Squeeze play

New York City – Coming back to New York from Washington, D.C., it seems that angry fireworks are more felt from Washington politicians starting with Barack Obama joining the chorus of condemnation against the American International Group (AIG)’s decision to give $165 million in bonuses to its executives. Obama was so mad he even lost his voice as he blasted AIG’s “recklessness and greed.” To date, AIG has received over $170 billion from the US government.

Even headlines in New York tabloids are screaming, changing the initials of AIG to P-I-G, calling the executives fat pigs with too much pork. AIG executives don’t seem to get it – Americans are furious at the blatant greed and excess in Wall Street. These people don’t care if AIG has a contractual obligation to pay $165 million in bonuses – it’s not just right because the money is from American taxpayers who have to make all kinds of belt tightening to survive this crisis. US officials are trying to block the bonuses and are thinking of taxing the money by as much as 100 percent.

Obama has to talk tough on the issue especially now that his approval rating dropped from 64 percent last month to 59 percent this March. People are also beginning to feel a little impatient. Though US share markets had a relatively good showing last week, the hoped-for turnaround is not about to happen soon. In fact, G-20 finance ministers seem to disagree on the best option to tackle the global meltdown. The US wants to infuse more money into the markets while European governments (especially Germany) don’t want to take on any more debt. World Bank president Robert Zoellick warned that 2009 will we a very “dangerous year,” adding that even if differences are resolved, this will not be enough to address the problem.

Despite a united front, it’s apparent that not much has really been resolved in the G-20 meeting last week. Nevertheless, there’s so much hope riding on the April 2 summit in London as the whole world will be waiting to see if the G-20 leaders will be able to come up with a comprehensive plan that would buoy the markets. Just how delicate the situation is can be gleaned from China’s veiled “warning” to the US to “honor” its commitments and ensure the safety of Chinese assets.

The relationship between China and the US is especially tricky and needs a delicate balancing act since their fortunes – economic and otherwise, are undoubtedly linked. China holds one trillion of US treasury bonds, and any decision to dispose of them would hurt the value of the dollar and increase the cost of borrowing in the US. However, the move could also hurt China since they could lose the biggest market for their products.

Which is why GMA should not overly rejoice at the telephone call made by US president Barack Obama. In the first place, it was probably timed to defuse any plans to abrogate the Visiting Forces Agreement. After all, the Philippines continues to be strategic to American military interests, and the VFA plays a critical role in the bilateral relationship between the US and the Philippines. Let’s not also forget that just recently, the US and China were engaged in a naval quarrel when the US accused China of harassing an American surveillance vessel stationed in international waters in the South China Sea. China in turn said the American vessel was operating illegally. Nevertheless, the US had dispatched a naval destroyer to protect its ship just in case.

China is also “angry” at the Philippines because of the Baselines Bill which places the disputed Kalayaan Group of Islands and Scarborough Shoal as part of a “regime of islands” under the “Republic of the Philippines.” While some have criticized the bill as a sellout because it did not categorically place the islands under the country’s main archipelago, it was enough to ruffle Chinese feathers – to the point that aside from a diplomatic protest, China has engaged in some “muscle flexing,” suddenly deploying a patrol boat in the disputed islands.

Despite government’s repeated assertions that the bill affirms our national sovereignty, China’s show of force has prompted Malacañang to consider asking the US and other Asian countries for help if the Chinese continue their posturing. The disputed islands sit on rather precious oil reserves – and as everyone knows, China’s need for oil is enormous and this demand just keeps growing. China will do anything to countermand claims made by other countries.

Clearly, the situation is rather serious and the Philippines must play its cards carefully since it could get squeezed between two major players. While the VFA is clearly important since the US will not want the treaty abrogated, the recantation of “Nicole” will most probably make the issue of Daniel Smith moot and academic as far as the United States is concerned. A militant leader I spoke with posited that the woman must have been bribed. I got the impression that she must have been offered a very good incentive to retract her accusations. Some people also find it outrageous for “Nicole” to settle in the US for good considering her earlier claim that the American raped her.

If push comes to shove and the US has to weigh its priorities, the Philippines may not be at the top of the list. After all, they already have some leverage given the “concern” of the Philippines over the posturing of China about the Spratlys/Baseline Bill issue. Besides, the economic recovery of America depends so much on China on account of the huge trade deficit and the one trillion US treasury bonds held by China. Given this reality, perhaps GMA should not be overly pleased at having finally received “the call” from US president Obama.

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