U.S. Debt Crisis Worries Russia and China which will be the Real Beneficiaries in the near Future

U.S. Debt Crisis has temporarily been resolved yesterday, when the Congress gave a green signal to President Barrack Obama’s debt ceiling agreement with the Republicans.

Meanwhile, the Senate approved the deal and President Barack Obama immediately signed it to raise the nation’s debt limit on Tuesday

The final compromise includes $2.4 trillion cuts over the next decade and the rise of the $14.3 trillion debt limit.

However, the deal merely helps the U.S. avoid default, which would have happened today, if the agreement had not been reached—as it is gives no solution of the main causes of the U.S. budget deficit, namely programs in the like of Medicare. What is most of the cuts are not coming until 2016.

Now, the default seems further away on temporary basis. The worst case scenario was that the U.S. would miss payments on its bonds and default, about which financial experts opined that all this would be disastrous with dire consequences around the globe.

In wake of the competing debt crises, America and Europe are looking at each other in shock, while each side understanding less and less about what is happening on the other side of the Atlantic.

Although the US debt crisis will affect the entire world at various levels, yet Russia and China worries greatly in this respect—but in the long run, both will get political and economic benefits at the cost of the United States.

On Monday, Russian Prime Minister Vladimir Putin accused the United States of living beyond its means “like a parasite” on the global economy, saying that dollar dominance was a threat to the financial markets.

“They (Americans) are living beyond their means and shifting a part of the weight of their problems to the world economy,” Putin told the pro-Kremlin youth group Nashi.

Putin, who has often criticised the US foreign exchange policy, pointed out that Russia holds a large amount of U.S. bonds and treasuries, and added, “If over there (in US) there is a systemic malfunction, this will affect everyone.”

Nevertheless, both Russia and China hold a significant part of their reserves in American securities; they have more concerns about the U.S debt crisis. Particularly Washington has still to pay huge loan, it got from Beijing.

While cooperating on the basis of mutual benefit and joint gain, Russia and China are the biggest economic and trade partners, over the past ten years, bilateral trade between the two has arisen from approximately $8 billion in 2000 to almost $60 billion last year.

Commenting on plans, laid out by President Dmitry Medvedev and Chinese President Hu Jintao last month at their meeting in Moscow, the Chinese minister said that both nations are committed to increasing bilateral trade to $100 billion by 2015 and $200 billion by 2020.

Both Russia and China agreed that by cooperating mutually, they would manage to overcome the effects of the global financial crisis and to maintain positive trends in their economic development, sharing the belief that multi-polar forces should protect and maintain “world order” as opposed to any one country.

Moscow and Beijing have pledged their active partnership in strengthening global security and stability through their participation in various international organisations.
Shanghai Cooperation Organization is one of the major organisations led by Russia and China, which criticises unipolar system in the world and emphasises the multi-polar word. The two countries also share similar approaches to settle the conflicts in North Africa and the Middle East.

The ongoing internal financial crisis coupled with debt problem, huge cost of prolonged war against terrorism is the greatest threat to the national security of the United States and its allies—American global and regional interest. Under the new budget plan, Obama administration, intends to cut funding for assistance programs in most countries in the Caucasus and Central Asia. These cuts will create gaps which will be filled by China and Russia with political, economical, and national security—unpredictable consequences in connection with U.S. ties with Beijing and Moscow. For example, the cuts will create an opening for organised crime, which as bank lending dries up, has become the lender of last resort in many poor countries.

Nonetheless, although the U.S. Debt Crisis worries Russia and China, yet in the near future, both will be the real beneficiaries.

About Marc Brentwood

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