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A nuclear agenda: China and Pakistan move ahead

Today's Financial News - Posted October 16, 2008

America’s not-so-friendly global counterparts are taking advantage of our national pain. Pakistan and China are making deals and rumors of a nuclear pact are spreading. Investors must carefully monitor the situation.

By Andrew Snyder

Baltimore – (TFN): Thanks to a financial debacle that started on Wall Street and rippled across the globe, America’s superpower prowess has been permanently damaged. While our political clout has not yet dropped to French levels, we are certainly one step closer.

With our national bank account running low, nations that once turned to the States to boost their economy and political stance are turning elsewhere. With over $1.9 trillion in foreign exchange reserves, China is their new first stop.

For a prime example, take a look at Pakistan and its new democratic government. When Asif Ali Zardari was sworn in, his first international stop was not the United States. It was China.

Zardari headed east to work on scoring nuclear materials and some desperately needed cash. After all, his country is nearly bankrupt and is getting overrun by Islamist militants.

Knocked down a peg

This is an important political trend Americans must monitor. Pakistan is far from happy with the United States. What was once a strong partnership in the war against terrorism has turned into an on-again-off-again relationship.

Lately, it is America that has led the friendship’s demise. Last week, the Bush Administration confirmed a nuclear-power deal with Pakistan’s rival, India. By helping India, Bush basically turned his head on Pakistan.

Even worse, Zardari is still mad after American troops used missiles and ground raids to cross the Afghanistan border into Pakistan in an effort to route out suspected terrorists. Pakistani military officials were far from happy and went directly to China for defense assistance. Not good.

Sometime during the next few days, Pakistan and China are supposed to announce their finalized deals, which will include arms sales, trade agreements, a loan of up to $1.5 billion, and most notably, a nuclear-energy trade deal.

This is not a time when America needs its so-called allies acting up and trading nuclear materials. But you can bet they will. They know we are being choked by a financial meltdown and are in a dire situation.

When mom and dad are fighting, kids get away with just about anything.

The heat is on

While a nuclear-energy pact between China and Pakistan is not the start of another Cold War, it has created tensions in one of the most critical regions of the world.

Pakistan and India are far from friendly to each other. So far, China and the United States have been able to tolerate each other’s worldly presence. But that could all change as financially desperate countries make desperate moves.

As investors, you need to consider the geo-political ramifications of America’s financial crisis. All sorts of power-hungry countries that have much better balance sheets than ours will be fighting for power.

Thanks to its huge export economy, China has a strong surplus of cash. It is thrusting the country into a powerful position.

Keep an eye on this situation and the potentially troublesome outcome the announcement of any deals could have on the region’s politics.

It will create some interesting profit opportunities. Whenever billions of dollars trade hands, somebody gets rich.


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Posted by Andrew Snyder · Filed Under International Investing 

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