– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

The fate of Yahoo Inc has become intertwined in the public’s imagination with the success or failure of its dealings with Microsoft Corp in recent years.

That’s despite the fact that as much as 70 percent of the value investors put on Yahoo’s depressed shares are tied up in its international assets or cash holdings — factors that have nothing to do with Microsoft.

Yahoo’s operations trade for just $5 to $6 per share out of its current $15 share price, once you exclude its Asian investments and the value of its cash. Its hidden assets in Japan and Chinese affiliates — Yahoo Japan Corp and China’s Alibaba Group — alone are worth around $6 to $7 per share.

The trouble is that Yahoo needs to find a way to cash out of its increasingly rocky relationship with Alibaba Group, in which it holds a 39 percent stake after it pulled back from operating its own business in China in 2005.

Yahoo’s best chance here may come next year if Alibaba succeeds with a second IPO of its Taobao.com consumer ecommerce site, building on the success of the 2007 IPO of Alibaba.com, now valued at more than US$13 billion on the Hong Kong exchange.

Truth be told, Yahoo’s huge success in building the biggest U.S. Internet media destination never translated very well overseas, despite the early foray into Asia that left it with lucrative assets in Japan and China. These passive investments came to substitute for a global operating strategy.

But that’s changing now, as Yahoo once again has begun investing in international operations it can fully control.

In its latest such push, Yahoo said on Tuesday that it would buy Maktoob.com, the largest Internet media site for the Arab world, with an estimated 16.5 million users. Terms were not disclosed.

Yahoo’s international stronghold is Asia, where it had 172 million unique users in the month of June, according to industry estimates. It is the top player in Japan through its stake in Softbank-controlled Yahoo Japan, and is dominant in Taiwan and Hong Kong as well.

In India, Yahoo has the most visited home page and is the most popular provider of e-mail, instant messaging and online news to consumers. In a country mad on the sport, Yahoo operates the most popular site for cricket fans. Yahoo had 23 million unique monthly users in India in June, according to market researcher comScore.

But Yahoo stock gets little to no stock market credit for these international operations. Converting market share into meaningful financial results will take years. First, Yahoo must develop its patchwork of leading properties in places like the Philippines and Vietnam and Latin America into a global franchise. And it’s hard to see how Yahoo can regain lost ground in Europe’s more developed Internet markets.

Until now, the trap for Yahoo has been that much of its international value remains latent, locked up in investments in Japan and China rather than in operating businesses it controls. That is changing, slowly.

This leaves Yahoo at the mercy of an eventual rebound in U.S. advertising markets. For the foreseeable future, any significant rebound in Yahoo’s share price depends on conjecture over the still unknown potential of getting into bed with Microsoft.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article, with the exception of a token Yahoo share. He may be an owner indirectly as an investor in a fund. –

Jaspal Bindra is Chief Executive, Asia, for Standard Chartered Bank. The views expressed are his own.

Asia has come of age. When leaders from the Group of 20 nations converge in London, Asia’s rising powers - China, India,  Korea and Indonesia - will be sitting at the global high table to decide on ways to reshape the world’s financial and economic order.

There are expectations that the meeting will include concrete steps to revive economic growth, a boost in funding for the International Monetary Fund, and an understanding on the new financial architecture to restore trust in the financial system.

Asian policy makers are looking for two other critical assurances from the meeting: one, that the developed countries will keep their markets open; and two, that global capital flows needed to finance trade and investment will remain unchecked.

No one doubts the difficulty of reaching consensus. But the stakes have never been higher.

Amidst the frenetic attempts by individual governments to tackle the biggest economic crisis since the Great Depression, it is easy to forget that the progressive dismantling of barriers against international trade and investment contributed to the biggest economic boom the world has seen.

More than 200 million jobs were created worldwide between 2000 and 2007, according to the Institute of International Finance, and millions of people in the developing world were lifted out of poverty, as a result of free flow of capital, goods and services.

