The major foreign policy dilemmas facing Washington in 2010 are in dealing with the fragile recovery of the global economy, the relations with the rising international influence of China, the shaping of climate change and energy policies, the redefining of the global nuclear order, the prospects for engagement with Iran and the impact of the military surge in Afghanistan. Out of these issues the US relations with China should take central stage, with implications on almost all of the above. Domestically, the success or failure to push the climate change and energy policy through the US Congress could also have major implications. US-China relations and the energy policy are the two defining factors to watch for this year.

Guarded optimism about the global economic recovery is warranted as many countries’ economies depend on the fragile recovery of the US economy which is still stymied by a high unemployment rate. In ’09 the major economic players were able to avert an imminent economic catastrophe, but the expedient measures taken by governments last year are not enough. The group of the big 20 met in Pittsburgh to discuss the “rebalancing” of the world economy. The prospects of that occurring this year really depend heavily on China. US-Chinese cooperation is essential for the global economic recovery, for international finance, for global trade but also on other major issues such as climate change, nuclear non-proliferation and Iran. Other countries have big roles to play in shaping these international issues but US-China coordination is going to be essential.
There is growing tension in US-China relations over the currency issue.

The undervalued Chinese currency is pegged to the weakened US dollar, hurting US, European and other exporters, while further encouraging cheep Chinese exports. To allow some of the needed global economic rebalancing to take place China needs to allow the value of its currency to rise. Even if that occurs, it is unclear that American and other consumer markets will still behave as they had. There is a good chance that China will not budge on the currency issue. Neither the United States’ nor China’s domestic agendas are inclined towards drastic changes. Behind the scene, the Chinese communist party is setting up the stage for the leadership succession in 2012 and all major political players there have an interest in keeping the status quo. Chinese leaders that would succumb to US pressure may seem week and could pay the price with their political careers. The US Congress seems just as bent on keeping the status quo. Democrats in Washington face the dilemma of having to find ways to unwind the massive stimulus packages while also facing 10% unemployment.

 Politically they are divided and vulnerable to Republican newfound indignation over the stimulus impact on the overall public debt. The stagnant high unemployment rate bodes badly for the Obama administration’s approval rating and it is likely to hurt democrats in Congress where much of the political capital they could muster has been spent on pushing the health reform package through.  The policies that the Obama administration needs to push in 2010 are going to require the same sort of congressional coalitions used in pushing the health care package through, but those coalitions will be much more difficult to forge and this has negative implications in particular on the climate change and energy package.

On the issue of addressing climate change there will be a great deal of international diplomatic activity in 2010. Following the Copenhagen talks, the movement to reduce the carbon emissions received greater momentum but not necessarily substantial commitments. The next meeting in Mexico City will likely be yet another venue for big promises and little action. Major breakthroughs will not be made in a policy buffet format with all the countries of the world picking their favorite thing. The real burden of change will have to be raised by the major carbon emitters of the world, primarily US and China. Some carbon emission de-escalation deal will have to be reached primarily between the two, and then by the rest. This approach worked in averting another man-made apocalypse scenario, it worked in the US-Russian agreements on reducing nuclear warheads and there is reason to believe it could work in this environment of economic interdependency.

China may shy away from assuming its responsibilities so it is important that the US makes the first decisive steps in reducing carbon emission. The Obama administration is dedicated to doing this and wants to get through Congress a climate change and energy policy package that includes cap and trade legislation. Chances are slim that democrats would succeed to do so in this election year on the Capitol Hill. The policy could have a real effect on the economy and republicans will bank on the issue to portray democrats as out of touch with the real suffering of America’s unemployed. One scenario is to decouple the climate change and the energy reform bills. Cap and trade would be put on the backburner and the energy bill would stand a change of being pushed through. This energy bill could include important infrastructure projects for the specific constituencies of reticent congressmen and this could prove to be the factor that may generate the necessary congressional coalition.

The energy bill is key to speeding US economic recovery, addressing the unemployment problem while also giving the United States an international moral pulpit on the climate change issue. The United States has a technological advantage in alternative and renewable sources of energy and it can use its standing to lead the way on a global scale. In many developing countries like China, US companies can build the infrastructure of the new “smart grid.” China has shown much interest in developing its wind power energy sector. The US, as a technology leader, stands in a good position to help China as well as the US economy along the way. The American people will get behind this job generating agenda and President Obama can use his charisma to direct popular support for tangible immediate policy ends. The other scenario would be to have cap and trade policy pushed together with the energy bill and have the package muddled down through Congress. The end result of this scenario is that what might come out could be of little use in actually addressing the climate change challenge in a meaningful way and the compromised policy package, laden with pet projects, would only generate popular frustration with Washington politics in general.

Exporting renewable energy technology and offering to build up China’s capacity could be the carrot that would lead China towards cooperation on issues it is reticent about. The US needs to have and use this carrot because, as mentioned before, US domestic pressure to do something about China, as well as international pressure from European partners pushes the Obama administration to risk trying to coerce China into changing its currency policy. Using a stick only approach to push China forward on this would likely lead to a very rocky US-Chinese relationship and there are plenty of negative ramifications if that occurs.

