huge natural-gas resources serving mainly China and Japan, presents an interesting case, since the country has apparently been cooperative with Washington's "war on terror" since September 2001. Indonesia's government raised an outcry in the wake of the recent tsunami disaster when the Pentagon dispatched a US aircraft carrier and special troops within 72 hours to land in Aceh province to do "rescue work". The USS Abraham Lincoln aircraft carrier, with 2,000 supposedly Iraq-bound Marines aboard, together with the USS Bonhomme Richard from Guam, landed some 13,000 US troops in Aceh, which alarmed many in the Indonesian military and government. The Indonesian government acceded, but demanded that the US leave by the end of March and not establish a base camp in Aceh. No less than deputy defense secretary and Iraq war strategist Paul Wolfowitz, former US ambassador to Indonesia, made an immediate "fact-finding" tour of the region. ExxonMobil runs a huge LNG [liquefied natural gas] production in Aceh that supplies energy to China and Japan.

If we add to the list of "emerging targets" Myanmar, a state that, however disrespectful of human rights, is also a major ally and recipient of military aid from Beijing, a strategic encirclement potential against China emerges quite visibly. Malaysia, Myanmar and Aceh in Indonesia represent strategic flanks on which the vital sea lanes from the Strait of Malacca, through which oil tankers from the Persian Gulf travel to China, can be controlled. Moreover, 80% of Japan's oil passes here.

The US government's Energy Information Administration identifies the Malacca Strait as one of the most strategic "world oil transit chokepoints". How convenient if in the course of cleaning out a nest of tyrant regimes Washington might militarily acquire control of this strait. Until now the states in the area have vehemently rejected repeated US attempts to militarize the strait.

Control or militarization of Malaysia, Indonesia and Myanmar would give US forces chokepoint control over the world's busiest sea channel for oil from the Persian Gulf to China and Japan. It would be a huge blow to China's efforts to secure energy independence from the US. Not only has China already lost huge oil concessions in Iraq with the US occupation, but China's oil supply from Sudan is also under increasing pressure from Washington.

Taking Iran from the mullahs would give Washington chokepoint control over the world's most strategically important oil waterway, the Strait of Hormuz, a three-kilometer-wide passage between the Persian Gulf and the Arabian Sea. The major US military base in the entire Middle East region is just across the strait from Iran in Doha, Qatar. One of the world's largest gas fields also lies here.

Algeria is another obvious target for the "war on tyranny". Algeria is the second-most-important supplier of natural gas to continental Europe, and has significant reserves of the highest-quality low-sulfur crude oil, just the kind US refineries need. Some 90% of Algeria's oil goes to Europe, mainly Italy, France and Germany. President Abdelaziz Bouteflika read the September 11, 2001, tea leaves and promptly pledged his support for Washington's "war on terror". Bouteflika has made motions to privatize various state holdings, but not the vital state oil company, Sonatrach. That will clearly not be enough to satisfy the appetite of Washington planners.

Sudan, as noted, has become a major oil supplier to China, whose national oil company has invested more than US$3 billion since 1999 building oil pipelines from southern Sudan to the Red Sea port. The coincidence of this fact with the escalating concern in Washington about genocide and humanitarian disaster in oil-rich Darfur in southern Sudan is not lost on Beijing. China threatened a United Nations veto against any intervention against Sudan. The first act of a re-elected Dick Cheney late last year was to fill his vice-presidential jet with UN Security Council members to fly to Nairobi to discuss the humanitarian crisis in Darfur, an eerie reminder of defense secretary Cheney's "humanitarian" concern over Somalia in 1991.

Washington's choice of Somalia and Yemen is a matched pair, as a look at a Middle East/Horn of Africa map will confirm. Yemen sits at the oil-transit chokepoint of Bab el-Mandap, the narrow point controlling oil flow from the Red Sea with the Indian Ocean. Yemen also has oil, although no one yet knows just how much. It could be huge. A US firm, Hunt Oil Co, is pumping 200,000 barrels a day from there but that is likely only the tip of the find.

Yemen fits nicely as an "emerging target" with the other target nearby, Somalia.

"Yes, Virginia," the 1992 Somalia military action by George Herbert Walker Bush, which gave the US a bloody nose, was in fact about oil too. Little known was the fact that the humanitarian intervention by 20,000 US troops ordered by father Bush in Somalia had little to do with the purported famine relief for starving Somalis. It had a lot to do with the fact that four major US oil companies, led by Bush's friends at Conoco of Houston, Texas, and including Amoco (now BP), Condi Rice's Chevron, and Phillips, all held huge oil-exploration concessions in Somalia. The deals had been made with the former "pro-Washington" tyrannical and corrupt regime of Mohamed Siad Barre.

Siad Barre was inconveniently deposed just as Conoco reportedly hit black gold with nine exploratory wells, confirmed by World Bank geologists. US Somalia envoy Robert B Oakley, a veteran of the US mujahideen project in Afghanistan in the 1980s, almost blew the US game when, during the height of the civil war in Mogadishu in 1992, he moved his quarters on to the Conoco compound for safety. A new US cleansing of Somali "tyranny" would open the door for these US oil companies to map and develop the possibly huge oil potential in Somalia. Yemen and Somalia are two flanks of the same geological configuration, which holds large potential petroleum deposits, as well as being the flanks of the oil chokepoint from the Red Sea.

Belarus is also no champion of human rights, but from Washington's standpoint, the fact that its government is tightly bound to Moscow makes it the obvious candidate for a Ukraine-style "Orange Revolution" regime-change effort. That would complete the US encirclement of Russia on the west and of Russia's export pipelines to Europe, were it to succeed. Some 81% of all Russian oil exports today go to Western European markets. Such a Belarus regime change now would limit the potential for a nuclear-armed Russia to form a bond with France, Germany and the EU as potential counterweight against the power of the United States sole superpower, a highest priority for Washington Eurasia geopolitics.

The military infrastructure for dealing with such tyrant states seems to be shaping up as well. In the January 24 New Yorker magazine, veteran journalist Seymour Hersh cited Pentagon and CIA sources to claim that the position of Rumsfeld and the warhawks is even stronger today than before the Iraq war. Hersh reported that Bush signed an Executive Order last year, without fanfare, placing major CIA covert operations and strategic analysis into the hands of the Pentagon, sidestepping any congressional oversight. He added that plans for the widening of the "war on terror" under Rumsfeld were also agreed upon in the administration well before the election.

The Washington Post confirmed Hersh's allegation, reporting that Rumsfeld's Pentagon had created, by Presidential Order, and bypassing Congress, a new Strategic Support Branch, which co-opts traditional clandestine and other functions of the CIA. According to a report by US Army Colonel (retired) Dan Smith, in Foreign Policy in Focus last November, the new SSB unit includes the elite military special SEAL Team 6, Delta Force army squadrons, and potentially a paramilitary army of 50,000 available for "splendid little wars" outside congressional purview.

The list of emerging targets in a new "war on tyranny" is clearly fluid, provisional, and adaptable as developments change. It is clear that a breathtaking array of future military and economic offensives is in the works at the highest policy levels to transform the world. A world oil price of US$150 a barrel or more in the next few years would be joined by chokepoint control of the supply by one power if Washington has its way.

F William Engdahl is the author of A Century of War: Anglo-American Oil Politics and the New World Order, published by Pluto Press Ltd.

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