Yet, as the crisis continues, governments and businesses in Asia are increasingly worried that the world’s biggest and most developed economies will explicitly or implicitly legislate to encourage manufacturers to keep production onshore and, banks and insurance companies to keep money within their borders.

Any such protectionism comes at a dark time. Although Asia remains fundamentally robust, thanks to high private savings, conservative balance sheets of companies and financial institutions and mammoth foreign reserves, the ongoing financial turmoil has caused consumers and lenders in developed countries to tighten their purse strings.

Steps to ensure that trade and capital keep flowing ought to be at the top of the agenda for the G20 leaders.

A good start

Getting developing nations to the table with the Group of Seven developed countries is a good start. The G20 was born as a response to the Asian financial crisis of the late 1990s and, although a G20 group of finance ministers and central bank governors has been meeting since 1999, it is in this financial crisis that its role has taken center stage.

The G20, whose member countries account for over 80 per cent of the world’s output and two-thirds of the world’s population, is a forum which truly represents the global economy. But will it produce real benefits for Asia?

At this summit, the emerging Asian powerhouses are expected to assert more leverage due to the relative strength of their position. Though weakened, the economies of China, India and Indonesia are still expected to show reasonable GDP growth this year of 6.8 per cent, 5 per cent and 4 per cent respectively, according to Standard Chartered economists’ forecasts.

The emerging powers have already notched up some gains. The G20 finance ministers, meeting in London in March, agreed to expand the Financial Stability Forum - a body which will set new standards for global financial institutions — to include developing country members. These countries will also join global forums that will set new international accounting and risk regulatory frameworks.

Greater participation of the rising powers in such key decision-making bodies should help resolve potential conflicts and go a long way in helping to rebalance the world economic order.

Ironically, it is the financial upheaval in the West which has brought the systemic importance of the emerging markets to the forefront. It is now clear that the imbalances between the high saving nations in the East and overspending economies of the West led to the asset bubbles in the United States and Europe.

To correct the imbalances, the big savers, particularly in Asia, will have to find ways to spend more to boost domestic economies. Higher local consumption will help the economies reduce their dependence on exports. Domestic spending will also help ameliorate the slowdown in investments from the West.

China has made a decisive move on this front, with its stimulus plan to spend almost $600 billion, largely in infrastructure projects. It has also pulled out all stops to make foreign direct investments easier for domestic companies.

New trade routes

Asian economies will also need to trade more between themselves and with the Middle East and Africa. That is already happening in some trade corridors. Trade between China and Africa has expanded 20-fold in just over a decade. For some countries in the region, China has replaced the U.S. and Europe as the biggest export market. This process is likely to accelerate as western consumers cut back on spending and increase savings.

Asian members of G20 are also looking to the international financial institutions such as the IMF and the World Bank to revive investments into the region’s developing economies. But the IMF is cash-strapped after bailing out several East European economies. It is hardly in any position to rescue another medium-sized economy in Asia, Africa or Latin America should the need arise.

The meeting of G20 finance ministers made some headway on this issue. The ministers agreed to substantially expand the IMF’s resources, possibly increasing the Fund’s emergency borrowing program by $500 billion, so that the institution can once again play its role as a lender of last resort in times of international crisis.

The Asian Development Bank also plans to triple its capital base to $165 billion, enabling it serve the poorest and most vulnerable sections of population in the region.

Emerging Asian powerhouses such as China and Korea, apart from the established members like Japan, are now expected to provide a significant part of the funding required to recapitalize these global financial institutions.

However, greater monetary contribution from the rising powers would have to be accompanied by giving them a greater say in the running of these institutions. For instance, today, Korea has more than twice the economic output of Belgium, but Belgium’s representation in the IMF is 50 per cent greater than Korea’s. This is where the developed countries will have to give up some more ground.

G20 leaders must accelerate the process of revising the quota allotted to IMF member countries so that the emerging markets can get voting rights in the Fund which reflect their financial weight.

