I am no expert on Egypt, but I know a client state when I see one. Egypt is the second largest recipient of US Foreign aid - only Israel receives more. And this is no accident, the two have been historic rivals, only to be at peace with each other under Carter's Administration with the Camp David Accords. The US, more than any other nation, is extremely influential in the Middle East - a region, due to its oil reserves, that has been described by US policy planners as "history's greatest prize."
Oil, you see, goes hand in hand with money. The two are strategic assets. To have the world's reserve currency means you also control, or at least influence the most oil rich region in the world. Dick Cheney once said at a 1999 speech at the Institute of Petroleum in London:
Oil is unique in that it is so strategic in nature. We are not talking about soapflakes or leisurewear here. Energy is truly fundamental to the world’s economy. The Gulf War was a reflection of that reality. The degree of government involvement also makes oil a unique commodity. This is true in both the overwhelming control of oil resources by national oil companies and governments as well as in the consuming nations where oil products are heavily taxed and regulated.
Essentially, the petroleum industry deals with extreme risk and with billions of dollars on the line. Oil is produced in distant lands as a result of huge risk and enormous capital outlays, it is transported over vast distances, refined in expensive refineries with very heavy outlays required to protect the environment and to comply with strict and expensive regulations, distributed through a wide network of pipelines, trucks and wholesale outlets and sold at stations in prime locations and taxed heavily.
It is the basic, fundamental building block of the world’s economy. It is unlike any other commodity.SOURCE
I was never a big fan of Cheney, but the man understands what makes the world work. I know many bloggers have covered this Egyptian crisis. But there are many aspects to it. There is the political aspect, the human rights aspect, and there is also the aspect of contagion. But as far as the focus of this blog, the global monetary system, this crisis represents a challenge to the US: a challenge of national security, energy, and as a result, the US Dollar. Let us not forget that a large portion of the recent run up of the national debt has been due to the wars in Iraq and Afghanistan. Thus, the Egyptian crisis falls at an extremely inconvenient moment. It is so inconvenient, that Vice President Joseph Biden said when asked if he would characterize Mubarak as a dictator:
“Mubarak has been an ally of ours in a number of things. And he’s been very responsible on, relative to geopolitical interest in the region, the Middle East peace efforts; the actions Egypt has taken relative to normalizing relationship with – with Israel. … I would not refer to him as a dictator.”When it comes to foreign policy, there is little difference between Republicans and Democrats that inhabit the White House. Biden's answer is how the White House views client regimes - they are a necessary evil in order to effectuate US policy. The US needs Mubarak, just as it once needed these guys:
President Eisenhower with Cuba's Batista, later to be overthrown by Castro
Vice President Nixon, with King Idris of Libya, later to be overthrown by Khadaffi
President Carter and the Shah of Iran and his wife, during Ayatolla Khomeini's rise
All of the above "transitions in power," and there have been many more, were big setbacks for US foreign policy. What is compounding the issue today with Egypt is the ongoing global financial crisis, as well as the ongoing wars in Afghanistan and Iraq. The US, financially, is not in the same state as it was during the cold war, when it only had to face the USSR with little debt, or at least, had a greater ability to finance military operations and foreign governments. I know that MMT'ers will say, the US is not debt-constrained technically, and that is true. But the US nonetheless has financial limits that affect the execution of its foreign policy.
Thus, this crisis in Egypt is worrisome for the US, and by extension, the US global monetary system which also relies on the US maintaining influence in the Middle East.
For the purposes of this blog, I am not viewing this crisis in a moral or patriotic context. I am viewing this crisis in a geopolitical context, based on realpolitik, and how it can affect the current global order, and by extension, the current global monetary system.