An excellent piece in yesterday’s New York Times magazine effectively argues that the US’s position in the global order of things is changing and, that in addition to the three powers in today’s world (i.e. the U.S., China and the European Union), a set of “second world” nations that are part developed & part developing are very much in play in the new world order.  Since many of these “second world” nations are ones that we cover here (e.g. Ukraine, Turkey, Azerbaijan, Uzbekistan, Venezuela, Colombia, Brazil, Libya, Egypt, Saudi Arabia, Iran, Malaysia, Indonesia, and Vietnam), we wanted to highlight the article (and recommend reading it in its entirety) and note a few salient paragraphs below.  As the author notes, these “second world” countries are not just emerging markets or frontier/black sheep nations, but countries in strategic regions that will shape geopolitics & global economics for the forseeable future.

“…So now, rather than bestriding the globe, we are competing — and losing — in a geopolitical marketplace alongside the world’s other superpowers: the European Union and China. This is geopolitics in the 21st century: the new Big Three. Not Russia, an increasingly depopulated expanse run by Gazprom.gov; not an incoherent Islam embroiled in internal wars; and not India, lagging decades behind China in both development and strategic appetite. The Big Three make the rules — their own rules — without any one of them dominating. And the others are left to choose their suitors in this post-American world.

…Lying alongside and between the Big Three, second-world countries are the swing states that will determine which of the superpowers has the upper hand for the next generation of geopolitics. From Venezuela to Vietnam and Morocco to Malaysia, the new reality of global affairs is that there is not one way to win allies and influence countries but three: America’s coalition (as in “coalition of the willing”), Europe’s consensus and China’s consultative styles. The geopolitical marketplace will decide which will lead the 21st century.

The key second-world countries in Eastern Europe, Central Asia, South America, the Middle East and Southeast Asia are more than just “emerging markets.” If you include China, they hold a majority of the world’s foreign-exchange reserves and savings, and their spending power is making them the global economy’s most important new consumer markets and thus engines of global growth — not replacing the United States but not dependent on it either. I.P.O.’s from the so-called BRIC countries (Brazil, Russia, India, China) alone accounted for 39 percent of the volume raised globally in 2007, just one indicator of second-world countries’ rising importance in corporate finance — even after you subtract China. When Tata of India is vying to buy Jaguar, you know the landscape of power has changed. Second-world countries are also fast becoming hubs for oil and timber, manufacturing and services, airlines and infrastructure — all this in a geopolitical marketplace that puts their loyalty up for grabs to any of the Big Three, and increasingly to all of them at the same time. Second-world states won’t be subdued: in the age of network power, they won’t settle for being mere export markets. Rather, they are the places where the Big Three must invest heavily and to which they must relocate productive assets to maintain influence.

…But what about the Stans: landlocked but resource-rich countries run by autocrats? Ever since these nations were flung into independence by the Soviet collapse, China has steadily replaced Russia as their new patron. Trade, oil pipelines and military exercises with China under the auspices of the Shanghai Cooperation Organization make it the new organizing pole for the region, with the U.S. scrambling to maintain modest military bases in the region. (Currently it is forced to rely far too much on Afghanistan after being booted, at China’s and Russia’s behest, from the Karshi Khanabad base in Uzbekistan in 2005.) The challenge of getting ahead in the strategically located and energy-rich Stans is the challenge of a bidding contest in which values seem not to matter. While China buys more Kazakh oil and America bids for defense contracts, Europe offers sustained investment and holds off from giving President Nursultan Nazarbayev the high-status recognition he craves. Kazakhstan considers itself a “strategic partner” of just about everyone, but tell that to the Big Three, who bribe government officials to cancel the others’ contracts and spy on one another through contract workers — all in the name of preventing the others from gaining mastery over the fabled heartland of Eurasian power.Just one example of the lengths to which foreigners will go to stay on good terms with Nazarbayev is the current negotiation between a consortium of Western energy giants, including ENI and Exxon, and Kazakhstan’s state-run oil company over the development of the Caspian’s massive Kashagan oil field. At present, the consortium is coughing up at least $4 billion as well as a large hand-over of shares to compensate for delayed exploration and production — and Kazakhstan isn’t satisfied yet. The lesson from Kazakhstan, and its equally strategic but far less predictable neighbor Uzbekistan, is how fickle the second world can be, its alignments changing on a whim and causing headaches and ripple effects in all directions. To be distracted elsewhere or to lack sufficient personnel on the ground can make the difference between winning and losing a major round of the new great game.