Progress has been made since the G20 leaders first met in Washington in November with the aim to restore normalcy to the global economy and markets. But risks remain.

It was the progressively free movement of capital, goods, people and services across borders that fueled the economic rise of the emerging markets and raised affluence in the developed world. The risk is that this could unravel if the current financial turmoil leads to heightened protectionism, curbed capital flows and fragmentation of the global economy. The G20 has the duty to ensure this does not happen.

– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

An American president vowing to cooperate with the rest of the world would barely be news if it did not follow eight years’ of George W. Bush’s tenure in the White House.

Barack Obama’s inauguration address was thin on foreign policy specifics, but his pledge to work with allies and adversaries on global problems from nuclear weapons to climate change was a message many have waited impatiently to hear.

In a few phrases, Obama sought to close the chapter on the U.S.-led invasion of Iraq, the Guantanamo Bay prisoner camp and the use of torture, denial of global warming and heavy-handed attempts to promote democracy across the Middle East.

His affirmation that “we are ready to lead once more” was tempered by commitments to the rule of law, human rights, military restraint and diplomatic alliances.

In one sentence, he set himself apart from Bush’s muscular unilateralism without renouncing force. “Our power alone cannot protect us, nor does it entitle us to do as we please.”

Obama enunciated modest objectives for extricating the United States from the two wars he inherits from Bush — leaving Iraq responsibly to its people, and forging a hard-earned peace in Afghanistan. No talk of victory or of “mission accomplished”.

His vow to defeat terrorism was coupled with a promise to seek a new way forward with the Muslim world, where Washington’s image suffered the most damage during the Bush years.

Where Bush made the “global war on terrorism” the central paradigm of his national security strategy, Obama set a broader and more inclusive agenda including areas disdained by his predecessor such as arms control and green energy.

Where Bush, right up to his final address, divided the world into good and evil, the new president offered to work with non-democracies and what used to be called “rogue states”.

“To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history; but that we will extend a hand if you are willing to unclench your fist,” he said.

Obama did not mention the flashpoints of recent weeks — the Israeli-Palestinian conflict, Russia’s use of its energy resources, or tension between India and Pakistan.

The guns fell silent in Gaza and the gas taps reopened at the Russia-Ukraine border just before he took office. No one wanted to be the first international problem for a president who warned that leaders would be judged by “what you can build, not what you destroy”.

Obama omitted any mention of free trade, amid rising protectionist pressure among his own electorate heightened by the global economic crisis.

Nor did he commit the United States in his first address to a reform of global governance to give more say to emerging powers such as China, India, Brazil or South Africa.

French President Nicolas Sarkozy used the U.S. leadership vacuum during Bush’s lame-duck period to press for expanding the Group of Eight industrialized powers and reforming the IMF, the World Bank and the U.N. Security Council.

Obama acknowledged that globalization and new threats such as nuclear proliferation and global warming would require “even greater cooperation and understanding between nations”.

His administration will have to turn that philosophy into practical policy before the G20 summit of nations representing 90 percent of global economic output meet in London in April.

Obama faces some other tough early choices.

He must arbitrate between those who argue that resolving the Israeli-Palestinian and Israeli-Syrian conflicts holds the key to Middle East stability, and those who say conditions are not ripe for peace and he should focus on Iran’s nuclear program.

He will have to choose between seeking Russia’s cooperation to reduce nuclear arsenals and combat the spread of nuclear weapons and continuing Bush’s divisive drive to bring former Soviet republics Georgia and Ukraine into NATO.

And he must decide whether to pursue a deal in world trade talks that could avert beggar-thy-neighbor protectionism in the economic crisis, or to assuage his voters by embracing “buy
American” measures and taking a tougher line on imports from low-cost producers such as China.

The United States is aiming to send 20,000 to 30,000 extra troops to Afghanistan by the beginning of next summer, according to the chairman of the U.S. Joint Chiefs of Staff.  The plan is not unexpected, and from a military point of view is meant to allow U.S. and NATO troops not just to clear out Taliban insurgents but also to bring enough stability to allow economic development, as highlighted in this analysis by Reuters Kabul correspondent Jon Hemming.

