Ariel Cohen of The Heritage Foundation -

The announcement by Gazprom CEO Alexei Miller that his company is aiming for the largest market capitalisation in the world is an unmistakable indicator how the global financial tectonic plates are shifting. Russian and Chinese energy and telecommunication companies are leading the global Fortune 100 list; India's Tata and Mittal Steel have become true multinationals.

Russia, China and India are playing increasingly important roles as the world's economic engines and as geopolitical players. And they have the US currency in their crosshairs. Today, Iran, Russia, Venezuela and even a US friend, Kuwait, are dumping the dollar in favor of the euro in energy transactions.

Abandonment of the dollar as the principal international currency for energy transactions is likely to decrease demand and increase the supply of dollars, continuing the slide of the US currency which started three years ago. A weaker dollar and higher inflation may add insult to injury in the prolonged process of the US economic deterioration. Treasury Secretary Henry (Hank) Paulson will visit Saudi Arabia on May 30, followed by Qatar, Kuwait and the United Arab Emirates. He is planning to ask the oil producers to pump more oil to get gasoline prices down. He will also ask their Sovereign Wealth Funds, the ships of the line and the aircraft carriers of the 21st century's geo-economics, to pump more cash into the ailing US banking system, which is already suffering in the aftermath of the sub-prime crisis.

How the mighty fall!

Countries that only a decade ago were the US' partners, if not its friends, such as Russia, are spearheading today's global geopolitical challenge to the perceived American hegemony. High oil prices are the cause and the driving force of this mega-trend.

The coffers in Moscow and Teheran are full of oil cash. Even more significantly, China, the manufacturing powerhouse of the world, is benefiting from the global demand for everything from building materials to tools. China today has the largest currency reserves in the world, while Russia is in third place behind Japan, but catching up fast. China, Russia, Iran, and Venezuela are playing a geopolitical game into which they would like to lure India and Brazil.

At the May 15 meeting of Brazilian, Russian, Indian, and Chinese foreign ministers in the Russian city of Ekaterinburg, these so-called BRIC countries announced their support of the Russian plan to create an alternative global economic system to replace the post-World War Two, post-Bretton Woods arrangements, dominated by the G7. These include the World Bank, the International Monetary Fund, and interbank clearing mechanisms. Significantly, the Kremlin's position on Kosovo was adopted by the BRIC. Something is indeed adrift.

At a recent Third International Congress on Turkey-Asia relations organized by the Turkish strategic studies institute TASAM, in which this author participated, the emerging Russia-India-China axis was the toast of the day. However, this may be a false dawn. After all, the inherent contradictions between New Delhi and Beijing, and even between Moscow and Beijing, are too numerous to enumerate. Yet, Russia's leaders wrote the book on using money and energy muscle to buy friends and influence neighbours.

Western Europe is "Exhibit A." Money talks, and a lot of money talks a lot. A recent trip to the European Parliament in Brussels demonstrated that not a single German representative would say a bad word about Moscow. German businessmen lobby Chancellor Angela Merkel of the Christian Democratic Union on behalf of Russia day in, day out. And the leader of her Social Democrat coalition partner, Foreign Minister Frank-Walter Steinmeier, is also known as the leader of the pro-Russian faction in the German government. There is much more to this than mere rhetoric. Germany bucked the US at April's Nato summit in Bucharest and objectеd to Georgia and Ukraine being issued a North Atlantic Treaty Association membership plan.

Russia's Gazprom has hired Steinmeier's former boss, former chancellor Gerhardt Schroeder, as chairman of the Nord Stream pipeline consortium, to the tune of €1m a year, and made a similar offer to former Italian Prime Minister and top Eurocrat, Romano Prodi. Prodi declined for now.

Vladimir Putin has made flying visits to Italy and France to do brisk energy business with Prime Minister Silvio Berlusconi and French President Nicolas Sarkozy, though both are ostensibly pro-American. Russia, argues Lucio Caracciolo, the well known Italian geopolitical expert and editor of the journal Limes, may have become the second most influential country in Europe after the US.

The 21st century may be the Chinese century, but it is also increasingly the century of Russia and India. In addition, it is the century of Brazil and the Gulf oil producers. It has begun as the era of natural resources, in which new players appear on the scene, but may continue as the century of biotech and nanotech. It is also an era of consolidating trading blocs, such as the EU and North American Free Trade Agreement, or Nafta.

Will Russia, China and India be able to create their own trading bloc based on the expanded Shanghai Cooperation Organization? So far, Moscow has said "nyet" to Beijing, and it is unlikely that far-away Brazil would join. But that may not continue to be the case. Russia and China are facing their own economic and structural problems, from inflation to grinding rural poverty, and from corruption to declining demographics.

And it may be too early to write the US off. Some budgetary discipline by Congress, coupled with a steady repayment of domestic and foreign national debt, would go a long way to restore US global economic clout.

World powers have risen and fallen over major economic factors, such as deficit spending, the loss of industrial base, and stifling innovation and entrepreneurship. The rising BRIC powers should keep it in mind. The expectations are high, and the world is watching.

Ariel Cohen, Ph.D., is Senior Research Fellow in International Energy Security and Russian and Eurasian Studies at The Heritage Foundation

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