U.S. rivals also feel money pinch

By Joel Brinkley

By his own account, President-elect Obama’s first priority will be to face up to the economic crisis gripping the United States and much of the world. But as he steps under that dark cloud on Jan. 20, if he looks up he will see a silver lining. The crisis is hobbling America’s adversaries and competitors, too.

Iran, Russia, China, Venezuela, even North Korea, are finding that their abilities to sponsor terrorism, create weapons of mass destruction and threaten or challenge Washington are dwindling as credit remains tight, housing prices collapse and the price of oil continues to drop. You can tell because the leaders of these countries are growing ever more pugnacious as they protest too much.

“Some people are uniting behind falling oil prices, thinking that Chavez will now fall,” Hugo Chavez, the Venezuelan president, blustered last month. As the price drops because of reduced demand in countries hurt by the economic crisis, “the revolution will only grow stronger.”

Raising prices

Maybe, but Chavez is already being forced to pull back. By his own account, oil must sell in the neighborhood of $90 a barrel for him to maintain his ability to buy the loyalty of other nations. This week, the price is hovering around $60. Already Chavez has had to put off building a refinery in Nicaragua — while raising the price two dozen allies pay him for subsidized oil.

Chavez has been working to build a relationship with Russia, in part by making large weapons purchases. But Russians were taken aback when Chavez, during a visit to Moscow, asked to buy advanced weaponry — on credit.

Moscow is having troubles of its own, and President Dmitry Medvedev’s outburst last week, blaming the United States for all of Russia’s problems, was clear evidence of that. High oil prices fueled Russia’s boasting and bluster in recent years. Russia must sell its oil for around $70 a barrel to maintain financial equilibrium. Last week, hat in hand, Russia asked to borrow about $25 billion from China — surely a humiliating moment.

Even China, with $1.9 trillion in currency reserves, is being forced to prop up its housing market with tax rebates and loans to keep it alive. The implications of a housing market crash reach far beyond homeowners; 80 million people work in China’s home construction industry. Last weekend, China announced it would spend $586 billion on a stimulus package.

China’s economy is hard to read, but North Korea’s is opaque. Still a study by a research institute in Seoul last week opened a small window. North Korea sells zinc and other minerals to China. Those are the reclusive state’s most lucrative exports. But last month Beijing, trying to deal with its own problems, slashed the prices it was willing to pay, throwing North Korea’s already dysfunctional economy into disarray.

These problems are ricocheting from state to state, but I’d like to skip forward — to Iran. As an American observer, I have to admit that I take pleasure in watching President Mahmoud Ahmadinejad squirm. And that’s exactly what he is doing now, as the price of oil tumbles and his house of cards begins to quiver.

While oil prices fell from $147 a barrel early this year to a recent low of $57, inflation in Iran shot up to a ruinous 30 percent, and unemployment climbed to 11 percent. The International Monetary Fund estimates that, to keep its economy solvent, Iran needs $75 a barrel for its oil.

General strike

Last month the government suddenly decided to impose a 3 percent national sales tax. Merchants in public markets across the country staged a general strike — not a trivial matter. These merchants helped overthrow Mohammad Reza Shah Pahlavi, the Shah of Iran, in 1979.

Then, two weeks ago, Iran’s central bank ordered a reduction on the import of luxury products and other “non-essential goods.” That’s bad news for Ahmadinejad, who has to run for re-election next year. No wonder his office says he is suffering from “exhaustion.”

Through the last two years, as the United Nations imposed ever-more punitive sanctions on Iran because of its nuclear program, Ahmadinejad boasted that the sanctions were meaningless. Oil money would cushion the blow.

X Joel Brinkley is a former Pulitzer Prize-winning foreign correspondent for The New York Times and now a professor of journalism at Stanford University.