But does it still make sense after the Mumbai attacks -- intentionally or otherwise -- sabotaged the peace process between India and Pakistan?

As discussed many times on this blog, most recently here, a crucial element of President-elect Barack Obama's Afghan strategy was to combine sending extra troops with a new diplomatic approach looking at the Afghanistan-Pakistan-India region as a whole. The argument was that Pakistan would never fully turn its back on Islamist militants as long as it felt threatened by India on its eastern border and by growing Indian influence in Afghanistan on its western border.  India and Pakistan, so the argument went, should therefore be encouraged to make peace over Kashmir, to reduce tensions in Afghanistan and pave the way for a successful operation by the extra U.S. troops.

Where does that plan stand now? India-Pakistan relations are extremely strained and vulnerable to any second militant attack on India. It's hard to imagine the two countries sitting down any time soon for serious peace talks, and certainly not at the United States' behest, given that outside interference on Kashmir has always been anathema to India.

Yet as the Soviet Union discovered during its failed occupation of Afghanistan from 1979 to 1989, no matter how many troops you send in, you can't win there as long as the Islamist mujahideen have sanctuary in Pakistan.  The United States knows this too having backed the mujahideen against the Soviets (this being a war that America has fought on both sides), which is presumably why it had begun to look at Afghanistan in a broader regional context.

So have the Americans reverted to a piecemeal approach with this plan to send in the extra troops? Are they just pushing on regardless and hoping for the best, perhaps thinking they have no other choice? Or should they have gone back to the drawing-board post-Mumbai and come up with a different plan?

In the immediate aftermath of the Mumbai attacks, India's response has been to look to the United States to lean on Pakistan, which it blames for spawning Islamist militancy across the region, rather than launching any military retaliation of its own. So after U.S. Secretary of State Condoleeza Rice's trip to India and Pakistan last week, have the Americans done enough for now?

According to Pakistan's Dawn newspaper, Rice told Pakistan there was "irrefutable evidence" that elements within the country were involved in the Mumbai attacks. And it quotes unnamed sources as saying that behind-the-scenes she “pushed the Pakistani leaders to take care of the perpetrators, otherwise the U.S. will act”.

India's Business Standard said the Indian government was pleased with the U.S. warning. "This is exactly what India wanted," the newspaper said.

The Times of India, however, fretted the U.S. action against Pakistan appeared to be "turning tepid", in public at least. It attributed the U.S. approach to the perceived need to avoid backing the civilian government led by President Asif Ali Zardari into a corner. (India has specifically not accused the Pakistan government of involvement in the Mumbai attacks, pointing instead to militant groups supported by Pakistan's powerful spy agency, the Inter-Services Intelligence, or ISI.) It also said the United States was wary of destabilising a partner on which it depends crucially as a transit route for supplies to Afghanistan, while also being hobbled by the change of administration in Washington.

So which way is the pendulum swinging -- towards firm U.S. action that will allow Indian Prime Minister Manmohan Singh to say he was right to put his faith in American diplomacy, or a lukewarm response that will either force India to act alone or leave its Congress-led government looking on in helpless frustration as it heads into a general election due by next May?

U.S. pressure has succeeded in pulling India and Pakistan back from the brink in the past.  When fighting erupted between the two newly declared nuclear-armed powers in the Kargil war in 1999, U.S. President Bill Clinton persuaded then Pakistan Prime Minister Nawaz Sharif to pull Pakistani troops back. (Sharif paid a high price. Later in the year he was overthrown by then General Pervez Musharraf, a lesson unlikely to be lost on the current civilian government which is seen as wary of making too many concessions to India for fear of alienating the powerful Pakistan Army.)