On the nuclear arms control and non-proliferation front, just like on the climate change efforts, 2010 will be a year filled with international diplomatic activity but with few likely breakthroughs. This year we will see ongoing negotiations with the Russians regarding the START successor treaty, since the previous one expired last year. The Pentagon, under congressional directive, is conducting the United States’ nuclear posture review in parallel with a similar process conducted on the Russian side. The White House might also try to get the Senate to reconsider signing on the Comprehensive Test Ban Treaty. Finally, in May, there will be a non-proliferation review conference in New York. To garner international support for consolidating the nuclear nonproliferation treaty, the US needs to showcase a major breakthrough in US-Russian arsenal cuts. To achieve that, the administration doesn’t just need the Russians to play along, it needs the US Senate to sign on the non-proliferation treaty and it needs Congress to approve significant changes in the US force structure. As in the case with climate change and energy package the administration will have a hard time garnering political coalitions in the US Senate so as to push through the signing of the CTBT.

Unlike the domestically charged healthcare debate, the signing of the CTBT does not have a major domestic relevance so as to make it a politically pressing topic on the Hill. With everything else that is on the US administration’s agenda this year, it is unlikely that these efforts with get sufficient attention.  The question is if the president will consider this agenda urgent enough to spend the administration’s human resources and the scarce political capital on it. President Obama is a well-calculated politician and will have to calibrate the effort put into this topic. He is aware that failure to achieve reductions in US arsenal will make it harder for the administration to make the case to other countries that they need to strengthen the nuclear non-proliferation treaty and crack down on regimes that seeking to develop nuclear arms capable programs. Instability in Iran and Pakistan may be the driving arguments instead.

Events in Iran will be closely watched in Washington in 2010 but little action is likely to be taken to support the anti-regime protests there. The current Obama administration has shown that it is open to a dialogue with Iran. It is up to Tehran to accept that dialogue or reject it and violently suppress street protests. We can expect to see the Ayatollahs still in power this year but they will have to make that choice. Last year, Iranian elites seemed bent on staying the course on developing their weapons capable nuclear program, this year they may be more susceptible to change. There is a clear Iranian popular support to reengage with the US and avoid international sanctions. We could hope to see a change in attitude within the Iranian ruling machine, one that would seek to avoid a revolution by putting forward a more reformist leadership that would seem to listen to the popular feeling. Such a move would allow the Ayatollah to maintain control. There will need to be changes with regards to President Ahmadinejad, an apparent sidelining of his powerbase and possibly a rebuff of his actions against the opposition. The ailing Ayatollah missed this opportunity during last year’s elections and that precedence has a negative impact on this scenario’s likelihood.

In the meantime the US has built an international coalition willing to impose a new set of sanctions on the Iranian regime. If US-China relations go astray, China could actually be the one spoiler of this international coalition against Iran’s nuclear ambitions. It has substantial economic interests in Iran, especially in obtaining Iranian natural gas. Here we can expect to the real intentions of Chinese diplomacy. It’s commitment to integrate as a major player on the international scene would be put to the test on this issue. Broadly speaking, as a major economic stakeholder, China has an interest in systemic economic stability, in integrating and assuming its great power status though its WTO membership, increased clout at the UN, major role in the G20, etc.  In practice however China also tends act only so as to protect its economic interests and to avoid the responsibilities that come with being a great power. Within the UN Security Council, China has become the main veto threat, especially in situations where international pressure needs to be exercised on regimes with which China has strong economic ties. Thwarted international pressure on the Sudanese regime is an example of behavior. 

At the end of last year the Obama administration announced a substantial temporary military surge policy for Afghanistan. In 2010 we can expect to see the US military forces effectively succeed in diminishing Taliban capabilities, reclaiming territories, in particular making major population centers safe. Getting the Afghan government and its institutions to operate effectively is a different matter. The country does not have effective central or even decentralized government, the Afghan president is not trusted and the Taliban know how to disrupt the rebuilding process. Because of the porous border there can be no stabile Afghanistan without a stabile Pakistan and vice versa. The US-Pakistani relationship will continue to be ripe with suspicion of manipulation on both sides and it is further complicated by Islamabad’s tension with New Delhi. The US interest in stepping up its positive relations with India, a growing regional player with increased economic clout, will likely trigger problems with the Pakistani. Add on top of this diplomatic juggling act the Chinese interests and their active meddling in fueling the fire between Pakistan and India, whose growing influence they would like to check. What might seem to be a military effort in securing local stability in Afghanistan is actually a much more complex geopolitical chess game. Any gains secured by the military in 2010 would be rolled back unless the US can secure a broad international coalition committed to developing Afghanistan’s institutional and governance prospects in the long-run. The European allies are helpful on this agenda, but regional power holders would need to be brought on board, in particular China. US-Chinese coordination could have a positive impact on the Pakistani behavior having in mind the close Chinese-Pakistani relations, and this could in turn increase regional stability. An exercise of US-Chinese coordination in the region would be a showcase for China taking on international responsibilities and the US accommodating China’s great power standing. Such a coordination would also reconfirm China’s regional influence vis-à-vis India’s. It would be a tricky diplomatic game to play but if it increases stability of the Pakistani government, if it increases the security for the Pakistani nuclear weapons complex, if it positively develops US-Chinese coordination, it is a game worth playing. 

In this globalized world of economic interdependency, domestic policies have an internal reach and international relations have major implications on the economic wellbeing, security and survival or each country. Among all international relations, success on the world’s most pressing topics will primarily depend on the US-China capacity to coordinate policies.