…The Middle East — spanning from Morocco to Iran — lies between the hubs of influence of the Big Three and has the largest number of second-world swing states. No doubt the thaw with Libya, brokered by America and Britain after Muammar el-Qaddafi declared he would abandon his country’s nuclear pursuits in 2003, was partly motivated by growing demand for energy from a close Mediterranean neighbor. But Qaddafi is not selling out. He and his advisers have astutely parceled out production sharing agreements to a balanced assortment of American, European, Chinese and other Asian oil giants. Mindful of the history of Western oil companies’ exploitation of Arabia, he — like Chávez in Venezuela and Nazarbayev in Kazakhstan — has also cleverly ratcheted up the pressure on foreigners to share more revenue with the regime by tweaking contracts, rounding numbers liberally and threatening expropriation. What I find in virtually every Arab country is not such nationalism, however, but rather a new Arabism aimed at spreading oil wealth within the Arab world rather than depositing it in the United States as in past oil booms. And as Egypt, Syria and other Arab states receive greater investment from the Persian Gulf and start spending more on their own, they, too, become increasingly important second-world players who can thwart the U.S.Saudi Arabia, for quite some years to come still the planet’s leading oil producer, is a second-world prize on par with Russia and equally up for grabs. For the past several decades, America’s share of the foreign direct investment into the kingdom decisively shaped the country’s foreign policy, but today the monarchy is far wiser, luring Europe and Asia to bring their investment shares toward a third each. Saudi Arabia has engaged Europe in an evolving Persian Gulf free-trade area, while it has invested close to $1 billion in Chinese oil refineries. Make no mistake: America was never all powerful only because of its military dominance; strategic leverage must have an economic basis. A major common denominator among key second-world countries is the need for each of the Big Three to put its money where its mouth is.

For all its historical antagonism with Saudi Arabia, Iran is playing the same swing-state game. Its diplomacy has not only managed to create discord among the U.S. and E.U. on sanctions; it has also courted China, nurturing a relationship that goes back to the Silk Road. Today Iran represents the final square in China’s hopscotch maneuvering to reach the Persian Gulf overland without relying on the narrow Straits of Malacca. Already China has signed a multibillion-dollar contract for natural gas from Iran’s immense North Pars field, another one for construction of oil terminals on the Caspian Sea and yet another to extend the Tehran metro — and it has boosted shipment of ballistic-missile technology and air-defense radars to Iran. Several years of negotiation culminated in December with Sinopec sealing a deal to develop the Yadavaran oil field, with more investments from China (and others) sure to follow. The longer International Atomic Energy Agency negotiations drag on, the more likely it becomes that Iran will indeed be able to stay afloat without Western investment because of backing from China and from its second-world friends — without giving any ground to the West.

Interestingly, it is precisely Muslim oil-producing states — Libya, Saudi Arabia, Iran, (mostly Muslim) Kazakhstan, Malaysia — that seem the best at spreading their alignments across some combination of the Big Three simultaneously: getting what they want while fending off encroachment from others…What is more, China is pulling off the most difficult of superpower feats: simultaneously maintaining positive ties with the world’s crucial pairs of regional rivals: Venezuela and Brazil, Saudi Arabia and Iran, Kazakhstan and Uzbekistan, India and Pakistan. At this stage, Western diplomats have only mustered the wherewithal to quietly denounce Chinese aid policies and value-neutral alliances, but they are far from being able to do much of anything about them.

…What is more, many second-world countries are confident enough to form anti-imperial belts of their own, building trade, technology and diplomatic axes across the (second) world from Brazil to Libya to Iran to Russia. Indeed, Russia has stealthily moved into position to construct Iran’s Bushehr nuclear reactor, putting it firmly in the Chinese camp on the Iran issue, while also offering nuclear reactors to Libya and arms to Venezuela and Indonesia. Second-world countries also increasingly use sovereign-wealth funds (often financed by oil) worth trillions of dollars to throw their weight around, even bullying first-world corporations and markets. The United Arab Emirates (particularly as represented by their capital, Abu Dhabi), Saudi Arabia and Russia are rapidly climbing the ranks of foreign-exchange holders and are hardly holding back in trying to buy up large shares of Western banks (which have suddenly become bargains) and oil companies. Singapore’s sovereign-wealth fund has taken a similar path. Meanwhile, Saudi Arabia plans an international investment fund that will dwarf Abu Dhabi’s. From Switzerland to Citigroup, a reaction is forming to limit the shares such nontransparent sovereign-wealth funds can control, showing just how quickly the second world is rising in the global power game….”