Then after an attack on India's parliament in December 2001 triggered the mobilisation of close to a million men along the two countries' borders, the United States dived into another round of frantic diplomacy to persuade Pakistan to crack down on Kashmiri militant groups and the Indians to stand down.  Much of that diplomacy went on behind-the-scenes, though for an interesting Pakistani view of how close the two countries came to war in 2002, here is a link to an article written in January that year by the current Pakistan High Commissioner to Britain.

So what are the prospects in the current crisis?

Unlike in previous years, the Americans have become much more forthright about the extent to which they are willing to support Indian assertions that the roots of Islamist militancy lie in Pakistan.  When the Indians blamed the ISI for bombing its embassy in Kabul in July -- a charge Pakistan denied -- the Americans delivered by leaking reports of ISI involvement to U.S. newspapers, as I discussed in an earlier post.

After the Mumbai attacks, the New York Times has brushed off Pakistani denials of involvement with an op-ed boldly headlined The Pakistan Connection.

Bruce Riedel at the Brookings Institution has argued that "the most dangerous terrorist menace (to India) comes from groups with intimate connections to the global jihadist network centered around Osama bin Laden and al Qaeda and its allies in the Pakistani jihadist culture."  Exploring links between the ISI and militant groups he says it nurtured to fight India in Kashmir, he says that Zardari's ability to get control of the ISI "is still very much in doubt."

At the other side of the world, The Australian has challenged what it calls "The dangerous illusion of independent terrorists" -- the misconceived notion, it says, that perpetrators of attacks are non-state actors operating beyond the control of governments. "The radical increase in the lethality, range, political consequence and strategic influence of terrorists comes not from their being non-state actors at all. Instead it comes from their being sponsored by states," it says.  Then in language that could have come straight from the Indian government, it says: "Pakistan has for many years been a significant state sponsor of terrorism."

All that sounds like the kind of response the Indian prime minister was looking for when he said that "We expect the world community to recognise that the territory of the neighbouring country has been used for perpetrating this crime."

But how will it play inside Pakistan, where a weak civilian government is delicately balanced against a powerful army that has run the country for much of its life, and which in turn is battling militants on its border with Afghanistan? And what too will it mean for the ordinary people of Pakistan, caught in the middle?

Wow, Thomas Friedman writing in the New York Times let fly with a zinger with his opinion piece “Calling all Pakistanis“, presumably aimed at stirring compassion in Pakistani hearts over last week’s horrifying attack in Mumbai.

Pakistanis were ready enough to take to the streets to vent their anger and indignation over cartoons in Denmark, why can’t they demonstrate a shared sense of outrage over the cold-blooded killing of 171 people in the country next door, asks Friedman.

Of course, anyone would like to see spontaneous public displays of grief and empathy for the people of Mumbai. Can it happen in Pakistan, a country that has fought three wars against India? The army doesn’t trust India and the people have been fed an anti-India diet by governments and media since 1947.

I think we can understand why it won’t happen in Peshawar, or faraway Quetta — cities where conservative, religious forces have a lot of influence.

But why not Karachi, Mumbai’s twin across the Arabian Sea, or Lahore, Pakistan’s cultural capital? After all they host the most progressive, liberal sections of Pakistan’s deeply fissured society. A few bravehearts from that tiny minority might risk some candle-lit vigils.

The trouble is that they also have a strong Islamist presence, which is why thousands of people turned out to protest against the cartoons in both cities.

Even remembering the genuine warmth that was shown to Indian visitors during the heady days of cricket diplomacy in spring of 2004, expecting a sudden, collective outpouring of sympathy from ordinary Pakistanis is probably expecting too much.

What people looking from a distance don’t understand, and I’ll risk including faraway news editors in this, is that reactions in Pakistan are often politically engineered, and delayed rather than spontaneous.

It probably has something to do with the fatalism of people who’ve seen generals overthrow their governments, who’ve been brutalised by bombs and suicide attacks in their own towns, who are so confused by their own powerlessness that they readily believe the most outlandish conspiracy theories.

