Much has been made of the challenges facing President Barack Obama, who
assumes office in what appear to be the early stages of the worst
economic downturn since the Great Depression. More should be made of
the great opportunities he possesses.
We Americans are more than two trillion dollars poorer, and counting, as
a result of the subprime mortgage crisis, and our confidence has been
badly shaken. But power is relative. The United States is more
powerful today relative to our adversaries than at any time since Aug.
29, 1949, when the Soviet Union exploded its first atomic bomb.
Mitigating the damage done by greed, corruption and stupidity on Wall
Street and in Washington has been the collapse of the price of oil. A
gallon of gasoline sells for about half what it did last summer.
More beneficial than the relief the oil price collapse provides to our
pocketbooks is the harm it does to our enemies. Venezuelan dictator
Hugo Chavez, who kicked out foreign oil companies in 2007, is now
begging them to return. The International Monetary Fund estimated last
fall that Iran needs an oil price of about $90 a barrel to meet its
budgetary obligations. The collapse in oil prices is stirring unrest at
home, and forcing Iran to reduce support for the terror groups Hezbollah
Last summer Russia, with petrodollars pouring into its coffers, was as
big a bully as the old Soviet Union. When Russia invaded its tiny
neighbor, Georgia, in August, there were fears of a new cold war.
But that action, coupled with the collapse of energy prices, has doomed
the Russian economy. Russia backed off Tuesday from an attempt to bully
another neighbor, Ukraine, by cutting off supplies of natural gas,
because Russia needed the money from the sale of the gas more than the
Ukrainians needed the gas. Foreign investment fled from Russia with the
invasion of Georgia. This didn't matter so much when the price of oil
and natural gas was high. But it's critical now that that price has
collapsed. Alex Alexiev, a Russian expert with the Hudson Institute,
estimates Gazprom needs a minimum of $20 billion a year for for ten
years of foreign investment to stave off a production collapse. It
won't get that money unless Russia's international behavior improves.
The Chinese are understandably upset with us for our mismanagement of
their investments. But the worldwide recession brought on by the
subprime mortgage crisis demonstrates that we still need to borrow their
money, and they still need our markets. China can disrupt our economy
by withholding investment, but only at the price of sabotaging their
own. If we fail to cooperate, it'll be bad for us both. We may be
reluctant partners, but partners we must be.
Most European economies are in worse shape than ours, so there is little
likelihood the euro will replace the dollar as the principal currency
for international transactions. The crisis has demonstrated that
however bad America may be as a place to invest your money, it is still
not as bad most other places.
Our economy will recover if the president and Congress don't load it
with debt for pork barrel projects of dubious merit and likely will
recover faster than economies elsewhere.
Victory in Iraq, coupled with the harm done to Iran by the oil price
collapse and rising Sunni Muslim fear of Iran and her proxies gives
President Obama a more tractable situation in the Middle East than
President Bush faced when he assumed office. The critical mistake he
must avoid is permitting Iran to acquire nuclear weapons. That would
alter the world situation as swiftly and dramatically for the worse as
the explosion of the Soviet bomb did in 1949.
President Obama begins his term of office with more than national and
international goodwill. He inherits a strategic situation more
beneficial to the U.S. than any since the collapse of the Soviet Union.
If President Obama fails, it won't be because the challenges he faced
were too great. It'll be because he failed to seize the opportunities
he was offered.