Dueling Markets: Can Food Fight Oil?

It's no secret that high oil prices have moved big money, some $3 trillion, from energy-consuming states in the West to suppliers like Saudi Arabia and Russia. Pooling up in huge state-controlled investment funds, this vast transfer wealth is tipping the global financial power, raising fears in the West of petrol-power domination.

Or maybe not. A recent Goldman Sachs commodities report notes that growing populations and wealth in the developing world, and to a lesser extent rising biofuel production, is moving some money back to farm powers like the United States. "Food exports won't offset our oil bill, but they will help," says Robert D. Hormats, vice chairman of Goldman Sachs International. Agricultural exports are a key reason the U.S. trade deficit decreased about 6 percent last year.
—Rana Foroohar

Geopolitics And Arms Deals: In The Courtship Of India And America, India Gains An Edge
After the end of the cold war, it looked as though America had clearly won South Asia. India began distancing itself from its old comrades in Moscow, and embracing the United States as a counterbalance to China. The alliance hit a milestone in 2006, when President George W. Bush and Prime Minister Manmohan Singh signed a deal by which America would give India a historic coup: acceptance into the elite club of nuclear-weapons states, and access to U.S. nuclear technology and fuel.

Now look what's happened. Communists in Parliament, who think Washington will use nuclear sales to lord it over India, have blocked the deal. Meanwhile, Parliament has declared 2008 "The Year of Russia," and the Russians are moving ahead on construction of four nuclear power plants in Tamil Nadu. In February 2006, France signed a tentative deal to assist India with nuclear-energy projects, and the two countries are expected to finalize negotiations this year. What the Singh government wants is a free market to meet its vast demands for nuclear energy, but what the communists are willing to allow is a market open to non-Americans.

This is a roadblock for the alliance of the world's two largest democracies. In the nuclear market, the communist card gives an advantage to Russia and France going forward. So the battle for influence is back on. On a visit to India last week, U.S. Defense Secretary Robert Gates warned Indian officials that the "clock is ticking" on the nuclear deal, but the truth is that it's ticking for the Bush administration, now in its last year. Singh can take his time to sort this out.

There are other ways to cement the alliance. India plans to spend $100 billion on arms over the next five years, and while 70 percent of its current arsenal is Russian or old Soviet, most of the new spending will go upgrade its fleet of Russian MiG fighter jets, most likely with American F-16s and F-18s—purchases over which the communists will have no say. Though the stalled nuclear deal "has put a brake" on strategic relations between India and the United States, there are signs the two "are trying to compensate" by boosting defense relations, says Deba Ranjan Mohanty, a senior fellow at the Observer Research Foundation in New Delhi. The United States is so eager to seal these deals, it may need to make big concessions, like easing restrictions on technology transfer to rival loose Russian standards.

The irony: the communists may be a thorn in Singh's side, but they are also giving India the upper hand in deals with the United States.
—Jason Overdorf

Regional Warfare: Turkey ' s New Line
Last week, a turkish raid on the separatist Kurdistan Workers' party (PKK) in northern Iraq left nearly 250 militants dead. Under international pressure—particularly from Baghdad and the U.S.—Turkey withdrew its troops for the time being. But the Turkish Army has already achieved one major goal: setting a precedent for massive incursions into autonomous Iraqi Kurdish territory.

Small cross-border Turkish moves are nothing new. In the name of self-defense, Turkey has maintained bases in the Iraqi towns of Bamarni and Bakoufa since 1997, for monitoring the PKK. But this mission pushed farther than ever: troops set up checkpoints on main roads and bombed bridges on the Greater Zab River, preventing the PKK from moving into fortified positions for summer attacks.

Insisting the raids don't violate Iraqi sovereignty, Ahmet Davutoglu, foreign-policy adviser to Turkish Prime Minister Recep Tayyip Erdogan, says they do "the opposite" by cleaning up terror cells that Iraq seems unable to control on its own. Iraq's powerful peshmerga—Kurdish security forces—are unlikely to agree. While they've distanced themselves from the PKK, the peshmerga may retaliate if Turkey continues to target Kurdish villages. And with the PKK likely to attempt a show of defiance—for instance, more terror attacks inside Turkey—this raid won't be Turkey's last foray into its neighbor's land.
—Owen Matthews