Look at those cartoon protests in 2006. Yes they were big.

Indeed the protest in Lahore, to the shock of most Lahoris, turned violent and destructive along the city’s famous Mall road.

But it took weeks for the Islamist parties, some say egged on by rogue anti-Musharraf agent provocateurs in the agencies, to mobilise their cadres in Karachi and Lahore.

The demonstrations in Pakistan were bigger than elsewhere in the Islamic world, but came far later and appeared contrived.

In contrast, the displays of public support in 2007 for the Supreme Court Chief Justice who Musharraf dismissed were genuinely impressive as he criss-crossed the country addressing bar associations.

Yes, the lawyers and Sharif’s party, and to some extent Bhutto’s People’s Party, organised these too.

But they generated a groundswell of public support in a way that cartoon issue never really did — look how Islamist parties were wiped out in February’s election.

So Pakistanis clearly respond to injustice, if someone gets them going.

Which political party is going to risk filling them with compassion for Mumbai, given India’s suspicions that the killers were trained by the Pakistani military.

Remember the politicians are in the middle of a transition from military rule, that the army chief has himself supported.

Still, perhaps the politicians should risk getting people involved. After all, it would fit nicely into the government’s avowed campaign to turn people against militancy and religious extremism.

Perhaps that was Friedman’s purpose.

Because otherwise an article that only a few well-read people in Karachi and Lahore are likely to see could simply play to the anti-Pakistan gallery, and harden attitudes of ordinary good-hearted Pakistanis who feel outsiders take cheap shots to malign them.

Let’s see, maybe the President Zardari’s Pakistan People’s Party will recognise this is an opportunity to reach out to India in a common war against jihadis who’d like to take over Pakistan and break up the Indian federation.

Maybe Kayani could lay a wreath.

Maybe that would give people confidence to show their true feelings of horror an sympathy for what happened in Mumbai.

Maybe, maybe, maybe.

PHOTO: Peace activists hold placards as they demonstrate for peace between Pakistan and India in Lahore December 5, 2008. REUTERS/Mohsin Raza (PAKISTAN)

Indian Prime Minister Manmohan Singh has blamed a group with "external linkages" for coordinated attacks which killed more than 100 people in Mumbai. The language was reminiscent of the darker days of India-Pakistan relations when India always saw a Pakistan hand in militant attacks, blaming groups it said were set up by Pakistan's spy agency, the Inter-Services Intelligence, or ISI, to seek revenge for Pakistan's defeat by India in the 1971 war.

An attack on India's parliament in December 2001 triggered a mass mobilisation along the two countries' borders and brought them close to a fourth war.  That attack was blamed by India on the Pakistan-based Kashmiri militant groups Lashkar-e-Taiba and Jaish-e-Mohammed - hardline Islamist groups with links to al Qaeda.  Both have been associated with the kind of "fedayeen" attacks -- in which the attackers, while not necessarily suicide bombers, are willing to fight to the death -- seen in Mumbai.

So does the assault on Mumbai spell the death-knell for what had been gradually warming ties between Pakistan and India?

Pakistan has condemned the attack, just as it did when gunmen attacked the Indian parliament in 2001. And the Pakistani context today is quite different from that of 2001. Then a military ruler, former president Pervez Musharraf was in power, whereas Pakistan is now run by a new civilian president, Asif Ali Zardari, who has made clear he wants peace with India over Kashmir.

But Singh's comments, made in a televised address to the nation, were remarkably strong for the usually mild-mannered prime minister:

“It is evident that the group which carried out these attacks, based outside the country, had come with single-minded determination to create havoc in the commercial capital of the country," he said. “We will take the strongest possible measures to ensure that there is no repetition of such terrorist acts. We are determined to take whatever measures are necessary to ensure the safety and security of our citizens."

