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  • Economics upstages diplomatic drama

    Economics upstages diplomatic drama
    By Gideon Rachman in Davos

    FT
    January 31 2009 02:00

    The organisers of the World Economic Forum like people to get along.
    The forum specialises in getting rivals and enemies to share platforms
    in Davos: Palestinians and Israelis, Indians and Pakistanis, Americans
    and Iranians.

    But this week, the Davos consensus broke down in spectacular fashion.
    Recep Tayip Erdogan, the Turkish prime minister, stormed out of a
    session with Shimon Peres, the Israeli president. Angered both by
    events in Gaza - and by what he saw as unfair handling of the
    discussion he was taking part in - Mr Erdogan vowed never to return to
    the forum.

    The cosy Davos world has already been profoundly shaken by the global
    financial crisis. The Erdogan walk-out also pointed to the threat posed
    to the consensual tradition of Davos by developments in international
    politics.

    For some years, Turkey has been a poster child for the politics of
    reconciliation that are promoted by the forum. It is a secular Muslim
    state that is also democratic, a member of Nato and has close ties to
    Israel. But there has been a growing, latent conflict between Turkish
    foreign policy and public opinion in the country. Opinion polls in
    Turkey have regularly revealed very high levels of anti-American and
    anti-Israeli sentiment. Some of those tensions burst into the open in
    the emotional performances of Mr Erdogan and Mr Peres in Davos.

    The walk-out also highlighted the extent to which the conflict in Gaza
    has further poisoned relations between Israel and moderates in the
    Islamic world.

    This development creates a tricky foreign policy dilemma for Barack
    Obama, the new US president. Mr Obama has made it clear that improving
    relations with the Muslim world is one of the highest foreign policy
    priorities of his administration. But he has also stressed his
    commitment to Israeli security and congressional support for Israel is
    still strong.

    The Obama administration was barely represented in Davos. The new
    president sent an old friend, Valerie Jarrett, to represent him -
    rather than the senior foreign policy advisers who had originally been
    on the forum's programme. But the main geopolitical issues raised at
    Davos still revolved around the US.

    The two leaders who topped the bill at the forum were Wen Jiabao, the
    Chinese premier, and Vladimir Putin, the prime minister of Russia. Both
    struck a similar note. They made appeals for international
    co-operation. But they also pointed to America's central role in the
    global financial crisis and stressed the need for a multi-polar world.

    On substance, however, the Russian and Chinese reactions to the early
    steps taken by the Obama administration were rather different.

    The Russians have reason to be pleased. They believe that a deal may be
    in the works in which the Americans go slow on the deployment of
    anti-missile systems in Poland and the Czech Republic, and downplay the
    hopes of Georgia and Ukraine to join Nato. In return, Russia would be
    asked to provide more help on other important issues - in particular,
    the drive to halt Iran's nuclear programme.

    The Chinese delegation at Davos, however, were clearly displeased and
    alarmed by the suggestion by Tim Geithner, Mr Obama's newly-confirmed
    Treasury secretary, that China has been "manipulating" its currency. In
    public and in private, they were at pains to dismiss this suggestion
    and to pin the blame for the global economic crisis on the US.

    For all the drama caused by the Erdogan walk-out, the tensions between
    the Chinese and the Americans on display in Davos may turn out to be
    more significant in the long term.

    They suggest that international economics may be the dominant foreign
    policy issue of the Obama years.
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