Suez Crisis, Public Debt and National Security

                                      http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

The last time Egypt had seen a big turmoil before the recent Facebook-induced people’s revolt was during the height of Suez Crisis. Thanks to the wise Nasser’s diplomacy that helped to secure Suez Canal permanently to the people of Egypt. One rarely told weapon out in public which was as effective as Nasser’s diplomacy was the British External Debt. The nationalization of Suez Canal led to the invasion of Egypt jointly by UK, France and Israel resulting into Suez Crisis. The motive was for Israel to invade in the ground while UK and France would provide aerial support, and later to intervene in the name of resolving crisis so that they would control the Canal again. Things didn’t work as well as British and French had hatched when the Canadian Foreign Secretary Lester B. Person proposed the first ever UN peace keeping force that would help ensure the access to all to the canal and also keep Israel out of the Sinai. The United States backed up Secretary Person’s proposal and exerted pressure on the British side by selling pounds ( British’s external debt) when the British initially didn’t support Pearson’s proposal. The US move to sell pounds would depreciate Pound Sterling which would be more damaging to British Economy. As a result, United Nations Emergency Force (UNEF) was established to maintain the neutrality of the canal and the Suez Crisis was resolved.

                The parallel that can be drawn is having stockpile of external debt can act against national interests. As can be seen on the graph, most of the developed nations including US, UK, Germany and France are estimated to have external debts more than 90% of their GDP. With respect to US external debt, China holds almost $1 trillion, which is going to be the major competitor against US on both economic and military frontiers. One cannot rule out the possibility China can use its stockpile of US treasuries against US anytime and anywhere like US used against British during Suez Crisis, which helped to resolve crisis rather than bring one. We could only hope China will use it to avoid future wars and conflicts among big nations rather than to fulfill its limited interests.