The strength of the language may have been fuelled by the scale of the Mumbai attacks, and could refer to either Pakistan or Bangladesh, which has also been accused by India of harbouring militant groups. But it sounded similar in tone to that of Singh's  predecessor, Atal Behari Vajpayee, who following the 2001 parliament attack warned Pakistan that India's patience was wearing thin. And they also contrasted with India's reaction to bombings which killed at least 63 people in the western city of Jaipur earlier this year, when the Indian government notably refrained from pointing a finger at Pakistan.

So was this a deliberate attempt to undermine India-Pakistan relations?  And if so, what will that mean for Pakistan's fragile civilian democracy? Zardari has staked his reputation on making peace with India to improve trade and help lift Pakistan's struggling economy.

Much will depend on how Singh, under pressure to show a firm hand ahead of a national election due in India by May 2009, reacts.

(Rueters photo of Taj Mahal hotel in Mumbai/Punit Paranjpe)

–Paul Taylor is a Reuters columnist, the views expressed are his own–

Anyone who expected the major emerging economies to write fat checks in exchange for being invited to the first G20 leaders’ summit on rescuing the world economy will have been disappointed.

But that should only have surprised the naive.

Despite intensive lobbying by British Prime Minister Gordon Brown of Saudi Arabia and China, the rising powers were never likely to make a cash down-payment to the International Monetary Fund before getting more seats and votes at the top table.

IMF Managing Director Dominique Strauss-Kahn said after Saturday’s Washington summit that his organization will need at least another $100 billion in the next six months to bail out countries stricken by the credit crisis.

Among the world’s major reserve holders, only Japan, an established member of the Group of Seven most industrialized nations, offered the IMF a $100 billion unilateral loan.

The Saudis, Chinese, Russians and Indians want to be sure of winning a permanent say as equal partners in the management of the global economy, and of locking incoming U.S. President Barack Obama into a new world financial order, before they open their wallets.

Even then, they face serious constraints due to domestic development priorities, nationalist public opinion and uncertain energy prices that will limit any contribution.

Here is some of their thinking:

SAUDI ARABIA - Saudi Finance Minister Ibrahim al-Assaf was most outspoken in explaining, in a Reuters interview, why the oil-rich kingdom was not about to pick up the bill for the financial crisis.

“We (Saudis) have been playing our role responsibly and we will continue to play our role responsibly but we are not going to finance the institutions just because we have large reserves. These reserves are for the development of the kingdom of Saudi Arabia,” he said.

Economists say Riyadh has taken a bigger hit from the crisis than it has publicly acknowledged. Its ambitious industrialization plans, as well as its largesse to domestic interest groups, may require a higher oil price than today’s.

Oil has tumbled from a record $147 a barrel in July to just $55 today, which is likely to prompt deeper production cuts. So producer nations face a double revenue hit on price and volume.

At this price, Saudi Arabia and all other Gulf Cooperation Council states except Kuwait can expect to post a fiscal deficit next year, according to economist Mushtaq Khan of Citigroup Global Markets.

Politically, it would be hard to justify helping bail out the widely hated West at a time when Saudi investors have seen their stock market plunge and their foreign investments tank.

The Saudi government may also wait to see whether Obama takes up a King Abdullah’s Arab League peace initiative with Israel and gives priority to Israeli-Palestinian and Israeli- Syrian peace, in contrast to outgoing President George W. Bush.

CHINA - Chinese President Hu Jintao made clear Beijing’s main contribution to stabilizing the world economy was a massive domestic investment program that should help cushion growth at a time when exports may shrink due to recession in the West.

The $586 billion two-year economic stimulus, much of it to be spent on modernizing the creaking infrastructure of the world’s most populous nation, was a bold move by the cautious standards of China’s collective leadership.

The Chinese, sitting on almost $2 trillion in foreign currency reserves, are waiting to see if Obama will share real power with emerging nations. They also want guarantees against protectionism by a Democratic administration and Congress.

“The question is whether developed countries are ready to accept China as a major player. If you want China to take out money when the crisis happens, but give China little power when voting, nobody is going to play with you,” a senior official in the country’s $200 billion wealth fund said.
Jin Liqun, supervisory board chairman of China Investment Corp. and a former vice finance minister, said industrialized powers “should address developing countries with humility”.

Although China is not a Western-style democracy, public opinion still matters.

Most media commentary has resolutely opposed any “bailout” of the West by succumbing to pressure to buy more U.S. Treasury bonds, Standard Chartered China analyst Stephen Green notes. But he said China could transfer some of its dollar reserves from U.S. Treasuries to IMF Special Drawing Rights, especially if it is given more voting rights in the IMF.

RUSSIA - Russian leaders have been dismissive of the IMF as a tool of U.S. dominance of the global economy. Although it still has $500 billion in reserves, Moscow is fast burning through its foreign currency pile as it tries to stabilize its own markets and bail out oligarchs in financial trouble.

A lower oil price also threatens future Russian state revenues and investment plans.
President Dmitry Medvedev and Prime Minister Vladimir Putin think in terms of power rather than economics.

Any Russian cash for the IMF would probably have to be part of a wider bargain with Obama covering missile defense, NATO enlargement, nuclear and conventional arms control, non-proliferation and perhaps Georgia and Kosovo as well.

The Russians don’t rule out such a deal but intend to talk with Obama from a position of strength. That is why they have blown hot and cold in the last two weeks, threatening to deploy missiles in Kaliningrad, on Poland’s border, but also voicing hopes of better ties with the new U.S. president.

INDIA - India, which still sees itself as a developing nation and has less IMF voting power than Belgium, is waiting to see whether Obama accepts a new distribution of world economic and political power before making commitments.

Finance Minister Palaniappan Chidambaram told a World Economic Forum event that the G20 had come to stay as the single most important forum to address global financial and economic issues, and much better than the G7.

But he said: “It is not clear to us whether the new (Obama) administration is fully on board with what the outgoing administration has put on the table.”

India too will be looking for guarantees against U.S. protectionism while demanding the right to protect its own millions of subsistence farmers.

All these countries say they are willing to become “responsible stakeholders” in a new world financial system. Just don’t expect them to pay up before they see the reality of power.

Will Israel and India -- the first the United States' closest ally and the second fast becoming one of the closest -- emerge as the trickiest adversaries in any attempt by the United States to seek a regional solution to Afghanistan?

The Washington Post reported earlier this week that the incoming administration of President-elect Barack Obama plans to explore a more regional strategy to the war in Afghanistan — including possible talks with Iran.

The idea has been fashionable among foreign policy analysts for a while, as I have discussed in previous posts here and here. The aim would be to capitalise on Shi'ite Iran's traditional hostility to the hardline brand of Sunni Islam espoused by the Taliban and al Qaeda to seek its help in neighbouring Afghanistan. At the same time India would be encouraged to make peace with Pakistan over Kashmir to end a cause of tension that has underpinned the rise of Islamist militancy in Pakistan and left both countries vying for influence in Afghanistan.

But Israel has already cautioned Obama against talking to Iran, which it said would be a seen as a sign of weakness in efforts to persuade Tehran to curb its nuclear programme. And Obama's suggestion that the United States should try to help resolve the Kashmir dispute has raised hackles in India, which resents any outside interference in what it sees as a bilateral dispute. That could make the two countries important allies in combating -- or at least reshaping -- any attempt to remould U.S. strategy. 

India and Israel have already built close defence ties, as underlined by this Times of India article.  And according to this Asia Times article by former Indian diplomat M K Bhadrakumar, India's growing relationship with Israel, combined with U.S. pressure, is pushing Delhi to break off what was once a strategic partnership with Tehran. "At the root of it lies unprecedented US-Israeli interference in India's Iran policy," he writes.

Are we going to see more signs of Israel and India working together -- if necessary to resist rather than support U.S. policy? And in an increasingly multi-polar world, will Obama discover that he needs to watch the United States' friends as closely as its enemies to drive through his plans for change?